Document:

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                                  LEASE BETWEEN

                          AMERICAN BAPTIST CHURCHES USA

                                       AND

                             INFONAUTICS CORPORATION

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                                TABLE OF CONTENTS
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<S>  <C>                                                                                                         <C>
1.   DEMISE OF PREMISES...........................................................................................1

2.   TERM. OPTION TO RENEW. RIGHT OF FIRST NEGOTIATION............................................................1

3.   RENT.........................................................................................................4

4.   SECURITY DEPOSIT.............................................................................................5

5.   USE OF PREMISES..............................................................................................6

6.   UTILITIES AND SERVICES.......................................................................................6

7.   ALTERATIONS, REMOVAL OF TRADE FIXTURES.......................................................................7

8.   SIGNS........................................................................................................8

9.   PARKING......................................................................................................8

10.     KEYS......................................................................................................8

11.     NO SMOKING................................................................................................8

12.     POSSESSION: TENANT IMPROVEMENTS...........................................................................9

13.     MAINTENANCE AND REPAIR...................................................................................10

14.     ENTRY BY LANDLORD........................................................................................11

15.     LIABILITY AND INSURANCE AND INDEMNITY....................................................................11

16.     DAMAGE AND DESTRUCTION TO THE PREMISES...................................................................14

17.     EMINENT DOMAIN...........................................................................................15

18.     SUBORDINATION............................................................................................15

19.     ESTOPPEL CERTIFICATE.....................................................................................16

20.     DEFAULT OF TENANT/LANDLORD'S RIGHTS AND REMEDIES.........................................................16

21.     NO WAIVER OF BREACH......................................................................................21

22.     DEFAULT OF LANDLORD/TENANT'S RIGHTS AND REMEDIES.........................................................21

23.     QUIET POSSESSION.........................................................................................23

24.     SURRENDER................................................................................................23

25.     STATUS OF PARTIES ON TERMINATION OF LEASE................................................................24

26.     ASSIGNMENT AND SUBLETTING................................................................................24

27.     NOTICES..................................................................................................25

28.     ATTORNEYS'FEES...........................................................................................25

29.     HOLDING OVER.............................................................................................26
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<S>  <C>                                                                                                         <C>
30.     TIME OF ESSENCE..........................................................................................27

31.     SUCCESSORS AND ASSIGNS...................................................................................27

32.     CUMULATIVE REMEDIES......................................................................................27

33.     TERMS AND HEADINGS.......................................................................................27

34.     ENTIRE AGREEMENT.........................................................................................27

35.     REPRESENTATIONS AND WARRANTIES...........................................................................27

36.     CONTROLLING LAW..........................................................................................28

37.     MISCELLANEOUS............................................................................................28

38.     HAZARDOUS SUBSTANCES.....................................................................................29

39.     FORCE MAJEURE............................................................................................30
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<PAGE>

                                      LEASE

         THIS LEASE is made as of this _25TH_ day of __APRIL___, 2000, by and
between AMERICAN BAPTIST CHURCHES USA, a New York Corporation (hereinafter
referred to as "Landlord") with offices and place of business at North Gulph
Road at First Ave., Valley Forge, PA 19482 and INFONAUTICS CORPORATION, a
Pennsylvania Corporation, (hereinafter referred to as "Tenant").

                                   WITNESSETH:

         The Landlord, for and in consideration of the covenants and agreements
herein set forth to be kept by Tenant, and intending to be legally bound, does
hereby demise and lease unto the Tenant, and the Tenant, for and in
consideration of the covenants and agreements herein set forth to be kept by the
Landlord, does hereby hire and rent certain space owned by Landlord as more
particularly described herein below with all rights, privileges, and
appurtenances thereto, for and during the terms herein described, upon the
following covenants and conditions:

1.       DEMISE OF PREMISES

         In consideration of the rents and covenants herein stipulated to be
paid and performed, Landlord hereby demises, rents and lets to Tenant and Tenant
hereby rents from Landlord, certain space and all rights, privileges, and
appurtenances related to such space in the building located at 590 North Gulph
Road, Valley Forge, PA (hereinafter referred to as the "Building") consisting of
approximately thirty thousand (30,000) rentable square feet of space in the
Building (hereinafter referred to as the "Premises"), all as more particularly
set forth on the plan attached hereto as Exhibit A.

         Tenant may request a different address from the appropriate Post
Office, including without limitation a First Avenue address, and in furtherance
thereof, Landlord shall cooperate as reasonably required.

2.       TERM. OPTION TO RENEW. RIGHT OF FIRST NEGOTIATION.

         A.       The term of this Lease shall commence (the "Commencement
Date") on the earlier to occur of (i) the date upon which the Tenant
completes Tenant's Work as described in

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Exhibit B attached hereto and defined in Section 12.A. hereof, or (ii) July
1, 2000, and shall continue for an initial term ("Initial Term") expiring on
December 31, 2003. Notwithstanding the foregoing, for the purpose of allowing
Tenant to construct its tenant improvements, Landlord shall permit Tenant to
occupy the Premises on a date which is earlier than the Commencement Date
(such date is herein called the "Construction Commencement Date") with the
understanding that Tenant shall be subject to all of the terms and conditions
of this Lease from and after the Construction Commencement Date, except for
the payment of rent and additional rent. Upon written request by either
party, the Commencement Date, Initial Term and Renewal Terms having been
determined, the parties shall execute a confirmation of such terms, in
accordance with the form attached hereto as Exhibit C.

         Notwithstanding anything to the contrary contained in this Lease, if,
by July 1, 2000, (subject to extension as hereafter provided), Tenant has not
received the necessary building permit plus any other approvals necessary for
Tenant's construction of the "Tenant Work" defined in Section 12.A. of this
Lease, then and in that event either Landlord or Tenant shall have the right to
terminate this Lease by written notice to the other: provided, however that for
purposes of this paragraph the July 1, 2000 date shall be extended if either (x)
Tenant, after using all due diligence to timely file for and obtain such permits
or approvals, suffers delays due to strikes, lockouts, acts of God or other
causes beyond Tenant's control, in which case such date shall be extended by one
(1) day for each day of delay, or (y) Tenant is denied the issuance of such
building permits or approvals by the applicable governmental authorities, in
which case, at Tenant's election, by written notice to Landlord, the July 1,
2000 date shall be extended for ninety (90) days in order to afford Tenant the
opportunity to appeal such denial.

         B.       Provided Tenant is not in default of its obligations under
this Lease beyond the expiration of the applicable notice and cure periods
either at the time of Tenant's exercise of its options to renew or at the
time of commencement of the renewal term in question, Tenant shall have the
option to renew this Lease for two additional terms of thirty-six (36) months
each (the "Renewal Terms"). The first Renewal Term shall commence on the
first day of the month immediately following the expiration of the Initial
Term and the second Renewal Term shall commence on the first day of the month
immediately following the expiration of the first

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Renewal Term. The terms of the Lease during the Renewal Terms shall be the same
as apply during the Initial Term, except that the rent payable during each
Renewal Term shall be equal to the fair market rental for the Premises at the
time of the commencement of each Renewal Term, based on rent payable by other
tenants for similar type, buildout and amount of space for comparable
warehouse/office buildings in the vicinity of the Building. In no event shall
the rent payable during any Renewal Term be less than the rent payable during
the last twelve month period of the Initial Term. Tenant may exercise this
option to renew only by giving Landlord written notice of exercise at least nine
(9) months prior to the expiration of the Initial Term, in the case of the first
Renewal Term, and at least nine (9) months prior to the expiration of the first
Renewal Term, in the case of the second Renewal Term.

         C.       1. If, at any time during the term of this Lease or any
Renewal Term, space within the Building appurtenant to the Premises ("Adjacent
Space") becomes available to lease, Landlord will, prior to leasing the Adjacent
Space to anyone else, notify Tenant in writing and offer to lease the Adjacent
Space to Tenant on the same general terms and conditions that Landlord, acting
in good faith, would lease the Adjacent Space to a third party. Such terms and
conditions will include without limitation a proposed rent based on the then
prevailing market rent for similar space in the King of Prussia/Valley Forge
area, a minimum lease term of three (3) years and a delivery of the Adjacent
Space to Tenant on an "as is" basis, with Tenant to be responsible for all
tenant improvements.

            2.          Upon Tenant's receipt of Landlord's offer as aforesaid,
Tenant shall have a period of twenty (20) days within which to notify Landlord
that Tenant has accepted Landlord's proposal, or to negotiate other terms with
Landlord. If, at the end of the twenty (20) day period, Landlord and Tenant have
agreed upon the principal business terms of the lease for the Adjacent Space,
then Landlord and Tenant shall as soon as reasonably possible thereafter, enter
into an amendment to this Lease expanding the Premises to include the Adjacent
Space.

            3.          If Landlord and Tenant are unable to agree on the terms
and conditions of the lease of the Adjacent Space within such twenty (20) day
period, then Landlord shall be free to lease the Adjacent Space to any third
party; provided, however that if, within twelve (12)

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months after Landlord's notice to Tenant as aforesaid Landlord proposes to lease
the Adjacent Space to a third party on substantive terms which are more
favorable to a tenant than those originally proposed by Landlord to Tenant as
provided above, then, before leasing the Adjacent Space to such third party,
Landlord must again offer to lease the Adjacent Space to Tenant at such
substantive terms offered to the third party, whereupon Tenant shall have twenty
(20) days from its receipt of Landlord's offer within which to notify Landlord
in writing whether Tenant accepts or rejects such offer. If the Tenant fails to
so notify Landlord whether it accepts or rejects Landlord's offer, then it shall
conclusively be presumed that Tenant has elected to reject Landlord's offer.

            4.          Time is of the essence of the performance by Landlord
and Tenant of their obligations under this Section 2.C..

3.       RENT

         A.       For the Premises, beginning on January 1, 2001 and continuing
throughout the Initial Term, Tenant shall pay rent to Landlord as follows:

            i)          For the period January 1, 2001 to December 31, 2001,
Tenant shall pay to Landlord monthly rent in the amount of Twenty-Four Thousand
Forty-One and 67/100ths Dollars ($24,041.67).

            ii)         For the period January 1, 2002 to December 31, 2002,
Tenant shall pay to Landlord monthly rent in the amount of Twenty-Five Thousand
Two Hundred and Ninety-One and 67/100ths Dollars ($25,291.67).

            iii)        For the period January 1, 2003 to December 31, 2003,
Tenant shall pay to Landlord, monthly rent in the amount of Twenty-Six Thousand
Five Hundred and Forty-One and 67/100ths Dollars ($26,541.67).

         B.       If the Commencement Date falls on any day other than the first
day of a calendar month, then, on the Commencement Date Tenant shall pay rent to
Landlord in an amount equal to the monthly rent for the Premises multiplied by a
fraction, the numerator of which is the number of days in the month in question
commencing on the Commencement Date

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and expiring on the last day of such month, and the denominator of which is the
actual number of days in such month.

         C.       All payments of rent hereunder shall be made in advance on the
first day of each and every month and shall be without offset or deduction of
any kind or nature except as specifically set forth herein to the contrary.

         D.       All rent due hereunder shall be payable to Landlord at its
address and forwarded to Landlord, att: Rev. Cheryl Wade or to such other place
as Landlord may designate in writing.

4.       SECURITY DEPOSIT

         Simultaneously with the delivery by Tenant of this Lease fully executed
by Tenant, Tenant shall deposit with Landlord a security deposit in the amount
of $24,041.67 (the "Security Deposit"). The Security Deposit shall be held by
Landlord in a non-interest bearing account, and shall be security for Tenant's
payment and performance of all Tenant's obligations, covenants, conditions and
agreements under this Lease. Tenant hereby waives any applicable law requiring
the placement of the Security Deposit in an escrow account. Landlord shall have
the right, upon prior written notice to Tenant, to apply all or any portion of
the Security Deposit to cure any default by Tenant. If Landlord so applies any
or all of the Security Deposit, Tenant shall be obligated to promptly deposit
with Landlord the amount necessary to restore the Security Deposit to its
original amount. In the event Tenant fails to perform its obligations, including
but not limited to accepting possession of the Premises on the Commencement Date
provided for herein, then the Security Deposit shall not be deemed liquidated
damages and Landlord may apply the deposit to reduce Landlord's damages, and
such application of the deposit shall not preclude Landlord from recovering from
Tenant all additional damages incurred by Landlord. In the event Tenant fully
and faithfully complies with all terms and conditions of this Lease, the
Security Deposit shall be returned to Tenant within forty-five (45) days
following the expiration of the Lease Term and Tenant's surrender of the
Premises in accordance with the terms of this Lease. No holder of a mortgage or
deed of trust to which this Lease is subordinate shall be responsible

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for the Security Deposit unless such mortgagee or holder of such deed of trust
shall have actually received or obtained control over the Security Deposit.

5.       USE OF PREMISES

         The Premises may be used only for general office, warehouse and storage
uses and no other use. Tenant shall occupy the Premises in a lawful manner and
shall not conduct any activity in the Premises contrary to this Lease or
applicable law. Tenant shall have the right, at its sole cost and expense, to
provide and place three (3) picnic tables and accompanying benches in a location
outside of the Building to be mutually acceptable to both Landlord and Tenant.
Tenant shall maintain the picnic tables and benches in good condition and repair
and shall deep the area around such picnic tables clean and free from waste and
other debris. Upon the expiration or earlier termination of this Lease, Tenant
shall remove the picnic tables and benches from the Landlord's Property. Tenant
understands that Landlord can give Tenant no assurances that others besides
Tenant's employees will not use the picnic tables.

6.       UTILITIES AND SERVICES

         A.       UTILITIES. Landlord shall, at its cost, except as hereafter
provided, furnish to Tenant during normal business hours all utilities and
services except telephone or other communications devices, including but not
limited to electricity, water, sewage and trash disposal, heat and
air-conditioning, maintenance and repair, and all other services customarily
provided under a full service lease, incidental to Tenant's use and occupancy of
the Premises, provided, however that Landlord shall not be liable to Tenant for
any interruption in services for any cause other than Landlord's negligence or
wilful misconduct. In the event of an interruption in utilities caused by
Landlord's negligence or wilful misconduct for a period of 72 consecutive hours
or more, then the rent payable to Landlord under Section 3. hereof or, as
applicable, Section 2.B., shall abate until the utilities to the Premises have
been restored.

         B.       JANITORIAL SERVICES. Landlord shall, at Landlord's sole cost
and expense, provide Tenant with janitorial services and supplies at least equal
to the quality and frequency of such services provided by Landlord to its office
tenants at the office building owned by Landlord at 588 North Gulph Road, Valley
Forge, PA.

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         C.       TELEPHONE. Telephone, mail, copying, and other similar
services shall be the responsibility of the Tenant.

7.       ALTERATIONS, REMOVAL OF TRADE FIXTURES

         A.       Tenant may, at Tenant's sole cost and expense, make any
non-structural alterations or additions to the Premises which do not violate any
local, state, or federal ordinances, laws, or regulations, to include any trade
fixtures, electrical and plumbing connections incidental thereto, partitions,
and any other alterations or additions as may be necessary for the conduct of
its business, provided that no such alterations shall be made without Landlord's
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed (in no event later than ten (10) business days from
receipt of Tenant's request therefor). Notwithstanding the foregoing, Tenant
shall be permitted to make interior non-structural alterations to the Premises
costing less than $20,000. per year (which cost does not include the cost of
replacing floor and/or wall covering) without Landlord's consent, so long as (a)
such alterations do not affect the exterior appearance, mechanical systems and
sprinkler systems of the Building, and (b) Tenant provides Landlord with copies
of the plans and specifications for such alterations. Any such alterations shall
become the property of Landlord at the expiration of this Lease but Tenant may
at its option, at any time during the Initial Term or any extensions thereof,
remove all or any of the nonstructural alterations and additions, including, but
not limited to, movable partitions, personal property and equipment, trade
fixtures, safes, computer equipment, alarm system, fire-suppressant system, air
conditioning equipment installed by Tenant, cypher, simplex or other locks,
white boards and any security or computer installations now or hereafter
installed by Tenant; provided, however, Tenant shall repair at its expense any
damage caused to the Premises in removing such item(s), and further provided
that, in all events, Landlord shall have the right to require Tenant to remove
all such items upon the expiration or earlier termination of this Lease. All
alterations, additions and partitions not so removed within five (5) business
days after the termination of the Lease shall become the property of the
Landlord. No structural alterations may be made to the Premises by Tenant
without Landlord's prior written consent, which consent may be withheld in
Landlord's sole and absolute discretion.

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         B.       Notwithstanding anything to the contrary contained in Section
7.A. above, (a) Tenant shall not be required to remove any alarm system,
fire-suppressant system or air conditioning system installed by Tenant and (b)
if the Landlord consents to any alterations or additions made by Tenant pursuant
to Section 7.A., Landlord will, as a part of such consent, advise Tenant whether
it desires Tenant to remove such alterations or additions upon the expiration or
earlier termination of this Lease, and if the Landlord fails to so advise
Tenant, then it shall conclusively be presumed that no such removal by Tenant
will be required.

8.       SIGNS

         Upon prior approval by Landlord of the use, content and design, and in
accordance with all applicable codes and ordinances, Tenant shall have the right
to install (a) signage in the entry area to the Premises and (b) a sign on the
corner of the Building, facing First Avenue. Such signage shall be furnished and
installed at Tenant's sole cost and expense. The signs, plans for which are
attached hereto as Exhibit D., are hereby approved. Tenant shall have the right
to include its name on the directional sign in the parking lot and the Landlord
shall modify the sign adjacent to the parking lot by the building, which
currently refers to the American Baptist Church parking only, to provide for
tenant parking as well, or to remove the sign entirely, at the Landlord's
option..

9.       PARKING

         During the Term, plus any extensions, Landlord shall provide Tenant, at
no cost, with non-exclusive parking in Landlord's parking facilities designated
for use by Building Tenants. Such parking facilities are depicted on the site
plan attached hereto as Exhibit E.

10.      KEYS

         Landlord shall give Tenant a reasonably sufficient number of keys to
the Premises.

11.      NO SMOKING

         The Building, including the Premises, has been designated a no smoking
building. The smoking of tobacco or use of smokeless tobacco is not allowed in
the Building. Tenant shall

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ensure that its employees, agents, invitees, and contractors do not smoke
tobacco or use smokeless tobacco in the Building, including the Premises.

12.      POSSESSION: TENANT IMPROVEMENTS

         A.       Tenant acknowledges that, except as specifically provided
herein to the contrary, Landlord is delivering the Premises to Tenant "as is,
where is" and without any representation or warranty, either express or implied,
as to the condition of the Premises or its fitness or suitability for any
particular purpose or use. Tenant shall be responsible, at Tenant's sole cost
and expense, for the construction and installation of all tenant improvements
set forth in Tenant's Work and in accordance with the plans and specifications
attached hereto or incorporated by reference as Exhibit F. ( the "Plans and
Specifications"). All Tenant improvements shall be contracted and installed in
compliance with the requirements of Section 7., 13.B, 13.C and 15. hereof.
"Tenant's Work" shall be the construction of those improvements in the Premises
and to the exterior of the Building which are substantially in conformance with
the Plans and Specifications, which have been approved by Landlord with the
understanding and agreement that, the partitions installed by Tenant pursuant to
the Plans and Specifications will be removed by Tenant at Tenant's expense upon
the expiration or earlier termination of this Lease.

         B.       Tenant shall have the right to install fiber optics, data and
telecommunications cabling (herein collectively called "Communications Cables")
to the Premises and to install two (2) thirty-six (36) inch microwave dishes on
the roof of the Building, subject to the following terms and conditions:

            (i)         Tenant will at all times comply with the requirements of
Sections 7., 13.B., 13.C. and 15. hereof;

            (ii)        The Communications Cables will be brought to the
Building from First Avenue;

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            (iii)       The microwave dishes shall (a) be subject to Landlord's
prior approval (which shall not be unreasonably withheld, conditioned or
delayed) as to location, design and installation, (b) conform to all applicable
federal, state and local laws, ordinances and building codes, it being
understood that it shall be Tenant's responsibility, at Tenant's sole cost and
expense to obtain any and all required governmental approvals and permits, (c)
in all events be installed in the Building Roof in such a manner as to not be
visible from the ground, and (d) be removed from the Building by Tenant at or
prior to the expiration of the Term or any extensions.

            (iv)        Tenant will, at Tenant's expense, promptly repair any
damage to the Building or the Premises caused by the installation or removal of
the Communications Cables or the microwave dishes. The provisions of this
subsection (iv) shall survive the expiration or termination of this Lease until
Tenant has repaired any damage to the Building occasioned by such removal.

13.      MAINTENANCE AND REPAIR

         A.       STRUCTURAL MAINTENANCE AND REPAIR. Landlord shall, at its sole
cost and expense, (i) maintain and keep in good order and repair and replace
when necessary, the structural parts of the Building and the Premises, including
but not limited to the shell, exterior skin, bearing walls, glass mullion
system, flooring (but not floor covering), stairs and stairwells, main utility
connections, main electrical service, the roof, roof deck and roofing membrane,
the foundation, the slab, the parking area(s) servicing the Building, the
plumbing, including replacement or lines, elevator system(s), and repair,
maintenance and replacement of part or all of the air-conditioning, heating and
ventilation system(s); (ii) repair any damage which is covered by the standard
form of fire, extended coverage, malicious mischief and vandalism insurance
carried by Landlord, and shall repair all broken glass in the Premises; (iii)
repair the Premises and any and all damage of any kind in connection therewith
caused by the negligent of intentional acts of Landlord, its employees, agents,
invitees, or contractors.

         B.       NON-STRUCTURAL MAINTENANCE AND REPAIR. Tenant shall maintain
and keep in good order and repair, the interior, exposed non-structural parts of
the Premises, including the replacement of light tubes or bulbs in the Premises.

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         Notwithstanding anything contained herein or elsewhere to the contrary,
Tenant shall not be obligated to make or pay for any alterations, additions or
improvements to the Building, or any building system or component that may be
required by any applicable law (including, The Americans With Disabilities Act)
unless the requirement results from Tenant's particular use of the Premises or
the construction by or for Tenant of any additions, alterations or improvements
to the Premises.

         C.       MECHANIC'S LIENS. If any mechanic's lien is filed against the
Premises, or the real property of which the Premises are a part, for work
claimed to have been done for or materials claimed to have been furnished to
Tenant, pursuant to this Lease, such mechanic's lien shall be discharged or
bonded by Tenant, at its sole cost and expense, within thirty (30) days after
Tenant receives written demand to discharge said lien from Landlord, by the
payment thereof or by filing any bond required by law. If Tenant shall fail to
discharge or bond any such mechanic's lien, Landlord may, at its option,
discharge the same and charge Tenant for the cost thereof, including reasonable
attorneys fees. Tenant shall indemnify and hold Landlord harmless from and
against any and all expenses, liens, claims or damages to any person or property
which may or might arise by reason of the making of any such alterations,
additions, or improvements.

14.      ENTRY BY LANDLORD

         Landlord, its agents and employees, shall have the right to enter the
Premises during Tenant's normal business hours upon reasonable notice, and
without notice at any time, in the event of an emergency, to make repairs and to
maintain the Building of which the Premises are a part, to show the Building to
prospective buyers and mortgagees and, within the last sixty (60) days of the
Term, or any extension(s) thereof, to prospective tenants. In the event Landlord
exercises this Section 14 right, Landlord shall use best efforts not to
interfere with Tenant's business and shall be responsible for any damage caused
by its negligence or wilful misconduct.

15.      LIABILITY AND INSURANCE AND INDEMNITY

         A.       Landlord will purchase, at its sole cost, and maintain during
the term of this Lease and any extensions thereof, fire and extended coverage
insurance on the Building in an amount equal to not less than the full
replacement cost of the Building and comprehensive

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general liability insurance in an amount not less than $2 million combined
single limit for bodily injury and property damage.

         B.       Tenant shall purchase, at its own expense, and maintain during
the term of this Lease and any extensions thereof, fire, extended coverage,
malicious mischief, and vandalism insurance on the contents of the Premises
owned or leased by Tenant and comprehensive general liability insurance in an
amount not less than $2 million combined single limit for bodily injury and
property damage arising out of its use of occupancy of the Premises. Tenant
shall name Landlord as an additional insured on its liability policy. Such
policy shall contain a provision that it may not be canceled without written
notice to Tenant at least 10 days prior to such cancellation.

         Tenant shall have the right, but not the obligation, to satisfy its
obligations under this Section through one or more so-called "blanket" or
"umbrella" policies of insurance, provided, however, that the coverages afforded
thereby must in all events satisfy the requirements set forth in this Section.
Any insurance policy or policies maintained by Tenant may contain deductibles in
such commercially reasonable amounts as Tenant may reasonably desire.

         C.       Tenant shall supply Landlord with Certificates of Insurance
required by Section 15.B. prior to the Construction Commencement Date.

         D.       Prior to the commencement of any work done by Tenant at the
Premises or the Building, Tenant shall procure or cause to be procured policies
of builders risk and workers compensation insurance reasonably satisfactory to
Landlord, and, in the case of the builders risk insurance, naming Landlord as an
additional insured thereon. Certificates evidencing such insurance shall be
delivered to Landlord prior to the commencement of any work.

         E.       Tenant shall indemnify and hold harmless Landlord from and
against any and all losses, damages, liabilities, and claims arising from any
activity, work or things done, permitted or suffered by Tenant in the Building
and the Premises. Tenant shall further indemnify and hold harmless Landlord from
and against any and all suits and/or claims arising from any breach or defaults
in the performance of any obligation on Tenant's part to be performed under

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the terms of this Lease which default or breach remains uncured after the
expiration of the applicable notice and cure periods or arising from any act or
omission of the Tenant or any of Tenant's agents, contractors, invitees or
employees while in the Premises, and from and against all costs, attorneys fees,
expenses and liability incurred in the defense of any claim or action or
proceeding brought thereon. If any case or action or proceeding be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the same at Tenant's expense with counsel reasonably acceptable to
Tenant.
         Notwithstanding any other provisions herein to the contrary, Landlord
shall indemnify and hold harmless Tenant from and against any and all losses,
damages, liabilities, claims, suits, and expenses suffered by Tenant, occasioned
by, arising or resulting form Landlord's or Landlord's agents', contractors', or
employees' negligence or willful, wrongful acts or omissions in or from (i) its
use of the Premises, (ii) the conduct of Landlord's business, (iii) any
activity, work, or things done by Landlord or Landlord's agents, contractors or
employees in or about the Premises, or (iv) any breach or default by Landlord in
the performance of its obligations hereunder, which default or breach remains
uncured within a reasonable time after written notice from Tenant of such
default or breach.
         If any claim for loss, damage, liability, or expense is sought against
either party for which indemnification is sought hereunder, the indemnifying
party, upon notice from the other, shall defend the same at the indemnifying
party's expense.
         Landlord and Tenant shall each use their best efforts to obtain from
their respective insurers under all policies of fire, theft, public liability
and other insurance maintained by either of them at any time during the Term
hereof insuring or covering the Premises or operations thereon, a waiver of all
rights of subrogation which the insurer of one party might have against the
other party. Notwithstanding any provision of this Agreement to the contrary,
Landlord and Tenant each hereby waives all claims for recovery against the other
for any loss or damage which may be inflicted upon the property of such party
even if such loss or damage shall be brought about by the fault or negligence of
the other party or its agents, but such waiver shall apply only to the extent
that the loss or damage in question is covered by insurance, or required to be
provided and maintained hereunder.

                                       13
<PAGE>

If either Landlord or Tenant is unable to obtain a waiver of subrogation from
its insurance carrier without payment of an additional premium therefor, then
such party will not be required to obtain the waiver of subrogation: provided,
however that before such party notifies its insurance carrier that it will not
pay the additional premium, the party will notify the other party hereto in
writing and shall give the other party a period of thirty (30) days within which
such other party may pay the additional premium itself at its own cost.

16.      DAMAGE AND DESTRUCTION TO THE PREMISES

         In the event that less than fifty percent (50%) of the Premises or the
Building of which the Premises are a part are damaged or destroyed by fire, the
elements, or any other cause or casualty, Landlord shall, and to the extent such
damage or destruction is covered by the proceeds of Landlord's insurance
required to be maintained hereunder, repair the Premises or Building within
forty-five (45) days of such damage or destruction. Within ten (10) days of such
damage or destruction, Landlord shall notify Tenant if the same can be repaired
within forty-five (45) days of such damage or destruction. If such repairs are
not or cannot be completed within said forty-five (45) days, either Tenant or
Landlord may cancel the entire Lease or may cancel the Lease as to the
unrepaired portion of the Premises as of the date of such damage or destruction
upon written notice to the other. Rent for the undamaged area, if any, continued
to be leased by Tenant shall then be an amount that bears the same relationship
to the total rent for the Premises as the amount of square feet remaining bears
to the total square foot area of the Premises. Upon termination of the Lease,
all rent, if any, paid in advance shall be apportioned as of the date of the
damage or destruction.
         In the event that more than fifty percent (50%) of the Premises or the
Building are damaged or destroyed by fire, the elements, or other cause or
casualty, Landlord shall, within thirty (30) days of such damage or destruction,
notify Tenant whether Landlord intends to repair such damage or destruction. If
Landlord elects not to so repair, then this Lease shall terminate as of the date
of such election. If Landlord elects to so repair, but such repairs are not or
cannot be completed within one hundred and eighty (180) days after the date of
Landlord's election, then either Tenant or Landlord may cancel the entire Lease
or may cancel the Lease as to the damaged portion of the Premises by providing
written notice to the other. Rent for the undamaged area, if any, continued to
be leased shall then be an amount that bears the same relationship to the total

                                       14
<PAGE>

rent for the Premises as the amount of square feet remaining bears to the total
square foot area of the Premises. Upon termination of the Lease, all rent. if
any, paid in advance shall be apportioned as of the date of damage or
destruction.

17.      EMINENT DOMAIN

         If either (i) thirty percent (30%) or more of the Premises or (ii) any
portion of the Building or the parking area which materially adversely affects
the operation of Tenant's business shall be taken for public use by right of
eminent domain or transferred by agreement under threat of such taking, this
Lease shall terminate as of the date of such taking, except that Tenant shall
have the right to prove and collect the value of the trade fixtures installed by
it and moving expenses, but for no other damages including the value of the
unexpired term of this Lease. In the event of the termination of this Lease
under the provisions of this Section 17., all rent paid in advance shall be
apportioned and returned to the Tenant as of the date of such taking. In the
event that less than thirty percent (30%) of the Premises shall be so taken and
such taking does not materially adversely affect Tenant's operations in the
Premises, then this Lease shall not terminate and there shall be a reduction in
the rent in corresponding proportion to the reduction in square footage of the
Premises.

18.      SUBORDINATION

         This Lease shall be subordinate to any mortgage, deed of trust, or
other lien which now or hereafter encumbers the Premises provided that a
Subordination, Non-Disturbance and Attornment Agreement in recordable form and
reasonably acceptable to Tenant is executed by Landlord, Tenant and the holder
of any such mortgage, deed of trust or lien. Said Agreement shall provide in
substance that, so long as Tenant is not in default under the terms and
conditions of this Lease beyond the expiration of the applicable notice and cure
periods thereof, and agrees to recognize the lender under any such mortgage,
deed of trust or other lien as the Landlord under this Lease upon the occurrence
of any of the hereinafter described events, then neither this Lease nor Tenant's
rights hereunder shall be terminated or affected by any sale, foreclosure,
transfer, assignment or hypothecation of the Premises or the Building or the
real property on which the Building is situated.

                                       15
<PAGE>

19.      ESTOPPEL CERTIFICATE

         Each party, within twenty (20) business days after notice from the
other party, shall execute and deliver to the other party, a certificate
substantially in the form attached hereto as Exhibit G, stating that this Lease
is unmodified and in full force and effect, or in full force and effect as
modified, and stating the modifications. The certificate also shall state the
amount of monthly rental and the dates to which the rent has been paid in
advance. Failure to deliver the certificate within the twenty (20) business days
shall be an event of default under this Lease Agreement.

20.      DEFAULT OF TENANT/LANDLORD'S RIGHTS AND REMEDIES

         A.       EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute a default (herein, an "Event of Default")
hereunder by Tenant:

            i)          The failure by Tenant to make any payment of rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure shall continue for a period of ten (10) days after Tenant's receipt
of written notice that same is past due;

            ii)         The failure by Tenant to observe or perform any of the
other express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant; provided,
however, that if the nature of Tenant's default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be deemed
to be in default if Tenant shall commence such cure promptly and shall
thereafter diligently prosecute such cure to completion, which completion may
not occur later than sixty (60) days from the date of Landlords notice;

            iii)        If Tenant shall be adjudicated as bankrupt or becomes
insolvent as a matter of law, or shall file or have filed against it a petition
for bankruptcy under the Federal Bankruptcy Code, and such petition is not
dismissed within sixty (60) days after the date of filing, or shall make an
assignment for the benefit of creditors.

            iv)         A dissolution or liquidation of Tenant.

                                       16
<PAGE>

         B.       Upon the occurrence of an Event of Default, Landlord may, at
any time thereafter and in addition to all other available legal or equitable
rights and remedies, elect any one or more of the following remedies:

            i)          upon an additional five (5) days' written notice to
Tenant, declare to be immediately due and payable, on account of the rent,
additional rent and other charges herein reserved for the balance of the term of
this Lease (taken without regard to any early termination of said term on
account of default), a sum equal to the Accelerated Rent Component (as
hereinafter defined) and Tenant shall pay such amount in equal monthly
installments during the remaining Term on the days on which rent is payable in
accordance with Section 3;
            ii)         whether or not Landlord has elected to recover the
Accelerated Rent Component, terminate this Lease on at least an additional five
(5) days' written notice to Tenant, whereupon on the date specified in this
notice, this Lease and the Initial Term and any extensions thereof and all
rights of Tenant under it shall expire and terminate and Tenant shall thereupon
quit and surrender possession of the Premises to Landlord in as good order and
condition as at the inception of the term of this Lease (or in such condition as
the same hereafter may be improved by Landlord or Tenant), reasonable wear and
damage by fire or other casualty and repairs which are Landlord's obligation
excepted. As a cumulative and alternative remedy of Landlord, in the event of
termination of this Lease by Landlord following any Event of Default by Tenant,
Landlord, at its option, shall be entitled to recover damages for such breach in
an amount equal to (x) the Accelerated Rent Component (determined from and after
the date of Landlord's election under this Subsection B(ii) less (y) the fair
rental value of the Premises for the remainder of the term of this Lease (taken
without regard to the early termination) discounted to present value on the
basis of a discount rate equal to 200 basis points above the "Prime Rate"
announced by First Union Bank at the time of demand by Landlord to recover these
damages, and such damages shall be payable by Tenant upon demand.

         C.       ACCELERATED RENT COMPONENT. For purposes of this Lease, the
"Accelerated Rent Component" shall mean the aggregate of:

                                       17
<PAGE>

            i)          all rent and other charges, payments, costs and
expenses due from Tenant to Landlord and in arrears at the time of the
election of Landlord to recover the Accelerated Rent Component;

           ii)          the rent reserved for the then entire unexpired
balance of the term of this Lease (computed without regard to any early
termination of the term by virtue of any default), plus all other charges,
payments, costs and expenses herein agreed to be paid by Tenant up to the end
of said term which shall be capable of precise determination at the time of
Landlord's election to recover the Accelerated Rent Component, discounted to
present value on the basis of a discount rate equal to 200 basis points above
the "Prime Rate" announced by First Union Bank at the time of the election by
Landlord to recover the Accelerated Rent Component.

         D.       CONTINUING LIABILITY. Tenant shall, with respect to all
periods of time up to and including the scheduled expiration or earlier
termination of this Lease remain liable to Landlord.

         E.       CUMULATIVE RIGHTS. All rights and remedies of Landlord
enumerated in this Section 20. shall be cumulative and none shall exclude any
other right or remedy. In addition to the other remedies provided in this Lease,
Landlord shall be entitled to seek an injunction restraining a violation or
attempted violation of any of the covenants, agreements or conditions of this
Lease.

         F.       SURRENDER OF POSSESSION. Upon termination of this Lease,
Tenant shall surrender possession and vacate the Premises immediately and
deliver possession to Landlord, and Tenant hereby grants to Landlord full and
free license to enter into and upon the Premises in such event with due process
of law and to repossess the Premises and in accordance with applicable law to
expel or remove Tenant and any others who may be occupying or within the
Premises in accordance with applicable law and to remove any and all property
from it, without being deemed in any manner guilty of trespass, eviction or
forcible entry or detainer and without relinquishing Landlord's right to rent or
any other right given to Landlord hereunder or by operation of law.

                                       18
<PAGE>

         G.       WAIVER OF DEFENSES. Tenant expressly waives:

            i)          The right to ten days, fifteen days or thirty days
notice required under certain circumstances by the Pennsylvania Landlord and
Tenant Act of 1951, as amended, Tenant hereby agreeing that the respective
notice periods provided for in this Lease shall be sufficient in either or
any such case.

           ii)          The right to trial by jury in any action, proceeding
or counterclaim brought by either of the parties hereto against the other on
or with respect to any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant hereunder,
Tenant's use or occupancy of the Premises, and/or any claim of injury or
damage.

         H.       REMOVAL OF PROPERTY. Following a termination of this Lease by
reason of default by Tenant beyond the expiration of the applicable notice and
cure periods any and all property which may be removed from the Premises by
Landlord pursuant to the authority of this Lease or by law, to which Tenant is
or may be entitled, may be handled, removed or stored by Landlord at the risk,
cost and expense of Tenant, and Landlord shall in no event be responsible for
its value, preservation or safekeeping. Tenant shall pay to Landlord, upon
demand, any and all expenses incurred in connection with such removal and all
storage charges applicable to such property so long as the same shall be in
Landlord's possession or under Landlord's control. Any such property of Tenant
not removed from the Premises or retaken from storage by Tenant within fifteen
(15) days after the end of the earlier of either the term of this Lease or of
Tenant's right of possession of the Premises, however terminated, shall be
conclusively deemed to have been forever abandoned by Tenant and may be retained
by Landlord as its property or may be disposed of in such manner as Landlord may
see fit.

         I.       NO DUTY TO RELET. Landlord shall in no event be responsible or
liable for any failure to relet the Premises or any part of it, or for any
failure to collect any rent due upon any reletting, although Landlord shall use
its best efforts to re-let the Premises.

                                       19
<PAGE>

         J.       BANKRUPTCY. Nothing contained in this Lease shall limit or
prejudice the right of Landlord to prove for and obtain as damages incident to a
termination of this Lease in any bankruptcy, reorganization or other court
proceedings, the maximum amount allowed by any statute or rule of law in effect
when such damages are to be proved. Subject to the United States Bankruptcy Code
the determination by Tenant to request relief under any insolvency proceeding,
including any state or federal insolvency, bankruptcy, creditor adjustment or
debtor rehabilitation laws, terminates the estate created in Tenant and the
Premises shall not become an asset in any such proceedings. In the event of such
a determination by Tenant, Landlord shall have, without need of further notice,
the rights enumerated in this Paragraph 20.

         K.       LANDLORD'S RIGHT TO CURE. Tenant agrees that if it shall at
any time fail to make any payment or perform any other act on its part to be
made or performed under this Lease beyond the expiration of the applicable
notice and cure period, Landlord may, but shall not be obligated to, after
written notice and demand to Tenant and without waiving or releasing Tenant from
any of its obligations under this Lease, make such payment or perform such other
act to the extent Landlord may deem desirable and in that connection, to pay
expenses and employ legal counsel. All sums paid by Landlord pursuant to this
subparagraph and all expenses in connection with it, together with interest at
First Union Bank's prime rate of interest plus two percent (2%) per annum
calculated from the date of payment by Landlord, shall be deemed to be
additional rent and shall be payable upon demand by Landlord and Landlord shall
have the same right and remedies for its nonpayment as in the case of default in
the payment of rent.

         L.       If Tenant is in default of this Lease for the same or
substantially the same reason more than three times during any twelve (12) month
period, then Tenant shall not have any right to cure such repeated default, the
terms and conditions of subsections (A) (i) and (ii) of the section of this
Lease entitled, "DEFAULT OF TENANT/LANDLORD'S RIGHTS AND REMEDIES",
notwithstanding. In such event, Landlord shall have available to it and may
exercise all remedies provided for in that section of this Lease for an uncured
default.

         M.       POSSESSORY CONFESSION OF JUDGMENT. WHEN THIS LEASE AND ITS
TERM SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY EVENT OF DEFAULT AND ALSO WHEN
THE TERM HEREBY CREATED SHALL HAVE EXPIRED,

                                       20
<PAGE>

AND IN BOTH EVENTS UPON AN ADDITIONAL FIVE (5) DAYS WRITTEN NOTICE TO TENANT, IT
SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR AS ATTORNEY
FOR LESSEE AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER LESSEE AND
TO SIGN AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION IN
EJECTMENT AGAINST LESSEE AND ALL PERSONS CLAIMING BY, THROUGH OR UNDER LESSEE
AND TO CONFESS JUDGMENT FOR THE RECOVERY BY LESSOR OF POSSESSION OF THE
PREMISES, FOR WHICH THIS LEASE SHALL BE SUFFICIENT WARRANT. THEREUPON, IF LESSOR
SO DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE PROMPTLY, WITHOUT ANY
PRIOR WRIT OR PROCEEDING WHATSOEVER, PROVIDED THAT IF FOR ANY REASON AFTER SUCH
ACTION SHALL HAVE BEEN COMMENCED IT SHALL BE DETERMINED THAT POSSESSION OF THE
PREMISES SHOULD REMAIN OR BE RESTORED TO LESSEE, LESSOR SHALL HAVE THE RIGHT FOR
THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE
TERMINATION OF THIS LEASE OR OF LESSEE'S RIGHT OF POSSESSION TO BRING ONE OR
MORE FURTHER AMICABLE ACTION OR ACTIONS TO RECOVER POSSESSION OF THE PREMISES
AND TO CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION OF THE PREMISES AS
PROVIDED. NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, THE
RIGHT OF LESSOR TO INITIATE AN AMICABLE ACTION IN EJECTMENT AS SPECIFIED ABOVE
SHALL NOT PRECLUDE OR LIMIT LESSOR'S RIGHT TO INITIATE AN AMICABLE ACTION FOR
RENT (INCLUDING BUT NOT LIMITED TO, ALL UNPAID RENT FOR THE BALANCE OF THE TERM
OF THIS LEASE).

         N.       AFFIDAVITS. IN ANY AMICABLE ACTION OF EJECTMENT, LESSOR
SHALL FIRST CAUSE TO BE FILED IN SUCH ACTION AN AFFIDAVIT MADE BY LESSOR OR
SOMEONE ACTING FOR LESSOR, SETTING FORTH THE FACTS NECESSARY TO AUTHORIZE THE
ENTRY OF JUDGMENT AND IF A TRUE COPY OF THIS LEASE (AND OF THE TRUTH OF THE
COPY SUCH AFFIDAVIT SHALL BE SUFFICIENT EVIDENCE) SHALL BE FILED IN SUCH
SUIT, ACTION OR ACTIONS, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A
WARRANT OF ATTORNEY, ANY RULE OF COURT, CUSTOM OR PRACTICE TO THE CONTRARY
NOTWITHSTANDING.

21.      NO WAIVER OF BREACH

         No failure or neglect by either party to assert or enforce any rights
or remedies because of any breach or default by the other hereunder shall
prejudice or affect their respective rights and remedies with respect to any
subsequent breaches or defaults.

22.      DEFAULT OF LANDLORD/TENANT'S RIGHTS AND REMEDIES.

         A.       The occurrence of any one or more of the following events
shall constitute a default (herein, a "Landlord's Default") by Landlord:

                                       21

<PAGE>

            1.          The failure by Landlord to make any payment required to
be made by Landlord under this Lease, and Landlord's failure to cure such
failure either by the payment of money, by the posting of a bond or by the
commencement of litigation against the party claiming the obligated payment is
due, within thirty (30) days after written notice of such failure by Tenant;

            2.          The failure by Landlord to observe or perform any of its
other obligations under this Lease, and Landlord fails to cure such failure
within thirty (30) days after written notice of such failure by Tenant provided,
however that if the nature of Landlord's default is such that more than thirty
(30) days are reasonably required for its cure, then Landlord shall not be
deemed to be in default if Landlord shall commence such cure promptly and shall
thereafter diligently prosecute such cure to completion as soon as reasonably
possible.

            B.          Upon the occurrence of a Landlord's Default, Tenant may,

at its option, cure the Landlord's Default as follows:

            1.          If the Tenant elects to cure a default with respect to
Landlord's maintenance and repair obligation, Tenant shall, prior to the
commencement of any maintenance or repair work, provide Landlord with the
following information: (a) a specific description of the work proposed to be
performed by Tenant, (b) the name of Tenant's contractor; the Tenant's
contractor shall be subject to Landlord's prior written approval, which approval
shall not be unreasonably withheld or delayed, (c) a copy of the contract
between Tenant and Tenant's contractor, (d) certificates of builders risk
insurance and liability insurance in reasonably satisfactory amounts, naming
Landlord and Tenant as additional insureds, (e) a certificate evidencing the
contractor's worker's compensation insurance in coverages as required by law,
(f) a waiver of liens by Tenant's contractor in recordable form, (g) evidence
that the waiver of liens has been properly recorded prior to the commencement of
the work, (h) if the work requires that equipment and materials be stored
outside the Building, then a drawing by Tenant showing the proposed location of
the staging area for such equipment and materials. The location of the staging
area shall interfere as little as possible with Landlord's parking area and with
ingress and

                                       22
<PAGE>

egress to and from the Building by other tenants thereof, and shall otherwise be
subject to Landlord's prior written approval and (i) if the budgeted or
contracted cost of the work exceeds fifty thousand dollars ($50,000.), then a
satisfactory completion bond shall also be provided. All materials used shall be
of at least equal quality with respect to those currently existing at the
Premises.

            2.          If the Tenant elects to cure a Landlord's Default under
Section 22.A.1. above, Tenant shall provide Landlord in writing with a specific
description of the defaulted obligation, and the approximate amount necessary to
cure same. Landlord shall then have an additional period of thirty (30) days
within which to cure said default either by the payment of money, the posting of
a bond or the commencement of litigation against the party claiming the alleged
payment is due.

            3.          Landlord shall reimburse Tenant for the Tenant's actual
cost (the "Cost") to cure the Landlord's Default, promptly upon receipt of
written demand therefor from Tenant (accompanied by adequate invoices in
reasonable detail, supported by reasonable evidence substantiating the Cost and
substantiating Tenant's payment of the Cost). If the Landlord fails to pay the
Cost in full within thirty (30) days following Tenant's delivery of such written
demand as described above, then the Tenant may setoff or withhold the Cost,
together with interest thereon at First Union Bank's prime rate of interest plus
two percent (2%) per annum, from future rent until Tenant has received the full
amount of the Cost; provided, however that Tenant's right of setoff hereunder
shall not limit any of Tenant's other rights to otherwise recover from Landlord
the full amount of the Cost, plus interest.

23.      QUIET POSSESSION
         Landlord agrees that upon compliance with the terms and conditions of
this Lease, Tenant shall at all times have the right to quiet use and enjoyment
of the Premises and Tenant shall peaceably and quietly have, hold and enjoy the
Premises for the lease term provided herein and any extensions thereof.

24.      SURRENDER

                                       23
<PAGE>

         At the expiration of the term of this Lease or any extension thereof,
and subject to Section 6 hereinabove, Tenant shall surrender the Premises in the
same condition Tenant received them, reasonable wear and tear, ordinary
deterioration. and any damage caused by fire, the elements, or any other cause
or casualty excepted.

25.      STATUS OF PARTIES ON TERMINATION OF LEASE
         Notwithstanding anything provided elsewhere herein, if a party elects
to terminate this Lease pursuant to the provisions under this Lease, then on the
date the Lease terminates the parties shall be released from further liabilities
and obligations other than obligations which by their terms are to be performed
after Lease termination and other than payments specifically required under this
Lease to be prorated between the parties or paid to Tenant or Landlord upon or
after termination of the Lease.

26.      ASSIGNMENT AND SUBLETTING
         Tenant shall not voluntarily assign, transfer, mortgage, pledge,
hypothecate or encumber this Lease or any interest therein to any party other
than a parent, subsidiary, affiliate or successor in interest of Tenant and
shall not sublet the Premises or any part thereof to any party other than a
parent, subsidiary, affiliate or successor in interest of Tenant, or any right
or privilege appurtenant thereof, or allow any person (the employees, agents,
servants, customers, invitees, and parent, subsidiary, affiliate or successor in
interest to Tenant excepted) to occupy or use the Premises or any portion
thereof, without the prior written consent of the Landlord. A consent to one
assignment, subletting, occupation or use by one person shall not be deemed to
be a consent to any subsequent assignment, subletting, occupation or use by
another person. Consent to any such assignment or subletting shall not relieve
Tenant or any guarantor of Tenant's obligations hereunder of any liability under
this Lease. Notwithstanding the foregoing, Landlord may, among other reasons,
withhold its consent to an assignment or subletting if the business of the
proposed assignee or subtenant violates the Landlord's then existing policies
(if any) against contracting with or investing in certain categories of
businesses.

         Notwithstanding any provision contained herein to the contrary: (a) a
change in the ownership of more than 50% of the stock of Tenant as of the date
hereof, (b) any merger, consolidation or other business combination of, with or
involving Tenant, a subsidiary of Tenant

                                       24
<PAGE>

or a corporation or entity owning more than 50% of the stock of Tenant as of the
date hereof, items (a) and (b) within this subsection being hereinafter referred
to as "Corporate Transactions:; the purchaser of all or substantially all of
Tenant's assets, or the surviving entity following any one or more of the
remaining corporate transactions described herein, as assignee of this lease,
being herein sometimes referred to as a "Corporate Assignee") shall not require
Landlord's prior written consent, so long as Tenant's or the Corporate
Assignee's creditworthiness after the Corporate Transaction equals or exceeds
Tenant's creditworthiness as of the date of this Lease. Nothing in this Lease
shall limit or prohibit the initial public offering or subsequent trading of
Tenant's stock on a recognized securities exchange or market, or any change in
stock ownership or control resulting therefrom.

27.      NOTICES
         Whenever any notice, demand, approval, consent, request, or election is
given or made pursuant to this Lease, it shall be in writing. Communications of
Landlord shall be addressed: American Baptist Churches USA, North Gulph Road at
First Ave., King of Prussia, PA 19406, att: Cheryl Wade, with a copy to John S.
Randolph, Jr., Esq., 259 N. Radnor-Chester Road, Suite 200, Radnor, PA 19087, or
other such address as may have been specified by prior written notice by
Landlord to Tenant. Communications to Tenant shall be addressed to Infonautics
Corporation, 590 North Gulph Road, Valley Forge, Pennsylvania 19482, attn:
Gerard J. Lewis, Vice President and General Counsel and attn: Federica O'Brien,
CFO with a copy to Morgan, Lewis & Bockius LLP, 1701 Market Street,
Philadelphia, Pennsylvania 19103, attn: Basil S. Donnelly, Esquire or to such
other address as may have been specified by prior written notice to Landlord.
Any communications so addressed shall be deemed given when received and shall be
deemed received when delivered by express, registered, or certified mail, or by
nationally recognized overnight courier, or delivered by hand, or by facsimile
transmission (Landlord's fax number is 610-768-2275 and Tenant's fax number is
610-971-8859.).

28.      ATTORNEYS' FEES
         Should any party hereto employ an attorney for the purpose of
enforcing, construing, or declaring rights under this Lease, in any legal
proceeding whatsoever, including bankruptcy, arbitration, declaratory relief or
other litigation, the prevailing party shall be entitled to receive

                                       25
<PAGE>

from the other party or parties thereto reimbursement for all reasonable
attorneys' fees and all costs, including but not limited to, service of process,
filing fees, court and court reporter costs, investigative costs, expert witness
fees, and the cost of any bonds, whether taxable or not. and that such
reimbursement shall be included in any judgment or final order issued in the
proceeding. The "prevailing party" means the party determined by the court to
most nearly prevail.

29.      HOLDING OVER

         A.       In the event Tenant does not immediately surrender the
Premises on the date of expiration of the Initial Term or Renewal Term, as
applicable, Tenant shall, by virtue of this paragraph of the Lease, become a
month to month Tenant.

         B.       Tenant hereby agrees to pay to Landlord as rent during its
tenancy after the expiration of the Initial Term or Renewal Term, as applicable,
a monthly amount equal to (i) one and one-half (1.50) times the amount of the
rent in effect during the last month of the applicable Initial Term or Renewal
Term, if the Landlord has not consented in writing to such holdover Tenancy. In
addition to the rent provided for above, Tenant shall be liable for all costs,
losses, claims and liabilities (including reasonable attorney's fees) which
Landlord may incur as a result of Tenant's failure to surrender possession of
the Demised Premises to Landlord at the expiration of the Initial Term or
Renewal Term, as applicable, including any costs arising from instigation and
prosecuting proceedings to dispossess Tenant. Rent assessed to Tenant under this
paragraph shall not be deemed liquidated damages for Landlord's losses resulting
from Tenant's holdover.

         C.       In the event Tenant holds over after the expiration of the
Initial Term or Renewal Term and Landlord desires to regain possession of the
Premises promptly at the expiration of the Initial Term or Renewal Term, as
applicable, then at any time prior to Landlord's acceptance of the rent
specified in subparagraph 29. B above from Tenant, Landlord, at its option, may
forthwith reenter and take possession of the Premises by any legal process in
force in the Commonwealth of Pennsylvania.

                                       26
<PAGE>

30.      TIME OF ESSENCE
         Time is of the essence of this Lease and each and all of its provisions
in which performance is a factor.

31.      SUCCESSORS AND ASSIGNS
         The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

32.      CUMULATIVE REMEDIES
         No remedy or election hereunder shall be deemed exclusive but shall be
cumulative with all other remedies in law or equity.

33.      TERMS AND HEADINGS
         The titles of the paragraphs of this Lease are for convenience of
reference only and are not to be considered in construing this Lease.

34.      ENTIRE AGREEMENT
         This Lease and Exhibits A, B, C, D, E, F and G attached hereto, contain
the entire agreement of the parties and no representations, inducements,
promises, or agreements oral or otherwise, not embodied herein shall be of any
force or effect.

35.      REPRESENTATIONS AND WARRANTIES.
         A.       Each signatory executing this Lease represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
the Landlord or Tenant, as applicable, and that the signatory's authority is in
accordance with the law and is binding upon the Landlord or Tenant accordingly.
This Lease shall be valid and legally binding upon the parties when this Lease
has been properly executed on behalf of all of the parties.

         B.       Landlord represents and warrants to Tenant that Landlord is
the fee owner of the Building and that as of the date hereof there are no
mortgages, deeds of trust or other security instruments encumbering the Building
which secure indebtedness of Landlord, and that there are

                                       27
<PAGE>

no private restrictions encumbering the Building which will affect Tenant's use
of the Premises permitted under Section 5. hereof.

36.      CONTROLLING LAW

         This Lease shall be construed and enforced in accordance with the laws
of the Commonwealth of Pennsylvania.

37.      MISCELLANEOUS
         A.       Landlord and Tenant each represent and warrant one to each
other that, except as hereinafter set forth, neither of them has employed any
broker in carrying on the negotiations, or had any dealings with any broker,
relating to this Lease. Landlord represents that it has employed Insignia/ESG,
Inc. as its broker and Tenant represents that it is represented by Julien J.
Studley, Inc., Landlord agrees to pay the commissions accruing to Insignia/ESG,
and to Julien J. Studley, pursuant to certain outside agreements. Landlord shall
indemnify and hold Tenant harmless, and Tenant shall indemnify and hold Landlord
harmless, from and against any claim or claims for brokerage or other commission
arising from or out of any breach of the foregoing representations and
warranties by the respective indemnitor.

         B.       If Landlord shall be in default under this Lease or shall
otherwise incur any liability to Tenant, and if as consequence thereof Tenant
obtains a judgment against Landlord, such judgment shall be satisfied only
against the Building and the rents, issues, profits and proceeds therefrom. In
no event shall Tenant have the right to levy execution against any property of
Landlord other than the Building.

         C.       Notwithstanding any provision in this Lease, in no event shall
Landlord or Tenant be liable for any indirect or consequential damages in
connection with this Lease, the use of the Property or for any other reason
whatsoever. Any damages specifically identified, referred to or described in
this Lease shall not be deemed to be "indirect" or "consequential" damages
within the meaning of this subsection.

                                       28
<PAGE>

38.      HAZARDOUS SUBSTANCES

         A.       As of the date of this Lease, Landlord represents to Tenant
that, to the best of Landlord's knowledge, there are no Hazardous Substances in,
under or upon the Premises as of the date hereof. In the event any Hazardous
Substances are discovered in, under or upon the Premises and are not introduced
into the Premises by Tenant, Tenant shall so notify Landlord and request that
Landlord remediate the Premises. If the Landlord elects to so remediate,
Landlord shall so notify Tenant within thirty (30) days after such notice from
Tenant, whereupon Landlord shall promptly remediate the Premises pursuant to all
applicable laws and Tenant shall receive a proportionate abatement of rent until
the Premises are completely restored and Tenant has received reasonable evidence
that the remediation is complete. In the event Landlord fails to promptly
remediate such Hazardous Substances or fails to diligently prosecute such
remediation or in the event more than thirty-five percent (35%) of Tenant's
business operation (in Tenant's reasonable opinion) is adversely affected as a
result of such Hazardous Substances (or the remediation thereof), Tenant shall
have the right to terminate this Lease upon fifteen (15) days' written notice to
Landlord. "Hazardous Materials" shall mean and include any and all substances,
chemicals, wasters, sewage, or other materials that are now or hereafter
regulated, controlled, or prohibited by any local, state or federal law or
regulation, requiring removal, warning, or restrictions on the use, generation,
disposal or transportation thereof including, without limitation, (i) any
substance defined as a "hazardous substance", "Hazardous material", "hazardous
waste", "toxic substance", or "air pollutant" in the Comprehensive Environmental
Response, Compensation and Liability Act, ("CERCLA"), 42 U.S.C. Section 9501,
set seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
set seq., the Resource Conservation and Recovery Act, ("RCRA"), 42 U.S.C.
Section 6901, set seq., the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, set seq., or the Clear Air Act, 42 U.S.C. Section 7401, set seq.,
all as amended and amended hereafter, and (ii) any hazardous substances,
hazardous wastes, toxic substances, toxic wastes, hazardous material, wastes,
chemical, or compound described in any other federal, state or local stature,
ordinance, code, rule, regulation or other laws now or at any time hereafter in
effect regulating, relating to or imposing liability or standards or conduct
concerning any hazardous, toxic, or dangerous substance, chemical, material,
compound or waste.

                                       29
<PAGE>

         B.       Tenant shall not cause nor permit Hazardous Substances to be
used, transported, stored, released, handled, produced or installed in, or from,
the Premises, except that inflammable or combustible (but not explosive) items
may be brought into and used within the Premises as may be needed for the
operation of normal office equipment, so long as both are in compliance with all
laws and governmental requirements.

39.      FORCE MAJEURE

         It shall be a force majeure event if either party hereto shall be
delayed or prevented from the performance of any act required hereunder (other
than the payment by Tenant of rent or additional rent, or the determination of
the Commencement Date) by reason of acts of God, labor disputes, civil
commotion, war, fire or other casualty, inability to procure materials,
governmental regulations, statues, ordinances, restrictions or decrees, or other
causes beyond the control of the party so obligated (financial inability
excepted), and the period for the performance of any such acts shall be extended
for a period equivalent to the period of such delay, but in no event shall any
such extension exceed a period of sixty (60) days.

         IN WITNESS WHEREOF, the parties have caused this Lease to be executed
on the day and year first written hereinabove.

LANDLORD:                                TENANT:

AMERICAN BAPTIST CHURCHES USA            INFONAUTICS CORPORATION.

By: /s/ Cheryl H. Wade                   By: /s/ Van Morris
    -----------------------------            ---------------------------------

Title: Associate General Secretary       Title: CEO
       and Treasurer                            ------------------------------
       ---------------------------

                                       30
<PAGE>

                                    EXHIBIT A

                                       31
<PAGE>

                                    EXHIBIT B

            SCHEDULE OF TENANT'S WORK TO BE PERFORMED AT THE PREMISES

                                       32
<PAGE>

                                    EXHIBIT C

                            TERM COMMENCEMENT LETTER

                                                       __________________, 2000

--------------------------
--------------------------
--------------------------

RE:      LEASE AGREEMENT DATED ____________ BETWEEN
         AMERICAN BAPTIST CHURCHES USA AND INFONAUTICS CORPORATION,
         590 NORTH GULPH ROAD, VALLEY FORGE, PENNSYLVANIA

DEAR ___________________:

The purpose of this letter is to confirm the commencement and termination dates
under the terms of the referenced Lease. In this regard, we would appreciate
your cooperation in verifying the lease dates.

Commencement Date: ____________________
Term: 3 years

If these lease dates are accurate, please execute the duplicate original of this
letter and return same to the undersigned at the address shown above.

I appreciate your prompt attention to this matter.

Very truly yours,

The above dates and renewal option privileges are accurate and are hereby
acknowledged.

---------------------------                 -------------------------
By:                                         Date:

                                       33
<PAGE>

                                    EXHIBIT D

                                    SIGN PLAN

                                       34
<PAGE>

                                    EXHIBIT E

                      SITE PLAN SHOWING PARKING FACILITIES

                                       35
<PAGE>

                                    EXHIBIT F

                            PLANS AND SPECIFICATIONS

                                       36
<PAGE>

                                    EXHIBIT G

                           TENANT ESTOPPEL CERTIFICATE

RE:      590 North Gulph Road, Valley Forge, Pennsylvania 19482

To Whom It May concern:

____________________________ ("Landlord") and __________________________
("Tenant") entered into a Lease dated _________ for a portion of the
above-referenced premises (the "Premises"), a true and complete copy of which is
attached hereto (the "Lease"). At the request of the Landlord, the undersigned
certifies that as of the date hereof:

         1.       The Lease is in full force and effect and has not been amended
or terminated.

         2.       The current monthly rent is $________.

         3.       Tenant has paid the rent due and payable under the terms of
the Lease through and including _________, 20___.

         4.       Tenant has no offsets or claims against the payment of rent or
other charges due under the Lease other than _____________ (if none, add none).

         5.       To the best knowledge of Tenant as of the date of this
certificate, Landlord is not in default in the performance of any covenant,
agreement or condition contained in the Lease, and the undersigned knows of no
event which, with notice and the passage of time or both, could result in such a
default.

         6.       To the best knowledge of Landlord as of the date of this
certificate, Tenant is not in default in the performance of any covenant,
agreement or condition contained in the Lease, and the undersigned knows of no
event which, with notice and the passage of time or both, could result in such a
default.

         7.       The Lease term expires on _____________, and there are two (2)
renewal options under the Lease to extend the term each for three (3) years.

         8.       No rent has been paid more than one month in advance.

         9.       The amount of the security deposit presently held by Landlord
is $_______.

         10.      The person or persons executing this document on behalf of the
undersigned have the power and authority to execute this document.

                                     -------------------------------------------

                                      By:
                                     -------------------------------------------
Dated: _________________, 20___

                                       37<PAGE>

                                                                    Exhibit 10.1

                                  OFFICE LEASE

                          PACIFIC PLAZA AT TORREY HILLS

                                  (Building A)

                        PACIFIC PLAZA CARMEL VALLEY LLC,
                     a California limited liability company

                                  as Landlord,

                                       and

                                 JNI CORPORATION

                             a Delaware corporation

                                    as Tenant

                                  July 11, 2000

<PAGE>

                             BASIC LEASE INFORMATION
                                  OFFICE LEASE

Lease Date:           July 11, 2000

Landlord:             Pacific Plaza Carmel Valley LLC, a California limited
                      liability company

Managing Agent:       Coast Income Properties, Inc., a California corporation

Landlord's Address:   c/o Coast Income Properties, Inc.
                      4350 La Jolla Village Drive, Suite 150
                      San Diego, California 92122

Tenant:               JNI Corporation, a Delaware corporation

Tenant's Address:     9775 Towne Centre Drive
                      San Diego, California
                      Until April 1, 2001; thereafter:
                      10945 Vista Sorrento Parkway
                      San Diego, California

Legal Description of
Land:                 See Exhibit "A"

Premises:             The entire three(3) floors of a
                      three-story building located at 10955
                      Vista Sorrento Parkway, San Diego,
                      California (the "Building"), in that
                      development commonly known as Pacific
                      Plaza at Torrey Hills (the "Project").
                      The Building is sometimes herein referred
                      to as Building B of the Project.

Rentable Area of the
Premises:             Approximately 57,323 rentable square feet.

Rentable Area of the
Building:             Approximately 57,323 rentable square feet.

Rentable Area of the
Project:              Approximately 214,848  rentable square feet.

Usable Area of the
Premises:             Approximately 51,774 usable square feet.

Usable Area of the
Building:             Approximately 51,774 usable square feet.

Permitted Uses:       General office purposes,  plus  approximately  twenty
                      percent (20%) computer laboratory/light assembly area.

Term:                 Five (5) years.

Estimated Term
Commencement Date:    April 1, 2002.

                                       i
<PAGE>

Base Rent:

LEASE
 YEAR             BASE RENT                         ANNUAL BASE RENT

  1     $ 2.45 per rentable sq. ft./month    $29.45  per rentable sq. ft./year
  2     $ 2.50 per rentable sq. ft./month    $30.00  per rentable sq. ft./year
  3     $ 2.55 per rentable sq. ft./month    $30.60  per rentable sq. ft./year
  4     $ 2.60 per rentable sq. ft./month    $31.20  per rentable sq. ft./year
  5     $ 2.65 per rentable sq. ft./month    $31.80  per rentable sq. ft./year

                    FIRST OPTION TERM

  6     $ 2.7265 per rentable sq. ft./month  $32.75  per rentable sq. ft./year
  7     $ 2.8114 per rentable sq. ft./month  $33.74  per rentable sq. ft./year
  8     $ 2.8957 per rentable sq. ft./month  $34.75  per rentable sq. ft./year
  9     $ 2.9826 per rentable sq. ft./month  $35.79  per rentable sq. ft./year
 10     $ 3.0721 per rentable sq. ft./month  $36.87  per rentable sq. ft./year

Base Calendar Year:             2002

Tenant's  Project Share of
Project Operating Expenses:     26.7%

Tenant's Building Share of
Building Operating Expenses:    100%

Security Deposit:               See Section 4.05 and Exhibit G, Section 19.02.

Broker:                         CB Richard Ellis, Inc. representing Landlord,
                                and Kelley Commercial, Inc. representing Tenant.

Business Hours:                 6:00 a.m. to 6:00 p.m., Monday through Friday,
                                and 9:00 a.m. to 12:00 noon on Saturdays,
                                holidays being those days designated as Federal
                                Holidays pursuant to 5 U.S.C. ss.6103, other
                                than Columbus Day ("Holidays").

Broker's Fee paid by:           Pacific Plaza Carmel Valley LLC, a California
                                limited liability company.

/ / /

/ / /

/ / /

/ / /

                                       ii
<PAGE>

The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the terms above shall
mean the respective information hereinabove set forth and shall be construed to
incorporated all of the terms provided under the particular paragraph pertaining
to such information. In the event of any conflict between any Basic Lease
Information and the Lease, the latter shall control.

LANDLORD:                                       TENANT:

PACIFIC PLAZA CARMEL VALLEY LLC,                JNI CORPORATION, a Delaware
a California limited liability company,         corporation
By: COAST PACIFIC PLAZA LLC,
    a California limited liability company,     By:
    Its Manager                                 Name:
    By: COAST INCOME PROPERTIES, INC.,          Its:
        a California corporation, Its Manager       --------------------

        By:                                     By:
                                                Name:
            Thomas G. Blake, President          Its:
                                                    --------------------

                                      iii
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                                                        PAGE
<S>                                                          <C>
1.       PREMISES.................................................................................................1
                  1.01     PREMISES...............................................................................1
                  1.02     EXHIBITS...............................................................................1
                  1.03     COMMON AREAS...........................................................................1
                  1.04     LANDLORD'S RESERVED RIGHTS IN COMMON AREAS AND PROJECT.................................1
                  1.05     RENTABLE AREA..........................................................................2
                  1.06     TENANT'S PARKING ENTITLEMENTS..........................................................3
                  1.07     CONDITION OF PREMISES..................................................................3

2.       TENANT'S IMPROVEMENTS....................................................................................3
                  2.01     PLANS..................................................................................3
                  2.02     TENANT IMPROVEMENT ALLOWANCE...........................................................4
                  2.03     CONSTRUCTION...........................................................................4
                  2.04     FAILURE TO COMPLETE CONSTRUCTION.......................................................4

3.       TERM.....................................................................................................5
                  3.01    COMMENCEMENT OF TERM....................................................................5
                  3.02    EARLY OCCUPANCY.........................................................................5
                  3.03    NOTICE OF LEASE DATES...................................................................5
                  3.04    OPTION TO EXTEND TERM...................................................................5
                  3.05    DAYS....................................................................................6

4.       RENT.....................................................................................................6
                  4.01    BASE RENT...............................................................................6
                  4.02    ADDITIONAL RENT.........................................................................8
                  4.03    ESCALATION..............................................................................8
                  4.04    LATE PAYMENT............................................................................8
                  4.05    SECURITY DEPOSIT........................................................................8

5.       INSURANCE................................................................................................8
                  5.01    ALL RISK COVERAGE.......................................................................8
                  5.02    LIABILITY COVERAGE......................................................................9
                  5.03    WORKER'S COMPENSATION INSURANCE.........................................................9
                  5.04    BUSINESS INTERRUPTION INSURANCE.........................................................9
                  5.05    INSURANCE CERTIFICATES.................................................................10
                  5.06    TENANT'S FAILURE.......................................................................10
                  5.07    WAIVER OF SUBROGATION..................................................................10
                  5.08    TENANT'S PROPERTY AND FIXTURES.........................................................10
                  5.09    INDEMNIFICATION........................................................................10
                  5.10    EARTHQUAKE AND FLOOD INSURANCE.........................................................11
                  5.11    OTHER TENANT INSURANCE COVERAGE........................................................11

6.       OPERATING EXPENSES......................................................................................11
                  6.01    TENANT'S SHARE.........................................................................11
</TABLE>

                                       iv
<PAGE>

<TABLE>
<S>                                                                                                              <C>
                  6.02    DEFINITION OF OPERATING EXPENSES.......................................................12
                  6.03    PRORATION..............................................................................16
                  6.04    SURVIVAL...............................................................................17
                  6.05    ESTIMATED PAYMENTS.....................................................................17
                  6.06    ADJUSTMENT.............................................................................17
                  6.07    IMPOSITIONS............................................................................17
                  6.08    SERVICES AND UTILITIES.................................................................18

7.       REPAIRS AND MAINTENANCE.................................................................................19
                  7.01    TENANT REPAIRS AND MAINTENANCE.........................................................19
                  7.02    LANDLORD REPAIRS AND MAINTENANCE.......................................................19
                  7.03    INSPECTION OF PREMISES.................................................................19
                  7.04    LIENS..................................................................................19

8.       FIXTURES, PERSONAL PROPERTY AND ALTERATIONS.............................................................20
                  8.01    FIXTURES AND PERSONAL PROPERTY.........................................................20
                  8.02    ALTERATIONS............................................................................20
                  8.03    REMOVAL OF ALTERATIONS.................................................................21
                  8.04    MINOR ALTERATIONS......................................................................21

9.       USE AND COMPLIANCE WITH LAWS............................................................................21
                  9.01    GENERAL USE AND COMPLIANCE WITH LAWS...................................................21
                  9.02    SIGNS..................................................................................21
                  9.03    PARKING ACCESS.........................................................................22
                  9.04    FLOOR LOAD.............................................................................22
                  9.05    DELIVERIES.............................................................................22

10.      DAMAGE AND DESTRUCTION..................................................................................22
                  10.01   RECONSTRUCTION.........................................................................22
                  10.02   RENT ABATEMENT.........................................................................22
                  10.03   REPAIR PERIOD NOTICE...................................................................23
                  10.04   EXCESSIVE DAMAGE OR DESTRUCTION/OPTION TO TERMINATE....................................23
                  10.05   UNINSURED CASUALTIES AND OTHER CONDITIONS/OPTION TO TERMINATE..........................23
                  10.06   WAIVER.................................................................................23

11.      EMINENT DOMAIN..........................................................................................23
                  11.01   TOTAL CONDEMNATION.....................................................................23
                  11.02   PARTIAL CONDEMNATION...................................................................23
                  11.03   LANDLORD'S AWARD.......................................................................24
                  11.04   TENANT'S AWARD.........................................................................24
                  11.05   TEMPORARY CONDEMNATION.................................................................24
                  11.06   NOTICE AND EXECUTION...................................................................24

12.      DEFAULT.................................................................................................24
                  12.01   EVENTS OF DEFAULT......................................................................24
                  12.02   LANDLORD'S REMEDIES....................................................................25

13.      ASSIGNMENT AND SUBLETTING...............................................................................26
                  13.01   ASSIGNMENT AND SUBLETTING; PROHIBITION.................................................26
                  13.02   BONUS RENTAL...........................................................................27
                  13.03   SCOPE..................................................................................27
                  13.04   WAIVER.................................................................................27
</TABLE>

                                       v

<PAGE>

<TABLE>
<S>                                                                                                             <C>
                  13.05   RELEASE................................................................................28
                  13.06   RECAPTURE OF PREMISES..................................................................28

14.      HAZARDOUS MATERIALS.....................................................................................28
                  14.01   DEFINITIONS............................................................................28
                  14.02   USE....................................................................................29
                  14.03   COMPLIANCE WITH LAWS; HANDLING OF HAZARDOUS MATERIALS..................................29
                  14.04   COMPLIANCE WITH INSURANCE REQUIREMENTS.................................................30
                  14.05   INDEMNITY..............................................................................30
                  14.06   NOTICE.................................................................................30
                  14.07   DEFAULT................................................................................30
                  14.08   LANDLORD'S DISCLOSURE..................................................................30

15.      OFFSET STATEMENT, ATTORNMENT AND SUBORDINATION..........................................................31
                  15.01   ESTOPPEL CERTIFICATE...................................................................31
                  15.02   ATTORNMENT.............................................................................31
                  15.03   SUBORDINATION..........................................................................31
                  15.04   NON-DISTURBANCE........................................................................31

16.      NOTICES.................................................................................................31
                  16.01   NOTICES................................................................................31

17.      SUCCESSORS BOUND........................................................................................32
                  17.01   SUCCESSORS BOUND.......................................................................32

18.      MISCELLANEOUS...........................................................................................32
                  18.01   WAIVER.................................................................................32
                  18.02   EASEMENTS..............................................................................32
                  18.03   RELOCATION.............................................................................32
                  18.04   NO LIGHT, AIR OR VIEW EASEMENT.........................................................32
                  18.05   CORPORATE AUTHORITY....................................................................32
                  18.06   ACCORD AND SATISFACTION................................................................32
                  18.07   LIMITATION OF LANDLORD'S LIABILITY.....................................................33
                  18.08   TIME...................................................................................33
                  18.09   ATTORNEYS' FEES........................................................................33
                  18.10   CAPTIONS AND ARTICLE NUMBERS...........................................................33
                  18.11   SEVERABILITY...........................................................................33
                  18.12   APPLICABLE LAW.........................................................................34
                  18.13   SUBMISSION OF LEASE....................................................................34
                  18.14   HOLDING OVER...........................................................................34
                  18.15   SURRENDER..............................................................................34
                  18.16   RULES AND REGULATIONS..................................................................34
                  18.17   NO NUISANCE............................................................................34
                  18.18   BROKER.................................................................................34
                  18.19   LANDLORD'S RIGHT TO PERFORM............................................................35
                  18.20   MORTGAGE PROTECTION....................................................................35
                  18.21   NONLIABILITY...........................................................................35
                  18.22   MODIFICATION FOR LENDER................................................................35
                  18.23   RECORDING..............................................................................35
                  18.24   ENTIRE AGREEMENT.......................................................................36
                  18.25   ADDITIONAL LEASE PROVISIONS............................................................37
</TABLE>

                                       vi
<PAGE>

<TABLE>
<C>                                                                                                           <C>
19       ADDITIONAL LEASE PROVISIONS..........................................................................G - 1
         19.01    ADDITIONAL LEASE............................................................................G - 1
         19.02    LETTER OF CREDIT............................................................................G - 1
         19.03    INTENTIONALLY LEFT BLANK....................................................................G - 1
                  ------------------------
         19.04    INTENTIONALLY LEFT BLANK....................................................................G - 2
                  ------------------------
         19.05    CONFORMANCE TO WORK LETTER..................................................................G - 2
         19.06    USE OF ROOF.................................................................................G - 2
         19.07    ADDITIONAL PROVISIONS RELATING TO RULES AND REGULATIONS.....................................G - 2
</TABLE>

                                    EXHIBITS

Exhibit A -- Legal Description            Exhibit E -- Rules and Regulations
Exhibit B -- Building Floor Plans         Exhibit F -- Letter of Credit
Exhibit C -- Preliminary Plans            Exhibit G -- Addendum to Lease
Exhibit D -- Work Letter

                                      vii
<PAGE>

                                  OFFICE LEASE

         THIS LEASE ("Lease"), dated for reference and effective as of the 11th
day of July, 2000, made and entered into by and between PACIFIC PLAZA CARMEL
VALLEY LLC, a California limited company ("Landlord"), and JNI CORPORATION a
Delaware corporation ("Tenant"), for space in the building located at 10955
Vista Sorrento Parkway (the "Building") located in the City of San Diego, County
of San Diego, State of California, in that development commonly known as Pacific
Plaza at Torrey Hills (the "Project"), described more particularly on the Legal
Description, attached hereto as Exhibit A, shall be upon the terms and
conditions contained hereinafter.

1.        PREMISES

1.1 PREMISES. Landlord leases to Tenant, subject to the provisions of this
Lease, the Premises in the Building as set forth in the Basic Lease Information,
the usable space of which is shown on the Building Floor Plans, attached hereto
as Exhibit B. The rentable square feet of the Premises, Building and Project
shall be as set forth in the Basic Lease Information, subject however, to
adjustment as set forth in Section 1.05. By entering the Premises, Tenant shall
be deemed to accept the same (subject, however, to the provisions of Section
1.07) and subject to all applicable municipal, county, state and federal
statutes, laws, ordinances, including zoning ordinances, and regulations
governing and relating to the Tenant's use, occupancy or possession of the
Premises. Tenant acknowledges that the only warranties and representations
Landlord has made in connection with the physical condition of the Premises or
Tenant's use of the same upon which Tenant has relied directly or indirectly for
any purpose are those expressly provided in this Lease.

1.2 EXHIBITS. The following Exhibits are attached to this Lease after the
signatures and by reference thereto are incorporated herein:
                  Exhibit A         Legal Description
                  Exhibit B         Building Floor Plans and Site Plan
                  Exhibit C         Preliminary Plans
                  Exhibit D         Work Letter
                  Exhibit E         Letter of Credit
                  Exhibit F         Addendum to Lease

1.3 COMMON AREAS. Tenant shall have, as appurtenant to the Premises and subject
to reasonable rules and regulations from time to time made by Landlord the right
to the use of the following in common (the "Common Areas"):

                  (a) Building Common Area. The common stairways and accessways,
lobbies, entrances, stairs, elevators, maintenance and utility service areas and
any passageways thereto, and the common pipes, ducts, conduits, wires and
appurtenant equipment serving the Premises (`the "Building Common Areas");

                  (b) Project Common Area. The common walkways, sidewalks,
landscape areas, parking spaces and driveways necessary for access to the
Project and Parking Area (the "Project Common Areas"); and;

                  (c) Parking Area. The common area located in the Project
parking lot area ("Parking Area") as shown on Exhibit "B.".

1.4 LANDLORD'S RESERVED RIGHTS IN COMMON AREAS AND PROJECT. Landlord reserves
full control over the Common Areas to the extent not inconsistent with Tenant's
quiet enjoyment and use of the Premises. This reservation includes but is not
limited to right of Landlord, to grant easements and

                                       1

<PAGE>

licenses to others and the right to maintain or establish ownerships of the
Building separate from fee title to the land and other improvements in the
Project, to the extent not inconsistent with Tenant's quiet enjoyment and use of
the Premises as granted by this Lease. Tenant shall, should Landlord so request,
promptly join with Landlord in execution of such documents as may be reasonably
appropriate to assist Landlord to implement any such action provided Tenant need
not execute any document which is of a nature wherein liability is created in
Tenant or if, by reason of the terms of such document, Tenant may be deprived of
the quiet enjoyment and use of the Premises as granted by this Lease. Landlord
reserves the right from time to time to do any of the following, so long as
Landlord does not materially and unreasonably interfere with Tenant's use or
quiet enjoyment of the Premises as granted by this Lease:

(a) to install, use, maintain, repair, relocate and replace any pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to the Building
above the ceiling surfaces, below the floor surfaces, within the walls and in
the central core areas;

(b) to change the lines of the lot or lots on which the Project stands ("Lot")
and to redesign and restripe the parking facilities around the Building and make
other reasonable changes and grant other rights thereto, including without
limitation, the granting of easements, rights of way and rights of ingress and
egress and similar rights to users of parcels in or adjacent to the parcel on
which the Building is situated; and

(c) to alter or relocate any common areas or other facilities. Notwithstanding
the foregoing, Landlord shall not reduce the number of parking spaces in the
Parking Area by more than two percent (2%) without Tenant's approval. Landlord
reserves the right to grant exclusive use to portions of the Parking Area to
specific tenants subject to Tenant's rights to parking under Section 1.06.
Tenant's approval rights set forth in this Section 1.04 shall be effective only
for so long as Tenant and any Affiliate Transferee, in the aggregate, continue
to lease at least eighty percent (80%) of the Rentable Area in the Building.

1.5 RENTABLE AREA. As used in this Lease, the
Rentable Area of the Premises, Building and Project shall be the square footage
designated in the Basic Lease Information, subject however, to adjustment as set
forth in this Section 1.05.

                  (a) The term "Rentable Area" as used in this Lease shall mean
the floor rentable area and the term "Usable Area" as used in this Lease shall
mean the floor Usable Area as both terms are measured and determined applying
the Standard Method for Measuring Floor Area in Office Buildings" (ANSI/BOMA
Z65.1, 1996).

                  (b) The term "Rentable Area" when applied to Tenant is that
area equal to the Rentable Area of the Premises. The term "Usable Area" when
applied to Tenant is that area equal to the Usable Area of the Premises. The
term "Rentable Area," when applied to the Project, is that area equal to the
Rentable Area of the buildings in the Project, including the Building. The term
"Usable Area," when applied to the Project, is that area equal to the Usable
Area of the buildings in the Project, including the Building.

                  (c) The initial Rentable Area of the Premises, the Building
and the Project as set forth in the Basic Lease Provisions is an estimate of the
area which will, upon completion of development of the Building, constitute the
Rentable Area of the Premises, the Building and the Project, respectively. Due
to changes in configurations which may be required in connection with the
development of the Building and the Project, the Rentable Area set forth in the
Basic Lease Provisions for the Premises, the Building and the Project is subject
to modification. In the event the Rentable Area applicable to the Premises, the
Building or the Project differs from such initial Rentable Area, the Basic
Annual Rent, monthly installments of Basic Annual Rent. Tenant's Share of
Project Operating Expenses and Tenant's Share of Building Operating Expenses
shall be adjusted upward or downward, as applicable, based on the actual
Rentable Area of the Premises, the Building and the Project.

                  (d) Upon Substantial Completion of the Building Shell, the
square feet of Rentable Area in the Premises shall be field measured and
confirmed by the Project Architect (as defined in the Work Letter) and shall be
presented to Tenant in writing. Within ten (10) business days, Tenant shall
either accept or reject Landlord's calculation. If Tenant accepts such
calculation, it shall become conclusive and binding on Landlord and Tenant as to
the actual square feet of Rentable Area for the

                                       2

<PAGE>

Premises. If Tenant rejects such calculation, Tenant shall have the Building
field measured by Tenant's Architect (as defined in the Work Letter) using the
same measurement method. If the Rentable Area as determined by the Project
Architect and by Tenant's Architect differs by less than two hundred (200)
square feet, the Rentable Area as determined by the Project Architect shall be
conclusive and binding on Landlord and Tenant. If the Rentable area as
determined by the Project and by Tenant's Architect differs by more than two
hundred (200) square feet and the Project Architect and Tenant's Architect
cannot agree on the Rentable Area of the Premises, they shall select a third
independent architect to field measure the Building using the same measurement
method and the determination of the Rentable Area by such third party architect
shall be conclusive and binding on Tenant and Landlord. Landlord and Tenant
shall each pay one-half (1/2) of the fees and expenses of the independent
architect. The same procedure shall be applied to determining the Rentable Area
of all buildings in the Project.

1.6 TENANT'S PARKING ENTITLEMENTS. Tenant shall be entitled to the exclusive
use, without charge, during the Term and any extension thereof, of parking
spaces in the area of the Project designated as the parking area for the
Building. The location of such parking spaces shall be as shown on Exhibit B
attached hereto. Tenant shall be entitled to install signage in conformance with
the Tenant's Improvement Plans indicating such spaces as Tenant's parking.
Landlord shall have no responsibility for policing or otherwise enforcing
parking rights in the Project; provided, however, if unauthorized parking the
Parking Area causes Tenant persistently to be deprived of its rights to use the
Parking Area pursuant to this Lease, then Landlord shall, after written notice
from Tenant, take reasonable action to insure that Tenant's parking entitlements
pursuant to this Lease are available to Tenants and its invitees.

1.7 Condition of Premises. Landlord warrants and covenants to Tenant that, as of
the Lease Term Commencement Date: (a) the Building Shell shall be constructed in
accordance with Landlord's Plans, as modified pursuant to the terms of the Work
Letter; (b) the electrical, plumbing or mechanical systems in the Building
("Building Systems") shall be new, properly installed and in good working order;
(c) to Landlord's actual knowledge, the Building Shell shall comply with the
American's with Disabilities Act, except for such noncompliance as shall not
have a material adverse effect on Tenant's rights or obligations under this
Lease or Tenant's ability to use the Premises; and (d) to Landlord's actual
knowledge, there shall be no Hazardous Substances located in, on or about the
Building or the Premises, except for such Hazardous Substances brought on the
Premises or Project by Tenant pursuant to the provision of Article 14 . Tenant
shall notify Landlord within thirty (30) days after Tenant becomes aware of any
breach of the foregoing warranty and covenant; provided, however, Tenant shall
have no recourse against Landlord for any breach of the foregoing warranty and
covenant that could have been discovered by a visual inspection of the Premises
and the public spaces located within the Building unless Tenant notifies
Landlord of such breach within thirty (30) days after the Lease Commencement
Date. With respect to the covenants and warranties in this Section 1.07,
Landlord shall repair or replace the defective elements of the Building Shell or
Building Systems at its own cost and not as an Operating Expense within thirty
(30) days after Landlord receives notice of such defect from Tenant; provided,
however, if by the nature of such correction more than thirty (30) days is
required to effect such correction, Landlord shall not be in default hereunder
if such correction is commenced within such thirty (30) days period and is
diligently pursued to completion. So long as Landlord satisfies the covenant set
forth in the preceding sentence, Tenant shall have no other remedy for the
failure of the covenants and warranties set forth in this Section 1.07. Except
as otherwise set forth in this Section 1.07, Landlord makes no representations
and warranties regarding the condition of the improvements in the Premises or
their fitness for Tenant's intended use. Landlord shall have no obligation to
make any other improvements to the Premises and, to the maximum extent permitted
by law, Tenant hereby agrees to accept the Premises in their "as-is" condition.

2 . TENANT'S IMPROVEMENTS

2.1 PLANS. For the purposes of this Article 2, capitalized terms not otherwise
defined elsewhere in this Lease shall have the meanings set forth in Exhibit "D"
attached hereto (the "Work Letter"). Tenant shall submit to Landlord preliminary
plans and outline specifications identified in Exhibit C

                                       3

<PAGE>

("Preliminary Plans") for the construction of the tenant improvements to the
Premises ("Tenant's Improvements") in accordance with the Work Letter. Once
Landlord has approved the preliminary plans and outline specifications submitted
by Tenant in accordance with the Work Letter, Tenant shall have final plans and
specifications ("Tenant Improvement Plans") prepared in substantial conformity
with the Preliminary Plans. Preparation and approval of the Tenant Improvement
Plans and any changes requested by Tenant thereto shall be made only in
accordance with the Work Letter. Landlord shall construct Tenant's Improvement
Work (as defined in the Work Letter) in accordance with the approved Tenant's
Improvement Plans, all in accordance with the provisions of the Work Letter. All
costs and expenses associated with such work, including but not limited to the
costs of the Tenant's Improvement Work, Tenant's moving costs (subject to the
limitation of Section 2.02 below), fees of, and other amounts payable to,
Tenant's Architect and Tenant's engineers and other building and/or construction
consultants, building permit fees, Landlord's Contractor's Fee (as defined in
the Work Letter) and all other costs and expenses chargeable to the Tenant
Improvement Fund pursuant to Exhibit "D" to this Lease (collectively the "Tenant
Improvement Costs"), shall be paid by Landlord from the Tenant Improvement Fund.

2.2 TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide Tenant with a basic
allowance for construction of Tenant's Improvements Work and to offset such
other Tenant Improvement Costs as Tenant may incur in connection with this Lease
in an amount determined by multiplying the sum of Thirty Five Dollars ($35.00)
times the number of square feet of Usable Area in the Premises as determined in
accordance with Section 1.05 ("Tenant Improvement Allowance"). All Tenant
Improvement Costs in excess of the Tenant Improvement Allowance ("Tenant's
Improvement Contribution") shall be paid by Tenant. The initial Tenant's
Improvement Contribution shall be paid to Landlord fifteen (15) days after
Tenant shall have approved a Cost Estimate or Revised Cost Estimate (as each
term is defined in the Work Letter) and Landlord and Tenant have thereafter
agreed on an estimate of Tenant Improvement Costs. In the event the actual
Tenant Improvement Costs are less than the sum of the Tenant Improvement
Allowance and Tenant's Improvement Contribution, then Landlord shall pay to
Tenant within ten (10) days after such determination the amount by which the sum
of the Tenant Improvement Allowance and Tenant's Improvement Contribution
exceeded the actual Tenant Improvement Costs; provided , however, in no event
shall the Landlord be required to pay an amount greater than the amount of
Tenant's Improvement Contribution. The Tenant Improvement Allowance and Tenant's
Improvement Contribution are herein collectively referred to as the "Tenant
Improvement Fund". In no event, however, shall amounts paid for Tenant's moving
costs from the Tenant Improvement Fund exceed Two Dollars ($2.00) per square
foot of Usable Area in the Premises. In the event that the Tenant Improvement
Costs exceed the Tenant Improvement Allowance, Tenant may elect by delivering
written notice to Landlord within ten (10) days after the estimate of Tenant
Improvement Cost is obtained pursuant to the Work Letter, to obtain from
Landlord an additional allowance for the Tenant's Improvement Work ("Additional
Tenant Improvement Allowance") in an amount not to exceed $5.00 per square foot
of Usable Area in the Premises. The Additional Tenant Improvement Allowance
shall be fully amortized at nine percent (9%) interest per annum on the unpaid
balance over the initial Term of this Lease and shall be repaid by Tenant to
Landlord in equal monthly payments commencing on the Term Commencement Date as
Additional Rent.

2.3 CONSTRUCTION. Landlord shall cause the Tenant's Improvement Work in the
Premises to be constructed substantially in accordance with the Tenant's
Improvement Plans and the Work Letter. Subject to the provisions of Section 2.04
below, Tenant shall pay all costs of constructing Tenant's Improvements, except
that Tenant shall be entitled to receive the Tenant Improvement Allowance from
Landlord in accordance with the terms and conditions of Section 2.02 of this
Lease.

2.4 FAILURE TO COMPLETE CONSTRUCTION. Tenant's only remedies for Landlord's
failure to cause Substantial Completion (as defined in the Work Letter) of
the Tenant's Improvement Work and the Landlord's Work (as each term is
defined in the Work Letter, and collectively, the "Improvements") to occur on
or before the Estimated Term Commencement Date, as extended pursuant to the
Work Letter, shall be as set forth in this Section 2.04. If Substantial
Completion of the Improvements has not occurred on or before the date which
is six (6) months following the Estimated Term Commencement Date (the

                                       4
<PAGE>

"Termination Option Date"), Tenant shall have the option to terminate this Lease
by the delivery to Landlord of written notice within ten (10) days after the
Termination Option Date or any one month anniversary of the Termination Option
Date until Substantial Completion of the Improvements occurs. Tenant shall not
be entitled to terminate the Lease for any delay in completion of the Premises
prior to the Termination Option Date. If it appears that Substantial Completion
of the Improvements may not occur on or before the Estimated Term Commencement
Date, as extended pursuant to the Work Letter (the "Scheduled Term Commencement
Date"), Landlord shall be entitled to incur overtime charges ("Overtime
Charges") with Landlord's Contractor and shall use commercially reasonable
efforts to accelerate the completion of Tenant's Improvement Work to meet the
Scheduled Term Commencement Date. If Tenant fails to submit a complete and fully
detailed set of Tenant's Improvement Plans to the City for plan check and
approval on or before September 15, 2001, then Tenant shall reimburse Landlord
within ten (10) days of Landlord's written request therefore for all Overtime
Charges incurred by Landlord relating to such failure. In the event Tenant
submits a complete and detailed set of Tenant's Improvement Plans to the City
for plan check and approval on or before September 15, 2001, and the City does
not approve Tenant's Improvement Plans or does not issues building permits for
Tenant's Improvements on of before December 15, 2001, then any Overtime Charges
payable to Landlord's Contractor shall be payable one-half (1/2) by Landlord and
one half (1/2) by Tenant. If Tenant submits a complete and fully detailed set of
Tenant's Improvement Plans to the City for plan check and approval on or before
September 15, 2001, and the City issues building permits for Tenant's
Improvements on of before December 15, 2001, then any Overtime Charges payable
to Landlord's Contractor shall be payable by Landlord. No Overtime Charges shall
be paid from the Tenant Improvement Fund.

3 . TERM

3.1 COMMENCEMENT OF TERM. The Lease shall be for the Term set forth in the Basic
Lease Information, commencing upon Term Commencement Date. The Term Commencement
Date shall be the later of: (i) the date set forth in the Basic Lease Provisions
as the Estimated Term Commencement Date; (ii) three days after the date (A)
Landlord delivers written notice that the Premises are ready for occupancy and
(B) Substantial Completion of the Improvements has occurred, or (iii) three (3)
days after the date the Premises would have been ready for occupancy and
Substantial Completion of the Improvements would have occurred, had there been
no Tenant Delays as set forth in the Work Letter.

3.2 EARLY OCCUPANCY. Subject to the availability of the Premises and the
issuance by the City of a temporary certificate of occupancy, Tenant shall be
permitted to move its furniture, trade fixtures, equipment, machinery, goods and
supplies into the Premises prior to the Term Commencement Date; the period
between the date Tenant commences to occupy the Premises and the Term
Commencement Date being hereinafter referred to as the "Early Occupancy Period."
Tenant shall be permitted to commence to occupy the Premises as soon as
Substantial Completion of the Improvements occurs and a temporary certificate of
occupancy has been issued by the City.. Such occupancy of the Premises shall be
subject to all the provisions of this Lease, except that Tenant shall not be
required to pay Monthly Base Rent for the Early Occupancy Period; provided,
however, that Tenant shall have provided Landlord proof of Tenant's insurance as
set forth in Section 5.05; and provided further that Tenant shall pay or
reimburse Landlord for all utilities and services to the Premises during the
Early Occupancy Period. All furniture, materials, work, installations, equipment
and decorations of any nature brought upon or installed in the Premises prior to
the Term Commencement Date shall be at Tenant's sole risk. Neither Landlord nor
any party acting on Landlord's behalf shall be responsible for any damage or
loss or destruction of such items brought to or installed in the Premises prior
to the Term Commencement Date unless such damage, loss or destruction results
from Landlord's gross negligence or intentional misconduct.

3.3 NOTICE OF LEASE DATES. Within ten (10) days after Landlord's written
request, Tenant shall execute a written confirmation of the commencement of the
Term and expiration date of the Term in a form reasonably provided by Landlord.
Such a notice shall be binding upon Tenant unless Tenant objects thereto in
writing within such ten (10) day period.

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<PAGE>

3.4 OPTION TO EXTEND TERM. Tenant shall have the option to extend the Term of
this Lease for the entire Premises for two (2) additional periods of five (5)
years each (the "Premises Options"). The period of the First Premises Option is
referred to herein as the "First Option Term", and the period of the second
Premises Option is referred to as the "Second Option Term.". The First Option
Term and the Second Option Term are sometimes hereinafter collectively referred
to as the "Option Term". Tenant shall have no right or interest to exercise any
Premises Option unless: (a) Tenant gives the Landlord written notice of its
intent to exercise the Premises Option no earlier than three hundred sixty (360)
days prior to the end of the Term, or any prior extension thereof, and no later
than three hundred (300) days prior to the end of the Term, or any prior
extension thereof (the "Extension Notice"); (b) There shall be no uncured Event
of Default on the date the Extension Notice is delivered to Landlord and on the
date the Option Term commences; (c) Tenant or an Affiliate Transferee occupies
more than fifty percent (50%) of the Rentable Area of the Premises; and (d)
Tenant has not filed for or sought protection under any bankruptcy statute.
Annual Base Rent during the First Option Term shall be as set forth in the Basic
Lease Provisions of this Lease and Base Rent during the Second Option Term shall
be as set forth in Section 4.01(b) of the Lease. Time is of the essence with
respect to Tenant's exercise of the Premises Option. Tenant's failure to exactly
comply with any of the time or other requirements herein, shall cause the
Premises Option to automatically expire and, in such event, this Lease shall
terminate upon the expiration of the Term. The option to extend the Term
pursuant hereto for the Option Term shall be personal to Tenant and shall not be
exercisable by or for the benefit of any assignee, subtenant or other transferee
of Tenant, except that the Premises Option may be transferred by Tenant to an
Affiliate Transferee in connection with a Transfer of the entire Lease to an
Affiliate Transferee and may be exercised by such Affiliate Transferee.

3.5 DAYS. Except for the Rent payment requirements of Articles 4 and 6, when
time periods of ten (10) days or less are provided in this Lease, unless
"calendar days" is expressly stated, such time periods are to be calculated such
that "days" shall mean business days, regardless of whether "business days" is
expressly stated. The option to extend the Term pursuant hereto for the Option
Term shall be personal to Tenant and shall not be exercisable by or for the
benefit of any assignee, subtenant or other transferee of Tenant. As used
herein, the term "business day" shall mean each day other than Saturdays and
Sundays and any other day designated as a Federal holiday pursuant to 5 U.S.C.
ss. 6105, other than Columbus Day.

4 . RENT

4.1 BASE RENT.
                  (a) INITIAL TERM. The Annual Base Rent shall be the amount set
forth in the Basic Lease Information payable in equal monthly installments of
Monthly Base Rent as set forth in the Basic Lease Information. Tenant shall pay
the Monthly Base Rent to Landlord in advance upon the first day of each calendar
month of the Term, except that the Monthly Base Rent for the first month of the
Term shall be payable upon execution of this Lease, at Landlord's address or at
such other place designated by Landlord in a notice to Tenant, without any prior
demand therefor and without any deduction, abatement or setoff whatsoever, in
lawful money of the United States of America. If the Term shall commence or end
on a day other than the first day of a calendar month, then Tenant shall pay, as
rent for such partial calendar month, a pro rata portion of the Monthly Base
Rent, prorated on a per diem basis, with respect to the portions of the
fractional calendar month included in the Term. Tenant shall pay rent for the
last calendar month of the Term on the first day of the last calendar month of
the Term. Because Tenant will have paid a full month's Base Rent for the first
fractional calendar month of the Term if the Term shall commence on a day other
than the first day of a calendar month, Tenant's Monthly Base Rent for the first
full calendar month of the Term shall be reduced by an amount equal to the
excess of (i) the amount Tenant actually paid as Monthly Base Rent for the first
fractional calendar month of the Term and (ii) the amount of Monthly Base Rent
that actually accrued with respect to such fractional calendar month. Upon
executing this Lease, Tenant shall pay the first full month's installment of the
Monthly Base Rent owing hereunder along with Tenant's Security Deposit as
provided in Section 4.05 below.

                                       6
<PAGE>

                  (b) OPTION TERM. During the first year of the Second Option
Term, if it occurs, Tenant shall pay to Landlord Base Rent equal to "Market
Rent" (as defined below) for the Premises determined as of the commencement date
of the Second Option Term, as such Base Rent shall be adjusted annually as set
forth in Section 4.03 below. As used herein, "Market Rent" shall mean the price
that a ready and willing tenant would pay, at commencement of the Second Option
Term, as monthly base rent to a ready and willing landlord of similar space in a
Class "A" office building in the geographical area known as Del Mar
Heights/Torrey Hills ("Similar Space"), if such Similar Space were offered for
lease on the open market for a reasonable period of time and be the sum of the
fair market annual rental rate per rentable square foot multiplied by the
Rentable Area of the Premises (as set forth in the Basic Lease Information).
Market Rent shall be determined as follows: (a) as mutually agreed by Landlord
and Tenant within ten (10) days of Landlord's delivery to Tenant of Landlord's
opinion of the Market Rent for the first year of the Second Option Term
("Landlord Rent Notice"), which shall be delivered to Tenant within ten (10)
days after Landlord receives Tenant's written Notice to Extend; or (b) in the
event that Landlord and Tenant are unable to so agree, the Market Rent shall be
determined by concurrent appraisals pursuant to Section 4.01(c) below. Tenant
shall have the right to withdraw its Extension Notice by written notice to
Landlord delivered to Landlord within thirty (30) days after delivery to Tenant
of Landlord's Rent Notice. In determining Market Rent, appraisers shall take
into account the duration of the Second Option Term, the quality and prestige of
the Building and Premises, recent monthly new and renewal rental rates for
Similar Space imputed to the commencement of the Second Option Term, and all
relevant economic terms of this Lease, it being the intent that Market Rent, as
so determined, should reflect the total economic package which would be offered
at the time of commencement of the Second Option Term to a tenant for the
Premises on a new lease or lease renewal basis, or substantially Similar Space
in a building of similar quality and value of tenant improvements (without
consideration of depreciation or amortization on an accounting basis) and
location under a lease with substantially the same terms and provisions as the
applicable terms and provisions of this Lease ("Market for Similar Space"),
without discounting the rent for the creditworthiness of the tenant or for the
real estate leasing commissions. Notwithstanding the foregoing, in no event
shall the Market Rent as so determined be less than the Base Rent for the
calendar year immediately preceding the commencement of the Option Term. In
determining the rental rate of similar space, the parties and the appraisers
shall take into consideration the following concessions: (i) Rental abatement
concessions, if any, being granted to tenants in connection with Similar Space;
(ii) Tenant improvements or allowances provided or to be provided for the
Similar Space on a new lease or lease renewal basis; and (iii) All other
monetary concessions not otherwise excluded above, if any, being granted to
tenants in connection with the Similar Space.

For example, if the parties, in applying the above criteria, determine that (1)
leases of comparable space provide a new or renewal tenant with comparable space
at a base rent rate of two dollars ($2.00) per square foot of Rentable Area per
month, with four (4) months free rent, and a thirty dollar ($30.00) per square
foot of Usable Area tenant improvement allowance where the value of existing
improvements in the comparable space is five dollars ($5.00) per square foot of
Usable Area, and (2) the value of the existing improvements in the Premises is
ten dollars ($10.00) per square foot of Usable Area, then the Fair Market Rental
Value of the Premises shall not be a base rent of two dollars ($2.00) per square
foot of Rentable Area per month only but shall be the equivalent of a two
dollars ($2.00) per square foot of Rentable Area base rent, four (4) months free
rent, and a twenty-five dollar ($25.00) per square foot of Usable Area tenant
improvement allowance or payment in lieu of such allowance.

                  (c)      MARKET RENT APPRAISAL PROCEDURE.

                           (i)      If Tenant  rejects the Market Rent  proposed
by Landlord in Landlord's Rent Notice, Landlord and Tenant shall attempt to
agree in good faith upon a single appraiser not later than seven (7) days after
the Landlord receives notice of Tenant's rejection of Landlord's proposed Market
Rent ("Tenant's Rejection Notice"), which date of receipt shall be within
fifteen (15) days after

                                       7
<PAGE>

Landlord's delivery of Landlord's Rent Notice. If Landlord and Tenant are unable
to agree upon a single appraiser within such time period, then Landlord and
Tenant shall each appoint one appraiser not later than fifteen (15) days after
Landlord's receipt of Tenant's Rejection Notice. Within five (5) days
thereafter, the two appointed appraisers shall appoint a third appraiser.
Landlord and Tenant shall instruct the appraiser(s) to complete the
determination of the Market Rent not later than fifteen (15) days after all
appraisers have been appointed. If the two appraisers are unable to select the
third appraiser within such five (5) day period, then Landlord and Tenant shall
be entitled to apply to the MAI for the appointment of a third appraiser.

                           (ii) If either Landlord or Tenant fails to appoint
its appraiser within the prescribed time period, the single appraiser appointed
shall determine the Market Rent of the Premises for the first year of the Second
Option Term. If both parties fail to appoint appraisers within the prescribed
time periods, then the first appraiser thereafter selected by a party shall
determine the Market Rent of the Premises for the first year of the Second
Option Term.

                           (iii) Landlord and Tenant shall each bear the cost of
its own appraiser and the parties shall share equally the cost of the single or
third appraiser, if applicable. All appraisers so designated herein shall have
at least five (5) years' experience in the appraisal of similar office buildings
in the San Diego area and shall be members of professional organizations such as
MAI or equivalent.

                           (iv) If a single appraiser is chosen, then such
appraiser shall determine the Market Rent of the Premises for the first year of
the Second Option Term. Otherwise, the Market Rent of the Premises for the first
year of the Second Option Term shall be the arithmetic average of two (2) of the
three (3) appraisals which are closest in amount, and the third appraisal shall
be disregarded. Notwithstanding anything else contained herein, the Market Rent
as so determined shall not be less than the Basic Annual Rent payable during the
year preceding the Second Option Term.

4.2 ADDITIONAL RENT. All charges required to be paid by Tenant hereunder,
including without limitation, payments for Operating Expenses and any other
amounts payable under this Lease, shall be considered additional rent for the
purposes of this Lease ("Additional Rent"), and Tenant shall pay Additional Rent
as provided in Article 6.05. "Rent" shall mean Base Rent and Additional Rent.

4.3 ESCALATION. Annual Base Rent for the second year of the Second Option Term
and each and every succeeding year thereafter during the Second Option Term
shall be increased by an amount equal to three percent (3%) of the Annual Base
Rent payable for the preceding year.

4.4 LATE PAYMENT. If any installment of Rent is not paid promptly on the first
of the month or otherwise when due, the unpaid amounts shall bear interest at
the interest rate set forth in Section 12.02(e) from the date due to the date of
payment. In addition, Tenant acknowledges that the late payment of any
installment of Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amount of which are extremely difficult
or impractical to fix. These costs and expenses will include, without
limitation, administrative and collection costs and processing and accounting
expenses. Therefore, if any installment of Rent is not received by Landlord from
Tenant when the installment is due, Tenant shall pay to Landlord on demand a
charge for administration, collection and accounting expenses equal to five
percent (5%) of the amount of such delinquent amounts due ("Late Charge") in
addition to the installment of Rent then owing with interest at the interest
rate set forth in Section 12.02(e), regardless of whether or not a notice of
default or notice of termination has been given by Landlord; provided, however,
Tenant shall not be required to pay such Late Charge if such late payment is the
first late payment of Rent by Tenant in the preceding twelve (12) months and the
installment of Rent is paid not more than five (5) days after the date same is
due.. Landlord and Tenant agree that the late payment charge represents a
reasonable estimate of Landlord's costs and expenses and is fair compensation to
Landlord for its loss suffered by Tenant's nonpayment of any amounts when due
and payable pursuant to this Lease. This provision shall not relieve Tenant from
payment of Rent at the time and in the manner herein specified.

                                       8
<PAGE>

4.5 SECURITY DEPOSIT. Upon executing this Lease, Tenant shall deposit with
Landlord a Security Deposit in the amount of the first month's Base Rent. The
Security Deposit shall secure Tenant's obligations under this Lease to pay rent
and other monetary amounts, to maintain the Premises and repair damages thereto,
to surrender the Premises to Landlord in clean and sanitary condition and repair
upon termination of this Lease as required pursuant to Section 18.15 below and
to discharge Tenant's other obligations hereunder. Landlord may use and
commingle the Security Deposit with other funds of Landlord. If Tenant fails to
perform Tenant's obligations hereunder, Landlord may, but without any obligation
to do so, apply all or any portion of the Security Deposit towards fulfillment
of Tenant's unperformed obligations. If Landlord does so apply any portion of
the Security Deposit, Tenant, shall immediately pay Landlord a sufficient amount
in cash to restore the Security Deposit to the full original amount. In the
event that Landlord shall expend the same in order to cure Tenant's default
hereunder, Tenant's failure to forthwith remit to Landlord a sufficient amount
in cash to restore the Security Deposit to the original sum deposited within ten
(10) days after Tenant's receipt of notice from Landlord that such amounts have
been so expended shall constitute an Event of Default. The Security Deposit
shall be held by Landlord without liability for interest on the same. Upon
termination of this Lease, if Tenant has then performed all of Tenant's
obligations hereunder, Landlord shall return the Security Deposit to Tenant. If
Landlord sells or otherwise transfers Landlord's rights or interest under this
Lease, Landlord may deliver the Security Deposit to the transferee, whereupon
Landlord shall be released from any further liability to Tenant with respect to
the Security Deposit.

5 . INSURANCE

5.1 ALL RISK COVERAGE. At all times during the Term, Landlord shall procure and
maintain in full force and effect with respect to the Project, a policy or
policies of all risk insurance (including sprinkler, vandalism and malicious
mischief coverage, and any other endorsements required by the holder of any fee
or leasehold mortgage) in an amount equal to one hundred percent (100%) of the
full replacement value (replacement cost new, including debris removal, and
demolition) thereof and any other insurance Landlord reasonably deems necessary,
including, but not limited to, boiler and machinery insurance. If the annual
premiums charged Landlord for such casualty insurance exceed the standard
premium rates because the nature of Tenant's operations results in increased
exposure, then Tenant shall, upon receipt of appropriate premium invoices,
reimburse Landlord for such increased amount. Landlord shall also keep and
maintain, by endorsement to its all risk insurance or by a separate policy ,
rental abatement insurance insuring against abatement or loss of Rent in case of
fire or other casualty insured against by a standard "all risk" policy, in an
amount at least equal to the amount of the Rent payable by Tenant during one (1)
year next ensuing, as reasonably determined by Landlord. At all times during the
Term, Tenant shall procure, pay for and maintain in full force and effect a
similar policy of insurance, naming Landlord and Managing Agent as an additional
insured with respect to property of every description and kind owned by Tenant
upon the Premises or the Building, or for which Tenant is legally liable,
including, without limitation, trade fixtures, furniture, equipment and other
personal property, and all tenant improvements owned or installed by or on
behalf of Tenant (but not with respect to those owned constructed by and owned
by Landlord and defined in the Work Letter as Tenant's Improvement Work)
insuring one hundred percent (100%) of the full replacement value of said
property and tenant improvements. Any policy proceeds shall be used for the
repair and replacement of the property damaged or destroyed unless this Lease
shall cease and terminate under the provisions on excessive damage or
destruction set forth in Section 10.04 below. Landlord shall cause the original
Tenant and any Affiliate Transferee to be named as an additional insured under
the all-risk policy of insurance to be maintained by Landlord pursuant to this
Section 5.01, except if such coverage becomes unavailable on commercially
reasonable terms.

5.2 LIABILITY COVERAGE. Within fifteen (15) days after the execution of this
Lease, Tenant shall provide Landlord with certificates of insurance for all of
Tenant's insurance policies required hereunder so that Landlord may determine
whether Tenant's insurance policies are in such forms, amounts and are written
by such insurance companies as required by Landlord. Tenant shall, at its own
cost and expense, keep and maintain in full force during the Term, a policy or
policies of broad form

                                       9

<PAGE>

commercial general liability insurance with and cross-liability endorsements
(insuring Tenant's indemnification obligations under this Lease, including
Article 5.09 hereof) written by an insurance company reasonably approved by
Landlord in the form customary to the locality, insuring Tenant's activities
with respect to the Premises and/or Building against loss, damage or liability
for personal and bodily injury (including wrongful death) of any person and loss
or damage to property occurring in, upon or about the Premises covering personal
and bodily injury in the amounts of not less than Three Million Dollars
($3,000,000) per person and Three Million Dollars ($3,000,000) per occurrence
and covering property damage in the amount of not less than One Million Dollars
($1,000,000) per occurrence. These limits may be satisfied by a basic policy and
an umbrella policy. Such insurance shall be with insurance companies with a Best
rating classification of not less than XI and a financial rating classification
not less than XII and approved to do business in California. Such insurance
shall have a deductible of no greater than Five Thousand Dollars ($5,000).
Tenant's obligations to carry the insurance set forth herein may be satisfied by
coverage under a so-called blanket policy of broad form commercial general
liability insurance with the same endorsements and coverage for the Premises as
described above, as well as coverage of other premises and properties of Tenant,
or in which Tenant has some interest; provided, however, that Landlord and
Managing Agent shall be named as an additional insured, the coverage afforded
Landlord shall not be reduced or diminished, and the requirements set forth in
this Lease are otherwise satisfied.

5.3 WORKER'S COMPENSATION INSURANCE. Tenant shall, at its own cost and
expense, keep and maintain in full force during the Term, a policy or
policies of worker's compensation insurance, in statutory amounts and limits,
and employer's liability insurance with limits as follows: bodily injury each
accident in the amount of not less than One Million Dollars ($1,000,000),
bodily injury/disease each employee in an amount not less than One Million
Dollars ($1,000,000), and a bodily injury/disease policy limit of not less
than One Million Dollars ($1,000,000).

5.4 BUSINESS INTERRUPTION INSURANCE. Tenant shall, at its own cost and expense,
keep and maintain in full force during the Term (a) such policy or policies of
business interruption insurance, as Tenant may deem necessary or appropriate,
insuring that the monthly installments of Rent shall be paid to Landlord for a
period of not less than one (1) year if the Premises are destroyed or
inaccessible by a risk not insured against by a standard "all risk" form policy
Landlord is required to maintain pursuant to the provisions of Section 5.01
above, and (b) such other policies of insurance insuring such other risks as
Tenant may deem necessary or appropriate.

5.5 INSURANCE CERTIFICATES. Tenant shall furnish to Landlord, no more than ten
(10) days prior to the earlier of Tenant's occupancy of the Premises (as
permitted by Section ) or the Term Commencement Date of this Lease and
thereafter no more than thirty (30) days prior to the expiration of each such
policy, a certificate of insurance issued by the insurance carrier of each
policy of insurance carried by Tenant pursuant hereto. Said certificates shall
expressly provide that such policies shall not be calculable or subject to
reduction of coverage or otherwise be subject to modification except after
thirty (30) days' prior written notice to the parties named as additional
insureds in this Article 5. Landlord, its successors and assigns, and any
nominee of Landlord holding any interest in the Premises, including without
limitation, any ground lessor and the holder of any fee or leasehold mortgage,
shall be named as additional insureds under each such policy of insurance
maintained by Tenant pursuant to this Lease.

5.6 TENANT'S FAILURE. If Tenant fails to maintain any insurance required in this
Lease, Tenant shall be liable for any loss or cost resulting from said failure.
Notwithstanding the foregoing, Landlord may at Landlord's sole discretion, but
shall not be required to, procure said insurance on Tenant's behalf and charge
Tenant the premium for such policies. This Section 5.06 shall not be deemed to
be a waiver of any of Landlord's rights and remedies under any other section of
this Lease.

5.7 WAIVER OF SUBROGATION. Any policy or policies of fire, extended coverage or
similar casualty insurance, which either party obtains in connection with the
Premises, or Tenant's personal property therein, shall, to the extent the same
can be obtained without unreasonable expense, include a clause or endorsement
denying the insurer any rights of subrogation against the other party to the
extent

                                       10
<PAGE>

rights have been waived by the insured prior to the occurrence of injury or
loss. Landlord and Tenant waive any rights of recovery against the other for
injury or loss due to hazards covered by insurance containing such a waiver of
subrogation clause or endorsement to the extent of the injury or loss covered
thereby.

5.8 TENANT'S PROPERTY AND FIXTURES. Tenant shall assume the risk of damage to
any furniture, equipment, machinery, goods, supplies or fixtures which are or
remain the property of Tenant or as to which Tenant retains the right of removal
from the Premises.

5.9 INDEMNIFICATION.
                  (a) To the fullest extent permitted by law, Tenant covenants
with Landlord that Landlord, Landlord's agents and employees shall not be liable
for any damage or liability of any kind or for any injury to or death of
persons, or damage to property of Tenant or any other person occurring from any
cause whatsoever related to the use, improvement, occupancy or enjoyment of the
Premises by Tenant or any person thereon or holding under Tenant, unless such
damage, liability, injury or death results from the gross negligence or willful
misconduct of Landlord or its agents. Tenant shall indemnify protect, defend and
hold Landlord and its members, officers, employees, agents, servants,
concessionaires, licensees, contractor or invitees ("Landlord Parties"), the
Premises, Building, Project, Lot and Landlord's related property, harmless from
and against (i) any and all liability, fines, penalties, losses, damages, costs
and expenses, demands, causes of action, claims or judgments (collectively,
"Claims") arising from or growing out of any injury to any person or persons or
any damage to any property as a result of any accident or other occurrence
during the Term occasioned in any way as a result of Tenant's or Tenant's
Parties' negligence or willful misconduct in the use, maintenance, occupation or
operation of the Premises during the Term, (ii) all liens, claims and demands
related to the Tenant's use of the Premises and its facilities during the Term,
or any repairs, alterations or improvements which Tenant may make or cause to be
made upon the Premises, and (iii) from and against all legal costs and charges,
including attorneys' fees, incurred in and about any of such matters and the
defense of any action arising out of the same or in discharging the Building,
Project, Lot and Landlord's related property or any part thereof from any and
all liens, charges or judgments which may accrue or be placed thereon by reason
of any act or omission of the Tenant; provided, however, that Tenant shall not
be required to indemnify Landlord for any damage or injury arising as a result
of the gross negligence or willful misconduct of Landlord, Landlord's agents or
employees. This indemnity shall survive the termination of this Lease for four
(4) years.
                  (b) Landlord shall indemnify, defend and hold harmless Tenant
and its officers, employees, agents, servants, subtenants, concessionaires,
licensees, contractor or invitees ("Tenant Parties") from and against all Claims
for damage to property outside the Premises to the extent that such Claims
result from the gross negligence or willful misconduct of Landlord and its
agents and employees in connection with their activities in, on or about the
Project or the Building, except to the extent that such Claim (i) is for damage
to Tenant's Improvements or Tenant's personal property, fixtures, furniture and
equipment in the Premises and is covered by insurance that Tenant is required to
obtain under this Lease (or would have been covered had Tenant carried the
insurance required under this Lease) or (ii) results from the negligent acts,
omissions or willful misconduct of Tenant Parties. This indemnity shall survive
the termination of this Lease for four (4) years.

5.10 EARTHQUAKE AND FLOOD INSURANCE. In addition to any other insurance policies
carried by Landlord in connection with the Project, Landlord may elect to
procure and maintain in full force and effect during the Term, with respect to
the Project, a policy of earthquake/volcanic action and flood and/or surface
water insurance, including rental value insurance against abatement or loss of
rent in the case of damage or loss covered under such earthquake/volcanic and
flood and/or surface water insurance, in an amount up to one hundred percent
(100%) of the full insurance replacement value (including debris removal and
demolition) of the Project improvements.

5.11 OTHER TENANT INSURANCE COVERAGE. Tenant shall, at Tenant's own expense,
procure and maintain any other and further insurance coverages that Landlord or
Landlord's lender may

                                       11

<PAGE>

reasonably require. Tenant shall not, however, be required to procure or
maintain other and further coverages that are beyond those typically maintained
by similarly situated tenants leasing reasonably similar amounts and types of
space for similar use in comparable buildings in the same submarket.

6 . OPERATING EXPENSES

6.1 TENANT'S SHARE. (a) Tenant's share of Building Operating Expenses
("Tenant's Building Share") is hereby mutually agreed to be that percentage
set forth in the Basic Lease Information, subject however, to adjustment as
set forth in Section 1.05 Tenant shall pay as Additional Rent Tenant's
Building Share of Building Operating Expenses for any calendar year after the
Base Calendar Year to the extent that Building Operating Expenses for such
calendar year exceed the Building Operating Expenses for the Base Calendar
Year .

                  (b) Tenant's share of Project Operating Expenses ("Tenant's
Project Share") is hereby mutually agreed to be that percentage set forth in the
Basic Lease Information, subject however, to adjustment as set forth in Section
1.05. Tenant shall pay as Additional Rent Tenant's Project Share of Project
Operating Expenses for any calendar year after the Base Calendar Year to the
extent that Project Operating Expenses for such calendar year exceed the Project
Operating Expenses for the Base Calendar Year.

                  (c) For the purposes of this Article 6 and determining
Tenant's Share of Building Operating Expenses and Tenant's Share of Project
Operating Expenses, Landlord and Tenant hereby agree that the Operating Expenses
for the Base Calendar Year shall be the greater of (A) the amount of Five
Dollars and Sixty Five Cents ($5.65) per square feet of Rentable Area in the
Premises, as increased by an amount determined by multiplying the amount of Five
Dollars and Sixty Five Cents ($5.65) per square feet of Rentable Area in the
Premises by the increase, if any, in the Index (as hereinafter defined) from the
date of this Lease through December 31, 2002, being the amount budgeted by
Landlord for Operating Expenses during the Base Calendar Year (the "Budgeted
Operating Expenses"); or (B) the sum of the actual Operating Expenses incurred
by Landlord during the Base Calendar Year and an amount equal to Twenty-five
Cents ($.25) per square foot of Rentable Area in the Premises (the "Operating
Expense Buffer"). Within sixty (60) days after the date of this Lease, Landlord
shall deliver to Tenant for Tenant's approval a revised budget for Operating
Expenses for the Base Calendar Year, which shall allocate in a reasonable manner
the foregoing expenses between Building Operating Expense and Project Operating
Expenses. Tenant shall not unreasonably withhold or delay Tenant's approval of
Landlord's budget. If Tenant disapproves Landlord's revised budget, then Tenant
shall notify Landlord of the reasons therefor and Landlord and Tenant shall
thereafter negotiate reasonably to agree upon a revised budget. If they are
unable to so agree within sixty (60) days after Landlord delivers its proposed
revised budget to Tenant, then the dispute shall be resolved in accordance with
the Real Estate Industry Arbitration Rules of the American Arbitration
Association. After Landlord and Tenant agree on (or arbitration establishes) a
revised budget that allocates Budgeted Operating Expenses between Building
Operating Expenses and Project Operating Expenses:

                           (i) Building Operating Expenses for the Base Calendar
         Year shall be the greater of (x) the amount of the Budgeted Operating
         Expenses allocated to Building Operating Expenses, or (y) the sum of
         the actual Building Operating Expenses incurred by Landlord during the
         Base Calendar Year and an amount equal to the portion of the Operating
         Expense Buffer that is allocated to the Building Operating Expenses;
         and

                           (ii) Project Operating Expenses for the Base Calendar
         Year shall be the greater of (x) the amount of the Budgeted Operating
         Expenses allocated to Project Operating Expenses, or (y) the sum of the
         actual Project Operating Expenses incurred by Landlord during the base
         Calendar Year and an amount equal to the portion of the Operating
         Expense Buffer that is allocated to the Project Operating Expenses.

                                       12

<PAGE>

For purposes of the foregoing, the Operating Expense Buffer shall be allocated
between Building Operating Expenses and Project Operating Expenses in the same
proportion that actual Building Operating Expenses for the Base Calendar Year
bears to actual Project Operating Expenses for the Base Calendar Year. Tenant's
Share of Building Operating Expenses and Tenant's Share of Project Operating
Expenses payable pursuant to subsections (a) and (b) above shall thereafter be
determined based on the approved revised budget submitted by Landlord. For the
purposes of this Section 6.01, the term "Index" shall mean the Department of
Labor, Bureau of Labor Statistics, Consumer Price Index, Subgroup "Urban Wage
Earners and Clerical Workers (Revised)", Los Angeles - Long Beach - Anaheim -
Riverside Metropolitan Area (1982-84 = 100).

6.2 DEFINITION OF OPERATING EXPENSES.
                  (a) "Building Operating Expenses" shall include all expenses
and costs of every kind and nature which Landlord shall pay or become obligated
to pay because of or in connection with the ownership and operation of the
Building, including, without limitation: (i) all Impositions as set forth in
Article 6; (ii) premiums for insurance maintained by Landlord pursuant to
Article 5; (iii) wages, salaries and related expenses and benefits of all
on-site employees, if any, and off-site employees, if any, engaged in operation,
maintenance and security of the Building; (iv) all supplies, materials, tool and
equipment rental used in operation of the Building; (v) all maintenance and
repair, waste disposal, janitorial, security and service costs incurred in
connection with the Building; (vi) a property management fee equal to 3% of the
Base Rent (the "Management Fee"); (vii) legal and accounting expenses, including
the cost of audits by certified public accountants; (viii) repairs, replacements
and general maintenance of the Building (excluding those paid for by proceeds of
insurance or other parties and alterations attributable solely to tenants of the
Project Building other than Tenant); (ix) all interior and exterior maintenance,
repair and replacement costs, including, without limitation, service areas,
elevators, mechanical rooms, plumbing, heating, ventilating and air conditioning
("HVAC") equipment and non-structural roof (all to the extent related to the
interior or exterior of the Building); (x) all other reasonable operating,
management and other expenses incurred by Landlord in connection with operation
of the Building; and (xi) all charges for water and sewer services not
separately metered by Tenant and used or consumed in the Building; (xii) any
other costs, levies or assessments resulting from statutes or regulations
promulgated by any governmental authority in connection with the use or
occupancy of the Project or the Premises; (xiii) personal property taxes levied
on or attributable to personal property used in connection with the Project;
(xiv) freight charges and transportation services attributable to the operation
and/or management of the Project; and (xv) reasonable accounting, audit,
verification and other reasonable consulting fees. Building Operating Expenses
do not include electricity and gas, if any, delivered to the Building, as well
as Tenant's Premises, which costs are Tenant's proportionate or sole
responsibility as further defined in Section 6.08. Notwithstanding the
provisions of this Section 6.02, the following shall not be included within
Building Operating Expenses:

                           (ii)  Any depreciation on the Building;

                           (iii) Costs incurred due to Landlord's violation of
any terms or conditions of this Lease or any other lease relating to the
Building;
                           (iv)  All interest, loan fees, and other carrying
costs related to any mortgage or deed of trust and all rental and other payable
due under any ground or underlying lease related to the Building, unless such
costs are directly attributable to a Tenant's breach or default under this
Lease;
                           (v)   Any  compensation  paid to clerks,  attendants,
or other persons in commercial concessions operated by Landlord;

                           (vi)  Advertising and promotional expenditures.

                           (vii) Any costs, fines, or penalties incurred due to
violations by Landlord of any governmental rule or authority, this Lease or any
other lease in the Building or due to Landlord's gross negligence or willful
misconduct.

                                       13

<PAGE>

                           (viii) Costs of acquisition of sculpture, paintings,
or other objects of art.

                           (ix)   Wages, salaries, or other compensation paid to
any executive employees of Landlord above the grade of building manager.

                           (x)    Real estate brokers' leasing commissions.

                           (xi)   Initial improvements or alterations to
tenant spaces.

                           (xii)  The cost of providing any service directly
to and paid directly by any tenant.

                           (xiii)  All management or similar fees other than
the Management Fee.

                           (xiv)   Costs associated with:

                                   (A) Operation of the business of the
                                   ownership of the Building or the Project or
                                   entity that constitutes Landlord or
                                   Landlord's property manager, as
                                   distinguished from the cost of Building
                                   operations, including the costs of
                                   partnership or corporate accounting and
                                   legal matters; defending or prosecuting any
                                   lawsuit with any mortgagee, lender, ground
                                   lessor, broker, tenant, occupant, or
                                   prospective tenant or occupant; selling or
                                   syndicating any of Landlord's interest in
                                   the Building or the Project; and disputes
                                   between Landlord and Landlord's property
                                   manager;

                                   (B) Landlord's general corporate or
                                   partnership overhead and general
                                   administrative expenses, including the
                                   salaries of management personnel other than
                                   those who are primarily engaged in the
                                   operation, maintenance, and repair of the
                                   Building, except to the extent that those
                                   costs and expenses are included in the
                                   Management Fees;

                           (xvi)   Costs of:
                                   (A) Initial construction of the Building;
                                   (B) Reconstruction of the Building pursuant
                                   to Article 10; or
                                   (C) Modification, alteration, or repair of
                                   any portion of Landlord's Work (as defined
                                   in the Work Letter) relating to the Building
                                   due to faulty initial construction;

                           (xvii)  Expenses incurred by Landlord for use of any
portion of the Building or the Project to accommodate special events such as
shows, promotions, filming, displays, photography, private events or parties,
ceremonies, and advertising. This exclusion to Building Operating Expenses shall
not include the normal expenses otherwise attributable to providing Building
services, such a lighting, heating, ventilating, and air-conditioning in the
public portions of the Building under normal Building operations during Business
Hours. This exclusion shall also not include programs, training, displays, or
other events for training or informing tenants and occupants of the Building on
how to cope with fire, earthquake and life-safety matters.

                           (xviii) Any costs or expenses relating to any
provisions of any:

                                   (A) Development agreement; owner
                                   participation agreement; conditions of
                                   governmental building permits for
                                   construction of Landlord's Work; approvals,
                                   or entitlements in connection with the
                                   initial performance of Landlord's Work or
                                   Tenant's Improvement Work relating to the
                                   Building; conditional use permits in
                                   connection with the performance of
                                   Landlord's Work or Tenant's Improvement Work
                                   relating to the Building; easements
                                   encumbering all or part of the Building; or

                                       15

<PAGE>

                                    (B) Other agreement relating to the initial
                                    development, entitlement, construction, or
                                    financing of the Building or the Project,
                                    including any initial payments or costs made
                                    in connection with any child-care
                                    facilities, traffic demand management
                                    programs, transportation impact mitigation
                                    fees, water conservation, sewage treatment,
                                    recycling and housing replacement or linkage
                                    fees existing as of the date of this Lease.

                           (xix) Capital improvement or capital replacement
related to the Building ("Capital
Costs"), including:

                                    (A) Costs incurred by Landlord that are
                                    considered to be capital improvements or
                                    capital replacements under generally
                                    accepted accounting and management
                                    practices; and

                                    (B) Rentals and other related expenses
                                    incurred in leasing air-conditioning
                                    systems, elevators, and other equipment
                                    ordinarily considered to be capital
                                    expenditures (except equipment not
                                    affixed to the Building that is used in
                                    providing janitorial or maintenance services
                                    for the Building, temporary equipment used
                                    for repairs of the Building).

                           (xx) All Project Operating Expenses and costs of
every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with the ownership and operation of the other
buildings in the Project or any surrounding property and supporting facilities.

                           (xxi) Legal, accounting, audit, verification and
other consulting fees relating to the ownership, as opposed to the operation, of
the Building and the Project.

                  (b) "Project Operating Expenses" shall include all expenses
and costs of every kind and nature which Landlord shall pay or become obligated
to pay because of or in connection with the ownership and operation of the
Project Common Areas and Parking Area, including, without limitation: (i) all
Impositions as set forth in Article 6; (ii) premiums for insurance maintained by
Landlord pursuant to Article 5; (iii) wages, salaries and related expenses and
benefits of all on-site employees, if any, and off-site employees, if any,
engaged in operation, maintenance and security of the Project Common Areas and
Parking Area; (iv) all supplies, materials, tool and equipment rental used in
operation of the Project Common Areas and Parking Area; (v) all maintenance and
repair, waste disposal, janitorial, security and service costs incurred in
connection with the Project Common Areas and Parking Areas; (vi) all maintenance
and repair, waste disposal, janitorial, security and service costs incurred in
connection with the Parking Area and the Project Common Area, including, without
limitation, locker rooms and exercise facilities; (vii) repairs, replacements
and general maintenance of the Parking Area and the Project Common Area
(excluding those paid for by proceeds of insurance or other parties and
alterations attributable solely to tenants of the Project other than Tenant);
(viii) all other reasonable operating, management and other expenses incurred by
Landlord in connection with operation of the Parking Area and the Project Common
Areas; (ix) all charges for water, electrical, and sewer services not separately
metered by any tenant of the Project and used or consumed in the Parking Area or
the Project Common Area; (x) any other costs, levies or assessments resulting
from statutes or regulations promulgated by any governmental authority in
connection with the use or occupancy of the Project; (xi) personal property
taxes levied on or attributable to personal property used in connection with the
Project Common Areas and Parking Area; (xii) freight charges and transportation
services attributable to the operation and/or management of the Project; and
(xiii) reasonable accounting, audit, verification and other reasonable
consulting fees. Project Operating Expenses do not include electricity and gas,
if any, delivered to the Project, which costs are the responsibility of any
tenant of the Project as further defined in Section 6.08. Notwithstanding the
provisions of this Section 6.02, the following shall not be included within
Project Operating Expenses:

                           (ii)  Any depreciation on the Project Common Areas or
Parking Area;

                                       15

<PAGE>

                           (iii) Costs incurred due to Landlord's
violation of any terms or conditions of this Lease or any other lease relating
to the Project;

                           (iv)  All interest,  loan fees,  and other carrying
costs related to any mortgage or deed of trust and all rental and other payable
due under any ground or underlying lease related to the Project, unless such
costs are directly attributable to a Tenant's breach or default under this
Lease;

                           (v)   Any compensation paid to clerks, attendants,
or other persons in commercial concessions operated by Landlord;

                           (vi)  Advertising and promotional expenditures.

                           (vii) Any costs, fines, or penalties incurred due to
violations by Landlord of any governmental rule or authority, this Lease or any
other lease in the Project or due to Landlord's gross negligence or willful
misconduct.

                           (viii) Costs of acquisition of sculpture, paintings,
                           or other objects of art. (ix) Wages, salaries, or
                           other compensation paid to any executive employees of
Landlord above the grade of building manager.

                           (x)      Real estate brokers' leasing commissions.

                           (xi)     Initial improvements or alterations to
tenant spaces.

                           (xii)    The cost of providing any service directly
to and paid directly by any tenant.

                           (xiii)   All management or similar fees other than
the Management Fee.
                           (xiv)    Costs associated with:

                                    (A) Operation of the business of the
                                    ownership of the Project or the Project or
                                    entity that constitutes Landlord or
                                    Landlord's property manager, as
                                    distinguished from the cost of Project
                                    operations, including the costs of
                                    partnership or corporate accounting and
                                    legal matters; defending or prosecuting any
                                    lawsuit with any mortgagee, lender, ground
                                    lessor, broker, tenant, occupant, or
                                    prospective tenant or occupant; selling or
                                    syndicating any of Landlord's interest in
                                    the Project Common Areas or Parking Area;
                                    and disputes between Landlord and Landlord's
                                    property manager;

                                    (B) Landlord's general corporate or
                                    partnership overhead and general
                                    administrative expenses, including
                                    the salaries of management personnel other
                                    than those who are primarily engaged in the
                                    operation, maintenance, and repair of the
                                    Project Common Areas or Parking Area, except
                                    to the extent that those costs and expenses
                                    are included in the Management Fees;

                           (xvi)    Costs of:

                                    (A) Initial construction of the Project
                                    Common Areas or Parking Area;

                                    (B) Reconstruction of the Project Common
                                    Areas or Parking Area pursuant to Article
                                    10; or

                                    (C) Modification, alteration, or repair of
                                    any portion of the Project Common Areas or
                                    Parking Area due to faulty initial
                                    construction;

                           (xvii) Expenses incurred by Landlord for use of any
portion of the Project or the Project Common Areas or Parking Area to
accommodate special events such as shows, promotions, filming, displays,
photography, private events or parties, ceremonies, and advertising. This
exclusion to

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Project Operating Expenses shall not include the normal expenses otherwise
attributable to providing Project services, such a lighting, heating,
ventilating, and air-conditioning in the public portions of the Project under
normal Project operations during Business Hours. This exclusion shall also not
include programs, training, displays, or other events for training or informing
tenants and occupants of the Project on how to cope with fire, earthquake and
life-safety matters.

                           (xviii) Any costs or expenses relating to any
provisions of any:

                                    (A) Development agreement; owner
                                    participation agreement for initial
                                    contribution of Landlord's Work; conditions
                                    of governmental building permits for
                                    construction of Landlord's Work, approvals,
                                    or entitlements in connection with the
                                    initial performance of Landlord's Work or
                                    Tenant Improvement Work relating to the
                                    Project Common Areas or Parking Area;
                                    conditional use permits in connection with
                                    the performance of Landlord's Work or
                                    Tenant's Improvement Work relating to the
                                    Project Common Areas or Parking Area;
                                    easements encumbering all or part of the
                                    Project Common Areas or Parking Area; or

                                    (B) Other agreement relating to the initial
                                    development, entitlement, construction, or
                                    financing of the Project or the Project,
                                    including any initial payments or costs made
                                    in connection with any child-care
                                    facilities, traffic demand management
                                    programs, transportation impact mitigation
                                    fees, water conservation, sewage treatment,
                                    recycling and housing replacement or linkage
                                    fees existing as of the date of this Lease.

                           (xix) Capital improvement or capital replacement
related to the Project Common Areas or Parking Area ("Capital Costs"),
including:
                                    (A) Costs incurred by Landlord that are
                                    considered to be capital improvements or
                                    capital replacements under generally
                                    accepted accounting and management
                                    practices; and

                                    (B) Rentals and other related expenses
                                    incurred in leasing air-conditioning
                                    systems, elevators, and other equipment
                                    ordinarily considered to be capital
                                    expenditures (except equipment not
                                    affixed to the Project Common Areas or
                                    Parking Area that is used in providing
                                    janitorial or maintenance services for the
                                    Project Common Areas or Parking Area ,
                                    temporary equipment used for repairs of the
                                    Project).

                           (xx) All Project Operating Expenses and costs of
every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with the ownership and operation of the other
buildings in the Project, Parking Area, Project Common Area or any surrounding
property and supporting facilities.

                           (xxi) Legal, accounting, audit, verification and
other consulting fees relating to the ownership, as opposed to the operation, of
the Project and the Project.

                  (c) As used herein, "Operating Expenses" shall mean Building
Operating Expenses or Project Operating Expenses, as applicable.

6.3 PRORATION. Any Building Operating Expenses or Project Operating Expenses
attributable to a period which falls only partially within the Term shall be
prorated between Landlord and Tenant so that Tenant shall pay only that
proportion thereof which the part of such period within the Term bears to the
entire period.

6.4 SURVIVAL. Any such sum payable by Tenant which would not otherwise be due
until after the date of the termination of this Lease, shall, if the exact
amount is uncertain at the time that this Lease terminates, be paid by Tenant to
Landlord upon such termination in an amount to be reasonably determined by
Landlord with an adjustment to be made once the exact amount is known.

                                       17
<PAGE>

6.5 ESTIMATED PAYMENTS.
Prior to the commencement of each calendar year of the Term, Landlord shall
reasonably estimate the Additional Rent payable by Tenant pursuant to this
provision and Tenant shall pay to Landlord on the first of each month in
advance, one-twelfth (1/12) of Landlord's estimated amount. After the end of
each calendar year there shall be an adjustment made to account for any
difference between the actual and the estimated Operating Expenses for the
previous year. Landlord shall calculate such adjustment within sixty (60) days
after the end of the applicable calendar year . If Tenant has overpaid the
amount of Additional Rent owing pursuant to this provision, Landlord shall pay
to Tenant the amount of such overpayment within thirty (30) days after
determination of such overpayment.. If Tenant has underpaid the amount of
Additional Rent owing pursuant to this provision, Tenant shall pay the amount of
such underpayment to Landlord, as Additional Rent, within thirty (30) days after
receipt of notice from Landlord of such underpayment.

6.6 ADJUSTMENT

                  (a) Notwithstanding any provision herein to the contrary, in
the event the Project and/or Building is not fully occupied (including because
it is not yet constructed) during the Base Calendar Year or any subsequent
calendar year , an adjustment shall be made in computing Operating Expenses for
such calendar year so that the same shall be computed for such calendar year as
though the Building and/or Project had been fully occupied during such year.

                  (b) If Landlord includes any buildings other than the Building
in the Project that were not included in the Project during the Base Calendar
Year or were part of the Project for only a portion of the Base Calendar Year,
Project Operating Expenses for the Base Calendar Year shall be considered to be
increased by the amounts that Landlord would have incurred during the Base
Calendar Year with respect to Project Operating Expenses had these additional
buildings been included in the Project during the entire Base Calendar Year

6.7 IMPOSITIONS. "Impositions" shall collectively refer to all forms of: (i)
real estate taxes, assessments, impact fees, transit charges, housing fund
assessments, assessment bonds, license fees, license taxes, business license
fees, commercial rental taxes, and improvement bonds in connection with the
Project and/or the Building; (ii) governmental taxes, levies, fees and charges
imposed by any authority having the direct power to tax, including but not
limited to any city, county, state or federal government or any school,
agricultural, lighting, drainage or other improvement or special assessment
district thereof, and all other taxes relating to any legal or equitable
interest in the Premises, Project and/or the Building; (iii) taxes which may be
levied in lieu of real estate taxes; and (iv) other governmental charges
(including, but not limited to, charges for traffic facilities improvements,
water service studies and improvements, and fire service studies and
improvements) or amounts necessary to be expended because of governmental
orders. "Impositions" shall include all such governmental obligations, whether
general or special, ordinary or extraordinary, unforeseen as well as foreseen,
of any kind and nature for public improvements, services, benefits, or any other
purpose which are assessed, levied, confirmed, imposed or become a lien upon the
Premises, Project and/or Building or become payable during the Term.

                  (a) INSTALLMENT ELECTION. In the case of any Impositions which
may be evidenced by improvement or other bonds or which may be paid in annual or
other periodic installments, Landlord shall cause such bonds to be issued or
cause such assessment to be paid in installments over the maximum period
permitted by law.
                  (b) LIMITATION. Nothing contained in this Lease shall require
Tenant to pay any franchise, estate, inheritance or succession transfer tax of
Landlord, or any income, profits or revenue tax or charge, upon the net income
of Landlord from all sources; provided, however, that if at any time during the
Term under the laws of the United States Government or the State of California,
or any political subdivision thereof, a tax or excise on rent, or any other tax
however described, is levied or assessed by any such political body against
Landlord on account of Rent, or a portion thereof, Tenant shall pay one hundred
percent (100%) of any said tax or excise as Additional Rent.

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<PAGE>

                  (c) PERSONAL PROPERTY TAXES. Tenant shall pay or cause to be
paid, prior to delinquency, any and all taxes and assessments levied upon all
trade fixtures, inventories and other personal property placed in and upon the
Premises by Tenant.

6.8 SERVICES AND UTILITIES.

                  (a) Tenant shall contract directly with the appropriate
utility company for the supply of electricity to the Premises, which shall be
separately metered. Landlord shall use its best reasonable efforts to provide
HVAC services during Business Hours. Landlord shall also use its best reasonable
efforts to provide electrical services to the Premises with distribution to each
floor of the Premises in accordance with Landlord's Plans.

                  (b) Landlord, in accordance with Landlord's Plans, shall
provide facilities for delivery of city water from the regular Building outlets
for drinking, lavatory and toilet purposes. Tenant shall have the right to add
to or access the water systems for the Building and to provide supplemental
water systems to service the Premises in accordance with Tenant's Improvement
Plans approved by Landlord.

                  (c) Landlord shall provide heating, ventilation and air
conditioning ("HVAC") in accordance with the Project Documents (as defined in
the Work Letter). Landlord shall, at all times during the Term, maintain in
effect a full service maintenance contract on the HVAC system in the Building
with a reputable HVAC contractor and a full service maintenance contract on the
elevators in the Building with a reputable elevator maintenance contractor.
Landlord shall use reasonable efforts to have included in such contracts a
provision requiring the contractor to respond to any applicable service failure
within two (2) hours of notification of any such service failure; PROVIDED,
HOWEVER, LANDLORD SHALL NOT BE DEEMED TO BE IN DEFAULT OF THE FOREGOING
OBLIGATION IF SUCH RESPONSE TIME IS NOT GENERALLY AVAILABLE ON COMMERCIALLY
REASONABLY TERMS AND CONDITIONS IN SAN DIEGO COUNTY.

                  (d) Landlord shall operate those portions of the Building that
Landlord is required to maintain under Section 7.02 and all portions of the
Project Common Areas and the Parking Area in accordance with a standard of
operation commensurate with the general standard of operation of Class "A"
office buildings located in San Diego County.

                  (e) Landlord shall provide during the Business Hours, as a
Project Operating Expense, utilities and maintenance to the Project Common Areas
and Parking Area.

                  (f) Landlord shall provide janitorial services in and about
the Premises, the Building Common Areas and the restrooms in the Project Common
Areas serving the Premises on Mondays through Fridays, except on Holidays.
Landlord shall also provide window-washing services for the Building in
accordance with that provided to comparable buildings but in no event less than
two (2) times per year.

                  (g) Landlord shall not be liable for any failure or
interruption of any utility or service (a "Service Failure"), and Tenant shall
not be entitled to any reduction or abatement of Rent on account of any such
failure or interruption, unless such failure or interruption is shown by Tenant
to be directly attributable to the gross negligence or intentional acts of
Landlord, its agents or employees, or unless Landlord fails to maintain in
effect during the Term a full service maintenance contract on the Building HVAC
system and elevators pursuant to Section 6.08(c) above. In the event of any such
interruption or failure of any services or utilities provided in this Lease
resulting from the gross negligence or intentional acts of Landlord, Landlord's
agents or employees, Tenant's sole remedy shall be the equitable abatement of
Base Rent for the duration of the interruption or failure of such Service
Failure, which abatement shall not commence until Tenant has first provided
notice to Landlord and given ten (10 ) days to cure such interruption or
failure. If a Service Failure creates imminent danger to human safety or
property, Tenant shall be entitled to cure the Service Failure and Landlord
shall reimburse Tenant for the costs incurred by Tenant in curing such Service
Failure.

6.9 SPECIAL SERVICES.

                                       19
<PAGE>

                  (a) ADDITIONAL SERVICES. In the event Landlord provides any
utilities or services to Tenant requested by Tenant beyond the standard services
set forth in Section 6.08 of this Lease, Tenant shall pay Landlord for such
special services as Additional Rent.

                  (b) UTILITY CONSUMPTION. IN CONSIDERATION OF LANDLORD AGREEING
TO MODIFICATION OF THE HVAC SYSTEM PURSUANT TO TENANT'S IMPROVEMENT PLANS,
TENANT AGREES TO PAY TO LANDLORD, AS ADDITIONAL RENT, ALL HVAC UTILITIES COSTS
ASSOCIATED WITH THE OPERATION OF THE HVAC SYSTEM IN THE BUILDING. IF, DURING THE
FIRST TEN (10) YEARS OF THE TERM OF THIS lEASE, INCLUDING ANY PRIOR EXTENSIONS
THEREOF, ANY MAJOR CAPITAL COMPONENTS OF THE HVAC SYSTEM IN THE BUILDING REQUIRE
REPLACEMENT, AS OPPOSED TO REPAIR AND MAINTENANCE, SUCH REPLACEMENTS SHALL BE
MADE AT THE SOLE COST OF LANDLORD. IF, HOWEVER, SUCH REPLACEMENTS ARE REQUIRED
TO BE MADE AT ANY TIME AFTER THE TENTH (10TH) YEAR OF THE TERM OF THIS LEASE,
INCLUDING ANY PRIOR EXTENSIONS THEREOF, TENANT SHALL PAY TO LANDLORD, WITHIN
THIRTY (30) DAYS AFTER LANDLORD'S WRITTEN REQUEST THEREFORE, A PRO-RATA SHARE OF
THE COST OF REPLACING ANY SUCH CAPITAL COMPONENTS REQUIRED TO BE REPLACED,
DETERMINED BASED ON THE NUMBER OF MONTHS THEN REMAINING IN THE TERM OF THE lEASE
AND AN AGREED UPON ESTIMATED USEFUL LIFE OF CAPITAL COMPONENTS IN THE HVAC
SYSTEM AS DETERMINED BY LANDLORD'S HVAC CONSULTANT BASED ON TENANT'S USE OF THE
HVAC SYSTEM IN EXCESS OF THE INDUSTRY STANDARD USE TENANT HVAC USE FOR OFFICE
BUILDINGS GENERALLY. In the event Tenant exercises any then unexercised Premises
Option, then Tenant shall pay to Landlord forthwith an additional pro-rata share
of such replacements determined on the same basis for the additional period of
the extension of the Term.

7 . REPAIRS AND MAINTENANCE

7.1 TENANT REPAIRS AND MAINTENANCE. Tenant shall, at Tenant's own expense,
maintain the interior of the Premises in a clean, sanitary and safe condition
and keep and maintain the integrity and quality of the non-structural portions
of the Premises, all non-structural walls, ceilings, lights, fixtures, and floor
coverings thereof, in first-class repair(excluding the roof, and the structural
elements of the Building thereof, in good repair (reasonable wear and tear
excepted). Tenant shall be responsible for the cost of any repairs due to damage
caused by Tenant's negligence or willful misconduct. Notwithstanding the
foregoing, Landlord, and not Tenant, shall be responsible for the performance of
repair and maintenance of those items described in Section 7.02 below. Tenant
waives the right to make repairs at Landlord's expense under any law, statute or
ordinance now or hereafter in effect (including the provisions of California
Civil Code Section 1942 and any successive sections or statutes of a similar
nature), provided, however, the foregoing shall not prohibit Tenant from making
repairs to the HVAC system in the Building if Landlord fails to make such
repairs within seven (7) days after written notice from Tenant (or, if more than
seven (7) days is reasonably required to complete such repairs, Landlord has
commenced such service during the seven (7) day period and is diligently
pursuing same to completion. Tenant waives all rights to recover any losses or
damages (including interference with or injury to Tenant's business) resulting
from Landlord's performing or failure to perform any such repairs or
maintenance, except to the extent of Landlord's gross negligence or willful
misconduct; it being expressly understood and agreed that Tenant shall be solely
responsible for and look solely to its insurance for any such damage and losses,
except if caused by Landlord's gross negligence or willful misconduct.

7.2 LANDLORD REPAIRS AND MAINTENANCE. Landlord shall, as part of the Operating
Expenses, repair and maintain in a clean, sanitary and safe condition, and keep
and maintain the integrity and quality of (reasonable wear and tear excepted):

                  (a) The structural portions of the Premises;

                  (b) The "Building Shell" (as defined in the Work Letter);

                                       20
<PAGE>

                  (c) The exterior portions of the Building and the Project;

                  (d) All Project Common Areas and Parking Area described in
                      Section 1.03; and

                  (e) Any defects in the initial construction of Landlord's Work
that exists as of the Term Commencement Date.

7.3 INSPECTION OF PREMISES. Landlord, at reasonable times, with twenty-four (24)
hour notice except in emergencies when no notice shall be required, may enter
the Premises to complete construction undertaken by Landlord on the Premises or
Building, to inspect, improve, clean or repair the same, to inspect the
performance by Tenant of the terms and conditions hereof and to affix reasonable
signs and displays, show the Premises to prospective purchasers, tenants and
lenders and for all other purposes as Landlord shall reasonably deem necessary;
provided, that Landlord shall show the Premises to prospective tenants only
during the last ten (10) months of the Term.

7.4 LIENS. Tenant shall promptly pay and discharge all claims for work or labor
done, supplies furnished or services rendered at the request of Tenant and shall
make good faith efforts to keep the Premises, the Common Areas, and Building
free and clear of all mechanics' and materialmen's liens in connection therewith
and shall discharge of record any such liens or post adequate security or bond
within five (5) days of written notice thereof. Landlord shall have the right to
post or keep posted on the Premises, or in the immediate vicinity thereof, any
notices of non-responsibility for any construction, alteration or repair of the
Premises by Tenant. If any such lien is filed, Landlord may, after Landlord has
first provided notice to Tenant and given Tenant seven (7) days to remove such
lien, but shall not be required to, take such action or pay such amount as may
be necessary to remove such lien; and, Tenant shall pay to Landlord as
Additional Rent any such amounts expended by Landlord within five (5) days after
notice is received from Landlord of the amount expended by Landlord.

8 . FIXTURES, PERSONAL PROPERTY AND ALTERATIONS

8.1 FIXTURES AND PERSONAL PROPERTY. Tenant, at Tenant's expense, may install any
necessary trade fixtures, equipment and furniture in the Premises; provided,
that such items are installed and are removable without material damage to the
structure or improvements of the Building. Landlord reserves the right to
approve or disapprove of curtains, draperies, shades, paint or other interior
improvements visible from outside the Premises on wholly aesthetic grounds,
provided Landlord exercises such discretion in a manner consistent with all
buildings in the Project. Such improvements described in the previous sentence
must be submitted for Landlord's written approval prior to installation, or
Landlord may remove or replace such items at Tenant's sole expense. Said trade
fixtures, equipment and furniture shall remain Tenant's property and shall be
removed by Tenant upon expiration of the Term, or earlier termination of this
Lease. Tenant shall repair, at Tenant's sole expense, all damage caused by the
installation or removal of trade fixtures, equipment, furniture or temporary
improvements. If Tenant fails to remove the foregoing items within ten (10) days
of the termination of this Lease, Landlord may (i) keep and use them, wherein
Tenant surrenders possession of title and waives all rights of possession, or
(ii) remove any or all of them and cause them to be stored or sold in accordance
with applicable law.

8.2 ALTERATIONS. Except as provided in Section 8.04, Tenant shall not make or
allow to be made any alterations, additions or improvements to the Premises,
either at the inception of this Lease or subsequently during the Term, without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Tenant shall deliver to Landlord full and
complete plans and specifications of all such alterations, additions or
improvements, and no such work shall be commenced by Tenant until Landlord has
given its written approval thereof. Landlord does not expressly or implicitly
covenant or warrant that any plans or specifications submitted by Tenant are
safe or that the same comply with any applicable laws, lawful ordinances, etc.
Further, Tenant shall indemnify and hold Landlord harmless from any loss, cost
or expense, including attorneys' fees and costs, incurred by Landlord as a
result of any defects in design, materials or workmanship resulting from
Tenant's alterations, additions or improvements to the Premises. All repairs,
alterations, additions, and restoration by Tenant hereinafter required or
permitted shall be done in a good and workmanlike manner and in

                                       21

<PAGE>

compliance with all applicable laws and applicable ordinances, by-laws,
regulations and orders of any federal, state, county, municipal or other public
authority and of the insurers of the Building. Tenant shall reimburse Landlord
for Landlord's reasonable charges for reviewing and approving or disapproving
plans and specifications for any alterations proposed by Tenant. Tenant shall
also reimburse Landlord for the costs of any increased insurance premiums
incurred by Landlord to include such alterations in the Landlord's all risk
insurance coverage requirements set forth in Section 5.01, provided, however,
that Landlord shall be required to include the Tenant's alterations under
Landlord's all risk insurance only to the extent such insurance is actually
obtained by Landlord and such alterations are insurable under Landlord's
insurance. If such Tenant alterations are not or cannot be included in the
coverage of Landlord's insurance, Tenant shall insure the alterations under
Tenant's all risk insurance policy or policies as set forth in Section 5.01.
Tenant shall require that any contractors used by Tenant carry a comprehensive
liability insurance policy covering bodily injury in the amounts of One Million
Dollars ($1,000,000) per person and Two Million Dollars ($2,000,000) per
occurrence(Two Million Dollars ($2,000,000) per person and Three Million Dollars
($3,000,000) per occurrence if the cost of the alteration, addition or
improvement exceeds Two Hundred Thousand Dollars ($200,000) and covering
property damage in the amount of One Million Dollars ($1,000,000). The amounts
of the foregoing insurance requirements shall be increased in accordance with
industry standards every five (5) years during the Term, and Landlord and Tenant
agree to execute an amendment to this Lease to such effect. Tenant shall obtain,
on behalf of Tenant and at Tenant's sole cost and expense, before proceeding
with any alteration, addition or improvement the cost of which exceeds One
Hundred Thousand Dollars ($100,000) a completion and lien indemnity bond, or
other surety, reasonably satisfactory to Landlord for such alteration. Landlord
may require proof of such insurance prior to commencement of any work on the
Premises. Tenant shall provide to Landlord a copy of "as-built" plans for any
alterations, additions or improvements constructed by Tenant.

8.3 REMOVAL OF ALTERATIONS. All alterations, additions and improvements shall
remain the property of Tenant until termination of this Lease, at which time
they shall be and become the property of Landlord.

8.4 MINOR ALTERATIONS. The original Tenant shall be permitted to make minor
alterations, additions or improvements to the interior improvements of the
Premises ("Minor Alterations") without Landlord's prior written consent, but
only if:

                  (a) At least fifteen (15) days before construction has begun,
Tenant gives Landlord written notice of the nature and extent of the intended
Minor Alterations, specifying the contractor that Tenant intends to use, a cost
estimate of the proposed Minor Alterations and copies of all contracts relating
thereto (those contracts not available at the time of Tenant's notice shall be
delivered to Landlord when they become available but in all events prior to
commencement of construction of the Minor Alterations);

                  (b) The proposed alterations, additions or improvements do not
affect the Building Systems, the exterior appearance or the structural
components of the Building;

                  (c) The proposed Minor Alterations do not involve the
installation of stairways, vaults or other equipment or improvements that would
cost more to move or remove than ordinary improvements for general office use;

                  (d) The proposed Minor Alterations, together with all other
Minor Alterations made without Landlord's consent under this Section 8.04 within
forty-eight (48) months of the proposed alteration, addition or improvement, do
not cost more than $100,000 in the aggregate; and

                  (e) Tenant provides to Landlord within two (2) days of
Landlord's request such further information as Landlord may reasonably request
regarding the proposed Minor Alterations. Within twenty (20) days of completion
of the Minor Improvements, Tenant shall deliver to Landlord a copy of as-built
plans for such Minor Alterations, is such Minor Alterations are of a type for
which as-built plans are reasonably available.

                                       22

<PAGE>

9 . USE AND COMPLIANCE WITH LAWS

9.1 GENERAL USE AND COMPLIANCE WITH LAWS. Tenant shall only use the Premises for
the Permitted Uses specified in the Basic Lease Information and for no other use
without the prior written consent of Landlord. Tenant shall, at Tenant's sole
cost and expense, use the Premises, Project, Building, Project Common Areas and
Parking Area in compliance with all of the requirements of municipal, county,
state, federal and other applicable governmental authorities now in force, or
which may hereafter be in force, pertaining to the Premises, Project, Building
and Parking Area and secure any necessary permits for Tenant's particular use of
the Premises, Project, Building, Project Common Areas and Parking Area and shall
faithfully observe, in the use of the Premises, Project, Building, Project
Common Areas and Parking Area, all municipal, county, state, federal and other
applicable governmental entities' requirements which are now in force, or which
may hereafter be in force. Tenant, in Tenant's use and occupancy of the
Premises, shall not subject the Premises to any use which would tend to damage
any portion thereof or which shall in any way increase the existing rate of any
insurance on the Building or any portion thereof or cause any cancellation of
any insurance policy covering the Building or portion thereof. Tenant shall not
do or permit to be done anything which would obstruct or interfere with the
rights of or injure other Tenants or occupants of the Project.

9.2 SIGNS. Tenant shall not install any sign on the Premises, Building or
Project unless Tenant receives prior written approval from Landlord for such
sign; provided, however, that Tenant may, on an exclusive basis, if Tenant or an
Affiliate Transferee (as defined in Section 13.01) leases eighty percent (80%)
or more of the Building, install one (1) identifying logo sign on the top west
fascia of the Building and an identifying sign on a non-exclusive basis, on a
monument sign on the Project and in a location reasonably acceptable to Tenant
and Landlord, so long as such signs conform to all laws, statutes, regulations,
restrictions and zoning, is designed by Wieber Nelson Design and is first
approved by all required governmental agencies and by Landlord, which Landlord
approval shall not be unreasonably withheld. Provided Tenant or an Affiliate
Transferee leases eighty percent (80%) or more of the Building. Landlord shall
not permit any other person or other Tenant to install on or affix to the
Building any other signage without Tenant's prior written consent, which consent
may be withheld in Tenant's sole and exclusive discretion. Tenant shall also
have the right to select, subject to Landlord's reasonable approval, interior
floor lobby signage for the Building, which signage shall be designed by Wieber
Nelson Design. Such directory signage shall be used exclusively for the display
and location of Tenant, any employees of Tenant and subtenants of Tenant. Any
sign placed by Tenant on the Premises, Project or Building shall be installed at
Tenant's sole cost and expense (which may be paid out of the Tenant Improvement
Allowance), and shall contain only Tenant's name, or the name of any affiliate
of Tenant actually occupying the Premises, and no advertising matter. Tenant
shall remove any such sign upon termination of this Lease and shall return the
affected portion of the Premises to their condition prior to the placement or
erection of said sign.

9.3 PARKING ACCESS. In addition to the general obligation of Tenant to comply
with laws and without limitation thereof, Landlord shall not be liable to Tenant
nor shall this Lease be affected if any parking privileges appurtenant to the
Premises are impaired by reason of any moratorium, initiative, referendum,
statute, regulation, or other governmental decree or action which could in any
manner prevent or limit the parking rights of Tenant hereunder. Any governmental
charges or surcharges or other monetary obligations imposed relative to parking
rights with respect to the Premises, Project and Building shall be considered as
Impositions and shall be payable by Tenant under the provisions of Article
hereinabove. Tenant hereby acknowledges that Tenant shall not use in excess of
Tenant's pro rata share of the Project's total parking spaces.

9.4 FLOOR LOAD. Tenant shall not place a load upon any floor of the
Premises which exceeds the load per square foot which such floor is designed to
carry and which is then allowed by law.

9.5 DELIVERIES. All deliveries to and from the Premises shall be made in such a
manner and during such time periods reasonably specified by Landlord so as to
cause the minimum amount of

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<PAGE>

interference with the business of other tenants; provided, however, deliveries
to Tenant's loading dock identified on Tenant's Plans, if any, may be made at
any time..

10. DAMAGE AND DESTRUCTION

10.1 RECONSTRUCTION. If (a) the Premises (including the Tenant's Improvements)
are damaged or destroyed, (b) any Common Areas of the Project providing access
to the Premises are damaged to the extent that Tenant does not have reasonable
access to the Premises, or (c) damage occurs to the Building or the Common Areas
such that Tenant does not have use of the parking entitlements described in
Section 1.06 or such that the Building is no longer provided with HVAC, elevator
service, running water, sewage, electrical service or security systems, in each
case, during the Term by any cause not attributable to Tenant, its agents,
employees or invitees, (each such event, a "Casualty"), then, unless Landlord or
Tenant terminates this Lease pursuant to Section 5.04 below, or Landlord
terminates this Lease pursuant to Section 5.05 below, Landlord shall promptly
and diligently reconstruct the Premises to the extent necessary to restore
Landlord's Work and Tenant's Improvement Work in the Premises as described in
Exhibit D, and Tenant shall be obligated for the restoration of all of the items
specified as Tenant's Work in said Exhibit D in the event of such
reconstruction, as well as Tenant's other leasehold improvements (but not with
respect to those improvements owned by Landlord), trade fixtures and other
personal property on the Premises. Landlord shall use commercially reasonable
efforts to prosecute all claims for insurance proceeds to which Landlord may be
entitled pursuant to the policies of insurance maintained by Landlord pursuant
to Section 5.01.

10.2 RENT ABATEMENT. If any portion of the Premises is damaged or destroyed
during the Term to the extent that such portion is rendered unusable by Tenant,
it is agreed that, except as hereinafter provided, Tenant shall look solely to
Tenant's business interruption insurance for any damages or losses arising from
substantial interference with the operation of Tenant's business by reason of
such damage or destruction. Rent shall abate during the first twelve (12) months
following the date of such damage or destruction to the extent of any proceeds
received by Landlord from rental abatement insurance maintained by Landlord
pursuant to Section 5.01 hereof. Rent shall be abated proportionately.

10.3 REPAIR PERIOD NOTICE. Landlord shall, within ninety (90) days after the
date of the Casualty, provide written notice to Tenant indicating the
anticipated period for repairing the Casualty (the "Repair Period Notice"). The
Repair Period Notice shall be accompanied by a certified statement executed by
the contractor retained by Landlord to complete the repairs or, if Landlord has
not retained a contractor, a licensed contractor not affiliated with Landlord,
certifying the contractor's opinion about the anticipated period for repairing
the Casualty. The Repair Period Notice shall also state, if applicable,
Landlord's election either to repair or to terminate the Lease under Section
10.01.

10.4 EXCESSIVE DAMAGE OR DESTRUCTION/OPTION TO TERMINATE. If the Repair Period
Notice states that Landlord determines that the Building or Common Areas cannot,
with reasonable diligence, be fully repaired or restored by Landlord within two
hundred seventy (270) days after the date of the damage or destruction, Landlord
or Tenant may terminate this Lease by delivery to the other party of written
notice thereof within ten (10) days of the Repair Period Notice. Landlord's
determination, pursuant to the Repair Period Notice, shall be binding upon
Tenant. If Landlord states in the Repair Period Notice that the Building can be
fully repaired or restored within the two hundred seventy (270) day period, or
if Landlord states in the Repair Period Notice that such repair or restoration
cannot be made within said period, but neither Landlord nor Tenant elects to
terminate within ten (10) days of the date of the Repair Period Notice, this
Lease shall remain in full force and effect and Landlord shall diligently repair
and restore the damage as soon as reasonably possible.

10.5 UNINSURED CASUALTIES AND OTHER CONDITIONS/OPTION TO TERMINATE.
Notwithstanding anything contained herein to the contrary, (a) in the event of
damage to or destruction of all or any portion of the Building, which is not
fully covered by the insurance proceeds received by Landlord under the insurance
policies required under Article 5 hereinabove (provided that any deductible
shall be ignored in determining whether any damage or destruction is covered),
Landlord may terminate this Lease by written notice to Tenant, given within
forty-five (45) days after the date of notice to Landlord that said

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<PAGE>

damage or destruction is not so covered; (b) in the event of
damage to or destruction of all or any portion of the Building, which is due to
the acts or omissions of Tenant, its agents, employees or contractors, Landlord
may terminate this Lease by written notice to Tenant, given within forty-five
(45) days after the date of a Landlord's determination that said damage or
destruction was due to the acts or omissions of Tenant, its agents, employees or
contractors; or (c) in the event sufficient proceeds of insurance maintained by
Landlord pursuant to the terms of this Lease are unavailable to Landlord to
reconstruct and restore the Premises in the event of damage to or destruction of
all or any portion of the Building because they have been applied by any lender
against payment of an existing loan on the Project or Building, Landlord may
terminate this Lease by written notice to Tenant, given within forty-five (45)
days after the date of notice to Landlord that any such lender intends to apply
any of the insurance proceeds against payment of an existing loan on the Project
or Building. If Landlord does not elect to terminate this Lease, the Lease shall
remain in full force and effect and Landlord shall commence reconstruction and
restoration of Landlord's Work and Tenant's Improvement Work in the Premises as
described in Exhibit D and shall diligently repair or rebuild Landlord's Work to
substantially the condition in which it existed immediately prior to such damage
or destruction.

10.6 WAIVER. With respect to any destruction which Landlord is obligated to
repair or may elect to repair under the terms of this Article 10, Tenant hereby
waives all rights to terminate this Lease pursuant to rights otherwise presently
or hereafter accorded by law to tenants, except as expressly otherwise provided
herein.

11. EMINENT DOMAIN

11.1 TOTAL CONDEMNATION. If the whole of the Premises is acquired or condemned
by eminent domain, inversely condemned or sold in lieu of condemnation, for any
public or quasi-public use or purpose ("Condemned"), then the Term shall
terminate as of the date of title vesting in such proceeding, and Rent shall be
adjusted as of the date of such termination. Tenant shall immediately notify
Landlord of any such occurrence.

11.2 PARTIAL CONDEMNATION. If any part of the Premises is partially Condemned,
and such partial condemnation renders the Premises unusable for the business of
the Tenant, as reasonably determined; or in the event a substantial portion of
the Building is Condemned, as reasonably determined, then the Term shall
terminate as of the date of title vesting in such proceeding and Rent shall be
adjusted to the date of termination. If such condemnation is not sufficiently
extensive to render the Premises unusable for the business of Tenant, as
reasonably determined, or less than a substantial portion of the Building is
Condemned, then Landlord shall promptly restore the Premises to a condition
comparable to its condition immediately prior to such condemnation less the
portion thereof lost in such condemnation, and this Lease shall continue in full
force and effect except that after the date of such title vesting the Base Rent
shall be appropriately reduced as reasonably determined by Landlord.

11.3 LANDLORD'S AWARD. If the Premises are wholly or partially Condemned, then,
subject to the provision of Article 11.04 Landlord shall be entitled to the
entire award paid for such condemnation, and Tenant waives any right or claim to
any part thereof from Landlord or the condemning authority.

11.4 TENANT'S AWARD. Tenant shall have the right to claim and recover from the
condemning authority, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account of
any and all costs or loss incurred by Tenant including, without limitation,
removing Tenant's merchandise, furniture, fixtures, leasehold improvements and
equipment to a new location.

11.5 TEMPORARY CONDEMNATION. If the whole or any part of the Premises
shall be Condemned for any temporary public or quasi-public use or purpose, this
Lease shall remain in effect and Tenant shall be entitled to receive for itself
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term. If a temporary condemnation
remains in force at the expiration or earlier termination of this Lease, Tenant
shall pay to Landlord a sum equal to the reasonable cost of performing any
obligations required of Tenant by this Lease with respect to the

                                       25
<PAGE>

surrender of the Premises, including without limitation, repairs and
maintenance, and upon such payment such obligations shall be deemed satisfied.
If a temporary condemnation is for an established period which extends beyond
the Term, the Lease shall terminate as of the date of occupancy by the
condemning authority, and the damages shall be as provided in Sections 11.03 and
11.04 hereinabove and Rent shall be adjusted to the date of occupancy.

11.6 NOTICE AND EXECUTION. Landlord shall, immediately upon service of process
in connection with any condemnation or potential condemnation, give Tenant
notice in writing thereof. Tenant shall immediately execute and deliver to the
Landlord all instruments that may be required to effectuate the provisions of
this Article.

12 . DEFAULT

12.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" on the part of Tenant:

                  (a) PAYMENT. Failure to pay any installment of Base Rent,
Additional Rent or other monies due and payable hereunder upon the date when
said payment is due, continuing for a period of three (3) days.

                  (b) PERFORMANCE. Default in the performance of any of Tenant's
covenants, agreements or obligations hereunder (except default in the payment of
Rent, Additional Rent or other monies), where such failure is curable and
continues uncured for ten (10) days after notice by Landlord to Tenant, provided
that if the nature of the default cannot be reasonably cured within ten (10)
days. Tenant shall not be deemed in default if it shall commence curing the
default within such ten (10) day period and diligently prosecutes same to
completion;
                  (c) ASSIGNMENT. A general assignment by Tenant for the benefit
of creditors or any Unauthorized Assignment as defined below in Article ;

                  (d) BANKRUPTCY. The filing of a voluntary petition by Tenant,
or the filing of an involuntary petition by any of Tenant's creditors seeking
the rehabilitation, liquidation or reorganization of Tenant under any law
relating to bankruptcy, insolvency or other relief of debtors;

                  (e) RECEIVERSHIP. The appointment of a receiver or other
custodian to take possession of substantially all of Tenant's assets or of this
leasehold;
                  (f) INSOLVENCY, DISSOLUTION, ETC. Tenant shall become
insolvent or unable to pay its debts, or shall fail generally to pay its debts
as they become due; or any court shall enter a decree or order directing the
winding up or liquidation of Tenant or of substantially all of its assets; or
Tenant shall take any action toward the dissolution or winding up of its affairs
or the cessation or suspension of its use of the Premises;

                  (g) ATTACHMENT. Attachment, execution or other judicial
seizure of substantially all of Tenant's assets or this leasehold; or

                  (h) HAZARDOUS MATERIALS RELEASE. Any on-site or off-site
material contamination of any portion of the Project or violation of any Health
and Safety Laws as set forth in Article 14; or any failure to remedy any on-site
or off-site contamination, whether material or not, within three (3) days of
Tenant having notice of such contamination, or if more than three (3) days is
reasonably required to remedy such contamination, any failure of Tenant to
commence to remedy such contamination within such three (3) day period and to
diligently prosecute such remedy to completion.

12.2 LANDLORD'S REMEDIES.

                  (a) ABANDONMENT. If Tenant vacates or abandons the Premises
and an uncured Event of Default exists, this Lease shall continue in effect,
Landlord shall not be deemed to have terminated this Lease other than by written
notice of termination from Landlord, and Landlord shall have all of the remedies
of a landlord provided by Section 1951.4 of the Civil Code of the State of
California. At

                                       26

<PAGE>

any time subsequent to vacation or abandonment of the Premises by Tenant,
Landlord may give notice of termination and shall thereafter have all of the
rights hereinafter set forth.

                  (b) TERMINATION. Following the occurrence of any Event of
Default, Landlord shall have the right, so long as the default continues, to
terminate this Lease by written notice to Tenant setting forth: (i) the default;
(ii) the requirements to cure it; and (iii) a demand for possession, which shall
be effective three (3) days after it is given or upon expiration of the times
specified in Section 12.01 hereinabove, whichever is later.

                  (c) POSSESSION. Following termination under subsection (b),
without prejudice to any other remedies Landlord may have by reason of Tenant's
default or of such termination, Landlord may then or at anytime thereafter, (i)
peaceably re-enter the Premises, or any part thereof, upon voluntary surrender
by Tenant or expel or remove Tenant therefrom and any other persons occupying
them, using such legal proceedings as are then available; (ii) repossess and
enjoy the Premises, or relet the Premises or any part thereof for such term or
terms (which may be for a term extending beyond the Term) at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion shall determine, with the right to make reasonable alterations and
repairs to the Premises; and (iii) remove all personal property therefrom and,
at Landlord's option, retain all or any of such personal property (and title
thereto shall thereupon vest in Landlord without compensation to Tenant) or
dispose of all or any of such personal property, in any manner, without
compensation to Tenant. In the event Landlord removes all or any of Tenant's
personal property pursuant to the foregoing provisions, Tenant shall pay to
Landlord, upon demand, the actual expense of such removal and disposition and
the cost of repairing any damage to the Premises resulting from such removal.

                  (d) RECOVERY. Following termination under subsection (b),
Landlord shall have all the rights and remedies of a landlord provided by
Section 1951.2 of the Civil Code of the State of California. The amount of
damages which Landlord may recover following termination under subsection (b)
shall include: (i) the worth at the time of the award of the unpaid rent and
other amounts which had been earned at the time of termination; (ii) the worth
at the time of the award of the amount by which the unpaid rent which would have
been earned after termination until the time of the award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided; (iii)
the worth at the time of the award of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of rental
loss Tenant proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all detriment proximately caused by
Tenant's failure to perform its obligations under this Lease. The "worth at the
time of the award" of the amount referred to in (i) and (ii) above shall be
computed by allowing interest thereon at the Default Rate (as set forth below).
The "worth at the time of the award" of the amount referred to in (iii) above
shall be computed by discounting such amount at the Default Rate (as set forth
below).
                  (e) ADDITIONAL REMEDIES. In addition to the foregoing
remedies, Landlord shall, so long as this Lease is not terminated, have the
right to remedy any default of Tenant to maintain or improve the Premises
without terminating this Lease, to incur expenses on behalf of Tenant in seeking
a new subtenant, or to cause a receiver to be appointed to administer the
Premises and new or existing subleases, and to add to the Rent payable hereunder
all of Landlord's reasonable costs in so doing, with interest at the lower of
the prime rate of interest at the time of said default charged by Wells Fargo
Bank N.A. plus three percent (3%) or the maximum lawful rate (the "Default
Rate").
                  (f) OTHER. If Tenant causes or threatens to cause a breach of
any of the covenants, agreements, terms or conditions contained in this Lease,
Landlord shall be entitled to retain all sums held by Landlord, by any trustee
or in any account provided for herein, to enjoin such breach or threatened
breach, and to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings and other remedies
were not provided for in this Lease. As used in this Article, the term
"threatens" is limited to delivery to Landlord of a written statement by Tenant
indicating Tenant's intent to cause a breach or Tenant's anticipation of its
uncured default in the performance of, any of the covenants, agreements, terms
or conditions contained in this Lease.

                                       27
<PAGE>

                  (g) CUMULATIVE. Each right and remedy of Landlord provided for
in this Lease shall be cumulative and shall be in addition to every other right
or remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise. The exercise or beginning of the exercise by
Landlord of any one or more of the rights or remedies provided for in this
Lease, or now or hereafter existing at law or in equity or by statute or
otherwise, shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights or remedies provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise.

                  (h) NO WAIVER. No failure by Landlord to insist upon the
strict performance of any term hereof or to exercise any right or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach shall constitute a waiver of
any such breach or of any such term. Efforts by Landlord to mitigate the damages
caused by Tenant's breach of this Lease shall not be construed to be a waiver of
Landlord's right to recover damages under this Article 12. Nothing in this
Article 12 affects the right of Landlord to indemnification by Tenant in
accordance with Article hereinabove for liability arising prior to the
termination of this Lease for personal injuries or property damage.

13 . ASSIGNMENT AND SUBLETTING

13.1 ASSIGNMENT AND SUBLETTING; PROHIBITION. Except as hereinafter provided
in this Section 13.01, Tenant shall not assign, mortgage, pledge, hypothecate
or otherwise transfer, this Lease, in whole or in part, or any interest
therein, nor sublet or permit occupancy by any party other than Tenant of all
or any part of the Premises (each of the foregoing is hereinafter sometimes
referred to as a "Transfer"), without the prior written consent of Landlord
in each instance, which may not be unreasonably withheld or delayed;
provided, however, Tenant acknowledges and agrees that it shall not be
unreasonable for Landlord to take into consideration in connection with a
proposed Transfer such factors as (a) the impact on parking in the Project;
(b) the impact of possible noise or odors generated by the proposed use; and
(c) the image of the project in the community. As material consideration for
this Lease, Tenant hereby agrees to provide the following written materials
to Landlord regarding any proposed Transfer and the proposed transferee (the
"Transferee") for Landlord's approval: (i) the proposed Transfer agreement to
Landlord for Landlord's approval; (ii) financial statements of the Transferee
for the three (3) years prior to the proposed Transfer, which financial
statements shall be audited if the Transfer contemplates the release of
Tenant from any of its obligations under this Lease, or otherwise audited, if
available, or certified by the transferee as being true and correct and
prepared in accordance with generally acceptable accounting principles,
consistently applied; (iii) detailed summaries of the Transferee's business
operation; (iv) a detailed credit report of the Transferee; and (v) banking
references for the Transferee. Landlord shall have the right to review the
written material submitted by Tenant regarding such Transfer for a period of
fifteen (15) business days following Landlord's receipt of such material to
consent or decline to consent to such Transfer. No Transfer by Tenant shall
relieve Tenant of any obligation under this Lease, including Tenant's
obligation to pay Base Rent and Additional Rent hereunder. Any purported
Transfer contrary to the provisions hereof without Landlord's consent
("Unauthorized Transfer") shall be void. The consent by Landlord to any
Transfer shall not constitute a waiver of the necessity for such consent to
any subsequent Transfer. As Additional Rent hereunder, Tenant shall reimburse
Landlord for actual legal and other expenses incurred by Landlord in
connection with any request by Tenant for Landlord's consent to the Transfer
up to Two Thousand Dollars ($2,000) per proposed Transfer. Such amount shall
be reimbursed by Tenant to Landlord within ten (10) days following the
submission to Tenant of a copy of the written invoice from Landlord's counsel
itemizing such costs and fees payable by Landlord with respect to any request
by Tenant for Landlord's consent to such a Transfer, whether or not Landlord
ultimately approves such Transfer. Tenant shall have the right, subject to
the foregoing obligations to deliver the relevant written materials to
Landlord, but without Landlord's consent, to enter into an assignment of this
Lease or a sublease of the Premises to any subsidiary corporation of Tenant,
Tenant's parent corporation, to any corporation or other entity that
controls, is controlled by or under common control with Tenant or to any
corporation, partnership or other entity succeeding to substantially all of
the assets of Tenant as a result of a consolidation or merger, or to

                                       28
<PAGE>

a corporation, partnership or other entity to which all or substantially all
of the assets of Tenant have been sold ("Affiliate Transferee"), provided any
Affiliate Transferee that is an assignee (but not any sublessee) executes an
instrument in form and content reasonably acceptable to Landlord assuming all
of Tenant's obligation under the Lease. If the net worth of such Transferee,
as of the date of the proposed Transfer, is equal to or greater than the net
worth of the initial Tenant measured as of the Lease Date or the date of the
proposed Transfer, whichever net worth is greater, then Landlord agrees that
Landlord will execute a form of release providing that Tenant shall be
released from the further performance of covenants on the part of Tenant
herein contained, and from any and all further liability, obligations, costs
and expenses, demands, causes of action, claims or judgments arising from or
growing out of, or connected with this Lease after the effective date of such
release, other than those arising out of or related to Tenant's obligations
under the Lease prior to the date of the release. The effective date of such
release shall be the date Tenant assigns its interest in this Lease to the
Tenant's assignee.

13.2 BONUS RENTAL. If for any assignment or sublease other than to an Affiliate
Transferee, Tenant receives rent or other consideration, either initially or
over the term of the assignment or sublease, in excess of the Rent called for
hereunder, or in case of the sublease of a portion of the Premises, in excess of
such Rent fairly allocable to such portion, after appropriate adjustments to
assure that all other payments called for hereunder are appropriately taken into
account, Tenant shall pay to Landlord promptly after its receipt by Tenant, as
Additional Rent hereunder, fifty percent (50%) of the excess of each such
payment of rent or other consideration received by Tenant, after the recovery by
Tenant of Tenant's reasonable actual costs of assigning the Lease or subletting
the Premises, including real estate commissions, tenant improvements, other
normal leasing costs and attorney fees.

13.3 SCOPE. The prohibition against Unauthorized Transfers contained in this
Article shall be construed to include a prohibition against any Transfer by
operation of law. If this Lease or any interest therein be assigned, or if the
underlying beneficial interest of Tenant is transferred, or if the Premises or
any part thereof be sublet or occupied by anybody other than Tenant, Landlord
may collect rent from the assignee, subtenant or occupant and apply the net
amount collected to the Rent herein reserved and apportion any excess rent so
collected in accordance with the terms of the immediately preceding paragraph,
but no such assignment, subletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. Except as set forth
in Section 13.01, no assignment or subletting shall affect the continuing
primary liability of Tenant (which, following assignment, shall be joint and
several with the assignee), and Tenant shall not be released from performing any
of the terms, covenants and conditions of this Lease.

13.4 WAIVER. Notwithstanding any Transfer, or any indulgences, waivers or
extensions of time granted by Landlord to any Transferee, or failure by Landlord
to take action against any Transferee, Tenant waives notice of any default of
any Transferee and agrees that Landlord may, at its option, proceed against
Tenant without having taken action against or joined such Transferee, except
that Tenant shall have the benefit of any indulgences, waivers and extensions of
time granted to any such Transferee. Tenant further waives monetary damages, of
whatever kind or nature, from Landlord as a result of, or in any way related to
any proposed Transfer, whether Landlord consented to such Transfer or withholds
its consent to such Transfer.

13.5 RELEASE. Whenever Landlord conveys its interest in the Project and/or
Building, Landlord shall be automatically released from the further performance
of covenants on the part of Landlord herein contained, and from any and all
further liability, obligations, costs and expenses, demands, causes of action,
claims or judgments arising from or growing out of, or connected with this Lease
after the effective date of said release. The effective date of said release
shall be the date Landlord transfers title of the Project to the new owner and
the new owner assumes Landlord's obligations under this Lease in writing. If
requested, Tenant shall execute a form of release and such other documentation
as may be required to further effect the provisions of this Section 13.05.

                                       29
<PAGE>

13.6 RECAPTURE OF PREMISES. In the event Tenant proposes to enter into a
Transfer, other than a Transfer with to an Affiliate Transferee, which
Transfer, when taken together with all previous transfers other than to
Affiliate Transferees, relates to more than forty nine percent (49%) of the
rentable square feet of the Premises (the "Subject Space") and is for the
entire then remaining balance of the Term, or substantially all of the
remaining balance of the Term, then Tenant shall notify Landlord in writing
(the "Availability Notice") if Tenant wishes to Transfer the Subject Space.
Landlord shall have the option, by written notice to Tenant (the "Recapture
Notice") within ten (10) days after receiving any Availability Notice, to
recapture the Subject Space as described below. A timely Recapture Notice
terminates this Lease and Tenant's obligations regarding the Subject Space
for the remaining term of the Lease and as of the date sixty (60) days after
Landlord delivers the Recapture Notice to Tenant. If Landlord declines to or
fails timely to elect to recapture the Subject Space, Landlord shall have no
further right under this Section 13.06 to the Subject Space unless Tenant
fails to Transfer the Subject Space within one hundred fifty (150) days after
Landlord receives the Availability Notice or it becomes available again after
Transfer by Tenant. To determine the new Base Rent under the Lease if
Landlord recaptures the Subject Space, the original Base Rent under the Lease
shall be multiplied by a fraction, the numerator of which is the square feet
of Rentable Area of the Premises retained by Tenant after Landlord's
recapture and the denominator of which is the total square feet of Rentable
Area of the Premises before Landlord's recapture. The Additional Rent, to the
extent that it is calculated on the basis of the square feet of Rentable Area
within the Premises, shall be reduced to reflect Tenant's proportionate share
based upon the square feet of Rentable Area of the Premises retained by
Tenant after Landlord's recapture. Notwithstanding the foregoing, Landlord's
right to recapture the Premises pursuant to this Section 13.06 shall not
apply to a Transfer during the initial five (5) year term of this Lease.

14 . HAZARDOUS MATERIALS

14.1 DEFINITIONS.

                  (a) HEALTH AND SAFETY LAWS. "Health and Safety Laws" means any
and all federal, state or local laws, ordinances, rules, decrees, orders,
regulations, court decisions and other authority relating to hazardous
substances, hazardous materials, hazardous waste, toxic substances, materials or
wastes, environmental conditions on, under or about the Premises, or soil and
ground water conditions, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as
amended, 42 U.S.C. ss. 9601, et seq., the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. ss. 6901, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss.1801, et seq., the Federal Water Pollution Control Act of
1972, 33 U.S.C. ss. 1251, et. seq., the Safe Drinking Water Act, 42 U.S.C. ss.
300f, et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601, et
seq., the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7
U.S.C. ss. 136, et seq., the Federal Hazardous Substances Control Act, 15 U.S.C.
ss. 1261, et seq., the Noise Control Act of 1972, 42 U.S.C. ss. 4901, et seq.,
the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss. 651, et seq., the
California Hazardous Waste Control Act, Cal. Health and Safety Code ss. 25100,
et seq., the Carpenter-Presley-Tanner Hazardous Substances Account Act, Cal.
Health and Safety Code ss. 25300, et seq., the Safe Drinking Water and Toxic
Enforcement Act of 1986 ("California Proposition 65"), Cal. Health and Safety
Code ss. 25249.5, et seq., the Porter-Cologne Water Quality Control Act, Cal.
Water Code ss. 13000, et. seq., any amendments to the foregoing, and any similar
federal, state or local laws, ordinances, rules, decrees, orders or regulations.

                  (b) HAZARDOUS MATERIALS. "Hazardous Materials" means any
chemical, compound, material, substance or other matter that: (i) is defined as
a hazardous substance, hazardous material, hazardous waste or toxic substance,
material or waste under any Health and Safety Law, including, but not limited
to, those substances, materials or wastes regulated now or in the future under
any statutes or regulations; (ii) is controlled or governed by any Health and
Safety Law or gives rise to any reporting, notice or publication requirements
thereunder, or gives rise to any liability, responsibility or duty on the part
of Tenant or Landlord with respect to any third person hereunder; or (iii) is
flammable or explosive material, oil or any other petroleum-based substance,
freon, asbestos, urea formaldehyde, radioactive

                                       30
<PAGE>

material, nuclear medicine material, drug, vaccine, bacteria, virus, hazardous
waste, toxic substance, or related injurious or potentially injurious material
(by itself or in combination with other materials).

                  (c) OFF-SITE CONTAMINATION. The term "Off-Site Contamination"
shall mean the presence of any Hazardous Materials, associated in any way with
Tenant's, its successors' or assigns' use or occupation of the Premises,
transported, arranged for disposal of, or disposed of by Tenant or any third
party on behalf of Tenant or its agents, employees or officers to any site or
location other than the Premises.

                  (d) ON-SITE CONTAMINATION. The term "On-Site Contamination"
shall mean the presence of any Hazardous Materials in, on or under any portion
of the Premises.

14.2 USE. Tenant shall not allow any Hazardous Material to be used, generated,
manufactured, released, stored or disposed of on, under or about, or transported
from, the Premises, unless: (a) such use is specifically disclosed to and
approved by Landlord in writing prior to such use; and (b) such use is conducted
in compliance with the provisions of this Article 14. Landlord's consent may be
withheld in Landlord's sole discretion, and, if granted, may be revoked at any
time. Landlord may approve such use subject to reasonable conditions to protect
the Premises and Landlord's interests. Landlord may withhold approval if
Landlord determines that such proposed use involves a material risk of a release
or discharge of Hazardous Materials or a violation of any Health and Safety Laws
or that Tenant has not provided reasonable assurances of its ability to remedy
such a violation and fulfill its obligations under this Article 14. Landlord
acknowledges that the original Tenant uses liquid nitrogen in the conduct of
certain tests performed on a routine basis. Landlord agrees and consents to
Tenant's use of such material on the Premises, provided Tenant shall handle,
use, store and dispose of such material in a safe and lawful manner, in
compliance with all Health and Safety Laws, and shall not allow such material to
materially contaminate the Premises or the Project. Notwithstanding the
foregoing, Landlord hereby consents to the original Tenant's use, storage or
disposal of products containing small quantities of Hazardous Materials, which
products are of a type customarily found in offices and households (such as
aerosol cans containing insecticides, toner for copies, paints, paint remover
and the like), provided that the Tenant shall handle, use, store and dispose of
such Hazardous Materials in a safe and lawful manner and shall not allow such
Hazardous Materials to contaminate the Premises.

14.3 COMPLIANCE WITH LAWS; HANDLING OF HAZARDOUS MATERIALS. Tenant shall
strictly comply with, and shall maintain the Premises in compliance with, all
Health and Safety Laws. Tenant shall obtain, maintain in effect and comply
with the conditions of all permits, licenses and other governmental approvals
required for Tenant's operations on the Premises under any Health and Safety
Laws, including, but not limited to, the discharge of appropriately treated
Hazardous Materials into or through any sanitary sewer serving the Premises.
At Landlord's request, Tenant shall deliver copies of, or allow Landlord to
inspect, all such permits, licenses and approvals. All Hazardous Materials
removed from the Premises shall be removed and transported by duly licensed
haulers to duly licensed disposal facilities, in compliance with all Health
and safety Laws. Tenant shall be responsible for the proper disposal of any
mercury-containing fluorescent lighting fixtures. Tenant shall perform any
monitoring, testing, investigation, clean-up, removal, detoxification,
preparation of closure or other required plans and any other remedial work
required by any governmental agency or lender or reasonably recommended by
Landlord's environmental consultants as a result of (a) any release or
discharge or potential release or discharge of Hazardous Materials and
resulting in On-Site Contamination or Off-Site Contamination or (b) any
violation or potential violation of Health and Safety Laws that, in the case
of (a) or (b) is by Tenant or any successor or sublessee of Tenant or their
respective agents, contractors, employees, licensees or invitees
(collectively, "Remedial Work"). Landlord shall have the right to intervene
in any governmental action or proceeding involving any Remedial Work, and to
approve performance of the work, in order to protect Landlord's interests.
Landlord shall have the right to require Tenant to provide an Standard ASTM E
1527-93 Phase I (cost not to exceed $3,000.00) Environmental Clearance Report
prepared for Landlord's approval at the time Tenant vacates the Premises.
Tenant shall not enter into any settlement

                                       31

<PAGE>

agreement, consent decree or other compromise with respect to any claims
relating to Hazardous Materials without notifying Landlord and providing ample
opportunity for Landlord to intervene.

14.4 COMPLIANCE WITH INSURANCE
REQUIREMENTS. Tenant shall comply with the requirements of Landlord's and
Tenant's insurers regarding Hazardous Materials and with such insurers'
recommendations based upon prudent industry practices regarding management of
Hazardous Materials.

14.5 INDEMNITY. Tenant shall indemnify, protect, defend and hold Landlord (and
its partners and their respective officers, directors, employees and agents),
the Premises, Building, Parking Areas, and all other areas of the Project
harmless from and against any and all liabilities, demands, penalties, fines,
claims, suits, judgments, actions, investigations, proceedings, costs and
expenses (including attorneys' fees and court costs) arising out of or in
connection with any breach of any provisions of this Article 14, directly or
indirectly arising out of any liability of Tenant under any Health and Safety
Law or associated with any On-Site Contamination or any Off-Site Contamination
which is caused, suffered or permitted to be brought upon, kept, used,
discharged, deposited or leaked in or about the Premises or any other portion of
the Project by Tenant or any of Tenant's assigns, agents, employees, contractors
or invitees or by anyone in the Premises other than Landlord, Landlord's agents,
employees or contractors, including, but not limited to, the use, generation,
storage, release, disposal or transportation of Hazardous Materials by Tenant,
or any successor or sublessee of Tenant, or their respective agents,
contractors, employees, licensees, or invitees, on, under or about the Premises
during the Term, and including, but not limited to, all consequential damages
and the cost of any Remedial Work. Any defense by Tenant pursuant to this
Article shall be by counsel reasonably acceptable to Landlord. Neither the
consent by Landlord to the use, generation, storage, release, disposal or
transportation of Hazardous Materials nor the strict compliance with all Health
and Safety Laws shall excuse Tenant from Tenant's indemnification obligations
pursuant to this Article 14. The foregoing indemnity shall be in addition to and
not a limitation of the indemnification provisions of Article 5.09 of this
Lease. Tenant's obligations pursuant to this Section 14.05 shall survive the
termination or expiration of the Lease.

14.6 NOTICE. Each party to this Lease shall notify the other party, in writing,
as soon as reasonably possible, and in any event within five (5) business days
after, any of the following: (a) a party has knowledge, or it has reasonable
cause to believe, that any Hazardous Material has been released, discharged or
is located on, under or about the Premises, whether or not the release or
discharge is in quantities that would otherwise be reportable to a public
agency; (b) a party receives any order of a governmental agency requiring any
Remedial Work pursuant to any Health and Safety Laws; (c) a party receives any
warning, notice of inspection, notice of violation or alleged violation, or a
party receives notice or knowledge of any proceeding, investigation of
enforcement action, pursuant to any Health and Safety Laws; or (d) a party
receives notice or knowledge of any claims made or threatened by any third party
against that party or the Premises relating to any loss or injury resulting from
Hazardous Materials or from violation of any Health and Safety Law. If the
potential risk of any of the foregoing events is material, the party having
notice of such event shall deliver immediate verbal notice to the other party,
in addition to written notice as set forth above. Landlord and Tenant agree to
deliver to one another copies of all test results, reports and business or
management plans required to be filed with any governmental agency pursuant to
any Health and Safety Laws.

14.7 DEFAULT. The material release or discharge of any Hazardous Material other
than as permitted by law or the in violation of any Hazardous Materials Law by
Tenant or any successor or sublessee of Tenant shall be a material default by
Tenant under the Lease. In addition to or in lieu of the remedies available
under the Lease as a result of such default, Landlord shall have the right,
without terminating the Lease, to require Tenant to suspend its operations and
activities on the Premises until Landlord is satisfied that appropriate Remedial
Work has been or is being adequately performed; Landlord's election of this
remedy shall not constitute a waiver of Landlord's right thereafter to declare a
default and pursue other remedies set forth in the Lease.

14.8 LANDLORD'S DISCLOSURE. Pursuant to the requirements of California Health
and Safety Code Section 25359.7, Landlord hereby notifies Tenant that Landlord
does not know, and does not have

                                       32
<PAGE>

reasonable cause to believe, that any release of any Hazardous Material has come
to be located on or beneath the Premises, Building or Project.

15 . OFFSET STATEMENT, ATTORNMENT AND SUBORDINATION

15.1 ESTOPPEL CERTIFICATE. Within ten (10) days after request therefor by either
party, the other party shall deliver to the requesting party, in recordable
form, a certificate certifying (if such be the case, or otherwise setting forth
any exceptions thereto) that (a) this Lease is in full force and effect; (b) the
date of Tenant's most recent payment of Rent, or setting forth any exceptions
(c) that the certifying party has no defenses or offsets outstanding, or stating
those offsets or defenses claimed by the certifying party; (d) that to the
certifying party's knowledge, the requesting party has no defenses or offsets
outstanding, or stating those offsets or defenses claimed by the other party;
and (e) and any other information reasonably requested. Tenant's failure to
deliver said certificate in time shall be conclusive upon Tenant that: (i) this
Lease is in full force and effect, without modification except as may be
represented by Landlord; (ii) there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counterclaim or deduction against
Rent hereunder; and (iii) no more than one period's Base Rent has been paid in
advance. Landlord's failure to deliver said certificate in time shall be
conclusive upon Landlord that: (x) this Lease is in full force and effect,
without modification except as may be represented by Tenant; (y) there are no
uncured defaults in Tenant's performance; and (z) Tenant's representation as to
the amount of Base Rent that has been paid in advance is correct. Failure of a
party to deliver such a certificate to the other party within ten (10) days
following Landlord's request therefor shall be deemed such party's
acknowledgment of the correctness of the statements made in the foregoing
sentence and that the requesting party's mortgagee(s) and/or purchaser(s) may
rely on said statements.

15.2 ATTORNMENT. Tenant shall, in the event any proceedings are brought for the
foreclosure of, or in the event of exercise of the power of sale under any
mortgage or deed of trust made by the Landlord, its successors or assigns,
encumbering the Premises, or any part thereof, or in the event of termination of
a ground lease, if any, and if so requested, attorn to the purchaser upon such
foreclosure or sale or upon any grant of a deed in lieu of foreclosure and
recognize such purchaser as the Landlord under this Lease.

15.3 SUBORDINATION. The rights of Tenant hereunder are and shall be, at the
election of the mortgagee, subject and subordinate to the lien of such mortgage,
or the lien resulting from any other method of financing or refinancing, now or
hereafter in force against the Project, Building and/or Parking Area, and to all
advances made or hereafter to be made upon the security thereof; provided,
however, no such subordination shall be effective unless and until Tenant shall
have received a non-disturbance agreement in a recordable, commercially
reasonable form to the effect that neither this Lease nor any of the rights of
Tenant hereunder shall be terminated or subject to termination by any trustee's
sale, any action to enforce the security, or by any proceeding or action in
foreclosure unless an uncured Event of Default shall exist. If requested, Tenant
agrees to execute whatever documentation may be required to further effect the
provisions of this Article.

15.4 NON-DISTURBANCE. Within ten (10) days after execution of this Lease,
Landlord shall deliver to Tenant with respect to each mortgage, deed of trust,
ground lease or other monetary lien or encumbrance in force against the Project
as of the date hereof, a non-disturbance agreement from the mortgagee, ground
lessor, beneficiary of the deed of trust or other lienholder in a commercially
reasonable form. If Landlord, after commercially reasonable efforts, is unable
for any reason to deliver such non-disturbance agreements within such period,
Tenant's sole remedy shall be to cancel this Lease by delivering written notice
thereof to Landlord within five (5) days of the expiration of such ten (10) days
period.

16 . NOTICES

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<PAGE>

16.1 NOTICES. All notices required to be given hereunder shall be in writing
(except for notice required pursuant to Article 12.01(b) and shall be (i)
personally delivered, in which even they shall be deemed received on the date of
delivery, (ii) sent by certified mail, postage prepaid, return receipt
requested, or by a professional courier company which provides a receipt
evidencing delivery, in which event they shall be deemed received on the date of
delivery as evidenced by the receipt; or (iii) sent by telecopy. Any notice,
request, demand, direction or other communication sent by cable, telex or
telecopy must be confirmed within forty-eight (48) hours by letter mailed or
delivered in accordance with the foregoing. The Landlord's and Tenant's
addresses for written notices required to be given hereunder shall be the
addresses set forth in the Basic Lease Information, or at such other place
designated by advance written notice delivered in accordance with the foregoing.

17 . SUCCESSORS BOUND

17.1 SUCCESSORS BOUND. This Lease and each of its covenants and conditions shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors and legal representatives and their respective
assigns, subject to the provisions hereof. Whenever in this Lease a reference is
made to the Landlord, such reference shall be deemed to refer to the person in
whom the interest of the Landlord shall be vested and Landlord shall have no
obligation hereunder as to any claim arising after the transfer of its interest
in the Premises, subject to the provisions of Section 13.05. Any successor or
assignee of the Tenant who accepts an assignment or the benefit of this Lease
and enters into possession or enjoyment hereunder shall thereby assume and agree
to perform and be bound by the covenants and conditions thereof. Nothing
contained in this section 17.01 shall be deemed in any manner to give a right of
assignment to Tenant without the written consent of Landlord.

18 . MISCELLANEOUS

18.1 WAIVER. No waiver of any default or breach of any covenant by either party
hereunder shall be implied from any omission by either party to take action on
account of such default if such default persists or is repeated, and no express
waiver shall affect any default other than the default specified in the waiver,
and then said waiver shall be operative only for the time and to the extent
therein stated. Waivers of any covenant, term or condition contained herein by
either party shall not be construed as a waiver of any subsequent breach of the
same covenant, term or condition. The consent or approval by either party to or
of any act by either party requiring further consent or approval shall not be
deemed to waive or render unnecessary their consent or approval to or of any
subsequent similar acts.

18.2 EASEMENTS. Landlord reserves the right to (i) subdivide or alter the
boundaries of the Project and (ii) grant easements on the Project and dedicate
for public use portions thereof without Tenant's consent; provided, however,
that no such subordination, alteration, grant or dedication shall materially
unreasonably interfere with Tenant's use of the Premises pursuant to the terms
of this Lease. From time to time, and upon Landlord's demand, Tenant shall
execute, acknowledge and deliver to Landlord, in accordance with Landlord's
instructions, any and all documents, instruments, maps or plats necessary to
effectuate Tenant's covenants hereunder.

18.3 RELOCATION. Intentionally deleted.

18.4 NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light,
air or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.

18.5 CORPORATE AUTHORITY. Tenant hereby covenants and warrants that: (i) Tenant
is a duly authorized and existing corporation; (ii) Tenant is qualified to do
business in the State of California; (iii)

                                       34
<PAGE>

Tenant has full right and authority to enter into this Lease; and (iv) each of
the persons executing on behalf of Tenant is authorized to do so. Concurrently
with the execution of this Lease, Tenant shall deliver to Landlord an original
certificate of the secretary of Tenant certifying the adoption of resolutions by
the board of directors of Tenant approving the terms and conditions of this
Lease and authorizing the persons executing this Lease to execute same for and
on behalf of Tenant.

18.6 ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of a
lesser amount than the Rent herein stipulated shall be deemed to be other than
on account of the Rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided in this Lease.

18.7 LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord under this
Lease shall not constitute personal obligations of the individual members,
partners, directors, officers, or shareholders of Landlord or any member of
Landlord, and in consideration of the benefits accruing hereunder to Tenant and
notwithstanding anything contained in this Lease to the contrary, Tenant hereby
covenants and agrees for itself and all of its successors and assigns that the
liability of Landlord for its obligations under this Lease shall be limited
solely to, and Tenant's and its successors' and assigns' sole and exclusive
remedy shall be against the real estate that is the subject of this Lease and
Tenant, its successors and assigns shall not seek recourse against the
individual member, partners, directors, officers or shareholders of Landlord or
any member of Landlord, or any of their personal assets for such satisfaction.

                  (a) If Landlord is in default of this Lease, and as a
consequence, Tenant recovers a money judgment against Landlord, the judgment
shall be satisfied only out of the proceeds of sale received on execution of the
judgment and levy against the right, title, and interest of Landlord in the
Project, and out of insurance proceeds, rent or other income from the Project
receivable by Landlord or out of the consideration received by Landlord from the
sale or other disposition of all or any part of Landlord's right, title and
interest in the Project. Notwithstanding the foregoing, if Landlord is in
default of this Lease and, as a consequence, Tenant recovers a money judgment
against Landlord, which is not satisfied within ten (10) days after written
demand by Tenant, then Tenant shall have the right to record a lien against the
Building or Project for the unsatisfied amount of the judgment.

                  (b) If Landlord, or a member of Landlord, is a limited
liability company, a partnership or joint venture, the member or partners of
such entity shall not be personally liable and no partner of Landlord shall be
sued or named as a party in any suit or action, or service of process be made
against such partner of Landlord, except as may be necessary to secure
jurisdiction of the partnership or joint venture or to the extent liability is
caused by willful and intentional misconduct or fraud. If Landlord, or member of
Landlord, is a corporation, the shareholders, directors, officers, employees,
and/or agents of such corporation shall not be personally liable and no
shareholder, director, officer, employee or agent of Landlord shall be sued or
named as a party in any suit or action, or service of process be made against
any shareholder, director, officer, employee, or agent of Landlord, except as
may be necessary to secure jurisdiction of the corporation. No partner,
shareholder, director, employee or agent of Landlord shall be required to answer
or otherwise plead to any service of process and no judgment will be taken or
writ of execution levied against any partner, shareholder, director, employee,
or agent of Landlord.

                  (c) Each of the covenants and agreements of this Section 18.07
shall be applicable to any covenant or agreement either expressly contained in
this Lease or imposed by statute or by common law.

18.8 TIME. Time is of the essence of every provision hereof.

                                       35
<PAGE>

18.9 ATTORNEYS' FEES. In any action or proceeding which the Landlord or the
Tenant may be required to prosecute to enforce its respective rights hereunder,
the less prevailing party therein agrees to pay all costs incurred by the more
prevailing party therein, including reasonable attorneys' fees, to be fixed by
the court, and said costs and attorneys' fees shall be made a part of the
judgment in said action. In any situation in which a dispute is settled other
than by action or proceeding, Tenant shall pay all Landlord's costs and
attorneys' fees related thereto.

18.10 CAPTIONS AND ARTICLE NUMBERS. The captions, article numbers and table of
contents appearing in this Lease are inserted only as a matter of convenience
and in no way define, limit, construe or describe the scope or intent or such
sections or articles of this Lease nor in any way affect this Lease.

18.11 SEVERABILITY. If any term, covenant, condition or provision of this Lease,
or the application thereof to any person or circumstance, shall to any extent be
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, covenants, conditions or provisions of this Lease,
or the application thereof to any person or circumstance, shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

18.12 APPLICABLE LAW. This Lease, and the rights and obligations of the parties
hereto, shall be construed and enforced in accordance with the laws of the State
of California.

18.13 SUBMISSION OF LEASE. The submission of this document for examination and
negotiation does not constitute an offer to lease, or a reservation of, or
option for leasing the Premises. This document shall become effective and
binding only upon execution and delivery hereof by Landlord and Tenant. No act
or omission of any employee or agent of Landlord or of Landlord's broker or
managing agent shall alter, change, or modify any of the provisions hereof.

18.14 HOLDING OVER. Should Tenant, or any of its successors in interest, hold
over the Premises, or any part thereof, after the expiration of the term of this
Lease, unless otherwise agreed to in writing, such holding over shall constitute
and be construed as tenancy from month-to-month only, at a monthly rent equal to
twice one hundred fifty percent (150%) of the Base Rent owed during the final
year of the Term of this Lease as the same may be extended from time to time,
plus Additional Rent, provided, however, if Tenant give written notice to
Landlord of a desire to hold over in the Premises not later than sixty (60) days
prior to the expiration of the Term, as extended, then for the first sixty (60)
days of such holding, which holding shall be deemed permitted by Landlord and
lawful and not a default under the provisions of this Lease provided Tenant has
complied with the notice provisions of this Section 18.14 an all other
provisions of this Lease, the monthly rent shall be one hundred twenty-five
percent (125%) of the Base Rent owed during the final year of the Term on this
Lease, as same may be extended from time to time, plus Additional Rent for such
period. This inclusion of the preceding sentence shall not be construed as
Landlord's permission for Tenant to holdover, except as herein permitted.

18.15 SURRENDER. Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises to Landlord in good order, condition and
repair, except for reasonable wear and tear or as otherwise provided in Articles
8, 10, and 11. Tenant shall not commit or allow any waste or damage to be
committed on any portion of the Premises, Building or Project. All property that
Tenant is required to surrender shall become Landlord's property upon the
termination of this Lease. Landlord may cause any of said personal property that
is not removed from the Premises within thirty (30) days after the date of any
termination of this Lease to be removed from the Premises and stored at Tenant's
expense, or, at Landlord's election said personal property thereafter shall
belong to Landlord without the payment of any consideration, subject to the
rights of any person holding a perfected security interest therein.

                                       36
<PAGE>

18.16 RULES AND REGULATIONS. At all times during the Term, Tenant shall comply
with rules and regulations ("Rules and Regulations") for the Project, as set
forth in Exhibit E (and such amendments as Landlord may reasonably adopt,
provided same are enforced by Landlord in a consistent and non-discriminatory
manner) attached hereto and by this reference made a part hereof; and. provided
further such Rules and Regulations shall diminish Tenant's rights under this
lease.

18.17 NO NUISANCE. Tenant shall conduct its business and control its agents,
employees, invitees and visitors in such a manner as not to create any nuisance,
or unreasonably interfere with, annoy or disturb any other tenant or Landlord in
its operation of the Project.

18.18 BROKER. Tenant warrants that it has had no dealings with any real estate
broker or agent, other than the Tenant's Broker and Landlord's broker, each set
forth in the Basic Lease Information, in connection with the negotiation of this
Lease, and that it knows of no other real estate broker or agent who is entitled
to any commission or finder's fee in connection with this Lease. Tenant agrees
to indemnify and hold harmless Landlord from and against any and all claims,
demands, losses, liabilities, lawsuits, judgments, costs and expenses
(including, without limitation, attorneys' fees and costs) with respect to any
leasing commission or equivalent compensation alleged to be owing on account of
Tenant's dealings with any real estate broker or agent other than Tenant's
Broker or Landlord's Broker. Landlord shall pay any commission owing to Tenant's
Broker and any commission owing to Landlord's Broker in connection with this
Lease, in accordance with a separate agreement between such brokers and
Landlord.

18.19 LANDLORD'S RIGHT TO PERFORM. Upon Tenant's failure to perform any
obligation of Tenant hereunder, including without limitation, payment of
Tenant's insurance premiums, charges of contractors who have supplied materials
or labor to the Premises, etc., Landlord shall have the right to perform such
obligation of Tenant on behalf of Tenant and/or to make payment on behalf of
Tenant to such parties, provided Landlord has first provided written notice to
Tenant and given Tenant ten (10) days to perform such obligation (unless another
cure period is provided herein). Tenant shall reimburse Landlord the reasonable
cost of Landlord's performing such obligation on Tenant's behalf, including
reimbursement of any amounts that may be expended by Landlord, plus interest at
the rate of three percent (3% ) over the prime rate as announced, from time to
time, by Bank of America, N.A. per annum, as Additional Rent.

18.20 MORTGAGE PROTECTION. Landlord shall not be in default under the terms of
this Lease, or by law, unless Landlord fails to perform the obligations required
of Landlord within a reasonable time, but in no event later than ten (10) days
after written notice by Tenant to Landlord and to the holder of any first
mortgage or deed of trust covering the Premises whose name and address shall
have theretofore been furnished to Tenant in writing specifying wherein Landlord
has failed to perform such obligation. If, however, the nature of Landlord's
obligation is such that more than ten (10) days are required for performance,
Landlord shall not be in default exist if Landlord commences performance within
such ten (10) day period and diligently prosecutes the same to completion.
Should Landlord be deemed to be in material default of this Lease, and If any
such default materially interferes with Tenant's business operation in the
Premises, Tenant may give Landlord and the holder of any first mortgage or deed
of trust covering the Premises a second written notice specifying exactly the
nature of the Landlord's failure and its impact on Tenant's business operation
in the Premises and the further remedial action deemed necessary by Tenant. If
such remedial action is not undertaken within thirty (30) days of such second
written notice, Tenant shall be entitled to terminate this Lease, but in no
event earlier than thirty (30) days after the second notice to Landlord and the
holder of any first mortgage or deed of trust covering the Premises.
Notwithstanding the foregoing, Tenant shall not be entitled to terminate this
Lease as a result of Landlord's default if Landlord is making diligent and
reasonable efforts to perform the obligations required of Landlord under this
Lease. Nothing herein contained shall be interpreted to mean that Tenant is
excused from paying any rent due hereunder as a result of any default by
Landlord.

                                       37
<PAGE>

18.21 NONLIABILITY. Landlord shall not be in default hereunder or be liable for
any damages directly or indirectly resulting from, nor shall the rental herein
reserved be abated by reason (unless otherwise provided herein) of (i) the
interruption of use of the Premises as a result of the installation of any
equipment in connection with the Premises or Building or (ii) any failure to
furnish or delay in furnishing any services required to be provided by Landlord
when such failure or delay is caused by accident or any condition beyond the
reasonable control of Landlord or by the making of necessary repairs or
improvements to the Premises or to the Building, or the governmental or
third-party supplier limitation, curtailment, rationing or restriction on use of
water or electricity, gas or any other form of energy or any other service or
utility whatsoever serving the Premises or the Building. Landlord shall use
reasonable efforts to expeditiously remedy any interruption in the furnishing of
such services.

18.22 MODIFICATION FOR LENDER. If, in connection with obtaining construction,
interim or permanent financing for the Project or the Building, the lender shall
require reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or materially and adversely affect the leasehold interest hereby
created or Tenant's rights hereunder.

18.23 RECORDING. Neither Landlord nor Tenant shall record this Lease without the
consent of the other. Either party may, at its sole cost and expense, record a
short form memorandum of this Lease in a form reasonably acceptable to the other
party.

18.24 ENTIRE AGREEMENT. This Lease sets forth all covenants, promises,
agreements, conditions and understandings between Landlord and Tenant concerning
the Premises, Project and Building, and there are no covenants, promises,
agreements, conditions or understandings, either oral or written, between
Landlord and Tenant other than as are herein set forth. Except as herein
otherwise provided no subsequent alteration, amendment, change or addition to
this Lease shall be binding upon Landlord or Tenant unless reduced to writing
and signed by Landlord and Tenant.

                                       38
<PAGE>

18.25 ADDITIONAL LEASE PROVISIONS. Additional Lease Provisions, if any, are set
forth on Exhibit G, attached hereto.

IN WITNESS WHEREOF, the parties have executed this Lease as of the date first
above-written.

"Landlord"                                           "Tenant"

PACIFIC PLAZA CARMEL VALLEY LLC,            JNI CORPORATION, a Delaware
a California limited liability company      corporation, liability company
By:COAST PACIFIC PLAZA LLC, a California
limited liability company, Its Manager      By:
   By:COAST INCOME PROPERTIES, INC.,        Name:
a California corporation, It's Its Manager  Its:

                                            By:
                                            Name:
       By:_____________________________     Its:

            Thomas G. Blake, President

                                       39
<PAGE>

                                    EXHIBIT A

                                LEGAL DESCRIPTION

                                   [ATTACHED]

                                       1
<PAGE>

                                    EXHIBIT B

                          BUILDING PLANS AND SITE PLAN

                                   [ATTACHED]

                                       1
<PAGE>

                                    EXHIBIT C

                                PRELIMINARY PLANS

     [TO BE ATTACHED WHEN PREPARED AND APPROVED PURSUANT TO THE WORK LETTER]

                                       1
<PAGE>

                                    EXHIBIT D

                                   WORK LETTER

                                   [ATTACHED]

                                       1
<PAGE>

                                    EXHIBIT E

                              RULES AND REGULATIONS

1. The sidewalks, entrances, lobby, elevators, stairways and public corridors
shall be used only as a means of ingress and egress and shall remain
unobstructed at all times. The entrance and exit doors of all suites are to be
kept closed at all times except as required for orderly passage to and from a
suite. Loitering in any part of the Building or obstruction of any means of
ingress or egress shall not be permitted. Doors and windows shall not be covered
or obstructed.

2. Plumbing fixtures shall not be used for any purposes other than those for
which they were constructed, and no rubbish, newspapers, trash or other
substances of any kind shall be thrown into them. Walls, floors and ceilings
shall not be defaced in any way and no one shall be permitted to mark, drive
nails, screws or drill into, paint, or in any way mar any Building surface,
except that pictures, certificates, licenses and similar items normally used in
Tenant's business may be carefully attached to the walls by Tenant in a manner
to be reasonably prescribed by Landlord. Upon removal of such items by Tenant
any damage to the walls or other surfaces, except minor nail holes, shall be
repaired by Tenant.

3. No awning, shade, sign, advertisement or notice shall be inscribed, painted,
displayed or affixed on, in or to any window, door or balcony or any other part
of the outside or inside of the Building or the demised premises unless provided
by Landlord or approved by Landlord in writing. No window displays or other
public displays shall be permitted without the prior written consent of
Landlord. All tenant identification on public corridor doors beyond building
standard will be installed by Landlord for Tenant but the cost shall be paid by
Tenant. No lettering or signs other than the name of Tenant will be permitted on
public corridor doors with the size and type of letters to be prescribed by
Landlord. All requests for listing on the Building directory shall be submitted
to the office of Landlord in writing. Landlord reserves the right to approve all
listing requests. Any change requested by Tenant of Landlord of the name or
names posted on directory, after initial posting, will be charged to Tenant.

4. The cost of any special electrical circuits for items such as copying
machines, computers, microwaves, etc., shall be borne by Tenant unless the same
are part of the building standard improvements. Prior to installation of
equipment Tenant must receive written approval from Landlord.

5. The weight, size and position of all safes and other unusually heavy objects
used or placed in the Building shall be prescribed by Landlord and shall, in all
cases, stand on metal plates of such size as shall be prescribed by Landlord.
The repair of any damage done to the Building or property therein by putting in
or taking out or maintaining such safes or other unusually heavy objects shall
be paid for by Tenant.

6. All freight, furniture, fixtures and other personal property shall be moved
into, within and out of the Building at times designated by and under the
supervision of Landlord and in accordance with such regulations as may be
delivered from the Landlord's property manager and shall not interfere with any
other tenant's conduct of business or quiet enjoyment of the Project. In no
event will Landlord be responsible for any loss or damage to such freight,
furniture, fixtures or personal property from any cause.

7. No improper noises, vibrations or odors will be permitted in the Building. No
person will be permitted to bring or keep within the Building any animal, bird
or bicycle or any toxic or flammable substances without Landlord's prior
permission. No person shall throw trash, refuse, cigarettes or other substances
of any kind any place within or out of the Building except in the refuse
containers provided therefor. Tenant shall not be permitted to materially
interfere in any way with tenants or those having business with them. Landlord
reserves the right to exclude or expel from the Building any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs
or who shall in any manner do any act in violation of the rules and regulations
of the Project.

8. All rekeying of office doors or changes to the card access system, after
occupancy, will be at the expense of Tenant. Tenant shall not rekey any doors or
change the card access system in any way without making prior arrangements with
Landlord.

                                       1
<PAGE>

9. Tenant will not use the balconies, if any, for storage, barbecues, drying of
laundry or any other activity which would detract from the appearance of the
Building or Project or interfere in any way with the use of the Building or
Project by other tenants.

10. If Tenant uses the Premises after regular business hours or on nonbusiness
days, Tenant shall lock any entrance doors to the Building used by Tenant or
take such other steps as are necessary to secure the Building's doors
immediately after entering or leaving the Building.

11. Tenant shall provide and cause all Tenant's employees to use protective
floor mats under all desk chairs used in the Premises.

12. If Tenant requires telegraphic, telephonic, burglar or of similar services,
it shall first obtain, and comply with, Landlord's instructions in their
installation.

13. Tenant shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Landlord to assure the most effective operation of the
Building's heating and air conditioning.

14. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.

15. Tenant shall not retail any goods on the Premises except for goods intended
to be sold to Tenant's employees.

16. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building without the written
consent of Landlord. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Building elsewhere. Tenant shall not
install, maintain or operate upon the Premises any vending machine without the
written consent of Landlord. Canvassing, soliciting and distribution of
handbills or any other written material, and peddling in the Building are
prohibited, and each tenant shall cooperate to prevent same.

17. Tenant shall not use in any space or in the public halls of the Building any
hand trucks except those equipped with rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any other vehicles of any kind into the Building.

18. Tenant shall not use in excess of Tenant's pro rata share of the Project's
total parking spaces. Tenant shall not park its vehicles in any parking areas
designated by Landlord as areas for parking by visitors to the Project or in any
other undesignated areas or parking areas assigned to other tenants. Tenant
shall not leave vehicles in the Project parking areas overnight nor park any
vehicles in the Project parking areas other than automobiles, motorcycles, motor
driven or nonmotor driven bicycles or four-wheeled trucks. Landlord may, in its
sole discretion, designate separate areas for bicycles and motorcycles.

19. Tenant shall not use Project's or Building's interior or exterior common
areas to conduct its business or as a waiting room.

20. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Project.

21. Tenant shall be deemed to have read these Rules and Regulations and to have
agreed to abide by them as a condition to his occupancy of the Premises and
shall be responsible for the observance of all the rules by Tenant's employees,
agents, clients, customers, invitees and guests.

                                       2
<PAGE>

                                    EXHIBIT F

                                LETTER OF CREDIT

                      IRREVOCABLE STANDBY LETTER OF CREDIT

                            Number:      _________________
                            Date:        _________________
                            Amount:      _________________
                            Expiration:  _________________

Beneficiary:                            Account Party:

PACIFIC PLAZA CARMEL VALLEY LLC                      ________________________
4350 La Jolla Village Drive, Suite 150               ________________________
San Diego, CA 92111                                  ________________________

We issue our Irrevocable Letter of Credit No. ___ in favor of PACIFIC PLAZA
CARMEL VALLEY, a California limited liability company, its successors and
assigns for the amount of ___________________ Dollars ($__________). We
undertake to honor your draft for any sum or sums not to exceed a total of
____________________ Dollars ($___________) in favor of said beneficiary when
accompanied by the following: a letter from the manager of PACIFIC PLAZA CARMEL
VALLEY LLC stating that PACIFIC PLAZA CARMEL VALLEY LLC is authorized to draw
upon this Letter of Credit according to the terms of the lease agreement with
the Account Party as "Tenant".

It is a condition of this Letter of Credit that it shall remain enforceable
against us for a period of sixty-nine (69) months without amendment.

The draft must be marked "Drawn under _____________ Letter of Credit No. _______
dated _______________, 2000.

There are no conditions of this Letter of Credit. Except so far as otherwise
stated, this Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1983 Revision, International Chamber of Commerce,
Publication No. 400).

                                 _______________________________
                                 _______________________________

                                 By: ___________________________

                                 By: ___________________________

                                       1
<PAGE>

                                    EXHIBIT G

                                ADDENDUM TO LEASE

         19       ADDITIONAL LEASE PROVISIONS

         19.01 ADDITIONAL LEASE. Landlord and Tenant have concurrently, with the
Execution of this Lease, entered into a lease of even date herewith ("Building A
Lease)) for the entire four (4) floors of a four-story building being
constructed by Landlord in the Project at 10945 Vista Sorrento Parkway, San
Diego, California, which building is commonly referred to as "Building B" of the
Project. Landlord and Tenant agree that for so long as Landlord owns both
Building B and the Building under this Lease, a default by Tenant under this
Lease shall constitute a default by Tenant under the Building B Lease, and a
default by Tenant under the Building B Lease shall constitute a default by
Tenant under this Lease. Additionally, Landlord and Tenant agree that for so
long as Landlord owns both Building B and the Building under this Lease, a
default by Landlord under this Lease shall constitute a default by Landlord
under the Building B Lease, and a default by Landlord under the Building B Lease
shall constitute a default by Landlord under this Lease.

                                       1
<PAGE>

         19.02 LETTER OF CREDIT. In addition to the Security Deposit and as
additional security hereunder, in the event Tenant fails, at any time during the
Term (including any Extensions) to maintain cash or cash equivalent reserves of
at least Ten Million Dollars ($10,000,000) (the "Cash Requirement"), then Tenant
shall, within ten (10) days after the date the Cash Requirement fails to be
satisfied, deliver to Landlord written notice thereof and a letter of credit in
an amount equal to six (6) times the then effective Monthly Rent. The letter of
credit shall be substantially in the form and of the substance of Exhibit F
attached hereto, and issued by Union Bank of California or another financial
institution reasonably acceptable to Landlord. Tenant shall be entitled to
replace any such letter of credit with a new letter of credit that satisfies
such conditions, and upon delivery of such replacement letter of credit by
Tenant to Landlord, Landlord shall deliver the old letter of credit to Tenant
and cooperate with Tenant in terminating the old letter of credit, including by
authorizing a full exoneration and release of the letter of credit. Landlord
shall be entitled to draw on the letter of credit if Tenant has not replaced the
letter of credit and the letter of credit is due to expire within ten (10) days
and before the end of the Term. If Landlord so draws on the letter of credit,
then Landlord shall hold the letter of credit proceeds as an additional security
deposit; provided, however, that if Tenant subsequently delivers a letter of
credit meeting the requirements set forth above, then Landlord shall immediately
release such proceeds to Tenant. Upon any default by Tenant which has not been
cured within the applicable time period after any notice required by this Lease,
including specifically but without limitation Tenant's obligation to pay rent or
abide by any of its obligations under this Lease, Landlord shall be entitled to
draw upon said letter of credit in the amount of the default(s) by the issuance
of Landlord's sole written demand to the issuing financial institution. Any such
draw shall be without waiver of any rights Landlord may have under this Lease or
at law or in equity as a result of the default. In the event that Tenant can
demonstrate by the delivery to Landlord of its audited financial statements
prepared in accordance with generally accepted accounting principles,
consistently applied, that Tenant has reestablished the Cash Requirement, then,
upon written request of Tenant, Landlord shall deliver the letter of credit to
Tenant and cooperate with Tenant in terminating the letter of credit, including
by authorizing a full exoneration and release of the letter of credit; provided,
however, if at any subsequent time Tenant shall fail to maintain the Cash
Requirement Tenant shall give written notice thereof to Landlord and cause a
replacement letter of credit to be delivered to Landlord in an amount equal to
six (6) times the then effective Monthly Rent, and on other terms of, the
original letter of credit. Tenant shall submit to Landlord annually during the
Term (including any Extension) on or before the first day of the fourth (4th)
calendar month of Tenant's fiscal year, Tenant's audited financial statements
for the preceding fiscal year prepared in accordance with generally accepted
accounting principles, consistently applied.

         19.03    INTENTIONALLY LEFT BLANK.

         19.04    INTENTIONALLY LEFT BLANK.

         19.05 CONFORMANCE TO WORK LETTER. Landlord and Tenant shall comply with
their respective obligations under the Work Letter.

         19.06 USE OF ROOF. For so long as Tenant and any Affiliate Transferee,
in the aggregate, leases at least eighty percent (80%) of the Usable Area in the
Building, Tenant shall be entitled to install, maintain and operate on the roof
of the Building, for the purpose of Tenant's business, a limited number of
telecommunications, satellite and other devices that make use of the
electromagnetic spectrum ("Telecommunications Devices") as Landlord may approve
in writing, subject to the following requirements and subject always to
compliance with all covenants or restrictions of record as of the date hereof,
applicable laws, building codes, regulations and ordinances. All such
Telecommunication Devices shall be located in an area of the roof not greater
than four hundred (400) square feet, reasonably specified by Landlord. Prior to
installing any Telecommunications Devices on the roof of the Building, Tenant
shall provide prior written notice to Landlord of Tenant's desire to install
such Telecommunications Devices on the roof of the Building, together with plans
and specifications for the

                                       2

<PAGE>

installation of such Telecommunications Devices. Landlord shall review such
plans and specifications within ten (10) days after receiving such plans and
specifications from Tenant, and within such period notify Tenant if Landlord
approves the installation of such Telecommunications Devices or disapproves the
installation of such Telecommunication Devices, and if Landlord disapproves the
installation of such Telecommunication Devices, the reasons therefor. Landlord
may withhold its approval to the installation of Telecommunications Devices on
the roof of the Building if such Telecommunication Devices are visible from
other locations in the Project or the surrounding areas, pose any material risk
to the physical integrity of the Project or adversely affect the appearance of
the Building from surrounding areas. Landlord may condition it's approval of any
Telecommunications Devices on Tenant installing any walkways, screening or other
devices or material requested by Landlord. Tenant shall be responsible for any
installation and maintenance costs of any such Telecommunication Devices, as
well as any damage to the Building, including without limitation the roof,
arising out of or related to the installation or use by Tenant of any such
Telecommunications Device.

         19.07 ADDITIONAL PROVISIONS RELATING TO RULES AND REGULATIONS. Landlord
agrees not to change the name of the Project during the Term to include the name
of any competitor of the original Tenant. Landlord agrees that Tenant may use a
forklift or similar equipment in the shipping and receiving area on the ground
floor of the Premises so long as the use of such equipment is in full compliance
with Section 9.01 and Section 9.04 of this Lease and does not cause damage to
the Building or Project. Tenant's employees may, while traveling away from the
San Diego area for the business purposes of Tenant, leave vehicles in such area
of the Parking Area as is designated by Landlord for a period of not to exceed
seven (7) calendar days.

                                       3
<PAGE>

                                   EXHIBIT "D"

                                   WORK LETTER

               Provisions Relating to the Design and Construction
                             of Project and Premises

                                    ARTICLE I

                              GENERAL REQUIREMENTS

         1.1 LANDLORD'S PLANS. Landlord's architect, Brian Paul & Associates
(hereinafter "Project Architect") has, together with its consultants, completed
drawings and specifications of the basic shell of the Building ("Building
Shell") and the land and other improvements in the Project, including surface
parking facilities, landscaping, hardscape, drainage, irrigation, lighting and
other improvements relating to ingress and egress (collectively "Land
Improvements") (collectively referred to as hereinafter amended as the
"Landlord's Plans"). Such drawings and specifications for the Building Shell
have been delivered to Tenant by Landlord. The Building Shell shall include at
minimum the elements and Improvements listed on Attachment 1 to this Exhibit "D"
together with such other elements and improvements as are set forth in
Landlord's Plans. A list of documents relating to the Project ("Project
Documents") provided to Tenant by Landlord is listed on Attachment 3 to this
Exhibit "D".

         1.2 DEVELOPMENT SCHEDULE. The schedule for design and development of
the Building Shell, Land Improvements and the improvements required to ready the
Building Shell for Tenant's occupancy (the "Tenant's Improvement Work"),
including without limitation the time periods for preparation and review of
construction documents, approvals and performance, whether by Landlord or by
Tenant, shall be in accordance with a Development and Construction Schedule to
be prepared by Landlord and Tenant and Landlord's Contractor and attached as
Attachment 2 to this Exhibit "D", subject to adjustment as mutually agreed to by
the parties and as provided in this Exhibit "D" (the "Development Schedule").

         1.3  TENANT'S IMPROVEMENT PLANS.

                  1.3.1 Prior to Tenant preparing calculations, designs,
drawings and specifications for the Premises as required in Section 1.3.3 below,
which pertain to Tenant's Improvement Work described in Article 3, Tenant's
Designer (as hereinafter defined), and engineers and other consultants retained
in connection with the Tenant Improvement Plans (such engineers and other
consultants, but specifically excluding Tenant's Designer, "Tenant's Improvement
Consultants") shall thoroughly familiarize themselves with the Landlord's Plans,
this Exhibit "D" and applicable building codes. Tenant's Plans shall be prepared
in full knowledge of and compliance with the Landlord's Plans, this Exhibit "D",
and all City, County and State ordinances, rules and regulations relating
thereto including, without limitation, the energy conservation and handicap
access requirements of Title 24 of the California Administrative Code ("Title
24"). Tenant's Designer and Tenant's Improvement Consultants shall be fully
qualified and licensed in the State of California to prepare the drawings
required in Sections 1.3.2 and 1.3.3. Landlord acknowledges that Tenant has
retained Inter-arch, as Tenant's space planner, ("Tenant's Designer") and
Landlord approves Tenant's use of Inter-arch as Tenant's Designer. Tenant shall
use Landlord's HVAC, electrical, mechanical, structural and plumbing consultants
for the Project in the preparation of Tenant's Improvement Plans. Tenant's
Improvement Consultants shall be under contract with the Landlord's Contractor.
Tenant shall be entitled to replace Tenant's Designer from time to time with a
new space planner or architect, subject to Landlord's prior written consent,
which consent shall not be unreasonably withheld.

                                      -1-

<PAGE>

                  1.3.2 On or before June 15, 2001, Tenant agrees to submit to
Landlord tenant improvement specifications and fully detailed and dimensioned
1/8" scale preliminary space plan drawings ("Space Plan") prepared by Tenant's
Designer for the Premises. This preliminary submittal shall include the
following: three (3) sets of prints which show fully developed floor plans.
Tenant's Space Plan is subject to Landlord's approval. Within five (5) business
days after Tenant delivers to Landlord the Space Plan, Landlord shall deliver to
Tenant written notice of its approval or disapproval of the Space Plan. If for
any reason Landlord fails to expressly reasonably approve or disapprove the
Space Plan within the time period set forth in this Section, then each day of
delay in Landlord's approval or disapproval of the Space Plan beyond the time
period set forth in this Section shall be a Landlord-Caused Delay (as defined in
Section 8.1 of this Exhibit "D"). If Landlord disapproves the Space Plan,
Landlord and Tenant shall meet and confer within five (5) business days after
delivery of Landlord's notice disapproving the Space Plan and shall attempt in
good faith to reach agreement on the Space Plan. In the event Tenant's Space
Plan is not approved by Landlord, on or before the date set forth in the
Development Schedule for such approval, such dispute shall be submitted for
resolution pursuant to Article 11 of this Exhibit "D."

                  1.3.3 On or before September 15, 2001, Tenant agrees to submit
to Landlord final tenant improvement specifications, as well as a full finish
schedule and sample color boards, and three (3) sets of prints of complete and
fully detailed and dimensioned 1/8" scale construction drawings for the
Premises, including mechanical, electrical, plumbing, structural, fire and
safety and other customary plans, prepared by Tenant's Designer and Tenant's
Improvement Consultants ("Tenant's Improvement Plans").

                  1.3.4 On or before September 15, 2001, Tenant agrees to submit
to the City of San Diego, complete and fully detailed Tenant's Improvement Plans
prepared by Tenant's Designer and Tenant's Improvement Consultants. Tenant's
Designer shall be responsible for the coordination with Tenant's engineers and
other consultants of submission of the Tenant's Improvements Plans to the City
as provided herein.

                  1.3.5 Fees of Tenant's Designer and Tenant's Improvement
Consultants in preparing Tenant's Improvement Plans shall be paid from the
Tenant Improvement Fund.

         1.4  APPROVAL OF TENANT'S IMPROVEMENT PLANS.

                  1.4.1 The design of, the quality of materials used in, and the
installation methods undertaken in the Premises, and Tenant's Improvement Plans,
shall be subject to the reasonable approval of Landlord after consultation with
the Project Architect, within the time periods set forth in Section 1.4.2, and
shall be in accordance with all City, County and State ordinances, rules and
regulations relating thereto.

                  1.4.2 Landlord shall reasonably approve or disapprove the
Tenant's Improvement Plans in writing within ten (10) business days after
Landlord's receipt of such documents. If for any reason Landlord fails to
expressly approve or disapprove the Tenant's Improvement Plans within the time
period set forth in this Section, then each day of delay in Landlord's approval
or disapproval of the Tenant's Improvement Plans beyond the time period set
forth in this Section shall be a Landlord-Caused Delay, as that term is defined
in Section 8.1 of this Exhibit "D". If Landlord reasonably disapproves any
portion of the Tenant's Improvement Plans, then Landlord shall specifically (a)
approve those portions which are acceptable to Landlord and (b) disapprove those
portions which are not acceptable to Landlord, specifying the reasons for such
disapproval and describing in detail the change Landlord requests for each item
disapproved ("Requested Change"). Tenant shall cause Requested Changes to be
made to the Tenant's Improvement Plans; provided, however, if Tenant does not
approve of a Requested Change, such dispute shall be resolved in accordance with
Article 11 of this Exhibit "D". A Requested Change

                                      -2-
<PAGE>

which is non-material and/or mutually agreed upon by Landlord and Tenant (a
"Non-Material Change") shall be made to the Tenant's Improvement Plans by
Tenant's Designer and any delay incurred as a result of such Non-Material Change
shall be a Force-Majeure Delay; provided, if Landlord and Tenant are unable to
agree on whether a Requested Change is a Non-Material Change, such dispute shall
be resolved in accordance with Article 11 of this Exhibit "D".

                  1.4.3 As a part of Landlord's review and approval of Tenant's
Improvement Plans described in Sections 1.4.1 and 1.4.2 above, Landlord shall
review Tenant's Improvement Plans for their conformance with provisions
contained within this Exhibit "D" and Landlord's Plans. Where Tenant's
Improvement Plans, as approved by Landlord, conflict with this Exhibit "D", the
provisions of this Exhibit "D" shall prevail. Landlord's approval of Tenant's
Improvement Plans shall not be deemed to certify that Tenant's Improvement Plans
comply with building codes and shall not relieve Tenant of the responsibility to
verify that Tenant's Improvement Plans comply with all of the requirements set
forth in Section 1.3.1 hereof.

                  1.4.4 Any subsequent changes, modifications or alterations to
Tenant's Improvement Plans requested by Tenant after Landlord's approval thereof
and before completion of Tenant's Improvement Work shall be processed in the
manner provided in Section 1.7 of this Exhibit "D" and any additional reasonable
costs and expenses incurred by Landlord in connection with said processing,
including but not limited to additional fees of Project Architect and its
consultants, shall be paid from the Tenant Improvement Fund. No such changes,
modifications or alterations in said approved drawings shall be made without the
written consent of Landlord after written request therefor by Tenant.

         1.5 BUILDING PERMIT FOR TENANT'S IMPROVEMENT WORK. Tenant's Designer
(as defined in Section 1.3.1 of this Exhibit "D") shall be responsible for
obtaining a building permit for the construction of Tenant's Improvement Work
and all other required governmental approvals and permits from the City of San
Diego ("City"). If the City rejects Tenant's Improvement Plans and thereby
prevents the issuance of a building permit, Tenant shall immediately, but in all
events within three (3) business days of notice from the City, make all
necessary corrections required by the City. If the City requires a change to the
Tenant's Improvement Plans (a "City-Required Change"), the City-Required Change
shall be made to the Tenant's Improvement Plans by Tenant's Designer or
engineers or other consultants as appropriate. Any delay incurred as a result of
such City-Required Change shall be a Force Majeure Delay, unless such
City-Required Change resulted from a failure of Tenant's Designer or engineers
or other consultants to submit to the City complete and fully dimensioned
Tenant's Improvement Plans or a failure of Tenant's Designer or engineers or
other consultants to conform their performance of their duties with respect to
the Tenant's Improvement Plans to customary professional standards of their
respective professions in the City of San Diego (in which event, such change
shall be an "Designer Caused Change"). Any delay occasioned by an
Designer-Caused Change shall be a Tenant-Caused Delay. Subject to Section 1.8,
any change to Tenant's Improvement Plans requested by Landlord after Landlord's
approval thereof (a "Landlord Change") shall be made to the Tenant's Improvement
Plans by Tenant's Designer at no cost to Tenant (with such cost to be borne by
Landlord and not charged against the Tenant Improvement Fund) and any delay
incurred as a result of such Landlord Change shall be a Landlord-Caused Delay.
If Landlord and Tenant are unable to agree on whether a change or addition to
the Tenant's Improvement Plans is a Landlord Change, Tenant Change,
City-Required Change or Designer-Caused Change, then such dispute shall be
resolved in accordance with Article 11 of this Exhibit "D". Upon the City's
approval of Tenant's Improvement Plans and permit application, Tenant shall pick
up and deliver to Landlord (or cause Tenant's Designer to pick up and deliver to
Landlord) the building permit and the approved set of Tenant's Improvement Plans
marked "For Construction". Landlord shall pay for the plan check and general
building permit fees required on the permit application from the Tenant
Improvement Fund, provided the building permit is issued. Landlord shall also
pay required sewer connection fees to the City upon issuance of the building
permit from the Tenant Improvement Fund. Tenant shall pay any other fees
required in connection therewith not otherwise payable from the Tenant
Improvement Fund as provided herein. Tenant shall apply for and obtain all
approvals and permits from the local health

                                      -3-

<PAGE>

department, as required. If Tenant's Improvement Plans are not approved as
provided herein or Tenant does not obtain all required building permits for
Tenant's Improvement Work, then Tenant shall, upon Landlord's written request,
forthwith reimburse Landlord for all fees paid by Landlord from the Tenant
Improvement Fund.

         1.6  CONSTRUCTION OF LANDLORD'S WORK, TENANT'S IMPROVEMENT WORK AND
TENANT'S WORK.

                  1.6.1 Landlord agrees to construct, at its own expense, as
soon as practical after Landlord's Plans have been approved by the City and a
building permit has been issued, within the time period set forth in the
Development Schedule, those improvements described as "Landlord's Work" in
Article 2 hereof in accordance with Landlord's Plans.

                  1.6.2 Landlord agrees, as soon as practical after completion
of Landlord's Work to the point where it can commence construction of Tenant's
Improvement Work and after receipt from Tenant of the building permit for the
Tenant's Improvement Work, to construct, within the time period set forth in the
Development Schedule, those improvements described as "Tenant's Improvement
Work" in Article 3 hereof in accordance with the approved Tenant's Improvement
Plans. The costs and expenses incurred by Landlord in connection with such
construction of Tenant's Improvement Work shall be paid from the Tenant
Improvement Fund, except that in no event shall the cost of cabling and
equipment and the expense of installing same be paid out of the Tenant
Improvement Fund, as such cost and expense shall be paid separately by Tenant.

                  1.6.3 Upon Substantial Completion of the Premises, Tenant
shall accept the Premises in the condition in accordance with the Lease and
subject, however, to Landlord's obligations under Section 1.6.8 of this Exhibit
"D". Tenant's acceptance of possession shall operate to waive any right Tenant
may have to terminate this Lease due to delayed delivery of possession. Landlord
shall deliver a copy of the Certificate of Occupancy to Tenant within ten (10)
days of its issuance.

                  1.6.4 In the event Tenant enters into possession of the
Premises prior to Substantial Completion of the Premises for the purpose of
performing Tenant's Work, Tenant agrees to indemnify, defend and hold Landlord
harmless from any loss or of damage to Tenant's or Tenant's contractor's
property, completed work, fixtures, equipment, materials or merchandise, or from
liability for death of or injury to any person, except to the extent same be
caused by the negligence of Landlord or its agents.

                  1.6.5 Tenant agrees, at its own expense, to construct
diligently and continuously to completion those improvements described as
"Tenant's Work" in Article 4. Tenant's Work shall comply with all City, County
and State ordinances, rules and regulations relating thereto and shall not be
constructed in a manner inconsistent with the approved Tenant's Improvement
Plans.

                  1.6.6 From the commencement of Landlord's Work until the
completion of Tenant's Improvement Work, Landlord shall obtain and maintain or
cause to be maintained public liability and worker's compensation insurance in
accordance with the Lease. From the commencement until the completion of
Tenant's Work, Tenant shall obtain and maintain, at Tenant's expense, public
liability and worker's compensation insurance in accordance with the Lease.

                  1.6.7 If a permit is required to construct Tenant's Work,
Tenant shall deliver a completed, signed-off inspection card to Landlord within
ten (10) days of completion of Tenant's Work or Tenant's opening for business,
whichever occurs first. If Tenant contracts with any person or entity to perform
any part of Tenant's Work, Tenant shall obtain and record a Notice of Completion
promptly following completion of Tenant's Work and shall promptly forward a
certified copy thereof to Landlord.

                  1.6.8 On or before the date Tenant occupies the Premises for
the purpose of conducting its business therein, Landlord and Tenant shall
conduct a walk-through inspection of the Premises and

                                      -4-

<PAGE>

shall jointly prepare a list of initial construction defect items related to
Tenant's Improvement Work and Tenant's Work that need to be corrected. Landlord
shall cause Landlord's Contractor to correct such initial construction defect
items within thirty (30) days thereafter, provided, however, if by the nature of
such correction more than thirty (30) days is required to effect such
correction, Landlord shall not be in default hereunder if such correction is
commenced within such thirty (30) day period and is diligently pursued to
completion.

         1.7 Tenant Changes. Any changes requested by Tenant to Landlord's Plans
and Landlord's Work after the date of this Lease and any changes to Tenant's
Improvement Plans and Tenant's Improvement Work requested by Tenant after
approval of the Tenant's Improvement Plans by Landlord shall be requested and
instituted in accordance with the provisions of this Section 1.7 and shall be
subject to the written approval of Landlord after consultation with the Project
Architect.

                  1.7.1 From time to time after the Tenant's Improvement Plans
have been approved by Landlord, Tenant may request changes to the Tenant's
Improvement Plans or request changes to the Tenant's Improvement Work already
completed ("Tenant Changes") by notifying Landlord in writing of the nature and
extent of any such Tenant Change and, if the nature of such Tenant Change
requires revisions to Tenant's Improvement Plans, then Tenant's Designer shall
revise Tenant's Improvement Plans. Such notice must be signed by at least one of
Tenant's Construction Representatives (as that term is defined in Section 9.1 of
this Exhibit "D") or Landlord shall not be required to process such Tenant
Change request. Landlord shall, before proceeding with a Tenant Change, use its
best efforts to respond to Tenant as soon as is reasonably possible with an
estimate of (i) the time it will take Landlord to analyze the requested Tenant
Change, and (ii) the architectural and engineering fees and costs which will be
incurred in order to analyze the requested Tenant Change, and thereafter submit
to Tenant in writing, within seven (7) business days after Tenant notifies
Landlord of the requested Tenant Change (or such longer period of time as is
reasonably required depending on the extent of Tenant's Change request), an
analysis of the additional cost or savings involved, including without
limitation architectural and engineering costs and the period of time, if any,
that the Tenant Change will extend the time for completion of Tenant's
Improvement Work. Any delay caused by Landlord's failure to deliver to Tenant
Landlord's analysis of a Tenant Change within the time herein provided shall be
a Landlord-Caused Delay. If Tenant fails to expressly approve or disapprove in
writing Landlord's submission within five (5) business days of receipt thereof,
then each day of delay in the Tenant's approval or disapproval of Landlord's
submission beyond such five (5) business day period shall be a Tenant-Caused
Delay. The time for completion of Tenant's Improvement Work shall be extended
one day for each day of delay caused by analyzing and processing Tenant's
request for a Tenant Change whether or not the cost or savings and the extension
of time for completion of Tenant's Improvement Work, if any, is approved by
Tenant and such delay shall be a Tenant-Caused Delay.

                  1.7.2 If Tenant approves in writing the cost or savings and
the extension in the time for completion of the Tenant's Improvement Work, if
any, Landlord shall cause the approved Tenant Change to be instituted. The time
for completion of the Tenant's Improvement Work shall be extended one day for
each day of delay caused by instituting the Tenant Change requested by Tenant
and such delay shall be a Tenant-Caused Delay. Delays resulting directly from
Tenant's Designer's failure to modify the Tenant Improvement Plans to the extent
necessary to determine the cost or savings and the extension in the time for
completion of Tenant's Improvement Work as a result of a Tenant Change requested
by Tenant shall be Tenant-Caused Delays.

                  1.7.3 Tenant shall reimburse Landlord, at its sole cost and
expense, for all architectural and engineering fees and costs incurred by
Landlord in connection with modifications and revisions to Landlord's Plans or
Tenant's Improvement Plans, which result from a Tenant Change request and/or
instituting the Tenant Change.

                  1.7.4 Notwithstanding anything to the contrary in this Section
1.7, Tenant shall not be

                                      -5-

<PAGE>

responsible for architectural and/or engineering fees and costs incurred by
Landlord and the Project Architect and delays which result from a Tenant Change
request if such fees and costs and/or delays are immaterial in nature; provided,
however, if Landlord and Tenant are unable to agree upon whether such
architectural and/or engineering fees and costs and/or delays which result from
a Tenant Change requested by Tenant are immaterial, then such dispute shall be
resolved in accordance with Article 11 of this Exhibit "D".

                  1.7.5 Landlord and Tenant agree that time and strict punctual
performance are of the essence with respect to this Article 1 and that each
shall use due diligence in performing their respective obligations pursuant to
this Article 1.

         1.8 Landlord Changes. Any changes requested by Landlord to Tenant's
Improvement Plans and Tenant's Improvement Work after Landlord's approval of
Tenant's Improvement Plans, other than changes required by the City or due to
the error or omission of Tenant's Designer or any party working for or on behalf
of Tenant (collectively a "Landlord Change"), shall be subject to the written
consent of Tenant, which consent shall not be unreasonably withheld or delayed;
shall be made at no cost to Tenant; and any delay incurred as a result of such
Landlord Change shall be a Landlord-Caused Delay.

                                    ARTICLE 2

                                 LANDLORD'S WORK

         2.1 General. "Landlord's Work" shall include and be limited to the
construction, purchase and/or installation of the Building Shell improvements
and Land Improvements in accordance with Landlord's Plans and the Work Letter.
Where more than one (1) type of material or structure is indicated, the
selection will be by Landlord. As to all building materials and equipment which
Landlord is obligated to supply under this Article, Landlord shall select the
manufacturer thereof, so long as the product from any such manufacturer complies
with the specifications of Landlord's Plans.

         2.2 Building Shell. Landlord shall cause to be constructed, within the
time period set forth in the Development Schedule, at its expense, the Building
Shell in accordance with Landlord's Plans.

         2.3 Land Improvements. Landlord shall cause to be constructed, within
the time period set forth in the Development Schedule, at its expense, the Land
Improvements in accordance with Landlord's Plans, including underground parking
facilities, surface parking areas, landscaping, hardscape, drainage, irrigation
and lighting.

                                    ARTICLE 3

                            TENANT'S IMPROVEMENT WORK

         3.1 GENERAL. "Tenant's Improvement Work" shall include the
construction, purchase and/or installation of all of the Tenant's improvements
in accordance with the approved Tenant's Improvement Plans.

         3.2 TENANT'S IMPROVEMENT WORK. Landlord shall cause to be constructed,
within the time period set forth in the Development Schedule, the Tenant's
Improvement Work in accordance with Tenant's Improvement Plans. All costs and
expenses of Tenant's Improvement Work shall be paid by Landlord from the Tenant
Improvement Fund. Landlord and Landlord's Contractor (as defined below) shall be
responsible for ensuring that all of the Tenant's Improvement Work is completed
in compliance with the Project Documents.

                                      -6-

<PAGE>
                                    ARTICLE 4

                          DESCRIPTION OF TENANT'S WORK

         4.1 GENERAL. "Tenant's Work" shall include the construction, purchase
and/or installation of all improvements described in this Article.

         4.2 EQUIPMENT AND FURNISHINGS. Tenant shall construct, purchase and/or
install, at Tenant's expense, all equipment and furnishings and other
improvements in the Premises as may be required by Tenant in the operation of
its business, other than the improvements described in Articles 2 and 3 of this
Exhibit "D". Costs of interior decorating services (other than interior
decorating services provided for in Tenant's Improvement Plans) shall be part of
Tenant's Work. Any costs, expenses or damages incurred by Landlord arising out
of or related to the performance of Tenant's Work by Tenant, its contractor,
subcontractor or other agents, to the extent not contemplated by the Lease or
this Exhibit "D"shall be paid by Tenant to Landlord.

                                    ARTICLE 5

                                 DESIGN CRITERIA

                           [Intentionally Left Blank]

                                    ARTICLE 6

                  LANDLORD'S USE OF A CONTRACTOR, COST ESTIMATE

         6.1 CONTRACTOR SELECTION. Subject to the conditions set forth in this
Article 6, Landlord may select any contractor or contractors ("Landlord's
Contractor") for the construction of Landlord's Work, provided such contractor
or contractors meets all licensing and insurance requirements established by the
State of California and the City of San Diego . Tenant acknowledges that
Landlord has engaged Nielsen Dillingham Builders as Landlord's Contractor for
the construction of the Building Shell as described in this Exhibit "D". Tenant
acknowledges that, as requested by Tenant, Landlord intends to engage Bycor
General Contractors as Landlord's Contractor for the construction of Tenant's
Improvement Work as described in this Exhibit "D" and Tenant agrees to the
selection of such contractor.

         6.2  ESTIMATE OF TENANT'S IMPROVEMENT WORK COSTS.

                  6.2.1 On or before the date Tenant submits the Tenant
Improvement Plans to the City for Plan Check, Landlord's Contractor shall submit
to Landlord and Tenant a list of acceptable subcontractors from whom Landlord's
Contractor desires to receive bids for the Tenant's Improvement Work required by
the Tenant Improvement Plans.. All Tenant's Improvement Work shall be bid, other
than general condition items. A minimum of three subcontractors per trade shall
be designated on such list. Landlord and Tenant shall have a right to disapprove
in writing any subcontractors shown on the list within the time set forth on the
Development Schedule and to propose up to two (2) subcontractors from which
Landlord's Contractor will be required to solicit bids unless Landlord has a
reasonable objection to such proposed subcontractors. Each day of delay in
approving or disapproving a subcontractor for each trade beyond the time period
set forth in the Development Schedule shall be a Tenant-Caused Delay or
Landlord-Caused Delay, as the case may be, as determined by the Construction
Panel.

                  6.2.2 From bids received by Landlord's Contractor from
approved subcontractors, Landlord's Contractor shall prepare a cost estimate of
the Tenant's Improvement Work ("Cost Estimate").

                                      -7-

<PAGE>

Such Cost Estimate shall include the entire cost of the construction and all
materials required for completing the Tenant's Improvement Work, including
without limitation direct construction costs, costs of design build components
of the Tenant's Improvement Work (excluding engineering costs associated with
such design build components), costs of materials supplied by materialmen,
Landlord's Construction Management Fee, all applicable taxes, the Tenant's
Improvement Work and Landlord's Contractor's fees.

                  6.2.3 Landlord shall submit to Tenant, within the time period
set forth in the Development Schedule, the Cost Estimate prepared by Landlord's
Contractor for Tenant's approval.

         6.3  TENANT APPROVAL OF COST ESTIMATE.

                  6.3.1 Tenant shall, within five (5) business days after
receipt of the Cost Estimate, notify Landlord in writing of either (i) Tenant's
approval of the Cost Estimate or (ii) Tenant's disapproval of the Cost Estimate
and specific instructions to Landlord to reduce the scope of Tenant's
Improvement Work.

                  6.3.2 If Tenant disapproves the Cost Estimate and instructs
Landlord to reduce the scope of Tenant's Improvement Work, and the scope
reduction complies with the requirements of Section 1.7, and Tenant delivers to
Landlord revisions to Tenant's Improvement Plans prepared by Tenant's Designer,
if required, then Landlord shall cause Tenant's Improvement Plans, as revised,
to be re-bid in accordance with Section 6.2 and shall cause a revised cost
estimate to be prepared by Landlord's Contractor and delivered to Tenant
("Revised Cost Estimate"). Tenant's approval or disapproval of the Revised Cost
Estimate shall be in compliance with this Section 6.3. Any subsequent reduction
in the scope of Tenant's Improvement Work and re-bid shall be subject to the
same procedures as set forth in this Section 6.3.

                  6.3.3 If Tenant fails to expressly approve or disapprove the
original Cost Estimate or any Revised Cost Estimate within the time periods set
forth in this Section 6.3, then each day of delay in Tenant's approval of the
original Cost Estimate or any Revised Cost Estimate or any subsequent cost
estimate beyond the time periods set forth in this Section 6.3 and any delay in
preparing a Revised Cost Estimate shall be a Tenant-Caused Delay.

                  6.3.4 Within ten (10) days after Tenant approves the original
Cost Estimate or any Revised Cost Estimate, Landlord shall enter into a
construction contract with Landlord's Contractor for construction of Tenant's
Improvement Work.

                  6.3.5 For each trade, Landlord's Contractor shall contract
with the lowest responsible bidder. Landlord's Contractor shall enter into a
stipulated sum contract with each subcontractor for the performance of such
subcontractor's work. Landlord shall compensate Landlord's Contractor for
performance of the Tenant's Improvement Work on a cost plus a fee basis with a
guaranteed maximum cost in accordance with an AIA A111 Construction Contract.
The guarantee maximum cost under the construction contract shall be an amount
computed as follows:

                           (a)      a cap on the Landlord's Contractor's general
                                    conditions costs; plus

                           (b)      the stipulated sums to be paid to
                                    subcontractors for performance of all work
                                    other than the general conditions items;
                                    plus

                           (c)      a contingency equal to five percent (5%) of
                                    the costs described in clauses (a) and (b);
                                    plus

                           (d)      Landlord's Contractor's Fee.

                  6.3.6 Landlord shall provide Tenant a copy of the fully
executed construction contract for

                                      -8-

<PAGE>

Tenant's Improvement Work between Landlord and Landlord's Contractor for
Tenant's records. Landlord and Landlord's designated representatives, including
Tenant, shall, as one of the terms and conditions of such contract, have the
right, at all reasonable times, to audit Landlord's Contractor's financial and
accounting records in connection with the construction of Tenant's Improvement
Work. Landlord shall assume responsibility for administering the construction
contract with Landlord's Contractor and supervising performance thereunder.
Landlord's construction management duties shall include, without limitation,
causing Landlord's Architect and Landlord's Contractor to review of shop
drawings and samples for compliance with approved design criteria, assisting in
preparation of bid documents and coordination of bidding process, conduct of
weekly site visits and attendance at weekly project meetings, and oversight of
installation of floor coverings and window coverings to assure quality
installation thereof. Landlord may delegate such construction management
responsibility to Coast Income Properties, Inc., an affiliate of Landlord. As
compensation for rendering the above referenced construction management
services, Landlord, or Landlord's designated construction manager, if any, shall
be entitled to be paid from Tenant Improvement Fund a construction management
fee ("Landlord's Construction Management Fee") of an amount equal to Fifty Cents
($.50) per square feet of Usable Area in the Premises.

                  6.3.7 If any dispute should arise between Landlord and Tenant
as to whether a delay under the provisions of this Section 6.3 is a
Landlord-Caused Delay or Tenant-Caused Delay, then such dispute shall be
resolved in accordance with Article 11 of this Exhibit "D".

                                    ARTICLE 7

                          TENANT'S USE OF A CONTRACTOR

         7.1 CONTRACTOR SELECTION. Tenant may select any contractor ("Tenant's
Contractor") reasonably approved by Landlord for the construction of Tenant's
Work provided such contractor is bondable and meets all licensing and insurance
requirements established by the State of California and the City of San Diego
and has in force a comprehensive liability insurance policy covering bodily
injury in the amounts of One Million Dollars ($1,000,000) per person and Two
Million Dollars ($2,000,000) per occurrence(Two Million Dollars ($2,000,000) per
person and Three Million Dollars ($3,000,000) per occurrence if the cost of the
Tenant's Work exceeds Two Hundred Thousand Dollars ($200,000)) and covering
property damage in the amount of One Million Dollars ($1,000,000) or such higher
limits as Landlord may reasonably request, which policy of insurance shall name
Landlord as an additional insured. Tenant shall provide Landlord with a copy of
the contract with Tenant's Contractor (if any) prior to the commencement of
Tenant's Work. However, Tenant may elect to self-perform any Tenant's Work.

         7.2 SPECIAL CONDITIONS. Tenant shall incorporate into the contract with
Tenant's Contractor the following items as "Special Conditions":

                  (a) Tenant's Contractor shall diligently perform said work and
shall use reasonable efforts to cooperate with Landlord and Landlord's
Contractor so that the performance of such work does materially impede or delay
Landlord in the completion of the Premises. Any delays in the completion of the
Premises caused by Tenant's Contractor shall not relieve Tenant of any
obligation under this Lease.

                  (b) Tenant's Contractor shall be responsible for the repair,
replacement or clean-up of any damage caused by Tenant's Contractor to any other
contractor's work in any area of the Project.

                  (c) Tenant's Contractor shall obtain written approval from
Landlord prior to penetrating any floor slab. Landlord's approval shall not
relieve Tenant or Tenant's Contractor from responsibility for damage to
Landlord's Work or Tenant's Improvement Work and/or any Tenant's Work because of
penetration by Tenant.

                  (d) Tenant's Contractor shall store all construction materials
and contain all operations

                                      -9-

<PAGE>

within the Premises and such other space as Landlord may specifically permit.
Should Tenant be assigned space outside of the Premises, Tenant shall move to
such other space as Landlord shall direct from time to time to avoid
interference or delays with other work. All trash, construction debris and
surplus construction materials shall be promptly removed from the Project.

                  (e) Tenant's Contractor shall notify Landlord or Landlord's
project manager of any work to be done on weekends or other than normal job
hours.

                  (f) Tenant and Tenant's Contractor shall comply with all
applicable laws, codes, rules and regulations governing the performance of
Tenant's Work, including all applicable safety regulations reasonably
established by Landlord's Contractor for the Project.

                  (g) Prior to commencement of construction, Tenant shall submit
to Landlord evidence of insurance as required in Article 8 , Section 8.02 of the
Lease and Section 1.6.6 of this Exhibit "D".

                  (h) Tenant's Contractor or subcontractors shall not post signs
on any part of the Project.

                  (i) Any and all work performed by Tenant or Tenant's
Contractor shall be performed in a manner so as to avoid any labor dispute which
results in a stoppage or impairment as the result of any such labor dispute.
Tenant shall immediately undertake such action as may be necessary to eliminate
such dispute or potential dispute, including without limitation (a) removing all
disputants from the job site until such time as the labor dispute no longer
exists, (b) seeking an injunction in the event of a breach of contract between
Tenant and Tenant's Contractor and (c) filing appropriate unfair labor practice
charges in the event of a union jurisdictional dispute.

                  (j) Prior to the commencement of construction, Tenant shall
give written notice to Landlord thereof and, if the cost of the Tenant's Work
exceeds Two Hundred Thousand Dollars ($200,000), obtain or cause Tenant's
Contractor to obtain payment and performance bonds covering the faithful
performance of the contract for the construction of Tenant's Work and the
payment of all obligations arising thereunder. Such bonds shall be for the
mutual benefit of both Landlord and Tenant and shall be issued jointly to
Landlord and Tenant as obligees and beneficiaries. Prior to the date Tenant
commences construction of Tenant's Work, Tenant shall submit evidence
satisfactory to Landlord that such bonds have been issued if same are required
pursuant to the provisions hereof.

                                    ARTICLE 8

                        COMPLETION AND RENT COMMENCEMENT

         8.1  DEFINITIONS.  For purposes of this Article 8 and this Exhibit "D",
the following definitions shall apply:

                  (a) As used in this Section and throughout the Lease,
including all Exhibits, the terms "Substantial Completion" and "Substantially
Complete" shall mean (i) as applied to Landlord's Work, the date the Project
Architect has certified that Landlord's Work is complete, and (ii) as applied to
the Premises, the date on which both (A) Landlord's Contractor has certified
that Tenant's Improvement Work is complete except for Punch-list items as
described in Section 9.2 of this Work Letter, and (B) the City has issued a
temporary certificate of occupancy for the Premises.

                  (b) "Force-Majeure Delays" shall mean delays or occurrences
outside the reasonable control of a party other than a delay or occurrence as
defined in subparagraphs (c), (d) and (e) of this Section 8.1;

                  (c) "Tenant-Caused Delays" shall mean (i) those delays,
exclusive of Force-Majeure

                                      -10-

<PAGE>

Delays, caused by the failure of Tenant, Tenant's Designer or other
representatives of Tenant to act within the time limits set forth in the
Development Schedule and this Exhibit "D"; (ii) delays defined as Tenant-Caused
Delays pursuant to this Exhibit "D"; and (iii) delays resulting from Tenant's
request for materials, finishes or installations which are unavailable and
nonstandard (other than those typical for improving buildings as offices). It is
the parties' intent that the Tenant's Improvement Work be Substantially Complete
on or before March 22, 2002, provided Tenant's Designer submits Tenant's
Improvement Plans to the City of San Diego for the building permit purposes on
or before September 15, 2001, and the City approves the Tenant's Improvement
Plans and issues building permits for same on or before December 15, 2001.

                  (d) "Landlord-Caused Delays" shall mean (i) those delays,
exclusive of Force-Majeure Delays, caused by the failure of Landlord, Project
Architect, Landlord's Contractor, materialmen, construction managers or other
representatives of Landlord to act within the time limits set forth in the
Development Schedule and this Exhibit "D"; and (ii) delays defined as
Landlord-Caused Delays pursuant to this Exhibit "D"; and

                  (e) "City-Required Change" shall mean any change to the
Tenant's Improvement Plans submitted to the City of San Diego as a condition to
its approval of such Plans (except for changes to Tenant's Improvement Plans
required by the City as a result of a Landlord Change). Any City-Required Change
shall be deemed Tenant-Caused Delays, except as provided in Section 1.5.

         8.2  COMPLETION OF THE WORK AND COMMENCEMENT DATE.

                  8.2.1 Landlord shall use its best efforts to Substantially
Complete Landlord's Work and Tenant's Improvement Work on or before the
"Estimated Term Commencement Date" as such Estimated Term Commencement Date may
be extended pursuant to the terms of this Exhibit "D". The Estimated Term
Commencement Date shall be extended one day for each day of delay in Substantial
Completion of Landlord's Work and Tenant's Improvement Work resulting from
Tenant-Caused Delays.

                  8.2.2 The Estimated Term Commencement Date shall be extended
one day for each day of delay in Substantial Completion of Landlord's Work and
Tenant's Improvement Work resulting from Force Majeure Delays, provided that the
maximum period of extension of the Estimated Term Commencement Date resulting
from Force Majeure Delays shall not exceed sixty (60) days.

                  8.2.3 The Term Commencement Date and Tenant's obligation to
pay Basic Annual Rent and Additional Rent shall be advanced one day for each day
of delay in Substantial Completion of Landlord's Work and Tenant's Improvement
Work which result from Tenant-Caused Delays; provided, however, in no event
shall the Term Commencement Date or Tenant's obligation to pay Base Rent occur
before the date set forth in the Base Lease Information of the Lease as the
Estimated Term Commencement Date (without any adjustments thereto).

         8.3 CALCULATIONS OF DELAYS/UPDATE OF DEVELOPMENT SCHEDULE. Any delay in
Landlord's or Tenant's performance beyond the date and time for such performance
set forth in the Development Schedule shall be a Force-Majeure Delay, a
Tenant-Caused Delay or a Landlord-Caused Delay as determined in accordance with
the terms and conditions of this Exhibit "D". Landlord-Caused Delays,
Tenant-Caused Delays and Force-Majeure Delays shall be allocated in accordance
with the following procedure: Force-Majeure Delays shall be applied first when
extending the Estimated Term Commencement Date, whether Landlord-Caused Delays
and/or Tenant-Caused Delays are concurrent or contributive. Landlord-Caused
Delays and Tenant-Caused Delays which are concurrent or contributive shall be
deemed Force-Majeure Delays. Landlord-Caused Delays, exclusive of Force-Majeure
Delays and Tenant-Caused Delays, shall be Landlord-Caused Delays. Tenant-Caused
Delays, exclusive of Force-Majeure Delays, and Landlord-Caused Delays shall be
Tenant-Caused Delays. By way of example, if the completion date is extended ten
(10) days for Force-Majeure Delays and during such ten-

                                      -11
<PAGE>

day period there are three (3) days of Tenant-Caused Delays and five days of
Landlord-Caused Delays, all ten (10) days of delays will be Force-Majeure
Delays. If the completion date is extended ten (10) days, two (2) days of which
are Force-Majeure Delays which occur concurrently with Landlord-Caused Delays,
five (5) days of which are Tenant-Caused Delays which occur concurrently with
Landlord-Caused Delays, and three (3) days of which are Landlord-Caused Delays,
exclusive of Force-Majeure Delays and Tenant-Caused Delays, the delay period
shall be allocated as follows: seven (7) days of Force-Majeure Delays and three
(3) days of Landlord-Caused Delays. At each weekly on-site Work review meeting
(unless a less frequent schedule is mutually agreed upon by the parties),
Landlord and Tenant, through their designated construction representatives,
shall update the Development Schedule and account for and allocate all
Force-Majeure Delays, Landlord-Caused Delays and Tenant-Caused Delays in
accordance with this Section 8.3; provided, however, if Landlord and Tenant,
through their designated construction representatives are unable to agree on the
allocation of Force-Majeure Delays, Landlord-Caused Delays and Tenant-Caused
Delays, then such dispute shall be resolved in accordance with Article 11 of
this Exhibit "D". Notwithstanding anything in this Exhibit "D" to the contrary,
if a Force-Majeure Delay, a Landlord-Caused Delay and/or a Tenant-Caused Delay
are/is deemed to have occurred pursuant to this Exhibit "D" but such delay has
no effect on the critical path of the Development Schedule, then the Development
Schedule shall govern and such delay shall be deemed not to have occurred.

                                    ARTICLE 9

                                   DEVELOPMENT

         9.1 TENANT'S CONSTRUCTION REPRESENTATIVES. Tenant designates Paul
Stambo, an employee of Tenant (or such other individuals designated as a
construction representative) as Tenant's construction representatives ("Tenant's
Construction Representatives") in connection with Tenant's Improvement Work.
Tenant's Construction Representatives shall be allowed complete access to the
Building during construction and shall participate in all meetings with
Landlord's Contractor and subcontractors involved in the construction of
Tenant's Improvement Work. Tenant's Construction Representatives are the only
individuals authorized to approve each Change requested by Tenant pursuant to
Section 1.7 of this Exhibit "D". Any questions arising during construction shall
be directed to Tenant's Construction Representatives. Notwithstanding anything
to the contrary in this Exhibit "D", any and all changes requested by Landlord
to be made to the Landlord's Plans or Tenant's Improvement Plans, or changes in
construction of the Building Shell, Land Improvements and/or Tenant
Improvements, shall be approved by Tenant prior to implementing such change,
which approval shall not be unreasonably withheld or delayed. Such change (i)
must be consistent with Landlord's Plans and the approved Tenant's Improvement
Plans, as modified by any Changes, and (ii) shall be documented in writing and
Tenant shall give approval by having Tenant's Construction Representatives sign
an appropriate change order.

         9.2 DELIVERY OF THE PREMISES. Landlord shall deliver the Premises to
Tenant upon Substantial Completion of Tenant's Improvement Work in clean and
operating condition, subject to punch-list items. For purposes of this Section
9.2, the term "clean and operating condition" shall include the following: (a)
tile floors wet mopped, waxed and buffed and carpets vacuumed; (b) walls and
partitions cleaned and all holes filled and touched up; (c) all glass cleaned on
both sides; (d) trash, dirt and left-over materials shall be removed from the
Building entrance area; (e) air-conditioning, heating and ventilating systems
shall be in operating condition suitable for Tenant's occupancy in the Building;
(f) plumbing, electrical and elevator systems shall be in good operating
condition; and (g) the Building shall be in good condition and all site work,
including without limitation, hardscape, landscape, storm drainage, parking lot
striping and parking lot cleaning shall be complete. Punch-list items shall mean
such minor pick-up work as would not materially interfere with Tenant's
occupancy and use of the Premises for the purpose for which it is to be used;
provided, however, in no event shall punch-list items include work which would
unreasonably interfere with Tenant's use of such facilities for the purpose for
which they are intended.

         9.3 AS-BUILT DRAWINGS. Landlord shall maintain a set of "as-built"
drawings of the Premises, which shall be available for inspection by Tenant at
the office of Landlord during normal business hours.

                                      -12-

                                       1
<PAGE>

                                   ARTICLE 10

                                   DEFINITIONS

         10.1 DEFINITIONS. Any capitalized, but undefined term used in this
Exhibit "D" shall have the same meaning as set forth in the Lease.

                                   ARTICLE 11

                         CONSTRUCTION DISPUTE RESOLUTION

         11.1 DISPUTE RESOLUTION. If any dispute arises in connection with this
Exhibit "D", such dispute shall be resolved in accordance with this Article.
Such dispute shall be determined by a panel consisting of one representative of
Landlord, one of Tenant's Construction Representatives (or another party
designated by Tenant), Project Architect, Tenant's Designer and a fifth party
that has extensive development and construction experience in the construction
of comparable office buildings of the San Diego County area selected in
accordance with Section 11.3 of this Article (the "Construction Panel").

         11.2 NOTICE. All disputes to be determined in accordance with this
Article shall be raised by notice to the other party, which notice shall state
with particularity the nature of the dispute and the demand for relief, making
specific reference by Section number and title to the provision of this Exhibit
"D" alleged to give rise to the dispute. Such notice shall also refer to this
Article.

         11.3 SELECTION OF FIFTH PARTY/COSTS. Landlord's representative,
Tenant's representative, Project Architect and Tenant's Designer shall mutually
and promptly select a fifth party who meets the qualifications set forth in
Section 11.1 of this Article. In the event a selection is not made within two
(2) days after demand for resolution is made, the fifth party shall, upon the
request of either party, be appointed by the then-president of the Association
of General Contractors of San Diego County. All proceedings contemplated by this
Section shall take place at the location for all job-site meetings, unless the
Construction Panel mutually agrees to another location. The cost for the fifth
party's services shall be paid by the non-prevailing party in the dispute being
determined by the Construction Panel, unless the Construction Panel determines
otherwise.

         11.4 INTERPRETATION AND RESOLUTION. In determining any dispute, the
Construction Panel shall apply the pertinent provisions of this Exhibit "D"
without departure therefrom in any respect. The Construction Panel shall not
have the power to add to, modify or change any of the provisions of this Exhibit
"D"; but this provision shall not prevent in any appropriate case the
interpretation, construction and determination by the Construction Panel of the
applicable provisions of this Exhibit "D" to the extent necessary in applying
the same to the matters to be determined by the Construction Panel. As part of
resolving a dispute, the Construction Panel shall determine the days of delay in
completing the Landlord's Work and Tenant's Improvement Work which directly
result from the dispute being considered by the Construction Panel, if any. The
days of delay shall be designated as either Tenant-Caused Delays,
Landlord-Caused Delays or Force-Majeure Delays or any combination of the three
types of delay, as determined by the Construction Panel.

         11.5 CONTINUED PERFORMANCE. During any proceedings pursuant to this
Article, Landlord and Tenant shall, to the extent possible, continue to perform
and discharge all of their respective obligations under this Exhibit "D" and the
Lease.

         11.6 BINDING RESOLUTION. The Construction Panel shall meet within two
(2) business days of the fifth party being selected as a member of the
Construction Panel and the Construction Panel shall thereafter resolve the issue
in dispute within two (2) business days, unless it is mutually agreed among the
Construction Panel members that additional time is necessary to resolve the
dispute, but in no event

                                      -13-

<PAGE>

shall such additional time exceed five (5) business days. Landlord and Tenant
agree that time and strict punctual performance are of the essence with respect
to each provision of this Exhibit "D" and that any and all decisions of the
Construction Panel as to the matter in dispute shall be binding upon both
Landlord and Tenant.

                                      -14-
<PAGE>

                           ATTACHMENT 1 to EXHIBIT "D"

                   DESCRIPTION OF BUILDING SHELL REQUIREMENTS

         The "Building Shell" as defined in the Work Letter shall include those
elements shown on Landlord's Plans described as : Construction Set Drawings
dated December 3, 1999, Addendum No. 1, and Project Manual dated December 3,
1999, both as prepared by Brian Paul & Associates, as same may be amended from
time to time as set forth in the Work Letter.

                           ATTACHMENT 2 TO EXHIBIT "D"

                              DEVELOPMENT SCHEDULE

      [DEVELOPMENT AND CONSTRUCTION SCHEDULE TO BE ATTACHED ONCE APPROVED]

                                      -15-
<PAGE>

                           ATTACHMENT 3 TO EXHIBIT "D"

                                PROJECT DOCUMENTS

----------------------------------------

1. Landlord's Plans.

2. Building Standards for Tenant Improvements dated June, 2000, prepared by
Facilities Solutions.

3. Project Operating Budget dated June 8, 2000 (preliminary draft subject to
finalization).

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