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BUILD-TO-SUIT LEASE

Exhibit 10.16

Landlord:   Slough BTC, LLC
Tenant:
 
Rigel Pharmaceuticals, Inc.
Date:
 
May 16, 2001

TABLE OF CONTENTS

1.   PROPERTY   1     1.1   Lease of Buildings   1     1.2   Landlord's Reserved
Rights   1
2.
 
TERM
 
2     2.1   Term   2     2.2   Early Possession   2     2.3   Delay In
Possession   3     2.4   Acknowledgment Of Rent Commencement   4     2.5  
Holding Over   4     2.6   Option To Extend Term   4
3.
 
RENTAL
 
5     3.1   Minimum Rental   5         (a)   Phase I Rental Amounts   5        
(b)   Phase II Rental Amounts   5         (c)   Rental Amounts During First
Extended Term   6         (d)   Rental Amounts During Second Extended Term   7  
      (e)   Rental Adjustment Due to Change in Square Footage   7     3.2   Late
Charge   7
4.
 
STOCK WARRANTS
 
8     4.1   Stock Warrants   8
5.
 
CONSTRUCTION
 
8     5.1   Construction of Improvements   8     5.2   Condition of Property   9
    5.3   Compliance with Law   9
6.
 
TAXES
 
9     6.1   Personal Property   9     6.2   Real Property   10
7.
 
OPERATING EXPENSES
 
10     7.1   Payment of Operating Expenses   10     7.2   Definition Of
Operating Expenses   11     7.3   Determination Of Operating Expenses   13    
7.4   Final Accounting For Lease Year   14     7.5   Proration   14
8.
 
UTILITIES
 
14     8.1   Payment   14     8.2   Interruption   15

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9.
 
ALTERATIONS; SIGNS
 
15     9.1   Right To Make Alterations   15     9.2   Title To Alterations   15
    9.3   Tenant Trade Fixtures   16     9.4   No Liens   16     9.5   Signs  
17
10.
 
MAINTENANCE AND REPAIRS
 
18     10.1   Landlord's Work   18     10.2   Tenant's Obligation For
Maintenance   18         (a)   Good Order, Condition And Repair   18         (b)
  Landlord's Remedy   18         (c)   Condition Upon Surrender   18
11.
 
USE OF PROPERTY
 
19     11.1   Permitted Use   19     11.2   [Omitted.]   19     11.3   No
Nuisance   19     11.4   Compliance With Laws   19     11.5   Liquidation Sales
  20     11.6   Environmental Matters   20
12.
 
INSURANCE AND INDEMNITY
 
24     12.1   Insurance   24     12.2   Quality Of Policies And Certificates  
25     12.3   Workers' Compensation   25     12.4   Waiver Of Subrogation   25  
  12.5   Increase In Premiums   26     12.6   Indemnification   26     12.7  
Blanket Policy   26
13.
 
SUBLEASE AND ASSIGNMENT
 
27     13.1   Assignment And Sublease Of Building   27     13.2   Rights Of
Landlord   27
14.
 
RIGHT OF ENTRY AND QUIET ENJOYMENT
 
28     14.1   Right Of Entry   28     14.2   Quiet Enjoyment   29
15.
 
CASUALTY AND TAKING
 
29     15.1   Damage or Destruction   29     15.2   Condemnation   30     15.3  
Reservation Of Compensation   31     15.4   Restoration Of Improvements   32

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16.
 
DEFAULT
 
32     16.1   Events Of Default   32         (a)   [Omitted.]   32         (b)  
Nonpayment   32         (c)   Other Obligations   32         (d)   General
Assignment   32         (e)   Bankruptcy   32         (f)   Receivership   33  
      (g)   Attachment   33         (h)   Insolvency   33     16.2   Remedies
Upon Tenant's Default   33     16.3   Remedies Cumulative   34
17.
 
SUBORDINATION, ATTORNMENT AND SALE
 
35     17.1   Subordination To Mortgage   35     17.2   Sale Of Landlord's
Interest   35     17.3   Estoppel Certificates   35     17.4   Subordination to
CC&R's   36     17.5   Mortgagee Protection   36
18.
 
SECURITY
 
37     18.1   Deposit   37
19.
 
MISCELLANEOUS
 
37     19.1   Notices   37     19.2   Successors And Assigns   38     19.3   No
Waiver   38     19.4   Severability   38     19.5   Litigation Between Parties  
39     19.6   Surrender   39     19.7   Interpretation   39     19.8   Entire
Agreement   39     19.9   Governing Law   39     19.10   No Partnership   39    
19.11   Financial Information   39     19.12   Costs   40     19.13   Time   40
    19.14   Rules And Regulations   40     19.15   Brokers   40     19.16  
Memorandum Of Lease   40     19.17   Corporate Authority   40     19.18  
Execution and Delivery   40     19.19   Survival   40     19.20   Parking and
Traffic   40

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BUILD-TO-SUIT LEASE

    THIS BUILD-TO-SUIT LEASE ("Lease") is made and entered into as of May 16,
2001, by and between SLOUGH BTC, LLC, a Delaware limited liability company
("Landlord"), and RIGEL PHARMACEUTICALS, INC., a Delaware corporation
("Tenant").

THE PARTIES AGREE AS FOLLOWS:

    1.  PROPERTY  

    1.1  Lease of Buildings.  

    (a) Landlord leases to Tenant and Tenant hires and leases from Landlord, on
the terms, covenants and conditions hereinafter set forth, the two
(2) freestanding buildings to be constructed pursuant to Article 5 hereof and
Exhibit C attached hereto on a portion of the real property described in
Exhibit A attached hereto (the "Property"), to consist of (i) a three-story
office and laboratory building containing approximately 73,500 square feet (the
"Phase I Building") to be located substantially as shown for the building
designated "BUILDING G" on the site plan attached hereto as Exhibit B (the "Site
Plan"), (ii) a three-story office and laboratory building containing
approximately 61,000 square feet (together with the linkage described in
clause (iii) below, the "Phase II Building") to be located substantially as
shown for the building designated "BUILDING F" on the Site Plan, and
(iii) subject to final design and to receipt of all required governmental
approvals, a two-story linkage connecting the Phase I Building with the Phase II
Building and presently estimated to contain approximately 11,500 square feet,
which linkage shall be considered to be part of the Phase II Building for
purposes of this Lease. The total estimated square footage of the Phase I
Building and the Phase II Building (including the linkage described in
clause (iii) of the preceding sentence) is therefore approximately 146,000
square feet. The Phase I Building and the Phase II Building are sometimes
hereinafter referred to individually as a "Building" and collectively as the
"Buildings." The Property is commonly known as Britannia Oyster Point (the
"Center") and is located at Oyster Point Boulevard and Veterans Boulevard in the
City of South San Francisco, County of San Mateo, State of California. The
Buildings and the other improvements to be constructed on the Property pursuant
to Article 5 hereof and Exhibit C attached hereto are sometimes referred to
collectively herein as the "Improvements." The parking areas, driveways,
sidewalks, landscaped areas and other portions of the Center that lie outside
the exterior walls of the buildings to be constructed in the Center, 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 "Common Areas."

    (b) As an appurtenance to Tenant's leasing of the Buildings 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, sidewalks, landscaped areas, or for other
common purposes, and (ii) all access easements and similar rights and privileges
relating to or appurtenant to the Center 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 Center, subject however to 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  Landlord's Reserved Rights.  To the extent reasonably necessary to
permit Landlord to exercise any rights of Landlord and discharge any obligations
of Landlord under this Lease, Landlord shall have, in addition to the right of
entry set forth in Section 14.1 hereof, the following rights: (i) to make
changes to the Common Areas, including, without limitation, changes in the
location, size or shape of any portion of the Common Areas, and to construct
and/or relocate parking structures and/or parking spaces in the Center (but not
materially decrease the number of such parking spaces in areas

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of the Center generally adjacent to the Buildings); (ii) to close temporarily
any of the Common Areas for maintenance or other reasonable purposes, provided
that reasonable parking and reasonable access to the Buildings remain available;
(iii) to construct, alter or add to other buildings and Common Area improvements
in the Center; (iv) to build in areas adjacent to the Center and to add such
areas to the Center; (v) to use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Center or any portion
thereof; and (vi) to do and perform such other acts with respect to the Common
Areas and the Center as may be necessary or appropriate; provided, however, that
notwithstanding anything to the contrary in this Section 1.2, Landlord's
exercise of its rights hereunder shall not cause any material diminution of
Tenant's rights, nor any material increase of Tenant's obligations, under this
Lease or with respect to the Improvements.

    2.  TERM  

    2.1  Term.  The term of this Lease shall commence upon mutual execution of
this Lease by Landlord and Tenant. Tenant's minimum rental and Operating Expense
obligations with respect to the Phase I Building shall commence on the earlier
of (i) one hundred eighty (180) days after Landlord's completion of the
principal structural components of the Phase I Building Shell (as hereinafter
defined) pursuant to the Workletter attached hereto as Exhibit C (the
"Workletter"), subject to any adjustments in such time period to the extent
authorized or required under the provisions of such Workletter, which completion
shall be evidenced by Landlord's delivery of the Structural Completion
Certificate for the Phase I Building pursuant to the Workletter, correctly
notifying Tenant of the matters set forth therein, or (ii) the date Tenant takes
occupancy of and commences operation of its business in the Phase I Building,
the earlier of such dates being herein called the "Phase I Rent Commencement
Date"; provided, however, that in no event shall the Phase I Rent Commencement
Date occur earlier than October 1, 2002 unless determined pursuant to
clause (ii) of the preceding sentence or unless an earlier date is hereafter
mutually agreed upon by Landlord and Tenant. Tenant's minimum rental and
Operating Expense obligations with respect to the Phase II Building shall
commence on the earlier of (iii) one hundred eighty (180) days after Landlord's
completion of the principal structural components of the Phase II Building Shell
(as hereinafter defined) pursuant to the Workletter, subject to any adjustments
in such time period to the extent authorized or required under the provisions of
such Workletter, which completion shall be evidenced by Landlord's delivery of
the Structural Completion Certificate for the Phase II Building pursuant to the
Workletter, correctly notifying Tenant of the matters set forth therein, or
(iv) the date Tenant takes occupancy of and commences operation of its business
in the Phase II Building, the earlier of such dates being herein called the
"Phase II Rent Commencement Date"; provided, however, that in no event shall the
Phase II Rent Commencement Date occur earlier than December 1, 2002 unless
determined pursuant to clause (iv) of the preceding sentence or unless an
earlier date is hereafter mutually agreed upon by Landlord and Tenant. The term
of this Lease shall end on the day (the "Termination Date") immediately
preceding the fifteenth (15th) anniversary of the first to occur of the Phase I
Rent Commencement Date or the Phase II Rent Commencement Date, unless sooner
terminated or extended as hereinafter provided.

    2.2  Early Possession.  Tenant shall have the nonexclusive right to occupy
and use the Buildings from and after the date of Landlord's delivery of the
respective Structural Completion Certificates described in clauses (i) and
(iii) of Section 2.1, even though Landlord may be continuing to construct the
balance of Landlord's Work as contemplated in the Workletter, for the purpose of
constructing Tenant's Work as contemplated in the Workletter and for the purpose
of installing fixtures and furniture, laboratory equipment, computer equipment,
telephone equipment, low voltage data wiring and personal property and other
similar work related to the construction of Tenant's Work and/or preparatory to
the commencement of Tenant's business in the respective Buildings. Such
occupancy and possession, and any early access under the next sentence of this
Section 2.2, shall be subject to and upon all of the terms and conditions of
this Lease and of the Workletter (including, but not limited to, conditions
relating to the maintenance of required insurance), except that Tenant shall
have no

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obligation to pay minimum rental or Operating Expenses for any period prior to
the applicable Rent Commencement Date for the respective Building as determined
under Section 2.1; such early possession shall not advance or otherwise affect
the applicable Rent Commencement Date or the Termination Date determined under
Section 2.1. Tenant shall also be entitled to have early access to the
respective Buildings and the Property at all appropriate times prior to
Landlord's delivery of the respective Structural Completion Certificates,
subject to the approval of Landlord and its general contractor (which approval
shall not be unreasonably withheld or delayed) and to all other provisions of
this Section 2.2, for the purpose of performing work preparatory to the
construction of Tenant's Work or necessary for the orderly sequencing of such
Work and/or for the actual construction of Tenant's Work pursuant to the
Workletter, and Tenant shall not be required to pay minimum rental or Operating
Expenses by reason of such early access until the applicable Rent Commencement
Date otherwise occurs; without limiting the generality of the preceding portion
of this sentence, Tenant shall be entitled to have early access to the Property
and the respective Buildings as soon as their respective roof metal decking is
in place to begin hanging electrical, mechanical and plumbing services from the
overhead structure, subject to all of the provisions of this Section 2.2. Tenant
shall not unreasonably interfere with or delay Landlord's contractors by any
early access, occupancy or possession under this Section 2.2, shall coordinate
and cooperate with Landlord and its contractors (who shall similarly coordinate
and cooperate with Tenant and its contractors) to minimize any interference or
delay by either party with respect to the other party's work following
Landlord's delivery of the applicable Structural Completion Certificate, and
shall indemnify, defend and hold harmless Landlord and its agents and employees
from and against any and all claims, demands, liabilities, actions, losses,
costs and expenses, including (but not limited to) reasonable attorneys' fees,
arising out of or in connection with Tenant's early entry upon the Property
hereunder.

    2.3  Delay In Possession.  Landlord agrees to use its best reasonable
efforts to complete its portion of the work described in Section 5.1 and the
Workletter promptly, diligently and within the respective time periods set forth
in the Estimated Construction Schedule attached hereto as Exhibit D and
incorporated herein by this reference, as such schedule may be modified from
time to time by mutual written agreement of Landlord and Tenant, and subject to
the effects of any delays caused by or attributable to Tenant or any other
circumstances beyond Landlord's reasonable control (excluding financial
inability); provided, however, that except to the extent caused by a material
default by Landlord with respect to its obligations set forth in this Lease
(including, but not limited to, its obligations set forth in this Section 2.3,
in Section 5.1 and in the Workletter), Landlord shall not be liable for any
damages caused by any delay in the completion of such work, nor shall any such
delay affect the validity of this Lease or the obligations of Tenant hereunder.
Notwithstanding any other provisions of this Section 2.3, however, if Landlord
fails to deliver the Structural Completion Certificate for at least one of the
two Buildings and tender possession of those completed structural portions of
the Building Shell for such Building that must be completed as a condition of
delivery of the Structural Completion Certificate by the date which is two
hundred ten (210) days after March 29, 2002 (that being the date specified for
structural completion as to the Phase I Building in the Estimated Construction
Schedule attached hereto as Exhibit D), then Tenant shall have the right to
terminate this Lease without further liability hereunder by written notice
delivered to Landlord at any time prior to Landlord's delivery of the Structural
Completion Certificate for at least one of the two Buildings and tender of
possession of the completed structural portions of the Building Shell for such
Building to Tenant; provided, however, that the applicable date on which
Tenant's termination right becomes exercisable pursuant to this sentence shall
be extended, day for day, for a period equal to the length of any delays in
Landlord's design and construction of the applicable Building Shell that are
caused by acts of God, action or inaction of public agencies, labor disputes,
strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain
supplies, materials, fuels or permits, delays of contractors or subcontractors,
Tenant Delays (as defined in the Workletter), or other causes or contingencies
beyond the reasonable control of Landlord (excluding financial inability).

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    2.4  Acknowledgment Of Rent Commencement.  Promptly following each
respective Rent Commencement Date, Landlord and Tenant shall execute a written
acknowledgment of the respective Rent Commencement Date, Termination Date
(determinable only after the second of the respective Rent Commencement Dates to
occur) and related matters, substantially in the form attached hereto as
Exhibit E (with appropriate insertions), which acknowledgment shall be deemed to
be incorporated herein by this reference. Notwithstanding the foregoing
requirement, the failure of either party to execute such a written
acknowledgment shall not affect the determination of the respective Rent
Commencement Date, Termination Date and related matters in accordance with the
provisions of this Lease.

    2.5  Holding Over.  If Tenant holds possession of one or both Buildings 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 of the applicable Building(s) from month to month at one hundred ten
percent (110%) of the rental and otherwise upon the terms herein specified for
such Building(s) 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 thirty (30) days prior written notice. If Tenant holds possession of
one or both Buildings 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 of the
applicable Building(s) 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 such
Building(s) 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 unconsented 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 respective Buildings or any portion thereof,
including but not limited to any claims made by a succeeding tenant by reason of
such delay; provided, however, that the indemnification and hold harmless
obligation set forth in this sentence shall not apply with respect to any
holdover period to which Landlord has consented in writing, except to the extent
either (i) Tenant fails to vacate and surrender the applicable Building by the
end of the holdover period to which Landlord has thus consented, or
(ii) Landlord advised Tenant in writing of Landlord's anticipated damages from
Tenant's holding over at the time Landlord granted its written consent to such
holding over. Acceptance of rent by Landlord following expiration or termination
of this Lease shall not constitute a renewal of this Lease.

    2.6  Option To Extend Term.  Tenant shall have the option to extend the term
of this Lease, at the minimum rental set forth in Section 3.1(c) and (d) (as
applicable) 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 five (5) 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 nine (9) months
and not more than twelve (12) 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 like written notice
to Landlord at least nine (9) months and not more than twelve (12) months prior
to the expiration of the first extended term hereof. If Tenant is in 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

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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  

    3.1  Minimum Rental.  

    (a)  Phase I Rental Amounts.  Tenant shall pay to Landlord as minimum rental
for the Phase I Building, in advance, without deduction, offset, notice or
demand, on or before the Phase I Rent Commencement Date and on or before the
first day of each subsequent calendar month of the initial term of this Lease,
the following amounts per month, subject to adjustment in accordance with the
terms of this Section 3.1:

Months

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  Monthly Minimum Rental

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001 - 012   $308,700.00 ($4.20/sq ft) 013 - 024   316,050.00 ($4.30/sq ft) 025 -
036   334,425.00 ($4.55/sq ft) 037 - 048   381,465.00 ($5.19/sq ft) 049 - 060  
396,165.00 ($5.39/sq ft) 061 - 072   411,600.00 ($5.60/sq ft) 073 - 084  
427,770.00 ($5.82/sq ft) 085 - 096   444,675.00 ($6.05/sq ft) 097 - 108  
462,315.00 ($6.29/sq ft) 109 - 120   480,690.00 ($6.54/sq ft) 121 - 132  
499,800.00 ($6.80/sq ft) 133 - 144   518,910.00 ($7.06/sq ft) 145 - 156  
539,490.00 ($7.34/sq ft) 157 - 168   560,805.00 ($7.63/sq ft) 169 - 180  
582,855.00 ($7.93/sq ft)

If the obligation to pay minimum rental for the Phase I Building 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 the Phase I Building for such first or last month, as the case may
be, shall be prorated based on the number of days the term of this Lease is in
effect with respect to the Phase I Building 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.

    (b)  Phase II Rental Amounts.  Tenant shall pay to Landlord as minimum
rental for the Phase II Building, in advance, without deduction, offset, notice
or demand, on or before the Phase II Rent Commencement Date and on or before the
first day of each subsequent calendar month of

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the initial term of this Lease, the following amounts per month, subject to
adjustment in accordance with the terms of this Section 3.1:

Months

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  Monthly Minimum Rental

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001 - 012   $304,500.00 ($4.20/sq ft) 013 - 024   311,750.00 ($4.30/sq ft) 025 -
036   329,875.00 ($4.55/sq ft) 037 - 048   376,275.00 ($5.19/sq ft) 049 - 060  
390,775.00 ($5.39/sq ft) 061 - 072   406,000.00 ($5.60/sq ft) 073 - 084  
421,950.00 ($5.82/sq ft) 085 - 096   438,625.00 ($6.05/sq ft) 097 - 108  
456,025.00 ($6.29/sq ft) 109 - 120   474,150.00 ($6.54/sq ft) 121 - 132  
493,000.00 ($6.80/sq ft) 133 - 144   511,850.00 ($7.06/sq ft) 145 - 156  
532,150.00 ($7.34/sq ft) 157 - 168   553,175.00 ($7.63/sq ft) 169 - 180  
574,925.00 ($7.93/sq ft)

If the obligation to pay minimum rental for the Phase II Building 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 the Phase II Building for such first or last month, as the case may
be, shall be prorated based on the number of days the term of this Lease is in
effect with respect to the Phase II Building 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.

    (c)  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 the fair market rental value of the Buildings (as defined
below), determined as of the commencement of such extended term in accordance
with this Section 3.1(c), and as of the beginning of each subsequent year of the
first extended term shall be increased by an amount equal to four percent (4%)
of the minimum rental in effect during the immediately preceding lease year.
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 sixty (60) days in which
to agree on the initial fair market rental for the Buildings as of the
commencement of the first extended term for the uses permitted hereunder. If the
parties agree on such initial fair market rental, they shall execute an
amendment to this Lease stating the amount of the initial minimum monthly rental
and the annually increased monthly rental for the first extended term. If the
parties are unable to agree on such initial fair market rental within such sixty
(60) day period, then within fifteen (15) 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 who is a member of the American Institute of
Real Estate Appraisers, or any other similar organization, and has at least five
(5) years experience appraising similar commercial properties in northeastern
San Mateo County, to determine the initial fair market rental for the Buildings
as of the commencement of the first extended term in accordance with the
provisions of this Section 3.1(c). 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 the initial 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

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(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 San Mateo County
Superior Court for the appointment of a third similarly 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,
a majority of the three appraisers shall determine the initial fair market
rental for the first extended term and shall so notify the parties. If a
majority are unable to agree within the allotted time, the three appraised
initial fair market rental amounts shall be added together and divided by three
and the resulting quotient shall be the initial fair market rental for the first
extended term, 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(c), the "fair market rental" of the Buildings shall be
determined with reference to the then prevailing market rental rates for
properties in the City of South San Francisco with shell and office, research
and development improvements and site (common area) improvements comparable to
those then existing in the Buildings and on the Property, taking into account
for such determination all tenant improvements then existing in the Buildings
(including, but not limited to, equipment and laboratory improvements installed
as part of the initial Tenant Improvements pursuant to Section 5.1 and the
Workletter) other than improvements or alterations which were constructed by
Tenant at its sole expense and which Tenant has a right or obligation to remove
from the Buildings at the expiration of this Lease pursuant to the provisions of
Article 9 hereof.

    (d)  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 (initial fair market rental followed by annual four percent (4%)
increases), except that the determination shall be made as of the commencement
of the second extended term.

    (e)  Rental Adjustment Due to Change in Square Footage.  The minimum rental
amounts specified in Sections 3.1(a) and 3.1(b) are based upon an estimated area
of 73,500 square feet for the Phase I Building and upon an estimated area of
72,500 square feet for the Phase II Building (including the linkage described in
Section 1.1(a)). If the actual area of either Building (measured from the
exterior faces of exterior walls and from the dripline of any overhangs, except
that the area of any enclosed mechanical penthouse shall be excluded and that in
the case of any two-story recesses or overhangs, the area to the dripline of the
overhang shall be counted as part of the area of the first story but not as part
of the area of the second story), when completed, is greater or less than such
estimated area, then the minimum rentals specified in Section 3.1(a) or
Section 3.1(b), as applicable, shall be adjusted for each rental period in
strict proportion to the ratio between the actual area of the applicable
Building during the applicable period (determined on the basis of measurement
described above in this sentence) and the assumed area of 73,500 or 72,500
square feet, as applicable. Measurement of building area under this paragraph
shall be made initially by Landlord's architect, subject to review and approval
by Tenant's architect.

    3.2  Late Charge.  If Tenant fails to pay when due rental or other amounts
due Landlord hereunder, such unpaid amounts shall bear interest for the benefit
of Landlord at a rate equal to the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the date due to the date of actual
payment. In addition to such interest, Tenant shall pay to Landlord a late
charge in an amount equal to six percent (6%) of any installment of minimum
rental and any other amounts due Landlord if not paid in full on or before the
fifth (5th) day after such rental or other amount is due. Tenant acknowledges
that late payment by Tenant to Landlord of rental or other amounts due

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hereunder will cause Landlord to incur costs not contemplated by this Lease,
including, without limitation, processing and accounting charges and late
charges which may be imposed on Landlord by the terms of any loan relating to
the Property. Tenant further acknowledges that it is extremely difficult and
impractical to fix the exact amount of such costs and that the late charge set
forth in this Section 3.2 represents a fair and reasonable estimate thereof.
Acceptance of any late charge by Landlord shall not constitute a waiver of
Tenant's default with respect to overdue rental or other amounts, nor shall such
acceptance prevent Landlord from exercising any other rights and remedies
available to it. Acceptance of rent or other payments by Landlord shall not
constitute a waiver of late charges or interest accrued with respect to such
rent or other payments or any prior installments thereof, nor of any other
defaults by Tenant, whether monetary or non-monetary in nature, remaining
uncured at the time of such acceptance of rent or other payments.

    4.  STOCK WARRANTS  

    4.1  Stock Warrants.  Concurrently with the mutual execution of this Lease,
Tenant shall deliver to Landlord or Landlord's designees (which may be any
members, partners, shareholders or affiliates of Landlord or any affiliates of
any such members, partners, shareholders or affiliates of Landlord) warrants
registered in the name of Landlord or Landlord's designees for the acquisition
of an aggregate of one hundred fifty thousand (150,000) shares of Tenant's
common stock, which warrants shall be in form and substance approved by Landlord
and Tenant prior to Lease execution as being mutually satisfactory to them. The
warrants shall have an exercise price per share equal to one hundred fifteen
percent (115%) of the closing market price per share of Tenant's common stock on
the day this Lease is mutually executed, shall be exercisable for a period
beginning on the date of this Lease and ending on the fifth (5th) anniversary of
the date of this Lease, and shall include an obligation on the part of the
warrantholder to sign, in connection with any public offering of Tenant's common
stock, any lockup agreement recommended by Tenant's underwriters in connection
with such public offering, provided that a similar lockup agreement is signed by
each other shareholder holding a number of shares of Tenant's common stock equal
to or exceeding the number of shares then issued and/or issuable pursuant to the
warrant.

    5.  CONSTRUCTION  

    5.1  Construction of Improvements.  

    (a) Landlord shall, at Landlord's cost and expense (except as otherwise
provided herein and in the Workletter), construct Landlord's Work as defined in
and in accordance with the terms and conditions of the Workletter. Landlord
shall use its best reasonable efforts to complete such construction promptly,
diligently and within the applicable time periods set forth in the Estimated
Construction Schedule attached hereto as Exhibit D and incorporated herein by
this reference, as such schedule may be modified from time to time in accordance
with the Workletter, subject to the effects of any delays caused by Tenant or
any other circumstances beyond Landlord's reasonable control (excluding any
financial inability), and subject to the provisions of Section 2.3 above.

    (b) Tenant shall, at Tenant's cost and expense (except as otherwise provided
herein and in the Workletter), construct Tenant's Work as defined in and in
accordance with the terms and conditions of the Workletter. Tenant shall use its
best reasonable efforts to complete such construction promptly, diligently and
within the applicable time periods set forth in the Estimated Construction
Schedule attached hereto as Exhibit D and incorporated herein by this reference,
as such schedule may be modified from time to time in accordance with the
Workletter, subject to the effects of any delays caused by Landlord or any other
circumstances beyond Tenant's reasonable control (excluding any financial
inability).

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    5.2  Condition of Property.  Landlord shall deliver each Building Shell and
the other Improvements constructed by Landlord to Tenant clean and free of
debris, promptly upon completion of construction thereof, and Landlord warrants
to Tenant that each Building Shell and the other Improvements constructed by
Landlord (i) shall be free from material structural defects and shall be in good
operating condition on the applicable Rent Commencement Date, and (ii) shall be
constructed in compliance in all material respects with the plans and
specifications developed pursuant to the Workletter and mutually approved (to
the extent required thereunder) by Landlord and Tenant, subject to any changes
implemented in such plans and specifications in accordance with the procedures
set forth in the Workletter. If this warranty is violated in any respect, then
it shall be the obligation of Landlord, after receipt of written notice from
Tenant setting forth with specificity the nature of the violation, to correct
promptly and diligently, at Landlord's sole cost, the condition(s) constituting
such violation. Tenant's failure to give such written notice to Landlord within
one hundred eighty (180) days after the applicable Rent Commencement Date shall
give rise to a conclusive presumption that Landlord has complied with all
Landlord's obligations under this Section 5.2 with respect to the applicable
Building and other Improvements, except with respect to latent defects (as to
which such 180-day limitation shall not apply). Without limiting the scope of
Landlord's obligations under the foregoing provisions of this Section 5.2,
Landlord also agrees to either (x) use its best reasonable efforts to enforce
when and as necessary, for the benefit of Tenant and the Improvements, any and
all contractor's and/or manufacturer's warranties extending more than one
hundred eighty (180) days after the applicable Rent Commencement Date with
respect to any of Landlord's Work or, at Tenant's request, (y) assign any or all
of such warranties to Tenant for enforcement purposes (provided, however, that
Landlord may reserve joint enforcement rights under such warranties to the
extent of Landlord's continuing obligations or warranties hereunder). TENANT
ACKNOWLEDGES THAT THE WARRANTY CONTAINED IN THIS SECTION IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION OF THE
IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD AND THAT LANDLORD MAKES NO OTHER
WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE.

    5.3  Compliance with Law.  Landlord warrants to Tenant that each Building
Shell and the other Improvements constructed by Landlord (when constructed), as
they exist on the applicable Rent Commencement Date, but without regard to the
use for which Tenant will occupy the respective Buildings, shall not violate any
covenants or restrictions of record or any applicable law, building code,
regulation or ordinance in effect on the applicable Rent Commencement Date.
Tenant warrants to Landlord that the Tenant Improvements and any other
improvements constructed by Tenant 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 has been violated,
then it shall be the obligation of the warranting party, after written notice
from the other party, to correct the condition(s) constituting such violation
promptly, at the warranting party's sole cost and expense. Tenant acknowledges
that except as expressly set forth in this Lease, neither Landlord nor any agent
of Landlord has made any representation or warranty as to the present or future
suitability of the Property or Improvements for the conduct of Tenant's business
or proposed business thereon.

    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
Buildings 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 Property. 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
Center,

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then such tax or assessment shall be paid by Tenant to Landlord within fifteen
(15) 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.  To the extent any real property taxes and assessments
on the Buildings (including, but not limited to, the Improvements) are assessed
directly to Tenant, Tenant shall be responsible for and shall pay prior to
delinquency all such taxes and assessments levied against the Buildings. Upon
request by Landlord, Tenant shall furnish Landlord with satisfactory evidence of
Tenant's payment thereof. To the extent the Property and/or Improvements are
taxed or assessed to Landlord following the applicable Rent Commencement Date,
such real property taxes and assessments shall constitute Operating Expenses (as
that term is defined in Section 7.2 of this Lease) and shall be paid in
accordance with the provisions of Article 7 of this Lease.

    7.  OPERATING EXPENSES  

    7.1  Payment of Operating Expenses.  

    (a) Tenant shall pay to Landlord, at the time and in the manner hereinafter
set forth, as additional rental, Tenant's Operating Cost Share (as hereinafter
defined) of the Operating Expenses defined in Section 7.2, subject to adjustment
pursuant to Sections 7.1(b) and (c) when applicable. The parties presently
anticipate that the percentage amount constituting Tenant's applicable share of
Operating Expenses ("Tenant's Operating Cost Share"), except as otherwise
provided herein, will be twenty-one and forty hundredths percent (21.40%) as of
the Phase I Rent Commencement Date and thirty-five and ten hundredths percent
(35.10%) as of the Phase II Rent Commencement Date. Notwithstanding the
foregoing, with respect to liability insurance premiums (except to the extent
separately and specifically allocable to the Building, in which event Tenant's
Operating Cost Share with respect thereto shall be 100%), the land component of
real property taxes and assessments, common area lighting and maintenance
expenses, and other similar expenses that are incurred or measured on a
Center-wide basis (rather than being clearly and reasonably allocable or
attributable to the Building alone, in which event Tenant's Operating Cost Share
with respect thereto shall be 100%) or that are incurred with respect to common
area facilities, notwithstanding any other provisions of this Article 7,
Tenant's Operating Cost Share with respect to such Center-wide and/or common
area expenses from and after the Rent Commencement Date, regardless of the
status of construction and occupancy of the other contemplated buildings in the
Center, shall be equal to the percentage amount which is equivalent to a
fraction, the numerator of which is the square footage of the Building as
actually constructed, as determined in good faith by Landlord's architect on the
basis of measurement set forth in Section 3.1(e) hereof, and the denominator of
which is the sum of the actual square footage of all then completed buildings in
the Center plus the proposed square footage (as reflected in Landlord's
entitlements for the Property) of all not yet completed buildings that Landlord
proposes to construct in the Center (excluding the proposed child care facility
and proposed stand-alone restaurant as hereinafter set forth), in each case as
determined in good faith by Landlord's architect on the basis of measurement set
forth in Section 3.1(e) hereof, consistently applied; provided, however, that
the adjusted Tenant's Operating Cost Share determined pursuant to this sentence
shall be further adjusted from time to time to reflect (x) any difference
between the actual square footage of an additional building completed in the
Center from time to time and the proposed square footage at which such
additional building was previously included in the application of the foregoing
formula, and (y) any increase or decrease in the aggregate square footage of the
buildings that Landlord proposes to construct in the Center as part of the
initial phased development of the Center (such as, but not limited to, any
decision by Landlord to defer indefinitely, beyond the normal and reasonable
phasing of the Center, the construction of any of the planned buildings in the
Center and/or any action by governmental authorities to reduce the

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aggregate square footage of the buildings that Landlord is entitled to construct
in the Center pursuant to Landlord's entitlements as amended from time to time).

    (b) Tenant's Operating Cost Share as specified in Section 7.1(a) as of the
Phase I Rent Commencement Date is based upon an estimated area of 73,500 square
feet for the Phase I Building and upon an aggregate estimated area of 343,500
square feet for all of the buildings that Landlord presently expects to have in
fully constructed and occupied condition on the Property at the Phase I Rent
Commencement Date, and Tenant's Operating Cost Share as specified in
Section 7.1(a) as of the Phase II Rent Commencement Date is based upon an
estimated area of 72,500 square feet for the Phase II Building and upon an
aggregate estimated area of 416,000 square feet for all of the buildings that
Landlord presently expects to have in fully constructed and occupied condition
on the Property at the Phase II Rent Commencement Date. If the actual area of
the respective Buildings (when completed) or of the other buildings existing
from time to time in the Center, as determined in good faith by Landlord's
architect on the basis of measurement set forth in Section 3.1(e) hereof (which
basis of measurement shall be applied consistently for all buildings in the
Center), differs from the assumed numbers set forth above (including, but not
limited to, any such difference arising from the completion and occupancy of
buildings in the Center before or after the respective Rent Commencement Dates
hereunder, as contemplated in Section 7.1(c) below, and/or from a change for any
reason in the anticipated sequence of occurrence of the Phase I Rent
Commencement Date and the Phase II Rent Commencement Date), then Tenant's
Operating Cost Share shall be adjusted to reflect the actual areas so determined
as they exist from time to time. In no event, however, shall the square footage
of any child care facility or stand-alone restaurant on the Property be included
as part of the square footage of buildings on the Property in calculating
Tenant's Operating Cost Share, nor shall any costs or expenses relating to the
proposed child care facility and proposed stand-alone restaurant on the Premises
be included in Operating Expenses as hereinafter defined.

    (c) As Landlord constructs additional buildings in the Center, Tenant's
Operating Cost Share shall be adjusted from time to time to be equal to the
percentage determined by dividing the gross square footage of the Building(s) as
it or they then exist by the gross square footage of all buildings located in
the Center (subject to the exclusion set forth in Section 7.1(b) with respect to
the proposed child care facility and proposed restaurant). In determining such
percentage, a building shall be taken into account from and after the date on
which a tenant first enters into possession of the building or a portion
thereof; the good faith determination of the gross square footage of any such
building by Landlord's architects in a manner consistent with the manner in
which other buildings in the Center are measured shall be final and binding upon
the parties; and costs and expenses relating to a new building shall be taken
into account as Operating Expenses under this Article 7 only from and after the
date on which the square footage of the building is taken into account in
determining Tenant's Operating Cost Share under the criteria set forth in this
paragraph.

    7.2  Definition Of Operating Expenses.  

    (a) Subject to the exclusions and provisions hereinafter contained, the term
"Operating Expenses" shall mean the total costs and expenses incurred by or
allocable to Landlord for management, operation and maintenance of the
Improvements, the Property and the Center, including, without limitation, costs
and expenses of (i) insurance (including, but not limited to, earthquake
insurance and environmental insurance), property management, landscaping, and
the operation, repair and maintenance of buildings and Common Areas; (ii) all
utilities and services; (iii) real and personal property taxes and assessments
or substitutes therefor levied or assessed against the Center 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

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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; (iv) supplies, equipment, utilities and
tools used in management, operation and maintenance of the Center; (v) capital
improvements to the Property, the Improvements or the Center, amortized over a
reasonable period, (aa) which reduce or will cause future reduction of other
items of Operating Expenses for which Tenant is otherwise required to contribute
or (bb) which are required by law, ordinance, regulation or order of any
governmental authority or (cc) of which Tenant has use or which benefit Tenant;
and (vi) any other costs (including, but not limited to, any parking or
utilities fees or surcharges not otherwise specifically addressed elsewhere in
this Lease) allocable to or paid by Landlord, as owner of the Center 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 declarations of covenants, conditions and restrictions now or hereafter
affecting the Center or any other property over which Tenant has non-exclusive
usage rights as contemplated in Section 1.1(b) hereof. Operating Expenses shall
not include any costs attributable to the work for which Landlord is required to
pay under Article 5 or the Workletter, nor any costs attributable to the initial
construction of buildings or Common Area improvements in the Center, nor any
costs attributable to buildings the square footage of which is not taken into
account in determining Tenant's Operating Cost Share under Section 7.1 for the
applicable period. The distinction between items of ordinary operating
maintenance and repair and items of a capital nature shall be made in accordance
with generally accepted accounting principles applied on a consistent basis or
in accordance with tax accounting principles, as determined in good faith by
Landlord's accountants.

    (b) Notwithstanding any other provisions of this Section 7.2, the following
shall not be included within Operating Expenses:

      (i) Costs of maintenance or repair of the roof membrane for any building
within the Center, except during periods (if any) in which costs of maintenance
or repair of the roof membrane for either or both Buildings are likewise
included as an Operating Expense (rather than being incurred directly by Tenant
or passed through directly to Tenant on a building-by-building basis);

      (ii) 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 Center;

      (iii) 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;

      (iv) Any depreciation on the Buildings or on any other improvements in the
Center;

      (v) 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 Center;

      (vi) 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 Center or the Property;

      (vii) Overhead profit increments paid to any subsidiary or affiliate of
Landlord for management or other services on or to the Center or any portion
thereof 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;

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      (viii) All interest, loan fees and other carrying costs related to any
mortgage or deed of trust or related to any capital item, and all rental and
other amounts payable under any ground or underlying lease, or under any lease
for any equipment ordinarily considered to be of a capital nature (except
(A) janitorial equipment which is not affixed to the Buildings and/or
(B) equipment the cost of which, if purchased, would be considered an
amortizable Operating Expense under the provisions of this Section 7.2,
notwithstanding the capital nature of such equipment);

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

      (x) Advertising and promotional expenditures;

      (xi) Costs of repairs and other work occasioned by fire, windstorm or
other casualty of an insurable nature, except to the extent of any applicable
deductible amounts under insurance actually carried by Landlord;

      (xii) Any costs, fines or penalties incurred due to violations by Landlord
or by any other tenants of the Center of any governmental rule or authority or
of this Lease or any other lease of any portion of the Center or the Property,
or due to Landlord's negligence or willful misconduct;

      (xiii) Management costs to the extent they exceed a reasonable and
competitive rate for such services in the market for management of comparable
commercial properties in the San Francisco Bay Area;

      (xiv) Costs for sculpture, paintings or other objects of art, and for any
insurance thereon or extraordinary security in connection therewith;

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

      (xvi) The cost of correcting any building code or other violations which
were violations prior to the applicable Rent Commencement Date; and

      (xvii) The cost of containing, removing or otherwise remediating any
contamination of the Property (including the underlying land and groundwater) by
any toxic or hazardous materials (including, without limitation, asbestos and
PCBs).

    7.3  Determination Of Operating Expenses.  On or before the first to occur
of the Phase I Rent Commencement Date or the Phase II Rent Commencement Date and
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 first to
occur of the Phase I Rent Commencement Date or the Phase II Rent Commencement
Date, Tenant shall pay to Landlord Tenant's Operating Cost Share of the portion
of such estimated Operating Expenses allocable (on a prorata 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 five percent (5%), 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.

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    7.4  Final Accounting For Lease Year.  

    (a) 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 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) At any time within three (3) months 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 reasonably 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 San Mateo County Superior Court 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 or by any of their respective affiliates. 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 audit in accordance with the provisions of this Section 7.4.

    7.5  Proration.  If either Rent Commencement Date falls on a day other than
the first day of a Lease Year or if this Lease terminates 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.

    8.  UTILITIES  

    8.1  Payment.  Commencing with the applicable Rent Commencement Date for
each Building and thereafter throughout the term of this Lease, Tenant shall
pay, before delinquency, 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 applicable Building
(other than any separately metered costs for water, electricity or other
services or utilities furnished with respect to the Common Areas, which costs
shall be paid by Landlord and shall constitute Operating Expenses under
Section 7.2 hereof), including any taxes on such services and utilities. It is
the intention of the parties

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that all such services shall be separately metered to the Buildings. In the
event that any of such services supplied to the Buildings are not separately
metered, then the amount thereof shall be an item of Operating Expenses and
shall be paid as provided in Article 7.

    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 Buildings or Property 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.
Notwithstanding the foregoing provisions of this Section 8.2, however, in the
event of any interruption or failure of any service or utility to either or both
Buildings that (i) is caused in whole or in material part by the active
negligence or willful misconduct of Landlord or its agents, employees or
contractors and (ii) continues for more than three (3) business days and
(iii) materially impairs Tenant's ability to use the applicable Building(s) for
its or their intended purpose hereunder, then following such three (3) business
day period, Tenant's obligations for payment of rent and other charges under
this Lease shall be abated in proportion to the degree of impairment of Tenant's
use of the applicable Building(s), and such abatement shall continue until
Tenant's use of the applicable Building(s) is no longer materially impaired
thereby.

    9.  ALTERATIONS; SIGNS  

    9.1  Right To Make Alterations.  Tenant shall make no alterations, additions
or improvements to the Buildings or the Property, other than interior
non-structural alterations costing less than Forty Thousand Dollars ($40,000.00)
for any single project (i.e., any single item of alterations or set of related
alterations) and less than One Hundred Thousand Dollars ($100,000.00) in the
aggregate during any twelve (12) month period, without the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed. All
such 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.
Tenant shall cause any contractors engaged by Tenant for work in the Buildings
or on the 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
members, 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 substantial changes to the
roof or substantial equipment installations on the roof, or any substantial
changes or alterations to the building systems, without Landlord's prior written
consent (which consent shall not be unreasonably withheld or delayed). If Tenant
so requests in seeking Landlord's consent to any alterations, additions or
improvements, Landlord shall specify in granting such consent whether Landlord
intends to require that Tenant remove such alterations, additions or
improvements (or any specified portions thereof) upon expiration or termination
of this Lease. Landlord shall receive no fee for supervision, profit, overhead
or general conditions in connection with any alterations, additions or
improvements constructed or installed by Tenant under this Lease, whether as
part of the initial Tenant's Work under the Workletter or otherwise, except for
a project management fee as specifically provided in Schedule C-2 attached to
the Workletter in connection with the initial Tenant Improvements.

    9.2  Title To Alterations.  All alterations, additions and improvements
installed in, on or about the Buildings or the Property (including, but not
limited to, lab benches, fume hoods, cold rooms and other similar improvements
and equipment) shall become part of the Property and shall become the property
of Landlord, unless Landlord elects to require Tenant to remove the same upon
the termination of this

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Lease; provided, however, that the foregoing shall not apply to Tenant's movable
furniture, equipment and trade fixtures, except to the extent any such items are
specifically identified in the parenthetical in the initial portion of this
sentence. Tenant shall promptly repair any damage caused by its removal of any
such furniture, equipment or trade fixtures. Notwithstanding any other
provisions of this Article 9, however, (a) under no circumstances shall Tenant
have any right to remove from the Buildings or the Property, at the expiration
or termination of this Lease, any lab benches, fume hoods, cold rooms or other
similar improvements and equipment installed in the Buildings, even if such
equipment and improvements were installed by Tenant as part of Tenant's Work
under the Workletter or otherwise; and (b) if Tenant requests Landlord's written
consent to any alterations, additions or improvements under Section 9.1 hereof
and, in requesting such consent, asks that Landlord specify whether Landlord
will require removal of such alterations, additions or improvements upon
termination or expiration of this Lease, then Landlord shall not be entitled to
require such 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. Without limiting the generality of clause (b) of the preceding
sentence, Tenant shall not be required to remove upon termination or expiration
of this Lease any of the improvements constructed by Tenant as part of Tenant's
Work under the Workletter, except to the extent that Landlord, in granting its
approval of the plans and specifications for Tenant's Work under the Workletter,
advises Tenant in writing that Landlord intends to require removal of any
specified elements of such Tenant's Work upon termination or expiration of this
Lease. Notwithstanding any other provisions of this Article 9, (x) it is the
intention of the parties that Landlord shall be entitled to claim all tax
attributes associated with alterations, additions, improvements and equipment
constructed or installed by Tenant or Landlord with funds provided by Landlord
pursuant to the Tenant Improvement Allowance; and (y) it is the intention of the
parties that Tenant shall be entitled to claim, during the term of this Lease,
all tax attributes associated with alterations, additions, improvements and
equipment constructed or installed by Tenant with Tenant's own funds (and
without any payment or reimbursement by Landlord pursuant to the Tenant
Improvement Allowance), despite the fact that the items described in this
clause (y) are characterized in this Section 9.2 as becoming Landlord's property
upon installation, in recognition of the fact that Tenant will have installed
and paid for such items, will have the right of possession of such items during
the term of this Lease and will have the obligation to pay (directly or
indirectly) property taxes on such items, carry insurance on such items and bear
the risk of loss with respect to such items under Article 15 hereof. If and to
the extent it becomes necessary, in implementation of the foregoing intentions,
to identify (either specifically or on a percentage basis, as may be required
under applicable tax laws) which alterations, additions, improvements and
equipment constructed as part of Tenant's Work under the Workletter have been
funded through the Tenant Improvement Allowance and which have been constructed
or installed with Tenant's own funds, Landlord and Tenant agree to cooperate
reasonably and in good faith to make such an identification by mutual agreement.

    9.3  Tenant Trade Fixtures.  Subject to the third sentence of Section 9.2
and to Section 9.5 (which shall be controlling in the case of signs, logos and
insignia), Tenant may install, remove and reinstall trade fixtures without
Landlord's prior written consent, except that installation and removal of any
trade fixtures which are affixed to the Buildings or the 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 or delayed. Tenant shall immediately repair any damage
caused by installation and removal of trade fixtures under this Section 9.3.

    9.4  No Liens.  Tenant shall at all times keep the Buildings and the
Property 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 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
Property.

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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.

    9.5  Signs.  Tenant shall have the right to display its corporate name, logo
and/or insignia on the Buildings and in front of the entrances to the Buildings,
subject to (a) Landlord's prior approval as to location, size, design and
composition (which approval shall not be unreasonably withheld or delayed),
(b) the sign criteria established for the Center from time to time and (c) all
restrictions and requirements of applicable law and of any covenants, conditions
and restrictions or other written agreements now or hereafter applicable to the
Property. Landlord is hereby deemed to have aproved, as to location, any signage
the location of which is expressly designated on any Approved Plans developed
pursuant to the Workletter. Tenant shall immediately repair any damage caused by
installation and removal of signs under this Section 9.5.

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    10.  MAINTENANCE AND REPAIRS  

    10.1  Landlord's Work.  

    (a) Landlord shall repair and maintain or cause to be repaired and
maintained the Common Areas of the Center and the roof (structural portions
only), exterior walls and other structural portions of the Buildings. The cost
of all work performed by Landlord under this Section 10.1 shall be an Operating
Expense hereunder, except to the extent such work (i) is required due to the
negligence of Landlord, (ii) involves the repair or correction of a condition or
defect that Landlord is required to correct pursuant to Section 5.2 hereof,
(iii) is a capital expense not includible as an Operating Expense under
Section 7.2 hereof, or (iv) is required due to the negligence or willful
misconduct of Tenant or its agents, employees or invitees (in which event Tenant
shall bear the full cost of such work pursuant to the indemnification provided
in Section 12.6 hereof, subject to the release set forth in Section 12.4
hereof). Tenant knowingly and voluntarily waives the right to make repairs at
Landlord's expense, except to the extent permitted by Section 10.1(b) below, or
to offset the cost thereof against rent, under any law, statute, regulation or
ordinance now or hereafter in effect.

    (b) If Landlord fails to perform any repairs or maintenance required to be
performed by Landlord on either or both Buildings under Section 10.1(a) and such
failure continues for thirty (30) days or more after Tenant gives Landlord
written notice of such failure (or, if such repairs or maintenance cannot
reasonably be performed within such 30-day period, then if Landlord fails to
commence performance within such 30-day period and thereafter to pursue such
performance diligently to completion), then Tenant shall have the right to
perform such repairs or maintenance and Landlord shall reimburse Tenant for the
reasonable cost thereof within fifteen (15) days after written notice from
Tenant of the completion and cost of such work, accompanied by copies of
invoices or other reasonable supporting documentation. Under no circumstances,
however, shall Tenant have any right to offset the cost of any such work against
rent or other charges falling due from time to time under this Lease.

    10.2  Tenant's Obligation For Maintenance.  

    (a)  Good Order, Condition And Repair.  Except as provided in Section 10.1
hereof, Tenant at its sole cost and expense shall keep and maintain in good and
sanitary order, condition and repair the Buildings and every part thereof,
wherever located, including but not limited to the roof (non-structural portions
only), signs, interior, ceiling, electrical system, plumbing system, telephone
and communications systems of the Buildings, the HVAC equipment and related
mechanical systems serving the Buildings (for which equipment and systems Tenant
shall enter into a service contract with a person or entity designated or
reasonably approved by Landlord), all doors, door checks, windows, plate glass,
door fronts, exposed plumbing and sewage and other utility facilities, fixtures,
lighting, wall surfaces, floor surfaces and ceiling surfaces of the Buildings
and all other interior repairs, foreseen and unforeseen, with respect to the
Buildings, as required.

    (b)  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, condition and repair.
Immediately on demand from Landlord, the cost of such repairs shall be due and
payable by Tenant to Landlord.

    (c)  Condition Upon Surrender.  At the expiration or sooner termination of
this Lease, Tenant shall surrender the Buildings and the Improvements, including
any additions, alterations and improvements thereto, broom clean, in good and
sanitary order, condition and repair, ordinary wear and tear and casualty damage
(the latter of which shall be governed by the provisions of

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Article 15 hereof) excepted, first, however, removing all goods and effects of
Tenant and all and fixtures and items required to be removed or specified to be
removed at Landlord's election pursuant to this Lease (including, but not
limited to, any such removal required as a result of an election duly made by
Landlord to require such removal as contemplated in Section 9.2), and repairing
any damage caused by such removal. Tenant shall not have the right to remove
fixtures or equipment if Tenant is in default hereunder unless Landlord
specifically waives this provision in writing. Tenant expressly waives any and
all interest in any personal property and trade fixtures not removed from the
Property 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.

    11.  USE OF PROPERTY  

    11.1  Permitted Use.  Subject to Sections 11.3, 11.4 and 11.6 hereof, Tenant
shall use the Buildings solely for a laboratory and research and development
facility, including (but not limited to) wet chemistry and biology labs, clean
rooms, storage and use of toxic and radioactive materials (subject to the
provisions of Section 11.6 hereof), storage and use of laboratory animals,
administrative offices, 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 of South San Francisco and other governmental
agencies having jurisdiction over the Buildings), and for no other purpose,
unless Landlord in its sole discretion otherwise consents in writing.

    11.2 [Omitted.]

    11.3  No Nuisance.  Tenant shall not use the Buildings for or carry on or
permit upon the Property 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 interfere with the rights or business of
Landlord in the Buildings or the Property, nor commit or allow to be committed
any waste in, on or about the Property. Tenant shall not do or permit anything
to be done in or about the Property, nor bring nor keep anything therein, which
will in any way cause the Property 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.

    11.4  Compliance With Laws.  

    (a  Tenant shall not use the Buildings or Property or permit the Buildings
or Property 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 Buildings and
Improvements equipped with all safety appliances required by law, ordinance or
insurance on the Property, or any order or regulation of any public authority,
because of Tenant's particular use of the Property. Tenant shall procure all
licenses and permits required for use of the Property. Tenant shall use the
Property in strict accordance with all applicable ordinances, rules, laws and
regulations and shall comply with all requirements of all governmental
authorities now in force or which may hereafter be in force pertaining to the
use of the Property by Tenant, including, without limitation, regulations
applicable to noise, water, soil and air pollution, and making such
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 Property (collectively,
"Requirements") because of Tenant's construction of improvements in or other
particular use of the Property. Any structural alterations or additions required
from time to time by applicable Requirements because of Tenant's construction of
improvements in the Buildings or other particular use of the Property shall, at
Landlord's election,

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either (i) be made by Tenant, at Tenant's sole cost and expense, in accordance
with the procedures and standards set forth in Section 9.1 for alterations by
Tenant, or (ii) be made by Landlord at Tenant's sole cost and expense, in which
event Tenant shall pay to Landlord as additional rent, within ten (10) days
after demand by Landlord, an amount equal to all reasonable costs incurred by
Landlord in connection with such alterations or additions. 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.

    (b  In compliance with requirements imposed upon Landlord by an Owner
Participation Agreement between Landlord and The Redevelopment Agency of the
City of South San Francisco, Tenant hereby agrees to and accepts the following
provision:

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

    11.5  Liquidation Sales.  Tenant shall not conduct or permit to be conducted
any auction, bankruptcy sale, liquidation sale, or going out of business sale,
in, upon or about the Property, whether said auction or sale be voluntary,
involuntary or pursuant to any assignment for the benefit of creditors, or
pursuant to any bankruptcy or other insolvency proceeding.

    11.6  Environmental Matters.  

    (a  For purposes of this Section, "hazardous substance" 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. §§ 9601 et seq., and the regulations
promulgated thereunder, as amended, (ii) the California Carpenter-Presley-Tanner
Hazardous Substance Account Act, California Health & Safety Code §§ 25300 et
seq., and regulations promulgated thereunder, as amended, (iii) the Hazardous
Materials Release Response Plans and Inventory Act, California Heath & Safety
Code §§ 25500 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. §§ 6901 et seq., and
regulations promulgated pursuant thereto, as amended (collectively, "RCRA"),
(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 §§ 25100 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 §§ 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  Without limiting the generality of the obligations set forth in
Section 11.4 of this Lease:

    (i)  Tenant shall not cause or permit any hazardous substance or hazardous
waste to be brought upon, kept, stored or used in or about the Property without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, except that Tenant, in

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connection with its permitted use of the Property as provided in Section 11.1,
may keep, store and use materials that constitute hazardous substances which are
customary for such permitted use, provided such hazardous substances 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 substances or wastes by Tenant or its
agents or employees, and Tenant will provide Landlord with copies of all
permits, licenses, registrations and other similar documents that authorize
Tenant to conduct any such activities in connection with its authorized use of
the Property from time to time.

    (iii) Tenant shall not (A) operate on or about the Property 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 Property for ninety (90) days or more, nor (C) conduct any other
activities on or about the Property that could result in the Property being
deemed to be a "hazardous waste facility" (including, but not limited to, any
storage or treatment of hazardous substances or hazardous wastes which could
have such a result), nor (D) store any hazardous wastes on or about the Property
in violation of any federal or California laws or in violation of the terms of
any federal or California licenses or permits held by Tenant.

    (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 § 25281(x), including, without
limitation, complying with California Health & Safety Code §§ 25280-25299.7 and
the regulations promulgated thereunder, as amended. 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 Property.

    (v) If applicable, Tenant shall provide Landlord in writing the following
information and/or documentation within fifteen (15) days after the first Rent
Commencement Date to occur, and shall update such information at least annually,
on or before each anniversary of the first Rent Commencement Date to occur, to
reflect any change in or addition to the required information and/or
documentation (provided, however, that in the case of the materials described in
subparagraphs (B), (C) and (E) below, Tenant shall not be required to deliver
copies of such materials to Landlord but shall maintain copies of such materials
to such extent and for such periods as may be required by applicable law and
shall permit Landlord or its representatives to inspect and copy such materials
during normal business hours at any time and from time to time upon reasonable
notice to Tenant):

    (A) A list of all hazardous substances and/or wastes that Tenant receives,
uses, handles, generates, transports, stores, treats or disposes of from time to
time in connection with its operations on the Property.

    (B) All Material Safety Data Sheets ("MSDS's"), if any, required to be
completed with respect to operations of Tenant at the Property from time to time
in accordance with Title 26, California Code of Regulations § 8-5194 or 42
U.S.C. §11021, or any amendments thereto, and any Hazardous Materials Inventory
Sheets that detail the MSDS's.

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    (C) All hazardous waste manifests (as defined in Title 26, California Code
of Regulations § 22-66481), if any, that Tenant is required to complete from
time to time in connection with its operations at the Property.

    (D) A copy of any Hazardous Materials Management Plan required from time to
time with respect to Tenant's operations at the Property, pursuant to California
Health & Safety Code §§ 25500 et seq., and any regulations promulgated
thereunder, as amended.

    (E) Any Contingency Plans and Emergency Procedures required of Tenant from
time to time due to its operations in accordance with Title 26, California Code
of Regulations §§ 22-67140 et seq., and any amendments thereto, and any Training
Programs and Records required under Title 26, California Code of Regulations, §
22-67105, and any amendments thereto.

    (F) Copies of any biennial reports to be furnished to the California
Department of Health Services from time to time relating to hazardous substances
or wastes, pursuant to Title 26, California Code of Regulations, § 22-66493, and
any amendments thereto.

    (G) Copies of all industrial wastewater discharge permits issued to or held
by Tenant from time to time in connection with its operations on the Property.

    (H) Copies of any other lists or inventories of hazardous substances and/or
wastes on or about the Property that Tenant is otherwise required to prepare and
file from time to time with any governmental or regulatory authority.

    (vi) Tenant shall secure Landlord's prior written approval for any proposed
receipt, storage, possession, use, transfer or disposal of "radioactive
materials" or "radiation," as such materials are defined in Title 26, California
Code of Regulations § 17-30100, and/or any other materials possessing the
characteristics of the materials so defined, which approval Landlord may
withhold in its sole and absolute discretion; provided, that such approval shall
not be required for any radioactive materials (x) for which Tenant has secured
prior written approval of the Nuclear Regulatory Commission and delivered to
Landlord a copy of such approval (if applicable), or (y) which Tenant is
authorized to use pursuant to the terms of a Radioactive Material License (if
any) issued by the State of California, provided that Tenant has delivered a
copy of such License to Landlord. Tenant, in connection with any such authorized
receipt, storage, possession, use, transfer or disposal of radioactive materials
or radiation, shall:

    (A) Comply with all federal, state and local laws, rules, regulations,
orders, licenses and permits issued to or applicable to Tenant with respect to
its business operations on the Property;

    (B) Maintain, to such extent and for such periods as may be required by
applicable law, and permit Landlord and its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, a list of all radioactive materials or radiation received, stored,
possessed, used, transferred or disposed of by Tenant or in connection with the
operation of Tenant's business on the Property from time to time, to the extent
not already disclosed through delivery of a copy of a Nuclear Regulatory
Commission approval and/or a California Radioactive Material License with
respect thereto as contemplated above; and

    (C) Maintain, to such extent and for such periods as may be required by
applicable law, and permit Landlord or its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, all licenses, registration materials, inspection reports,
governmental orders and permits in connection with the receipt, storage,
possession, use, transfer or disposal of radioactive materials or

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radiation by Tenant or in connection with the operation of Tenant's business on
the Property from time to time.

    (vii) Tenant shall comply with any and all applicable laws, rules,
regulations and orders of any governmental authority with respect to the release
into the environment of any hazardous wastes or substances or radiation or
radioactive materials by Tenant or its agents or employees. Tenant shall give
Landlord immediate verbal notice of any unauthorized release of any such
hazardous wastes or substances or radiation or radioactive materials into the
environment, and shall follow such verbal notice with written notice to Landlord
of such release within twenty-four (24) hours of the time at which Tenant became
aware of such release.

    (viii) 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), 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 11.6(b), or (B) any receipt, use handling,
generation, transportation, storage, treatment, release and/or disposal of any
hazardous substance or waste or any radioactive material or radiation on or
about the Property as a proximate result of Tenant's use of the Property or as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent, employee or invitee of Tenant.

    (ix) Tenant shall cooperate with Landlord in furnishing Landlord with
complete information regarding Tenant's receipt, handling, use, storage,
transportation, generation, treatment and/or disposal of any hazardous
substances or wastes or radiation or radioactive materials. Upon request, Tenant
shall grant Landlord reasonable access at reasonable times to the Property to
inspect Tenant's receipt, handling, use, storage, transportation, generation,
treatment and/or disposal of hazardous substances or wastes or radiation or
radioactive materials, without being deemed guilty of any disturbance of
Tenant's use or possession and without being liable to Tenant in any manner.

    (x) Notwithstanding Landlord's rights of inspection and review under this
Section 11.6(b), Landlord shall have no obligation or duty to so inspect or
review, and no third party shall be entitled to rely on Landlord to conduct any
sort of inspection or review by reason of the provisions of this
Section 11.6(b).

    (xi) If Tenant or its employees, agents, contractors, vendors, customers or
guests receive, handle, use, store, transport, generate, treat and/or dispose of
any hazardous substances or wastes or radiation or radioactive materials on or
about the Property at any time during the term of this Lease, then within thirty
(30) days after the termination or expiration of this Lease, Tenant at its sole
cost and expense shall obtain and deliver to Landlord an environmental study,
performed by an expert reasonably satisfactory to Landlord, evaluating the
presence or absence of hazardous substances and wastes, radiation and
radioactive materials on and about the Property. Such study shall be based on a
reasonable and prudent level of tests and investigations of the Property and
surrounding portions of the Center (if appropriate), which tests shall be
conducted no earlier than the date of termination or expiration of this Lease.
Liability for any remedial actions required or recommended on the basis of such
study shall be allocated in accordance with Sections 11.4, 11.6, 12.6 and other
applicable provisions of this Lease. The parties acknowledge that nothing in
this Section 11.6(b) is intended to impose on Tenant any responsibility or
liability for any hazardous substances or wastes or radiation or radioactive
materials present on the Property as of the first Rent Commencement Date to
occur (other than as a result of any intentional or negligent acts or omissions
of Tenant or of any agent, employee or invitee of Tenant), but also acknowledge
that nothing in the preceding portion of this sentence is intended to exculpate

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Tenant from responsibility or liability for any exacerbation of any such
pre-existing conditions as a result of any breach of Tenant's obligations under
this Section 11.6 or any breach by Tenant or its employees, agents or
contractors of the provisions of the Environmental Restriction as defined in
Section 17.4 hereof.

    (c  Landlord shall indemnify, defend and hold Tenant harmless from and
against any and all claims, losses, damages, liabilities, costs, legal fees and
expenses of any sort arising out of or relating to (i) the presence on the
Property of any hazardous substances or wastes or radiation or radioactive
materials present on the Property as of the first Rent Commencement Date to
occur (other than as a result of any intentional or negligent acts or omissions
of Tenant or of any agent, employee or invitee of Tenant), and/or (ii) any
unauthorized release into the environment (including, but not limited to, the
Property) of any hazardous substances or wastes or radiation or radioactive
materials to the extent such release results from the negligence of or willful
misconduct or omission by Landlord or its agents or employees.

    (d  The provisions of this Section 11.6 shall survive the termination of
this Lease.

    12.  INSURANCE AND INDEMNITY  

    12.1  Insurance.  

    (a  Tenant shall procure and maintain in full force and effect at all times
during the term of this Lease, at Tenant's cost and expense, commercial general
liability insurance to protect against liability to the public, or to any
invitee of Tenant or Landlord, arising out of or related to the use of or
resulting from any accident occurring in, upon or about the Property, with
limits of liability of not less than (i) Two Million Dollars ($2,000,000.00) for
injury to or death of one person, (ii) Five Million Dollars ($5,000,000.00) for
personal injury or death, per occurrence, and (iii) One Million Dollars
($1,000,000.00) for property damage, or combined single limit of liability of
not less than Five Million Dollars ($5,000,000.00). Such insurance shall name
Landlord, its Manager, its property manager and any lender holding a deed of
trust on the Property from time to time (as designated in writing by Landlord to
Tenant from time to time) as additional insureds thereunder. The amount of such
insurance shall not be construed to limit any liability or obligation of Tenant
under this Lease. Tenant shall also procure and maintain in full force and
effect at all times during the term of this Lease, at Tenant's cost and expense,
products/completed operations coverage on terms and in amounts (A) customary in
Tenant's industry for companies engaged in the marketing of products on a scale
comparable to that in which Tenant is engaged from time to time and (B) mutually
satisfactory to Landlord and Tenant in their respective reasonable discretion.

    (b  Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 7.2 hereof), commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Property, with combined single limit of liability of not less than Five
Million Dollars ($5,000,000.00) per occurrence for bodily injury and property
damage.

    (c  Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 7.2 hereof), policies of
property insurance providing protection against "all risk of direct physical
loss" (as defined by and detailed in the Insurance Service Office's Commercial
Property Program "Cause of Loss—Special Form [CP1030]" or its equivalent) for
the Building Shell (as defined in the Workletter) of each Building and for the
improvements in the Common Areas of the Property, on a full replacement cost
basis (with no co-insurance or, if coverage without co-insurance is not
reasonably available, then on an "agreed amount" basis). Such insurance shall
include earthquake coverage and shall have such commercially reasonable
deductibles and other

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terms as Landlord in its reasonable discretion determines to be appropriate.
Landlord shall have no obligation to carry property damage insurance for any
alterations, additions or improvements installed by Tenant in the Buildings or
on or about the Property.

    (d  Tenant shall procure and maintain in full force and effect at all times
during the term of this Lease, at Tenant's cost and expense, policies of
property insurance providing protection against "all risk of direct physical
loss" (as defined by and detailed in the Insurance Service Office's Commercial
Property Program "Cause of Loss-Special Form [CP1030]" or its equivalent) for
the Tenant Improvements constructed by Tenant pursuant to the Workletter and on
all other alterations, additions and improvements installed by Tenant from time
to time in or about the Buildings, on a full replacement cost basis (with no
co-insurance or, if coverage without co-insurance is not reasonably available,
then on an "agreed amount" basis). Such insurance may have such commercially
reasonable deductibles and other terms as Tenant in its reasonable discretion
determines to be appropriate, and shall name both Tenant and Landlord as
insureds as their interests may appear. Without limiting the generality of the
foregoing provisions, Tenant's property insurance on the Tenant Improvements
shall in all events include earthquake insurance in an amount at least equal to
the amount of the Tenant Improvement Allowance paid by Landlord pursuant to the
Workletter in connection with the construction of the Tenant Improvements.

    (e  During the course of construction of the improvements being constructed
by Landlord and Tenant under Section 5.1 and the Workletter, Landlord and Tenant
respectively shall each procure and maintain in full force and effect, at its
respective sole cost and expense, policies of builder's risk insurance on the
improvements respectively being constructed by it, in such amounts and with such
commercially reasonable deductibles and other terms as Landlord in its
reasonable discretion determines to be appropriate with respect to the insurance
to be maintained by Landlord, and in such amounts and with such commercially
reasonable deductibles and other terms as Landlord and Tenant may mutually and
reasonably determine to be appropriate with respect to the insurance to be
maintained by Tenant. Without limiting the generality of the foregoing
provisions, Tenant's builder's risk insurance with respect to the Tenant
Improvements shall in all events include earthquake insurance in an amount at
least equal to the cumulative amount of the Tenant Improvement Allowance paid
from time to time by Landlord pursuant to the Workletter in connection with the
construction of the Tenant Improvements.

    12.2  Quality Of Policies And Certificates.  All policies of insurance
required hereunder shall be issued by responsible insurers and, in the case of
policies carried or required to be carried by Tenant, shall be written as
primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Tenant shall deliver to Landlord copies of policies or
certificates of insurance showing that said policies are in effect. The coverage
provided by such policies shall include the clause or endorsement referred to in
Section 12.4. If Tenant fails to acquire, maintain or renew any insurance
required to be maintained by it under this Article 12 or to pay the premium
therefor, then Landlord, at its option and in addition to its other remedies,
but without obligation so to do, may procure such insurance, and any sums
expended by it to procure any such insurance on behalf of or in place of Tenant
shall be repaid upon demand, with interest as provided in Section 3.2 hereof.
Tenant shall give Landlord at least thirty (30) days prior written notice of any
cancellation or nonrenewal of insurance required to be maintained under this
Article 12, and shall obtain written undertakings from each insurer under
policies required to be maintained by it to endeavor to notify all insureds
thereunder at least thirty (30) days prior to cancellation of coverage.

    12.3  Workers' Compensation.  Tenant shall maintain in full force and effect
during the term of this Lease workers' compensation insurance in at least the
minimum amounts required by law, covering all of Tenant's employees working on
the Property.

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    12.4  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 Property 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
property insurance actually carried or required to be carried hereunder 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 property 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.

    12.5  Increase In Premiums.  Tenant shall do all acts and pay all expenses
necessary to insure that the Buildings are not used for purposes prohibited by
any applicable fire insurance, and that Tenant's use of the Buildings and
Property complies with all requirements necessary to obtain any such insurance.
If Tenant uses or permits the Buildings or Property to be used in a manner which
increases the existing rate of any insurance carried by Landlord on the Center
and such use continues for longer than a reasonable period specified in any
written notice from Landlord to Tenant identifying the rate increase and the
factors causing the same, then Tenant shall pay the amount of the increase in
premium caused thereby, and Landlord's costs of obtaining other replacement
insurance policies, including any increase in premium, within ten (10) days
after demand therefor by Landlord.

    12.6  Indemnification.  

    (a  Except as otherwise expressly provided for in this Lease, Tenant shall
indemnify, defend and hold Landlord and its members, partners, shareholders,
officers, directors, agents, employees and contractors 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 Landlord or which
Landlord may pay or incur by reason of the use, occupancy and enjoyment of the
Property by Tenant or any invitees, sublessees, licensees, assignees, employees,
agents or contractors of Tenant or holding under Tenant (including, but not
limited to, any such matters arising out of or in connection with any early
entry upon the Property by Tenant pursuant to Section 2.2 hereof) from any cause
whatsoever other than negligence or willful misconduct or omission by Landlord
or its agents, employees or contractors. Landlord and its members, partners,
shareholders, officers, directors, agents, employees and contractors shall not
be liable for, and Tenant hereby waives all claims against such persons for,
damages to goods, wares and merchandise in or upon the Property, or for injuries
to Tenant, its agents or third persons in or upon the Property, from any cause
whatsoever other than negligence or willful misconduct or omission by Landlord
or its agents, employees or contractors. Tenant shall give prompt notice to
Landlord of any casualty or accident in, on or about the Property.

    (b  Except as otherwise expressly provided for in this Lease, Landlord shall
indemnify, defend and hold Tenant and its partners, shareholders, officers,
directors, agents, employees and contractors 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
Property by reason of any negligence or willful misconduct or omission by
Landlord or its agents, employees or contractors.

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    12.7  Blanket Policy.  Any policy required to be maintained hereunder may be
maintained under a so-called "blanket policy" insuring other parties and other
locations so long as the amount of insurance required to be provided hereunder
is not thereby diminished. Without limiting the generality of the requirement
set forth at the end of the preceding sentence, property insurance provided
under a blanket policy shall provide full replacement cost coverage and
liability insurance provided under a blanket policy shall include per location
aggregate limits meeting or exceeding the limits required under this Article 12.

    13.  SUBLEASE AND ASSIGNMENT  

    13.1  Assignment And Sublease Of Building.  Except in the case of a
Permitted Transfer, Tenant shall not have the right or power to assign its
interest in this Lease, or make any sublease of either Building or any portion
thereof, nor shall any interest of Tenant under this Lease be assignable
involuntarily or by operation of law, without on each occasion obtaining the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Any purported sublease or assignment of Tenant's interest
in this Lease requiring but not having received Landlord's consent thereto (to
the extent such consent is required hereunder) shall be void. Without limiting
the generality of the foregoing provisions, Landlord may withhold consent to any
proposed subletting or assignment solely on the ground, if applicable, that the
use by the proposed subtenant or assignee is reasonably likely to be
incompatible with Landlord's use of the balance of the Property or of any
adjacent property owned or operated by Landlord, unless the proposed use is
within the permitted uses specified in Section 11.1, in which event it shall not
be reasonable for Landlord to object to the proposed use. Except in the case of
a Permitted Transfer, any dissolution, consolidation, merger or other
reorganization of Tenant, or any sale or transfer of substantially all of the
stock or assets of Tenant in a single transaction or series of related
transactions, shall be deemed to be an assignment hereunder and shall be void
without the prior written consent of Landlord as required above. Notwithstanding
the foregoing, (i) no issuance or sale of Tenant's capital stock through any
public securities exchange nor any other issuance of Tenant's capital stock for
bona fide financing purposes shall be deemed to be an assignment, subletting or
transfer hereunder; and (ii) Tenant shall have the right to assign this Lease or
sublet either or both Buildings, or any portion thereof, without Landlord's
consent (but with prior or concurrent written notice by Tenant to Landlord), to
any Affiliate of Tenant, or to any entity which results from a merger 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 fifty percent (50%) equity
interest, any entity which owns at least a fifty percent (50%) equity interest
in Tenant, and/or any entity which is related to Tenant by a chain of ownership
interests involving at least a fifty percent (50%) 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. Except as expressly set forth in this
Section 13.1, however, the provisions of Section 13.2 shall remain applicable to
any Permitted Transfer and the transferee under such Permitted Transfer shall be
and remain subject to all of the terms and provisions of this Lease.

    13.2  Rights Of Landlord.  

    (a  Consent by Landlord to one or more assignments of this Lease, or to one
or more sublettings of either or both 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

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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. In addition,
Tenant immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any subletting of all or a part of
either or both Buildings as permitted under this Lease, and Landlord, as
Tenant's assignee and as attorney-in-fact for Tenant, or any receiver for Tenant
appointed on Landlord's application, may collect such rent and apply it toward
Tenant's obligations under this Lease; except that, until the occurrence of an
act of default by Tenant, Tenant shall have the right to collect such rent and
to retain all sublease profits (subject to the provisions of Section 13.2(c),
below).

    (b  Upon any assignment of Tenant's interest in this Lease for which
Landlord's consent is required under Section 13.1 hereof, Tenant shall pay to
Landlord, within fifteen (15) days after receipt thereof by Tenant from time to
time, one-half (1/2) of all cash sums and other economic considerations received
by Tenant in connection with or as a result of such assignment, after first
deducting therefrom (i) any costs incurred by Tenant for leasehold improvements
(including, but not limited to, third-party architectural and space planning
costs) in the applicable Building(s) in connection with such assignment,
amortized over the remaining term of this Lease, (ii) any reasonable real estate
commissions and/or reasonable attorneys' fees incurred by Tenant in connection
with such assignment, and (iii) the lesser of the actual sales price (as
evidenced by a bona fide bill of sale or sales contract) or the fair market
value of any personal property sold outright by Tenant to the assignee, free of
any return or repurchase right or obligation.

    (c  Upon any sublease of all or any portion of either or both Buildings for
which Landlord's consent is required under Section 13.1 hereof, Tenant shall pay
to Landlord, within fifteen (15) days after receipt thereof by Tenant from time
to time, one-half (1/2) of all cash sums and other economic considerations
received by Tenant in connection with or as a result of such sublease, after
first deducting therefrom (i) the minimum rental due hereunder for the
corresponding period, prorated (on the basis of the average per-square-foot cost
paid by Tenant for the entire applicable Building(s) for the applicable period
under this Lease) to reflect the size of the subleased portion of the applicable
Building(s), (ii) any costs incurred by Tenant for leasehold improvements in the
subleased portion of the applicable Building(s) (including, but not limited to,
third-party architectural and space planning costs) for the specific benefit of
the sublessee in connection with such sublease, amortized over the remaining
term of this Lease, (iii) any reasonable real estate commissions and/or
reasonable attorneys' fees incurred by Tenant in connection with such sublease,
amortized over the term of such sublease, and (iv) the lesser of the actual
sales price (as evidenced by a bona fide bill of sale or sales contract) or the
fair market value of any personal property sold outright by Tenant to the
sublessee, free of any return or repurchase right or obligation.

    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 and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency (in which event no notice 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 deem necessary, to show the Buildings to prospective
purchasers, to show the Buildings to prospective tenants (but only during the
final year 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 Buildings or the Property or by
reason of erecting or maintaining any protective barricades in connection with
any such work, and

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the obligations of Tenant under this Lease shall not thereby be affected in any
manner whatsoever, provided, however, Landlord shall use 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
Buildings and the Property 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  If either or both Buildings, or the Common Areas of the Property
necessary for Tenant's use and occupancy of either or both Buildings, 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 Common
Areas of the Property and the Building Shell of the applicable Building(s), and
Tenant, as to the Tenant Improvements constructed by Tenant, 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 to return the affected portions of the 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, if such damage
or destruction (despite being corrected to the extent then permitted under
applicable governmental laws, regulations and building codes) would still
materially impair Tenant's ability to conduct its business in the applicable
Building(s), then either party may terminate this Lease with respect to the
applicable Building(s) 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, or if such damage or destruction
does not materially impair Tenant's ability to conduct its business in the
applicable Building(s), 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 of Operating Expenses, based upon the extent to
which Tenant's ability to conduct its business in the applicable Building(s) is
impaired, and Landlord and Tenant respectively shall restore the Common Areas
and the Building Shell and the Tenant Improvements in the applicable Building(s)
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 year 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 with
respect to the applicable Building(s) 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 and Tenant shall each
repair and restore applicable portions of the Property in accordance with the
first sentence of this Section 15.1(a).

    (b  The respective obligations of Landlord and Tenant 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) and (d) above, the obligations of either party 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

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been maintained) by reason of such occurrence, plus the amount of the party's
permitted deductible (provided that each party 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 Section 12.1(c) or (d), as
applicable), 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 with respect
to the applicable Building(s) 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 Section 12.1(c) and (d) above and is not actually insured,
Landlord shall be required to repair and restore the Building Shell of the
applicable Building(s) and the Common Areas to the extent necessary for Tenant's
continued use and occupancy of the applicable Building(s), and Tenant shall be
required to repair and restore the Tenant Improvements to the extent necessary
for Tenant's continued use and occupancy of the applicable Building(s), provided
that each party's obligation to repair and restore shall not exceed an amount
equal to five percent (5%) of the replacement cost of the Building Shell of the
applicable Building(s) and the Common Area improvements, as to Landlord, or five
percent (5%) of the replacement cost of the Tenant Improvements in the
applicable Building(s), as to Tenant; if the replacement cost as to either party
exceeds such amount, then the party whose limit has been exceeded may terminate
this Lease with respect to the applicable Building(s) unless the other party
promptly elects and agrees, in writing, to contribute the amount of the
shortfall.

    (c  If this Lease is terminated with respect to the applicable Building(s)
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 Section 12.1(c) and (d), Landlord and Tenant agree (and any Lender
shall be asked to agree) that such insurance proceeds 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  From and after the date of an occurrence resulting in damage to or
destruction of either or both Buildings or of the Common Areas necessary for
Tenant's use and occupancy of either or both Buildings, and continuing until
repair and restoration thereof are completed, 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 applicable Building(s) is impaired.

    15.2  Condemnation.  

    (a  If during the term of this Lease either or both Buildings, the Property
or Improvements, or any substantial part of any of them, 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), or receives
irreparable damage by reason of anything lawfully done under color of public or
other authority, then (i) this Lease shall terminate as to the entire applicable
Building(s) 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 applicable Building(s) 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
applicable Building(s) taken is of such extent and nature as substantially to
handicap, impede or permanently impair Tenant's use of the balance of the
applicable Building(s). If Tenant elects to terminate this Lease, Tenant shall
also notify

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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 to the
applicable Building(s) 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
applicable Building(s) is impaired), Landlord shall restore the Building Shell
of the applicable Building(s) and the Common Area improvements to a complete
architectural whole and a functional condition and as nearly as reasonably
possible to the condition existing before the taking, and Tenant shall restore
the Tenant Improvements and Tenant's other alterations, additions and
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, each party shall use its respective best
efforts (including, without limitation, any necessary negotiation or
intercession with its respective 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
Landlord and Tenant in portions reasonably corresponding to the cost and scope
of their respective restoration obligations, 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 either or both
Buildings or the Property.

    (b  The respective obligations of Landlord and Tenant pursuant to
Section 15.2(a) are subject to the following limitations:

    (i)  Each party'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 five percent
(5%) of the replacement cost of the Building Shell of the applicable Building(s)
and the Common Area improvements, as to Landlord, or five percent (5%) of the
replacement cost of the Tenant Improvements in the applicable Building(s), as to
Tenant; if the replacement cost as to either party exceeds such amount, then the
party whose limit has been exceeded may terminate this Lease with respect to the
applicable Building(s) unless the other party promptly elects and agrees, in
writing, to contribute the amount of the shortfall; and

    (ii) If this Lease is terminated with respect to the applicable Building(s)
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 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, the Property and 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 paid for or on account of
Tenant's moving expenses, trade fixtures and equipment and any leasehold
improvements installed by Tenant in the applicable

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Building(s) 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 by either party following a casualty or taking as
hereinabove set forth, the party responsible for 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 or delayed), 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 impair or impede Tenant's conduct of
its business in the applicable Building(s) (in which case any such modifications
in Landlord's work shall require Tenant's consent, not unreasonably withheld or
delayed) or would materially and adversely affect the exterior appearance, the
structural integrity or the mechanical or other operating systems of the
applicable Building(s) (in which case any such modifications in Tenant's work
shall require Landlord's consent, not unreasonably withheld or delayed).

    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) [Omitted.]

    (b)  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; provided, 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;

    (c)  Other Obligations.  Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in subsection
(b) 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;

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

    (e)  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 thirty (30) 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 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

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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
Property and the benefits to Landlord therefrom are preserved, consistent with
the purpose and intent of applicable bankruptcy laws;

    (f)  Receivership.  The employment of a receiver appointed by court order to
take possession of substantially all of Tenant's assets or either or both
Buildings, if such receivership remains undissolved for a period of thirty
(30) days;

    (g)  Attachment.  The attachment, execution or other judicial seizure of all
or substantially all of Tenant's assets or either or both Buildings, if such
attachment or other seizure remains undismissed or undischarged for a period of
thirty (30) days after the levy thereof; or

    (h)  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 thirty (30) 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) 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), using such
force as may be necessary to do so (as to which Tenant hereby waives any claim
for loss or damage that may thereby occur). 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) Even if Tenant has breached this Lease and abandoned either or both
Buildings, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession under subsection (a) hereof 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 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 either or both
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) 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 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 which would have been
earned after termination until the time of

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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 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 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 applicable Building(s), expenses of reletting,
including necessary repair, renovation and alteration of the applicable
Building(s), 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 ten percent (10%) 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.

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    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
Property, the Center, or any of them, and the rights of any assignee of Landlord
or of any ground lessor, mortgagee, trustee, beneficiary or leaseback lessor
under any of the foregoing, and to any and all advances made on the security
thereof and to all 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 Property,
the Center, 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. If any
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee elects to have this Lease be an encumbrance upon the 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. Promptly following execution of this Lease, Landlord shall use commercially
reasonable efforts to obtain a Non-Disturbance Agreement comparable to that
described above in this Section 17.1 from any mortgagee, trustee, beneficiary,
ground lessor or leaseback lessor holding an interest in the Property on the
date of this Lease (but Landlord hereby advises Tenant that in fact there is no
mortgagee, trustee, beneficiary, ground lessor or leaseback lessor holding an
interest in the Property on the date of this Lease).

    17.2  Sale Of Landlord's Interest.  Upon sale, transfer or assignment of
Landlord's entire interest in the Buildings and the 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.

    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 responding 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

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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 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
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.

    17.4  Subordination to CC&R's.  This Lease, and any permitted sublease
entered into by Tenant under the provisions of this Lease, and the interests in
real property conveyed hereby and thereby shall be subject and subordinate
(a) to any declarations of covenants, conditions and restrictions or other
recorded restrictions affecting the Property or the Center from time to time,
provided that the terms of such declarations or restrictions are reasonable (or,
to the extent they are not reasonable, are mandated by applicable law), do not
materially impair Tenant's ability to conduct the uses permitted hereunder on
the Property, and do not discriminate against Tenant relative to other similarly
situated tenants occupying portions of the Center, (b) to the Declaration of
Covenants, Conditions and Restrictions and Reciprocal Easements for Shearwater
Project dated January 21, 1998 and recorded on January 22, 1998 as Instrument
No. 98-008277, Official Records of San Mateo County, as amended from time to
time (the "Shearwater Declaration"), the provisions of which Shearwater
Declaration are an integral part of this Lease, and (c) to the Covenant and
Environmental Restriction dated as of January 26, 1998 and recorded on
February 3, 1998 as Instrument No. 98-013813, Official Records of San Mateo
County, as amended from time to time (the "Environmental Restriction"), the
provisions of which Environmental Restriction are incorporated herein by this
reference. Tenant agrees to execute, upon request by Landlord, any documents
reasonably required from time to time to evidence the foregoing subordination.

    17.5  Mortgagee Protection.  If, following a default by Landlord under any
mortgage, deed of trust, ground lease, leaseback lease or other security
arrangement covering the Buildings, the Property, the Center, or any of them,
the Buildings, the Property and/or the Center, as applicable, is acquired by the
mortgagee, beneficiary, master lessor or other secured party, or by any other
successor owner, pursuant to a foreclosure, trustee's sale, sheriff's sale,
lease termination or other similar procedure (or deed in lieu thereof), then any
such person or entity so acquiring the Buildings, the Property and/or the Center
shall not be:

    (a) liable for any act or omission of a prior landlord or owner of the
Property (including, but not limited to, Landlord);

    (b) subject to any offsets or defenses that Tenant may have against any
prior landlord or owner of the Property and/or the Center (including, but not
limited to, Landlord);

    (c) bound by any rent or additional rent that Tenant may have paid in
advance to any prior landlord or owner of the Property and/or the Center
(including, but not limited to, Landlord) for a period in excess of one month,
or by any security deposit, cleaning deposit or other prepaid charge that Tenant
may have paid in advance to any prior landlord or owner (including, but not
limited to, Landlord), except to the extent such deposit or prepaid amount has
been expressly turned over to or credited to the successor owner thus acquiring
the Property and/or the Center, as applicable;

    (d) liable for any warranties or representations of any nature whatsoever,
whether pursuant to this Lease or otherwise, by any prior landlord or owner of
the Property and/or the Center

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(including, but not limited to, Landlord) with respect to the use, construction,
zoning, compliance with laws, title, habitability, fitness for purpose or
possession, or physical condition (including, without limitation, environmental
matters) of the Property, the Buildings or the Center; or

    (e) liable to Tenant in any amount beyond the interest of such mortgagee,
beneficiary, master lessor or other secured party or successor owner in the
Property and the Center as they exist from time to time, it being the intent of
this provision that Tenant shall look solely to the interest of any such
mortgagee, beneficiary, master lessor or other secured party or successor owner
in the Property and Center for the payment and discharge of the landlord's
obligations under this Lease and that such mortgagee, beneficiary, master lessor
or other secured party or successor owner shall have no separate personal
liability for any such obligations.

    18.  SECURITY  

    18.1  Deposit.  Within ten (10) days after mutual execution of this Lease,
Tenant shall deposit with Landlord the sum of Five Hundred Fifty-Six Thousand
One Hundred and No/100 Dollars ($556,100.00), which sum (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. If Tenant defaults (beyond any applicable cure period)
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 or any
other amount which Landlord may spend or become 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. If any portion of the
Security Deposit is so used or applied, Tenant shall, within ten (10) 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 not be required to
keep any deposit under this Section separate from Landlord's general funds, and
Tenant shall not be entitled to interest thereon. If Tenant fully and faithfully
performs every provision of this Lease to be performed by it, the Security
Deposit, or any balance thereof, shall be returned to Tenant or, at Landlord's
option, to the last assignee of Tenant's interest hereunder, at the expiration
of the term of this Lease and after Tenant has vacated the Property. 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.

    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 same-day or overnight courier or express delivery service)
or by telecopier with mechanical confirmation of transmission, effective upon
personal delivery to or refusal of delivery by the recipient (in the case of
personal delivery by any of the means described above) or upon telecopier
transmission during normal business hours at the recipient's office (in the case
of telecopier transmission, with any transmission outside of normal business
hours being effective as of the beginning of the first business day commencing
after the time of actual transmission) to the parties at their respective
addresses as follows:

To Tenant:   (until first Rent Commencement Date)
Rigel Pharmaceuticals, Inc.
240 E. Grand Avenue
South San Francisco, CA 94080
Attn: James M. Gower
Telecopier: (650)

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(after first Rent Commencement Date)
Rigel Pharmaceuticals, Inc.
[street address to be determined]
South San Francisco, CA 94080
Attn: James M. Gower
Telecopier: (650) [to be determined]
with a copy to:
 
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
Attn: Anna B. Pope, Esq.
Telecopier: (415) 951-3699
To Landlord:
 
Slough BTC, LLC
33 West Monroe Street, Suite 2000
Chicago, IL 60603
Attn: William Rogalla
Telecopier: (312) 558-9041
with a copy to:
 
Britannia Management Services, Inc.
1939 Harrison Street, Suite 715
Oakland, CA 94612
Telecopier: (510) 763-6262
and a copy to:
 
Folger Levin & Kahn LLP
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
Telecopier: (415) 986-2827

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 in care of Britannia
Management Services, Inc., 1939 Harrison Street, Suite 715, Oakland, CA 94612,
or at 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 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
enforcement of this

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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, contains all the representations and the entire understanding between
the parties hereto with respect to the subject matter hereof. Any prior
correspondence, memoranda or agreements are replaced in total by this Lease and
the exhibits hereto. 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 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.

    19.11  Financial Information.  From time to time Tenant shall promptly
provide directly to prospective lenders and purchasers of the Property and/or
Center 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 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 Property and/or Center, solely for use in connection with
their bona fide consideration of a proposed financing or purchase of the
Property and/or Center, 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

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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 Property and/or Center 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.  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 of this Lease or subletting of the
Buildings or any part 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
$3,000.00 per request.

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

    19.14  Rules And Regulations.  Tenant shall observe, comply with and obey,
and shall cause its employees, agents and, to the best of Tenant's ability,
invitees to observe, comply with and obey such reasonable rules and regulations
as Landlord may promulgate from time to time for the safety, care, cleanliness,
order and use of the Improvements, the Property and the Center.

    19.15  Brokers.  Each party represents and warrants that no broker
participated in the consummation of this 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 compensation in connection
with any conversations, prior negotiations or other dealings by the indemnifying
party with any broker.

    19.16  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, acknowledgment and recordation of such document in
reasonable form.

    19.17  Corporate Authority.  The person signing this Lease on behalf of
Tenant warrants that he or she is fully authorized to do so and, by so doing, to
bind Tenant.

    19.18  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.

    19.19  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, 11.6, 12.6, 19.5 and 19.20 hereof shall survive the
termination of this Lease with respect to matters occurring prior to the
expiration of this Lease.

    19.20  Parking and Traffic.  

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    (a) Landlord has advised Tenant that the approval of the Britannia Oyster
Point project by the City of South San Francisco was conditioned upon, among
other things, Landlord's development and implementation of a Transportation
Demand Management Plan (the "TDMP") pursuant to which Landlord is required to
undertake various measures to try to reduce the volume of traffic generated by
the Center. Tenant hereby agrees (i) to designate one of its employees to act as
a liaison with Landlord's designated transportation coordinator in facilitating
and coordinating such programs as may be required from time to time by
governmental agencies and/or by the terms of the TDMP to reduce the traffic
generated by the Center (as required by the City of South San Francisco as part
of the conditions of approval of this project) and to facilitate and encourage
the use of public transportation, (ii) to make reasonable efforts to encourage
cooperation and participation by Tenant's employees in the programs implemented
from time to time pursuant to the TDMP, including (but not limited to) programs
described in this Section 19.20, and (iii) to cooperate with Landlord's
designated transportation coordinator in identifying an appropriate area within
each Building where an information kiosk can be maintained for the dissemination
of transportation-related information, to be updated from time to time by
Landlord's designated transportation coordinator.

    (b) The Center is presently intended to contain a maximum of approximately
2.9 parking spaces per 1,000 square feet of rentable area in the buildings to be
constructed on the Property, subject to approval by appropriate agencies of the
City of South San Francisco. Consistent with the TDMP, a specified percentage
(presently anticipated to be ten percent (10%)) of these spaces will be
designated for carpool, vanpool and clean fuel vehicles. Among other things, the
City of South San Francisco requires that Landlord charge a monthly parking fee
for each parking space allocated to tenants and their employees. The monthly
fees per parking space for the parking spaces allocable to the Buildings
pursuant to the foregoing formula have been factored into the monthly minimum
rent payable by Tenant under Sections 3.1(a) and 3.1(b). In accordance with the
policies and requirements of the City of South San Francisco, Landlord
recommends that Tenant pass through these parking charges (which are at the rate
of $20 per space per month in the first 5 years, $30 per space per month in the
second five years and $40 per space per month in the third five years) to
Tenant's employees using the spaces.

    (c) On or about the date Tenant commences business in each Building,
Landlord intends to provide Tenant, through Landlord's designated transportation
coordinator, with an appropriate number of packets of employee transportation
information, presently expected to include (but not be limited to) information
about carpool parking; schedules and maps for SamTrans, Caltrain, BART and
shuttle services operating to and from the Property; and a bicycle map. Landlord
shall thereafter cause its designated transportation coordinator to provide
updated copies of the employee transportation information packet to Tenant from
time to time, as appropriate, and to make additional copies of the packet
available to Tenant from time to time, upon request by Tenant, for new
employees. Tenant shall distribute copies of the employee transportation
information packet to all employees commuting to the Property at the time Tenant
commences business in the respective Buildings, shall thereafter distribute
copies of the packet to new employees from time to time and shall distribute
updated packets to all employees from time to time when and as such updated
packets are furnished to Tenant by Landlord's designated transportation
coordinator.

    (d) Landlord is required to conduct, pursuant to the TDMP, annual surveys of
its tenants and their employees regarding both quantitative and qualitative
aspects of commuting and transportation patterns at the Center. Landlord
anticipates that these surveys will be prepared, administered and analyzed by an
independent transportation consultant retained by the City of South San
Francisco, and will be summarized by that consultant in an annual report to be
submitted by that consultant to the City of South San Francisco and its
Redevelopment Agency

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with respect to the Center. Tenant shall cooperate with Landlord, with
Landlord's designated transportation coordinator and with any independent
transportation consultant retained by the City, and shall use reasonable efforts
to cause Tenant's employees to so cooperate, in the completion and return of
such surveys from time to time, when and as requested by Landlord or its
designated transportation coordinator or the independent consultant. Tenant
acknowledges and understands that employees who fail to respond to such surveys
will be counted as drive-alone commuters.

    (e) Landlord has advised Tenant that pursuant to conditions imposed by the
City of South San Francisco and its Redevelopment Agency, Landlord may incur
financial penalties if implementation of the TDMP at the Center fails to achieve
a target rate of at least thirty-five percent (35%) alternative mode
transportation usage (the "Alternative Mode Standard") by employees working at
the Center, as reflected in the surveys conducted pursuant to Section 19.20(d)
above. Any such financial penalties shall be imposed by the City of South San
Francisco Redevelopment Agency (the "Redevelopment Agency"), in its sole
discretion, based on its review of the annual reports submitted from time to
time pursuant to Section 19.20(d) above. The amount of such financial penalties
is presently set at $15,000 per year for each percentage point (if any) by
which, after a phase-in period (two (2) years after the granting of a
certificate of occupancy) for each building, the aggregate rate of alternative
mode transportation usage by employees throughout the Center falls short of the
Alternative Mode Standard. If any such financial penalties are imposed on
Landlord for failure to meet the Alternative Mode Standard on a Center-wide
basis for any applicable survey period, then Landlord shall be entitled to pass
such financial penalties through to all tenants of the Center whose employees
have failed to demonstrate (pursuant to the applicable surveys) compliance with
the Alternative Mode Standard for the applicable period (each such tenant being
hereinafter referred to as a "Noncomplying Tenant" for that period), in which
event the actual penalty amount shall be allocated among the Noncomplying
Tenants for the applicable period in the following manner: Each Noncomplying
Tenant shall bear a portion of the applicable penalty amount equal to a
fraction, the numerator of which is the number of employees by which such
Noncomplying Tenant fell short of meeting the Alternative Mode Standard for the
applicable period and the denominator of which is the sum of the respective
numbers of employees by which all Noncomplying Tenants, in the aggregate, fell
short of meeting the Alternative Mode Standard for the applicable period. Each
such Noncomplying Tenant shall pay its share of the applicable penalty amount to
Landlord within thirty (30) days after receipt of written demand from Landlord,
accompanied by supporting documentation evidencing the applicable penalty
amount, as provided by the Redevelopment Agency or its consultant, and
demonstrating in reasonable detail the calculation of such Noncomplying Tenant's
share of that penalty amount. Under no circumstances shall Tenant be required to
bear any portion of any penalties contemplated in this paragraph with respect to
any period as to which Tenant can demonstrate that its employees, as evidenced
by the applicable survey(s) for that period, met the Alternative Mode Standard.
If Tenant subleases any portion(s) of the Buildings from time to time, then for
purposes of this Section 19.20, as between Tenant and Landlord, Tenant shall be
fully and solely responsible for compliance by its subtenant(s) and their
employees with the requirements of this Section 19.20, and all surveys and
reports submitted by Tenant to Landlord or its designated transportation
coordinator or to the independent consultant pursuant to this Section 19.20
shall cover the entire Buildings and shall report figures for Tenant and its
subtenant(s) on an aggregate basis. Nothing in the preceding sentence, however,
shall preclude Tenant, as between itself and its subtenant(s), from allocating
to such subtenant(s) in the applicable sublease agreement any compliance
obligations and/or penalty reimbursement obligations under this
Section 19.20(e), but no such allocation shall be binding on Landlord or require
Landlord, its designated transportation coordinator or the independent
consultant to deal directly with any such subtenant(s) regarding the matters
addressed in this Section 19.20. If Tenant

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believes, reasonably and in good faith, that there are circumstances particular
to the nature of Tenant's business operations that would justify a mitigation of
penalties and/or a modification of the implementation of the TDMP as applied to
Tenant's business, and requests in writing (with supporting information
describing, in reasonable detail, the circumstances on which Tenant is relying)
that Landlord present such mitigation or modification arguments to the
Redevelopment Agency, then Landlord shall use reasonable and good faith efforts
to present or cause its designated transportation coordinator to present such
mitigation and/or modification arguments, but Tenant acknowledges and
understands that any decision with respect to such mitigation and/or
modification arguments will be in the sole discretion of the Redevelopment
Agency and agrees that Landlord shall have no liability to Tenant if such
mitigation and/or modification arguments are not accepted by the Redevelopment
Agency.

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

"Landlord"   "Tenant"
SLOUGH BTC, LLC, a Delaware limited liability company
 
RIGEL PHARMACEUTICALS, INC., a Delaware corporation
By:
 
Slough Estates USA Inc., a Delaware corporation, Its Manager
 
By:
 
/s/ James M. Gower

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            Its:                     CEO & President

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By:
 
/s/ William Rogalla

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By:
 
/s/ James H. Welch

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Its:
 
VP

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Its:
 
VP Finance

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QuickLinks

BUILD-TO-SUIT LEASE

Exhibit 10.16