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                                                                    EXHIBIT 10.1

LEASE

                       (Nexus/Epoch Pharmaceuticals, Inc.)

         THIS LEASE ("Lease") is made as of February __, 2000, by and between
Nexus Canyon Park LLC, a California limited liability company ("Landlord"), and
Epoch Pharmaceuticals, Inc., a Delaware corporation ("Tenant").

1. LEASE PREMISES.

         1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises ("Premises") consisting of approximately 25,580
square feet of Rentable Area in the building (the "Building") located at
21720-23rd Drive S.E., Bothell, Washington, on real property legally described
as Tract 21-B of Canyon Park Business Center Binding Site Plan recorded under
Recording No. 9708195005, records of Snohomish County, Washington, being a
portion of the Northwest Quarter of Section 29, Township 27 North, Range 5 East,
W.M. The Building consists of approximately 152,080 square feet of Rentable
Area. The Building, the real property upon which the Building is located, and
all landscaping, parking facilities, and other improvements and appurtenances
related thereto are hereinafter collectively referred to as the "Project." The
site plan for the Project is attached hereto as Exhibit "A", and the Premises
are outlined on Exhibit "B". All portions of the Project which are for the
non-exclusive use of tenants of the Project, including without limitation
roadways, driveways, sidewalks, parking areas, and landscaped areas, are
hereinafter referred to as "Common Areas".

2. Basic Lease Provisions.

         2.1 For convenience of the parties, certain basic provisions of this
Lease are set forth herein, which provisions are subject to the remaining terms
and conditions of this Lease and are to be interpreted in light of such
remaining terms and conditions.

             2.1.1  Address of the Project:
                    21720-23rd Drive S.E.
                    Bothell, Washington

             2.1.2  Designation of Tenant's Suite:
                    Suite 150

             2.1.3  Rentable Area:
                    Approximately 25,580 square feet

             2.1.4  Basic Annual Rent:
                    $580,666 ($22.70 per square foot per year of Rentable Area,
                    subject to adjustment pursuant to Sections 6.1, and 8.3)

             2.1.5  Monthly Installment of Basic Annual Rent: $48,388.83 ($22.70
                    per square foot per year of Rentable Area, subject to
                    adjustment pursuant to Sections 6.1 and 8.3)


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             2.1.6  Tenant's Pro Rata Share: 16.8% of the Project (subject to
                    adjustment pursuant to Section 8.3)

             2.1.7  (a) Estimated Term Commencement Date: November 1, 2000
                        (subject to adjustment pursuant to Section 3.2)

                    (b) Term Expiration Date: Twelve (12) years from the actual
                        Term Commencement Date

             2.1.8  Security Deposit: $580,666 Letter of Credit, Treasury Bills
                    or Certificate of Deposit (subject to adjustment pursuant to
                    Article 9)

             2.1.9  Permitted Use: Office, research and development,
                    manufacturing, and any other lawful use permitted in the
                    applicable zone

             2.1.10 Address for Rent Payment and Notices to Landlord:

                        Nexus Canyon Park LLC
                        4350 La Jolla Village Drive, Suite 930
                        San Diego, CA 92122
                        Attn: Michael J. Reidy

                    Address for Notices to Tenant Prior to Occupancy:

                        Epoch Pharmaceuticals, Inc.
                        12277 134th Ct. N.E. Suite #110
                        Redmond, WA 98052

                    Address for Notices to Tenant After Occupancy:

                        Epoch Pharmaceuticals, Inc.
                        21720-23rd Drive S.E.
                        Bothell, WA

         2.2 The following exhibits are attached hereto and incorporated herein
by this reference:

             Exhibit "A" Site Plan of the Project
             Exhibit "B" Outline of the Premises
             Exhibit "C" Form of Letter of Credit
             Exhibit "D" Rules and Regulations

         2.3 Capitalized terms not defined when first used in this Lease shall
have the meaning ascribed to them in Article 42 below.

3. TERM.

         3.1 This Lease shall take effect upon the date of execution hereof by
each of the parties hereto, and each of the provisions hereof shall be binding
upon and inure to the benefit of Landlord and Tenant from the date of execution
hereof by each of the parties hereto.


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         3.2 The term of this Lease will be that period from the date Tenant
commences conduct of its business on the Premises after the completion of Tenant
Improvements or November 1, 2000, whichever is earlier ("Term Commencement
Date"), and through twelve (12) years from the Term Commencement Date, subject
to earlier termination of this Lease or extension of the term as provided
herein. The target date set forth in the preceding sentence is based on the
assumption that the Premises will be tendered for construction of the Tenant
Improvements by June 1, 2000. If the Premises are tendered to Tenant after June
1, 2000, the target date of November 1, 2000 shall be extended by one day for
each day of delay beyond June 1, 2000.

4. CONSTRUCTION AND POSSESSION.

         4.1 Landlord shall construct at Landlord's expense, and in compliance
with the warranties set forth in Article 14, the following improvements to the
Building ("Landlord Improvements"): (a) removal of the existing mezzanine and
construction of a new mezzanine with a loading capacity of 125 lbs/square foot
and two exit stairwells, and (b) the addition of new exterior windows along the
west walls of the Building.

         4.2 At such time as Landlord has completed the Landlord Improvements to
the extent that construction of the tenant improvements("Tenant Improvements")
can commence, Tenant shall construct the Tenant Improvements in accordance with
the Tenant Improvement Plans at Tenant's expense, including the expense of
design, permitting and construction, subject to Landlord providing the Tenant
Improvement Allowance described in Section 4.3 below. The Tenant Improvement
Plans, and any revisions and supplements thereto, shall be subject to the
written approval of Landlord, which approval shall not be unreasonably withheld
or delayed (and shall be deemed approved if Landlord does not respond to a
written request for approval within ten (10) days after the request). Tenant
shall obtain and provide to Landlord a certificate of occupancy as soon as
possible after completion of the Tenant Improvements.

         4.3 Tenant intends to fully improve 19,038 square feet of Rentable
Area, and leave 6,532 square feet of Rentable Area in shell condition. Landlord
shall contribute for the cost of Tenant Improvements the amount of $1,523,084
($80 per square foot for the 19,038 square feet to be fully improved) (the
"Tenant Improvement Allowance"). Landlord shall not contribute to the cost of
improving the 6,532 square feet of Rentable Area left in shell condition, and
Tenant shall bear the entire cost of improving the space left in shell
condition. The cost of Tenant Improvements in excess of the costs to be borne by
Landlord as set forth herein shall be paid by Tenant (except that Tenant shall
be required to pay for only Tenant's half of any demising walls separating the
Premises from space occupied by another tenant in the Building).

             (a) Tenant shall prepare a Tenant Improvement budget equal to the
Tenant Improvement Allowance ("Tenant Improvement Budget"), including design
fees, architect fees and other direct costs incurred in the design and
construction of the Tenant Improvements. The Tenant Improvement Budget, and all
revisions thereto, shall be subject to Landlord's approval, which shall not be
unreasonably withheld or delayed. As work progresses on the Tenant Improvements,
Tenant shall submit an application for payment ("Application for Payment") to
Landlord no more often than monthly, and by the twentieth (20th) day of the
month, for disbursement of the Tenant Improvement Allowance. Applications for
Payment may be made only for work actually completed or services actually
provided and shall include a detailed description of such completed Tenant
Improvement work or services. Applications for Payment shall include copies of
the invoices to Tenant by Tenant's contractor(s) or other vendors for the work
completed. As a condition of payment of any


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Application for Payment, Landlord shall require the certification by both Tenant
and Tenant's architect that the described Tenant Improvement Work or services
have been completed. Landlord shall disburse the requested funds from the Tenant
Improvement Allowance directly to the invoicing party (or, in Landlord's
discretion, directly to Tenant) no later than the tenth (10th) day of each
calendar month for Applications for Payment with required supporting
documentation received on or before the twentieth (20th) day of the previous
calendar month. Tenant agrees to reasonably cooperate with Landlord in compiling
the Applications for Payment in form and content satisfactory to Landlord's
construction lender.

             (b) If the work described on the Tenant Improvement Budget, as it
may be revised from time to time, exceeds the amount of the Tenant Improvement
Allowance, because of changes in work, cost overruns, or otherwise, Tenant shall
pay the overage on a monthly basis as the work progresses.

             (c) Tenant shall, at its expense, install any improvements in
addition to those listed on the Tenant Improvement Budget which are necessary to
ensure (i) the Premises are completed in accordance with the Tenant Improvement
Plans, (ii) the Premises are fully operational, and (iii) a certificate of
occupancy is issued for the Premises.

         4.4 Landlord shall tender possession of the Premises to Tenant for
construction of the Tenant Improvements at such time as Landlord and Landlord's
architect gives Tenant written notice that construction of the Landlord
Improvements has progressed to the point that construction of the Tenant
Improvements can commence, but no later than June 1, 2000. Tenant agrees that in
the event possession of the Premises for construction of the Tenant Improvements
is not tendered to Tenant by June 1, 2000, this Lease shall not be void or
voidable and Landlord shall not be liable to Tenant for any loss or damage
resulting therefrom; provided, however, if the Premises are tendered to Tenant
after June 1, 2000, pursuant to Section 3.2 of this Lease, the Term Commencement
Date of November 1, 2000, shall be extended one day for each day of delay beyond
June 1, 2000. Without limiting the generality of the foregoing, Tenant expressly
waives any right to terminate this Lease because of delays in completion of
construction of the Premises; provided however, if the Premises are not tendered
to Tenant for construction of the Tenant Improvements on or before August 1,
2000, Tenant at its election by written notice given to Landlord on or before
August 15, 2000, my terminate this Lease, in which event Landlord shall return
to Tenant the Security Deposit, and neither Landlord nor Tenant shall have any
further obligation to the other.

         4.5 Tenant understands that the Site Improvements, Building Shell and
Landlord Improvements may not be complete at the time possession of the Premises
is tendered to Tenant for construction of the Tenant Improvements, but will be
in a condition such that construction of the Tenant Improvements can commence.
Landlord shall fully complete construction of the Site Improvements, Building
Shell and the Landlord Improvements no later than the date Tenant completes
construction of the Tenant Improvements. In the event that the Site
Improvements, Building Shell and Landlord Improvements are not fully completed
by the date Tenant completes the Tenant Improvements, neither the term of this
Lease nor Tenant's obligation to pay Rent shall commence until a certificate of
occupancy for the Premises has been issued by the City of Bothell, provided that
the delay in issuance of the certificate of occupancy is caused by Landlord's
failure to timely complete the Site Improvements, Building Shell and Landlord
Improvements (as opposed to the Tenant Improvements, which are the
responsibility of Tenant).



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         4.6 Landlord and Tenant shall diligently and in good faith cooperate
with one another, and shall cause their architects and contractors to cooperate
with one another, to insure timely and cost effective design, permitting and
construction of the Site Improvements, Building Shell, and Tenant Improvements.

         4.7 Landlord shall be entitled to apply for and retain the benefit of
State of Washington sales tax deferral under the "Retail Sales/Use Tax Deferral
for High Technology Industries" statute for the improvements installed by
Landlord pursuant to Section 4.1. Landlord and Tenant acknowledge and agree that
the amount of Basic Annual Rent set forth herein reflects the economic benefit
of such sales tax deferral having been passed through to Tenant in the form of
reduced rent, and would have been greater in an amount equal to the sales tax
deferral if Landlord were not entitled to apply for and retain the benefits of
the sales tax deferral. If Landlord fails for any reason to qualify for such
sales tax deferral, Basic Annual Rent shall be increased in an amount equal to
the sales tax deferral prorated over the term of this Lease.

         4.8 Any dispute between Landlord and Tenant arising under this Article
4 that is not resolved by the parties within fifteen (15) days shall be promptly
resolved by binding arbitration conducted by a single neutral arbitrator in
Seattle, Washington, under the Commercial Rules of the American Arbitration
Association. In order that completion of the Project is not delayed, the party
responsible for construction or other performance shall continue to perform
pending completion of the arbitration proceeding.

5. RENT.

         5.1 Tenant agrees to pay Landlord as Basic Annual Rent for the Premises
the sum set forth in Section 2.1.4, subject to adjustment as set forth in
Sections 6.1 and 8.3, commencing on the Term Commencement Date. Basic Annual
Rent shall be paid in the equal monthly installments set forth in Section 2.1.5,
subject to adjustment as set forth in Sections 6.1 and 8.3, each in advance on
the first day of each and every calendar month during the term of this Lease,
commencing on the Term Commencement Date.

         5.2 In addition to Basic Annual Rent, Tenant agrees to pay to Landlord
as additional rent ("Additional Rent"), at the times hereinafter specified in
this Lease (i) Tenant's Pro Rata Share (as defined in Section 7.3(a) and as set
forth in Section 2.1.6, subject to adjustment pursuant to Section 8.3) of
Operating Expenses as provided in Section 7 and (ii) all other amounts that
Tenant assumes or agrees to pay under the provisions of this Lease, including
but not limited to any and all other sums that may become due by reason of any
default of Tenant or failure on Tenant's part to comply with the agreements,
terms, covenants and conditions of this Lease to be performed by Tenant.

         5.3 Basic Annual Rent and Additional Rent shall together be denominated
"Rent." Except as expressly set forth in this Lease, Rent shall be paid to
Landlord, without notice, demand, abatement, suspension, deduction, setoff,
counterclaim, or defense, in lawful money of the United States of America, at
the office of Landlord as set forth in Section 2.1.10 or to such other person or
at such other place as Landlord may from time to time designate in writing.

         5.4 In the event the term of this Lease commences or ends on a day
other than the first day of a calendar month, then the Rent for such fraction of
a month shall be prorated for such period on the basis of a thirty (30) day
month and shall be paid at the then current rate for such fractional month prior
to the commencement of the partial month.




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6. RENTAL ADJUSTMENTS.

         6.1 Commencing on the first anniversary of the Term Commencement Date,
the Basic Annual Rent then in effect (and as previously increased pursuant to
this Section 6.1) shall be increased each year by three and one-half percent
(3.5%) on each annual anniversary of the Term Commencement Date for so long as
this Lease continues in effect.

7. OPERATING EXPENSES.

         7.1 As used herein, the term "Operating Expenses" shall include:

             (a) Government impositions including, without limitation, real and
personal property taxes and assessments (but excluding personal property taxes
and assessments of other tenants of the Project) levied upon the Project or any
part thereof; amounts due under any improvement bond upon the Project and
assessments levied in lieu thereof (except to the extent they represent costs
related to the construction of the Project); any tax on or measured by gross
rentals received from the rental of space in the Project or tax based on the
square footage of the buildings in the Project to the extent such tax is in lieu
of or in the nature of a property tax; and any utilities surcharges or any other
costs levied, assessed or imposed by, or at the direction of, or resulting from
statutes or regulations, or interpretations thereof promulgated by, any federal,
state, regional, municipal or local government authority in connection with the
use or occupancy of the Building or Project, and any expenses, including the
cost of attorneys or experts, reasonably incurred by Landlord in seeking
reduction by the taxing authority of the applicable taxes not to exceed the
amount of any such reduction, less tax refunds obtained as a result of an
application for review thereof.

             (b) Except as set forth in Section 7.2 below, all other costs paid
or incurred by Landlord which, in accordance with accepted principles of sound
accounting practice as applied to the operation and maintenance of first class
buildings, are properly chargeable to the maintenance and operation of the
Project including, by way of examples and not as a limitation upon the
generality of the foregoing, costs of (i) maintenance, repairs and replacements
to improvements within the Project as appropriate to maintain the Project in
first class condition; (ii) utilities furnished to the Project, but excluding
utilities furnished to the Premises, which will be separately metered and paid
for directly by Tenant; (iv) trash collection; (v) cleaning (including windows,
but excluding janitorial costs, which will be contracted for directly by
Tenant); (vi) maintenance of landscape and grounds; (vii) maintenance of drives
and parking areas, including periodic resurfacing; (viii) reasonable and
customary security services, if any; (ix) maintenance, repair, and replacement
of reasonable and customary security devices; (x) building supplies; (xi)
maintenance, repair, and replacement of equipment utilized for operation and
maintenance of the Project; (xii) costs of maintenance, repairs and replacements
of mechanical, plumbing, electrical and other systems which are part of the
Building Shell; (xiii) insurance premiums; (xiv) portions of insured losses
attributable to Tenant Improvements deductible by reason of insurance policy
terms; (xv) service contracts for work of a nature before referenced; (xvi)
costs of services of independent contractors retained to do work of nature
before referenced at reasonable and customary rates; (xvii) costs of
compensation (including employment taxes and fringe benefits) of all persons who
perform regular and recurring duties connected with the day-to-day operation and
maintenance of the Project at reasonable and customary rates; and (xviii) costs
of management services equal to three percent (3%) of Basic Annual Rent.



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         7.2 Notwithstanding the foregoing, Operating Expenses shall not
include, and Tenant shall not be responsible for the payment of, the following
costs and expenses:

             (a) costs incurred for the initial construction of the Project,
except for the costs of the Tenant Improvements in excess of the Tenant
Improvement Allowance;

             (b) costs incurred for the repair, maintenance or replacement of
the structural components of the footings, foundation, ground floor slab, and
load bearing walls of the buildings in the Project (but excluding painting and
ordinary maintenance and repair of exterior surfaces, which are Operating
Expenses under Section 7.1(b));

             (c) costs of a capital nature, as defined by generally accepted
accounting principles, incurred for the replacement of all other components of
the Site Improvements and Building Shell, except to the extent caused by
Tenant's negligence;

             (d) costs incurred to correct any defects in design, materials or
construction of the Project other than the Tenant Improvements;

             (e) costs, expenses and penalties (including without limitation
attorneys fees) incurred as a result of the use, storage, removal or remediation
of any toxic or hazardous substances or other environmental contamination not
caused by Tenant or its employees, contractors, agents, representatives, or
invitees;

             (f) rentals and other payments by Landlord under any ground lease
or other lease underlying the Lease, and interest, principal, points and other
fees on debt or amortization of any debt secured in whole or part by all or any
portion of the Project (provided that interest upon a government assessment or
improvement bond payable in installments is an Operating Expense under Section
7.1(a));

             (g) costs incurred in connection with the financing, sale or
acquisition of the Project or any portion thereof;

             (h) costs, expenses, and penalties (including without limitation
attorneys' fees) incurred due to the violation by Landlord of any underlying
deed of trust, mortgage or ground lease affecting the Project or any portion
thereof;

             (i) depreciation and amortization of any type (provided this
exclusion is not intended to delete from Operating Expenses actual costs of
maintenance, repairs and replacements which are otherwise included within
Operating Expenses);

             (j) any costs incurred as a result of Landlord's violation of any
statute, ordinance or other source of applicable law, or breach of contract or
tort liability to any other party, including without limitation, any unrelated
third party, or Landlord's employees, contractors, agents or representatives;

             (k) costs incurred in leasing or procuring tenants (including,
without limitation, lease commissions, advertising expenses, attorneys' fees and
expenses of renovating space for tenants);



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             (l) advertising, marketing, media and promotional expenditures
regarding the Project and costs of signs identifying the owner, lender or any
contractor thereof;

             (m) any fees or salaries of the principals of Landlord;

             (n) any rentals and related expenses incurred in leasing equipment
which may be classified as capital expenditures under generally accepted
accounting principles;

             (o) any net income, franchise, capital stock, estate or inheritance
taxes or taxes which are the personal obligation of Landlord or of another
tenant of the Project;

             (p) expenses which relate to preparation of rental space for a
tenant;

             (q) legal expenses arising out of the initial construction of the
Project or any tenant improvements or for the enforcement of the provisions of
any tenant leases other than this Lease;

             (r) the cost of any work or service performed for or facilities
furnished to a tenant at such tenant's cost;

             (s) any interest or penalties imposed upon Landlord by any taxing
authority for late payment or otherwise;

             (t) utilities costs to the Premises, which shall be separately
metered and paid for directly by Tenant; and

             (u) any other expense otherwise chargeable as part of the cost of
operation and maintenance but which is not of general benefit to the Project but
is primarily for the benefit of one or more specific tenants.

         7.3 Commencing on the Term Commencement Date, Tenant shall pay to
Landlord on the first day of each calendar month of the term of this lease, as
Additional Rent, Landlord's good faith estimate of Tenant's Pro Rata Share (as
set forth in 2.1.6) of Operating Expenses with respect to the Project for such
month.

             (a) "Tenant's Pro Rata Share" under this Lease shall mean a
percentage determined by dividing the Rentable Area of the Premises by the total
Rentable Area of the Project, as set forth in Section 2.1.6, subject to
adjustment pursuant to Section 8.

             (b) Within sixty (60) days after the conclusion of each calendar
year, Landlord shall furnish to Tenant a statement (the "Annual Operating
Expense Statement") showing in reasonable detail the actual Operating Expenses
and Tenant's Pro Rata Share of Operating Expenses for the previous calendar
year. Any additional sum due from Tenant to Landlord shall be due and payable
within thirty (30) days of Tenant's receipt of such statement. If the estimated
amounts paid by Tenant pursuant to this Section 7.3 exceed Tenant's Pro Rata
Share of the actual Operating Expenses for the previous calendar year, the
difference shall be credited by Landlord against the Rent next due and owing
from Tenant; provided that, if the Lease term has expired, Landlord shall
accompany said statement with payment for the amount of such difference.


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             (c) Any amount due under this Section 7.3 for any period which is
less than a full month shall be prorated for such fractional month on the basis
of a thirty (30) day month.

             (d) Notwithstanding this Section 7.3, Operating Expenses which can
fairly and reasonably be allocated to one or more tenants rather than to all
tenants of the Project shall be so allocated, and shall be separately scheduled
on the Annual Operating Expense Statement.

         7.4 Tenant shall have the right, at Tenant's expense, upon reasonable
notice during reasonable business hours, to inspect that portion of Landlord's
books which are relevant to preparation of the Annual Operating Expense
Statement provided any request for such review shall be furnished within one
hundred eight (180) days after Tenant's receipt of such statement as to a prior
year's Operating Expenses.

         7.5 Operating Expenses for the calendar year in which Tenant's
obligation to pay them commences and in the calendar year in which such
obligation ceases shall be prorated. Expenses such as taxes, assessments and
insurance premiums which are incurred for an extended time period shall be
prorated based upon time periods to which applicable so that the amounts
attributed to the Premises relate in a reasonable manner to the time period
wherein Tenant has an obligation to pay Operating Expenses.

8. RENTABLE AREA.

         8.1 The Rentable Area of the Project is determined by making separate
calculations of the Rentable Area of each floor of all buildings and totaling
the Rentable Area of all floors within the buildings. The Rentable Area of a
floor is calculated by measuring to the outside finished surface of each
permanent outer building wall where it intersects the floor, or where it would
have intersected the floor except for recessed entryways, windows and the like
(also known as the "drip line", measured from where the outside finished surface
of the second floor wall intersects the roof). The full area calculated as set
forth above is included as Rentable Area of the Project without deduction for
(i) columns or projections, (ii) vertical penetrations including stairs,
elevator shafts, flues, pipe shafts, vertical ducts, and the like, and their
enclosing walls, (iii) corridors, equipment rooms, rest rooms, entrance ways,
elevator lobbies, and the like, and their enclosing walls, and (iv) any other
unusable area of any nature.

         8.2 The term "Rentable Area" when applied to Tenant is the approximate
area to be occupied by Tenant plus an equitable allocation of Rentable Area
within the Project which is not then utilized or expected to be utilized by
Tenant or other tenants of the Project, including but not limited to the
portions of the buildings devoted to fire exit corridors, stairwells, and
equipment rooms. In making such allocations, consideration will be given to
tenants benefitted by space allocated such that areas which primarily serve
tenants of only one floor, such as corridors and rest rooms upon such floor,
shall be allocated to that tenant's Rentable Area. If the Premises are separated
from space occupied by another tenant, the Rentable Area shall be measured to
the center of any interior demising walls.

         8.3 The Rentable Area as set forth in Section 2.1.3 is an estimate of
the area which constitutes the Rentable Area of the Premises, which, at the
request of either Landlord or Tenant made within ninety (90) days after the Term
Commencement Date, shall be adjusted in accordance with measurement and
certification of the Project architect. If the Rentable Area as determined
hereunder is more or less than the Rentable Area set forth in Section 2.1.3,
Basic Annual Rent and




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the monthly installments of Basic Annual Rent shall be adjusted upward or
downward, as the case may be, based on the actual Rentable Area of the Premises.
Rentable Area as adjusted shall also be utilized for computation of Tenant's Pro
Rata Share of Operating Expenses among tenants of the Project.

         8.4 In the event Landlord expands the Building, Landlord will promptly
have its architect measure and certify to Tenant the rentable area of any such
expansion, in which case Tenant's Pro Rata Share shall be adjusted, but in no
event shall Tenant's Pro Rata Share be increased by any such expansion, or for
any other reason other than measurement of the Premises pursuant to Section 8.3,
without Tenant's prior written consent.

9. SECURITY DEPOSIT.

         9.1 Within thirty (30) days after the date this Lease is executed by
both Landlord and Tenant, Tenant shall deposit with Landlord cash in the amount
of $100,000 ("Initial Deposit"). Tenant may elect to terminate this Lease by
failing to deposit the Security Deposit (as defined in Section 9.2 below) in the
amount and manner and at the time set forth in Section 9.2, in which event this
lease shall terminate sixty-one (61) days after the date of this Lease. If
Tenant elects to terminate this Lease pursuant to this Section 9.1, Landlord
shall retain the Initial Deposit, not as damages or a forfeiture, but as
consideration for what is essentially an option in favor of Tenant to enter into
this Lease, and neither Landlord nor Tenant shall have any further obligations
or liability one to the other under this Lease. In the event Tenant elects not
to terminate this Lease by depositing the Security Deposit in the amount and
manner and at the time set forth in Section 9.2, Landlord shall within two (2)
business days following receipt of the Security Deposit return the Initial
Deposit to Tenant. Landlord may commingle the Initial Deposit with its other
funds, and Tenant shall not be entitled to any interest on the Initial Deposit.

         9.2 Within sixty (60) days after the date of this Lease is executed by
both Landlord and Tenant, Tenant shall (i) deposit with Landlord an irrevocable
stand-by letter of credit in substantially the form of Exhibit "C" ("Letter of
Credit"), (ii) deposit with Landlord bearer treasury bills ("Treasury Bills"),
or (iii) grant to Landlord a security interest in a certificate of deposit in a
form reasonably acceptable to Landlord ("Certificate of Deposit"), in favor of
Landlord in the principal amount of $580,666, to be held by Landlord as security
for the faithful performance by Tenant of all of the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the term and
any extension term hereof. If Tenant defaults with respect to any provision of
this Lease, including but not limited to any provision relating to the payment
of Rent, and subject to any notice requirements and cure periods for Tenant's
benefit set forth in Article 24, Landlord may (but shall not be required to)
draw from the Letter of Credit the amount required to cure the default,
negotiate or redeem the Treasury Bills in the amount required to cure the
default, or foreclose on and take possession of the Certificate of Deposit, and
to use, apply or retain the proceeds thereof for the payment of any Rent or any
other sum in default, or to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of Tenant's default.

         9.3 At the commencement of the seventh year of the term the amount of
the Letter of Credit, Treasury Bills or Certificate of Deposit shall be reduced
to $435,499 on the conditions that (i) Tenant is not then in default, (ii)
Tenant has not been in default under Section 24.4(a) on more than three (3)
separate occasions for failure to make a payment of Rent, and (iii) Tenant then
has cash on hand, including cash equivalents and marketable securities, in an
amount in excess of Tenant's net loss, as determined under generally accepted
accounting principles, for the combined two (2) most recent calendar years.


                                       10
<PAGE>   11

         9.4 At the commencement of the tenth year of the term the amount of the
Letter of Credit, Treasury Bills, or Certificate of Deposit shall be reduced to
$290,333 on the conditions that (i) Tenant is not then in default, (ii) Tenant
has not been in default under Section 24.4(a) on more than three (3) separate
occasions for failure to make a payment of Rent, and (iii) Tenant then has cash
on hand, including cash equivalents and marketable securities, in an amount in
excess of Tenant's net loss, as determined under generally accepted accounting
principles, for the combined two (2) most recent calendar years..

         9.5 The Letter of Credit, Treasury Bills or Certificate of Deposit
shall be reduced to $290,333 at such time as Tenant achieves, or is merged into
or acquired by another company with, a Standard & Poor's investment-grade rating
of BBB or better; provided, however, that the other company becomes responsible
for Tenant's obligations under this Lease, either by operation of law or an
assumption of this Lease in form and substance reasonably satisfactory to
Landlord; provided further, that Tenant shall replenish the Letter of Credit,
Treasury Bills or Certificate of Deposit to the amount otherwise required by
Sections 9.2 through 9.4 above during any period the Standard & Poor's
investment-grade rating of Tenant or the other company, as the case may be,
falls below BBB.

         9.6 Tenant shall be responsible for any expenses in obtaining,
replacing and maintaining the Letter of Credit, Treasury Bills or Certificate of
Deposit. If Landlord draws upon the Letter of Credit, negotiates or redeems the
Treasury Bills, or foreclosed upon the Certificate of Deposit, any cash proceeds
not used by Landlord shall be deposited in an interest-bearing account or
certificate of deposit reasonably satisfactory to Tenant with a bank reasonably
satisfactory to Tenant. All interest earned on any cash proceeds of the Letter
of Credit, Treasury Bills or Certificate of Deposit shall belong to Tenant.

         9.7 The Letter of Credit, and any replacement Letter of Credit, shall
be issued by Bank of America, or another financial institution reasonably
acceptable to Landlord, with an office in Seattle, Washington, authorized to
disburse funds upon a draw request. Should the institution be placed in
conservatorship or receivership by the Federal Deposit Insurance Corporation or
any other state of federal regulatory agency, Tenant shall, within thirty (30)
days after written request by Landlord, provide a replacement Letter of Credit
from a financial institution reasonably acceptable to Landlord, and in the event
Tenant fails to do so, Landlord may draw on the Letter of Credit and use the
proceeds thereof as a security deposit in accordance with the provisions of
Section 9.1.

         9.8 The Letter of Credit shall provide (i) that the issuer of the
Letter of Credit shall pay to Landlord the amount in default immediately upon
presentation in Seattle, Washington, of a sight draft by Landlord accompanied by
a certified statement signed by an officer of the manager of Landlord (or, if
any successor Landlord is a corporation or a partnership, by any officer of the
corporation or general partner of the partnership, as the case may be) stating
that a default has occurred under the Lease and Tenant has failed to cure the
default within the applicable time period, as a result of which Landlord is
entitled to collect the amount specified in the site draft in order to cure the
default, and (ii) that the issuer shall have no obligation to confirm that a
default has occurred, or the amount which Landlord is entitled to draw, or that
notice of the default has been given to Tenant, or that Tenant has failed to
cure the default.


                                       11
<PAGE>   12

         9.9 The initial Letter of Credit shall be for a period of not less than
one (1) year, and any replacement Letter of Credit shall be for a period of not
less than one (1) year. The initial Letter of Credit (or any later replacement
Letter of Credit) shall be replaced by Tenant by delivering to Landlord a
replacement Letter of Credit at least thirty (30) days prior to the expiration
of the then current Letter of Credit. If Tenant fails to deliver a replacement
Letter of Credit at least thirty (30) days prior to the expiration of the then
current Letter of Credit, Landlord shall have the right to draw the total amount
of the then current Letter of Credit and hold the proceeds thereof as a security
deposit pursuant to the provisions of Section 9.1. The Letter of Credit shall be
successively renewed or replaced until that date which is thirty (30) days after
the expiration of the initial or any extended term of this Lease.

         9.10 In the event of a partial draw on the Letter of Credit, or the use
of any proceeds of the Treasury Bills or the Certificate of Deposit, Tenant
shall immediately replenish the Letter of Credit or substitute a new Letter of
Credit, or replenish the Treasury Bills or Certificate of Deposit, to the full
amount set forth above.

         9.11 Any Letter of Credit and Treasury Bills, and any security interest
in a Certificate of Deposit, shall be transferable by Landlord to a successor
Landlord or mortgagee or beneficiary of a deed of trust encumbering the
Premises, or, in the case of a Letter of Credit, a substitute Letter of Credit
shall be issued to any such entity at the request of Landlord; provided,
however, that Landlord shall pay any expenses incurred by Tenant on account of
any such transfer or issuance.

         9.12 In the event of bankruptcy or other debtor/creditor proceedings
against Tenant, the proceeds of the Letter of Credit, Treasury Bills or
Certificate of Deposit shall be deemed to be applied first to the payment of
Rent and other charges due Landlord for all periods prior to the filing of such
proceedings.

         9.13 Landlord shall deliver the Letter of Credit, the Treasury Bills,
or security interest in the Certificate of Deposit, and any proceeds thereof, to
any purchaser of Landlord's interest in the Premises, and thereupon Landlord
shall be discharged from any further liability with respect thereto, provided
that such purchaser has agreed to assume in writing the obligations of Landlord
hereunder. This provision shall also apply to any subsequent transfers.

         9.14 The Letter of Credit, Treasury Bills or Certificate of Deposit,
and any proceeds thereof, shall be returned to Tenant within thirty (30) days
following the expiration of this Lease, except for amounts which are needed by
Landlord to cure any default by Tenant.

10. USE.

         10.1 Tenant may use the Premises for any use permitted by (i) the
applicable zoning, (ii) any other applicable laws, regulations, ordinances,
requirements, permits and approvals applicable to the Premises, and (iii) all
covenants, conditions and restrictions recorded against the Project, and shall
not use the Premises, or permit or suffer the Premises to be used for any other
purpose without the prior written consent of Landlord.

         10.2 Tenant shall conduct its business operations and use the Premises
in compliance with all federal, state, and local laws, regulations, ordinances,
requirements, permits and approvals applicable to the Premises. Tenant shall not
use or occupy the Premises in violation of any law or regulation or the
certificate of occupancy issued for the Building, and shall, upon five (5) days'




                                       12
<PAGE>   13

written notice from Landlord, discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be a violation of
law or the certificate of occupancy. Tenant shall comply with any direction of
any governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant
or Landlord with respect to the Premises or with respect to the use or
occupation thereof, including any duty to make structural or capital
improvements, alterations, repairs and replacements to the Premises; provided,
however, if the costs thereof exceed an amount equal to six (6) monthly
installments of the Basic Annual Rent then payable, Tenant may elect to
terminate the Lease if Landlord, after notice from Tenant, declines to pay such
excess.

         10.3 Tenant shall not do or permit to be done anything which will
invalidate or increase the cost (unless Tenant agrees to pay such increased
cost) of any fire, extended coverage or any other insurance policy covering the
Premises, or which will make such insurance coverage unavailable on commercially
reasonable terms and conditions, and shall comply with all rules, orders,
regulations and requirements of the insurers of the Premises.

         10.4 Subject to the warranty of Landlord in Section 14.3, Tenant shall
comply with the Americans with Disabilities Act of 1990 ("ADA"), and the
regulations promulgated thereunder, as amended from time to time. All
responsibility for compliance with the ADA relating to the Premises and the
activities conducted by Tenant within the Premises shall be exclusively that of
Tenant and not of Landlord, including any duty to make structural or capital
improvements, alterations, repairs and replacements to the Premises. Any
alterations to the Premises made by Tenant for the purpose of complying with the
ADA or which otherwise require compliance with the ADA shall be done in
accordance with Article 17; provided, that Landlord's consent to such
alterations shall not constitute either Landlord's assumption, in whole or in
part, of Tenant's responsibility for compliance with the ADA, or representation
or confirmation by Landlord that such alterations comply with the provisions of
the ADA. However, nothing in this Lease shall be construed to require Tenant to
make structural or capital improvements, alterations, repairs or replacements to
comply with ADA unless and until required to do so by order of any government
entity or court of law exercising proper jurisdiction with regard thereto,
subject to any right to appeal or otherwise contest any such order. Furthermore,
Landlord shall be responsible for compliance with ADA to the extent of a
violation of Landlord's warranty in Section 14.3.

         10.5 Tenant may install signage, and re-install replacement or new
signage, on and about the Premises to the extent permitted by, and in conformity
with, the applicable provisions of any governmental law, ordinance or
regulation, and to the extent reasonably approved by Landlord. Tenant
acknowledges that it understands that other tenants will occupy space in the
Project, and that the maximum allowable signage is to be shared among all of the
tenants on a fair and reasonable basis. Tenant further acknowledges it is
familiar with the restrictions of any governmental law, ordinance or regulation
governing signage, and is not relying on any representations or warranty of
Landlord regarding the number, size or location of any signage. The expense of
design, permits, purchase and installation of any signs shall be the
responsibility of Tenant and the cost thereof shall be borne by Tenant. At the
termination of the Lease, all signs shall be the property of Tenant and may be
removed from the Premises by Tenant, subject to the provisions of Article 36.
Any relocation of Tenant's signage required by Landlord's division of the
Project into more than one lot shall be with the consent of Tenant and at
Landlord's expense.


                                       13
<PAGE>   14

         10.6 No equipment shall be placed at a location within the Premises
other than a location designed to carry the load of the equipment. Equipment
weighing in excess of floor loading capacity shall not be placed in the
Building.

         10.7 Tenant shall not use or allow the Premises to be used for any
unlawful purpose, nor shall Tenant cause, maintain or permit any nuisance or
waste in, on, or about the Premises.

11. BROKERS.

         11.1 Landlord and Tenant represent and warrant one to the other that
there have been no dealings with any real estate broker or agent in connection
with the negotiation of this Lease other than CB Richard Ellis, which
represented Landlord, and Alexander Commercial Real Estate, Inc., which
represented Tenant. The commissions of both brokers shall be paid by Landlord.
Landlord and Tenant shall each indemnify, defend, protect, and hold harmless the
other from any claim of any other broker as a result of any act or agreement of
the indemnitor.

         11.2 Tenant represents and warrants that no broker or agent has made
any representation or warranty relied upon by Tenant in Tenant's decision to
enter into this Lease other than as contained in this Lease.

12. HOLDING OVER.

         12.1 If, with Landlord's consent, Tenant holds possession of all or any
part of the Premises after the expiration or earlier termination of this Lease,
Tenant shall become a tenant from month to month upon the date of such
expiration or earlier termination, and in such case Tenant shall continue to pay
in accordance with Article 5 the Basic Annual Rent as adjusted from the Term
Commencement Date in accordance with Article 6, together with Operating Expenses
in accordance with Article 7 and other Additional Rent as may be payable by
Tenant, and such month-to-month tenancy shall be subject to every other term,
covenant and condition contained herein.

         12.2 If Tenant remains in possession of all or any portion of the
Premises after the expiration or earlier termination of the term hereof without
the express written consent of Landlord, Tenant shall become a tenant at
sufferance upon the terms of this Lease except that each monthly installment of
Basic Annual Rent shall be equal to one hundred twenty five percent (125%) of
each monthly installment of Basic Annual Rent that was payable during the last
twelve (12) months of the Lease term.

         12.3 Acceptance by Landlord of Rent after such expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.

         12.4 The foregoing provisions of this Article 12 are in addition to and
do not affect Landlord's right to re-entry or any other rights of Landlord under
Article 24 or elsewhere in this Lease or as otherwise provided by law.

13. TAXES ON TENANT'S PROPERTY

         13.1 Tenant shall pay not less than ten (10) days before delinquency
taxes levied against any personal property or trade fixtures placed by Tenant in
or about the Premises. Tenant shall not be responsible for taxes levied against
any personal property or trade fixtures of other tenants.



                                       14
<PAGE>   15

         13.2 If any such taxes on Tenant's personal property or trade fixtures
are levied against Landlord or Landlord's property or, if the assessed valuation
of the Project is increased by the inclusion therein of a value attributable to
Tenant's personal property or trade fixtures, and if Landlord after written
notice to Tenant pays the taxes based upon such increase in the assessed value,
then Tenant shall upon demand repay to Landlord the taxes so levied against
Landlord.

         13.3 If any improvements in or alterations to the Premises, whether
owned by Landlord or Tenant and whether or not affixed to the real property so
as to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which improvements in other spaces in the
Project are assessed, then the real property taxes and assessments levied
against Landlord or the Project by reason of such excess assessed valuation
shall be deemed to be taxes levied against personal property to Tenant and shall
be governed by the provisions of Section 13.2 above. Any such excess assessed
valuation due to improvements in or alterations to space in the Project leased
by other tenants of Landlord shall not be included in the Operating Expenses
defined in Section 7, but shall be treated, as to such other tenants, as
provided in this Section 13.3, and shall be allocated to such other tenants. If
the records of the County assessor are available and sufficiently detailed to
serve as a basis for determining whether said Tenant improvements or alterations
are assessed at a higher valuation than improvements in other spaces in the
Project, such records shall be binding on both Landlord and Tenant.

         13.4 To the extent Tenant fails to make any payment required by this
Article 13 and Landlord does so on Tenant's behalf, Tenant shall reimburse
Landlord for the cost thereof pursuant to the provisions of Sections 7.1 and
24.3.

14. CONDITION OF PREMISES.

         14.1 Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty, express or implied, with
respect to the condition of the Premises, or to the Project, except as set forth
herein, or with respect to their suitability for the conduct of Tenant's
business.

         14.2 Landlord warrants to Tenant that the Project (other than the
Tenant Improvements, which are the responsibility of Tenant), will be built in a
good and workmanlike manner and in substantial compliance with the project plans
and all applicable building code requirements, laws, rules, orders, ordinances,
directions, regulations, permits, approvals, and requirements of all
governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and with the rules, orders, directions, regulations, and
requirements of any applicable fire rating bureau, and will be free of patent
and latent defects in design, materials and construction.

         14.3 Landlord warrants to Tenant that the Project (other than the
Tenant Improvements, which are the responsibility of Tenant) will be in
compliance with ADA, and the regulations promulgated thereunder, at such time as
the Site Improvements and Building Shell are completed.

15. COMMON AREAS AND PARKING FACILITIES.

         15.1 Tenant shall have the nonexclusive right, in common with others,
to use the Common Areas, subject to the rules and regulations adopted by
Landlord and attached hereto as Exhibit "E" together with such other reasonable
and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord (the "Rules and Regulations").



                                       15
<PAGE>   16

         15.2 Tenant shall not place any equipment, storage containers or any
other property on the surface parking area or otherwise outside of the Premises
without the consent of Landlord. In the event Tenant elects to locate Hazardous
Material storage facilities, water systems, mechanical equipment, emergency
generators, or other Tenant Improvements in the parking area, the space used for
such facilities shall be part of the portion of the parking area that Tenant
would otherwise use for parking pursuant to Section 15.3.

         15.3 As an appurtenance to the Premises, Tenant, and its employees and
invitees, shall be entitled to use, without additional charge, at least 50
parking spaces in the parking area (computed at 2.0 spaces per 1,000 square feet
of Rentable Area). All parking areas serving the Project shall be used in common
with other tenants of the Project; provided, however, four (4) spaces
immediately in front of the Premises (and not in front of another tenant's
premises), at locations mutually acceptable to both Landlord and Tenant, shall
be appropriately identified by Landlord at Landlord's expense as reserved for
Tenant's use by words painted on the asphalt surface of each such space;
provided further, Landlord reserves the right to similarly identify other
parking spaces as reserved for other tenants of the Project. Landlord shall not
be responsible for policing the use of the reserved spaces.

16. UTILITIES AND SERVICES.

         16.1 Tenant shall pay for all water, gas, electricity, telephone, cable
television, and other utilities which may be furnished to the Premises during
the term of this Lease, together with any taxes thereon. If any such utility is
not separately metered to Tenant, Tenant shall pay a reasonable proportion to be
determined by Landlord of all charges jointly metered with tenants of other
premises and shall be paid together with Operating Expenses. Utilities and
services provided to the Premises which are separately metered shall be paid by
Tenant directly to the supplier of such utility or service, and Tenant shall pay
for such utilities and services prior to delinquency during the term of this
Lease.

         16.2 Landlord shall not be liable for, nor shall any eviction of Tenant
result from, any failure of any such utility or service, and in the event of
such failure Tenant shall not be entitled to any abatement or reduction of Rent,
nor be relieved from the operation of any covenant or agreement of this Lease,
and Tenant waives any right to terminate this Lease on account thereof. However,
notwithstanding the foregoing, in the event any such failure persists for more
than twelve (12) months, Tenant at its election may terminate this Lease.

         16.3 Tenant shall provide and pay for janitors, maintenance personnel,
and other persons who perform duties connected with the operation and
maintenance of the interior of the Premises.

17. ALTERATIONS.

         17.1 Tenant shall make no alterations, additions or improvements
(hereinafter in this section, "improvements") in or to the Premises, except for
non-structural improvements costing less than $50,000 in any one instance nor in
the aggregate in any 12-month period, without Landlord's prior written consent,
which shall not be unreasonably withheld or delayed. Tenant shall deliver to
Landlord final plans and specifications and working drawings for the
improvements to Landlord, and Landlord shall have ten (10) days thereafter to
grant or withhold its consent. If Landlord does not notify Tenant of its
decision within the ten (10) days, Landlord shall be deemed to have given its
approval.



                                       16
<PAGE>   17

         17.2 If a permit is required to construct the improvements, Tenant
shall deliver a completed, signed-off inspection card to Landlord within ten
(10) days of completion of the improvements, and shall promptly thereafter
obtain and record a notice of completion and deliver a copy thereof to Landlord.

         17.3 The improvements shall be constructed only by licensed
contractors. All contractors, except those constructing non-structural
improvements costing less than $50,000 as set forth in Section 17.1, shall be
approved by Landlord, which approval shall not be unreasonably withheld or
delayed. Any such contractor must have in force a general liability insurance
policy of not less than $2,000,000, which policy of insurance shall name
Landlord as an additional insured. Tenant shall provide Landlord with a copy of
the contract with the contractor and a certificate of insurance showing that the
contractor has the insurance required by this Section 17.3 prior to the
commencement of construction.

         17.4 Tenant agrees that any work by Tenant shall be accomplished in
such a manner as to permit any fire sprinkler system and fire water supply lines
to remain fully operable at all times except when minimally necessary for
building reconfiguration work.

         17.5 Tenant covenants and agrees that all work done by Tenant shall be
performed in good and workmanlike manner and in substantial compliance with all
laws, rules, orders, ordinances, directions, regulations, permits, approvals,
and requirements of all governmental agencies, offices, departments, bureaus and
boards having jurisdiction, and in full compliance with the rules, orders,
directions, regulations, and requirements of any applicable fire rating bureau.
Tenant shall provide Landlord with "as-built" plans showing any change in the
Premises within thirty (30) days after completion.

         17.6 Before commencing any work (other than interior non-structural
alterations, additions or improvements), Tenant shall give Landlord at least
five (5) days' prior written notice of the proposed commencement of such work
and, for any such work which exceeds $25,000.00 in cost, if required by
Landlord, secure at Tenant's own cost and expense a completion and lien
indemnity bond approved by Landlord, which approval will not be unreasonably
withheld.

18. REPAIRS AND MAINTENANCE.

         18.1 Landlord shall repair and maintain the structural and exterior
portions and Common Areas of the Building and Project, including foundations,
exterior walls, load bearing walls, windows, plate glass, roofing, and roofing
covering materials, and plumbing, fire sprinkler system, heating, ventilating,
air conditioning, elevator, telecommunications and electrical systems installed
or furnished by Landlord (and not part of the Tenant Improvements), subject to
reimbursement by Tenant as its Pro Rata Share of Operating Expenses to the
extent provided by Section 7. However, if such maintenance or repairs are
required because of any act, neglect, fault of or omissions of any duty by
Tenant, its agents, servants, employees, contractors or invitees, Tenant shall
pay to Landlord upon demand the costs of the entirety of such maintenance and
repairs attributable to such act, neglect, fault or omission, subject to credit
for any insurance proceeds recovered on account thereof..

         18.2 Except as otherwise set forth in Section 18.1, Tenant shall,
throughout the term of this Lease, at Tenant's sole cost and expense, keep the
Premises and every part thereof in the same condition and repair as delivered to
Tenant, including plumbing, fire sprinkler, heating, ventilating, air
conditioning, elevator, and electrical systems installed as part of the Tenant
Improvements.




                                       17
<PAGE>   18

Tenant shall upon the expiration or earlier termination of the term hereof
surrender the Premises to Landlord in the same condition as when received
(together with the Tenant Improvements and any subsequent improvements made by
Tenant), ordinary wear and tear and damage from causes beyond the reasonable
control of Tenant excepted. Except as set forth in Section 18.1, Landlord shall
have no obligation to alter, remodel, improve, repair, decorate or paint the
Premises or any part thereof.

         18.3 There shall be no abatement of Rent and no liability of Landlord
by reason of any injury to or interference with Tenant's business arising from
the making of any repairs, alterations or improvements in or to any portion of
the Premises, Building or Project, or in or to improvements, fixtures, equipment
and personal property therein. If repairs or replacements become necessary which
by the terms of this Lease are the responsibility of Tenant and Tenant fails to
make the repairs or replacements, Landlord may do so pursuant to the provisions
of Section 24.3.

19. LIENS.

         19.1 Tenant shall keep the Premises, the Building and the property upon
which the Building is situated free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to, Tenant, will be discharged by Tenant, by bond or otherwise, within thirty
(30) days after Tenant receives notice of the filing thereof (or within ten (10)
days after the filing thereof if requested by Landlord as necessary to
facilitate a pending sale or refinancing), at the cost and expense of Tenant.

         19.2 Should Tenant fail to discharge any lien of the nature described
in Section 19.1, Landlord may at Landlord's election pay such claim or post a
bond or otherwise provide security to eliminate the lien as a claim against
title and the cost thereof shall be immediately due from Tenant as Additional
Rent.

         19.3 In the event Tenant shall lease or finance the acquisition of
office equipment, furnishings, or other personal property utilized by Tenant in
the operation of Tenant's business, Tenant warrants that any Uniform Commercial
Code financing statement executed by Tenant will upon its face or by exhibit
thereto indicate that such financing statement is applicable only to personal
property of Tenant specifically described in the financing statement, and that
such property is subject to the provisions of Section 30 regarding the removal
of property on the expiration or earlier termination of this Lease. In no event
shall the address of the Building be furnished on the financing statement
without qualifying language as to applicability of the lien only to personal
property of Tenant described in the financing statement. Should any holder of a
security agreement executed by Tenant record or place of record a financing
statement which appears to constitute a lien against any interest of Landlord,
Tenant shall within ten (10) days after the filing of such financing statement
cause (i) copies of the security agreement or other documents to which the
financing statement pertains to be furnished to Landlord to facilitate
Landlord's being in a position to show such lien is not applicable to any
interest of Landlord, and (ii) the holder of the security interest to amend
documents of record so as to clarify that such lien is not applicable to any
interest of Landlord in the Premises.



                                       18
<PAGE>   19

20. INDEMNIFICATION AND EXCULPATION.

         20.1 Except to the extent of the responsibility of Landlord pursuant to
Section 20.2 hereof, Tenant agrees to indemnify Landlord, and its partners and
affiliates, and their respective shareholders, directors, officers, agents,
contractors and employees (collectively, "Landlord's Agents"), against, and to
protect, defend, and save them harmless from, all demands, claims, causes of
action, liabilities, losses and judgments, and all reasonable expenses incurred
in investigating or resisting the same (including reasonable attorneys' fees),
for death of or injury to person or damage to property arising out of (i) any
occurrence in, upon or about the Premises during the term of this Lease, (ii)
Tenant's use, occupancy, repairs, maintenance, and improvements of the Premises
and all improvements, fixtures, equipment and personal property thereon, and
(iii) any act or omission of Tenant, its shareholders, directors, officers,
agents, employees, servants, contractors, invitees and subtenants, except to the
extent caused by the negligence or willful misconduct of Landlord or Landlord's
Agents. Tenant's obligation under this Section 20.1 shall survive the expiration
or earlier termination of the term of this Lease.

         20.2 Landlord agrees to indemnify Tenant and Tenant's shareholders,
directors, officers, agents, and employees (collectively "Tenant's Agents")
against and save them harmless from all demands, claims, causes of action, and
judgments, and all reasonable expenses incurred in investigating or resisting
the same (including reasonable attorneys' fees), for death of, or injury to, any
person or damage to property arising from or out of any occurrence in, upon, or
about the Premises during the term of this Lease if caused by the negligence or
willful misconduct of Landlord or Landlord's Agents, except to the extent caused
by the negligence or willful misconduct of Tenant or Tenant's Agents. Landlord's
obligations under this Section 20.2 shall survive the expiration or earlier
termination of the term of this Lease.

         20.3 Notwithstanding any provision of Sections 20.1 and 20.2 to the
contrary, Landlord shall not be liable to Tenant and Tenant assumes all risk of
damage to any fixtures, goods, inventory, merchandise, equipment, records,
research, experiments, animals and other living organisms, computer hardware and
software, leasehold improvements, and other personal property of any nature
whatsoever, and Landlord shall not be liable for injury to Tenant's business or
any loss of income therefrom relative to such damage, unless caused by
Landlord's or Landlord's Agents' willful misconduct or gross negligence.

         20.4 The indemnity obligations of both Landlord and Tenant under this
Section 20 shall be satisfied to the extent of proceeds of applicable insurance
maintained by the indemnifying party to the extent thereof, and thereafter to
proceeds of any applicable insurance maintained by the other party; Landlord and
Tenant shall be required to satisfy any such obligation only to the extent it is
not satisfied by proceeds of applicable insurance as set forth above.

         20.5 Security devices and services, if any, while intended to deter
crime, may not in given instances prevent theft or other criminal acts, and it
is agreed that Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties and the risk that any security device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's cost obtain insurance coverages to the extent Tenant
desires protection against such criminal acts.

         20.6 Landlord shall not be liable for any damages arising from any act
or neglect of any other tenant in the Building or Project.



                                       19
<PAGE>   20

21. INSURANCE - WAIVER OF SUBROGATION.

         21.1 Commencing prior to Tenant's first entry onto the Premises for
purposes of installing any improvements, fixtures or personal property, but no
later than the Term Commencement Date, and continuing at all times during the
term of this Lease, Tenant shall maintain, at Tenant's expense, commercial
general liability insurance, on an occurrence basis, insuring Tenant and
Tenant's agents, employees and independent contractors against all bodily
injury, property damage, personal injury and other covered loss arising out of
the use, occupancy, improvement and maintenance of the Premises and the business
operated by Tenant, or any other occupant, on the Premises. Such insurance shall
have a minimum combined single limit of liability per occurrence of not less
than $1,000,000.00 and a general aggregate limit of $2,000,000.00. Such
insurance shall: (i) name Landlord, and Landlord's lenders if required by such
lenders, and any management company retained to manage the Premises if requested
by Landlord, as additional insureds; (ii) include a broad form contractual
liability endorsement insuring Tenant's indemnity obligations under Section
20.1; (iii) include a products liability coverage endorsement (with limits of
$2,000,000.00 on a "claims made" basis); (iv) provide that it is primary
coverage and noncontributing with any insurance maintained by Landlord or
Landlord's lenders, which shall be excess insurance with respect only to losses
arising out of Tenant's negligence; and (v) provide for severability of
interests, such that an act or omission of an insured shall not reduce or avoid
coverage of other insureds.

         21.2 At all times during the term of this Lease, Landlord shall
maintain, subject to reimbursement by Tenant as an Operating Expense under
Section 7.1(b), "special form" insurance, including, but not limited to,
coverage against loss or damage by fire, vandalism, and malicious mischief
covering the Project (exclusive of excavations, foundations and footings), the
Tenant Improvements, and all other improvements and fixtures that may be
constructed or installed on the Premises, in an amount equal to one hundred
percent (100%) of the full replacement value thereof. If any boilers or other
pressure vessels or systems are installed on the Premises, Landlord shall
maintain, subject to reimbursement by Tenant as an Operating Expense under
Section 7.1(b), boiler and machinery insurance in an amount equal to one hundred
percent (100%) of the full replacement value thereof. At all times during the
course of any major demolition or construction permitted hereunder, or any
restoration pursuant to Articles 22 or 23, Tenant shall maintain, at Tenant's
expense, "all risk" builder's risk insurance, including, but not limited to,
coverage against loss or damage by fire, vandalism and malicious mischief,
covering improvements in place and all material and equipment at the job site
furnished under contract, in an amount equal to one hundred percent (100%) of
the full replacement value thereof. The insurance described in this Section 21.2
shall: (i) insure Landlord, and Landlord's lenders if required by such lenders,
as their interests may appear; (ii) contain a Lender's Loss Payable Form (Form
438 BFU or equivalent) in favor of Landlord's lenders and name Landlord, or
Landlord's lender if required by such lender, as the loss payee; (iii) provide
for severability of interests, such that an act or omission of an insured shall
not reduce or avoid coverage of other insureds; (iv) include an agreed amount
endorsement and an inflation endorsement; and (v) provide that it is primary
coverage and noncontributing with any insurance maintained by Landlord or
Landlord's lenders, which shall be excess insurance. The full replacement value
of the Project, the Tenant Improvements and other improvements and fixtures
insured thereunder shall, for the purpose of establishing insurance limits and
premiums only, be determined by the company issuing the insurance policy and
shall be redetermined by said company within six (6) months after completion of
any material alterations or improvements to the Premises and otherwise at
intervals of not more than three (3) years. Landlord shall promptly increase the
amount of the insurance carried pursuant to this Section 21.2 to the amount so
redetermined. The proceeds of the insurance described in this Section shall be
used for the repair, replacement and restoration of the Premises and the Tenant
Improvements and other improvements and fixtures insured thereunder, as further
provided in



                                       20
<PAGE>   21

Article 22; provided, however, if this Lease is terminated after damage or
destruction, the insurance policy or policies, all rights thereunder and all
insurance proceeds shall be assigned to Landlord.

         21.3 At all times during the term of this Lease, Tenant shall maintain,
at Tenant's expense, business interruption insurance in order to insure that the
Basic Annual Rent and Operating Expenses provided for hereunder will be paid for
a period of up to one (1) year after any casualty insured against by all risk
policy of insurance described in Section 21.2 above or any restriction of access
to the Premises as a result of such casualty.

         21.4 At all times during the term of this Lease, Tenant shall maintain,
at Tenant's expense, "all risk" insurance against all other personal property,
including trade fixtures, equipment and merchandise, of Tenant or any subtenant
of Tenant that may be occupying the Premises, or any portion thereof, from time
to time, in an amount equal to the full replacement value thereof.

         21.5 At all times during the term of this Lease, Tenant shall maintain
workers' compensation insurance in accordance with state law, and employers'
liability insurance with limits typical for companies similar to Tenant.

         21.6 All of the policies of insurance referred to in this Article 21
shall be written by companies authorized to do business in Washington and rated
A+VII or better in Best's Insurance Guide. Each insurer referred to in this
Article 21 shall agree, by endorsement on the applicable policy or by
independent instrument furnished to Landlord, that it will give Landlord, and
Landlord's lenders if required by such lenders, at least ten (10) days' prior
written notice before the applicable policy shall be canceled for non-payment of
premium, and thirty (30) days' prior written notice before the applicable policy
shall be canceled or altered in coverage, scope, amount or other material term
for any other reason (although any failure of an insurer to give notice as
provided herein shall not be a breach of this Lease by Tenant). No policy shall
provide for a deductible amount in excess of $100,000, unless approved in
advance in writing by Landlord, which approval shall not be unreasonably
withheld. Tenant shall deliver to Landlord, and to Landlord's lenders if
required by such lenders, copies of the insurance policies required to be
carried by Tenant, certified by the insurer, or certificates evidencing such
insurance policies, issued by the insurer, together with evidence of payment of
the required premiums, prior to the required date for commencement of such
coverage. At least thirty (30) days prior to expiration of any such policy,
Tenant shall deliver to Landlord, and Landlord's lenders if required by such
lenders, a certificate evidencing renewal, or a certified copy of a new policy
or certificate evidencing the same, together with evidence of payment of the
required premiums. If Tenant fails to provide to Landlord any such policy or
certificate by the required date for commencement of coverage, or within fifteen
(15) days prior to expiration of any policy, or to pay the premiums therefor
when required, Landlord shall have the right, but not the obligation, to procure
said insurance and pay the premiums therefor. Any premiums so paid by Landlord
shall be repaid by Tenant to Landlord with the next due installment of rent, and
failure to repay the same shall have the same consequences as failure to pay any
installment of Rent.

         21.7 Landlord may provide the property insurance required under this
Article 21 pursuant to a so-called blanket policy or policies of property
insurance maintained by Landlord.

         21.8 Subject to the provisions of Section 20.4, Landlord and Tenant
each hereby waives any and all rights of recovery against the other or against
the officers, directors, partners, employees, agents, and representatives of the
other, on account of loss or damage to such waiving party's property or the
property of others under its control, to the extent that such loss or damage is
caused



                                       21
<PAGE>   22

by or results from risks insured against under any insurance policy which
insures such waiving party's property at the time of such loss or damage. Prior
to obtaining policies of insurance required or permitted under this Lease,
Landlord and Tenant shall give notice to the insurers that the foregoing mutual
waiver is contained in this Lease, and each party shall cause such insurer to
approve such waiver in writing and to cause each insurance policy obtained by it
to provide that the insurer waives all right of recovery by way of subrogation
against the other party. If the release of either Landlord or Tenant, as set
forth in the first sentence of this Section 21.8, shall contravene any law with
respect to exculpatory agreements, the liability of the party in question shall
be deemed not released but shall be secondary to the other's insurer.

22. DAMAGE OR DESTRUCTION.

         22.1 In the event of damage to or destruction of all or any portion of
the Premises or the improvements and fixtures thereon (collectively,
"improvements") arising from a risk covered by the insurance described in
Section 21.2, Landlord shall within a reasonable time commence and proceed
diligently to repair, reconstruct and restore (collectively, "restore") the Site
Improvements and Building Shell to substantially the same condition as they were
in immediately prior to the casualty, and Tenant shall within a reasonable time
commence and proceed diligently to restore the Tenant Improvements to
substantially the same condition as they were in immediately prior to the
casualty, whether or not the insurance proceeds are sufficient to cover the
actual cost of restoration. Landlord shall be responsible for all insurance
deductibles attributable to the Site Improvements and Building Shell, and for
all costs of restoration of the Site Improvements and Building Shell in excess
of insurance proceeds for the Site Improvements and Building Shell. Tenant shall
be responsible for all insurance deductibles attributable to the Tenant
Improvements, and for all costs of restoration in excess of insurance proceeds
for the Tenant Improvements, as an Operating Expense under Section 7.1(b).
Except as expressly set forth below, this Lease shall continue in full force and
effect, notwithstanding such damage or destruction.

         22.2 In the event of any damage to or destruction of all or any portion
of the improvements arising from a risk which is not covered by the insurance
described in Section 21.2, Landlord shall within a reasonable time, at its
expense, commence and proceed diligently to restore the Site Improvements and
Building Shell to substantially the same condition as they were in immediately
prior to the casualty, and Tenant shall within a reasonable time, at its
expense, commence and proceed diligently to restore the Tenant Improvements to
substantially the same condition as they were in immediately prior to the
casualty. This Lease shall continue in full force and effect notwithstanding
such damage or destruction; provided, however, that if the damage or destruction
(i) occurs during the last two years of the term and the expense of restoration
to either Landlord or Tenant exceeds $200,000, or (ii) occurs at any other time
and the expense of restoration to either Landlord or Tenant exceeds $500,000,
the party responsible for the cost may at its election terminate the Lease
unless the other party elects to pay the full cost of restoration.

         22.3 In satisfying its obligations under this Article 22, neither party
shall be required to fulfill its restoration responsibilities with improvements
identical to those which were damaged or destroyed; rather, with the consent of
the other party, which consent will not be unreasonably withheld, the restoring
party may restore the damage or destruction with improvements reasonably
equivalent or of reasonably equivalent value to those damaged or destroyed.

         22.4 In the event of damage, destruction and/or restoration as herein
provided, there shall be no abatement of Rent, and Tenant shall not be entitled
to any compensation or damages




                                       22
<PAGE>   23

occasioned by any such damage, destruction or restoration. Notwithstanding the
foregoing, in the event restoration of the Site Improvements and Building Shell
cannot reasonably be completed within nine (9) months following the damage or
destruction, Landlord will give notice thereof to Tenant within sixty (60) days
following such damage or destruction, and Tenant at its election may by written
notice to Landlord terminate this Lease effective nine (9) months following such
damage or destruction. In the event of such termination, Tenant shall have no
responsibility for contributing to the expense of restoration.

         22.5 Notwithstanding anything to the contrary contained in this
Article, should a party be delayed or prevented from completing the restoration
of the improvements after the occurrence of such damage or destruction by reason
of acts of God, war, government restrictions, inability to procure the necessary
labor or materials, strikes, or other causes beyond the control of such party
(but excluding economic conditions or financial inability to perform), the time
for such party to commence or complete restoration shall be extended for the
time reasonably required as a result of such event.

         22.6 If an insured casualty occurs, Landlord shall make the loss
adjustment with the insurance company, which adjustment shall be subject to the
approval of Tenant, which approval shall not be unreasonably withheld, and the
proceeds shall be paid to a fund control escrow established by Landlord and
Tenant for the purpose of paying for the restoration required by this Article
22.

         22.7 Tenant waives the provisions of any statute now existing or
hereafter adopted governing destruction of the Premises, so that the parties'
rights and obligations in the event of damage or destruction shall be governed
by the provisions of this Lease.

23. EMINENT DOMAIN.

         23.1 In the event the whole of the Premises shall be taken for any
public or quasi-public purpose by any lawful power or authority by exercise of
the right of appropriation, condemnation or eminent domain, or sold to prevent
such taking, Tenant or Landlord may terminate this Lease effective as of the
date possession is required to be surrendered to said authority.

         23.2 In the event of a partial taking of the Premises for any public or
quasi-public purpose by any lawful power or authority by exercise of right of
appropriation, condemnation, or eminent domain, or sold to prevent such taking,
then Landlord may elect to terminate this Lease if such taking is of a material
nature such as to make it uneconomical to continue use of the unappropriated
portions for the purposes for which they were intended, and Tenant may elect to
terminate this Lease if such taking is of material detriment to, and
substantially interferes with, Tenant's use and occupancy of the Premises. In no
event shall this Lease be terminated when such a partial taking does not have a
material adverse effect upon Landlord or Tenant or both. Termination by either
party pursuant to this section shall be effective as of the date possession is
required to be surrendered to said authority.

         23.3 If upon any taking of the nature described in this Article 23 this
Lease continues in effect, then Landlord shall promptly proceed to restore the
remaining portion of the Premises, and all improvements and fixtures located
thereon, to substantially their same condition prior to such partial taking;
provided, however, Landlord's obligation hereunder shall be limited to the
amount of the condemnation proceeds. Basic Annual Rent shall be abated
proportionately on the basis of the rental



                                       23
<PAGE>   24

value of the Premises, including improvements and fixtures, as restored after
such taking compared to the rental value of the Premises prior to such taking.

         23.4 In the event of any such taking or private purchase in lieu
thereof, Landlord shall be entitled to receive the entire award less the
following items, so long as such items are assigned a specific value in the
award: (a) Tenant's relocation expenses; and (b) Any improvements made to the
Premises by Tenant (other than the initial Tenant Improvements) that, prior to
the time of installation of the improvements, Landlord informed Tenant that
Tenant would be required to remove the improvement at the expiration or earlier
termination of this Lease.

24. DEFAULTS AND REMEDIES.

         24.1 Late payment by Tenant to Landlord of Rent and other sums due will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult and impracticable to ascertain. Such costs
include, but are not limited to, processing and accounting charges and late
charges which may be imposed on Landlord by the terms of any mortgage or trust
deed covering the Premises. Therefore, if any installment of Rent due from
Tenant is not received by Landlord within ten (10) days of the date such payment
is due, Tenant shall pay to Landlord an additional sum of five percent (5%) of
the overdue rent as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of late payment by Tenant. In addition to the late charge, Rent not
paid within thirty (30) days of the date such payment is due shall bear interest
from thirty (30) days after the date due until paid at the lesser of (i) ten
percent (10%) per annum or (ii) the maximum rate permitted by law.

         24.2 No payment by Tenant or receipt by Landlord of a lesser amount
than the rent payment herein stipulated shall be deemed to be other than on
account of the rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
provided. If at any time a dispute shall arise as to any amount or sum of money
to be paid by Tenant to Landlord, Tenant shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment,
and there shall survive the right on the part of Tenant to institute suit for
recovery of the payment paid under protest.

         24.3 If Tenant fails to pay any sum of money (other than Basic Annual
Rent) required to be paid by it hereunder, or shall fail to perform any other
act on its part to be performed hereunder, Landlord may, without waiving or
releasing Tenant from any obligations of Tenant, but shall not be obligated to,
make such payment or perform such act; provided, that such failure by Tenant
continued for ten (10) days after written notice from Landlord demanding
performance by Tenant was delivered to Tenant, or that such failure by Tenant
unreasonably interfered with the use or efficient operation of the Premises, or
resulted or could have resulted in a violation of law or the cancellation of an
insurance policy maintained by Landlord. All sums so paid or incurred by
Landlord, together with interest thereon, from the date such sums were paid or
incurred, at the annual rate equal to ten percent (10%) per annum or highest
rate permitted by law, whichever is less, shall be payable to Landlord on demand
as Additional Rent.




                                       24
<PAGE>   25

         24.4 The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:

             (a) The failure by Tenant to make any payment of Rent, as and when
due, where such failure shall continue for a period of ten (10) days after
written notice thereof from Landlord to Tenant. Such notice shall be in lieu of,
and not in addition to, any notice required under Washington law;

             (b) The failure by Tenant to observe or perform any obligation
other than described in Section 24.4(a) to be performed by Tenant, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
to cure the default, then Tenant shall not be deemed to be in default if Tenant
shall commence such cure within said thirty (30) day period and thereafter
diligently prosecute the same to completion. Such notice shall be in lieu of,
and not in addition to, any notice required under state law;

             (c) Tenant makes an assignment for the benefit of creditors;

             (d) A receiver, trustee or custodian is appointed to, or does, take
title, possession or control of all, or substantially all, of Tenant's assets;

             (e) An order for relief is entered against Tenant pursuant to a
voluntary or involuntary proceeding commenced under any chapter of the
Bankruptcy Code;

             (f) Any involuntary petition is filed against the Tenant under any
chapter of the Bankruptcy Code and is not dismissed within ninety (90) days; or

             (g) Tenant's interest in this Lease is attached, executed upon, or
otherwise judicially seized and such action is not released within ninety (90)
days of the action.

         Notices given under this Section shall specify the alleged default and
shall demand that Tenant perform the provisions of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Premises. No such notice shall be deemed a forfeiture or a termination
of this Lease unless Landlord elects otherwise in such notice, and in no event
shall a forfeiture or termination occur without such written notice.

         24.5 In the event of a default by Tenant, and at any time thereafter,
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have, Landlord shall be entitled to terminate Tenant's right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Tenant shall immediately surrender possession of the Premises to
Landlord. In such event Landlord shall have the immediate right to re-enter and
remove all persons and property, and such property may be removed and stored in
a public warehouse or elsewhere at the cost of, and for the account of Tenant,
all without service of notice and without being deemed guilty of trespass, or
becoming liable for any loss or damage which may be occasioned thereby. In the
event that Landlord shall elect to so terminate this Lease, then Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including:

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




                                       25
<PAGE>   26

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

             (d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligation under
this Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, the cost of restoring the Premises to
the condition required under the terms of this Lease; plus

             (e) At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.

         As used in Subsections (a), (b) and (c), the "time of award" shall mean
the date upon which the judgment in any action brought by Landlord against
Tenant by reason of such default is entered or such earlier date as the court
may determine. As used in Subsections (a) and (b), the "worth at the time of
award" shall be computed by allowing interest at the rate specified in Section
24.1. As used in Subsection (c) above, the "worth at the time of award" shall be
computed by taking the present value of such amount using the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one
percentage point.

         24.6 In the event of a default by Tenant, and if Landlord does not
elect to terminate this Lease as provided in Section 24.5 or otherwise terminate
Tenant's right to possession of the Premises, Landlord may continue this Lease
in effect for so long as Landlord does not terminate Tenant's right to
possession of the Premises, and may enforce all of its rights and remedies under
the Lease, including the right from time to time to recover Rent as it becomes
due under the Lease. At any time thereafter, Landlord may elect to terminate
this Lease and to recover damages to which Landlord is entitled.

         24.7 Notwithstanding anything herein to the contrary, Landlord's
reentry to perform acts of maintenance or preservation of, or in connection with
efforts to relet, the Premises, or any portion thereof, or the appointment of a
receiver upon Landlord's initiative to protect Landlord's interest under this
Lease, shall not terminate Tenant's right to possession of the Premises or any
portion thereof and, until Landlord does elect to terminate this Lease, this
Lease shall continue in full force and Landlord may pursue all its remedies
hereunder, including, without limitation, the right to recover from Tenant as
they become due hereunder all Rent and other charges required to be paid by
Tenant under the terms of this Lease.

         24.8 All rights, options, and remedies of Landlord contained in this
Lease shall be construed and held to be nonexclusive and cumulative. Landlord
shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law, whether or not stated in this
Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any rent or other payments due hereunder or by any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.


                                       26
<PAGE>   27

         24.9 Termination of this Lease or Tenant's right to possession by
Landlord shall not relieve Tenant from any liability to Landlord which has
theretofore accrued or shall arise based upon events which occurred prior to the
last to occur of (i) the date of Lease termination or (ii) the date possession
of Premises is surrendered.

         24.10 Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event later
than thirty (30) days after written notice by Tenant specifying wherein Landlord
has failed to perform such obligation; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion.

         24.11 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee of a mortgage covering the Premises whose address shall have
been furnished to Tenant and shall offer such beneficiary and/or mortgagee a
reasonable opportunity to cure the default, including time to obtain possession
of the Premises by power of sale or a judicial action if such should prove
necessary to effect a cure.

25. ASSIGNMENT OR SUBLETTING.

         25.1 Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, sell, hypothecate or transfer this Lease, or
sublet the Premises or any part thereof, or permit or suffer the Premises or any
part thereof to be used or occupied as work space, storage space, concession or
otherwise by anyone other than Tenant or Tenant's employees, without the prior
written consent of Landlord in each instance, which consent shall not be
unreasonably withheld or delayed.

         25.2 If Tenant desires to assign this Lease to any entity into which
Tenant is merged, with which Tenant is consolidated, or which acquires all or
substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this Lease
arising after the effective date of the transfer, then Landlord upon receipt of
proof of foregoing, will consent to the assignment.

         25.3 In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Premises or any part thereof to a transferee
other than one set forth in Section 25.2, then at least ten (10) days, but not
more than forty-five (45) days, prior to the date when Tenant desires the
assignment or sublease to be effective (the "Assignment Date"), Tenant shall
give Landlord a notice (the "Assignment Notice") which shall set forth the name,
address and business of the proposed assignee or sublessee, information
(including references and financial statements) concerning the reputation and
financial ability of the proposed assignee or sublessee, the Assignment Date,
any ownership or commercial relationship between Tenant and the proposed
assignee or sublessee, and the consideration and all other material terms and
conditions of the proposed assignment or sublease, all in such detail as
Landlord shall reasonably require.

         25.4 Landlord in making its determination as to whether consent should
be given to a proposed assignment or sublease, may give consideration to the
reputation of a proposed successor, the financial strength of such successor in
the case of a proposed assignment (notwithstanding the assignor remaining liable
for Tenant's performance), and any use which such successor proposes to



                                       27
<PAGE>   28

make of the Premises. If Landlord fails to deliver written notice of its
determination to Tenant within fifteen (15) days following receipt of the
Assignment Notice and the information required under Section 25.3, Landlord
shall be deemed to have approved the request. As a condition to any assignment
to which Landlord has given consent, any such assignee must execute, acknowledge
and deliver to Landlord an agreement whereby the assignee agrees to be bound by
all of the covenants and agreements in this Lease.

         25.5 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of Premises that is not in compliance with the provisions of this
Article 25 shall be void and shall, at the option of Landlord, terminate this
Lease.

         25.6 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignee of this Lease or sublessee of the Premises from
obtaining the consent of Landlord to any further assignment or subletting and
shall not release Tenant or any assignee or sublessee of Tenant from full and
primary liability.

         25.7 If Tenant shall sublet the Premises or any part thereof Tenant
hereby immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any subletting of all or a part of
the Premises, and Landlord as assignee of Tenant, or a receiver for Tenant
appointed on Landlord's application, may collect such rent and apply it toward
Tenant's obligations under this Lease; except that, until the occurrence of an
act of default by Tenant, Tenant shall have the right to collect such rent.

         25.8 Notwithstanding any subletting or assignment Tenant shall remain
fully and primarily liable for the payment of all Rent and other sums due, or to
become due hereunder, and for the full performance of all other terms,
conditions, and covenants to be kept and performed by Tenant. The acceptance of
rent or any other sum due hereunder, or the acceptance of performance of any
other term, covenant, or condition hereof, from any other person or entity shall
not be deemed to be a waiver of any of the provisions of this Lease or a consent
to any subletting or assignment of the Premises. Landlord shall not withhold
consent to an assignment back to the original Tenant hereunder from a subsequent
assignee.

         25.9 Any sublease of the Premises shall be subject and subordinate to
the provisions of this Lease, shall not extend beyond the term of this Lease,
and shall provide that the sublessee shall attorn to Landlord, at Landlord's
sole option, in the event of the termination of this Lease. Landlord and any
lender shall upon Tenant's request provide any subtenant of the entirety of the
Premises with a recognition and nondisturbance agreement in the form set forth
in Article 35 hereof on the condition that the sublessee agrees to attorn to
Landlord on exactly the same terms and conditions as this Lease.

         25.10 In the event Tenant assigns or otherwise transfers this Lease or
sublets the Premises to a transferee other than one set forth in Section 25.2,
Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of the
rent and other consideration received from the transferee during the term of
this Lease in excess of Rent payable to Landlord under this Lease, after Tenant
has recouped any reasonable commission, legal, improvement and other
out-of-pocket expenses occasioned by such transfer and payable to third parties,
and after Tenant has recouped any expenses incurred for tenant improvements to
the transferred space constructed after the Term Commencement Date.


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<PAGE>   29

26. ATTORNEY'S FEES.

         26.1 If either party becomes a party to any action or proceeding
concerning this Lease, the Premises, or the Building or Project in which the
Premises are located, by reason of any act or omission of the other party or its
authorized representatives, and not by any act or omission of the party that
becomes a party to that litigation or any act or omission of its authorized
representatives, the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorneys' fees, expert
witness fees, and court costs incurred by it in the litigation.

         26.2 If either party commences an action or proceeding against the
other party arising out of or in connection with this Lease, the prevailing
party shall be entitled to have and recover from the other party reasonable
attorneys' fees, expert witness fees and costs of suit.

27. BANKRUPTCY.

         27.1 In the event a debtor or trustee under the Bankruptcy Code, or
other person with similar rights, duties and powers under any other law,
proposes to cure any default under this Lease or to assume or assign this Lease,
and is obliged to provide adequate assurance to Landlord that (i) a default will
be cured, (ii) Landlord will be compensated for its damages arising from any
breach of this Lease, or (iii) future performance under this Lease will occur,
then adequate assurance shall include any or all of the following, as determined
by the Bankruptcy Court: (a) those acts specified in the Bankruptcy Code or
other law as included within the meaning of adequate assurance; (b) a cash
payment to compensate Landlord for any monetary defaults or damages arising from
a breach of this Lease; (c) the credit worthiness and desirability, as a tenant,
of the person assuming this Lease or receiving an assignment of this Lease, at
least equal to Landlord's customary and usual credit worthiness requirements and
desirability standards in effect at the time of the assumption or assignment, as
determined by the Bankruptcy Court; and (d) the assumption or assignment of all
of Tenant's interest and obligations under this Lease.

28. DEFINITION OF LANDLORD.

         28.1 The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only Landlord or the successor-in-interest of Landlord under this Lease
at the time in question. In the event of any transfer, assignment or conveyance
of Landlord's title or leasehold, the Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor and any prior grantors)
shall be automatically freed and relieved from and after the date of such
transfer, assignment or conveyance of all liability for the performance of any
covenants or obligations contained in this Lease thereafter to be performed by
Landlord and, without further agreement, the transferee of such title or
leasehold shall be deemed to have assumed and agreed to observe and perform any
and all obligations of Landlord hereunder, during its ownership of the Premises.
Landlord may transfer its interest in the Premises or this Lease without the
consent of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on the part of Landlord or the then grantor of any of the terms or
conditions of this Lease.

29. ESTOPPEL CERTIFICATE.

         29.1 Each party shall, within fifteen (15) days of written notice from
the other party, execute, acknowledge and deliver to the other party a statement
in writing on a form reasonably requested by a proposed lender, purchaser,
assignee or subtenant (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and




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<PAGE>   30

certifying that this Lease as so modified is in full force and effect) and the
dates to which the rental and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to each party's knowledge, any uncured
defaults on the part of Landlord or Tenant hereunder (or specifying such
defaults if any are claimed) and (iii) setting forth such further information
with respect to this Lease or the Premises as may be reasonably requested
thereon. Any such statement may be relied upon by any prospective lender,
purchaser, assignee or subtenant of all or any portion of the Premises.

30. REMOVAL OF PROPERTY.

         30.1 Except as provided below, all fixtures and personal property owned
by Tenant shall be and remain the property of Tenant, and may be removed by
Tenant at the expiration or earlier termination of the term of this Lease;
however, cabling for telecom and computers, package HVAC units, and case work,
including lab benches and sinks, may not be removed by Tenant, even if paid for
by Tenant in addition to the Tenant Improvement Allowance.

         30.2 The Project, Building and Tenant Improvements, and all fixtures
and personal property owned by Landlord, including all fixtures and improvements
paid from the Tenant Improvement Allowance, shall be and remain the property of
Landlord, and shall, upon the expiration or earlier termination of this Lease,
remain upon and be surrendered with the Premises as a part thereof.

         30.3 Notwithstanding Section 30.1, Tenant may not remove any property
if such removal would cause material damage to the Premises, unless such damages
can be and is repaired by Tenant. Furthermore, Tenant shall repair any damage to
the Premises caused by Tenant's removal of any such property, and shall, prior
to the expiration or earlier termination of this Lease, restore and return the
Premises to the condition they were in when first occupied by Tenant, reasonable
wear and tear excepted. At a minimum, even if they are determined to be fixtures
or personal property owned by Tenant, Tenant shall leave in place and repair any
damage to the interior floors, walls, doors and ceilings of the Premises, and
the heating, ventilation, air conditioning, plumbing, and electrical systems;
all such property shall become the property of Landlord upon the expiration or
earlier termination of this Lease, and shall remain upon and be surrendered with
the Premises as a part thereof. The provisions of Article 17 shall apply to any
restoration work under this Article as if the restoration was an alteration,
addition or improvement thereunder. Should Tenant require any period beyond the
expiration or earlier termination of the Lease to complete such restoration,
Tenant shall be a tenant at sufferance subject to the provisions of Section 12.2
hereof.

         30.4 If Tenant shall fail to remove any fixtures or personal property
which it is entitled to remove under this Article 30 from the Premises prior to
termination of this Lease, then Landlord may dispose of the property under the
provisions of applicable law now or hereafter in effect.

31. LIMITATION OF LANDLORD'S LIABILITY.

         31.1 If Landlord is in default of this Lease, and as a consequence,
Tenant recovers a money judgment against Landlord, the judgment shall be
satisfied only out of the proceeds of sale received on execution of the judgment
and levy against the right, title, and interest of Landlord in the Project of
which the Premises are a part, and out of rent or other income from the Project
receivable by Landlord or out of the consideration received by Landlord from the
sale or other disposition of all or any part of Landlord's right, title, and
interest in the Building and Project of which the Premises are a part, or by
offsetting Rent under this Lease, notwithstanding anything to the contrary in
this Lease.


                                       30
<PAGE>   31

         31.2 Neither Landlord nor Landlord's Agents shall be personally liable
for any deficiency except to the extent liability is based upon willful and
intentional misconduct. If Landlord is a partnership or joint venture, the
partners of such partnership shall not be personally liable and no partner of
Landlord shall be sued or named as a party in any suit or action, or service of
process be made against any partner of Landlord, except as may be necessary to
secure jurisdiction of the partnership or joint venture or to the extent
liability is caused by willful and intentional misconduct. If Landlord is a
corporation, the shareholders, directors, officers, employees, and/or agents of
such corporation shall not be personally liable and no shareholder, director,
officer, employee, or agent of Landlord shall be sued or named as a party in any
suit or action, or service of process be made against any shareholder, director,
officer, employee, or agent of Landlord, except as may be necessary to secure
jurisdiction of the corporation. If Landlord is a limited liability company, the
members, managers, officers, employees, and/or agents of such limited liability
company shall not be personally liable and no member, manager, officer,
employee, or agent of Landlord shall be sued or named as a party in any suit or
action, or service of process be made against any member, manager, officer,
employee, or agent of Landlord, except as may be necessary to secure
jurisdiction of the corporation. No partner, shareholder, director, member,
manager, employee, or agent of Landlord shall be required to answer or otherwise
plead to any service of process and no judgment will be taken or writ of
execution levied against any partner, shareholder, director, member, manager,
employee, or agent of Landlord.

         31.3 If Landlord shall be in default for more than thirty (30) days
after receipt of Tenant's written notice specifying such default, Tenant may
incur any expense necessary to perform any obligation of Landlord specified in
such notice and, notwithstanding anything to the contrary in this Lease, deduct
such expense from any sums payable by Tenant under this Lease thereafter to
become due, or pursue any other remedy available by law, equity, or by statute.
Provided, however, if Landlord's obligation is such than more than thirty (30)
days are required for its performance, Landlord shall not be deemed in default
if it commences such performance within such thirty (30) day period and
diligently prosecutes such default cure to completion. Tenant may not deduct any
expenses against any sums payable by Tenant to Landlord under this Lease unless
Tenant gives Landlord at least thirty (30) days notice in writing of the default
and Tenant's intention to incur expense to cure this default. In any event,
Tenant may only deduct the reasonable costs of curing the noticed default;
provided, further, Tenant's inability to deduct such expense against any sums
payable by Tenant to Landlord under this Lease shall not affect any other right
or remedy of Tenant.

         31.4 Each of the covenants and agreements of this Article 31 shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or by common law.

32. CONTROL BY LANDLORD.

         32.1 Landlord reserves full control over the Building and Project to
the extent not inconsistent with Tenant's quiet enjoyment and use of Premises.
This reservation includes the right to establish ownership of the buildings
separate from fee title to the real property underlying the Buildings, and to
divide the Project into more than one lot.


                                       31
<PAGE>   32

         32.2 Tenant shall, should Landlord so request, promptly join with
Landlord in execution of such documents as may be appropriate to assist Landlord
to implement any such action provided Tenant need not execute any document which
is of a nature wherein liability is created in Tenant or if by reason of the
terms of such document Tenant will be deprived of the quiet enjoyment and use of
the Premises as granted by this Lease.

33. QUIET ENJOYMENT.

         33.1 So long as Tenant is not in default, Landlord covenants that
Landlord or anyone acting through or under Landlord will not disturb Tenant's
occupancy of the Premises except as permitted by the provisions of this Lease
and that Landlord shall use reasonable efforts to enforce the lease obligations
of tenants of the balance of the Building and Project to the extent they might
otherwise disturb Tenant's occupancy.

34. QUITCLAIM DEED.

         34.1 Tenant shall execute and deliver to Landlord on the expiration or
termination of this Lease, immediately on Landlord's request, a quitclaim deed
to the Premises and Project or other document in recordable form suitable to
evidence of record termination of this Lease and the right of first refusal and
option contained herein.

35. SUBORDINATION AND ATTORNMENT.

         35.1 Unless the mortgagee or beneficiary elects otherwise at any time
prior to or following a default by Tenant, this Lease shall be subject to and
subordinate to the lien of any mortgage or deed of trust now or hereafter in
force against the Project and Building of which the Premises are a part, and to
all advances made or hereafter to be made upon the security thereof without the
necessity of the execution and delivery of any further instruments on the part
of Tenant to effectuate such subordination, provided that the lienholder,
beneficiary, or mortgagee has previously executed and delivered to Tenant a
non-disturbance, attornment, and subordination agreement in such form as the
lienholder, beneficiary, or mortgagee may request and as the Tenant may approve,
which approval will not be unreasonably withheld, setting forth that so long as
Tenant is not in default hereunder, Landlord's and Tenant's rights and
obligations hereunder shall remain in force and Tenant's right to possession
shall be upheld. Furthermore, Landlord shall provide to Tenant, within one
hundred twenty (120) days after execution of this Lease by both parties, such a
nondisturbance agreement from the beneficiary of any mortgage presently
encumbering the Project.

         35.2 Notwithstanding the foregoing, Tenant shall execute and deliver
upon demand such further instrument or instruments evidencing such subordination
of this Lease to the lien of any such mortgage or deed of trust as may be
required by Landlord and in a form reasonably satisfactory to Tenant, provided
that the lienholder, beneficiary, or mortgagee has previously executed and
delivered to Tenant a non-disturbance agreement in recordable form. However, if
any such mortgagee or beneficiary so elects at any time prior to or following a
default by Tenant, this Lease shall be deemed prior in priority to any such
mortgage or deed of trust regardless of date and Tenant will execute a statement
in writing to such effect at Landlord's request in a form reasonably
satisfactory to Tenant.

         35.3 In the event any proceedings are brought for foreclosure, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by the Landlord covering the Premises, the Tenant shall at the
election of the purchaser at such foreclosure or sale attorn to the



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<PAGE>   33

purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease in accordance with the terms of the non-disturbance
Agreement.

36. SURRENDER.

         36.1 No surrender of possession of any part of the Premises shall
release Tenant from any of its obligations hereunder unless accepted by Landlord
in writing.

         36.2 The voluntary or other surrender of this Lease by Tenant shall not
work a merger, unless Landlord consents, and shall, at the option of Landlord,
operate as an assignment to it of any or all subleases or subtenancies.

37. WAIVER AND MODIFICATION.

         37.1 No provision of this Lease may be modified, amended or added to
except by an agreement in writing. The waiver by Landlord of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of any subsequent breach of the same or any other term, covenant or condition
herein contained.

38. WAIVER OF JURY TRIAL.

         38.1 The parties hereto shall and they hereby do waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, and/or any claim of injury or damage.

39. HAZARDOUS MATERIAL.

         39.1 During the term, Tenant, at its sole cost, shall comply with all
federal, state and local laws, statutes, ordinances, codes, regulations and
orders relating to the receiving, handling, use, storage, accumulation,
transportation, generation, spillage, migration, discharge, release and disposal
of Hazardous Material (as defined below) in or about the Project. Tenant shall
not cause or permit any Hazardous Material to be brought upon, kept or used in
or about the Project by Tenant, its agents, employees, contractors, invitees or
subtenants, in a manner or for a purpose prohibited by any federal, state or
local agency or authority. The accumulation of Hazardous Material shall be in
approved containers and removed from the Project by duly licensed carriers.

         39.2 Tenant shall immediately provide Landlord with telephonic notice,
which shall promptly be confirmed by written notice, of any and all spillage,
discharge, release and disposal of Hazardous Material onto or within the
Project, including the soils and subsurface waters thereof, which by law must be
reported to any federal, state or local agency, and any injuries or damages
resulting directly or indirectly therefrom. Further, Tenant shall deliver to
Landlord each and every notice or order, when said order or notice identifies a
violation which may have the potential to adversely impact the Project, received
from any federal, state or local agency concerning Hazardous Material and the
possession, use and/or accumulation thereof promptly upon receipt of each such
notice or order by Tenant. Landlord shall have the right, upon reasonable
notice, to inspect and copy each and every notice or order received from any
federal, state or local agency concerning Hazardous Material and the possession,
use and/or accumulation thereof.


                                       33
<PAGE>   34

         39.3 Tenant shall be responsible for and shall indemnify, protect,
defend and hold harmless Landlord and Landlord's Agents from any and all
liability, damages, injuries, causes of action, claims, judgments, costs,
penalties, fines, losses, and expenses which arise during or after the term of
this Lease and which result from Tenant's (or from Tenant's Agents, assignees,
subtenants, employees, agents, contractors, licensees, or invitees) receiving,
handling, use, storage, accumulation, transportation, generation, spillage,
migration, discharge, release or disposal of Hazardous Material in, upon or
about the Project, including without limitation (i) diminution in value of the
Project or any portion of the Project, (ii) damages for the loss or restriction
on use of any portion or amenity of the Project , (iii) damages arising from any
adverse impact on marketing of space in the Project, (iv) damages and the costs
of remedial work to other property in the vicinity of the Project incurred by
Landlord or an affiliate of Landlord, and (v) reasonable consultant fees, expert
fees, and attorneys' fees. Landlord shall be responsible for and shall
indemnify, protect, defend and hold harmless Tenant and Tenant's Agents on the
same basis as above for any claims which result from Landlord's or from
Landlord's Agents receiving, handling, use, storage, accumulation,
transportation, generation, spillage, migration, discharge, release or disposal
of Hazardous Material in, upon or about the Project.

         39.4 The indemnification pursuant to the preceding Section 39.3
includes, without limiting the generality of Section 39.3, reasonable costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Material
present in the soil, subsoil, ground water, or elsewhere on, under or about the
Project, or on, under or about any other property in the vicinity of the
Project. Without limiting the foregoing, if the presence of any Hazardous
Material on the Project caused or permitted by Tenant results in any
contamination of the Project, or underlying soil or groundwater, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Project to that condition required by applicable law, provided that Landlord's
approval of such action shall first be obtained, which approval shall not be
unreasonably withheld, except that Tenant shall not be required to obtain
Landlord's prior approval of any action of an emergency nature reasonably
required or any action mandated by a governmental authority, but Tenant shall
give Landlord prompt notice thereof.

         39.5 Landlord acknowledges that it is not the intent of this Article 39
to prohibit Tenant from operating its business as described in Article 10 or to
unreasonably interfere with the operation of Tenant's business. Tenant may
operate its business according to the custom of the industry so long as the use
or presence of Hazardous Material is strictly and properly monitored according
to all applicable governmental requirements. As a material inducement to
Landlord to allow Tenant to use Hazardous Material in connection with its
business, Tenant agrees to make available to Landlord upon reasonable request a
list identifying each type of Hazardous Material to be present in or upon the
Project and setting forth any and all governmental approvals or permits required
in connection with the presence of Hazardous Material on the Project ("Hazardous
Material Summary"). At Landlord's request, and at reasonable times, Tenant shall
make available to Landlord the latest available Hazardous Materials Summary and
true and correct copies of the following documents (hereinafter referred to as
the "Hazardous Material Documents") relating to the handling, storage, disposal
and emission of Hazardous Material: permits; approvals; reports and
correspondence; storage and management plans; notice of violations of any laws;
plans relating to the installation of any storage tanks to be installed in or
under the Project (provided said installation of tanks shall be permitted only
after Landlord has given Tenant its written consent to do so, which consent may
not be unreasonably withheld); and all closure plans or any other documents
required by any and all federal, state and local governmental agencies and
authorities for any storage tanks installed in, on or



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<PAGE>   35

about the Project for the closure of any such tanks. Tenant shall not be
required, however, to provide Landlord with that portion of any document which
contains information of a proprietary nature and which, in and of itself, does
not contain a reference to any Hazardous Material which are not otherwise
identified to Landlord in such documentation, unless any such Hazardous Material
Document names Landlord as an "owner" or "operator" of the facility in which
Tenant is conducting its business. It is not the intent of this subsection to
provide Landlord with information which could be detrimental to Tenant's
business should such information become possessed by Tenant's competitors.
Landlord shall treat all information furnished by Tenant to Landlord pursuant to
this Section 39.5 as confidential and shall not disclose such information to any
person or entity without Tenant's prior written consent, which consent shall not
be unreasonably withheld or delayed, except as required by law.

         39.6 Notwithstanding other provisions of this Article 39, it shall be a
default under this Lease, and Landlord shall have the right to terminate the
Lease and/or pursue its other remedies under Article 24, in the event that (i)
Tenant's use of the Premises for the generation, storage, use, treatment or
disposal of Hazardous Material is in a manner or for a purpose prohibited by
applicable law unless Tenant is diligently pursuing compliance with such law,
(ii) Tenant has been required by any governmental authority to take remedial
action in connection with Hazardous Material contaminating the Project if the
contamination resulted from Tenant's action or use of the Premises, unless
Tenant is diligently pursuing compliance with such requirement, or (iii) Tenant
is subject to an enforcement order issued by any governmental authority in
connection with Tenant's use, disposal or storage of a Hazardous Material on the
Project, unless Tenant is diligently seeking compliance with such enforcement
order.

         39.7 Notwithstanding the provisions of Article 25, if (i) any
anticipated use of the Premises by a proposed assignee or subtenant involves the
generation or storage, use, treatment or disposal of Hazardous Material in any
manner or for a purpose prohibited by any applicable law, or (ii) the proposed
assignee or sublessee is subject to a final, unappealable enforcement order
issued by any governmental authority in connection with such party's use,
disposal or storage of Hazardous Material of a type such proposed assignee or
sublessee intends to use in the Premises and shall have failed to comply with
such order, it shall not be unreasonable for Landlord to withhold its consent to
an assignment or subletting to such proposed assignee or sublessee.

         39.8 Landlord represents that, to the best of its knowledge, as of the
date of this Lease, there is no Hazardous Material on the Project. Landlord
shall provide Tenant with a Phase I Environmental Site Assessment dated
September 1, 1999, by Earth Consultants, Inc., and will provide to Tenant an
update of the environmental site assessment as of the date Landlord tenders
possession of the Premises to Tenant for construction of the Tenant
Improvements. Should the environmental site assessment(s) disclose the presence
of Hazardous Material beyond legally permissible levels, Landlord shall correct
the deficiencies to Tenant's reasonable satisfaction and shall cause updates to
the environmental site assessment(s) to be issued reflecting the remedy. The
environmental site assessment(s) and all updates thereto are hereinafter
referred to as the "Base Line Report," and shall be deemed conclusive as to the
condition of the Project, unless, within ninety (90) days after the date of
execution hereof, Tenant causes an inspection of its own to be conducted, which
inspection discloses the presence of Hazardous Material materially different
from that disclosed in the Base Line Report.

         39.9 At any time prior to the expiration or earlier termination of the
term of the Lease, Landlord shall have the right to enter upon the Premises at
all reasonable times and at reasonable



                                       35
<PAGE>   36

intervals in order to conduct appropriate tests regarding the presence, use and
storage of Hazardous Material, and to inspect Tenant's records with regard
thereto. Tenant will pay the reasonable costs of any such test which
demonstrates that contamination in excess of permissible levels has occurred and
such contamination was caused by Tenant's use of the Project during the term of
the Lease. Tenant shall correct any deficiencies identified in any such tests in
accordance with its obligations under this Article 39 to the extent the
deficiencies are the result of Tenant's use of the Project during the term of
this Lease.

         39.10 Tenant shall at its own expense cause an environmental site
assessment of the Premises to be conducted and a report thereof delivered to
Landlord upon the expiration or earlier termination of the Lease, such report to
be as complete and broad in scope as is necessary to identify any impact on the
Project Tenant's operations might have had (hereinafter referred to as the "Exit
Report"). In order to facilitate the Exit Report, Tenant shall install, as part
of the Tenant Improvements, a sampling port on the sewer drain from the
Premises. Tenant shall correct any deficiencies identified in the Exit Report in
accordance with its obligations under this Article 39 prior to the expiration or
earlier termination of this Lease. This Article 39 is the exclusive provision in
this Lease regarding clean-up, repairs or maintenance arising from receiving,
handling, use, storage, accumulation, transportation, generation, spillage,
migration, discharge, release or disposal of Hazardous Material in, upon or
about the Project, and the provisions of Articles 7, 10, 18, and 20 shall not
apply thereto.

         39.11 Landlord's and Tenant's obligations under this Article 39 shall
survive the termination of the Lease.

         39.12 As used herein, the term "Hazardous Material" means any hazardous
or toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of Washington or the United States Government.
The term "Hazardous Material" includes, without limitation, any material or
substance which is (i) petroleum, (ii) asbestos, (iii) designated as a
"hazardous substance" pursuant to Section 311 of the Federal Water Pollution
Control Act (33 U.S.C. Section 1317), (iv) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act,
42 U.S.C. Section 6901, et. seq. (42 U.S.C. Section 6903), or (v) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42
U.S.C. Section 9601).

40. OPTION TO EXTEND TERM.

         40.1 Landlord grants to Tenant the right to extend the term of this
Lease for two (2) separate five (5) year periods under the same terms and
conditions existing in the original Lease except as set forth in this Article
40. Tenant shall exercise such right to extend the term of this Lease by written
notice to Landlord given no earlier than twelve (12) and no later than nine (9)
months prior to the end of the original term or the first extension term of this
Lease, as the case may be. The second extension option shall lapse and have no
further force or effect if the first extension option is not exercised, and
there shall be no right to extend the term beyond said two (2) extension
periods.

         40.2 Basic Annual Rent shall be adjusted on the first day of each
extension term to the fair market rental value of the Premises as of the
commencement of the extension term. Notwithstanding the foregoing, the Basic
Annual Rent on the first day of each extension term shall not be less than the
Basic Annual Rent of the last year of the preceding term.


                                       36
<PAGE>   37

         40.3 Landlord and Tenant shall attempt in good faith to agree on the
fair market rental value of the Premises as of the commencement of the extension
term, within thirty (30) days after Tenant shall have exercised its right to
extend the term. If the parties do not agree within such thirty (30) day period,
Landlord shall obtain within thirty (30) days at its expense and deliver to
Tenant an independent appraisal of the fair market rental value of the Premises
as of the commencement of the extension term. Following its receipt of
Landlord's appraisal, Tenant may elect to obtain within thirty (30) days
thereafter at its expense and deliver to Landlord a second independent appraisal
of the fair market rental value of the Premises as of the commencement of the
extension term. If Tenant elects not to obtain a second appraisal, Landlord's
appraisal shall be conclusive. If Tenant's appraisal is no more than five
percent (5%) less than Landlord's appraisal, the fair market rental value of the
Premises shall be the arithmetic average of the two appraisals. If Tenant's
appraisal is more than five percent (5%) less than Landlord's appraisal, the two
appraisers shall appoint a third independent appraiser to appraise the fair
market rental value of the Premises as of the commencement of the extension
term, and the fair market rental value of the Premises shall be the arithmetic
average of the two appraisals closest in their determination of fair market
rental value. Landlord and Tenant shall bear equally the expense of the third
appraiser.

         40.4 All appraisers appointed hereunder shall have at least ten (10)
years' experience in the appraisal of commercial and industrial real property in
the general area of the Premises, and shall be members of professional
organizations such as the American Appraisal Institute with a designation of MAI
or equivalent.

         40.5 As used herein, the term "fair market rental value of the
Premises" shall mean the base rent that a ready and willing tenant would pay for
similarly improved space in the general area of the Premises, as of the
commencement of each extension term, to a ready and willing landlord, for a term
of five (5) years on the terms and conditions of the Lease, determined as if the
Premises were exposed for lease on the open market for a reasonable period of
time and taking into account all of the purposes for which such property may be
used. Any appraiser appointed hereunder to determine the "fair market rental
value of the Premises" shall take into account all of the other terms and
conditions of this Lease, including, without limitation, that this Lease
provides for the Basic Annual Rent to increase annually by three and one-half
percent (3 1/2%) during each extension term.

         40.6 Any increase in Basic Annual Rent under this Article 40 which is
not determined until after the effective date of the increase shall nevertheless
be retroactive to the effective date, and Tenant shall pay any such retroactive
increase with the installment of Rent next due.

         40.7 Basic Annual Rent during each extension period as determined under
this Article 40 (and as previously increased each year of the extension term
pursuant to this Section 40.7) shall be increased on the annual anniversary of
the Rent Commencement Date each year of each extension term by three and
one-half percent (3 1/2%). For example, the first such increase shall become
effective commencing with that monthly rental installment which is first due on
or after the thirteenth (13th) anniversary of the Term Commencement Date and the
next increase shall become effective on or after the fourteenth (14th)
anniversary of the Term Commencement Date.

         40.8 Tenant shall not have the right to exercise the option to extend
the term, notwithstanding anything set forth above to the contrary: (a) during
the time commencing from the date Landlord gives to Tenant a written notice that
Tenant is in default under any provision of this Lease and continuing until the
default alleged in said notice is cured; (b) during the period of time
commencing on the day after a monetary obligation to Landlord is due from Tenant
and unpaid



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without any necessity for notice thereof to Tenant and continuing until the
obligation is paid; or (c) after the expiration or earlier termination of this
Lease. The period of time within which the option to extend may be exercised
shall not be extended or enlarged by reason of the Tenant's inability to
exercise the option because of the foregoing provisions. At the election of
Landlord, all rights of Tenant under the provisions of this Article 40 shall
terminate and be of no further force or effect even after Tenant's due and
timely exercise of an option to extend if, after such exercise, but prior to the
commencement of the extension term, (1) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of sixty (60) days after such
obligation becomes due (without necessity of Landlord to give notice to Tenant),
or (2) Tenant fails to commence to cure a non-monetary default within thirty
(30) days after the date Landlord gives notice to Tenant of such default.

41. MISCELLANEOUS.

         41.1 TERMS AND HEADINGS . Where applicable in this Lease, the singular
includes the plural and the masculine or neuter includes the masculine, feminine
and neuter. The section headings of this Lease are not a part of this Lease and
shall have no effect upon the construction or interpretation of any part hereof.

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

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

         41.4 COVENANTS AND CONDITIONS. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.

         41.5 CONSENTS. Whenever consent or approval of either party is
required, that party shall not unreasonably withhold or delay such consent or
approval, except as may be expressly set forth to the contrary.

         41.6 ENTIRE AGREEMENT. The terms of this Lease are intended by the
parties as a final expression of their agreement with respect to the terms as
are included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement.

         41.7 SEVERABILITY. Any provision of this Lease which shall prove to be
invalid, void, or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.

         41.8 RECORDING. Within ten (10) days from the execution of this Lease,
Landlord and Tenant shall record a short form memorandum hereof, subject to the
requirement to execute and deliver a quitclaim deed pursuant to the provisions
of Section 34.1 hereof.

         41.9 IMPARTIAL CONSTRUCTION. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.

         41.10 INUREMENT. Each of the covenants, conditions, and agreements
herein contained shall inure to the benefit of and shall apply to and be binding
upon the parties hereto and their



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respective heirs, legatees, devisees, executors, administrators, successors,
assigns, sublessees, or any person who may come into possession of said Premises
or any part thereof in any manner whatsoever. Nothing in this Section 41.10
contained shall in any way alter the provisions against assignment or subletting
in this Lease provided.

         41.11 FORCE MAJEURE. If either party cannot perform any of its
obligations (other than Tenant's obligation to pay Rent), or is delayed in such
performance (other than Tenant's obligation to pay Rent), due to events beyond
such party's control, the time provided for performing such obligations shall be
extended by a period of time equal to the delay attributable to such events.
Events beyond a party's control include, but are not limited to, acts of God
(including earthquake), war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortage of labor or material, government regulation or
restriction and weather conditions, but do not include financial inability to
perform.

         41.12 NOTICES. Any notice, consent, demand, bill, statement, or other
communication required or permitted to be given hereunder must be in writing and
may be given by personal delivery, by facsimile transmission, or by mail, and if
given by personal delivery or facsimile transmission shall be deemed given on
the date of delivery or transmission, and if given by mail shall be deemed
sufficiently given three (3) business days after time when deposited in United
States Mail if sent by registered or certified mail, addressed to Tenant at the
Premises, or to Tenant or Landlord at the addresses shown in Section 2.1.10
hereof. Either party may, by notice to the other given pursuant to this Section,
specify additional or different addresses for notice purposes.

         41.13 AUTHORITY TO EXECUTE LEASE. Landlord and Tenant each acknowledge
that it has all necessary right, title and authority to enter into and perform
its obligations under this Lease, that this Lease is a binding obligation of
such party and has been authorized by all requisite action under the party's
governing instruments, that the individuals executing this Lease on behalf of
such party are duly authorized and designated to do so, and that no other
signatories are required to bind such party.

         41.14 GOVERNING LAW. This Lease shall be construed and enforced
pursuant to the laws of the State of Washington, irrespective of the conflict of
law rules of the State of Washington. Both parties consent to the personal
jurisdiction of the courts of the State of Washington with respect to any action
or legal proceeding arising out of, or related to, this Lease. Venue for any
such action or proceeding shall be in the Superior Court for Snohomish County,
Washington, or the Federal District Court for the Western District of
Washington.

42. DEFINITIONS. Capitalized terms not defined elsewhere in this Lease shall
have the meaning set forth below:

         42.1 "PREMISES" shall have the meaning ascribed to it in Section 1.1.

         42.2 "SITE IMPROVEMENTS". The exterior improvements, to include surface
parking areas, landscaping, drainage, irrigation, gutters, sidewalks, exterior
lighting, walkways, driveways and other improvements and appurtenances relating
to ingress and egress.

         42.3 "SITE PLAN". The site plan attached hereto as Exhibit "A".

         42.4 "BUILDING". The Building Shell and the Tenant Improvements.


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         42.5 "BUILDING SHELL". The shell of the Building, consisting of a two
story concrete tilt-up structure, footings, foundations, floors, exterior walls,
and roof, with building electrical service, natural gas, telephone, water,
plumbing, and other utilities necessary for the Tenant Improvements extended
from the street and stubbed to the Building.

         42.6 "TENANT IMPROVEMENTS". The initial improvements within the
Building Shell desired by Tenant for occupancy and use of the entire Premises by
Tenant.

         42.7 "TENANT IMPROVEMENT PLANS". The plans and specifications for the
Tenant Improvements.

         42.8 "PROJECT". The Site Improvements, the Building Shell, and the
Tenant Improvements, and the real property upon which the foregoing are located.

         42.9 "TENANT IMPROVEMENT ALLOWANCE" shall have the meaning ascribed to
it in Section 4.3.

         IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.

[signatures on following page]

LANDLORD:

NEXUS CANYON PARK LLC
A California limited liability company
By Nexus Properties, Inc.
A California corporation
Its Manager


By: /s/ Michael J. Reidy
    ------------------------------------
        Michael J. Reidy
        Chief Executive Officer


TENANT:

EPOCH PHARMACEUTICALS, INC.
A Delaware corporation


By: /s/ SANFORD S. ZWEIFACH
    ------------------------------------

    Name: Sanford S. Zweifach
         -------------------------------

    Its:  Chief Financial Officer
         -------------------------------




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