ANACOMP INC
REAL PROPERTY LEASE
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>kilroyrealtylease.txt
<DESCRIPTION>REAL PROPERTY LEASE
<TEXT>




                                  OFFICE LEASE
                                  KILROY REALTY

                         15378 AVENUE OF SCIENCE PROJECT









                              KILROY REALTY, L.P.,

                         a Delaware limited partnership,

                                  as Landlord,

                                       and

                                 ANACOMP, INC.,

                             a Indiana corporation,

                                   as Tenant.



<PAGE>







                                      TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                         Page

<S>                                                                                     <C>

ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS....................................5

ARTICLE 2 INITIAL LEASE TERM; OPTION TERM(S)...............................................6

ARTICLE 3 BASE RENT.......................................................................10

ARTICLE 4 ADDITIONAL RENT.................................................................11

ARTICLE 5 USE OF PREMISES.................................................................18

ARTICLE 6 SERVICES AND UTILITIES..........................................................19

ARTICLE 7 REPAIRS.........................................................................23

ARTICLE 8 ADDITIONS AND ALTERATIONS.......................................................24

ARTICLE 9 COVENANT AGAINST LIENS..........................................................26

ARTICLE 10 INSURANCE......................................................................27

ARTICLE 11 DAMAGE AND DESTRUCTION.........................................................30

ARTICLE 12 NONWAIVER......................................................................32

ARTICLE 13 CONDEMNATION...................................................................33

ARTICLE 14 ASSIGNMENT AND SUBLETTING......................................................33

ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND  REMOVAL OF TRADE FIXTURES................38

ARTICLE 16 HOLDING OVER...................................................................39

ARTICLE 17 ESTOPPEL CERTIFICATES..........................................................40

ARTICLE 18 SUBORDINATION..................................................................40

ARTICLE 19 DEFAULTS; REMEDIES.............................................................41

ARTICLE 20 COVENANT OF QUIET ENJOYMENT....................................................44

ARTICLE 21 SECURITY DEPOSIT; LETTER OF CREDIT.............................................44

ARTICLE 22 TELECOMMUNICATIONS EQUIPMENT...................................................47

ARTICLE 23 SIGNS..........................................................................48
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                     <C>

ARTICLE 24 COMPLIANCE WITH LAW............................................................50

ARTICLE 25 LATE CHARGES...................................................................51

ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT...........................51

ARTICLE 27 ENTRY BY LANDLORD..............................................................52

ARTICLE 28 TENANT PARKING.................................................................53

ARTICLE 29 MISCELLANEOUS PROVISIONS.......................................................53

</TABLE>


















<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                     <C>

Abatement Event...........................................................................10
Accountant................................................................................18
Accountant's Statement....................................................................18
Additional Rent...........................................................................11
Advocate Arbitrators.......................................................................9
Alterations...............................................................................24
Applicable Laws...........................................................................50
Award......................................................................................9
Bank Prime Loan...........................................................................51
Base Building.............................................................................25
Base Rent.................................................................................10
Brokers...................................................................................58
BS Exception..............................................................................23
Building Monument Sign....................................................................49
Building Structure........................................................................23
Building Systems..........................................................................21
CC&Rs.....................................................................................19
Comparable Area............................................................................8
Comparable Buildings.......................................................................8
Comparable Deals...........................................................................7
Comparable Term............................................................................7
Control,..................................................................................38
Cosmetic Alterations......................................................................24
Damage Termination Date...................................................................31
Damage Termination Notice.................................................................31
Direct Expenses...........................................................................11
Eligibility Period........................................................................10
Emergency Generator.......................................................................22
Environmental Laws........................................................................60
Estimate..................................................................................17
Estimate Statement........................................................................17
Estimated Direct Expenses.................................................................17
Excess....................................................................................16
Exercise Notice............................................................................8
Expense Year..............................................................................11
Force Majeure.............................................................................55
Hazardous Material(s).....................................................................59
Holdover Notice...........................................................................39
HVAC......................................................................................21
Initial Abatement Period..................................................................10
Interest Rate.............................................................................18
Landlord...................................................................................1
Landlord Parties..........................................................................27
Landlord Repair Notice....................................................................30
Landlord Response Date.....................................................................8
Landlord Response Notice...................................................................8
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                     <C>

Landlord's Option Rent Calculation.........................................................8
L-C.......................................................................................45
L-C Amount................................................................................45
L-C Security Deposit......................................................................47
Lease......................................................................................1
Lease Commencement Date....................................................................6
Lease Expiration Date......................................................................6
Lease Term.................................................................................6
Lease Year.................................................................................6
Lines.....................................................................................59
LLBS Period...............................................................................21
Mail......................................................................................56
Market Rent................................................................................7
Neutral Arbitrator.........................................................................9
Nondisturbance Agreement..................................................................40
Notices...................................................................................56
Objectionable Name........................................................................49
Operating Expenses........................................................................11
Option Rent................................................................................6
Option Term................................................................................6
Option Term TI Allowance...................................................................7
Original Improvements.....................................................................29
Outside Agreement Date.....................................................................8
Permitted Holdover Term...................................................................39
Permitted Transferee......................................................................38
Pre-Approved Transfer.....................................................................38
Premises...................................................................................5
Premises Signage..........................................................................48
Proposition 13............................................................................15
Provider..................................................................................61
Reestablishment Notice....................................................................45
Renovations...............................................................................59
Rent Commencement Date.....................................................................2
Rent Concessions...........................................................................7
Rent......................................................................................11
Rentable Square Feet.......................................................................6
Required Thresholds.......................................................................45
Security Deposit..........................................................................44
Sign Specifications.......................................................................49
Statement.................................................................................16
Subject Space.............................................................................34
Summary....................................................................................1
Tax Expenses..............................................................................15
Telecommunications Equipment..............................................................47
Tenant.....................................................................................1
Tenant Parties............................................................................27
Tenant Work Letter.........................................................................5
Tenant's BS Notice........................................................................21
Tenant's Option Rent Calculation...........................................................8
Tenant's Share............................................................................16
Transfer..................................................................................37
Transfer Notice...........................................................................34
Transfer Premium..........................................................................35
Transferee................................................................................34
Transfers.................................................................................34
Unusable Area.............................................................................11

</TABLE>





















<PAGE>



                         15378 AVENUE OF SCIENCE PROJECT

                                  OFFICE LEASE

     This Office Lease (the "Lease"),  dated as of the date set forth in Section
1 of the Summary of Basic Lease  Information (the "Summary"),  below, is made by
and between KILROY REALTY,  L.P., a Delaware limited  partnership  ("Landlord"),
and ANACOMP, INC., a Indiana corporation ("Tenant").

                       SUMMARY OF BASIC LEASE INFORMATION
<TABLE>
<CAPTION>
<S>                                             <C>

        TERMS OF LEASE                            DESCRIPTION

1       Date:                                     June 14, 2002.

2       Premises:

        2.1     Building:                         That certain  single  (1)-story  building (the
                                                  "Building")   located   at  15378   Avenue  of
                                                  Science,  San Diego,  California 92128,  which
                                                  Building   contains    approximately    68,910
                                                  rentable square feet of space.

        2.2     Premises:                         All  of  the  approximately   68,910  rentable
                                                  square feet of space  located in the Building,
                                                  as  further  set  forth  in  Exhibit A  to the
                                                                               ---------
                                                  Office Lease,  and the real property  owned by
                                                  Landlord  upon which the  Building is located,
                                                  including,  without  limitation,  the  parking
                                                  area exclusively serving the Building.

        2.3     Project:                          The  Premises  is  a  single-building  project
                                                  known  as  the   "15378   Avenue  of   Science
                                                  Project,"  as  further  set forth in  Section
                                                  1.1.2 of this Lease.

3       Lease Term
        (Article 2):

        3.1     Length of Term:                   Approximately eight (8) years and eleven (11)
                                                  months.

        3.2     Lease Commencement Date:          June 28, 2002.

<PAGE>


        3.3     Lease Expiration Date:            May 31, 2011.

        3.4     Option Term(s):                   Two (2) five  (5)-year  options  to renew,  as
                                                  more  particularly set forth in Section 2.2 of
                                                  this Lease.

4.      Base Rent (Article 3):

</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>     <C>                     <C>                        <C>                     <C>
                                                                                 Monthly
                                                         Monthly               Rental Rate
      Period of                  Annual                Installment             per Rentable
      Lease Term               Base Rent               of Base Rent            Square Foot
      ----------               ---------               ------------            -----------
    June 28, 2002
       through                      n/a                      n/a                   $0.00
  December 31, 2002

   January 1, 2003*
       through                 $868,266.00               $72,355.50                $1.05
  December 31, 2005

   January 1, 2006
       through                 $992,304.00               $82,692.00                $1.20
  December 31, 2008

   January 1, 2009
       through               $1,116,342.00               $93,028.50                $1.35
     May 31, 2011
</TABLE>

To the extent  Tenant  elects to increase  the amount of the Tenant  Improvement
Allowance  pursuant  to  Section  2.2.2 of the  Tenant  Work  Letter,  such "TIA
Increase,"  as that term is defined in Section  2.2.2 of the Tenant Work Letter,
shall be amortized  over the initial  Lease Term using an  amortization  rate of
eleven and one-half  percent (11 1/2%) per annum,  the monthly  payment of which
shall be payable in the same place and in the same  manner as Base Rent for each
month of the initial Lease Term as "Additional  Rent," as that term is set forth
in  Section  4.1 of the  Lease.  Accordingly,  for each  dollar of TIA  Increase
utilized by Tenant, the Base Rent payable by Tenant throughout the initial Lease
Term, as set forth in Section 4 of the Summary,  shall be increased by an amount
equal to $0.0155 per month.


*The date upon which Base Rent  commences (the "Rent  Commencement  Date") shall
be, pursuant to the terms of Section 3.2 of this Lease, January 1, 2003.

<TABLE>
<CAPTION>
<S>     <C>                                       <C>

5.      Intentionally Omitted.

6.      Tenant's Share                            One hundred percent (100%).
        (Article 4):
         ---------

7.      Permitted Use                             Provided any such use is legally  permissible,
        (Article 5):                              Tenant  shall  use  the  Premises  solely  for
         ---------
                                                  general   office,   assembly,   research   and
                                                  development,  or any other  legally  permitted
                                                  use pursuant to the M1B zoning  applicable  to
                                                  the Building.

8.      Security Deposit                          $72,355.50.   In  addition  to  the   Security
        (Article 21):                             Deposit,    Tenant   shall   have   additional
         ----------
                                                  security   obligations,   in  the  form   more
                                                  particularly set forth in Section 21.2.
                                                                            ------------

9.      Parking Spaces                            All  of the  two  hundred  Seventy-five  (275)
        (Article 28):                             parking  spaces  contained  within the Project
         ----------
                                                  parking area.

10.     Address of Tenant                         Anacomp, Inc.
        (Section 29.18):                          12365 Crosthwaite Circle
         -------------
                                                  Poway, California 92064
                                                  Attention: Vice President of Real Estate

                                                  Anacomp, Inc.
                                                  12365 Crosthwaite Circle
                                                  Poway, California 92064
                                                  Attention: General Counsel

                                                  Gray Cary Ware & Freidenrich LLP.
                                                  401 B Street, Suite 2000
                                                  San Diego, California 92101-4240
                                                  Attention: Joe Delaney

                                                  (Prior to Lease Commencement Date)

                                                   and

                                                  Anacomp, Inc.
                                                  15378 Avenue of Science
                                                  San Diego, California  92128
                                                  Attention: Vice President of Real Estate

                                                  Anacomp, Inc.
                                                  15378 Avenue of Science
                                                  San Diego, California  92128
                                                  Attention: General Counsel

                                                  Gray Cary Ware & Freidenrich LLP.
                                                  401 B Street, Suite 2000
                                                  San Diego, California 92101-4240
                                                  Attention: Joe Delaney

                                                  (After Lease Commencement Date)

11.     Address of Landlord
        (Section 29.18):                          See Section 29.18 of the Lease.
         -------------                                -------------

12.     Broker(s)                                 CB Richard Ellis, Inc.
        (Section 29.24):                          4365 Executive Drive, Suite 900
         -------------
                                                  San Diego, California  92121
                                                  Attention:  Mr. Christopher J. Pascale
                                                  (as Broker for Tenant)

                                                  and

                                                  CB Richard Ellis, Inc.
                                                  4365 Executive Drive, Suite 900
                                                  San Diego, California  92121
                                                  Attention:  Mr. Ted Cuthbert
                                                  (as Broker for Landlord)

13.     Tenant Improvement Allowance              $800,000.00,  subject  to the "TIA  Increase,"
        (Section 2 of Exhibit B):                 as that term is set forth in, and  pursuant to
         ---------    ---------
                                                  the terms and conditions of,  Section 2.2.2 of
                                                  the Tenant  Work Letter (up to a maximum of an
                                                  additional $250,000.00).
</TABLE>

<PAGE>

                                   ARTICLE 1

                  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

          1.1     Premises, Building, Project and Common Areas.

     1.1.1 The  Premises.  Landlord  hereby  leases to Tenant and Tenant  hereby
leases from  Landlord  the premises set forth in Section 2.2 of the Summary (the
"Premises").  The  outline  of the  Premises  is set forth in Exhibit A attached
hereto and the Building  has the number of rentable  square feet as set forth in
Section  2.2 of the  Summary.  The  parties  hereto  agree that the lease of the
Premises is upon and subject to the terms, covenants and conditions (the "TCCs")
herein set forth, and Tenant  covenants as a material part of the  consideration
for this  Lease to keep and  perform  each and all of such TCCs by it to be kept
and  performed  and  that  this  Lease  is  made  upon  the  condition  of  such
performance. The parties hereto hereby acknowledge that the purpose of Exhibit A
is to show the  approximate  location of the portion of the  Premises  contained
within the  "Building," as that term is defined in Section 1.1.2,  below,  only,
and such Exhibit is not meant to  constitute  an  agreement,  representation  or
warranty as to the construction of such portion of the Premises, or the elements
thereof or of the  accessways to the Premises or the  "Project," as that term is
defined in Section 1.1.2,  below. Except as specifically set forth in this Lease
and in the Tenant Work Letter  attached  hereto as Exhibit B (the  "Tenant  Work
Letter"),  Landlord shall not be obligated to provide or pay for any improvement
work or  services  related  to the  improvement  of the  Premises.  Tenant  also
acknowledges  that  neither  Landlord  nor any  agent of  Landlord  has made any
representation  or  warranty  regarding  the  condition  of any  portion  of the
Premises, specifically including, without limitation, the Building, with respect
to the suitability of any of the foregoing for the conduct of Tenant's business,
except as specifically  set forth in this Lease and the Tenant Work Letter.  The
taking of possession of the Premises by Tenant shall conclusively establish that
the  Premises and the  Building  were at such time in good and  sanitary  order,
condition and repair, subject only to punchlist items and Landlord's obligations
set forth in Article 7 of this Lease.

     1.1.2 The Building and The Project.  The Premises includes (i) the building
set forth in Section  2.1 of the  Summary  (the  "Building"),  and (ii) the real
property   (which  is  improved  with   landscaping,   parking  area  and  other
improvements)  upon which the  Building is  located.  The  Premises  comprises a
single-building  research  and  development  project  known as "15378  Avenue of
Science  Project."  The term  "Project,"  as used in this Lease,  shall mean the
Premises.

     1.1.3 Common Areas.  Landlord and Tenant hereby  acknowledge and agree that
the areas within the Project which would  traditionally  be  considered  "common
areas" are, due to the single-building  single-tenant nature of the Project, not
separately demised areas, but are included within the definition of Premises, as
more  specifically  set forth in Section 1.1.1 of this Lease. To the extent this
Lease references "common areas," the same refers to the exterior portions of the
Premises  which are  typically  referred  to in  third-party  leases as  "Common
Areas." Landlord  reserves the right to close  temporarily,  make alterations or
additions to, or change the location of elements of the "common areas"; provided
that no such changes shall be permitted which materially  reduce Tenant's rights
or  access  hereunder.  Except  when  and  where  Tenant's  right of  access  is
specifically  excluded in this Lease,  Tenant  shall have the right of access to
the Building, and the Project parking area twenty-four (24) hours per day, seven
(7) days per week  during the  "Lease  Term," as that term is defined in Section
2.1,  below.

     1.2  Stipulation of Rentable  Square Feet of the Building.  For purposes of
this Lease,  Landlord and Tenant  hereby  stipulate  that the Building  shall be
deemed to contain 68,910 "Rentable  Square Feet",  which Rentable Square Footage
shall not be subject to any verification or remeasurement.

                                    ARTICLE 2

                       INITIAL LEASE TERM; OPTION TERM(S)

     2.1 Initial  Lease  Term.  The TCCs and  provisions  of this Lease shall be
effective  as of the date of this  Lease.  The term of this  Lease  (the  "Lease
Term")  shall be as set forth in Section 3.1 of the Summary,  shall  commence on
the date set  forth in  Section  3.2 of the  Summary  (the  "Lease  Commencement
Date"),  and shall terminate on the date set forth in Section 3.3 of the Summary
(the  "Lease  Expiration  Date")  unless  this  Lease is  sooner  terminated  as
hereinafter  provided.  For purposes of this Lease,  the term "Lease Year" shall
mean each consecutive twelve (12) month period during the Lease Term;  provided,
however, that the first Lease Year shall commence on the Lease Commencement Date
and end on the last day of the eleventh full month thereafter and the second and
each succeeding  Lease Year shall commence on the first day of the next calendar
month;  and  further  provided  that the last  Lease Year shall end on the Lease
Expiration  Date.  At any time  during the Lease Term,  Landlord  may deliver to
Tenant a notice in the form as set forth in Exhibit  C,  attached  hereto,  as a
confirmation  only of the  information  set forth  therein,  which  Tenant shall
execute and return to Landlord within ten (10) days of receipt thereof.

     2.2 Option Term(s).

     2.2.1 Option Right.  Landlord hereby grants the Tenant  originally named in
this Lease (the "Original Tenant") and its "Permitted  Transferee," as that term
is set forth in Section 14.8 of this Lease,  two (2) options to extend the Lease
Term for the  entire  Premises,  each by a period  of five (5) years  (each,  an
"Option  Term").  Such option shall be exercisable  only by Notice  delivered by
Tenant to Landlord as provided below,  provided that, as of the date of delivery
of such Notice, Tenant is not in Default under this Lease (beyond any applicable
notice and cure periods). Upon the proper exercise of such option to extend, and
provided that, as of the end of the then applicable Lease term, Tenant is not in
Default under this Lease (beyond any applicable  notice and cure  periods),  the
Lease Term, as it applies to the entire Premises, shall be extended for a period
of five (5)  years.  The  rights  contained  in this  Section  2.2 shall only be
exercised by the Original Tenant or its Permitted  Transferee (and not any other
assignee, sublesee or other transferee of the Original Tenant's interest in this
Lease) if Original Tenant and/or its Permitted  Transferee is in occupancy of no
less than forty-five thousand (45,000) Rentable Square Feet of the Building.

     2.2.2 Option Rent.  The Rent payable by Tenant  during the Option Term (the
"Option  Rent") shall be equal to the Market Rent as set forth below;  provided,
however, that the average annual, effective (including free rent, if applicable,
on a straight line basis) base rent component of Market Rent, shall not be lower
than the then  existing  "Base  Rent," as that term is set forth in Article 3 of
this Lease, in effect immediately prior to the commencement of such Option Term.
For purposes of this Lease,  the term "Market  Rent" shall mean rent  (including
additional  rent and  considering  any "base year" or "expense stop"  applicable
thereto), including all escalations, at which tenants, as of the commencement of
the  applicable  term  are,  pursuant  to  transactions   completed  within  the
twenty-four  (24) months prior to the first day of the  applicable  Option Term,
leasing non-sublease,  non-encumbered,  non-synthetic,  non-equity space (unless
such space was leased  pursuant to a definition of "fair  market"  comparable to
the definition of Market Rent) comparable in size, location, access, visibility,
and quality to the Premises for a "Comparable  Term," as that term is defined in
this Section 2.2.2 (the "Comparable  Deals"),  which comparable space is located
in the  "Comparable  Buildings,"  as that term is defined in this Section 2.2.2,
giving appropriate  consideration to the annual rental rates per rentable square
foot  (adjusting  the base rent  component  of such rate to  reflect a net value
after  accounting  for whether or not utility  expenses are directly paid by the
tenant such as Tenant's direct utility  payments  provided for in Section 6.1 of
this Lease), the standard of measurement by which the rentable square footage is
measured,  the ratio of rentable  square feet to usable square feet,  and taking
into consideration only, and granting only, the following  concessions (provided
that the rent payable in Comparable  Deals in which the terms of such Comparable
Deals are  determined  by use of a discounted  fair market rate formula shall be
equitably  increased  in order that such  Comparable  Deals  will not  reflect a
discounted rate) (collectively,  the "Rent  Concessions"):  (a) rental abatement
concessions  or  build-out  periods,  if any,  being  granted  such  tenants  in
connection with such comparable  spaces;  (b) tenant  improvements or allowances
provided or to be provided for such  comparable  space,  taking into account the
value of the existing improvements in the Premises,  such value to be based upon
the age, quality and layout of the improvements and the extent to which the same
could be utilized  by general  office  users as  contrasted  with this  specific
Tenant, (c) Proposition 13 protection,  and (d) all other monetary  concessions,
if any,  being granted such tenants in connection  with such  comparable  space;
provided,  however,  that  notwithstanding  anything to the contrary herein,  no
consideration  shall be given to the fact that Landlord is or is not required to
pay a real estate brokerage commission in connection with the applicable term or
the fact that the  Comparable  Deals do or do not  involve  the  payment of real
estate brokerage commissions.  Such determination of Market Rent shall take into
account  market  trends  by,  all other  factors  being  equal,  weighting  such
Comparable Deals in accordance with how near or far in time such Comparable Deal
were  executed by the parties  thereto as  compared to the  commencement  of the
applicable  Option Term. The term "Comparable Term" shall refer to the length of
the lease term,  without  consideration  of options to extend such term, for the
space in  question.  In  addition,  the  determination  of the Market Rent shall
include a  determination  as to whether,  and if so to what extent,  Tenant must
provide  Landlord  with  financial  security,  such as a  letter  of  credit  or
guaranty,   for  Tenant's  rent   obligations   during  any  Option  Term.  Such
determination  shall be made by reviewing the extent of financial  security then
generally  being imposed in Comparable  Transactions  upon tenants of comparable
financial  condition and credit history to the then existing financial condition
and credit  history  of Tenant  (with  appropriate  adjustments  to account  for
differences in the  then-existing  financial  condition of Tenant and such other
tenants)  If in  determining  the Market  Rent,  Tenant is  entitled to a tenant
improvement  or comparable  allowance for the  improvement  of the Premises (the
"Option Term TI Allowance"),  Landlord may, at Landlord's sole option, elect any
or a portion of the  following:  (A) to grant some or all of the Option  Term TI
Allowance to Tenant in the form as  described  above  (i.e.,  as an  improvement
allowance), and/or (B) to reduce the rental rate component of the Market Rent to
be an effective rental rate which takes into  consideration that Tenant will not
receive the total dollar value of such excess Option Term TI Allowance (in which
case the Option Term TI Allowance  evidenced in the effective  rental rate shall
not be granted to Tenant). The term "Comparable  Buildings" shall mean the other
research and development buildings which are comparable to the Building in terms
of age (based upon the date of completion of construction or major renovation as
to the building containing the portion of the Premises in question),  quality of
construction,  level of services and amenities, size and appearance,  access and
visibility,  and are located in the Carmel  Mountain  Ranch and Rancho  Bernardo
areas (the "Comparable Area").

     2.2.3 Exercise of Option. The option contained in this Section 2.2 shall be
exercised  by Tenant,  if at all,  only in the manner set forth in this  Section
2.2.3.  Tenant shall deliver notice (the "Exercise Notice") to Landlord not more
than fifteen  (15) months nor less than nine (9) months prior to the  expiration
of the then-existing  Lease Term,  stating that Tenant is exercising its option.
Concurrently  with such  Exercise  Notice,  Tenant  shall  deliver  to  Landlord
Tenant's   calculation   of  the  Market   Rent  (the   "Tenant's   Option  Rent
Calculation"). Landlord shall deliver notice (the "Landlord Response Notice") to
Tenant on or before the date which is thirty (30) days after Landlord's  receipt
of the  Exercise  Notice and Tenant's  Option Rent  Calculation  (the  "Landlord
Response  Date"),  stating that (A) Landlord is accepting  Tenant's  Option Rent
Calculation  as  the  Market  Rent,  or  (B)  rejecting   Tenant's  Option  Rent
Calculation  and setting forth  Landlord's  calculation  of the Market Rent (the
"Landlord's  Option Rent  Calculation").  Within ten (10)  business  days of its
receipt of the Landlord Response Notice,  Tenant may, at its option,  accept the
Market Rent contained in the Landlord's Option Rent Calculation.  If Tenant does
not  affirmatively  accept or Tenant  rejects the Market Rent  specified  in the
Landlord's Option Rent Calculation,  the parties shall follow the procedure, and
the Market Rent shall be determined as set forth in Section 2.2.4.

     2.2.4  Determination  of Market  Rent.  In the event  Tenant  objects or is
deemed to have objected to the Market Rent, Landlord and Tenant shall attempt to
agree upon the Market Rent using reasonable  good-faith efforts. If Landlord and
Tenant  fail to reach  agreement  within  sixty  (60)  days  following  Tenant's
objection or deemed  objection to the Landlord's  Option Rent  Calculation  (the
"Outside  Agreement  Date"),  then  (i) in  connection  with  the  Option  Rent,
Landlord's Option Rent Calculation and Tenant's Option Rent Calculation, each as
previously  delivered to the other party,  shall be submitted to the arbitrators
pursuant to the TCCs of this  Section  2.2.4,  and (ii) in  connection  with any
other  contested  calculation  of Market  Rent,  the  parties  shall each make a
separate  determination  of the  Market  Rent and shall  submit  the same to the
arbitrators  pursuant  to the TCCs of this  Section  2.2.4;  provided,  however,
Tenant may elect to rescind its  Exercise  Notice by delivery of written  notice
thereof to Landlord  on or before the Outside  Agreement  Date.  The  submittals
shall be made  concurrently  with the selection of the  arbitrators  pursuant to
this Section  2.2.4 and shall be submitted to  arbitration  in  accordance  with
Section 2.2.4.1  through  2.2.4.7 of this Lease,  but subject to the conditions,
when appropriate, of Section 2.2.3.

          2.2.4.1  Landlord  and Tenant shall each  appoint one  arbitrator  who
shall by  profession be a real estate  broker,  or appraiser who shall have been
active over the five (5) year period ending on the date of such  appointment  in
the leasing  (or  appraisal,  as the case may be) of  first-class  research  and
development  properties  in  the  Comparable  Area.  The  determination  of  the
arbitrators  shall be  limited  solely to the  issue of  whether  Landlord's  or
Tenant's  submitted  Market  Rent,  is the closest to the actual  Market Rent as
determined by the  arbitrators,  taking into account the requirements of Section
2.2.2 of this Lease. Each such arbitrator shall be appointed within fifteen (15)
days  after the  applicable  Outside  Agreement  Date.  Landlord  and Tenant may
consult with their selected  arbitrators  prior to appointment and may select an
arbitrator who is favorable to their  respective  positions.  The arbitrators so
selected by Landlord and Tenant shall be deemed ("Advocate Arbitrators").

          2.2.4.2  The  two  Advocate   Arbitrators   so   appointed   shall  be
specifically  required  pursuant to an engagement letter within ten (10) days of
the date of the appointment of the last appointed Advocate Arbitrator agree upon
and appoint a third  arbitrator  ("Neutral  Arbitrator")  who shall be qualified
under the same  criteria  set forth  hereinabove  for  qualification  of the two
Advocate  Arbitrators  except  that  neither  the  Landlord  or Tenant or either
party's  Advocate  Arbitrator  may,  directly or  indirectly,  consult  with the
Neutral  Arbitrator  prior to subsequent to his or her  appearance.  The Neutral
Arbitrator  shall be  retained  via an  engagement  letter  jointly  prepared by
Landlord's counsel and Tenant's counsel.

          2.2.4.3 The three  arbitrators  shall  within  thirty (30) days of the
appointment  of the  Neutral  Arbitrator  reach a decision as to Market Rent and
determine  whether the  Landlord's or Tenant's  determination  of Market Rent as
submitted pursuant to Section 2.2.4.1 and Section 2.2.3 of this Lease is closest
to Market Rent as determined by the  arbitrators  and  simultaneously  publish a
ruling ("Award") indicating whether Landlord's or Tenant's submitted Market Rent
is  closest to the  Market  Rent as  determined  by the  arbitrators.  Following
notification  of the Award,  the  Landlord's or Tenant's  submitted  Market Rent
determination,  whichever  is selected by the  arbitrators  as being  closest to
Market rent shall become the then applicable Market Rent.

          2.2.4.4  The Award  issued by the  majority  of the three  arbitrators
shall be binding upon Landlord and Tenant.

          2.2.4.5 If either  Landlord  or Tenant  fail to  appoint  an  Advocate
Arbitrator within fifteen (15) days after the applicable Outside Agreement Date,
either party may petition the presiding judge of the Superior Court of San Diego
County to appoint such  Advocate  Arbitrator  subject to the criteria in Section
2.2.4.1 of this Lease, or if he or she refuses to act, either party may petition
any  judge  having  jurisdiction  over the  parties  to  appoint  such  Advocate
Arbitrator.

          2.2.4.6 If the two Advocate Arbitrators fail to agree upon and appoint
the Neutral  Arbitrator,  then either party may petition the presiding  judge of
the  Superior  Court of San Diego  County to  appoint  the  Neutral  Arbitrator,
subject to criteria in Section 2.2.4.1 of this Lease, or if he or she refuses to
act, either party may petition any judge having jurisdiction over the parties to
appoint such arbitrator.

          2.2.4.7 The cost of  arbitration  shall be paid by Landlord and Tenant
equally.

                                    ARTICLE 3

                                    BASE RENT

     3.1 Base  Rent.  Tenant  shall pay,  without  prior  notice or  demand,  to
Landlord or Landlord's  agent at the  management  office of the Project,  or, at
Landlord's  option,  at such  other  place as  Landlord  may  from  time to time
designate in writing,  by a check for currency which, at the time of payment, is
legal tender for private or public debts in the United  States of America,  base
rent ("Base  Rent") as set forth in Section 4 of the  Summary,  payable in equal
monthly  installments  as set forth in Section 4 of the Summary in advance on or
before the first day of each and every  calendar  month  during the Lease  Term,
without any setoff or deduction  whatsoever,  except as  expressly  set forth in
this  Lease.  The Base Rent for the first  full  month of the Lease  Term  which
occurs after the expiration of any free rent period shall be paid at the time of
Tenant's  execution of this Lease. If any Rent payment date (including the Lease
Commencement  Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one month,
the Rent for any  fractional  month shall accrue on a daily basis for the period
from the date such  payment is due to the end of such  calendar  month or to the
end of the  Lease  Term  at a rate  per day  which  is  equal  to  1/365  of the
applicable  annual Rent. All other  payments or adjustments  required to be made
under the TCCs of this Lease that  require  proration  on a time basis  shall be
prorated on the same basis.

     3.2 Initial Abatement Period. Provided that the Original Tenant is not then
in default of this Lease (beyond any applicable  notice and cure periods),  then
for the  first six (6)  months  and  three  (3)  days,  commencing  on the Lease
Commencement  Date  and  ending  on  the  day  immediately  preceding  the  Rent
Commencement  Date  (the  "Initial  Abatement  Period"),  Tenant  shall  have no
obligation to pay any Base Rent (or "Additional Rent," as that term is set forth
in Section 4.1 of this Lease) otherwise  attributable to such Initial  Abatement
Period; provided,  however, that such Initial Abatement Period shall be extended
by the actual  number of days of any  "Landlord  Caused  Delay," as that term is
defined in Section 5.2 of the Tenant Work Letter.  Such Initial Abatement Period
has been  factored  into the schedule of Base Rent set forth in Section 4 of the
Summary.

     3.3  Abatement of Rent.  In the event that Tenant is prevented  from using,
and does not use,  the Premises or any portion  thereof,  as a result of (i) any
repair,  maintenance  or  alteration  performed by Landlord,  or which  Landlord
failed to perform, after the Lease Commencement Date and required by this Lease,
which substantially interferes with Tenant's use of or ingress to or egress from
the Premises  (including  the Project  parking  area to the extent  commercially
reasonable replacement spaces are not provided); or (ii) any failure by Landlord
to provide  services,  utilities  or ingress to and egress from the  Premises as
required  pursuant to the TCCs of this Lease; or (iii) the presence of Hazardous
Materials  not brought on the Premises by "Tenant  Parties," as that term is set
forth in Section  10.1 of this Lease to the extent such  presence  substantially
interferes  with  Tenant's  use of or  ingress  to or egress  from the  Premises
(including  the  Project  parking  area to the  extent  commercially  reasonable
replacement spaces are not provided) (any such set of circumstances as set forth
in items (i) through (iii),  above, to be known as an "Abatement  Event"),  then
Tenant shall give Landlord Notice of such Abatement Event, and if such Abatement
Event continues for five (5) consecutive  business days after Landlord's receipt
of any such Notice (the  "Eligibility  Period"),  then,  as Tenant's sole remedy
vis-a-vis  such  Abatement  Event,  the Base Rent and  Tenant's  Share of Direct
Expenses shall be abated or reduced, as the case may be, after expiration of the
Eligibility  Period for such time that Tenant continues to be so prevented (on a
commercially reasonable basis) from using, and does not use (provided,  however,
to the extent Tenant  continues a particular use even though it would  otherwise
be commercially unreasonable to continue such use, Tenant shall be deemed not to
be using the  applicable  portion of the Premises),  the Premises,  or a portion
thereof, in the proportion that the rentable area of the portion of the Building
that Tenant is prevented from using, and does not use ("Unusable  Area"),  bears
to the  total  rentable  area  of  the  Building.  Landlord  and  Tenant  hereby
acknowledge  that, in addition to the abatement rights set forth in this Section
3.2,  Tenant's  abatement rights following an event of damage and destruction or
condemnation  is  provided  pursuant  to the TCCs of  Articles 11 and 13 of this
Lease.

                                   ARTICLE 4

                                 ADDITIONAL RENT

     4.1 General Terms. In addition to paying the Base Rent specified in Article
3 of this  Lease,  Tenant  shall  pay  "Tenant's  Share" of the  annual  "Direct
Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2, respectively,
of this Lease. Such payments by Tenant,  together with any and all other amounts
payable  by  Tenant  to  Landlord  pursuant  to the  TCCs  of  this  Lease,  are
hereinafter collectively referred to as the "Additional Rent," and the Base Rent
and the  Additional  Rent are herein  collectively  referred  to as "Rent."  All
amounts  due under this  Article 4 as  Additional  Rent shall be payable for the
same  periods and in the same  manner as the Base Rent.  Without  limitation  on
other  obligations of Tenant which survive the expiration of the Lease Term, the
obligations of Tenant to pay the Additional  Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

     4.2  Definitions of Key Terms Relating to Additional  Rent. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:

          4.2.1 Intentionally Deleted.

          4.2.2  "Direct  Expenses"  shall mean  "Operating  Expenses"  and "Tax
Expenses."

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

          4.2.4 "Operating Expenses" shall mean all expenses,  costs and amounts
of every kind and nature which  Landlord pays or accrues during any Expense Year
because  of  or in  connection  with  the  ownership,  management,  maintenance,
security, repair,  replacement,  restoration or operation of the Project, or any
portion  thereof.  Without  limiting the generality of the foregoing,  Operating
Expenses shall specifically  include any and all of the following:  (i) the cost
of supplying all utilities, the cost of operating,  repairing,  maintaining, and
renovating  the utility,  telephone,  mechanical,  sanitary,  and storm drainage
systems,  and the  cost of  maintenance  and  service  contracts  in  connection
therewith; (ii) the cost of licenses, certificates,  permits and inspections and
the cost of contesting any  governmental  enactments  which may affect Operating
Expenses,  and the costs incurred in connection with a  governmentally  mandated
transportation  system management program or similar program;  (iii) the cost of
all insurance  carried by Landlord in connection  with the Project in accordance
with the  provisions  of Section  10.2 of this  Lease,  below;  (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation,  repair and maintenance of the Project,  or any portion  thereof;
(v) costs incurred in connection  with the parking areas  servicing the Project;
(vi) fees and other  costs,  including  management  fees (which  shall equal two
percent (2.0%) of the  then-applicable  Base Rent),  consulting fees, legal fees
and accounting  fees, of all  contractors and consultants in connection with the
management,  operation,  maintenance  and repair of the Project;  (vii) payments
under  any  equipment  rental  agreements;  (viii)  wages,  salaries  and  other
compensation and benefits, including taxes levied thereon, of all persons (other
than  persons  generally  considered  to be higher in rank than the  position of
Project  manager)  engaged in the  operation,  maintenance  and  security of the
Project (which shall be pro-rated or equitably allocated vis-a-vis the amount of
time such personnel spend on projects other than the Project);  (ix) costs under
any instrument pertaining to the sharing of costs by the Project; (x) operation,
repair,  maintenance and replacement of all systems and equipment and components
thereof of the Building; (xi) the cost of janitorial,  alarm, security and other
services, replacement of wall and floor coverings, ceiling tiles and fixtures in
common areas, maintenance and replacement of curbs and walkways, repair to roofs
and re-roofing;  (xii) amortization (including interest on the unamortized cost)
of the cost of acquiring or the rental expense of personal  property used in the
maintenance, operation and repair of the Project, or any portion thereof, to the
extent of a  reduction  in  Operating  Expenses  is  reasonably  anticipated  by
Landlord at the time of such expenditure to be incurred in connection therewith;
(xiii) the cost of capital  improvements  or other costs  incurred in connection
with the Project (A) to the extent the same are reasonably anticipated to reduce
the operation or maintenance  expenses of the Project,  or any portion  thereof,
(B) that are  required  to  comply  with  governmentally  mandated  conservation
programs,  (C) which are replacements or  modifications  of nonstructural  items
located in the common  areas  required to keep the common areas in good order or
condition,  or (D) that are required under any governmental law or regulation by
a federal,  state or local  governmental  agency,  except for  capital  repairs,
replacements or other  improvements to remedy a condition  existing prior to the
Lease Commencement Date which an applicable  governmental  authority,  if it had
knowledge of such condition  prior to the Lease  Commencement  Date,  would have
then  required to be  remedied  pursuant to  then-current  governmental  laws or
regulations  in  their  form  existing  as of the  Lease  Commencement  Date and
pursuant  to the  then-current  interpretation  of  such  governmental  laws  or
regulations   by  the  applicable   governmental   authority  as  of  the  Lease
Commencement  Date;  provided,  however,  that any capital  expenditure shall be
amortized  with  interest  over its useful  life as  Landlord  shall  reasonably
determine;  (xiv) costs, fees,  charges or assessments  imposed by, or resulting
from any mandate imposed on Landlord by, any federal,  state or local government
for fire and police  protection,  trash removal,  community  services,  or other
services  which do not  constitute  "Tax  Expenses"  as that term is  defined in
Section 4.2.5, below; and (xv) payments under any easement,  license,  operating
agreement,  declaration,  restrictive  covenant, or instrument pertaining to the
sharing of costs by the Building. Notwithstanding the foregoing, for purposes of
this Lease, Operating Expenses shall not, however, include:

               (a) costs, including marketing costs, legal fees, space planners'
fees,  advertising  and  promotional  expenses,  and brokerage  fees incurred in
connection with the original construction or development,  or original or future
leasing of the Project,  and costs,  including  permit,  license and  inspection
costs, incurred with respect to the installation of tenant improvements made for
new  tenants   initially   occupying  space  in  the  Project  after  the  Lease
Commencement Date or incurred in renovating or otherwise improving,  decorating,
painting or  redecorating  vacant  space for tenants or other  occupants  of the
Project  (excluding,  however,  such costs  relating to any common  areas of the
Project or parking facilities);

               (b) except as set forth in items (xii),  (xiii), and (xiv) above,
depreciation, interest and principal payments on mortgages and other debt costs,
if any, penalties and interest;

               (c) costs for which the Landlord is  reimbursed  by any tenant or
occupant of the Project or by insurance  by its carrier or any tenant's  carrier
or by anyone  else,  and  electric  power  costs for which any  tenant  directly
contracts with the local public service company;

               (d) any bad debt loss,  rent loss,  or reserves  for bad debts or
rent loss;

               (e) costs  associated  with the  operation of the business of the
partnership  or  entity  which  constitutes  the  Landlord,   as  the  same  are
distinguished   from  the  costs  of  operation  of  the  Project  (which  shall
specifically  include,  but not be limited to,  accounting costs associated with
the  operation  of the  Project).  Costs  associated  with the  operation of the
business of the  partnership or entity which  constitutes  the Landlord  include
costs of  partnership  accounting  and legal  matters,  costs of  defending  any
lawsuits  with any  mortgagee  (except  as the  actions  of the Tenant may be in
issue), costs of selling,  syndicating,  financing,  mortgaging or hypothecating
any of the Landlord's interest in the Project,  and costs incurred in connection
with any disputes  between  Landlord  and its  employees,  between  Landlord and
Project  management,  or between  Landlord and other tenants or  occupants,  and
Landlord's general corporate overhead and general and administrative expenses;

               (f) the wages and  benefits of any  employee  who does not devote
substantially  all of his or her employed time to the Project  unless such wages
and benefits  are  prorated to reflect time spent on operating  and managing the
Project  vis-a-vis time spent on matters unrelated to operating and managing the
Project;  provided,  that in no event shall  Operating  Expenses for purposes of
this Lease include wages and/or  benefits  attributable  to personnel  above the
level of Project manager;

               (g) amount paid as ground rental for the Project by the Landlord;

               (h)  overhead  and profit  increment  paid to the  Landlord or to
subsidiaries  or  affiliates  of the Landlord for services in the Project to the
extent  the same  exceeds  the costs of such  services  rendered  by  qualified,
first-class unaffiliated third parties on a competitive basis;

               (i) any compensation paid to clerks,  attendants or other persons
in  commercial   concessions  operated  by  the  Landlord,   provided  that  any
compensation  paid to any  concierge at the Project  shall be  includable  as an
Operating Expense;

               (j) rentals and other  related  expenses  incurred in leasing air
conditioning  systems or other  equipment  which if purchased  the cost of which
would be excluded from Operating  Expenses as a capital cost,  except  equipment
not  affixed to the Project  which is used in  providing  janitorial  or similar
services and,  further  excepting from this  exclusion such equipment  rented or
leased to remedy or ameliorate an emergency condition in the Project ;

               (k) all items and  services  for which Tenant or any other tenant
in the Project reimburses Landlord or which Landlord provides selectively to one
or more tenants (other than Tenant) without reimbursement;

               (l) costs, other than those incurred in ordinary  maintenance and
repair, for sculpture, paintings, fountains or other objects of art;

               (m)  any  costs  expressly   excluded  from  Operating   Expenses
elsewhere in this Lease,  specifically including,  but not limited to, (1) costs
incurred  by  Landlord  in  connection  with its  Building  Systems  obligations
pursuant to the terms of Section 6.2 with  respect to the "LLBS R&R  Period," as
that term is set forth in such Section 6.2 of this Lease,  and (2) those certain
other costs  incurred by Landlord  which are expressly  excluded from  Operating
Expenses  pursuant  to the  terms and  conditions  of  Section 7 of this  Lease;
provided,  however,  that with regard to item (2) only, such exclusion shall not
apply to the extent such costs are  expressly  allowable as  Operating  Expenses
pursuant to the terms of Section 4.2.4(xii) or (xiii) of this Lease;

               (n) costs arising from the gross negligence or willful misconduct
of Landlord or its agents,  employees,  vendors,  contractors,  or  providers of
materials or services; and

               (o) costs incurred to comply with laws relating to the removal of
hazardous  material (as defined under  applicable law) which was in existence in
the Building or on the Project prior to the Lease  Commencement Date, and was of
such a nature that a federal, State or municipal governmental  authority,  if it
had then had knowledge of the presence of such hazardous material, in the state,
and under the conditions that it then existed in the Building or on the Project,
would  have then  required  the  removal  of such  hazardous  material  or other
remedial or  containment  action with  respect  thereto;  and costs  incurred to
remove, remedy,  contain, or treat hazardous material,  which hazardous material
is  brought  into the  Building  or onto the  Project  after the date  hereof by
Landlord or any other  tenant of the  Project  and is of such a nature,  at that
time, that a federal, State or municipal governmental  authority, if it had then
had  knowledge of the presence of such  hazardous  material,  in the state,  and
under the  conditions,  that it then exists in the  Building or on the  Project,
would  have then  required  the  removal  of such  hazardous  material  or other
remedial or containment action with respect thereto.

     Landlord shall not collect  Operating  Expenses from Tenant in an amount in
excess of what Landlord incurs for the items included in Operating Expenses.

          4.2.5 Taxes.

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

               4.2.5.2 Tax Expenses shall include,  without limitation:  (i) Any
tax on the rent, right to rent or other income from the Project,  or any portion
thereof,  or as against  the  business of leasing  the  Project,  or any portion
thereof;  (ii) Any  assessment,  tax,  fee, levy or charge in addition to, or in
substitution,  partially or totally, of any assessment, tax, fee, levy or charge
previously  included  within  the  definition  of real  property  tax,  it being
acknowledged  by Tenant and  Landlord  that  Proposition  13 was  adopted by the
voters of the State of California in the June 1978 election  ("Proposition  13")
and that  assessments,  taxes,  fees,  levies  and  charges  may be  imposed  by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance,  refuse removal and for other  governmental  services formerly
provided  without  charge to  property  owners or  occupants,  and,  in  further
recognition  of the decrease in the level and quality of  governmental  services
and amenities as a result of Proposition 13, Tax Expenses shall also include any
governmental  or private  assessments  or the Project's  contribution  towards a
governmental or private cost-sharing  agreement for the purpose of augmenting or
improving   the  quality  of  services  and  amenities   normally   provided  by
governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable
to or  measured  by the  area of the  Premises  or the Rent  payable  hereunder,
including,  without  limitation,  any business or gross income tax or excise tax
with  respect  to the  receipt  of such  rent,  or upon or with  respect  to the
possession, leasing, operating, management, maintenance, alteration, repair, use
or occupancy by Tenant of the  Premises,  or any portion  thereof;  and (iv) Any
assessment,  tax, fee, levy or charge,  upon this transaction or any document to
which Tenant is a party,  creating or  transferring  an interest or an estate in
the Premises.

               4.2.5.3 Subject to Tenant's reasonable approval of any attempt by
Landlord to protest,  reduce or minimize  Tax  Expenses,  any costs and expenses
(including,   without  limitation,   reasonable  attorneys'  fees)  incurred  in
attempting to protest,  reduce or minimize Tax Expenses shall be included in Tax
Expenses in the Expense  Year such  expenses  are paid.  Refunds of Tax Expenses
shall be credited against Tax Expenses and refunded to Tenant regardless of when
received, based on the Expense Year to which the refund is applicable,  provided
that in no event shall the amount to be refunded to Tenant for any such  Expense
Year  exceed  the total  amount  paid by Tenant as  Additional  Rent  under this
Article 4 for such Expense Year. If Tax Expenses for any period during the Lease
Term or any  extension  thereof  are  increased  after  payment  thereof for any
reason,  including,  without  limitation,  error or  reassessment  by applicable
governmental  or municipal  authorities,  Tenant shall pay Landlord  upon demand
Tenant's  Share of any such  increased  Tax  Expenses  included  by  Landlord as
Building  Tax  Expenses  pursuant  to the  TCCs of this  Lease.  Notwithstanding
anything to the contrary contained in this Section 4.2.5 (except as set forth in
Section  4.2.5.1,  above),  there shall be excluded  from Tax  Expenses  (i) all
excess  profits  taxes,  franchise  taxes,  gift  taxes,  capital  stock  taxes,
inheritance and succession taxes, estate taxes,  federal and state income taxes,
and other taxes to the extent applicable to Landlord's general or net income (as
opposed to rents, receipts or income attributable to operations at the Project),
(ii) any items  included  as  Operating  Expenses,  and (iii) any items  paid by
Tenant under Section 4.5 of this Lease.

          4.2.6 "Tenant's  Share" shall mean the percentage set forth in Section
6 of the Summary.


     4.3  Intentionally Omitted.


     4.4  Calculation  and  Payment  of  Additional  Rent.  Tenant  shall pay to
Landlord,  in the manner set forth in Section  4.4.1,  below,  and as Additional
Rent, Tenant's Share of Direct Expenses for each Expense Year.

          4.4.1  Statement  of Actual  Direct  Expenses  and  Payment by Tenant.
Landlord  shall  give  to  Tenant  following  the end of each  Expense  Year,  a
statement (the  "Statement")  which shall state in general major  categories the
Direct Expenses  incurred or accrued for such preceding  Expense Year, and which
shall indicate the amount of Tenant's Share of Direct  Expenses.  Landlord shall
use  commercially  reasonable  efforts to deliver such Statement to Tenant on or
before  April 1 following  the end of the Expense  Year to which such  Statement
relates.  Upon receipt of the  Statement  for each Expense  Year  commencing  or
ending  during the Lease Term,  Tenant shall pay,  within thirty (30) days after
receipt of the Statement,  the full amount of Tenant's Share of Direct  Expenses
for such Expense Year,  less the amounts,  if any, paid during such Expense Year
as "Estimated Direct Expenses," as that term is defined in Section 4.4.2, below,
and if Tenant paid more as Estimated  Direct  Expenses than the actual  Tenant's
Share of Direct  Expenses (an  "Excess"),  Tenant shall  receive a credit in the
amount of such Excess  against  Rent next due under this  Lease.  The failure of
Landlord  to  timely  furnish  the  Statement  for any  Expense  Year  shall not
prejudice  Landlord or Tenant from  enforcing  its rights  under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final  determination  is made of Tenant's  Share of Direct  Expenses for the
Expense  Year in which  this  Lease  terminates,  if  Tenant's  Share of  Direct
Expenses is greater than the amount of Estimated Direct Expenses previously paid
by Tenant to Landlord,  Tenant  shall,  within thirty (30) days after receipt of
the Statement, pay to Landlord such amount, and if Tenant paid more as Estimated
Direct  Expenses than the actual Tenant's Share of Direct  Expenses  (again,  an
Excess),  Landlord  shall,  within thirty (30) days,  deliver a check payable to
Tenant in the amount of such Excess.  The provisions of this Section 4.4.1 shall
survive the expiration or earlier termination of the Lease Term. Notwithstanding
the immediately preceding sentence, Tenant shall not be responsible for Tenant's
Share of any Direct  Expenses  attributable  to any Expense Year which are first
billed to Tenant more than two (2)  calendar  years  after the Lease  Expiration
Date,  provided that in any event Tenant shall be responsible for Tenant's Share
of Direct Expenses levied by any governmental authority or by any public utility
companies at any time following the Lease Expiration Date which are attributable
to any Expense Year.

          4.4.2 Statement of Estimated  Direct Expenses.  In addition,  Landlord
shall give Tenant a yearly expense estimate statement (the "Estimate Statement")
which shall set forth in general major categories Landlord's reasonable estimate
(the   "Estimate")  of  what  the  total  amount  of  Direct  Expenses  for  the
then-current  Expense Year shall be and the estimated  Tenant's  Share of Direct
Expenses (the  "Estimated  Direct  Expenses").  Landlord shall use  commercially
reasonable efforts to deliver such Estimate Statement to Tenant on or before May
1  following  the end of the  Expense  Year to  which  such  Estimate  Statement
relates.  The failure of Landlord to timely  furnish the Estimate  Statement for
any  Expense  Year shall not  preclude  Landlord  from  enforcing  its rights to
collect any Estimated  Direct  Expenses under this Article 4, nor shall Landlord
be prohibited from revising any Estimate  Statement or Estimated Direct Expenses
theretofore  delivered to the extent  necessary.  Thereafter,  Tenant shall pay,
within thirty (30) days after receipt of the Estimate  Statement,  a fraction of
the Estimated Direct Expenses for the then-current  Expense Year (reduced by any
amounts paid pursuant to the last sentence of this Section 4.4.2). Such fraction
shall  have as its  numerator  the number of months  which have  elapsed in such
current  Expense Year,  including the month of such payment,  and twelve (12) as
its  denominator.  Until a new Estimate  Statement is furnished  (which Landlord
shall  have the  right to  deliver  to  Tenant at any  time),  Tenant  shall pay
monthly, with the monthly Base Rent installments, an amount equal to one-twelfth
(1/12) of the total Estimated Direct Expenses set forth in the previous Estimate
Statement  delivered by Landlord to Tenant.  Throughout  the Lease Term Landlord
shall maintain  books and records with respect to Direct  Expenses in accordance
with  generally  accepted  real  estate  accounting  and  management  practices,
consistently  applied.

     4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.

          4.5.1  Tenant  shall be liable for and shall pay ten (10) days  before
delinquency,  taxes levied against Tenant's equipment,  furniture,  fixtures and
any other personal property located in or about the Premises.  If any such taxes
on Tenant's equipment,  furniture,  fixtures and any other personal property are
levied  against  Landlord or  Landlord's  property or if the  assessed  value of
Landlord's property is increased by the inclusion therein of a value placed upon
such  equipment,  furniture,  fixtures  or any other  personal  property  and if
Landlord pays the taxes based upon such  increased  assessment,  which  Landlord
shall have the right to do  regardless  of the  validity  thereof but only under
proper  protest if  requested  by Tenant,  Tenant  shall  upon  demand  repay to
Landlord the taxes so levied  against  Landlord or the  proportion of such taxes
resulting from such increase in the assessment, as the case may be.

          4.5.2  Notwithstanding any contrary provision herein, Tenant shall pay
prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or
value added tax, or any other  applicable tax on the rent or services  herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project,  including
the Project  parking area; or (iii) taxes assessed upon this  transaction or any
document to which Tenant is a party creating or  transferring  an interest or an
estate in the Premises.

     4.6 Landlord's  Books and Records.  Upon Tenant's written request given not
more than one hundred  eighty (180) days after  Tenant's  receipt of a Statement
for a particular  Expense Year,  and provided that Tenant is not then in default
under this Lease  beyond the  applicable  cure  period  provided  in this Lease,
Landlord  shall  provide  Tenant with an audited  statement  (the  "Accountant's
Statement") concerning the Direct Expenses for such Expense Year from Landlord's
independent certified public accountants, and Landlord shall also furnish Tenant
with such  reasonable  supporting  documentation  in connection with said Direct
Expenses  as  Tenant  may  reasonably  request.   Landlord  shall  provide  said
information  and the  Accountant's  Statement  to Tenant  within sixty (60) days
after Tenant's  written  request  therefor.  The  Accountant's  Statement  shall
contain  sufficient  detail  to  enable  Tenant  to  verify  that  the  terms of
exclusions and inclusions with respect to Direct Expenses,  as set forth in this
Lease,  have been  adhered to in  computing  the Excess  payable by Tenant.  If,
within  thirty  (30)  days  following   Tenant's   receipt  of  such  supporting
documentation, Tenant still disputes such Additional Rent, a determination as to
the proper amount shall be made, at Tenant's expense, by a nationally recognized
independent   certified  public  accountant  (the  "Accountant")   mutually  and
reasonably agreed to by Landlord and Tenant; provided that if such determination
by the  Accountant  confirms that Direct  Expenses were  overstated by more than
four  percent  (4%),  then  the  cost of the  Accountant  and  the  cost of such
determination  shall be paid for by Landlord.  Tenant hereby  acknowledges  that
Tenant's sole right to inspect  Landlord's  books and records and to contest the
amount  of  Direct  Expenses  payable  by  Tenant  shall be as set forth in this
Section  4.6,  and Tenant  hereby  waives any and all other  rights  pursuant to
Applicable Law to inspect such books and records and/or to contest the amount of
Direct Expenses payable by Tenant. Tenant's sole remedy shall be for the parties
to make  such  appropriate  payments  or  reimbursements,  as the  case  may be,
(including  interest on any such amount at an annual  interest rate equal to the
Prime Rate (as stated under the column "Money Rates" in The Wall Street Journal)
plus two percent (2%) (the "Interest Rate"; provided, however, in no event shall
such  Interest  Rate  exceed the  highest  annual  interest  rate  permitted  by
applicable  law) to each other as are determined to be owing,  provided that any
reimbursements  payable by Landlord to Tenant may, at Landlord's option, instead
be credited  against  the Base Rent next coming due under this Lease  unless the
Lease Term has expired,  in which event  Landlord  shall refund the  appropriate
amount to Tenant.

                                   ARTICLE 5

                                 USE OF PREMISES

     5.1 Permitted Use.  Tenant shall use the Premises  solely for the Permitted
Use set forth in Section 7 of the Summary and Tenant shall not use or permit the
Premises or the Project to be used for any other purpose or purposes  whatsoever
without  the  prior  written  consent  of  Landlord,  which may be  withheld  in
Landlord's sole discretion.

     5.2 Prohibited  Uses. The uses  prohibited  under this Lease shall include,
without limitation,  use of the Premises or a portion thereof for (i) offices of
any agency or bureau of the United States or any state or political  subdivision
thereof;  (ii)  offices or  agencies of any foreign  governmental  or  political
subdivision  thereof;  (iii) offices of any health care professionals or service
organization;  (iv) schools or other training facilities which are not ancillary
to  corporate,  executive or  professional  office use; (v) retail or restaurant
uses; or (vi)  communications  firms such as radio and/or  television  stations.
Tenant  further  covenants  and agrees that  Tenant  shall not use, or suffer or
permit any person or persons to use,  the  Premises or any part  thereof for any
use or purpose contrary to the provisions of the Rules and Regulations set forth
in Exhibit D, attached hereto,  or in violation of the laws of the United States
of  America,  the  State  of  California,  or  the  ordinances,  regulations  or
requirements  of the local  municipal or county  governing  body or other lawful
authorities having jurisdiction over the Project) including, without limitation,
any such laws,  ordinances,  regulations or  requirements  relating to hazardous
materials or  substances,  as those terms are defined by applicable  laws now or
hereafter in effect;  provided,  however,  Landlord shall not enforce, change or
modify the Rules and Regulations in a discriminatory  manner and Landlord agrees
that the Rules and Regulations shall not be unreasonably modified or enforced in
a manner which will unreasonably interfere with the normal and customary conduct
of Tenant's  business.  Tenant shall not do or permit  anything to be done in or
about the Premises which will in any way damage the reputation of the Project or
use or allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall comply with all recorded covenants,  conditions,  and
restrictions now or hereafter affecting the Project.

     5.3 CC&Rs. Tenant shall comply with all recorded covenants, conditions, and
restrictions currently affecting the Project. Additionally,  Tenant acknowledges
that the  Project  may be  subject  to any  future  covenants,  conditions,  and
restrictions  (the "CC&Rs")  which  Landlord,  in Landlord's  discretion,  deems
reasonably  necessary or  desirable,  and Tenant agrees that this Lease shall be
subject and subordinate to such CC&Rs provided,  however,  such future CC&R's do
not  materially and adversely  affect  Tenant's use or occupancy of the Premises
nor any of its rights hereunder. Landlord shall have the right to require Tenant
to execute and  acknowledge,  within  fifteen (15) business days of a request by
Landlord, a "Recognition of Covenants,  Conditions,  and Restriction," in a form
substantially  similar to that  attached  hereto as Exhibit F,  agreeing  to and
acknowledging  the CC&Rs,  provided such CC&Rs do not  materially  and adversely
affect  Tenant's  use  or  occupancy  of the  Premises  nor  any  of its  rights
hereunder.

                                   ARTICLE 6

                             SERVICES AND UTILITIES

     6.1 Standard Tenant  Services.  Subject to Section 6.1.1,  below,  Landlord
shall maintain and operate the Building in a first-class  manner consistent with
the  Comparable  Buildings,  and shall keep the Building  Structure and Building
Systems in condition and repair  consistent  with the Comparable  Buildings.  In
addition,  Landlord  shall  provide,  as part  of the  Building  Structure,  (i)
adequate  electrical wiring to subpanel facilities for the Building for Tenant's
connection  with a  minimum  capacity  of 2000  Amps  at  120/277  Volts,  three
(3)-phase,  four (4)  wire),  and (ii)  city  water  and  sewer  stubbed  to the
Premises.

     Notwithstanding the foregoing,  Tenant shall independently contract for and
pay for all utilities (including without limitation, electricity, gas, sewer and
water) attributable to its use of the entire Premises and shall also provide its
own  janitorial and security  services for the Building.  Such utility use shall
include electricity, water, and gas use for lighting, incidental use and "HVAC,"
as that  term is  defined  below.  All such  utility,  janitorial  and  security
payments shall be excluded from Operating Expenses and shall be paid directly by
Tenant  prior  to the date on which  the  same are due to the  utility  provider
janitorial  company  and/or  security  company,  as  applicable.  Landlord shall
separately meter the Premises,  and shall otherwise equitably determine Tenant's
use of such utilities.

     Landlord  shall not be  required to provide  any  services  other than with
regard  to its  maintenance  and  repair  obligation  relating  to the  Building
Structure and the common areas.

          6.1.1  Tenant  Contracted  Services.  To the  extent the same would be
reasonable vis-a-vis Tenant's in-house expertise,  Tenant may, from time-to-time
during the term and, upon receiving the prior written consent of Landlord (which
consent shall not be unreasonably withheld,  conditioned or delayed), enter into
a service contract ("Service Contract") with a service contractor or contractors
(or an employee of Tenant to the extent such  employee is  reasonably  qualified
and, if necessary,  licensed to perform such applicable  work) (each, a "Service
Contractor"),   selected  from  a  list  of  Landlord-approved  contractors  (or
otherwise  reasonably  approved by  Landlord),  for one or more of the  services
provided  by  Landlord   (individually,   a  "Service"  and  collectively,   the
"Services")  pursuant  to the  terms  of  this  Article  6.  If  Tenant  desires
Landlord's  consent to a Service  Contract,  Tenant  shall  notify  Landlord  in
writing, which notice (the "Service Contract Notice") shall include (A) the name
of the  selected  Service  Contractor,  (B) the  effective  date of the proposed
Service  Contract,  which date shall not be less than thirty (30) days after the
date of delivery of the Service  Contract Notice and which date shall be subject
to Landlord's reasonable ability to terminate any existing contract currently in
effect  for the  applicable  Service  or  Services,  (C) a copy of the  proposed
Service  Contract  and  scope  of  services,   (D)  such  Service   Contractor's
certificate  of insurance as required by Landlord,  and (E) an executed  Service
estoppel  certificate  from Tenant in the form attached  hereto as Exhibit H. In
the event Landlord has not responded to Tenant's  request for consent within ten
(10)  business  days  period,  Tenant  shall  deliver to  Landlord a second such
request.  In the  event  Landlord  fails to  respond  (either  affirmatively  or
negatively)  to Tenant's  second  such  request  for  consent  within  three (3)
business days after its receipt of such second request, Landlord shall be deemed
to have consented thereto.  The rights contained in this Section 6 shall only be
available  to the Original  Tenant and its  Permitted  Transferees  (and not any
other assignee,  sublessee or other transferee of the Original Tenant's interest
in this  Lease) if  Original  Tenant  and/or its  Permitted  Transferees  are in
possession of at least forty-five  thousand (45,000) Rentable Square Feet of the
Building.

          6.1.2  Landlord's  and Tenant's  Obligations.  Provided  that Landlord
consents  to a  Service  Contract,  upon  the  effective  date of  such  Service
Contract,  (i)  Landlord  shall have no  obligation  to provide  the  applicable
Service  to the  Premises  and,  notwithstanding  anything  in this Lease to the
contrary,  Landlord shall not be liable for any such  interruption or failure of
such applicable Service regardless of the cause of such interruption or failure,
and (ii) Tenant, at Tenant's sole cost and expense,  shall directly contract for
such  Service  to be  provided  to  the  Building  (A) in a  first-class  manner
consistent with such particular service being provided to Comparable  Buildings,
and (B) in accordance with any applicable manufacturer's recommended service and
maintenance plan. In such case, Landlord shall have the right, after twenty-four
(24) hours notice to Tenant, to inspect the Building and/or Tenant's maintenance
records, in order to ensure compliance  herewith.  In the event Tenant fails, in
the reasonable judgment of Landlord, to provide the contracted Service (or cause
the same to be provided) in accordance with the  obligations  under this Section
6, and which failure  continues at the end of ten (10)  business days  following
Tenant's receipt of written notice from Landlord stating with  particularity the
nature of the  failure  (which  notice  shall not be required in the event of an
emergency),  Landlord shall have the right to resume  providing such  contracted
Service and the cost thereof shall be included as an Operating  Expense.  Tenant
shall at all times maintain written records of maintenance and repairs and shall
provide  Landlord,  within  five (5)  business  days  following  the first (1st)
business day of each calendar quarter, a copy of all such maintenance and repair
records  and/or  reports.  In addition,  Tenant shall  deliver full and complete
copies of all  Service  Contracts  entered  into by Tenant for the  Building  to
Landlord  within  thirty  (30) days  after the  effective  date of such  Service
Contract.  Any such  cost or  expense  paid by  Tenant  pursuant  to a  Landlord
approved Service Contract shall not be included in Operating Expenses.

          6.1.3  Compliance with Law. Tenant  covenants that it will not provide
the Services or permit a Contractor  or any other person to provide the Services
in any manner or for any  purpose  (a) which would  constitute  a nuisance,  (b)
which would injure the reputation of the Project, (c) which would cause Landlord
to be in breach of, or default under,  any provision of this Lease, or (d) which
would in any way increase the existing rate of, or adversely affect, any fire or
other insurance of the Project or any of its contents or cause a cancellation of
any insurance  policy with respect to the Project.  At all times during the term
of this Lease,  Tenant and its Services  Contractors shall comply with and shall
cause all persons  providing  the Services to comply with all  applicable  laws,
rules,  regulations,  orders,  directives  and  ordinances  (including,  but not
limited  to,  federal  (including,  but not  limited  to,  Federal  OSHA  Hazard
Communication   Requirements),   state,  municipal  and  other  agencies  having
jurisdiction  thereof)  relating  to the  use,  operation  or  condition  of the
Project, together with the Project rules and regulations.

     6.2 Tenant  Maintained  Building  Systems;  HVAC. Tenant shall, at Tenant's
sole cost and expense, (i) maintain the Building's mechanical,  electrical, life
safety, plumbing,  fire-sprinkler systems (except to the extent Landlord retains
repair and  maintenance  responsibility  for the portion of such  fire-sprinkler
system contained in the Building Structure), (ii) subject to limitations imposed
by all  governmental  rules,  regulations  and  guidelines  applicable  thereto,
maintain (itself or through a service  provider) heating and air conditioning to
the  Premises  ("HVAC")  (items  identified  in (i) and (ii)  collectively,  the
"Building  Systems"),  and (iii) maintain the remaining portions of the Premises
which  are not part of the  "Building  Structure,"  as that term is set forth in
Article 7 of this Lease.  Notwithstanding  Tenant's Building System  obligations
set forth above,  (X) Landlord hereby  covenants that the Building Systems shall
be in good operating  condition and order as of the Lease Commencement Date, and
(Y) during the twelve (12) month  period  commencing  on the Lease  Commencement
Date and  ending  on the day  preceding  the  first  anniversary  of such  Lease
Commencement  Date (the "LLBS R&R Period"),  Landlord shall be  responsible  (at
Landlord's  sole cost and  expense,  which shall not be  included  in  Operating
Expenses) for any repairs or replacements,  as applicable,  which are reasonably
necessary with regard to the Building Systems; provided, however, Landlord shall
only be obligated  for such to the extent  Tenant  notifies  Landlord in writing
during  such LLBS R&R  Period  identifying,  with  reasonable  specificity,  the
applicable  Building System component  requiring such repair and/or  replacement
("Tenant's BS Notice"), with Tenant using its commercially reasonable efforts to
provide  such  Tenant's BS Notice as soon as  reasonably  practicable;  provided
further,  however,  that following Tenant's submission of it initial improvement
plans to  Landlord  for  Landlord's  review in  accordance  with the TCCs of the
Tenant Work Letter,  Landlord  shall  conduct a survey of the HVAC package units
and shall,  to the extent  such units (i) are  anticipated  to be used by Tenant
pursuant to such plans,  and (ii) have a reasonably  expected  remaining  useful
life of less than twenty-four (24) months,  Landlord shall replace the same with
new units of equal or greater capacity.

     6.3 Tenant Maintained  Security.  Tenant hereby  acknowledges that Landlord
shall have no obligation to provide guard service or other security measures for
the  benefit of the  Building  or any other  portion of the  Premises.  Any such
security  measures for the benefit of the Premises  shall be provided by Tenant,
at Tenant's sole cost and expense.  Tenant hereby assumes all responsibility for
the protection of Tenant and its agents,  employees,  contractors,  invitees and
guests, and the property thereof, from acts of third parties,  including keeping
doors locked and other means of entry to the Premises closed.

     6.4 Tenant Maintenance  Standards.  All Tenant maintained Building Systems,
including   HVAC,   shall  be  maintained  in   accordance   with   manufacturer
specifications by Tenant in a commercially  reasonable  condition.  In addition,
upon  request from  Landlord,  Tenant  shall  provide to Landlord  copies of any
service contracts and records of Tenant's maintenance of such Building Systems.

     6.5 Emergency Generator. Subject to Landlord's approval, which shall not be
unreasonably  withheld,  delayed  or  conditioned,  and  subject  to the  terms,
covenants and conditions of this Section 6.5 and Article 8 of this Lease, Tenant
may install,  for Tenant's  own use and at Tenant's  sole cost and expense,  but
without  the  payment  of any Rent or a license or  similar  fee or  charge,  an
emergency   generator  and  related   equipment  (all  such  equipment   defined
collectively  as the "Emergency  Generator")  in, on or adjacent to the Building
(such  location to be determined  in  conjunction  with Landlord and  Landlord's
reasonable requirements). The location, physical appearance, size and use of the
Emergency  Generator  shall be subject to Landlord's  reasonable  approval,  and
Landlord  may  require  Tenant  to  install   screening  around  such  Emergency
Generator,  at Tenant's  sole cost and  expense,  as  reasonably  designated  by
Landlord.  Tenant shall maintain such Emergency  Generator at Tenant's sole cost
and  expense.  In the event  Tenant  elects to exercise its right to install the
Emergency  Generator,  then Tenant shall give  Landlord no less than ninety (90)
days prior written notice thereof. Tenant shall reimburse to Landlord the actual
costs  reasonably  incurred by Landlord in approving such  Emergency  Generator.
Landlord  shall have the right to require  that  Tenant  remove  such  Emergency
Generator  upon the  expiration or earlier  termination of this Lease and repair
any damage to the  Building  caused by such  removal  and  return  the  affected
portion of the  Premises to a building  standard  tenant  improved  condition as
determined by Landlord.  Such Emergency Generator shall be installed pursuant to
plans and  specifications  approved  by  Landlord,  which  approval  will not be
unreasonably withheld. Such Emergency Generator shall, in all instances,  comply
with applicable governmental laws, codes, rules and regulations.

     6.6 Interruption of Use. Except as otherwise provided in this Lease, Tenant
agrees that  Landlord  shall not be liable for damages,  by abatement of Rent or
otherwise,  for failure to furnish or delay in furnishing any service (including
telephone and telecommunication  services), or for any diminution in the quality
or quantity thereof, when such failure or delay or diminution is occasioned,  in
whole or in part, by breakage, repairs,  replacements,  or improvements,  by any
strike, lockout or other labor trouble, by inability to secure electricity, gas,
water,  or other fuel at the Building or Project after  reasonable  effort to do
so, by any riot or other dangerous  condition,  emergency,  accident or casualty
whatsoever,  by act or default of Tenant or other parties, or by any other cause
beyond Landlord's  reasonable control; and such failures or delays or diminution
shall never be deemed to constitute an eviction or  disturbance  of Tenant's use
and  possession of the Premises or relieve Tenant from paying Rent or performing
any of its obligations  under this Lease,  except as otherwise  provided in this
Lease.  Furthermore,  Landlord shall not be liable under any circumstances for a
loss of, or injury to, property or for injury to, or interference with, Tenant's
business,  including,  without limitation,  loss of profits,  however occurring,
through or in  connection  with or incidental to a failure to furnish any of the
services or utilities as set forth in this Article 6.

                                    ARTICLE 7

                                     REPAIRS

     Landlord shall maintain in  first-class  condition and operating  order and
keep in good repair and  condition  the  structural  portions  of the  Building,
including the  foundation,  floor/ceiling  slabs,  roof structure (as opposed to
roof  membrane),  curtain wall,  exterior  glass and mullions,  columns,  beams,
shafts,   stairs,   parking  areas,   landscaping,   exterior  Project  signage,
stairwells,  men's and women's washrooms,  Building  mechanical,  electrical and
telephone  closets,  and all  exterior  common and public  areas  (collectively,
"Building Structure") and the Project common areas. In addition,  and as part of
Landlord's Building Structure repair and maintenance obligations, Landlord shall
maintain and/or replace,  as necessary,  slab plumbing  fixtures,  utility lines
outside the Building or below the foundation or slab, downspouts, gutters within
or below the  foundation,  exterior  walls,  interior  load bearing  walls,  the
foundation, slab, slab membrane and roof structure (as opposed to roof membrane)
at  Landlord's  sole cost and  expense,  which  costs  shall not be  included in
Operating  Expenses  except to the extent such costs are  expressly  included in
Operating  Expenses  pursuant  to Section  4.2.4(xii)  or (xiii) of this  Lease.
Notwithstanding anything in this Lease to the contrary, Tenant shall be required
to repair the Building Structure to the extent caused due to Tenant's use of the
Premises for other than normal and customary business office operations,  unless
and to the extent such damage is covered by insurance  carried or required to be
carried  by  Landlord  pursuant  to  Article  10  and to  which  the  waiver  of
subrogation is applicable (such obligation to the extent applicable to Tenant as
qualified and conditioned  will  hereinafter be defined as the "BS  Exception").
Tenant shall, at Tenant's own expense, keep the Premises, including all Building
Systems  (except to the extent  otherwise  expressly  provided  in Section  6.2,
above),  improvements,  fixtures and furnishings  therein,  and the floor (other
than the slab or slab  membrane)  of the  Building  on which  the  Premises  are
located,  in good order, repair and condition at all times during the Lease Term
(but such obligation shall not extend to the Building  Structure except pursuant
to the BS Exception).  In addition,  Tenant shall, at Tenant's own expense,  but
under the supervision and subject to the prior approval of Landlord,  and within
any  reasonable  period of time  specified by Landlord,  promptly and adequately
repair all damage to the Premises and replace or repair all damaged,  broken, or
worn fixtures and  appurtenances,  but such  obligation  shall not extend to the
Building Structure except pursuant to the BS Exception, except for damage caused
by ordinary wear and tear or beyond the reasonable  control of Tenant;  provided
however,  that, at Landlord's  option,  or if Tenant fails to make such repairs,
Landlord may, after written notice to Tenant and Tenant's  failure to repair (or
failure to commence to repair and  thereafter  diligently  prosecute the same to
completion) within ten(10) days thereafter,  but need not, make such repairs and
replacements,  and Tenant  shall pay  Landlord  the cost  thereof,  including  a
percentage  of the cost  thereof (to be uniformly  established  for the Building
and/or the Project)  sufficient to reimburse Landlord for all overhead,  general
conditions, fees and other costs or expenses arising from Landlord's involvement
with such  repairs  and  replacements  forthwith  upon  being  billed  for same.
Notwithstanding the foregoing,  Landlord shall be responsible for repairs to the
exterior walls,  foundation and roof of the Building, the structural portions of
the floors of the  Building,  and the systems  and  equipment  of the  Building,
except to the extent that such  repairs are required  due to the  negligence  or
willful misconduct of Tenant; provided, however, that if such repairs are due to
the negligence or willful misconduct of Tenant, Landlord shall nevertheless make
such repairs at Tenant's expense, or, if covered by Landlord's insurance, Tenant
shall only be obligated to pay any deductible in connection therewith.  Landlord
may, but shall not be required to, enter the Premises at all reasonable times to
make such repairs, alterations,  improvements or additions to the Premises or to
the Project or to any equipment  located in the Project as Landlord shall desire
or deem  necessary  or as  Landlord  may be required  to do by  governmental  or
quasi-governmental authority or court order or decree; provided, however, except
for (i)  emergencies,  (ii)  repairs,  alterations,  improvements  or  additions
required by  governmental  or  quasi-governmental  authorities or court order or
decree, or (iii) repairs which are the obligation of Tenant hereunder,  any such
entry into the Premises by Landlord  shall be performed in a manner so as not to
materially interfere with Tenant's use of, or access to, the Premises;  provided
that,  with  respect  to  items  (ii)  and  (iii)  above,   Landlord  shall  use
commercially  reasonable  efforts to not materially  interfere with Tenant's use
of, or access to, the  Premises.  Tenant  hereby waives any and all rights under
and benefits of  subsection 1 of Section 1932 and Sections  1941 and 1942 of the
California  Civil Code or under any similar law,  statute,  or ordinance  now or
hereafter in effect.

                                    ARTICLE 8

                            ADDITIONS AND ALTERATIONS

     8.1   Landlord's   Consent  to   Alterations.   Tenant  may  not  make  any
improvements,   alterations,  additions  or  changes  to  the  Premises  or  any
mechanical,  plumbing or HVAC  facilities or systems  pertaining to the Premises
(collectively,  the  "Alterations")  without  first  procuring the prior written
consent of Landlord to such  Alterations,  which  consent  shall be requested by
Tenant  not less than  fifteen  (15)  business  days  prior to the  commencement
thereof,  and which  consent  shall not be  unreasonably  withheld by  Landlord,
provided it shall be deemed  reasonable  for Landlord to withhold its consent to
any Alteration which adversely affects the structural portions or the systems or
equipment  of the  Building or is visible  from the  exterior  of the  Building.
Notwithstanding  the  foregoing,  Tenant shall be permitted to make  Alterations
following  ten (10)  business  days notice to Landlord,  but without  Landlord's
prior consent,  to the extent that such  Alterations do not adversely affect the
systems and equipment of the Building,  exterior appearance of the Building,  or
structural   aspects  of  the  Building  (the   "Cosmetic   Alterations").   The
construction  of the initial  improvements  to the Premises shall be governed by
the terms of the Tenant Work Letter and not the terms of this Article 8.

     8.2 Manner of  Construction.  Landlord  may impose,  as a condition  of its
consent  to any and all  Alterations  or repairs  of the  Premises  or about the
Premises,  such  requirements as Landlord in its reasonable  discretion may deem
desirable,  including,  but not limited to, the requirement  that Tenant utilize
for such  purposes only  contractors  reasonably  approved by Landlord,  and the
requirement that upon Landlord's request (unless Landlord waived, at the time of
Landlord's  approval of any  Alterations  pursuant to the  provisions of Section
8.5, below, its right to make such request),  Tenant shall, at Tenant's expense,
remove such  Alterations  upon the  expiration or any early  termination  of the
Lease  Term and  return  the  affected  portion  of the  Premises  to a building
standard  tenant  improved  condition as  determined  by Landlord.  Tenant shall
construct such  Alterations  and perform such repairs in a good and  workmanlike
manner,  in conformance with any and all applicable  federal,  state,  county or
municipal laws,  rules and regulations and pursuant to a valid building  permit,
issued by the City of San Diego, all in conformance with Landlord's construction
rules and regulations;  provided, however, that prior to commencing to construct
any  Alteration,  Tenant shall meet with Landlord to discuss  Landlord's  design
parameters  and  code  compliance  issues.  In the  event  Tenant  performs  any
Alterations  in the  Premises  which  require  or give  rise  to  governmentally
required  changes to the "Base  Building," as that term is defined  below,  then
Landlord shall, at Tenant's expense, make such changes to the Base Building. The
"Base Building" shall include the structural  portions of the Building,  and the
public  restrooms,  exit stairwells and the systems and equipment located in the
internal core of the Building.  In performing the work of any such  Alterations,
Tenant  shall have the work  performed  in such  manner so as not to obstruct or
otherwise interfere with Landlord's ability to perform its obligations under the
terms and  conditions of this Lease.  Tenant shall not use (and upon notice from
Landlord shall cease using) contractors,  services, workmen, labor, materials or
equipment that, in Landlord's  reasonable judgment,  would disturb labor harmony
with the workforce or trades engaged in performing other work, labor or services
in or  about  the  Building  or  the  common  areas.  In  addition  to  Tenant's
obligations  under Article 9 of this Lease,  upon completion of any Alterations,
Tenant  agrees to cause a Notice of  Completion  to be recorded in the office of
the Recorder of the County of San Diego in  accordance  with Section 3093 of the
Civil Code of the State of California or any successor statute, and Tenant shall
deliver  to the  Project  construction  manager a  reproducible  copy of the "as
built" drawings of the  Alterations,  to the extent  applicable,  as well as all
permits,  approvals and other  documents  issued by any  governmental  agency in
connection with the Alterations.

     8.3 Payment for  Improvements.  If payment is made directly to contractors,
Tenant shall (i) comply with Landlord's requirements for final lien releases and
waivers in connection with Tenant's  payment for work to  contractors,  and (ii)
sign Landlord's  standard  contractor's rules and regulations.  If Tenant orders
any work directly from Landlord, Tenant shall pay to Landlord an amount equal to
two and  one-half  percent  (2  1/2%)  of the  cost of such  work to  compensate
Landlord for all overhead, general conditions, fees and other costs and expenses
arising from Landlord's involvement with such work. If Tenant does not order any
work directly from  Landlord,  Tenant shall  reimburse  Landlord for  Landlord's
reasonable,  actual,  out-of-pocket  costs and  expenses  actually  incurred  in
connection with Landlord's review of such work.

     8.4 Construction  Insurance.  In addition to the requirements of Article 10
of this Lease,  in the event that  Tenant  makes any  Alterations,  prior to the
commencement of such  Alterations,  Tenant shall provide  Landlord with evidence
that Tenant  carries  "Builder's  All Risk"  insurance  in an amount  reasonably
approved by Landlord  covering the  construction of such  Alterations,  and such
other  insurance as Landlord may  reasonably  require,  it being  understood and
agreed  that all of such  Alterations  shall be  insured by Tenant  pursuant  to
Article 10 of this Lease  immediately  upon  completion  thereof.  In  addition,
Landlord may, in its reasonable discretion,  require Tenant to obtain a lien and
completion  bond or some alternate form of security  satisfactory to Landlord in
an amount sufficient to ensure the lien-free  completion of such Alterations and
naming Landlord as a co-obligee.

     8.5 Landlord's Property. All Alterations, improvements, fixtures, equipment
and/or  appurtenances which may be installed or placed in or about the Premises,
from time to time,  shall be at the sole cost of Tenant  and shall be and become
the  property  of  Landlord,  except  that  Tenant may  remove any  Alterations,
improvements,  fixtures  and/or  equipment  which  Tenant  can  substantiate  to
Landlord  have not been paid for with any  Tenant  improvement  allowance  funds
provided  to Tenant by  Landlord,  provided  Tenant  repairs  any  damage to the
Premises and Building caused by such removal and returns the affected portion of
the Premises to a building  standard tenant improved  condition as determined by
Landlord;  provided,  however, if, in connection with its request for Landlord's
approval for particular  Alterations,  (1) Tenant requests  Landlord's  decision
with  regard to the removal of such  Alterations,  and (2)  Landlord  thereafter
agrees  in  writing  to  waive  the  removal  requirement  when  approving  such
Alterations,  then Tenant  shall not be required to so remove such  Alterations;
provided  further,  however,  that if Tenant requests such a determination  from
Landlord and Landlord, in its approval of any Alterations,  fails to address the
removal requirement with regard to such Alterations, Landlord shall be deemed to
have agreed to waive the removal requirement with regard to such Alterations. If
Tenant fails to complete such removal  and/or to repair any damage caused by the
removal of any  Alterations  or  improvements  in the Premises,  and returns the
affected  portion  of  the  Premises  to a  building  standard  tenant  improved
condition as  determined  by Landlord,  then at  Landlord's  option,  either (A)
Tenant  shall be  deemed  to be  holding  over in the  Premises  and Rent  shall
continue to accrue in accordance with the terms of Article 16, below, until such
work  shall be  completed,  or (B)  Landlord  may do so and may  charge the cost
thereof  to Tenant.  Tenant  hereby  protects,  defends,  indemnifies  and holds
Landlord harmless from any liability, cost, obligation, expense or claim of lien
in any manner relating to the installation,  placement,  removal or financing of
any such  Alterations,  improvements,  fixtures and/or equipment in, on or about
the  Premises,  which  obligations  of Tenant shall  survive the  expiration  or
earlier termination of this Lease.

                                   ARTICLE 9

                             COVENANT AGAINST LIENS

     Tenant  shall  keep  the  Project  and  Premises  free  from  any  liens or
encumbrances  arising  out  of  the  work  performed,   materials  furnished  or
obligations  incurred  by or on behalf of  Tenant,  and shall  protect,  defend,
indemnify and hold Landlord  harmless from and against any claims,  liabilities,
judgments or costs (including,  without limitation,  reasonable  attorneys' fees
and costs)  arising out of same or in  connection  therewith.  Tenant shall give
Landlord notice at least fifteen (15) days prior to the commencement of any such
work  on the  Premises  (or  such  additional  time  as may be  necessary  under
applicable  laws) to afford  Landlord the  opportunity  of posting and recording
appropriate notices of non-responsibility.  Tenant shall remove any such lien or
encumbrance by bond or otherwise  within ten (10) days after notice by Landlord,
and if Tenant  shall fail to do so,  Landlord  may pay the amount  necessary  to
remove such lien or encumbrance, without being responsible for investigating the
validity thereof.  The amount so paid shall be deemed Additional Rent under this
Lease payable upon demand,  without limitation as to other remedies available to
Landlord  under this Lease.  Nothing  contained  in this Lease  shall  authorize
Tenant to do any act which shall  subject  Landlord's  title to the  Building or
Premises to any liens or  encumbrances  whether  claimed by  operation of law or
express  or  implied  contract.  Any  claim  to a lien or  encumbrance  upon the
Building or Premises  arising in connection with any such work or respecting the
Premises not performed by or at the request of Landlord  shall be null and void,
or at  Landlord's  option  shall attach only  against  Tenant's  interest in the
Premises and shall in all respects be  subordinate  to  Landlord's  title to the
Project, Building and Premises.

                                   ARTICLE 10

                                    INSURANCE

     10.1  Indemnification and Waiver.  Tenant hereby assumes all risk of damage
to property or injury to persons in, upon or about the  Premises  from any cause
whatsoever  and  agrees  that  Landlord,  its  partners,  subpartners  and their
respective officers,  agents,  servants,  employees, and independent contractors
(collectively,  "Landlord  Parties")  shall not be liable  for,  and are  hereby
released from any responsibility for, any damage either to person or property or
resulting  from the loss of use thereof,  which damage is sustained by Tenant or
by other  persons  claiming  through  Tenant.  Tenant shall  indemnify,  defend,
protect,  and hold  harmless the Landlord  Parties from any and all loss,  cost,
damage,  expense and liability  (including  without  limitation  court costs and
reasonable  attorneys'  fees)  incurred in  connection  with or arising from any
cause in, on or about the Premises,  any acts, omissions or negligence of Tenant
or of any person  claiming by, through or under Tenant,  or of the  contractors,
agents, servants, employees, invitees, guests or licensees of Tenant or any such
person,  in, on or about the  Project or any  breach of the TCCs of this  Lease,
either prior to,  during,  or after the  expiration of the Lease Term,  provided
that the terms of the foregoing  indemnity  shall not apply to the negligence or
willful  misconduct of Landlord.  Should Landlord be named as a defendant in any
suit  brought  against  Tenant in  connection  with or arising  out of  Tenant's
occupancy of the  Premises,  Tenant shall pay to Landlord its costs and expenses
incurred in such suit,  including without  limitation,  its actual  professional
fees such as  appraisers',  accountants'  and attorneys'  fees.  Landlord hereby
indemnifies and holds Tenant,  its partners,  subpartners  and their  respective
officers,    agents,   servants,    employees,   and   independent   contractors
(collectively,  "Tenant Parties")  harmless from any and all loss, cost, damage,
expense and liability  (including  without limitation court costs and reasonable
attorneys'  fees)  (collectively,  a "Claim")  incurred  in  connection  with or
arising from the gross negligence or willful  misconduct of Landlord or Landlord
Parties on or within the Premises; provided, however, Landlord's indemnification
of Tenant  shall only  extend to the extent (i) such Claim is not covered by the
Tenant's  insurance  (or  which  would  not have  been  covered  if  Tenant  had
maintained the insurance required  hereunder),  (ii) of any insurance deductible
Tenant is required to pay in connection with a Claim that is covered by Tenant's
insurance  (or the  deductible  Tenant would have been required to pay if Tenant
had maintained the insurance  required  hereunder),  or (iii) of any increase in
the premiums  for Tenant  maintained  insurance  policies to the extent (A) such
policies  are  required  to be  maintained  by  Tenant  hereunder,  and (B) such
increase  results  from  such  Claim.  Pursuant  to this  Section  10,  Tenant's
agreement to indemnify and hold Landlord harmless,  and Landlord's  agreement to
indemnify and hold Tenant harmless are not intended to and shall not relieve any
insurance  carrier of its obligations  under policies  required to be carried by
Landlord  or Tenant,  respectively,  pursuant  to this Lease to the extent  such
policies cover the results of such acts,  omissions or willful  misconduct.  The
provisions  of  this  Section  10.1  shall  survive  the  expiration  or  sooner
termination  of this Lease with  respect to any claims or  liability  arising in
connection  with any event  occurring  prior to such  expiration or termination.
Notwithstanding  anything to the contrary  contained  in this Lease,  nothing in
this Lease shall impose any  obligations on Tenant or Landlord to be responsible
or liable  for,  and each  hereby  releases  the other from all  liability  for,
consequential  damages  other  than  those  consequential  damages  incurred  by
Landlord  in  connection  with a holdover of the  Premises  by Tenant  after the
expiration  or earlier  termination  of this Lease or  incurred  by  Landlord in
connection with any repair,  physical construction or improvement work performed
by or on behalf of Tenant in the Project,  but Tenant  shall not be  responsible
for  any  direct  or   consequential   damages   resulting  from  Landlord's  or
contractor's  acts in connection  with the  completion by Landlord of the tenant
improvements in the Premises pursuant to the Tenant Work Letter.

     10.2  Landlord's  Fire,  Casualty and Liability  Insurance.  Landlord shall
carry commercial general liability insurance with respect to the Building during
the Lease Term,  and shall  further  insure the  Building  during the Lease Term
against  loss or damage  due to fire and other  casualties  covered  within  the
classification of fire and extended  coverage,  vandalism coverage and malicious
mischief,  sprinkler leakage,  water damage and special extended coverage.  Such
coverage shall be in such amounts, from such companies,  and on such other terms
and  conditions,  as  Landlord  may  from  time  to time  reasonably  determine.
Additionally, at the option of Landlord, such insurance coverage may include the
risks of earthquakes  and/or flood damage and additional  hazards, a rental loss
endorsement  and one or more loss payee  endorsements in favor of the holders of
any  mortgages  or deeds of trust  encumbering  the  interest of Landlord in the
Building or the ground or  underlying  lessors of the  Building,  or any portion
thereof.  Notwithstanding  the foregoing  provisions  of this Section 10.2,  the
coverage and amounts of  insurance  carried by Landlord in  connection  with the
Building  shall,  at a minimum,  be  comparable  to the  coverage and amounts of
insurance  which are  carried by  reasonably  prudent  landlords  of  Comparable
Buildings,  and  Worker's  Compensation  and  Employer's  Liability  coverage as
required by applicable law. Tenant shall, at Tenant's  expense,  comply with all
insurance  company  requirements  pertaining  to the  use of  the  Premises.  If
Tenant's  conduct or use of the Premises  causes any increase in the premium for
such  insurance  policies  then Tenant  shall  reimburse  Landlord  for any such
increase.  Tenant,  at Tenant's  expense,  shall comply with all rules,  orders,
regulations or requirements of the American Insurance  Association (formerly the
National Board of Fire Underwriters) and with any similar body.

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

          10.3.1  Commercial  General Liability  Insurance  covering the insured
against claims of bodily injury,  personal injury and property damage (including
loss  of use  thereof)  arising  out of  Tenant's  operations,  and  contractual
liabilities  (covering the  performance  by Tenant of its indemnity  agreements)
including a Broad Form  endorsement  covering  the insuring  provisions  of this
Lease and the  performance  by Tenant of the indemnity  agreements  set forth in
Section 10.1 of this Lease, for limits of liability not less than:

<TABLE>
<CAPTION>
<S>          <C>                            <C>

             Bodily Injury and              $5,000,000 each occurrence
             Property Damage Liability      $5,000,000 annual aggregate
             Personal Injury Liability      $5,000,000 each occurrence
                                            $5,000,000 annual aggregate
                                            0% Insured's participation
</TABLE>

          10.3.2 Physical Damage  Insurance  covering (i) all office  furniture,
business and trade  fixtures,  office  equipment,  free-standing  cabinet  work,
movable partitions,  merchandise and all other items of Tenant's property on the
Premises  installed  by,  for,  or at the  expense of Tenant,  (ii) the  "Tenant
Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter,
and  any  other  improvements  which  exist  in the  Premises  as of  the  Lease
Commencement  Date (excluding the Base Building) (the "Original  Improvements"),
and (iii) all other  improvements,  alterations  and  additions to the Premises.
Such  insurance  shall be written on an "all risks" of  physical  loss or damage
basis,  for the full  replacement  cost value (subject to reasonable  deductible
amounts; provided,  however,  deductibles of $50,000 shall be deemed reasonable)
new without  deduction for depreciation of the covered items and in amounts that
meet any  co-insurance  clauses of the policies of insurance  and shall  include
coverage for damage or other loss caused by fire or other peril  including,  but
not limited to,  vandalism and malicious  mischief,  theft,  water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, and explosion.

          10.3.3 Worker's Compensation and Employer's Liability or other similar
insurance pursuant to all applicable state and local statutes and regulations.

     10.4 Form of Policies. The minimum limits of policies of insurance required
of Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease.  Such  insurance  shall (i) name  Landlord,  and any other party the
Landlord so specifies that has a material financial interest in the Project,  as
an  additional  insured,  including  Landlord's  managing  agent,  if any;  (ii)
specifically cover the liability assumed by Tenant under this Lease,  including,
but not limited to, Tenant's obligations under Section 10.1 of this Lease; (iii)
be issued by an insurance company having a rating of not less than A-X in Best's
Insurance Guide or which is otherwise  acceptable to Landlord and licensed to do
business in the State of California;  (iv) be primary insurance as to all claims
thereunder  and provide that any insurance  carried by Landlord is excess and is
non-contributing  with any insurance  requirement of Tenant;  (v) be in form and
content reasonably acceptable to Landlord;  and (vi) provide that said insurance
shall not be canceled or coverage changed unless thirty (30) days' prior written
notice  shall have been given to Landlord and any  mortgagee  of  Landlord,  the
identity of whom has been  provided to Tenant in writing.  Tenant shall  deliver
said  policy or policies  or  certificates  thereof to Landlord on or before the
Lease  Commencement  Date and at least  thirty (30) days  before the  expiration
dates thereof.  In the event Tenant shall fail to procure such insurance,  or to
deliver such policies or certificate, Landlord may, at its option, after written
notice to Tenant and Tenant's  failure to obtain such insurance  within five (5)
days thereafter,  procure such policies for the account of Tenant,  and the cost
thereof  shall be paid to Landlord  within  thirty  (30) days after  delivery to
Tenant of bills therefor.

     10.5 Subrogation. Landlord and Tenant intend that their respective property
loss risks shall be borne by reasonable  insurance  carriers to the extent above
provided,  and  Landlord  and Tenant  hereby  agree to look  solely to, and seek
recovery  only  from,  their  respective  insurance  carriers  in the event of a
property  loss to the  extent  that  such  coverage  is  agreed  to be  provided
hereunder.  The parties  each hereby  waive all rights and claims  against  each
other for such losses,  and waive all rights of subrogation of their  respective
insurers,  provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective insurance
policies  are now,  or shall be,  endorsed  such that the waiver of  subrogation
shall not affect the right of the insured to recover  thereunder,  so long as no
material additional premium is charged therefor.

     10.6 Additional Insurance Obligations.  Upon the fifth (5th) anniversary of
the Lease  Commencement  Date and the  commencement  of any Option Term,  Tenant
shall carry and maintain (throughout the then-remaining Lease Term), at Tenant's
sole cost and expense, increased amounts of the insurance required to be carried
by  Tenant  pursuant  to this  Article  10 and such  other  reasonable  types of
insurance  coverage  and in such  reasonable  amounts  covering the Premises and
Tenant's operations therein, as may be reasonably requested by Landlord,  but in
no event in excess of the amounts and types of insurance  then being required by
landlords of other Comparable Buildings.

                                   ARTICLE 11

                             DAMAGE AND DESTRUCTION

     11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify
Landlord  of any  damage  to the  Premises  resulting  from  fire  or any  other
casualty.  If the Premises shall be damaged by fire or other casualty,  Landlord
shall  promptly  and  diligently,  subject to  reasonable  delays for  insurance
adjustment or other matters beyond Landlord's reasonable control, and subject to
all other terms of this Article 11,  restore the  Premises;  provided,  however,
Tenant hereby  acknowledges  that in no event shall Landlord have any obligation
to restore any office furniture,  business and trade fixtures, office equipment,
free-standing  cabinet work, movable partitions,  merchandise or any other items
of Tenant's  property on the  Premises  installed  by, for, or at the expense of
Tenant.  Such restoration  shall be to  substantially  the same condition of the
Base  Building  and  the  common  areas  prior  to  the  casualty,   except  for
modifications  required  by zoning and  building  codes and other laws or by the
holder of a mortgage on the Building or Project or any other modifications which
are  consistent  with the character of the Project,  provided that access to the
Premises shall not be materially impaired.  Upon the occurrence of any damage to
the  Premises,  upon  notice  (the  "Landlord  Repair  Notice")  to Tenant  from
Landlord,  Tenant  shall  assign  to  Landlord  (or to any party  designated  by
Landlord)  all insurance  proceeds  payable to Tenant under  Tenant's  insurance
required under Section 10.3 of this Lease,  and Landlord shall repair any injury
or damage to the Tenant Improvements and the Original Improvements  installed in
the Premises and shall return such Tenant Improvements and Original Improvements
to  their  original  condition;  provided  that if the  cost of such  repair  by
Landlord  exceeds the amount of  insurance  proceeds  received by Landlord  from
Tenant's  insurance  carrier,  as assigned by Tenant,  the cost of such  repairs
shall be paid by Tenant to Landlord prior to Landlord's  commencement  of repair
of the damage.  In the event that Landlord does not deliver the Landlord  Repair
Notice within sixty (60) days  following the date the casualty  becomes known to
Landlord,  Tenant  shall,  at its sole cost and  expense,  repair  any injury or
damage to the Tenant Improvements and the Original Improvements installed in the
Premises and shall return such Tenant Improvements and Original  Improvements to
their original  condition.  Whether or not Landlord  delivers a Landlord  Repair
Notice,  prior to the  commencement  of  construction,  Tenant  shall  submit to
Landlord,  for Landlord's  review and approval,  all plans,  specifications  and
working drawings relating thereto,  and Landlord shall select the contractors to
perform  such   improvement   work.   Landlord  shall  not  be  liable  for  any
inconvenience  or  annoyance  to Tenant or its  visitors,  or injury to Tenant's
business  resulting in any way from such damage or the repair thereof;  provided
however,  that if such fire or other  casualty  shall have damaged the Building,
and the Building is not occupied by Tenant as a result thereof,  then during the
time and to the extent the  Building is unfit for  occupancy,  the Rent shall be
abated in proportion to the ratio that the amount of rentable square feet of the
Building  which is unfit for  occupancy  for the purposes  permitted  under this
Lease bears to the total rentable square feet of the Building. In the event that
Landlord shall not deliver the Landlord  Repair  Notice,  Tenant's right to rent
abatement  pursuant to the  preceding  sentence  shall  terminate as of the date
which is  reasonably  determined  by Landlord to be the date Tenant  should have
completed  repairs to the Premises assuming Tenant used reasonable due diligence
in connection therewith.

     11.2 Landlord's Option to Repair. Notwithstanding the terms of Section 11.1
of this Lease,  Landlord may elect not to rebuild  and/or  restore the Premises,
Building and/or Project,  and instead  terminate this Lease, by notifying Tenant
in  writing  of such  termination  within  sixty  (60)  days  after  the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the  Premises,  but  Landlord may so elect only if the
Building or Project shall be damaged by fire or other casualty or cause, whether
or not the Premises are affected, and one or more of the following conditions is
present:  (i) in Landlord's  reasonable  judgment,  repairs cannot reasonably be
completed  within one hundred  eighty  (180) days after the date of discovery of
the damage  (when such repairs are made without the payment of overtime or other
premiums);  (ii) the holder of any mortgage on the Building or Project or ground
lessor with respect to the Building or Project  shall require that the insurance
proceeds or any portion  thereof be used to retire the mortgage  debt,  or shall
terminate the ground lease,  as the case may be; (iii) except with regard to any
applicable  deductible  amount,  the damage is not fully  covered by  Landlord's
insurance policies; or (iv) the damage occurs during the last twelve (12) months
of the Lease Term (unless  Tenant has an unexpired  option to extend the term of
this Lease and Tenant irrevocably exercises such option pursuant to the terms of
Section  2.2.3 of this  Lease,  but in no  event  later  than  sixty  (60)  days
following the date such damage occurs; provided,  however, that if Landlord does
not elect to terminate  this Lease pursuant to Landlord's  termination  right as
provided above, and the repairs cannot,  in the reasonable  opinion of Landlord,
be completed within one hundred eighty (180) days after being commenced,  Tenant
may elect,  no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such  damage,  to  terminate  this
Lease by written  notice to Landlord  effective as of the date  specified in the
notice,  which date shall not be less than  thirty (30) days nor more than sixty
(60) days after the date such notice is given by Tenant. Furthermore, if neither
Landlord nor Tenant has terminated this Lease,  and the repairs are not actually
completed  within such 180-day period,  Tenant shall have the right to terminate
this Lease during the first ten (10) days of each calendar  month  following the
end of such period  until such time as the repairs  are  complete,  by notice to
Landlord (the "Damage Termination Notice"),  effective as of a date set forth in
the Damage  Termination  Notice (the "Damage  Termination  Date"),  which Damage
Termination Date shall not be less than fifteen (15) business days following the
end of each such month.  Notwithstanding  the  foregoing,  if Tenant  delivers a
Damage  Termination  Notice to Landlord,  then Landlord  shall have the right to
suspend the occurrence of the Damage Termination Date for a period ending thirty
(30) days after the Damage  Termination Date set forth in the Damage Termination
Notice by  delivering  to Tenant,  within five (5) business  days of  Landlord's
receipt of the Damage Termination Notice, a certificate of Landlord's contractor
responsible for the repair of the damage certifying that it is such contractor's
good faith  judgment that the repairs shall be  substantially  completed  within
thirty  (30)  days  after the  Damage  Termination  Date.  If  repairs  shall be
substantially  completed prior to the expiration of such thirty-day period, then
the Damage Termination Notice shall be of no force or effect, but if the repairs
shall not be substantially  completed within such thirty-day  period,  then this
Lease shall  terminate upon the  expiration of such  thirty-day  period.  At any
time, from time to time, after the date occurring sixty (60) days after the date
of the damage,  Tenant may request that  Landlord  inform  Tenant of  Landlord's
reasonable  opinion of the date of completion of the repairs and Landlord  shall
respond to such  request  within five (5)  business  days.  Notwithstanding  the
provisions of this Section 11.2,  Tenant shall have the right to terminate  this
Lease  under  this  Section  11.2 only if each of the  following  conditions  is
satisfied:  (a) the  damage to the  Project  by fire or other  casualty  was not
caused by the gross  negligence or intentional  act of Tenant or its partners or
subpartners and their respective  officers,  agents,  servants,  employees,  and
independent contractors; (b) Tenant is not then in default under this Lease; (c)
as a result of the damage,  Tenant cannot  reasonably  conduct business from the
entire Premises.

     11.3  Waiver  of  Statutory  Provisions.  The  provisions  of  this  Lease,
including this Article 11,  constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises,  the Building or the Project,  and any statute or regulation of
the State of California,  including,  without  limitation,  Sections 1932(2) and
1933(4) of the California  Civil Code, with respect to any rights or obligations
concerning  damage or destruction in the absence of an express agreement between
the parties,  and any other statute or  regulation,  now or hereafter in effect,
shall have no  application  to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

                                   ARTICLE 12

                                    NONWAIVER

     No  provision  of this Lease shall be deemed  waived by either party hereto
unless expressly waived in a writing signed thereby.  The waiver by either party
hereto of any breach of any term,  covenant or condition  herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or  condition  herein  contained.  The  subsequent  acceptance  of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term,  covenant  or  condition  of this  Lease,  other than the
failure  of  Tenant  to pay the  particular  Rent  so  accepted,  regardless  of
Landlord's  knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein  stipulated shall be
deemed a waiver of  Landlord's  right to receive the full amount due,  nor shall
any endorsement or statement on any check or payment or any letter  accompanying
such check or payment be deemed an accord and  satisfaction,  and  Landlord  may
accept such check or payment  without  prejudice to Landlord's  right to recover
the full  amount due.  No receipt of monies by  Landlord  from Tenant  after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's  right of  possession  hereunder,  or after the giving of any notice
shall  reinstate,  continue or extend the Lease Term or affect any notice  given
Tenant  prior to the  receipt of such  monies,  it being  agreed  that after the
service of notice or the  commencement  of a suit,  or after final  judgment for
possession of the  Premises,  Landlord may receive and collect any Rent due, and
the  payment  of said  Rent  shall  not waive or  affect  said  notice,  suit or
judgment.

                                   ARTICLE 13

                                  CONDEMNATION

     If the whole or any part of the Premises shall be taken by power of eminent
domain or condemned by any competent  authority  for any public or  quasi-public
use or  purpose,  or if any  adjacent  property  or street  shall be so taken or
condemned,  or  reconfigured  or vacated by such  authority in such manner as to
require the use, reconstruction or remodeling of any part of the Premises, or if
Landlord  shall  grant a deed or  other  instrument  in lieu of such  taking  by
eminent domain or condemnation, Landlord shall have the option to terminate this
Lease  effective as of the date  possession is required to be surrendered to the
authority. If more than twenty-five percent (25%) of the rentable square feet of
the Building is taken, or if access to the Building is  substantially  impaired,
in each case for a period in excess of one hundred  eighty  (180)  days,  Tenant
shall  have  the  option  to  terminate  this  Lease  effective  as of the  date
possession  is required to be  surrendered  to the  authority.  Tenant shall not
because of such taking  assert any claim  against  Landlord or the authority for
any  compensation  because of such taking and Landlord  shall be entitled to the
entire award or payment in connection  therewith,  except that Tenant shall have
the right to file any  separate  claim  available  to Tenant  for any  taking of
Tenant's  personal  property and fixtures  belonging to Tenant and  removable by
Tenant upon  expiration  of the Lease Term  pursuant to the terms of this Lease,
and for  moving  expenses,  so long as such  claims  do not  diminish  the award
available to Landlord, its ground lessor with respect to the Building or Project
or its mortgagee, and such claim is payable separately to Tenant. All Rent shall
be apportioned as of the date of such  termination.  If any part of the Premises
shall be taken,  and this Lease  shall not be so  terminated,  the Rent shall be
proportionately  abated.  Tenant  hereby  waives  any and all  rights  it  might
otherwise  have  pursuant to Section  1265.130 of The  California  Code of Civil
Procedure.  Notwithstanding  anything to the contrary  contained in this Article
13, in the event of a temporary taking of all or any portion of the Premises for
a period of one hundred and eighty (180) days or less, then this Lease shall not
terminate  but the Base Rent and the  Additional  Rent  shall be abated  for the
period of such  taking in  proportion  to the ratio that the amount of  rentable
square feet of the Premises taken bears to the total rentable square feet of the
Premises.  Landlord  shall be  entitled  to  receive  the  entire  award made in
connection with any such temporary taking.

                                   ARTICLE 14

                            ASSIGNMENT AND SUBLETTING

     14.1  Transfers.  Tenant shall not,  without the prior  written  consent of
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer,  this Lease or any interest hereunder,  permit
any  assignment,  or other  transfer of this Lease or any interest  hereunder by
operation  of law,  sublet the Premises or any part  thereof,  or enter into any
license or concession agreements or otherwise permit the occupancy or use of the
Premises or any part thereof by any persons  other than Tenant and its employees
and  contractors  (all of the foregoing are  hereinafter  sometimes  referred to
collectively  as  "Transfers"  and any  person to whom any  Transfer  is made or
sought to be made is hereinafter  sometimes  referred to as a "Transferee").  If
Tenant desires Landlord's consent to any Transfer,  Tenant shall notify Landlord
in writing,  which notice (the "Transfer Notice") shall include (i) the proposed
effective  date of the  Transfer,  which shall not be less than thirty (30) days
nor more than one  hundred  eighty  (180) days after the date of delivery of the
Transfer  Notice,  (ii) a  description  of the  portion  of the  Premises  to be
transferred  (the  "Subject  Space"),  (iii)  all of the  terms of the  proposed
Transfer and the consideration therefor,  including calculation of the "Transfer
Premium", as that term is defined in Section 14.3 below, in connection with such
Transfer,  the name and address of the  proposed  Transferee,  and a copy of all
existing  executed  and/or  proposed  documentation  pertaining  to the proposed
Transfer,  including all existing operative documents to be executed to evidence
such Transfer or the  agreements  incidental or related to such  Transfer,  (iv)
current financial statements of the proposed Transferee certified by an officer,
partner or owner thereof, business credit and personal references and history of
the  proposed  Transferee  and any  other  information  reasonably  required  by
Landlord which will enable  Landlord to determine the financial  responsibility,
character,   and  reputation  of  the  proposed   Transferee,   nature  of  such
Transferee's  business and proposed use of the Subject Space and (v) an executed
estoppel  certificate  from Tenant in the form attached hereto as Exhibit E. Any
Transfer made without  Landlord's  prior written  consent  shall,  at Landlord's
option,  be null,  void and of no  effect,  and  shall,  at  Landlord's  option,
constitute  a default  by Tenant  under  this  Lease.  Whether  or not  Landlord
consents  to any  proposed  Transfer,  Tenant  shall pay  Landlord's  review and
processing fees, as well as any reasonable professional fees (including, without
limitation, attorneys',  accountants',  architects', engineers' and consultants'
fees)  incurred by Landlord,  within thirty (30) days after  written  request by
Landlord;  provided  that such costs and expenses  shall not exceed One Thousand
Five  Hundred and No/100  Dollars  ($1,500.00)  for a Transfer  in the  ordinary
course of business.  Landlord and Tenant  hereby agree that a proposed  Transfer
shall not be  considered  "in the ordinary  course of business" if such Transfer
involves the review of documentation by Landlord on more than two (2) occasions.

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

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

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

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

          14.2.4 The  Transferee  is not a party of reasonable  financial  worth
and/or financial stability in light of the  responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;

          14.2.5 The terms of the proposed Transfer will allow the Transferee to
exercise a right of renewal, right of expansion,  right of first offer, or other
similar right held by Tenant; or

          14.2.6 The  Transferee  does not intend to occupy the entire  Premises
and conduct its business therefrom for a substantial  portion of the term of the
Transfer.

     If Landlord  consents to any Transfer pursuant to the terms of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease),  Tenant may within six (6) months after Landlord's consent,
but not later than the  expiration  of said  six-month  period,  enter into such
Transfer of the Premises or portion thereof,  upon  substantially the same terms
and  conditions as are set forth in the Transfer  Notice  furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease,  provided that if there are any
changes in the terms and conditions  from those specified in the Transfer Notice
(i) such that Landlord would  initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer  to be more  favorable  to the  Transferee  than the terms set forth in
Tenant's  original  Transfer  Notice,  Tenant shall again submit the Transfer to
Landlord for its  approval  and other  action  under this Article 14  (including
Landlord's  right of  recapture,  if any,  under  Section  14.4 of this  Lease).
Notwithstanding  anything  to the  contrary  in this  Lease,  if  Tenant  or any
proposed  Transferee  claims that Landlord has unreasonably  withheld or delayed
its consent under  Section 14.2 or otherwise has breached or acted  unreasonably
under this Article 14, their sole remedies  shall be a declaratory  judgment and
an injunction  for the relief sought  without any monetary  damages,  and Tenant
hereby waives all other remedies,  including,  without limitation,  any right at
law or equity to  terminate  this  Lease,  on its own behalf  and, to the extent
permitted  under all  applicable  laws,  on behalf of the  proposed  Transferee.
Tenant  shall  indemnify,  defend and hold  harmless  Landlord  from any and all
liability,  losses,  claims,  damages,  costs,  expenses,  causes of action  and
proceedings  involving any third party or parties  (including without limitation
Tenant's  proposed  subtenant  or  assignee)  who  claim  they were  damaged  by
Landlord's wrongful withholding or conditioning of Landlord's consent,  unless a
court of competent jurisdiction  determines that Landlord unreasonably withheld,
delayed or conditioned its consent or was otherwise wrongful in its withholding,
delaying or conditioning of its consent.

     14.3 Transfer Premium.  If Landlord consents to a Transfer,  as a condition
thereto  which the  parties  hereby  agree is  reasonable,  Tenant  shall pay to
Landlord fifty percent (50%) of any "Transfer  Premium," as that term is defined
in this  Section  14.3,  received  by  Tenant  from such  Transferee.  "Transfer
Premium" shall mean all rent,  additional rent or other consideration payable by
such  Transferee  in  connection  with the  Transfer  in  excess of the Rent and
Additional  Rent  payable  by Tenant  under  this  Lease  during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred,  after deducting the reasonable expenses incurred by Tenant for (i)
any changes, alterations and improvements to the Premises in connection with the
Transfer or which  Tenant can  substantiate  to Landlord  have not been paid for
with any Tenant improvement  allowance funds provided to Tenant by Landlord (and
then only to the extent of any  unamortized  amount of such  expense),  (ii) any
free base rent reasonably  provided to the  Transferee,  and (iii) any brokerage
commissions in connection with the Transfer,  (iv) any marketing costs and legal
fees in connection with the Transfer, and (v) any other commercially  reasonable
costs or  concessions  incurred  or  granted  by Tenant in  connection  with the
Transfer.  "Transfer  Premium"  shall also  include,  but not be limited to, key
money,  bonus money or other cash  consideration paid by Transferee to Tenant in
connection  with such  Transfer,  and any payment in excess of fair market value
for  services  rendered  by  Tenant  to  Transferee  or  for  assets,  fixtures,
inventory,  equipment,  or  furniture  transferred  by Tenant to  Transferee  in
connection with such Transfer. In the calculations of the Rent (as it relates to
the Transfer  Premium  calculated under this Section 14.3), and the Transferee's
Rent and Quoted Rent under Section 14.2 of this Lease, the Rent paid during each
annual period for the Subject Space,  and the  Transferee's  Rent and the Quoted
Rent,  shall be computed after adjusting such rent to the actual  effective rent
to be paid, taking into consideration any and all leasehold  concessions granted
in  connection  therewith,  including,  but not  limited to, any rent credit and
tenant  improvement  allowance.  For purposes of calculating  any such effective
rent all such concessions  shall be amortized on a straight-line  basis over the
relevant term.

     14.4 Landlord's Option as to Subject Space. Notwithstanding anything to the
contrary  contained  in this Article 14, in the case of a sublease  which,  when
added to all then existing subleases applicable to the Premises, would result in
fifty percent (50%) or more of the rentable square footage of the Premises being
subject to subleases  (in the  aggregate)  with  entities  other than  Permitted
Transferees,  Landlord shall have the option, by giving written notice to Tenant
(the  "Recapture  Notice")  within  twenty-one  (21) days  after  receipt of any
Transfer  Notice,  to recapture the Subject Space.  Such recapture  notice shall
cancel and terminate this Lease with respect to the Subject Space as of the date
stated in the Transfer  Notice as the  effective  date of the proposed  Transfer
until  the last day of the term of the  Transfer  as set  forth in the  Transfer
Notice (or at Landlord's option, shall cause the Transfer to be made to Landlord
or its agent, in which case the parties shall execute the Transfer documentation
promptly  thereafter).  However,  if  Landlord  delivers a  Recapture  Notice to
Tenant, Tenant may, within ten (10) days after Tenant's receipt of the Recapture
Notice,  deliver written notice to Landlord indicating that Tenant is rescinding
its request for consent to the proposed  Transfer,  in which case such  Transfer
shall not be consummated and this Lease shall remain in full force and effect as
to the portion of the Premises  that was the subject of the  Transfer.  Tenant's
failure to so notify  Landlord in writing  within said ten (10) day period shall
be deemed to constitute  Tenant's  election to allow the Recapture  Notice to be
effective.  In the event of a  recapture  by  Landlord,  if this Lease  shall be
canceled with respect to less than the entire Building, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in  proportion  to the number of rentable  square feet  contained  in the
Building,  and this Lease as so amended shall continue  thereafter in full force
and effect; provided,  however, Landlord and Tenant shall negotiate and execute,
in good faith,  an amendment to this Lease  setting  forth (i) the revised Rent,
(ii) the revised  definition of "Premises"  (which definition shall only include
that  portion  of  the  Building  actually  occupied  by  Tenant  subsequent  to
Landlord's recapture of space pursuant to the terms of this Section 14.4), (iii)
a  definition  of  "Common  Areas" of the  Project  (which  definition  shall be
consistent to such definition for Comparable Buildings), (iv) Tenant's allocated
share of the Project  parking  area (which shall be prorated on the basis of the
number of rentable square feet retained by Tenant in proportion to the number of
rentable  square feet  contained  in the  Building),  and (v) the  reversion  to
Landlord of any Services for which Tenant is directly  contracting to the extent
the  same  would,  in  Comparable   Buildings,   typically  be  performed  on  a
building-wide basis. If Landlord declines,  or fails to elect in a timely manner
to recapture the Subject Space under this Section 14.4, then,  provided Landlord
has consented to the proposed  Transfer,  Tenant shall be entitled to proceed to
transfer the Subject Space to the proposed Transferee,  subject to provisions of
this Article 14.

     14.5 Effect of Transfer.  If Landlord consents to a Transfer,  (i) the TCCs
of this Lease  shall in no way be deemed to have been waived or  modified,  (ii)
such  consent  shall not be deemed  consent to any  further  Transfer  by either
Tenant or a Transferee,  (iii) Tenant shall deliver to Landlord,  promptly after
execution,  an executed copy of all documentation  pertaining to the Transfer in
form  reasonably  acceptable  to  Landlord,   (iv)  Tenant  shall  furnish  upon
Landlord's request a complete  statement,  certified by Tenant's chief financial
officer,  setting forth in detail the computation of any Transfer Premium Tenant
has derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or  agreement  entered  into with  respect  thereto,  whether with or
without Landlord's  consent,  shall relieve Tenant or any guarantor of the Lease
from  any  liability  under  this  Lease,  including,   without  limitation,  in
connection  with the Subject Space.  Landlord or its authorized  representatives
shall have the right at all  reasonable  times to audit the books,  records  and
papers of Tenant  relating  to any  Transfer,  and shall  have the right to make
copies thereof.  If the Transfer Premium  respecting any Transfer shall be found
understated,  Tenant  shall,  within  thirty  (30) days  after  demand,  pay the
deficiency,  and if understated by more than two percent (2%),  Tenant shall pay
Landlord's costs of such audit.

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

     14.7 Occurrence of Default. Any Transfer hereunder shall be subordinate and
subject to the  provisions of this Lease,  and if this Lease shall be terminated
during  the term of any  Transfer,  Landlord  shall have the right to: (i) treat
such  Transfer as canceled and  repossess the Subject Space by any lawful means,
or (ii) require that such  Transferee  attorn to and  recognize  Landlord as its
landlord  under any such  Transfer.  If Tenant  shall be in  default  under this
Lease,  Landlord  is  hereby  irrevocably  authorized,  as  Tenant's  agent  and
attorney-in-fact,  to direct any  Transferee  to make all  payments  under or in
connection  with the Transfer  directly to Landlord  (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured. Such
Transferee  shall  rely on any  representation  by  Landlord  that  Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment,  the assignee shall assume in writing all  obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any  Transferee  shall be deemed a waiver
of any  provision  of this  Article 14 or the  approval of any  Transferee  or a
release of Tenant from any obligation under this Lease,  whether  theretofore or
thereafter accruing.  In no event shall Landlord's  enforcement of any provision
of this Lease against any  Transferee be deemed a waiver of Landlord's  right to
enforce any term of this Lease against  Tenant or any other person.  If Tenant's
obligations  hereunder have been guaranteed,  Landlord's consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.

     14.8 Non-Transfers.  Notwithstanding  anything to the contrary contained in
this  Article 14, (i) an  assignment  or  subletting  of all or a portion of the
Premises to an affiliate of Tenant (an entity which is controlled by,  controls,
or is under common control with, Tenant),  (ii) an assignment of the Premises to
an entity  which  acquires all or  substantially  all of the assets or interests
(partnership,  stock or other) of Tenant, or (iii) an assignment of the Premises
to an entity  which is the  resulting  entity of a merger  or  consolidation  of
Tenant,  shall not be deemed a Transfer  under this  Article 14,  provided  that
Tenant  notifies  Landlord  of any such  assignment  or  sublease  and  promptly
supplies  Landlord  with any  documents  or  information  requested  by Landlord
regarding such  assignment or sublease or such affiliate,  and further  provided
that such  assignment  or  sublease is not a  subterfuge  by Tenant to avoid its
obligations under this Lease. The transferee under a transfer specified in items
(i),  (ii) or (iii)  above shall be  referred  to as a  "Permitted  Transferee."
"Control," as used in this Section 14.8,  shall mean the ownership,  directly or
indirectly,  of at least fifty-one percent (51%) of the voting securities of, or
possession of the right to vote, in the ordinary direction of its affairs, of at
least fifty-one percent (51%) of the voting interest in, any person or entity.

     14.9  Pre-Approved  Transfers.  Notwithstanding  anything  to the  contrary
contained in this Article 14, a subletting of less than 10,000  rentable  square
feet of space within the Building shall be pre-approved (and,  therefore,  shall
not require Landlord'  consent) (a "Pre-Approved  Transfer");  provided that (A)
Tenant shall provide Landlord with at least five (5) days advance written Notice
of such Pre-Approved  Transfer, (B) such Pre-Approved Transfer occurs during the
first  eighteen  (18)  months of the initial  Lease  Term,  (C) the term of such
Pre-Approved Transfer shall,  inclusive of any and all option rights, not exceed
five (5) years,  (D) such  Pre-Approved  Transfer  shall not grant any  exterior
signage rights to the applicable transferee,  and (E) such applicable transferee
shall not be a governmental agency or instrumentality thereof.

                                   ARTICLE 15

                      SURRENDER OF PREMISES; OWNERSHIP AND
                            REMOVAL OF TRADE FIXTURES

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

     15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease
Term, or upon any earlier  termination of this Lease,  Tenant shall,  subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession and as
thereafter  improved by Landlord  and/or  Tenant,  reasonable  wear and tear and
repairs which are specifically  made the  responsibility  of Landlord  hereunder
excepted. Upon such expiration or termination,  Tenant shall, without expense to
Landlord,  remove  or cause to be  removed  from the  Premises  all  debris  and
rubbish,  and such items of furniture,  equipment,  business and trade fixtures,
free-standing  cabinet work,  movable  partitions and other articles of personal
property  owned by Tenant or installed or placed by Tenant at its expense in the
Premises,  and such similar articles of any other persons claiming under Tenant,
as Landlord may, in its sole discretion, require to be removed, and Tenant shall
repair at its own expense all damage to the Premises and Building resulting from
such removal.

                                   ARTICLE 16

                                  HOLDING OVER

     If Tenant  holds  over  after the  expiration  of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such  tenancy  shall be from  month-to-month  only,  and shall not  constitute a
renewal hereof or an extension for any further term, and in such case Rent shall
be payable at a monthly  rate  equal to the  product of (i) the Rent  applicable
during the last rental  period of the Lease Term under this Lease,  and (ii) two
hundred percent (200%).  Such  month-to-month  tenancy shall be subject to every
other applicable TCCs contained herein.  Notwithstanding  the foregoing,  Tenant
shall have the one-time right,  upon notice (the "Holdover  Notice") to Landlord
not more than twelve (12) months  prior to, nor less than nine (9) months  prior
to, the expiration of the then Lease Term, to extend the Lease Term for a period
of up to six (6) months (the "Permitted  Holdover Term"), in which case the Rent
payable by Tenant during such Permitted Holdover Term shall equal the product of
(a) the Rent  applicable  during the last rental  period of the Lease Term under
this Lease, and (b) one hundred  twenty-five  percent (125%) for the first three
(3) months of any such  Permitted  Holdover  Term and one hundred  fifty percent
(150%)  for the  fourth  (4th),  fifth  (5th)  and  sixth  (6th)  months of such
Permitted  Holdover Term.  Except in connection with a Permitted  Holdover Term,
nothing  contained  in this Article 16 shall be construed as consent by Landlord
to any holding  over by Tenant,  and  Landlord  expressly  reserves the right to
require  Tenant to surrender  possession of the Premises to Landlord as provided
in this  Lease upon the  expiration  or other  termination  of this  Lease.  The
provisions  of this  Article  16 shall not be deemed  to limit or  constitute  a
waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender  the Premises  upon the  termination  or expiration of
this Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall  protect,  defend,  indemnify and hold  Landlord  harmless from all
loss, costs (including  reasonable attorneys' fees) and liability resulting from
such failure,  including,  without limiting the generality of the foregoing, any
claims made by any succeeding  tenant founded upon such failure to surrender and
any lost profits to Landlord resulting therefrom.

                                   ARTICLE 17

                              ESTOPPEL CERTIFICATES

     Within fifteen (15) days following a request in writing by Landlord, Tenant
shall  execute,  acknowledge  and deliver to  Landlord an estoppel  certificate,
which, as submitted by Landlord,  shall be  substantially in the form of Exhibit
E,  attached  hereto (or such other form as may be required  by any  prospective
mortgagee  or  purchaser of the  Project,  or any portion  thereof),  indicating
therein  any  exceptions  thereto  that may exist at that  time,  and shall also
contain any other  information  reasonably  requested by Landlord or  Landlord's
mortgagee or prospective  mortgagee.  Any such certificate may be relied upon by
any  prospective  mortgagee  or  purchaser of all or any portion of the Project.
Tenant shall execute and deliver  whatever other  instruments  may be reasonably
required  for such  purposes.  At any time during the Lease Term,  Landlord  may
require  Tenant to  provide  Landlord  with a current  financial  statement  and
financial  statements  of the two  (2)  years  prior  to the  current  financial
statement year.  Such statements  shall be prepared in accordance with generally
accepted  accounting  principles  and, if such is the normal practice of Tenant,
shall be audited  by an  independent  certified  public  accountant.  Failure of
Tenant to timely execute,  acknowledge and deliver such estoppel  certificate or
other  instruments  shall  constitute  an  acceptance  of  the  Premises  and an
acknowledgment  by Tenant that statements  included in the estoppel  certificate
are true and correct,  without  exception.  Landlord hereby agrees to provide to
Tenant an estoppel certificate signed by Landlord,  containing the same types of
information,  and within the same periods of time, as set forth above, with such
changes as are reasonably  necessary to reflect that the estoppel certificate is
being  granted  and signed by  Landlord  to Tenant,  rather  than from Tenant to
Landlord or a lender.

                                   ARTICLE 18

                                  SUBORDINATION

     This Lease  shall be subject  and  subordinate  to all  present  and future
ground or  underlying  leases of the Premises  and to the lien of any  mortgage,
trust deed or other  encumbrances now or hereafter in force against the Premises
or any part  thereof,  if any, and to all renewals,  extensions,  modifications,
consolidations and replacements  thereof,  and to all advances made or hereafter
to be made upon the  security  of such  mortgages  or trust  deeds,  unless  the
holders of such  mortgages,  trust deeds or other  encumbrances,  or the lessors
under such ground lease or underlying leases, require in writing that this Lease
be superior thereto.  Landlord's  delivery to Tenant of commercially  reasonable
non-disturbance agreement(s) (the "Nondisturbance Agreement") in favor of Tenant
from any ground lessor,  mortgage  holders or lien holders of Landlord who later
come into  existence at any time prior to the expiration of the Lease Term shall
be in consideration of, and a condition  precedent to, Tenant's  agreement to be
bound by the TCCs of this  Article  18.  Subject to  Tenant's  receipt of such a
Nondisturbance  Agreement,   Tenant  covenants  and  agrees  in  the  event  any
proceedings are brought for the foreclosure of any such mortgage or deed in lieu
thereof  (or  if any  ground  lease  is  terminated),  to  attorn,  without  any
deductions  or  set-offs  whatsoever,  to the  lienholder  or  purchaser  or any
successors thereto upon any such foreclosure sale or deed in lieu thereof (or to
the ground lessor),  if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor as
the lessor under this Lease,  provided  such  lienholder  or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant's  occupancy,  so
long as Tenant  timely pays the rent and  observes and performs the TCCs of this
Lease to be observed and performed by Tenant.  Landlord's interest herein may be
assigned as security at any time to any lienholder. Tenant shall, within fifteen
(15) days of request by Landlord, execute such further instruments or assurances
as  Landlord  may   reasonably   deem  necessary  to  evidence  or  confirm  the
subordination  or superiority of this Lease to any such mortgages,  trust deeds,
ground leases or underlying leases.  Tenant waives the provisions of any current
or future  statute,  rule or law which may give or  purport  to give  Tenant any
right or election to terminate or otherwise  adversely affect this Lease and the
obligations of the Tenant  hereunder in the event of any foreclosure  proceeding
or sale.

                                   ARTICLE 19

                               DEFAULTS; REMEDIES

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

          19.1.1  Any  failure  by Tenant  to pay any Rent or any  other  charge
required to be paid under this Lease, or any part thereof,  when due unless such
failure is cured within five (5) business days after Tenant's receipt of written
notice that the same was not paid when due; or

          19.1.2  Except where a specific time period is otherwise set forth for
Tenant's  performance  in this  Lease,  in which event the failure to perform by
Tenant  within such time period  shall be a default by Tenant under this Section
19.1.2,  any  failure  by Tenant to  observe  or  perform  any other  provision,
covenant or  condition of this Lease to be observed or performed by Tenant where
such failure  continues for thirty (30) days after written  notice  thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot  reasonably  be cured within a thirty (30) day period,  Tenant shall
not be deemed to be in default if it diligently  commences such cure within such
period and thereafter  diligently proceeds to rectify and cure such default, but
in no event  exceeding  a period of time in excess  of  thirty  (30) days  after
written notice thereof from Landlord to Tenant; or

          19.1.3 To the extent permitted by law, a general  assignment by Tenant
or any  guarantor of this Lease for the benefit of  creditors,  or the taking of
any corporate action in furtherance of bankruptcy or dissolution  whether or not
there exists any proceeding under an insolvency or bankruptcy law, or the filing
by or against Tenant or any guarantor of any  proceeding  under an insolvency or
bankruptcy law,  unless in the case of a proceeding  filed against Tenant or any
guarantor the same is dismissed  within sixty (60) days, or the appointment of a
trustee or receiver to take possession of all or substantially all of the assets
of Tenant or any  guarantor,  unless  possession  is  restored to Tenant or such
guarantor  within  thirty  (30)  days,  or any  execution  or  other  judicially
authorized  seizure of all or substantially  all of Tenant's assets located upon
the  Premises or of Tenant's  interest  in this  Lease,  unless such  seizure is
discharged within thirty (30) days; or

          19.1.4 Abandonment or vacation of all or a substantial  portion of the
Premises by Tenant; or

          19.1.5 The  failure by Tenant to observe or perform  according  to the
provisions  of  Articles  5,  14,  17 or 18 of this  Lease  where  such  failure
continues for more than three (3) business days after notice from Landlord; or

     The notice periods  provided herein are in lieu of, and not in addition to,
any notice periods provided by law.

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

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

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

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

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

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

               (e) 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.

     The term "rent" as used in this  Section  19.2 shall be deemed to be and to
mean all sums of every  nature  required  to be paid by Tenant  pursuant  to the
terms of this  Lease,  whether to  Landlord  or to others.  As used in  Sections
19.2.1(a) and (b), above,  the "worth at the time of award" shall be computed by
allowing  interest at the rate set forth in Article 25 of this Lease,  but in no
case greater than the maximum amount of such interest  permitted by law. As used
in Section 19.2.1(c),  above, the "worth at the time of award" shall be computed
by discounting  such amount at the discount rate of the Federal  Reserve Bank of
San Francisco at the time of award plus one percent (1%).

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

          19.2.3 Landlord shall at all times have the rights and remedies (which
shall be  cumulative  with each other and  cumulative  and in  addition to those
rights and remedies  available under Sections  19.2.1 and 19.2.2,  above, or any
law or other provision of this Lease),  without prior demand or notice except as
required  by  applicable  law,  to seek  any  declaratory,  injunctive  or other
equitable relief,  and specifically  enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.

     19.3 Subleases of Tenant.  Whether or not Landlord elects to terminate this
Lease on account of any  default by  Tenant,  as set forth in this  Article  19,
Landlord  shall have the right to  terminate  any and all  subleases,  licenses,
concessions or other  consensual  arrangements  for  possession  entered into by
Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed
to Tenant's interest in such subleases,  licenses,  concessions or arrangements.
In the event of Landlord's  election to succeed to Tenant's interest in any such
subleases, licenses,  concessions or arrangements,  Tenant shall, as of the date
of notice by Landlord of such election,  have no further right to or interest in
the rent or other consideration receivable thereunder.

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

     19.5 Efforts to Relet. No re-entry or repossession,  repairs,  maintenance,
changes,  alterations  and  additions,  reletting,  appointment of a receiver to
protect  Landlord's  interests  hereunder,  or any other  action or  omission by
Landlord  shall be construed as an election by Landlord to terminate  this Lease
or Tenant's right to possession,  or to accept a surrender of the Premises,  nor
shall same  operate to release  Tenant in whole or in part from any of  Tenant's
obligations  hereunder,  unless express written notice of such intention is sent
by Landlord to Tenant.  Tenant  hereby  irrevocably  waives any right  otherwise
available under any law to redeem or reinstate this Lease.

     19.6 Landlord Default.  Notwithstanding  anything to the contrary set forth
in this Lease, Landlord shall be in default in the performance of any obligation
required to be performed by Landlord pursuant to this Lease if Landlord fails to
perform such obligation within thirty (30) days after the receipt of notice from
Tenant specifying in detail Landlord's failure to perform; provided, however, if
the nature of Landlord's  obligation is such that more than thirty (30) days are
required for its  performance,  then Landlord shall not be in default under this
Lease if it shall commence such  performance  within such thirty (30) day period
and thereafter diligently pursues the same to completion.  Upon any such default
by Landlord  under this  Lease,  Tenant may,  except as  otherwise  specifically
provided in this Lease to the contrary,  exercise any of its rights  provided at
law or in  equity.  Any  award  from a court or  arbitrator  in favor of  Tenant
requiring  payment by  Landlord  which is not paid by  Landlord  within the time
period  directed by such  award,  may be offset by Tenant from Rent next due and
payable under this Lease; provided, however, Tenant may not deduct the amount of
the award  against more than fifty percent (50%) of Base Rent next due and owing
(until  such time as the entire  amount of such  judgment  is  deducted)  to the
extent following a foreclosure or a deed-in-lieu of foreclosure.

                                   ARTICLE 20

                           COVENANT OF QUIET ENJOYMENT

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

                                   ARTICLE 21

                       SECURITY DEPOSIT; LETTER OF CREDIT

     21.1 Security Deposit. Tenant shall deposit with Landlord, on or before the
Lease  Commencement  Date, a security  deposit (the  "Security  Deposit") in the
amount set forth in  Section 8 of the  Summary,  as  security  for the  faithful
performance  by Tenant of all of its  obligations  under this  Lease.  If Tenant
defaults  with  respect to any  provisions  of this  Lease,  including,  but not
limited  to, the  provisions  relating  to the  payment of Rent,  the removal of
property and the repair of resultant  damage,  Landlord may,  without  notice to
Tenant,  but shall  not be  required  to apply  all or any part of the  Security
Deposit  for the  payment  of any Rent or any other sum in  default  and  Tenant
shall,  upon demand  therefor,  restore  the  Security  Deposit to its  original
amount.  Any  unapplied  portion of the  Security  Deposit  shall be returned to
Tenant,  or, at Landlord's  option,  to the last  assignee of Tenant's  interest
hereunder,  within thirty (30) days  following the expiration of the Lease Term.
Tenant  shall not be entitled to any interest on the  Security  Deposit.  Tenant
hereby waives the provisions of Section 1950.7 of the California  Civil Code, or
any successor statute.

     21.2 Letter of Credit.

          21.2.1 Delivery of Letter of Credit. Tenant shall deliver to Landlord,
on or before the Lease Commencement Date, an unconditional,  clean,  irrevocable
letter of credit (the "L-C") in an amount equal to the sum of (i) Eight  Hundred
Thousand and No/100  Dollars  ($800,000.00),  and (ii) the TIA Increase,  if any
(collectively,  the "L-C  Amount"),  which L-C shall be issued by a money-center
bank (a bank which accepts deposits,  maintains  accounts,  has a local Southern
California  office which will  negotiate a letter of credit,  and whose deposits
are insured by the FDIC) reasonably acceptable to Landlord,  and which L-C shall
be in the form of Exhibit F, attached hereto; provided, however, Landlord hereby
pre-approves  Fleet  National Bank as an acceptable  issuer of such L-C.  Tenant
shall pay all  expenses,  points and/or fees incurred by Tenant in obtaining the
L-C.

          21.2.2  Annual  Reduction of L-C Amount.  Landlord  and Tenant  hereby
acknowledge and agree that commencing on the first (1st) day of the second (2nd)
Lease Year, the L-C Amount shall be reduced by an amount equal to the sum of (i)
$85,000.00,  and (ii) ten percent (10%) of the TIA Increase (if any),  and shall
continue  to  decrease  by the same  amount on the first day of each  Lease Year
thereafter; provided, however, (A) in no event shall the L-C Amount be decreased
below $120,000.00,  and (B) the L-C Amount shall not decrease as set forth above
during  any  period in which  Tenant  is in  default  under the Lease  (but such
decrease shall take place  retroactively  after such default is cured,  provided
that no such  decrease  shall  thereafter  take effect in the event the Lease is
terminated early due to such default by Tenant).

          21.2.3 Conditional Reduction of L-C Amount. Landlord and Tenant hereby
acknowledge and agree that the L-C Amount is subject to a conditional  reduction
throughout the Lease Term depending upon a determination  of Tenant's  financial
condition at the end of each financial quarter as more particularly set forth in
this Section 21.2.3.  Tenant shall be entitled to a reduction of the L-C Amount,
as set  forth  below,  only to the  extent  (A)  Tenant  has a "Net  Worth,"  as
determined by generally accepted accounting principles, in excess of One Hundred
Twenty-Five  Million and No/100  Dollars  ($125,000,000.00),  and (B) Tenant has
positive "Net Income," as determined by generally accepted accounting principles
(such thresholds to be, collectively,  the "Required Thresholds").  In the event
Tenant  maintains  such Required  Thresholds for two (2)  consecutive  financial
quarters, Tenant shall be entitled to a fifty percent (50%) reduction of the L-C
Amount.  In the event Tenant  maintains  such Required  Thresholds  for four (4)
consecutive  financial  quarters,  Tenant  shall be  entitled  to a one  hundred
percent  (100%)  reduction of the L-C Amount.  Following the  completion of each
financial  quarter  throughout  the Lease Term, in the event that (i) Tenant has
failed to satisfy the Required Thresholds, or (ii) Tenant is in economic default
under the Lease (beyond any  applicable  notice and cure  periods),  then Tenant
shall,  upon its receipt of written  notice from Landlord (the  "Reestablishment
Notice"),  cause the L-C to be  reestablished  with an L-C Amount  equal to what
such L-C Amount would have been (subject to the reduction  schedule set forth in
Section 21.2.2,  above), had there been no conditional reduction pursuant to the
terms of this Section 21.2.3.

          21.2.4  FAILURE TO REINSTATE;  LIQUIDATED  DAMAGES.  IN THE EVENT THAT
TENANT  FAILS,   WITHIN  THIRTY  (30)  DAYS  FOLLOWING  TENANT'S  RECEIPT  OF  A
REESTABLISHMENT  NOTICE, TO CAUSE THE L-C TO BE REESTABLISHED IN THE L-C AMOUNT,
THEN TENANT'S MONTHLY INSTALLMENT OF BASE RENT SHALL BE INCREASED BY ONE HUNDRED
TEN PERCENT  (110%) OF ITS THEN EXISTING  LEVEL DURING THE PERIOD  COMMENCING ON
THE  DATE   WHICH  IS  THIRTY   (30)  DAYS  AFTER   TENANT'S   RECEIPT  OF  SUCH
REESTABLISHMENT  NOTICE AND ENDING ON THE  EARLIER TO OCCUR OF (I) THE DATE SUCH
L-C IS  REESTABLISHED  PURSUANT TO THE TERMS OF THIS SECTION  21.2,  OR (II) THE
DATE WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE. IN
THE EVENT THAT TENANT  FAILS,  DURING SUCH THREE (3) MONTH PERIOD  FOLLOWING THE
DATE OF THE REESTABLISHMENT  NOTICE, TO CAUSE THE L-C TO BE REESTABLISHED IN THE
L-C AMOUNT, THEN TENANT'S MONTHLY INSTALLMENT OF BASE RENT SHALL BE INCREASED BY
ONE HUNDRED  TWENTY-FIVE  PERCENT  (125%) OF ITS THEN EXISTING  LEVEL DURING THE
PERIOD  COMMENCING  ON THE DATE WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH
REESTABLISHMENT    NOTICE    AND    ENDING    ON   THE   DATE    SUCH   L-C   IS
RE-ISSUED/REESTABLISHED  PURSUANT TO THE TERMS OF THIS SECTION 21.2. THE PARTIES
AGREE THAT IT WOULD BE  IMPRACTICABLE  AND EXTREMELY  DIFFICULT TO ASCERTAIN THE
ACTUAL  DAMAGES  SUFFERED BY LANDLORD AS A RESULT OF TENANT'S  FAILURE TO TIMELY
REESTABLISH  THE L-C  FOLLOWING THE  REESTABLISHMENT  NOTICE AS REQUIRED IN THIS
SECTION 21.2, AND THAT UNDER THE  CIRCUMSTANCES  EXISTING AS OF THE DATE OF THIS
LEASE,  THE LIQUIDATED  DAMAGES  PROVIDED FOR IN THIS SECTION 21.2.3 REPRESENT A
REASONABLE ESTIMATE OF THE DAMAGES WHICH LANDLORD WILL INCUR AS A RESULT OF SUCH
FAILURE,  PROVIDED,  HOWEVER,  THAT  THIS  PROVISION  SHALL  NOT WAIVE OR AFFECT
LANDLORD'S  RIGHTS AND TENANT'S  INDEMNITY  OBLIGATIONS  UNDER OTHER SECTIONS OF
THIS LEASE  (EXCEPT  THAT THE  PARTIES  SPECIFICALLY  AGREE  THAT THE  FOREGOING
PROVISION  WAS  AGREED TO IN LIEU OF MAKING  FAILURE TO  RE-ESTABLISH  THE L-C A
DEFAULT  UNDER THE  LEASE).  THE  PARTIES  ACKNOWLEDGE  THAT THE PAYMENT OF SUCH
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING
OF  CALIFORNIA  CIVIL CODE SECTION 3275 OR 3369,  BUT IS INTENDED TO  CONSTITUTE
LIQUIDATED  DAMAGES TO LANDLORD  PURSUANT TO CALIFORNIA CIVIL CODE SECTION 1671.
THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH
THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION 21.2.3.





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

        LANDLORD'S INITIALS                 TENANT'S INITIALS


          21.2.5  Application  of  Letter  of  Credit.  The L-C shall be held by
Landlord as security for the faithful  performance  by Tenant of all the TCCs of
this Lease to be kept and  performed  by Tenant  during the Lease Term.  The L-C
shall not be  mortgaged,  assigned or  encumbered  in any manner  whatsoever  by
Tenant without the prior written  consent of Landlord.  If Tenant  defaults with
respect to any  provisions  of this  Lease,  including,  but not limited to, the
provisions  relating to the payment of Rent, or if Tenant fails to renew the L-C
at least thirty (30) days before its expiration,  Landlord may, but shall not be
required  to, draw upon all or any portion of the L-C for payment of any Rent or
any other sum in default,  or for the payment of any amount  that  Landlord  may
reasonably spend or may become obligated to spend by reason of Tenant's default,
or to compensate  Landlord for any other loss or damage that Landlord may suffer
by reason of Tenant's default.  The use, application or retention of the L-C, or
any portion thereof,  by Landlord shall not prevent Landlord from exercising any
other right or remedy  provided by this Lease or by law, it being  intended that
Landlord  shall not first be required  to proceed  against the L-C and shall not
operate as a  limitation  on any  recovery to which  Landlord  may  otherwise be
entitled. Any amount of the L-C which is drawn upon by Landlord, but is not used
or applied by Landlord,  shall be held by Landlord and deemed a security deposit
(the "L-C Security  Deposit") and, in connection with such L-C Security Deposit,
Tenant hereby waives the provisions of Section  1950.7 of the  California  Civil
Code, or any successor statute.  If any portion of the L-C is drawn upon, Tenant
shall,  within ten (10) days after written demand  therefor,  either (i) deposit
cash with Landlord  (which cash shall be applied by Landlord to the L-C Security
Deposit) in an amount  sufficient  to cause the sum of the L-C Security  Deposit
and the amount of the  remaining  L-C to be  equivalent to the amount of the L-C
then  required  under this Lease or (ii)  reinstate  the L-C to the amount  then
required  under this Lease,  and if any portion of the L-C  Security  Deposit is
used or  applied,  Tenant  shall,  within  ten (10) days  after  written  demand
therefor, deposit cash with Landlord (which cash shall be applied by Landlord to
the L-C Security  Deposit) in an amount  sufficient  to restore the L-C Security
Deposit to the amount then required under this Lease, and Tenant's failure to do
so shall be a default under this Lease;  provided,  however,  that upon Tenant's
satisfaction  of its economic  obligations  and  restoration of the L-C Security
Deposit  pursuant to this  sentence,  any unused portion of the drawn upon funds
shall be returned to Tenant.  Tenant acknowledges that Landlord has the right to
transfer  or mortgage  its  interest in the Project and in this Lease and Tenant
agrees that in the event of any such transfer or mortgage,  Landlord  shall have
the right to transfer or assign the L-C Security  Deposit  and/or the L-C to the
transferee or mortgagee,  and in the event of such  transfer,  Tenant shall look
solely to such  transferee  or  mortgagee  for the  return  of the L-C  Security
Deposit  and/or  the L-C.  Landlord  shall  pay all  costs  associated  with the
transfer or  re-issuance  of the L-C due to Landlord's  transfer or  assignment.
Tenant shall, within five (5) days of request by Landlord,  execute such further
instruments or assurances as Landlord may reasonably  deem necessary to evidence
or confirm Landlord's  transfer or assignment of the L-C Security Deposit and/or
the L-C to such transferee or mortgagee.  If Tenant is not then in default under
this Lease,  the L-C Security  Deposit  and/or the L-C, or any balance  thereof,
shall be returned to Tenant within thirty (30) days  following the expiration of
the Lease Term.

                                   ARTICLE 22

                          TELECOMMUNICATIONS EQUIPMENT

     At any time during the Lease Term,  subject to the TCCs of this  Article 22
and Article 8 of this Lease, Tenant and/or its Permitted Transferee may install,
at  Tenant's  sole cost and  expense,  but  without the payment of any Rent or a
license or similar fee or charge,  up to two (2)  satellite or microwave  dishes
(or similar substitute communications equipment) directly servicing the business
conducted  by Tenant from within the  Premises  (all such  equipment  is defined
collectively  as  the  "Telecommunications  Equipment")  upon  the  roof  of the
Building.  The  physical  appearance  and  the  size  of the  Telecommunications
Equipment shall be subject to Landlord's  reasonable  approval,  the location of
any such installation of the Telecommunications Equipment shall be designated by
Tenant subject to Landlord's reasonable approval and Landlord may require Tenant
to install screening around such Telecommunications  Equipment, at Tenant's sole
cost and expense,  as reasonably  designated by Landlord.  Tenant shall maintain
such  Telecommunications  Equipment,  at Tenant's sole cost and expense.  In the
event  Tenant  elects to  exercise  its right to install  the  Telecommunication
Equipment,  then Tenant shall give Landlord prior notice  thereof.  Tenant shall
reimburse  to  Landlord  the actual  costs  reasonably  incurred  by Landlord in
approving   such   Telecommunications   Equipment.   Tenant  shall  remove  such
Telecommunications  Equipment upon the expiration or earlier termination of this
Lease and shall return the  affected  portion of the rooftop and the Building to
the  condition  the  rooftop  and the  Building  would  have been in had no such
Telecommunications Equipment been installed (reasonable wear and tear excepted).
Such  Telecommunications  Equipment  shall be  installed  pursuant  to plans and
specifications  approved by Landlord,  which  approval will not be  unreasonably
withheld,  conditioned, or delayed. Such Telecommunications  Equipment shall, in
all  instances,  comply with  applicable  governmental  laws,  codes,  rules and
regulations. Tenant shall not be entitled to license its Communication Equipment
to any  unrelated  third  party,  nor shall  Tenant be  permitted to receive any
revenues,  fees or any  other  consideration  for the use of such  Communication
Equipment by an unrelated third party

                                   ARTICLE 23

                                      SIGNS

     23.1 Full Floors. Subject to Landlord's prior written approval, in its sole
discretion,  and provided all signs are in keeping with the quality,  design and
style of the  Building and Project,  Tenant may install  identification  signage
anywhere in the Building  including in the lobby of the Building,  provided that
such signs must not be visible from the exterior of the Building.

     23.2 Intentionally Omitted.

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

     23.4  Tenant's  Signage.  Tenant shall be entitled to install the following
signage in connection  with Tenant's  lease of the Premises  (collectively,  the
"Premises Signage"):

               (i)  Building signage identifying  Tenant's name and logo located
                    at the top of the Building; and

               (ii) Exclusive  signage on the monument  located  adjacent to the
                    main entrance to the  Building,  as set forth on the Project
                    Site Plan  attached  hereto as  Exhibit  A-1 (the  "Building
                    Monument Sign");  provided,  however,  Landlord, at its sole
                    expense, shall be able to locate its standard identification
                    signage on the  Building  Monument  Sign (with  lowest/least
                    prominent  position  and with a  relative  size  equal to no
                    greater than  twenty-five  percent (25%) of Tenant's signage
                    thereon).

          23.4.1  Specifications  and Permits.  Tenant's Signage shall set forth
Tenant's name and logo as determined by Tenant in its sole discretion; provided,
however, in no event shall Tenant's Signage include an "Objectionable  Name," as
that term is defined in Section 23.4.2, of this Lease. The graphics,  materials,
color, design, lettering, lighting, size, illumination, specifications and exact
location of Tenant's Signage (collectively,  the "Sign Specifications") shall be
subject to the prior written  approval of Landlord,  which approval shall not be
unreasonably  withheld,  conditioned  or delayed,  and shall be  consistent  and
compatible  with  the  quality  and  nature  of  the  Project.  Landlord  hereby
pre-approves   the  depiction  of  Tenant's   Project   Signage  (and  the  Sign
Specifications contained therein) set forth in Exhibit I attached to this Lease.
For purposes of this  Section  23.4.1,  the  reference to "name" shall mean name
and/or logo. In addition,  Tenant's Signage shall be subject to Tenant's receipt
of all required  governmental  permits and approvals and shall be subject to all
Applicable Law and to any covenants,  conditions and restrictions  affecting the
Project.  Landlord shall use commercially reasonable efforts to assist Tenant in
obtaining all necessary governmental permits and approvals for Tenant's Signage.
Tenant hereby acknowledges that, notwithstanding Landlord's approval of Tenant's
Signage,  Landlord has made no representation or warranty to Tenant with respect
to the probability of obtaining all necessary governmental approvals and permits
for  Tenant's  Signage.  In the event  Tenant  does not  receive  the  necessary
governmental approvals and permits for Tenant's Signage, Tenant's and Landlord's
rights  and  obligations  under  the  remaining  TCCs of  this  Lease  shall  be
unaffected.

          23.4.2  Objectionable  Name.  To the  extent  Original  Tenant  or its
Permitted  Transferee  desires  to  change  the name  and/or  logo set  forth on
Tenant's  Signage,  such name and/or logo shall not have a name which relates to
an  entity  which is of a  character  or  reputation,  or is  associated  with a
political faction or orientation,  which is inconsistent with the quality of the
Project, or which would otherwise reasonably offend a landlord of the Comparable
Buildings  (an  "Objectionable  Name").  The parties  hereby agree that the name
"Anacomp,  Inc.," or any reasonable  derivation thereof,  shall not be deemed an
Objectionable Name.

          23.4.3 Termination of Right to Tenant's Signage.  The rights contained
in this Section 23.4 shall be personal to the Original  Tenant,  and may only be
exercised by the Original  Tenant and its Permitted  Assignee (and not any other
assignee,  sublessee or other  transferee of the Original  Tenant's  interest in
this Lease) if the Original Tenant or its Permitted  Assignee is in occupancy of
at least forty-five  thousand (45,000) Rentable Square Feet of the then-existing
Building.

          23.4.4 Cost and Maintenance.  The costs of the actual signs comprising
Tenant's Signage and the  installation,  design,  construction,  and any and all
other costs associated with Tenant's  Signage,  including,  without  limitation,
utility charges and hook-up fees, permits, and maintenance and repairs, shall be
the sole  responsibility  of Tenant;  provided that Landlord shall construct and
install the  Building  Monument  Sign  (including,  but not limited to,  running
sufficient  power and utilities to the site of the Building  Monument Sign), and
Tenant  shall  reimburse  Landlord for the actual and  reasonable  costs of such
initial installation,  design and construction.  Tenant shall be responsible for
the cost of Tenant's sign on the Building Monument  Sign(s),  but Landlord shall
maintain all monument  signs set forth in this Article 23 in good  condition and
repair, the cost of which in connection with the Building Monument Sign(s) shall
be included in Operating  Expenses.  Should  Tenant's  Signage  require  repairs
and/or maintenance,  as determined in Landlord's  reasonable judgment,  Landlord
shall have the right to provide  Notice  thereof to Tenant and Tenant (except as
set forth  above) shall cause such repairs  and/or  maintenance  to be performed
within thirty (30) days after receipt of such Notice from Landlord,  at Tenant's
sole cost and expense; provided, however, if such repairs and/or maintenance are
reasonably  expected to require longer than thirty (30) days to perform,  Tenant
shall  commence  such  repairs  and/or  maintenance  within such thirty (30) day
period  and  shall   diligently   prosecute  such  repairs  and  maintenance  to
completion. Should Tenant fail to perform such repairs and/or maintenance within
the periods  described in the immediately  preceding  sentence,  Landlord shall,
upon the delivery of an additional five (5) business days' prior written notice,
have the  right to cause  such  work to be  performed  and to  charge  Tenant as
Additional Rent for the actual cost of such work. Upon the expiration or earlier
termination of this Lease,  Tenant shall, to the extent required by Landlord and
at Tenant's  sole cost and  expense,  cause  Tenant's  Signage to be removed and
shall cause the areas in which such Tenant's  Signage was located to be restored
to the condition  existing  immediately  prior to the placement of such Tenant's
Signage,  ordinary wear and tear excepted. If Tenant fails to timely remove such
Tenant's  Signage or to restore  the areas in which such  Tenant's  Signage  was
located, as provided in the immediately  preceding  sentence,  then Landlord may
perform such work,  and all actual costs  incurred by Landlord in so  performing
shall be reimbursed by Tenant to Landlord within thirty (30) days after Tenant's
receipt of an invoice  therefor.  The TCCs of this Section  23.4.4 shall survive
the expiration or earlier termination of this Lease.

                                   ARTICLE 24

                               COMPLIANCE WITH LAW

     Tenant shall not do anything or suffer  anything to be done in or about the
Premises or the Project  which will in any way conflict  with any law,  statute,
ordinance or other governmental rule,  regulation or requirement now in force or
which may hereafter be enacted or promulgated (collectively, "Applicable Laws").
At its  sole  cost and  expense,  Tenant  shall  promptly  comply  with all such
Applicable Laws which relate to (i) Tenant's use of the Premises for non-general
office use, (ii) the  Alterations  or Tenant  Improvements  in the Premises,  or
(iii) the Base Building,  but, as to the Base Building,  only to the extent such
obligations are triggered by Tenant's Alterations,  the Tenant Improvements,  or
use of  the  Premises  for  non-general  office  use.  Should  any  standard  or
regulation now or hereafter be imposed on Landlord or Tenant by a state, federal
or local  governmental  body  charged  with the  establishment,  regulation  and
enforcement  of   occupational,   health  or  safety  standards  for  employers,
employees,  landlords  or  tenants,  then  Tenant  agrees,  at its sole cost and
expense, to comply promptly with such standards or regulations.  The judgment of
any court of competent  jurisdiction  or the admission of Tenant in any judicial
action,  regardless  of whether  Landlord  is a party  thereto,  that Tenant has
violated any of said governmental measures,  shall be conclusive of that fact as
between  Landlord and Tenant.  Landlord  shall comply with all  Applicable  Laws
relating to the Base Building,  provided that  compliance  with such  Applicable
Laws is not the  responsibility of Tenant under this Lease, and provided further
that Landlord's failure to comply therewith would prohibit Tenant from obtaining
or  maintaining  a  certificate   of  occupancy  for  the  Premises,   or  would
unreasonably and materially affect the safety of Tenant's  employees or create a
significant health hazard for Tenant's employees. Landlord shall be permitted to
include in Operating  Expenses any costs or expenses  incurred by Landlord under
this Article 24 to the extent consistent with the terms of Section 4.2.4, above.

                                   ARTICLE 25

                                  LATE CHARGES

     If any  installment  of Rent or any other sum due from Tenant  shall not be
received by Landlord or Landlord's  designee within five (5) business days after
Tenant's  receipt of written  notice  that the same was not paid when due,  then
Tenant  shall pay to Landlord a late charge  equal to three  percent (3%) of the
overdue  amount  plus any  attorneys'  fees  incurred  by  Landlord by reason of
Tenant's  failure to pay Rent and/or other charges when due hereunder.  The late
charge shall be deemed  Additional  Rent and the right to require it shall be in
addition to all of Landlord's other rights and remedies  hereunder or at law and
shall not be construed as liquidated damages or as limiting  Landlord's remedies
in any manner. In addition to the late charge described above, any Rent or other
amounts owing  hereunder  which are not paid within ten (10) business days after
the date they are due shall bear interest from the date when due until paid at a
rate per annum  equal to the lesser of (i) the  annual  "Bank  Prime  Loan" rate
cited  in  the  Federal  Reserve  Statistical  Release  Publication   G.13(415),
published on the first Tuesday of each calendar month (or such other  comparable
index as Landlord and Tenant shall  reasonably agree upon if such rate ceases to
be  published)  plus  four (4)  percentage  points,  and (ii) the  highest  rate
permitted by applicable law.

                                   ARTICLE 26

              LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

     26.1 Landlord's  Cure. All covenants and agreements to be kept or performed
by Tenant under this Lease shall be  performed  by Tenant at Tenant's  sole cost
and expense and without any  reduction  of Rent,  except to the extent,  if any,
otherwise  expressly  provided  herein.  If Tenant  shall  fail to  perform  any
obligation  under this Lease,  and such failure shall  continue in excess of the
time allowed  under  Section  19.1.2,  above,  unless a specific  time period is
otherwise  stated in this Lease,  Landlord  may, but shall not be obligated  to,
make any such payment or perform any such act on Tenant's  part without  waiving
its rights  based upon any default of Tenant and without  releasing  Tenant from
any obligations hereunder.

     26.2 Tenant's Reimbursement.  Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord,  upon delivery by Landlord
to Tenant of statements therefor: (i) sums equal to expenditures reasonably made
and  obligations  incurred by  Landlord  in  connection  with the  remedying  by
Landlord of Tenant's  defaults  pursuant to the provisions of Section 26.1; (ii)
sums equal to all losses, costs,  liabilities,  damages and expenses referred to
in Article 10 of this Lease; and (iii) sums equal to all  expenditures  made and
obligations incurred by Landlord in collecting or attempting to collect the Rent
or in enforcing or attempting to enforce any rights of Landlord under this Lease
or  pursuant to law,  including,  without  limitation,  all legal fees and other
amounts so expended.  Tenant's obligations under this Section 26.2 shall survive
the expiration or sooner termination of the Lease Term.

                                   ARTICLE 27

                                ENTRY BY LANDLORD

     Landlord  reserves the right at all reasonable times (during Building Hours
with  respect to items (i) and (ii)  below) and upon at least  twenty-four  (24)
hours prior notice to Tenant  (except in the case of an  emergency) to enter the
Premises to (i) inspect them; (ii) show the Premises to prospective  purchasers,
or to  current  or  prospective  mortgagees,  ground or  underlying  lessors  or
insurers,  or during the last nine (9) months of the Lease Term, to  prospective
tenants;  provided,  however,  that  during  the first  three (3) months of such
period in which  Landlord may enter the Premises to show the same to prospective
tenants,  Landlord's  entries for such purpose shall be limited to three (3) per
month   unless   otherwise   agreed  to  by  Tenant;   (iii)  post   notices  of
nonresponsibility;  or  (iv)  alter,  improve  or  repair  the  Premises  or the
Building, or for structural alterations, repairs or improvements to the Building
or  the  Building's  systems  and  equipment.  Notwithstanding  anything  to the
contrary  contained in this  Article 27,  Landlord may enter the Premises at any
time to (A) perform  services  required of Landlord;  (B) take possession due to
any breach of this Lease in the manner  provided  herein;  and (C)  perform  any
covenants of Tenant  which  Tenant fails to perform.  Landlord may make any such
entries  without the  abatement of Rent,  except as  otherwise  provided in this
Lease,  and may take such reasonable  steps as required to accomplish the stated
purposes;  provided,  however,  except for emergencies,  any such entry shall be
performed  in a  commercially  reasonable  manner  so  as  not  to  unreasonably
interfere with Tenant's use of the Premises and shall be performed  after normal
business hours if reasonably practical. Except as otherwise set forth in Section
3.3,  Tenant  hereby  waives  any  claims for  damages  or for any  injuries  or
inconvenience to or interference with Tenant's business,  lost profits, any loss
of occupancy or quiet  enjoyment of the Premises,  and any other loss occasioned
thereby. For each of the above purposes,  Landlord shall at all times have a key
with which to unlock all the doors in the Premises,  excluding  Tenant's vaults,
safes and  special  security  areas  designated  in  advance  by  Tenant.  In an
emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises.  Any entry into the Premises by
Landlord  in the  manner  hereinbefore  described  shall  not be  deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an actual or
constructive  eviction of Tenant from any portion of the Premises.  No provision
of this Lease shall be construed as obligating  Landlord to perform any repairs,
alterations or decorations except as otherwise  expressly agreed to be performed
by Landlord herein.

                                   ARTICLE 28

                                 TENANT PARKING

     Commencing on the Lease  Commencement Date, Tenant and the Tenant's parties
(including Tenant's visitors) shall be entitled to utilize,  without charge, all
of parking spaces  identified in Section 9 of the Summary,  throughout the Lease
Term,  which  parking  spaces  shall be  located  in the  Project  parking  area
exclusively  serving the  Premises.  Each  parking  space shall be for a single,
non-tandem  space.  Included in such allotment of parking spaces provided in the
Summary shall be the number of handicapped parking spaces required by Applicable
Law.  Tenant may cause all of such  parking  spaces to be marked  "reserved  for
Anacomp" or otherwise denoted to be reserved for its use; provided,  however, in
connection  therewith,  Tenant shall additionally be responsible for posting any
governmentally required notices. In connection therewith, Tenant may establish a
sticker or other identification system for such parking; provided,  however, the
enforcement  of Tenant's  parking  areas only for such  stickered  or  otherwise
identified  Tenant  visitors/guests  shall be  reasonably  conducted  by Tenant.
Tenant shall  cooperate  with Landlord to attempt to require that Tenant Parties
comply with the Rules and Regulations  which are prescribed from time to time by
Landlord  for the  orderly  operation  and use of the  parking  areas  where the
parking spaces are located.  Tenant hereby acknowledges and agrees that Landlord
may, at any time upon thirty (30) days' prior written notice to Tenant,  without
incurring  any  liability to Tenant and without any abatement of Rent under this
Lease,  from  time to time,  temporarily  close-off  or  restrict  access to the
Project parking areas only for purposes of permitting or facilitating  requisite
construction,  alteration  or  improvements,  not to  exceed,  without  Tenant's
reasonable  approval,  three (3) business days for any single  occasion or seven
(7) business days in any calendar year; provided, however, that to the extent it
is practicable  for such work to be conducted (and completed) on weekends and/or
national holidays, Landlord shall take commercially reasonable steps to do so.

                                   ARTICLE 29

                            MISCELLANEOUS PROVISIONS

     29.1 Terms;  Captions.  The words  "Landlord"  and  "Tenant" as used herein
shall  include the plural as well as the  singular.  The  necessary  grammatical
changes  required to make the provisions  hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be  assumed  as though in each  case  fully  expressed.  The  captions  of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.

     29.2 Binding Effect. Subject to all other provisions of this Lease, each of
the  covenants,  conditions  and  provisions  of this Lease shall  extend to and
shall,  as the  case may  require,  bind or  inure  to the  benefit  not only of
Landlord  and  of  Tenant,   but  also  of  their  respective  heirs,   personal
representatives,  successors  or assigns,  provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

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

     29.4 Intentionally Omitted.

     29.5 Transfer of Landlord's Interest. Tenant acknowledges that Landlord has
the right to  transfer  all or any  portion of its  interest  in the  Project or
Building  and in this  Lease,  and Tenant  agrees  that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease (and Tenant agrees to look solely to such  transferee for the  performance
of Landlord's obligations hereunder) for obligations to be performed by Landlord
after the date of  transfer  and such  transferee  shall be deemed to have fully
assumed  and be liable  for all  obligations  of this Lease to be  performed  by
Landlord,  including the return of any Security Deposit, and Tenant shall attorn
to such  transferee.  Tenant further  acknowledges  that Landlord may assign its
interest in this Lease to a mortgage  lender as  additional  security and agrees
that  such an  assignment  shall  not  release  Landlord  from  its  obligations
hereunder and that Tenant shall continue to look to Landlord for the performance
of its obligations hereunder.

     29.6 Prohibition  Against Recording.  Except as provided in Section 29.4 of
this Lease,  neither this Lease, nor any memorandum,  affidavit or other writing
with respect  thereto,  shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant.

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

     29.8  Relationship  of Parties.  Nothing  contained  in this Lease shall be
deemed or  construed  by the parties  hereto or by any third party to create the
relationship  of  principal  and  agent,  partnership,  joint  venturer  or  any
association between Landlord and Tenant.

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

     29.10  Time  of  Essence.  Time  is of  the  essence  with  respect  to the
performance  of every  provision of this Lease in which time of performance is a
factor.

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

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

     29.13  Landlord  Exculpation.  The  liability  of Landlord or the  Landlord
Parties to Tenant for any  default  by  Landlord  under this Lease or arising in
connection herewith or with Landlord's operation,  management,  leasing, repair,
renovation,  alteration  or any other  matter  relating  to the  Project  or the
Premises shall be limited solely and  exclusively to an amount which is equal to
the  net  interest  of  Landlord  in  the  Building  (following  payment  of any
outstanding liens and/or mortgages).  Neither Landlord,  nor any of the Landlord
Parties shall have any personal liability therefor,  and Tenant hereby expressly
waives and releases such personal  liability on behalf of itself and all persons
claiming by, through or under Tenant. The limitations of liability  contained in
this  Section  29.13 shall inure to the benefit of  Landlord's  and the Landlord
Parties'  present  and  future  partners,  beneficiaries,  officers,  directors,
trustees,  shareholders,  agents and employees,  and their respective  partners,
heirs,  successors  and  assigns.  Under no  circumstances  shall any present or
future  partner  of  Landlord  (if  Landlord  is a  partnership),  or trustee or
beneficiary  (if  Landlord  or any  partner of  Landlord  is a trust),  have any
liability  for the  performance  of  Landlord's  obligations  under this  Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties  shall be liable  under any  circumstances  for  injury or damage to, or
interference  with,  Tenant's  business,  including  but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity,  loss of
goodwill or loss of use, in each case, however occurring.

     29.14 Entire Agreement. It is understood and acknowledged that there are no
oral agreements  between the parties hereto  affecting this Lease and this Lease
constitutes  the parties'  entire  agreement  with respect to the leasing of the
Premises  and  supersedes  and  cancels  any  and  all  previous   negotiations,
arrangements,  brochures,  agreements and  understandings,  if any,  between the
parties  hereto or  displayed  by Landlord to Tenant with respect to the subject
matter  thereof,  and none thereof  shall be used to interpret or construe  this
Lease. None of the terms, covenants,  conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.

     29.15 Right to Lease.  In the event of a recapture of space in the Building
by Landlord  pursuant to the terms and conditions of Section 14.4 of this Lease,
Landlord  shall have the  absolute  right to effect such other  tenancies in the
Project  as  Landlord  in the  exercise  of its  sole  business  judgment  shall
determine to best promote the interests of the Building or Project.  Tenant does
not rely on the fact, nor does Landlord  represent,  that any specific tenant or
type or number of tenants shall,  during the Lease Term, occupy any space in the
Building or Project.

     29.16 Force  Majeure.  Any  prevention,  delay or stoppage  due to strikes,
lockouts,  labor disputes, acts of God, inability to obtain services,  labor, or
materials  or  reasonable  substitutes  therefor,  governmental  actions,  civil
commotions,  fire or other  casualty,  and other  causes  beyond the  reasonable
control  of  the  party  obligated  to  perform,  except  with  respect  to  the
obligations  imposed with regard to Rent and other  charges to be paid by Tenant
pursuant to this Lease and except as to Tenant's  obligations  under  Articles 5
and 24 of this Lease (collectively, a "Force Majeure"), notwithstanding anything
to the contrary  contained in this Lease,  shall excuse the  performance of such
party  for a period  equal  to any  such  prevention,  delay  or  stoppage  and,
therefore,  if  this  Lease  specifies  a  time  period  for  performance  of an
obligation of either party,  that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.

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

     29.18 Notices. All notices, demands, statements, designations, approvals or
other communications (collectively,  "Notices") given or required to be given by
either party to the other hereunder or by law shall be in writing,  shall be (A)
sent by United States  certified or registered  mail,  postage  prepaid,  return
receipt  requested  ("Mail"),  (B) transmitted by telecopy,  if such telecopy is
promptly  followed  by a Notice  sent by Mail,  (C)  delivered  by a  nationally
recognized overnight courier, or (D) delivered  personally.  Any Notice shall be
sent,  transmitted,  or  delivered,  as  the  case  may  be,  to  Tenant  at the
appropriate  address  set forth in Section 10 of the  Summary,  or to such other
place as Tenant may from time to time  designate in a Notice to Landlord,  or to
Landlord at the addresses  set forth below,  or to such other places as Landlord
may from time to time designate in a Notice to Tenant. Any Notice will be deemed
given (i) three (3) days  after the date it is posted if sent by Mail,  (ii) the
date the telecopy is transmitted if confirmed  receipt occurs prior to 4:00PM on
such date,  otherwise on the date immediately  following such transmittal  date,
(iii) the date the overnight courier delivery is made, or (iv) the date personal
delivery is made or attempted to be made.  If Tenant is notified of the identity
and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall
give to such  mortgagee or ground or  underlying  lessor  written  notice of any
default by Landlord  under the terms of this Lease by  registered  or  certified
mail,  and such  mortgagee  or  ground  or  underlying  lessor  shall be given a
reasonable  opportunity  to cure such default prior to Tenant's  exercising  any
remedy  available  to  Tenant.  As of the date of this  Lease,  any  Notices  to
Landlord must be sent,  transmitted,  or  delivered,  as the case may be, to the
following addresses:

                             Kilroy Realty Corporation
                             12200 W. Olympic Boulevard,
                             Suite 200
                             Los Angeles, California  90064
                             Attention:  Legal Department

                             with copies to:

                             Kilroy Realty Corporation
                             3811 Valley Centre Drive, Suite 300
                             San Diego, California  92130
                             Attention:  Mr. Roger Simsiman

                             and

                             Allen, Matkins, Leck, Gamble & Mallory
                             1999 Avenue of the Stars, Suite 1800
                             Los Angeles, California 90067
                             Attention:  Anton N. Natsis, Esq.

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

     29.20  Authority.  If  Tenant  or  Landlord  is  a  corporation,  trust  or
partnership,  each  individual  executing  this  Lease on  behalf  of  Tenant or
Landlord hereby represents and warrants that Tenant or Landlord, as appropriate,
is a duly formed and existing entity  qualified to do business in California and
that  Tenant and  Landlord,  as  appropriate,  has full right and  authority  to
execute and deliver this Lease and that each person  signing on behalf of Tenant
or Landlord,  as appropriate,  is authorized to do so. In such event,  Tenant or
Landlord,  as appropriate,  shall,  within ten (10) days after execution of this
Lease,  deliver to the other party satisfactory  evidence of such authority and,
if a corporation, upon demand by Tenant or Landlord, also deliver to Landlord or
Tenant, as appropriate,  satisfactory  evidence of (i) good standing in Tenant's
or Landlord, as appropriate, state of incorporation and (ii) qualification to do
business in California.

     29.21  Attorneys'  Fees. In the event that either Landlord or Tenant should
bring suit for the  possession of the Premises,  for the recovery of any sum due
under this Lease, or because of the breach of any provision of this Lease or for
any other  relief  against  the other,  then all costs and  expenses,  including
reasonable  attorneys'  fees,  incurred by the prevailing party therein shall be
paid by the other party,  which  obligation on the part of the other party shall
be deemed to have  accrued on the date of the  commencement  of such  action and
shall be enforceable whether or not the action is prosecuted to judgment.

     29.22 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed
and  enforced in  accordance  with the laws of the State of  California.  IN ANY
ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I)
THE  JURISDICTION  OF ANY COMPETENT  COURT WITHIN THE STATE OF CALIFORNIA,  (II)
SERVICE OF PROCESS BY ANY MEANS  AUTHORIZED BY CALIFORNIA  LAW, AND (III) IN THE
INTEREST  OF  SAVING  TIME AND  EXPENSE,  TRIAL  WITHOUT  A JURY IN ANY  ACTION,
PROCEEDING OR  COUNTERCLAIM  BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER  OR  THEIR  SUCCESSORS  IN  RESPECT  OF ANY  MATTER  ARISING  OUT OF OR IN
CONNECTION WITH THIS LEASE,  THE  RELATIONSHIP OF LANDLORD AND TENANT,  TENANT'S
USE OR OCCUPANCY OF THE PREMISES,  AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR  STATUTORY  REMEDY.  IN THE EVENT  LANDLORD  COMMENCES  ANY SUMMARY
PROCEEDINGS  OR ACTION FOR  NONPAYMENT OF BASE RENT OR ADDITIONAL  RENT,  TENANT
SHALL NOT INTERPOSE ANY  COUNTERCLAIM OF ANY NATURE OR DESCRIPTION  (UNLESS SUCH
COUNTERCLAIM  SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE
RELEGATED TO AN INDEPENDENT ACTION AT LAW.

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

     29.24  Brokers.  Landlord and Tenant hereby warrant to each other that they
have had no dealings with any real estate broker or agent in connection with the
negotiation  of this Lease,  excepting  only the real  estate  brokers or agents
specified in Section 12 of the Summary (the "Brokers"), and that they know of no
other real estate  broker or agent who is entitled to a commission in connection
with this Lease.  Landlord shall pay such Brokers  pursuant to separate  written
agreements between Landlord and the Brokers.  Each party agrees to indemnify and
defend the other party  against and hold the other party  harmless  from any and
all  claims,  demands,  losses,  liabilities,  lawsuits,  judgments,  costs  and
expenses (including without limitation  reasonable attorneys' fees) with respect
to any leasing  commission  or  equivalent  compensation  alleged to be owing on
account of any  dealings  with any real estate  broker or agent,  other than the
Brokers, occurring by, through, or under the indemnifying party.

     29.25  Independent  Covenants.  This Lease shall be construed as though the
covenants  herein between  Landlord and Tenant are independent and not dependent
and Tenant  hereby  expressly  waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its  obligations  set forth herein,
Tenant  shall not be entitled to make any repairs or perform any acts  hereunder
at  Landlord's  expense  or to any  setoff  of the Rent or other  amounts  owing
hereunder against Landlord.

     29.26 Project or Building  Name and Signage.  Tenant shall not use the name
of the Project or Building or use  pictures or  illustrations  of the Project or
Building in advertising or other  publicity or for any purpose other than as the
address of the business to be conducted by Tenant in the  Premises,  without the
prior written consent of Landlord.

     29.27  Counterparts.  This Lease may be executed in  counterparts  with the
same effect as if both  parties  hereto had  executed  the same  document.  Both
counterparts shall be construed together and shall constitute a single lease.

     29.28 Confidentiality.  Landlord shall have the right to review and approve
(with no less than three (3) business days advance notice) any press releases of
Tenant which  reference (i) the Premises or any part thereof (or makes reference
in such a manner to  identify  the  Premises or any  portion  thereof),  or (ii)
Landlord (or makes reference in such a manner as to identify Landlord).

     29.29 Transportation Management. Tenant shall fully comply with all present
or future  mandatory  programs  intended to manage  parking,  transportation  or
traffic in and around the Building,  and in connection  therewith,  Tenant shall
take responsible  action for the  transportation  planning and management of all
employees  located  at the  Premises  by working  directly  with  Landlord,  any
governmental    transportation    management    organization    or   any   other
transportation-related committees or entities.

     29.30 Building Renovations.  It is specifically  understood and agreed that
Landlord has made no  representation or warranty to Tenant and has no obligation
and has made no  promises  to  alter,  remodel,  improve,  renovate,  repair  or
decorate the Premises, Building, or any part thereof and that no representations
respecting  the  condition  of the  Premises or the  Building  have been made by
Landlord to Tenant except as specifically set forth herein or in the Tenant Work
Letter.  However,  Tenant hereby acknowledges that Landlord may during the Lease
Term renovate,  improve, alter, or modify (collectively,  the "Renovations") the
Premises including without  limitation the parking  structure,  common areas (if
any),  systems and equipment,  roof, and structural  portions of the same, which
Renovations may include,  without  limitation,  modifying the Premises to comply
with  applicable laws and  regulations,  including  regulations  relating to the
physically disabled,  seismic conditions,  and building safety and security, and
in connection  with any  Renovations,  Landlord may,  among other things,  erect
scaffolding or other  necessary  structures in the Building,  limit or eliminate
access to portions of the Project,  including  portions of the common areas,  or
perform work in the Building,  which work may create noise, dust or leave debris
in the  Building.  Tenant  hereby agrees that such  Renovations  and  Landlord's
actions  in  connection  with  such  Renovations  shall in no way  constitute  a
constructive  eviction of Tenant nor entitle  Tenant to any  abatement  of Rent.
Landlord shall have no  responsibility or for any reason be liable to Tenant for
any direct or indirect injury to or interference  with Tenant's business arising
from the  Renovations,  nor shall  Tenant be  entitled  to any  compensation  or
damages  from  Landlord  for  loss of the use of the  whole  or any  part of the
Premises or of Tenant's  personal  property or  improvements  resulting from the
Renovations or Landlord's  actions in connection with such  Renovations,  or for
any  inconvenience  or annoyance  occasioned by such  Renovations  or Landlord's
actions.

     29.31 No Violation.  Tenant hereby warrants and represents that neither its
execution  of nor  performance  under this  Lease  shall  cause  Tenant to be in
violation of any  agreement,  instrument,  contract,  law, rule or regulation by
which Tenant is bound,  and Tenant shall  protect,  defend,  indemnify  and hold
Landlord harmless against any claims,  demands,  losses,  damages,  liabilities,
costs and expenses,  including,  without limitation,  reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.

     29.32  Communications  and Computer  Lines.  Tenant may install,  maintain,
replace,  remove  or  use  any  communications  or  computer  wires  and  cables
(collectively,  the "Lines") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain  Landlord's  prior written  consent,  which consent
shall not be unreasonably withheld,  delayed or conditioned,  use an experienced
and qualified contractor approved in writing by Landlord, and comply with all of
the other provisions of Articles 7 and 8 of this Lease,  (ii) the Lines therefor
(including riser cables) shall be appropriately  insulated to prevent  excessive
electromagnetic  fields or radiation,  (iii) any new or existing Lines servicing
the Premises shall comply with all applicable governmental laws and regulations,
(iv) as a condition to permitting the  installation  of new Lines,  Landlord may
require that Tenant remove existing Lines located in or serving the Premises and
repair any damage in connection with such removal,  and (v) Tenant shall pay all
costs in  connection  therewith.  Landlord  reserves  the right to require  that
Tenant remove any Lines  located in or serving the Premises  which are installed
in violation of these  provisions,  or which are at any time in violation of any
laws or represent a dangerous or potentially dangerous condition.

     29.33 Hazardous Substances.

          29.33.1  Definitions.  For  purposes  of  this  Lease,  the  following
definitions shall apply: "Hazardous Material(s)" shall mean any solid, liquid or
gaseous  substance or material that is described or  characterized as a toxic or
hazardous  substance,  waste,  material,  pollutant,  contaminant  or infectious
waste, or any matter that in certain specified  quantities would be injurious to
the  public  health  or  welfare,  or words  of  similar  import,  in any of the
"Environmental  Laws," as that term is defined  below,  or any other words which
are intended to define,  list or classify  substances  by reason of  deleterious
properties  such  as  ignitability,  corrosivity,  reactivity,  carcinogenicity,
toxicity or reproductive  toxicity and includes,  without limitation,  asbestos,
petroleum (including crude oil or any fraction thereof, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel, or any mixture
thereof),  petroleum  products,  polychlorinated  biphenyls,  urea formaldehyde,
radon gas, nuclear or radioactive  matter,  medical waste, soot, vapors,  fumes,
acids,  alkalis,  chemicals,  microbial  matters (such as molds,  fungi or other
bacterial  matters),  biological  agents and  chemicals  which may cause adverse
health  effects,  including  but not  limited  to,  cancers  and  /or  toxicity.
"Environmental   Laws"  shall  mean  any  and  all  federal,   state,  local  or
quasi-governmental  laws  (whether  under  common  law,  statute or  otherwise),
ordinances,  decrees, codes, rulings,  awards, rules, regulations or guidance or
policy  documents now or hereafter  enacted or  promulgated  and as amended from
time to time, in any way relating to (i) the protection of the environment,  the
health and  safety of  persons  (including  employees),  property  or the public
welfare from actual or potential release, discharge, escape or emission (whether
past or present) of any Hazardous Materials or (ii) the manufacture, processing,
distribution,  use, treatment,  storage, disposal,  transport or handling of any
Hazardous Materials.

          29.33.2  Compliance with Environmental  Laws.  Landlord covenants that
during the Lease Term,  Landlord  shall  comply with all  Environmental  Laws in
accordance  with,  and as  required  by, the TCCs of  Article 24 of this  Lease.
Tenant shall not sell,  use, or store in or around the  Premises  any  Hazardous
Materials,  except if stored, properly packaged and labeled,  disposed of and/or
used in accordance  with  applicable  Environmental  Laws.  In addition,  Tenant
agrees that it: (i) shall not cause or suffer to occur, the release,  discharge,
escape or emission of any  Hazardous  Materials  at,  upon,  under or within the
Premises  or any  contiguous  or  adjacent  premises;  (ii)  shall not engage in
activities  at the  Premises  that could result in, give rise to, or lead to the
imposition  of liability  upon Tenant or Landlord or the creation of a lien upon
the  building or land upon which the  Premises is  located;  (iii) shall  notify
Landlord promptly  following receipt of any knowledge with respect to any actual
release,  discharge,  escape  or  emission  (whether  past  or  present)  of any
Hazardous  Materials  at,  upon,  under or within the  Premises;  and (iv) shall
promptly   forward  to  Landlord  copies  of  all  orders,   notices,   permits,
applications  and  other  communications  and  reports  in  connection  with any
release,  discharge,  escape or emission of any  Hazardous  Materials  at, upon,
under or within the Premises or any contiguous or adjacent premises.

          29.33.3  Landlord's Right of Environmental  Audit.  Landlord may, upon
reasonable  notice to Tenant,  be granted  access to and enter the  Premises (as
often as is  reasonably  necessary)  to  perform or cause to have  performed  an
environmental inspection, site assessment or audit. Such environmental inspector
or auditor may be chosen by Landlord,  in its sole discretion,  and be performed
at  Landlord's  sole expense.  To the extent that the report  prepared upon such
inspection,  assessment or audit,  indicates the presence of Hazardous Materials
in violation of Environmental Laws (to the extent the same were caused by Tenant
or Tenant Parties),  or provides  recommendations or suggestions to prohibit the
release,  discharge,  escape or emission of any  Hazardous  Materials  at, upon,
under or within the Premises,  or to comply with any Environmental  Laws, Tenant
shall promptly,  at Tenant's sole expense,  comply with such  recommendations or
suggestions,   including,   but  not  limited  to  performing   such  additional
investigative or subsurface  investigations  or remediation(s) as recommended by
such inspector or auditor.  Notwithstanding  the above, if at any time, Landlord
has actual  notice or reasonable  cause to believe that Tenant has violated,  or
permitted  any  violations  of any  Environmental  Law,  then  Landlord  will be
entitled to perform its  environmental  inspection,  assessment  or audit at any
time,  notwithstanding  the above mentioned annual  limitation,  and Tenant must
reimburse Landlord for the cost or fees incurred for such as Additional Rent.

          29.33.4  Indemnifications.   Landlord  agrees  to  indemnify,  defend,
protect and hold  harmless the Tenant  Parties  from and against any  liability,
obligation,  damage or costs, including without limitation,  attorneys' fees and
costs,  resulting  directly or  indirectly  from any use,  presence,  removal or
disposal of any Hazardous  Materials to the extent such  liability,  obligation,
damage or costs was a result of actions  caused or  permitted  by  Landlord or a
Landlord Party.  Tenant agrees to indemnify,  defend,  protect and hold harmless
the  Landlord  Parties  from and against any  liability,  obligation,  damage or
costs,  including  without  limitation,  attorneys'  fees and  costs,  resulting
directly  or  indirectly  from any use,  presence,  removal or  disposal  of any
Hazardous  Materials or breach of any provision of this  section,  to the extent
such  liability,  obligation,  damage or costs was a result of actions caused or
permitted by Tenant or a Tenant Party.

     29.34 Intentionally Omitted.

     29.35 Communications Services.


          29.35.1  The  Provider.  Landlord  has  advised  Tenant  that  certain
communications  services  may be offered to Tenant by Pacific  Bell,  which is a
concessionaire  under  contract  to  Landlord  ("Provider").   Tenant  shall  be
permitted  to contract  with  Provider  for the  provision of any or all of such
services on such terms and conditions as Tenant and Provider may agree.

          29.35.2 Other Terms. Tenant acknowledges and agrees that: (i) Landlord
has  made  no  warranty  or   representation  to  Tenant  with  respect  to  the
availability  of any such services,  or the quality,  reliability or suitability
thereof;  (ii) the  Provider  is not  acting as the agent or  representative  of
Landlord in the provision of such services, and Landlord shall have no liability
or  responsibility  for any  failure  or  inadequacy  of such  services,  or any
equipment or facilities used in the furnishing  thereof,  or any act or omission
of Provider, or its agents, employees, representatives, officers or contractors;
(iii) Landlord shall have no  responsibility  or liability for the installation,
alteration, repair, maintenance, furnishing, operation, adjustment or removal of
any such  services,  equipment  or  facilities;  and (iv) any  contract or other
agreement  between Tenant and Provider  shall be independent of this Lease,  the
obligations  of Tenant  hereunder,  and the rights of Landlord  hereunder,  and,
without  limiting the foregoing,  no default or failure of Provider with respect
to any such  services,  equipment  or  facilities,  or  under  any  contract  or
agreement  relating  thereto,  shall  have any  effect on this  Lease or give to
Tenant  any  offset  or  defense  to the  full  and  timely  performance  of its
obligations hereunder,  or entitle Tenant to any abatement of rent or additional
rent or any other payment required to be made by Tenant hereunder, or constitute
any accrual or  constructive  eviction of Tenant,  or otherwise give rise to any
other claim of any nature against Landlord.
<PAGE>

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

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

                                          "LANDLORD":

                                          KILROY REALTY, L.P.,
                                          a Delaware limited partnership

                                          By:   Kilroy Realty Corporation,
                                                a Maryland corporation,
                                                General Partner

                                                By:

                                                     Its:

                                                By:

                                                     Its:



                                          "TENANT":

                                          ANACOMP, INC.,
                                          a Indiana corporation


                                          By:

                                                  Its:

                                          By:

                                                  Its:


<PAGE>


                                    EXHIBIT A


                         15378 AVENUE OF SCIENCE PROJECT

                               OUTLINE OF PREMISES

Diagram of Facility


<PAGE>


                                    EXHIBIT B


                         15378 AVENUE OF SCIENCE PROJECT

                               TENANT WORK LETTER

                                    EXHIBIT B

                         15378 AVENUE OF SCIENCE PROJECT

                               TENANT WORK LETTER

     This Tenant Work Letter shall set forth the terms and  conditions  relating
to the construction of the tenant improvements in the Premises. This Tenant Work
Letter is essentially organized  chronologically and addresses the issues of the
construction of the Premises,  in sequence, as such issues will arise during the
actual  construction of the Premises.  All references in this Tenant Work Letter
to  Articles or Sections of "this  Lease"  shall mean the  relevant  portions of
Articles 1 through 29 of the Office  Lease to which this  Tenant  Work Letter is
attached as Exhibit B, and all references in this Tenant Work Letter to Sections
of "this  Tenant Work  Letter"  shall mean the  relevant  portions of Sections 1
through 6 of this Tenant Work Letter.

     1.

DELIVERY OF THE PREMISES AND BASE BUILDING

          a. Base Building as Constructed by Landlord. Landlord has constructed,
at its sole cost and expense,  the "Base  Building,"  as that term is defined is
Section 8.2 of this Lease. The Base Building,  as delivered to Tenant,  shall be
in good  condition and working  order and shall comply with the existing  CC&Rs,
the PID, applicable  building codes and other governmental laws,  ordinances and
regulations  which  were  enacted  prior  to the  Lease  Commencement  Date  and
applicable to new  construction  for unoccupied  space to the extent required to
obtain a certificate of occupancy  (collectively,  the "Code") and Tenant shall,
except as  otherwise  set forth in this  Lease or in this  Tenant  Work  Letter,
accept the  Premises and Base  Building  from  Landlord in their then  existing,
"as-is" condition as of the Lease  Commencement  Date of this Lease,  subject to
the terms of this Tenant Work Letter. Tenant shall have the right, within ninety
(90) days  following  the Lease  Commencement  Date,  to notify  Landlord of any
material  defects in the Base  Building,  in which event Landlord shall promptly
repair such items to Tenant's reasonable satisfaction.

     2.

TENANT IMPROVEMENTS

          a.  Tenant  Improvement  Allowance.  Tenant  shall  be  entitled  to a
one-time tenant improvement  allowance (the "Tenant  Improvement  Allowance") in
the amount of Eight Hundred  Thousand and No/100 Dollars  ($800,000.00)  for the
costs relating to the initial design and  construction of Tenant's  improvements
which are permanently  affixed to the Premises or as otherwise  allowed pursuant
to the  express  terms of the Lease or this  Tenant  Work  Letter  (the  "Tenant
Improvements").  Except as otherwise  expressly  set forth  herein,  in no event
shall Landlord be obligated to make  disbursements  pursuant to this Tenant Work
Letter in a total amount which exceeds the Tenant Improvement Allowance,  as the
same may be increased by the "TIA  Increase"  pursuant to Section  2.2.2 of this
Tenant Work Letter.  All Tenant  Improvements  for which the Tenant  Improvement
Allowance has been made available shall be deemed Landlord's  property under the
terms of the Lease.

          b. Disbursement of the Tenant Improvement Allowance.


               i) Tenant  Improvement  Allowance Items.  Except as otherwise set
forth in this Tenant Work  Letter,  the Tenant  Improvement  Allowance  shall be
disbursed by Landlord only for the following items and costs  (collectively  the
"Tenant Improvement Allowance Items"):


                    (1)  Payment  of  the  fees  of  the   "Architect"  and  the
"Engineers,"  as those  terms are  defined in Section  3.1 of this  Tenant  Work
Letter,  and  payment of the fees  incurred  by, and the cost of  documents  and
materials  supplied by,  Landlord and Landlord's  consultants in connection with
the  preparation  and  review of the  "Construction  Drawings,"  as that term is
defined in Section 3.1 of this Tenant Work Letter;

                    (2) The  payment  of plan  check,  permit and  license  fees
relating to construction of the Tenant Improvements;

                    (3) The cost of  construction  of the  Tenant  Improvements,
including,  without limitation,  testing and inspection costs,  freight elevator
usage,  hoisting and trash  removal  costs,  and  contractors'  fees and general
conditions;

                    (4) The cost of any changes in the Base  Building  when such
changes are required by the Construction Drawings (including if such changes are
due to the fact that such work is prepared on an unoccupied basis), such cost to
include all direct  architectural  and/or engineering fees and expenses incurred
in connection therewith;

                    (5) The cost of any changes to the Construction  Drawings or
Tenant Improvements required by Code;

                    (6) The cost of  Tenant's  voice  and data  cabling  (not to
exceed $140,000.00);

                    (7) The  cost of the  "Coordination  Fee,"  as that  term is
defined in Section 4.2.2 of this Tenant Work Letter;

                    (8) Sales and use taxes; and

                    (9) All other costs to be expended by Landlord in connection
with the construction of the Tenant Improvements.

               ii)  Increase  Tenant  Improvement  Allowance.  Tenant may,  upon
written  notice to  Landlord  given on or before the date which  occurs ten (10)
business  days  following the "Final Costs  Delivery  Date," as that term is set
forth in Section 4.2.1,  below, elect to cause the Tenant Improvement  Allowance
to be  increased  by an amount (the "TIA  Increase")  set forth in such  notice;
provided,  however,  that the amount of such TIA Increase shall (i) be an amount
equal to an even number of United  States  Dollars (as opposed to  fractions  of
United States Dollars),  and (ii) in no event exceed $250,000.00.  To the extent
Tenant  elects to  increase  the  amount  of the  Tenant  Improvement  Allowance
pursuant to this Section  2.2.2,  such TIA Increase  shall be amortized over the
initial Lease Term using an amortization rate of eleven and one-half percent (11
1/2%) per annum, the monthly payment of which shall be payable in the same place
and in the same manner as Base Rent for each month of the initial  Lease Term as
"Additional  Rent,"  as that  term is set forth in  Section  4.1 of this  Lease.
Accordingly,  for each dollar of TIA Increase utilized by Tenant,  the Base Rent
payable by Tenant  throughout  the initial Lease Term, as set forth in Section 4
of the Summary, shall be increased by an amount equal to $0.0155 per month.

               iii)  Disbursement of Tenant  Improvement  Allowance.  During the
construction   of  the  Tenant   Improvements,   Landlord   shall  make  monthly
disbursements  of  the  Tenant  Improvement  Allowance  for  Tenant  Improvement
Allowance  Items for the  benefit of Tenant and shall  authorize  the release of
monies for the benefit of Tenant as follows.

                    (1)  Monthly  Disbursements.  On or  before  the day of each
calendar month, as determined by Landlord, during the construction of the Tenant
Improvements  (or such other  date as  Landlord  may  designate),  Tenant  shall
deliver to Landlord: (i) a request for payment of the "Contractor," as that term
is defined in Section 4.1 of this Tenant Work Letter,  approved by Tenant,  in a
form to be provided by Landlord,  showing the schedule,  by trade, of percentage
of completion of the Tenant Improvements in the Premises,  detailing the portion
of the work completed and the portion not  completed;  (ii) invoices from all of
"Tenant's  Agents," as that term is defined in Section 4.1.2 of this Tenant Work
Letter,  for labor  rendered  and  materials  delivered to the  Premises;  (iii)
executed mechanic's lien releases from all of Tenant's Agents which shall comply
with the  appropriate  provisions,  as  reasonably  determined  by Landlord,  of
California Civil Code Section 3262(d); and (iv) all other information reasonably
requested by Landlord.  Tenant's  request for payment  shall be deemed  Tenant's
acceptance and approval of the work furnished  and/or the materials  supplied as
set forth in Tenant's  payment  request.  Thereafter,  Landlord  shall deliver a
check to Tenant made jointly  payable to Contractor and Tenant in payment of the
lesser of: (A) the amounts so requested by Tenant,  as set forth in this Section
2.2.3.1, above, less a ten percent (10%) retention (the aggregate amount of such
retentions  to be known as the "Final  Retention"),  and (B) the  balance of any
remaining  available portion of the Tenant Improvement  Allowance (not including
the Final  Retention),  provided  that Landlord does not dispute any request for
payment  based  on  non-compliance  of  any  work  with  the  "Approved  Working
Drawings,"  as  that  term  is  defined  in  Section  3.4  below,  or due to any
substandard  work, or for any other reason.  Landlord's  payment of such amounts
shall not be deemed  Landlord's  approval or acceptance of the work furnished or
materials supplied as set forth in Tenant's payment request.

                    (2)  Final  Retention.  Subject  to the  provisions  of this
Tenant Work Letter,  a check for the Final  Retention  payable jointly to Tenant
and Contractor shall be delivered by Landlord to Tenant following the completion
of construction  of the Premises,  provided that (i) Tenant delivers to Landlord
properly  executed  mechanics lien releases in compliance  with both  California
Civil  Code  Section   3262(d)(2)  and  either  Section  3262(d)(3)  or  Section
3262(d)(4),  (ii) Landlord has determined that no substandard  work exists which
adversely affects the mechanical, electrical, plumbing, heating, ventilating and
air conditioning, life-safety or other systems of the Building, the curtain wall
of the Building,  the structure or exterior  appearance of the Building,  or any
other  tenant's use of such other tenant's  leased  premises in the Building and
(iii)  Architect  delivers  to  Landlord  a  certificate,  in a form  reasonably
acceptable  to  Landlord,   certifying  that  the  construction  of  the  Tenant
Improvements in the Premises has been substantially completed.

                    (3) Other  Terms.  Landlord  shall only be obligated to make
disbursements  from the Tenant  Improvement  Allowance  to the extent  costs are
incurred  by  Tenant  for  Tenant   Improvement   Allowance  Items.  All  Tenant
Improvement  Allowance Items for which the Tenant Improvement Allowance has been
made  available  shall be  deemed  Landlord's  property  under the terms of this
Lease.

          c. Standard Tenant  Improvement  Package.  Landlord  requires  certain
"Building Standard Tenant Improvements" specifications for the Building standard
components  to be used in the  construction  of the Tenant  Improvements  in the
Premises.  The  quality of Tenant  Improvements  shall be equal to or of greater
quality  than the quality of the  Building  Standard  Tenant  Improvements.  For
purposes of this Tenant Work Letter,  "Building  Standard  Tenant  Improvements"
shall  mean  first  class  improvements  consistent  with the  level  of  tenant
improvements constructed in Comparable Buildings.

          d.  Removal of  Extraordinary  Alterations.  Landlord may require that
Tenant  remove any initial  Tenant  Improvements  in the Premises  identified by
Landlord  concurrently  with  Landlord's  review and  approval  of the  Approved
Construction  Drawings as "Extraordinary  Alterations," and to repair any damage
to the Premises and Building  caused by such removal  (reasonable  wear and tear
excepted);  provided, however, if Landlord, in its approval of any Extraordinary
Alterations,  fails to  address  the  removal  requirement  with  regard to such
Extraordinary Alterations,  Landlord shall be deemed to have agreed to waive the
removal   requirement   with   regard   to   such   Extraordinary   Alterations.
"Extraordinary  Alterations"  shall mean (a) Tenant  Improvements  which are not
normal,   customary   and   first-class   improvements   vis-a-vis  the  general
implementation  of the  Permitted  Use,  and (b) a  configuration  of the Tenant
Improvements which is not usual and customary for normal occupancy. Such removal
and replacement of  Extraordinary  Alterations  shall be performed  promptly and
shall be completed by Tenant on or before the end of the Term of this Lease, and
if Tenant fails to remove and/or replace any Above Standard Tenant Improvements,
Landlord  may do so and Tenant  shall  reimburse  Landlord  for the cost of such
removal and/or replacement.

     3.

CONSTRUCTION DRAWINGS

          a. Selection of  Architect/Construction  Drawings. Tenant shall retain
Smith  Consulting  Architects  (the  "Architect")  to prepare the  "Construction
Drawings," as that term is defined in this Section 3.1.  Tenant shall retain the
engineering  consultants designated by Landlord (the "Engineers") to prepare all
plans and engineering  working drawings relating to the structural,  mechanical,
electrical,  plumbing,  HVAC,  lifesafety,  and  sprinkler  work  of the  Tenant
Improvements.  The  plans and  drawings  to be  prepared  by  Architect  and the
Engineers hereunder shall be known collectively as the "Construction  Drawings."
All   Construction   Drawings   shall   comply  with  the  drawing   format  and
specifications  determined  by  Landlord,  and shall be  subject  to  Landlord's
approval;   provided,   however,   Landlord  shall  only   disapprove  any  such
Construction  Drawing  to the  extent  of a  "Design  Problem,"  as that term is
defined below.  Tenant and Architect shall verify,  in the field, the dimensions
and conditions as shown on the relevant portions of the base building plans, and
Tenant and  Architect  shall be solely  responsible  for the same,  and Landlord
shall have no responsibility in connection  therewith.  Landlord's review of the
Construction  Drawings  as set forth in this  Section  3,  shall be for its sole
purpose and shall not imply Landlord's  review of the same, or obligate Landlord
to review the same, for quality,  design, Code compliance or other like matters.
Accordingly,  notwithstanding  that any  Construction  Drawings  are reviewed by
Landlord  or its  space  planner,  architect,  engineers  and  consultants,  and
notwithstanding  any advice or  assistance  which may be  rendered  to Tenant by
Landlord or Landlord's  space planner,  architect,  engineers,  and consultants,
Landlord  shall have no liability  whatsoever in connection  therewith and shall
not be  responsible  for any omissions or errors  contained in the  Construction
Drawings,  and  Tenant's  waiver and  indemnity  set forth in this  Lease  shall
specifically  apply to the Construction  Drawings.  Landlord shall advise Tenant
within  five (5)  business  days after  Landlord's  receipt of the  Construction
Drawings for the Premises if the same is  unsatisfactory  or  incomplete  in any
respect.  Landlord shall set forth with  reasonable  specificity in what respect
the  Construction  Drawings are  unsatisfactory  or incomplete.  If Tenant is so
advised,  Tenant shall promptly  direct the Architect to cause the  Construction
Drawings to be revised to correct any deficiencies or other matters Landlord may
reasonably  require,   and  immediately   thereafter  Architect  shall  promptly
re-submit the Construction Drawings to Landlord for its approval. Such procedure
shall  continue  until the  Construction  Drawings are  approved by Landlord.  A
"Design  Problem"  is defined as, and shall be deemed to exist if there could be
(i) an affect on the exterior appearance of the Building, (ii) an adverse affect
on the Base Building  (including  without  limitation  the Building  Structure),
(iii) an adverse affect on the Building Systems or the operation and maintenance
thereof, or (iv) any failure to comply with Applicable Laws or Code.

          b. Final Space Plan.  Tenant and the Architect shall prepare the final
space plan for Tenant  Improvements  in the Premises  (collectively,  the "Final
Space Plan"),  which Final Space Plan shall include a layout and  designation of
all offices, rooms and other partitioning,  their intended use, and equipment to
be  contained  therein,  and shall  deliver the Final Space Plan to Landlord for
Landlord's  approval;  provided,  however,  Landlord shall only  disapprove such
Final  Space  Plans to the extent of a Design  Problem.  Landlord  shall  advise
Tenant within five (5) business days after Landlord's receipt of the Final Space
Plan  for the  Premises  if the  same is  unsatisfactory  or  incomplete  in any
respect.  Landlord shall set forth with  reasonable  specificity in what respect
the Final Space Plan is unsatisfactory  or incomplete.  If Tenant is so advised,
Tenant shall  promptly  direct the Architect to cause the Final Space Plan to be
revised to correct any  deficiencies  or other matters  Landlord may  reasonably
require, and immediately thereafter Architect shall promptly re-submit the Final
Space Plan to Landlord for its approval. Such procedure shall continue until the
Final Space Plan is approved by Landlord.

          c. Final  Working  Drawings.  Tenant,  the Architect and the Engineers
shall complete the architectural and engineering drawings for the Premises,  and
the final  architectural  working  drawings in a form which is complete to allow
subcontractors  to  bid  on  the  work  and to  obtain  all  applicable  permits
(collectively,  the  "Final  Working  Drawings")  and shall  submit  the same to
Landlord  for  Landlord's  approval  as set forth  below.  Following  Landlord's
approval of the  applicable  Final Space Plan,  Tenant,  the  Architect  and the
Engineers shall complete the Final Working  Drawings for the applicable phase of
the Tenant  Improvements  in a form which is sufficient to allow  contractors to
bid on the work and to obtain all  applicable  permits and shall submit the same
to Landlord for Landlord's  approval.  Landlord shall,  within five (5) business
days after Landlord's  receipt of all of the Final Working Drawings,  either (i)
approve the Final  Working  Drawings,  (ii) approve the Final  Working  Drawings
subject to specified conditions, or (iii) disapprove and return the Construction
Drawings to Tenant with requested revisions;  provided,  however, Landlord shall
only disapprove  such Final Working  Drawings to the extent of a Design Problem.
If Landlord  disapproves  the Final  Working  Drawings,  Tenant may resubmit the
Final Working  Drawings to Landlord at any time,  and Landlord  shall approve or
disapprove the resubmitted Final Working  Drawings,  based upon the criteria set
forth in this  Section  3.3,  within  three (3)  business  days  after  Landlord
receives  such  resubmitted  Final Working  Drawings.  Such  procedure  shall be
repeated until the Final Working Drawings are approved.

          d. Approved  Working  Drawings.  The Final Working  Drawings  shall be
approved by Landlord (the "Approved Working Drawings") prior to the commencement
of  construction  of the  Premises by Tenant.  Landlord  shall,  within five (5)
business days after  Landlord's  receipt of all of the Final  Working  Drawings,
either (i) approve the Final  Working  Drawings,  (ii) approve the Final Working
Drawings  subject to specified  conditions,  or (iii)  disapprove and return the
Construction  Drawings to Tenant with requested  revisions;  provided,  however,
Landlord shall only  disapprove  such Final Working  Drawings to the extent of a
Design Problem. If Landlord  disapproves the Final Working Drawings,  Tenant may
resubmit the Final Working  Drawings to Landlord at any time, and Landlord shall
approve or disapprove the  resubmitted  Final Working  Drawings,  based upon the
criteria  set forth in this Section  3.3,  within three (3) business  days after
Landlord receives such resubmitted Final Working Drawings.  Such procedure shall
be repeated  until the Final Working  Drawings are approved.  After  approval by
Landlord  of the Final  Working  Drawings,  Tenant  may  submit  the same to the
appropriate  municipal authorities for all applicable building permits necessary
to allow  "Contractor,"  as that term is  defined in Section  4.1.1,  below,  to
commence and fully complete the  construction  of the Tenant  Improvements  (the
"Permits"),  and, in connection therewith, Tenant shall coordinate with Landlord
in order to allow  Landlord,  at its  option,  to take part in all phases of the
permitting process and shall supply Landlord, as soon as possible, with all plan
check numbers and dates of submittal. Tenant hereby agrees that neither Landlord
nor  Landlord's  consultants  shall be  responsible  for  obtaining any building
permit or  certificate of occupancy for the Premises and that obtaining the same
shall  be  Tenant's  responsibility;  provided,  however,  that  Landlord  shall
cooperate with Tenant in executing  permit  applications  and  performing  other
ministerial acts reasonably necessary to enable Tenant to obtain any such permit
or certificate  of occupancy.  No changes,  modifications  or alterations in the
Approved  Working  Drawings  may be made  without the prior  written  consent of
Landlord, which consent may not be unreasonably withheld.

          e. Time Deadlines.  Tenant shall use its best, good faith, efforts and
all due diligence to cooperate with the Architect,  the Engineers,  and Landlord
to complete all phases of the Construction  Drawings and the permitting  process
and to receive  the  Permits,  and with  Contractor  for  approval of the "Final
Costs," as that term is defined in Section  4.2.1 of this  Tenant  Work  Letter,
within the  appropriate  timeline  for the receipt of Permits,  set forth on the
"Construction Schedule" attached hereto as Schedule 1 to this Exhibit B, and, in
that regard,  shall meet with Landlord on a scheduled  basis to be determined by
Landlord, to discuss Tenant's progress in connection with the same.

     4.

CONSTRUCTION OF THE TENANT IMPROVEMENTS

          a. Tenant's Selection of Contractors.

               i) The Contractor.  Tenant hereby appoints Kilroy Services, Inc.,
(the   "Construction   Manager")  to  manage  the  construction  of  the  Tenant
Improvements.  The Construction  Manager shall retain Burger  Construction  (the
"Contractor") to construct the Tenant  Improvements;  provided,  however, in the
event Burger  Construction  provides a cost  proposal to Tenant which sets forth
(i) anticipated profits in excess of five percent (5%) of such cost proposal, or
(ii) the cost of insurance in excess of one percent (1%) of such cost  proposal,
then Tenant shall be allowed to select an alternative contractor (in which event
such alternative  contractor  selected by Tenant shall be thereafter  deemed the
Contractor) from a list of general  contractors  supplied by Landlord.  Landlord
hereby indemnifies and holds Tenant and the Tenant Parties harmless from any and
all loss, cost,  damage,  expense and liability  (including  without  limitation
court costs and  reasonable  attorneys'  fees)  incurred in  connection  with or
arising from the negligence or willful misconduct of the Construction Manager on
or within the  Premises  during  the  construction  of the Tenant  Improvements;
provided,  however, nothing in this Section 4.1.1 shall be interpreted to impose
any  obligations  on  Landlord  to be  responsible  or liable for  consequential
damages.

               ii)  Tenant's  Agents.   Except  for  Construction   Manager  and
Contractor, all other subcontractors,  laborers, materialmen, and suppliers used
by Tenant (such other subcontractors, laborers, materialmen, and suppliers to be
known  collectively  as  "Tenant's  Agents")  must be  approved  in  writing  by
Landlord,  which approval  shall not be  unreasonably  withheld,  conditioned or
delayed.  If Landlord does not approve any of Tenant's proposed  subcontractors,
laborers,   materialmen  or  suppliers,   Tenant  shall  submit  other  proposed
subcontractors,  laborers,  materialmen  or  suppliers  for  Landlord's  written
approval.

          b. Construction of Tenant Improvements.

               i) Cost Budget.  Prior to the commencement of the construction of
the  Tenant  Improvements,   Tenant  shall  provide  Landlord  with  a  detailed
breakdown,  by  trade,  of the final  costs to be  incurred  or which  have been
incurred,  as set forth more  particularly in Sections  2.2.1.1 through 2.2.1.9,
above, in connection with the design and construction of the Tenant Improvements
to be performed by or at the direction of Tenant or the Contractor,  which costs
form a basis for the amount of the Contract  (the "Final  Costs"),  and the date
Tenant  provides such Final Costs to Landlord shall be known as the "Final Costs
Delivery Date." For purposes hereof, the "Over-Allowance  Amount" shall be equal
to the difference  between (i) the amount of the Final Costs and (ii) the sum of
the  amount  of the  Tenant  Improvement  Allowance  plus the  amount of the TIA
Increase,  if any,  which  Tenant  elects to  utilize  pursuant  to the terms of
Section  2.2.2 of this Tenant Work Letter.  The  Over-Allowance  Amount shall be
delivered  from  Tenant  to  Landlord  (on a  pro-rata  basis,  based  upon  the
percentage of the Tenant Improvement completed) within ten (10) days of Tenant's
receipt of an invoice  for such  portion of the  Over-Allowance  Amount.  In the
event that,  after the Final Costs Delivery Date,  any  revisions,  changes,  or
substitutions  shall  be  made  to  the  Construction  Drawings  or  the  Tenant
Improvements,   any  additional  costs  which  arise  in  connection  with  such
revisions,  changes or substitutions or any other additional costs shall be paid
by Tenant to Landlord  immediately upon Landlord's request as an addition to the
Over-Allowance  Amount.  In  addition,  if the  Final  Working  Drawings  or any
amendment thereof or supplement  thereto shall require  alterations in the Base,
Shell and Core (as contrasted with the Tenant Improvements),  and if Landlord in
its sole and exclusive  discretion agrees to any such alterations,  and notifies
Tenant of the need and cost for such alterations, then Tenant shall pay the cost
of such required  changes upon receipt of bills  therefor.  Tenant shall pay all
direct  architectural  and/or engineering fees in connection  therewith,  plus a
reasonable administration fee to Landlord.

               ii) Tenant Improvement Work.

                    (1) Landlord's  General  Conditions  for Tenant  Improvement
Work.  The  construction  of the  Tenant  Improvements  shall  comply  with  the
following: (i) the Tenant Improvements shall be constructed in strict accordance
with the Approved Working Drawings;  (ii) the Construction  Schedule;  and (iii)
Tenant  shall  abide by all  commercially  reasonable  rules made by  Landlord's
Building  manager  with respect to the use of any staging  area,  the storage of
materials,  and any other  matter in  connection  with this Tenant Work  Letter,
including,  without  limitation,  the  construction of the Tenant  Improvements.
Tenant  shall pay a  logistical  coordination  fee (the  "Coordination  Fee") to
Landlord in an amount  equal to the product of (i) one percent (1%) and (ii) the
sum of the Tenant  Improvement  Allowance  (inclusive of any TIA Increase),  the
Over-Allowance Amount, as such amount may be increased hereunder,  and any other
amounts expended by Tenant in connection with the design and construction of the
Tenant  Improvements,  which  Coordination Fee shall be for services relating to
the coordination of the construction of the Tenant Improvements.

                    (2)  Contractor's  Warranties and  Guaranties.  Landlord and
Construction  Manager  hereby assigns to Tenant all warranties and guaranties by
Contractor  relating to the Tenant  Improvements,  and,  except as expressly set
forth in this  Tenant  Work  Letter,  Tenant  hereby  waives all claims  against
Landlord  relating  to,  or  arising  out of the  construction  of,  the  Tenant
Improvements..

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

               iii)  Governmental  Compliance.  The  Tenant  Improvements  shall
comply  in all  respects  with the  following:  (i) the Code  and  other  state,
federal, city or quasi-governmental laws, codes, ordinances and regulations,  as
each may apply  according  to the rulings of the  controlling  public  official,
agent or other  person;  (ii)  applicable  standards of the  American  Insurance
Association (formerly, the National Board of Fire Underwriters) and the National
Electrical Code; and (iii) building material manufacturer's specifications.

               iv)  Inspection  by  Landlord.  Landlord  shall have the right to
inspect the Tenant Improvements at all times,  provided however, that Landlord's
failure to inspect the Tenant Improvements shall in no event constitute a waiver
of any of Landlord's  rights  hereunder nor shall  Landlord's  inspection of the
Tenant Improvements  constitute Landlord's approval of the same. Should Landlord
disapprove any portion of the Tenant Improvements,  Landlord shall notify Tenant
in writing of such  disapproval  and shall  specify the items  disapproved.  Any
defects  or  deviations  in,  and/or  disapproval  by  Landlord  of,  the Tenant
Improvements  shall be rectified  by Tenant at no expense to Landlord,  provided
however, that in the event Landlord determines that a defect or deviation exists
or  disapproves  of any  matter in  connection  with any  portion  of the Tenant
Improvements  and such defect,  deviation or matter might  adversely  affect the
mechanical,  electrical,  plumbing, heating, ventilating and air conditioning or
life-safety systems of the Building, the structure or exterior appearance of the
Building  or any other  tenant's  use of such other  tenant's  leased  premises,
Landlord may, take such action as Landlord deems necessary,  at Tenant's expense
and without  incurring  any  liability on  Landlord's  part, to correct any such
defect,  deviation and/or matter,  including,  without  limitation,  causing the
cessation of performance of the  construction of the Tenant  Improvements  until
such time as the defect,  deviation  and/or  matter is corrected  to  Landlord's
satisfaction.

               v) Meetings.  Commencing upon the execution of this Lease, Tenant
shall hold weekly  meetings at a reasonable  time,  with the  Architect  and the
Contractor  regarding the progress of the preparation of  Construction  Drawings
and the construction of the Tenant Improvements, which meetings shall be held at
a location designated by Landlord,  and Landlord and/or its agents shall receive
prior  notice of, and shall have the right to attend,  all such  meetings,  and,
upon Landlord's request,  certain of Tenant's Agents shall attend such meetings.
In  addition,  minutes  shall be taken  at all  such  meetings,  a copy of which
minutes  shall be promptly  delivered to  Landlord.  One such meeting each month
shall include the review of Contractor's current request for payment.

          c. Notice of Completion;  Copy of Record Set of Plans. Within ten (10)
days after completion of construction of the Tenant  Improvements,  Tenant shall
cause a Notice of Completion to be recorded in the office of the Recorder of the
county in which the Building is located in  accordance  with Section 3093 of the
Civil  Code of the  State of  California  or any  successor  statute,  and shall
furnish a copy thereof to Landlord upon such recordation.  If Tenant fails to do
so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent
for such purpose, at Tenant's sole cost and expense.

     5.

COMPLETION OF THE TENANT IMPROVEMENTS

          a.  Ready for  Occupancy.  The  Building  shall be deemed  "Ready  for
Occupancy"  upon the  Substantial  Completion  of the Tenant  Improvements.  For
purposes  of this Lease,  "Substantial  Completion"  of the Tenant  Improvements
shall occur upon the completion of  construction  of the Tenant  Improvements in
the Building  pursuant to the Approved Working  Drawings,  with the exception of
any minor  punch  list items and any tenant  fixtures,  work-stations,  built-in
furniture,  or equipment to be installed by Tenant or under the  supervision  of
Contractor.

          b.  Delay of the  Substantial  Completion  of the  Premises;  Holdover
Penalty.  The Term shall commence on the Lease  Commencement  Date as defined in
Section  3.2 of the Summary of Basic  Lease  Information  and Section 2.1 of the
Lease; provided, however, that the Rent Commencement Date, as defined in Section
4 of the Summary of Basic Lease Information,  shall be extended by the number of
days of actual delay of the Substantial Completion of the Tenant Improvements to
the extent caused by a "Landlord  Caused Delay," as that term is defined,  below
(the  number of days of such delay to be the "Delay  Days").  In  addition to an
extension of the Rent  Commencement  Date  pursuant to the  foregoing,  Landlord
shall pay to Tenant an amount equal to (i) One Thousand  Four Hundred and No/100
Dollars  ($1,400.00)  for each of the first  thirty  (30) Delay  Days,  (ii) One
Thousand Five Hundred Forty and No/100 Dollars  ($1,540.00) for each of the next
sixty (60) Delay Days,  and (iii) One Thousand  Seven  Hundred  Fifty and No/100
Dollars ($1,750.00) for the ninety-first Delay Day and each Delay Day thereafter
(collectively,  the  "Holdover  Penalty").  For purposes of example only, if the
Substantial  Completion of the Tenant Improvements  occurred on January 15, 2003
due to eight  (8) days of delay  resulting  from  force  majeure  and/or  Tenant
Delays,  and seven (7) days of Landlord  Caused Delay,  there would be seven (7)
Delay  Days,  the Rent  Commencement  Date  would  occur on  January 8, 2003 and
Landlord would pay a Holdover Penalty to Tenant equal to $9,800.00.

          c. Landlord  Caused  Delay.  As used in this Lease,  "Landlord  Caused
Delay"  shall mean any actual  delay  resulting  from the acts or  omissions  of
Landlord or Construction Manager which causes the Substantial  Completion of the
Premises to occur  after  January 1, 2003  (except to the extent  such  Landlord
Caused Delay results from the occurrence of a Tenant Delay),  including, but not
limited  to, (i)  failure  of  Landlord  to timely  approve  or  disapprove  any
Construction  Drawings;  and (ii)  delays due to the acts or  failures to act of
Landlord,  Construction Manager, or their agents and/or contractors with respect
to payment of the Tenant Improvement Allowance and/or any cessation of work upon
the Tenant Improvements as a result thereof.

          d. Tenant  Delay.  If there shall be any actual delay which causes the
Substantial  Completion  of the  Premises to occur after the Lease  Commencement
Date, as set forth in the Lease, as a direct, indirect, partial, or total result
of any of the following:

               i) Tenant's  failure to comply with the time  deadlines set forth
in this Tenant Work Letter and/or Schedule 1 to this Exhibit B;

               ii)  Tenant's  failure  to timely  submit  any  matter  requiring
Landlord's  response  and/or  approval,  except to the  extent  that a  Landlord
disapproval is based upon a matter other than a Design Problem;

               iii) A breach by Tenant of the terms of this  Tenant  Work Letter
or the Lease;

               iv)  Changes in any of the  Construction  Drawings  requested  by
Tenant;

               v) Tenant's request for changes in the Approved Working Drawings;

               vi) Tenant's requirement for materials,  components,  finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial  Completion of the Tenant  Improvements,  as set
forth on Schedule 1 to Exhibit B;

               vii)  Changes  to the  Base  Building  required  by the  Approved
Working Drawings;

               viii) Tenant's use of specialized or unusual  improvements and/or
delays in obtaining necessary permits as a result thereof;

               ix) Any other acts or  omissions  of Tenant,  or its  agents,  or
employees which causes a delay in the Substantial Completion of the Premises;

then a "Tenant  Delay" shall be deemed to have  occurred.  If Landlord  contends
that a Tenant Delay has occurred (other than with regard to a scheduled date for
Tenant's  approval  or  disapproval  of an item  pursuant  to this  Tenant  Work
Letter),  Landlord  shall  notify  Tenant in writing of the date upon which such
Tenant  Delay  occurred.  The date upon  which such  Tenant  Delay ends shall be
referred  to in  this  Section  5.4  as the  "Tenant  Delay  Termination  Date".
Notwithstanding anything in this Lease or Tenant Work Letter to the contrary, as
to Tenant Delays,  only if any actions,  inaction or circumstances  described in
such notice (the "Tenant  Delay  Notice") are not cured by Tenant within one (1)
business day after  receipt of the Tenant  Delay  Notice,  and if such  actions,
inaction or  circumstances  otherwise  qualify as a Tenant Delay,  then a Tenant
Delay shall be deemed to have occurred  commencing as of such date and ending as
of the Tenant Delay Termination Date.

          e.  Determination  of Landlord Caused Delay. If Tenant contends that a
Landlord  Caused Delay has occurred  (other than with regard to a scheduled date
for  Landlord's  approval or disapproval of an item pursuant to this Tenant Work
Letter), Tenant shall notify Landlord and Construction Manager in writing of the
date upon which such Landlord  Caused Delay  occurred.  The date upon which such
Landlord  Caused  Delay ends shall be  referred  to in this  Section  5.5 as the
"Termination Date". Notwithstanding anything in this Lease or Tenant Work Letter
to the contrary, as to Landlord Caused Delays, only if any actions,  inaction or
circumstances  described  in such notice (the "Delay  Notice")  are not cured by
Landlord and/or Construction  Manager,  as appropriate,  within one (1) business
days  after  receipt  of the Delay  Notice,  and if such  actions,  inaction  or
circumstances  otherwise  qualify as a Landlord  Caused  Delay,  then a Landlord
Caused  Delay shall be deemed to have  occurred  commencing  as of such date and
ending as of the Termination Date.

     6.

MISCELLANEOUS

          a. Tenant's  Representative.  Tenant has designated Ms. Fran Burton as
its sole  representative  with  respect to the  matters set forth in this Tenant
Work Letter,  who shall have full authority and  responsibility to act on behalf
of the Tenant as required in this Tenant Work Letter.

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

          c. Time of the Essence in This Tenant Work  Letter.  Unless  otherwise
indicated,  all references  herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by Landlord,
the  procedure  for  preparation  of the document and approval  thereof shall be
repeated until the document is approved by Landlord.

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



<PAGE>


                             SCHEDULE 1 TO EXHIBIT B


                              CONSTRUCTION SCHEDULE

<TABLE>
<CAPTION>
<S>                                               <C>

Action.                                           Completion Date.

Tenant's submission of Approved Working           August 23, 2002.
Drawings for Permits.

Tenant's receipt of Permits.                      September 29,2002.

Substantial Completion                            December 31, 2002

</TABLE>



<PAGE>


                                          EXHIBIT C


                               15378 AVENUE OF SCIENCE PROJECT

                                  NOTICE OF LEASE TERM DATES


To:  ________________________
     ________________________
     ________________________
     ________________________

Re:  Office Lease dated  ____________,  200__  between  ____________________,  a
     _____________________   ("Landlord"),   and   _______________________,    a
     _______________________  ("Tenant")  concerning  Suite  ______ on  floor(s)
     __________ of the office building located at  ____________________________,
     _______________, California.

Gentlemen:

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

     1.   The Lease Term shall  commence on or has  commenced on  ______________
          for a term of __________________ ending on __________________.

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

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

     4.   Your rent  checks  should be made  payable  to  __________________  at
          -------------------.

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

     6.   Tenant's  Share as  adjusted  based  upon the  exact  number of usable
          square feet within the Building is ________%.

                                        "Landlord":


                                        ______________________________,
                                        a_____________________________



                                        By:___________________________
                                                Its:__________________

Agreed to and Accepted
as of ____________, 200__.

"Tenant":

_______________________
a______________________


By:_____________________________
        Its:____________________



<PAGE>




                                    EXHIBIT D


                         15378 AVENUE OF SCIENCE PROJECT

                              RULES AND REGULATIONS

     Tenant shall  faithfully  observe and comply with the  following  Rules and
Regulations.  Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project;  provided,  however,
in  no  event  shall   Landlord   enforce  such  Rules  and   Regulations  in  a
discriminatory  manner to the detriment of Tenant.  In the event of any conflict
between the Rules and  Regulations and the other  provisions of this Lease,  the
latter shall control.

     1. Safes and other heavy objects shall, if reasonably  considered necessary
by  Landlord,  stand on supports of such  thickness  as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such safe or property in any case.  Any damage to any part of the  Building,
its contents,  occupants or visitors by moving or  maintaining  any such safe or
other property shall be the sole responsibility and expense of Tenant.

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

     3. No  advertisement,  notice or handbill shall be exhibited,  distributed,
painted or affixed by Tenant on any part of the Pacific Corporate Center without
the prior written  consent of the Landlord.  Tenant shall not disturb,  solicit,
peddle,  or canvass  any  occupant  of the  Pacific  Corporate  Center and shall
cooperate with Landlord and its agents of Landlord to prevent same.

     4. Tenant shall not overload the floor of the Premises.

     5. Tenant shall not use or keep in or on the Premises, the Building, or the
Project any kerosene, gasoline, explosive material, corrosive material, material
capable of emitting  toxic fumes,  or other  inflammable  or  combustible  fluid
chemical,  substitute or material,  except in compliance  with  applicable  law.
Tenant shall  maintain  material  safety data sheets for any Hazardous  Material
used or kept on the Premises.

     6.  Tenant  shall not use,  keep or permit to be used or kept,  any foul or
noxious  gas or  substance  in or on the  Premises  to the  extent  the  same is
noticeable in the common areas of the Pacific  Corporate Center or which affects
other tenants of the Pacific Corporate  Center.  Tenant shall not throw anything
out of doors, windows or skylights.

     7. No cooking  shall be done or permitted on the  Premises  (unless  Tenant
receives  Landlord's  prior  written  approval  to install a  cafeteria  for its
employees  in the  Premises),  nor  shall  the  Premises  be used  for  lodging.
Notwithstanding the foregoing,  Underwriters'  laboratory-approved equipment and
microwave ovens may be used in the Premises for heating food and brewing coffee,
tea, hot  chocolate and similar  beverages for employees and visitors,  provided
that such use is in accordance with all applicable  federal,  state,  county and
city laws, codes, ordinances, rules and regulations.

     8. Tenant shall store all its trash and garbage  within the interior of the
Premises or in the  appropriate  external  trash  area(s) for the  Building.  No
material  shall be placed in the trash boxes or  receptacles if such material is
of such  nature that it may not be disposed  of in the  ordinary  and  customary
manner of removing and  disposing of trash and garbage in San Diego,  California
without  violation of any law or ordinance  governing such  disposal;  provided,
however,  Tenant may  maintain  separate  trash  enclosures  for the  storage of
non-conforming  disposal items to the extent Tenant  satisfies and complies with
any applicable laws or other  governmental  regulations  relating to the storage
and disposal  thereof.  If the Premises is or becomes  infested with vermin as a
result of the use or any  misuse or  neglect  of the  Premises  by  Tenant,  its
agents, servants,  employees,  contractors,  visitors or licensees, Tenant shall
forthwith,  at Tenant's expense, cause the Premises to be exterminated from time
to  time  to the  satisfaction  of  Landlord  and  shall  employ  such  licensed
exterminators as shall be approved in writing in advance by Landlord.

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

     10.  Neither the interior  nor  exterior of any windows  shall be coated or
otherwise  sunscreened  without the prior  written  consent of Landlord.  Tenant
shall be responsible  for any damage to the window film on the exterior  windows
of the Premises and shall promptly  repair any such damage at Tenant's sole cost
and expense.

     11.  Tenant must  comply  with  requests  by the  Landlord  concerning  the
informing of their  employees of items of reasonable  importance to the Landlord
vis-a-vis the operation of the Project and the Pacific Corporate Center.

     12.  Tenant must comply with any  applicable  "NO-SMOKING"  Ordinances.  If
Tenant is required under the ordinance to adopt a written smoking policy, a copy
of said  policy  shall be on file in the office of the  Building.  Additionally,
Tenant  must  provide  at least  one  area  within  the  Premises  in which  its
employees,  invitees and visitors may smoke, to the extent such area is required
by law.

     13. Tenant hereby  acknowledges  that Landlord  shall have no obligation to
provide  guard  service  or  other  security  measures  for the  benefit  of the
Premises, the Building or the Project.  Tenant hereby assumes all responsibility
for the protection of Tenant and its agents,  employees,  contractors,  invitees
and guests,  and the property  thereof,  from acts of third  parties,  including
keeping doors locked and other means of entry to the Premises closed, whether or
not  Landlord,  at its option,  elects to provide  security  protection  for the
Project or any portion thereof.  Tenant further assumes the risk that any safety
and security  devices,  services and programs which Landlord elects, in its sole
discretion,  to  provide  may  not  be  effective,  or  may  malfunction  or  be
circumvented  by an unauthorized  third party,  and Tenant shall, in addition to
its other  insurance  obligations  under this  Lease,  obtain its own  insurance
coverage to the extent Tenant desires  protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.

     14. No auction, liquidation, fire sale, going-out-of-business or bankruptcy
sale shall be  conducted in the Premises  without the prior  written  consent of
Landlord.

     15. No tenant  shall use or permit the use of any  portion of the  Premises
for living quarters, sleeping apartments or lodging rooms.

     Landlord  reserves  the right at any time to change or  rescind  any one or
more  of  these  Rules  and  Regulations,  or to make  such  other  and  further
reasonable,  non-discriminatory  Rules and Regulations as in Landlord's judgment
may from time to time be necessary  (relative to a building  occupied  solely by
one tenant) for the  management,  safety,  care and cleanliness of the Premises,
Building,  the common areas and the Project,  and for the  preservation  of good
order therein,  as well as for the  convenience  of other  occupants and tenants
therein.  Landlord may waive any one or more of these Rules and  Regulations for
the benefit of any particular  tenants,  but no such waiver by Landlord shall be
construed  as a waiver  of such  Rules  and  Regulations  in favor of any  other
tenant,  nor  prevent  Landlord  from  thereafter  enforcing  any such  Rules or
Regulations against any or all tenants of the Project; provided,  however, in no
event shall  Landlord  enforce such Rules and  Regulations  in a  discriminatory
manner to the  detriment  of Tenant.  Tenant  shall be deemed to have read these
Rules and  Regulations and to have agreed to abide by them as a condition of its
occupancy of the Premises.



<PAGE>



                                    EXHIBIT E


                         15378 AVENUE OF SCIENCE PROJECT

                      FORM OF TENANT'S ESTOPPEL CERTIFICATE

     The  undersigned  as Tenant under that certain  Office Lease (the  "Lease")
made and entered into as of ___________,  200 by and between  _______________ as
Landlord,  and the  undersigned  as Tenant,  for Premises on the  ______________
floor(s)  of the office  building  located at  ______________,  _______________,
California ____________, certifies as follows:

     1. Attached hereto as Exhibit A is a true and correct copy of the Lease and
all amendments and modifications  thereto.  The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.

     2. The undersigned  currently occupies the Premises described in the Lease,
the  Lease  Term  commenced  on  __________,  and  the  Lease  Term  expires  on
___________,  and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.

     3. Base Rent became payable on ____________.

     4. The  Lease  is in full  force  and  effect  and has not  been  modified,
supplemented or amended in any way except as provided in Exhibit A. ---------

     5.  Tenant has not  transferred,  assigned,  or sublet  any  portion of the
Premises  nor entered  into any license or  concession  agreements  with respect
thereto except as follows:




     6. Tenant shall not modify the documents contained in Exhibit A without the
prior written consent of Landlord's mortgagee.

     7. All  monthly  installments  of Base Rent,  all  Additional  Rent and all
monthly  installments  of  estimated  Additional  Rent  have  been paid when due
through   ___________.   The  current  monthly   installment  of  Base  Rent  is
$_____________________.

     8. All conditions of the Lease to be performed by Landlord necessary to the
enforceability  of the Lease have been  satisfied and Landlord is not in default
thereunder.  In  addition,  the  undersigned  has not  delivered  any  notice to
Landlord regarding a default by Landlord thereunder.

     9. No rental has been paid more than  thirty  (30) days in  advance  and no
security has been deposited with Landlord except as provided in the Lease.

     10. To Tenant's actual knowledge and belief,  as of the date hereof,  there
are no existing defenses or offsets, or, to the undersigned's knowledge,  claims
or any basis for a claim, that the undersigned has against Landlord.

     11. If Tenant is a corporation or partnership,  each  individual  executing
this Estoppel  Certificate  on behalf of Tenant hereby  represents  and warrants
that Tenant is a duly formed and  existing  entity  qualified  to do business in
California  and that Tenant has full right and  authority to execute and deliver
this Estoppel  Certificate  and that each person  signing on behalf of Tenant is
authorized to do so.

     12.  There  are no  actions  pending  against  the  undersigned  under  the
bankruptcy or similar laws of the United States or any state.

     13. Other than in compliance with all applicable laws and incidental to the
ordinary  course of the use of the  Premises,  the  undersigned  has not used or
stored any hazardous substances in the Premises.

     14. To the  undersigned's  knowledge,  all  tenant  improvement  work to be
performed by Landlord under the Lease has been completed in accordance  with the
Lease  and has been  accepted  by the  undersigned  and all  reimbursements  and
allowances due to the undersigned  under the Lease in connection with any tenant
improvement work have been paid in full.

     The  undersigned   acknowledges  that  this  Estoppel  Certificate  may  be
delivered to Landlord or to a prospective  mortgagee or  prospective  purchaser,
and acknowledges that said prospective  mortgagee or prospective  purchaser will
be relying upon the statements  contained herein in making the loan or acquiring
the  property of which the  Premises  are a part and that  receipt by it of this
certificate is a condition of making such loan or acquiring such property.

        Executed at ______________ on the ____ day of ___________, 200_.


                                        "Tenant":

                                        _______________________________,
                                        a______________________________

                                        By:____________________________
                                                Its:___________________

                                        By:____________________________
                                                Its:___________________



<PAGE>




                                    EXHIBIT F


                                  KILROY REALTY

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

ALLEN, MATKINS, LECK, GAMBLE
        & MALLORY LLP
1999 Avenue of the Stars
18th Floor
Los Angeles, California 90067
Attention:  Anton N. Natsis, Esq.
________________________________________________________________________________

                            RECOGNITION OF COVENANTS,
                          CONDITIONS, AND RESTRICTIONS

     This  Recognition  of  Covenants,   Conditions,   and  Restrictions   (this
"Agreement") is entered into as of the __ day of ________, 200__, by and between
__________________ ("Landlord"), and ________________ ("Tenant"), with reference
to the following facts:

     A.  Landlord and Tenant  entered into that certain  Office Lease  Agreement
dated _____,  200__ (the  "Lease").  Pursuant to the Lease,  Landlord  leased to
Tenant and Tenant  leased from  Landlord  space (the  "Premises")  located in an
office building on certain real property  described in Exhibit A attached hereto
and incorporated herein by this reference (the "Property").

     B. The Premises are located in an office building  located on real property
which is part of an area owned by  Landlord  containing  approximately  ___ (__)
acres of real  property  located in the City of  ____________,  California  (the
"Project"),  as more  particularly  described  in Exhibit B attached  hereto and
incorporated herein by this reference.

     C. Landlord,  as declarant,  has previously recorded, or proposes to record
concurrently with the recordation of this Agreement, a Declaration of Covenants,
Conditions, and Restrictions (the "Declaration"), dated ________________, 200__,
in connection with the Project.

     D.  Tenant  is  agreeing  to  recognize  and be bound  by the  terms of the
Declaration,  and the  parties  hereto  desire  to set  forth  their  agreements
concerning the same.

     NOW,  THEREFORE,  in  consideration  of (a) the foregoing  recitals and the
mutual  agreements  hereinafter  set forth,  and (b) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows,

     1. Tenant's Recognition of Declaration.  Notwithstanding that the Lease has
been executed  prior to the  recordation  of the  Declaration,  Tenant agrees to
recognize and by bound by all of the terms and conditions of the Declaration.

     2. Miscellaneous.

          2.1 This  Agreement  shall be binding upon and inure to the benefit of
the   parties   hereto   and   their   respective   heirs,   estates,   personal
representatives, successors, and assigns.

          2.2 This  Agreement  is made in, and shall be  governed,  enforced and
construed under the laws of, the State of California.

          2.3 This Agreement constitutes the entire understanding and agreements
of the parties with respect to the subject  matter hereof,  and shall  supersede
and  replace  all prior  understandings  and  agreements,  whether  verbal or in
writing.  The parties confirm and acknowledge  that there are no other promises,
covenants,  understandings,  agreements,  representations,  or  warranties  with
respect to the subject  matter of this  Agreement  except as expressly set forth
herein.

          2.4 This  Agreement is not to be modified,  terminated,  or amended in
any respect,  except pursuant to any instrument in writing duly executed by both
of the parties hereto.

          2.5 In the event that either party hereto shall bring any legal action
or other proceeding with respect to the breach,  interpretation,  or enforcement
of this  Agreement,  or with respect to any dispute  relating to any transaction
covered by this Agreement,  the losing party in such action or proceeding  shall
reimburse the prevailing  party therein for all reasonable  costs of litigation,
including reasonable attorneys' fees, in such amount as may be determined by the
court or other tribunal having jurisdiction, including matters on appeal.

          2.6 All captions and heading  herein are for  convenience  and ease of
reference  only,  and shall not be used or referred to in any way in  connection
with the interpretation or enforcement of this Agreement.

          2.7 If any provision of this Agreement,  as applied to any party or to
any circumstance,  shall be adjudged by a court of competent jurisdictions to be
void or  unenforceable  for any  reason,  the same  shall not  affect  any other
provision  of  this   Agreement,   the   application  of  such  provision  under
circumstances  different  form those  adjudged by the court,  or the validity or
enforceability of this Agreement as a whole.

          2.8 Time is of the essence of this Agreement.

          2.9 The Parties agree to execute any further  documents,  and take any
further actions,  as may be reasonable and appropriate in order to carry out the
purpose and intent of this Agreement.

          2.10 As used herein, the masculine, feminine or neuter gender, and the
singular and plural numbers, shall each be deemed to include the others whenever
and whatever the context so indicates.



<PAGE>



                        SIGNATURE PAGE OF RECOGNITION OF

                     COVENANTS, CONDITIONS AND RESTRICTIONS

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                                            "Landlord":

                                            __________________________,
                                            a ________________________

                                            By:  _____________________________
                                                 Its:  _______________________




                                            "Tenant":

                                            __________________________,
                                            a_________________________

                                            By:  _____________________________
                                                   Its:  _____________________


                                            By:  _____________________________
                                                   Its:  _____________________



<PAGE>



                                    EXHIBIT G


                            FORM OF LETTER OF CREDIT
                       (Letterhead of a money center bank
                           acceptable to the Landlord)

______________, 200_
__________________________________
__________________________________
__________________________________
__________________________________


     Gentlemen:

     We hereby  establish our Irrevocable  Letter of Credit and authorize you to
draw   on  us  at   sight   for  the   account   of   _____________________,   a
___________________________,   the  aggregate  amount  of  _____________________
_________________________________ ($_____________).

     Funds under this Letter of Credit are available to the  beneficiary  hereof
as follows:

     Any or all of the sums  hereunder  may be  drawn  down at any time and from
time  to  time  from  and  after  the  date  hereof  by  a   representative   of
________________________________("Beneficiary")  when accompanied by this Letter
of Credit and a written  statement  signed by a  representative  of Beneficiary,
certifying that such moneys are due and owing to Beneficiary.

     This  Letter  of  Credit  is  transferable  in its  entirety  at no cost to
Beneficiary.  Should a transfer be desired, such transfer will be subject to the
return to us of this advice, together with written instructions.

     The amount of each  draft must be  endorsed  on the  reverse  hereof by the
negotiating  bank.  We hereby  agree  that this  Letter of Credit  shall be duly
honored upon presentation and delivery of the certification specified above.

     This Letter of Credit shall expire on ______________.

     Notwithstanding  the above  expiration  date of this Letter of Credit,  the
term of this Letter of Credit  shall be  automatically  renewed for  successive,
additional one (1) year periods  unless,  at least thirty (30) days prior to any
such  date  of  expiration,   the  undersigned  shall  give  written  notice  to
Beneficiary,  by certified mail, return receipt requested and at the address set
forth  above or at such  other  address  as may be given to the  undersigned  by
Beneficiary, that this Letter of Credit will not be renewed.

     This Letter of Credit is governed by the Uniform  Customs and  Practice for
Documentary   Credits  (1993  Revision),   International   Chamber  of  Commerce
Publication 500.


                                          Very truly yours,
                                          (Name of Issuing Bank)

                                          By:__________________________________




<PAGE>



                                    EXHIBIT H

     FORM OF TENANT'S SERVICE, REPAIRS AND MAINTENANCE ESTOPPEL CERTIFICATE

The undersigned as Tenant under that certain Office Lease (the "Lease") made and
entered into as of  ___________,  2002 by and between  Kilroy  Realty,  L.P., as
Landlord, and the undersigned as Tenant, for Premises located at 15378 Avenue of
Science, San Diego, California 92128, certifies as follows:

     To Tenant's actual knowledge,  all equipment and/or applicable  portions of
     the  Building   and/or   Premises   associated   with  [INSERT   CONTRACTED
     SERVICE]_____________________ are in good order, repair and condition as of
     the date signed below.

     Tenant has not transferred, assigned, or sublet any portion of the Premises
     nor entered into any license or concession  agreements with respect thereto
     except as follows:

                      __________________________________________________________

Executed at on the ____ day of ___________, 200__.

                                                 "Tenant":

                                                 Anacomp, Inc.,
                                                 a Indiana corporation

                                                 By: ___________________________
                                                         Its: __________________

                                                 By: ___________________________
                                                         Its: __________________




</TEXT>
</DOCUMENT>
