Document:

<PAGE>
                                                                    Exhibit 10.7

                                INDUSTRIAL LEASE

                                 by and between

                               AMB PROPERTY, L.P.
                                   "LANDLORD"

                                       and

                          CAPSTONE TURBINE CORPORATION
                                    "TENANT"

                            Dated: September 25, 2000

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                                TABLE OF CONTENTS

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<S>                                                                                        <C>
1.       BASIC PROVISIONS                                                                    1
   1.1   PARTIES                                                                             1
   1.2   PREMISES                                                                            1
   1.3   TERM                                                                                1
   1.4   BASE RENT                                                                           1
   1.5   TENANT'S SHARE OF OPERATING EXPENSES                                                1
   1.6   TENANT'S ESTIMATED MONTHLY RENT PAYMENT                                             1
   1.7   SECURITY DEPOSIT                                                                    1
   1.8   PERMITTED USE                                                                       1
   1.9   GUARANTOR                                                                           1
   1.10  ADDENDA                                                                             I
   1.11  EXHIBITS                                                                            1
   1.12  ADDRESS FOR RENT PAYMENTS                                                           2
2.       PREMISES AND COMMON AREAS                                                           3
   2.1   LETTING                                                                             3
   2.2   CONDITION OF PREMISES                                                               3
3.       TERM                                                                                3
   3.1   TERM                                                                                3
   3.2   DELAY IN POSSESSION                                                                 3
   3.3   COMMENCEMENT DATE CERTIFICATE                                                       3
4.       RENT                                                                                3
   4.1   BASE RENT                                                                           3
   4.2   OPERATING EXPENSES                                                                  3
5.       SECURITY DEPOSIT                                                                    4
6.       USE                                                                                 4
   6.1   PERMITTED USE                                                                       4
   6.2   HAZARDOUS SUBSTANCES                                                                5
   6.3   TENANT'S COMPLIANCE WITH REQUIREMENTS                                               6
   6.4   INSPECTION; COMPLIANCE WITH LAW                                                     6
7.       MAINTENANCE, REPAIRS, TRADE FIXTURES AND ALTERATIONS                                6
   7.1   TENANT'S OBLIGATIONS                                                                6
   7.2   LANDLORD'S OBLIGATIONS                                                              6
   7.3   ALTERATIONS                                                                         6
   7.4   SURRENDER/RESTORATION                                                               6
8.       INSURANCE; INDEMNITY                                                                7
   8.1   PAYMENT OF PREMIUMS                                                                 7
   8.2   TENANT'S INSURANCE                                                                  7
   8.3   LANDLORD'S INSURANCE                                                                7
   8.4   WAIVER OF SUBROGATION                                                               7
   8.5   INDEMNITY                                                                           7
   8.6   EXEMPTION OF LANDLORD FROM LIABILITY                                                8
9.       DAMAGE OR DESTRUCTION                                                               8
   9.1   TERMINATION RIGHT                                                                   8
   9.2   DAMAGE CAUSED BY TENANT                                                             8
10.      REAL PROPERTY TAXES                                                                 8
   10.1  PAYMENT OF REAL PROPERTY TAXES                                                      8
   10.2  REAL PROPERTY TAX DEFINITION                                                        8
   10.3  ADDITIONAL IMPROVEMENTS                                                             9
   10.4  JOINT ASSESSMENT                                                                    9
   10.5  TENANT'S PROPERTY TAXES                                                             9
11.      UTILITIES                                                                           9
12.      ASSIGNMENT AND SUBLETTING                                                           9
   12.1  LANDLORD'S CONSENT REQUIRED                                                         9
13.      DEFAULT;REMEDIES                                                                   10
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                               TABLE OF CONTENTS

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   13.1  DEFAULT                                                                            10
   13.2  REMEDIES                                                                           10
   13.3  LATE CHARGES                                                                       12
14.      CONDEMNATION                                                                       12
15.      ESTOPPEL CERTIFICATE AND FINANCIAL STATEMENTS                                      12
   15.1  ESTOPPEL CERTIFICATE                                                               12
   15.2  FINANCIAL STATEMENT                                                                13
16.      ADDITIONAL COVENANTS AND PROVISIONS                                                13
   16.1  SEVERABILITY                                                                       13
   16.2  INTEREST ON PAST-DUE OBLIGATIONS                                                   13
   16.3  TIME OF ESSENCE                                                                    13
   16.4  LANDLORD LIABILITY                                                                 13
   16.5  NO PRIOR OR OTHER AGREEMENTS                                                       13
   16.6  NOTICE REQUIREMENTS                                                                13
   16.7  DATE OF NOTICE                                                                     13
   16.8  WAIVERS                                                                            13
   16.9  HOLDOVER                                                                           13
   16.10 CUMULATIVE REMEDIES                                                                14
   16.11 BINDING EFFECT: CHOICE OF LAW                                                      14
   16.12 LANDLORD                                                                           14
   16.13 ATTORNEYS' FEES AND OTHER COSTS                                                    14
   16.14 LANDLORD'S ACCESS; SHOWING PREMISES; REPAIRS                                       14
   16.15 SIGNS                                                                              14
   16.16 TERMINATION; MERGER                                                                14
   16.17 QUIET POSSESSION                                                                   14
   16.18 SUBORDINATION; ATTORNMENT; NON-DISTURBANCE                                         14
   16.19 RULES AND REGULATIONS                                                              15
   16.20 SECURITY MEASURES                                                                  15
   16.21 RESERVATIONS                                                                       15
   16.22 CONFLICT                                                                           15
   16.23 OFFER                                                                              15
   16.24 AMENDMENTS                                                                         15
   16.25 MULTIPLE PARTIES                                                                   15
   16.26 AUTHORITY                                                                          16
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<PAGE>

                            AMB PROPERTY CORPORATION
                                INDUSTRIAL LEASE

1.      BASIC PROVISIONS ("Basic Provisions").

        1.1 Parties: This Lease ("Lease") dated September 25, 2000, is made by
and between AMB Property, L.P., a Delaware limited partnership, ("Landlord") and
Capstone Turbine Corporation, a Delaware corporation, ("Tenant") (collectively,
the "Parties" or individually, a "Party").

        1.2 Premises The premises ("Premises") consist of:

        [ ] Approximately square feet of space as depicted on Exhibit A. This
space is a part of the building ("Building") which is also identified on Exhibit
A.

                                       or

        [X] All of the building ("Building") identified on Exhibit A, consisting
of approximately 78,711 square feet and commonly known as 16640 Stagg Street,
Van Nuys, California.

If the Premises are all of the Building, there shall, for purposes of this
Lease, be no distinction between the words "Premises" or "Building."

        1.3 Term: 10 years and 2 months ("Term") commencing October 1, 2000
("Commencement Date") and ending December 31, 2010 ("Expiration Date").

        1.4 Base Rent: $44,078.00 per month ("Base Rent"). $51,495.00 is payable
on execution of this Lease for the period December 2000.

        1.5 Tenant's Share of Operating Expenses ("Tenant's Share"):

(a) Building Operating Expenses                                     100%

        1.6 Tenant's Estimated Monthly Rent Payment: Following is the estimated
monthly Rent payment to Landlord pursuant to the provisions of this Lease. This
estimate is made at the inception of the Lease and is subject to adjustment
pursuant to the provisions of this Lease:

          (a)  Base Rent (Paragraph 4.1)             $44,078.00
          (b)  Operating Expenses (Paragraph 4.2,
               excluding Real Property Taxes,
               Landlord Insurance, and HVAC)         $ 3,000.00
          (c)  Landlord Insurance (Paragraph 8.3)    $   415.00
          (d)  Real Property Taxes (Paragraph 10)    $ 4,002.00
          (e)  HVAC maintenance (Paragraph 4.2)      $   -0-

               Estimated Monthly Payment                            $51,495.00

        1.7 Security Deposit: $44,078.00 ("Security Deposit").

        1.8 Permitted Use ("Permitted Use"): Office, assembly, product testing
(outside and inside), warehouse and distribution of micro-turbines, recuperators
and related parts and for other general office, assembly, warehouse and
distribution purposes provided they do not involve Hazardous Substances, as
defined in this Lease and for no other purpose.

        1.9 Guarantor: None

        1.10 Addenda: Attached hereto are the following Addenda, all of which
constitute a part of this Lease:

               (a) Addenda: Rent Adjustment
               (b) Addenda: Option to Extend
               (c) Addenda: Addendum
               (d) Addenda: Tenant Improvement Addendum

        1.11 Exhibits: Attached hereto are the following Exhibits, all of which
constitute a part of this Lease:

               Exhibit A: Description of Premises.
               Exhibit B: Commencement Date Certificate.
               Exhibit C: Estoppel Certificate
               Exhibit D: Hazardous Substances Questionnaire

                                      -1-

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        1.12 Address for Rent Payments: All amounts payable by Tenant to
Landlord shall, until further notice from Landlord, be paid to AMB Property
Corporation at the following address:

          AMB Property, L.P.
          ------------------------------------
          P.O. Box 840507
          ------------------------------------
          Dallas, TX 75284-0507
          ------------------------------------

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

                                      -2-

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2.      PREMISES AND COMMON AREAS.

        2.1 Letting. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises upon all of the terms, covenants, and conditions, set
forth in this Lease. Any statement of square footage set forth in this Lease or
that may have been used in calculating Base Rent and/or Operating Expenses is an
approximation which Landlord and Tenant agree is reasonable, and the Base Rent
and Tenant's Share based thereon is not subject to revision whether or not the
actual square footage is more or less.

        Intentionally Deleted Intentionally Deleted Intentionally Deleted
Intentionally Deleted

        2.2 Condition of Premises. Landlord shall deliver the Premises to Tenant
clean and free of debris on the Commencement Date. Landlord represents and
warrants to Tenant that the roof shall be water-tight and the plumbing,
lighting, ceiling, interior and exterior walls, electrical, air conditioning,
fire-sprinklers, heating, ventilating and other mechanical systems and equipment
and fixtures in the Premises, and the loading doors shall be in good operating
condition on the Commencement Date. Without limitation to Landlord's obligations
as set forth in Paragraph 7.2, in the event that Tenant gives notice to Landlord
within 6 months following the Commencement Date of any defect or malfunction in
or repair reasonably needed to any of the aforementioned items or systems, as
long as not caused by Tenant, then it shall be the obligation of Landlord to
promptly, at Landlord's sole cost and expense, perform such work.

3.      TERM.

        3.1 Term. The Commencement Date, Expiration Date, and Term of this Lease
are as specified in Paragraph 1.3.

        3.2 Delay in Possession. If for any reason Landlord cannot deliver
possession of the Premises to Tenant by the Commencement Date, except as
provided below, Landlord shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations of
Tenant hereunder. In such case, Tenant shall not, except as otherwise provided
herein, be obligated to pay Rent or perform any other obligation of Tenant under
the terms of this Lease until Landlord delivers possession of the Premises to
Tenant. The term of the Lease shall commence on the earlier of (a) the date
Tenant takes possession of the Premises or (b) 10 days following notice to
Tenant that Landlord is prepared to tender possession of the Premises to Tenant.
If possession of the Premises is not delivered to Tenant within 60 days after
the Commencement Date and such delay is not due to Tenant's acts, failure to
act, or omissions, Tenant shall have the option to either (i) by notice in
writing to Landlord within 10 days after the end of said 60-day period cancel
this Lease and the parties shall be discharged from all obligations hereunder;
or (ii) elect not to cancel this Lease, in which case Tenant shall receive rent
abatement, to be applied to the rent coming due when the term of the Lease
commences, equal to one day for each day following such sixtieth (60th) day that
Landlord fails to deliver the Premises to Tenant If such written notice of
Tenant's cancellation under (i) above is not received by Landlord within said
10-day period, Tenant's right to cancel this Lease shall terminate and Tenant
shall be deemed to have elected option (ii) above.

        3.3 Commencement Date Certificate. At the request of Landlord, Tenant
shall execute and deliver to Landlord a completed certificate ("Commencement
Date Certificate") in the form attached hereto as Exhibit B.

4.      RENT.

        4.1 Base Rent. Tenant shall pay to Landlord Base Rent and other monetary
obligations of Tenant to Landlord under the terms of this Lease (such other
monetary obligations are herein referred to as "Additional Rent") in lawful
money of the United States, without offset or deduction, in advance on or before
the first day of each month. Base Rent and Additional Rent for any period during
the term hereof which is for less than one full month shall be prorated based
upon the actual number of days of the month involved. Payment of Base Rent and
Additional Rent shall be made to Landlord at its address stated herein or to
such other persons or at such other addresses as Landlord may from time to time
designate in writing to Tenant. Base Rent and Additional Rent are collectively
referred to as "Rent." All monetary obligations of Tenant to Landlord under the
terms of this Lease are deemed to be Rent.

        4.2 Operating Expenses. Tenant shall pay to Landlord on the first day of
each month during the term hereof, in addition to the Base Rent, Tenant's Share
of all Operating Expenses in accordance with the following provisions:

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               (a) "Operating Expenses" are all reasonable costs incurred by
Landlord relating to the ownership and operation of the Premises including, but
not limited to, the following:

                      (i) The operation, repair, maintenance, and replacement in
neat, clean, good order, and condition of the areas of the Premises Landlord is
obligated to maintain under this Lease.

                      (ii) Property management.

                      (iii) Reserves set aside for maintenance, repair, and
replacement of the Building.

                      (iv) Real Property Taxes.

                      (v) Premiums for the insurance policies maintained by
Landlord under Paragraph 8 hereof.

                      (vi) Environmental monitoring and insurance programs, but
only in the event that such monitoring is required by the acts or omissions of
Tenant or its agents.

                      (vii) Monthly amortization of capital improvements to the
Building. The monthly amortization of any given capital improvement shall be the
sum of the (a) quotient obtained by dividing the cost of the capital improvement
by Landlord's estimate of the number of months of useful life of such
improvement plus (b) an amount equal to the cost of the capital improvement
times 1/12 of the lesser of 12% or the maximum annual interest rate permitted by
law.

                      (viii) Maintenance of the Building including, but not
limited to, painting, caulking, and repair and replacement of Building
components, including, but not limited to, roof, elevators, and fire detection
and sprinkler systems.

                      (ix) Maintenance, repair and replacement of the heating,
ventilating, and air conditioning systems ("HVAC").

               (b) Tenant's Share of Operating Expenses shall be 100%.

               (c) Tenant shall pay monthly in advance, on the same day that the
Base Rent is due, Tenant's Share of estimated Operating Expenses and HVAC
maintenance costs in the amount set forth in Paragraph 1.6. Landlord shall
deliver to Tenant within 90 days after the expiration of each calendar year a
reasonably detailed statement showing Tenant's Share of the actual Operating
Expenses incurred during the preceding year. If Tenant's estimated payments
under this Paragraph 4(c) during the preceding year exceed Tenant's Share as
indicated on said statement, Tenant shall be credited the amount of such
overpayment against Tenant's Share of Operating Expenses next becoming due, or,
if such amount is owing at the end of Lease term, such amount shall be paid
within 30 days following the end of the Lease term. If Tenant's estimated
payments under this Paragraph 4.2(c) during said preceding year were less than
Tenant's Share as indicated on said statement, Tenant shall pay to Landlord the
amount of the deficiency within 30 days after delivery by Landlord to Tenant of
said statement. At any time Landlord may, in the exercise of its reasonable
judgment, adjust the amount of the estimated Tenant's Share of Operating
Expenses and HVAC maintenance costs to reflect Landlord's estimate of such
expenses for the year.

5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon Tenant's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Tenant's
faithful performance of Tenant's obligations under this Lease. If Tenant fails
to pay Base Rent or Additional Rent or otherwise defaults under this Lease (as
defined in paragraph 13.1), landlord may use the security deposit for the
payment of any amount due Landlord or to reimburse or compensate Landlord for
any liability, cost, expense, loss, or damage (including attorneys' fees) which
Landlord may suffer or incur by reason thereof. Tenant shall on demand pay
Landlord the amount so used or applied so as to restore the Security Deposit to
the amount set forth in Paragraph 1.7. Landlord shall not be required to keep
all or any part of the Security Deposit separate from its general accounts.
Landlord shall, at the expiration or earlier termination of the term hereof and
after Tenant has vacated the Premises, return to Tenant that portion of the
Security Deposit not used or applied by Landlord. No part of the Security
Deposit shall be considered to be held in trust, to bear interest, or to be
prepayment for any monies to be paid by Tenant under this Lease.

6. USE.

        6.1 Permitted Use. Tenant shall use and occupy the Premises only for the
Permitted Use set forth in Paragraph 1.8. Tenant shall not commit any nuisance,
permit the emission of any objectionable noise or odor, suffer any waste, make
any use of the Premises which is

                                      -4-

<PAGE>

contrary to any law or ordinance, or which will invalidate or increase the
premiums for any of Landlord's insurance. Tenant shall not service, maintain, or
repair vehicles on the Premises. Tenant shall not store foods, pallets, drums,
or any other materials outside the Premises. Notwithstanding the foregoing,
Tenant shall be permitted, provided such use is not in violation of any law or
ordinance and such use is screened from view by screening reasonably acceptable
to Landlord, to use the exterior areas of the Premises for the purposes of
product testing and uses related to such product testing.

        6.2 Hazardous Substances.

               (a) Reportable Uses Require Consent. The term, "Hazardous
Substance," as used in this Lease, shall mean any product, substance, chemical,
material, or waste whose presence, nature, quantity, and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release, or
effect, either by itself or in combination with other materials expected to be
on the Premises, is either: (i) potentially injurious to the public health,
safety or welfare, the environment, or the Premises; (ii) regulated or monitored
by any governmental authority; or (iii) a basis for potential liability of
Landlord to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil, or any products or by-products
thereof. Tenant shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Landlord and compliance in a timely
manner (at Tenant's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration, or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on, or about the Premises of a Hazardous Substance with
respect to which any Applicable Requirements require that a notice be given to
persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Tenant may, without Landlord's prior consent, but
upon notice to Landlord and in compliance with all Applicable Requirements, use
any ordinary and customary materials reasonably required to be used by Tenant in
the normal course of the Permitted Use, so long as such use is not a Reportable
Use and does not expose the Premises or neighboring properties to any meaningful
risk of contamination or damage, or expose Landlord to any liability therefor.
In addition, Landlord may (but without any obligation to do so) condition its
consent to any Reportable Use of any Hazardous Substance by Tenant upon Tenant's
giving Landlord such additional assurances as Landlord, in its reasonable
discretion, deems necessary to protect itself, the public, the Premises, and the
environment against damage, contamination, injury, and/or liability therefor,
including but not limited to the installation (and, at Landlord's option,
removal on or before Lease expiration or earlier termination) of reasonably
necessary protective modifications to the Premises (such as concrete
encasements) and/or the deposit of an additional Security Deposit.

               (b) Duty to Inform Landlord. If Tenant knows, or has reasonable
cause to believe, that a Hazardous Substance is located in, under, or about the
Premises or the Building, Tenant shall immediately give Landlord written notice
thereof, together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to such Hazardous Substance.
Tenant shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under, or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).

               (c) Indemnification. Tenant shall indemnify, protect, defend, and
hold Landlord, Landlord's affiliates, Lenders, and the officers, directors,
shareholders, partners, employees, managers, independent contractors, attorneys,
and agents of the foregoing ("Landlord Entities") and the Premises harmless from
and against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance on or brought onto the
Premises by or for Tenant or by any of Tenant's employees, agents, contractors,
servants, visitors, suppliers, or invitees (such employees, agents, contractors,
servants, visitors, suppliers, and invitees as herein collectively referred to
as "Tenant Entities"). Tenant's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property, or the environment created or suffered by Tenant, and the cost
of investigation (including consultants' and attorneys' fees and testing),
removal, remediation,

                                      -5-

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restoration and/or abatement thereof, or of any contamination therein involved.
Tenant's obligations under this Paragraph 6.2(c) shall survive the Expiration
Date or earlier termination of this Lease.

        6.3 Tenant's Compliance with Requirements. Tenant shall, at Tenant's
sole cost and expense, fully, diligently, and in a timely manner comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements, and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the reasonable recommendations of
Landlord's engineers and/or consultants, relating in any manner to the Premises
(including but not limited to matters pertaining to (a) industrial hygiene, (b)
environmental conditions on, in, under, or about the Premises, including soil
and groundwater conditions, and (c) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill,
or release of any Hazardous Substance), now in effect or which may hereafter
come into effect. Tenant shall, within 5 days after receipt of Landlord's
written request, provide Landlord with copies of all documents and information
evidencing Tenant's compliance with any Applicable Requirements, and shall
immediately upon receipt notify Landlord in writing (with copies of any
documents involved) of any claim, notice, citation, warning, complaint, or
report pertaining to or involving failure by Tenant or the Premises to comply
with any Applicable Requirements.

        6.4 Inspection; Compliance with Law. In addition to Landlord's
environmental monitoring and insurance program, the cost of which is included in
Operating Expenses as provided in Paragraph 4, Landlord and the holders of any
mortgages, deeds of trust, or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Tenant with this Lease and all
Applicable Requirements. Landlord shall be entitled to employ experts and/or
consultants in connection therewith to advise Landlord with respect to Tenant's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The cost and expenses of any such
inspections shall be paid by the party requesting same unless a violation of
Applicable Requirements exists or is imminent, or the inspection is requested or
ordered by a governmental authority. Tenant shall upon request reimburse
Landlord or Landlord's Lender, as the case may be, for the costs and expenses of
such inspections.

7. MAINTENANCE, REPAIRS, TRADE FIXTURES AND ALTERATIONS.

        7.1 Tenant's Obligations. Subject to the provisions of Paragraph 2.6
(Condition of the Premises, Paragraph 7.2 (Landlord's Obligations), Paragraph 9
(Damage or Destruction), and Paragraph 14 (Condemnation), Tenant shall, at
Tenant's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition, and repair (whether or not such portion
of the Premises requiring repair, or the means of repairing the same, are
reasonable or readily accessible to Tenant and whether or not the need for such
repairs occurs as a result of Tenant's use, any prior use, the elements, or the
age of such portion of the Premises) including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire hose connectors if within the
Premises, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Landlord pursuant to Paragraph 7.2 below.
Tenant's obligations shall include restorations, replacements, or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition, and state of repair.

        7.2 Landlord's Obligations. Subject to the provisions of Paragraph 6
(Use), Paragraph 7.1 (Tenant's Obligations), Paragraph 9 (Damage or
Destruction), and Paragraph 14 (Condemnation), Landlord, at its expense and not
subject to the reimbursement requirements of Paragraph 4.2, shall keep in good
order, condition, and repair the roof structure, foundations and exterior walls
of the Building. Landlord, subject to reimbursement pursuant to Paragraph 4.2,
shall keep in good order, condition, and repair the air conditioning systems
servicing the Premises, Building roof membrane, and Common Areas.

        7.3 Alterations. Tenant shall not make nor cause to be made any
alterations or installations in, on, under, or about the Premises without the
prior written consent of Landlord which will not be unreasonably withheld or
delayed.

        7.4 Surrender/Restoration. Tenant shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition, and state of repair,
ordinary wear and tear excepted. Without limiting

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the generality of the above, Tenant shall remove all Alterations designated by
Landlord in Landlord's sole discretion, personal property, trade fixtures, and
floor bolts, patch all floors, and cause all lights to be in good operating
condition. Notwithstanding the foregoing, Tenant by written notice to Landlord
may require, prior to the installation of any Alterations, that Landlord elect
whether such Alterations must be removed at the end of the Lease term or whether
Tenant shall have the option of removing such Alterations at the end of the
Lease term, and Landlord shall make such election within 20 days following
Landlord's receipt such written notice.

8. INSURANCE; INDEMNITY.

        8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Landlord under this Paragraph 8 shall be an Operating
Expense reimbursable pursuant to Paragraph 4.2 hereof. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease shall
be prorated to coincide with the corresponding Commencement Date and Expiration
Date.

        8.2 Tenant's Insurance.

               (a) At its sole cost and expense, Tenant shall maintain in full
force and effect during the Term of the Lease the following insurance coverages
insuring against claims which may arise from or in connection with the Tenant's
operation and use of the Premises.

                      (i) Commercial General Liability insurance with minimum
limits of $1,000,000 per occurrence and $3,000,000 general aggregate for bodily
injury, personal injury, and property damage. If required by Landlord, liquor
liability coverage will be included. Such insurance shall be endorsed to include
Landlord and Landlord Entities as additional insureds, shall be primary and
noncontributory with any Landlord insurance, and shall provide severability of
interests between or among insureds.

                      (ii) Workers' Compensation insurance with statutory limits
and Employers Liability with a $1,000,000 per accident limit for bodily injury
or disease.

                      (iii) Automobile Liability insurance covering all owned,
nonowned, and hired vehicles with a $1,000,000 per accident limit for bodily
injury and property damage.

                      (iv) Property insurance against "all risks" at least as
broad as the current ISO Special Form policy, including earthquake and flood,
for loss to any tenant improvements or betterments, floor and wall coverings,
and business personal property (except for earthquake and flood coverage) on a
full insurable replacement cost basis with no coinsurance clause, and Business
Income insurance covering at least six months of loss of income and continuing
expense.

               (b) Tenant shall deliver to AMB certificates of all insurance
reflecting evidence of required coverages prior to initial occupancy, and
annually thereafter.

               (c) If, in the opinion of Landlord's insurance advisor, the
amount or scope of such coverage is deemed inadequate at any time during the
Term, Tenant shall increase such coverage to such reasonable amounts or scope as
Landlord's advisor deems adequate and which are customary for premises of the
size and location of the Premises.

               (d) All insurance required under Paragraph 8.2 (i) shall be
issued by insurers licensed to do business in the state in which the Premises
are located and which are rated A:VII or better by Best's Key Rating Guide and
(ii) shall be endorsed to provide at least 30-days prior notification of
cancellation or material change in coverage to said additional insureds.

        8.3 Landlord's Insurance. Landlord shall maintain "all risks" coverage
as broad as the current ISO Special Form policy, including earthquake and flood,
covering Building and such other insurance in such amounts and covering such
other liability or hazards as deemed appropriate by Landlord. The amount and
scope of coverage of Landlord's insurance shall be determined by Landlord from
time to time in its sole discretion and shall be subject to such reasonable
deductible amounts as Landlord may elect. Except as to the "all risks" coverage
for the Building, Landlord shall have the right to reduce or terminate any
insurance or coverage.

        8.4 Waiver of Subrogation. To the extent permitted by law and with
permission of their insurance carriers, Landlord and Tenant each waive any right
to recover against the other on account of any and all claims Landlord or Tenant
may have against the other with respect to property insurance actually carried,
or required to be carried hereunder, to the extent of the proceeds realized from
such insurance coverage.

        8.5 Indemnity. Tenant shall protect, defend, indemnify, and hold
Landlord and Landlord Entities harmless from and against any and all loss,
claims, liability, or costs (including court costs and attorneys' fees) incurred
by reason of:

               (a) any damage to any property (including but not limited to
property of any Landlord Entity) or death, bodily, or personal injury to any
person occurring in or about the

                                      -7-

<PAGE>

Premises, the Building, or the Industrial Center to the extent that such injury
or damage shall be caused by or arise from any actual or alleged act, neglect,
fault, or omission by or of Tenant, its agents, servants, employees, invitees,
contractors, suppliers, subtenants, or visitors;

               (b) the conduct or management of any work or anything whatsoever
done by the Tenant on or about the Premises or from transactions of the Tenant
concerning the Premises;

               (c) Tenant's failure to comply with any and all governmental
laws, ordinances, and regulations applicable to the condition or use of the
Premises or its occupancy; or

               (d) any breach or default on the part of Tenant in the
performance of any covenant or agreement to be performed pursuant to this Lease.

        The provisions of this Paragraph 8.5 shall, with respect to any claims
or liability accruing prior to such termination, survive the Expiration Date or
earlier termination of this Lease.

        8.6 Exemption of Landlord from Liability. Except to the extent caused by
the gross negligence or willful misconduct of Landlord, Landlord shall not be
liable for and Tenant waives any claims against Landlord for injury or damage to
the person or the property of Tenant, Tenant Entities, or any other person in or
about the Premises, Building, or Industrial Center from any cause whatsoever,
including, but not limited to, damage or injury which is caused by or results
from (a) fire, steam, electricity, gas, water, or rain, or from the breakage,
leakage, seepage, back up of sewers or drains, obstruction, or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning, or
lighting fixtures or (b) from the condition of the Premises, other portions of
the Building, or Industrial Center. Landlord shall not be liable for any damages
arising from any act or neglect of any other tenant of Landlord nor from the
failure by Landlord to enforce the provisions of any other lease of which
Landlord is the landlord. Except with respect to Landlord's gross negligence or
willful misconduct, Landlord shall not be liable for injury to Tenant's
business, for any loss of income or profit therefrom, or any indirect,
consequential, or punitive damages.

9. DAMAGE OR DESTRUCTION.

        9.1 Termination Right. Tenant shall give Landlord immediate written
notice of any damage to the Premises. Subject to the provisions of Paragraph
9.2, if the Premises or the Building shall be damaged to such an extent that
there is substantial interference for a period exceeding 90 consecutive days
with the conduct by Tenant of its business at the Premises, Tenant, at any time
prior to commencement of repair of the Premises and following 10 days written
notice to Landlord, may terminate this Lease effective 30 days after delivery of
such notice to Landlord. Such termination shall not excuse the performance by
Tenant of those covenants which under the terms hereof survive termination. Rent
shall be abated in proportion to the degree of interference during the period
that there is such substantial interference with the conduct of Tenant's
business at the Premises. Abatement of rent and Tenant's right of termination
pursuant to this provision shall be Tenant's sole remedy for Tenant's loss of
beneficial use of the Premises due to the failure of Landlord to keep in good
order, condition, and repair the foundations and exterior walls of the Building,
Building roof, utility systems outside the Building, the Common Areas, and HVAC.

        9.2 Damage Caused by Tenant. Tenant's termination rights under Paragraph
9.1 shall not apply if the damage to the Premises or Building is the result of
any act or omission of Tenant or of any of Tenant's, agents, employees,
customers, invitees, or contractors ("Tenant Acts"). Any damage resulting from a
Tenant Act shall be promptly repaired by Tenant. Landlord at its option may at
tenant's expense repair any damage caused by tenant acts. Tenant shall continue
to pay all rent and other sums due hereunder and shall be liable to Landlord for
all damages that Landlord may sustain resulting from a Tenant Act. This section
shall not apply to any damage covered by Landlord's insurance pursuant to
Section 8.3.

10. REAL PROPERTY TAXES.

        10.1 Payment of Real Property Taxes. Landlord shall pay the Real
Property Taxes due and payable during the term of this Lease and, except as
otherwise provided in Paragraph 10.3, such payments shall be a Common Area
Operating Expense reimbursable pursuant to Paragraph 4.2. Notwithstanding the
foregoing, there shall be excluded from Real Property Taxes: (i) all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts, or income attributable to operations at the project), and (ii)
any items included as operating expenses.

        10.2 Real Property Tax Definition. As used herein, the term "Real
Property Taxes" is any form of tax or assessment, general, special, ordinary, or
extraordinary, imposed or levied upon (a) the Industrial Center or Building, (b)
any interest of Landlord in the Industrial Center or

                                      -8-

<PAGE>

Building, (c) Landlord's right to rent or other income from the Industrial
Center or Building, and/or (d) Landlord's business of leasing the Premises. Real
Property Taxes include (a) any licenses fee, commercial rental tax, excise tax,
improvement bond or bonds, levy, or tax; (b) any tax or charge which replaces
or is in addition to any of such above-described "Real Property Taxes," and (c)
any fees, expenses, or costs (including attorneys' fees, expert fees, and the
like) incurred by Landlord in protesting or contesting any assessments levied or
any tax rate. Real Property Taxes for tax years commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date and Expiration Date.

        10.3 Additional Improvements. Operating Expenses shall not include Real
Property Taxes attributable to improvements placed upon the Building by Landlord
unless requested by Tenant. Tenant shall, however, pay to Landlord at the time
Operating Expenses are payable under Paragraph 4.2, the entirety of any increase
in Real Property Taxes if assessed by reason of improvements placed upon the
Premises by Tenant or at Tenant's request.

        10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed.

        10.5 Tenant's Property Taxes. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon Tenant's improvements, fixtures,
furnishings, equipment, and all personal property of Tenant contained in the
Premises.

11. UTILITIES. Tenant shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas, and cleaning of the Premises, together with any taxes thereon.

12. ASSIGNMENT AND SUBLETTING

        12.1 Landlord's Consent Required.

               (a) Tenant shall not assign, transfer, mortgage, or otherwise
transfer or encumber (collectively, "assign") or sublet all or any part of
Tenant's interest in this Lease or in the Premises without Landlord's prior
written consent, which consent shall not be unreasonably withheld. Relevant
criteria in determining reasonability of consent include, but are not limited
to, credit history of a proposed assignee or sublessee, references from prior
landlords, any change or intensification of use of the Premises or the Common
Areas, and any limitations imposed by the Internal Revenue Code and the
Regulations promulgated thereunder relating to Real Estate Investment Trusts.
Assignment or sublet shall not release Tenant from its obligations hereunder.
Tenant shall not (i) sublet, assign, or enter into other arrangements in which
the amounts to be paid by the sublessee or assignee thereunder would be based,
in whole or in part, on the income or profits derived by the business activities
of the sublessee or assignee; (ii) sublet the Premises or assign this Lease to
any person or entity in which Landlord owns an interest, directly or indirectly
(by applying constructive ownership rules set forth in Section 856(d)(5) of the
Internal Revenue Code (the "Code"); or (iii) sublet the Premises or assign this
Lease in any other manner which could cause any portion of the amounts received
by Landlord pursuant to this Lease or any sublease to fail to qualify as "rents
from real property" within the meaning of Section 856(d) of the Code, or which
could cause any other income received by Landlord to fail to qualify as income
described in Section 856(c)(2) of the Code. The requirements of this Section
12.1 shall apply to any further subleasing by any subtenant. Notwithstanding the
foregoing, in the event of any assignment or subletting to which Landlord
consents, Landlord shall receive fifty percent (50%), in the event of a
sublease, of any rent received by Tenant above the rent then being paid by
Tenant to Landlord less: (i) rent obligations paid by Tenant hereunder during
any period when the Premises were vacant following the marketing of the Premises
for such sublease; (ii) the costs of any tenant improvements made or allowance
given to the subtenant for tenant improvements; (iii) any free rent or other
economic concessions given the subtenant; and (iv) any commissions or marketing
expense paid by Tenant for such sublease. In addition, Landlord shall receive
fifty percent (50%), in the event of an assignment, of any profit derived by
Tenant from such assignment less any commissions or marketing expense paid by
Tenant for such assignment. In the event of any assignment or subletting, Tenant
shall pay to Landlord or its authorized managing agent (as directed by Landlord)
a fee of $750.00 to cover Landlord's costs of review, negotiation, preparation
or execution of any documentation regarding such assignment or subletting.
Notwithstanding the foregoing, Tenant may sublease up to 50% of the Premises,
pursuant to this Section, and Landlord shall not receive any portion of the
profit derived from such sublease. Landlord shall approve or disapprove a
proposed sublease of up to 50% of the Premises within ten (10) days following
receipt of Tenant's written request.

                                      -9-

<PAGE>

               (b) A change in the control of Tenant shall constitute an
assignment requiring Landlord's consent. The transfer, on a cumulative basis, of
25% or more of the voting or management control of Tenant shall constitute a
change in control for this purpose, provided that changes resulting from the
sale of stock through a recognized stock exchange shall not constitute a change
of control hereunder.

        12.2 Non-Transfers. The term "Affiliate" shall mean any entity which is
controlled by controls, or is under common control with, Tenant or which merges
with, is acquired by, or acquires all of Tenant's assets or stock. "Control," as
used in this Paragraph 12.2, shall mean the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
person or entity, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding anything to the contrary contained in
this Paragraph 12, an assignment or subletting of all or a portion of the
Premises to an "Affiliate" of Tenant shall not be deemed a Transfer under this
Paragraph 12, provided that Tenant notifies Landlord of any such assignment or
sublease and promptly supplies Landlord with any documents or information
reasonably required by Landlord regarding such assignment or sublease or such
Affiliate, and further provided that such assignment or sublease is not a
subterfuge by Tenant to avoid its obligations and Tenant remains liable under
this Lease.

13. DEFAULT; REMEDIES.

        13.1  Default. The occurrence of any one of the following events shall
constitute an event of default on the part of Tenant ("Default"):

               (a) The abandonment of the Premises by Tenant;

               (b) Failure to pay any installment of Base Rent, Additional Rent,
or any other monies due and payable hereunder, said failure continuing for a
period of 5 days after Tenant receives notices that such payment was not
received when due, which notice shall be in lieu of and not in addition to any
notice required by statute;

               (c) A general assignment by Tenant or any guarantor for the
benefit of creditors;

               (d) The filing of a voluntary petition of bankruptcy by Tenant or
any guarantor; the filing of a voluntary petition for an arrangement; the filing
of a petition, voluntary or involuntary, for reorganization; or the filing of an
involuntary petition by Tenant's creditors or guarantors;

               (e) Receivership, attachment, of other judicial seizure of the
Premises or all or substantially all of Tenant's assets on the Premises;

               (f) Failure of Tenant to maintain insurance as required by
Paragraph 8.2;

               (g) Any breach by Tenant of its covenants under Paragraph 6.2;

               (h) Failure in the performance of any of Tenant's covenants,
agreements, or obligations hereunder (except those failures specified as events
of Default in other Paragraphs of this Paragraph 13.1 which shall be governed by
such other Paragraphs), which failure continues for 20 days after written notice
thereof from Landlord to Tenant; provided that, if Tenant has exercised
reasonable diligence to cure such failure and such failure cannot be cured
within such 20-day period despite reasonable diligence, tenant shall not be in
default under this subparagraph unless Tenant fails thereafter diligently and
continuously to prosecute the cure to completion;

        13.2 Remedies. In the event of any Default by Tenant, Landlord shall
have any or all of the following remedies:

               (a) Termination. In the event of any Default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the immediate option to terminate this
Lease and all rights of Tenant hereunder by giving written notice of such
intention to terminate. In the event that Landlord shall elect to so terminate
this Lease then Landlord may recover from Tenant:

                      (1) the worth at the time of award of any unpaid Rent and
any other sums due and payable which have been earned at the time of such
termination; plus

                      (2) the worth at the time of award of the amount by which
the unpaid Rent and any other sums due and payable which would have been earned
after termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus

                      (3) the worth at the time of award of the amount by which
the unpaid Rent and any other sums due and payable for the balance of the term
of this Lease after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; plus

                                      -10-

<PAGE>

                      (4) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course would be likely to
result therefrom, including, without limitation, any costs or expenses incurred
by Landlord (i) in retaking possession of the Premises; (ii) in maintaining,
repairing, preserving, restoring, replacing, cleaning, the Premises or any
portion thereof, including such acts for reletting to a new lessee or lessees;
(iii) for leasing commissions; or (iv) for any other costs necessary or
appropriate to relet the Premises; plus

                      (5) such reasonable attorneys' fees incurred by Landlord
as a result of a Default, and costs in the event suit is filed by Landlord to
enforce such remedy; and plus

                      (6) at Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law. As used in subparagraphs (1) and (2) above, the "worth at the
time of award" is computed by allowing interest at an annual rate equal to
twelve percent (12%) per annum or the maximum rate permitted by law, whichever
is less. As used in subparagraph (3) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award, plus one percent (1 %). Tenant
waives redemption or relief from forfeiture under California Code of Civil
Procedure Sections 1174 and 1179, or under any other present or future law, in
the event Tenant is evicted or Landlord takes possession of the Premises by
reason of any Default of Tenant hereunder.

               (b) Continuation of Lease. In the event of any Default by Tenant,
then in addition to any other remedies available to Landlord at law or in equity
and under this Lease, Landlord shall have the remedy described in California
Civil Code Section 1951.4 (Landlord may continue this Lease in effect after
Tenant's Default and abandonment and recover Rent as it becomes due, provided
tenant has the right to sublet or assign, subject only to reasonable
limitations).

               (c) Re-entry. In the event of any Default by Tenant, Landlord
shall also have the right, with or without terminating this Lease, in compliance
with applicable law, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.

               (d) Reletting. In the event of the abandonment of the Premises by
Tenant or in the event that Landlord shall elect to re-enter or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, then if Landlord does not elect to terminate this Lease
as provided in Paragraph a, Landlord may from time to time, without terminating
this Lease, relet the Premises or any part thereof for such term or terms and at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable with the right to make alterations and
repairs to the Premises. In the event that Landlord shall elect to so relet,
then rentals received by Landlord from such reletting shall be applied in the
following order: (1) to reasonable attorneys' fees incurred by Landlord as a
result of a Default and costs in the event suit is filed by Landlord to enforce
such remedies; (2) to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord; (3) to the payment of any costs of such
reletting; (4) to the payment of the costs of any alterations and repairs to the
Premises; (5) to the payment of Rent due and unpaid hereunder; and (6) the
residue, if any, shall be held by landlord and applied in payment of future Rent
and other sums payable by Tenant hereunder as the same may become due and
payable hereunder. Should that portion of such rentals received from such
reletting during any month, which is applied to the payment of Rent hereunder,
be less than the Rent payable during the month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any
costs and expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such reletting.

               (e) Termination. No re-entry or taking of possession of the
Premises by Landlord pursuant to this Addendum shall be construed as an election
to terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any Default by Tenant, Landlord may at any time after such reletting
elect to terminate this Lease for any such Default.

               (f) Cumulative Remedies. The remedies herein provided are not
exclusive and Landlord shall have any and all other remedies provided herein or
by law or in equity.

               (g) No Surrender. No act or conduct of Landlord, whether
consisting of the acceptance of the keys to the premises, or otherwise, shall be
deemed to be or constitute an acceptance of the surrender of the premises by
tenant prior to the expiration of the term, and such acceptance by Landlord of
surrender by tenant shall only flow from and must be evidenced by a written
acknowledgment of acceptance of surrender signed by landlord. The surrender of
this lease by tenant, voluntarily or otherwise, shall not work a merger unless
Landlord elects in writing that

                                      -11-

<PAGE>

such merger take place, but shall operate as an assignment to Landlord of any
and all, existing subleases, or Landlord may, at its option, elect in writing to
treat such surrender as a merger terminating Tenant's estate under this Lease,
and thereupon Landlord may terminate any or all such subleases by notifying the
sublessee of its election so to do within five (5) days after such surrender.

               (h) Notice Provisions. Tenant agrees that any notice given by
Landlord pursuant to Paragraph 13.1 of the Lease shall satisfy the requirements
for notice under California Code of Civil Procedure Section 1161, and Landlord
shall not be required to give any additional notice in order to be entitled to
commence an unlawful detainer proceeding. Should Landlord prepare any notice to
Tenant for failure to pay rent, additional rent or perform any other obligation
under the Lease, Tenant shall pay to Landlord, without any further notice from
Landlord, the additional sum of $75.00 which the parties hereby agree represents
a fair and reasonable estimate of the costs Landlord will incur by reason of
preparing such notice.

        13.3 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges. Accordingly, if any installment of Rent or
other sum due from Tenant shall not be received by Landlord or Landlord's
designee within 4 days after such amount shall be due, then, without any
requirement for notice to Tenant, Tenant shall pay to Landlord a late charge
equal to 5% of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's Default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder. In addition, should Landlord be unable to
negotiate any payment made by Tenant on the first attempt by Landlord and
without any notice to Tenant, Tenant shall pay to Landlord a fee of $50.00 per
item which the parties hereby agree represents a fair and reasonable estimate of
the costs Landlord will incur by reason of Landlord's inability to negotiate
such item(s). Notwithstanding the foregoing or anything to the contrary, Tenant
shall not be obligated to pay a late charge until each time after the fourth
time during the term or extended term of that Tenant fails to pay any amount due
under this Lease within 4 days after said amount shall be due.

14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of exercise of said power (all
of which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the floor area of the Premises, or
more than 25% of the portion of the Common Areas designated for Tenant's,
parking, is taken by condemnation, Tenant may, at Tenant's option, to be
exercised in writing within 10 days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within 10 days
after the condemning authority shall have taken possession), terminate this
Lease as of the date the condemning authority takes such possession. If Tenant
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor area
of the premises. No reduction of Base Rent shall occur if the condemnation does
not apply to any portion of the Premises. Any award for the taking of all or any
part of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Landlord;
provided, however, that Tenant shall be entitled to any compensation, separately
awarded to Tenant, for Tenant's relocation expenses and/or loss of Tenant's
trade fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Landlord shall to the extent of its net severance damages in the
condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Tenant shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.

15. ESTOPPEL CERTIFICATE AND FINANCIAL STATEMENTS.

        15.1 Estoppel Certificate. Each party (herein referred to as "Responding
Party") shall within 10 days after written notice from the other Party (the
"Requesting Party") execute, acknowledge, and deliver to the Requesting Party,
to the extent it can truthfully do so, an estoppel certificate in the form
attached hereto as Exhibit C, plus such additional information, confirmation,
and statements as be reasonably requested by the Requesting Party. Should Tenant
fail to deliver an executed and acknowledged estoppel certificate to Landlord
as prescribed herein, Tenant hereby authorizes Landlord to act as Tenant's
attorney-in-fact in executing such

                                      -12-

<PAGE>

estoppel certificate or, at Landlord's option, Tenant shall pay a fee of $100.00
per day ("Estoppel Delay Fee") for each day after the 10 days' written notice in
which Tenant fails to comply with this requirement.

        15.2 Financial Statement. If Landlord desires to finance, refinance, or
sell the Building, Industrial Center, or any part thereof, Tenant shall deliver
to any potential lender or purchaser designated by Landlord such financial
statements of Tenant as may be reasonably required by such lender or purchaser,
including but not limited to Tenant's financial statements for the past 3 years.
All such financial statements shall be received by Landlord and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.

16. ADDITIONAL COVENANTS AND PROVISIONS.

        16.1 Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall not affect the validity
of any other provision hereof.

        16.2 Interest on Past-Due Obligations. Any monetary payment due Landlord
hereunder not received by Landlord within 10 days following the date on which it
was due shall bear interest from the date due at 12% per annum, but not
exceeding the maximum rate allowed by law in addition to the late charge
provided for in Paragraph 13.3.

        16.3 Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

        16.4 Landlord Liability. Tenant, its successors, and assigns shall not
assert nor seek to enforce any claim for breach of this Lease against any of
Landlord's assets other than Landlord's interest in the Industrial Center.
Tenant agrees to look solely to such interest for the satisfaction of any
liability or claim against Landlord under this Lease. In no event whatsoever
shall Landlord (which term shall include, without limitation, any general or
limited partner, trustees, beneficiaries, officers, directors, or stockholders
of Landlord) ever be personally liable for any such liability.

        16.5 No Prior or Other Agreements. This Lease contains all agreements
between the Parties with respect to any matter mentioned herein, and supersedes
all prior or contemporaneous oral or written agreements or understandings.

        16.6 Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand, messenger, or
courier service) or may be sent by regular, certified, or registered mail or
U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 16.6. The addresses
noted adjacent to a Party's signature on this Lease shall be that Party's
address for delivery or mailing of notice purposes. Either Party may by written
notice to the other specify a different address for notice purposes, except that
upon Tenant's taking possessing of the Premises, the Premises shall constitute
Tenant's address for the purpose of mailing or delivering notices to Tenant. A
copy of all notices required or permitted to be given to Landlord hereunder
shall be concurrently transmitted to such party or parties at such addresses as
Landlord may from time to time hereafter designate by written notice to Tenant.

        16.7 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given 48 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or an overnight courier that guarantees next day
delivery shall be deemed given 24 hours after delivery of the same to the United
States Postal Service or courier. If any notice is transmitted by facsimile
transmission or similar means, the same shall be deemed served or delivered upon
telephone or facsimile confirmation of receipt of the transmission thereof,
provided a copy is also delivered via hand or overnight delivery or certified
mail. If notice is received on a Saturday, Sunday, or legal holiday, it shall be
deemed received on the next business day.

        16.8 Waivers. No waiver by Landlord of a Default by Tenant shall be
deemed a waiver of any other town, covenant, or condition hereof, or of any
subsequent Default by Tenant of the same or any other term, covenant, or
condition hereof.

        16.9 Holdover. Tenant has no right to retain possession of the Premises
or any part thereof beyond the expiration or earlier termination of this Lease.
If Tenant holds over with the consent of Landlord: (a) the Base Rent payable
shall be increased to 150% of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination; (b) Tenant's right
to possession shall terminate on 30 days notice from Landlord; and (c) all other
terms and conditions of this Lease shall continue to apply. Nothing contained
herein shall be

                                      -13-

<PAGE>

construed as a consent by Landlord to any holding over by Tenant. Tenant shall
indemnify, defend, and hold Landlord harmless from and against any and all
claims, demands, actions, losses, damages, obligations, costs, and expenses,
including, without limitation, attorneys' fees incurred or suffered by Landlord
by reason of Tenant's failure to surrender the Premises on the expiration or
earlier termination of this Lease in accordance with the provisions of this
Lease.

        16.10 Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies in law or in equity.

        16.11 Binding Effect: Choice of Law. This Lease shall be binding upon
the Parties, their personal representatives, successors, and assigns, and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located.

        16.12 Landlord. The covenants and obligations contained in this Lease on
the part of Landlord are binding on Landlord, its successors, and assigns only
during their respective period of ownership of an interest in the Building. In
the event of any transfer or transfers of such title to the Building, Landlord
(and, in the case of any subsequent transfers or conveyances, the then grantor)
shall be concurrently freed and relieved from and after the date of such
transfer or conveyance, without any further instrument or agreement, of all
liability with respect to the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed.

        16.13 Attorneys' Fees and Other Costs. If any Party brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding shall be entitled
to reasonable attorneys' fees. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought. Landlord shall be entitled to attorneys' fees, costs, and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently commenced
in connection with such Default or resulting breach. Tenant shall reimburse
Landlord on demand for all reasonable legal, engineering, and other professional
services expenses incurred by Landlord in connection with all requests by Tenant
or any lender of Tenant for consent, waiver or approval of any kind.

        16.14 Landlord's Access; Showing Premises; Repairs. Landlord and
Landlord's agents shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times upon reasonable notice
for the purpose of showing the same to prospective purchasers, lenders, or
tenants, and making such alterations, repairs, improvements, or additions to the
Premises or to the Building, as Landlord may reasonably deem necessary. Landlord
may at any time place on or about the Premises or Building any ordinary "For
Sale" signs, and Landlord may at any time during the last 180 days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Landlord shall be without abatement of rent or liability to
Tenant.

        16.15 Signs. Tenant shall not place any signs at or upon the exterior of
the Premises or the Building, except that Tenant may, with Landlord's prior
written consent, install (but not on the roof) such signs as are reasonably
required to advertise Tenant's own business so long as such signs are in a
location designated by Landlord and comply with sign ordinances and the signage
criteria established for the Industrial Center by Landlord.

        16.16 Termination; Merger. Unless specifically stated otherwise in
writing by Landlord, the voluntary or other surrender of this Lease by Tenant,
the mutual termination or cancellation hereof, or a termination hereof by
Landlord for Default by Tenant, shall automatically terminate any sublease or
lesser estate in the Premises; provided, however, Landlord shall, in the event
of any such surrender, termination, or cancellation, have the option to continue
any one or all of any existing subtenancies. Landlord's failure within 10 days
following any such event to make a written election to the contrary by written
notice to the holder of any such lesser interest shall constitute Landlord's
election to have such event constitute the termination of such interest.

        16.17 Quiet Possession. Upon payment by Tenant of the Base Rent and
Additional Rent for the Premises and the performance of all of the covenants,
conditions, and provisions on Tenant's part to be observed and performed under
this Lease, Tenant shall have quiet possession of the Premises for the entire
term hereof, subject to all of the provisions of this Lease.

        16.18 Subordination; Attornment; Non-Disturbance.

               (a) Subordination. This Lease shall be subject and subordinate to
any ground lease, mortgage, deed of trust, or other hypothecation or mortgage
(collectively, "Mortgage") now or hereafter placed by Landlord upon the real
property of which the Premises are a part, to

                                      -14-

<PAGE>

any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements, and extensions thereof. Tenant
agrees that any person holding any Mortgage shall have no duty, liability, or
obligation to perform any of the obligations of Landlord under this Lease. In
the event of Landlord's default with respect to any such obligation, Tenant will
give any Lender, whose name and address have previously been furnished in
writing to Tenant, notice of a default by Landlord. Tenant may not exercise any
remedies for default by Landlord unless and until Landlord and the Lender shall
have received written notice of such default and a reasonable time (not less
than 90 days) shall thereafter have elapsed without the default having been
cured. If any Lender shall elect to have this Lease superior to the lien of its
Mortgage and shall give written notice thereof to Tenant, this Lease shall be
deemed prior to such Mortgage. The provisions of a Mortgage relating to the
disposition of condemnation and insurance proceeds shall prevail over any
contrary provisions contained in this Lease.

               (b) Attornment. Subject to the nondisturbance provisions of
subparagraph (c) of this Paragraph 16.18, Tenant agrees to attorn to a Lender or
any other party who acquires ownership of the Premises by reason of a
foreclosure of a Mortgage. In the event of such foreclosure, such new owner
shall not: (i) be liable for any act or omission of any prior landlord or with
respect to events occurring prior to acquisition of ownership, (ii) be subject
to any offsets or defenses which Tenant might have against any prior Landlord,
or (iii) be liable for security deposits or be bound by prepayment of more than
one month's rent.

               (c) Non-Disturbance. With respect to a Mortgage entered into by
Landlord after the execution of this Lease, Tenant's subordination of this Lease
shall be subject to receiving assurance (a "nondisturbance agreement") from the
Mortgage holder that Tenant's possession and this Lease will not be disturbed so
long as Tenant is not in default and attorns to the record owner of the
Premises.

               (d) Self-Executing. The agreements contained in this Paragraph
16.18 shall be effective without the execution of any further documents;
provided, however, that upon written request from Landlord or a Lender in
connection with a sale, financing, or refinancing of Premises, Tenant and
Landlord shall execute such further writings as may be reasonably required to
separately document any such subordination or nonsubordination, attornment,
and/or nondisturbance agreement, as is provided for herein. Landlord is hereby
irrevocably vested with full power to subordinate this Lease to a Mortgage.

        16.19 Rules and Regulations. Tenant agrees that it will abide by, and to
cause its employees, suppliers, shippers, customers, tenants, contractors, and
invitees to abide by, all reasonable rules and regulations ("Rules and
Regulations") which Landlord may make from time to time for the management,
safety, care, and cleanliness of the Industrial Center, the parking and
unloading of vehicles, and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Industrial
Center and their invitees. Landlord shall not be responsible to Tenant for the
noncompliance with said Rules and Regulations by other tenants of the Industrial
Center.

        16.20 Security Measures. Tenant acknowledges that the rental payable to
Landlord hereunder does not include the cost of guard service or other security
measures. Landlord has no obligations to provide same. Except for the gross
negligence or intentional acts of Landlord and its agents, Tenant assumes all
responsibility for the protection of the Premises, Tenant, its agents, and
invitees and their property from the acts of third parties.

        16.21 Reservations. Landlord reserves the right to grant such easements
that Landlord deems necessary and to cause the recordation of parcel maps, so
long as such easements and maps do not unreasonably interfere with the use of
the Premises by Tenant. Tenant agrees to sign any documents reasonably requested
by Landlord to effectuate any such easements or maps.

        16.22 Conflict. Any conflict between the printed provisions of this
Lease and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.

        16.23 Offer. Preparation of this lease by either Landlord or Tenant or
Landlord's agent or Tenant's agent and submission of same to Tenant or Landlord
shall not be deemed an offer to lease. This Lease is not intended to be binding
until executed and delivered by all Parties hereto.

        16.24 Amendments. This Lease may be modified only in writing, signed by
the parties in interest at the time of the modification.

        16.25 Multiple Parties. Except as otherwise expressly provided herein,
if more than one person or entity is named herein as Tenant, the obligations of
such persons shall be the joint and several responsibility of all persons or
entities named herein as such Tenant.

                                      -15-

<PAGE>

        16.26 Authority. Each person signing on behalf of Landlord or Tenant
warrants and represents that she or he is authorized to execute and deliver this
Lease and to make it a binding obligation of Landlord or Tenant.

                         [SIGNATURES ON FOLLOWING PAGE]

                                      -16-

<PAGE>

        The parties hereto have executed this Lease at the place and on the
dates specified below their respective signatures.

LANDLORD:                                    TENANT:
AMB PROPERTY, L.P.                           CAPSTONE TURBINE CORPORATION
a Delaware limited partnership               A Delaware corporation

By: AMB Property Corporation,
    a Maryland corporation

                                             By: /s/ J. WATTS        9/26/00
                                                -------------------------------
    By: /s/ MARTIN J. COYNE                  Its: CFO
       ------------------------------            ------------------------------
                                                            N/A
                                             By: ------------------------------
       Martin J. Coyne, Vice President       Telephone: (818) 734-5552
                                                       ------------------------
Telephone: (415) 394-9000                    Facsimile: (818) 734-5352

Facsimile: (415) 394-9001                    Executed at: Manhattan Beach, CA

Executed at: San Francisco, CA               Executed at: 90266

on: 10/11/2000                               ADDRESS --------------------------

ADDRESS                                      ADDRESS

505 Montgomery Street                        ----------------------------------

San Francisco, CA 94111                      ----------------------------------

                                             Tax ID:
                                             ----------------------------------

                                      -17-

<PAGE>

                                    GLOSSARY

        The following terms in the Lease are defined in the paragraphs opposite
the terms.

                           TERM DEFINED IN PARAGRAPH

<TABLE>
<S>                                                              <C>
Assignment                                                        12
Base Rent                                                         1.4
Basic Provisions                                                  1
Building                                                          1.2
Building Operating Expenses                                       4.2
Commencement Date                                                 1.3
Commencement Date Certificate                                     3.3
Condemnation                                                      14
Default                                                           13.1
Expiration Date                                                   1.3
HVAC                                                              4.2(a)(x)
Hazardous Substance                                               6.2
Indemnity                                                         8.5
Landlord                                                          1.1
Landlord Entities                                                 6.2(c)
Lease                                                             1.1
Mortgage                                                          16.18
Operating Expenses                                                4.2
Party/Parties                                                     1.1
Permitted Use                                                     1.8
Premises                                                          1.2
Real Property Taxes                                               10.2
Rent                                                              4.1
Reportable Use                                                    6.2
Requesting Party                                                  15
Responding Party                                                  15
Rules and Regulations                                             16.19
Security Deposit                                                  1.7,5
Taxes                                                             10.2
Tenant                                                            1.1
Tenant Acts                                                       9.2
Tenant's Entity                                                   6.2(c)
Tenant's Share                                                    1.5
Term                                                              1.3
Use                                                               6.1
</TABLE>

                                      -18-

<PAGE>

                               AMB PROPERTY, L.P.,
                         A DELAWARE LIMITED PARTNERSHIP
                                INDUSTRIAL LEASE
                            RENT ADJUSTMENT ADDENDUM

This Rent Adjustment Addendum is a part of the Lease dated September 251, 2000,
by and between AMB PROPERTY, L.P. ("Landlord") and Capstone Turbine Corporation
("Tenant") for the premises commonly known as 16664 Stagg Street, Van Nuys,
California.

Monthly Base Rent for the each of the periods designated in this Addendum
("Adjustment Periods") shall be the amount calculated in accordance with the
alternative selected below ("Rent Adjustment Alternative"), but in no event
shall the monthly Base Rent for an Adjustment Period be less than the highest
monthly rent payable during the term preceding the Adjustment Period.

1.      ADJUSTMENT PERIODS:

        October 1, 2000   to March 31, 2003     ("Period One")
        April 1, 2003     to September 30, 2005 ("Period Two")
        October 1, 2005   to March 31, 2008     ("Period Three")
        April 1, 2008     to September 30, 2010 ("Period Four")
        October 1, 2010   to November 30, 2010  ("Period Five")

2.      RENT ADJUSTMENT ALTERNATIVES

        [X]     Fixed rent adjustment ("Fixed Rent Adjustment")
                $44,078.00 shall be the monthly Base Rent for Period One.
                $47,384.00 shall be the monthly Base Rent for Period Two.
                $50,938.00 shall be the monthly Base Rent for Period Three.
                $54;758.00 shall be the monthly Base Rent for Period Four.
                $58,865.00 shall be the monthly Base Rent for Period Five.

        [ ]     Cost of living adjustment ("CPI Adjustment")

               Monthly Base Rent shall be calculated using the following CPI
index ("Index"):

                       [ ] Urban Wage Earners and Clerical Workers
                       [ ] All Urban Consumers
                       [ ] ________________________________________

               The Comparison Month is:
                       [ ] the first month of the term of this Lease; or
                       [ ] ________________________________________

        [ ]     Market rent ("Market Rent Adjustment")

3.      CALCULATION OF RENT ADJUSTMENT

LANDLORD:                                     TENANT:
AMB PROPERTY, L.P.                            CAPSTONE TURBINE CORPORATION
A DELAWARE LIMITED-PARTNERSHIP                A DELAWARE CORPORATION
By: AMB Property Corporation,
    a Maryland corporation, its
    general partner

By: /s/ MARTIN COYNE
   ------------------------------
   Martin Coyne, Vice President              /s/ J. WATTS
                                             -----------------------------------
                                             By: J. Watts
                                             Its: CFO

                                             By: [ILLEGIBLE]
                                             Its: [ILLEGIBLE]
                                             -----------------------------------

                                       1

<PAGE>
                               AMB PROPERTY, L.P.,
                         A DELAWARE LIMITED PARTNERSHIP
                                INDUSTRIAL LEASE

                                OPTION TO EXTEND

This Option to Extend is a part of the Lease dated September 25, 2000, by and
between AMB PROPERTY, L.P. ("Landlord") and Capstone Turbine Corporation
("Tenant") for the premises commonly known as 16640 Stagg Street, Van Nuys,
California.

1.    OPTION TO EXTEND. Landlord hereby grants to Tenant the option to extend
the term of this Lease for the following periods ("Option Periods") commencing
when the prior term expires:

      December 1, 2010 to November 30, 2015 ("Period One")

      December 1, 2015 to November 30, 2020 ("Period Two")

2.    EXERCISE DATES. For purposes of Paragraph 4 of this Addendum,

      a.    the Earliest Exercise Date is 12 months prior to the date that the
            Option Period would commence, and

      b.    the Last Exercise Date is 4 months prior to the date that the Option
            Period would commence.

3.    MONTHLY BASE RENT. The monthly Base Rent for each month of an Option
Period shall be the amount calculated in accordance with the alternative
selected below ("Rent Adjustment Alternative"), but in no event shall the
monthly Base Rent for an Option Period be less than the highest monthly Base
Rent payable during the term immediately preceding the Option Period.

      [X]   Fixed rent adjustment ("Fixed Rent Adjustment")
            7.5% increase at the 1st and 31st month of each option period.

      [ ]   Cost of living adjustment ("CPI Adjustment")
            Monthly Base Rent shall be calculated using the following CPI index
            ("Index"):

            [ ]    Urban Wage Earners and Clerical Workers

            [ ]    All Urban Consumers

            [ ]
                   ----------------------------------------

            The Comparison Month is:

                  [ ]    the first month of the term of this Lease; or

                  [ ]
                         ------------------------------

      [ ]   Market rent ("Market Rent Adjustment")

4.    CONDITIONS TO EXERCISE OF OPTION. Tenant's right to extend is conditioned
upon and subject to each of the following:

      a. In order to exercise an option to extend, Tenant must give written
notice of such election to Landlord and Landlord must receive the same by the
Last Exercise Date but not prior to the Earliest Exercise Date. If proper
notification of the exercise of an option is not given and/or received, such
option shall automatically expire. Options (if there are more than one) may only
be exercised consecutively. Failure to exercise an option terminates that option
and all subsequent options. Tenant acknowledges that because of the importance
to Landlord of knowing no later than the Last Exercise Date whether or not
Tenant will exercise the option, the failure of Tenant to notify Landlord by the
Last Exercise Date will conclusively be presumed an election by Tenant not to
exercise the option.

      b. Tenant shall have no right to exercise an option (i) if Tenant is in
Default or (ii) in the event that Landlord has given to Tenant three or more
notices of separate Defaults during the 12-month period immediately preceding
the exercise of the option, whether or not the Defaults are cured. The period of
time within which an option may be exercised shall not be extended or enlarged
by reason of Tenant's inability to exercise an option because of the provisions
of this paragraph.

      c. All of the terms and conditions of this Lease, except where
specifically modified by this Addendum, shall apply.

                                       1

<PAGE>
      d. The options are personal to the Tenant, cannot be assigned or exercised
by anyone other than the Tenant, and only while the Tenant is in full possession
of the Premises and without the intention of thereafter assigning or subletting.

LANDLORD:                                      TENANT:
AMB PROPERTY, L.P.                             Capstone Turbine Corporation
a Delaware limited partnership                 a California corporation
By: AMB Property Corporation,
    a Maryland corporation

BY                                                By:  J. Watts
    Martin Coyne, Vice President                  Its: CFO 9/26/00

    /s/ MARTIN COYNE                              By: /s/ J. WATTS
    ----------------------------                     -------------
                                                  Its: CFO

                                       2

<PAGE>
                               AMB PROPERTY, L.P.,
                         A DELAWARE LIMITED PARTNERSHIP
                                INDUSTRIAL LEASE

                                    ADDENDUM

      This Addendum to Industrial Lease ("Addendum") is made and entered into as
of the 25th day of September, 2000, by and between AMB Property, L.P., a
Delaware limited partnership ("Landlord"), and Capstone Turbine Corporation, a
Delaware corporation ("Tenant"), with reference to that certain Industrial Lease
dated as of September 25th, 2000, by and between Landlord and Tenant ("Lease").
The promises, covenants, agreements and declarations made and set forth herein
are intended to and shall have the same force and effect as if set forth at
length in the body of the Lease. To the extent that the provisions of this
Addendum are inconsistent with the terms and conditions of the Lease, the terms
of this Addendum shall prevail and control for all purposes. Unless otherwise
defined below, all terms used in this Addendum and defined in the Lease shall
have the same meaning as is ascribed to such terms in the Lease.

      1. Delivery of Premises. Subject to Landlord performing the improvements
set forth on Attachment 2 and delivering the Premises pursuant to Section 2.6 of
the Lease, Tenant acknowledges that it has inspected and accepts the Premises in
their present "as-is" condition as suitable for the purpose for which the
Premises are leased. The taking of possession by Tenant shall be conclusive to
establish that the Premises are in good and satisfactory condition when
possession is taken, except as expressly set forth in this Lease. Tenant
further acknowledges that no representations or promises were made by Landlord
or any agent of Landlord to repair, alter, remodel or improve the Premises,
except as expressly set forth in this Lease.

      2. Signage. Provided Tenant is not in default hereunder, Tenant shall have
the right to install (i) a monument sign, and (ii) exterior sign identification
of the Premises, at Tenant's sole cost and expense (collectively, "Tenant's
Signage"). Tenant's Signage shall be subject to Landlord's approval as to size,
design, location, graphics, materials, colors and similar specifications and
shall be consistent with the exterior design, materials and appearance of the
Industrial Center and the Industrial Center's signage program and shall be
further subject to and comply with all applicable local governmental laws,
rules, regulations, codes and other approvals. Landlord has the right, but not
the obligation, to oversee the installation of Tenant's Signage. The cost to
operate, if any, Tenant's Signage shall be paid for by Tenant, and Tenant shall
be separately metered for such expense (the cost of separately metering any
utility usage shall also be paid for by Tenant). Upon the expiration of the
Lease Term, or other earlier termination of this Lease, Tenant shall be
responsible for any and all costs associated with the removal of Tenant's
Signage, including, but not limited to, the cost to repair and restore the
Premises to its original condition, normal wear and tear excepted.

      3. Rental Abatement. Landlord shall grant to Tenant base rental abatement
for the first 2 months of the Lease Term.

      4. DWP Interconnect. Landlord shall allow Tenant the right to interconnect
with the DWP grid, subject to DWP final approval. There shall be no cost or
expense to Landlord.

      5. Environmental Indemnification. Landlord shall indemnify, protect,
defend, and hold Tenant, Tenant's affiliates, and the officers, directors,
shareholders, partners, employees, managers, independent contractors, attorneys,
and agents of the foregoing ("Tenant Entities") and the Premises, harmless from
and against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance that exists at or beneath
the Premises or that migrate to, beneath or from the Premises, unless directly
caused by Tenant or its agents. Landlord's obligations under this Paragraph 4
shall include, but not be limited to, the effects of any contamination or injury
to persons, property, or the environment and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved.
Landlord's obligations under this Paragraph 4 shall survive the Expiration Date
or earlier termination of this Lease directly caused by Tenant.

                                       1

<PAGE>
      6. Early Possession. Tenant shall be given early possession of the
premises (subject to all terms and conditions of the Lease with the exception of
Rent) upon full execution of Lease documents.

      7. Roof Maintenance. Roof maintenance following the Commencement Date
shall be the responsibility of Tenant, subject to an annual maintenance cost cap
of $1,500.00. All costs in excess of $1,500 shall be paid by Landlord except
that Tenant shall bear the entire cost of any roof repair attributable to a
negligent or intentional act or omission of Tenant's Entities.

      8. Tenant Improvements. Tenant shall have the right to construct canopies
over the east parking lot/yard portion of the Premises, subject to Landlord's
reasonable approval. Such canopies shall be removed at the end of the Lease
Term.

      9. Subordination - Non-Disturbance from Existing Lender. Prior to the
Commencement Date, Landlord shall provide Tenant with a commercially reasonable
subordination and non-disturbance agreement from any existing lender to whose
interest, Tenant's interest in this Lease is subordinate.

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

LANDLORD:

AMB PROPERTY, L.P.,
a Delaware limited partnership

By:  AMB Property Corporation,
     a Maryland corporation, its general partner

     By: /s/ MARTIN J. COYNE
        -----------------------------------
         Martin J. Coyne, Vice President

TENANT:

CAPSTONE TURBINE CORPORATION,
a Delaware corporation

By: /S/ J. WATTS     9/26/00
   ----------------------------------

Its: CFO
    ---------------------------------

                                       2

<PAGE>
                                  ATTACHMENT 1

                                 PARKING DIAGRAM

                                [PARKING DIAGRAM]

                                     Bldg 7
                                   78, 711 SF
                                16640 Stagg St.

                                       3

<PAGE>
                                  Attachment 2

                                 LANDLORD'S WORK

As part of Landlord's Work, Landlord will:

1.    Carpet (in a mutually agreeable color/grade) the entire office space.

2.    Once the cul-de-sac is completed, Landlord shall install a wrought iron
      fence with gate similar to the existing entrance to the property (or a
      mutually acceptable substitute).

3.    Repair, clean, and seal the warehouse floor.

4.    Assist in the installation of a 4" high pressure gas line; any repair work
      necessitated by the installation shall be Landlord's sole cost and
      expense.

5.    Install traffic rated drain across the northeastern ground level door.

6.    Landlord warrants that the parking lot shall drain properly with no
      unreasonable puddling.

7.    Term shall not commence until Landlord's work as described in Item 3
      above, as well connection to permanent electrical power is completed.

                                       4

<PAGE>
                               AMB PROPERTY, L.P.,
                          DELAWARE LIMITED PARTNERSHIP
                                INDUSTRIAL LEASE

                           TENANT IMPROVEMENT ADDENDUM

This Tenant Improvement Addendum is a part of the Lease dated September 25,
2000, by and between AMB PROPERTY, L.P. "(Landlord") and Capstone Turbine
Corporation, a Delaware corporation ("Tenant") for the premises commonly known
as 16640 Stagg Street, Van Nuys, California.

Tenant may construct at its sole cost and expense the improvements
("Alterations") described on Exhibit 1 attached hereto. Prior to commencement of
construction, Tenant shall obtain and deliver to Landlord any building permit
required by applicable law and a copy of the executed construction contract(s).
Tenant shall reimburse Landlord within 10 days after the rendition of a bill for
all of Landlord's actual out-of-pocket costs incurred in connection with the
Alterations, including, without limitation, all management, engineering, outside
consulting, and construction fees incurred by or on behalf of Landlord for the
review and approval of Tenant's plans and specifications and for the monitoring
of construction of the Alterations. Tenant shall require its contractor to
maintain insurance in the amounts and in the forms described in Exhibit 2. The
Alterations shall be constructed by licensed contractors approved by Landlord
and in accordance with rules, such as hours of construction, imposed by
Landlord. The Alterations shall be completed lien free, in accordance with the
plans and specifications described in Exhibit 1, in a good, workmanlike, and
prompt manner, with new materials of first-class quality and comply with all
applicable local, state, and federal regulations. The competed Alterations shall
be the property of Landlord and shall, subject to the provisions of the next
sentence, be surrendered with the Premises upon the expiration or sooner
termination of this Lease.

Prior to commencing construction of the Improvements, Tenant shall obtain from
its contractors and deliver to Landlord a commercially reasonable waiver and
release of any and all claims against Landlord and liens against the Premises to
which such contractor might at any time be entitled and to provide such payment
and performance bonds as Landlord may require. The delivery of the waiver and
release of claims and liens and such bonds shall be a condition precedent to
Tenant's ability to begin its construction work at the Premises.

Tenant shall pay when due all claims for labor or materials furnished or alleged
to have been furnished to or for Tenant at or for use on the Premises. Tenant
shall give Landlord not less than 10 days' notice prior to the commencement of
any work in, on, or about the Premises, and Landlord shall have the right to
post notices of non-responsibility in or on the Premises as provided by law.

Tenant agrees to indemnify, protect, and defend Landlord and hold Landlord
harmless against any loss, liability, or damage resulting from construction of
the Alterations.

                                    EXHIBITS

Exhibit 1: Description of Alterations and plans and specifications

Exhibit 2: Insurance requirements

                                       1

<PAGE>
                                    EXHIBIT A

                             DESCRIPTION OF PREMISES

                           [DESCRIPTION OF PREMISES]

                                     Bldg 7
                                   78, 711 SF
                                16640 Stagg St.

<PAGE>
                         COMMENCEMENT DATE MEMORANDUM

        LANDLORD:                   AMB PROPERTY, L.P.

        TENANT:                     Capstone Turbine Corporation
                                    ------------------------------------

        LEASE DATE:                 September 25, 2000
                                    ------------------------------------

        PREMISES:                   16640 Stagg Street
                                    ------------------------------------
                                    Van Nuys, CA
                                    ------------------------------------

      Tenant hereby accepts the Premises as being in the condition required
under the Lease.

      The Commencement Date of the Lease is October 1, 2000.

      The Expiration Date of the Lease is September 30, 2005.

LANDLORD:                                       TENANT:
AMB PROPERTY, L.P.,                             CAPSTONE TURBINE CORPORATION,

a Delaware limited partnership                  a Delaware corporation

By:     AMB Property Corporation,               By:
        a Maryland corporation,                    ----------------------------
        its general partner                        Its:
                                                       ------------------------

                                                Title:
        ---------------------------                   -------------------------
By:     Martin J. Coyne                         Telephone: (   )
Its:    Vice President                                      -------------------
                                                Facsimile: (   )
Telephone:  (415) 394-9000                                  -------------------
            -----------------------
                                                ADDRESS:
Facsimile:    415 394-6257
            -----------------------

ADDRESS:                                        -------------------------------

505 Montgomery Street
-----------------------------------             -------------------------------

San Francisco, CA 94111                         Tax ID:
-----------------------------------             -------------------------------

                                    EXHIBIT B
<PAGE>

                                  EXHIBIT "D"

          TENANT MOVE-IN AND LEASE RENEWAL ENVIRONMENTAL QUESTIONNAIRE
                                      FOR
                      COMMERCIAL AND INDUSTRIAL PROPERTIES

Property Name:      Airport Business Park
Property Address:   16640 Stagg Street, Van Nuys, CA

                 Addendum to the Lease Dated September 25, 2000
                                    Between
                          CAPSTONE TURBINE CORPORATION
                             a Delaware corporation
                                   ("Tenant")
                                      and
                               AMB PROPERTY, L.P.
                                  ("Landlord")

Instructions: The following questionnaire is to be completed by the Tenant
Representative with knowledge of the planned/existing operations for the
specified building/location. A copy of the completed form must be attached to
all new leases and renewals, and forwarded to the Owner's Risk Management
Department.

1.0  PLANNED USE/OPERATIONS

1-1. Describe planned use (new Lease) or existing operations (lease renewal),
and include brief description of manufacturing processes employed.

THE MANUFACTURING PROCESSES INCLUDE: METAL FORMING, WELDING, MECHANICAL
ASSEMBLY AND PRODUCT PERFORMANCE TESTING.

2.0  HAZARDOUS MATERIALS

2-1. Are hazardous materials used or stored? If so, continue with the next
     question. If not, go to Section 3.0.

     YES

2-2. Are any of the following materials handled on the property? (A material is
     handled if it is used, generated, processed, produced, packaged, treated,
     stored, emitted, discharged, or disposed.) If so, complete this section.
     If this section is not applicable, skip this section and go on to Section
     5.0.

     [ ] Explosives             [X] Fuels              [X] Oils

     [ ] Solvents               [ ] Oxidizers          [X] Organics/Inorganics

     [ ] Acids                  [ ] Bases              [ ] Pesticides

     [X] Gases                  [ ] PCBs               [ ] Radioactive Materials

     [ ] Other (please specify)

2-3. For the following groups of chemicals, please check the type(s), use(s),
     and quantity of each chemical used or stored on the site. Attach either a
     chemical inventory or list the chemicals in each category.

     Solvents_________________   Gases __________________     SEE ATTACHMENT "A"

     Type:____________________   Type:___________________

     Use:_____________________   Use:____________________

     Quantity:________________   Quantity:_______________

     Inorganic________________   Acids___________________

<PAGE>
Type:                      Type:
----------------------     ----------------------

Use:                       Use:
----------------------     ----------------------

Quantity:                  Quantity:
----------------------     ----------------------

Fuels                      Explosives
----------------------     ----------------------

Type:                      Type:
----------------------     ----------------------

Use:                       Use:
----------------------     ----------------------

Quantity:                  Quantity:
----------------------     ----------------------

Oils                       Bases
----------------------     ----------------------

Type:                      Type:
----------------------     ----------------------

Use:                       Use:
----------------------     ----------------------

Quantity:                  Quantity:
----------------------     ----------------------

Oxidizers                  Pesticides
----------------------     ----------------------

Type:                      Type:
----------------------     ----------------------

Use:                       Use:
----------------------     ----------------------

Quantity:                  Quantity:
----------------------     ----------------------

Organic                    Radioactive Materials
----------------------     ----------------------

Type:                      Type:
----------------------     ----------------------

Use:                       Use:
----------------------     ----------------------

Quantity:                  Quantity:
----------------------     ----------------------

Other
----------------------

Type:
----------------------

Use:
----------------------

Quantity:
----------------------

                                       2
<PAGE>
2-4.   List and quantify the materials identified above. SEE ATTACHMENT "A"

================================================================================
   MATERIAL         PHYSICAL STATE        CONTAINER SIZE           NUMBER OF
                                                                   CONTAINERS
--------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

================================================================================
2-5.   Describe the storage area location(s) for these materials.

3.0    HAZARDOUS WASTES

3-1.   Are hazardous wastes generated? If so, continue with the next question.
       If not, skip this section and go to section 4.0.

       YES

3-2.   Are any of the following wastes generated, handled, or disposed of
       (where applicable) on the property?

          [ ]  Hazardous wastes         [X]  Industrial Wastewater
          [X]  Waste oils               [ ]  PCBs
          [X]  Air emissions            [ ]  Sludges
          [ ]  Other (please specify)

3-3.   Identify and describe those wastes generated, handled or disposed of
       (disposition). Specify any wastes known to be regulated under the
       Resource Conservation and Recovery Act (RCRA) as "listed characteristic
       or statutory" wastes. Include total amounts generated monthly. Please
       include name, location, and permit number (e.g. EPA ID No.) for
       transporter and disposal facility, if applicable. Attach separate pages
       as necessary.

           EPA ID # CAL 000131155

       1)  WASTE OILS FROM METAL WORKING WATER SOLUBLE

       2)  INDUSTRIAL WASTEWATER FROM WELDING OPERATIONS

       3)  AIR EMISSION FROM WELDING AND PRODUCT TESTING.

                                       3
<PAGE>

3-4.  List and quantify the materials identified in Question 3-2 of this
      section.

<Table>
<Caption>
                                  APPROXIMATE
  WASTE                             MONTHLY             WASTE
GENERATED         SOURCE           QUANTITY        CHARACTERIZATION        DISPOSITION
---------         ------          -----------      ----------------        -----------
<S>               <C>             <C>              <C>                     <C>
INDUSTRIAL        WELDING           60,000         BAY AREA                COULD BE CONDITIONALLY
WASTEWATER                        GAL PER MO       WASTEWATER BEING        AUTHORIZED FOR NPORS
                                                   ANALYZED

WASTE OILS        MACHINES          55 GAL         HAZ WASTE LIQUID        STORE FOR HAZ WASTE
WATER SOLUBLE     METAL WORK        PER MO         NON-FLAM RCRA           PICK-UP AND DISPOSAL

</Table>

3-5.  Are pollution controls or monitoring employed in the process to prevent or
      minimize the release of wastes into the environment? If so, please
      describe.

      NO

4.0   USTS/ASTS

4-1.  Are underground storage tanks (USTs), aboveground storage tanks (ASTs),
      or associated pipelines present on site (lease renewals) or required for
      planned operations (new tenants)? If not, continue with section 5.0. If
      yes, please describe capacity, contents, age, design and construction of
      USTs or ASTs.

      YES
      ONE AST 300 GALLON WITH SECONDARY CONTAINMENT, ONE YEAR OLD

4-2.  Is the UST/AST registered and permitted with the appropriate regulatory
      agencies? Please provide a copy of the required permits.

      NOT PROCURED - TO BE DETERMINED

4-3.  Indicate if any of the following leak prevention measures have been
      provided for the USTs/ASTs and their associated piping. Additionally,
      please indicate the number of tanks that are provided with the indicated
      measure. Please provide copies of written test results and monitoring
      documentation.
                          NOT YET DESIGNED OR PROCURED

      ____ Integrity testing           ____ Inventory reconciliation

      ____ Leak detection system       ____ Overfill spill protection

      ____ Secondary containment       _________________ Other (please describe)

      ____ Cathodic protection

4-4.  If this Questionnaire is being completed for a lease renewal, and if any
      of the USTs/ASTs have leaked, please state the substance released, the
      media(s) impacted (e.g., soil, water, asphalt, etc.), the actions taken,
      and all remedial responses to the incident.

N/A

                                       4

<PAGE>
4-5.  If this Questionnaire is being completed for a lease renewal, have
      USTs/AST's been removed from the property? If so, please provide any
      official closure letters or reports and supporting documentation (e.g.,
      analytical test results, remediation report results, etc.)

      N/A

4-6.  For Lease renewals, are there any above or below ground pipelines on site
      used to transfer chemicals or wastes? For new tenants, are installations
      of this type required for the planned operations? If so, please describe.

      To be determined.

4-7.  If present or planned, have the chemical transfer pipelines been inspected
      or tested for leaks? If so, please indicate the results and provide a copy
      of the inspection or test results.

      Not present - not planned.

5.0   ASBESTOS CONTAINING BUILDING MATERIALS

5-1.  Please be advised that this property participates in an Asbestos
      Operations and Maintenance Program, and that an asbestos survey may have
      been performed at the Property. If provided, please review the information
      that identifies the locations of known asbestos containing material or
      presumed asbestos containing material. All personnel and appropriate
      subcontractors should be notified of the presence of these materials, and
      informed not to disturb these materials. Any activity that involves the
      disturbance or removal of these materials must be done by an
      appropriately trained individual/contractor.

6.0   REGULATORY

6-1.  For lease Renewals, are there any past, current, or pending regulatory
      actions by federal, state, or local environmental agencies alleging
      noncompliance with regulations? If so, please describe.

      Unknown

6-2.  For lease renewals, are there any past, current, or pending lawsuits or
      administrative proceedings for alleged environmental damages involving the
      property, you, or any owner or tenant of the property? If so, please
      describe.

      Yes - previous tenants/current owner have remediation in process for
      trichloroethylene. Should be complete in 4 months.

6-3.  Does the operation have or require a National Pollutant Discharge
      Elimination System (NPDES) or equivalent permit? If so, please provide a
      copy of this permit.

      No

6-4.  For Lease renewals, have there been any complaints from the surrounding
      community regarding facility operations? If so, please describe. Have
      there been any worker complaints or regulatory investigations regarding
      hazardous material exposure at the facility? If so, please describe status
      and any corrective actions taken.

      Unknown

6-5.  Has a Hazardous Materials Business Plan been developed for the site? If
      so, please provide a copy.

      No

                                       5
<PAGE>
CERTIFICATION

I am familiar with the real property described in this questionnaire. By signing
below, I represent and warrant that the answers to the above questions are
complete and accurate to the best of my knowledge. I also understand that the
Owner will rely on the completeness and accuracy of my answers in assessing any
environmental liability risks associated with the property.

                                             Signature: /s/ J WATTS
                                                        -----------------------
                                             Name:      J Watts
                                                        -----------------------
                                             Title:     CFO
                                                        -----------------------
                                             Date:      10-9-00
                                                        -----------------------
                                             Telephone: 818-734-5552
                                                        -----------------------

                                       6
<PAGE>
                                 ATTACHMENT "A"
          TENANT MOVE-IN AND LEASE RENEWAL ENVIRONMENTAL QUESTIONNAIRE
                                      FOR
                      COMMERCIAL AND INDUSTRIAL PROPERTIES

Property Name:     Airport Business Park
Property Address:  16640 Stagg Street, Van Nuys, CA

                 Addendum to the Lease Dated September 25, 2000

                          CAPSTONE TURBINE CORPORATION
                             A Delaware corporation
                                   ("Tenant")
                                      and
                               AMB Property, L.P.
                                  ("Landlord")

Ref: EXHIBIT "D", Section 2-3 & 2-4

                          CHEMICAL/SUBSTANCE INVENTORY
<Table>
<Caption>
================================================================================================================
                    MATERIAL SUBSTANCE        PHYSICAL     CONTAINER
CATEGORY                    NAME                STATE        SIZE        QTY           USE
----------------------------------------------------------------------------------------------------------------
<S>             <C>                             <C>        <C>             <C>     <C>
Oils            Compressor Oil                  liquid     1 gallon        2       lubricant for equipment
                Hydraulic jack oil              liquid     1 gallon        2       hydraulic fluid - equip
                LPS Tapmatic cutting fluid      liquid     16 oz           4       metalworking lubricant
                LPS LST Penetrant oil           liquid     11 oz           2       penetrating oil
                Rapid Tap cutting oil           liquid     4 oz            4       metal cutting oil
                Saf-T-Eze anti-seize            liquid     8 oz            4       thread anti-seize
                White multipurpose grease       liquid     14 oz           4       lubricant
                Molly Graph multipurpose        liquid     14 oz           4       lubricant

Gases           Air - compressed                  gas      "A" cylinder    2       calibration
                Mixture: CO in air                gas      "A" cylinder    1       calibration
                Mixture: CO2 in air               gas      "A" cylinder    1       calibration
                Mixture: NO in air                gas      "A" cylinder            calibration
                Mixture: propane in air/
                non-flammable                     gas      "A" cylinder    1       calibration
                Carbon Dioxide                    gas      "A" cylinder    2       calibration
                Nitrogen                          gas      "A" cylinder    2       calibration
                Methane                           gas      "A" cylinder    1       calibration
                Acetylene                         gas      "A" cylinder    1       calibration
                Argon                             gas      400 ltr         1       calibration/welding
                Hydrogen                          gas      400 ltr         1       welding
                Hydrogen/Helium mix               gas      "A" cylinder    1       calibration
                Propane                           gas      498 gallons     1       fuel - product testing

Oxidizers       Oxygen                            gas      "A" cylinder    2       calibration

Organics &
Inorganics      Isopropyl Alcohol               liquid     1 gallon        4       cleaning-hand wipe
                Acetone                         liquid     1 gallon        4       cleaning-hand wipe
                Methyl Ethyl Keytone            liquid     1 gallon        1       thinning

Fuels           Diesel #2                       liquid     300 gallons     1       fuel - product testing
                Gasoline                        liquid     5 gallons       2       fuel - product testing
                Kerosene                        liquid     5 gallons       4       fuel - product testing
=================================================================================================================
</Table>

                                     Page 1<PAGE>

                                                                    EXHIBIT 10.8

                                  OFFICE LEASE

                                  WARNER CENTER

                          AH WARNER CENTER PROPERTIES,
                            LIMITED LIABILITY COMPANY
                      a Delaware limited liability company

                                  as Landlord,

                                       and

                          CAPSTONE TURBINE CORPORATION,
                             a Delaware corporation

                                   as Tenant.

<PAGE>

                               WARNER CENTER PLAZA

                       SUMMARY OF BASIC LEASE INFORMATION

       The undersigned hereby agree to the following terms of this Summary of
Basic Lease Information (the "SUMMARY"). This Summary is hereby incorporated
into and made a part of the attached Office Lease (the "OFFICE LEASE") which
pertains to the "Project," as that term is defined in the Office Lease, commonly
known as "Warner Center Plaza" located in Woodland Hills, California. This
Summary and the Office Lease are collectively referred to herein as the "Lease".
Each reference in the Office Lease to any term of this Summary shall have the
meaning set forth in this Summary for such term. In the event of a conflict
between the terms of this Summary and the Office Lease, the terms of the Office
Lease shall prevail. Any capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Office Lease.

<TABLE>
<S>                                             <C>
           TERMS OF LEASE
 (References are to the Office Lease)                     DESCRIPTION

1.   Date:                                      February 16, 2001.

2.   Landlord:                                  AH WARNER CENTER PROPERTIES,
                                                LIMITED LIABILITY COMPANY, a
                                                Delaware limited liability
                                                company.

3.   Tenant:                                    CAPSTONE TURBINE CORPORATION, a
                                                Delaware corporation.

4.   Premises (Article 1).

     4.1  Building Address:                     21700 Oxnard Street, Woodland Hills,
                                                California 91367.

     4.2  Premises:                             Approximately 6,846 rentable (6,005 usable)
                                                square feet of space located on the 16th floor
                                                of the Building, as further set forth in
                                                Exhibit A to the Office Lease.

5.   Lease Term (Article 2).

     5.1  Length of Term:                       Five (5) years.

     5.2  Lease Commencement Date:              April 1, 2001.

     5.3  Lease Expiration Date:                March 31, 2006.
</TABLE>

                                      (i)
<PAGE>

6.   Base Rent (Article 3):

<TABLE>
<CAPTION>
                                                       Monthly                 Monthly
        Month of                Annual               Installment           Rental Rate per
       Lease Term              Base Rent            of Base Rent        Rentable Square Foot
       ----------              ---------            ------------        --------------------
<S>                          <C>                    <C>                 <C>
          1-12               $217,702.80             $18,141.90                $2.65
         13-24               $224,274.96             $18,689.58                $2.73
         25-36               $230,847.12             $19,237.26                $2.81
         37-48               $238,240.80             $19,853.40                $2.90
         49-60               $244,812.96             $20,401.08                $2.98
</TABLE>

<TABLE>
<S>                                             <C>
7.   Additional Rent (Article 3).

     7.1  Base Year:                            The calendar year of 2001.

     7.2  Tenant's Share:                       Approximately 1.52%.

     7.3  Tenant's Common Area Share:           Approximately 1.03%.

8.   Security Deposit (Article 4):              $18,142.00.

9.   Parking Pass Ratio (Article 18):           Twenty (20) unreserved parking passes.

10.  Address of Tenant (Section 19.5):          21211 Nordoff Street
                                                Chatsworth, California 91311
                                                Attention: Jeffrey Watts
                                                (Prior to Lease Commencement Date)

                                                                 and

                                                21700 0xnard Street, Suite 1650
                                                Woodland Hills, California 91367
                                                Attention: Office Manager
                                                (After Lease Commencement Date)

11.  Broker(s) (Article 14):                    CB Richard Ellis, Inc., Colliers Seeley
                                                International, Inc
</TABLE>

                                      (ii)
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
ARTICLE 1    PREMISES, BUILDING, PROJECT, AND COMMON AREAS ..............................      l
   1.1       The Premises ...............................................................      1
   1.2       The Building and The Project ...............................................      1
   1.3       Common Areas ...............................................................      1
   1.4       Landlord's Use and Operation of the Building, Project, and Common
             Areas ......................................................................      2

ARTICLE 2    LEASE TERM .................................................................      2
   2.1       Initial Term ...............................................................      2

ARTICLE 3    RENT .......................................................................      4
   3.1       Base Rent ..................................................................      4
   3.2       Additional Rent ............................................................      4
   3.3       Definitions of Key Terms Relating to Additional Rent .......................      4
   3.4       Allocation of Direct Expenses ..............................................     10
   3.5       Calculation and Payment of Additional Rent .................................     10
   3.6       Landlord's Books and Records ...............................................     11

ARTICLE 4    SECURITY DEPOSIT ...........................................................     12

ARTICLE 5    USE OF PREMISES ............................................................     12
   5.1       Permitted Use ..............................................................     12
   5.2       Prohibited Uses ............................................................     13
   5.3       Labor Harmony ..............................................................     13

ARTICLE 6    REPAIRS, ADDITIONS AND ALTERATIONS .........................................     13
   6.1       Repairs ....................................................................     13
   6.2       Landlord's Consent to Alterations ..........................................     13
   6.3       Manner of Construction .....................................................     14
   6.4       Payment for Improvements ...................................................     14
   6.5       Construction Insurance .....................................................     15
   6.6       Landlord's Property ........................................................     15

ARTICLE 7    INSURANCE ..................................................................     15
   7.1       Indemnification and Waiver .................................................     15
   7.2       Tenant's Compliance with Landlord's Fire and Casualty Insurance ............     16
   7.3       Tenant's Insurance .........................................................     16
   7.4       Form of Policies ...........................................................     17
   7.5       Subrogation ................................................................     17
   7.6       Additional Insurance Obligations ...........................................     17

ARTICLE 8    DAMAGE AND DESTRUCTION .....................................................     18
   8.1       Repair of Damage to Premises by Landlord ...................................     18
   8.2       Landlord's Option to Repair ................................................     18
   8.3       Waiver of Statutory Provisions .............................................     19
   8.4       Damage Near End of Term ....................................................     19
</TABLE>

                                     (iii)
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
ARTICLE 9    PERSONAL PROPERTY AND OTHER TAX ............................................     19

ARTICLE 10   SERVICES AND UTILITIES .....................................................     20
  10.1       Standard Tenant Services ...................................................     20
  10.2       Overstandard Tenant Use ....................................................     21
  10.3       Interruption of Use ........................................................     21
  10.4       Additional Services ........................................................     22

ARTICLE 11   ASSIGNMENT AND SUBLETTING ..................................................     22
  11.1       Transfers ..................................................................     22
  11.2       Landlord's Consent .........................................................     23
  11.3       Transfer Premium ...........................................................     24
  11.4       Landlord's Option as to Subject Space ......................................     25
  11.5       Effect of Transfer .........................................................     25
  11.6       Additional Transfers .......................................................     26
  11.7       Non-Transfers ..............................................................     26

ARTICLE 12 DEFAULTS; REMEDIES ...........................................................     26
  12.1       Events of Default ..........................................................     26
  12.2       Remedies Upon Default ......................................................     27
  12.3       Sublessees of Tenant .......................................................     28
  12.4       Form of Payment After Default ..............................................     28
  12.5       Efforts to Relet ...........................................................     28

ARTICLE 13   CONDEMNATION ...............................................................     28
  13.1       Permanent Taking ...........................................................     28
  13.2       Temporary Taking ...........................................................     29

ARTICLE 14   BROKERS ....................................................................     29

ARTICLE 15   LANDLORD'S LIABILITY .......................................................     30

ARTICLE 16   SUBSTITUTION OF OTHER PREMISES .............................................     30
  16.1       New Premises ...............................................................     30
  16.2       Effectiveness Prior to Commencement of Construction of the Premises ........     30
  16.3       Effectiveness After Commencement of Construction of the Premises ...........     30
  16.4       General Provisions .........................................................     31

ARTICLE 17   WARNER CENTER ASSOCIATION ..................................................     31

ARTICLE 18   TENANT PARKING .............................................................     31

ARTICLE 19   MISCELLANEOUS PROVISIONS ...................................................     32
  19.1       Estoppel Certificates ......................................................     32
  19.2       Partial Invalidity .........................................................     32
  19.3       Time of Essence ............................................................     32
  19.4       Captions ...................................................................     33
</TABLE>

                                      (iv)
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                          <C>
  19.5       Notices ....................................................................     33
  19.6       Nonwaiver...................................................................     33
  19.7       Holding Over ...............................................................     34
  19.8       Waiver of Default ..........................................................     34
  19.9       Binding Effect .............................................................     34
  19.10      Governing Law ..............................................................     34
  19.11      Subordination ..............................................................     34
  19.12      Waiver of Jury Trial; Attorney's Fees ......................................     35
  19.13      Entry by Landlord ..........................................................     35
  19.14      Authority ..................................................................     36
  19.15      Surrender of Premises; Ownership and Removal of Trade Fixtures .............     36
  19.16      Entire Agreement ...........................................................     37
  19.17      Signs.......................................................................     37
  19.18      Covenant Against Liens .....................................................     37
  19.19      Terms ......................................................................     38
  19.20      Prohibition Against Recording ..............................................     38
  19.21      Confidentiality ............................................................     38
  19.22      Quiet Enjoyment ............................................................     38
  19.23      Improvement of the Premises ................................................     38
  19.24      Force Majeure ..............................................................     39
  19.25      Verification of Rentable Square Feet of Premises, Building, and Project ....     39
  19.26      Transportation Management ..................................................     39
  19.27      Compliance With Law ........................................................     39
  19.28      Late Charges ...............................................................     40
  19.29      Hazardous Material .........................................................     40
  19.30      Landlord's Right to Cure Default; Payments by Tenant .......................     41
  19.31      No Air Rights ..............................................................     42
  19.32      Modification of Lease ......................................................     42
  19.33      Transfer of Landlord's Interest ............................................     42
  19.34      Landlord's Title ...........................................................     42
  19.35      Relationship of Parties ....................................................     42
  19.36      Application of Payments ....................................................     43
  19.37      No Warranty ................................................................     43
  19.38      Right to Lease .............................................................     43
  19.39      Submission of Lease ........................................................     43
  19.40      Independent Covenants ......................................................     43
  19.41      Waiver of Redemption by Tenant .............................................     43
  19.42      Joint and Several ..........................................................     43
  19.43      Project or Building Name and Signage .......................................     43
  19.44      No Discrimination ..........................................................     44
  19.45      Landlord Renovations .......................................................     44
</TABLE>

                                      (v)
<PAGE>

EXHIBITS

A     OUTLINE OF PREMISES
B     SITE PLAN/PROJECT COMMON AREAS
C     TENANT WORK LETTER
D     FORM OF NOTICE OF LEASE TERM DATES
E     RULES AND REGULATIONS
F     FORM OF TENANT'S ESTOPPEL CERTIFICATE
G     SUBORDINATION OF DEED OF TRUST AGREEMENT
H     FORM OF RESOLUTION

                                      (vi)
<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                <C>
Abandonment ..............................................................................27
Additional Rent ...........................................................................4
Affiliated Assignee ......................................................................26
Alterations ..............................................................................13
Approved Working Drawings .........................................................Exhibit C
Architect .........................................................................Exhibit C
Audit Notice .............................................................................11
Base Rent .................................................................................4
Base Year..................................................................................4
Base, Shell and Core ..............................................................Exhibit C
Beneficial Occupancy Period ...............................................................2
BOMA......................................................................................39
Brokers ..................................................................................29
Building...................................................................................1
Building Common Areas .....................................................................1
Building Direct Expenses ..................................................................4
Building Operating Expenses ...............................................................4
Building Tax Expenses .....................................................................5
Claims ...................................................................................15
Code ..............................................................................Exhibit C
Common Areas ..............................................................................1
Construction Drawings .............................................................Exhibit C
Contractor ........................................................................Exhibit C
Control ..................................................................................26
Cost Pools ...............................................................................10
Cost Proposal .....................................................................Exhibit C
Cost Proposal Delivery Date .......................................................Exhibit C
Damage Repair Estimate ...................................................................18
Deed of Trust .....................................................................Exhibit G
Delivery Date .............................................................................2
Direct Expenses ...........................................................................5
Engineers..........................................................................Exhibit C
Estimate .................................................................................11
Estimate Statement .......................................................................11
Estimated Additional Rent ................................................................11
Existing Premises ........................................................................30
Expense Year ..............................................................................5
Final Space Plan ..................................................................Exhibit C
Final Working Drawings ............................................................Exhibit C
Force Majeure ............................................................................39
Hazardous Material .......................................................................40
Holidays .................................................................................20
Interest Notice ...........................................................................3
Interest Rate.............................................................................40
</TABLE>

                                     (vii)
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                <C>
Landlord ..................................................................................1
Landlord Parties .........................................................................15
Landlord Supervision Fee ..........................................................Exhibit C
Landlord's Designee ......................................................................32
Laws .....................................................................................39
Lease .....................................................................................l
Lease Commencement Date ...................................................................2
Lease Expiration Date .....................................................................2
Lease Term.................................................................................2
Lease Year ................................................................................2
New Premises .............................................................................30
Notices ..................................................................................33
Office Lease ..............................................................................i
Operating Expenses ........................................................................5
Option Notice .............................................................................3
Option Rent................................................................................3
Option Rent Notice ........................................................................3
Option Term................................................................................3
Original Tenant ...........................................................................3
Over-Allowance Amount .............................................................Exhibit C
Permits ...........................................................................Exhibit C
Premises ..................................................................................1
Project ...................................................................................1
Project Common Areas ......................................................................l
Proposition 13 ............................................................................8
Renovations ..............................................................................44
Rent ......................................................................................4
Review Period ............................................................................11
Rules and Regulations ....................................................................13
Security Deposit .........................................................................12
Specifications ....................................................................Exhibit C
Standard Improvement Package ......................................................Exhibit C
Statement ................................................................................10
Subject Space ............................................................................22
Summary ...................................................................................l
Systems and Equipment .....................................................................7
Tax Expenses ..............................................................................7
Tenant ....................................................................................1
Tenant Improvement Allowance ......................................................Exhibit C
Tenant Improvement Allowance Items ................................................Exhibit C
Tenant Improvements ...............................................................Exhibit C
Tenant Representative ....................................................................11
Tenant's Building Share ...................................................................9
Tenant's Common Area Share ................................................................9
Tenant's Share ............................................................................9
</TABLE>

                                     (viii)
<PAGE>

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
Tenant's Share of Building Direct Expenses ................................................9
Transfer Costs ...........................................................................24
Transfer Notice ..........................................................................22
Transfer Premium .........................................................................24
Transferee ...............................................................................22
Transfers ................................................................................22
Vacation Date ............................................................................30
</TABLE>

                                      (ix)
<PAGE>
                                  OFFICE LEASE

        This Office Lease, which includes the preceding Summary of Basic Lease
Information (the "SUMMARY") attached hereto and incorporated herein by this
reference (the Office Lease and Summary are collectively referred to herein as
the "LEASE"), dated as of the date set forth in Section 1 of the Summary is made
by and between AH WARNER CENTER PROPERTIES, LIMITED LIABILITY COMPANY, a
Delaware limited liability company ("LANDLORD"), and CAPSTONE TURBINE
CORPORATION, a Delaware corporation ("TENANT").

                                    ARTICLE 1

                  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

               1.1 The Premises. Upon and subject to the terms, covenants and
conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord the premises set forth in Section 4.2 of
the Summary (the "PREMISES"). The outline of the Premises is set forth in
Exhibit A attached hereto.

               1.2 The Building and The Project. The Premises are a part of the
building set forth in Section 4.1 of the Summary (the "BUILDING"). The Building
is part of an office project known as WARNER CENTER PLAZA. The term "PROJECT,"
as used in this Lease, shall mean (i) the Building and the "Common Areas", as
that term is defined in Section 1.3 below, (ii) the land (which is improved with
landscaping, parking facilities and other improvements as shown on Exhibit B
attached hereto) upon which the Building and the Common Areas are located, and
(iii) at Landlord's discretion, any additional real property, areas, land,
buildings or other improvements added thereto pursuant to the terms of Section
1.4 of this Lease.

               1.3 Common Areas. Tenant shall have the non-exclusive right to
use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain areas designated for the exclusive use of certain tenants, or
to be shared by Landlord and certain tenants, are collectively referred to
herein as the "COMMON AREAS"). The Common Areas shall consist of the "Project
Common Areas" and the "Building Common Areas". The term "PROJECT COMMON AREAS",
as used in this Lease, shall mean the portion of the Project designated as such
by Landlord, and may include, without limitation, any fixtures, systems, signs,
facilities, parking areas, gardens, parks or other landscaping contained,
maintained or used in connection with the Project, and may include any city
sidewalks adjacent to the Project, pedestrian walkway system, whether above or
below-grade, park or other facilities open to the general public and roadways,
sidewalks, walkways, parkways, driveways and landscape areas appurtenant to the
Project. The location of the Project Common Areas as of the date of this Lease
is shown on Exhibit B attached hereto. The term "BUILDING COMMON AREAS", as used
in this Lease, shall mean the portions of the Common Areas located within the
Building designated as such by Landlord, and may include, without limitation,
the common entrances, lobbies, atrium areas, restrooms, elevators, stairways and
accessways, loading docks, ramps, drives, platforms, passageways,

<PAGE>
serviceways, common pipes, conduits, wires, equipment, loading and unloading
areas, parking facilities and trash areas servicing the Building. The manner in
which the Common Areas are maintained and operated shall be at the sole
discretion of Landlord, provided that, notwithstanding the foregoing, Landlord
shall maintain the Common Areas in a manner consistent with other class "A"
properties in the area.

               1.4 Landlord's Use and Operation of the Building, Project, and
Common Areas. Landlord reserves the right from time to time without notice to
Tenant (i) to close temporarily any of the Common Areas; (ii) to make changes to
the Common Areas, including, without limitation, changes in the location, size,
shape and number of street entrances, driveways, ramps, entrances, exits,
passages, stairways and other ingress and egress, direction of traffic,
landscaped areas, loading and unloading areas, and walkways; (iii) to expand the
Building; (iv) to add additional buildings and improvements to the Common Areas;
(v) to designate land outside the Project to be part of the Project, and in
connection with the improvement of such land to add additional buildings and
common areas to the Project and/or to delete land and improvements from the
Project; (vi) to use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project or to any adjacent land, or
any portion thereof; and (vii) to do and perform such other acts and make such
other changes in, to or with respect to the Project, Common Areas and Building
or the expansion thereof as Landlord may deem to be appropriate; provided,
however, in connection with Landlord's exercise of its rights under this Section
1.4, Landlord shall use commercially reasonable efforts to minimize interference
with Tenant's business operations..

                                    ARTICLE 2

                                   LEASE TERM

               2.1 Initial Term. The terms and provisions of this Lease shall be
effective as of the date of this Lease. Landlord shall deliver the Premises to
Tenant in its current "as is" condition, upon the date of full execution and
delivery of this Lease (the "DELIVERY DATE"). The term of this Lease (the "LEASE
TERM") shall be as set forth in Section 5.1 of the Summary, shall commence on
the date set forth in Section 5.2 of the Summary (the "LEASE COMMENCEMENT
DATE"), and shall terminate on the date set forth in Section 5.3 of the Summary
(the "LEASE EXPIRATION DATE") unless this Lease is sooner terminated as
hereinafter provided. Tenant shall have the right to commence business from the
Premises during the period from the Delivery Date to the Lease Commencement Date
(the "BENEFICIAL OCCUPANCY PERIOD"), provided that (A) Tenant shall give
Landlord prior notice of any such occupancy of the Premises, (B) a certificate
of occupancy (or its equivalent) shall have been issued by the appropriate
governmental authorities for the Premises, and (C) all of the terms and
conditions of this Lease shall apply, including Tenant's obligations to pay
parking fees pursuant to Article 28 below, during the Beneficial Occupancy
Period, except that Tenant's obligation to pay Base Rent and any Direct
Expenses shall not apply during the Beneficial Occupancy Period. For purposes
of this Lease, the term "LEASE YEAR" shall mean each consecutive twelve (12)
month period during the Lease Term; provided, however, that the first Lease Year
shall commence on the Lease Commencement Date and end on the last day of the
eleventh calendar month thereafter and the second and each succeeding Lease Year
shall commence on the first day of the next calendar month; and further provided
that the last Lease Year shall end on the Lease Expiration Date. At

                                      -2-

<PAGE>
any time during the Lease Term, Landlord may deliver to Tenant a notice in the
form as set forth in Exhibit D, attached hereto, which Tenant shall execute and
return to Landlord within five (5) days of receipt thereof.

               2.2 Option Term. Landlord hereby grants to the original Tenant
named in this Lease (the "ORIGINAL TENANT"), one (1) option to extend the Lease
Term for a period of five (5) years (the "OPTION TERM"), which option shall be
exercisable only by written notice ("OPTION NOTICE") delivered by Tenant to
Landlord as provided in Section 2.2.2 below, provided that, as of the date of
delivery of such notice and, at Landlord's option, as of the last day of the
initial Lease Term, Tenant is not in default under this Lease after expiration
of applicable cure periods. The right contained in this Section 2.2 shall be
personal to the Original Tenant and may only be exercised by the Original Tenant
or an Affiliated Assignee (and not any other assignee, sublessee or other
transferee of the Original Tenant's interest in this Lease) if the Original
Tenant or such Affiliated Assignee occupies the entire Premises as of the date
of the Option Notice.

                      2.2.1 Option Rent. The Rent payable by Tenant during the
Option Term (the "OPTION RENT") shall be equal to the then prevailing fair
market rent for the Premises as of the commencement date of the Option Term. The
then prevailing fair market rent shall be the rental rate, including all
escalations, at which renewal tenants, as of the commencement of the Option
Term, are entering into leases for non-sublease, non-encumbered space comparable
in size, location and quality to the Premises for a term of approximately the
Option Term, which comparable space is located in comparable buildings in Warner
Center, taking into consideration the following concessions: (a) rental
abatement concessions, if any, being granted such tenants in connection with
such comparable space and (b) tenant improvements or allowances provided or to
be provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Premises, with such value to be based
upon the age, quality and layout of the improvements and the extent to which the
same could be utilized by Tenant based upon the fact that the precise tenant
improvements existing in the Premises are specifically suitable to Tenant.

                      2.2.2 Exercise of Option. The option contained in this
Section 2.2 shall be exercised by Tenant, if at all, only in the following
manner: (i) Tenant shall deliver written notice ("INTEREST NOTICE") to Landlord
on or before the date which is twelve (12) months prior to the expiration of the
initial Lease Term, stating that Tenant is interested in exercising its option;
(ii) Landlord, after receipt of Tenant's notice, shall deliver notice (the
"OPTION RENT NOTICE") to Tenant not less than ten (10) months prior to the
expiration of the initial Lease Term, setting forth the Option Rent; and (iii)
if Tenant wishes to exercise such option, Tenant shall, on or before the earlier
of (A) the date occurring nine (9) months prior to the expiration of the initial
Lease Term, and (B) the date occurring thirty (30) days after Tenant's receipt
of the Option Rent Notice, exercise the option by delivering the Option Notice
to Landlord. Failure of Tenant to deliver the Interest Notice to Landlord on or
before the date specified in (i) above or to deliver the Option Notice to
Landlord on or before the date specified in (iii) above shall be deemed to
constitute Tenant's failure to exercise its option to extend. If Tenant timely
and properly exercises its option to extend, the Lease Term shall be extended
for the Option Term upon all of the terms and conditions set forth in this
Lease, except that the Rent shall be as indicated in the Option Rent Notice.

                                      -3-

<PAGE>
                                    ARTICLE 3

                                      RENT

               3.1 Base Rent. Tenant shall pay, without prior notice or demand,
to Landlord or Landlord's agent at the management office of the Project, or, at
Landlord's option, at such other place as Landlord may from time to time
designate in writing, in a check for currency which, at the time of payment, is
legal tender for private or public debts in the United States of America, base
rent ("BASE RENT") as set forth in Section 6 of the Summary, payable in equal
monthly installments as set forth in Section 6 of the Summary in advance on or
before the first day of each and every month during the Lease Term, without any
setoff or deduction whatsoever. The Base Rent for the first full month of the
Lease Term which occurs after the expiration of any free rent period shall be
paid at the time of Tenant's execution of this Lease. If any Rent payment date
(including the Lease Commencement Date) falls on a day of the month other than
the first day of such month or if any payment of Rent is for a period which is
shorter than one month, the Rent for any fractional month shall accrue on a
daily basis for the period from the date such payment is due to the end of such
calendar month or to the end of the Lease Term at a rate per day which is equal
to 1/365 of the applicable annual Rent. All other payments or adjustments
required to be made under the terms of this Lease that require proration on a
time basis shall be prorated on the same basis.

               3.2 Additional Rent. In addition to paying the Base Rent
specified in Section 3.1 of this Lease, Tenant shall pay "Tenant's Share" of the
annual "Building Direct Expenses," as those terms are defined in Sections 3.3.10
and 3.3.2 of this Lease, respectively, to the extent such Building Direct
Expenses are in excess of Building Direct Expenses for the "Base Year," as that
term is defined in Section 3.3.1 of this Lease. Such payments by Tenant,
together with any and all other amounts payable by Tenant to Landlord pursuant
to the terms of this Lease, are hereinafter collectively referred to as the
"ADDITIONAL RENT", and the Base Rent and the Additional Rent are herein
collectively referred to as "Rent." All amounts due under this Article 3 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent. Without limitation on other obligations of Tenant which survive
the expiration of the Lease Term, the obligations of Tenant to pay the
Additional Rent provided for in this Article 3 shall survive the expiration of
the Lease Term.

               3.3 Definitions of Key Terms Relating to Additional Rent. As used
in this Article 3, the following terms shall have the meanings hereinafter set
forth:

                      3.3.1 "BASE YEAR" shall be as set forth in Section 7.1 of
the Summary.

                      3.3.2 "BUILDING DIRECT EXPENSES" shall mean "Building
Operating Expenses" and "Building Tax Expenses", as those terms are defined in
Sections 3.3.3 and 3.3.4, below, respectively.

                      3.3.3 "BUILDING OPERATING EXPENSES" shall mean the portion
of "Operating Expenses," as that term is defined in Section 3.3.7 below,
allocated to the tenants of the Building pursuant to the terms of Section 3.4.1
below.

                                       -4-

<PAGE>
                      3.3.4 "BUILDING TAX EXPENSES" shall mean that portion of
"Tax Expenses", as that term is defined in Section 3.3.9 below, allocated to the
tenants of the Building pursuant to the terms of Section 3.4.1 below.

                      3.3.5 "EXPENSE YEAR" shall mean each calendar year in
which any portion of the Lease Term falls, through and including the calendar
year in which the Lease Term expires, provided that Landlord, upon notice to
Tenant, may change the Expense Year from time to time to any other twelve (12)
consecutive month period, and, in the event of any such change, Tenant's Share
of Building Direct Expenses shall be equitably adjusted for any Expense Year
involved in any such change.

                      3.3.6 "DIRECT EXPENSES" shall mean "Operating Expenses"
and "Tax Expenses".

                      3.3.7 "OPERATING EXPENSES" shall mean all expenses, costs
and amounts of every kind and nature which Landlord pays during any Expense Year
because of or in connection with the ownership, management, maintenance, repair,
replacement, restoration or operation of the Project, or any portion thereof.
Without limiting the generality of the foregoing, Operating Expenses shall
specifically include any and all of the following: (i) the cost of supplying all
utilities, the cost of operating, maintaining, repairing, renovating, complying
with conservation measures in connection with, and managing the utility systems,
mechanical systems, sanitary and storm drainage systems, and elevator systems,
and the cost of supplies and equipment and maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting the validity or applicability of any
governmental enactments which may affect Operating Expenses, and the costs
incurred in connection with the implementation and operation of a transportation
system management program or a municipal, private or public shuttle service or
parking program; (iii) the cost of all insurance carried by Landlord in
connection with the Project, or any portion thereof; (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation, repair and maintenance of the Project, or any portion thereof;
(v) the cost of parking area repair, restoration, and maintenance including, but
not limited to, resurfacing, repainting, restriping, and cleaning; (vi) fees,
charges and other costs, including consulting fees, legal fees and accounting
fees, of all contractors and consultants engaged by Landlord or reasonably
incurred by Landlord in connection with the management, operation, maintenance
and repair of the Project, or any portion thereof including the fair market
rental value of any office space utilized for such purpose and a management fee
in the amount of fifteen percent (15%) of all other Direct Expenses; (vii)
payments under any equipment rental agreements; (viii) wages, salaries and other
compensation and benefits of all persons engaged in the operation, maintenance
or security of the Project, or any portion thereof, including employer's Social
Security taxes, unemployment taxes or insurance, and any other taxes which may
be levied on such wages, salaries, compensation and benefits; provided, that if
any employees of Landlord provide services for more than one project of
Landlord, then a prorated portion of such employees' wages, benefits and taxes
shall be included in Operating Expenses based on the portion of their working
time devoted to the Project, or any portion thereof; (ix) payments, fees or
charges under any easement, license, operating agreement, declaration,
restrictive covenant, or instrument pertaining to the sharing of costs by the
Project, or any portion thereof; (x) operation, repair, maintenance and
replacement of all "Systems and Equipment," as that term is defined in

                                      -5-

<PAGE>
Section 3.3.8 of this Lease, and components thereof; (xi) the cost of janitorial
services, alarm and security service, window cleaning, trash removal,
replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies,
corridors, restrooms and other common or public areas or facilities, maintenance
and replacement of curbs and walkways, repair to roofs and re-roofing; (xii)
amortization (including interest on the unamortized cost at a rate reasonably
determined by Landlord) of the cost of acquiring or the rental expense of
personal property used in the maintenance, operation and repair of the Project,
or any portion thereof; (xiii) the cost of capital improvements or other costs
incurred in connection with the Project (A) which are intended to effect
economies in the operation or maintenance of the Project, or any portion
thereof, or (B) that are required under any governmental law or regulation;
provided, however, that any capital expenditure shall be amortized over its
useful life as Landlord shall reasonably determine, and the unamortized cost of
the same shall bear interest at a rate reasonably determined by Landlord; and
(xiv) costs, fees, charges or assessments imposed by any federal, state or local
government for fire and police protection, trash removal, community services, or
other services which do not constitute "Tax Expenses" as that term is defined in
Section 3.3.9, below. If Landlord is not furnishing any particular work or
service (the cost of which, if performed by Landlord, would be included i n
Operating Expenses) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such work or service to such
tenant. If the Building is not at least ninety-five percent (95%)
occupied during all or a portion of any Expense Year (including the Base Year),
Landlord shall make an appropriate adjustment to the variable components of
Operating Expenses for such year employing sound accounting and management
principles, to determine the amount of Operating Expenses that would have been
paid had the Building been ninety-five percent (95%) occupied; and the
amount so determined shall be deemed to have been the amount of Operating
Expenses for such year. Notwithstanding the foregoing, for purposes of this
Lease, Operating Expenses shall not, except as otherwise set forth in this
Section 3.3, include (A) depreciation, interest and amortization on mortgages,
or ground lease payments, if any; (B) legal fees incurred in negotiating and
enforcing tenant leases; (C) real estate brokers' leasing commissions; (D)
initial improvements or alterations to tenant spaces; (E) the cost of providing
any service directly to and paid directly by any tenant; (F) any costs expressly
excluded from Operating Expenses elsewhere in this Lease; (G) costs of any items
to the extent Landlord receives reimbursement from insurance proceeds or from a
third party (such proceeds to be credited to Operating Expenses in the year in
which received, except that any deductible amount under any insurance policy
shall be included within Operating Expenses); (H) Tax Expenses; (I) costs of
capital improvements, except those set forth in this Section 3.3 or those
includable in Operating Expenses pursuant to an application by Landlord of sound
real estate management principles; (J) marketing costs, including leasing
commissions, attorneys' fees in connection with the negotiation and preparation
of letters, deal memos, letters of intent, leases, subleases and/or assignments,
space planning costs, and other costs and expenses incurred in connection with
lease, sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Building, including attorneys'
fees and other costs and expenditures incurred in connection with disputes with
present or prospective tenants or other occupants of the Building; (K) expenses
in connection with services or other benefits which are not offered to Tenant or
for which Tenant is charged for directly but which are provided to

                                      -6-

<PAGE>
another tenant or occupant of the Building without charge; (L) the cost of any
items for which Landlord is reimbursed by insurance proceeds, condemnation
awards, a tenant of the Building, or otherwise to the extent so reimbursed; (M)
bad debt expenses and interest, principal, points and fees on debts (except in
connection with the financing of items which may be included in Operating
Expenses); and (N) costs of correcting defects in or inadequacy of the initial
design or construction of the Building. Notwithstanding anything to the contrary
set forth in this Article 3, when calculating Direct Expenses for the Base Year,
Operating Expenses shall exclude (i) market-wide labor-rate increases due to
extraordinary circumstances, including, but not limited to, boycotts and
strikes, (ii) utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes or
other shortages, and (iii) amortization and other costs of capital improvement,
restoration, and replacement relating to any portion of the Project (including
the amortization expenses of any such costs incurred in prior years) ; provided,
however, that if Landlord does not carry earthquake insurance for the Project
during any part of the Base Year but subsequently obtains earthquake insurance
for the Project during the Lease Term, then from and after the date upon which
Landlord obtains such earthquake insurance and continuing throughout the period
during which Landlord maintains such insurance, Operating Expenses for the Base
Year shall be deemed to be increased by the amount of the premium Landlord
reasonably estimates it would have incurred had Landlord maintained such
insurance for the same period of time during the Base Year as such insurance was
maintained by Landlord during such subsequent calendar year.

                      3.3.8 "SYSTEMS AND EQUIPMENT" shall mean any plant,
machinery, transformers, duct work, conduit, pipe, bus duct, cable, wires, and
other equipment, facilities, and systems designed to supply-heat, ventilation,
air conditioning and humidity or any other services or utilities, or comprising
or serving as any component or portion of the electrical, gas, steam, plumbing,
sprinkler, communications, alarm, security, or fire/life safety systems or
equipment, or any other mechanical, electrical, electronic, computer or other
systems or equipment which serve the Project in whole or in part.

                      3.3.9 "TAX EXPENSES" shall mean all federal, state,
county, or local governmental or municipal taxes, fees, charges or other
impositions of every kind and nature, whether general, special, ordinary or
extraordinary, (including, without limitation, real estate taxes, general and
special assessments, transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property taxes
imposed upon the fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid during
any Expense Year (without regard to any different fiscal year used by such
governmental or municipal authority) because of or in connection with the
ownership, leasing and operation of the Project, or any portion thereof.

                             3.3.9.1 Tax Expenses shall include, without
limitation:

                               (i) Any tax on the rent, right to rent or other
        income from the Project, or any portion thereof, or as against the
        business of leasing the Project, or any portion thereof;

                                      -7-

<PAGE>
                               (ii) Any assessment, tax, fee, levy or charge in
        addition to, or in substitution, partially or totally, of any
        assessment, tax, fee, levy or charge previously included within the
        definition of real property tax, it being acknowledged by Tenant and
        Landlord that Proposition 13 was adopted by the voters of the State of
        California in the June 1978 election ("PROPOSITION 13") and that
        assessments, taxes, fees, levies and charges may be imposed by
        governmental agencies for such services as fire protection, street,
        sidewalk and road maintenance, refuse removal and for other governmental
        services formerly provided without charge to property owners or
        occupants, and, in further recognition of the decrease in the level and
        quality of governmental services and amenities as a result of
        Proposition 13, Tax Expenses shall also include any governmental or
        private assessments or the Project's contribution towards a governmental
        or private cost-sharing agreement for the purpose of augmenting or
        improving the quality of services and amenities normally provided by
        governmental agencies. It is the intention of Tenant and Landlord that
        all such new and increased assessments, taxes, fees, levies, and charges
        and all similar assessments, taxes, fees, levies and charges be included
        within the definition of Tax Expenses for the purposes of this Lease;

                               (iii) Any assessment, tax, fee, levy, or charge
        allocable to or measured by the area of the Premises or the Rent payable
        hereunder, including, without limitation, any gross income tax with
        respect to the receipt of such rent, or upon or with respect to the
        possession, leasing, operating, management, maintenance, alteration,
        repair, use or occupancy by Tenant of the Premises, or any portion
        thereof; and

                               (iv) Any assessment, tax, fee, levy or charge,
        upon this transaction or any document to which Tenant is a party,
        creating or transferring an interest or an estate in the Premises.

                             3.3.9.2 With respect to any assessment that may be
levied against, upon, or in connection with the Project, or any portion thereof,
and may be evidenced by improvement or other bonds, or may be paid in annual
installments, there shall be included within the definition of Tax Expenses with
respect to any tax fiscal year only the amount currently payable on such bonds,
including interest, for such tax fiscal year, or the current annual installment
for such tax fiscal year.

                             3.3.9.3 If the method of taxation of real estate
prevailing at the time of execution hereof shall be, or has been, altered so as
to cause the whole or any part of the taxes now, hereafter or heretofore levied,
assessed or imposed on real estate to be levied, assessed or imposed upon the
owner or owners of the Project, wholly or partially, as a capital levy or
otherwise, or on or measured by the rents received therefrom, then such new or
altered taxes attributable to the Project, or any portion thereof, shall be
included within the term "Tax Expenses" except that the same shall not include
any enhancement of said tax attributable to other income.

                             3.3.9.4 In no event shall Tax Expenses for any
Expense Year be less than Tax Expenses for the Base Year.

                                      -8-

<PAGE>
                             3.3.9.5 If Tax Expenses for any period during the
Lease Term or any extension thereof are increased after payment thereof for any
reason, including, without limitation, error or reassessment by applicable
governmental or municipal authorities, Tenant shall pay Landlord upon demand
Tenant's Share of any such increased Tax Expenses included by Landlord as
Building Tax Expenses pursuant to the terms of this Lease.

                             3.3.9.6 Any expenses incurred in attempting to
protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in
the Expense Year such expenses are paid. Tax refunds shall be deducted from Tax
Expenses in the Expense Year they are received.

                             3.3.9.7 Notwithstanding anything to the contrary
contained in this Section 3.3.9 (except as set forth in Sections 3.3.9.1 and
3.3.9.3, above), there shall be excluded from Tax Expenses (i) all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Project), (ii) any
items included as Operating Expenses, and (iii) any items paid by Tenant under
Article 9 of this Lease.

                             3.3.9.8 Notwithstanding anything to the contrary
set forth in this Article 3, when calculating Direct Expenses for the Base Year,
such Direct Expenses shall not include any increase in Tax Expenses attributable
to special assessments, charges, costs, or fees, or due to modifications or
changes in governmental laws or regulations, including, but not limited to, the
institution of a split tax roll.

                      3.3.10 "TENANT'S SHARE" shall mean the percentage
calculated by dividing the number of rentable square feet of the Premises by the
total number of rentable square feet in the Building. In the event either the
rentable square feet of the Premises and/or the total rentable square feet of
the Building is changed, Tenant's Share shall be appropriately adjusted, and, as
to the Expense Year in which such change occurs, Tenant's Share for such Expense
Year shall be determined on the basis of the number of days during such Expense
Year that each such Tenant's Share was in effect.

                      3.3.11 Landlord shall, at Landlord's option, have the
right to segregate Direct Expenses into two (2) separate categories, one (1)
such category to be applicable only to Direct Expenses incurred for the Building
and the other category applicable to Direct Expenses incurred for the Project
Common Areas. If Landlord so segregates Direct Expenses into two (2) categories,
two (2) Tenant's Shares shall apply, one (1) such Tenant's Share shall be
calculated by dividing the number of rentable square feet of the Premises by the
total number of rentable square feet in the Building ("TENANT'S BUILDING
SHARE"), subject to adjustment as provided in Section 3.3.10 above, and the
other Tenant's Share to be calculated by dividing the number of rentable square
feet of the Premises by the total number of rentable square feet (subject to
adjustment as provided in Section 1.2 of all buildings in the Project ("TENANT'S
COMMON AREA SHARE"). Consequently, if Landlord elects to so segregate Direct
Expenses info two (2) categories, any reference in this Lease to "TENANT'S SHARE
OF BUILDING DIRECT EXPENSES" shall mean and refer to both Tenant's Building
Share of Direct Expenses and Tenant's Common Area Share of Direct Expenses. No
Operating Expenses or Taxes may be charged in a duplicative

                                      -9-

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manner or as both Tenant's Building Share of Direct Expenses and Tenant's Common
Area Share of Direct Expenses.

               3.4 Allocation of Direct Expenses.

                      3.4.1 Method of Allocation. The parties acknowledge that
the Building is a part of a multi-building project and that the costs and
expenses incurred in connection with the Project (i.e., the Direct Expenses)
should be shared between the tenants of the Building and the tenants of the
other buildings in the Project. Accordingly, as set forth in Section 3.3 above,
Direct Expenses (which consists of Operating Expenses and Tax Expenses) are
determined annually for the Project as a whole, and a portion of the Direct
Expenses, which portion shall be determined by Landlord on an equitable basis,
shall be allocated to the tenants of the Building (as opposed to the tenants of
any other buildings in the Project) and such portion shall be the Building
Direct Expenses for purposes of this Lease. Such portion of Direct Expenses
allocated to the tenants of the Building shall include all Direct Expenses
attributable solely to the Building and an equitable portion of the Direct
Expenses attributable to the Project as a whole.

                      3.4.2 Cost Pools. Landlord shall have the right, from time
to time, to equitably allocate some or all of the Direct Expenses for the
Project among different portions or occupants of the Project (the "COST POOLS"),
in Landlord's discretion. Such Cost Pools may include, but shall not be limited
to, the office space tenants of a building of the Project or of the Project, and
the retail space tenants of a building of the Project or of the Project. The
Direct Expenses within each such Cost Pool shall be allocated and charged to the
tenants within such Cost Pool in a reasonable, non-discriminatory and equitable
manner.

               3.5 Calculation and Payment of Additional Rent. For every Expense
Year ending or commencing within the Lease Term, Tenant shall pay to Landlord,
in the manner set forth in Section 3.5.1, below, and as Additional Rent an
amount equal to Tenant's Share of Building Direct Expenses for such Expense Year
in excess of the Building Direct Expenses for the Base Year.

                      3.5.1 Statement of Actual Building Direct Expenses and
Payment by Tenant. Landlord shall endeavor to give to Tenant on or before the
first day of April following the end of each Expense Year, a statement (the
"STATEMENT") which shall state the Building Direct Expenses incurred or accrued
for such preceding Expense Year, and which shall indicate the amount of Tenant's
Share of such Building Direct Expenses in excess of the Building Direct Expenses
for the Base Year. Upon receipt of the Statement for each Expense Year
commencing or ending during the Lease Term, Tenant shall pay, with its next
installment of Base Rent due, the full amount of Tenant's Share of Building
Direct Expenses for such Expense Year in excess of the Building Direct Expenses
for the Base Year, less the amounts, if any, paid during such Expense Year as
"Estimated Additional Rent," as that term is defined in Section 3.5.2, below.
The failure of Landlord to timely furnish the Statement for any Expense Year
shall not prejudice Landlord or Tenant from enforcing its rights under this
Article 3. Even though the Lease Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Share of Building
Direct Expenses for the Expense Year in which this Lease terminates, Tenant
shall pay to Landlord any underpaid amounts described herein or Landlord shall
pay to Tenant any overpaid amounts, as applicable, within thirty (30) days
following delivery of the

                                      -10-

<PAGE>
Statement. The provisions of this Section 3.5.1 shall survive the expiration or
earlier termination of the Lease Term.

                      3.5.2 Statement of Estimated Building Direct Expenses. In
addition, Landlord shall endeavor to give Tenant a yearly expense estimate
statement (the "ESTIMATE STATEMENT") which shall set forth Landlord's reasonable
estimate (the "ESTIMATE") of what the total amount of Building Direct Expenses
for the then-current Expense Year shall be and the estimated amount of Tenant's
Share of Building Direct Expenses for the then-current Expense Year in excess of
the Building Direct Expenses for the Base Year (the "ESTIMATED ADDITIONAL
RENT"). The failure of Landlord to timely furnish the Estimate Statement for any
Expense Year shall not preclude Landlord from enforcing its rights to collect
any Estimated Additional Rent under this Article 3. Thereafter, Tenant shall
pay, with its next installment of Base Rent due, a fraction of the Estimated
Additional Rent for the then-current Expense Year (reduced by any amounts paid
pursuant to the last sentence of this Section 3.5.2). Such fraction shall have
as its numerator the number of months which have elapsed in such current Expense
Year, including the month of such payment, and twelve (12) as its denominator.
Until a new Estimate Statement is furnished (which Landlord shall have the right
to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly
Base Rent installments, an amount equal to one-twelfth (1/12) of the total
Estimated Additional Rent set forth in the previous Estimate Statement delivered
by Landlord to Tenant.

               3.6 Landlord's Books and Records. Within ninety (90) days after
receipt of a Statement by Tenant ("REVIEW PERIOD"), if Tenant disputes the
amount of Additional Rent set forth in the Statement, Tenant's employees or an
accountant designated by Tenant and not paid on a contingency fee basis
(collectively, "TENANT REPRESENTATIVE"), may, after reasonable notice to
Landlord and during normal business hours, inspect and photocopy Landlord's
records at Landlord's offices, provided that Tenant is not then in default after
expiration of any applicable cure period, and provided, further, that Tenant and
the Tenant Representative shall, and each of them shall use their commercially
reasonable efforts to cause their respective employees to, maintain all
information contained in Landlord's records in strict confidence. If after such
inspection, Tenant notifies Landlord in writing ("AUDIT NOTICE") that Tenant
still disputes such Additional Rent a certification as to the proper amount
shall be made, at 'Tenant's expense, by an independent certified public
accountant (which accountant is a member of a nationally recognized accounting
firm and is not compensated on a contingency fee basis) selected by Landlord and
approved by Tenant. The designated accountant shall review the Landlord records
and calculations, each parties' contentions and this Lease. Landlord shall
cooperate in good faith with Tenant and the designated accountant to show Tenant
and the designated accountant the information upon which the certification is to
be based; provided that if such certification by the designated accountant
proves that the Direct Expenses set forth in the Statement were overstated by
more than five percent (5%), then the cost of the designated accountant and the
cost of such certification shall be paid for by Landlord. Promptly following the
parties receipt of such certification, the parties shall make such appropriate
payments or reimbursements, as the case may be, to each other, as are
determined to be owing pursuant to such certification, together with interest at
the Interest Rate from the date due until paid, in the case of payments by
Tenant to Landlord, or from the date paid until reimbursed, in the case of
reimbursements by Landlord to Tenant. The payment by Tenant of any amounts
pursuant to this Article 3 shall not preclude Tenant from questioning the
correctness of any Statement delivered by Landlord, provided that

                                      -11-

<PAGE>
the failure of Tenant to deliver the Audit Notice prior to the expiration of the
Review Period shall be conclusively deemed Tenant's approval of the applicable
Statement.

                                    ARTICLE 4

                                SECURITY DEPOSIT

        Concurrent with Tenant's execution of this Lease, Tenant shall deposit
with Landlord a security deposit (the "SECURITY DEPOSIT") in the amount set
forth in Section 8 of the Summary. The Security Deposit shall be held by
Landlord as security for the faithful performance by Tenant of all the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Lease Term. The Security Deposit shall not be mortgaged, assigned or
encumbered in any manner whatsoever by Tenant without the prior written consent
of Landlord. If Tenant defaults with respect to any provisions of this Lease,
including, but not limited to, the provisions relating to the payment of Rent,
Landlord may, but shall not be required to, use, apply or retain all or any part
of the Security Deposit for the payment of any Rent or any other sum in default,
or for the payment of any amount that Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any other
loss or damage that Landlord may suffer by reason of Tenant's default. If any
portion of the Security Deposit is so used or applied, Tenant shall, within five
(5) days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount, and Tenant's
failure to do so shall be a default under this Lease. Tenant acknowledges that
Landlord has the right to transfer or mortgage its interest in the Building or
Project and in this Lease and Tenant agrees that in the event of any such
transfer or mortgage, Landlord shall have the right to transfer or assign the
Security Deposit to the transferee or mortgagee. Upon such transfer or
assignment of the Security Deposit, Landlord shall thereby be released by Tenant
from all liability or obligation for the return of such Security Deposit and
Tenant shall look solely to such transferee or mortgagee for the return of the
Security Deposit. If Tenant shall fully and faithfully perform every provision
of this Lease to be performed by it, the Security Deposit, or any balance
thereof, shall be returned to Tenant, or, at Landlord's option, to the last
assignee of Tenant's interest hereunder, within thirty (30) days following the
expiration of the Lease Term. Tenant shall not be entitled to any interest on
the Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of
the California Civil Code, and all other provisions of law, now or hereafter
enforced, which provide that Landlord may claim from a security deposit only
those sums reasonably necessary to remedy defaults in the payment of rent, to
repair damage caused by Tenant or to clean the Premises, it being agreed that
Landlord may, in addition, claim those sums reasonably necessary to compensate
Landlord for any other loss or damage, foreseeable or unforeseeable, caused by
the acts or omissions of Tenant or any officer, employee, agent, contractor or
invitee of Tenant.

                                    ARTICLE 5

                                 USE OF PREMISES

               5.1 Permitted Use. Tenant shall use the Premises solely for
general office purposes and related uses consistent with the character of the
Project as a first-class office building project, and Tenant shall not use or
permit the Premises to be used for any other purpose

                                      -12-

<PAGE>
or purposes whatsoever without the prior written consent of Landlord, which
Landlord may withhold in its sole discretion.

               5.2 Prohibited Uses. Tenant further covenants and agrees that
Tenant shall not use, or suffer or permit any person or persons to use, the
Premises, the Common Areas (including, without limitation, the Project's parking
facility) or any part thereof for any use or purpose contrary to the provisions
of Exhibit E attached hereto ("RULES AND REGULATIONS"), or in violation of the
laws of the United States of America, the State of California, or the
ordinances, regulations or requirements of the local municipal or county
governing body or other lawful authorities having jurisdiction over the Project)
including, without limitation, any such laws, ordinances, regulations or
requirements relating to "Hazardous Material", as that term is defined in
Section 19.29 below. Tenant shall comply with all recorded covenants,
conditions, and restrictions now or hereafter affecting the Project.

               5.3 Labor Harmony. Tenant shall not use (and upon notice from
Landlord shall cease using) contractors, services, workmen, labor, materials or
equipment that, in Landlord's reasonable judgment, would disturb labor harmony
with the workforce or trades engaged in performing other work, labor or services
in or about the Project.

                                    ARTICLE 6

                       REPAIRS, ADDITIONS AND ALTERATIONS

               6.1 Repairs. Tenant shall, at Tenant's own expense, keep the
Premises, including all improvements, fixtures and furnishings therein, in good
order, repair and condition at all times during the Lease Term. In addition,
Tenant shall, at Tenant's own expense, but under the supervision and subject to
the prior approval of Landlord, and within any reasonable period of time
specified by Landlord, promptly and adequately repair all damage to the Premises
and replace or repair all damaged, broken, or worn fixtures and appurtenances;
provided however, that, at Landlord's option, or if Tenant fails to make such
repairs, Landlord may, but need not, make such repairs and replacements, and
Tenant shall pay Landlord the cost thereof, including a percentage of the cost
thereof (to be uniformly established for the Building and/or the Project)
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other costs or expenses arising from Landlord's involvement with such repairs
and replacements forthwith upon being billed for same. Landlord may, but shall
not be required to, enter the Premises at all reasonable times to make such
repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or
deem necessary or as Landlord may be required to do by governmental or
quasi-governmental authority or court order or decree. Tenant hereby waives and
releases its right to make repairs at Landlord's expense under Sections 1941 and
1942 of the California Civil Code or under any similar law, statute, or
ordinance now or hereafter in effect.

               6.2 Landlord's Consent to Alterations Tenant may, not make
any improvements, alterations, additions or changes to the Premises
(collectively, the "ALTERATIONS") without first procuring the prior written
consent of Landlord to such Alterations, which consent shall be requested by
Tenant not less than thirty (30) days prior to the commencement thereof, and
which consent shall not be unreasonably withheld by Landlord. Notwithstanding
the

                                      -13-

<PAGE>
foregoing, Tenant may make strictly cosmetic changes to the finish work in the
Premises, without Landlord's consent, provided that the aggregate cost of any
such changes does not exceed $15,000.00 in any twelve (12) month period, and
such changes do not require any structural or other substantial modifications to
the Premises, do not require any changes to, or adversely affect, the Systems
and Equipment, and do not affect the exterior appearance of the Building. Tenant
shall give Landlord at least thirty (30) days prior notice of such cosmetic
changes, which notice shall be accompanied by reasonably adequate evidence that
such changes meet the criteria contained in this Section 6.2. The construction
of the initial improvements to the Premises shall be governed by the terms of
the Tenant Work Letter and not the terms of this Article 6.

               6.3 Manner of Construction. Landlord may impose, as a condition
of its consent to any and all Alterations or repairs of the Premises or about
the Premises, such requirements as Landlord in its sole discretion may deem
desirable, including, but not limited to, the requirement that upon Landlord's
request given concurrently with Landlord's consent to such Alteration, Tenant
shall, at Tenant's expense, remove such Alterations upon the expiration or any
early termination of the Lease Term, and/or the requirement that Tenant utilize
for such purposes only contractors, materials, mechanics and materialmen
selected by Landlord. In any event, a contractor of Landlord's selection shall
perform all mechanical, electrical, plumbing, lifesafety, sprinkler and
structural work, and such work shall be performed at Tenant's cost. Tenant shall
construct such Alterations and perform such repairs in conformance with any and
all applicable federal, state, county or municipal laws, rules and regulations
and pursuant to a valid building permit, all in conformance with Landlord's
construction rules and regulations. All work with respect to any Alterations-
must be done in a good and workmanlike manner and diligently prosecuted to
completion to the end that the Premises shall at all times be a complete unit
except during the period of work. In performing the work of any such
Alterations, Tenant shall have the work performed in such manner so as not to
obstruct access to the Project or any portion thereof by any other tenant of the
Project, and so as not to obstruct the business of Landlord or other tenants in
the Project, or interfere with the labor force working in the Project. In
addition to Tenant's obligations under Section 19.18 of this Lease, upon
completion of any Alterations, Tenant agrees to cause a Notice of Completion to
be recorded in the office of the Recorder of the County of Los Angeles in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute, and Tenant shall deliver to the Project management office a
reproducible, full-sized copy of the "as built" drawings (1 /8 inch = 1 foot
scale) of the Alterations.

               6.4 Payment for Improvements. In the event Tenant orders any
Alterations or repair work directly from Landlord, the charges for such work
shall be deemed Additional Rent under this Lease, due and payable prior to the
commencement of such work. If payment is made directly to contractors, Tenant
shall comply with Landlord's requirements for final lien releases and waivers in
connection with Tenant's payment for work to such contractors: Whether or not
Tenant orders any work directly from Landlord, Tenant shall pay to Landlord a
percentage of the cost of such work (such percentage, which shall vary depending
upon whether or not Tenant orders the work directly from Landlord, to be
established on a uniform basis for the Building and/or Project, but shall in no
event exceed five percent (5%) of the cost of such work) sufficient to
compensate Landlord for all overhead, general conditions, fees and other costs
and expenses arising from Landlord's involvement with such work.

                                      -14-

<PAGE>
               6.5 Construction Insurance. In addition to the requirements of
Article 7 of this Lease, in the event that Tenant makes any Alterations, prior
to the commencement of such Alterations, Tenant shall provide Landlord with
evidence that Tenant carries "Builder's All Risk" insurance in an amount
approved by Landlord covering the construction of such Alterations, and such
other insurance as Landlord may require, it being understood and agreed that all
of such Alterations shall be insured by Tenant pursuant to Article 7 of this
Lease immediately upon completion thereof. In addition, Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a
co-obligee Notwithstanding the foregoing, if the cost of such Alterations is
$15,000 or less and the net worth of the Tenant as of the date Tenant requests
Landlord's consent to such Alterations is not less than that of Tenant as of the
date of this Lease calculated under generally accepted accounting principles, no
lien and completion bond shall be required.

               6.6 Landlord's Property. All Alterations, improvements, fixtures
and/or equipment which may be installed or placed in or about the Premises, and
all signs installed in, on or about the Premises, from time to time, shall be at
the sole cost of Tenant and shall be and become the property of Landlord.
Furthermore, if Landlord, as a condition to Landlord's consent to any
Alteration, requires that Tenant remove any Alteration upon the expiration or
early termination of the Lease Term, Landlord may, by written notice to Tenant
prior to the end of the Lease Term, or given following any earlier termination
of this Lease, require Tenant, at Tenant's expense, to remove such Alterations
and to repair any damage to the Premises and Building caused by such removal. If
Tenant fails to complete such removal and/or to repair any damage caused by the
removal of any Alterations, Landlord may do so and may charge the cost thereof
to Tenant.

                                    ARTICLE 7

                                    INSURANCE

               7.1 Indemnification and Waiver. To the extent not prohibited by
law, Landlord, its members, their partners and all of their respective officers,
agents (including, without limitation, Transwestern Commercial Services),
servants, employees, and independent contractors (collectively, "LANDLORD
PARTIES") shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant. Tenant shall indemnify, defend, protect, and hold
harmless the Landlord Parties from any and all loss, cost, damage, expense and
liability (including without limitation court costs and reasonable attorneys'
fees) incurred in connection with or arising from any cause in, on or about the
Premises, provided that Tenant shall not be required to indemnify and hold
Landlord harmless from any loss, cost, liability, damage or expense, including,
but not limited to, penalties, fines, attorneys' fees or costs (collectively,
"CLAIMS"), to any person, property or entity resulting from the negligence or
willful misconduct of Landlord or its agents, contractors, employees or
licensees, in connection with Landlord's activities in the Building (except for
damage to the Tenant Improvements and Tenant's personal property, fixtures,
furniture and equipment in the Premises, to the extent Tenant is required to
obtain the requisite insurance coverage pursuant to this Lease) or the Project,
and Landlord hereby so indemnifies and holds Tenant harmless from

                                      -15-

<PAGE>
any such Claims; provided further that because Landlord is required to maintain
insurance on the Building and Tenant compensates Landlord for such insurance as
part of Tenant's Share of Direct Expenses and because of the existence of
waivers of subrogation set forth in Section 7.5 of this Lease, and to minimize
multiplicity of actions, Landlord hereby defends, indemnifies and holds Tenant
harmless from any Claims to any property outside of the Premises, including
damage to the Building and Landlord's property, even if resulting from the
negligent acts, omissions, or willful misconduct of Tenant or those of its
agents, contractors, servants, employees or licensees. Similarly, since Tenant
must carry insurance pursuant to this Article 7 to cover its personal property
within the Premises and the Tenant Improvements, and because of the waiver of
subrogation set forth in Section 7.5 and to minimize duplicity of action, Tenant
hereby defends, indemnifies and holds Landlord harmless from any Claim to any
property within the Premises, even if resulting from the negligent acts,
omissions or willful misconduct of Landlord or those of its agents, contractors,
employees or licensees. The provisions of this Section 7.1 shall survive the
expiration or sooner termination of this Lease with respect to any claims or
liability arising in connection with any event occurring prior to such
expiration or termination.

               7.2 Tenant's Compliance with Landlord's Fire and Casualty
Insurance. Tenant shall, at Tenant's expense, comply with all insurance company
requirements pertaining to the use of the Premises. If Tenant's conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase within ten (10) days
after receipt of notice of such increase. Tenant, at Tenant's expense, shall
comply with all rules, orders, regulations or requirements of the American
Insurance Association (formerly the National Board of Fire Underwriters) and
with any similar body.

               7.3 Tenant's Insurance. Tenant shall maintain the following
coverages in the following amounts.

                      7.3.1 Commercial General Liability Insurance on an
occurrence basis covering the insured against claims of bodily injury, personal
injury and property damage arising out of Tenant's operations, assumed
liabilities or use of the Premises, including the following divisions of
insurance: Premises and Operations, Independent Contractors and Blanket
Contractual Liability. Such insurance shall cover the insuring provisions of
this Lease and the performance by Tenant of the indemnity agreements set forth
in Section 7.1 of this Lease, for limits of liability not less than:

                   Bodily Injury and
                   Property Damage Liability      $3,000,000 each occurrence
                                                  $3,000,000 annual aggregate

                   Personal Injury Liability      $3,000,000 each occurrence
                                                  $3,000,000 annual aggregate
                                                  0% Insured's participation

                      7.3.2 Property Insurance covering (i) all office
furniture, trade fixtures, office equipment, merchandise and all other items of
Tenant's property on the Premises installed by, for, or at the expense of
Tenant, (ii) the Tenant Improvements, and (iii) all other

                                      -16-

<PAGE>
improvements, alterations and additions to the Premises. Such insurance shall be
written on an "all risks" of physical loss or damage basis, for the full
replacement cost value new without deduction for depreciation of the covered
items and in amounts that meet any co-insurance clauses of the policies of
insurance and shall include a vandalism and malicious mischief endorsement,
sprinkler leakage coverage and earthquake sprinkler leakage coverage.

                      7.3.3 Loss-of-income and extra-expense insurance in such
amounts as will reimburse Tenant for direct or indirect loss of earnings
attributable to all perils commonly insured against by prudent tenants or
attributable to prevention of access to the Premises or to the Building as a
result of such perils.

               7.4 Form of Policies. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. All insurance shall (i) be issued by an insurance
company having a rating of not less than A-X in Best's Insurance Guide or which
is otherwise acceptable to Landlord and licensed to do business in the State of
California; and (ii) provide that said insurance shall not be canceled or
coverage changed unless thirty (30) days' prior written notice shall have been
given to Landlord and any mortgagee of Landlord. In addition, the insurance
described in Section 7.3.1 shall (a) name Landlord, and any other party
specified by Landlord, as an additional insured; (b) specifically cover the
liability assumed by Tenant under this Lease including, but not limited to,
Tenant's obligations under Section 7.1 of this Lease; and (c) be primary
insurance as to all claims thereunder and provide that any insurance carried by
Landlord is excess and is non-contributing with any insurance requirement of
Tenant. Tenant shall deliver all policies or certificates thereof to Landlord on
or before the Delivery Date and at least thirty (30) days before the expiration
dates thereof. In the event Tenant shall fail to procure such insurance, or to
deliver such policies or certificate, Landlord may, at its option, (i) deny
Tenant the right to occupy the Premises until such time as Tenant delivers such
policies or certificate (which denial shall have no effect upon the Lease
Commencement Date), or (ii) following three (3) days prior notice to Tenant,
procure such policies for the account of Tenant, and the cost thereof shall be
paid to Landlord within five (5) days after delivery to Tenant of bills
therefor.

               7.5 Subrogation. Tenant agrees to have its insurer(s) issuing the
insurance described in Sections 7.3.2 and 7.3.3 above, to waive any rights of
subrogation that such companies may have against Landlord. Tenant hereby waives
any right that Tenant may have against Landlord as a result of any loss or
damage to the extent such loss or damage is insurable under such policies.

               7.6 Additional Insurance Obligations. Tenant shall carry and
maintain during the entire Lease Term, at Tenant's sole cost and expense,
increased amounts of the insurance required to be carried by Tenant pursuant to
this Article 7, and such other reasonable types of insurance coverage and in
such reasonable amounts covering the Premises and Tenant's operations therein,
as may be reasonably requested by Landlord.

                                      -17-

<PAGE>
                                    ARTICLE 8

                             DAMAGE AND DESTRUCTION

               8.1 Repair of Damage to Premises by Landlord. Tenant shall
promptly notify Landlord of any damage to the Premises resulting from fire or
any other casualty. Within sixty (60) days after the date Landlord learns of the
necessity for repairs as a result of damage, Landlord shall notify Tenant
("DAMAGE REPAIR ESTIMATE") of Landlord's estimated assessment of the period of
time in which the repairs will be completed, which assessment shall be based
upon the opinion of a contractor reasonably selected by Landlord and experienced
in comparable repairs of high-rise office buildings. If the Premises or any
Common Areas serving or providing access to the Premises shall be damaged by
fire or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord's
reasonable control, and subject to all other terms of this Article 8, restore
the base, shell and core of the Building and such Common Areas. Such restoration
shall be to substantially the same condition of the base, shell, and core of the
Building and the Common Areas prior to the casualty, except for modifications
required by zoning and building codes and other laws or by the holder of a
mortgage on the Building or Project or any other modifications to the Common
Areas deemed desirable by Landlord, provided that access to the Premises and any
common restrooms serving the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to
any party designated by Landlord) all insurance proceeds payable to Tenant under
Tenant's insurance required under Section 7.3.2 of this Lease, and Landlord
shall repair any injury or damage to the Tenant Improvements installed in the
Premises and shall return such Tenant Improvements to their original condition;
provided that if the cost of such repair by Landlord exceeds the amount of
insurance proceeds received by Landlord from Tenant's insurance carrier, as
assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord
prior to Landlord's repair of the damage. In connection with such repairs and
replacements, Tenant shall, prior to the commencement of construction, submit to
Landlord, for Landlord's review and approval, all plans, specifications and
working drawings relating thereto, and Landlord shall select the contractors to
perform such improvement work. Such submittal of plans and construction of
improvements shall be performed in substantial compliance with the terms of the
Tenant Work Letter as though such construction of improvements were the initial
construction of the Tenant Improvements. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises,
and if such damage is not the result of the negligence or willful misconduct of
Tenant or Tenant's employees, contractors, licensees, or invitees, Landlord
shall allow Tenant a proportionate abatement of Rent during the time and to the
extent the Premises are unfit for occupancy for the purposes permitted under
this Lease, and not occupied by Tenant as a result thereof.

               8.2 Landlord's Option to Repair: Notwithstanding the terms of
Section 8.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after
Landlord learns of the necessity for repairs as the result of damage, such
notice to include a termination date giving Tenant ninety (90) days to vacate
the Premises, but Landlord may so elect only if the Building or Project shall be
damaged by fire or other

                                      -18-

<PAGE>
casualty or cause, whether or not the Premises are affected, and one or more of
the following conditions is present: (i) in Landlord's reasonable judgment,
repairs cannot reasonably be completed within one hundred twenty (120) days
after the date Landlord learns of the necessity for repairs as the result of
damage (when such repairs are made without the payment of overtime or other
premiums); (ii) the holder of any mortgage on the Building or Project or ground
lessor with respect to the Building or Project shall require that the insurance
proceeds or any portion thereof be used to retire the mortgage debt, or shall
terminate the ground lease, as the case may be; or (iii) the damage is not fully
covered, except for deductible amounts, by Landlord's insurance policies.
However, if Landlord does not elect to terminate this Lease pursuant to
Landlord's termination right as provided above, and the Damage Repair Estimate
indicates that repairs cannot be completed within one hundred eighty (180) days
after being commenced, Tenant may elect, not later than thirty (30) days after
Tenant's receipt of the Damage Repair Estimate, to terminate this Lease by
written notice to Landlord effective as of the date specified in Tenant's
notice.

               8.3 Waiver of Statutory Provisions. The provisions of this Lease,
including this Article 8, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

               8.4 Damage Near End of Term. In the event that the Premises, the
Building, or the Project is destroyed or damaged to any substantial extent
during the last twenty-four (24) months of the Lease Term, then notwithstanding
anything contained in this Article 8, Landlord shall have the option to
terminate this Lease by giving written notice to Tenant of the exercise of such
option within sixty (60) days after Landlord learns of the necessity for repairs
as the result of such damage or destruction, in which event this Lease shall
cease and terminate as of the date of such notice, Tenant shall pay the Base
Rent and Additional Rent, properly apportioned up to such date of damage, and
both parties hereto shall thereafter be freed and discharged of all further
obligations hereunder, except as provided for in provisions of this Lease which
by their terms survive the expiration or earlier termination of the Lease Term.

                                    ARTICLE 9

                         PERSONAL PROPERTY AND OTHER TAX

        Tenant shall reimburse Landlord upon demand for any and all taxes
required to be paid by Landlord (except to the extent included in Tax Expenses
by Landlord), excluding state, local and federal personal or corporate income
taxes measured by the net income of Landlord from all sources and estate and
inheritance taxes, whether or not now customary or within the contemplation of
the parties hereto, when: (i) such taxes are measured by or reasonably
attributable to the cost or value of Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, or by the cost or value of any
leasehold improvements made in

                                      -19-

<PAGE>
or to the Premises by or for Tenant, to the extent the cost or value of such
leasehold improvements exceeds the cost or value of a building standard
build-out as determined by Landlord regardless of whether title to such
improvements shall be vested in Tenant or Landlord; (ii) such taxes are assessed
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion of the Project, including the Project's parking facility; (iii) such
taxes are assessed upon this transaction or any document to which Tenant is a
party creating or transferring an interest or an estate in the Premises; or (iv)
such taxes or assessments are levied or assessed upon the Project or any part
thereof or upon Landlord by any governmental authority or entity, and relate to
the construction, operation, management, use, alteration or repair of mass
transit improvements.

                                   ARTICLE 10

                             SERVICES AND UTILITIES

               10.1 Standard Tenant Services. Landlord shall provide the
following services on all days (unless otherwise stated below) during the Lease
Term.

                      10.1.1 Subject to all governmental rules, regulations and
guidelines applicable thereto, Landlord shall provide heating ventilation and
air conditioning when necessary for normal comfort for normal office use in the
Premises, from Monday through Friday, during the period from 8:00 A.M. to 6:00
P.M. and on Saturday during the period from 9:00 A.M. to 1:00 P.M., except for
the date of observation of New Year's Day, Independence Day, Labor Day, Memorial
Day, Thanksgiving Day, Christmas Day and, at Landlord's discretion, other
locally or nationally recognized holidays (collectively, the "Holidays").

                      10.1.2 Landlord shall provide adequate electrical wiring,
power and facilities for connection to Tenant's lighting fixtures and incidental
uses, provided that (i) the monthly connected electrical load of the incidental
use equipment does not exceed an average of two (2.0) watts per usable square
foot of the Premises, and (ii) the monthly connected electrical load of Tenant's
lighting fixtures does not exceed an average of one and one-half (1 1/2) watt
per usable square foot of the Premises. Tenant shall bear the initial cost of
lamps, starters and ballasts for lighting fixtures within the Premises. Tenant
shall also bear the cost of replacement of non-standard lamps, starters and
ballasts for lighting fixtures within the Premises; however, the cost of
replacement of Building-standard lamps, starters and ballasts for lighting
fixtures within the Premises shall be included in Operating Expenses.

                      10.1.3 Landlord shall provide city water from the regular
Building outlets for drinking, lavatory and toilet purposes.

                      10.1.4 Landlord shall provide janitorial services Monday
through Friday except the date of observation of the Holidays, in and about the
Premises.

                      10.1.5 Landlord shall provide nonexclusive automatic
passenger elevator service.

                                      -20-

<PAGE>
                      10.1.6 Landlord shall provide nonexclusive freight
elevator service subject to scheduling by Landlord.

               10.2 Overstandard Tenant Use. Tenant shall not, without
Landlord's prior written consent, use heat-generating machines, machines other
than normal office machines, or equipment or lighting other than Building
standard lights in the Premises, which may affect the temperature otherwise
maintained by the air conditioning system or increase the water normally
furnished for the Premises by Landlord pursuant to the terms of Section 10.1 of
this Lease. If such consent is given, Landlord shall have the right to install
supplementary air conditioning units or other facilities in the Premises,
including supplementary or additional metering devices, and the cost thereof,
including the cost of installation, operation and maintenance, increased wear
and tear on existing equipment and other similar charges, together with an
administrative fee, shall be paid by Tenant to Landlord upon billing by
Landlord. If Tenant uses water or electricity in excess of that supplied by
Landlord pursuant to Section 10.1 of this Lease, and in excess of that typically
used by office tenants of the Building, Tenant shall pay to Landlord, upon
billing, the cost of such excess consumption, the cost of the installation,
operation, and maintenance of equipment which is installed in order to supply
such excess consumption, and the cost of the increased wear and tear on existing
equipment caused by such excess consumption; and Landlord may install devices to
separately meter any increased use and in such event Tenant shall pay the
increased cost directly to Landlord, on demand, including the cost of such
additional metering devices. If Tenant desires to use heat, ventilation or air
conditioning during hours other than those for which Landlord is obligated to
supply such utilities pursuant to the terms of Section 10.1 of this Lease,
Tenant shall give Landlord such prior notice, if any, as Landlord shall from
time to time establish as appropriate, of Tenant's desired use in order to
supply such utilities, and Landlord shall supply such utilities to Tenant at
such commercially reasonable hourly cost to Tenant as Landlord shall from time
to time establish. Amounts payable by Tenant to Landlord for such use of
additional utilities shall be deemed Additional Rent hereunder and shall be
billed on a monthly basis. Landlord may increase the hours or days during which
air conditioning, heating and ventilation are provided to the Premises and the
Building to accommodate the usage by tenants occupying two-thirds or more of the
rentable square feet of the Building or Project.

               10.3 Interruption of Use. Tenant agrees that Landlord shall not
be liable for damages, by abatement of Rent or otherwise, for failure to furnish
or delay in furnishing any service (including telephone and telecommunication
services), or for any diminution in the quality or quantity thereof, when such
failure or delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any accident or casualty
whatsoever, by act or default of Tenant or other parties, or by any other cause
beyond Landlord's reasonable control; and such failures or delays or diminution
shall never be deemed to constitute an eviction or disturbance of Tenant's use
and possession of the Premises or relieve Tenant from paying Rent or performing
any of its obligations under this Lease. Furthermore, Landlord shall not be
liable under any circumstances for a loss of, or injury to, property or for
injury to, or interference with, Tenant's business, including, without
limitation, loss of profits, however occurring, through or in connection with or
incidental to a failure to furnish any of the services or utilities as set forth
in this Article 10. If any governmental entity promulgates or revises any
statute, ordinance, building code, fire code

                                      -21-

<PAGE>
or other code or imposes mandatory or voluntary controls or guidelines on
Landlord or the Project or any portion thereof, relating to the use or
conservation of energy, water, gas, light or electricity or the reduction of
automobile or other emissions or the provision of any other utility or service
provided with respect to this Lease or if Landlord is required to make
alterations to the Project or any portion thereof in order to comply with such
mandatory or voluntary controls or guidelines, then Landlord may, in its sole
discretion, comply with such mandatory or voluntary controls or guidelines or
make such alterations to the Project related thereto without creating any
liability of Landlord to Tenant under this Lease, provided that the Premises are
not thereby rendered untenantable, and further provided that Landlord will not
voluntarily reduce the level of services provided to the Premises unless
Landlord is motivated to do so by anticipated costs savings and efficiencies of
operation consistent with the first class character of the Project. Such
compliance and the making of such permitted alterations shall in no event
entitle Tenant to any damages, relieve Tenant of the obligation to pay the full
Rent reserved hereunder or constitute or be construed as a constructive or other
eviction of Tenant. In addition, the cost of such compliance and alterations
shall be included in Operating Expenses.

               10.4 Additional Services. Landlord shall also have the exclusive
right, but not the obligation, to provide any additional services which may be
required by Tenant, including, without limitation, locksmithing, lamp
replacement, additional janitorial service, and additional repairs and
maintenance, provided that Tenant shall pay to Landlord upon billing, the sum of
all costs to Landlord of such additional services plus an administration fee at
a rate equal to the fee Landlord is generally charging tenants of the Project
for such services. Charges for any service for which Tenant is required to pay
from time to time hereunder shall be deemed Additional Rent hereunder and shall
be billed on a monthly basis. Notwithstanding anything to the contrary set forth
in this Lease, if Tenant fails to make payment for any such services within ten
(10) days of receipt of bills therefor, Landlord may discontinue any or all of
such services and such discontinuance shall not be deemed to constitute an
eviction or disturbance of Tenant's use and possession of the Premises or
relieve Tenant from paying Rent or performing any of its other obligations under
this Lease.

                                   ARTICLE 11

                            ASSIGNMENT AND SUBLETTING

               11.1 Transfers. Tenant shall not, without the prior written
consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit
any lien to attach to, or otherwise transfer, this Lease or any interest
hereunder, permit any assignment, or other transfer of this Lease or any
interest hereunder by operation of law, sublet the Premises or any part thereof,
or permit the use of the Premises by any persons other than Tenant and its
employees (all of the foregoing are hereinafter sometimes referred to
collectively as "TRANSFERS" and any entity to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "TRANSFEREE"). If
Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the "TRANSFER NOTICE") shall include (i) the proposed
effective date of the Transfer, which shall not be less than thirty (30) days
nor more than one hundred eighty (180) days after the date of delivery of the
Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "SUBJECT SPACE"), (iii) all of the terms of the proposed
Transfer and the consideration therefor, including calculation of the "Transfer

                                      -22-

<PAGE>
Premium", as that term is defined in Section 11.3 below, in connection with such
Transfer, the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including all existing operative documents to be executed to evidence
such Transfer or the agreements incidental or related to such Transfer, and (iv)
current financial statements of the proposed Transferee (including, without
limitation, federal income tax returns for the two (2) most recent years)
certified by an officer, partner or owner thereof, and any other information
required by Landlord, which will enable Landlord to determine the financial
responsibility, character, and reputation of the proposed Transferee, nature of
such Transferee's business and proposed use of the Subject Space, and such other
information as Landlord may reasonably require. Any Transfer made without
Landlord's prior written consent shall, at Landlord's option, be null, void and
of no effect, and shall, at Landlord's option, constitute a default by Tenant.
Whether or not Landlord consents to any proposed Transfer, Tenant shall pay
Landlord's review and processing fees, as well as any reasonable legal fees
incurred by Landlord, within thirty (30) days after written request by Landlord,
which fees shall not exceed, in the aggregate, Two Thousand Dollars ($2,000.00)
per proposed Transfer.

               11.2 Landlord's Consent. Landlord shall not unreasonably withhold
its consent to any proposed Transfer of the Subject Space to the Transferee on
the terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:

                      11.2.1 The Transferee is of a character or reputation or
engaged in a business which is not consistent with the quality of the Building
or the Project,;

                      11.2.2 The Transferee intends to use the Subject Space for
purposes which are not permitted under this Lease;

                      11.2.3 The Transferee is either a governmental agency or
instrumentality thereof;

                      11.2.4 The Transfer will result in more than a reasonable
and safe number of occupants per floor within the Subject Space;

                      11.2.5 The Transferee is not a party of reasonable
financial worth and/or financial stability in light of the responsibilities
involved under the Lease on the date consent is requested;

                      11.2.6 The proposed Transfer would cause a violation of
another lease for space in the Project, or would give an occupant of the Project
a right to cancel its lease; or

                      11.2.7 Either the proposed Transferee, or any person of
entity which directly or indirectly, controls, is controlled by, or is under
common control with, the proposed Transferee is negotiating with Landlord to
lease space in the Project.

                                      -23-

<PAGE>
        If Landlord consents to any Transfer pursuant to the terms of this
Section 11.2 (and does not exercise any recapture rights Landlord may have under
Section 11.4 of this Lease), Tenant may within six (6) months after Landlord's
consent, but not later than the expiration of said six-month period, enter into
such Transfer of the Premises or portion thereof, upon substantially the same
terms and conditions as are set forth in the Transfer Notice furnished by Tenant
to Landlord pursuant to Section 11.1 of this Lease, provided that if there are
any changes in the terms and conditions from those specified in the Transfer
Notice (i) such that Landlord would initially have been entitled to refuse its
consent to such Transfer under this Section 11.2, or (ii) which would cause the
proposed Transfer to be more favorable to the Transferee than the terms set
forth in Tenant's original Transfer Notice, Tenant shall again submit the
Transfer to Landlord for its approval and other action under this Article 11
(including Landlord's right of recapture, if any, under Section 11.4 of this
Lease). Notwithstanding any contrary provision of this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent to a proposed Transfer or otherwise has breached its obligations
under this Article 11, Tenant's and such Transferee's sole remedy shall be to
seek a declaratory judgment and/or injunctive relief, and Tenant, on behalf of
itself and, to the extent permitted by law, such proposed Transferee, waives all
other remedies against Landlord, including without limitation, the right to seek
monetary damages or to terminate this Lease.

               11.3 Transfer Premium.

                      11.3.1 Definition of Transfer Premium. If Landlord
consents to a Transfer, as a condition thereto which the parties hereby agree is
reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer
Premium," as that term is defined in this Section 11.3, received by Tenant from
such Transferee. "TRANSFER PREMIUM" shall mean all rent, additional rent or
other consideration payable by such Transferee in connection with the Transfer
in excess of the Rent and Additional Rent payable by Tenant under this Lease
during the term of the Transfer on a per rentable square foot basis if less than
all of the Premises is transferred, after deducting the reasonable expenses
incurred by Tenant for (i) any changes, alterations and improvements to the
Premises in connection with the Transfer, and (ii) any brokerage commissions in
connection with the Transfer (collectively, the "TRANSFER COSTS"). "Transfer
Premium" shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer, and any payment in excess of fair market value for services rendered
by Tenant to Transferee or for assets, fixtures, inventory, equipment, or
furniture transferred by Tenant to Transferee in connection with such Transfer.
If part of the Transfer Premium shall be payable by the Transferee other than in
cash, Landlord's share of such non-cash consideration shall be in such form as
is reasonably satisfactory to Landlord.

                      11.3.2 Payment of Transfer Premium. The determination of
the amount of Landlord's applicable share of the Transfer Premium shall be made
on an annual basis in accordance with the terms of this Section 11.3.2, but an
estimate of the amount of Landlord's applicable share of the Transfer Premium
shall be made each month and one-twelfth of such estimated amount shall be paid
to Landlord promptly, but in no event later than the next date for payment of
Base Rent hereunder, subject to an annual reconciliation on each anniversary
date of the Transfer. If the payments to Landlord under this Section 11.3.2
during the twelve (12) months preceding each annual reconciliation exceed the
amount of Landlord's applicable share of

                                      -24-

<PAGE>
Transfer Premium determined on an annual basis, then Landlord shall credit the
overpayment against Tenant's future obligations under this Section 11.3.2 or if
the overpayment occurs during the last year of the Transfer in question, refund
the excess to Tenant. If Tenant has underpaid Landlord's applicable share of the
Transfer Premium, as determined by such annual reconciliation, Tenant shall pay
the amount of such deficiency to Landlord promptly, but in no event later than
the next date for payment of Base Rent hereunder. For purposes of calculating
the Transfer Premium on an annual basis, Tenant's Transfer Costs shall be deemed
to be offset against the first rent, additional rent or other consideration
payable by the Transferee, until such Transfer Costs are exhausted.

                      11.3.3 Calculations of Rent. In the calculation of the
Rent (as it relates to the Transfer Premium calculated under Section 11.3.1 of
this Lease), the Rent paid during each annual period for the Subject Space by
Tenant shall be computed after adjusting such rent to the actual effective rent
to be paid, taking into consideration any and all leasehold concessions granted
in connection therewith, including, but not limited to, any rent credit and
tenant improvement allowance. For purposes of calculating any such effective
rent all such concessions shall be amortized on a straight-line basis over the
relevant term.

               11.4 Landlord's Option as to Subject Space. Notwithstanding
anything to the contrary contained in this Article 11, Landlord shall have the
option, by giving written notice to Tenant within thirty (30) days after receipt
of any Transfer Notice, to recapture the Subject Space. Such recapture notice
shall cancel and terminate this Lease with respect to the Subject Space as of
the date stated in the Transfer Notice as the effective date of the proposed
Transfer until the last day of the term of the Transfer as set forth in the
Transfer Notice. In the event of a recapture by Landlord, if this Lease shall be
canceled with respect to less than the entire Premises, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same. If Landlord declines, or fails to elect in a timely
manner to recapture the Subject Space under this Section 11.4, then, provided
Landlord has consented to the proposed Transfer, Tenant shall be entitled to
proceed to transfer the Subject Space to the proposed Transferee, subject to
provisions of this Article 11.

               11.5 Effect of Transfer. If Landlord consents to a Transfer, (i)
the terms and conditions of this Lease shall in no way be deemed to have been
waived or modified, (ii) such consent shall not be deemed consent to any further
Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, (iv) Tenant shall furnish upon Landlord's request a complete
statement, certified by an independent certified public accountant, or Tenant's
chief financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of the Lease from liability under this Lease. Landlord or its
authorized representatives shall have the right at all reasonable times to audit
the books, records and papers of Tenant relating to any Transfer, and shall have
the right to make copies thereof. If the Transfer Premium with respect to any
Transfer shall be

                                      -25-

<PAGE>
found understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency and Landlord's costs of such audit, and if understated by more than
ten percent (10%), Tenant shall pay to Landlord a late charge and interest in
connection with such understated amount at rates as set forth in Section 19.28
of this Lease.

               11.6 Additional Transfers. For purposes of this Lease, the term
"Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of fifty percent (50%) or
more of the partners, or transfer of FIFTY percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of more than an aggregate of fifty percent (50%) of the voting shares
of Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of more than an aggregate of fifty percent (50%) of the value of the
unencumbered assets of Tenant within a twelve (12)month period.

               11.7 Non-Transfers. Notwithstanding anything to the contrary
contained in this Article 11, an assignment or subletting of all or a portion of
the Premises to an affiliate of Tenant (an entity which is controlled by,
controls, or is under common control with, Tenant), shall not be deemed a
Transfer under this Article 11, provided that Tenant notifies Landlord of any
such assignment or sublease and promptly supplies Landlord with any documents or
information requested by Landlord regarding such assignment or sublease or such
affiliate, and further provided that such assignment or sublease is not a
subterfuge by Tenant to avoid its obligations under this Lease. An assignee of
Tenant's entire interest in this Lease pursuant to the immediately preceding
sentence may be referred to herein as an "AFFILIATED ASSIGNEE." "CONTROL," as
used in this Section 11.7, shall mean the ownership, directly or indirectly, of
greater than FIFTY percent (50%) of the voting securities of, or possession of
the right to vote, in the ordinary direction of its affairs, of greater than
fifty percent (50%) of the voting interest in, an entity.

                                   ARTICLE 12

                               DEFAULTS; REMEDIES

               12.1 Events of Default. The occurrence of any of the following
shall constitute a default of this Lease by Tenant:

                      12.1.1 Any failure by Tenant to pay any Rent or any other
charge required to be paid under this Lease, or any part thereof, when due; or

                      12.1.2 Any failure by Tenant to observe or perform any
other provision, covenant or condition of this Lease to be observed or performed
by Tenant where such failure continues for fifteen (15) days after written
notice thereof from Landlord to Tenant; provided that (i) any such notice shall
be in lieu of, and not in addition to, any notice required under California Code
of Civil Procedure Section 1161 or any similar or successor law; (ii) if the

                                      -26-

<PAGE>
nature of such default is such that the same cannot reasonably be cured within a
fifteen (15) day period, Tenant shall not be deemed to be in default if it
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and cure said default, as soon as possible; and (iii) the
cure period specified in this Section 12.1.2 shall not be applicable to Tenant's
obligations under Sections 7.3 and 7.4 and Sections 19.1 and 19.11 of this
Lease; i.e., Tenant's failure to comply with any provision, covenant or
condition described in such Sections and/or articles within the time periods
specified therein shall constitute a default under this Section 12.1.2; or

                      12.1.3 Abandonment of the Premises by Tenant;
("ABANDONMENT" is herein defined to include, but is not limited to, any absence
by Tenant from the Premises for three (3) business days or longer while in
default of any provision of this Lease.

               12.2 Remedies Upon Default. Upon the occurrence of any event of
default by Tenant, Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity, the option to pursue any one or more
of the following remedies, each and all of which shall be cumulative and
nonexclusive, without any notice or demand whatsoever.

                      12.2.1 Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the Premises
and expel or remove Tenant and any other person who may be occupying the
Premises or any part thereof, without being liable for prosecution or any claim
or damages therefor; and Landlord may recover from Tenant the following:

                               (i) The worth at the time of award of any unpaid
        rent which had been earned at the time of such termination; plus

                               (ii) The worth at the time of award of the amount
        by which the unpaid rent which would have been earned after termination
        until the time of award exceeds the amount of such rental loss that
        Tenant proves could have been reasonably avoided; plus

                               (iii) The worth at the time of award of the
        amount by which the unpaid rent for the balance of the Lease Term after
        the time of award exceeds the amount of such rental loss that Tenant
        proves could have been reasonably avoided; plus

                               (iv) Any other amount necessary to compensate
        Landlord for all the detriment proximately caused by Tenant's failure to
        perform its obligations under this Lease or which in the ordinary course
        of things would be likely to result therefrom, specifically including
        but not limited to, brokerage commissions and advertising expenses
        incurred, expenses of remodeling the Premises or any portion thereof for
        a new tenant, whether for the same or a different use, and any special
        concessions made to obtain a new tenant; and

                               (v) At Landlord's election, such other amounts in
        addition to or in lieu of the foregoing as may be permitted from time to
        time by applicable law.

                                      -27-

<PAGE>
        The term "rent" as used in this Section 12.2 shall be deemed to be and
to mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
12.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Section 19.28 of this Lease, but in
no case greater than the maximum amount of such interest permitted by law. As
used in Paragraph 12.2.1 (iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

               12.2.2 Landlord shall have the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee has the
right to sublet or assign, subject only to reasonable limitations). Accordingly,
if Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.

        12.3 Sublessees of Tenant. Whether or not Landlord elects to terminate
this Lease on account of any default by Tenant as set forth in this Article 12,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases, licenses, concessions or arrangements.
In the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.

        12.4 Form of Payment After Default. Following the occurrence of an,
event of default by Tenant, Landlord shall have the right to require that any or
all subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.

        12.5 Efforts to Relet. For the purposes of this Article 12, Tenant's
right to possession shall not be deemed to have been terminated by efforts of
Landlord to relet the Premises, by its acts of maintenance or preservation with
respect to the Premises, or by appointment of a receiver to protect Landlord's
interests hereunder. The foregoing enumeration is not exhaustive, but merely
illustrative of acts which may be performed by Landlord without terminating
Tenant's right to possession.

                                   ARTICLE 13

                                  CONDEMNATION

        13.1 Permanent Taking. If the whole or any part of the Premises,
Building or Project shall be taken by power of eminent domain or condemned by
any competent authority for any public or quasi-public use or purpose, or if any
adjacent property or street shall be so taken

                                      -28-

<PAGE>
or condemned, or reconfigured or vacated by such authority in such manner as to
require the use, reconstruction or remodeling of any part of the Premises,
Building or Project, or if Landlord shall grant a deed or other instrument in
lieu of such taking by eminent domain or condemnation, Landlord shall have the
option to terminate this Lease upon ninety (90) days' notice, provided such
notice is given no later than one hundred eighty (180) days after the date of
such taking, condemnation, reconfiguration, vacation, deed or other instrument.
If more than twenty-five percent (25%) of the rentable square feet of the
Premises is taken, or if access to the Premises is substantially impaired,
Tenant shall have the option to terminate this Lease upon ninety (90) days'
notice, provided such notice is given no later than one hundred eighty (180)
days after the date of such taking. Landlord shall be entitled to the entire
award or payment in connection therewith, except that Tenant shall have the
right to file any separate claim available to Tenant for any taking of Tenant's
personal property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Lease Term pursuant to the terms of this Lease, and for moving
expenses, so long as such claims do not diminish the award available to
Landlord, its ground lessor with respect to the Building or Project or its
mortgagee, and such claim is payable separately to Tenant. All Rent shall be
apportioned as of the date of such termination, or the date of such taking,
whichever shall first occur. If any part of the Premises shall be taken, and
this Lease shall not be so terminated, the Rent shall be proportionately abated.
Tenant hereby waives any and all rights it might otherwise have pursuant to
Section 1265.130 of The California Code of Civil Procedure.

        13.2 Temporary Taking. Notwithstanding anything to the contrary
contained in this Article 13, in the event of a temporary taking of all or any
portion of the Premises for a period of one hundred and eighty (180) days or
less, then this Lease shall not terminate but the Base Rent and the Additional
Rent shall be abated for the period of such taking in proportion to the ratio
that the number of rentable square feet of the Premises taken bears to the total
rentable square feet of the Premises. Landlord shall be entitled to receive the
entire award made in connection with any such temporary taking.

                                   ARTICLE 14

                                     BROKERS

        Landlord and Tenant hereby warrant to each other that they have had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease, excepting only the real estate brokers or agents specified in
Section 11 of the Summary (the "BROKERS"), and that they know of no other real
estate broker or agent who is entitled to a commission in connection with this
lease. Each party agrees to indemnify and defend the other party against and
hold the other party harmless from any and all claims, demands, losses,
liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.

                                      -29-

<PAGE>
                                   ARTICLE 15

                              LANDLORD'S LIABILITY

        It is expressly understood and agreed that notwithstanding anything in
this Lease to the contrary, and notwithstanding any applicable law to the
contrary, the liability of Landlord and the Landlord Parties hereunder
(including any successor landlord hereunder) and any recourse by Tenant against
Landlord or the Landlord Parties shall be limited solely and exclusively to an
amount which is equal to the lesser of (i) the interest of Landlord in and to
the Building, or (ii) the equity interest Landlord would have in the Building if
the Building were encumbered by third-party debt in an amount equal to eighty
percent (80%) of the value of the Building (as such value is determined by
Landlord), and neither Landlord, nor any of the Landlord Parties, shall have any
personal liability therefor, and Tenant, on behalf of itself and all persons
claiming by, through or under Tenant, hereby expressly waives and releases
Landlord and the Landlord Parties from such personal liability.

                                   ARTICLE 16

                         SUBSTITUTION OF OTHER PREMISES

        16.1 New Premises. At any time after the date of this Lease, Landlord
shall have the right to substitute for the premises then being leased or to be
leased hereunder (the "EXISTING PREMISES") other premises within the Project
(the "New Premises"), provided that the New Premises shall be of at least
substantially the same size and shall either have substantially the same
perimeter configuration or a perimeter configuration substantially usable for
the purposes for which the Existing Premises were being used by Tenant or, if
possession of the Existing Premises had not yet been received by Tenant, then
for the purposes for which the Existing Premises were to be used by Tenant.

        16.2 Effectiveness Prior to Commencement of Construction of the
Premises. If Tenant shall not have received possession of the Existing Premises
and no construction has been commenced thereon, then, as of the date Landlord
gives notice of a substitution, such substitution shall be effective, the New
Premises shall be the Premises hereunder and the Existing Premises shall cease
to be the Premises hereunder.

        16.3 Effectiveness After Commencement of Construction of the Premises.
If construction of the Premises shall have already begun or if Tenant shall have
already received possession of the Existing Premises as of the date Landlord
gives notice of the substitution, the following provisions of this Section 16.3
shall apply. In the case where Tenant already has possession of the Existing
Premises, Tenant shall vacate and surrender the Existing Premises on or before
the date (the "VACATION DATE") which occurs on the later of (i) the thirtieth
(30th) day after the date that Landlord shall notify Tenant of Landlord's intent
to make the substitution in question, or (ii) the fifteenth (15th) day after
Landlord shall have substantially completed the work to be done by Landlord in
the New Premises pursuant to this Section 16.3. Such substitution of the New
Premises for the Existing Premises shall be effective as of the sooner of the
Vacation Date or the date Tenant surrenders and vacates the Existing Premises.
In the case where the Existing Premises are under construction, Tenant shall
immediately surrender the

                                      -30-

<PAGE>
Existing Premises, the New Premises shall be the Premises for purposes of this
Lease, and the Existing Premises shall cease to be the Premises for purposes of
this Lease. In either case, (A) Landlord shall pay the actual and reasonable
out-of-pocket expenses of Tenant's moving of its property, if any, from the
Existing Premises to the New Premises, provided that Landlord may elect to
either move Tenant's property or provide personnel to do so under Tenant's
direction, (B) Landlord shall improve the New Premises so that they are
substantially similar to the Existing Premises as of the time of the notice of
substitution (and in the case of the Existing Premises being under construction,
the remaining construction necessary to the completion of the New Premises shall
be performed pursuant to the terms of the Tenant Work Letter), and (C) Landlord
shall promptly reimburse Tenant for Tenant's actual and reasonable out-of-pocket
costs relating to the relocation of any telephone or other communications
equipment, if any, from the Existing Premises to the New Premises and relating
to stationery reprinting costs necessary to reflect the address of the New
Premises.

        16.4 General Provisions. Tenant shall not be entitled to any
compensation for any inconvenience or interference with Tenant's business, nor
to any abatement or reduction in Rent, nor shall Tenant's obligations under this
Lease be otherwise affected, as a result of the substitution, except as
otherwise provided in this Article 16. Tenant agrees to cooperate with Landlord
so as to facilitate the prompt completion by Landlord of its obligations under
this Article 16. Without limiting the generality of the preceding sentence,
Tenant agrees to promptly provide Landlord with such documentation, approvals,
instructions, plans, specifications or other information as may be reasonably
requested by Landlord in connection with this Article 16, and to promptly
execute any operative documents to evidence Landlord's actions under this
Article 16. Upon delivery of the New Premises to Tenant as set forth herein,
Tenant shall execute, within five (5) days of delivery to Tenant by Landlord, an
amendment amending all amounts, percentages and figures appearing or referred to
in this Lease (including, without limitation, the amount of the Rent and any
Security Deposit), to reflect the substitution of the New Premises for the
Existing Premises.

                                   ARTICLE 17

                            WARNER CENTER ASSOCIATION

        It is understood that at the time of the execution of this Lease an
association has been formed, the purpose of which is to identify and promote the
best interest of the employers and employees of Warner Center. Tenant shall,
throughout the Lease Term, at its sole cost and expense, cooperate with and
promote the programs of such association as they may from time to time exist so
long as the policies of such association shall be non-discriminatory with
respect to Tenant and with respect to any membership fee.

                                   ARTICLE 18

                                 TENANT PARKING

        Tenant shall lease, commencing on the Lease Commencement Date, the
number of parking passes set forth in Section 9 of the Summary, throughout the
Lease Term, which parking passes shall pertain to that portion or structure of
the Project parking facility designated for

                                      -31-

<PAGE>
Tenant's parking by Landlord. Tenant shall pay to Landlord or, at Landlord's
option, "Landlord's Designee" (as that term is defined in this Article 18
below), for such automobile parking passes, on a monthly basis, the prevailing
rate charged from time to time for parking passes in the parking facility or
facilities. In addition, Tenant shall be responsible for any taxes imposed by
any governmental authority in connection with the renting of such parking passes
by Tenant or the use of the parking facility by Tenant. Tenant's continued right
to use the parking passes is conditioned upon Tenant abiding by all Rules and
Regulations which are prescribed from time to time for the orderly operation and
use of the parking facility or facilities and upon Tenant's cooperation in
seeing that Tenant's employees and visitors also comply with such Rules and
Regulations. Landlord specifically reserves the right, at any time, to (i)
change the size, configuration, design, layout and all other aspects of the
parking facility or facilities, and/or (ii) perform repairs to the parking
facility or facilities, and Tenant acknowledges and agrees that Landlord may,
without incurring any liability to Tenant and without any abatement of Rent
under this Lease, from time to time, close-off or restrict access to the parking
facility or facilities for purposes of permitting or facilitating any such
construction, alteration, improvements or repairs. Landlord may lease the
parking areas, enter into a license agreement or otherwise delegate its
responsibilities under this Article 18 to a parking operator ("LANDLORD'S
DESIGNEE") in which case Landlord's Designee shall have all the rights
attributed under this Article 18 to the Landlord. The parking passes leased by
Tenant pursuant to this Article 18 are provided to Tenant solely for use by
Tenant's own personnel and such passes may not be transferred, assigned,
subleased or otherwise alienated by Tenant without Landlord's prior approval.

                                   ARTICLE 19

                            MISCELLANEOUS PROVISIONS

        19.1 Estoppel Certificates. Within ten (10) business days following a
request in writing by Landlord, Tenant shall execute and deliver to Landlord an
estoppel certificate, which, as submitted by Landlord, shall be substantially in
the form of Exhibit F, attached hereto (or such other form as may be required by
any prospective mortgagee or purchaser of the Project, or any portion thereof),
indicating therein any exceptions thereto that may exist at that time, and shall
also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Tenant shall execute and deliver
whatever other instruments may be reasonably required for such purposes. Failure
of Tenant to timely execute and deliver such estoppel certificate or other
instruments shall constitute an acceptance of the Premises and an acknowledgment
by Tenant that statements included in the estoppel certificate are true and
correct, without exception.

        19.2 Partial Invalidity. If any term, provision or condition contained
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

        19.3 Time of Essence. Time is of the essence of this Lease and each of
its provisions.

                                      -32-

<PAGE>
        19.4 Captions. The captions of Articles and Sections are for convenience
only and shall not be deemed to limit, construe, affect or alter the meaning of
such Articles and Sections.

        19.5 Notices. All notices, demands, statements, designations, approvals
or other communications (collectively, "NOTICES") given or required to be given
by either party to the other hereunder shall be in writing, shall be sent by
United States certified or registered mail, postage prepaid, return receipt
requested, or delivered personally (i) to Tenant at the appropriate address set
forth in Section 10 of the Summary, or to such other place as Tenant may from
time to time designate in a Notice to Landlord; or (ii) to Landlord at the
following addresses, or to such other firm or to such other place as Landlord
may from time to time designate in a Notice to Tenant:

        21600 Oxnard Street
        Suite 300
        Woodland Hills, California 91367
        Attn: Property Manager

        With a copy to:

        Allen, Matkins, Leck, Gamble & Mallory LLP
        515 South Figueroa Street, 8th Floor
        Los Angeles, California 90071
        Attn: Anton N. Natsis, Esq.

Any Notice will be deemed given on the date it is mailed as provided in this
Section 19.5 or upon the date personal delivery is made. If Tenant is notified
of the identity and address of the holder of any deed of trust or ground or
underlying lessor, Tenant shall give to such mortgagee or ground or underlying
lessor written notice of any default by Landlord under the terms of this Lease
by registered or certified mail, and such mortgagee or ground or underlying
lessor shall be given a reasonable opportunity to cure such default prior to
Tenant's exercising any remedy available to Tenant.

        19.6 Nonwaiver. No waiver of any provision of this Lease shall be
implied by any failure of Landlord to enforce any remedy on account of the
violation of such provision and even if such violation shall continue or be
repeated subsequently, any waiver by Landlord of any provision of this Lease may
only be in writing. Additionally, no express waiver shall affect any provision
other than the one specified in such waiver and then only for the time and in
the manner specifically stated. No receipt of monies by Landlord from Tenant
after the termination of this Lease shall in any way alter the length of the
Lease Term or of Tenant's right of possession hereunder, or after the giving of
any notice shall reinstate, continue or extend the Lease Term or affect any
notice given Tenant prior to the receipt of such monies, it being agreed that
after the service of notice or the commencement of a suit, or after
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of said Rent shall not waive or affect said
notice, suit or judgment.

                                      -33-

<PAGE>
        19.7 Holding Over. If Tenant holds over after the expiration of the
Lease Term hereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Base Rent
shall be payable at a monthly rate equal to the product of (i) the Base Rent
applicable during the last rental period of the Lease Term under this Lease, and
(ii) a percentage equal to the sum of (A) 150% and (B) the percentage by which
Base Rent was increased at the time of the last increase of Base Rent during the
Lease Term. Such month-to-month tenancy shall be subject to every other
applicable term, covenant and agreement contained herein. Nothing contained in
this Section 19.7 shall be construed as consent by Landlord to any holding over
by Tenant, and Landlord expressly reserves the right to require Tenant to
surrender possession of the Premises to Landlord as provided in this Lease upon
the expiration or other termination of this Lease. The provisions of this
Section 19.7 shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law. If Tenant fails to
surrender the Premises upon the termination or expiration of this Lease, in
addition to any other liabilities to Landlord accruing therefrom, Tenant shall
protect, defend, indemnify and hold Landlord harmless from all loss, costs
(including reasonable attorneys' fees) and liability resulting from such
failure, including, without limiting the generality of the foregoing, any claims
made by any succeeding tenant founded upon such failure to surrender and any
lost profits to Landlord resulting therefrom.

        19.8 Waiver of Default. No waiver by Landlord or Tenant of any violation
or breach of any of the terms, provisions and covenants herein contained shall
be deemed or construed to constitute a waiver of any other or later violation or
breach of the same or any other of the terms, provisions, and covenants herein
contained. Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default. The acceptance of any Rent hereunder by
Landlord following the occurrence of any default, whether or not known to
Landlord, shall not be deemed a waiver of any such default, except only a
default in the payment of the Rent so accepted.

        19.9 Binding Effect. Subject to all other provisions of this Lease, each
of the provisions of this Lease shall extend to and shall, as the case may
require, bird or inure to the benefit not only of Landlord and of Tenant, but
also of their respective successors or assigns, provided this clause shall not
permit any assignment by Tenant contrary to the provisions of Article 11 of this
Lease.

        19.10 Governing. Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.

        19.11 Subordination. This Lease shall be subject and subordinate to all
present and future ground or underlying leases of the Building or Project and to
the lien of any mortgage or trust deed, now or hereafter in force against the
Building or Project, if any, and to all renewals, extensions, modifications,
consolidations and replacements thereof, and to all advances made or hereafter
to be made upon the security of such mortgages or trust deeds, unless the
holders of such mortgages or trust deeds, or the lessors under such ground lease
or underlying leases, require in writing that this Lease be superior thereto.
Tenant covenants and agrees in the event any proceedings are brought for the
foreclosure of any such mortgage or deed in lieu thereof, to

                                      -34-

<PAGE>
attorn, without any deductions or set-offs whatsoever, to the purchaser or any
successors thereto upon any such foreclosure sale or deed in lieu thereof if so
requested to do so by such purchaser, and to recognize such purchaser as the
lessor under this Lease. Tenant shall, within five (5) days of request by
Landlord, execute such further instruments or assurances as Landlord may
reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant hereby irrevocably authorizes Landlord to execute and
deliver in the name of Tenant any such instrument or instruments if Tenant fails
to do so, provided that such authorization shall in no way relieve Tenant from
the obligation of executing such instruments of subordination or superiority.
Tenant waives the provisions of any current or future statute, rule or law which
may give or purport to give Tenant any right or election to terminate or
otherwise adversely affect this Lease and the obligations of the Tenant
hereunder in the event of any foreclosure proceeding or sale. Within ten (10)
days following a request in writing by Landlord, Tenant shall execute and
deliver to Landlord a Subordination of Deed of Trust Agreement in the form of
Exhibit G attached hereto and made a part hereof.

        19.12 Waiver of Jury Trial; Attorneys' Fees. EACH PARTY HEREBY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE THE SPECIFIC PERFORMANCE
OF THIS LEASE, FOR DAMAGES FOR THE BREACH HEREOF, OR OTHERWISE FOR ENFORCEMENT
OF ANY REMEDY HEREUNDER. If either party commences litigation against the other
for the specific performance of this Lease, for damages for the breach hereof or
otherwise for enforcement of any remedy hereunder, the prevailing party shall be
entitled to recover from the other party such costs and reasonable attorneys'
fees as may have been incurred, including any and all costs incurred in
enforcing, perfecting and executing such judgment.

        19.13 Entry by Landlord. Landlord reserves the right at all reasonable
times and upon reasonable notice to Tenant (except in the case of an emergency)
to enter the Premises to (i) inspect them; (ii) show the Premises to prospective
purchasers, mortgagees or tenants, or to the ground or underlying lessors; (iii)
post notices of nonresponsibility; or (iv) alter, improve or repair the Premises
or the Building if necessary to comply with current building codes or other
applicable laws, or for structural alterations, repairs or improvements to the
Building. Notwithstanding anything to the contrary contained in this Section
19.13, Landlord may enter the Premises at any time to (A) perform services
required of Landlord; (B) take possession due to any breach of this Lease in the
manner provided herein; and (C) perform any covenants of Tenant which Tenant
fails to perform. Landlord may make any such entries without the abatement of
Rent and may take such reasonable steps as required to accomplish the stated
purposes. Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant's business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the above purposes, Landlord shall at all times have a key
with which to unlock all the doors in the Premises, excluding Tenant's vaults,
safes and special security areas designated in advance by Tenant. In an
emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises. Any entry into the Premises by
Landlord in the manner herein before described shall not be deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.

                                      -35-

<PAGE>
        19.14 Authority. If Tenant is a corporation, partnership or limited
liability company, each individual executing this Lease on behalf of said entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity in accordance with: (i) if Tenant is a
corporation, a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the by-laws of said corporation, (ii) if
Tenant is a partnership, the terms of the partnership agreement, and (iii) if
Tenant is a limited liability company, the terms of its operating agreement, and
that this Lease is binding upon said entity in accordance with its terms.
Concurrently with Tenant's execution of this Lease, Tenant shall provide to
Landlord a copy of (a) if Tenant is a corporation, a resolution of the Board of
Directors authorizing the execution of this Lease on behalf of such corporation,
which copy of resolution shall be duly certified by the secretary or an
assistant secretary of the corporation to be a true copy of a resolution duly
adopted by the Board of Directors of said corporation and shall be in the form
of Exhibit "H" or in some other form reasonably acceptable to Landlord, (b) if
Tenant is a partnership, a copy of the provisions of the partnership agreement
granting the requisite authority to each individual executing this Lease on
behalf of said partnership, and (c) if Tenant is a limited liability company, a
copy of the provisions of its operating agreement granting the requisite
authority to each individual executing this Lease on behalf of said limited
liability company. In the event Tenant fails to comply with the requirements set
forth in this Section 19.14, then each individual executing this Lease shall be
personally liable for all of Tenant's obligations in this Lease.

        19.15 Surrender of Premises; Ownership and Removal of Trade Fixtures.

               19.15.1 Surrender of Premises. No act or thing done by Landlord
or any agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such
intent is specifically acknowledged in writing by Landlord. The delivery of keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord, and notwithstanding
such delivery Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises.

               19.15.2 Removal of Tenant Property by Tenant. Upon the expiration
of the Lease Term, or upon any earlier termination of this Lease, Tenant shall,
subject to the provisions of this Section 19.15, quit and surrender possession
of the Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear and repairs which are specifically made the responsibility of Landlord
hereunder excepted. Upon such expiration or termination, Tenant shall, without
expense to Landlord, remove or cause to be removed from the Premises (i) all
debris and rubbish, and such items of furniture, equipment, free-standing
cabinet work, telephone and data cabling and other articles of personal property
owned by Tenant or installed or placed by Tenant at its expense in the Premises,
and any similar articles of any other persons claiming under Tenant, and (ii)
those cables and wires in the Premises as Landlord may, in its sole

                                      -36-

<PAGE>
discretion, require to be removed. Tenant shall repair at its own expense all
damage to the Premises and Building resulting from removal of the items
described in this Section 19.15.2.

        19.16 Entire Agreement. It is understood and acknowledged that there are
no oral agreements between the parties hereto affecting this Lease and this
Lease supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease, the
exhibits and schedules attached hereto, and any side letter or separate
agreement executed by Landlord and Tenant in connection with this Lease and
dated of even date herewith, contain all of the terms, covenants, conditions,
warranties and agreements of the parties relating in any manner to the rental,
use and occupancy of the Premises and shall be considered to be the only
agreement between the parties hereto and their representatives and agents. None
of the terms, covenants, conditions or provisions of this Lease can be modified,
deleted or added to except in writing signed by the parties hereto. All
negotiations and oral agreements acceptable to both parties have been merged
into and are included herein. There are no other representations or warranties
between the parties, and all reliance with respect to representations is based
totally upon the representations and agreements contained in this Lease.

        19.17 Signs.

               19.17.1 Full Floors. Subject to Landlord's prior written
approval, in its sole discretion, and provided all signs are in keeping with the
quality, design and style of the Building and Project, Tenant, for any portion
of the Premises which comprises an entire floor of the Building, at its sole
cost and expense, may install identification signage anywhere in such full floor
portion of the Premises including in the elevator lobby of such full floor
portion of the Premises, provided that such signs must not be visible from the
exterior of the Building. Tenant shall be responsible, at Tenant's sole cost and
expense, for maintenance and repair of any such signs. In addition, Tenant shall
cause such signs to be removed from the Premises and shall repair all damage to
the Premises and the Building resulting from such removal, at Tenant's sole cost
and expense, prior to the expiration or earlier termination of this Lease.

               19.17.2 Multi-Tenant Floors. If other tenants occupy space on the
floor on which the Premises is located, Tenant's identifying signage shall be
provided by Landlord, at Tenant's cost, and such signage shall be comparable to
that used by Landlord for other similar floors in the Building and shall comply
with Landlord's Building standard signage program.

               19.17.3 Prohibited Signage and Other Items. Any signs, notices,
logos, pictures, names or advertisements which are installed and that have not
been separately approved by Landlord may be removed without notice by Landlord
at the sole expense of Tenant. Tenant may not install any signs on the exterior
or roof of the Project or the Common Areas. Any signs, window coverings, or
blinds (even if the same are located behind the Landlord-approved window
coverings for the Building), or other items visible from the exterior of the
Premises or Building, shall be subject to the prior written approval of
landlord, in its sole discretion.

        19.18 Covenant Against Liens. Tenant has no authority or power to cause
or permit any lien or encumbrance of any kind whatsoever, whether created by act
of Tenant,

                                      -37-

<PAGE>
operation of law or otherwise, to attach to or be placed upon the Project or
Premises, and any and all liens and encumbrances created by Tenant shall attach
to Tenant's interest only. Landlord shall have the right at all times to post
and keep posted on the Premises any notice which it deems necessary for
protection from such liens. Tenant covenants and agrees not to suffer or permit
any lien of mechanics or materialmen or others to be placed against the Project,
the Building or the Premises, or any portion thereof, with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises, and, in case of any such lien attaching or
notice of any lien, Tenant covenants and agrees to cause it to be immediately
released and removed of record. Notwithstanding anything to the contrary set
forth in this Lease, in the event that such lien is not released and removed on
or before the date occurring five (S) days after notice of such lien is
delivered by Landlord to Tenant, Landlord, at its sole option, may immediately
take all action necessary to release and remove such lien, without any duty to
investigate the validity thereof, and all sums, costs and expenses, including
reasonable attorneys' fees and costs, incurred by Landlord in connection with
such lien shall be deemed Additional Rent under this Lease and shall immediately
be due and payable by Tenant.

        19.19 Terms. The necessary grammatical changes required to make the
provisions hereof apply either to corporations or partnerships or individuals,
men or women, as the case may require, shall in all cases be assumed as though
in each case fully expressed.

        19.20 Prohibition Against Recording. Except as provided in Section 19.32
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant, and the recording thereof in violation of
this provision shall make this Lease null and void at Landlord's election.

        19.21 Confidentiality. Tenant acknowledges that the content of this
Lease and any related documents are confidential information. Tenant shall keep
such confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants.

        19.22 Quiet Enjoyment. Landlord covenants that Tenant, on paying the
Rent, charges for services and other payments herein reserved and on keeping,
observing and performing all the other terms, covenants, conditions, provisions
and agreements herein contained on the part of Tenant to be kept, observed and
performed, shall, during the Lease Term, peaceably and quietly have, hold and
enjoy the Premises subject to the terms, covenants, conditions, provisions and
agreements hereof without interference by any persons lawfully claiming by or
through Landlord. The foregoing covenant is in lieu of any other covenant
express or implied.

        19.23 Improvement of the Premises. Except as specifically set forth in
this Lease and in the Tenant Work Letter attached hereto as Exhibit C, Landlord
shall not be obligated to provide or pay for any improvement work or services
related to the improvement of the Premises. Tenant also acknowledges that
Landlord has made no representation or warranty regarding the condition of the
Premises or the Project except as specifically set forth in this Lease and the
Tenant Work Letter.

                                      -38-

<PAGE>
        19.24 Force Majeure. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental action(s) or
inaction(s), civil commotions, fire or other casualty, and other causes beyond
the reasonable control of the party obligated to perform, except with respect to
the obligations imposed with regard to Rent and other charges to be paid by
Tenant pursuant to this Lease (collectively, a "FORCE MAJEURE"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.

        19.25 Verification of Rentable Square Feet of Premises, Building, and
Project. The rentable square feet of the Premises, the Building, and the Project
are subject to verification from time to time by Landlord's floor area
consultant and such verification shall be made in accordance with the provisions
of this Section 19.25. For purposes of this Lease, "rentable square feet" shall
mean rentable area calculated pursuant to Standard Method for Measuring Floor
Area in Office Buildings, ANSI Z65.1 - 1996 ("BOMA"), provided that the rentable
square footage of the Building and the Project shall include all of (and the
rentable square footage of the Premises therefore shall include a portion of)
(i) the Building Common Areas, and (ii) an equitable portion of space of the
Project dedicated to the service of the Project. Tenant's architect may consult
with Landlord's floor area consultant regarding such verification as it pertains
to the Premises; however, the determination of Landlord's floor area consultant
shall be conclusive and binding upon the parties. In the event that Landlord's
floor area consultant determines that the amounts thereof shall be different
from those set forth in this Lease, all amounts, percentages and figures
appearing or referred to in this Lease based upon such incorrect amount
(including, without limitation, the amount of the "Rent" and any "Security
Deposit," as those terms are defined in Article 3 and Article 4 of this Lease,
respectively) shall be modified in accordance with such determination. If such
determination is made, it will be confirmed in writing by Landlord to Tenant.

        19.26 Transportation Management. Tenant shall fully comply with all
present or future programs intended to manage parking, transportation or traffic
in and around the Project or Building, and in connection therewith, Tenant shall
take responsible action for the transportation planning and management of all
employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other
transportation-related committees or entities. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of
an in-house ridesharing program and an employee transportation coordinator; (iv)
working with employees and any Project, Building or area-wide ridesharing
program manager; (v) instituting employer-sponsored incentives (financial or
inkind) to encourage employees to rideshare; and (vi) utilizing flexible work
shifts for employees.

        19.27 Compliance With Law. Tenant shall not do anything or suffer
anything to be done in or about the Premises which will in any way conflict with
any law, statute, ordinance or other governmental rule, regulation or
requirement now in force or which may hereafter be enacted or promulgated
("LAWS"). Landlord shall be responsible, as part of Operating Expenses to the
extent permitted under Article 3, for making all alterations to the following
portions of the

                                      -39-

<PAGE>
Premises and Project required by Laws: (i) structural portions of the Premises
but not including Tenant Improvements or any Alterations installed by or at the
request of Tenant, and (ii) those portions of the Building and Project located
outside the Premises; provided, however, Landlord shall not be obligated to make
alterations to any such portions of the Premises and Project described in clause
(i) or (ii) above to the extent such alterations are necessary due to the
installation of Alterations to the Premises by or at the request of Tenant and
Tenant shall, at its sole cost and expense, be responsible therefor. Except for
Landlord's obligations described in the immediately preceding sentence, Tenant
shall, at its sole cost and expense, be responsible for compliance with all Laws
affecting the Premises, including the making of all required alterations
thereto. Should any standard or regulation now or hereafter be imposed on
Landlord or Tenant by a state, federal or local governmental body charged with
the establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, landlords or tenants, then Tenant agrees, at
its sole cost and expense, to comply promptly with such standards or
regulations. The judgment of any court of competent jurisdiction or the
admission of Tenant in any judicial action, regardless of whether Landlord is a
party thereto, that Tenant has violated any of said governmental measures, shall
be conclusive of that fact as between Landlord and Tenant.

        19.28 Late Charges. If any installment of Rent or any other sum due from
Tenant shall not be received by Landlord or Landlord's designee within ten (10)
days after said amount is due, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of the overdue amount. In addition, if such
installment of Rent or other sum due from Tenant shall still not be received by
Landlord or Landlord's designee within the first three (3) days of the following
calendar month(s), then Tenant shall pay to Landlord an additional late charge
equal to five percent (5%) of the overdue amount for each such month. Tenant
shall also be responsible for any attorneys' fees incurred by Landlord by reason
of Tenant's failure to pay Rent and/or other charges when due hereunder. The
late charge shall be deemed Additional Rent and the right to require it shall be
in addition to all of Landlord's other rights and remedies hereunder or at law
and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner. Tenant hereby agrees that if Tenant is subject to a late
charge for two (2) consecutive months, Rent for the following twelve (12) months
shall automatically be adjusted to be payable quarterly, in advance, by
cashier's check only, commencing upon the first day of the month following such
consecutive late month and continuing for the next twelve (12) months on a
quarterly basis in advance. In addition to the late charge described above, any
Rent or other amounts owing hereunder which are not paid within ten (10) days
after the date they are due shall bear interest from the date when due until
paid at a rate per annum equal to the lesser of (i) the rate per annum announced
from time to time by Citibank N.A. as its prime rate (or, if such bank fails to
announce such a rate, then the prime rate announced by the largest state
chartered bank operating in the State of California) plus four (4) percentage
points (the "INTEREST RATE"), and (ii) the highest rate permitted by applicable
law.

        19.29 Hazardous Material. As used herein, the term "HAZARDOUS MATERIAL"
means any hazardous or toxic substance, material or waste which is or becomes
regulated by, or is dealt with in, any local governmental authority, the State
of California or the United States Government. Accordingly, the term "Hazardous
Material" includes, without limitation, any material or substance which is (i)
defined as a "hazardous waste," "extremely hazardous waste" or "restricted
hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to

                                      -40-

<PAGE>
Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5
(Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under
Section 25316 of the California Health and Safety Code, Division 20, Chapter
6.95 (Hazardous Materials Release Response Plans and Inventory), (iii) defined
as a "hazardous substance" under Section 25281 of the California Health and
Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous
Substances), (iv) petroleum, (v) asbestos, (vi) listed under Article 9 or
defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22
of the California Administrative Code, Division 4, Chapter 20, (vii) designated
as a "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. 1317), (viii) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act,
42 U.S.C. Section 6902 et seq. (42 U.S.C. Section 6903), or (ix) defined as a
"hazardous substance" pursuant to Section 101 of the Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601). Tenant shall not
(either with or without negligence) cause or permit the escape, disposal or
release of any Hazardous Materials. Tenant shall not allow the storage or use of
Hazardous Materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage or use of such substances
or materials, nor allow to be brought into the Project any such materials or
substances, except that Tenant may maintain products in the Premises which are
incidental to the operation of its offices, such as photocopy supplies,
secretarial supplies and limited janitorial supplies which products contain
chemicals which are categorized as Hazardous Materials, provided that the use of
such products in the Premises by Tenant shall be in compliance with applicable
laws and shall be in the manner in which such products are designed to be used
and provided further that Tenant must provide prior written notice to Landlord
of the identity of such substances or materials. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of Hazardous Materials, then the reasonable cost thereof shall be
reimbursed by Tenant to Landlord upon demand as Additional Rent if such
requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
Hazardous Materials on the Premises. In all events, Tenant shall indemnify
Landlord in the manner provided in Section 7.1 above from any release of
Hazardous Materials on the Premises occurring while Tenant is in possession, or
elsewhere if caused by Tenant or persons acting under Tenant. The covenants of
this Section 19.29 shall survive the expiration or earlier termination of the
Lease Term.

        19.30 Landlord's Right to Cure Default; Payments by Tenant.

               19.30.1 Landlord's Cure. All covenants and agreements to be kept
or performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent. If Tenant shall fail to
perform any of its obligations under this Lease within a reasonable time after
such performance is required by the terms of this Lease, Landlord may, but shall
not be obligated to, after reasonable prior notice to Tenant (except in the case
of an emergency), make any such payment or perform any such act on Tenant's part
without waiving its rights based upon any default of Tenant and without
releasing Tenant from any obligations hereunder.

               19.30.2 Tenant's Reimbursement. Except as may be specifically
provided to the contrary in this Lease, Tenant shall pay to Landlord, within
fifteen (15) days after

                                      -41-

<PAGE>
delivery by Landlord to Tenant of statements therefor: (i) sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with the remedying by Landlord of Tenant's defaults pursuant to the provisions
of Section 19.30.1; (ii) sums equal to all losses, costs, liabilities, damages
and expenses referred to in Article 7 of this Lease; and (iii) sums equal to all
expenditures made and obligations incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant's obligations
under this Section 19.30 shall survive the expiration or sooner termination of
the Lease Term.

        19.31 No Air Rights. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.

        19.32 Modification of Lease. Should any current or prospective mortgagee
or ground lessor for the Building or Project require a modification or
modifications of this Lease, which modification or modifications will not cause
an increased cost or expense to Tenant or in any other way materially and
adversely change the rights and obligations of Tenant hereunder, then and in
such event, Tenant agrees that this Lease may be so modified and agrees to
execute whatever documents are reasonably required therefor and to deliver the
same to Landlord within ten (10) days following a request therefor. Should
Landlord or any such prospective mortgagee or ground lessor require execution of
a short form of Lease for recording, containing, among other customary
provisions, the names of the parties, a description of the Premises and the
Lease Term, Tenant agrees to execute such short form of Lease and deliver the
same to Landlord within ten (10) days following the request therefor.

        19.33 Transfer of Landlord's Interest. Tenant acknowledges that Landlord
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer. Tenant further
acknowledges that Landlord may assign its interest in this Lease to the holder
of any mortgage or deed of trust as additional security, but agrees that an
assignment shall not release Landlord from its obligations hereunder and Tenant
shall continue to look to Landlord for the performance of its obligations
hereunder.

        19.34 Landlord's Title. Landlord's title is and always shall be
paramount to the title of Tenant. Nothing herein contained shall empower Tenant
to do any act which can, shall or may encumber the title of Landlord.

        19.35 Relationship of Parties. Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant, it being expressly understood and
agreed that neither the method of computation of Rent nor any act of

                                      -42-

<PAGE>
the parties hereto shall be deemed to create any relationship between Landlord
and Tenant other than the relationship of landlord and tenant.

        19.36 Application of Payments. Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.

        19.37 No Warranty. In executing and delivering this Lease, Tenant has
not relied on any representations, including, but not limited to, any
representation as to the amount of any item comprising Additional Rent or the
amount of the Additional Rent in the aggregate or that Landlord is furnishing
the same services to other tenants, at all, on the same level or on the same
basis, or any warranty or any statement of Landlord which is not set forth
herein or in one or more of the exhibits attached hereto.

        19.38 Right to Lease. Landlord reserves the absolute right to effect
such other tenancies in the Project as Landlord in the exercise of its sole
business judgment shall determine to best promote the interests of the Building
or Project. Tenant does not rely on the fact, nor does Landlord represent, that
any specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.

        19.39 Submission of Lease. Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of or an option for
lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.

        19.40 Independent Covenants. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord; provided, however, that the foregoing shall in no
way impair the right of Tenant to commence a separate action against Landlord
for any violation by Landlord of the provisions hereof so long as notice is
first given to Landlord and any holder of a mortgage or deed of trust covering
the Building or Project or any portion thereof, whose address has theretofore
been given to Tenant, and an opportunity is granted to Landlord and such holder
to correct such violations as provided above.

        19.41 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant
and for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.

        19.42 Joint and Several. If there is more than one entity which
constitutes Tenant, the obligations imposed upon Tenant under this Lease shall
be joint and several.

        19.43 Project or Building Name and Signage. Landlord shall have the
right at any time to change the name of the Project or Building and to install,
affix and maintain any and all signs on the exterior and on the interior of the
Project or Building as Landlord may, in

                                      -43-

<PAGE>
Landlord's sole discretion, desire. Tenant shall not use the name of the Project
or Building or use pictures or illustrations of the Project or Building in
advertising or other publicity, without the prior written consent of Landlord.

        19.44 No Discrimination. Tenant covenants by and for itself, its heirs,
executors, administrators and assigns, and all persons claiming under or through
Tenant, and this Lease is made and accepted upon and subject to the following
conditions: that there shall be no discrimination against or segregation of any
person or group of persons, on account of race, color, creed, sex, religion,
marital status, ancestry or national origin in the leasing, subleasing,
transferring, use, or enjoyment of the Premises, nor shall Tenant itself, or any
person claiming under or through Tenant, establish or permit such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy, of tenants, lessees, sublessees, subtenants
or vendees in the Premises.

        19.45 Landlord Renovations. It is specifically understood and agreed
that Landlord has no obligation and has made no promises to alter, remodel,
improve, renovate, repair or decorate the Premises, Building, Project or any
part thereof and that no representations respecting the condition of the
Premises, Building or Project have been made by Landlord to Tenant except as
specifically set forth herein or in the Tenant Work Letter. However, Tenant
acknowledges that Landlord shall have the right, but not the obligation, during
the Lease Term to renovate, improve, alter, or modify (collectively, the
"RENOVATIONS") the Building, Premises, and/or Project, including without
limitation the parking facilities, Common Areas, Systems and Equipment, roof,
and structural portions of the same. In connection with such Renovations,
Landlord may, among other things, erect scaffolding or other necessary
structures in the Building or on the Project, limit or eliminate access to
portions of the Project, including portions of the Common Areas and/or parking
facilities, or perform work in the Building, which work may create noise, dust
or leave debris in the Building. Tenant hereby agrees that such Renovations and
Landlord's actions in connection with such Renovations shall in no way
constitute a constructive eviction of Tenant nor entitle Tenant to any abatement
of Rent. Landlord shall have no responsibility or for any reason be liable to
Tenant for any direct or indirect injury to or interference with Tenant's
business arising from the Renovations, nor shall Tenant be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Premises or of Tenant's personal property or improvements resulting
from the Renovations or Landlord's actions in connection with such Renovations,
or for any inconvenience or annoyance occasioned by such Renovations or
Landlord's actions in connection with such Renovations.

                                      -44-

<PAGE>
        IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.

                               "Landlord":

                               AH WARNER CENTER PROPERTIES,
                               LIMITED LIABILITY COMPANY,
                               a Delaware limited liability company

                               By: COPLEY MANAGEMENT AND ADVISORS,
                                   L.P., a Delaware limited partnership,
                                   Its duly authorized asset manager and advisor

                                   By: AEW INVESTMENT GROUP, INC.
                                       (formerly known as COPLEY
                                       INVESTMENT GROUP, INC.),
                                       a Massachusetts corporation,
                                       Its general partner

                                       By:
                                          --------------------------------

                                          Print Name:
                                                     ---------------------
                                               Title:
                                                     ---------------------

                               "Tenant":
                               CAPSTONE TURBINE CORPORATION,
                               a Delaware corporation

                               By: /s/ JEFFREY WATTS
                                  --------------------------------
                                  JEFFREY WATTS
                                  Its: Chief Financial Officer

                                      -45-

<PAGE>
                                    EXHIBIT A

                               WARNER CENTER PLAZA

                               OUTLINE OF PREMISES

                             [DIAGRAM OF PREMISES]

                                    EXHIBIT A
                                      -1-

<PAGE>
                                    EXHIBIT B

                               WARNER CENTER PLAZA

                         SITE PLAN/PROJECT COMMON AREAS

                               [DIAGRAM OF SITE]

                                    EXHIBIT B
                                      -1-

<PAGE>
                                    EXHIBIT C

                               WARNER CENTER PLAZA

                               TENANT WORK LETTER

        This Tenant Work Letter shall set forth the terms and conditions
relating to the construction of the tenant improvements in the Premises. This
Tenant Work Letter is essentially organized chronologically and addresses the
issues of the construction of the Premises, in sequence, as such issues will
arise during the actual construction of the Premises. All references in this
Tenant Work Letter to Articles or Sections of "this LEASE" shall mean the
relevant portion of Articles 1 through 19 of the Standard Form Office Lease to
which this Tenant Work Letter is attached as Exhibit C and of which this Tenant
Work Letter forms a part, and all references in this Tenant Work Letter to
Sections of "this TENANT WORK LETTER" shall mean the relevant portion of
Sections 1 through 6 of this Tenant Work Letter.

                                    SECTION 1

                 LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES

        Landlord has constructed, at its sole cost and expense, the base, shell
and core (i) of the Premises, and (ii) of the floor of the Building on which the
Premises is located (collectively, the "BASE, SHELL AND CORE"). In addition,
improvements in the Premises have been constructed for a previous occupant.
Tenant has inspected and hereby approves the condition of the Base, Shell and
Core and the Premises, and agrees that the Base, Shell and Core and the Premises
shall be delivered to Tenant in their current "as-is" condition. Renovations to
the existing improvements in the Premises shall be designed and constructed
pursuant to this Tenant Work Letter. Any costs of initial design and
construction of such renovations to the existing improvements in the Premises
shall be a "Tenant Improvement Allowance Item", as that term is defined in
Section 2.2 of this Tenant Work Letter.

                                    SECTION 2

                               TENANT IMPROVEMENTS

        2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount
of $5.00 per usable square foot of the Premises for the costs relating to the
initial design and construction of Tenant's improvements which are permanently
affixed to the Premises (the "TENANT IMPROVEMENTS"). In no event shall Landlord
be obligated to make disbursements pursuant to this Tenant Work Letter in a
total amount which exceeds the Tenant Improvement Allowance. All Tenant
Improvements for which the Tenant Improvement Allowance has been made available
shall be deemed Landlord's property under the terms of Section 6.6 of the Lease.
Tenant shall not be entitled to any payment or credit for any portion of the
Tenant Improvement Allowance which is not used or requested for Tenant
Improvement Allowance Items on or before September 30, 2001.

                                    EXHIBIT C
                                       -1-

<PAGE>
        2.2 Disbursement of the Tenant Improvement Allowance. Except as
otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance
shall be disbursed by Landlord (each of which disbursements shall be made
pursuant to Landlord's disbursement process) for costs related to the
construction of the Tenant Improvements and for the following items and costs
(collectively, the "TENANT IMPROVEMENT ALLOWANCE ITEMS"): (i) payment of the
fees of the "Architect" and the "Engineers," as those terms are defined in
Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and
the cost of documents and materials supplied by, Landlord and Landlord's
consultants in connection with the preparation and review of the "Construction
Drawings," as that term is defined in Section 3.1 of this Tenant Work Letter;
(ii) the cost of any changes in the Base, Shell and Core required by the
Construction Drawings; (iii) the cost of any changes to the Construction
Drawings or Tenant Improvements required by applicable building codes (the
"CODE"); (iv) the "Landlord Supervision Fee", as that term is defined in Section
4.3.2 of this Tenant Work Letter; and (v) a portion of the costs, if any, of the
tenant demising walls and public corridor walls and materials on the floor of
the Building on which the Premises is located as designated by Landlord.

        2.3 Standard Tenant Improvement Package. Landlord has established
specifications (the "SPECIFICATIONS") for the Building standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "STANDARD IMPROVEMENT PACKAGE"), which Specifications shall
be supplied to Tenant by Landlord. The quality of Tenant Improvements shall be
equal to or of greater quality than the quality of the Specifications, provided
that Landlord may, at Landlord's option, require the Tenant Improvements to
comply with certain Specifications. Landlord may make changes to the
Specifications for the Standard Improvement Package from time to time.

                                    SECTION 3

                              CONSTRUCTION DRAWINGS

        3.1 Selection of Architect/Construction Drawings. Landlord shall retain
the architect/space planner designated by Landlord (the "ARCHITECT") to prepare
the "Construction Drawings," as that term is defined in this Section 3.1.
Landlord shall retain the engineering consultants designated by Landlord (the
"ENGINEERS") to prepare all plans and engineering working drawings relating to
the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of
the Tenant Improvements. The plans and drawings to be prepared by Architect and
the Engineers hereunder shall be known collectively as the "CONSTRUCTION
DRAWINGS." All Construction Drawings shall comply with the drawing format and
specifications as determined by Landlord, and shall be subject to Landlord's
approval. Notwithstanding that any Construction Drawings are reviewed by
Landlord or prepared by Landlord's designated space planner, architect,
engineers and consultants, and notwithstanding any advice or assistance which
may be rendered to Tenant by Landlord or Landlord's space planner, architect,
engineers, and consultants, Landlord shall have no liability whatsoever in
connection therewith and shall not be responsible for any omissions or errors
contained in the Construction Drawings, and Tenant's waiver and indemnity set
forth in Section 7.1 of this Lease shall specifically apply to the Construction
Drawings.

                                    EXHIBIT C
                                       -2-

<PAGE>
        3.2 Final Space Plan. Promptly after full execution and delivery of this
Lease, Landlord and the Architect shall prepare the final space plan for Tenant
Improvements in the Premises (collectively, the "FINAL SPACE PLAN"), which Final
Space Plan shall include a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and shall deliver the Final Space Plan to Tenant for Tenant's approval. Tenant
shall approve or reasonably disapprove the Final Space Plan or any revisions
thereto within three (3) business days after Landlord delivers the Final Space
Plan or such revisions to Tenant. Tenant's failure to reasonably disapprove the
Final Space Plan or any revisions thereto by written notice to Landlord (which
notice shall specify in detail the reasonable reasons for Tenant's disapproval)
within said three (3) business day period shall be deemed to constitute Tenant's
approval of the Final Space Plan or such revisions.

        3.3 Final Working Drawings. Upon Tenant's approval or deemed approval of
the Final Space Plan, Landlord, the Architect and the Engineers shall complete
the architectural and engineering drawings for the Premises, and the final
architectural working drawings in a form which is complete to allow
subcontractors to bid on the work and to obtain all applicable permits
(collectively, the "FINAL WORKING DRAWINGS") and shall submit the same to Tenant
for Tenant's approval. Tenant shall approve or reasonably disapprove the Final
Working Drawings or any revisions thereto within three (3) business days after
Landlord delivers the Final Working Drawings or any revisions thereto to Tenant.
Tenant's failure to reasonably disapprove the Final Working Drawings or any
revisions thereto by written notice to Landlord (which notice shall specify in
detail the reasonable reasons for Tenant's disapproval) within said three (3)
business day period shall be deemed to constitute Tenant's approval of the Final
Working Drawings or such revisions.

        3.4 Permits. The Final Working Drawings shall be approved or deemed
approved by Landlord and Tenant (the "APPROVED WORKING DRAWINGS") prior to the
commencement of the construction of the Tenant Improvements. Landlord shall
cause the Architect to submit the Approved Working Drawings to the appropriate
municipal authorities for all applicable building permits necessary to allow
"Contractor," as that term is defined in Section 4.1, below, to commence and
fully complete the construction of the Tenant Improvements (the "PERMITS"), and,
in connection therewith, Tenant shall coordinate with Landlord in order to allow
Landlord, at its option, to take part in all phases of the permitting process
and shall supply Landlord, as soon as possible, with all plan check numbers and
dates of submittal and obtain the Permits on or before the date set forth in
Schedule 1. Notwithstanding anything to the contrary set forth in this Section
3.4, Tenant hereby agrees that neither Landlord nor Landlord's consultants shall
be responsible for obtaining any building permit or certificate of occupancy for
the Premises and that the obtaining of the same shall be Tenant's
responsibility; provided however that Landlord shall, in any event, cooperate
with Tenant in executing permit applications and performing other ministerial
acts reasonably necessary to enable Tenant to obtain any such permit or
certificate of occupancy. No changes, modifications or alterations in the
Approved Working Drawings may be made without the prior written consent of
Landlord, provided that Landlord may withhold its consent, in its sole
discretion, to any change in the Approved Working Drawings if such change would
directly or indirectly delay the "Substantial Completion" of the Premises as
that term is defined in Section 5.1 of this Tenant Work Letter.

                                    EXHIBIT C
                                      -3-

<PAGE>
        3.5 Time Deadlines. Tenant shall use its good faith efforts to cooperate
with the Architect, the Engineers, and Landlord to complete all phases of the
Construction Drawings and the permitting process and to receive the permits, and
with Contractor for approval of the "Cost Proposal," as that term is defined in
Section 4.2 of this Tenant Work Letter, as soon as possible after the execution
of the Lease, and, in that regard, shall meet with Landlord on a scheduled basis
to be determined by Landlord, to discuss Tenant's progress in connection with
the same.

                                    SECTION 4

                     CONSTRUCTION OF THE TENANT IMPROVEMENTS

        4.1 Contractor. A contractor designated by Landlord ("CONTRACTOR") shall
construct the Tenant Improvements.

        4.2 Cost Proposal. After the Approved Working Drawings are signed by
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant Improvement Allowance
Items to be incurred by Tenant in connection with the construction of the Tenant
Improvements (the "COST PROPOSAL"). Tenant shall approve and deliver the Cost
Proposal to Landlord within three (3) business days of the receipt of the same,
and upon receipt of the same by Landlord, Landlord shall be released by Tenant
to purchase the items set forth in the Cost Proposal and to commence the
construction relating to such items. The date by which Tenant must approve and
deliver the Cost Proposal to Landlord shall be known hereafter as the "COST
PROPOSAL DELIVERY DATE".

        4.3 Construction of Tenant Improvements by Contractor under the
Supervision of Landlord.

               4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date,
Tenant shall deliver to Landlord cash in an amount (the "OVER-ALLOWANCE AMOUNT")
equal to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the Tenant Improvement Allowance (less any portion thereof already
disbursed by Landlord, or in the process of being disbursed by Landlord, on or
before the Cost Proposal Delivery Date). The Over-Allowance Amount shall be
disbursed by Landlord prior to the disbursement of any then remaining portion of
the Tenant Improvement Allowance, and such disbursement shall be pursuant to the
same procedure as the Tenant Improvement Allowance. In the event that, after the
Cost Proposal Date, any revisions, changes, or substitutions shall be made to
the Construction Drawings or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions or any other
additional costs shall be paid by Tenant to Landlord immediately upon Landlord's
request as an addition to the Over-Allowance Amount.

               4.3.2 Landlord's Retention of Contractor. Landlord shall
independently retain Contractor, on behalf of Tenant, to construct the Tenant
Improvements in accordance with the Approved Working Drawings and the Cost
Proposal and Landlord shall supervise the construction by Contractor, and Tenant
shall pay a construction supervision and management fee (the "LANDLORD
SUPERVISION FEE") to Landlord in an amount equal to the product of (i) five

                                    EXHIBIT C
                                       -4-

<PAGE>
percent (5%) and (ii) an amount equal to the Tenant Improvement Allowance plus
the Over-Allowance Amount (as such Over-Allowance Amount may increase pursuant
to the terms of this Tenant Work Letter).

               4.3.3 Contractor's Warranties and Guaranties. Landlord hereby
assigns to Tenant all warranties and guaranties by Contractor relating to the
Tenant Improvements, and Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Tenant Improvements. The
Contractor shall be required to comply with Landlord's standard construction
rules and regulations, which may include, at Landlord's option, a requirement
for a payment and performance bond.

               4.3.4 Tenant's Covenants. Tenant hereby indemnifies Landlord for
any loss, claims, damages or delays arising from the actions of Architect on the
Premises or in the Building. Within ten (10) days after completion of
construction of the Tenant Improvements, Tenant shall cause Contractor and
Architect to cause a Notice of Completion to be recorded in the office of the
Recorder of the County of Los Angeles in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute and furnish a
copy thereof to Landlord upon recordation, failing which, Landlord may itself
execute and file the same on behalf of Tenant as Tenant's agent for such
purpose. In addition, immediately after the Substantial Completion of the
Premises, Tenant shall have prepared and delivered to the Building a copy of the
"as built" plans and specifications (including all working drawings) for the
Tenant Improvements, which may be a marked copy of the Approved Working
Drawings.

                                    SECTION 5

                                  MISCELLANEOUS

        5.1 Freight Elevators. Landlord shall, consistent with its obligations
to other tenants of the Building, make the freight elevator of the Building, if
applicable, reasonably available to Tenant in connection with initial
decorating, furnishing and moving into the Premises.

        5.2 Tenant's Representative. Prior to the commencement of construction
of the Tenant Improvements, Tenant shall designate its representative with
respect to the matters set forth in this Tenant Work Letter, who, until further
notice to Landlord, shall have full authority and responsibility to act on
behalf of the Tenant as required in this Tenant Work Letter.

        5.3 Landlord's Representative. Landlord has designated Mary Ann Hansen
as its sole representatives with respect to the matters set forth in this Tenant
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

        5.4 Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.

                                    EXHIBIT C
                                      -5-
<PAGE>
        5.5 Tenant's Lease Default. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in Section
12.1 of the Lease, or a default by Tenant under this Tenant Work Letter, has
occurred at any time on or before the completion of the Tenant Improvements in
the Premises, then (i) in addition to all other rights and remedies granted to
Landlord pursuant to the Lease, Landlord shall have the right to withhold
payment of all or any portion of the Tenant Improvement Allowance and/or
Landlord may cause Contractor to cease the construction of the Premises (in
which case Tenant shall be responsible for any delay in the completion of the
Premises caused by such work stoppage), and (ii) all other obligations of
Landlord under the terms of this Tenant Work Letter shall be forgiven until such
time as such default is cured pursuant to the terms of the Lease.

        5.7 No Abatement. Tenant hereby acknowledges that the work to be
performed by Landlord pursuant to this Tenant Work Letter shall be performed
during the Beneficial Occupancy Period and/or the Lease Term. Tenant shall not
be deemed constructively evicted, nor shall Tenant be entitled to any abatement
of rent due to any interference with Tenant's business and/or operations
resulting from the performance of such work.

                                    EXHIBIT C
                                       -6-

<PAGE>
                                    EXHIBIT D

                               WARNER CENTER PLAZA

                           NOTICE OF LEASE TERM DATES

To:
   --------------------------------

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

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

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

Re:     Office Lease dated ______________, 20__ between AH WARNER CENTER
        PROPERTIES, LIMITED LIABILITY COMPANY, a Delaware limited liability
        company ("Landlord"), and ___________________________ a
        ______________________ ("Tenant") concerning Suite _____ on floor(s)
        _______ of the office building located at _____________ Los Angeles,
        California.

Ladies and Gentlemen:

        In accordance with the referenced Office Lease (the "Lease"), we wish to
advise you and/or confirm as follows:

        1. The Substantial Completion of the Premises has occurred, and the
Lease Term shall commence on ________ or has commenced on for a term of
____________ ending on ____________.

        2. Rent commenced to accrue on ____________, in the amount of
____________.

        3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each billing
thereafter, with the exception of the final billing, shall be for the full
amount of the monthly installment as provided for in the Lease.

        4. Your rent checks should be made payable to ________________ at
________________.

        5. The exact number of rentable square feet within the Premises is
____________ square feet.

                                    EXHIBIT D
                                       -1-

<PAGE>
        6. Tenant's Share as adjusted based upon the exact number of rentable
square feet within the Premises is ____________%.

                            AH WARNER CENTER PROPERTIES,
                            LIMITED LIABILITY COMPANY,
                            a Delaware limited liability company

                            By:   COPLEY MANAGEMENT AND ADVISORS,
                                  L.P., a Delaware limited partnership,
                                  Its duly authorized asset manager and advisor

                                  By:   AEW INVESTMENT GROUP, INC.
                                        (formerly known as COPLEY
                                        INVESTMENT GROUP, INC.),
                                        a Massachusetts corporation,
                                        Its general partner

                                  By:
                                     ---------------------------------
                                     Print Name:
                                                ----------------------
                                          Title:
                                                ----------------------

Agreed to and Accepted as
of                 , 200_
   ----------------
"Tenant":

                         ,
------------------------
a
 -------------------------

By:
    ----------------------
    Its:
        ------------------

By:
    ----------------------
    Its:
        ------------------

                                   EXHIBIT D
                                      -2-

<PAGE>
                                    EXHIBIT E

                               WARNER CENTER PLAZA

                              RULES AND REGULATIONS

        Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project.

        1. Tenant shall not alter any lock or install any new or additional
locks or bolts on any doors or windows of the Premises without obtaining
Landlord's prior written consent. Tenant shall bear the cost of any lock changes
or repairs required by Tenant and Tenant shall utilize only the locksmith
designated by Landlord for such purposes. Two keys will be furnished by Landlord
for the Premises, and any additional keys required by Tenant must be obtained
from Landlord at a reasonable cost to be established by Landlord.

        2. All doors opening to public corridors shall be kept closed at all
times except for normal ingress and egress to the Premises.

        3. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building during such hours as are customary for comparable
buildings in the greater Los Angeles area. Tenant, its employees and agents must
be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. The Landlord and its agents shall in no case be
liable for damages for any error with regard to the admission to or exclusion
from the Building of any person. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access to
the Building or the Project during the continuance thereof by any means it deems
appropriate for the safety and protection of life and property.

        4. No furniture, freight or equipment of any kind shall be brought into
the Building without prior notice to Landlord. All moving activity into or out
of the Building shall be scheduled with Landlord and done only at such time and
in such manner as Landlord designates. No service deliveries (other than
messenger services) will be allowed between hours of 4:00 p.m. to 6:00 p.m.,
Monday through Friday. Landlord shall have the right to prescribe the weight,
size and position of all safes and other heavy property brought into the
Building and also the times and manner of moving the same in and out of the
Building. Safes and other heavy objects shall, if considered necessary by
Landlord, stand on supports of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such safe or property in any case. Any damage to any part of the Building,
its contents,

                                    EXHIBIT E
                                       -1-

<PAGE>
occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility and expense of Tenant.

        5. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours, in such specific elevator and by such personnel as shall be
designated by Landlord.

        6. The requirements of Tenant will be attended to only upon application
at the management office for the Project or at such office location designated
by Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.

        7. Tenant shall not disturb, solicit, or canvass any occupant of the
Project and shall cooperate with Landlord and its agents of Landlord to prevent
same.

        8. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the tenant who, or whose employees or agents, shall have caused it.

        9. Tenant shall not overload the floor of the Premises, nor mark, drive
nails or screws, or drill into the partitions, woodwork or plaster or in any way
deface the Premises or any part thereof without Landlord's prior written
consent.

        10. No vending machine or machines shall be installed, maintained or
operated upon the Premises without the written consent of Landlord.

        11. Tenant shall not use or keep in or on the Premises, the Building, or
the Project any kerosene, gasoline or other inflammable or combustible fluid or
material.

        12. Tenant shall not without the prior written consent of Landlord use
any method of heating or air conditioning other than that supplied by Landlord.

        13. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Project by reason of noise, odors, or vibrations, or
interfere in any way with other tenants or those having business therein.

        14. Tenant shall not bring into or keep within the Project, the Building
or the Premises any animals, birds, bicycles or other vehicles except as
provided in the Office Lease.

        15. No cooking shall -be done or permitted on the Premises, nor shall
the Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that (i) such use is in

                                    EXHIBIT E
                                       -2-

<PAGE>
accordance with all applicable federal, state and city laws, codes, ordinances,
rules and regulations, and (ii) Landlord determines that no odors emanate from
the Premises as a result of such use. If Landlord determines that odors have
emanated from the Premises as a result of such use, Landlord shall be entitled
to require Tenant to discontinue such use or to remove such equipment from the
Premises.

        16. Landlord will approve where and how telephone and telegraph wires
are to be introduced to the Premises. No boring or cutting for wires shall be
allowed without the consent of Landlord. The location of telephone, call boxes
and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.

        17. Landlord reserves the right to exclude or expel from the Project 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 any of
these Rules and Regulations.

        18. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, halls, stairways, elevators, or any
Common Areas for the purpose of smoking tobacco products or for any other
purpose, nor in any way obstruct such areas, and shall use them only as a means
of ingress and egress for the Premises.

        19. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls.

        20. Tenant shall store all its trash and garbage within the interior of
the Premises. No material shall be placed in the trash boxes or receptacles if
such material is of such nature that it may not be disposed of in the ordinary
and customary manner of removing and disposing of trash and garbage in Woodland
Hills, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Landlord
shall designate.

        21. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.

        22. Tenant shall assume any and all responsibility for protecting the
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.

        23. No awnings or other projection shall be attached to the outside
walls of the Building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises without the prior written
consent of Landlord. All electrical ceiling fixtures hung in offices or spaces
along the perimeter of the Building must be fluorescent and/or of a quality,
type, design and bulb color approved by Landlord. Tenant shall abide by
Landlord's regulations concerning the opening and closing of window coverings
which are attached to the windows in the Premises, if any, which have a view of
any interior portion of the Building or Building Common Areas.

                                    EXHIBIT E
                                       -3-

<PAGE>
        24. The sashes, sash doors, skylights, windows, and doors that reflect
or admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant. nor shall any bottles,
parcels or other articles be placed on the windowsills.

        25. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.

        26. Tenant shall comply with any non-smoking ordinance adopted by the
City of Los Angeles or any other applicable governmental authority.

        Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building, the Common Areas and the Project (including, without limitation, the
Project's parking facility), and for the preservation of good order therein, as
well as for the convenience of other occupants and tenants therein. Landlord may
waive any one or more of these Rules and Regulations for the benefit of any
particular tenants, but no such waiver by Landlord shall be construed as a
waiver of such Rules and Regulations in favor of any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules or Regulations against any or
all tenants of the Project. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.

                                    EXHIBIT E
                                       -4-

<PAGE>
                                    EXHIBIT F

                               WARNER CENTER PLAZA

                              ESTOPPEL CERTIFICATE

To:
   -----------------------

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

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

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

        _____________, a _______________ ("Tenant") hereby certifies as follows:

        1. The undersigned is the Tenant under that certain Office Lease dated
20 ________ (the "Lease"), executed by AH WARNER CENTER PROPERTIES, LIMITED
LIABILITY COMPANY, a Delaware limited liability company ("Landlord") as Landlord
and the undersigned as Tenant, covering a portion of the property located at
______________________________ (the "Property").

        2. Pursuant to the Lease, Tenant has leased approximately __________
square feet of space (the "Premises") at the Property and has paid to Landlord a
security deposit of $__________. The term of the Lease commenced on
_______________, 20__ and the expiration date of the Lease is __________, 20__.
Tenant has paid rent through _______________, 20__. The next rental payment in
the amount of $ __________ is due on __________, 20__. Tenant is required to pay
__________ percent (__%) of all annual operating expenses for the Property in
excess of __________.

        3. Tenant is entitled __________ to parking passes at a charge of
$__________ per pass.

        4. The Lease provides for an option to extend the term of the Lease for
___ years. The rental rate for such extension term is as follows:
_____________________________________________________Except as expressly
provided in the Lease, and other documents attached hereto. Tenant does not have
any right or option to renew or extend the term of the Lease, to lease other
space at the Property, nor any preferential right to purchase all or any part of
the Premises or the Property.

        5. True, correct and complete copies of the Lease and all amendments,
modifications and supplements thereto are attached hereto and the Lease, as so
amended, modified and supplemented, is in full force and effect, and represents
the entire agreement between Tenant and Landlord with respect to the Premises
and the Property. There are no amendments, modifications or supplements to the
Lease, whether oral or written, except as follows (include the date of such
amendment, modification or supplement):________________________________________
_______________________________________________________________________________
______________________________________________________________________________.

                                    EXHIBIT F
                                       -1-

<PAGE>
        6. All space and improvements leased by the Tenant have been completed
and furnished in accordance with the provisions of the Lease, and the Tenant has
accepted and taken possession of the Premises.

        7. To the best of Tenant's knowledge, Landlord is not in any respect in
default in the performance of the terms and provisions of the Lease. Tenant is
not in any respect in default under the Lease and has not assigned, transferred
or hypothecated the Lease or any interest therein or subleased all or any
portion of the Premises

        8. There are no offsets or credits against rentals payable under the
Lease and no free periods or rental concessions have been granted to Tenant,
except as follows:______________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.

        9. Tenant has no actual or constructive knowledge of any processing,
use, storage, disposal, release or treatment of any hazardous or toxic materials
or substances on the Premises or the Property except as follows (if none, state
"none"):________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.

        10. This Certificate is given to __________ with the understanding that
____________________ will rely hereon in connection with the conveyance of the
Property of which the Premises constitute a part to _______________. Following
any such conveyance, Tenant agrees that the Lease shall remain in full force and
effect and shall bind and inure to the benefit of __________ and its successor
in interest as if no purchase had occurred.

DATED:_______________, 200_         "TENANT"

                                        ________________________________

                                        ________________________________

                [ATTACH LEASE AND AMENDMENTS TO THIS CERTIFICATE]

                                    EXHIBIT F
                                       -2-

<PAGE>
                                    EXHIBIT G

                               WARNER CENTER PLAZA

                         SUBORDINATION OF DEED OF TRUST

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

_____________________________

_____________________________

_____________________________

Attention:
          ___________________

================================================================================
                                                (Space Above For Recorder's Use)

        MARINE MIDLAND BANK, as owner and holder of a certain Promissory Note
dated July 13, 1995, in the principal sum of One Hundred Forty-One Million
Dollars ($141,000,000.00) and of a certain deed of trust, Assignment of Rents,
Security Agreement and Fixture Filing Statement ("DEED OF TRUST") of even date
therewith and securing the said Note, recorded on July 20, 1995 as Instrument
No. 95-175900, Official Records, Los Angeles County, California, now a first
lien upon the property described in Exhibit A attached hereto and more
particularly demised and described in that certain Lease dated ______________ by
and between AH WARNER CENTER PROPERTIES, LIMITED LIABILITY COMPANY, a Delaware
limited liability company, as Lessor, and __________________ , a ______________
as Lessee, and upon other property, in consideration of such leasing and of the
sum of One Dollar ($1.00) and other good and valuable consideration, receipt of
which is hereby acknowledged,

        DOES hereby covenant and agree that the said Deed of Trust shall be and
the same is hereby SUBORDINATE to the said Lease with the same force and effect
as if the said Lease had been executed, delivered and recorded prior to the
execution, delivery and recording of the said Deed of Trust;

        EXCEPT, HOWEVER, that this Subordination shall not affect nor be
applicable to and does hereby expressly exclude:

        (a)     The prior right, claim and lien of the said Deed of Trust in, to
                and upon any award or other compensation heretofore or hereafter
                to be made for any taking by eminent domain of any part of the
                said premises, and to the right of disposition thereof in
                accordance with the provisions of the said Deed of Trust,

        (b)     The prior right, claim and lien of the said Deed of Trust in, to
                and upon any proceeds payable under all policies of fire and
                rent insurance upon the said

                                   EXHIBIT G
                                      -1-

<PAGE>
                premises and to the right of disposition thereof in accordance
                with the terms of the said Deed of Trust, and

        (c)     Any lien, right, power or interest, if any, which may have
                arisen or intervened in the period between the recording of the
                said Deed of Trust and the execution of the said Lease, or any
                lien or judgment which may arise at any time under the terms of
                such Lease.

        This Subordination shall inure to the benefit of and shall be binding
upon the undersigned, its successors and assigns.

        IN WITNESS WHEREOF, this Subordination has been duly signed and
delivered by the undersigned this _____ day of _________, 20__.

                                MARINE MIDLAND BANK

                                By:  BANKERS TRUST COMPANY, as Master
                                     Servicer under that certain Trust and
                                     Servicing Agreement dated as of July 13,
                                     1995

                                     By:
                                        ________________________________
                                        Its:
                                            ____________________________

STATE OF _____________)
                      )ss.
COUNTY OF ____________)

        On ________________, before me, ________________, a Notary Public in and
for said state, personally appeared _______________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument, the person, or the entity upon behalf of which the person
acted, executed the instrument.

        WITNESS my hand and official seal.

                                _________________________________________
                                Notary Public in and for said State

(SEAL)

                                    EXHIBIT G
                                       -2-

<PAGE>
                               LESSEE'S AGREEMENT

        The undersigned, as Lessee under the Lease herein described does hereby
accept and agree to the terms of the foregoing Subordination, which shall inure
to the benefit of and be binding upon the undersigned and the heirs, executors,
administrators, legal representatives, successors and assigns of the
undersigned.

                                      ________________________________
                                      a
                                      ________________________________

                                      By:_____________________________

                                         Its:_________________________

                                      By:_____________________________

                                         Its:_________________________

STATE OF________________   )
                           ) ss.
COUNTY OF_______________   )

        On _______________, before me, _____________________, a Notary Public in
and for said state, personally appeared _____________, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he/she
executed the same in his/her authorized capacity, and that by his/her signature
on the instrument, the person, or the entity upon behalf of which the person
acted, executed the instrument.

        WITNESS my hand and official seal.

                                    ___________________________________
                                    Notary Public in and for said State

(SEAL)

                                    EXHIBIT G

                                       -3-

<PAGE>
STATE OF_________    )
                     ) ss.
COUNTY OF________    )

        On _________________, before me, ____________________, a Notary Public
in and for said state, personally appeared  ___________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument, the person, or the entity upon behalf of
which the person acted, executed the instrument.

        WITNESS my hand and official seal.

                                -----------------------------------------
                                Notary Public in and for said State

(SEAL)

                                   EXHIBIT G
                                       -4-

<PAGE>
                                    EXHIBIT A
                                  to EXHIBIT G

                               LEGAL DESCRIPTION

                                    EXHIBIT G
                                       -5-

<PAGE>
                                    EXHIBIT H

                               WARNER CENTER PLAZA

                                CERTIFIED COPY OF
                         BOARD OF DIRECTORS RESOLUTIONS
                                       OF
                          CAPSTONE TURBINE CORPORATION

        The undersigned, being the duly elected Corporate Secretary of Capstone
Turbine Corporation, a Delaware corporation ("Corporation"), hereby certifies
that the following is a true, full and correct copy of the resolutions adopted
by the Corporation by unanimous written consent in lieu of a special meeting of
its Board of Directors, and that said resolutions have not been amended or
revoked as of the date hereof.

        RESOLVED, that the Corporation, is hereby authorized to execute, deliver
and fully perform that certain document entitled Standard Office Lease ("Lease")
by and between the Corporation and AH Warner Center Properties, Limited
Liability Company, a Delaware limited liability company, for the lease of space
at 21700 Oxnard Street, Woodland Hills, California 91367.

        RESOLVED FURTHER, that the Corporation is hereby authorized and directed
to make, execute and deliver any and all, consents, certificates, documents,
instruments, amendments, confirmations, guarantees, papers or writings as may be
required in connection with or in furtherance of the Lease (collectively with
the Lease, the "Documents") or any transactions described therein, and to do any
and all other acts necessary or desirable to effectuate the foregoing
resolution.

        RESOLVED FURTHER, that the following officers acting together:
_________________ as _____________; and _______________ as _____________ are
authorized to execute and deliver the Documents on behalf of the Corporation,
together with any other documents and/or instruments evidencing or ancillary to
the Documents, and in such forms and on such terms as such officer(s) shall
approve, the execution thereof to be conclusive evidence of such approval and to
execute and deliver on behalf of the Corporation all other documents necessary
to effectuate said transaction in conformance with these resolutions.

Date:___________, 200_
                                      _________________________________
                                                  , Corporate Secretary
                                      ____________

                                    EXHIBIT H
                                       -1-

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