<PAGE>

10600 North De Anza Blvd.     408.446.0700                          Exhibit 10.3
Suite 200                     Facsimile:  408.446.0583
Cupertino, CA  95014-2075     www.sobrato.com                  MASTER LEASE

                                 LEASE BETWEEN

                      SOBRATO INTERESTS AND XENOPORT, INC.

<TABLE>
<CAPTION>
SECTION                                                                           PAGE #
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<S>                                                                               <C>
PARTIES.........................................................................     1
PREMISES........................................................................     1
USE.............................................................................     1
TERM AND RENTAL.................................................................     1
SECURITY DEPOSIT................................................................     1
LATE CHARGES....................................................................     2
POSSESSION......................................................................     2
COVENANTS TO SURRENDER..........................................................     3
USES PROHIBITED.................................................................     3
ALTERATIONS AND ADDITIONS.......................................................     3
MAINTENANCE OF PREMISES.........................................................     4
     A.    Landlord and Tenant's Obligations Regarding Common Area Costs........     4
     B.    Common Area Costs....................................................     4
     C.    Tenant's Allocable Share.............................................     5
     D.    Waiver of Liability..................................................     5
     E.    Tenant's Obligations.................................................     5
HAZARD INSURANCE................................................................     6
     A.    Tenant's Use.........................................................     6
     B.    Landlord's Insurance.................................................     6
     C.    Tenant's Insurance...................................................     6
     D.    Waiver...............................................................     6
TAXES...........................................................................     6
UTILITIES.......................................................................     7
ABANDONMENT.....................................................................     7
FREE FROM LIENS.................................................................     7
COMPLIANCE WITH GOVERNMENTAL REGULATIONS........................................     7
TOXIC WASTE AND ENVIRONMENTAL DAMAGE............................................     7
     A.    Tenant's Responsibility..............................................     8
     B.    Tenant's Indemnity Regarding Hazardous Materials.....................     8
     C.    Landlord's Indemnity Regarding Hazardous Materials...................     8
LANDLORD'S LIABILITY............................................................     9
     A.    Limitation on Landlord's Liability...................................     9
     B.    Limitation on Tenant's Recourse......................................     9
     C.    Indemnification of Landlord..........................................     9
ADVERTISEMENTS AND SIGNS........................................................     9
ATTORNEY'S FEES.................................................................    10
TENANT'S DEFAULT................................................................    10
     A.    Remedies.............................................................    10
     B.    Right to Re-enter....................................................    10
     C.    Additional Remedies..................................................    10
     D.    No Termination.......................................................    11
SURRENDER OF LEASE..............................................................    11
LANDLORD'S DEFAULT..............................................................    11
NOTICES.........................................................................    11
ENTRY BY LANDLORD...............................................................    11
DESTRUCTION OF PREMISES.........................................................    11
     A.    Destruction by an Insured Casualty...................................    11
</TABLE>

                                       1.
<PAGE>

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                  PAGE
<S>                                                                               <C>
     B.    Destruction by an Uninsured Casualty.................................    12
ASSIGNMENT OR SUBLEASE..........................................................    12
     A.    Consent by Landlord..................................................    12
     B.    Assignment or Subletting Consideration...............................    13
     C.    No Release...........................................................    13
     D.    Reorganization of Tenant.............................................    13
     E.    Permitted Transfers..................................................    14
     F.    Effect of Default....................................................    14
     G.    Successors and Assigns...............................................    14
CONDEMNATION....................................................................    14
EFFECTS OF CONVEYANCE...........................................................    15
SUBORDINATION...................................................................    15
WAIVER..........................................................................    15
HOLDING OVER....................................................................    15
SUCCESSORS AND ASSIGNS..........................................................    15
ESTOPPEL CERTIFICATES...........................................................    16
OPTION TO EXTEND THE LEASE TERM.................................................    16
     A.    Grant and Exercise of Option.........................................    16
     B.    Determination of Fair Market Rental..................................    16
     C.    Resolution of a Disagreement over the Fair Market Rental.............    17
OPTIONS.........................................................................    17
QUIET ENJOYMENT.................................................................    17
BROKERS.........................................................................    17
AUTHORITY OF PARTIES............................................................    17
MISCELLANEOUS PROVISIONS........................................................    17
     A.    Rent.................................................................    18
     B.    Management Fee.......................................................    18
     C.    Performance by Landlord..............................................    18
     D.    Interest.............................................................    18
     E.    Rights and Remedies..................................................    18
     F.    Survival of Indemnities..............................................    18
     G.    Severability.........................................................    18
     H.    Choice of Law........................................................    18
     I.    Time.................................................................    18
     J.    Entire Agreement.....................................................    18
     K.    Representations......................................................    18
     L.    Headings.............................................................    18
CONDITION PRECEDENT.............................................................    18

Exhibit "A" - Premises and Project..............................................    21

Exhibit "B" - Draft Letter of Credit............................................    22
</TABLE>

                                      -ii-
<PAGE>

10600 North De Anza Blvd.    408.446.0700                           MASTER LEASE
Suite 200                    Facsimile:  408.446.0583
Cupertino, CA  95014-2075    www.sobrato.com

      1 PARTIES: THIS LEASE, is entered into on this 24th day of September,
2001, between Sobrato Interests, a California limited partnership, whose address
is 10600 North De Anza Boulevard, Suite 200 Cupertino, CA 95014 and Xenoport,
Inc., a Delaware corporation, whose address is 2631 Hanover Street, Palo Alto,
California, 94304, hereinafter called respectively Landlord and Tenant.

      2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from
Landlord those certain Premises with the appurtenances, situated in the City of
Santa Clara, County of Santa Clara, State of California, and more particularly
described as follows, to-wit:

That certain real property commonly known and designated as 3410 Central
Expressway consisting of approximately 102,759 square feet ("Building") and 361
parking stalls in a project consisting of a total of five (5) buildings,
including the Premises, totaling 412,171 square feet ("Project") as outlined in
red on Exhibit "A". Said stalls shall be available for Tenant's exclusive use
but shall not be designated or segregated from the balance of the parking area.

      3. USE: Tenant shall use the Premises only for the following purposes and
shall not change the use of the Premises without the prior written consent of
Landlord: Office, laboratory research, development, testing, light
manufacturing, ancillary warehouse, and related legal uses. Tenant shall be
entitled to utilize Hazardous Materials in compliance with laws in accordance
with paragraph 18 of the Lease. Landlord makes no representation or warranty
that any specific use of the Premises desired by Tenant is permitted pursuant to
any Laws.

      4. TERM AND RENTAL: The term ("Lease Term") shall be for one hundred
twenty (120) months, commencing on the Commencement Date (as hereinafter
defined), and ending 120 months thereafter ("Expiration Date"). In addition to
all other sums payable by Tenant under this Lease, Tenant shall pay as base
monthly rent ("Base Monthly Rent") for the Premises pursuant to the following
schedule:

<TABLE>
<S>                    <C>
Months 01 - 12:        $246,621.60 per month
Months 13 - 36:        $267,173.40 per month
Months 37 - 48:        $292,863.15 per month
Months 49 - 60:        $302,381.20 per month
Months 61 - 72:        $312,208.59 per month
Months 73 - 84:        $322,355.37 per month
Months 85 - 96:        $332,831.92 per month
Months 97 -108:        $343,648.96 per month
Months 109 - 120:      $354,817.55 per month
</TABLE>

      Base Monthly Rent shall be due on the first day of each calendar month
during Lease Term. All sums payable by Tenant under this Lease shall be paid in
lawful money of the United States of America, without offset or deduction, and
shall be paid to Landlord at such place or places as may be designated from time
to time by Landlord. Base Monthly Rent for any period less than a calendar month
shall be a pro rata portion of the monthly installment. Concurrently with
Tenant's execution of this Lease, Tenant shall pay to Landlord the sum of Two
Hundred Forty Six Thousand Six Hundred Twenty One and 60/100 Dollars
($246,621.60) as prepaid rent for the first month of the Lease.

      5. SECURITY DEPOSIT: Concurrently with Tenant's execution of this Lease,
Tenant has deposited with Landlord the sum of Three Million and No/100 Dollars
($3,000,000.00) ("Security Deposit"). Landlord shall not be deemed a trustee of
the Security Deposit, may use the Security Deposit in business, and shall not be
required to segregate it from its general accounts. Tenant shall not be entitled
to interest on the Security Deposit. If Tenant defaults with respect to any
provisions of the Lease beyond applicable notice and cure periods, including but
not limited to the provisions relating to payment of Base Monthly Rent or other
charges, Landlord may, to the extent reasonably necessary to remedy Tenant's
default, use any or all of the Security Deposit towards payment of the
following: (i) Base Monthly Rent or other charges in default; (ii) any other
amount which Landlord

                                       1.
<PAGE>

may spend or become obligated to spend by reason of Tenant's default including,
but not limited to Tenant's failure to restore or clean the Premises following
vacation thereof. If any portion of the Security Deposit is so used or applied,
Tenant shall, within ten (10) days after written demand from Landlord, deposit
cash with Landlord in an amount sufficient to restore the Security Deposit to
its full original amount, and shall pay to Landlord such other sums as necessary
to reimburse Landlord for any sums paid by Landlord. Tenant may not assign or
encumber the Security Deposit without the consent of Landlord. Any attempt to do
so shall be void and shall not be binding on Landlord. The Security Deposit
shall be returned to Tenant within thirty (30) days after the Expiration Date
and surrender of the Premises to Landlord, less any amount deducted in
accordance with this Section, together with Landlord's written notice itemizing
the amounts and purposes for such deduction.

Landlord agrees that in lieu of a cash Security Deposit, Tenant may deposit a
letter of credit ("Letter of Credit") substantially in the form attached hereto
as Exhibit "B". Landlord shall be entitled to draw against the Letter of Credit
in the event of a default by Tenant beyond applicable notice and cure periods
provided only that an authorized agent of Landlord certifies to the issuer of
the Letter of Credit that Tenant is in default under the Lease beyond applicable
notice and cure periods and that Landlord is entitled under the Lease to draw
the requested amount. Tenant shall keep the letter of credit in effect during
the entire Lease Term, as the same may be extended, plus a period of four (4)
weeks after expiration of the Lease Term. At least thirty (30) days prior to
expiration of any Letter of Credit, the term thereof shall be renewed or
extended for a period of at least one (1) year. Tenant's failure to so renew or
extend the Letter of Credit shall be a material default of this Lease by Tenant.
In the event Landlord draws against the Letter of Credit, Tenant shall replenish
the existing Letter of Credit or cause a new Letter of Credit to be issued such
that the aggregate amount of letters of credit available to Landlord at all
times during the Lease Term is the amount of the Security Deposit originally
required. Provided Tenant has not been in default under this Lease beyond
applicable notice and cure periods, Landlord agrees to reimburse Tenant one half
the cost incurred by Tenant for the issuance of the Letter of Credit and for any
transfer of the Letter of Credit requested by Landlord.

Notwithstanding the foregoing, provided Tenant has not been in default under the
Lease beyond applicable notice and cure periods, then at the commencement of the
61st month of the Lease Term, Tenant shall be allowed to reduce the amount of
the Security Deposit by $1,500,000.00.

      6. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to,
administrative, processing, accounting charges, and late charges, which may be
imposed on Landlord by the terms of any contract, revolving credit, mortgage or
trust deed covering the Premises. Accordingly, if any installment of Base
Monthly Rent due from Tenant shall not be received by Landlord or Landlord's
designee within ten (10) days after written notice from Landlord that such
amount is due, Tenant shall pay to Landlord a late charge equal to five (5%)
percent of such overdue amount which shall be due and payable with the payment
then delinquent. Landlord agrees to waive said late charge in the event the Base
Monthly Rent or other sum due is received within five days after receipt by
Tenant of Landlord's notice to quit or pay rent. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of the
other rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Monthly Rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly, notwithstanding any provision
of this Lease to the contrary.

IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:

      7. POSSESSION: Tenant: The parties acknowledge that the target
Commencement Date is December 1, 2001. The "Commencement Date" shall occur on
the later of (i) December 1, 2001, or (ii) the date by which all of the
following have occurred: (a) the tenant currently in the Premises has completed
the regulatory closure of the facility in accordance with applicable laws, (b)
Landlord has delivered possession of the Premises. On the Commencement Date,
Landlord shall deliver and Tenant shall accept possession of the Premises and
enter into occupancy of the Premises on the Commencement Date. Tenant
acknowledges that it has had an opportunity to conduct, and has conducted, such
inspections of the Premises as it deems necessary to evaluate its condition.
Tenant

                                       2.
<PAGE>

agrees to accept possession of the Premises in its then existing condition
(latent defects excepted), subject to all Restrictions and without
representation or warranty by Landlord, provided that the Premises are then in
broom clean condition and in as good condition as they exist at the time of
Lease execution. If Landlord, for any reason whatsoever, cannot deliver
possession of the said Premises to Tenant at the Commencement Date, this Lease
shall not be void or voidable, nor shall Landlord be liable to Tenant for any
loss or damage resulting therefrom; but in that event the Commencement Date and
Expiration Date of the Lease and all other dates affected thereby shall be
revised to conform to the date of Landlord's delivery of possession.

Notwithstanding the foregoing, in the event the Commencement Date has not
occurred for any reason whatsoever on or before March 1, 2002, then Tenant may
terminate the Lease by written notice to Landlord, whereupon any monies
previously paid by Tenant to Landlord shall be reimbursed to Tenant. Tenant's
right to terminate shall be the sole and exclusive remedy of Tenant with respect
to the Commencement Date not occurring by March 1, 2002. As soon as reasonably
practicable prior to the Commencement Date but no sooner than the date the
tenant currently in the Premises has completed the regulatory closure of the
facility in accordance with applicable law, Landlord shall provide Tenant with
access to the Premises for Tenant's design and construction of tenant
improvements and for the installation of Tenant's wiring, data cabling, phone
system, equipment and furniture. Such early access to the Premises by Tenant
shall be upon all the terms and conditions of the Lease, except that no Base
Monthly Rent shall be due by Tenant until the Commencement Date.

      8. COVENANTS TO SURRENDER: The Tenant agrees on the Expiration Date, or on
the sooner termination of this Lease, to surrender the Premises to Landlord in
good condition and repair, reasonable wear and tear excepted. "Good condition"
shall mean that the interior walls, floors, suspended ceilings, and carpeting
within the Premises will be cleaned to reasonably good condition, normal wear
and tear excepted. Tenant agrees, at its sole cost, to remove all phone and data
cabling from the suspended ceiling installed by Tenant and repair or replace
broken ceiling tiles, and relevel the ceiling if required as a result of such
repair or replacement. At the expiration of the Lease Term, Landlord shall not
have the right to require that Tenant remove from the Premises any Alterations
made with Landlord's consent unless Landlord, at the time of granting such
consent, indicates that the subject Alteration must be removed upon the
expiration of the Lease Term. With respect to Permitted Alterations as defined
in Section 10 below, Tenant shall ascertain from Landlord within ninety (90)
days before the Expiration Date whether Landlord desires to have any such
Permitted Alterations removed. If Landlord shall so desire, Tenant shall, at
Tenant's sole cost and expense, remove such Alterations and Permitted
Alterations as Landlord requires and shall repair any damage to the Building
which results from Tenant's removal of any Alterations, Permitted Alterations,
and any of Tenant's equipment, trade fixtures, and components, and shall repair
and restore said Premises or such parts thereof before the Expiration Date. Such
repair and restoration shall include causing the Premises to be brought into
compliance with all applicable building codes and laws in effect at the time of
the removal to the extent such compliance is necessitated by the repair and
restoration work. Tenant on or before the Expiration Date or sooner termination
of this Lease, shall remove all its personal property and trade fixtures from
the Premises, and all property and trade fixtures not so removed shall be deemed
to be abandoned by Tenant. If the Premises are not surrendered at the Expiration
Date or sooner termination of this Lease in the condition required by this
paragraph, Tenant shall indemnify, defend, and hold harmless Landlord against
loss or liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant founded
on such delay.

      9. USES PROHIBITED: Tenant shall not commit, or suffer to be committed,
any waste upon the said Premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any other tenant in or around the Building or
allow any sale by auction upon the Premises, or allow the Premises to be used
for any unlawful or objectionable purpose, or place any loads upon the floor,
walls, or ceiling which endanger the structure, or use any machinery or
apparatus which will in any manner vibrate or shake the Building, or place any
harmful liquids, waste materials, or hazardous materials in the drainage system
of, or upon or in the soils surrounding the Building. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature or any waste materials, refuse, scrap or debris shall be
stored upon or permitted to remain on any portion of the Premises outside of the
Building except in enclosed conforming structures without Landlord's prior
approval, which approval may be withheld in its sole discretion.

      10. ALTERATIONS AND ADDITIONS: Tenant shall not make any alterations or
additions to the Premises ("Alterations") without (i) the written consent of
Landlord first had (which consent shall not be

                                       3.
<PAGE>

unreasonably withheld) and obtained, and (ii) delivering to Landlord the
proposed architectural and structural plans for all such Alterations. After
obtaining Landlord's consent, which consent shall state whether or not Landlord
will require Tenant to remove such Alteration at the expiration or earlier
termination of this Lease, Tenant shall not proceed to make such Alterations
until Tenant has: (i) obtained all required governmental approvals and permits,
and (ii) provides Landlord 7 days' notice prior to beginning construction so
Landlord can post a notice of nonresponsibility. Tenant agrees to provide
Landlord (i) written notice of the anticipated and actual start-date of the
work, (ii) a complete set of half-size (15" X 21") vellum as-built drawings, and
(iii) a certificate of occupancy for the work upon completion of the
Alterations, if necessary. All Alterations shall be constructed in compliance
with all applicable building codes and laws including, without limitation, the
Americans with Disabilities Act of 1990 as amended from time to time. Upon the
Expiration Date, all Alterations, except movable furniture and trade fixtures,
shall become a part of the realty and belong to Landlord but shall nevertheless
be subject to removal by Tenant as provided in Section 8 above. Alterations
which are not deemed as trade fixtures include heating, lighting, electrical
systems, air conditioning, walls, carpeting, or any other installation which has
become an integral part of the Premises. All Alterations shall be maintained,
replaced or repaired by Tenant at its sole cost and expense. Notwithstanding the
foregoing, Tenant shall be entitled without obtaining Landlord's consent, to
make Alterations which do not affect the structure of the Building or which do
not cost more than Seventy Five Thousand Dollars ($75,000.00) per Alteration
("Permitted Alterations"); provided, however, that Tenant shall still be
required to comply with all other provisions of this paragraph. All Alterations
shall be maintained, replaced or repaired at Tenant's sole cost and expense.
Tenant acknowledges Landlord's right to and hereby consents to construction of
additional building(s) on the land where the Premises are located or on adjacent
land owned by Landlord. The parties hereto acknowledge that Tenant is purchasing
certain furniture, trade fixtures, equipment, and alterations installed by the
previous tenant in the Premises (collectively, the "Assets") from the current
tenant in the Premises through an Asset purchase agreement attached to this
Lease as Exhibit "C". The parties hereto agree that the Assets shall remain the
property of Tenant during the term of this Lease. Upon the Expiration Date, all
of the Assets, except movable-furniture, trade fixtures, and equipment, shall
become a part of the realty and belong to Landlord. In no event shall Tenant be
required to remove any such Assets from the Premises except movable furniture,
trade fixtures and equipment.

      11. MAINTENANCE OF PREMISES:

            A. LANDLORD AND TENANT'S OBLIGATIONS REGARDING COMMON AREA COSTS:
Tenant agrees to reimburse Landlord for the expenses resulting from Landlord's
payment of Common Area Costs as defined in paragraph 11(B) incurred by Landlord
because the cost is not directly allocable to or payable by a single tenant in
the Building or the Project. Tenant agrees to pay Tenant's Allocable Share as
defined in paragraph 11(C) of the Common Area Costs, as additional rental,
within thirty (30) days of written invoice from Landlord.

            B. COMMON AREA COSTS: For purposes of calculating Tenant's Allocable
Share of Building and of Project Costs, the term "Common Area Costs" shall mean
all costs and expenses of the nature hereinafter described which are incurred in
connection with ownership and operation of the Building or the Project in which
the Premises are located, as the case may be not directly allocable to or
payable by a single tenant in the Building or the Project, together with such
additional facilities as may be determined by Landlord to be reasonably
desirable or necessary to the ownership and operation of the Building and/or
Project. All costs and expenses shall be determined in accordance with generally
accepted accounting principles which shall be consistently applied (with
accruals appropriate to Landlord's business), including but not limited to, the
following: (i) common area utilities, including water and power and lighting to
the extent not separately metered; (ii) common area maintenance and service
agreements for the Building or the Project and the equipment therein including,
without limitation, common area janitorial services, alarm and security
services, exterior window cleaning, and maintenance of sidewalks, landscaping,
waterscape, parking areas, and driveways; (iii) insurance premiums and costs,
including without limitation, the premiums and cost of fire, casualty and
liability coverage and rental abatement and earthquake (if commercially
available) insurance applicable to the Building or Project; (iv) repairs,
replacements and general maintenance (excluding repairs and general maintenance
paid by proceeds of insurance or by Tenant or other third parties, and repairs
or alterations attributable solely to tenants of the Building or Project other
than Tenant); and (v) all real estate taxes, special assessments, service
payments in lieu of taxes, excises, transit charges, housing fund assessment,
levies, fees or charges and including any substitutes or additions thereto which
may occur during the Lease Term (and Renewal Terms, if any) of this lease which
are assessed, or imposed by any public authority upon the Building or Project,
the act of entering this Lease, the occupancy by Tenant, the rent provided for
in this Lease

                                       4.
<PAGE>

and including real estate tax increases due to a sale or transfer of the
Building or the Project, in which the Premises are located, as such taxes are
levied or appear on the City and County tax bills and assessment rolls. Common
Area Costs shall specifically exclude (i) costs and impact fees resulting from
new construction, (ii) costs incurred in connection with the presence of any
Hazardous Material, except to the extent caused by the release or emission of
the Hazardous Material in question by Tenant, and (iii) costs associated with
restoration of any casualty. All special assessments shall be paid over the
longest period allowed by the taxing authority. This shall be a Net Lease and
the Base Monthly Rent shall be paid to Landlord absolutely net of all costs and
expenses. The provision for payment of Common Area Costs by means of periodic
payment of Tenant's Allocable Share of Building and/or Project Costs are
intended to pass on to Tenant and reimburse Landlord for all costs of operating
and managing the Building and/or Project.

            C. TENANT'S ALLOCABLE SHARE: For purposes of prorating Common Area
Costs which Tenant shall pay, Tenant's Allocable Share of Building Costs is
computed by multiplying the total Common Area Costs for services shared by the
Building by a fraction, the numerator of which is the rentable square footage of
the Premises and the denominator of which is the total rentable square footage
of the Building (excluding common areas). Tenant's Allocable Share of Project
Costs shall be computed on a shared service by service basis, by multiplying the
total Common Area Costs for services shared by the Building and one or more
buildings in the Project by a fraction, the numerator of which is the rentable
square footage of the Premises and the denominator of which is the total
rentable square footage of the Buildings in the Project which share the
services. It is understood and agreed that Tenant's obligation to share in
Common Area Costs shall be adjusted to reflect the commencement and termination
dates of the Lease Term and are subject to recalculation in the event of
expansion of the Building or Project.

            D. WAIVER OF LIABILITY: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord, shall not render Landlord liable in any
respect for damages to either person or property, nor be construed as an
eviction of Tenant, nor cause an abatement of rent nor relieve Tenant from
fulfillment of any covenant or agreement hereof. Should any of the equipment or
machinery utilized in supplying the services listed herein break down, or for
any cause cease to function properly, upon receipt of written notice from Tenant
of any deficiency or failure of any defined Services, Landlord shall use
reasonable diligence to repair the same promptly, but Tenant shall have no right
to terminate this Lease, and shall have no claim for rebate of rent or damages,
on account of any interruptions in service occasioned thereby or resulting
therefrom. Notwithstanding the foregoing, Tenant shall retain a claim for
damages in the event the interruption of service results from Landlord's willful
misconduct, negligence or breach of this Lease. Tenant waives the provisions of
California Civil Code Sections 1941 and 1942 concerning the Landlord's
obligation of tenantability and Tenant's right to make repairs and deduct the
cost of such repairs from the rent. Landlord shall not be liable for a loss of
or injury to property, however occurring, through or in connection with or
incidental to furnishing or its failure to furnish any of the foregoing, unless
such loss or injury is due to the active negligence or willful misconduct of
Landlord.

            E. TENANT'S OBLIGATIONS: Except as provided in 11(A) above, Tenant
shall, at its sole cost, keep and maintain, repair and replace, said Premises
and appurtenances and every part hereof, including but not limited to, exterior
walls, roof, glazing, elevator, plumbing, electrical and HVAC systems, and all
the Tenant Interior Improvements in good and sanitary order, condition, and
repair (but excluding the structural roof, the building foundation and load
bearing walls, all or which Landlord shall repair and maintain); normal wear and
tear and damage by casualty excepted. Tenant shall provide Landlord with a copy
of a service contract between Tenant and (i) a licensed air-conditioning and
heating contractor which contract shall provide for bi-monthly maintenance of
all air conditioning and heating equipment at the Premises; and (ii) a licensed
elevator maintenance contractor which contract shall provide for monthly
maintenance of all elevator related systems. Tenant shall pay the cost of all
air-conditioning heating, and elevator equipment repairs or replacements which
are either excluded from such service contract or any existing equipment
warranties. All wall surfaces and floor tile are to be maintained in an as good
a condition as when Tenant took possession free of holes, gouges, or
defacements. Tenant agrees to limit attachments to vinyl demountable wall
exclusively to V joints.

Tenant shall also be responsible for the preventive maintenance of the membrane
of the roof, which responsibility shall be deemed properly discharged if (i)
Tenant contracts with a licensed roof contractor who is reasonably

                                       5.
<PAGE>

satisfactory to both Tenant and Landlord, at Tenant's sole cost, to inspect the
roof membrane at least every six (6) months, with the first inspection due the
sixth (6th) month after the Commencement Date, and (ii) Tenant performs, at
Tenant's sole cost, all preventive maintenance recommendations made by such
contractor within a reasonable time after such recommendations are made. Such
preventive maintenance might include acts such as clearing storm gutters and
drains, removing debris from the roof membrane, trimming trees overhanging the
roof membrane, applying coating materials to seal roof penetrations, repairing
blisters, and other routine measures. Tenant shall provide to Landlord a copy of
such preventive maintenance contract and paid invoices for the recommended work.

      Notwithstanding the provisions of this paragraph 11, in the event a repair
or replacement (i) would be properly be capitalized under generally accepted
accounting principles; and (ii) costs in excess of Fifteen Thousand and No/100
Dollars ($15,000.00), Landlord shall perform such replacement and Tenant shall
only be required to pay that portion of the cost equal to the product of such
total cost multiplied by a fraction, the numerator of which is the number of
years remaining in the Lease Term, the denominator of which is the useful life
(in years) of the replacement.

      12. HAZARD INSURANCE:

            A. TENANT'S USE: Tenant shall not use, or permit said Premises, or
any part thereof, to be used, for any purpose other than that for which the said
Premises are hereby leased; and no use shall be made or permitted to be made of
the said Premises, nor acts done, which will cause an increase in premiums or a
cancellation of any insurance policy covering said Building, or any part
thereof, nor shall Tenant sell or permit to be kept, used or sold, in or about
said Premises, any article which may be prohibited by the standard form of fire
insurance policies. Tenant shall, at its sole cost and expense, comply with any
and all requirements, pertaining to said Premises, of any insurance organization
or company, necessary for the maintenance of reasonable fire and public
liability insurance, covering said Building and appurtenances.

            B. LANDLORD'S INSURANCE: Landlord agrees to purchase and keep in
force fire and extended coverage, earthquake (at Landlord's election), and 12
month rental loss insurance covering the Premises for the full replacement value
of the Building as determined by Landlord's insurance company's appraisers. The
Tenant agrees to pay to the Landlord as additional rent, on demand, the full
cost of said insurance as evidenced by insurance billings to the Landlord, and
in the event of damage covered by said insurance, the amount of any deductible
(as reasonably approved by Tenant) under such policy. Payment shall be due to
Landlord within ten (10) days after written invoice to Tenant. Notwithstanding
the foregoing, Tenant's obligation to pay for the cost of any earthquake
insurance premiums shall be limited to an amount equal or less than four (4)
times the cost of the fire and extended coverage premiums. It is understood and
agreed that Tenant's obligation under this paragraph will be prorated to reflect
the commencement and termination dates of this Lease.

            C. TENANT'S INSURANCE: Tenant, at its sole cost, agrees to insure
its personal property and Alterations for amounts not to exceed their actual
insurable value and to obtain worker's compensation and public liability and
property damage insurance for occurrences within the Premises with a
$5,000,000.00 combined single limit for bodily injury and property damage.
Tenant shall name Landlord and Landlord's lender as an additional insured, shall
deliver a copy of the policies and renewal certificates to Landlord. All such
policies shall provide for thirty (30) days' prior written notice to Landlord of
any cancellation, termination, or reduction in coverage.

            D. WAIVER: Notwithstanding anything to the contrary in the Lease,
Landlord and Tenant hereby waive any and all rights each may have against the
other on account of any loss or damage occasioned to the Landlord or the Tenant
as the case may be, or to the Premises or its contents, and which may arise from
any risk covered by their respective property insurance policies or would have
been covered had the waiving party carried the property insurance required to be
carried under this Lease, as set forth above. The parties shall obtain from
their respective insurance companies a waiver of any right of subrogation which
said insurance company may have against the Landlord or the Tenant, as the case
may be.

      13. TAXES: Tenant shall be liable and shall pay prior to delinquency, for
all taxes and assessments levied against personal property and trade or business
fixtures, and agrees to pay, as additional rental, all real estate taxes and
assessment installments (special or general) or other impositions or charges
which may be levied on the Premises, upon the occupancy of the Premises and
including any substitute or additional charges which may be

                                       6.
<PAGE>

imposed during, or applicable to the Lease Term including real estate tax
increases due to a sale or other transfer of the Premises, as they appear on the
City and County tax bills during the Lease Term, and as they become due. It is
understood and agreed that Tenant's obligation under this paragraph will be
prorated to reflect the commencement and termination dates of this Lease. In any
time during the Lease Term a tax, excise on rents, business license tax, or any
other tax, however described, is levied or assessed against Landlord, as a
substitute in whole or in part for taxes assessed or imposed on land or
Buildings, Tenant shall pay and discharge his pro rata share of such tax or
excise on rents or other tax before it becomes delinquent, except that this
provision is not intended to cover net income taxes, inheritance, gift or estate
tax imposed upon the Landlord. In the event that a tax is placed, levied, or
assessed against Landlord and the taxing authority takes the position that the
Tenant cannot pay and discharge his pro rata share of such tax on behalf of the
Landlord, then at the sole election of the Landlord, the Landlord may increase
the rental charged hereunder by the exact amount of such tax and Tenant shall
pay such increase as additional rent hereunder.

      14. UTILITIES: Tenant shall pay directly to the providing utility all
water, gas, heat, light, power, telephone and other utilities supplied to the
Premises. Landlord shall not be liable for a loss of or injury to property,
however occurring, through or in connection with or incidental to furnishing or
failure to furnish any of utilities to the Premises and Tenant shall not be
entitled to abatement or reduction of any portion of the Base Monthly Rent so
long as any failure to provide and furnish the utilities to the Premises due to
any cause beyond the Landlord's reasonable control.

      15. ABANDONMENT: Tenant shall not abandon the Premises at any time during
the Lease Term; and if Tenant shall abandon or surrender said Premises, or be
dispossessed by process of law, or otherwise, any personal property belonging to
Tenant and left on the Premises shall be deemed to be abandoned, at the option
of Landlord, except such property as may be mortgaged to Landlord.
Notwithstanding the foregoing, Tenant shall entitled to suspend its operations
on the Premises and vacate the Premises provided that Tenant continues to timely
pay rent and perform all other obligations of Tenant under this Lease, and
further provided that Tenant provides a security guard or other reasonable
security protection for the Premises.

      16. FREE FROM LIENS: Tenant shall keep the Premises and the Building free
from any liens arising out of any work performed, materials furnished, or
obligations incurred by Tenant or claimed to have been performed for Tenant. In
the event Tenant fails to discharge any such lien within ten (10) days after
receiving notice of the filing, Landlord shall be entitled to discharge such
lien at Tenant's expense and all resulting costs incurred by Landlord, including
attorney's fees shall be due from Tenant as additional rent.

      Notwithstanding the provisions of this paragraph 15, Tenant shall have the
right to contest such liens if Tenant obtains a bond equal to 150% of the amount
of such lien to prevent enforcement of the lien during such contest or otherwise
makes adequate provision to prevent enforcement of the lien during such contest.

      17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Tenant shall, at its sole
cost and expense, comply with all of the requirements of all Municipal, State
and Federal authorities now in force, or which may hereafter be in force,
pertaining to the said Premises, and shall faithfully observe in the use of the
Premises all Municipal ordinances and State and Federal statutes now in force or
which may hereafter be in force. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any action or proceeding against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
such ordinance or statute in the use of the Premises, shall be conclusive of
that fact as between Landlord and Tenant.

      Notwithstanding the provisions of this paragraph 17, if any improvement or
alteration to the Premises is required as a result of any future laws or
regulations affecting the Premises not related to Tenant's specific use of the
Premises, and provided further said improvement or alteration is not required
because of alterations to the Premises made by Tenant, the cost of such
improvements shall be allocated between Landlord and Tenant such that Tenant
shall pay to Landlord upon completion of such improvement, the portion of the
cost thereof equal to the remaining number of years in the lease term divided by
the anticipated useful life of such improvement. Landlord represents and
warrants, to the best of its knowledge, that as of the date of this Lease the
Building complies with all applicable building codes.

      18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

                                       7.
<PAGE>

            A. TENANT'S RESPONSIBILITY: Tenant shall not bring, use, or permit
upon the Premises, or generate, emit, or dispose from the Premises any
chemicals, toxic or hazardous gaseous, liquid or solid materials or waste,
including without limitation, material or substance having characteristics of
ignitability, corrosivity, reactivity, or toxicity or substances or materials
which are listed on any of the Environmental Protection Agency's lists of
hazardous wastes or which are identified in Sections 66680 through 66685 of
Title 22 of the California Administrative Code as the same may be amended from
time to time ("Hazardous Materials") except in compliance with all applicable
laws. Landlord consents to Tenant's use of Hazardous Materials on the Premises
on the condition that Tenant represents and warrants that Tenant will (i) adhere
to all reporting and inspection requirements imposed by Federal, State, County
or Municipal laws, ordinances or regulations including without limitation, any
applicable requirement that Tenant prepare a Hazardous Materials Management Plan
under California Health and Safety Code Section 255055 and will provide Landlord
a copy of any such reports or agency inspections, (ii) obtain and provide
Landlord copies of all necessary permits required for the use and handling
Hazardous Materials on the Premises, (iii) enforce Hazardous Materials handling
and disposal practices consistent with industry standards, and (iv) properly
close the facility with regard to Hazardous Materials including the removal or
decontamination of any process piping, mechanical ducting, storage tanks,
containers, or trenches which have come into contact with Hazardous Materials
and complete any action required to obtain a closure certificate from the local
administering agency prior to the Expiration Date. Landlord may employ an
independent engineer or consultant to periodically inspect Tenant's operations
to verify that Tenant is complying with its obligations under this paragraph. In
the event it is determined by Landlord's consultant that Tenant is in material
violation with respect to its obligations under this paragraph and such
violation has not previously been reported by Tenant or has not been cured, then
Tenant shall pay the reasonable future expense of employing Landlord's
independent engineer or consultant to periodically inspect Tenant's operations.
The forgoing right of inspection shall be exercised by Landlord only if Landlord
believes it may be subject to liability because of Tenant's handling of
hazardous materials.

            B. TENANT'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Tenant shall
comply, at its sole cost, with all laws pertaining to, and shall indemnify and
hold Landlord harmless from any claims, liabilities, costs or expenses incurred
or suffered by Landlord, except through Landlord's or Landlord's agents
negligence or willful misconduct, arising from such bringing, using, permitting,
generating, emitting or disposing of Hazardous Materials by Tenant or Tenant's
agents or employees. Tenant's indemnification and hold harmless obligations set
forth above include, without limitation, (i) claims, liability, costs or
expenses resulting from or based upon administrative, judicial (civil or
criminal) or other action, legal or equitable, brought by any private or public
person under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal
law, ordinance or regulation, (ii) claims, liabilities, costs or expenses
pertaining to the identification, monitoring, cleanup, containment, or removal
of Hazardous Materials from soils, riverbeds or aquifers including the provision
of an alternative public drinking water source, and (iii) all costs of defending
such claims. Notwithstanding anything to the contrary in the Lease, under no
circumstance shall Tenant be liable for any losses, costs, claims, liabilities
and damages (including attorneys' and consultants' fees) of any type and nature,
directly or indirectly arising out of or in connection with any Hazardous
Material present at any time on or about the Project, or the soil, air,
improvements, groundwater or surface water thereof, or the violation of any
laws, orders or regulations, relating to any such Hazardous Material, except to
the extent that any of the foregoing actually results from the use, release or
emission of Hazardous Material by Tenant or its agents or employees.

            C. LANDLORD'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Landlord
shall indemnify and hold Tenant harmless from any claims, liabilities, costs or
expenses incurred or suffered by Tenant related to the removal, investigation,
monitoring or remediation of Hazardous Materials which: (i) are present; or (ii)
which come to be present in the soil or groundwater of the Premises or the
adjacent property within the Project through no fault of Tenant. Landlord's
indemnification and hold harmless obligations include, without limitation, (i)
claims, liability, costs or expenses resulting from or based upon
administrative, judicial (civil or criminal) or other action, legal or
equitable, brought by any private or public person under common law or under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Resource Conservation and recovery Act of 1980 ("RCRA") or any
other Federal, State, County or Municipal law, ordinance or regulation, (ii)
claims, liabilities, costs or expenses pertaining to the identification,
monitoring, cleanup, containment, or removal of Hazardous Materials from soils,
riverbeds or aquifers including the provision of an alternative public drinking
water source, and (iii) all costs of defending such claims. In no event shall
Landlord be liable for any consequential

                                       8.
<PAGE>

damages suffered or incurred by Tenant as a result of any such contamination
unless such contamination results from Landlord's active negligence or willful
misconduct.

      19. LANDLORD'S LIABILITY:

            A. LIMITATION ON LANDLORD'S LIABILITY: In the event of Landlord's
failure to perform any of its covenants or agreements under this Lease, Tenant
shall give Landlord written notice of such failure and shall give Landlord
thirty (30) days to cure or commence to cure such failure prior to any claim for
breach or resultant damages, provided, however, that if the nature of the
default is such that it cannot reasonably be cured within the 30-day period,
Landlord shall not be deemed in default if it commences within such period to
cure, and thereafter diligently prosecutes the same to completion. In addition,
upon any such failure by Landlord, Tenant shall give notice by registered or
certified mail to any person or entity with a security interest in the Premises
("Mortgagee") that has provided Tenant with notice of its interest in the
Premises, and shall provide Mortgagee a reasonable opportunity to cure such
failure, including such time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effectuate a
cure. Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third-party beneficiary hereof. Tenant waives any right
under California Civil Code Section 1950.7 or any other present or future law to
the collection of any payment or deposit from Mortgagee or any purchaser at a
foreclosure sale of Mortgagee's interest unless Mortgagee or such purchaser
shall have actually received and not refunded the applicable payment or deposit.
Tenant Further waives any right to terminate this Lease and to vacate the
Premises on Landlord's default under this Lease. Tenant's sole remedy on
Landlord's default is an action for damages or injunctive or declaratory relief.

            B. LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation,
trust, partnership, joint venture, unincorporated association or other form of
business entity, then (i) the obligations of Landlord shall not constitute
personal obligations of the officers, directors, trustees, partners, joint
venturers, members, owners, stockholders, or other principals or representatives
except to the extent of their interest in the Project (including proceeds from
the sale therefrom, insurance proceeds and rental proceeds therefrom). Tenant
shall have recourse only to the interest of Landlord in the Project (including
proceeds from the sale therefrom, insurance proceeds and rental proceeds
therefrom) or for the satisfaction of the obligations of Landlord and shall not
have recourse to any other assets of Landlord for the satisfaction of such
obligations.

            C. INDEMNIFICATION OF LANDLORD: Except to the extent due to the
negligence or willful misconduct of Landlord, as a material part of the
consideration rendered to Landlord, Tenant hereby waives all claims against
Landlord for damages to goods, wares and merchandise, and all other personal
property in, upon or about said Premises and for injuries to persons in or about
said Premises, from any cause arising at any time to the fullest extent
permitted by law, and Tenant shall indemnify, defend with counsel reasonably
acceptable to Landlord and hold Landlord, and their shareholders, directors,
officers, trustees; employees; partners, affiliates and agents from any claims,
liabilities, costs or expenses incurred or suffered arising from the use of
occupancy of the Premises or any part of the Project by Tenant or Tenant's
Agents, the acts or omissions of Tenant or Tenant's Agents, Tenant's breach of
this Lease, or any damage or injury to person or property from any cause, or
from the failure of Tenant to keep the Premises in good condition and repair as
herein provided. Further, except to the extent due to the negligence or willful
misconduct of Landlord, in the event Landlord is made party to any litigation
due to the acts or omission of Tenant or Tenant's Agents, Tenant will indemnify,
defend (with counsel reasonably acceptable to Landlord) and hold Landlord
harmless from any such claim or liability including Landlord's costs and
expenses and reasonable attorney's fees incurred in defending such claims.

      20. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be
placed, in, upon or about the said Premises any unusual or extraordinary signs,
or any signs not approved by the city or other governing authority. The Tenant
will not place, or permit to be placed, upon the Premises, any signs,
advertisements or notices without the written consent of the Landlord as to
type, size, design, lettering, coloring and location, and such consent will not
be unreasonably withheld. Any sign so placed on the Premises shall be removed by
Tenant, at its expense, prior to the Expiration Date or promptly following the
earlier termination of the lease and Tenant shall repair any damage or injury to
the Premises caused thereby, and if not so removed by Tenant then Landlord may
have same so removed at Tenant's expense. Notwithstanding the foregoing, Tenant
shall have the right to install signage in the same locations as the current
tenant in the Premises, subject to Landlord's approval as described herein.

                                       9.
<PAGE>

      21. ATTORNEY'S FEES: In case suit should be brought for the possession of
the Premises, for the recovery of any sum due hereunder, or because of the
breach of any other covenant herein, the losing party shall pay to the
prevailing party a reasonable attorney's fee as part of its costs which shall be
deemed to have accrued on the commencement of such action.

      22. TENANT'S DEFAULT: The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant: a) Any failure
by Tenant to pay the rental or to make any other payment required to be made by
Tenant hereunder provided however, that Tenant may cure such default by payment
to Landlord of the Base Monthly Rent or other sum due within ten (10) days after
receipt by Tenant of written notice specifying Landlord has failed to receive
the amount in question; b) The abandonment of the Premises by Tenant; c) A
failure by Tenant to observe and perform any other material provision of this
Lease to be observed or performed by Tenant, where such failure continues for
thirty (30) days after written notice thereof by Landlord to Tenant; provided,
however, that if the nature of such default is such that the same cannot
reasonably be cured within such thirty (30) day period Tenant shall not be
deemed to be in default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion; d) The making by
Tenant of any general assignment for the benefit of creditors; the filing by or
against Tenant of a petition to have Tenant adjudged a bankrupt or of a petition
for reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Tenant, the same is dismissed after the
filing); the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. The notice requirements set forth herein are in lieu of and not in
addition to the notices required by California Code of Civil Procedure Section
1161.

            A. REMEDIES: In the event of any such default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant: a) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus b) the worth at the time
of award of the amount by which the unpaid rent would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus c) the worth at the time
of award of the amount by which the unpaid rent for the balance of the Lease
Term after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus d) any other amount necessary to
compensate Landlord for all the detriment directly and foreseeably caused by
Tenant's failure to perform his obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, and e) at
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable California law.
The term "rent", as used herein, shall be deemed to be and to mean the minimum
monthly installments of Base Monthly Rent and all other sums required to be paid
by Tenant pursuant to the terms of this Lease, all other such sums being deemed
to be additional rent due hereunder. As used in (a) and (b) above, the "worth at
the time of award" to be computed by allowing interest at the rate of the
discount rate of the Federal Reserve Bank of San Francisco plus five (5%)
percent per annum. As used in (c) above, the "worth at the time of award" to be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one (1%) percent.

            B. RIGHT TO RE-ENTER: In the event of any such default by Tenant,
Landlord shall also have the right, with or without terminating this Lease, to
re-enter the Premises and remove all persons and property from the Premises;
such property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant and disposed of by Landlord in any
manner permitted by law.

            C. ADDITIONAL REMEDIES: In the event of any such default by Tenant,
including an abandonment of the Premises, in addition to all other rights or
remedies available at law or in equity, if Landlord does not elect to terminate
this Lease as provided in Section 13.A or 13.B above, then the provisions of
California Civil Code Section 1951.4, (Landlord may continue the lease in effect
after Tenant's breach and abandonment and recover rent as it becomes due if
Tenant has a right to sublet and assign, subject only to reasonable limitations)
as amended from time to time, shall apply and Landlord may from time to time,
without terminating this Lease, recover all rental as it becomes due.

                                      10.
<PAGE>

            D. NO TERMINATION: No re-entry or taking possession of the Premises
by Landlord pursuant to 22(B) or 22(C) of this Article 22 shall be construed as
an election to terminate this Lease unless a written notice of such intention be
given to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by
Landlord because of any default by Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such default.

      23. SURRENDER OF LEASE: The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not automatically effect a
merger of the Lease with Landlord's ownership of the Building or Premises.
Instead, at the option of Landlord, Tenant's surrender may terminate all or any
existing sublease or subtenancies, or may operate as an assignment to Landlord
of any or all such subleases or subtenants, thereby creating a direct
Landlord-Tenant relationship between Landlord and any subtenants.

      24. This paragraph intentionally left blank.

      25. LANDLORD'S DEFAULT: In the event of Landlord's failure to perform any
of its covenants or agreements under this Lease, Tenant shall give Landlord
written notice of such failure and shall give Landlord thirty (30) days or such
other reasonable opportunity to cure or to commence to cure such failure prior
to any claim for breach or for damages resulting from such failure. In addition,
upon any such failure by Landlord, Tenant shall give notice by registered or
certified mail to any person or entity with a security interest in the Premises
("Mortgagee") that has provided Tenant with notice of its interest in the
Premises, and shall provide such Mortgagee a reasonable opportunity to cure such
failure, including such time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effectuate a
cure. Tenant agrees that each of the Mortgagees to whom this Lease has been
assigned is an expressed third party beneficiary hereof. Tenant shall not make
any prepayment of rent more than one (1) month in advance without the prior
written consent of such Mortgagee. Tenant waives any right under California
Civil Code Section 1950.7 or any other present or future law to the collection
of any payment or deposit from such Mortgagee or any purchaser at a foreclosure
sale of such Mortgagee's interest unless such Mortgagee or such purchaser shall
have actually received and not refunded the applicable payment or deposit.

      26. NOTICES: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, by overnight courier, or by personal delivery addressed to
the party to be notified at the address for such party specified in paragraph 1
of this Lease, or to such other place as the party to be notified may from time
to time designate by at least fifteen (15) days prior notice to the notifying
party.

      27. ENTRY BY LANDLORD: Tenant shall permit Landlord and his agents to
enter into and upon said Premises at all reasonable times subject to any
security regulations or any requirements regarding safe use of lab space,
maintenance of power, temperature, and quarantine areas of Tenant for the
purpose of inspecting the same or for the purpose of maintaining the Premises or
for the purpose of making repairs, alterations or additions to any other portion
of said Premises or for the purpose of erecting additional building(s) and
improvements on the land where the Premises are situated, or on adjacent land
owned by Landlord, including the erection and maintenance of such scaffolding,
canopies, fences and props as may be required without any abatement or reduction
of Base Monthly Rent or without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned; and Tenant
shall permit Landlord and his agents, at any time within one hundred eighty
(180) days prior to the Expiration Date (or at any time during the Lease if
Tenant is in default hereunder), to place upon the Premises any "For Sale" or
"For Lease" signs and exhibit the Premises to real estate brokers and
prospective tenants at reasonable hours with reasonable notice. Landlord shall
comply with Tenant's security procedures applicable to the Premises and shall
not unreasonably interfere with Tenant's use of the Premises.

      28. DESTRUCTION OF PREMISES:

            A. DESTRUCTION BY AN INSURED CASUALTY: In the event of a partial
destruction of the Premises by a casualty for which Landlord is required to
maintain insurance under paragraph 12(B) during the Lease Term from any cause,
Landlord shall forthwith repair the same, provided such repairs can be made
within one hundred eighty (180) days from the date of receipt of all necessary
governmental approvals necessary under the laws and regulations of State,
Federal, County or Municipal authorities, such partial destruction shall in no
way annul or

                                      11.
<PAGE>

void this Lease, except that Tenant shall be entitled to a proportionate
reduction of Base Monthly Rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with the business carried on by Tenant in the Premises.
For purposes of this paragraph "partial destruction" shall mean destruction of
no greater than one-third (1/3) of the replacement cost of the Premises,
including the replacement cost of the Tenant Improvements paid for by Landlord.
In the event the Premises are more than partially destroyed, or in the event the
repairs cannot be made within such one hundred eighty (180) day period, Landlord
or Tenant may elect to terminate this Lease.4 Landlord shall not be required to
restore Alterations or replace Tenant's trade fixtures or personal property. In
respect to any partial destruction which Landlord is obligated to repair or may
elect to repair under the terms of this paragraph, the provision of Section
1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of
the State of California and any other similarly enacted statue are waived by
Tenant and the provisions of this paragraph 28 shall govern in the case of such
destruction.

            B. DESTRUCTION BY AN UNINSURED CASUALTY: In the event of a total or
partial destruction of the Premises by a casualty for which Landlord is not
actually carrying insurance and is not required to carry insurance, the Lease
shall automatically terminate, unless Landlord elects to rebuild or Tenant
elects to contribute the shortfall in insurance proceeds, such election to be
made by written notice from Tenant to Landlord within ten (10) days after
determination that there is a shortfall. In the event of a destruction by an
uninsured casualty (i) of greater than one-third (1/3) of the replacement cost
of the Premises, or (ii) that can not be repaired within one hundred eighty
(180) days from the date of receipt of all necessary governmental approvals
necessary under the laws and regulations of State, Federal, County or Municipal
authorities, Tenant may elect to terminate this Lease.

      29. ASSIGNMENT OR SUBLEASE:

            A. CONSENT BY LANDLORD: Except as specifically provided in Section
29.E, Tenant may not voluntarily, involuntarily or by operation of law, assign,
sell or otherwise transfer all or any part of Tenant's interest in this Lease or
in the Premises, cause or permit any part of the Premises to be sublet, occupied
or used by anyone other than Tenant, or permit any person to succeed to any
interest in this Lease or the Premises (all of the foregoing being a "Transfer")
without the express written consent of Landlord. In the event Tenant desires to
effectuate a Transfer, Tenant shall deliver to Landlord (1) executed
counterparts of any agreement and of all ancillary agreements with the proposed
transferee, (2) current financial statements of the transferee covering the
preceding three years, (3) the nature of the proposed transferee's business to
be carried on in the Premises, (4) a statement outlining all consideration to be
given on account of the Transfer, and (5) a current financial statement of
Tenant. Landlord may condition its approval of any Transfer on receipt of a
certification from both Tenant and the proposed transferee of all consideration
to be paid to Tenant in connection with such Transfer. At Landlord's request,
Tenant shall also provide additional information reasonably required by Landlord
to determine whether it will consent to the proposed Transfer. Landlord shall
have a fifteen (15) day period following receipt of all the foregoing within
which to notify Tenant in writing that Landlord elects to: (i) permit Tenant to
Transfer such space to the named transferee on the terms and conditions set
forth in the notice; or (ii) refuse consent. If Landlord should fail to notify
Tenant in writing of such election within the 15-day period, Landlord shall be
deemed to have elected option (i) above. Landlord's consent to the proposed
Transfer shall not be unreasonably withheld, provided and upon the condition
that: (i) the proposed transferee is engaged in a business that is limited to
the use expressly permitted under this Lease; (ii) the proposed transfer
agreement is in form reasonably satisfactory to Landlord; and (iii) Tenant
reimburses Landlord on demand for any reasonable costs that may be incurred by
Landlord in connection with said Transfer, including the reasonable costs of
making investigations as to the acceptability of the proposed transferee and
reasonable legal costs incurred in connection with the granting or denial of any
requested consent (up to a maximum of $3,000.00 per request for consent). In the
event all or any one of the foregoing conditions are not satisfied (without
limiting other factors that may be considered or conditions that may be imposed
by Landlord in connection with a requested Transfer), Landlord shall be
considered to have acted reasonably if it withholds its consent. Tenant shall
not hypothecate, mortgage, pledge or otherwise encumber Tenant's interest in
this Lease or the Premises or otherwise use the Lease as a security device in
any manner without the consent of Landlord, (all of the foregoing being an
"Hypothecation") which consent Landlord may withhold in its sole discretion.
Tenant shall reimburse Landlord on demand for any costs that may be incurred by
Landlord in connection with an Hypothecation, including legal costs incurred in
connection with the granting or denial of any requested consent. Landlord's
consent to one or more Transfers or Hypothecations shall not operate to exhaust
Tenant's obligation to obtain Landlord's consent to other Transfers or
Hypothecations nor constitute consent to an assignment or other

                                      12.
<PAGE>

Transfer following foreclosure of any permitted lien, mortgage or other
encumbrance. If Tenant is a corporation, limited liability company,
unincorporated association, partnership or other legal entity, the sale,
assignment, transfer or hypothecation of any stock, membership or other
ownership interest in such entity (whether occurring at one time or over a
period of time) in the aggregate of more than fifty percent (50%) (determined
cumulatively) shall be deemed an assignment of this Lease; in the case of a
partnership, any withdrawal or substitution (whether occurring at one time or
over a period of time) of any partners owning fifty percent (50%) or more
(cumulatively) of the partnership, or the dissolution of the partnership shall
be deemed an assignment of this Lease; provided that, subject to Section 17.D
below, the foregoing provisions of this sentence shall not apply to a transfer
of stock in a corporation whose stock is publicly traded on a public stock
exchange, a transfer of stock or ownership interest resulting from a financing
of Tenant or a private or public offering, or an acquisition of substantially
all of Tenant's capital stock. If Tenant is a corporation whose stock is not
publicly traded on a public stock exchange, any dissolution, merger,
consolidation or reorganization of Tenant shall be deemed a Transfer.

            B. ASSIGNMENT OR SUBLETTING CONSIDERATION: Landlord and Tenant
hereby agree that fifty percent (50%) of any rent or other economic
consideration (including without limitation, payments for trade fixtures and
personal property in excess of the fair market value thereof, stock, warrants,
and options) in excess of the Base Monthly Rent payable hereunder (after
deducting therefrom Reasonable Transfer Costs (defined below) (i) realized by
Tenant in connection with any Transfer by Tenant (excluding any such Transfer
occurring during the first five (5) years of the Lease Term), and/or (ii) profit
realized by a subtenant or any other person or entity (other than Tenant) (any
such subtenant, person or entity being a "Subsequent Transferor") in connection
with a sublease, assignment or other Transfer by such Subsequent Transferor,
shall be paid by Tenant to Landlord promptly after such amounts are paid to
Tenant or a Subsequent Transferor. As used in this Section 29.B, "Reasonable
Transfer Costs" shall mean the-following costs, to the extent reasonably
incurred in connection with the transfer in question: (i) advertising costs and
brokerage commissions and reasonable attorneys' fees payable to unaffiliated
third parties, (ii) the cost of Alterations incurred solely in connection with
such Transfer; (iii) the unamortized portion of the amount paid by Tenant for
Assets specifically utilized by a transferee in such Transfer; and (iv) all
other reasonable costs incurred by Tenant in connection the Transfer (including,
for example, costs for janitorial services provided to the transferee). In the
case of a Transfer other than an assignment of Tenant's entire interest in the
Lease and Premises, Reasonable Transfer Costs shall be amortized on a straight
line basis, without interest, over the initial term of the Transfer. Tenant's
obligation to pay over Landlord's portion of the consideration constitutes an
obligation for additional rent hereunder. The above provisions relating to
Landlord's right to terminate the Lease and relating to the allocation of excess
rent are independently negotiated terms of the Lease which constitute a material
inducement for the Landlord to enter into the Lease, and are agreed by the
Parties to be commercially reasonable. No Transfer by Tenant shall relieve it of
any obligation under this Lease. Any Transfer which conflicts with the
provisions of this Lease shall be void.

            C. NO RELEASE: Any Transfer shall be made only if and shall not be
effective until the transferee shall execute, acknowledge, and deliver to
Landlord an agreement, in form and substance satisfactory to Landlord, whereby
the transferee shall assume all the obligations of this Lease on the part of
Tenant to be performed or observed to the extent of the interest being
transferred and shall be subject to all the covenants, agreements, terms,
provisions and conditions in this Lease to the extent applicable to the interest
being transferred. Notwithstanding any Transfer and the acceptance of rent or
other sums by Landlord from any transferee, Tenant shall remain fully liable for
the payment of Base Monthly Rent and additional rent due, and to become due
hereunder, for the performance of all the covenants, agreements, terms,
provisions and conditions contained in this Lease on the part of Tenant to be
performed and for all acts and omissions of any transferee or any other person
claiming under or through any transferee that shall be in violation of any of
the terms and conditions of this Lease, and any such violation shall be deemed a
violation by Tenant. Tenant shall indemnify, defend and hold Landlord harmless
from and against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed transferee or by any real estate brokers or other
persons claiming compensation in connection with the proposed Transfer.

            D. REORGANIZATION OF TENANT: The provisions of this Section 29.D
shall apply if Tenant is a publicly-held corporation and: (i) there is a
dissolution, merger, consolidation, or other reorganization of or affecting
Tenant, where Tenant is not the surviving corporation, or (ii) there is a sale
or transfer of stock possessing more than 50% of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors to one person or entity (or to any group of
related persons or entities)

                                      13.
<PAGE>

(the "Acquiring Entity"), and after such sale or transfer of stock Tenant's
stock is no longer publicly traded. In a transaction under clause (i), the
surviving corporation shall promptly execute and deliver to Landlord an
agreement in form reasonably satisfactory to Landlord under which such surviving
corporation assumes the obligations of Tenant hereunder. In a transaction under
clause (ii), the Acquiring Entity shall promptly execute and deliver to Landlord
a guaranty of lease in form reasonably satisfactory to Landlord under which the
Acquiring Entity guarantees the full payment and performance of the obligations
of Tenant under the Lease ("Lease Guaranty"). The foregoing notwithstanding, in
the event the Acquiring Entity is itself not a publicly-traded corporation, but
is instead the subsidiary of a publicly-traded corporation (or a subsidiary of a
subsidiary of a publicly-traded corporation, or a subsidiary in a chain of
entities in which a parent corporation is publicly traded), then the
publicly-traded parent corporation shall be required to execute and deliver to
Landlord the Lease Guaranty. In addition, in the event that after such
acquisition Tenant no longer prepares audited financial statements, then in
addition to the financial statements required to be delivered by Tenant
hereunder, the entity required to execute the Lease Guaranty shall provide
Landlord its audited financial statements at the times and in the manner
required of Tenant hereunder. It is the intent of the parties that after such an
acquisition of the stock of Tenant, Landlord shall be entitled to rely on the
creditworthiness of a publicly-traded corporation and to receive audited
financial information from a publicly-traded corporation.

            E. PERMITTED TRANSFERS: Notwithstanding anything contained in this
Section 29, so long as Tenant otherwise complies with the provisions of this
Section 29, Tenant may enter into any of the following Transfers (a "Permitted
Transfer") without Landlord's prior consent, and Landlord shall not be entitled
to receive any part of any subrent resulting therefrom that would otherwise be
due pursuant to Sections 29.A and 29.B. Tenant may sublease all or part of the
Premises or assign its interest in this Lease to (i) any corporation which
controls, is controlled by, or is under common control with the original Tenant
to this Lease by means of an ownership interest of more than 50%; (ii) a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a net worth at the time of such assignment that is equal to or
greater than the net worth of Tenant immediately prior to such transaction; and
(iii) a corporation which purchases or otherwise acquires all or substantially
all of the assets of Tenant so long as such acquiring corporation has a net
worth at the time of such assignment that is equal to or greater than the net
worth of Tenant immediately prior to such transaction.

            F. EFFECT OF DEFAULT: In the event of Tenant's default beyond
applicable cure periods, Tenant hereby assigns all amounts due to Landlord from
ally Transfer as security for performance of Tenant's obligations under this
Lease, and Landlord may collect such amounts as Tenant's Attorney-in-Fact,
except that Tenant may collect such amounts unless a default occurs as described
in Section 22 above. A termination of the Lease due to Tenant's default shall
not automatically terminate a Transfer then in existence; rather at Landlord's
election, such Transfer shall survive the Lease termination, the transferee
shall attorn to Landlord, and Landlord shall undertake the obligations of Tenant
under the transfer agreement; except that Landlord shall not be liable for
prepaid rent, security deposits or other defaults of Tenant to the transferee,
or for any acts or omissions of Tenant and Tenant's Agents.

            G. SUCCESSORS AND ASSIGNS: Subject to the provisions this Section
29, the covenants and conditions of this Lease shall apply to and bind the
heirs, successors, executors, administrators and assigns of all Parties hereto;
and all parties hereto comprising Tenant shall be jointly and severally liable
hereunder.

      30. CONDEMNATION: If any part of the Premises shall be taken for any
public or quasi-public use, under any statute or by right of eminent domain or
private purchase in lieu thereof, and a part thereof remains which is
susceptible of occupation hereunder, this Lease shall as to the part so taken,
terminate as of the date title shall vest in the condemnor or purchaser, and the
Base Monthly Rent payable hereunder shall be adjusted so that the Tenant shall
be required to pay for the remainder of the Lease Term only such portion of such
rent as the value of the part remaining after such taking bears to the value of
the entire Premises prior to such taking; but in such event Landlord shall have
the option to terminate this Lease as of the date when title to the part so
taken vests in the condemnor or purchaser. If all of the Premises, or such part
thereof be taken so that there does not remain a portion susceptible for
occupation hereunder, this Lease shall thereupon terminate. If a part or all of
the Premises be taken, all compensation awarded upon such taking shall go to the
Landlord and the Tenant shall have no claim thereto but Landlord shall cooperate
with Tenant to recover compensation for damage to or taking of any Alterations,
Tenant's equipment, furniture, trade fixtures or personal property or for
Tenant's moving costs. Tenant hereby waives the

                                      14.
<PAGE>

provisions of California Code of Civil Procedures Section 1265.130 and any other
similarly enacted statue are waived by Tenant and the provisions of this
paragraph 30 shall govern in the case of such destruction.

      31. EFFECTS OF CONVEYANCE: The term Landlord as used in this Lease, means
only the owner for the time being of the land and Building, containing the
Premises, so that, in the event of any sale or other conveyance of said land or
Building, or in the event of a master Lease of the Building, the Landlord shall
be and hereby is entirely freed and relieved of all covenants and obligations of
the Landlord hereunder accruing thereafter, and it shall be deemed and
construed, without further agreement between the parties and the purchaser at
any such sale, or the master tenant of the Building, that the purchaser or
master tenant of the Building has assumed and agreed to carry out any and all
covenants and obligations of the Landlord hereunder. Landlord shall transfer and
deliver Tenant's security deposit, to the purchaser at any such sale or the
master tenant of the Building, and thereupon the Landlord shall be discharged
from any further liability in reference thereto.

      32. SUBORDINATION: In the event Landlord notifies Tenant in writing, this
Lease shall be subordinate to any ground Lease, deed of trust, or other
hypothecation for security now or hereafter placed upon the real property of
which the Premises are a part and to any and all advances made on the security
thereof and to renewals, modifications, replacements and extensions thereof.
Tenant agrees to promptly execute and deliver any documents which may be
required to effectuate such subordination. Notwithstanding such subordination,
Tenant's right to quiet possession of the Premises shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay the rent and observe
and perform all of the provisions of this Lease. At the request of any lender,
Tenant agrees to execute and deliver any reasonable modifications of this Lease
which do not materially adversely affect Tenant's rights hereunder or increase
Tenant's obligation hereunder (including, without limitation, any increase in
rent).

      Landlord shall cause the existing lender, Principal Mutual Life, to
furnish to Tenant, within forty five (45) days of the date of both parties'
execution of this Lease, and shall use commercially reasonable efforts to cause
any future mortgagor or ground lessor, with a written agreement in form
satisfactory to Tenant providing for: (i) recognition by the existing lender of
all of the terms and conditions of this Lease; and (ii) continuation of this
Lease upon foreclosure of lender's security interest in the Premises.

      33. WAIVER: The waiver by either party of any breach of any term, covenant
or condition, herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No delay or omission in the exercise of any right or remedy by Landlord
shall impair such right or remedy or be construed as a waiver thereof by
Landlord. No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises shall constitute acceptance of the surrender
of the Premises by Tenant before the Expiration; Date. Landlord's consent to or
approval of any act by Tenant which require Landlord's consent or approvals
shall not be deemed to waive or render unnecessary Landlord's consent to or
approval of any subsequent act by Tenant.

      34. HOLDING OVER: Any holding over after the termination or Expiration
Date, shall be construed to be a tenancy from month to month terminable on
thirty (30) days written notice from either party and Tenant shall pay Base
Monthly Rent to Landlord at a rate equal to the greater of (i) one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month preceding
the termination or Expiration Date. Any holding over shall otherwise be on the
terms and conditions herein specified, except those provisions relating to the
Lease Term and any options to extend or renew, which provisions shall be of no
further force and effect following the expiration of the applicable exercise
period. Tenant shall indemnify, defend, and hold Landlord harmless from all loss
or liability (including, without limitation, any loss or liability resulted from
any claim against Landlord made by any succeeding tenant) founded on or
resulting from Tenant's failure to surrender the Premises and losses to Landlord
due to lost opportunities to lease the Premises to succeeding tenants.

      35. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained
shall, subject to the provisions of paragraph 31, apply to and bind the heirs,
successors, executors, administrators arid assigns of all the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

                                      15.
<PAGE>

      36. ESTOPPEL CERTIFICATES: Tenant shall at any time during the Lease Term,
within ten (10) business days following written notice from Landlord, execute
and deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification) and the date to which the rent and other charges are paid in
advance, if any, and acknowledging that there are not, to Tenant's knowledge,
any uncured defaults on the part of Landlord hereunder or specifying such
defaults if they are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises. Tenant's failure
to deliver such statement within such time shall be conclusive upon the Tenant
that: (i) this Lease is in full force and effect, without modification except as
may be represented by Landlord; (ii) there are not uncured defaults in
Landlord's performance. Tenant also agrees to provide the most current three (3)
years of audited financial statements within ten (10) business days of a request
by Landlord for Landlord's use in financing the Premises with commercial
lenders. Other than the right to pass on Tenant's financial statements to
commercial lenders, Landlord shall keep all such financial statements strictly
confidential and shall instruct its lenders to do likewise.

      37. OPTION TO EXTEND THE LEASE TERM:

            A. GRANT AND EXERCISE OF OPTION: Landlord hereby grants to Tenant,
upon and subject to the terms and conditions set forth in this paragraph, the
option ("Option") to extend the Lease Term for two (2) additional terms of five
(5) years ("Option Term"). The Option shall be exercised, if at all, by written
notice to Landlord on or before the date that is nine (9) months prior to the
Expiration Date. If Tenant exercises the Option, each of the terms, covenants
and conditions of this Lease except this paragraph shall apply during the Option
Term as though the expiration date of the Option Term was the date originally
set forth herein as the Expiration Date, provided that the-Bas Monthly Rent to
be paid shall be the greater of (i) the Base Monthly Rent applicable to the
period immediately prior to the commencement of the Option Term, or (ii) ninety
five percent (95%) of the Fair Market Rental, as hereinafter defined, for the
Premises for the Option Term. Anything contained herein to the contrary
notwithstanding, if Tenant is in material default under any of the terms,
covenants or conditions of this Lease either at the time Tenant exercises the
Option, Landlord shall have, in addition to all of Landlord's other rights and
remedies provided in this Lease, the right to terminate the Option upon notice
to Tenant, in which event the expiration date of this Lease shall be and remain
the Expiration Date.

      As used herein, the term "Fair Market Rental" for the Premises shall mean
the rental and all other monetary payments including any escalations and
adjustments thereto (including without limitation Consumer Price Indexing) then
being obtained for recent leases of space comparable in age, size and quality to
the Premises in Santa Clara or Sunnyvale that Landlord could obtain during the
Option Term from a third party desiring to lease the Premises for the Option
Term. The appraisers shall be instructed that the Fair Market Rental shall be
based upon rental comparables in which no tenant improvements were provided and
no commissions were paid. The Fair Market Rental shall not take into account any
Alterations made by Tenant or Tenant's equipment, trade fixtures which Tenant
has a right to remove, furniture, or personal property.

            B. DETERMINATION OF FAIR MARKET RENTAL: If Tenant exercises the
Option, Landlord shall send to Tenant a notice setting forth the Fair Market
Rental for the Premises for the Option Term, on or before the date that is one
hundred fifty (150) days prior to the Expiration Date. If Tenant disputes
Landlord's determination of the Fair Market Rental for the Option Term, Tenant
shall, within thirty (30) days after the date of Landlord's notice setting forth
the Fair Market Rental for the Option Term, send to Landlord a notice stating
that Tenant either (i) elects to terminate its exercise of the Option, in which
event the Option shall lapse and this Lease shall terminate on the Expiration
Date, or (ii) disagrees with Landlord's determination of Fair Market Rental for
the Option Term and elects to resolve the disagreement as provided in paragraph
37(C) below. If Tenant does not send to Landlord a notice as provided in the
previous sentence, Landlord's determination of the Fair Market Rental shall be
the basis for determining the Base Monthly Rent to be paid by Tenant hereunder
during the Option Term. If Tenant elects to resolve the disagreement as provided
in paragraph 37(C) below and such procedures shall not have been concluded prior
to the commencement date of the Option Term, Tenant shall pay Base Monthly Rent
to Landlord hereunder adjusted to reflect the Fair Market Rental as determined
by Landlord in the manner provided above. If the amount of Fair Market Rental as
finally determined pursuant to in paragraph 37(C) below is greater than
Landlord's determination, Tenant shall pay to Landlord the difference between
the amount paid by Tenant and the Fair Market Rental as so determined in
paragraph 37(C) below within thirty (30) days after the determination. If the
Fair Market Rental as finally determined in paragraph 37(C) below is less than
Landlord's determination, the difference between

                                      16.
<PAGE>

the amount paid by Tenant and the Fair Market Rental as so determined in
paragraph 37(C) below shall be credited against the next installments of rent
due from Tenant to Landlord hereunder.

            C. RESOLUTION OF A DISAGREEMENT OVER THE FAIR MARKET RENTAL: Any
disagreement regarding the Fair Market Rental shall be resolved as follows:

                  1. Within thirty (30) days after Tenant's response to
Landlord's notice to Tenant of the Fair Market Rental, Landlord and Tenant shall
meet no less than two (2) times, at a mutually agreeable time and place; to
attempt to-resolve any such disagreement.

                  2. If within the thirty (30) day period referred to in (i)
above, Landlord and Tenant can not reach agreement as to the Fair Market Rental,
they shall each select one appraiser to determine the Fair Market Rental. Each
such appraiser shall arrive at a determination of the Fair Market Rental and
submit their conclusions to Landlord and Tenant within thirty (30) days after
the expiration of the thirty (30) day consultation period described in (i)
above.

                  3. If only one appraisal is submitted within the requisite
time period, it shall be deemed to be the Fair Market Rental. If both appraisals
are submitted within such time period, and if the two appraisals so submitted
differ by less than ten percent (10%) of the higher of the two, the average of
the two shall be the Fair Market Rental. If the two appraisals differ by more
than ten percent (10%) of the higher of the two, then the two appraisers shall
immediately select a third appraiser who shall within thirty (30) days after his
or her selection make a determination of the Fair Market Rental and submit such
determination to Landlord and Tenant. This third appraisal will then be averaged
with the closer of the two previous appraisals and the result shall be the Fair
Market Rental.

                  4. All appraisers specified pursuant to this paragraph shall
be members of the American Institute of Real Estate Appraisers with not less
than ten (10) years experience appraising office and industrial properties in
the Santa Clara Valley. Each party shall pay the cost of the appraiser selected
by such party and one-half of the cost of the third appraiser plus one-half of
any other costs incurred in resolving the dispute pursuant to this paragraph.

      38. OPTIONS: The Option to Lease described in paragraph 42 below provided
Tenant in this Lease is personal and granted to original Tenant and to any
Permitted Transferee only and are not exercisable by any third party should
Tenant assign or sublet all or a portion of its rights under this Lease, unless
Landlord consents to permit exercise of any option by any assignee or subtenant,
in Landlord's sole discretion.

      39. QUIET ENJOYMENT: Upon Tenant's faithful and timely performance of all
the terms and covenants of the Lease, Tenant shall quietly have and hold the
Premises for the Lease Term and any extensions thereof.

      40. BROKERS: Tenant represents it has not utilized or contacted a real
estate broker or finder with respect to this Lease other than CRESA Partners to
which Landlord shall pay a commission as agreed in the letter of intent, and
Tenant agrees to indemnify and hold Landlord harmless against any claim, cost,
liability or cause of action asserted by any other broker or finder claiming
through Tenant.

      41. AUTHORITY OF PARTIES: Each individual executing this Lease on behalf
of Tenant represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of the corporation, in accordance with a duly
adopted resolution of the Board of Directors of said corporation or in
accordance with the by-laws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms. Each individual executing
this Lease on behalf of Landlord represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of the limited
partnership and that this Lease is binding upon said limited partnership in
accordance with its terms.

      42. MISCELLANEOUS PROVISIONS:

                                      17.
<PAGE>

            A. RENT: All monetary sums due from Tenant to Landlord under this
Lease shall be deemed to be rent.

            B. MANAGEMENT FEE: Tenant agrees to pay Landlord along with the
expenses to be reimbursed by Tenant a monthly fee for management services
rendered by either Landlord or a third party manager engaged by Landlord (which
may be a party affiliated with Landlord), in the amount of two percent (2%) of
the Base Monthly Rent.

            C. PERFORMANCE BY LANDLORD: If Tenant fails to perform any
obligation required under this Lease or by law or governmental regulation and
reasonable notice from Landlord, Landlord in its sole discretion may without
notice perform such obligation, in which event Tenant shall pay Landlord as
additional rent all sums paid by Landlord in connection with such substitute
performance within ten (10) days following Landlord's written notice for such
payment.

            D. INTEREST: All sums due hereunder, including rent and additional
rent, if not paid when due, shall bear interest at the lesser of either fifteen
percent (15%) or the maximum rate permitted under California law accruing from
the date due until the date paid to Landlord.

            E. RIGHTS AND REMEDIES: All rights and remedies hereunder are
cumulative and not alternative to the extent permitted by law and are in
addition to all other rights and remedies in law and in equity.

            F. SURVIVAL OF INDEMNITIES: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under the Lease shall survive the
expiration or sooner termination of the Lease.

            G. SEVERABILITY: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.

            H. CHOICE OF LAW: This Lease shall be governed by and construed in
accordance with California law.

            I. TIME: Time is of the essence hereunder.

            J. ENTIRE AGREEMENT: This instrument contains all of the agreements
and conditions made between the parties hereto and may not be modified orally or
in any other manner than by an agreement in writing signed by all of the parties
hereto or their respective successors in interest.

            K. REPRESENTATIONS: Tenant acknowledges that neither Landlord or its
affiliates or agents have made any agreements, representations, warranties or
promises with respect to the demised Premises or the Building of which they are
a part, or with respect to present or future rents, expenses, operations,
tenancies or any other matter. Except as herein expressly set forth herein,
Tenant relied on no statement of Landlord or its agents for that purpose.

            L. HEADINGS: The headings or titles to the paragraphs of this Lease
are not a part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.

      43. CONDITION PRECEDENT: The parties acknowledge that the Premises are
currently encumbered by a lease between Landlord and Affymax Research Institute
("Affymax") which is scheduled to expire on August 31, 2003. Notwithstanding
Landlord's and Tenant's execution of this Lease, it is expressly understood and
agreed that the obligations created by this Lease are contingent upon Landlord
and Affymax executing a lease termination agreement no later than ten (10)
business days following execution of this Lease by Landlord and Tenant. If the
foregoing condition is not met, then this Lease shall be null and void and
neither party shall have any obligation or liability towards one another. In
addition, notwithstanding the Landlord's and Tenant's execution of this Lease,
it is expressly understood and agreed that the obligations created by this Lease
are contingent upon Tenant and Affymax executing an asset purchase agreement
(for the purchase and sale of the Assets) no later than

                                       18.
<PAGE>

five (5) business days following execution of this Lease by Landlord and Tenant,
such asset agreement attached to this Lease as Exhibit "C". If the asset
purchase agreement between Tenant and Affymax is not executed by such time, then
this Lease shall be null and void and neither party shall have any obligation or
liability towards one another.

                                      19.
<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have executed these presents, the day
and year first above written.

LANDLORD:  Sobrato Interests,         XENOPORT:  Xenoport, Inc.,
a California limited Partnership      a Delaware corporation

By: /s/ John M. Sobrato               By: /s/ Ronald W. Barrett
    -----------------------------     Its: President and Chief Executive Officer
Its: General Partner

                                      20.
<PAGE>

                       EXHIBIT "A" - PREMISES AND PROJECT

                           [MAP OF PROJECT PREMISES]

                                      21.
<PAGE>

                      EXHIBIT "B" - DRAFT LETTER OF CREDIT

                          DRAFT COPY ONLY - 09/14/2001

<TABLE>
<S>                                     <C>
ISSUING BANK:

       CITIZENS BANK OF MASSACHUSETTS

       28 STATE STREET

       BOSTON, MA 02109

       USA

PLACE AND DATE OF ISSUE                 PLACE AND DATE OF EXPIRY:

       CRANSTON, RI                            AT OUR COUNTERS

       2001 SEPTEMBER 14                       2002 SEPTEMBER 14

                                        BENEFICIARY:

APPLICANT:                                     SOBRATO INTERESTS

       XENOPORT, INC                           10600 NORTH DE ANZA BOULEVARD

       2631 HANOVER STREET                     SUITE 200

       PALO ALTO, CA  93404                    CUPERTINO, CA  95014

                                        AMOUNT:  USD 3,000,000.00

                                               UP TO AN AGGREGATE THEREOF

                                        CREDIT AVAILABLE WITH:

                                        CITIZENS BANK OF MASSACHUSETTS

                                        20 CABOT ROAD (MAIL STOP MMF170)

PARTIAL DRAWINGS:  PERMITTED            INTERNATIONAL DEPARTMENT

                                        MEDFORD, MA  02155

                                        BY:  PAYMENT

                                        Against presentation of documents detailed
                                        herein and drafts at:

                                        SIGHT

                                        Drawn on:

                                        CITIZENS BANK OF MASSACHUSETTS

                                        20 CABOT ROAD (MAIL STOP MMF470)

                                        MEDFORD, MA 02155
</TABLE>

Document Required:

We hereby establish our Irrevocable Standby Letter of Credit in your favor
available for payment by your draft(s) at sight drawn on us accompanied by the
following documents:

                                      22.
<PAGE>

      1.    The original of this Letter of Credit and amendment, if any.

      2.    A signed and dated certification from your company stating that:
            "Xenoport, Inc., as Tenant under that Certain Lease dated September
            __, 2001 between Tenant and Sobrato Interests as Landlord (the
            "Lease") is in default under the Lease beyond applicable notice and
            cure periods and Sobrato Interests is entitled to draw the requested
            amount."

This Letter of Credit shall be automatically extended for an additional period
of one year from the present or each future expiration date unless we have
notified you in writing by courier mail, not less than sixty (60) days before
such date, that we elect not to renew this Letter of Credit.

We hereby agree with you that all draft(s) drawn under and in compliance with
the terms of this Letter of Credit will be duly honored upon presentation.

Each draft must bear upon its face the clause "Drawn under Citizens Bank of
Massachusetts Letter of Credit number LC-012161 dated September ___, 2001."

This Letter of Credit sets forth in full the terms of our undertaking to you.
Such undertaking shall not in any way be modified, mended or amplified by
reference to any document or instrument referred to herein or related hereto and
any such reference shall not be deemed to incorporate herein by reference any
such document or instrument.

Except as otherwise expressly stated herein, this Letter of Credit is subject to
the "Uniform Customs and Practice for Documentary Credits, 1993 Revision)
International Chamber of Commerce Publication, No. 500."

_____________________________                      _____________________________
Authorized Signature                               Authorized Signature

THIS IS BEING POSTED FOR USD 30,000,000.00

APPROVED BY: _________________

PREPARED BY: E271604

                                      23.
<PAGE>

                                   EXHIBIT "C"

                      ASSIGNMENT OF ASSETS AND BILL OF SALE

      This ASSIGNMENT OF ASSETS AND BILL OF SALE ("Agreement"), dated as of
September ___, 2001, is entered into by Affymax Research Institute, a California
corporation ("Seller") and Xenoport, Inc., a Delaware corporation ("Buyer").

                                    RECITALS

      WHEREAS, Buyer intends to lease and occupy the premises commonly known and
designated as 3410 Central Expressway, Santa Clara, California 95051 consisting
of approximately 102,759 square feet (the "Premises") pursuant to a least (the
"Xenoport Lease") between Buyer and Sobrato Interests ("Landlord"), which
Premises were previously leased and occupied by Seller from Landlord under that
certain Lease dated December, 1992 (the "Prior Lease").

      WHEREAS, Seller desires to transfer to Buyer all of Seller's right, title
and interest in and to all assets listed on Schedule 1 hereto and such other
assets are described herein, consisting of certain personal property owned by
Seller located at the Premises and certain fixtures and improvements made by
Seller to the Premises (collectively, the "Assets") and terminate the Prior
Lease;

      WHEREAS, Buyer desires to accept the transfer of Assets, for which it has
agreed to pay to Seller a one-time payment of One Million Seven Hundred Thousand
Dollars ($1,700,000.00).

      NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

      1. Transfer of Assets. Seller does hereby sell, convey, transfer, assign,
set over and deliver to Buyer, its successors and assigns, and Buyer does hereby
accept all of Seller's right, title and interest in and to the Assets, including
but not limited to:

      a. all of the Assets listed on Schedule 1 hereto;

      b. all of the personal property, furniture, equipment, fixtures and
         improvements located on and in the Premises on the date hereof; and

      c. such other Assets as are mutually agreed upon by the parties hereto.

      TO HAVE AND TO HOLD all such Assets conveyed hereby, with the
appurtenances thereof, unto Buyer, it successors and assigns forever, to it and
for their own use and benefit.

      2. Purchase Price. On the Termination Date (as defined below), Buyer shall
deliver to Seller by wire transfer the sum of One Million Seven Hundred Thousand
Dollars ($1,700,000.00), representing payment in full for the Assets. If such
payment remains delinquent for a period in excess of five (5) days after written
notice to Buyer, then Buyer shall pay to Seller interest on such amount at the
lesser of fifteen percent (15%) or the maximum rate permitted by law until paid.
The Termination Date shall be the date by which all of the following have
occurred: (i) the Prior Lease has terminated pursuant to that certain
Termination of Lease between Seller and Landlord on or about the date hereof and
attached hereto as Exhibit A (the "Lease Termination"); (ii) Seller has
surrendered the Premises and all conditions contained in the Lease Termination
for the effective termination of the Prior Lease have been satisfied; and (iii)
Landlord has provided Buyer with written notice that (i) and (ii) of this
Section 2 have in fact occurred.

      3. Representations, Warranties and Indemnification. Seller does hereby
represent and warrant to Buyer that Seller is the sole, lawful owner of the
Assets, that Seller has good title and full right to sell the same free

                                      24.
<PAGE>

and clear of any lien, encumbrance or claim of any nature, and will warrant and
defend the title thereto unto Buyer, its successors and assigns, against the
claims and demands of all persons whomsoever. Seller, on behalf of itself and
its successors and assigns, does hereby agree to indemnify and hold Buyer, its
successors and assigns, harmless from any and all claims, liabilities and
obligations arising under or in relation to the use, ownership or operation of
the Assets (or any maintenance, service and supply contracts related thereto),
prior to the date hereof.

      4. Further Actions. Seller will, at the request of Buyer and without
further consideration, promptly execute and deliver, and will cause its
officers, agents and employees to execute and deliver, such other instruments of
sale, transfer, conveyance and assignment, and take such other actions, as may
reasonably be necessary or requested by Buyer to effectuate the transactions
contemplated hereby, to place Buyer in possession and control of, and to confirm
Buyer's title to, the Assets, and to assist Buyer in exercising all rights and
enjoying all benefits with respect thereto.

      5. Conditions Precedent. Notwithstanding anything to the contrary in this
Agreement, this Agreement and the parties obligations hereunder are conditioned
upon the following: (i) The execution by Landlord and Buyer of the Xenoport
Lease and (ii) the occurrence of the Termination Date.

      6. General.

            (a) This Agreement shall be governed by and construed in accordance
with the laws of the state of California as applied to agreements among
California residents entered into and to be performed entirely within
California.

            (b) This Agreement, and the covenants and agreements herein
contained, shall be enforceable against, binding upon and inure to the benefit
of the successors and assigns of Seller and Buyer.

            (c) This Agreement may not be modified or amended, nor may any
rights hereunder be waived, except in a writing signed by the parties hereto.

            (d) If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be executed from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

            (e) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one original instrument.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      25.
<PAGE>

      IN WITNESS WHEREOF, Affymax Research Institute and Xenoport, Inc. each
have caused this Agreement to be duly executed in its name by its duly
authorized officer to be effective as of the date hereof.

SELLER:                             BUYER:

AFFYMAX RESEARCH INSTITUTE          XENOPORT, INC.

By: /s/ Donald F. Parman            By: /s/ Ronald W. Barrett
    -----------------------             ----------------------
Name: Donald F. Parman              Name: Ronald W. Barrett

Title: Secretary                    Title: President and Chief Executive Officer

                                      26.
<PAGE>

                                   SCHEDULE 1

HOUSE SYSTEMS:
HVAC units
Kohler back-up generator
CDA; Nitrogen; Helium systems
DI water system and all wall-attached Milli-Q units

LABORATORY:
All attached casework indicated on plan
Fume Hoods (63)
BioSafety Cabinets (11)
Autoclaves (4)
Double sided autoclaves (2)
Glassware washers (2)
Cage washer (1)
Cold Rooms (4)

OFFICE:
Office Desks & chairs and cubicles
File cabinets
Conference and seminar room tables/chairs

CAFETERIA:
Fountain systems for beverages
Salad bar cabinetry
Kitchen grill
Lunch room tables/chairs

MISCELLANEOUS:
PA System
Phone system w/telephone handsets and attendant station
Security system - with cameras/card access readers
Network cabling/fiber lines/server cabinets

                                      27.
<PAGE>

                                [2ND FLOOR PLAN]

                                [1ST FLOOR PLAN]

                                      28.
<PAGE>

                                  [FLOOR PLAN]

                                      29.