CONFIDENTIAL

CONFIDENTIAL
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Date:          July 21, 1998

To:            Stephen Evans-Freke
               Chairman and Chief Executive Officer

cc:            Susan Kanaya, Treasurer, SUGEN, Inc.
               Brian Cunningham, Cooley Godward

From:          Donald E. Nickelson
               Chairman of the Compensation Committee
               SUGEN, Inc. Board of Directors

Reference:     Your Compensation


Dear Stephen:


     The  Executive  Committee  and  Compensation  Committee of SUGEN's Board of
Directors  have  settled  on the  following  proposal  in order to  secure  your
continuing  services  as Chief  Executive  Officer  of SUGEN  for up to one year
beyond the July 30, 1998 date by which you had  previously  intended to withdraw
from this position.  The Board respects your desire to step back to the position
of Non-Executive  Chairman of SUGEN,  Inc. and SUGEN,  Europe. It is understood,
therefore,  that your commitment to stay on for the time being will be satisfied
as soon as a Chief Executive Officer candidate  acceptable to the Board has been
selected and has himself or herself accepted this position, and that in any case
you will have no continuing  obligation to continue as Chief  Executive  Officer
beyond June 30, 1999.

     In  consideration  for your commitment to serve as Chief Executive  Officer
for up to one  further  year,  SUGEN  promises  to transfer to you up to 100,000
shares of fully paid-up  common stock of SUGEN,  Inc.  ("Shares"),  provided the
following  conditions  are satisfied.  If SUGEN  appoints a new Chief  Executive
Officer prior to July 1, 1999,  SUGEN will transfer  50,000 shares to you within
10 days  following  such  appointment,  but not earlier than January 4, 1999. If
SUGEN  (including  its  affiliated  entities)  raises at least an additional $30
million in new money  prior to July 1, 1999,  SUGEN will  transfer to you 50,000
Shares within 10 days  following the  completion  of such  transaction,  but not
earlier  than  January 4, 1999.  Both  contingencies  may be met by any means in
order to  count  for  these  purposes.  Until  the time of  transfer  under  the
foregoing  conditions,  you are not a shareholder  of SUGEN in respect of any of
the 100,000 Shares.

     You will  continue  to be paid your  present  salary,  subject to  year-end
reviews if still  applicable,  and will be entitled to the appropriate  year-end
bonus regardless of whether a new Chief Executive  Officer has been appointed by
that time.

     It is  understood  by the Board that you are in the  process of  relocating
your family to the East Coast, and that your personal time will be split between
the East Coast, SUGEN's Bay Area


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facilities,  and Europe to the extent  that the  establishment  of SUGEN  Europe
requires your presence there.  The Board is comfortable with this arrangement so
long as you are  physically  at SUGEN with  reasonable  frequency  and are fully
available and functional by phone,  fax, and e-mail when on the East Coast.  The
Board also appreciates that you are now in the position of maintaining two large
mortgages  since you have  purchased  a house in Maine  and have been  unable to
place your Hillsborough,  CA house on the market this last Spring as planned. It
is understood  that you have now listed your  Hillsborough  house, in which your
family no longer  resides.  With  effect as of July 1, 1998,  SUGEN will pay the
monthly cost of your  mortgages  on the  property,  estimated  at  approximately
$16,786.36  per month (these  amounts may  fluctuate  due to changes in interest
rates), by direct payment to First Republic against their monthly invoices.

     If this proposal is acceptable to you,  please  confirm by signing below in
the indicated  space on each copy of this letter,  returning one to me with copy
to Susan Kanaya and Brian Cunningham, and retaining the other for your records.



                                   Sincerely,

                                   /s/ Donald E. Nickelson
                                   Donald E. Nickelson


Agreed:
/s/ Stephen Evans-Freke                                   July 22, 1998
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Stephen Evans-Freke                                  Date
Chairman and Chief Executive Officer         



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