Document:

<PAGE>   1
                                                                   EXHIBIT 10.18

                                 LEASE AGREEMENT

                                 BY AND BETWEEN

                          AETNA LIFE INSURANCE COMPANY,
                            a Connecticut corporation

                                   AS LANDLORD

                                       and

                          STANFORD MICRODEVICES, INC.,
                             a Delaware corporation

                                    AS TENANT

                             Dated January 14, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
<S>                                                                       <C>
Basic Lease Information                                                    iv

1.   Demise                                                                 1

2.   Premises                                                               1

3.   Term                                                                   2

4.   Rent                                                                   2

5.   Utility Expenses                                                       6

6.   Late Charge                                                            7

7.   Security Deposit                                                       7

8.   Possession                                                             8

9.   Use of Premises                                                        8

10.  Acceptance of Premises                                                10

11.  Surrender                                                             10

12.  Alterations and Additions                                             11

13.  Maintenance and Repairs of Premises                                   13

14.  Landlord's Insurance                                                  14

15.  Tenant's Insurance                                                    14

16.  Indemnification                                                       15

17.  Subrogation                                                           16

18.  Signs                                                                 16

19.  Free From Liens                                                       17

20.  Entry By Landlord                                                     17

21.  Destruction and Damage                                                17

22.  Condemnation                                                          19
</TABLE>

                                        i
<PAGE>   3

<TABLE>
<S>                                                                        <C>
23.  Assignment and Subletting                                             20

24.  Tenant's Default                                                      23

25.  Landlord's Remedies                                                   24

26.  Landlord's Right to Perform Tenant's Obligations                      27

27.  Attorneys' fees                                                       27

28.  Taxes                                                                 28

29.  Effect of Conveyance                                                  28

30.  Tenant's Estoppel Certificate                                         28

31.  Subordination                                                         29

32.  Environmental Covenants                                               29

33.  Notices                                                               32

34.  Waiver                                                                33

35.  Holding Over                                                          33

36.  Successors and Assigns                                                33

37.  Time                                                                  33

38.  Brokers                                                               33

39.  Limitation of Liability                                               34

40.  Financial Statements                                                  34

41.  Rules and Regulations                                                 34

42.  Mortgagee Protection                                                  34

43.  Entire Agreement                                                      35

44.  Interest                                                              35

45.  Construction                                                          35

46.  Representations and Warranties of Tenant                              36

47.  Security                                                              36
</TABLE>

                                       ii
<PAGE>   4

<TABLE>
<S>                                                                        <C>
48.  Jury Trial Waiver                                                     36
</TABLE>

<TABLE>
<CAPTION>
         Exhibit

<S>                 <C>
            A       Diagram of the Premises

            B       Tenant Improvements

            B-1     Final Plans and Specifications for Tenant
                    Improvements

            C       Commencement and Expiration Date
                    Memorandum

            D       Rules and Regulations

            E       Hazardous Materials Disclosure Certificate
</TABLE>

                                       iii
<PAGE>   5

                                 LEASE AGREEMENT

                             BASIC LEASE INFORMATION

                 Lease Date:    January 14, 2000

                   Landlord:    AETNA LIFE INSURANCE COMPANY,
                                a Connecticut corporation

         Landlord's Address:    c/o UBS Brinson Realty Investors LLC
                                455 Market Street, Suite 1540
                                San Francisco, California 94105
                                Attention: Asset Manager,
                                           UBS Brinson Business Center

                                All notices sent to Landlord under
                                this Lease shall be sent to the
                                above address, with copies to:

                                Insignia Commercial Group, Inc.
                                160 West Santa Clara Street, Suite 1350
                                San Jose, California 95113
                                Attention: Property Manager,
                                           UBS Brinson Business Center

                     Tenant:    STANFORD MICRODEVICES, INC.,
                                a Delaware corporation

    Tenant's Contact Person:    Susan O'Campo

        Tenant's Address and    522 Almanor Avenue
           Telephone Number:    Sunnyvale, California 94086
                                (408) 616-5499

    Premises Square Footage:    Approximately Ten Thousand (10,000) rentable
                                square feet

           Premises Address:    726 Palomar Avenue
                                Sunnyvale, California

                    Project:    720-726 Palomar Avenue, Sunnyvale, California,
                                together with the land on which the Project is
                                situated and all Common Areas

Building (if not the same as
               the Project):    Same as the Project

                                       iv
<PAGE>   6

 Tenant's Proportionate Share
                  of Project:    50%

 Tenant's Proportionate Share
                 of Building:    50%

              Length of Term:    Sixty (60) months

       Estimated Commencement
                        Date:    February 1, 2000

   Estimated Expiration Date:    January 31, 2005

<TABLE>
<CAPTION>
           Monthly Base Rent:                         Monthly Base  Monthly Base
                                   Months    Sq. Ft.       Rate          Rent
<S>                                <C>       <C>      <C>           <C>
                                    1-12     10,000       x $2.15   =$21,500.00

                                    13-24    10,000       x $2.24   = $22,400.00

                                    25-36    10,000       x $2.33   = $23,300.00

                                    37-48    10,000       x $2.42   = $24,200.00

                                    49-60    10,000       x $2.52   = $25,200.00
</TABLE>

           Prepaid Base Rent:    Twenty One Thousand Five Hundred Dollars
                                 ($21,500.00)

     Prepaid Additional Rent:    Two Thousand Five Hundred Forty Six and 16/100
                                 Dollars ($2,546.16)

  Month to which Prepaid Base
Rent and Additional Rent will
                  be Applied:    First (1st) month of the Term

            Security Deposit:    Fifty Thousand Dollars ($50,000.00)

               Permitted Use:    General office and sales and engineering of
                                 microwave devices

   Unreserved Parking Spaces:    Thirty-five (35) nonexclusive and undesignated
                                 parking spaces

                     Brokers:    (1) BT Commercial and Cornish & Carey
                                 Commercial (collectively, Landlord's Broker)

                                 (2) Grubb & Ellis Company (Tenant's Broker)

                                        v
<PAGE>   7

                                 LEASE AGREEMENT

        THIS LEASE AGREEMENT is made and entered into by and between Landlord
and Tenant on the Lease Date. The defined terms used in this Lease which are
defined in the Basic Lease Information attached to this Lease Agreement ("BASIC
LEASE INFORMATION") shall have the meaning and definition given them in the
Basic Lease Information. The Basic Lease Information, the exhibits, the addendum
or addenda described in the Basic Lease Information, and this Lease Agreement
are and shall be construed as a single instrument and are referred to herein as
the "LEASE".

1.      DEMISE

        In consideration for the rents and all other charges and payments
payable by Tenant, and for the agreements, terms and conditions to be performed
by Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES
HEREBY HIRE AND TAKE FROM LANDLORD, the Premises described below (the
"PREMISES"), upon the agreements, terms and conditions of this Lease for the
Term hereinafter stated.

2.      PREMISES

        The Premises demised by this Lease is located in that certain building
(the "BUILDING") specified in the Basic Lease Information, which Building is
located in that certain real estate development (the "PROJECT") specified in the
Basic Lease Information. The Premises has the address and contains the square
footage specified in the Basic Lease Information. The location and dimensions of
the Premises are depicted on Exhibit A, which is attached hereto and
incorporated herein by this reference; provided, however, that any statement of
square footage set forth in this Lease, or that may have been used in
calculating any of the economic terms hereof, is an approximation which Landlord
and Tenant agree is reasonable and, except as expressly set forth in Paragraph
4(c)(iii) below, no economic terms based thereon shall be subject to revision
whether or not the actual square footage is more or less. Tenant shall have the
non-exclusive right (in common with the other tenants, Landlord and any other
person granted use by Landlord) to use the Common Areas (as hereinafter
defined), except that, with respect to parking, Tenant shall have only a license
to use the number of non-exclusive and undesignated parking spaces set forth in
the Basic Lease Information in the Project's parking areas (the "PARKING
AREAS"); provided, however, that Landlord shall not be required to enforce
Tenant's right to use such parking spaces; and, provided further, that the
number of parking spaces allocated to Tenant hereunder shall be reduced on a
proportionate basis in the event any of the parking spaces in the Parking Areas
are taken or otherwise eliminated as a result of any Condemnation (as
hereinafter defined) or casualty event affecting such Parking Areas. No easement
for light or air is incorporated in the Premises. For purposes of this Lease,
the term "COMMON AREAS" shall mean all areas and facilities outside the Premises
and within the exterior boundary line of the Project that are provided and
designated by Landlord for the non-exclusive use of Landlord, Tenant and other
tenants of the Project and their respective employees, guests and invitees.

        The Premises demised by this Lease shall include the Tenant Improvements
(as that term is defined in the tenant improvement work agreement attached
hereto as Exhibit B) to be

                                        1
<PAGE>   8

constructed by Landlord within the interior of the Premises. Landlord shall
construct the Tenant Improvements on the terms and conditions set forth in
EXHIBIT B. Landlord and Tenant agree to and shall be bound by the terms and
conditions of EXHIBIT B.

        Landlord has the right, in its sole discretion, from time to time, to:
(a) make changes to the Common Areas, including, without limitation, changes in
the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors and
walkways; (b) close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available; (c) add
additional buildings and improvements to the Common Areas or remove existing
buildings or improvements therefrom; (d) use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or any
portion thereof; and (e) do and perform any other acts or make any other changes
in, to or with respect to the Common Areas and the Project as Landlord may, in
its sole discretion, deem to be appropriate.

3.      TERM

        The term of this Lease (the "TERM") shall be for the period of months
specified in the Basic Lease Information, commencing on the earliest to occur of
the following dates (the "COMMENCEMENT DATE"):

        (a) The date the Tenant Improvements are approved by the appropriate
governmental agency as being in accordance with its building code and the
building permit issued for such improvements, as evidenced by the issuance of a
final building inspection approval; or

        (b) The date Landlord's architect and general contractor have both
certified in writing to Tenant that the Tenant Improvements have been
substantially completed in accordance with the plans and specifications
therefor; or

        (c) The date Tenant commences occupancy of the Premises.

        In the event the actual Commencement Date, as determined pursuant to the
foregoing, is a date other than the Estimated Commencement Date specified in the
Basic Lease Information, then Landlord and Tenant shall promptly execute a
Commencement and Expiration Date Memorandum in the form attached hereto as
Exhibit C, wherein the parties shall specify the Commencement Date and the date
on which the Term expires (the "EXPIRATION DATE").

4.      RENT

        (a) BASE RENT. Tenant shall pay to Landlord, in advance on the first day
of each month, without further notice or demand and without offset, rebate,
credit or deduction for any reason whatsoever, the monthly installments of rent
specified in the Basic Lease Information (the "BASE RENT").

        Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid
Rent and first monthly installment of estimated Additional Rent (as hereinafter
defined) specified in the Basic Lease Information to be applied toward Base Rent
and Additional Rent for the month of the Term specified in the Basic Lease
Information.

                                        2
<PAGE>   9

        (b) ADDITIONAL RENT. This Lease is intended to be a triple-net Lease
with respect to Landlord; and subject to Paragraph 13(b) below, the Base Rent
owing hereunder is (i) to be paid by Tenant absolutely net of all costs and
expenses relating to Landlord's ownership and operation of the Project and the
Building, and (ii) not to be reduced, offset or diminished, directly or
indirectly, by any cost, charge or expense payable hereunder by Tenant or by
others in connection with the Premises, the Building and/or the Project or any
part thereof. The provisions of this Paragraph 4(b) for the payment of Tenant's
Proportionate Share(s) of Expenses (as hereinafter defined) are intended to pass
on to Tenant its share of all such costs and expenses. In addition to the Base
Rent, Tenant shall pay to Landlord, in accordance with this Paragraph 4,
Tenant's Proportionate Share(s) of all costs and expenses paid or incurred by
Landlord in connection with the ownership, operation, maintenance, management
and repair of the Premises, the Building and/or the Project or any part thereof
(collectively, the "EXPENSES"), including, without limitation, all the following
items (the "ADDITIONAL RENT"):

               (i) Taxes and Assessments. All real estate taxes and assessments,
which shall include any form of tax, assessment, fee, license fee, business
license fee, levy, penalty (if a result of Tenant's delinquency), or tax (other
than net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by any authority having the direct or indirect power to tax, or by any
city, county, state or federal government or any improvement or other district
or division thereof, whether such tax is (A) determined by the area of the
Premises, the Building and/or the Project or any part thereof, or the Rent and
other sums payable hereunder by Tenant or by other tenants, including, but not
limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent and/or other sums due under this
Lease; (B) upon any legal or equitable interest of Landlord in the Premises, the
Building and/or the Project or any part thereof; (C) upon this transaction or
any document to which Tenant is a party creating or transferring any interest in
the Premises, the Building and/or the Project; (D) levied or assessed in lieu
of, in substitution for, or in addition to, existing or additional taxes against
the Premises, the Building and/or the Project, whether or not now customary or
within the contemplation of the parties; or (E) surcharged against the parking
area. Tenant and Landlord acknowledge that Proposition 13 was adopted by the
voters of the State of California in the June, 1978 election and that
assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such purposes as fire protection, street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental services
which may formerly have been provided without charge to property owners or
occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to any cause whatsoever are to
be included within the definition of real property taxes for purposes of this
Lease. "Taxes and assessments" shall also include legal and consultants' fees,
costs and disbursements incurred in connection with proceedings to contest,
determine or reduce taxes, Landlord specifically reserving the right, but not
the obligation, to contest by appropriate legal proceedings the amount or
validity of any taxes.

               (ii) Insurance. All insurance premiums for the Building and/or
the Project or any part thereof, including premiums for "all risk" fire and
extended coverage insurance, commercial general liability insurance, rent loss
or abatement insurance, earthquake insurance, flood or surface water coverage,
and other insurance as Landlord deems necessary in its sole discretion, and any
deductibles paid under policies of any such insurance.

                                        3
<PAGE>   10

               (iii) Utilities. The cost of all Utilities (as hereinafter
defined) serving the Premises, the Building and the Project that are not
separately metered to Tenant, any assessments or charges for Utilities or
similar purposes included within any tax bill for the Building or the Project,
including, without limitation, entitlement fees, allocation unit fees, and/or
any similar fees or charges and any penalties (if a result of Tenant's
delinquency) related thereto, and any amounts, taxes, charges, surcharges,
assessments or impositions levied, assessed or imposed upon the Premises, the
Building or the Project or any part thereof, or upon Tenant's use and occupancy
thereof, as a result of any rationing of Utility services or restriction on
Utility use affecting the Premises, the Building and/or the Project, as
contemplated in Paragraph 5 below (collectively, "UTILITY EXPENSES").

               (iv) Common Area Expenses. All costs to operate, maintain,
repair, replace, supervise, insure and administer the Common Areas, including
supplies, materials, labor and equipment used in or related to the operation and
maintenance of the Common Areas, including parking areas (including, without
limitation, all costs of resurfacing and restriping parking areas), signs and
directories on the Building and/or the Project, landscaping (including
maintenance contracts and fees payable to landscaping consultants), amenities,
sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which
the Project or any part thereof is a member or to which the Project or any part
thereof is subject.

               (v) Parking Charges. Any parking charges or other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental
authority or insurer in connection with the use or occupancy of the Building or
the Project.

               (vi) Maintenance and Repair Costs. Except for costs which are the
responsibility of Landlord pursuant to Paragraph 13(b) below, all costs to
maintain, repair, and replace the Premises, the Building and/or the Project or
any part thereof, including, without limitation, (A) all costs paid under
maintenance, management and service agreements such as contracts for janitorial,
security and refuse removal, (B) all costs to maintain, repair and replace the
roof coverings of the Building or the Project or any part thereof, (C) all costs
to maintain, repair and replace the heating, ventilating, air conditioning,
plumbing, sewer, drainage, electrical, fire protection, life safety and security
systems and other mechanical and electrical systems and equipment serving the
Premises, the Building and/or the Project or any part thereof (collectively, the
"SYSTEMS"), and (D) all costs and expenses incurred in causing the Project to be
Year 2000 Compliant (as defined below). "YEAR 2000 COMPLIANT" shall mean that
all Systems containing or using computers or other information technology will
function without material error or interruption resulting from the date change
from year 1999 to year 2000, to the extent that information technology of third
parties properly communicates date/time data with the Systems.

               (vii) Life Safety Costs. All costs to install, maintain, repair
and replace all life safety systems, including, without limitation, all fire
alarm systems, serving the Premises, the Building and/or the Project or any part
thereof (including all maintenance contracts and fees payable to life safety
consultants) whether such systems are or shall be required by Landlord's
insurance carriers, Laws (as hereinafter defined) or otherwise.

                                        4
<PAGE>   11

               (viii) Management and Administration. All costs for management
and administration of the Premises, the Building and/or the Project or any part
thereof, including, without limitation, a property management fee, accounting,
auditing, billing, postage, salaries and benefits for clerical and supervisory
employees, whether located on the Project or off-site, payroll taxes and legal
and accounting costs and fees for licenses and permits related to the ownership
and operation of the Project.

               Notwithstanding anything in this Paragraph 4(b) to the contrary,
with respect to all sums payable by Tenant as Additional Rent under this
Paragraph 4(b) for the replacement of any item or the construction of any new
item in connection with the physical operation of the Premises, the Building or
the Project (i.e., HVAC, roof membrane or coverings and parking area) which is a
capital item the replacement of which would be capitalized under Landlord's
commercial real estate accounting practices, Tenant shall be required to pay
only the prorata share of the cost of the item falling due within the Term
(including any Renewal Term) based upon the amortization of the same over the
useful life of such item, as reasonably determined by Landlord.

        (c) Payment of Additional Rent.

               (i) Upon commencement of this Lease, Landlord shall submit to
Tenant an estimate of monthly Additional Rent for the period between the
Commencement Date and the following December 31 and Tenant shall pay such
estimated Additional Rent on a monthly basis, in advance, on the first day of
each month. Tenant shall continue to make said monthly payments until notified
by Landlord of a change therein. If at any time or times Landlord determines
that the amounts payable under Paragraph 4(b) for the current year will vary
from Landlord's estimate given to Tenant, Landlord, by notice to Tenant, may
revise the estimate for such year, and subsequent payments by Tenant for such
year shall be based upon such revised estimate. By April 1 of each calendar
year, Landlord shall endeavor to provide to Tenant a statement showing the
actual Additional Rent due to Landlord for the prior calendar year, to be
prorated during the first year from the Commencement Date. If the total of the
monthly payments of Additional Rent that Tenant has made for the prior calendar
year is less than the actual Additional Rent chargeable to Tenant for such prior
calendar year, then Tenant shall pay the difference in a lump sum within ten
(10) days after receipt of such statement from Landlord. Any overpayment by
Tenant of Additional Rent for the prior calendar year shall be credited towards
the Additional Rent next due.

               (ii) Landlord's then-current annual operating and capital budgets
for the Building and the Project or the pertinent part thereof shall be used for
purposes of calculating Tenant's monthly payment of estimated Additional Rent
for the current year, subject to adjustment as provided above. Landlord shall
make the final determination of Additional Rent for the year in which this Lease
terminates as soon as possible after termination of such year. Even though the
Term has expired and Tenant has vacated the Premises, Tenant shall remain liable
for payment of any amount due to Landlord in excess of the estimated Additional
Rent previously paid by Tenant, and, conversely, Landlord shall promptly return
to Tenant any overpayment. Failure of Landlord to submit statements as called
for herein shall not be deemed a waiver of Tenant's obligation to pay Additional
Rent as herein provided.

                                        5
<PAGE>   12

               (iii) With respect to Expenses which Landlord allocates to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth in
the Basic Lease Information as Tenant's Proportionate Share of the Building, as
adjusted by Landlord from time to time for a remeasurement of or changes in the
physical size of the Premises or the Building, whether such changes in size are
due to an addition to or a sale or conveyance of a portion of the Building or
otherwise. With respect to Expenses which Landlord allocates to the Project as a
whole or to only a portion of the Project, Tenant's "PROPORTIONATE SHARE" shall
be, with respect to Expenses which Landlord allocates to the Project as a whole,
the percentage set forth in the Basic Lease Information as Tenant's
Proportionate Share of the Project and, with respect to Expenses which Landlord
allocates to only a portion of the Project, a percentage calculated by Landlord
from time to time in its sole discretion and furnished to Tenant in writing, in
either case as adjusted by Landlord from time to time for a remeasurement of or
changes in the physical size of the Premises or the Project, whether such
changes in size are due to an addition to or a sale or conveyance of a portion
of the Project or otherwise. Notwithstanding the foregoing, Landlord may
equitably adjust Tenant's Proportionate Share(s) for all or part of any item of
expense or cost reimbursable by Tenant that relates to a repair, replacement, or
service that benefits only the Premises or only a portion of the Building and/or
the Project or that varies with the occupancy of the Building and/or the
Project. Without limiting the generality of the foregoing, Tenant understands
and agrees that Landlord shall have the right to adjust Tenant's Proportionate
Share(s) of any Utility Expenses based upon Tenant's use of the Utilities or
similar services as reasonably estimated and determined by Landlord based upon
factors such as size of the Premises and intensity of use of such Utilities by
Tenant such that Tenant shall pay the portion of such charges reasonably
consistent with Tenant's use of such Utilities and similar services. If Tenant
disputes any such estimate or determination of Utility Expenses, then Tenant
shall either pay the estimated amount or cause the Premises to be separately
metered at Tenant's sole expense.

        (d) GENERAL PAYMENT TERMS. The Base Rent, Additional Rent and all other
sums payable by Tenant to Landlord hereunder, including, without limitation, any
late charges assessed pursuant to Paragraph 6 below and any interest assessed
pursuant to Paragraph 44 below, are referred to as the "Rent". All Rent shall be
paid without deduction, offset or abatement in lawful money of the United States
of America. Checks are to be made payable to Aetna Life Insurance Company and
shall be mailed to: UBS Brinson Business Center, Department #44820, San
Francisco, California 94144-4820, or to such other person or place as Landlord
may, from time to time, designate to Tenant in writing. The Rent for any
fractional part of a calendar month at the commencement or termination of the
Lease term shall be a prorated amount of the Rent for a full calendar month
based upon a thirty (30) day month.

5.      UTILITY EXPENSES

        (a) Tenant shall pay the cost of all water, sewer use, sewer discharge
fees and permit costs and sewer connection fees, gas, heat, electricity, refuse
pick-up, janitorial service, telephone and all materials and services or other
utilities (collectively, "UTILITIES") billed or metered separately to the
Premises and/or Tenant, together with all taxes, assessments, charges and
penalties added to or included within such cost. Tenant acknowledges that the
Premises, the Building and/or the Project may become subject to the rationing of
Utility services or restrictions on Utility use as required by a public utility
company, governmental agency or other similar entity having

                                        6
<PAGE>   13

jurisdiction thereof. Tenant acknowledges and agrees that its tenancy and
occupancy hereunder shall be subject to such rationing or restrictions as may be
imposed upon Landlord, Tenant, the Premises, the Building and/or the Project,
and Tenant shall in no event be excused or relieved from any covenant or
obligation to be kept or performed by Tenant by reason of any such rationing or
restrictions. Tenant agrees to comply with energy conservation programs
implemented by Landlord by reason of rationing, restrictions or Laws.

        (b) Landlord shall not be liable for any loss, injury or damage to
property caused by or resulting from any variation, interruption, or failure of
Utilities due to any cause whatsoever, or from failure to make any repairs or
perform any maintenance. No temporary interruption or failure of such services
incident to the making of repairs, alterations, improvements, or due to
accident, strike, or conditions or other events shall be deemed an eviction of
Tenant or relieve Tenant from any of its obligations hereunder. In no event
shall Landlord be liable to Tenant for any damage to the Premises or for any
loss, damage or injury to any property therein or thereon occasioned by
bursting, rupture, leakage or overflow of any plumbing or other pipes
(including, without limitation, water, steam, and/or refrigerant lines),
sprinklers, tanks, drains, drinking fountains or washstands, or other similar
cause in, above, upon or about the Premises, the Building, or the Project.

6.      LATE CHARGE

        Notwithstanding any other provision of this Lease, Tenant hereby
acknowledges that late payment to Landlord of Rent, or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord's
designated agent within five (5) days after their due date, then Tenant shall
pay to Landlord a late charge equal to five percent (5%) of such overdue amount,
plus any costs and attorneys' fees incurred by Landlord by reason of Tenant's
failure to pay Rent and/or other charges when due hereunder. Landlord and Tenant
hereby agree that such late charges represent a fair and reasonable estimate of
the cost that Landlord will incur by reason of Tenant's late payment and shall
not be construed as a penalty. Landlord's acceptance of such late charges shall
not constitute a waiver of Tenant's default with respect to such overdue amount
or estop Landlord from exercising any of the other rights and remedies granted
under this Lease.

        INITIALS: /s/ Signature Illegible   /s/ Signature Illegible
                            Landlord                  Tenant

7.      SECURITY DEPOSIT

        Concurrently with Tenant's execution of the Lease, Tenant shall deposit
with Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy
Tenant's default in the payment of any Rent, (b) to repair damage to the
Premises caused by Tenant, (c) to clean the Premises upon termination of this
Lease, (d) to reimburse Landlord for the payment of any amount which Landlord
may reasonably spend or be required to spend by reason of Tenant's default, or
(e) to compensate Landlord for any other loss or damage

                                        7
<PAGE>   14

which Landlord may suffer by reason of Tenant's default. Should Tenant
faithfully and fully comply with all of the terms, covenants and conditions of
this Lease, within thirty (30) days following the expiration of the Term, the
Security Deposit or any balance thereof shall be returned to Tenant or, at the
option of Landlord, to the last assignee of Tenant's interest in this Lease.
Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to any interest on such deposit.
If Landlord so uses or applies all or any portion of said deposit, within five
(5) days after written demand therefor Tenant shall deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to the full extent of
the above amount, and Tenant's failure to do so shall be a default under this
Lease. In the event Landlord transfers its interest in this Lease, Landlord
shall transfer the then remaining amount of the Security Deposit to Landlord's
successor in interest, and thereafter Landlord shall have no further liability
to Tenant with respect to such Security Deposit.

8.      POSSESSION

        (a) TENANT'S RIGHT OF POSSESSION. Subject to Paragraph 8(b), Tenant
shall be entitled to possession of the Premises upon commencement of the Term.

        (b) DELAY IN DELIVERING POSSESSION. If for any reason whatsoever,
Landlord cannot deliver possession of the Premises to Tenant on or before the
Estimated Commencement Date, this Lease shall not be void or voidable, nor shall
Landlord, or Landlord's agents, advisors, employees, partners, shareholders,
directors, invitees or independent contractors (collectively, "LANDLORD'S
AGENTS"), be liable to Tenant for any loss or damage resulting therefrom. Tenant
shall not be liable for Rent until Landlord delivers possession of the Premises
to Tenant. The Expiration Date shall be extended by the same number of days that
Tenant's possession of the Premises was delayed beyond the Estimated
Commencement Date.

        (c) EARLY OCCUPANCY. Notwithstanding the provisions of Paragraph 8(a)
above, Tenant shall be permitted to enter upon the Premises at times convenient
to Landlord during the fourteen (14) day period prior to the Commencement Date
for the sole purpose of installing furniture and telephone and data lines and
preparing the Premises for Tenant's occupancy; provided, however, that prior to
any such entry, Tenant shall provide Landlord with proof of Tenant's insurance
as set forth in Paragraph 15 of this Lease. Such entry upon the Premises shall
be subject to all of the provisions of this Lease, except that Tenant shall not
be required to pay Base Rent or Additional Rent as long as Tenant is not
operating its business in the Premises during such early possession period. All
materials, work, installations, equipment and decorations of any nature brought
upon or installed by Tenant in the Premises prior to the Commencement Date shall
be at Tenant's sole risk.

9.      USE OF PREMISES

        (a) PERMITTED USE. The use of the Premises by Tenant and Tenant's
agents, advisors, employees, partners, shareholders, directors, invitees and
independent contractors (collectively, "TENANT'S AGENTS") shall be solely for
the Permitted Use specified in the Basic Lease Information and for no other use.
Notwithstanding anything in this Lease to the contrary, Tenant acknowledges and
agrees that it shall have no right to use, and shall expressly be prohibited
from using, (i) the Premises for manufacturing or assembly purposes of any kind,
and (ii) Hazardous

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<PAGE>   15

Materials of any type in or about the Premises at any time. Tenant shall not
permit any objectionable or unpleasant odor, smoke, dust, gas, noise or
vibration to emanate from or near the Premises. The Premises shall not be used
to create any nuisance or trespass, for any illegal purpose, for any purpose not
permitted by Laws, for any purpose that would invalidate the insurance or
increase the premiums for insurance on the Premises, the Building or the Project
or for any purpose or in any manner that would interfere with other tenants' use
or occupancy of the Project. If any of Tenant's office machines or equipment
disturb any other tenant in the Building, then Tenant shall provide adequate
insulation or take such other action as may be necessary to eliminate the noise
or disturbance. Tenant agrees to pay to Landlord, as Additional Rent, any
increases in premiums on policies resulting from Tenant's Permitted Use or any
other use or action by Tenant or Tenant's Agents which increases Landlord's
premiums or requires additional coverage by Landlord to insure the Premises.
Tenant agrees not to overload the floor(s) of the Building.

        (b) COMPLIANCE WITH GOVERNMENTAL REGULATIONS AND PRIVATE RESTRICTIONS.
Tenant and Tenant's Agents shall, at Tenant's expense, faithfully observe and
comply with (i) all municipal, state and federal laws, statutes, codes, rules,
regulations, ordinances, requirements, and orders (collectively, "LAWS"), now in
force or which may hereafter be in force pertaining to the Premises or Tenant's
use of the Premises, the Building or the Project, including, without limitation,
any Laws requiring installation of fire sprinkler systems, seismic reinforcement
and related alterations, and removal of asbestos, whether substantial in cost or
otherwise; provided, however, that except as provided in Paragraph 9(c) below,
Tenant shall not be required to make or, except as provided in Paragraph 4
above, pay for, structural changes to the Premises or the Building not related
to Tenant's specific use of the Premises unless the requirement for such changes
is imposed as a result of any improvements or additions made or proposed to be
made at Tenant's request; (ii) all recorded covenants, conditions and
restrictions affecting the Project ("PRIVATE RESTRICTIONS") now in force or
which may hereafter be in force; and (iii) any and all rules and regulations set
forth in EXHIBIT D and any other rules and regulations now or hereafter
promulgated by Landlord related to parking or the operation of the Premises, the
Building and/or the Project (collectively, the "RULES AND REGULATIONS"). The
judgment of any court of competent jurisdiction, or the admission of Tenant in
any action or proceeding against Tenant, whether Landlord be a party thereto or
not, that Tenant has violated any such Laws or Private Restrictions, shall be
conclusive of that fact as between Landlord and Tenant.

        (c) COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Landlord and Tenant
hereby agree and acknowledge that the Premises, the Building and/or the Project
may be subject to, among other Laws, the requirements of the Americans with
Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including,
but not limited to, Title III thereof, and all regulations and guidelines
related thereto, together with any and all laws, rules, regulations, ordinances,
codes and statutes now or hereafter enacted by local or state agencies having
jurisdiction thereof, including all requirements of Title 24 of the State of
California, as the same may be in effect on the date of this Lease and may be
hereafter modified, amended or supplemented (collectively, the "ADA"). Any
Tenant Improvements to be constructed hereunder shall be in compliance with the
requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Tenant
Improvements. Tenant shall be solely responsible for conducting its own
independent investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly complies with all requirements of the ADA. Subject
to

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<PAGE>   16

reimbursement pursuant to Paragraph 4 above, if any barrier removal work or
other work is required to the Building, the Common Areas or the Project under
the ADA, then such work shall be the responsibility of Landlord; provided that,
if such work is required under the ADA as a result of Tenant's use of the
Premises or any work or Alteration (as hereinafter defined) made to the Premises
by or on behalf of Tenant, then such work shall be performed by Landlord at the
sole cost and expense of Tenant. Except as otherwise expressly provided in this
provision, Tenant shall be responsible at its sole cost and expense for fully
and faithfully complying with all applicable requirements of the ADA, including,
without limitation, not discriminating against any disabled persons in the
operation of Tenant's business in or about the Premises, and offering or
otherwise providing auxiliary aids and services as, and when, required by the
ADA. Within ten (10) days after receipt, Tenant shall advise Landlord in
writing, and provide Landlord with copies of (as applicable), any notices
alleging violation of the ADA relating to any portion of the Premises, the
Building or the Project; any claims made or threatened orally or in writing
regarding noncompliance with the ADA and relating to any portion of the
Premises, the Building, or the Project; or any governmental or regulatory
actions or investigations instituted or threatened regarding noncompliance with
the ADA and relating to any portion of the Premises, the Building or the
Project. Tenant shall and hereby agrees to protect, defend (with counsel
acceptable to Landlord) and hold Landlord and Landlord's Agents harmless and
indemnify Landlord and Landlord's Agents from and against all liabilities,
damages, claims, losses, penalties, judgments, charges and expenses (including
attorneys' fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision) arising
from or in any way related to, directly or indirectly, Tenant's or Tenant's
Agents' violation or alleged violation of the ADA. Tenant agrees that the
obligations of Tenant herein shall survive the expiration or earlier termination
of this Lease

10.     ACCEPTANCE OF PREMISES

        (a) By entry hereunder, Tenant accepts the Premises as suitable for
Tenant's intended use and as being in good and sanitary operating order,
condition and repair, AS IS, and without representation or warranty by Landlord
as to the condition, use or occupancy which may be made thereof. Any exceptions
to the foregoing must be by written agreement executed by Landlord and Tenant.

        (b) Notwithstanding the terms of Paragraph 10(a), Landlord shall cause
the mechanical, electrical and plumbing systems serving the Premises to be in
good working order and the roof on the Building to be in good condition on the
Commencement Date. Any claims by Tenant under the preceding sentence shall be
made in writing not later than the tenth (10th) day after the Commencement Date.
In the event Tenant fails to deliver a written claim to Landlord on or before
such tenth (10th) day, then Landlord shall be conclusively deemed to have
satisfied its obligations under this Paragraph 10(b).

11.     SURRENDER

        Tenant agrees that on the last day of the Term, or on the sooner
termination of this Lease, Tenant shall surrender the Premises to Landlord (a)
in good condition and repair (damage by acts of God, fire, and normal wear and
tear excepted), but with all interior walls painted or cleaned so they appear
painted, any carpets cleaned, all floors cleaned and waxed, all non-working
light bulbs and ballasts replaced and all roll-up doors and plumbing fixtures in
good condition and

                                       10
<PAGE>   17

working order, and (b) otherwise in accordance with Paragraph 32(h). Normal wear
and tear shall not include any damage or deterioration to the floors of the
Premises arising from the use of forklifts in, on or about the Premises
(including, without limitation, any marks or stains on any portion of the
floors), and any damage or deterioration that would have been prevented by
proper maintenance by Tenant, or Tenant otherwise performing all of its
obligations under this Lease. On or before the expiration or sooner termination
of this Lease, (i) Tenant shall remove all of Tenant's Property (as hereinafter
defined) and Tenant's signage from the Premises, the Building and the Project
and repair any damage caused by such removal, and (ii) Landlord may, by notice
to Tenant given not later than ninety (90) days prior to the Expiration Date
(except in the event of a termination of this Lease prior to the scheduled
Expiration Date, in which event no advance notice shall be required), require
Tenant at Tenant's expense to remove any or all Alterations and/or the initial
Tenant Improvements constructed and installed pursuant to EXHIBIT B hereto, and
to repair any damage caused by such removal. Any of Tenant's Property not so
removed by Tenant as required herein shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant
waives all claims against Landlord for any damages resulting from Landlord's
retention and disposition of such property; provided, however, that Tenant shall
remain liable to Landlord for all costs incurred in storing and disposing of
such abandoned property of Tenant. All Tenant Improvements and Alterations
except those which Landlord requires Tenant to remove shall remain in the
Premises as the property of Landlord. If the Premises are not surrendered at the
end of the Term or sooner termination of this Lease, and in accordance with the
provisions of this Paragraph 11 and Paragraph 32(h) below, Tenant shall continue
to be responsible for the payment of Rent (as the same may be increased pursuant
to Paragraph 35 below) until the Premises are so surrendered in accordance with
said Paragraphs, and Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all loss or liability resulting from delay by Tenant in
so surrendering the Premises including, without limitation, any loss or
liability resulting from any claim against Landlord made by any succeeding
tenant or prospective tenant founded on or resulting from such delay and losses
to Landlord due to lost opportunities to lease any portion of the Premises to
any such succeeding tenant or prospective tenant, together with, in each case,
actual attorneys' fees and costs.

12.     ALTERATIONS AND ADDITIONS

        (a) Tenant shall not make, or permit to be made, any alteration,
addition or improvement (hereinafter referred to individually as an "ALTERATION"
and collectively as the "ALTERATIONS") to the Premises or any part thereof
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld; provided, however, that Landlord shall have the right in
its sole and absolute discretion to consent or to withhold its consent to any
Alteration which affects the structural portions of the Premises, the Building
or the Project or the Systems serving the Premises, the Building and/or the
Project or any portion thereof.

        (b) Any Alteration to the Premises shall be at Tenant's sole cost and
expense, in compliance with all applicable Laws and all requirements requested
by Landlord, including, without limitation, the requirements of any insurer
providing coverage for the Premises or the Project or any part thereof, and in
accordance with plans and specifications approved in writing by Landlord, and
shall be constructed and installed by a contractor approved in writing by
Landlord ("TENANT'S CONTRACTOR"). As a further condition to giving consent,
Landlord may require that either Tenant or Tenant's Contractor provide Landlord,
at Tenant's or Tenant's

                                       11
<PAGE>   18

Contractor's sole cost and expense, a payment and performance bond in form
acceptable to Landlord, in a principal amount not less than one and one-half
times the estimated costs of such Alterations, to ensure Landlord against any
liability for mechanic's and materialmen's liens and to ensure completion of
work. Before Alterations may begin, valid building permits or other permits or
licenses required must be furnished to Landlord, and, once the Alterations
begin, Tenant will diligently and continuously pursue their completion. Landlord
may monitor construction of the Alterations and Tenant shall reimburse Landlord
for its costs (including, without limitation, the costs of any construction
manager retained by Landlord) in reviewing plans and documents and in monitoring
construction. Tenant shall ensure that its contractor(s) maintain during the
course of construction, at the contractor'(s) sole cost and expense, builders'
risk insurance for the amount of the completed value of the Alterations on an
all-risk non-reporting form covering all improvements under construction,
including building materials, and other insurance in amounts and against such
risks as Landlord shall reasonably require in connection with the Alterations.
In addition to and without limitation on the generality of the foregoing, Tenant
shall ensure that its contractor(s) procure and maintain in full force and
effect during the course of construction a "broad form" commercial general
liability and property damage policy of insurance naming Landlord, Landlord's
investment advisor and agent, UBS Brinson Realty Investors LLC, Tenant and
Landlord's lenders as additional insureds. The minimum limit of coverage of the
aforesaid policy shall be in the amount of not less than Two Million Dollars
($2,000,000.00) for injury or death of one person in any one accident or
occurrence and in the amount of not less than Two Million Dollars
($2,000,000.00) for injury or death of more than one person in any one accident
or occurrence, and shall contain a severability of interest clause or a cross
liability endorsement. Such insurance shall further insure Landlord and Tenant
against liability for property damage of at least One Million Dollars
($1,000,000.00).

        (c) All Alterations, including, but not limited to, heating, lighting,
electrical, air conditioning, fixed partitioning, drapery, wall covering and
paneling, built-in cabinet work and carpeting installations made by Tenant,
together with all property that has become an integral part of the Premises or
the Building, shall at once be and become the property of Landlord, and shall
not be deemed trade fixtures or Tenant's Property. If requested by Landlord,
Tenant will pay, prior to the commencement of construction, an amount determined
by Landlord necessary to cover the costs of demolishing such Alterations and/or
the cost of returning the Premises and the Building to its condition prior to
such Alterations.

        (d) No private telephone systems and/or other related computer or
telecommunications equipment or lines may be installed without Landlord's prior
written consent. If Landlord gives such consent, all equipment must be installed
within the Premises and, at the request of Landlord made at any time prior to
the expiration of the Term, removed upon the expiration or sooner termination of
this Lease and the Premises restored to the same condition as before such
installation.

        (e) Notwithstanding anything herein to the contrary, before installing
any equipment or lights which generate an undue amount of heat in the Premises,
or if Tenant plans to use any high-power usage equipment in the Premises, Tenant
shall obtain the written permission of Landlord. Landlord may refuse to grant
such permission unless Tenant agrees to pay the costs to Landlord for
installation of supplementary air conditioning capacity or electrical systems
necessitated by such equipment.

                                       12
<PAGE>   19

        (f) Tenant agrees not to proceed to make any Alterations,
notwithstanding consent from Landlord to do so, until Tenant notifies Landlord
in writing of the date Tenant desires to commence construction or installation
of such Alterations and Landlord has approved such date in writing, in order
that Landlord may post appropriate notices to avoid any liability to contractors
or material suppliers for payment for Tenant's improvements. Tenant will at all
times permit such notices to be posted and to remain posted until the completion
of work.

13.     MAINTENANCE AND REPAIRS OF PREMISES

        (a) MAINTENANCE BY TENANT. Throughout the Term, Tenant shall, at its
sole expense, (i) keep and maintain in good order and condition the Premises,
and repair and replace every part thereof, including glass, windows, window
frames, window casements, skylights, interior and exterior doors, door frames
and door closers; interior lighting (including, without limitation, light bulbs
and ballasts), the plumbing and electrical systems exclusively serving the
Premises, all communications systems serving the Premises, Tenant's signage,
interior demising walls and partitions, equipment, interior painting and
interior walls and floors, and the roll-up doors, ramps and dock equipment,
including, without limitation, dock bumpers, dock plates, dock seals, dock
levelers and dock lights located in or on the Premises (excepting only those
portions of the Building or the Project to be maintained by Landlord, as
provided in Paragraph 13(b) below), (ii) furnish all expendables, including
light bulbs, paper goods and soaps, used in the Premises, and (iii) keep and
maintain in good order and condition, repair and replace all of Tenant's
security systems in or about or serving the Premises and, except to the extent
that Landlord notifies Tenant in writing of its intention to arrange for such
monitoring, cause the fire alarm systems serving the Premises to be monitored by
a monitoring or protective services firm approved by Landlord in writing. Tenant
shall not do nor shall Tenant allow Tenant's Agents to do anything to cause any
damage, deterioration or unsightliness to the Premises, the Building or the
Project.

        (b) MAINTENANCE BY LANDLORD. Subject to the provisions of Paragraphs
13(a), 21 and 22, and further subject to Tenant's obligation under Paragraph 4
to reimburse Landlord, in the form of Additional Rent, for Tenant's
Proportionate Share(s) of the cost and expense of the following items, Landlord
agrees to repair and maintain the following items: the roof coverings (provided
that Tenant installs no additional air conditioning or other equipment on the
roof that damages the roof coverings, in which event Tenant shall pay all costs
resulting from the presence of such additional equipment); the Systems serving
the Premises and the Building, excluding the plumbing and electrical systems
exclusively serving the Premises; and the Parking Areas, pavement, landscaping,
sprinkler systems, sidewalks, driveways, curbs, and lighting systems in the
Common Areas. Subject to the provisions of Paragraphs 13(a), 21 and 22,
Landlord, at its own cost and expense, agrees to repair and maintain the
following items: the structural portions of the roof (specifically excluding the
roof coverings), the foundation, the footings, the floor slab, and the load
bearing walls and exterior walls of the Building (excluding any glass and any
routine maintenance, including, without limitation, any painting, sealing,
patching and waterproofing of such walls). Notwithstanding anything in this
Paragraph 13 to the contrary, Landlord shall have the right to either repair or
to require Tenant to repair any damage to any portion of the Premises, the
Building and/or the Project caused by or created due to any act, omission,
negligence or willful misconduct of Tenant or Tenant's Agents and to restore the
Premises, the Building and/or the Project, as applicable, to the condition
existing prior to the

                                       13
<PAGE>   20

occurrence of such damage; provided, however, that in the event Landlord elects
to perform such repair and restoration work, Tenant shall reimburse Landlord
upon demand for all costs and expenses incurred by Landlord in connection
therewith. Landlord's obligation hereunder to repair and maintain is subject to
the condition precedent that Landlord shall have received written notice of the
need for such repairs and maintenance and a reasonable time to perform such
repair and maintenance. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair, and
failure to so report such defects shall make Tenant responsible to Landlord for
any liability incurred by Landlord by reason of such condition.

        (c) TENANT'S WAIVER OF RIGHTS. Tenant hereby expressly waives all rights
to make repairs at the expense of Landlord or to terminate this Lease, as
provided for in California Civil Code Sections 1941 and 1942, and 1932(1),
respectively, and any similar or successor statute or law in effect or any
amendment thereof during the Term.

14.     LANDLORD'S INSURANCE

        Landlord shall purchase and keep in force fire, extended coverage and
"all risk" insurance covering the Building and the Project. Tenant shall, at its
sole cost and expense, comply with any and all reasonable requirements
pertaining to the Premises, the Building and the Project of any insurer
necessary for the maintenance of reasonable fire and commercial general
liability insurance, covering the Building and the Project. Landlord, at
Tenant's cost, may maintain "Loss of Rents" insurance, insuring that the Rent
will be paid in a timely manner to Landlord for a period of at least twelve (12)
months if the Premises, the Building or the Project or any portion thereof are
destroyed or rendered unusable or inaccessible by any cause insured against
under this Lease.

15.     TENANT'S INSURANCE

        (a) COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant shall, at Tenant's
expense, secure and keep in force a "broad form" commercial general liability
insurance and property damage policy covering the Premises, insuring Tenant, and
naming Landlord, Landlord's investment advisors and agents from time to time,
including, without limitation, UBS Brinson Realty Investors LLC, and Landlord's
lenders as additional insureds, against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises. The minimum limit of
coverage of such policy shall be in the amount of not less than One Million
Dollars ($1,000,000.00) for injury or death of one person in any one accident or
occurrence and in the amount of not less than One Million Dollars
($1,000,000.00) for injury or death of more than one person in any one accident
or occurrence and shall contain a severability of interest clause or a cross
liability endorsement. In addition to the foregoing coverages, Tenant shall
maintain an umbrella policy of liability insurance with a minimum coverage limit
of Two Million Dollars ($2,000,000.00) above the foregoing amounts. Such
insurance policies (including the umbrella policy) shall further insure Landlord
and Tenant against liability for property damage of at least Three Million
Dollars ($3,000,000.00). Landlord may from time to time require reasonable
increases in any such limits if Landlord believes that additional coverage is
necessary or desirable. The limit of any insurance shall not limit the liability
of Tenant hereunder. No policy maintained by Tenant under this Paragraph 15(a)
shall contain a deductible greater than Ten Thousand Dollars

                                       14
<PAGE>   21

($10,000.00). No policy shall be cancelable or subject to reduction of coverage
without thirty (30) days prior written notice to Landlord, and loss payable
clauses shall be subject to Landlord's approval. Such policies of insurance
shall be issued as primary policies and not contributing with or in excess of
coverage that Landlord may carry, by an insurance company authorized to do
business in the State of California for the issuance of such type of insurance
coverage and rated A:XIII or better in Best's Key Rating Guide.

        (b) PERSONAL PROPERTY INSURANCE. Tenant shall maintain in full force and
effect on all of its personal property, furniture, furnishings, trade or
business fixtures and equipment (collectively, "TENANT'S PROPERTY") on the
Premises, a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of the full replacement cost
thereof. No such policy shall contain a deductible greater than Ten Thousand
Dollars ($10,000.00). During the term of this Lease the proceeds from any such
policy or policies of insurance shall be used for the repair or replacement of
the fixtures and equipment so insured. Landlord shall have no interest in the
insurance upon Tenant's equipment and fixtures and will sign all documents
reasonably necessary in connection with the settlement of any claim or loss by
Tenant. Landlord will not carry insurance on Tenant's possessions.

        (c) Worker's Compensation Insurance; Employer's Liability Insurance.
Tenant shall, at Tenant's expense, maintain in full force and effect worker's
compensation insurance with not less than the minimum limits required by law,
and employer's liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).

        (d) EVIDENCE OF COVERAGE. Tenant shall deliver to Landlord certificates
of insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least thirty (30)
days prior to expiration of each policy, furnish Landlord with certificates of
renewal or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancelable or otherwise subject to modification except
after thirty (30) days prior written notice to Landlord and the other parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days notice has been given to Landlord).

16.     INDEMNIFICATION

        (a) OF LANDLORD. Tenant shall indemnify and hold harmless Landlord and
Landlord's Agents against and from any and all claims, liabilities, judgments,
costs, demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from (i) the use of the Premises, the
Building or the Project by Tenant or Tenant's Agents, or from any activity done,
permitted or suffered by Tenant or Tenant's Agents in or about the Premises, the
Building or the Project, and (ii) any act, neglect, fault, willful misconduct or
omission of Tenant or Tenant's Agents, or from any breach or default in the
terms of this Lease by Tenant or Tenant's Agents, and (iii) any action or
proceeding brought on account of any matter in items (i) or (ii). If any action
or proceeding is brought against Landlord by reason of any such claim, upon
notice from Landlord, Tenant shall defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord. As a material part of the
consideration to Landlord, Tenant hereby releases Landlord and Landlord's Agents
from responsibility for, waives its entire claim

                                       15
<PAGE>   22

of recovery for and assumes all risk of (A) damage to property or injury to
persons in or about the Premises, the Building or the Project from any cause
whatsoever (except that which is caused by the sole active gross negligence or
willful misconduct of Landlord or Landlord's Agents or by the failure of
Landlord to observe any of the terms and conditions of this Lease, if such
failure has persisted for an unreasonable period of time after written notice of
such failure), or (B) loss resulting from business interruption or loss of
income at the Premises. The obligations of Tenant under this Paragraph 16 shall
survive any termination of this Lease.

        (b) OF TENANT. Landlord shall indemnify and hold harmless Tenant against
and from any and all claims, liabilities, judgments, costs, demands, causes of
action and expenses (including, without limitation, reasonable attorneys' fees)
arising from (1) the gross negligence of Landlord or from any breach or default
in the terms of this Lease by Tenant, and (2) any action or proceeding brought
on account of any matter in item (1). If any action or proceeding is brought
against Tenant by reason of any such claim, upon notice from Tenant, Landlord
shall defend the same at Landlord's expense by counsel reasonably satisfactory
to Tenant. The obligations of Landlord under this Paragraph 16(b) shall survive
any termination of this Lease.

        (c) NO IMPAIRMENT OF INSURANCE. The foregoing indemnities shall not
relieve any insurance carrier of its obligations under any policies required to
be carried by either party pursuant to this Lease, to the extent that such
policies cover the peril or occurrence that results in the claim that is subject
to the foregoing indemnity.

17.     SUBROGATION

        Landlord and Tenant hereby mutually waive any claim against the other
and its Agents for any loss or damage to any of their property located on or
about the Premises, the Building or the Project that is caused by or results
from perils covered by property insurance carried by the respective parties, to
the extent of the proceeds of such insurance actually received with respect to
such loss or damage, whether or not due to the negligence of the other party or
its Agents. Because the foregoing waivers will preclude the assignment of any
claim by way of subrogation to an insurance company or any other person, each
party now agrees to immediately give to its insurer written notice of the terms
of these mutual waivers and shall have their insurance policies endorsed to
prevent the invalidation of the insurance coverage because of these waivers.
Nothing in this Paragraph 17 shall relieve a party of liability to the other for
failure to carry insurance required by this Lease.

18.     SIGNS

        Tenant shall not place or permit to be placed in, upon, or about the
Premises, the Building or the Project any exterior lights, decorations,
balloons, flags, pennants, banners, advertisements or notices, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior of the
Premises without obtaining Landlord's prior written consent or without complying
with Landlord's signage criteria, as the same may be modified by Landlord from
time to time, and with all applicable Laws, and will not conduct, or permit to
be conducted, any sale by auction on the Premises or otherwise on the Project.
Tenant shall remove any sign, advertisement or notice placed on the Premises,
the Building or the Project by Tenant upon the expiration of the Term or sooner

                                       16
<PAGE>   23

termination of this Lease and shall repair any damage or injury to the Premises,
the Building or the Project caused thereby, all at Tenant's expense. If any
signs are not removed or necessary repairs not made, Landlord shall have the
right to remove the signs and repair any damage or injury to the Premises, the
Building or the Project at Tenant's sole cost and expense.

19.     FREE FROM LIENS

        Tenant shall keep the Premises, the Building and the Project free from
any liens arising out of any work performed, material furnished or obligations
incurred by or for Tenant. In the event that Tenant shall not, within ten (10)
days following the imposition of any such lien, cause the lien to be released of
record by payment or posting of a proper bond, Landlord shall have in addition
to all other remedies provided herein and by law the right but not the
obligation to cause same to be released by such means as it shall deem proper,
including payment of the claim giving rise to such lien. All such sums paid by
Landlord and all expenses incurred by it in connection therewith (including,
without limitation, attorneys' fees) shall be payable to Landlord by Tenant upon
demand. Landlord shall have the right at all times to post and keep posted on
the Premises any notices permitted or required by law or that Landlord shall
deem proper for the protection of Landlord, the Premises, the Building and the
Project, from mechanics' and materialmen's liens. Tenant shall give to Landlord
at least five (5) business days' prior written notice of commencement of any
repair or construction on the Premises.

20.     ENTRY BY LANDLORD

        Tenant shall permit Landlord and Landlord's Agents to enter into and
upon the Premises at all reasonable times, upon reasonable notice (except in the
case of an emergency, for which no notice shall be required), and subject to
Tenant's reasonable security arrangements, for the purpose of inspecting the
same or showing the Premises to prospective purchasers, lenders or tenants or to
alter, improve, maintain and repair the Premises or the Building as required or
permitted of Landlord under the terms hereof, or for any other business purpose,
without any rebate of Rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned (except for
actual damages resulting from the sole active gross negligence or willful
misconduct of Landlord); and Tenant shall permit Landlord to post notices of
non-responsibility and ordinary "for sale" or "for lease" signs. No such entry
shall be construed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises. Landlord may
temporarily close entrances, doors, corridors, elevators or other facilities
without liability to Tenant by reason of such closure in the case of an
emergency and when Landlord otherwise deems such closure necessary.

21.     DESTRUCTION AND DAMAGE

        (a) If the Premises are damaged by fire or other perils covered by
extended coverage insurance, Landlord shall, at Landlord's option:

               (i) In the event of total destruction (which shall mean
destruction or damage in excess of twenty-five percent (25%) of the full
insurable value thereof) of the Premises, elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to

                                       17
<PAGE>   24

repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty (60)
days after the date (the "CASUALTY DISCOVERY DATE") Landlord obtains actual
knowledge of such destruction. If Landlord elects not to restore the Premises,
this Lease shall be deemed to have terminated as of the date of such total
destruction.

               (ii) In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding twenty-five percent (25%) of
the full insurable value thereof) of the Premises for which Landlord will
receive insurance proceeds sufficient to cover the cost to repair and restore
such partial destruction and, if the damage thereto is such that the Premises
may be substantially repaired or restored to its condition existing immediately
prior to such damage or destruction within one hundred eighty (180) days from
the Casualty Discovery Date, Landlord shall commence and proceed diligently with
the work of repair and restoration, in which event the Lease shall continue in
full force and effect. If such repair and restoration requires longer than one
hundred eighty (180) days or if the insurance proceeds therefor (plus any
amounts Tenant may elect or is obligated to contribute) are not sufficient to
cover the cost of such repair and restoration, Landlord may elect either to so
repair and restore, in which event the Lease shall continue in full force and
effect, or not to repair or restore, in which event the Lease shall terminate.
In either case, Landlord shall give written notice to Tenant of its intention
within sixty (60) days after the Casualty Discovery Date. If Landlord elects not
to restore the Premises, this Lease shall be deemed to have terminated as of the
date of such partial destruction.

               (iii) Notwithstanding anything to the contrary contained in this
Paragraph, in the event of damage to the Premises occurring during the last
twelve (12) months of the Term, Landlord may elect to terminate this Lease by
written notice of such election given to Tenant within thirty (30) days after
the Casualty Discovery Date.

        (b) If the Premises are damaged by any peril not covered by extended
coverage insurance, and the cost to repair such damage exceeds any amount Tenant
may agree to contribute, Landlord may elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to
repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty (60)
days after the Casualty Discovery Date. If Landlord elects not to restore the
Premises, this Lease shall be deemed to have terminated as of the date on which
Tenant surrenders possession of the Premises to Landlord, except that if the
damage to the Premises materially impairs Tenant's ability to continue its
business operations in the Premises, then this Lease shall be deemed to have
terminated as of the date such damage occurred.

        (c) Notwithstanding anything to the contrary in this Paragraph 21,
Landlord shall have the option to terminate this Lease, exercisable by notice to
Tenant within sixty (60) days after the Casualty Discovery Date, in each of the
following instances:

               (i) If more than twenty-five percent (25%) of the full insurable
value of the Building or the Project is damaged or destroyed, regardless of
whether or not the Premises are destroyed.

                                       18
<PAGE>   25

               (ii) If the Building or the Project or any portion thereof is
damaged or destroyed and the repair and restoration of such damage requires
longer than one hundred eighty (180) days from the Casualty Discovery Date.

               (iii) If the Building or the Project or any portion thereof is
damaged or destroyed and the insurance proceeds therefor are not sufficient to
cover the costs of repair and restoration.

               (iv) If the Building or the Project or any portion thereof is
damaged or destroyed during the last twelve (12) months of the Term.

        (d) In the event of repair and restoration as herein provided, the
monthly installments of Base Rent shall be abated proportionately in the ratio
which Tenant's use of the Premises is impaired during the period of such repair
or restoration, but only to the extent of rental abatement insurance proceeds
received by Landlord; provided, however, that Tenant shall not be entitled to
such abatement to the extent that such damage or destruction resulted from the
acts or inaction of Tenant or Tenant's Agents. Except as expressly provided in
the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any damage to or destruction of the Premises, the Building or the
Project or the repair or restoration thereof, including, without limitation, any
cost, loss or expense resulting from any loss of use of the whole or any part of
the Premises, the Building or the Project and/or any inconvenience or annoyance
occasioned by such damage, repair or restoration.

        (e) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall repair or restore only the initial tenant improvements,
if any, constructed by Landlord in the Premises pursuant to the terms of this
Lease, substantially to their condition existing immediately prior to the
occurrence of the damage or destruction; and Tenant shall promptly repair and
restore, at Tenant's expense, Tenant's Alterations which were not constructed by
Landlord.

        (f) Tenant hereby waives the provisions of California Civil Code Section
1932(2) and Section 1933(4) which permit termination of a lease upon destruction
of the leased premises, and the provisions of any similar law now or hereinafter
in effect, and the provisions of this Paragraph 21 shall govern exclusively in
case of such destruction.

22.     CONDEMNATION

        (a) If twenty-five percent (25%) or more of either the Premises, the
Building or the Project or the parking areas for the Building or the Project is
taken for any public or quasi-public purpose by any lawful governmental power or
authority, by exercise of the right of appropriation, inverse condemnation,
condemnation or eminent domain, or sold to prevent such taking (each such event
being referred to as a CONDEMNATION), Landlord may, at its option, terminate
this Lease as of the date title vests in the condemning party. If twenty-five
percent (25%) or more of the Premises is taken and if the Premises remaining
after such Condemnation and any repairs by Landlord would be untenantable for
the conduct of Tenant's business operations, Tenant shall have the right to
terminate this Lease as of the date title vests in the condemning party. If
either party elects to terminate this Lease as provided herein, such election

                                       19
<PAGE>   26

shall be made by written notice to the other party given within thirty (30) days
after the nature and extent of such Condemnation have been finally determined.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially the same
condition as existed prior to such Condemnation, allowing for the reasonable
effects of such Condemnation, and a proportionate abatement shall be made to the
Base Rent corresponding to the time during which, and to the portion of the
floor area of the Premises (adjusted for any increase thereto resulting from any
reconstruction) of which, Tenant is deprived on account of such Condemnation and
restoration, as reasonably determined by Landlord. Except as expressly provided
in the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any Condemnation or the repair or restoration of the Premises, the
Building or the Project or the parking areas for the Building or the Project
following such Condemnation, including, without limitation, any cost, loss or
expense resulting from any loss of use of the whole or any part of the Premises,
the Building, the Project or the parking areas and/or any inconvenience or
annoyance occasioned by such Condemnation, repair or restoration. The provisions
of California Code of Civil Procedure Section 1265.130, which allows either
party to petition the Superior Court to terminate the Lease in the event of a
partial taking of the Premises, the Building or the Project or the parking areas
for the Building or the Project, and any other applicable law now or hereafter
enacted, are hereby waived by Tenant.

        (b) Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection with any Condemnation, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease or otherwise;
provided, however, that Tenant shall be entitled to receive any award separately
allocated by the condemning authority to Tenant for Tenant's relocation expenses
or the value of Tenant's Property (specifically excluding fixtures, Alterations
and other components of the Premises which under this Lease or by law are or at
the expiration of the Term will become the property of Landlord), provided that
such award does not reduce any award otherwise allocable or payable to Landlord.

23.     ASSIGNMENT AND SUBLETTING

        (a) Tenant shall not voluntarily or by operation of law, (1) mortgage,
pledge, hypothecate or encumber this Lease or any interest herein, (2) assign or
transfer this Lease or any interest herein, sublease the Premises or any part
thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld; provided, however,
that (i) Tenant is not then in Default under this Lease nor is any event then
occurring which with the giving of notice or the passage of time, or both, would
constitute a Default hereunder, and (ii) the proposed transfer is not an
assignment or a sublease under a previous assignment or an existing sublease.
When Tenant requests Landlord's consent to such assignment or subletting, it
shall notify Landlord in writing of the name and address of the proposed
assignee or subtenant and the nature and character of the business of the
proposed assignee or subtenant and shall provide (A) a fully

                                       20
<PAGE>   27

completed Hazardous Materials Disclosure Certificate for such assignee or
subtenant in the form of EXHIBIT E hereto, and (B) current and prior financial
statements for the proposed assignee or subtenant, which financial statements
shall be audited to the extent available and shall in any event be prepared in
accordance with generally accepted accounting principles. Tenant shall also
provide Landlord with a copy of the proposed sublease or assignment agreement,
including all material terms and conditions thereof. Landlord shall have the
option, to be exercised within thirty (30) days of receipt of the foregoing, to
(1) terminate this Lease as of the commencement date stated in the proposed
sublease or assignment, (2) sublease or take an assignment, as the case may be,
from Tenant of the interest, or any portion thereof, in this Lease and/or the
Premises that Tenant proposes to assign or sublease, on the same terms and
conditions as stated in the proposed sublet or assignment agreement, (3) consent
to the proposed assignment or sublease, or (4) refuse its consent to the
proposed assignment or sublease, providing that such consent shall not be
unreasonably withheld so long as Tenant is not then in Default under this Lease
nor is any event then occurring which with the giving of notice or the passage
of time, or both, would constitute a Default hereunder. In the event Landlord
elects to terminate this Lease or sublease or take an assignment from Tenant of
the interest, or portion thereof, in the Lease and/or the Premises that Tenant
proposes to assign or sublease as provided in the foregoing clauses (1) and (2),
respectively, then Landlord shall have the additional right to negotiate
directly with Tenant's proposed assignee or subtenant and to enter into a direct
lease or occupancy agreement with such party on such terms as shall be
acceptable to Landlord in its sole and absolute discretion, and Tenant hereby
waives any claims against Landlord related thereto, including, without
limitation, any claims for any compensation or profit related to such lease or
occupancy agreement.

        (b) Without otherwise limiting the criteria upon which Landlord may
withhold its consent, Landlord shall be entitled to consider all reasonable
criteria including, but not limited to, the following: (1) whether or not the
proposed subtenant or assignee is engaged in a business which, and the use of
the Premises will be in an manner which, is in keeping with the then character
and nature of all other tenancies in the Project, (2) whether the use to be made
of the Premises by the proposed subtenant or assignee will conflict with any
so-called "exclusive" use then in favor of any other tenant of the Building or
the Project, and whether such use would be prohibited by any other portion of
this Lease, including, but not limited to, any rules and regulations then in
effect, or under applicable Laws, and whether such use imposes a greater load
upon the Premises and the Building and Project services then imposed by Tenant,
(3) the business reputation of the proposed individuals who will be managing and
operating the business operations of the assignee or subtenant, and the
long-term financial and competitive business prospects of the proposed assignee
or subtenant, and (4) the creditworthiness and financial stability of the
proposed assignee or subtenant in light of the responsibilities involved. In any
event, Landlord may withhold its consent to any assignment or sublease, if (i)
the actual use proposed to be conducted in the Premises or portion thereof
conflicts with the provisions of Paragraph 9(a) or (b) above or with any other
lease which restricts the use to which any space in the Building or the Project
may be put, or (ii) the proposed assignment or sublease requires alterations,
improvements or additions to the Premises or portions thereof.

        (c) If Landlord approves an assignment or subletting as herein provided,
Tenant shall pay to Landlord, as Additional Rent, the difference, if any,
between (1) the Base Rent plus Additional Rent allocable to that part of the
Premises affected by such assignment or sublease

                                       21
<PAGE>   28

pursuant to the provisions of this Lease, and (2) the rent and any additional
rent payable by the assignee or sublessee to Tenant, less reasonable and
customary market-based leasing commissions, if any, incurred by Tenant in
connection with such assignment or sublease, which commissions shall, for
purposes of the aforesaid calculation, be amortized on a straight-line basis
over the term of such assignment or sublease. The assignment or sublease
agreement, as the case may be, after approval by Landlord, shall not be amended
without Landlord's prior written consent, and shall contain a provision
directing the assignee or subtenant to pay the rent and other sums due
thereunder directly to Landlord upon receiving written notice from Landlord that
Tenant is in default under this Lease with respect to the payment of Rent. In
the event that, notwithstanding the giving of such notice, Tenant collects any
rent or other sums from the assignee or subtenant, then Tenant shall hold such
sums in trust for the benefit of Landlord and shall immediately forward the same
to Landlord. Landlord's collection of such rent and other sums shall not
constitute an acceptance by Landlord of attornment by such assignee or
subtenant. A consent to one assignment, subletting, occupation or use shall not
be deemed to be a consent to any other or subsequent assignment, subletting,
occupation or use, and consent to any assignment or subletting shall in no way
relieve Tenant of any liability under this Lease. Any assignment or subletting
without Landlord's consent shall be void, and shall, at the option of Landlord,
constitute a Default under this Lease.

        (d) Notwithstanding any assignment or subletting, Tenant and any
guarantor or surety of Tenant's obligations under this Lease shall at all times
remain fully responsible and liable for the payment of the Rent and for
compliance with all of Tenant's other obligations under this Lease (regardless
of whether Landlord's approval has been obtained for any such assignment or
subletting).

        (e) Tenant shall pay Landlord's reasonable fees (including, without
limitation, the fees of Landlord's counsel, not to exceed One Thousand Five
Hundred Dollars ($1,500.00)), incurred in connection with Landlord's review and
processing of documents regarding any proposed assignment or sublease.

        (f) Notwithstanding anything in this Lease to the contrary, in the event
Landlord consents to an assignment or subletting by Tenant in accordance with
the terms of this Paragraph 23, Tenant's assignee or subtenant shall have no
right to further assign this Lease or any interest therein or thereunder or to
further sublease all or any portion of the Premises. In furtherance of the
foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee
or subtenant claiming under it (and any such assignee or subtenant by accepting
such assignment or sublease shall be deemed to acknowledge and agree) that no
sub-subleases or further assignments of this Lease shall be permitted at any
time.

        (g) Tenant acknowledges and agrees that the restrictions, conditions and
limitations imposed by this Paragraph 23 on Tenant's ability to assign or
transfer this Lease or any interest herein, to sublet the Premises or any part
thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4,
as amended from time to time, and for all other purposes, reasonable at the time
that the Lease was entered into, and shall be deemed to be reasonable at the
time that Tenant seeks to assign or transfer this Lease or any interest herein,
to sublet the Premises or any part thereof, to transfer or assign any right or

                                       22
<PAGE>   29

privilege appurtenant to the Premises, or to allow any other person to occupy or
use the Premises or any portion thereof.

24.     TENANT'S DEFAULT

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

        (a) The vacation or abandonment of the Premises by Tenant for a period
of ten (10) consecutive days or any vacation or abandonment of the Premises by
Tenant which would cause any insurance policy to be invalidated or otherwise
lapse, or the failure of Tenant to continuously operate Tenant's business in the
Premises, in each of the foregoing cases irrespective of whether or not Tenant
is then in monetary default under this Lease. Tenant agrees to notice and
service of notice as provided for in this Lease and waives any right to any
other or further notice or service of notice which Tenant may have under any
statute or law now or hereafter in effect;

        (b) Failure to pay any installment of Rent or any other monies due and
payable hereunder, said failure continuing for a period of three (3) days after
the same is due;

        (c) A general assignment by Tenant or any guarantor or surety of
Tenant's obligations hereunder (collectively, "GUARANTOR") for the benefit of
creditors;

        (d) The filing of a voluntary petition in bankruptcy by Tenant or any
Guarantor, the filing by Tenant or any Guarantor of a voluntary petition for an
arrangement, the filing by or against Tenant or any Guarantor of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by the creditors of Tenant or any Guarantor, said involuntary petition
remaining undischarged for a period of sixty (60) days;

        (e) Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other seizure
remaining undismissed or undischarged for a period of sixty (60) days after the
levy thereof;

        (f) Death or disability of Tenant or any Guarantor, if Tenant or such
Guarantor is a natural person, or the failure by Tenant or any Guarantor to
maintain its legal existence, if Tenant or such Guarantor is a corporation,
partnership, limited liability company, trust or other legal entity;

        (g) Failure of Tenant to execute and deliver to Landlord any estoppel
certificate, subordination agreement, or lease amendment within the time periods
and in the manner required by Paragraphs 30 or 31 or 42, and/or failure by
Tenant to deliver to Landlord any financial statement within the time period and
in the manner required by Paragraph 40;

        (h) An assignment or sublease, or attempted assignment or sublease, of
this Lease or the Premises by Tenant contrary to the provision of Paragraph 23,
unless such assignment or sublease is expressly conditioned upon Tenant having
received Landlord's consent thereto;

        (i) Failure of Tenant to restore the Security Deposit to the amount and
within the time period provided in Paragraph 7 above;

                                       23
<PAGE>   30

        (j) Failure in the performance of any of Tenant's covenants, agreements
or obligations hereunder (except those failures specified as events of Default
in any other subparagraphs of this Paragraph 24, which shall be governed by such
other Paragraphs), which failure continues for ten (10) 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 ten (10) day period despite reasonable diligence, Tenant shall not
be in default under this subparagraph so long as Tenant thereafter diligently
and continuously prosecutes the cure to completion and actually completes such
cure within thirty (30) days after the giving of the aforesaid written notice;

        (k) Chronic delinquency by Tenant in the payment of Rent, or any other
periodic payments required to be paid by Tenant under this Lease. "CHRONIC
DELINQUENCY" shall mean failure by Tenant to pay Rent, or any other payments
required to be paid by Tenant under this Lease within three (3) days after
written notice thereof for any three (3) months (consecutive or nonconsecutive)
during any period of twelve (12) months. In the event of a Chronic delinquency,
in addition to Landlord's other remedies for Default provided in this Lease, at
Landlord's option, Landlord shall have the right to require that Rent be paid by
Tenant quarterly, in advance;

        (l) Chronic overuse by Tenant or Tenant's Agents of the number of
undersignated parking spaces set forth in the Basic Lease Information. "CHRONIC
OVERUSE" shall mean use by Tenant or Tenant's Agents of a number of parking
spaces greater than the number of parking spaces set forth in the Basic Lease
Information more than three (3) times during the Term after written notice by
Landlord;

        (m) Any insurance required to be maintained by Tenant pursuant to this
Lease shall be canceled or terminated or shall expire or be reduced or
materially changed, except as permitted in this Lease; and

        (n) Any failure by Tenant to discharge any lien or encumbrance placed on
the Project or any part thereof in violation of this Lease within ten (10) days
after the date such lien or encumbrance is filed or recorded against the Project
or any part thereof.

        Tenant agrees that any notice given by Landlord pursuant to Paragraph
24(j), (k) or (l) above 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.

25.     LANDLORD'S 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:

               (i) 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

                                       24
<PAGE>   31

               (ii) 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

               (iii) 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

               (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 would be likely to result
therefrom, including, without limitation, (A) any costs or expenses incurred by
Landlord (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including such actions undertaken in connection with the reletting or
attempted reletting of the Premises to a new tenant or tenants; (3) for leasing
commissions, advertising costs and other expenses of reletting the Premises; or
(4) in carrying the Premises, including taxes, insurance premiums, utilities and
security precautions; (B) any unearned brokerage commissions paid in connection
with this Lease; (C) reimbursement of any previously waived or abated Base Rent
or Additional Rent or any free rent or reduced rental rate granted hereunder;
and (D) any concession made or paid by Landlord to the benefit of Tenant in
consideration of this Lease including, but not limited to, any moving
allowances, contributions, payments or loans by Landlord for tenant improvements
or build-out allowances (including, without limitation, any unamortized portion
of the Tenant Improvement Allowance (such Tenant Improvement Allowance to be
amortized over the Term in the manner reasonably determined by Landlord), if
any, and any outstanding balance (principal and accrued interest) of the Tenant
Improvement Loan, if any), or assumptions by Landlord of any of Tenant's
previous lease obligations; plus

               (v) 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

               (vi) 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 (i) and (ii) 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 (iii) 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 pertinent 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

                                       25
<PAGE>   32

Lease in effect after Tenant's Default and abandonment and recover Rent as it
becomes due, provided that Tenant has the right to sublet or assign, subject
only to reasonable limitations). In addition, Landlord shall not be liable in
any way whatsoever for its failure or refusal to relet the Premises. For
purposes of this Paragraph 25(b), the following acts by Landlord will not
constitute the termination of Tenant's right to possession of the Premises:

               (i) Acts of maintenance or preservation or efforts to relet the
Premises, including, but not limited to, alterations, remodeling, redecorating,
repairs, replacements and/or painting as Landlord shall consider advisable for
the purpose of reletting the Premises or any part thereof; or

               (ii) The appointment of a receiver upon the initiative of
Landlord to protect Landlord's interest under this Lease or in the Premises.

        (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 as provided in Paragraph
25(c) 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 25(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 Landlord's sole discretion.
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: (i) 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; (ii) to
the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; (iii) to the payment of any costs of such reletting; (iv) to the
payment of the costs of any alterations and repairs to the Premises; (v) to the
payment of Rent due and unpaid hereunder; and (vi) 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 Paragraph 25 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.

                                       26
<PAGE>   33

        (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 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.

26.     LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS

        (a) Without limiting the rights and remedies of Landlord contained in
Paragraph 25 above, if Tenant shall be in Default in the performance of any of
the terms, provisions, covenants or conditions to be performed or complied with
by Tenant pursuant to this Lease, then Landlord may at Landlord's option,
without any obligation to do so, and without notice to Tenant perform any such
term, provision, covenant, or condition, or make any such payment and Landlord
by reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant or any of
Tenant's Agents.

        (b) Without limiting the rights of Landlord under Paragraph 26(a) above,
Landlord shall have the right at Landlord's option, without any obligation to do
so, to perform any of Tenant's covenants or obligations under this Lease without
notice to Tenant in the case of an emergency, as determined by Landlord in its
sole and absolute judgment, or if Landlord otherwise determines in its sole
discretion that such performance is necessary or desirable for the proper
management and operation of the Building or the Project or for the preservation
of the rights and interests or safety of other tenants of the Building or the
Project.

        (c) If Landlord performs any of Tenant's obligations hereunder in
accordance with this Paragraph 26, the full amount of the cost and expense
incurred or the payment so made or the amount of the loss so sustained shall
immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to
Landlord upon demand, as Additional Rent, the full amount thereof with interest
thereon from the date of payment by Landlord at the lower of (i) ten percent
(10%) per annum, or (ii) the highest rate permitted by applicable law.

27.     ATTORNEYS' FEES

        (a) If either party hereto fails to perform any of its obligations under
this Lease or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Lease, then the defaulting
party or the party not prevailing in such dispute, as the case may be, shall pay
any and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder, including,
without

                                       27
<PAGE>   34

limitation, court costs and reasonable attorneys' fees and disbursements. Any
such attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Lease shall be recoverable separately from and
in addition to any other amount included in such judgment, and such attorneys'
fees obligation is intended to be severable from the other provisions of this
Lease and to survive and not be merged into any such judgment.

        (b) Without limiting the generality of Paragraph 27(a) above, if
Landlord utilizes the services of an attorney for the purpose of collecting any
Rent due and unpaid by Tenant or in connection with any other breach of this
Lease by Tenant, Tenant agrees to pay Landlord actual attorneys' fees as
determined by Landlord for such services, regardless of the fact that no legal
action may be commenced or filed by Landlord.

28.     TAXES

        Tenant shall be liable for and shall pay, prior to delinquency, all
taxes levied against Tenant's Property. If any Alteration installed by Tenant or
any of Tenant's Property is assessed and taxed with the Project or Building,
Tenant shall pay such taxes to Landlord within ten (10) days after delivery to
Tenant of a statement therefor.

29.     EFFECT OF CONVEYANCE

        The term "Landlord" as used in this Lease means, from time to time, the
then current owner of the Building or the Project containing the Premises, so
that, in the event of any sale of the Building or the Project, Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and it shall be deemed and construed, without further
agreement between the parties and the purchaser at any such sale, that the
purchaser of the Building or the Project has assumed and agreed to carry out any
and all covenants and obligations of Landlord hereunder.

30.     TENANT'S ESTOPPEL CERTIFICATE

        From time to time, upon written request of Landlord, Tenant shall
execute, acknowledge and deliver to Landlord or its designee, a written
certificate stating (a) the date this Lease was executed, the Commencement Date
of the Term and the date the Term expires; (b) the date Tenant entered into
occupancy of the Premises; (c) the amount of Rent and the date to which such
Rent has been paid; (d) that this Lease is in full force and effect and has not
been assigned, modified, supplemented or amended in any way (or, if assigned,
modified, supplemented or amended, specifying the date and terms of any
agreement so affecting this Lease); (e) that this Lease represents the entire
agreement between the parties with respect to Tenant's right to use and occupy
the Premises (or specifying such other agreements, if any); (f) that all
obligations under this Lease to be performed by Landlord as of the date of such
certificate have been satisfied (or specifying those as to which Tenant claims
that Landlord has yet to perform); (g) that all required contributions by
Landlord to Tenant on account of Tenant's improvements have been received (or
stating exceptions thereto); (h) that on such date there exist no defenses or
offsets that Tenant has against the enforcement of this Lease by Landlord (or
stating exceptions thereto); (i) that no Rent or other sum payable by Tenant
hereunder has been paid more than one (1) month in advance (or stating
exceptions thereto); (j) that security has been deposited with

                                       28
<PAGE>   35

Landlord, stating the original amount thereof and any increases thereto; and (k)
any other matters evidencing the status of this Lease that may be required
either by a lender making a loan to Landlord to be secured by a deed of trust
covering the Building or the Project or by a purchaser of the Building or the
Project. Any such certificate delivered pursuant to this Paragraph 30 may be
relied upon by a prospective purchaser of Landlord's interest or a mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
Premises. If Tenant shall fail to provide such certificate within ten (10) days
of receipt by Tenant of a written request by Landlord as herein provided, such
failure shall, at Landlord's election, constitute a Default under this Lease,
and Tenant shall be deemed to have given such certificate as above provided
without modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee.

31.     SUBORDINATION

        Landlord shall have the right to cause this Lease to be and remain
subject and subordinate to any and all mortgages, deeds of trust and ground
leases, if any ("ENCUMBRANCES") that are now or may hereafter be executed
covering the Premises, or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made or
to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided only, that in the event of termination of any such
ground lease or upon the foreclosure of any such mortgage or deed of trust, so
long as Tenant is not in default, the holder thereof ("HOLDER") shall agree to
recognize Tenant's rights under this Lease as long as Tenant shall pay the Rent
and observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute, acknowledge and deliver any and all reasonable documents
required by Landlord or the Holder to effectuate such subordination. If Tenant
fails to do so, such failure shall constitute a Default by Tenant under this
Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31,
Tenant hereby attorns and agrees to attorn to any person or entity purchasing or
otherwise acquiring the Premises at any sale or other proceeding or pursuant to
the exercise of any other rights, powers or remedies under such Encumbrance.

32.     ENVIRONMENTAL COVENANTS

        (a) Prior to executing this Lease, Tenant has completed, executed and
delivered to Landlord a Hazardous Materials Disclosure Certificate ("INITIAL
DISCLOSURE CERTIFICATE"), a fully completed copy of which is attached hereto as
EXHIBIT E and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that the information on the Initial
Disclosure Certificate is true and correct and accurately describes the
Hazardous Materials which will be manufactured, treated, used or stored on or
about the Premises by Tenant or Tenant's Agents. Tenant shall, on each
anniversary of the Commencement Date and at such other times as Tenant desires
to manufacture, treat, use or store on or about the Premises new or additional
Hazardous Materials which were not listed on the Initial Disclosure Certificate,
complete, execute and deliver to Landlord an updated Disclosure Certificate
(each, an "UPDATED DISCLOSURE CERTIFICATE") describing Tenant's then current and
proposed future uses of Hazardous Materials on or about the Premises, which
Updated Disclosure Certificates shall be in the same format as that which is set
forth in EXHIBIT E or in such updated format as Landlord may require

                                       29
<PAGE>   36

from time to time. Tenant shall deliver an Updated Disclosure Certificate to
Landlord not less than thirty (30) days prior to the date Tenant intends to
commence the manufacture, treatment, use or storage of new or additional
Hazardous Materials on or about the Premises, and Landlord shall have the right
to approve or disapprove such new or additional Hazardous Materials in its sole
and absolute discretion. Tenant shall make no use of Hazardous Materials on or
about the Premises except as described in the Initial Disclosure Certificate or
as otherwise approved by Landlord in writing in accordance with this Paragraph
32(a).

        (b) As used in this Lease, the term "HAZARDOUS MATERIALS" shall mean and
include any substance that is or contains (i) any "hazardous substance" as now
or hereafter defined in section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") (42
U.S.C. section 9601 et seq.) or any regulations promulgated under CERCLA; (ii)
any "hazardous waste" as now or hereafter defined in the Resource Conservation
and Recovery Act, as amended ("RCRA") (42 U.S.C. section 6901 et seq.) or any
regulations promulgated under RCRA; (iii) any substance now or hereafter
regulated by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C.
section 2601 et seq.) or any regulations promulgated under TSCA; (iv) petroleum,
petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons;
(v) asbestos and asbestos-containing material, in any form, whether friable or
non-friable; (vi) polychlorinated biphenyls; (vii) lead and lead-containing
materials; or (viii) any additional substance, material or waste (A) the
presence of which on or about the Premises (1) requires reporting, investigation
or remediation under any Environmental Laws (as hereinafter defined), (2) causes
or threatens to cause a nuisance on the Premises or any adjacent area or
property or poses or threatens to pose a hazard to the health or safety of
persons on the Premises or any adjacent area or property, or (3) which, if it
emanated or migrated from the Premises, could constitute a trespass, or (B)
which is now or is hereafter classified or considered to be hazardous or toxic
under any Environmental Laws.

        (c) As used in this Lease, the term "ENVIRONMENTAL LAWS" shall mean and
include (i) CERCLA, RCRA and TSCA; and (ii) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or
hereinafter in effect relating to (A) pollution, (B) the protection or
regulation of human health, natural resources or the environment, (C) the
treatment, storage or disposal of Hazardous Materials, or (D) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.

        (d) Tenant agrees that during its use and occupancy of the Premises it
will (i) not (A) permit Hazardous Materials to be present on or about the
Premises except in a manner and quantity necessary for the ordinary performance
of Tenant's business or (B) release, discharge or dispose of any Hazardous
Materials on, in, at, under, or emanating from, the Premises, the Building or
the Project; (ii) comply with all Environmental Laws relating to the Premises
and the use of Hazardous Materials on or about the Premises and not engage in or
permit others to engage in any activity at the Premises in violation of any
Environmental Laws; and (iii) immediately notify Landlord of (A) any inquiry,
test, investigation or enforcement proceeding by any governmental agency or
authority against Tenant, Landlord or the Premises, Building or Project relating
to any Hazardous Materials or under any Environmental Laws or (B) the occurrence
of any event or existence of any condition that would cause a breach of any of
the covenants set forth in this Paragraph 32.

                                       30
<PAGE>   37

        (e) If Tenant's use of Hazardous Materials on or about the Premises
results in a release, discharge or disposal of Hazardous Materials on, in, at,
under, or emanating from, the Premises, the Building or the Project, Tenant
agrees to investigate, clean up, remove or remediate such Hazardous Materials in
full compliance with (i) the requirements of (A) all Environmental Laws and (B)
any governmental agency or authority responsible for the enforcement of any
Environmental Laws; and (ii) any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the
Project.

        (f) Upon reasonable notice to Tenant, Landlord may inspect the Premises
and surrounding areas for the purpose of determining whether there exists on or
about the Premises any Hazardous Material or other condition or activity that is
in violation of the requirements of this Lease or of any Environmental Laws.
Such inspections may include, but are not limited to, entering the Premises or
adjacent property with drill rigs or other machinery for the purpose of
obtaining laboratory samples. Landlord shall not be limited in the number of
such inspections during the Term of this Lease. In the event (i) such
inspections reveal the presence of any such Hazardous Material or other
condition or activity in violation of the requirements of this Lease or of any
Environmental Laws, or (ii) Tenant or its Agents contribute or knowingly consent
to the presence of any Hazardous Materials in, on, under, through or about the
Premises, the Building or the Project or exacerbate the condition of or the
conditions caused by any Hazardous Materials in, on, under, through or about the
Premises, the Building or the Project, Tenant shall reimburse Landlord for the
cost of such inspections within ten (10) days of receipt of a written statement
therefor. Tenant will supply to Landlord such historical and operational
information regarding the Premises and surrounding areas as may be reasonably
requested to facilitate any such inspection and will make available for meetings
appropriate personnel having knowledge of such matters. Tenant agrees to give
Landlord at least sixty (60) days' prior notice of its intention to vacate the
Premises so that Landlord will have an opportunity to perform such an inspection
prior to such vacation. The right granted to Landlord herein to perform
inspections shall not create a duty on Landlord's part to inspect the Premises,
or liability on the part of Landlord for Tenant's use, storage, treatment or
disposal of Hazardous Materials, it being understood that Tenant shall be solely
responsible for all liability in connection therewith.

        (g) Landlord shall have the right, but not the obligation, prior or
subsequent to a Default, without in any way limiting Landlord's other rights and
remedies under this Lease, to enter upon the Premises, or to take such other
actions as it deems necessary or advisable, to investigate, clean up, remove or
remediate any Hazardous Materials or contamination by Hazardous Materials
present on, in, at, under, or emanating from, the Premises, the Building or the
Project in violation of Tenant's obligations under this Lease or under any
Environmental Laws. Notwithstanding any other provision of this Lease, Landlord
shall also have the right, at its election, in its own name or as Tenant's
agent, to negotiate, defend, approve and appeal, at Tenant's expense, any action
taken or order issued by any governmental agency or authority with regard to any
such Hazardous Materials or contamination by Hazardous Materials. All costs and
expenses paid or incurred by Landlord in the exercise of the rights set forth in
this Paragraph 32 shall be payable by Tenant upon demand.

        (h) Tenant shall surrender the Premises to Landlord upon the expiration
or earlier termination of this Lease free of debris, waste or Hazardous
Materials placed on, about or near the Premises by Tenant or Tenant's Agents,
and in a condition which complies with all

                                       31
<PAGE>   38

Environmental Laws and any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the
Project, including, without limitation, the obtaining of any closure permits or
other governmental permits or approvals related to Tenant's use of Hazardous
Materials in or about the Premises. Tenant's obligations and liabilities
pursuant to the provisions of this Paragraph 32 shall survive the expiration or
earlier termination of this Lease. If it is determined by Landlord that the
condition of all or any portion of the Premises, the Building, and/or the
Project is not in compliance with the provisions of this Lease with respect to
Hazardous Materials, including, without limitation, all Environmental Laws, at
the expiration or earlier termination of this Lease, then at Landlord's sole
option, Landlord may require Tenant to hold over possession of the Premises
until Tenant can surrender the Premises to Landlord in the condition in which
the Premises existed as of the Commencement Date and prior to the appearance of
such Hazardous Materials except for normal wear and tear, including, without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. The burden of proof hereunder shall be upon Tenant. For
purposes hereof, the term "normal wear and tear" shall not include any
deterioration in the condition or diminution of the value of any portion of the
Premises, the Building, and/or the Project in any manner whatsoever related to
directly, or indirectly, Hazardous Materials. Any such holdover by Tenant will
be with Landlord's consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of Paragraph 35 of
this Lease.

        (i) Tenant agrees to indemnify and hold harmless Landlord from and
against any and all claims, losses (including, without limitation, loss in value
of the Premises, the Building or the Project, liabilities and expenses
(including attorneys' fees)) sustained by Landlord attributable to (i) any
Hazardous Materials placed on or about the Premises, the Building or the Project
by Tenant or Tenant's Agents, or (ii) Tenant's breach of any provision of this
Paragraph 32.

        (j) The provisions of this Paragraph 32 shall survive the expiration or
earlier termination of this Lease.

33.     NOTICES

        All notices and demands which are required or may be permitted to be
given to either party by the other hereunder shall be in writing and shall be
sent by United States mail, postage prepaid, certified, or by personal delivery
or overnight courier, addressed to the addressee at Tenant's Address or
Landlord's Address as specified in the Basic Lease Information, or to such other
place as either party may from time to time designate in a notice to the other
party given as provided herein. Copies of all notices and demands given to
Landlord shall additionally be sent to Landlord's property manager at the
address specified in the Basic Lease Information or at such other address as
Landlord may specify in writing from time to time. Notice shall be deemed given
upon actual receipt (or attempted delivery if delivery is refused), if
personally delivered, or one (1) business day following deposit with a reputable
overnight courier that provides a receipt, or on the third (3rd) day following
deposit in the United States mail in the manner described above.

                                       32
<PAGE>   39

34.     WAIVER

        The waiver of any breach of any term, covenant or condition of this
Lease shall not be deemed to be a waiver of such term, covenant or condition or
of any subsequent breach of the same or any other term, covenant or condition
herein contained. The subsequent acceptance of Rent by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant, other than the failure
of Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent. No
delay or omission in the exercise of any right or remedy of Landlord in regard
to any Default by Tenant shall impair such a right or remedy or be construed as
a waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease.

35.     HOLDING OVER

        Any holding over after the expiration of the Term, without the express
written consent of Landlord, shall constitute a Default and, without limiting
Landlord's remedies provided in this Lease, such holding over shall be construed
to be a tenancy at sufferance, at a rental rate equal to the greater of one
hundred fifty percent (150%) of the fair market rental value for the Premises as
determined by Landlord or two hundred percent (200%) of the Base Rent last due
in this Lease, plus Additional Rent, and shall otherwise be on the terms and
conditions herein specified, so far as applicable; provided, however, that in no
event shall any renewal or expansion option or other similar right or option
contained in this Lease be deemed applicable to any such tenancy at sufferance.
If the Premises are not surrendered at the end of the Term or sooner termination
of this Lease, and in accordance with the provisions of Paragraphs 11 and 32(h),
Tenant shall indemnify, defend and hold Landlord harmless from and against any
and all loss or liability resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any loss or liability resulting from any
claim against Landlord made by any succeeding tenant or prospective tenant
founded on or resulting from such delay and losses to Landlord due to lost
opportunities to lease any portion of the Premises to any such succeeding tenant
or prospective tenant, together with, in each case, actual attorneys' fees and
costs.

36.     SUCCESSORS AND ASSIGNS

        The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of more than one entity or person, the obligations of Tenant under this Lease
shall be joint and several.

37.     TIME

        Time is of the essence of this Lease and each and every term, condition
and provision herein.

38.     BROKERS

        Landlord and Tenant each represents and warrants to the other that
neither it nor its officers or agents nor anyone acting on its behalf has dealt
with any real estate broker except the

                                       33
<PAGE>   40

Broker(s) specified in the Basic Lease Information in the negotiating or making
of this Lease, and each party agrees to indemnify and hold harmless the other
from any claim or claims, and costs and expenses, including attorneys' fees,
incurred by the indemnified party in conjunction with any such claim or claims
of any other broker or brokers to a commission in connection with this Lease as
a result of the actions of the indemnifying party.

39.     LIMITATION OF LIABILITY

        Tenant agrees that, in the event of any default or breach by Landlord
with respect to any of the terms of the Lease to be observed and performed by
Landlord (a) Tenant shall look solely to the then-current landlord's interest in
the Building for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord;
(b) no other property or assets of Landlord, its partners, shareholders,
officers, directors, employees, investment advisors, or any successor in
interest of any of them (collectively, the "LANDLORD PARTIES") shall be subject
to levy, execution or other enforcement procedure for the satisfaction of
Tenant's remedies; (c) no personal liability shall at any time be asserted or
enforceable against the Landlord Parties; and (d) no judgment will be taken
against the Landlord Parties. The provisions of this section shall apply only to
the Landlord and the parties herein described, and shall not be for the benefit
of any insurer nor any other third party.

40.     FINANCIAL STATEMENTS

        Within ten (10) days after Landlord's request, Tenant shall deliver to
Landlord the then current financial statements of Tenant (including interim
periods following the end of the last fiscal year for which annual statements
are available), prepared or compiled by a certified public accountant, including
a balance sheet and profit and loss statement for the most recent prior year,
all prepared in accordance with generally accepted accounting principles
consistently applied.

41.     RULES AND REGULATIONS

        Tenant agrees to comply with such reasonable rules and regulations as
Landlord may adopt from time to time for the orderly and proper operation of the
Building and the Project. Such rules may include but shall not be limited to the
following: (a) restriction of employee parking to a limited, designated area or
areas; and (b) regulation of the removal, storage and disposal of Tenant's
refuse and other rubbish at the sole cost and expense of Tenant. The then
current rules and regulations shall be binding upon Tenant upon delivery of a
copy of them to Tenant. Landlord shall not be responsible to Tenant for the
failure of any other person to observe and abide by any of said rules and
regulations. Landlord's current rules and regulations are attached to this Lease
as EXHIBIT D.

42.     MORTGAGEE PROTECTION

        (a) MODIFICATIONS FOR LENDER. If, in connection with obtaining financing
for the Project or any portion thereof, Landlord's lender shall request
reasonable modifications to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent to such
modifications, provided that such modifications do not materially adversely
affect Tenant's rights or increase Tenant's obligations under this Lease.

                                       34
<PAGE>   41

        (b) RIGHTS TO CURE. Tenant agrees to give to any trust deed or mortgage
holder ("HOLDER"), by registered mail, at the same time as it is given to
Landlord, a copy of any notice of default given to Landlord, provided that prior
to such notice Tenant has been notified, in writing, (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Holder shall have an
additional twenty (20) days after expiration of such period, or after receipt of
such notice from Tenant (if such notice to the Holder is required by this
Paragraph 42(b)), whichever shall last occur within which to cure such default
or if such default cannot be cured within that time, then such additional time
as may be necessary if within such twenty (20) days, any Holder has commenced
and is diligently pursuing the remedies necessary to cure such default
(including, but not limited to, commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated.

43.     ENTIRE AGREEMENT

        This Lease, including the Exhibits and any Addenda attached hereto,
which are hereby incorporated herein by this reference, contains the entire
agreement of the parties hereto, and no representations, inducements, promises
or agreements, oral or otherwise, between the parties, not embodied herein or
therein, shall be of any force and effect.

44.     INTEREST

        Any installment of Rent and any other sum due from Tenant under this
Lease which is not received by Landlord within ten (10) days from when the same
is due shall bear interest from the date such payment was originally due under
this Lease until paid at an annual rate equal to the maximum rate of interest
permitted by law. Payment of such interest shall not excuse or cure any Default
by Tenant. In addition, Tenant shall pay all costs and attorneys' fees incurred
by Landlord in collection of such amounts.

45.     CONSTRUCTION

        This Lease shall be construed and interpreted in accordance with the
laws of the State of California. The parties acknowledge and agree that no rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall be employed in the interpretation of this Lease,
including the Exhibits and any Addenda attached hereto. All captions in this
Lease are for reference only and shall not be used in the interpretation of this
Lease. Whenever required by the context of this Lease, the singular shall
include the plural, the masculine shall include the feminine, and vice versa. If
any provision of this Lease shall be determined to be illegal or unenforceable,
such determination shall not affect any other provision of this Lease and all
such other provisions shall remain in full force and effect.

                                       35
<PAGE>   42

46.     REPRESENTATIONS AND WARRANTIES OF TENANT

        Tenant hereby makes the following representations and warranties, each
of which is material and being relied upon by Landlord, is true in all respects
as of the date of this Lease, and shall survive the expiration or termination of
the Lease.

        (a) If Tenant is an entity, Tenant is duly organized, validly existing
and in good standing under the laws of the state of its organization and the
persons executing this Lease on behalf of Tenant have the full right and
authority to execute this Lease on behalf of Tenant and to bind Tenant without
the consent or approval of any other person or entity. Tenant has full power,
capacity, authority and legal right to execute and deliver this Lease and to
perform all of its obligations hereunder. This Lease is a legal, valid and
binding obligation of Tenant, enforceable in accordance with its terms.

        (b) Tenant has not (i) made a general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by any creditors, (iii) suffered the
appointment of a receiver to take possession of all or substantially all of its
assets, (iv) suffered the attachment or other judicial seizure of all or
substantially all of its assets, (v) admitted in writing its inability to pay
its debts as they come due, or (vi) made an offer of settlement, extension or
composition to its creditors generally.

47.     SECURITY

        (a) Tenant acknowledges and agrees that, while Landlord may engage
security personnel to patrol the Building or the Project, Landlord is not
providing any security services with respect to the Premises, the Building or
the Project and that Landlord shall not be liable to Tenant for, and Tenant
waives any claim against Landlord with respect to, any loss by theft or any
other damage suffered or incurred by Tenant in connection with any unauthorized
entry into the Premises or any other breach of security with respect to the
Premises, the Building or the Project.

        (b) Tenant hereby agrees to the exercise by Landlord and Landlord's
Agents, within their sole discretion, of such security measures as, but not
limited to, the evacuation of the Premises, the Building or the Project for
cause, suspected cause or for drill purposes, the denial of any access to the
Premises, the Building or the Project and other similarly related actions that
it deems necessary to prevent any threat of property damage or bodily injury.
The exercise of such security measures by Landlord and Landlord's Agents, and
the resulting interruption of service and cessation of Tenant's business, if
any, shall not be deemed an eviction or disturbance of Tenant's use and
possession of the Premises, or any part thereof, or render Landlord or
Landlord's Agents liable to Tenant for any resulting damages or relieve Tenant
from Tenant's obligations under this Lease.

48.     JURY TRIAL WAIVER

        Tenant hereby waives any right to trial by jury with respect to any
action or proceeding (a) brought by Landlord, Tenant or any other party,
relating to (i) this Lease and/or any understandings or prior dealings between
the parties hereto, or (ii) the Premises, the Building or the Project or any
part thereof, or (b) to which Landlord is a party. Tenant hereby agrees that
this Lease constitutes a written consent to waiver of trial by jury pursuant to
the provisions of

                                       36
<PAGE>   43

California Code of Civil Procedure Section 631, and Tenant does hereby
constitute and appoint Landlord its true and lawful attorney-in-fact, which
appointment is coupled with an interest, and Tenant does hereby authorize and
empower Landlord, in the name, place and stead of Tenant, to file this Lease
with the clerk or judge of any court of competent jurisdiction as a statutory
written consent to waiver of trial by jury.

        Landlord and Tenant have executed and delivered this Lease as of the
Lease Date specified in the Basic Lease Information.

                                LANDLORD:  AETNA LIFE INSURANCE COMPANY,
                                           a Connecticut corporation,

                                           By: UBS Brinson Realty Investors LLC
                                               its Investment Advisor and Agent

                                           By: /s/ Signature Illegible
                                                   Cynthia Stevenin
                                                   Vice President

                                  TENANT:  STANFORD MICRODEVICES, INC.,
                                           a Delaware corporation

                                           By: /s/ Signature Illegible
                                           Name: Susan M. Ocampo
                                                 ------------------------------
                                           Title: Treasurer
                                                  -----------------------------

                                       37
<PAGE>   44

                                [EXHIBIT OMITTED]

<PAGE>   45

                                    EXHIBIT B

                               TENANT IMPROVEMENTS

        This exhibit, entitled "Tenant Improvements", is and shall constitute
Exhibit B to the Lease Agreement, dated as of the Lease Date, by and between
Landlord and Tenant for the Premises. The terms and conditions of this Exhibit B
are hereby incorporated into and are made a part of the Lease. Capitalized terms
used, but not otherwise defined, in this Exhibit B have the meanings ascribed to
such terms in the Lease.

1.      LANDLORD'S WORK

        Prior to the Commencement Date, Landlord shall, at its sole cost and
expense, construct an insulating wall to Landlord's specifications surrounding
the existing transformer in the rear of the Premises ("LANDLORD'S WORK").

2.      TENANT IMPROVEMENTS

        In addition to Landlord's Work, subject to the conditions set forth
below, Landlord agrees to construct certain Tenant Improvements in the Premises
pursuant to the terms of this Exhibit B.

3.      DEFINITION

        "TENANT IMPROVEMENTS" as used in the Lease and this Exhibit B shall
include only those improvements within the interior portions of the Premises
which are depicted on the Final Plans and Specifications (hereafter defined in
Paragraph 4) or described hereinbelow. "TENANT IMPROVEMENTS" shall specifically
not include Landlord's Work, any Alterations installed or constructed by Tenant,
or any of Tenant's Property.

        The Tenant Improvements may include:

        (a) Partitioning, doors, floor coverings, finishes, ceilings, wall
coverings and painting, millwork and similar items.

        (b) Electrical wiring, lighting fixtures, outlets and switches, and
other electrical work.

        (c) Duct work, terminal boxes, diffusers and accessories required for
the completion of the heating, ventilation and air conditioning systems serving
the Premises, including the cost of meter and key control for after-hour air
conditioning.

        (d) Any additional Tenant requirements including, but not limited to,
odor control, special heating, ventilation and air conditioning, noise or
vibration control or other special systems.

        (e) All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Building and serving the Premises.

        (f) All plumbing, fixtures, pipes, and accessories to be installed
within the Building and serving the Premises.

                                       B-1
<PAGE>   46

4.      Plans and Specifications

        Landlord shall retain the architect specified in the Basic Lease
Information ("ARCHITECT") for the preparation of preliminary and final working
architectural and engineering plans and specifications for the Tenant
Improvements ("FINAL PLANS AND SPECIFICATIONS"). Landlord reserves the right to
substitute for the Architect another architect of its selection. Tenant shall
cooperate diligently with the Architect and shall furnish within ten (10) days
after request therefor, all information required by the Architect for completion
of the Final Plans and Specifications, and shall provide (in writing, if
requested by Landlord), not later than three (3) business days after request
therefor, any approval or disapproval of preliminary or Final Plans and
Specifications which Tenant is permitted to give under this Exhibit B. The Final
Plans and Specifications shall be subject to Landlord's approval, which approval
shall not be unreasonably withheld. Landlord shall not be deemed to have acted
unreasonably if it withholds its approval of any plans, specifications, drawings
or other details or of any requested changes thereto because, in Landlord's
reasonable opinion, the work as described in any such item, or any requested
change, as the case may be: (a) is likely to adversely affect Building systems,
the structure of the Building or the safety of the Building and/or its
occupants; (b) might impair Landlord's ability to furnish services to Tenant or
other tenants in the Building or the Project; (c) would increase the cost of
operating the Building or the Project; (d) would violate any Laws; (e) contains
or uses Hazardous Materials; (f) would adversely affect the appearance of the
Building or the Project or the marketability of the Premises to subsequent
tenants; (g) might adversely affect another tenant's premises or such other
tenant's use and enjoyment of such premises; (h) is prohibited by any ground
lease affecting the Building and/or the Project, any Private Restrictions or any
mortgage, trust deed or other instrument encumbering the Building and/or the
Project; (i) is likely to be substantially delayed because of unavailability or
shortage of labor or materials necessary to perform such work or the
difficulties or unusual nature of such work; (j) is not, at a minimum in
accordance with Landlord's building standards, or (k) would increase the Tenant
Improvements Cost (defined in Paragraph 7 below) by more than ten percent (10%)
from the cost originally estimated and anticipated by the parties. The foregoing
reasons, however, shall not be the only reasons for which Landlord may withhold
its approval, whether or not such other reasons are similar or dissimilar to the
foregoing. Neither the approval by Landlord of the Final Plans and
Specifications or any other plans, specifications, drawings or other items
associated with the Tenant Improvements nor Landlord's performance, supervision
or monitoring of the Tenant Improvements shall constitute any warranty or
covenant by Landlord to Tenant of the adequacy of the design for Tenant's
intended use of the Premises. Tenant agrees to, and does hereby, assume full and
complete responsibility to ensure that the Tenant Improvements and the Final
Plans and Specifications are adequate to fully meet the needs and requirements
of Tenant's intended operations of its business within the Premises and Tenant's
use of the Premises. Landlord and Tenant shall indicate their approval of the
Final Plans and Specifications by initialing them and attaching them to the
Lease as Exhibit B-1. Upon completion of the Final Plans and Specifications and
approval thereof by Landlord and Tenant, Landlord will obtain subcontractor
trade bids and furnish a cost breakdown to Tenant. In the event the estimated
Tenant Improvements Cost, based on such bids and the reasonably anticipated
costs of other items constituting the Tenant Improvements Cost, exceeds the
Tenant Improvements Allowance (hereafter defined in Paragraph 6), plus any
amounts which Tenant desires to pay as an Excess Tenant Improvements Cost
(hereafter defined in Paragraph 8) ("TENANT'S T.I. BUDGET"), at Tenant's
request, the Final Plans and Specifications may be revised once, at Tenant's
cost and

                                       B-2
<PAGE>   47

expense. Any such revisions shall be subject to Landlord's approval, and the
amended Final Plans and Specifications, as approved by Landlord and Tenant,
shall thereafter be deemed to be the Final Plans and Specifications for the
Tenant Improvements. The amended Final Plans and Specifications shall be
approved by Tenant (in writing, if requested by Landlord) not later than three
(3) days after Landlord's request therefor. Landlord shall thereafter submit
such amended Final Plans and Specifications to its contractor and subcontractor
for re-bidding, and shall furnish a cost breakdown to Tenant. If the estimated
Tenant Improvements Cost, as determined by the bids based on the amended Final
Plans and Specifications and the reasonably anticipated costs of other items
constituting the Tenant Improvements Cost, result in an Excess Tenant
Improvements Cost, then Tenant shall pay such Excess Tenant Improvements Cost as
and when required by Paragraph 8. Tenant's failure to approve or disapprove any
matters which Tenant shall be entitled to approve or disapprove pursuant to this
Paragraph 4 shall be conclusively deemed to be approval of same by Tenant.

5.      LANDLORD TO CONSTRUCT IMPROVEMENTS

        When the Final Plans and Specifications (as amended, if required by
Paragraph 4 above) have been approved by Landlord and Tenant, Landlord shall
submit such Final Plans and Specifications to all governmental authorities
having rights of approval over the Tenant Improvement work and shall apply for
all governmental approvals and building permits. Subject to satisfaction of all
conditions precedent and subsequent to its obligations under this Exhibit B, and
further subject to the provisions of Paragraph 8, Landlord shall thereafter
commence and proceed to complete construction of the Tenant Improvements.

6.      TENANT IMPROVEMENTS ALLOWANCE

        Landlord shall provide an allowance for the planning and construction of
the Tenant Improvements in the amount specified in the Basic Lease Information
("TENANT IMPROVEMENTS ALLOWANCE"). The Tenant Improvements Allowance shall be
the maximum contribution by Landlord for the Tenant Improvements Cost. Should
the actual cost of planning and constructing those Tenant Improvements depicted
on the Final Plans and Specifications be less than the Tenant Improvements
Allowance, the Tenant Improvements Allowance shall be reduced to an amount equal
to said actual cost.

7.      TENANT IMPROVEMENTS COST

        The Tenant Improvements Cost ("TENANT IMPROVEMENTS COST") shall include
all costs and expenses associated with the design, preparation, approval and
construction of the Tenant Improvements, including, but not limited to, the
following:

        (a) All costs of preliminary and final architectural and engineering
plans and specifications for the Tenant Improvements, and engineering costs
associated with completion of the State of California energy utilization
calculations under Title 24 legislation;

        (b) All costs of obtaining building permits and other necessary
authorizations and approvals from local governmental authorities;

                                      B-3
<PAGE>   48

        (c) All costs of interior design and finish schedule plans and
specifications including as-built drawings;

        (d) All direct and indirect costs of procuring, constructing and
installing the Tenant Improvements in the Premises, including, but not limited
to, the construction fee for overhead and profit and the cost of all on-site
supervisory and administrative staff, office, equipment and temporary services
rendered by Landlord, Landlord's consultants and property manager and Landlord's
contractor in connection with construction of the Tenant Improvements and all
labor (including overtime) and materials constituting the Tenant Improvements;

        (e) All fees payable to the Architect, general contractor,
subcontractors and Landlord's engineering firm if they are required by Tenant
and/or any governmental authorities to redesign any portion of the Tenant
Improvements following Tenant's approval of the Final Plans and Specifications;

        (f) All construction and project management fees payable by Landlord to
Landlord's property management company or any other individual or entity; and

        (g)    Utility connection fees.

        In no event shall the Tenant Improvements Cost include any costs of
procuring, constructing or installing in the Premises any of Tenant's Property.

8.      EXCESS TENANT IMPROVEMENTS COST

        If the Tenant Improvements Cost is more than the Tenant Improvements
Allowance, then the difference between the Tenant Improvements Cost and the
Tenant Improvements Allowance ("EXCESS TENANT IMPROVEMENTS COST") shall be paid
by Tenant to Landlord in cash, within ten (10) days of delivery of statements
from Landlord to Tenant therefor. If construction of the Tenant Improvements
will result in an Excess Tenant Improvements Cost, Landlord shall not be
obligated to commence or continue construction of the Tenant Improvements if
payment of the Excess Tenant Improvements Costs by Tenant is not received within
ten (10) days after delivery by Landlord to Tenant of a statement therefor;
provided, however, that Landlord may, at its option, commence or continue
construction of the Tenant Improvements, in which event Tenant shall pay the
Excess Tenant Improvements Cost within ten (10) days after delivery by Landlord
to Tenant of the statement therefor. If Landlord so elects to commence
construction of the Tenant Improvements or has already commenced construction of
the Tenant Improvements when there occurs an Excess Tenant Improvements Cost,
then Landlord shall be entitled to suspend or terminate construction of the
Tenant Improvements if payment by Tenant to Landlord of the Excess Tenant
Improvement Costs has not been received within ten (10) days after delivery by
Landlord to Tenant of a statement therefor.

9.      CHANGE REQUEST

        When the Final Plans and Specifications have been approved by Landlord,
there shall be no changes without Landlord's prior written consent, except for
(a) necessary on-site installation variations or minor changes necessary to
comply with building codes and other governmental regulations; (b) one revision,
if requested by Tenant, to adjust the estimated Tenant

                                       B-4
<PAGE>   49

Improvements Cost to Tenant's T.I. Budget therefor, as permitted by Paragraph 4
above; and (c) changes approved in writing by both parties. Any costs related to
such governmentally required or requested and approved changes shall be added to
the Tenant Improvements Cost and, to the extent such cost results in Excess
Tenant Improvements Cost, shall be paid for by Tenant as and with any Excess
Tenant Improvements Cost as set forth in Paragraph 8. The billing for such
additional costs to Tenant shall be accompanied by evidence of the amounts
billed as is customarily used in the business. Costs related to changes shall
include, without limitation, any architectural or design fees, construction
management fees and Landlord's general contractor's price for effecting the
change.

10.     TERMINATION

        If the Lease is terminated prior to completion of the Tenant
Improvements for any reason due to the Default of Tenant under the Lease, in
addition to any other damages available to Landlord, Tenant shall pay to
Landlord, within five (5) days of receipt of a statement therefor, all costs
incurred by Landlord through the date of termination in connection with the
Tenant Improvements. Landlord shall have the right to terminate the Lease, upon
written notice to Tenant, if Landlord is unable to obtain a building permit for
the Tenant Improvements within one hundred twenty (120) days from the date the
Lease is mutually executed.

11.     INTEREST

        Any payments required to be made by Tenant hereunder which are not paid
when due shall bear interest at the maximum rate permitted by law from the due
date therefor until paid.

12.     DISCLAIMER

        Landlord shall have no liability to Tenant in the event construction of
the Tenant Improvements is delayed or prevented due to any cause beyond
Landlord's reasonable control. If Tenant is entitled or permitted to enter the
Premises prior to completion of the Tenant Improvements, Landlord shall not be
liable to Tenant or Tenant's Agents for any loss or damage to property, or
injury to person, arising from or related to construction of the Tenant
Improvements. Tenant shall take all reasonable precautions to protect against
such loss, damage or injury during construction of the Tenant Improvements, and
shall not interfere with the conduct of the Tenant Improvement work. Tenant
shall cooperate with all reasonable directives of Landlord and Landlord's
contractor in order to minimize any disruption or delay in completion of the
Tenant Improvements work.

13.     LEASE PROVISIONS; CONFLICT

        The terms and provisions of the Lease, insofar as they are applicable,
in whole or in part, to this Exhibit B, are hereby incorporated herein by
reference. In the event of any conflict between the terms of the Lease and this
Exhibit B, the terms of this Exhibit B shall prevail. Any amounts payable by
Tenant to Landlord hereunder shall be deemed to be Additional Rent under the
Lease and, upon any default in the payment of same, Landlord shall have all
rights and remedies available to it as provided for in the Lease.

                                       B-5
<PAGE>   50

                                   EXHIBIT B-1

                         FINAL PLANS AND SPECIFICATIONS

        Reference is hereby made to that certain Lease Agreement dated January
14, 2000 by and between AETNA LIFE INSURANCE COMPANY, a Connecticut corporation,
as landlord ("LANDLORD"), and STANFORD MICRODEVICES, INC., a Delaware
corporation, as tenant ("TENANT") ("LEASE AGREEMENT").

        The Final Plans and Specifications (as defined in Exhibit B to the Lease
Agreement) consists of the following described drawings, specifications and
other documents:

               Title of Drawing, Specification or
                         Other Document                          Date

        The Final Plans and Specifications have been initiated by both Landlord
and Tenant and are on file with Landlord.

                               INITIALS:  ________________      ______________
                                              Landlord              Tenant

                                      B-1-1
<PAGE>   51

                                    EXHIBIT C

                   COMMENCEMENT AND EXPIRATION DATE MEMORANDUM

               LANDLORD:  AETNA LIFE INSURANCE COMPANY

                 TENANT:  STANFORD MICRODEVICES, INC.

             LEASE DATE:  January 14, 2000

               PREMISES:  Located at 726 Palomar Avenue, Sunnyvale, California

        Tenant hereby accepts the Premises as being in the condition required
under the Lease, with all Tenant Improvements completed (except for minor
punchlist items which Landlord agrees to complete).

        The Commencement Date of the Lease is hereby established as ___________,
________ and the Expiration Date is ____________________, ______.

                                        TENANT:  STANFORD MICRODEVICES, INC.,
                                                 a Delaware corporation

                                                 By: ___________________________

                                                 Name:__________________________

                                                 Title:_________________________

Approved and Agreed:

LANDLORD:

AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation,

By: UBS Brinson Realty Investors LLC
    its Investment Advisor and Agent

    By:_______________________________
             Cynthia Stevenin
             Vice President

                                       C-1
<PAGE>   52

                                    EXHIBIT D

                              RULES AND REGULATIONS

        This exhibit, entitled "Rules and Regulations," is and shall constitute
Exhibit D to the Lease Agreement, dated as of the Lease Date, by and between
landlord and Tenant for the Premises. The terms and conditions of this Exhibit D
are hereby incorporated into and are made a part of the Lease. Capitalized terms
used, but not otherwise defined, in this Exhibit D have the meanings ascribed to
such terms in the Lease.

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

        2. All window coverings installed by Tenant and visible from the outside
of the building require the prior written approval of Landlord.

        3. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on or around
the Premises, except to the extent that Tenant is permitted to use the same
under the terms of Paragraph 32 of the Lease.

        4. Tenant shall not alter any lock or install any new locks or bolts on
any door at the Premises without the prior consent of Landlord.

        5. Tenant shall not make any duplicate keys without the prior consent of
Landlord.

        6. Tenant shall park motor vehicles in parking areas designated by
Landlord except for loading and unloading. During those periods of loading and
unloading, Tenant shall not unreasonably interfere with traffic flow around the
Building or the Project and loading and unloading areas of other tenants. Tenant
shall not park motor vehicles in designated parking areas after the conclusion
of normal daily business activity.

        7. Tenant shall not disturb, solicit or canvas any tenant or other
occupant of the Building or Project and shall cooperate to prevent same.

        8. No person shall go on the roof without Landlord's permission.

        9. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Landlord or other tenants,
shall be placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or in noise-dampening housing or other devices sufficient to
eliminate noise or vibration.

        10. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and shall not be
left in parking or receiving areas overnight.

        11. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks under the
dolly wheels to prevent

                                       D-1
<PAGE>   53

damage to the asphalt paving surfaces. No parking or storing of such trailers
will be permitted in the auto parking areas of the Project or on streets
adjacent thereto.

        12. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.

        13. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable receptacles
stored behind screened enclosures at locations approved by Landlord.

        14. Tenant shall not store or permit the storage or placement of goods
or merchandise in or around the common areas surrounding the Premises. No
displays or sales of merchandise shall be allowed in the parking lots or other
common areas.

        15. Tenant shall not permit any animals, including, but not limited to,
any household pets, to be brought or kept in or about the Premises, the
Building, the Project or any of the common areas.

                                       D-2
<PAGE>   54

                                    EXHIBIT E

                   HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE

        Your cooperation in this matter is appreciated. Initially, the
information provided by you in this Hazardous Materials Disclosure Certificate
is necessary for the Landlord to evaluate your proposed uses of the premises
(the "PREMISES") and to determine whether to enter into a lease agreement with
you as tenant. If a lease agreement is signed by you and the Landlord (the
"LEASE AGREEMENT"), on an annual basis in accordance with the provisions of
Paragraph 32 of the Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. Any questions
regarding this certificate should be directed to, and when completed, the
certificate should be delivered to:

        Landlord:  Aetna Life Insurance Company
                   c/o Allegis Realty Investors LLC
                   455 Market Street, Suite 1540
                   San Francisco, California 94105
                   Attention: Cynthia Stevenin
                   Phone: (415) 538-4800

        Name of (Prospective) Tenant: Stanford Microdevices
                                      ---------------------

        Mailing Address:  726 Palomar Avenue
                          ------------------
                          Sunnyvale, CA 94086
                          -------------------

        Contact Person, Title and Telephone Number(s):
               Guy Krevet, V.P. Operation (408) 616-5413
               -----------------------------------------

        Contact Person for Hazardous Waste Materials Management and Manifests
        and Telephone Number(s): Don Scheel (408) 616-5433
                                 -------------------------

        Address of (Prospective) Premises: 726 Palomar Avenue
                                           ------------------

        Length of (Prospective) initial Term: 5 years
                                              -------

1.      GENERAL INFORMATION:

               Describe the proposed operations to take place in, on, or about
        the Premises, including, without limitation, principal products
        processed, manufactured or assembled, and services and activities to be
        provided or otherwise conducted. Existing tenants should describe any
        proposed changes to on-going operations.

        Office functions for sales, administration and application engineering.
        -----------------------------------------------------------------------

                                       E-1
<PAGE>   55

2.      USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS

        2.1    Will any Hazardous Materials (as hereinafter defined) be used,
               generated, treated, stored or disposed of in, on or about the
               Premises? Existing tenants should describe any Hazardous
               Materials which continue to be used, generated, treated, stored
               or disposed of in, on or about the Premises.

               Wastes                 Yes [ ]    No [X]

               Chemical Products             Yes [ ]  No [X]

               Other                         Yes [ ]  No [X]

               If Yes is marked, please explain: _______________________________

               _________________________________________________________________

               _________________________________________________________________

        2.2    If Yes is marked in Section 2.1, attach a list of any Hazardous
               Materials to be used, generated, treated, stored or disposed of
               in, on or about the Premises, including the applicable hazard
               class and an estimate of the quantities of such Hazardous
               Materials to be present on or about the Premises at any given
               time; estimated annual throughput; the proposed location(s) and
               method of storage (excluding nominal amounts of ordinary
               household cleaners and janitorial supplies which are not
               regulated by any Environmental Laws, as hereinafter defined); and
               the proposed location(s) and method(s) of treatment or disposal
               for each Hazardous Material, including the estimated frequency,
               and the proposed contractors or subcontractors. Existing tenants
               should attach a list setting forth the information requested
               above and such list should include actual data from on-going
               operations and the identification of any variations in such
               information from the prior year's certificate.

3.      STORAGE TANKS AND SUMPS

        3.1    Is any above or below ground storage or treatment of gasoline,
               diesel, petroleum, or other Hazardous Materials in tanks or sumps
               proposed in, on or about the Premises? Existing tenants should
               describe any such actual or proposed activities.

               Yes [ ]   No [X]

               If yes, please explain: _________________________________________

               _________________________________________________________________

               _________________________________________________________________

                                       E-2
<PAGE>   56

4.      WASTE MANAGEMENT

        4.1    Has your company been issued an EPA Hazardous Waste Generator
               I.D. Number? Existing tenants should describe any additional
               identification numbers issued since the previous certificate.

               Yes [ ]   No [X]

        4.2    Has your company filed a biennial or quarterly reports as a
               hazardous waste generator? Existing tenants should describe any
               new reports filed.

               Yes [ ]   No [X]

               If yes, attach a copy of the most recent report filed.

5.      WASTEWATER TREATMENT AND DISCHARGE

        5.1    Will your company discharge wastewater or other wastes to:

               ______ storm drain?  _____ sewer?

               ______ surface water? [X] no wastewater or other wastes
                                         discharged.

               Existing tenants should indicate any actual discharges. If so,
               describe the nature of any proposed or actual discharge(s).

               _________________________________________________________________

               _________________________________________________________________

        5.2    Will any such wastewater or waste be treated before discharge?

               Yes [ ]   No [X]

               If yes, describe the type of treatment proposed to be conducted.
               Existing tenants should describe the actual treatment conducted.

               _________________________________________________________________

               _________________________________________________________________

                                       E-3
<PAGE>   57

6.      AIR DISCHARGES

        6.1    Do you plan for any air filtration systems or stacks to be used
               in your company's operations in, on or about the Premises that
               will discharge into the air; and will such air emissions be
               monitored? Existing tenants should indicate whether or not there
               are any such air filtration systems or stacks in use in, on or
               about the Premises which discharge into the air and whether such
               air emissions are being monitored.

               Yes [ ]   No [X]

               If yes, please describe: ________________________________________

               _________________________________________________________________

               _________________________________________________________________

        6.2    Do you propose to operate any of the following types of
               equipment, or any other equipment requiring an air emissions
               permit? Existing tenants should specify any such equipment being
               operated in, on or about the Premises.

               _____ Spray booth(s)  ______ Incinerator(s)

               _____ Dip tank(s)     ______ Other (Please describe)

               ______ Drying oven(s) [X] No Equipment Requiring Air Permits

               If yes, please describe: ________________________________________

               _________________________________________________________________

               _________________________________________________________________

        6.3    Please describe (and submit copies of with this Hazardous
               Materials Disclosure Certificate) any reports you have filed in
               the past [thirty-six] months with any governmental or
               quasi-governmental agencies or authorities related to air
               discharges or clean air requirements and any such reports which
               have been issued during such period by any such agencies or
               authorities with respect to you or your business operations.

                                       E-4
<PAGE>   58

7.      HAZARDOUS MATERIALS DISCLOSURES

        7.1    Has your company prepared or will it be required to prepare a
               Hazardous Materials management plan. ("MANAGEMENT PLAN") or
               Hazardous Materials Business Plan and Inventory ("BUSINESS PLAN")
               pursuant to Fire Department or other governmental or regulatory
               agencies' requirements? Existing tenants should indicate whether
               or not a Management Plan is required and has been prepared.

               Yes [ ]   No [X]

               If yes, attach a copy of the Management Plan or Business Plan.
               Existing tenants should attach a copy of any required updates to
               the Management Plan or Business Plan.

        7.2    Are any of the Hazardous Materials, and in particular chemicals,
               proposed to be used in your operations in, on or about the
               Premises listed or regulated under Proposition 65? Existing
               tenants should indicate whether or not there are any new
               Hazardous Materials being so used which are listed or regulated
               under Proposition 65.

               Yes [ ]   No [X]

               If yes, please explain: _________________________________________

               _________________________________________________________________

               _________________________________________________________________

8.      ENFORCEMENT ACTIONS AND COMPLAINTS

        8.1    With respect to Hazardous Materials or Environmental Laws, has
               your company ever been subject to any agency enforcement actions,
               administrative orders, or consent decrees or has your company
               received requests for information, notice or demand letters, or
               any other inquiries regarding its operations? Existing tenants
               should indicate whether or not any such actions, orders or
               decrees have been, or are in the process of being, undertaken or
               if any such requests have been received.

               Yes [ ]   No [X]

               If yes, describe the actions, orders or decrees and any
               continuing compliance obligations imposed as a result of these
               actions, orders or decrees and also describe any requests,
               notices or demands, and attach a copy of all such documents.
               Existing tenants should describe and attach a copy of any new
               actions, orders, decrees, requests, notices or demands not
               already delivered to Landlord pursuant to the provisions of
               Paragraph 32 of the Lease Agreement.

               _________________________________________________________________

               _________________________________________________________________

                                       E-5
<PAGE>   59

        8.2    Have there ever been, or are there now pending, any lawsuits
               against your company regarding any environmental or health and
               safety concerns?

               Yes [ ]   No [X]

               If yes, describe any such lawsuits and attach copies of the
               complaint(s), cross-complaint(s), pleadings and other documents
               related thereto as requested by Landlord. Existing tenants should
               describe and attach a copy of any new complaint(s),
               cross-complaint(s), pleadings and other related documents not
               already delivered to Landlord pursuant to the provisions of
               Paragraph 32 of the Lease Agreement.

               _________________________________________________________________

               _________________________________________________________________

        8.3    Have there been any problems or complaints from adjacent tenants,
               owners or other neighbors at your company's current facility with
               regard to environmental or health and safety concerns? Existing
               tenants should indicate whether or not there have been any such
               problems or complaints from adjacent tenants, owners or other
               neighbors at, about or near the Premises and the current status
               of any such problems or complaints.

               Yes [ ]   No [X]

               If yes, please describe. Existing tenants should describe any
               such problems or complaints not already disclosed to Landlord
               under the provisions of the signed Lease Agreement and the
               current status of any such problems or complaints.

               _________________________________________________________________

               _________________________________________________________________

9.      PERMITS AND LICENSES

        9.1    Attach copies of all permits and licenses issued to your company
               with respect to its proposed operations in, on or about the
               Premises, including, without limitation, any Hazardous Materials
               permits, wastewater discharge permits, air emissions permits, and
               use permits or approvals. Existing tenants should attach copies
               of any new permits and licenses as well as any renewals of
               permits or licenses previously issued.

        As used herein, "HAZARDOUS MATERIALS" shall mean and include any
substance that is or contains (a) any "hazardous substance" as now or hereafter
defined in section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C.
section 9601 et seq.) or any regulations promulgated under CERCLA; (b) any
"hazardous waste" as now or hereafter defined in the Resource Conservation and
Recovery Act, as amended ("RCRA") (42 U.S.C. section 6901 et seq.) or any
regulations promulgated under RCRA;

                                       E-6
<PAGE>   60

(c) any substance now or hereafter regulated by the Toxic Substances Control
Act, as amended ("TSCA") (15 U.S.C. section 2601 et seq.) or any regulations
promulgated under TSCA; (d) petroleum, petroleum by-products, gasoline, diesel
fuel, or other petroleum hydrocarbons; (e) asbestos and asbestos-containing
material, in any form, whether friable or non-friable; (f) polychlorinated
biphenyls; (g) lead and lead-containing materials; or (h) any additional
substance, material or waste (A) the presence of which on or about the Premises
(i) requires reporting, investigation or remediation under any Environmental
Laws (as hereinafter defined), (ii) causes or threatens to cause a nuisance on
the Premises or any adjacent property or poses or threatens to pose a hazard to
the health or safety of persons on the Premises or any adjacent property, or
(iii) which, if it emanated or migrated from the Premises, could constitute a
trespass, or (B) which is now or is hereafter classified or considered to be
hazardous or toxic under any Environmental Laws; and "ENVIRONMENTAL LAWS" shall
mean and include (a) CERCLA, RCRA and TSCA; and (b) any other federal, state or
local laws, ordinances, statutes, codes, rules, regulations, orders or decrees
now or hereinafter in effect relating to (i) pollution, (ii) the protection or
regulation of human health, natural resources or the environment, (iii) the
treatment, storage or disposal of Hazardous Materials, or (iv) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.

        The undersigned hereby acknowledges and agrees that this Hazardous
Materials Disclosure Certificate is being delivered to Landlord in connection
with the evaluation of a Lease Agreement and, if such Lease Agreement is
executed, will be attached thereto as an exhibit. The undersigned further
acknowledges and agrees that if such Lease Agreement is executed, this Hazardous
Materials Disclosure Certificate will be updated from time to time in accordance
with Paragraph 32 of the Lease Agreement. The undersigned further acknowledges
and agrees that the Landlord and its partners, lenders and representatives may,
and will, rely upon the statements, representations, warranties, and
certifications made herein and the truthfulness thereof in entering into the
Lease Agreement and the continuance thereof throughout the term, and any
renewals thereof, of the Lease Agreement. I [print name] Guy Krevet, acting with
full authority to bind the (proposed) Tenant and on behalf of the (proposed)
Tenant, certify, represent and warrant that the information contained in this
certificate is true and correct.

(PROSPECTIVE) TENANT:

STANFORD MICRODEVICES, INC.,

a __________________________________ corporation

By: /s/ Signature Illegible

Name: Guy Krevet
      ----------------------------
Title: V.P. Operation
       ---------------------------

Date: January 20, 2000
      ----------------------------

                                       E-7<PAGE>

                                                                    EXHIBIT 4.10

                           KILROY REALTY CORPORATION

                            ARTICLES SUPPLEMENTARY

                               120,000 SHARES OF

     9 1/4% SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK

          Kilroy Realty Corporation, a Maryland corporation (the "Company"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
(the "Department") that:

          First: By Articles Supplementary filed with the Department on December
          -----
10, 1999 (the "December 10, 1999 Articles Supplementary"), the Company has
               ----------------------------------------
classified 780,000 shares of its authorized but unissued preferred stock, par
value $0.01 per share (the "Preferred Stock") as a separate class of Preferred
                            --------- -----
Stock designated as "9 1/4% Series D Cumulative Redeemable Preferred Stock,"
(the "Series D Preferred Stock"), and set the preferences, conversion and other
      ------------------------
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other terms and
conditions of such Series D Preferred Stock, all as set forth in the December
10, 1999 Articles Supplementary.

          Second:  The Board of Directors of the Company (the "Board of
          ------
Directors"), by resolutions duly adopted on October 8, 1999, and a duly
appointed committee of the Board of Directors (the "Committee"), by resolutions
                                                    ---------
duly adopted on December 9, 1999 pursuant to the authority conferred on such
Committee by the Board of Directors, authorized the issuance of up to 780,000
shares of Series D Preferred Stock.

          Third:  Pursuant to the authority expressly vested in the Board of
          -----
Directors of the Company by Article IV of the Articles of Amendment and
Restatement of the Company filed with the Department on January 21, 1997, which
comprises, together with the Articles Supplementary (the "Series A Articles
                                                          -----------------
Supplementary") filed by the Company on February 6, 1998 and April 20, 1998
-------------
establishing a class of Preferred Stock designated as the "8.073% Series A
Cumulative Redeemable Preferred Stock" (the "Series A Preferred Stock"), the
                                             ------------------------
Articles Supplementary (the "Series B Articles Supplementary") filed by the
                             -------------------------------
Company on October 15, 1998, establishing a class of Preferred Stock designated
as the Series B Junior Participating Preferred Stock (the "Series B Preferred
                                                           ------------------
Stock"), the Articles Supplementary (the "Series C Articles Supplementary")
-----                                     -------------------------------
filed by the Company on November 25, 1998, establishing a class of Preferred
Stock designated as the "9 3/8% Series C Cumulative Redeemable Preferred Stock"
(the "Series C Preferred Stock"), the December 10, 1999 Articles Supplementary
      ------------------------
establishing the Series D Preferred Stock and these Articles Supplementary, the
charter  (collectively, the "Charter") and Section 2-105 of the Maryland General
                             -------
Corporation Law (the "MGCL"), the Board of Directors by resolutions duly adopted
                      ----
on October 8, 1999, and the Committee, by resolutions duly adopted on December
30, 1999 pursuant to the authority conferred on such Committee by the Board of
Directors, has classified 120,000 additional shares of the authorized but
unissued Preferred Stock of the Company as Series D Preferred Stock, having the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, terms and
conditions of redemption and other terms and
<PAGE>

conditions as set forth in the December 10, 1999 Articles Supplementary, and has
authorized the issuance of a maximum of 120,000 of such additional shares of
Series D Preferred Stock.

          Fourth:  The additional 120,000 shares of Series D Preferred Stock
          ------
have been classified and designated by the Board of Directors, and the Committee
thereof, under the authority contained in the Charter.

          Fifth: These Articles Supplementary have been approved by the
          -----
Committee, pursuant to the authority conferred upon such Committee by the Board
of Directors, in the manner and by the vote required by law.  No stockholder of
the Company has any voting rights with respect to these Articles Supplementary.

          Sixth:  The total number of shares of Preferred Stock that the Company
          -----
has authority to issue is 30,000,000 shares.  Immediately prior to the adoption
of the December 30, 1999 resolutions by the Committee, and the filing of these
Articles Supplementary, the total number of shares of Preferred Stock of the
Company classified as Series D Preferred Stock was 780,000 shares.  Immediately
following the adoption of the December 30, 1999 resolutions by the Committee,
and the filing of these Articles Supplementary, the total number of shares of
Preferred Stock of the Company classified as Series D Preferred Stock is 900,000
shares.

          Seventh: The undersigned Senior Vice President of the Company
          -------
acknowledges these Articles Supplementary to be the corporate act of the Company
and, as to all matters or facts required to be verified under oath, the
undersigned Senior Vice President acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.

                       (space left intentionally blank)
<PAGE>

          In witness whereof, the Company has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
Senior Vice President and attested to by its Assistant Secretary on this 30/th/
day of December.

                                  KILROY REALTY CORPORATION

                                  By: /s/ Tyler H. Rose
                                     -----------------------------
                                      Tyler H. Rose
                                      Senior Vice President

[SEAL]

ATTEST:

/S/ Jeffrey C. Hawken
----------------------------
JEFFREY C. HAWKEN
Assistant Secretary

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