BioMed Realty Trust Inc
EXHIBIT 10.23
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>11
<FILENAME>a01842exv10w23.txt
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.23


                              AMENDED AND RESTATED
                               BUILT-TO-SUIT LEASE

                                 BY AND BETWEEN

                        INHALE 201 INDUSTRIAL ROAD, L.P.

                      A CALIFORNIA LIMITED PARTNERSHIP, AS

                                    LANDLORD

                                       AND

           NEKTAR THERAPEUTICS (FKA INHALE THERAPEUTIC SYSTEMS, INC.),

                           A DELAWARE CORPORATION, AS

                                     TENANT

                               201 INDUSTRIAL ROAD
                              SAN CARLOS, CA 94070
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          PAGE
<S>                                                                                                       <C>
1.  PROPERTY.................................................................................................3
    1.1      Lease of Premises...............................................................................3
             (a)      Buildings, Real Property, Improvements.................................................3
             (b)      Use of Common Areas....................................................................4
    1.2      [Deleted].......................................................................................4

2.  TERM.....................................................................................................4
    2.1      Term............................................................................................4
    2.2      [Deleted].......................................................................................4
    2.3      [Deleted].......................................................................................4
    2.4      Acknowledgement of Rent Commencement............................................................4
    2.5      Holding Over....................................................................................5
    2.6      Options To Extend Term..........................................................................5

3.  RENTAL...................................................................................................5
    3.1      Minimum Rental..................................................................................6
             (a)      Commencement of Rental Obligations for Phase 1.........................................6
             (b)      Commencement of Rental Obligations for Phase 2A........................................6
             (c)      Rental Amounts for Phase 1A, Phase 1B, and Phase 2A:  Annual Increases.................6
             (d)      Rental Amounts During First Extended Term..............................................7
             (e)      Rental Amounts During Second Extended Term.............................................7
    3.2      Late Charge.....................................................................................7

4.  PARKING..................................................................................................8

5.  CONSTRUCTION.............................................................................................8
    5.1      Construction of Improvements....................................................................8
             (a)      Base Building Work; Performance and Payment............................................8
             (b)      Tenant's Work; Phase 2A Improvements...................................................8
             (c)      Compliance with Law....................................................................8

6.  TAXES....................................................................................................9
    6.1      Personal Property...............................................................................9
    6.2      Real Property Taxes.............................................................................9
             (a)      Real Property Taxes....................................................................9
             (b)      Protests...............................................................................9
             (c)      Refunds...............................................................................10
             (d)      Other Taxes...........................................................................10
             (e)      Tax and Insurance Escrows.............................................................10

7.  OPERATING EXPENSES......................................................................................10
    7.1      Payment of Operating Expenses..................................................................10
             (a)      Tenant's Operating Cost Share.........................................................10
</TABLE>
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<S>                                                                                                         <C>
             (b)      Adjustment of Tenant's Operating Cost Share...........................................10
    7.2      Definition of Operating Expenses...............................................................10
             (a)      Inclusions............................................................................11
             (b)      Exclusions............................................................................12
    7.3      Determination of Operating Expenses............................................................13
    7.4      Final Accounting For Lease Year................................................................13
             (a)      Annual Statement......................................................................13
             (b)      Audit Rights..........................................................................14
    7.5      Proration......................................................................................14
    7.6      Reserve Account................................................................................14
    7.7      Property Management Fee........................................................................15

8.  UTILITIES...............................................................................................15
    8.1      Payment........................................................................................15
    8.2      Interruption...................................................................................15

9.  ALTERATIONS.............................................................................................16
    9.1      Right To Make Alterations......................................................................16
    9.2      Title To Alterations...........................................................................16
    9.3      Tenant Fixtures and Personal Property..........................................................17
    9.4      No Liens.......................................................................................17
    9.5      Signs..........................................................................................17

10. MAINTENANCE AND REPAIRS.................................................................................17
    10.1     Tenant's Obligation for Maintenance............................................................17
             (a)      Good Order, Condition and Repair......................................................17
             (b)      [Deleted].............................................................................18
             (c)      Landlord's Remedy.....................................................................18
             (d)      Condition Upon Surrender..............................................................18
    10.2     Landlord's Obligation for Maintenance..........................................................18
             (a)      Good Order, Condition and Repair......................................................18
             (b)      No Abatement..........................................................................19
             (c)      Landlords' Right of Entry for Repairs.................................................19

11. USE OF PROPERTY.........................................................................................19
    11.1     Permitted Use..................................................................................19
    11.2     No Nuisance....................................................................................19
    11.3     Compliance With Laws...........................................................................19
    11.4     Environmental Matters..........................................................................20
             (a)      Definition of Hazardous Materials.....................................................20
             (b)      Tenant's Obligations Re:  Hazardous Substances........................................20
             (c)      Tenant's Indemnity....................................................................22
             (d)      Survival..............................................................................22

12. INSURANCE AND INDEMNITY.................................................................................22
    12.1     Landlord's Insurance...........................................................................22
    12.2     Tenant's Insurance.............................................................................22
</TABLE>

                                       ii
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<TABLE>
<S>                                                                                                         <C>
             (a)      Commercial General Liability Insurance................................................23
             (b)      Tenant's Risk.........................................................................23
             (c)      Other Insurance.......................................................................23
    12.3     Insurers; Primary Insurance....................................................................23
    12.4     Blanket Policy.................................................................................24
    12.5     Deductibles....................................................................................24
    12.6     Certificates...................................................................................24
    12.7     Adjustment in the Event of Loss................................................................24
    12.8     Proration Upon Termination.....................................................................25
    12.9     Waiver of Subrogation..........................................................................25
    12.10    Indemnification................................................................................25
             (a)      Tenant's Indemnification Obligations..................................................25
             (b)      Landlord's Indemnification Obligations................................................26
    12.11    Limitation on Landlord Liability...............................................................26

13. SUBLEASE AND ASSIGNMENT.................................................................................27
    13.1     Assignment and Sublease of Building............................................................27
             (a)      Consent Required......................................................................27
             (b)      Permitted Transfers...................................................................28
             (c)      Consent Required......................................................................28
             (d)      Procedure to Obtain Consent...........................................................28
             (e)      Sublease of Phase 2A..................................................................29
    13.2     Rights of Landlord:  Effect of Landlord's Consent..............................................29
    13.3     Advertising....................................................................................29
    13.4     Writing Required...............................................................................29
    13.5     Transfer Premiums..............................................................................30

14. RIGHT OF ENTRY AND QUIET ENJOYMENT......................................................................30
    14.1     Right of Entry.................................................................................30
    14.2     Quiet Enjoyment................................................................................30

15. CASUALTY AND TAKING.....................................................................................30
    15.1     Damage or Destruction..........................................................................30
             (a)      Termination Rights....................................................................30
             (b)      Limitations on Parties' Obligations...................................................31
             (c)      Entitlement to Insurance Proceeds.....................................................32
             (d)      Abatement of Rent.....................................................................32
    15.2     Condemnation...................................................................................32
             (a)      Termination Rights....................................................................32
             (b)      Limitations on Parties' Obligations...................................................33
    15.3     Reservation of Compensation....................................................................33
    15.4     Restoration of Improvements....................................................................33

16. DEFAULT.................................................................................................34
    16.1     Events of Default..............................................................................34
             (a)      Nonpayment............................................................................34
</TABLE>

                                      iii
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<S>                                                                                                         <C>
             (b)      Other Obligations.....................................................................34
             (c)      General Assignment....................................................................34
             (d)      Bankruptcy............................................................................34
             (e)      Receivership..........................................................................35
             (f)      Attachment............................................................................35
             (g)      Insolvency............................................................................35
    16.2     Remedies Upon Tenant's Default.................................................................35
             (a)      Re-entry; Termination.................................................................35
             (b)      Continuation of Lease.................................................................35
             (c)      Remedies..............................................................................36
    16.3     Remedies Cumulative............................................................................36
    16.4     Landlord's Default.............................................................................36

17. SUBORDINATION, ATTORNMENT AND SALE......................................................................36
    17.1     Subordination to Mortgage......................................................................36
    17.2     Sale of Landlord's Interest....................................................................37
    17.3     Estoppel Certificates..........................................................................38

18. SECURITY................................................................................................38
    18.1     Deposit........................................................................................38
    18.2     Pledge of Security Deposit.....................................................................39

19. MISCELLANEOUS...........................................................................................39
    19.1     Notices........................................................................................39
    19.2     Successors and Assigns.........................................................................40
    19.3     No Waiver......................................................................................40
    19.4     Severability...................................................................................40
    19.5     Litigation Between Parties.....................................................................41
    19.6     Surrender......................................................................................41
    19.7     Interpretation.................................................................................41
    19.8     Entire Agreement...............................................................................41
    19.9     Governing Law..................................................................................41
    19.10    No Partnership.................................................................................41
    19.11    Financial Information..........................................................................41
    19.12    Costs..........................................................................................42
    19.13    Time...........................................................................................42
    19.14    Brokers........................................................................................42
    19.15    Memorandum of Lease............................................................................43
    19.16    Corporate Authority............................................................................43
    19.17    Execution and Delivery.........................................................................43
    19.18    Survival.......................................................................................43
    19.19    Waiver of Jury Trial...........................................................................43
    19.20    Exclusivity....................................................................................43
    19.21    Tenant's Remedies..............................................................................43
    19.22    Security Measures..............................................................................43
</TABLE>

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                                    EXHIBITS

Exhibit A                   Real Property Description
Exhibit B                   Site Plan
Exhibit C                   Work Letter
<PAGE>
                              AMENDED AND RESTATED

                               BUILD-TO-SUIT LEASE

         THIS AMENDED AND RESTATED BUILD-TO-SUIT LEASE ("LEASE") is made and
entered into as of August 13, 2004 by and between INHALE 201 INDUSTRIAL ROAD,
L.P., a California limited partnership ("LANDLORD"), and NEKTAR THERAPEUTICS
(FKA INHALE THERAPEUTIC SYSTEMS, INC.), a Delaware corporation ("TENANT").

                                    RECITALS

         A. CONTRIBUTION AGREEMENT. Tenant and Landlord entered into that
certain Contribution Agreement dated as of September 14 2000 (the "CONTRIBUTION
AGREEMENT") pursuant to which, among other things: (i) Tenant agreed to
contribute, and Landlord agreed to accept, inter alia, that certain real
property situated at 201 Industrial Road, San Carlos, California, as partially
improved by Tenant (the "REAL PROPERTY"); and (ii) the parties agreed to enter
into a lease (the "ORIGINAL LEASE") as of the date of closing under the
Contribution Agreement. The Real Property is more particularly described in
EXHIBIT A attached hereto and incorporated herein by this reference.

         B. BUILD-TO-SUIT. Pursuant to the lease and the plans, specifications,
and other documents required hereby, Landlord constructed and/or completed
certain improvements on the Real Property, including (i) two connected
four-story buildings containing an aggregate of approximately 390,000 square
feet, consisting of approximately 171,965 square feet of rentable area and two
lower stories primarily of parking for the foregoing buildings as well as for
adjacent property currently leased and occupied by Tenant located at 150
Industrial Road; (ii) site improvements; and (iii) certain other improvements.

         C. AMENDMENT AND RESTATEMENT. The Landlord and Tenant now desire to
amend and restate the Original Lease as set forth in this Lease to provide for
certain modifications, including the deletion of Tenant's rights respecting
Phase 2B and certain other modifications, in complete replacement of the
Original Lease entered into in connection with the Contribution Agreement.

         D. DEFINITIONS. Unless the context otherwise specifies or requires for
the purpose of this Lease, all words and phrases having their initial letters
capitalized herein shall have the meanings set forth below:

                  AFFILIATE OF TENANT: shall have the meaning assigned in
                  Section 13.1(b).

                  BUILDING COST: shall have the meaning assigned in Section
                  18.2.

                  BUILDING 1: shall have the meaning assigned in Section
                  1.1(a)(ii).

                  BUILDING 1 TERMINATION DATE: shall have the meaning assigned
                  in Section 2.1.
<PAGE>
                  BUILDING 2: shall have the meaning assigned in Section
                  1.1(a)(ii).

                  BUILDING 2 TERMINATION DATE: shall have the meaning assigned
                  in Section 2.1.

                  BUILDINGS: shall have the meaning assigned in Section 1.1(a).

                  COMMON AREAS: shall mean the Interior and Exterior Common
                  Areas, collectively, as indicated in Section 1.1 (a)(x).

                  COSMETIC ALTERATIONS: shall have the meaning assigned in
                  Section 9.1.

                  EFFECTIVE DATE: shall have the meaning assigned in Section
                  2.1.

                  EXTERIOR COMMON AREAS: shall have the meaning assigned in
                  Section 1.1(a)(viii).

                  FAIR MARKET RENTAL: shall have the meaning assigned in Section
                  3.1(d).

                  HAZARDOUS MATERIALS: shall have the meaning assigned in
                  Section 11.4(a).

                  HVAC: shall have the meaning assigned in Section 7.2(a).

                  IMPROVEMENTS: shall have the meaning assigned in Section
                  1.1(a)(vii).

                  INTERIOR COMMON AREAS: shall have the meaning assigned in
                  Section 1.1(a)(ix).

                  LANDLORD: shall have the meaning assigned in the Introduction.

                  LEASE YEAR: shall have the meaning assigned in Section 7.3.

                  LEASE: shall have the meaning assigned in the Introduction.

                  MINIMUM RENTAL: shall have the meaning assigned in Section
                  3.1(c).

                  OPERATING EXPENSES: shall have the meaning assigned in Section
                  7.2(a).

                  PARKING LEASE: shall have the meaning assigned in Section
                  1.1(a).

                  PERMITTED TRANSFER: shall have the meaning assigned in Section
                  13.1(b).

                  PHASE 1A: shall have the meaning assigned in Section
                  1.1(a)(iii).

                  PHASE 1B: shall have the meaning assigned in Section
                  1.1(a)(iv).

                  PHASE 2A: shall have the meaning assigned in Section
                  1.1(a)(v).

                  PHASE 2B: shall have the meaning assigned in Section
                  1.1(a)(vi).

                                       1
<PAGE>
                  PHASE 1 RENT COMMENCEMENT DATE: shall have the meaning
                  assigned in Section 2.4.

                  PHASE 2A RENT COMMENCEMENT DATE: shall have the meaning
                  assigned in Section 2.4.

                  PREMISES: shall have the meaning assigned in Section 1.1(a).

                  PREVAILING PARTY: shall have the meaning assigned in Section
                  19.5.

                  PROJECT: shall have the meaning assigned in Section
                  1.1(a)(vii).

                  REAL PROPERTY: shall have the meaning assigned in Recital A.

                  RENT COMMENCEMENT DATE: shall mean the Phase 1 Rent
                  Commencement Date, or Phase 2A Rent Commencement Date, as
                  defined in Section 2.4.

                  REQUESTING PARTY: shall have the meaning assigned in Section
                  17.3.

                  REQUIREMENTS: shall have the meaning assigned in Section 11.3.

                  RESPONDING PARTY: shall have the meaning assigned in Section
                  17.3.

                  SECURITY DEPOSIT: shall have the meaning assigned in Section
                  18.1.

                  SITE PLAN: shall have the meaning assigned in Section
                  1.1(a)(ii).

                  TENANT: shall have the meaning assigned in the Introduction.

                  TENANT IMPROVEMENTS: shall mean improvements to or within the
                  Premises, other than improvements constructed by Landlord as
                  part of the Building, constructed from time to time by Tenant.

                  TENANT'S OPERATING COST SHARE: shall have the meaning assigned
                  in Section 7.1(a).

                  TENANT'S EXTERIOR COMMON AREA OPERATING COST SHARE: shall have
                  the meaning assigned in Section 7.1(a).

                  TERM: shall have the meaning assigned in Section 2.1.

                  USABLE SQUARE FEET: shall mean, with respect to each Phase
                  shall mean the square feet indicated in Section 1.1(a) below.

         THE PARTIES AGREE AS FOLLOWS:

                                       2
<PAGE>
1. PROPERTY.

         1.1 LEASE OF PREMISES.

                  (a) Buildings, Real Property, Improvements. Subject to the
Parking Lease dated as of September 14, 2000 (the "PARKING LEASE") by and
between Landlord and Tenant, Landlord leases to Tenant and Tenant leases from
Landlord, on the terms, covenants and conditions hereinafter set forth, Phase
1A, Phase 1B, and Phase 2A (all as defined below and referred to collectively
herein as the "PREMISES"). Upon the Building 2 Termination Date, the Premises
shall consist of Phase 1A and Phase 1B only. The Premises, together with Phase
2B, were constructed by Landlord; and are located in two connected four-story
buildings containing an aggregate of approximately 390,000 square feet,
consisting of approximately 171,965 square feet of rentable area for office and
laboratory research and development and two lower stories primarily of parking
(collectively, the "BUILDINGS" and each a "BUILDING"). The Buildings were
constructed on the Real Property in connection with the Project.

                           (i) The Real Property is located at 201 Industrial
Road in the City of San Carlos, County of San Mateo, State of California.

                           (ii) The location of the Buildings on the Real
Property is substantially as shown on the site plans attached hereto as EXHIBIT
B (the "SITE PLAN"); the first BUILDING to be constructed ("BUILDING 1") was
constructed on the Real Property in the location depicted on the Site Plan, and
the second BUILDING was constructed ("BUILDING 2") on the Real Property in the
location depicted on the Site Plan.

                           (iii) The term "PHASE 1A" shall refer to that portion
of Building 1 consisting of approximately 39,077 rentable square feet (37,703
usable square feet) located on the fourth floor and the approximately 964
rentable square feet (930 usable square feet) located on the second floor and
shown on the Site Plan.

                           (iv) The term "PHASE 1B" shall refer to that portion
of Building 1 consisting of approximately 39,876 rentable square feet (38,474
usable square feet) located on the third floor and shown on the Site Plan.

                           (v) The term "PHASE 2A" shall refer to that portion
of Building 2 consisting of approximately 45,574 rentable square feet (43,972
usable square feet) located on the third floor and shown on the Site Plan.

                           (vi) The term "PHASE 2B" shall refer to that portion
of Building 2 consisting of approximately 46,474 rentable square feet (44,840
usable square feet) located on the fourth floor and shown on the Site Plan.

                           (vii) The Buildings and the other improvements to be
constructed on the Real Property in connection with the Project, including the
Common Areas (defined below), are sometimes referred to collectively herein as
the "IMPROVEMENTS." The "PROJECT," when completed, will consist of the Real
Property and the Improvements.

                                       3
<PAGE>
                           (viii) The parking areas (whether inside or outside
the Buildings), courtyard, driveways, sidewalks, landscaped areas and other
portions of the Project, including any areas leased under the Parking Lease,
that lie outside the exterior walls of the Buildings to be constructed on the
Real Property, as depicted in the Site Plan and as hereafter modified by
Landlord from time to time in accordance with the provisions of this Lease, are
sometimes referred to herein as the "EXTERIOR COMMON AREAS."

                           (ix) The term "INTERIOR COMMON AREAS" shall refer to
the interior lobby, elevators, stairwells, utility risers, and any mechanical
rooms located outside any tenant's premises in the Buildings.

                           (x) The term "COMMON AREAS" shall refer collectively
to the Exterior Common Areas and the Interior Common Areas

                  (b) Use of Common Areas. As an appurtenance to Tenant's
leasing of the Premises pursuant to Section 1.1(a), Landlord hereby grants to
Tenant, for the benefit of Tenant and its employees, suppliers, shippers,
customers and invitees, during the Term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, (i) those portions of the
Common Areas improved from time to time for use as parking areas, driveways,
courtyard, sidewalks, landscaped areas, lobbies, elevators, stairwells, utility
risers, any mechanical rooms located outside any tenant's premises, or for other
common purposes, and (ii) all access easements and similar rights and privileges
relating to or appurtenant to the Real Property and created or existing from
time to time under any access easement agreements, declarations of covenants,
conditions and restrictions, or other written agreements now or hereafter of
record with respect to the Real Property, subject however to the rights granted
under the Parking Lease and any limitations applicable to such rights and
privileges under applicable law, under this Lease and/or under the written
agreements creating such rights and privileges.

         1.2 [DELETED]

2. TERM.

         2.1 TERM. The term of this Lease (as it may be extended from time to
time, the "TERM") shall commence upon mutual execution of this Lease by Landlord
and Tenant (the "EFFECTIVE DATE") and shall terminate on August 31, 2016 as to
Phase 1A and Phase 1B (as it may be extended pursuant to Section 2.6, below, the
"BUILDING 1 TERMINATION DATE"), and August 12, 2007 as to Phase 2A (the
"BUILDING 2 TERMINATION DATE").

         2.2 [DELETED].

         2.3 [DELETED].

         2.4 ACKNOWLEDGEMENT OF RENT COMMENCEMENT. The Landlord and the Tenant
agree that the following dates are the Phase 1 Rent Commencement Date and the
Phase 2A Rent Commencement Date:

         Phase 1 Rent Commencement Date: October 6, 2000 (under Original Lease).

                                       4
<PAGE>
         Phase 2A Rent Commencement Date: October 6, 2001 (under Original
Lease).

         2.5 HOLDING OVER. If Tenant holds possession of the Premises or any
portion thereof after the Term of this Lease with Landlord's written consent,
then except as otherwise specified in such consent, Tenant shall become a tenant
from month to month at one hundred and two percent (102%) of the rental and
otherwise upon the terms herein specified for the period immediately prior to
such holding over and shall continue in such status until the tenancy is
terminated by either party upon not less than one hundred twenty (120) days
prior written notice. If Tenant holds possession of the Premises or any portion
thereof after the Term of this Lease without Landlord's written consent, then
Landlord in its sole discretion may elect (by written notice to Tenant) to have
Tenant become a tenant either from month to month or at will, at one hundred
fifty percent (150%) of the rental (prorated on a daily basis for an at-will
tenancy, if applicable) and otherwise upon the terms herein specified for the
period immediately prior to such holding over, or may elect to pursue any and
all legal remedies available to Landlord under applicable law with respect to
such holding over by Tenant. Tenant shall indemnify and hold Landlord harmless
from any loss, damage, claim, liability, cost or expense (including reasonable
attorneys' fees) resulting from any delay by Tenant in surrendering the Premises
or any portion thereof (except to the extent such delay is with Landlord's prior
written consent), including, but not limited to, any claims made by a succeeding
tenant by reason of such delay. Acceptance of rent by Landlord following
expiration or termination of this Lease shall not constitute a renewal of this
Lease.

         2.6 OPTIONS TO EXTEND TERM. Tenant shall have the option to extend the
Term of this Lease for Phase 1A and Phase 1B only (but not Phase 2A), at the
Minimum Rental set forth in Section 3.1(b) and (c), below, and otherwise upon
all the terms and provisions set forth herein with respect to the initial term
of this Lease, for up to two (2) additional periods of ten (10) years each, the
first commencing upon the expiration of the initial term hereof and the second
commencing upon the expiration of the first extended term, if any. Exercise of
such option with respect to the first such extended term shall be by written
notice to Landlord at least eighteen (18) months prior to the expiration of the
initial term hereof, exercise of such option with respect to the second extended
term, if the first extension option has been duly exercised, shall be by written
notice to Landlord at least eighteen (18) months prior to the expiration of the
first extended term hereof. If Tenant is in material default hereunder, beyond
any applicable notice and cure periods, on the date of such notice or on the
date any extended term is to commence, then the exercise of the option shall be
of no force or effect, the extended term shall not commence and this Lease shall
expire at the end of the then current term hereof (or at such earlier time as
Landlord may elect pursuant to the default provisions of this Lease). If Tenant
properly exercises one or more extension options under this Section, then all
references in this Lease (other than in this Section 2.6) to the "term" of this
Lease shall be construed to include the extension term(s) thus elected by
Tenant. Except as expressly set forth in this Section 2.6, Tenant shall have no
right to extend the Term of this Lease beyond its prescribed term.

3. RENTAL.

         Tenant shall cause payment of Minimum Rental and other rent or charges
to be received by Landlord on the first calendar day of each month of the Term
of this Lease in lawful money

                                       5
<PAGE>
of the United States, without offset or deduction, except as specifically
provided herein. All amounts payable by Tenant hereunder shall be deemed "Rent."

         3.1 MINIMUM RENTAL.

                  (a) Commencement of Rental Obligations for Phase 1. Tenant's
Minimum Rental obligations with respect to Phase 1A and Phase 1B shall commence
on the Phase 1 Rent Commencement Date and Tenant's Operating Expense Obligations
with respect to Phase 1A and Phase 1B shall commence as of the Effective Date,
and both shall end on the Building 1 Termination Date, unless sooner terminated
or extended as hereinafter provided.

                  (b) Commencement of Rental Obligations for Phase 2A. Tenant's
Minimum Rental obligations with respect to Phase 2A shall commence on the
Effective Date and Tenant's Operating Expense obligations with respect to Phase
2A shall commence as of the Effective Date and both shall end on the Building 2
Termination Date, unless sooner terminated as hereinafter provided.

                  (c) Rental Amounts for Phase 1A, Phase 1B, and Phase 2A:
Annual Increases. Tenant shall pay to Landlord as minimum rental for the
following Phases, in advance, without deduction, offset, notice or demand, on or
before the respective Rent Commencement Date and on or before the first day of
each subsequent calendar month of the Term of this Lease, the following amounts
per month, subject to adjustment in accordance with the terms of this Section
3.1 ("MINIMUM RENTAL"):

                           (i) Phase 1A and 1B. Beginning on the Phase 1 Rent
Commencement Date, Tenant shall pay Minimum Rental for Phase 1 in an amount
equal to $287,701.20 ($3.60 per sq. ft. multiplied by 79,917).

                           (ii) Phase 2A. Beginning on the Phase 2A Rent
Commencement Date, Tenant shall pay Minimum Rental for Phase 2A in an amount
equal to $164,066.40 ($3.60 per sq. ft. multiplied by 45,574).

                           (iii) [Deleted].

                           (iv) Annual Increases. On the anniversary of each of
September 1 of each year (as to the Phase 1 Rent) and October 6 of each year (as
to the Phase 2A Rent), the then current Minimum Rental for the relevant Phase
shall be increased by two percent (2%).

                           (v) Partial Months. If the obligation to pay Minimum
Rental hereunder commences on other than the first day of a calendar month or if
the Term of this Lease terminates on other than the last day of a calendar
month, the Minimum Rental for such first or last month of the Term of this
Lease, as the case may be, shall be prorated based on the number of days the
Term of this Lease is in effect during such month. If an increase in Minimum
Rental becomes effective on a day other than the first day of a calendar month,
the Minimum Rental for that month shall be the sum of the two applicable rates,
each prorated for the portion of the month during which such rate is in effect.

                                       6
<PAGE>
                  (d) Rental Amounts During First Extended Term. If Tenant
properly exercises its right to extend the Term of this Lease pursuant to
Section 2.6 hereof, the Minimum Rental during the first year of the first
extended term shall be equal to one hundred percent (100%) of the fair market
rental value (as defined below), determined as of the commencement of such
extended term in accordance with this paragraph. Upon Landlord's receipt of a
proper notice of Tenant's exercise of its option to extend the Term of this
Lease, the parties shall have thirty (30) days in which to agree on the Fair
Market Rental at the commencement of the first extended term for the uses
permitted hereunder. If the parties agree on such Fair Market Rental, they shall
execute an amendment to this Lease stating the amount of the applicable minimum
monthly rental (including the indexed amounts applicable during subsequent years
of the first extended term as described above in Section 3.1(c)(iv)). If the
parties are unable to agree on such rental within such thirty (30) day period,
then within thirty (30) days after the expiration of such period each party, at
its cost and by giving notice to the other party, shall appoint a real estate
appraiser with at least five (5) years experience appraising similar commercial
properties in the County in which the Real Property is located to appraise and
set the Fair Market Rental for the Premises at the commencement of the first
extended term in accordance with the provisions of this Section 3.1(d). If
either party fails to appoint an appraiser within the allotted time, the single
appraiser appointed by the other party shall be the sole appraiser. If an
appraiser is appointed by each party and the two appraisers so appointed are
unable to agree upon a Fair Market Rental within thirty (30) days after the
appointment of the second, the two appraisers shall appoint a third similarly
qualified appraiser within ten (10) days after expiration of such 30-day period;
if they are unable to agree upon a third appraiser, then either party may, upon
not less than five (5) days notice to the other party, apply to the Presiding
Judge of the Superior Court of the County in which the Real Property is located
for the appointment of a third qualified appraiser. Each party shall bear its
own legal fees in connection with appointment of the third appraiser and shall
bear one-half of any other costs of appointment of the third appraiser and of
such third appraiser's fee. The third appraiser, however selected, shall be a
person who has not previously acted for either party in any capacity. Within
thirty (30) days after the appointment of the third appraiser, the third
appraiser shall set the Fair Market Rental for the first extended term by
selecting the appraised value determined by the first two appraisers which is
closest to his own determination, and shall so notify the parties, which
determination shall be binding on the parties and shall be enforceable in any
further proceedings relating to this Lease. For purposes of this Section 3.1(d),
the "FAIR MARKET RENTAL" of the Premises shall be determined with reference to
the then prevailing market rental rates for properties in the City of San Carlos
with improvements and common area improvements comparable to those then existing
in the Premises and paid for by Landlord.

                  (e) Rental Amounts During Second Extended Term. If Tenant
properly exercises its right to a second extended Term of this Lease pursuant to
Section 2.6 hereof, the Minimum Rental during such second extended term shall be
determined in the same manner provided in the preceding paragraph for the first
extended term (including the rental increase provision for years after the first
year of such second extended term), except that the determination shall be made
as of the commencement of the second extended term.

         3.2 LATE CHARGE. If Tenant shall fail to pay, when the same is due and
payable (after giving effect to any applicable notice and cure period), any rent
or other amounts due Landlord

                                       7
<PAGE>
hereunder, such unpaid amounts shall bear interest for the benefit of the
Landlord at a rate equal to the lesser of ten percent (10%) per annum or the
maximum rate permitted by law, from the date due to the date of payment. Tenant
further acknowledges that late payment of rent will cause Landlord to incur
certain costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impractical to determine with certainty. For this
reason, in addition to interest, if Tenant shall fail to pay (which for purposes
of this paragraph, "pay" shall mean actual receipt of the payment by Landlord)
any installment of rent by the fifth (5th) day of the calendar month for which
such installment is due, a late charge equal to five percent (5%) of the overdue
installment of rent automatically shall be due without further notice, and shall
be in addition to all other sums due. The parties agree that this additional
late charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant.

4. PARKING.

         Landlord and Tenant agree that the Common Areas of the Real Property
shall include not less than 690 parking spaces. Commencing on the Effective Date
and ending on the Building 2 Termination Date, Tenant shall be entitled to 361
spaces, and commencing on the Building 2 Termination Date and ending on the
Building 1 Termination Date, Tenant shall be entitled to 224 spaces, all in
addition to those spaces provided in and subject to the Parking Lease.

5. CONSTRUCTION.

         5.1 CONSTRUCTION OF IMPROVEMENTS.

                  (a) Base Building Work; Performance and Payment. Landlord has
constructed Building 1 and Building 2 pursuant to its obligations under the
Original Lease and Landlord and Tenant agree, subject to Section 5.1(c) below,
that Landlord's obligations in connection with such construction have been fully
and satisfactorily performed.

                  (b) Tenant's Work; Phase 2A Improvements. Tenant has
constructed Tenant Improvements within Phase 1A Phase 1B of the Premises in
accordance with the prior lease, and may make such future improvements and
modifications to the same as set forth herein. Tenant and Landlord agreed under
the Original Lease to provide Tenant with a Tenant improvement Allowance for
tenant improvements within each Phase of the Premises equal to $100 per Usable
Square Foot. Tenant and Landlord agree that this obligation has been satisfied
as to Phase 1, and further agree Landlord shall construct improvements to Phase
2A pursuant to that Work Letter attached hereto as EXHIBIT C, and that such
improvements constructed pursuant to the Work Letter shall meet Landlord's
obligations as to $70 per Usable Square Foot of Phase 2A, or such higher amount
per Usable Square Foot actually expended by Landlord in constructing
improvements within Phase 2A.

                  (c) Compliance with Law. Landlord warrants to Tenant that the
Base Building Work and any other improvements constructed by Landlord from time
to time shall not violate any applicable law, building code, regulation or
ordinance in effect on the applicable Rent Commencement Date or at the time such
improvements are placed in service. If it is determined that any of these
warranties have been violated, then it shall be the obligation of the

                                       8
<PAGE>
Landlord, after written notice from Tenant, to correct the conditions(s)
constituting such violation promptly, at Landlord's sole cost and expense.

6. TAXES.

         6.1 PERSONAL PROPERTY. Tenant shall be responsible for and shall pay
prior to delinquency all taxes and assessments levied against or by reason of
(a) any and all alterations, additions and items installed or placed on or in
the Premises and taxed as personal property rather than as real property, and/or
(b) all personal property, trade fixtures and other property placed by Tenant on
or about the Premises. Upon request by Landlord, Tenant shall furnish Landlord
with satisfactory evidence of Tenant's payment thereof. If at any time during
the Term of this Lease any of said alterations, additions or personal property,
whether or not belonging to Tenant, shall be taxed or assessed as part of the
Real Property, then such tax or assessment shall be paid by Tenant to Landlord
within thirty (30) days after presentation by Landlord of copies of the tax
bills in which such taxes and assessments are included and shall, for the
purposes of this Lease, be deemed to be personal property taxes or assessments
under this Section 6.1.

         6.2 REAL PROPERTY TAXES.

                  (a) Real Property Taxes. Commencing with the Effective Date
and continuing for each calendar year, or tax year at Landlord's option (such
"tax year" being a period of twelve (12) consecutive calendar months for which
the applicable taxing authority levies or assesses real property taxes), for the
balance of the Lease Term, Tenant shall pay to Landlord the Tenant's Operating
Cost Share of all real property taxes, pursuant to Section 7.2(a) below. Such
sum for any partial year of the Lease Term shall be prorated on the basis of the
number of days of such partial year. Landlord also shall provide Tenant with a
copy of the applicable tax bill or tax statement from the taxing authority. In
addition to any other amounts due from Tenant to Landlord, if Tenant fails to
pay the real property taxes to Landlord as herein required, Tenant shall pay to
Landlord the amount of any interest, penalties or late charges caused by
Tenant's late payment.

                  (b) Protests. If the Premises are separately assessed, Tenant
shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of real property taxes, any special
assessment, or the validity of any real property taxes or of any change in
assessment or tax rate; provided, however, that prior to any such challenge
Tenant must either (a) pay the taxes alleged to be due in their entirety and
seek a refund from the appropriate authority, or (b) post bond in an amount
sufficient to insure full payment of the real property taxes. In any event, upon
a final determination with respect to such contest or protest, Tenant shall
promptly pay all sums found to be due with respect thereto. In any such protest
or contest, Tenant may act in its own name, and at the request of Tenant,
Landlord shall cooperate with Tenant in any way Tenant may reasonably require in
connection with such contest or protest, including signing such documents as
Tenant reasonably shall request, provided that such cooperation shall be at no
expense to Landlord and shall not require Landlord to attend any appeal or other
hearing. Any such contest or protest shall be at Tenant's sole expense, and if
any penalties, interest or late charges become payable with respect to the real
property taxes as a result of such contest or protest, Tenant shall pay the
same.

                                       9
<PAGE>
                  (c) Refunds. If Tenant obtains a refund as the result of
Tenant's protest or contest and subject to Tenant's obligation to pay Landlord's
costs (if any) associated therewith, Tenant shall be entitled to such refund to
the extent it relates to Phase 1 or Phase 2A (to the extent occupied by Tenant)
of the Premises during the Lease Term.

                  (d) Other Taxes. If at any time during the Lease Term under
the laws of the United States Government, state, county or city, or any
political subdivision thereof in which the Premises are situated, a tax or
excise on rent or any other tax however described is levied or assessed by any
such political body against Landlord on account of rentals payable to Landlord
hereunder, such tax or excise shall be considered "real property taxes" for the
purposes of this Section 6.2, excluding, however, from such tax or excise any
amount assessed against Landlord as state or federal income tax.

                  (e) Tax and Insurance Escrows. To the extent required by any
lender of Landlord, Tenant shall timely pay all tax and insurance impound
payments due on the Premises.

7. OPERATING EXPENSES.

         7.1 PAYMENT OF OPERATING EXPENSES.

                  (a) Tenant's Operating Cost Share.

                           (i) Commencing on the Effective Date through the
Building 1 Termination Date or the Building 2 Termination Date, as applicable,
Tenant shall pay to Landlord, at the time and in the manner hereinafter set
forth, as additional rental: (i) an amount equal to Tenant's Operating Cost
Share multiplied by the Operating Expenses defined in Section 7.2, and (ii) an
amount equal to Tenant's Operating Cost Share multiplied by the Exterior Common
Area Cost.

                           (ii) [Deleted]

                           (iii) [Deleted].

                           (iv) The term "TENANT'S OPERATING COST SHARE" means
72.98% through and until the Building 2 Termination Date and thereafter means
46.47% through and until the Building 1 Termination Date. "TENANT'S EXTERIOR
COMMON AREA COST SHARE" shall be equal to the Tenant's Operating Cost Share as
established from time to time.

                  (b) Adjustment of Tenant's Operating Cost Share. If at any
time the percentage the gross square footage of the Premises as a part of the
combined gross square footage of Buildings 1 and 2 should change, then Tenant's
Operating Cost Share shall be adjusted to be equal to the new percentage
determined by dividing the new gross square footage of the Premises by the new
gross square footage of Buildings 1 and/or 2 (as applicable).

         7.2 DEFINITION OF OPERATING EXPENSES.

                                       10
<PAGE>
                  (a) Inclusions. Subject to the exclusions and provisions
hereinafter contained, the term "OPERATING EXPENSES" shall mean the total costs
and expenses incurred by Landlord or Tenant for operation and maintenance of the
Buildings and the Real Property, including, without limitation, costs and
expenses of:

                           (i) insurance premiums for insurance carried by
Landlord pursuant to Section 12.1 (which may include, at Landlord's option,
flood, earthquake or environmental remediation insurance), insurance
deductibles, provided that any increase in premiums for flood, earthquake or
environmental remediation coverage which is in excess of twenty five percent of
the previous years' premium shall not be included in Operating Expenses;

                           (ii) the operation, repair and maintenance of the
Building and Common Areas in a first class condition including but not limited
to sidewalks, parking areas, curbs, roads, driveways, lighting standards,
landscaping, sewers, water, gas and electrical distribution systems and
facilities, drainage facilities, and all signs, both illuminated and
non-illuminated that are now or hereafter in the Buildings and on the Real
Property;

                           (iii) all Common Area utilities and services not
separately metered to Tenant;

                           (iv) real and personal property taxes and assessments
or substitutes therefor levied or assessed against the Real Property or any part
thereof, including (but not limited to any possessory interest, use, business,
license or other taxes or fees, any taxes imposed directly on rents or services,
any assessments or charges for police or fire protection, housing, transit, open
space, street or sidewalk construction or maintenance or other similar services
from time to time by any governmental or quasi-governmental entity, and any
other new taxes on landlords in addition to taxes now in effect;

                           (v) supplies, equipment, utilities and tools used in
the operation and maintenance of the Real Property;

                           (vi) capital improvements to the Real Property, the
Improvements or the Buildings including, without limitation, all structural,
roof, HVAC (defined as heating, ventilation, and air conditioning equipment and
fixtures related thereto) serving the Common Areas, plumbing and electrical
systems costing Seventy-Five Thousand Dollars ($75,000) or less, provided that
the cost of all other capital improvements shall be amortized over the useful
life of any such capital improvement (calculated in accordance with GAAP) and
included in Operating Expenses;

                           (vii) [Deleted]

                           (viii) market rate lease costs for equipment; and

                           (ix) any other costs (including, but not limited to,
any parking or utilities fees or surcharges) allocable to or paid by Landlord,
as owner of the Real Property, Buildings or Improvements, pursuant to any
applicable laws, ordinances, regulations or orders of any governmental or
quasi-governmental authority or pursuant to the terms of any declaration of

                                       11
<PAGE>
covenants, conditions and restrictions now or hereafter affecting the Real
Property or any other property over which Tenant has non-exclusive use rights as
contemplated in Section 1.1(b) hereof.

                  (b) Exclusions. Notwithstanding anything to the contrary
contained in this Lease, the following shall not be included within Operating
Expenses:

                           (i) Leasing commissions, attorneys' fees, costs,
disbursements, and other expenses incurred in connection with negotiations or
disputes with tenants, or in connection with leasing, renovating or improving
space for tenants or other occupants or prospective tenants or other occupants
of the Real Property;

                           (ii) The cost of any service sold to any tenant
(including Tenant) or other occupant for which Landlord is entitled to be
reimbursed as an additional charge or rental over and above the basic rent and
operating expenses payable under the lease with that tenant;

                           (iii) Any depreciation on the Buildings or on any
other improvements on the Real Property;

                           (iv) Expenses in connection with services or other
benefits of a type that are not offered or made available to Tenant but that are
provided to another tenant of the Real Property or of any other property owned
by Landlord;

                           (v) Costs incurred due to Landlord's violation of any
terms or conditions of this Lease or of any other lease relating to the
Buildings or to any other portion of the Real Property;

                           (vi) Overhead profit increments paid to any
subsidiary or affiliate of Landlord for services other than management on or to
the Real Property, or for supplies or other materials to the extent that the
cost of the services, supplies or materials exceeds the cost that would have
been paid had the services, supplies or materials been provided by unaffiliated
parties on a competitive basis;

                           (vii) All interest, loan fees and other carrying
costs related to any mortgage or deed of trust, and all rental and other amounts
payable under any ground or underlying lease, or above market lease payments
under any lease for any equipment ordinarily considered to be of a capital
nature (except janitorial equipment which is not affixed to the Buildings and/or
equipment the costs of which, if purchased, would be considered an amortizable
Operating Expense under the provisions above, notwithstanding the capital nature
of such equipment);

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

                           (ix) Advertising and promotional expenditures;

                                       12
<PAGE>
                           (x) Any costs, fines or penalties incurred due to
violations by Landlord of any governmental rule or authority or of this Lease or
any other lease of any portion of the Real Property or any other property owned
by Landlord, or due to Landlord's gross negligence or willful misconduct;

                           (xi) Property management fees;

                           (xii) Costs for sculpture, paintings or other objects
of art, and for any insurance thereon or extraordinary security in connection
therewith other than that provided in connection with the initial construction
of the Buildings or the Common Area improvements on the Real Property;

                           (xiii) Wages, salaries or other compensation paid to
any executive employees above the grade of building manager;

                           (xiv) The cost of containing, removing or otherwise
remediating any contamination of the Real Property (including the underlying
land and groundwater) by any toxic or Hazardous Materials (as defined in Section
11.4(a), below) for which Landlord is responsible under Section 11.4, below; and

                           (xv) Premiums for earthquake, environmental
remediation or flood insurance coverage other than as permitted under Section
7.2(a), above.

                           (xvi) Operating Expenses shall not include any costs
attributable to the work for which Landlord is required to pay under Article 5
or EXHIBIT C, nor any costs attributable to the initial construction of the
Buildings or of Common Area improvements on the Real Property.

         7.3 DETERMINATION OF OPERATING EXPENSES. During the last month of each
calendar year of the Term of this Lease ("LEASE YEAR"), or as soon thereafter as
practical, Landlord shall provide Tenant notice of Landlord's estimate of the
Operating Expenses for the ensuing Lease Year or applicable portion thereof. On
or before the first day of each month during the ensuing Lease Year or
applicable portion thereof, beginning on the Phase 1 Rent Commencement Date,
Tenant shall pay to Landlord Tenant's Operating Cost Share of the portion of
such estimated Operating Expenses allocable (on a pro rata basis) to such month;
provided, however, that if such notice is not given in the last month of a Lease
Year, Tenant shall continue to pay on the basis of the prior year's estimate, if
any, until the month after such notice is given. If at any time or times it
appears to Landlord that the actual Operating Expenses will vary from Landlord's
estimate by more than four percent (4%), Landlord may, by notice to Tenant,
revise its estimate for such year and subsequent payments by Tenant for such
year shall be based upon such revised estimate.

         7.4 FINAL ACCOUNTING FOR LEASE YEAR.

                  (a) Annual Statement. Within ninety (90) days after the close
of each Lease Year, or as soon after such 90-day period as practicable, Landlord
shall deliver to Tenant a statement of Tenant's Operating Cost Share of the
Operating Expenses for such Lease Year prepared by Landlord from Landlord's
books and records, which statement shall be final and

                                       13
<PAGE>
binding on Landlord and Tenant (except as provided in Section 7.4(b)). If on the
basis of such statement Tenant owes an amount that is more or less than the
estimated payments for such Lease Year previously made by Tenant, Tenant or
Landlord, as the case may be, shall pay the deficiency to the other party within
thirty (30) days after delivery of the statement. Failure or inability of
Landlord to deliver the annual statement within such ninety (90) day period
shall not impair or constitute a waiver of Tenant's obligation to pay Operating
Expenses, or cause Landlord to incur any liability for damages.

                  (b) Audit Rights. At any time within one hundred twenty (120)
days after receipt of Landlord's annual statement of Operating Expenses as
contemplated in Section 7.4(a), Tenant shall be entitled, upon reasonable
written notice to Landlord and during normal business hours at Landlord's office
or such other places as Landlord shall designate, to inspect and examine those
books and records of Landlord relating to the determination of Operating
Expenses for the immediately preceding Lease Year covered by such annual
statement or, if Tenant so elects by written notice to Landlord, to request an
independent audit of such books and records. The independent audit of the books
and records shall be conducted by a certified public accountant acceptable to
both Landlord and Tenant or, if the parties are unable to agree, by a certified
public accountant appointed by the Presiding Judge of the County Superior Court
in which the Real Property is located upon the application of either Landlord or
Tenant (with notice to the other party). In either event, such certified public
accountant shall be one who is not then employed in any capacity by Landlord or
Tenant. The audit shall be limited to the determination of the amount of
Operating Expenses for the subject Lease Year, and shall be based on generally
accepted accounting principles and tax accounting principles, consistently
applied. If it is determined, by mutual agreement of Landlord and Tenant or by
independent audit, that the amount of Operating Expenses billed to or paid by
Tenant for the applicable Lease Year was incorrect, then the appropriate party
shall pay to the other party the deficiency or overpayment, as applicable,
within thirty (30) days after the final determination of such deficiency or
overpayment. All costs and expenses of the audit shall be paid by Tenant unless
the audit shows that Landlord overstated Operating Expenses for the subject
Lease Year by more than five percent (5%), in which case Landlord shall pay all
costs and expenses of the audit. Each party agrees to maintain the
confidentiality of the findings of any such audit.

         7.5 PRORATION. If the Rent Commencement Date for Phase 1 or Phase 2A
falls on a day other than the first day of a Lease Year and/or if the Building 1
Termination Date or the Building 2 Termination Date falls on a day other than
the last day of a Lease Year, then the amount of Operating Expenses payable by
Tenant with respect to such first or last partial Lease Year shall be prorated
on the basis which the number of days during such Lease Year in which this Lease
is in effect bears to 365. The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 7.4 to be performed after
such termination.

         7.6 RESERVE ACCOUNT. Tenant shall each month, commencing on the Phase 1
Rent Commencement Date and on the first day of each calendar month thereafter of
the Lease term, deposit into a segregated, interest bearing bank account in a
federally insured bank or savings institute an amount equal to one percent (1%)
of the monthly rent due for that month, to provide for future replacements to
improvements and fixtures within the Premises (the "RESERVE ACCOUNT"); provided
that if at any time the amount held in the Reserve Account is equal to the

                                       14
<PAGE>
product of thirty six months times the amount of the monthly contribution,
Tenant's obligation to make additional deposits shall be temporarily suspended.
Tenant's obligation to make such deposits shall resume at such time as the
amount in the Reserve Account drops below such amount. The Reserve Account shall
remain the property of Tenant, but disbursements from the Reserve Account shall
be made only by joint check executed by Landlord and Tenant upon the mutual
consent of Landlord and Tenant, which consent shall not be unreasonably
withheld, delayed or conditioned. Landlord shall, within ten (10) days after
receipt of a written request, either sign any such check or convey in writing to
Tenant any objections to signing the check, and shall thereafter diligently work
with Tenant to resolve any differences with regard to the disbursement.
Notwithstanding the foregoing, if Tenant, pursuant to the Lease, is required to
make certain repairs, improvements, or replacements to the Premises or Common
Area but fails to do so within the time allowed hereunder (subject to any
applicable cure period), then Landlord, as provided under the Lease, may make
such repairs, improvements, or replacements, and may disburse funds from the
Reserve Account, without Tenant's consent or signature on the disbursement
check(s), to pay for the cost of the repairs, improvements, or replacements. Any
amount in the Reserve Account remaining at the expiration of the Lease shall
remain the property of Tenant.

         7.7 PROPERTY MANAGEMENT FEE. Commencing with the execution of this
Lease, Tenant shall pay to Landlord a monthly fee ("MANAGEMENT FEE") to cover
costs of property management services in an amount not to exceed one percent
(1.00%) of the Minimum Rental for the Premises whether or not Landlord incurs
fees payable to any third party to provide such services and without regard to
the actual costs incurred by Landlord for such services.

8. UTILITIES.

         8.1 PAYMENT. Commencing with the Phase 1 Rent Commencement Date and
thereafter throughout the Term of this Lease, Tenant shall pay, before
delinquency, all charges for water, trash collection, gas, heat, light,
electricity, power, sewer, telephone, alarm system, janitorial and other
services or utilities supplied to or consumed in or with respect to the
Premises, including any taxes on such services and utilities, and Tenant's
Operating Cost Share of all charges for water, gas, heat, light, electricity,
power, sewer, telephone, alarm system, janitorial and other services or
utilities supplied to or consumed in or with respect to the Common Areas. It is
the intention of the parties that to the extent feasible, all services provided
to the Premises (as opposed to the Common Areas and as the same shall exist from
time to time) shall be separately metered to the Premises.

         8.2 INTERRUPTION. There shall be no abatement of rent or other charges
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used with respect to the Premises because of accident, making of repairs,
alterations or improvements, severe weather, difficulty or inability in
obtaining services or supplies, labor difficulties or any other cause, except
the gross negligence or willful misconduct of Landlord, its employees and/or
agents.

                                       15
<PAGE>
9. ALTERATIONS.

         9.1 RIGHT TO MAKE ALTERATIONS. Tenant shall make no alterations,
additions or improvements to the Premises, other than interior non-structural
alterations ("COSMETIC ALTERATIONS") costing less than One Hundred Thousand
Dollars ($100,000) in the aggregate during any twelve (12) month period, without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned, and if Tenant so requests, Landlord shall
specify whether Landlord intends to require that Tenant remove such Cosmetic
Alterations (or any specified portions thereof) upon expiration or termination
of this Lease. Landlord's failure to respond within fifteen (15) days of
Tenant's request or notice to Landlord shall be deemed Landlord's consent to
allow the Cosmetic Alterations to remain with the Premises at the end of the
Lease Term. Tenant shall provide to Landlord copies of any plans submitted to
any governmental agency in connection with the construction of any Cosmetic
Alterations, within thirty (30) days of such submittal. All alterations,
additions and improvements shall be completed with due diligence in a
first-class, workmanlike manner, in compliance with plans and specifications
approved in writing by Landlord and in compliance with all applicable laws,
ordinances, rules and regulations, and to the extent Landlord's consent is not
otherwise required hereunder for such alterations, additions or improvements,
Tenant shall give prompt written notice thereof to Landlord. With respect to all
proposed alterations (other than Cosmetic Alterations or otherwise), Tenant
shall provide Landlord with a cost estimate to perform the alterations, a set of
plans and specifications for the proposed work, and a set of final "as built"
plans of the work actually performed. Tenant shall cause any contractors engaged
by Tenant for work in the Buildings or on the Real Property to maintain public
liability and property damage insurance, and other customary insurance, with
such terms and in such amounts as Landlord may reasonably require, naming as
additional insureds Landlord and any of its partners, shareholders, property
managers and lenders designated by Landlord for this purpose, and shall furnish
Landlord with certificates of insurance or other evidence that such coverage is
in effect. Notwithstanding any other provisions of this Section 9.1, under no
circumstances shall Tenant make any structural alterations or improvements, or
any changes to the roof or equipment installations on the roof, or any
substantial changes or alterations to the building systems, except Cosmetic
Alterations, without Landlord's prior written consent (which consent shall not
be unreasonably withheld, delayed or conditioned). Landlord's failure to respond
within fifteen (15) days following Tenant's request shall be deemed approval.
Landlord shall receive no fee for supervision, profit, overhead or general
conditions, but shall be entitled to be reimbursed by Tenant for any reasonable
costs incurred by Landlord in connection with its retention of third parties to
assist in its review of Tenant's request for consent in connection with any
alterations, additions or improvements constructed or installed by Tenant under
this Lease after the date hereof.

         9.2 TITLE TO ALTERATIONS. All alterations, additions and improvements
installed in, on or about the Premises at Tenant's expense shall belong to
Tenant during the Lease Term and upon expiration or earlier termination shall
become part of the Real Property and shall become the property of Landlord,
unless Landlord elects (at the time it grants consent to installation) to
require Tenant to remove the same upon the termination of this Lease; provided,
however, that the foregoing shall not apply to Tenant's movable furniture and
equipment and trade fixtures. Tenant shall promptly repair any damage caused by
its removal of any such alterations, additions

                                       16
<PAGE>
and improvements, furniture, equipment or trade fixtures. Landlord shall not be
entitled to require removal unless Landlord specified its intention to do so at
the time of granting of Landlord's consent to the requested alterations,
additions or improvements. Notwithstanding any other provisions of this Article
9, however, under no circumstances shall Tenant have any obligation to remove
from the Buildings or the Real Property, at the expiration or termination of
this Lease, any of the Tenant Improvements constructed by Landlord.

         9.3 TENANT FIXTURES AND PERSONAL PROPERTY. Subject to Section 9.2 and
to Section 9.5, Tenant may install, remove and reinstall trade fixtures without
Landlord's prior written consent, except that installation and removal of any
fixtures which are affixed to the Buildings or the Real Property or which affect
the exterior or structural portions of the Buildings or the building systems
shall require Landlord's written approval, which approval shall not be
unreasonably withheld, delayed or conditioned.

         9.4 NO LIENS. Tenant shall at all times keep the Premises free from all
liens and claims of any contractors, subcontractors, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Buildings or the Real Property. Tenant may contest any
claim of lien, but only if, prior to such contest, Tenant either (i) posts
security in the amount of the claim, plus estimated costs and interest, or (ii)
records a bond of a responsible corporate surety in such amount as may be
required to release the lien from the Buildings and the Real Property no later
than the thirtieth day following recordation of such lien. Tenant shall
indemnify, defend and hold Landlord harmless against any and all liability,
loss, damage, cost and other expenses, including, without limitation, reasonable
attorneys' fees, arising out of claims of any lien for work performed or
materials or supplies furnished at the request of Tenant or persons claiming
under Tenant. Tenant shall at no time voluntarily place any fixture filing or
otherwise grant a security interest in any alterations, additions or
improvements installed in, on or about the Premises.

         9.5 SIGNS. Tenant shall have the right to a proportionate share of
external and monument signage, in proportion to the ratio between the Useable
Square Footage in Tenant's Premises and the total Useable Square Footage on the
Real Property, provided however, Tenant shall have the right to continue to
display its corporate name and logo on the exterior of the Buildings in the size
and manner it is displayed as of the Effective Date (subject to changes in
applicable laws or regulations requiring a modification to such signage).

10. MAINTENANCE AND REPAIRS.

         10.1 TENANT'S OBLIGATION FOR MAINTENANCE.

                  (a) Good Order, Condition and Repair.

                           (i) In addition to Tenant's obligation to pay
Tenant's Operating Cost Share as required by Section 7, Tenant's repair and
maintenance obligation shall be limited to the repair and maintenance of the
interior of the Premises, as the same shall exist from time to time (being
defined as the floor surfaces, ceiling, interior wall surfaces, electrical,
plumbing,

                                       17
<PAGE>
HVAC equipment exclusively serving the Premises and telephone and communications
systems within such interior).

                  (b) [Deleted].

                  (c) Landlord's Remedy. If Tenant, after notice from Landlord,
fails to make or perform promptly any repairs or maintenance which are the
obligation of Tenant hereunder, Landlord shall have the right, but shall not be
required, to enter the Buildings and make the repairs or perform the maintenance
necessary to restore the Buildings to good and sanitary order, in a first class
condition and repair. In such case, immediately on demand from Landlord, the
cost of such repairs shall be due and payable by Tenant to Landlord.

                  (d) Condition Upon Surrender. At the expiration or sooner
termination of this Lease, Tenant shall surrender the Premises, including any
additions, alterations and improvements thereto, broom clean, in good and
sanitary order, in a first class condition and repair, free from Hazardous
Materials caused to be present by Tenant, its agents or invitees (it being
understood and agreed that Tenant shall have no responsibility for Hazardous
Materials that have migrated onto the Real Property through the air, water or
soils), ordinary wear and tear excepted, and delivered free of radioactive
licenses or other restrictions on use, first, however, removing all goods and
effects of Tenant and all fixtures and items required to be removed or specified
to be removed at Landlord's election pursuant to this Lease, and repairing any
damage caused by such removal. Tenant expressly waives any and all interest in
any personal property and trade fixtures not removed from the Premises by Tenant
at the expiration or termination of this Lease, agrees that any such personal
property and trade fixtures may, at Landlord's election, be deemed to have been
abandoned by Tenant, and authorizes Landlord (at its election and without
prejudice to any other remedies under this Lease or under applicable law) to
remove and either retain, store or dispose of such property at Tenant's cost and
expense, and Tenant waives all claims against Landlord for any damages resulting
from any such removal, storage, retention or disposal.

         10.2 LANDLORD'S OBLIGATION FOR MAINTENANCE.

                  (a) Good Order, Condition and Repair. Landlord, at its cost
and expense, but subject to Tenant's obligation to pay the Tenant's Operating
Cost Share as required by Section 7.1, shall keep and maintain in good and
sanitary order, in a first class condition and repair, all Common Areas and each
such Building and every part thereof, wherever located, including, but not
limited to the structural components of the Buildings, the roof, signs,
exterior, interior, walls, ceiling, electrical system, plumbing system,
telephone and communications systems of each such Building, all the HVAC
equipment and related mechanical systems serving each such Building, all doors,
door checks, windows, plate glass, door fronts, plumbing and sewage and other
utility facilities, fixtures, lighting, wall surfaces, floor surfaces and
ceiling surfaces of each such Building and all other interior repairs, foreseen
and unforeseen, (except the interior of the Premises and the systems designated
for Tenant's exclusive use required to be repaired and maintained by Tenant as
required by Section 10.1(a) above).

                                       18
<PAGE>
                  (b) No Abatement. There shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Premises or Common Areas, or in or to improvements,
fixtures, equipment and personal property therein.

                  (c) Landlords' Right of Entry for Repairs. Landlord and
Landlord's agents shall have the right to enter upon the Premises, or any part
thereof, for the purpose of performing any repairs or maintenance Landlord is
permitted to make pursuant to this Lease, and of ascertaining the condition of
the Premises or whether Tenant is observing and performing Tenant's obligations
hereunder, all without unreasonable interference from Tenant or Tenant's agents.
Except for emergency maintenance or repairs, the right of entry contained in
this Section shall be exercisable at reasonable times, at reasonable hours and
on reasonable notice (which shall not be less than twenty-four (24) hours).

11. USE OF PROPERTY.

         11.1 PERMITTED USE. Subject to Sections 11.3, and 11.4 hereof, Tenant
shall use the Premises solely for an office and laboratory research and
development facility, including (but not limited to) storage and use of small
laboratory animals, and other lawful purposes reasonably related to or
incidental to such specified uses (subject in each case to receipt of all
necessary approvals from the City and County in which the Real Property is
located and other governmental agencies having jurisdiction over the Buildings
and uses therein), and for no other purpose.

         11.2 NO NUISANCE. Tenant shall not use the Premises for or carry on or
permit upon the Premises or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor commit or allow to be committed any waste
in, on or about the Premises. Tenant shall not do or permit anything to be done
in or about the Premises, nor bring nor keep anything therein, which will in any
way cause the Premises to be uninsurable with respect to the insurance required
by this Lease or with respect to standard fire and extended coverage insurance
with vandalism, malicious mischief and riot endorsements.

         11.3 COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit
the Premises to be used in whole or in part for any purpose or use that is in
violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Premises equipped
with all safety appliances required by law, ordinance or insurance on the
Premises, or any order or regulation of any public authority, because of
Tenant's particular use of the Premises. Tenant shall procure at its costs all
licenses and permits required for Tenant's use of the Premises. Tenant shall use
the Premises in strict accordance with all applicable ordinances, rules, laws
and regulations and shall comply, at its expense, with all requirements of all
governmental authorities now in force or which may hereafter be in force
pertaining to the use of the Premises by Tenant, including, without limitation,
regulations applicable to noise, water, soil and air pollution, and making such
structural and nonstructural alterations and additions thereto as may be
required from time to time by such laws, ordinances, rules, regulations and
requirements of governmental authorities or insurers of the Premises

                                       19
<PAGE>
(collectively, "REQUIREMENTS") because of Tenant's construction of improvements
in or other particular use of the Premises. The judgment of any court, or the
admission by Tenant in any proceeding against Tenant, that Tenant has violated
any law, statute, ordinance or governmental rule, regulation or requirement
shall be conclusive of such violation as between Landlord and Tenant.

         11.4 ENVIRONMENTAL MATTERS.

                  (a) Definition of Hazardous Materials. For purposes of this
Lease, "HAZARDOUS MATERIALS" shall mean the substances included within the
definitions of the term "hazardous substance" under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., and the regulations promulgated thereunder,
as amended, (ii) the California Carpenter-Presley-Tanner Hazardous Substance
Account Act, California Health & Safety Code Sections 25300 et seq., and
regulations promulgated thereunder, as amended, (iii) the Hazardous Materials
Release Response Plans and InvenTory Act, California Heath & Safety Code
Sections 2-5500 et seq., and regulations promulgated thereunder, as
amended, and (iv) petroleum; "HAZARDOUS WASTE" shall Mean (i) any waste listed
as or meeting the identified characteristics of a "hazardous waste" under the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et
seq., and regulations promulgated pursuant thereto, as amended, (ii) any waste
meeting the identified characteristics of "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" under the California Hazardous
Waste Control Law, California Health & Safety Code Sections 25 100 et
seq., and regulations promulgated pursuant thereto, as amended (collectively,
the "CHWCL"), and/or (iii) any waste meeting the identified characteristics of
"medical waste" under California Health & Safety Code Sections
25015-25027.8, and regulations promulgated thereunder, as amended; and
"HAZARDOUS WASTE FACILITY" shall mean a hazardous waste facility as defined
under the CHWCL.

                  (b) Tenant's Obligations Re: Hazardous Substances.

                           (i) Tenant shall not cause or permit any Hazardous
Material or hazardous waste to be brought upon, kept, stored or used in or about
the Premises without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, delayed or conditioned, except that Tenant, in
connection with its permitted use of the Premises as provided in Section 11.1,
may keep, store and use materials that constitute Hazardous Materials which are
customary for such permitted use, provided such Hazardous Materials are kept,
stored and used in quantities which are customary for such permitted use and are
kept, stored and used in full compliance with clauses (ii) and (iii) immediately
below.

                           (ii) Tenant shall comply with all applicable laws,
rules, regulations, orders, permits, licenses and operating plans of any
governmental authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment and/or disposal of Hazardous Materials or
wastes by Tenant or its agents or employees.

                           (iii) Tenant shall not (A) operate on or about the
Premises any facility required to be permitted or licensed as a hazardous waste
facility or for which interim status as such is required, nor (B) store any
hazardous wastes on or about the Premises for ninety (90)

                                       20
<PAGE>
days or more, nor (C) conduct any other activities on or about the Premises that
could result in the Premises being deemed to be a "hazardous waste facility"
(including, but not limited to, any storage or treatment of Hazardous Materials
or hazardous wastes which could have such a result).

                           (iv) Tenant shall comply with all applicable laws,
rules, regulations, orders and permits relating to underground storage tanks
installed by Tenant or its agents or employees or at the request of Tenant
(including any installation, monitoring, maintenance, closure and/or removal of
such tanks) as such tanks are defined in California Health & Safety Code Section
25281(x), including, without limitation, complying with California Health &
Safety Code Sections 25280-25299.7 and the regulations promulgated
thereunder, as amended. Upon request by Landlord, Tenant shall furnish to
Landlord copies of all registrations and permits issued to or held by Tenant
from time to time for any and all underground storage tanks located on or under
the Real Property. Notwithstanding the foregoing, Tenant shall not install any
underground storage tanks at the Real Property without Landlord's prior written
consent, which Landlord may withhold in its reasonable discretion.

                           (v) Tenant shall not keep any trash, garbage, waste
or other refuse on the Premises except in sanitary containers and shall
regularly and frequently remove the same from the Premises. Tenant shall keep
all incinerators, containers or other equipment used for the storage or disposal
of such matter in a clean and sanitary condition. Tenant shall properly dispose
of all sanitary sewage and shall not use the sewage disposal system of the
Buildings for the disposal of anything except as permitted by any governmental
entity.

                           (vi) At reasonable times and upon reasonable prior
notice, prior to the expiration or earlier termination of the Lease Term,
Landlord shall have the right to conduct (a) an annual hazardous waste
investigation of the Premises and (b) if Landlord has reasonable cause to
believe that any contamination exists on, in, under, or around the Buildings or
the Premises, such other tests of the Premises and the Buildings as Landlord may
deem necessary or desirable to demonstrate whether contamination has occurred as
a result of Tenant's use of the Premises. Tenant shall be solely responsible for
and shall defend, indemnify and hold the Landlord, its agents and contractors
harmless from and against any and all claims, demands or actions, arising out of
or in connection with any removal, clean up, restoration and materials required
hereunder to return the Premises and any other property of whatever nature to
their condition existing prior to the time of any such contamination caused by
Tenant, its employees or agents. Landlord shall pay for the cost of the annual
investigation and other tests of the Premises, unless it has been determined
that Tenant, its employees or agents have caused contamination of the Premises
with Hazardous Materials, in which case Tenant shall bear such costs. Tenant
shall pay the reasonable costs required to perform or conduct any closure study,
exit audit or similar investigation required by then applicable laws.

                           (vii) Tenant shall surrender the Premises at the
expiration or earlier termination of this Lease free of any Hazardous Materials
caused to be present by Tenant, its employees or agents and free and clear of
all judgments, liens or encumbrances relating thereto and at its own cost and
expense, shall repair all damage and clean up or perform any remedial action
necessary relating to any Hazardous Materials caused to be present by Tenant,
its

                                       21
<PAGE>
employees or agents. Tenant, at its sole cost and expense, shall, following
Landlord's request, remove any alterations or improvements that may be
contaminated or contain Hazardous Materials caused to be present by Tenant, its
employees or agents.

                  (c) Tenant's Indemnity. Tenant shall indemnify, defend and
hold Landlord harmless from and against any and all claims, losses (including,
but not limited to, loss of rental income and diminution in value), damages,
liabilities, costs, legal fees and expenses of any sort arising out of or
relating to (A) any failure by Tenant to comply with any provisions of this
Section 11.4, or (B) any receipt, use handling, generation, transportation,
storage, treatment, release and/or disposal of any Hazardous Material or waste
or any radioactive material or radiation on or about the Premises as a proximate
result of Tenant's use of the Premises or as a result of any intentional or
negligent acts or omissions of Tenant or of any agent, employee, vendor or
invitee of Tenant.

                  (d) Survival. The provisions of this Section 11.4 shall
survive the termination of this Lease.

12. INSURANCE AND INDEMNITY.

         12.1 LANDLORD'S INSURANCE. During the Lease Term, Landlord shall keep
and maintain, or cause to be kept and maintained, as part of Operating Expenses,
a policy or policies of insurance on the Buildings insuring the same against
loss or damage by the following risks: fire and extended coverage, vandalism,
malicious mischief, sprinkler leakage (if sprinklers are required in the
Buildings under applicable building code provisions, or are installed by Tenant
in the absence of such requirement) in amounts not less than ninety percent
(90%) of Full Replacement Value of the Buildings, (including both the Buildings
and any tenant improvements), or the amount of such insurance Landlord's lender
requires Landlord to maintain. The term "Full Replacement Value" shall mean
actual replacement cost, including changes required by new building codes or
ordinances (exclusive of the cost of excavation, foundations and footings). Such
insurance shall show, as a loss payee in respect of the Premises, Landlord,
Tenant and any ground lessor or mortgagee of Landlord required to be named
pursuant to its mortgage documents, as their interests may appear. Landlord,
subject to availability thereof and, as part of Operating Expenses, shall
further insure as Landlord deems appropriate coverage against flood, earthquake,
environmental remediation, loss or failure of building equipment, rental loss
for a period of eighteen (18) months for periods of repair or rebuild, workmen's
compensation insurance and fidelity bonds for employees employed to perform
services. Notwithstanding the foregoing, Landlord may, but shall not be deemed
required to, provide insurance as to any improvements installed by Tenant,
provided that such coverage does not duplicate coverages maintained by Tenant.
Landlord, as part of the Operating Expenses, shall further carry General
Liability with General Aggregate Amount & Per Occurrence Limit insurance with a
single loss limit of not less than Five Million Dollars ($5,000,000) for death
or bodily injury, or property damage with respect to the Real Property.

         12.2 TENANT'S INSURANCE.

                                       22
<PAGE>
                  (a) Commercial General Liability Insurance. During the Lease
Term, Tenant shall keep and maintain, or cause to be kept and maintained, at
Tenant's sole cost and expense, a policy or policies of Commercial General
Liability insurance, showing, as an additional insured in respect of the
Premises, Landlord, Tenant, any management company retained by Landlord to
manage the Premises, any ground lessor and any lender of Landlord required to be
named pursuant to its loan documents. Such policy shall insure against any and
all claims, demands or actions for injuries to persons, loss of life and damage
to property occurring upon, in or about the Premises (including coverage for
liability caused by independent contractors of Tenant or subtenants of Tenant
working in or about the Premises), with minimum coverage in an amount not less
than a Five Million Dollars ($5,000,000) combined single limit with respect to
all bodily injury, death or property damage in any one accident or occurrence.
In the event of a claim, action or demand relating to the Premises, the amount
of any deductible or self-insured retention and/or any award in excess of the
policy limits shall be the sole responsibility of Tenant.

                  (b) Tenant's Risk. Tenant assumes the risk of damage to any
fixtures, goods, inventory, merchandise and equipment, and Landlord shall not be
liable for injury to Tenant's business or any loss of income therefrom relative
to such damage except as more particularly heretofore set forth within this
Lease. Tenant at Tenant's cost may carry such insurance as Tenant desires for
Tenant's protection with respect to personal property of Tenant, business
interruption or other coverages.

                  (c) Other Insurance. In addition to all other insurance
required to be carried by Tenant hereunder, Tenant, throughout the Lease Term,
shall provide and keep in force at Tenant's sole cost and expense the following:

                           (i) Workman's Compensation insurance to the full
extent required under the laws of the State of California;

                           (ii) Insurance on Tenant's equipment, personal
property and other contents in, on or about the Premises insuring against loss
or damage by all risks covered by "special form" coverage, in amounts equal to
ninety percent (90%) of their full replacement value;

                           (iii) [Deleted]; and

                           (iv) Other nonduplicative insurance required by
Landlord, in types and amounts consistent with commercially reasonable practice.

         12.3 INSURERS; PRIMARY INSURANCE. All policies of insurance provided
for herein shall be on an occurrence basis and shall be issued by insurance
companies with a general policy holder's rating of not less than A- and a
financial rating of not less than Class XV as rated in the most current
available "Best's" Insurance Reports. Such insurance companies shall be
qualified to do business in the State of California. All such policies carried
by Tenant shall name Landlord, any ground lessor and any lender (or its
successors and assigns) as additional insureds, and shall be for the mutual and
joint benefit and protection of Landlord, Tenant, any ground lessor and
Landlord's first mortgagee or beneficiary. All public liability and property
damage

                                       23
<PAGE>
policies carried by Tenant shall contain a provision that Landlord, although
named as an insured, nevertheless shall be entitled to recovery under said
policies for any loss occasioned to it, its servants, agents and employees by
reason of the negligence of Tenant. As often as any such policy shall expire or
terminate, renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent. All policies of insurance must contain
a provision that the company writing said policy will give to Landlord thirty
(30) days notice in writing in advance of any cancellation or lapse. All public
liability, property damage and other casualty policies carried by Tenant shall
be written as primary policies, not contributing with and not in excess of
coverage which Landlord may carry. Tenant shall, upon request from Landlord from
time to time, immediately deliver to Landlord copies of all insurance policies
(including the declarations pages) in effect with respect to the Premises. All
liability policies shall contain endorsements for cross-liability, fire, legal
liability, broad form contractual liability, employer's automobile
non-ownership, products completed operation coverage and dram shop liability, as
applicable.

         12.4 BLANKET POLICY. Notwithstanding anything to the contrary contained
within this Section 12, Tenant's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant; provided, however, that
Landlord, any ground lessor and any lender shall be named as an additional
insured thereunder as their interests appear, the coverage afforded Landlord
will not be reduced or diminished by reason of the use of such blanket policy of
insurance, and the requirements set forth herein are otherwise satisfied.

         12.5 DEDUCTIBLES. The deductible amounts, if any, with respect to all
insurance, which Tenant is required to maintain hereunder, shall not exceed
Twenty Thousand Dollars ($20,000) per claim or occurrence. The amount of the
deductibles, if any, within this limitation shall be a business decision by
Tenant; under no circumstances shall Landlord be required to reimburse Tenant
for the amount of any deductible incurred by Tenant in connection with any
insured event, except to the extent the event resulting in the claim was caused
by Landlord's or Landlord's agents' gross negligence or willful misconduct.

         12.6 CERTIFICATES. Upon the execution and delivery of this Lease and
thereafter not less than thirty (30) days prior to the expiration dates of the
expiring policies theretofore maintained, Tenant shall deliver to Landlord
certificates of insurance with respect to the policies of insurance required by
this Lease or duplicate originals of all such policies. Landlord, upon
reasonable notice, may inspect and copy any policies of insurance, and any
records relating thereto kept and maintained by Tenant.

         12.7 ADJUSTMENT IN THE EVENT OF LOSS. Except as otherwise provided
herein, all insurance proceeds payable with respect to any damage or destruction
to the Premises (but not with respect to Tenant's personal property, it being
understood that insurance proceeds allocable to Tenant's personal property shall
be payable directly to Tenant) shall be payable to Landlord and Tenant, jointly,
to be held in an interest bearing account. If Tenant and Landlord undertake to
repair said damage in accordance with Article 15 below, the proceeds shall be
made available to Tenant as to the tenant improvements and to Landlord as to the
Building and Common Area used to fund the reconstruction. In all other events,
the proceeds shall be the sole property of

                                       24
<PAGE>
Landlord except otherwise expressly provided herein. Landlord shall be entitled
to compromise, adjust or settle any and all claims with respect to insurance
carried by it covering the Premises. Each party agrees to execute and deliver to
the other party such releases, endorsements and other instruments as the other
party reasonably may require in order to compromise, adjust or settle any
insurance claim which such other party shall be entitled to compromise, adjust
or settle pursuant to this paragraph and to enable the other party or its
designee to collect such insurance proceeds as are payable in respect of such
claim.

         12.8 PRORATION UPON TERMINATION. If any of the insurance required to be
carried by Tenant hereunder is still in effect at the termination of this Lease,
Landlord may elect to terminate such insurance, or Landlord shall reimburse
Tenant for the pro rata portion of the premium paid by Tenant for such insurance
based upon the number of days remaining unexpired in such insurance.

         12.9 WAIVER OF SUBROGATION. To the extent permitted by law and without
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
with respect to (i) damage to property, (ii) damage to the Premises or any part
thereof, or (iii) claims arising by reason of any of the foregoing, but only to
the extent that any of the foregoing damages and claims under clauses (i)-(iii)
hereof are covered, and only to the extent of such coverage, by casualty
insurance actually carried by either Landlord or Tenant. This provision is
intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance carrier.
Each party shall procure a clause or endorsement on any casualty insurance
policy denying to the insurer rights of subrogation against the other party to
the extent rights have been waived by the insured prior to the occurrence of
injury or loss. Coverage provided by insurance maintained by Tenant shall not be
limited, reduced or diminished by virtue of the subrogation waiver herein
contained.

         12.10 INDEMNIFICATION.

                  (a) Tenant's Indemnification Obligations. Tenant shall
indemnify, defend, and hold Landlord and its lenders, agents, employees,
directors, officers, managers, members, partners, affiliates, independent
contractors, and property managers (collectively, "LANDLORD'S AGENTS" or
"AGENTS") harmless from and against any and all claims, demands, liability, loss
or damage, whether for injury to or death of persons or damage to real or
personal property, arising out of or in connection with the Premises, Tenant's
use of the Premises, any activity, work, or other thing done, permitted, or
suffered by Tenant in or about the Buildings, or arising from any reason or
cause whatsoever in connection with the use or occupancy of the Premises by any
party during the Term of this Lease, except to the extent that the event giving
rise to the claim, demand, liability, loss or damage was caused by the gross
negligence or willful misconduct of Landlord or Landlord's Agents. Tenant shall
further indemnify, defend, and hold Landlord and Landlord's Agents harmless
against and from any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant or any officer,
agent, employee, guest, or invitee of Tenant, and from and against all costs,
attorneys' fees, expenses, and liabilities incurred as a result of any such
claim or any action or proceeding brought thereon. In

                                       25
<PAGE>
any case, action, or proceeding brought against Landlord or Landlord's Agents by
reason of any such claim, Tenant, upon notice from Landlord, shall defend the
same at Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant,
as a material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon, or about the Premises from any
cause arising prior to the later of the termination of this Lease or the date
Tenant has performed all obligations under Section 10.1(d) and is no longer in
possession of the Premises (except for such damage or injury caused by
Landlord's or Landlord's Agents' willful misconduct or gross negligence), and
Tenant hereby waives all claims in respect thereof against Landlord and
Landlord's Agents. Tenant's obligation to indemnify under this paragraph shall
include attorneys' fees, investigation costs, and other reasonable costs,
expenses, and liabilities incurred by Landlord and Landlord's Agents. If the
ability of Tenant to use the Premises or the Buildings is interrupted for any
reason, Landlord and Landlord's Agents shall not be liable to Tenant for any
loss or damages occasioned by such loss of use, except to the extent such loss
or damages is caused by Landlord's or its Agents' willful misconduct or gross
negligence.

                  (b) Landlord's Indemnification Obligations. Landlord shall
indemnify, defend and hold Tenant and its members, partners, shareholders,
officers, directors, agents and employees harmless from any and all liability
for injury to or death of any person, or loss of or damage to the property of
any person, and all actions, claims, demands, costs (including, without
limitation, reasonable attorneys' fees), damages or expenses of any kind arising
therefrom which may be brought or made against Tenant or which Tenant may pay or
incur, to the extent such liabilities or other matters arise in, on or about the
Premises by reason of the gross negligence or willful misconduct or omission by
Landlord or Landlord's Agents. Landlord shall further indemnify, defend, and
hold Tenant and its members, partners, shareholders, officers, directors, agents
and employees harmless against and from any and all claims arising from any
breach or default in the performance of any obligation on Landlord's part to be
performed under the terms of this Lease, and from and against all costs,
attorneys' fees, expenses, and liabilities incurred as a result of any such
claim or any action or proceeding brought thereon. In any case, action, or
proceeding brought against Tenant or its members, partners, shareholders,
officers, directors, agents and employees by reason of any such claim, Landlord,
upon notice from Tenant, shall defend the same at Landlord's expense by counsel
reasonably satisfactory to Tenant.

         12.11 LIMITATION ON LANDLORD LIABILITY. Neither Landlord nor Landlord's
Agents shall be liable for loss or damage to any property by theft or otherwise,
or for any injury to or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, or rain which may
leak from any part of the Buildings or from the pipes, appliances, or plumbing
works therein or from the roof, street, or subsurface or from any other place
resulting from dampness or any other cause whatsoever, except to the extent
caused by the gross negligence or willful misconduct of Landlord or Landlord's
Agents. Neither Landlord nor Landlord's Agents, shall be liable for interference
with or loss of business by Tenant. Tenant shall give prompt written notice to
Landlord in case of fire or accidents in the Premises or in the Buildings or of
defects therein or in the fixtures or equipment belonging to Landlord. If
Landlord is in default of this Lease, and as a consequence, Tenant recovers a
money judgment against Landlord, the judgment shall be satisfied only out of the
proceeds of sale received on execution of the judgment and levy against the
right, title, and interest of Landlord in the Premises, and out of rent or other
income from the Premises receivable by Landlord or out of the

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<PAGE>
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title, and interest in the Premises. Landlord's
Agents shall not be personally liable for any deficiency except to the extent
liability is based upon willful misconduct. If Landlord is a partnership, joint
venture, or limited liability company, the partners or members of such
partnership or limited liability company, as the case may be, shall not be
personally liable and no partner or member of Landlord (or of any affiliated
entity) shall be sued or named as a party in any suit or action, or service of
process be made against any partner or member of Landlord (or of any affiliated
entity), except as may be necessary to secure jurisdiction of the partnership,
joint venture, or limited liability company or to the extent liability is caused
by willful misconduct. If Landlord is a corporation, the shareholders,
directors, officers, employees, and/or agents of such corporation shall not be
personally liable and no shareholder, director, officer, employee, or agent of
Landlord shall be sued or named as a party in any suit or action, or service of
process be made against any shareholder, director, officer, employee or agent of
Landlord, except as may be necessary to secure jurisdiction of the corporation.
No partner, member, shareholder, director, employee, or agent of Landlord (or of
any affiliated entity) shall be required to answer or otherwise plead to any
service of process and no judgment will be taken or writ of execution levied
against any partner, shareholder, director, employee, or agent of Landlord.

13. SUBLEASE AND ASSIGNMENT.

         13.1 ASSIGNMENT AND SUBLEASE OF BUILDING.

                  (a) Consent Required. Except in connection with a Permitted
Transfer, Tenant shall neither voluntarily nor by operation of law assign, sell,
encumber, pledge or otherwise transfer all or any part of Tenant's leasehold
estate hereunder, or permit any other person (excepting Tenant's agents and
employees) to occupy the Premises or any portion thereof, without Landlord's
prior written consent, which consent shall be not be unreasonably withheld,
delayed or conditioned Consent by Landlord to one or more assignments of this
Lease or to one or more sublettings of the Premises shall not constitute a
waiver of Landlord's right to require consent to any subsequent assignment,
subletting or other transfer. If Tenant is a corporation, unincorporated
association or partnership, the transfer, assignment or hypothecation of any
stock or interest in such corporation, association or partnership in the
aggregate in excess of twenty-five percent (25%) of all outstanding stock or
interests, or liquidation thereof, shall be deemed an assignment within the
meaning and provisions of this section and the sale of all or substantially all
of the assets of Tenant shall be deemed an assignment within the meanings and
provisions of this section. The foregoing sentence shall not apply to: (i) any
corporation or partnership which is a reporting company under the Securities
Exchange Act of 1934, or (ii) a sale to an entity with a net worth, as
designated in its most recent financial statement (no older than 3 months),
equal to or greater than Tenant's net worth on the Effective Date. Tenant shall
reimburse Landlord for all of Landlord's reasonable costs and attorneys' fees
incurred in conjunction with the processing and documentation of any required
consent to assignment, subletting, transfer, change of ownership or
hypothecation of this Lease or Tenant's interest in and to the Premises, not to
exceed One Thousand Dollars ($1,000) per request plus reasonable out-of-pocket
expenses payable to third parties. Any purported sublease or assignment of
Tenant's interest in this Lease

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<PAGE>
requiring but not having received Landlord's consent thereto (to the extent such
consent is required hereunder) shall be void.

                  (b) Permitted Transfers. Notwithstanding the foregoing, (i)
any bona fide financing or capitalization, including a public offering of the
common stock of Tenant, shall not be deemed to be an assignment hereunder; and
(ii) Tenant shall have the right to assign this Lease or sublet the Buildings,
or any portion thereof, without Landlord's consent, to any Affiliate of Tenant,
or to any entity which results from a merger, reorganization or consolidation
with Tenant, or to any entity which acquires substantially all of the stock or
assets of Tenant as a going concern (hereinafter each a "PERMITTED TRANSFER").
For purposes of the preceding sentence, an "AFFILIATE" of Tenant shall mean any
entity in which Tenant owns at least a twenty five percent (25%) equity
interest, any entity which owns at least a twenty five percent (25%) equity
interest in Tenant and/or any entity which is related to Tenant by a chain of
ownership interests involving at least twenty five percent (25%) equity interest
at each level in the chain. Landlord shall have no right to terminate this Lease
in connection with, and shall have no right to any sums or other economic
consideration resulting from, any Permitted Transfer. The transferee under such
Permitted Transfer shall be and remain subject to all of the terms and
provisions of this Lease.

                  (c) Consent Required. Landlord's consent may be based upon a
determination that the same type, class, nature and quality of business,
services, management and financial soundness of ownership shall exist after the
proposed assignment or subletting and, provided further, that each and every
covenant, condition and obligation imposed upon Tenant by this Lease and each
and every right, remedy and benefit afforded Landlord by this Lease and the
underlying purpose of this Lease is not thereby impaired or diminished. The
determination by Landlord as to whether consent will be granted in any specific
instance may be based on, without limitation, the following factors, which shall
be in Landlord's reasonable discretion: (a) whether the transferee's use of the
Premises will be compatible with the provisions of this Lease; (b) the financial
capacity of the transferee; (c) the business reputation of the transferee; (d)
the quality and type of the business operations of the transferee; and (e) the
business experience of the proposed transferee. This list of factors is not
intended to be exclusive, and Landlord may rely on such other basis for judgment
as may apply from time to time.

                  (d) Procedure to Obtain Consent. If Tenant desires at any time
to assign this Lease or to sublet the Premises or any portions thereof, it first
shall notify Landlord of its desire to do so and shall submit in writing to
Landlord (i) the name and legal composition of the proposed subtenant or
assignee; (ii) the nature of the proposed subtenant's or assignee's business to
be carried on in the Premises; (iii) the terms and provisions of the proposed
sublease or assignment and all transfer documents relating to the proposed
transfer; and (iv) such reasonable business and financial information as
Landlord may request concerning the proposed subtenant or assignee. Any request
for Landlord's approval of a sublease or assignment shall be accompanied with a
check in such reasonable amount as Landlord shall advise for the cost of review
and preparation, including reasonable attorneys' fees, of any documents relating
to such proposed transfer, not to exceed One Thousand Dollars ($1,000) for each
transfer plus reasonable out-of-pocket expenses payable to third parties. The
provisions and conditions of any proposed sublease or assignment must not be
inconsistent with any provision of this Lease, and

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<PAGE>
must address all matters contained in this Lease. In addition, the transferee
must expressly assume all of the obligations of Tenant under this Lease.
Notwithstanding the assumption of the obligations of this Lease by the
transferee, no subletting or assignment, even with the consent of Landlord,
shall relieve Tenant of its continuing obligation to pay the rent and perform
all the other obligations to be performed by Tenant hereunder. The obligations
and liability of Tenant hereunder shall continue notwithstanding the fact that
Landlord may accept rent and other performance from the transferee. The
acceptance of rent by Landlord from any other person shall not be deemed to be a
waiver by Landlord of any provision of this Lease or to be a consent to any
assignment or subletting.

                  (e) Sublease of Phase 2A. In the event of any sublease of
Phase 2A, in addition to any other payment obligation of Tenant hereunder,
Tenant shall remit to Landlord, as additional rent, as and when received by
Tenant, all net subrents received from a subtenant in excess of $2.00 per
rentable square foot per month. For purposes of this section "net subrents" are
defined as all rents received from a subtenant however designated, net of any
out-of-pocket costs incurred by Tenant to sublease the space and net of any
payments received from a subtenant as reimbursement of operating expenses,
taxes, utilities or service fees.

         13.2 RIGHTS OF LANDLORD: EFFECT OF LANDLORD'S CONSENT. Consent by
Landlord to one or more assignments of this Lease, or to one or more sublettings
of the Buildings or any portion thereof, or collection of rent by Landlord from
any assignee or sublessee, shall not operate to exhaust Landlord's rights under
this Article 13, nor constitute consent to any subsequent assignment or
subletting. No assignment of Tenant's interest in this Lease and no sublease
shall relieve Tenant of its obligations hereunder, notwithstanding any waiver or
extension of time granted by Landlord to any assignee or sublessee, or the
failure of Landlord to assert its rights against any assignee or sublessee, and
regardless of whether Landlord's consent thereto is given or required to be
given hereunder. In the event of a default by any assignee, sublessee or other
successor of Tenant in the performance of any of the terms or obligations of
Tenant under this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against any such assignee, sublessee or
other successor.

         13.3 ADVERTISING. In no event shall Tenant display on or about the
Premises any signs for the purpose of advertising the Premises for assignment,
subletting or other transfer of rights, without the Landlord's prior consent,
which shall not be unreasonably withheld or delayed. Landlord shall not display
on or about the Premises any signs for the purpose of advertising any of the
Real Property for lease, subletting, assignment or rent except with the consent
of Tenant, which consent shall not be unreasonably withheld or delayed.

         13.4 WRITING REQUIRED. Each Permitted Transfer, permitted assignment or
sublease shall be consummated by an instrument in writing executed by the
transferor and transferee in form satisfactory to Landlord. Each assignee and
subtenant shall agree in writing for the benefit of the Landlord herein to
assume all obligations of Tenant hereunder which are applicable to the space
subject to the assignment or sublease and any associated common areas, including
the payment of all amounts due or to become due under this Lease directly to the
Landlord. At least one executed copy of such written instrument shall be
delivered to the Landlord.

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<PAGE>
         13.5 TRANSFER PREMIUMS. If Tenant assigns or sublets its rights under
this Lease, Tenant shall pay to Landlord as additional rent, after Tenant has
recovered any relevant leasing commissions, costs of tenant improvements and
other expenses of the assignment or sublease, the unamortized (over the Term of
the Lease) costs of any tenant improvements consented to by Landlord paid for by
Tenant prior to such Transfer, one-half (1/2) of all such excess consideration
due and payable to Tenant from said assignment or sublease to the extent said
consideration exceeds the rent or a pro rata portion of the rent, in the event
only a portion of the Premises is sublet or assigned.

14. RIGHT OF ENTRY AND QUIET ENJOYMENT.

         14.1 RIGHT OF ENTRY. Landlord and its authorized representatives shall
have the right to enter the Buildings at any time during the Term of this Lease
during normal business hours when accompanied by a representative of Tenant and
upon not less than twenty-four (24) hours prior notice, except in the case of
emergency (in which event no notice and no accompaniment shall be required and
entry may be made at any time), for the purpose of inspecting and determining
the condition of the Buildings or for any other proper purpose including,
without limitation, to make repairs, replacements or improvements which Landlord
may be entitled to make hereunder, to show the Buildings to prospective
purchasers, lenders and investors, to show the Buildings to prospective tenants
(but only during the final eighteen (18) months of the Term of this Lease), and
to post notices of nonresponsibility. Landlord shall not be liable for
inconvenience, annoyance, disturbance, loss of business, quiet enjoyment or
other damage or loss to Tenant by reason of making any repairs or performing any
work upon the Premises or by reason of erecting or maintaining any protective
barricades in connection with any such work, and the obligations of Tenant under
this Lease shall not thereby be affected in any manner whatsoever, provided,
however, Landlord shall use its best reasonable efforts to minimize the
inconvenience to Tenant's normal business operations caused thereby.

         14.2 QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying the
rent and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term of this Lease, or until this Lease is terminated as
provided by this Lease.

15. CASUALTY AND TAKING.

         15.1 DAMAGE OR DESTRUCTION.

                  (a) Termination Rights. If the Buildings, or the Common Areas
necessary for Tenant's use and occupancy of the Premises, are damaged or
destroyed in whole or in part under circumstances in which (i) repair and
restoration is permitted under applicable governmental laws, regulations and
building codes then in effect and (ii) repair and restoration reasonably can be
completed within a period of one (1) year (or, in the case of an occurrence
during the last year of the Term of this Lease, within a period of sixty (60)
days) following the date of the occurrence, then Landlord, as to the Buildings
and Common Areas and the tenant improvements, shall commence and complete, with
all due diligence and as promptly as is reasonably practicable under the
conditions then existing, all such repair and restoration as may be required

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<PAGE>
to return the affected portions of the Real Property to a condition comparable
to that existing immediately prior to the occurrence. In the event of damage or
destruction the repair of which is not permitted under applicable governmental
laws, regulations and building codes then in effect, or if such damage or
destruction (despite being repaired to the extent then permitted under
applicable governmental laws, regulations and building codes) would materially
impair Tenant's ability to conduct its business in the Premises, then either
party may terminate this Lease as of the date of the occurrence by giving
written notice to the other within sixty (60) days after the date of the
occurrence; if neither party timely elects such termination, or if such damage
or destruction after being repaired would not materially impair Tenant's ability
to conduct its business in the Premises, then this Lease shall continue in full
force and effect, except that there shall be an equitable adjustment in monthly
Minimum Rental and of Tenant's Operating Cost Share, based upon the extent to
which Tenant's ability to conduct its business in the Premises is impaired, and
Landlord shall restore the Common Areas and Building and tenant improvements to
a complete architectural whole and to a functional condition. In the event of
damage or destruction which cannot reasonably be repaired within one (1) year
(or, in the case of an occurrence during the last twenty-four (24) months of the
Term of this Lease, within a period of sixty (60) days) following the date of
the occurrence, then either Landlord or Tenant, at its election, may terminate
this Lease as of the date of the occurrence by giving written notice to the
other within thirty (30) days after the date of the occurrence; if neither party
timely elects such termination, then this Lease shall continue in full force and
effect and Landlord shall repair and restore applicable portions of the Real
Property in accordance with the first sentence of this Section 15. Landlord and
Tenant agree that the terms of this Lease shall govern the effect of any damage
to or destruction of the Project with respect to termination of this Lease and
hereby waive the provisions of any present or future statute to the extent
inconsistent herewith.

                  (b) Limitations on Parties' Obligations. The obligations of
Landlord pursuant to Section 15.1(a) are subject to the following limitations:

                           (i) If the occurrence results from a peril which is
required to be insured pursuant to Section 12.1(c) above, the obligations of
Landlord shall not exceed the amount of insurance proceeds received from
insurers (or, in the case of any failure to maintain required insurance,
proceeds that reasonably would have been available if the required insurance had
been maintained) by reason of such occurrence, plus the amount of the permitted
deductible (provided that Landlord shall be obligated to use its best efforts to
recover any available proceeds from the insurance which it is required to
maintain pursuant to the provisions of Article 12, and, if such proceeds
(including, in the case of a failure to maintain required insurance, any
proceeds that reasonably would have been available) are insufficient, either
party may terminate the Lease unless the other party promptly elects and agrees,
in writing, to contribute the amount of the shortfall; and

                           (ii) If the occurrence results from a peril which is
not required to be insured pursuant to Article 12 above and is not actually
insured, Landlord shall be required to repair and restore the Building and
Common Areas and tenant improvements to the extent necessary for Tenant's
continued use and occupancy of the Buildings, provided that Landlord's
obligation to repair and restore shall not exceed an amount equal to ten percent
(10%) of the replacement cost of the Building and Common Area improvements and
ten percent (10%) of the

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<PAGE>
replacement cost of the tenant improvements; if the cost to repair and restore
exceeds such amount, then Landlord may terminate this Lease unless the Tenant
promptly elects and agrees, in writing, to contribute the amount of the
shortfall.

                  (c) Entitlement to Insurance Proceeds. If this Lease is
terminated pursuant to the foregoing provisions of this Section 15.1 following
an occurrence which is a peril actually insured or required to be insured
against pursuant to Article 12, Landlord and Tenant agree (and any Lender shall
be asked to agree) that such insurance proceeds, after repayment of the loan,
shall be allocated between Landlord and Tenant in a manner which fairly and
reasonably reflects their respective ownership rights under this Lease, as of
the termination or expiration of the Term of this Lease, with respect to the
improvements, fixtures, equipment and other items to which such insurance
proceeds are attributable.

                  (d) Abatement of Rent. From and after the date of an
occurrence resulting in damage to or destruction of the Buildings or of the
Common Areas necessary for Tenants use and occupancy of the Buildings, and
continuing until the earlier of the date repair and restoration thereof are
completed or the date on which rental loss insurance payments cease, there shall
be an equitable abatement of Minimum Rental and of Tenant's Operating Cost Share
of Operating Expenses based upon the degree to which Tenant's ability to conduct
its business in the Buildings is impaired.

        15.2 CONDEMNATION.

                  (a) Termination Rights. If during the Term of this Lease the
Real Property or Improvements or any substantial part of either, is taken by
eminent domain or by reason of any public improvement or condemnation
proceeding, or in any manner by exercise of the right of eminent domain
(including any transfer in avoidance of an exercise of the power of eminent
domain), then (i) this Lease shall terminate as to the entire affected Premises
at Landlord's election by written notice given to Tenant within sixty (60) days
after the taking has occurred, and (ii) this Lease shall terminate as to the
entire affected Premises at Tenant's election, by written notice given to
Landlord within thirty (30) days after the nature and extent of the taking have
been finally determined, if the portion of the Premises taken is of such extent
and nature as substantially to handicap, impede or permanently impair Tenant's
use of the balance of the Premises, and (iii) this Lease shall remain in full
force and effect as to the remaining portion of the Premises. If Tenant elects
to terminate this Lease, as to the affected Premises, Tenant shall also notify
Landlord of the date of termination, which date shall not be earlier than thirty
(30) days nor later than ninety (90) days after Tenant has notified Landlord of
Tenant's election to terminate, except that this Lease shall terminate on the
date of taking if such date falls on any date before the date of termination
designated by Tenant. If neither party elects to terminate this Lease as
hereinabove provided, this Lease shall continue in full force and effect (except
that there shall be an equitable abatement of Minimum Rental and of Tenant's
Operating Cost Share of Operating Expenses based upon the degree to which
Tenant's ability to conduct its business in the Premises is impaired), Landlord
shall restore the Building and Common Area and tenant improvements to a complete
architectural whole and a functional condition and as nearly as reasonably
possible to the condition existing before the taking. In connection with any
such restoration, Landlord shall use its best efforts (including, without
limitation, any necessary

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<PAGE>
negotiation or intercession with its lender, if any) to ensure that any
severance damages or other condemnation awards intended to provide compensation
for rebuilding or restoration costs are promptly collected and made available to
Tenant and Landlord subject only, to such payment controls as either party or
its lender may reasonably require in order to ensure the proper application of
such proceeds toward the restoration of the Improvements. Each party waives the
provisions of Code of Civil Procedure Section 1265.130, allowing either party to
petition the Superior Court to terminate this Lease in the event of a partial
condemnation of the Buildings or Real Property.

                  (b) Limitations on Parties' Obligations. The obligations of
Landlord pursuant to Section 15.2(a) are subject to the following limitations:

                           (i) Landlord's obligation to repair and restore shall
not exceed, net of any condemnation awards or other proceeds available for and
allocable to such restoration as contemplated in Section 15.2(a), an amount
equal to ten percent (10%) of the replacement cost of the Building and Common
Area improvements and an amount equal to ten percent (10%) of the replacement
cost of the tenant improvements; if the replacement cost exceeds such amount,
then Landlord may terminate this Lease unless Tenant promptly elects and agrees,
in writing, to contribute the amount of the shortfall; and

                           (ii) If this Lease is terminated pursuant to the
foregoing provisions of this Section 15.2, or if this Lease remains in effect
but any condemnation awards or other proceeds become available as compensation
for the loss or destruction of any of the Improvements, then Landlord and Tenant
agree (and any Real Property lender shall be asked to agree) that such proceeds
shall be allocated between Landlord and Tenant, respectively, in the respective
proportions in which Landlord and Tenant would have shared, under Section
15.1(c), the proceeds of any insurance proceeds following loss or destruction of
the applicable Improvements by an insured casualty.

         15.3 RESERVATION OF COMPENSATION. Landlord reserves, and Tenant waives
and assigns to Landlord, all rights to any award or compensation for damage to
the Improvements and the Real Property, but not the leasehold estate created
hereby, accruing by reason of any taking in any public improvement, condemnation
or eminent domain proceeding or in any other manner by exercise of the right of
eminent domain or of anything lawfully done by public authority, except that (a)
Tenant shall be entitled to any and all compensation or damages expressly
awarded to Tenant on account of Tenant's loss of the leasehold estate and
Tenant's moving expenses, trade fixtures and equipment and any leasehold
improvements installed by Tenant in the Buildings at its own sole expense, but
only to the extent Tenant would have been entitled to remove such items at the
expiration of the Term of this Lease and then only to the extent of the then
remaining unamortized value of such improvements computed on a straight-line
basis over the Term of this Lease, and (b) any condemnation awards or proceeds
described in Section 15.2(b)(ii) shall be allocated and disbursed in accordance
with the provisions of Section 15.2(b)(ii), notwithstanding any contrary
provisions of this Section 15.3.

         15.4 RESTORATION OF IMPROVEMENTS. In connection with any repair or
restoration of Improvements following a casualty or taking as hereinabove set
forth, the party responsible for

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<PAGE>
such repair or restoration shall, to the extent possible, return such
Improvements to a condition substantially equal to that which existed
immediately prior to the casualty or taking. To the extent such party wishes to
make material modifications to such Improvements, such modifications shall be
subject to the prior written approval of the other party (not to be unreasonably
withheld, delayed or conditioned), except that no such approval shall be
required for modifications that are required by applicable governmental
authorities as a condition of the repair or restoration, unless such required
modifications would substantially impair or impede Tenant's conduct of its
business in the Buildings (in which case any such modifications in the Building
shall require Tenant's consent, not unreasonably withheld, delayed or
conditioned) or would materially affect the exterior appearance, the structural
integrity or the mechanical or other operating systems of the Buildings (in
which case any such modifications shall require Tenant's consent, not to be
unreasonably withheld, delayed or conditioned).

16. DEFAULT.

         16.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an event of default on the part of Tenant:

                  (a) Nonpayment. Failure to pay, when due, any amount payable
to Landlord hereunder, such failure continuing for a period of five (5) business
days after written notice of such failure;

                  (b) Other Obligations. Failure to perform any obligation,
agreement or covenant under this Lease other than those matters specified in
subsection (a) hereof, such failure continuing for thirty (30) days after
written notice of such failure; provided, however, that if such failure is
curable in nature but cannot reasonably be cured within such 30-day period, then
Tenant shall not be in default if, and so long as, Tenant promptly (and in all
events within such 30-day period) commences such cure and thereafter diligently
pursues such cure to completion; and provided further, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 et seq., as amended from time to
time. Notwithstanding the foregoing, if any such failure on the part of Tenant
affects or threatens to affect the health or safety of others, or would result
in the destruction of property, Tenant shall immediately begin to cure and shall
use its diligent and best efforts in pursuing said cure to completion (it being
understood and agreed that Landlord shall not be entitled to exercise any remedy
to terminate this Lease unless and until such failure shall have continued for
thirty (30) days after written notice of such failure);

                  (c) General Assignment. A general assignment by Tenant for the
benefit of creditors;

                  (d) Bankruptcy. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary petition by Tenant's
creditors, which involuntary petition remains undischarged for a period of sixty
(60) days. In the event that under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction, cure all
defaults of Tenant hereunder outstanding as of the

                                       34
<PAGE>
date of the affirmance of this Lease and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued performance
of Tenant's obligations under this Lease. Specifically, but without limiting the
generality of the foregoing, such adequate assurances must include assurances
that the Buildings continue to be operated only for the use permitted hereunder.
The provisions hereof are to assure that the basic understandings between
Landlord and Tenant with respect to Tenant's use of the Premises and the
benefits to Landlord therefrom are preserved, consistent with the purpose and
intent of applicable bankruptcy laws;

                  (e) Receivership. The employment of a receiver appointed by
court order to take possession of substantially all of Tenants assets or its
interest in the Buildings, if such receivership remains undissolved for a period
of sixty (60) days;

                  (f) Attachment. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets or its interest in the
Buildings, if such attachment or other seizure remains undismissed or
undischarged for a period of sixty (60) days after the levy thereof; or

                  (g) Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due, the filing by Tenant of a
petition seeking any reorganization or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.

         16.2 REMEDIES UPON TENANT'S DEFAULT.

                  (a) Re-entry; Termination. Upon the occurrence of any event of
default described in Section 16.1 hereof, Landlord, in addition to and without
prejudice to any other rights or remedies it may have, shall have the immediate
right to re-enter the Buildings or any part thereof and repossess the same,
expelling and removing therefrom all persons and property (which property may be
stored in a public warehouse or elsewhere at the cost and risk of and for the
account of Tenant). In addition to or in lieu of such re-entry, and without
prejudice to any other rights or remedies it may have, Landlord shall have the
right either (i) to terminate this Lease and recover from Tenant all damages
incurred by Landlord as a result of Tenant's default, as hereinafter provided,
or (ii) to continue this Lease in effect and recover rent and other charges and
amounts as they become due.

                  (b) Continuation of Lease. Even if Tenant has breached this
Lease and abandoned the Buildings, this Lease shall continue in effect for so
long as Landlord does not terminate Tenant's right to possession and Landlord
may enforce all of its rights and remedies under this Lease, including the right
to recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and

                                       35
<PAGE>
abandonment and recover rent as it becomes due, if lessee has right to sublet or
assign, subject only to reasonable limitations), or any successor Code section.
Acts of maintenance, preservation or efforts to relet the Buildings or the
appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.

                  (c) Remedies. If Landlord terminates this Lease pursuant to
this Section 16.2, Landlord shall have all of the rights and remedies of a
landlord provided by Section 1951.2 of the Civil Code of the State of
California, or any successor Code section, which remedies include Landlord's
right to recover from Tenant (i) the worth at the time of award of the unpaid
rent and additional rent and Tenant's Operating Cost Share of Operating Expense
which had been earned at the time of termination, (ii) the worth at the time of
award of the amount by which the unpaid rent and additional rent and Tenant's
Operating Cost Share of Operating Expense 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, (iii) the worth at the time of
award of the amount by which the unpaid rent and additional rent and Tenant's
Operating Cost Share of Operating Expense for the balance of the Term after the
time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided, and (iv) any other amount reasonably 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, including, but not limited to, the cost of
recovering possession of the Buildings, expenses of reletting, including
necessary repair, renovation and alteration of the Buildings, reasonable
attorneys' fees, and other reasonable costs. The "worth at the time of award" of
the amounts referred to in clauses (i) and (ii) above shall be computed by
allowing interest at twelve percent (12%) per annum from the date such amounts
accrued to Landlord. The "worth at the time of award" of the amounts referred to
in clause (iii) above shall be computed by discounting such amount at one
percentage point above the discount rate of the Federal Reserve Bank of San
Francisco at the time of award.

         16.3 REMEDIES CUMULATIVE. All rights, privileges and elections or
remedies of Landlord contained in this Article 16 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.

         16.4 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default
of this Lease unless Landlord fails within a reasonable time (or the time
specified herein, if applicable) to perform an obligation required to be
performed by it. Tenant agrees to give Landlord and any lender designated by
Landlord notice of any Landlord default, and a reasonable opportunity to cure
such default.

17. SUBORDINATION, ATTORNMENT AND SALE.

         17.1 SUBORDINATION TO MORTGAGE. This Lease, and any sublease entered
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security now or hereafter placed upon
the Buildings, the Real Property, or any of them, and the rights of any assignee
of Landlord or of any ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor

                                       36
<PAGE>
under any of the foregoing, and to any and all advances made on the security
thereof and to ail renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, that such subordination in the case of
any future ground lease, mortgage, deed of trust, sale/leaseback transaction or
any other hypothecation for security placed upon the Buildings, the Real
Property, or any of them shall be conditioned on Tenant's receipt from the
ground lessor, mortgagee, trustee, beneficiary or leaseback lessor of a
Non-Disturbance Agreement in a form reasonably acceptable to Tenant (i)
confirming that so long as Tenant is not in material default hereunder beyond
any applicable cure period (for which purpose the occurrence of any event of
default under Section 16.1 hereof shall be deemed to be "material"), Tenant's
rights hereunder shall not be disturbed by such person or entity and (ii)
agreeing that the benefit of such Non-Disturbance Agreement shall be
transferable to any transferee under a Permitted Transfer and to any other
assignee or subtenant that is acceptable to the ground lessor, mortgagee,
trustee, beneficiary or leaseback lessor at the time of transfer. Tenant agrees
to execute such other commercially reasonable documentation as may be required
by an institutional lender to evidence such subordination and to attorn to any
such ground lessor, mortgagee, trustee, beneficiary or leaseback lessor in the
event such party succeeds to Landlord's interest hereunder and agrees to
recognize this Lease. Moreover, Tenant's obligations under this Lease shall be
conditioned on Tenant's receipt within thirty (30) days after mutual execution
of this Lease, from any existing ground lessor, mortgagee, trustee, beneficiary
or leaseback lessor currently owning or holding a security interest in the Real
Property, of a Non-Disturbance Agreement in a form reasonably acceptable to
Tenant confirming (i) that so long as Tenant is not in material default
hereunder beyond any applicable cure period, Tenant's rights hereunder shall not
be disturbed by such person or entity and (ii) agreeing that the benefit of such
Non-Disturbance Agreement shall be transferable to any transferee under a
Permitted Transfer and to any other assignee or subtenant that is acceptable to
the ground lessor, mortgagee, trustee, beneficiary or leaseback lessor at the
time of transfer. If any mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or assignee elects in writing to have this Lease be an
encumbrance upon the Real Property prior to the lien of its mortgage, deed of
trust, ground lease or leaseback lease or other security arrangement and gives
notice thereof to Tenant, this Lease shall be deemed prior thereto, whether this
Lease is dated prior or subsequent to the date thereof or the date of recording
thereof. Tenant, and any sublessee, shall execute such documents as may
reasonably be requested by any mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or assignee to evidence the subordination herein set
forth, subject to the conditions set forth above, or to make this Lease prior to
the lien of any mortgage, deed of trust, ground lease, leaseback lease or other
security arrangement, as the case may be. Upon any default by Landlord in the
performance of its obligations under any mortgage, deed of trust, ground lease,
leaseback lease or assignment, Tenant (and any sublessee) shall, notwithstanding
any subordination hereunder, attorn to the mortgagee, trustee, beneficiary,
ground lessor, leaseback lessor or assignee thereunder upon demand and become
the tenant of the successor in interest to Landlord, at the option of such
successor in interest, and shall execute and deliver any instrument or
instruments confirming the attornment herein provided for.

         17.2 SALE OF LANDLORD'S INTEREST. Upon sale, transfer or assignment of
Landlord's entire interest in the Buildings and the Real Property, Landlord
shall be relieved of its obligations hereunder with respect to liabilities
accruing from and after the date of such sale, transfer or assignment.

                                       37
<PAGE>
         17.3 ESTOPPEL CERTIFICATES. Tenant or Landlord (the "RESPONDING PARTY")
as applicable, shall at any time and from time to time, within ten (10) days
after written request by the other party (the "REQUESTING PARTY"), execute,
acknowledge and deliver to the Requesting Party a certificate in writing
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the Requesting Party is not in default in the performance of any of its
obligations under this Lease, that the certifying party has given no notice of
default to the Requesting Party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder, or if the responding party alleges that any such default,
notice or event has occurred, specifying the same in reasonable detail; and (iv)
such other matters as may reasonably be requested by the Requesting Party or by
any institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Real Property, or
prospective sublessee or assignee of this Lease. Any such certificate provided
under this Section 17.3 may be relied upon by any lender, mortgagee, trustee,
beneficiary, assignee or successor in interest to the Requesting Party, by any
prospective purchaser, by any purchaser on foreclosure or sale, by any grantee
under a deed in lieu of foreclosure of any mortgage or deed of trust on the Real
Property, by any subtenant or assignee, or by any other third party. Failure to
execute and return within the required time any estoppel certificate requested
hereunder, if such failure continues for five (5) days after a second written
request by the Requesting Party for such estoppel certificate, shall be deemed
to be an admission of the truth of the matters set forth in the form of
certificate submitted to the Responding Party for execution.

18. SECURITY.

         18.1 DEPOSIT. Upon execution of the original Lease, Tenant deposited
with Landlord the sum of $5,500,000. In lieu of a cash security deposit, Tenant
elected to provide one or more irrevocable letters of credit, payable to
Landlord, as a security deposit. Upon the execution of this Lease, the amount of
such deposit shall be reduced to $1,375,000. At Tenant's election, in lieu of a
cash security deposit, Tenant may continue to provide one or more irrevocable
letters of credit in amounts described above, payable to Landlord, and issued by
an institution and in form reasonably satisfactory to Landlord. Such sums or the
Letter of Credit (individually and collectively, the "SECURITY DEPOSIT") shall
be held by Landlord as security for the faithful performance of all of the
terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the Term hereof; provided that if at any time Tenant shall have
maintained an investment grade credit rating of BBB or better by Standard and
Poors for a consecutive twelve month period, Landlord shall return the Security
Deposit to Tenant. Upon the execution of this Lease, Landlord shall promptly
obtain the release of any Letters of Credit pledged as permitted in Section 18.2
below which exceed the amounts indicated above and shall return such Letters of
Credit to Tenant. Upon such release and return, Tenant shall cause to be issued
and delivered a substitute letter of credit in the amount of the required
security deposit. If Tenant defaults with respect to any provision of this
Lease, including, without limitation, the provisions relating to the payment of
rental and other sums due hereunder, Landlord shall have the right, but shall
not be required, to use, apply or retain all or any part of the Security Deposit
for the payment of rental, unreimbursed Operating Expenses or any other amount
which Landlord may spend or become

                                       38
<PAGE>
obligated to spend by reason of Tenant's default or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. Landlord may also apply the Security Deposit toward costs incurred to
repair damages to the Premises or to clean and bring the Premises to good order,
condition and repair during its Lease Term and upon expiration or sooner
termination of this Lease. If any portion of the Security Deposit is so used or
applied, Tenant shall, within five (5) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall be required to keep any deposit under this
Section separate from Landlord's general funds in an interest bearing account
reasonably acceptable to Tenant, and Tenant shall be entitled to the interest
thereon, to be paid to Tenant when and if the Security Deposit is refundable to
Tenant. If Tenant fully and faithfully performs every provision of this Lease to
be performed by it, the Security Deposit, or any balance thereof, together with
all accrued interest, shall be returned to Tenant or, at Landlord's option, to
the last assignee of Tenant's interest hereunder, at the expiration of the Term
of this Lease and after Tenant has vacated the Premises. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer all
deposits then held by Landlord under this Section to Landlord's successor in
interest, whereupon Tenant agrees to release Landlord from all liability for the
return of such deposit or the accounting thereof.

         18.2 PLEDGE OF SECURITY DEPOSIT. The Security Deposit may be pledged by
Landlord as additional collateral to any lender having a security interest in
the Real Property. The lender may use, apply or retain all or any part of the
Security Deposit for the payment of Building Costs, but only in the event that
lender shall have notified Landlord and Tenant that such Building Costs remain
unpaid and the parties shall have failed within thirty (30) days following
receipt of such notice to cure such nonpayment. For purposes of this Section,
"BUILDING COST(S)" shall mean any and all costs actually incurred in
constructing the Building, Common Area and the related site improvements
including, but not limited to, costs for demolition, grading, utility fees,
architectural and engineering fees, permits, surveys, appraisals, insurance,
legal and accounting fees, development overhead, construction management,
blueprinting, equity fees, construction lender, permanent lender and mortgage
banker fees, interest carry, site improvements, off-site improvements and tenant
improvements. If any portion of the Security Deposit is so applied, upon the
Phase 1 Rent Commencement Date, Tenant shall deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount, and
Tenant's failure to do so shall constitute a material breach of this Lease.

19. MISCELLANEOUS.

         19.1 NOTICES. All notices, consents, waivers and other communications
which this Lease requires or permits either party to give to the other shall be
in writing and shall be deemed given when delivered personally (including
delivery by private courier or express delivery service) or three (3) days after
deposit in the United States mail, registered or certified mail, postage
prepaid, assessed to the parties at their respective addresses as follows:

         To Tenant:                 150 Industrial Road
                                    San Carlos, CA 94070
                                    Attn:  Ajay Bansal, Chief Financial Officer

                                       39
<PAGE>
         with a copy to:            150 Industrial Road
                                    San Carlos, CA 94070
                                    Attn:  Paula Kasler, Esq.

         and with a copy to:        Greenberg Traurig LLP
                                    Attn: Toni Wise, Esq.
                                    2000 University Avenue
                                    East Palo Alto, CA 94303
                                    Attn:  Toni P. Wise, Esq.

         To Landlord:               Inhale 201 Industrial Road L.P.
                                    c/o Bernardo Property Advisors, Inc.
                                    17140 Bernardo Center Dr., Suite 195
                                    San Diego, CA 92128
                                    Attn:  Alan D. Gold

         with a copy to:            Seltzer Caplan McMahon Vitek
                                    2100 Symphony Towers
                                    750 B Street
                                    San Diego, CA 92101
                                    Attn:  David J. Dorne, Esq.

or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other address as Landlord may from time to time specify
in writing to Tenant, and shall be deemed to be paid only upon actual receipt.

         19.2 SUCCESSORS AND ASSIGNS. The obligations of this Lease shall run
with the land, and this Lease shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Real Property, and any liability for obligations accruing after
termination of such ownership shall terminate as of the date of such termination
of ownership and shall pass to the successor lessor.

         19.3 NO WAIVER. The failure of Landlord to seek redress for violation,
or to insist upon the strict performance, of any covenant or condition of this
Lease shall not be deemed a waiver of such violation, or prevent a subsequent
act which would originally have constituted a violation from having all the
force and effect of an original violation.

         19.4 SEVERABILITY. If any provision of this Lease or the application
thereof is held to be invalid or unenforceable, the remainder of this Lease or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable shall not be affected thereby, and
each of the provisions of this Lease shall be valid and enforceable, unless

                                       40
<PAGE>
enforcement of this Lease as so invalidated would be unreasonable or grossly
inequitable under all the circumstances or would materially frustrate the
purposes of this Lease.

         19.5 LITIGATION BETWEEN PARTIES. In the event of any litigation or
other dispute resolution proceedings between the parties hereto arising out of
or in connection with this Lease, the prevailing party shall be reimbursed for
all reasonable costs, including, but not limited to, reasonable accountants'
fees and attorneys' fees, incurred in connection with such proceedings
(including, but not limited to, any appellate proceedings relating thereto) or
in connection with the enforcement of any judgment or award rendered in such
proceedings. "PREVAILING PARTY" within the meaning of this Section shall
include, without limitation, a party who dismisses an action for recovery
hereunder in exchange for payment of the sums allegedly due, performance of
covenants allegedly breached or consideration substantially equal to the relief
sought in the action.

         19.6 SURRENDER. A voluntary or other surrender of this Lease by Tenant,
or a mutual termination thereof between Landlord and Tenant, shall not result in
a merger but shall, at the option of Landlord, operate either as an assignment
to Landlord of any and all existing subleases and subtenancies, or a termination
of all or any existing subleases and subtenancies. This provision shall be
contained in any and all assignments or subleases made pursuant to this Lease.

         19.7 INTERPRETATION. The provisions of this Lease shall be construed as
a whole, according to their common meaning, and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.

         19.8 ENTIRE AGREEMENT. This written Lease, together with the exhibits
hereto, and that certain Redemption Agreement dated as of June 22, 2004,
contains all the representations and the entire understanding between the
parties hereto with respect to the subject matter hereof and replaces any prior
agreements, including the prior lease, and any prior correspondence, memoranda
or agreements. This Lease may be modified only by an agreement in writing signed
by each of the parties.

         19.9 GOVERNING LAW. This Lease and all exhibits hereto shall be
construed and interpreted in accordance with and be governed by all the
provisions of the laws of the State of California.

         19.10 NO PARTNERSHIP. The relationship created by this lease between
Landlord and Tenant is solely that of a lessor and lessee. Nothing contained in
this Lease shall be construed as creating any type or manner of partnership,
joint venture or joint enterprise with or between Landlord and Tenant. Neither
party is the agent or representative of the other.

         19.11 FINANCIAL INFORMATION. From time to time Tenant shall promptly
provide directly to prospective lenders and purchasers of the Real Property
designated by Landlord such financial information pertaining to the financial
status of Tenant as Landlord may reasonably request; provided, Tenant shall be
permitted to provide such financial information in a manner

                                       41
<PAGE>
which Tenant deems reasonably necessary to protect the confidentiality of such
information. In addition, from time to time, Tenant shall provide Landlord with
such financial information pertaining to the financial status of Tenant as
Landlord may reasonably request. Landlord agrees that all financial information
supplied to Landlord by Tenant shall be treated as confidential material, and
shall not be disseminated to any party or entity (including any entity
affiliated with Landlord) without Tenant's prior written consent, except that
Landlord shall be entitled to provide such information, subject to reasonable
precautions to protect the confidential nature thereof, (i) to Landlord's
partners and professional advisors, solely to use in connection with Landlord's
execution and enforcement of this Lease, and (ii) to prospective lenders and/or
purchasers of the Real Property, solely for use in connection with their bona
fide consideration of a proposed financing or purchase of the Real Property,
provided that such prospective lenders and/or purchasers are not then engaged in
businesses directly competitive with the business then being conducted by
Tenant. For purposes of this Section, without limiting the generality of the
obligations provided herein, it shall be deemed reasonable for Landlord to
request copies of Tenant's most recent audited annual financial statements, or,
if audited statements have not been prepared, unaudited financial statements for
Tenant's most recent fiscal year, accompanied by a certificate of Tenant's chief
financial officer that such financial statements fairly present Tenant's
financial condition as of the date(s) indicated. Notwithstanding any other
provisions of this Section 19.11, during any period in which Tenant has
outstanding a class of publicly traded securities and is filing with the
Securities and Exchange Commission, on a regular basis, Forms 10Q and 10K and
any other periodic filings required under the Securities Exchange Act of 1934,
as amended, it shall constitute sufficient compliance under this Section 19.11
for Tenant to furnish Landlord with copies of such periodic filings
substantially concurrently with the filing thereof with the Securities and
Exchange Commission.

         Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and purchasers
of the Real Property financial information pertaining to, Tenant's financial
status. Landlord and Tenant agree to cooperate with each other in achieving
these needs within the context of the obligations set forth in this Section.

         19.12 COSTS. Notwithstanding anything to the contrary contained in this
Lease, if Tenant requests the consent of Landlord under any provision of this
Lease for any act that Tenant proposes to do hereunder, including, without
limitation, assignment or subletting of the Buildings or any portion thereof,
Tenant shall, as a condition to doing any such act and the receipt of such
consent, reimburse Landlord promptly for any and all reasonable costs and
expenses incurred by Landlord in connection therewith (including, without
limitation, reasonable attorneys' fees) up to a maximum of $1,000 per request.

         19.13 TIME. Time is of the essence of this Lease, and of every term and
condition hereof

         19.14 BROKERS. Each party represents and warrants that no other broker
participated in the consummation of this Amended and Restated Lease and agrees
to indemnify, defend and hold the other party harmless against any liability,
cost or expense, including, without limitation, reasonable attorneys' fees,
arising out of any claims for brokerage commissions or other similar

                                       42
<PAGE>
compensation in connection with any conversations, prior negotiations or other
dealings by the indemnifying party with any other person making such claim.

         19.15 MEMORANDUM OF LEASE. At any time during the Term of this Lease,
either party, at its sole expense, shall be entitled to record a memorandum of
this Lease and, if either party so elects, both parties agree to cooperate in
the preparation, execution, acknowledgement and recordation of such document in
reasonable form.

         19.16 CORPORATE AUTHORITY. Each person signing this Lease on behalf of
Tenant or Landlord warrants that he or she is fully authorized to do so and, by
so doing, to bind the entity on whose behalf he or she is signing.

         19.17 EXECUTION AND DELIVERY. This Lease may be executed in one or more
counterparts and by separate parties on separate counterparts, but each such
counterpart shall constitute an original and all such counterparts together
shall constitute one and the same instrument.

         19.18 SURVIVAL. Without limiting survival, provisions which would
otherwise be implied or construed under applicable law, the provisions of
Sections 2.5, 7.4, 9.2, 9.3, 9.4, 11.4, 12.10, 12.11, 19.5 and 19.11 hereof
shall survive the termination of this Lease with respect to matters occurring
prior to the expiration of this Lease.

         19.19 WAIVER OF JURY TRIAL. The parties hereto shall, and they hereby
do, waive trial by jury in any action or proceeding or counterclaim brought by
either of the parties hereto against the other on any matters arising out of or
in any way connected with this Lease.

         19.20 EXCLUSIVITY. Landlord agrees that it shall not, during the Term
of this Lease or any period during which Tenant occupies all or any portion of
the Premises, lease or allow the use or occupancy of any portion of the Premises
or the Buildings to or by any party which is a competitor of Tenant.

         19.21 TENANT'S REMEDIES. Except to the extent expressly provided
herein, no event or occurrence during the Lease Term is intended to allow Tenant
the right to surrender or terminate this Lease or to relieve Tenant from any of
its obligations hereunder, and Tenant waives any rights now or hereafter
conferred upon it by statute or otherwise (except for rights conferred herein)
to surrender or terminate this Lease or to claim any abatement or suspension of
Rent or other sums payable hereunder.

         19.22 SECURITY MEASURES. Tenant acknowledges that the Rent payable to
Landlord hereunder does not and will not include the cost of guard service or
other security services and that Landlord shall have no obligation whatsoever to
provide same. Tenant agrees that Landlord shall have no responsibility for the
protection of the Premises, Tenant, its agents and invitees or their property
from the acts of third parties.

                                       43
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first set forth above.

"LANDLORD"                                "TENANT"

INHALE 201 INDUSTRIAL ROAD, L.P.,         NEKTAR THERAPEUTICS (FKA INHALE
a California limited partnership          THERAPEUTIC SYSTEMS, INC.),
                                          a Delaware corporation

By SciMed Prop III, a California
corporation, its General Partner          By:        /s/ AJAY BANSAL
                                                   ------------------------
                                          Name:    Ajay Bansal
                                                   ------------------------
                                          Its:     CFO
                                                   ------------------------

By:     /s/ ALAN D. GOLD                  By:        /s/ AJIT GILL
      -------------------------------              ------------------------
Name: Alan D. Gold                        Name:    Ajit Gill
      -------------------------------              ------------------------
Its:  President                           Its:     CEO
      -------------------------------              ------------------------

By:     /s/ GARY A. KREITZER
      -------------------------------
Name: Gary A. Kreitzer
      -------------------------------
Its:  Executive Vice President
      -------------------------------

</TEXT>
</DOCUMENT>
