STANDARD INDUSTRIAL/COMMERCIAL
                           MULTI-TENANT LEASE - GROSS
                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION


1. Basic Provisions ("Basic Provisions").

     1.1. Parties: This Lease ("Lease"), dated for reference purposes only
December 28, 201, is made by and between Temescal, L.P., a California limited
partnership and Contra Costa Industrial Park, Ltd., a California limited
partnership ("Lessor") and XOMA (US) LLC, a Delaware limited liability company
("Lessee"), (collectively the "Parties", or individually a "Party").

     1.2. (a) Premises: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of Lease, commonly known by the street address of 2850 7th Street, Second Floor,
located in the City of Berkeley, County of Alameda, State of CA, with zip code
94710, as outlined on Exhibit A attached hereto ("Premises") and generally
described as (describe briefly the nature of the Premises): The second floor of
the building at 2850 7th Street, Berkeley in the Temescal Business Center, also
designated as "Suite 200". In addition to Lessee's rights to use and occupy the
Premises as hereinafter specified, Lessee shall have non-exclusive rights to the
Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but
shall not have any rights to the roof, exterior walls or utility raceways of the
building containing the Premises ("Building") or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Project." (See also Paragraph 2.)

     1.2. (b) Parking: 17 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking Spaces").
(See also Paragraph 2.6.)

     1.3. Term: 6 years and 4 months ("Original Term") commencing January 1,
2002 ("Commencement Date") and ending April 30, 2008 ("Expiration Date"). (See
also Paragraph 3.)

     1.4. Early Possession: N/A ("Early Possession Date"). (See also Paragraphs
3.2 and 3.3.)

     1.5. Base Rent: $11,678.85 per month ("Base Rent"), payable on the 1st day
of each month commencing 1/1/2002. (See also Paragraph 4.) There are provisions
in this Lease for the Base Rent to be adjusted.


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     1.6. Lessee's Share of Common Area Operating Expenses: 4.8% (See Addn P 52)
percent (4.8%) (Lessee's Share").

     1.7. Base Rent and Other Monies Paid Upon Execution:

          (a) Base Rent: $11,678.85 for the period of January, 2002.

          (b) Common Area Operating Expenses: $605.57 for the period January,
     2002.

          (c) Security Deposit: $11,679.00 (Security Deposit"). (See also
     Paragraph 5.)

          (d) Other: $______________ (space left blank intentionally).

          (e) Total Due Upon Execution of this Lease: $23,963.42.

     1.8. Agreed Use: General Office Use. (See also Paragraph 6.)

     1.9. Insuring Party. Lessor is the "Insuring Party". (See also Paragraph
8.)

     1.10. Real Estate Brokers: (See also Paragraph 15.)

     (a) Representation: The following real estate brokers (the "Brokers") and
brokerage relationships exist in this transaction:

                  John Norheim; Norheim & Yost represents Lessor
                  exclusively ("Lessor's Broker");

                  Eli Ceryak; Aegis Realty Partners represents Lessee
                  exclusively (Lessee's Broker").

     (b) Payment to Brokers: Upon execution and delivery of this Lease by both
Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement (or if there is no such agreement, the sum of ______
or ______% of the total Base Rent for the brokerage services rendered by the
Brokers).

     1.11. Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by XOMA Ltd., a Bermuda company with limited liability ("Guarantor").
(See also Paragraph 37.)


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     1.12. Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 57 and Exhibits A through B, all of which
constitute a part of this Lease.

2. Premises.

     2.1. Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all terms, covenants
and conditions set forth in this Lease. Unless otherwise provided herein, any
statement of size set forth in this Lease, or that may have been used in
calculating Rent, is an approximation which the Parties agree is reasonable and
any payments based thereon are not subject to revision whether or not the actual
size is more or less.

     2.2. Condition. Lessor shall deliver that portion of the Premises contained
within the Building ("Unit") to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession Date, whichever first occurs ("Start
Date"), warrants that the existing electrical, plumbing, fire sprinkler,
lighting, heating, ventilating and air conditioning systems ("HVAC"), loading
doors, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date and
that the structural elements of the roof, bearing walls and foundation of the
Unit shall be free of material defects. If a non-compliance with such warranty
exists as of the Start Date, or if one of such systems or elements should
malfunction or fail within the appropriate warranty period, Lessor shall, as
Lessor's sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor's expense. The warranty periods
shall be as follows: (i) 30 days as all systems and the elements of the Unit
(which shall exclude the HVAC, which shall be maintained and repaired pursuant
to Addendum Para. 55). If Lessee does not give Lessor the required notice within
the appropriate warranty period, correction of any such non-compliance,
malfunction or failure shall be the obligation of Lessee at Lessee's sole cost
and expense (except for the repairs to the fire sprinkler systems, roof,
foundations, and/or bearing walls - see Paragraph 7).

     2.3. Compliance. Lessor warrants that the improvements on the Premises and
the Common Areas comply with the building codes that were in effect at the time
that each such improvement, or portion thereof, was constructed, and also with
all applicable laws, covenants or restrictions of record, regulations, and
ordinances in effect on the Start Date ("Applicable Requirements"). Said
warranty does not apply to the use to which Lessee will put the Premises of to
any Alterations or Utility Installations (as defined in Paragraph 7.3(a).) made
or to be made by Lessee. Note: Lessee is responsible for determining whether or
not the zoning is appropriate for Lessee's intended use, and acknowledges that
past uses of the


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Premises may no longer be allowed. If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within 6
months following the Start Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense. If the Applicable
Requirements are hereafter changed so as to require during the term of this
Lease the construction of an addition to or an alteration of the Unit, Premises
and/or Building, the remediation of any Hazardous Substance, or the
reinforcement or other physical modification of the Unit, Premises and/or
Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of
such work as follows:

     (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are
required as a result of the specific and unique use of the Premises by Lessee as
compared with uses by tenants in general, Lessee shall be fully responsible for
the cost thereof, provided, however, that if such Capital Expenditure is
required during the last 2 years of this Lease and the cost thereof exceeds 6
months' Base Rent, Lessee may instead terminate this Lease unless Lessor
notifies Lessee, in writing, within 10 days after receipt of Lessee's
termination notice that Lessor has elected to pay the difference between the
actual cost thereof and the amount equal to 6 months' Base Rent. If Lessee
elects termination, Lessee shall immediately cease the use of the Premises which
requires such Capital Expenditure and deliver to Lessor written notice
specifying a termination date at least 90 days thereafter. Such termination date
shall, however, in no event be earlier than the last day that Lessee could
legally utilize the Premises without commencing such Capital Expenditure.

     (b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
the portion of such costs reasonably attributable to the Premises pursuant to
the formula set out in Paragraph 7.1(d); provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease or if Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon 90 days prior
written notice to Lessee unless Lessee notifies Lessor, in writing, within 10
days after receipt of Lessor's termination notice that Lessee will pay for such
Capital Expenditure. Lessor acknowledges that Lessee's stated intended use of
the Premises for general office use is not a specific and unique use as such
term is used in this Paragraph 2. If Lessor does not elect to terminate, and
fails to tender its share of any Capital Expenditure, Lessee may advance such
funds and deduct same, with interest, from rent until Lessor's share of such
costs have fully paid. If Lessee is unable to finance Lessor's share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.


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     (c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

     2.4. Acknowledgments. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements and the Americans with Disabilities Act), and their suitability for
Lessee's intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and (c) neither Lessor,
Lessor's agents, nor Brokers have made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.
In addition, Lessor acknowledges that: (i) Brokers have made no representations,
promises or warranties concerning Lessee's ability to honor the Lease or
suitability to occupy the Premises, and (ii) it is Lessor's sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.

     2.5. Lessee as Prior Owner/Occupant. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

     2.6. Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting
Rules and Regulations as provided in Paragraph 2.9. No vehicles other than
Permitted Size Vehicles may be parked in the Common Area without the prior
written permission of Lessor.

     (a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

     (b) Lessee shall not service or store any vehicles in the Common Areas.


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     (c) If Lessee permits or allows any of the prohibited activities described
in this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

     2.7. Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project and interior utility raceways and installations within the Unit
that are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other tenants of the Project and their
respective employees, suppliers, shippers, customers, contractors and invitees,
including parking areas, loading and unloading areas, trash areas, roadways,
walkways, driveways and landscaped areas. 2.8. Common Areas - Lessee's Rights.
Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers,
shippers, contractors, customers and invitees, during the term of this Lease,
the non-exclusive right to use, in common with others entitled to such use, the
Common Areas as they exist from time to time, subject to any rights, powers, and
privileges reserved by Lessor under the terms hereof or under the terms of any
rules and regulations or restrictions governing the use of the Project. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur, then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.

     2.9. Common Areas - Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable rules and regulations ("Rules and Regulations") for
the management, safety, care and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Project and
their invitees. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said Rules and Regulations by
other tenants of the Project.

     2.10. Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:


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     (a) To make reasonable changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, leading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways,
provided, however, that any such change that will meaningfully interfere with
Lessee's use of the Premises shall be made only upon the approval of Lessee;

     (b) To close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available;

     (c) To designate other land outside the boundaries of the Project to be a
part of the Common Areas;

     (d) To add additional buildings and improvements to the Common Areas;

     (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and

     (f) To do and perform such other reasonable acts and make such other
changes in, to or with respect to the Common Areas and Project as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.

3. Term.

     3.1. Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

     3.2. Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Lessee's Share of Common
Area Operating Expenses, Real Property Taxes and insurance premiums and to
maintain the Premises) shall, however, be in effect during such period. Any such
early possession shall not affect the Expiration Date.

     3.3. Delay in Possession. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered with 30 days after
the Commencement Date, Lessee may, at its option, by notice in writing with 10
days after the end of such 30 day period, cancel this Lease, in which event the
Parties shall be discharged from all obliga-


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tions hereunder. If such written notice is not received by Lessor within said 10
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within 4
months after the Commencement Date, this Lease shall terminate unless other
agreements are reached between Lessor and Lessee, in writing.

     3.4. Lessee Compliance. Lessor shall not be required to tender possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.

4. Rent.

     4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").

     4.2. Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6.) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:

     (a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Project, including, but not limited to, the following:

          (i) The operation, repair and maintenance, in neat, clean, good order
     and condition, but not the replacement (see subparagraph (e)), of the
     following:

               (aa) The Common Areas and Common Area improvements, including
          parking areas, loading and unloading areas, trash areas, roadways,
          parkways, walkways, driveways, landscaped areas, bumpers, irrigation
          systems, Common Area lighting facilities, fences and gates, elevators,
          roofs and roof drainage systems.


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               (bb) Exterior signs and any tenant directories.

               (cc) Any fire sprinkler systems.

          (ii) The cost of water, gas, electricity and telephone to service the
     Common Areas and any utilities not separately metered.

          (iii) Trash disposal, pest control services, property management,
     security services, and the costs of any environmental inspections.

          (iv) Reserves set aside for maintenance and repair of Common Areas.

          (v) Any increase above the Base Real Property Taxes (as defined in
     Paragraph 10).

          (vi) Any "Insurance Cost Increase" (as defined in Paragraph 8).

          (vii) Any deductible portion of an insured loss concerning the
     Building or the Common Areas.

          (viii) The cost of any Capital Expenditure to the Building or the
     Project not covered under the provisions of Paragraph 2.3 provided;
     however, that Lessor shall allocate the cost of any such Capital
     Expenditure over a 12 year period and Lessee shall not be required to pay
     more than Lessee's Share of 1/144th of the cost of such Capital Expenditure
     in any given month.

          (ix) Any other services to be provided by Lessor that are stated
     elsewhere in this Lease to be a Common Area Operating Expense.

     (b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Unit, the Building or to any other building in
the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.

     (c) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the project already has the same, Lessor already provides the services, or
Lessor has agreed elsewhere in this Lease to provide the same or some of them.


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     (d) Lessee's Share of Common Area Operating Expenses shall be payable by
Lessee within 15 days after a reasonably detailed statement of actual expenses
is presented to Lessee. At Lessor's option, however, an amount may be estimated
by Lessor from time to time of Lessee's Share of annual Common Area Operating
Expenses and the same shall be payable monthly, as Lessor shall designate,
during each 12 month period of the Lease term, on the same day as the Base Rent
is due hereunder. Lessor shall deliver to Lessee within 60 days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee's Share of the actual Common Area Operating Expenses incurred during the
preceding year. If Lessee's payments under this Paragraph 4.2(d) during the
preceding year exceed Lessee's Share as indicated on such statement, Lessor
shall credit the amount of such over-payment against Lessee's Share of Common
Area operating Expenses next becoming due. If Lessee's payments under this
Paragraph 4.2(d) during the preceding year were less than Lessee's Share as
indicated on such statement, Lessee shall pay to Lessor the amount of the
deficiency within 15 days after delivery by Lessor to Lessee of the statement.

     (e) When a capital component such as the roof, foundations, exterior walls,
HVAC or a Common Area capital improvement, such as the parking lot paving,
elevators, fences, etc. requires replacement, rather than repair or maintenance,
Lessor shall, at Lessor's expense, be responsible for such replacement. Such
expenses and/or costs are not Common Area Operating Expenses.

     4.3. Payment. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating. In the event that any check,
draft, or other instrument of payment given by Lessee to Lessor is dishonored
for any reason, Lessee agrees to pay to Lessor the sum of $25.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any potion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of the Security Deposit, Lessee shall within 15 days after written request
therefor deposit monies with Lessor sufficient to restore said Security Deposit
to the full amount required by this Lease. Should


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the Agreed Use be amended to accommodate a material change in the business of
Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to
increase the Security Deposit to the extent necessary, in Lessor's reasonable
judgment, to account for any increase wear and tear that the Premises may suffer
as a result thereof. Lessor shall not be required to keep the Security Deposit
separate from its general accounts. Within 14 days after the expiration or
termination of this Lease, if Lessor elects to apply the Security Deposit only
to unpaid Rent, and otherwise within 21 days after the Premises have been
vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of
the Security Deposit not used or applied by Lessor. No part of the Security
Deposit shall be considered to be held in trust, to bear interest or to be
prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

     6.1. Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after
such request give written notification of same, which notice shall include an
explanation of Lessor's objections to the change in the Agreed Use.

     6.2. Hazardous Substances.

     (a) Reportable Uses Require Consent. The term "Hazardous Substance" as used
in this Lease shall mean any product, substance, or waste whose presence, use,
manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either: (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not limited to, hydrocarbons, petroleum, gasoline,
and/or crude oil or any products, by-products or fractions thereof. Lessee shall
not engage in any activity in or on the Premises which constitutes a Reportable
Use of Hazardous Substances without the express prior written consent of Lessor
and timely compliance (at Lessee's expense) with all Applicable Requirements.
"Reportable Use" shall mean (i) the installation or use of any above or below
ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report,


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notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit.

     (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

     (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of the
Premises and neighboring properties, that was caused or materially contributed
to by Lessee, or pertaining to or involving any Hazardous Substance brought onto
the Premises during the term of this Lease, by or for Lessee, or any third
party.

     (d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor,
its agents, employees, lenders and ground lessor, if any, harmless from and
against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party present at the invitation of Lessee (provided, however, that
Lessee shall have no liability under this Lease with re-


<PAGE>
                                      -13-


spect to underground migration of any Hazardous Substance under the Premises
from areas outside of the Project). Lessee's obligations shall include, but not
limited to, the effects of any contamination or injury to person, property or
the environment created or suffered by Lessee, and the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.

     (e) Lessor Indemnification. Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

     (f) Investigations and Remediations. Lessor shall retain the responsibility
and pay for any investigations or remediation measures required by governmental
entities having jurisdiction with respect to the existence of Hazardous
Substances on the Premises prior to the Start Date, unless such remediation
measure is required as a result of Lessee's use (including "Alterations", as
defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall
be responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessor's
agents to have reasonable access to the Premises at reasonable times in order to
carry out Lessor's investigative and remedial responsibilities.

     (g) Lessor Termination Option. Is a Hazardous Substance Condition (see
Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within 30 days after
receipt by Lessor of knowledge of the occurrence of such Hazardous Substance
Condition, of Lessor's desire to terminate this Lease as of the date 90 days
following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 15 days thereafter, give written notice
to Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with satisfactory assurance


<PAGE>
                                      -14-


thereof within 30 days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.

     6.3. Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within 15 days after receipt of Lessor's written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall promptly upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements.

     6.4. Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at any
time, in the case of an emergency, and otherwise at reasonable times, for the
purpose of inspecting the condition of the Premises and for verifying compliance
by Lessee with this Lease. The cost of any such inspections shall be paid by
Lessor, unless a violation of Applicable Requirements, or a contamination is
found to exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination.

7.   Maintenance; Repairs; Utility Installations; Trade Fixtures and
     Alterations.

     7.1. Lessee's Obligations.

     (a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2
(Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee's sole expense, keep the Premises, Utility Installations
(intended for Lessee's exclusive use, no matter where located), and Alterations
in good order, condition and repair, including, but not limited to, all
equipment or facilities (but exclusive of HVAC as set forth in Addendum Para.
55), such as plumbing (which shall be defined to end at the point at which the
relevant pipe(s) meet(s) the pipes of any other unit in the Building),
electrical, lighting facilities, fixtures, interior walls, interior surfaces of
exterior walls, ceilings, floors, windows, doors, and plate glass but excluding
any items which are the responsibility of Lessor pursuant to Paragraph 7.2.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or


<PAGE>
                                      -15-


renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair.

     (b) Service Contracts. Lessee shall, at Lessee's sole expense, procure and
maintain contracts, in customary form and substance for, and with contractors
specializing and experienced in the maintenance of the following equipment and
improvements, if any, if and when installed on the premises: (i) the alarm
equipment (if use of the alarm is desired by Lessee), if reasonably required by
Lessor. However, in addition to the provisions of Para. 55, Lessor reserves the
right, upon notice to Lessee, to procure and maintain any or all of such service
contracts.

     (c) Failure to Perform. If Lessee fails to perform Lessee's obligations
under this Paragraph 7.1, Lessor may enter upon the Premises after 15 days'
prior written notice to Lessee (except in the case of an emergency, in which
case not notice shall be required), perform such obligations on Lessee's behalf,
and put the Premises in good order, condition and repair, and Lessee shall
promptly reimburse Lessor for the cost thereof.

     (d) Replacement. Subject to Lessee's indemnification of Lessor as set forth
in Paragraph 8.7 below, and without relieving Lessee of liability resulting from
Lessee's failure to exercise and perform good maintenance practices, if an item
described in Paragraph 7.1(b) cannot be repaired other than at a cost which is
in excess of 50% of the cost of replacing such item, then such item shall be
replaced by Lessor, and the cost thereof shall be prorated between the Parties
and Lessee shall only be obligated to pay, each month during the remainder of
the term of this Lease, on the date on which Base Rent is due, an amount equal
to the product of multiplying the cost of such replacement by a fraction, the
numerator of which is one, and the denominator of which is 144 (i.e. 1/144th of
the cost per month).

     7.2. Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessor (except as to
matters governed by the laws concerning Unlawful Detainer actions) and Lessee
expressly waives the benefit of any statue now or hereafter in effect to the
extent it is inconsistent with the terms of this Lease.


<PAGE>
                                      -16-


     7.3. Utility Installations; Trade Fixtures; Alterations.

     (a) Definitions. The term "Utility Installations" refers to all floor and
window coverings, air lines, power panels, electrical distribution, security and
fire protection systems, communication systems, lighting fixtures, HVAC
equipment, plumbing, and fencing in or on the Premises. The term "Trade
Fixtures" shall mean Lessee's machinery and equipment that can be removed
without doing material damage to the Premises. The term "Alterations" shall mean
any modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or
Utility Installations" are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

     (b) Consent. Lessee shall not make any Alterations or Utility Installations
to the Premises without Lessor's prior written consent, which shall not be
unreasonably withheld. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without such
consent but upon notice to Lessor, as long as they are not visible from the
outside, do not involve puncturing, relocating or removing the roof or any
existing walls, and the cumulative cost thereof during this Lease as extended
does not exceed a sum equal to 3 month's Base Rent in the aggregate or a sum
equal to one month's Base Rent in any one year. Notwithstanding the foregoing,
Lessee shall not make or permit any roof penetrations and/or install anything on
the roof without the prior written approval of Lessor. Lessor may, as a
precondition to granting such approval, require Lessee to utilize a licensed
contractor. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans. If set forth in writing by Lessor in Lessor's
consent to any proposed Alterations or Utility Installation, Consent may be
deemed conditioned upon Lessee's: (i) acquiring all applicable governmental
permits, (ii) furnishing Lessor with copies of both the permits and the plans
and specifications prior to commencement of the work, and (iii) compliance with
all conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Upon the termination
of this Lease, Lessee shall promptly furnish Lessor with as-built plans and
specifications upon the request of Lessor. For work which cost an amount in
excess of five month's Base Rent, Lessor may condition its consent upon Lessee
providing a lien and completion bond in an amount equal to 100% of the estimated
cost of such Alteration or Utility Installation unless Lessee can reasonably
demonstrate the financial ability to complete the proposed work.

     (c) Indemnification. Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than 10 days notice prior to


<PAGE>
                                      -17-


the commencement of any work on, in or about the Premises, and Lessor shall have
the right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien or claim, then Lessee shall, at its sole expense
defend and protect itself, Lessor and the Premises against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety
bond in an amount as required by law to release the title from such contested
lien or claim, indemnifying Lessor against liability for the same.

     7.4. Ownership; Removal; Surrender; and Restoration.

     (a) Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at the time Lessor provides consent to any proposed
Alteration or Utility Installation, further condition such consent on Lessee's
agreement that upon completion of the Alteration or Utility Installation, Lessor
shall be the owner of all or any specified part of the Lessee Owned Alterations
and Utility Installations. Unless otherwise instructed per paragraph 7.4(b)
hereof, all Lessee Owned Alterations and Utility Installations shall, at the
expiration or termination of this Lease, become the property of Lessor and be
surrendered by Lessee with the Premises.

     (b) Removal. By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 60 days prior to the end of the term of this
Lease, Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

     (c) Surrender; Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. "Ordinary
wear and tear" shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Notwithstanding the foregoing, if
this Lease is for 12 months or less, then Lessee shall surrender the Premises in
the same condition as delivered to Lessee on the Start Date with no allowance
for ordinary wear and tear. Lessee shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal
of any storage tank installed by or for Lessee. Lessee shall also completely
remove from the Premises any and all Hazardous Substance brought onto the
Premises by or for Lessee, or any third party (except Hazardous Substances which
were deposited via underground migration from areas outside of the Project) even
if such removal would require Lessee to perform or pay for work that exceeds
statutory require-


<PAGE>
                                      -18-


ments. Trade Fixtures shall remain the property of Lessee and shall be removed
by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this
Paragraph 7.4(c) without the express written consent of Lessor shall constitute
a holdover under the provisions of Paragraph 26 below.

     8. Insurance; Indemnity.

     8.1. Payment of Premium Increases.

     (a) As used herein, the term "Insurance Cost Increase" is defined as any
increase in the actual cost of the insurance applicable to the Building and/or
the Project and required to be carried by Lessor, pursuant to Paragraphs 8.2(b),
8.3(a) and 8.3(b), (Required Insurance"), over and above the Base Premium, as
hereinafter defined, calculated on an annual basis. Insurance Cost Increase
shall include, but not limited to, requirements of the holder of a mortgage or
deed of trust covering the Premises, Building and/or Project, increased
valuation of the Premises, Building and/or Project, and/or a general premium
rate increase. The term Insurance Cost Increase shall not, however, include any
premium increases resulting from the nature of the occupancy of any other tenant
of the Building. If the parties insert a dollar amount in Paragraph 1.9, such
amount shall be considered the "Base Premium." The Base Premium shall be the
annual premium applicable to the 12 month period immediately preceding the Start
Date. If, however, the Project was not insured for the entirety of such 12 month
period, then the Base Premium shall be the lowest annual premium reasonably
obtainable for the Required Insurance as of the Start Date, assuming the most
nominal use possible of the Building. In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable to liability
insurance coverage in excess of $2,000,000 procured under Paragraph 8.2(b).

     (b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Start Date or Expiration Date.

     8.2. Liability Insurance.

     (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial
General Liability policy of insurance protecting Lessee and Lessor as an
additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on a reporting basis that is commercially reasonable and available,
based on market conditions at the time of policy placement. Claims Made coverage
is acceptable provided such coverage includes Tail Coverage (Extended Reporting
Period) purchased for at least twelve (12) months should coverage be cancelled
or non-renewed. Such


<PAGE>
                                      -19-


coverage should provide single limit coverage in an amount not less than
$2,000,000 per occurrence with an annual aggregate of not less than $5,000,000,
an "Additional Insured-Managers or Lessors of Premises Endorsement" and contain
the "Amendment of the Pollution Exclusion Endorsement" for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this lease as an "insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance shall not, however, limit the liability of Lessee nor
relieve Lessee of any obligation hereunder. All insurance carried by Lessee
shall be primary to and not contributory with any similar insurance carried by
Lessor, whose insurance shall be considered excess insurance only.

     (b) Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

     8.3. Property Insurance - Building, Improvements and Rental Value.

     (a) Building and Improvements. Lessor shall obtain and keep in force a
policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee's personal property shall be insured
by Lessee under Paragraph 8.4. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquakes unless
required by a Lender), including coverage for debris removal and the enforcement
of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $1,000 per occurrence.

     (b) Rental Value. Lessor shall also obtain and keep in force a policy or
policies in the name of Lessor with loss payable to Lessor and any Lender,
insuring the loss of the full Rent for one year with an extended period of
indemnity for an additional 180 days ("Rental Value insurance"). Said insurance
shall contain an agreed valuation provision in lieu


<PAGE>
                                      -20-


of any coinsurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected Rent otherwise payable by Lessee, for the next 12 month
period.

     (c) Adjacent Premises. Lessee shall pay for any increase in the premiums
for the property insurance of the Building and for the Common Areas or other
buildings in the Project if said increase is caused by Lessee's acts, omissions,
use or occupancy of the Premises.

     (d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor shall
not be required to insure Lessee Owned Alterations and Utility Installations
unless the item in question has become the property of Lessor under the terms of
this Lease.

     8.4. Lessee's Property; Business Interruption Insurance.

     (a) Property Damage. Lessee shall obtain and maintain insurance coverage on
all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations
and Utility Installations. Such insurance shall be full replacement cost
coverage with a deductible of not to exceed $25,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of personal
property, Trade Fixtures and Lessee Owned Alterations and Utility Installations.
Lessee shall provide Lessor with written evidence that such insurance is in
force. Lessee shall notify Lessor of any claim against Lessee made under such
policies maintained by Lessee under this Lease, within thirty (30) days of such
claim being made, where such claim exceeds $25,000.

     (b) Business Interruption. Lessee shall obtain and maintain loss of income
and extra expense insurance in amounts as will reimburse Lessee for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent lessees in the business of Lessee or attributable to prevention of
access to the Premises as a result of such perils.

     (c) No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified herein are adequate
to cover Lessee's property, business operations and obligations under this
Lease.

     8.5. Insurance Policies. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after 30 days prior written notice
to Lessor. Lessee shall, not later than 10 days prior to the


<PAGE>
                                      -21-


expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.

     8.6. Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carries waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.

     8.7. Indemnity. Except for Lessor's gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.

     8.8. Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor nor from the failure of Lessor to enforce
the provisions of any other lease in the Project. Notwithstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances be
liable for injury to Lessee's business or for any loss of income or profit
therefrom.

9. Damage or Destruction.


<PAGE>
                                      -22-


     9.1. Definitions.

     (a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in 3 months or less from the
date of the damage or destruction, and the cost thereof does not exceed a sum
equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within 15
days from the date of the damage or destruction as to whether or not the damage
is Partial or Total.

     (b) "Premises Total Destruction" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in 3
months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify Lessee
in writing within 15 days from the date of the damage or destruction as to
whether or not the damage is Partial Total. (c) "Insured Loss" shall mean damage
or destruction to improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which was caused by an
event required to be covered by the insurance described in Paragraph 8.3(a),
irrespective of any deductible amounts or coverage limits involved.

     (d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

     (e) "Hazardous Substance Condition" shall mean the occurrence or discovery
of a condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

     9.2. Partial Damage - Insured Loss. If a Premise Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $2,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in full force
or the insurance proceeds are not sufficient to effect such repair, the Insuring
Party shall promptly contribute the shortage in proceeds as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement
insurance coverage was not commercially reasonable and available, Lessor shall
have no obli-


<PAGE>
                                      -23-


gation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within 10 days following receipt of
written notice of such shortage and request therefor. If Lessor receives said
funds or adequate assurance thereof within said 10 day period, the party
responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If such funds or
assurance are not received, Lessor may nevertheless elect by written notice to
Lessee within 10 days thereafter to: (i) make such restoration and repair as is
commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect, or (ii) have this Lease
terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of
any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to Paragraph
9.3, notwithstanding that there may be some insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if made
by either Party.

     9.3. Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
30 days after receipt by Lessor of knowledge of the occurrence of such damage.
Such termination shall be effective 60 days following the date of such notice.
In the event Lessor elects to terminate this Lease, Lessee shall have the right
within 15 days after receipt of the termination notice to give written notice to
Lessor of Lessee's commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide with said funds or satisfactory
assurance thereof within 30 days after making such commitment. In such event
this Lease shall continue in full force and effect, and Lessor shall proceed to
make such repairs as soon as reasonably possible after the required funds are
available. If Lessee does not make the required commitment, this Lease shall
terminate as of the date specified in the termination notice.

     9.4. Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate 30 days following
such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

     9.5. Damage Near End of Term. If at any time during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month's Base
Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written
termination notice to Lessee within


<PAGE>
                                      -24-


30 days after the date of occurrence of such damage. Notwithstanding the
foregoing, if Lessee at that time has an exercisable option to extend this Lease
or to purchase the Premises, then Lessee may preserve this Lease by, (a)
exercising such option and (b) providing Lessor with any shortage in insurance
proceeds (or adequate assurance thereof) needed to make the repairs on or before
the earlier of (i) the date which is 15 days after Lessee's receipt of Lessor's
written notice purporting to terminate this Lease, or (ii) the day prior to the
date upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee's
option shall be extinguished.

     9.6. Abatement of Rent; Lessee's Remedies.

     (a) Abatement. In the event of Premises Partial Damage or Premises Total
Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

     (b) Remedies. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within 40 days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee's elections to terminate this Lease on a date not less than 30 days
following the giving of such notice. If Lessee gives such notice and such repair
or restoration is not commenced within 30 days thereafter, this Lease shall
terminate as of the date specified in said notice. If the repair or restoration
is commenced within such 30 days, this Lease shall continue in full force and
effect. "Commence" shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs.

     9.7. Termination; Advance Payments. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.


<PAGE>
                                      -25-


     9.8. Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.

10. Real Property Taxes.

     10.1. Definitions.

     (a) "Real Property Taxes." As used herein, the term "Real Property Taxes"
shall include any form of assessment; real estate, general, special, ordinary or
extraordinary, or rental levy or tax (other than inheritance, personal income or
estate taxes); improvement bond; and/or license fee imposed upon or levied
against any legal or equitable interest of Lessor in the Project, Lessor's right
to other income therefrom, and/or Lessor's business of leasing, by any authority
having the direct or indirect power to tax and where the funds are generated
with reference to the Project address and where the proceeds so generated are to
be applied by the city, country or other local taxing authority of a
jurisdiction within which the Project is located. The term "Real Property Taxes"
shall also include any tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring during the term of this Lease,
including but not limited to, a change in the ownership of the Project or any
portion thereof or a change in the improvements thereon.

     (b) "Base Real Property Taxes." As used herein, the term "Base Real
Property Taxes" shall be the amount of Real Property Taxes, which are assessed
against the Premises, Building, Project or Common Areas in the calendar year
during which the Lease is executed. In calculating Real Property Taxes for any
calendar year, the Real Property Taxes for any real estate tax year shall be
included in the calculation of Real Property Taxes for such calendar year based
upon the number of days which such calendar year and tax year have in common.

     10.2. Payment of Taxes. Lessor shall pay the Real Property Taxes applicable
to the Project, and except as otherwise provided in Paragraph 10.3, any
increases in such amounts over the Base Real Property Taxes shall be included in
the calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.

     10.3. Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee's request.


<PAGE>
                                      -26-


     10.4. Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

     10.5. Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee's property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.

     11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines that
Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume of
trash as to require an increase in the size of the dumpster and/or an increase
in the number of times per month that the dumpster is emptied, then Lessor may
increase Lessee's Base Rent by an amount equal to such increased costs.

12. Assignment and Subletting.

     12.1. Lessor's Consent Required.

     (a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or encumber (collectively, "assign or assignment") or sublet all or any
part of Lessee's interest in this Lease or in the Premises without Lessor's
prior written consent, which consent shall not be unreasonably withheld.

     (b) A change in the control of Lessee (which, for purposes of this
paragraph shall mean the transfer by Lessee, on a cumulative basis, of 25% or
more of the voting control of Lessee), in the absence of any material change in
the use of the Premises by XOMA (US) LLC, shall not constitute an assignment
requiring consent, although lessee shall give written notice to Lessor in the
event of such change in control not later than 30 days following such change of
control. A change of control coupled with a material change in the use of the
Premises by XOMA (US) LLC shall constitute an assignment requiring consent. The
transfer,


<PAGE>
                                      -27-


on a cumulative basis, of 25% or more of the voting control of Lessee a change
in control for this purpose.

     (c) Deleted.

     (d) An assignment or subletting without consent shall, at Lessor's option,
be a default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unapproved assignment or subletting as a noncurable Breach, Lessor may
either: (i) terminate this Lease, or (ii) upon 45 days written notice, increase
the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the
event of such Breach and rental adjustment, (i) the purchase price of any option
to purchase the Premises held by Lessee shall be subject to similar adjustment
to 110% of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to 110% of the scheduled adjusted rent.

     (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.

     12.2. Terms and Conditions Applicable to Assignment and Subletting.

     (a) Regardless of Lessor's consent, any assignment or subletting shall not:
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

     (b) Lessor may accept Rent or performance of Lessee's obligations from any
person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for Lessee's Default or Breach.

     (c) Lessor's consent to any assignment or subletting shall not constitute a
consent to nay subsequent assignment or subletting.

     (d) In the event of any Default or Breach by Lessee, Lessor may proceed
directly against Lessee, any Guarantors or anyone else responsible for the
performance of Lessee's obligations under this Lease, including any assignee or
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefore to Lessor, or any security held by Lessor.


<PAGE>
                                      -28-


     (e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, as consideration for Lessor's
considering and processing said request. Lessee agrees to provide Lessor with
such other or additional information and/or documentation as may be reasonably
requested.

     (f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.

     12.3. Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

     (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a Breach shall occur in the performance of Lessee's obligations, Lessee may
collect said Rent. Lessor shall not, by reason of the foregoing or any
assignment of such sublease, nor by reason of the collection of Rent, be deemed
liable to the sublessee for any failure of Lessee to perform and comply with any
of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes
and directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations under
this Lease, to pay to Lessor all Rent due and to become due under the sublease.
Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to
Lessor without any obligation or right to inquire as to whether such Breach
exists, notwithstanding any claim from Lessee to the contrary.

     (b) In the event of a Breach by Lessee, Lessor may, at its option, require
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

     (c) Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.


<PAGE>
                                      -29-


     (d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

     (e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.

13. Default; Breach; Remedies.

     13.1. Default; Breach. A "Default" is defined as a failure by the Lessee to
comply or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A "Breach" is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:

     (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.

     (b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of 5 business days following
written notice to Lessee.

     (c) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, (vii) any document requested under Paragraph 41
(easements), or (viii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such
failure continues for a period of 30 days following written notice to Lessee.

     (d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of 30 days after written notice; provided,
however, that if the nature of Lessee's Default is such that more than 30 days
are reasonably required for its cure, then it shall not be deemed to be a Breach
if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.


<PAGE>
                                      -30-


     (e) The occurrence of any of the following events: (i) the making of any
general arrangement or assignment for the benefit of creditors; (ii) becoming a
"debtor" as defined in 11 U.S.C. ss. 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within 60 days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within 45 days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days;
provided, however, in the event that any provision of this subparagraph (e) is
contrary to any applicable law, such provisions shall be of no force or effect,
and not affect the validity of the remaining provisions.

     (f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.

     (g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within 60 days following written notice of any such event, to
provide written alternative assurance security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

     13.2. Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within 15 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

     (a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession to Lessor. In such event Lessor shall be entitled to
recover from Lessee: (i) the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of award


<PAGE>
                                      -31-


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 that
the Lessee proves could have been reasonably avoided; (iii) 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 that the Lessee
proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Lessor for all the detriment proximately caused by the Lessee's
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not limited
to the cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and that portion of any leasing commission paid by Lessor in
connection with this Lease applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision (iii) of the
immediately preceding sentence shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of the District within which the
Premises are located at the time of award plus one percent. Efforts by Lessor to
mitigate damages caused by Lessee's Breach of this Lease shall not waive
Lessor's right to recover damages under Paragraph 12. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages
as are recoverable therein, or Lessor may reserve the right to recover all or
any part thereof in a separate suit. If a notice or grace period required under
Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to
perform or quit given to Lessee under the unlawful detainer statute shall also
constitute the notice required by Paragraph 13.1. In such case, the applicable
grace period required by Paragraph 13.1 and the unlawful detainer statute shall
run concurrently, and the failure of Lessee to cure the Default with the greater
of the two such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.

     (b) Continue the Lease and Lessee's right to possession and recover the
Rent as it becomes due, in which event Lessee may sublet or assign, subject only
to reasonable limitations. Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

     (c) Pursue any other remedy now and hereafter available under the laws or
judicial decisions of the state wherein the Premises are located. The expiration
or termination of this Lease and/or the termination of Lessee's right to
possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

     13.3. Deleted


<PAGE>
                                      -32-


     13.4. Late Charges. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within 5 days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time charge equal to 10% of each such overdue amount or $100, whichever is
greater. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect with such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for 3 consecutive installments of Base Rent, then notwithstanding any provision
of this Lease to the contrary, Base Rent shall, at Lessor's option, become due
and payable quarterly in advance.

     13.5. Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to non-scheduled payments. The interest
("Interest") charged shall be six percent.

     13.6. Breach by Lessor.

     (a) Notice of Breach. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph, a reasonable time
shall in no event be less than 30 days after receipt by Lessor, and any Lender
whose name and address shall have been furnished Lessee in writing for such
purpose, of written notice specifying wherein such obligation of Lessor has not
been performed; provided, however, that if the nature of Lessor's obligation is
such that more than 30 days are reasonably required for its performance, then
Lessor shall not be in breach if performance is commenced within such 30 day
period and thereafter diligently pursued to completion.

     (b) Performance by Lessee on Behalf of Lessor. In the event that neither
Lessor nor Lender cures said breach within 30 days after receipt of said notice,
or if having commenced said cure they do not diligently pursue it to completion,
then Lessee may elect to cure said breach at Lessee's expense and offset from
Rent an amount equal to the greater of one month's Base Rent or the Security
Deposit, and to pay an excess of such expense under protest, reserving Lessee's
right to reimbursement from Lessor. Lessee shall document the cost of said cure
and supply said documentation to lessor.


<PAGE>
                                      -33-


14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than 10% of the floor area of the Unit, or more than 25%
of Lessee's Reserved Parking Spaces, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within 10 days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes for Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

15. (Deleted)

16. Estoppel Certificates.

     (a) Each Party (as "Responding Party") shall within 10 days after written
notice from the other Party (the "Requesting Party") execute, acknowledge and
deliver to the Requesting Party a statement in writing in form similar to the
then most current "Estoppel Certificate" form published by the American
Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

     (b) If the Responding Party shall fail to execute or deliver the Estoppel
Certificate within such 10 day period, the Requesting Party may execute an
Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's performance, and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Re-


<PAGE>
                                      -34-


questing Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

     (c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee and all Guarantors shall deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee's
financial statements for the last 3 years. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.

     17. Definition of Lessor. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6.2 above.

18. Severability. The invalidity of any provision of this Lease, as determined
by a court if competent jurisdiction, shall in no way affect the validity of any
other provisions hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.


<PAGE>
                                      -35-


22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the use, nature, quality and character of the Premises.

23. Notices.

     23.1. Notice Requirements. All notices required or permitted by this Lease
or applicable law shall be in writing and may be delivered in person (by hand or
by courier) or may be sent by certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

     23.2. Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date in shown, the postmark thereon. Notices
delivered by United States Express Mail or overnight courier that guarantee next
day delivery shall be deemed given 24 hours after delivery of the same to the
Postal Service or courier. Notices transmitted by facsimile transmission or
similar means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or


<PAGE>
                                      -36-


conditions shall be of no force or effect whatsoever unless specifically agreed
to in writing by Lessor at or before the time of deposit of such payment.

25. (Deleted)

26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
110% of the Base Rent applicable immediately preceding the expiration or
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

     30.1. Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

     30.2. Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclo-


<PAGE>
                                      -37-


sure, such new owner shall not: (a) be liable for any act or omission of any
prior lessor or with respect to events occurring prior to acquisition of
ownership; (b) be subject to any offsets or defenses which Lessee might have
against any prior lessor, (c) be bound by prepayment of more than one month's
rent, or (d) be liable for the return of any security deposit paid to any prior
lessor.

     30.3. Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within 60 days after the execution of this Lease, Lessor
shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's
option, directly contact Lender and attempt to negotiate for the execution and
delivery of a Non-Disturbance Agreement.

     30.4. Self Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31. Attorneys' Fees. If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorney's fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach ($200 is a reasonable minimum per
occurrence for such services and consultation).


<PAGE>
                                      -38-


32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any reasonable time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders or tenants, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "For Sale" signs and
Lessor may during the last 6 months of the term hereof place on the Premises any
ordinary "For Lease" signs. Lessee may at any time place on the Premises any
ordinary "For Sublease" sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises with Lessor's prior written consent.

34. Signs. Except for ordinary "For Sublease" signs which may be placed only on
the Premises, Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
or elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36. Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the

<PAGE>
                                      -39-


determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.

37. Guarantor.

     37.1. Execution. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.

     37.2. Default. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d)
written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39. Options. If Lessee is granted an option, as defined below, then the
following provisions shall apply.

     39.1. Definition. "Option" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

     39.2. Options Personal To Original Lessee. Any Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

     39.3. Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.

     39.4. Effect of Default on Options.


<PAGE>
                                      -40-


     (a) Lessee shall have no right to exercise an Option: (i) during the period
commencing with the giving of any notice of Default and continuing until said
Default is cured, (ii) during the period of time any Rent is unpaid (without
regard to whether notice thereof is given Lessee), (iii) during the time Lessee
is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or
more notices of separate Default, whether or not the Defaults are cured, during
the 12 month period immediately preceding the exercise of the Option.

     (b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4(a).

     (c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of 30 days after such Rent becomes due (without any
necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or
more notices of separate Default during any 12 month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted 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
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.

43. Authority. If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease on
behalf of such entity repre-


<PAGE>
                                      -41-


sents and warrants that he or she is duly authorized to execute and deliver this
Lease on its behalf. Each party shall, within 30 days after request, deliver to
the other party satisfactory evidence of such authority.

44. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or hand written provisions shall be controlled by the typewritten or
handwritten provisions.

45. Offer. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal refinancing of
the Premises.

47. Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

48. Waiver of Jury Trial. The Parties hereby waive their respective rights to
trial by jury in any action or proceeding involving the Property or arising out
of this Agreement.

49. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation
and/or Arbitration of all disputes between the Parties and/or Brokers arising
out of this lease is not attached to this Lease.

     Lessor and Lessee have carefully read and reviewed this Lease and each term
and provision contained herein, and by the execution of this Lease show their
informed and voluntary consent thereto. The Parties hereby agree that, at the
time this Lease is executed, the terms of this Lease are commercially reasonable
and effectuate the intent and purpose of Lessor and Lessee with respect to the
Premises.

     Attention: No representation or recommendation is made by the American
Industrial Real Estate Association or by any Broker as to the legal sufficiency,
legal effect, or tax consequences of this Lease or the transaction to which it
relates. The Parties are urged to:

     1. Seek advice of counsel as to the legal and tax consequences of this
Lease.


<PAGE>
                                      -42-


     2. Retain appropriate consultants to review and investigate the condition
of the Premises. Said investigation should include but not be limited to: the
possible presence of Hazardous Substances, the zoning of the Premises, the
structural integrity, the condition of the roof and operating systems,
compliance with the Americans with Disabilities Act and the suitability of the
Premises for Lessee's intended use.

     Warning: If the Premises are located in a State other than California,
certain provisions of the Lease may need to be revised to comply with the laws
of the State in which the Premises are located.

     The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

                           Executed at:  Emeryville, CA
                           On:  12/28/01
                           By Lessor:  Temescal, L.P. a California limited
                           partnership and Contra Costa Industrial Pa



                           By:      /J.R. Ortoni III/
                                    -----------------------------------
                           Name Printed:  J.R. Ortoni III
                           Title:  Mgr LLC
                           Address:  c/o Libitzky Management Corp.
                           1475 Powell Street, Suite 201
                           Emeryville, CA  94608
                           Telephone:        (510) 652-4950
                           Facsimile:        (510) 652-0588

                           Executed at:  Berkeley, CA
                           On:  Dec. 28, 2001
                           By Lessor:  XOMA (US) LLC a Delaware limited
                           liability company
                           By:      /Clarence L. Dellio/
                                    --------------------------------------------
                           Name Printed:  Clarence L. Dellio
                           Title:  Senior Vice President, Operations





<PAGE>
                                      -43-






                            By:      /Christopher J. Margolin/
                                     -----------------------------------
                            Address:  Legal Department
                            Attn:  Chris Margolin
                            2910 Seventh Street
                            Berkeley, CA  94710
                            Telephone:        (510) 644-1170
                            Facsimile:        (510) 649-7571



<PAGE>
                                      -44-




                   Addendum to Standard Industrial/Commercial
                           Multi-Tenant Lease - Gross



     Reference is hereby expressly made to that certain Standard
Industrial/Commercial Multi-Tenant Lease - Gross (the "Lease"), dated as of even
date herewith. This Addendum to the Lease is being made simultaneously with the
Lease and is intended by the parties hereto to set forth additional terms of
said Lease and to supersede any inconsistent terms of said Lease.

50. Base Rent Increases.


     The Base Rent shall be adjusted for the then remaining portion of the
Original Term as of the first and each anniversary date(s) of the Commencement
Date. Each such anniversary date is hereunder referred to as an "Adjustment
Date". The Base Rent shall be adjusted as of each Adjustment Date to an amount
equal to one hundred and three percent (103%) of the Base Rent payable for the
month immdiately preceding such Adjustment Date.

51. Option to Extend.


     Subject to Paragraph 39, Lessee shall have the Option to extend the Term
for one (1) consecutive period of three (3) years (the "Extension Term"), at
Lessee's election immediately following the expiration of the Original Term.
Lessee shall exercise the Option by delivery of written notice of such election
to Lessor at least one hundred eighty (180) days and no more than two hundred
seventy (270) days prior to the Expiration Date of the Original Term. The Base
Rent payable monthly during the Extension Term with respect to the Premises as
of the commencement of such term (the "Extension Term Commencement Date") shall
be at that amount equal to ninety-five per cent (95%) of the then prevailing
fair market rental rate for similar space in comparable buildings in the area
which have been similarly built out for occupancy, comparable in area and
location to the space for which such rental rate is being determined, but in no
event less than the Base Rent payable for the last month of the Original Term.

     The Base Rent shall be adjusted for the then remaining portion of the
Extension Term as of the first and each anniversary date(s) of the Extension
Term Commencement Date. Each such anniversary date is hereunder referred to as
an "Adjustment Date". The Base Rent shall be adjusted as of each Adjustment Date
to an amount equal to one hundred and three percent (103%) of the Base Rent
payable for the month immediately preceding such Adjustment Date.


<PAGE>
                                      -45-


52. Lessee's Share.


     Notwithstanding anything to the contrary in the Lease, Lessee shall be
responsible for 65% of the expenses incurred in connection with the maintenance
and repair of the elevator located at the Building. For purposes of this Lease,
Building shall mean the properties located at 285 and 2840 Seventh Street.

53.  Lessor Duty to Clean Carpet and Paint Premises; Fix Front Entrance Noise.


     Notwithstanding anything to the contrary in this Lease, Lessor shall, prior
to the Commencement Date, (1) have the carpets professionally cleaned, (2) touch
up the interior paint as necessary and (3) fix the mechanical vibration/noise
that is apparent near the front entrance.

54.  Certain Personal Property of Lessor To be Used By Lessee.


     Attached hereto as Exhibit B, entitled "Personal Property List" is a
description of certain personal property belonging to Lessor, generally
consisting of dividers, partitions and other items commonly referred to as
modular furniture (the "Furniture") at no additional cost. For so long as Lessee
occupies the Premises pursuant to this Lease, Lessor permits Lessee to use the
Furniture. Lessee shall take reasonable steps to assure that the Furniture is
properly cared for and maintained, and shall return possession of the Furniture
to Lessor upon the termination of this Lease. Prior to the return of such
possession, Lessee shall have the Furniture cleaned and effect any such repairs
and/or maintenance as may be necessary to put such Furniture in a condition
reasonably similar to the condition in which such Furniture was received by
Lessee on the Commencement Date, with reasonable wear and tear excepted.

55.  Lessee's and Lessor's HVAC Maintenance and Repair Responsibility.


     Notwithstanding anything to the contrary in the Lease, the Lessor shall
administer a service contract on the HVAC units (with any service and repair
costs passed through to Lessee). The HVAC serving the Premises serves solely the
Premises. In the event an


<PAGE>
                                      -46-


HVAC unit requires replacement, then, unless the requirement for such
replacement arises out of the negligence or intentional wrongful act of Lessee,
Lessor shall be responsible for arranging for such replacement, which shall be
at the sole cost of Lessor.

56.  Consent by Lessor to Sublease or Assignment.


     Notwithstanding anything to the contrary in the Lease, Lessee shall
continue to be liable to Lessor under the Lease, whether this Lease is assigned,
sublet or otherwise transferred, and in any event Lessee waives any suretyship
defenses that it may otherwise have to an action brought by Lessor, including
without limitation, those contained in Sections 2809, 2810, 2819, 2839, 2849,
2855, 2899 and 3433 of the California Civil Code, as now hereafter amended and
any similar laws. Lessee additionally hereby waives the remedies provided in
Section 1995.310 of the California Civil Code, consisting of the right to
terminate this Lease or collect contract damages, if Lessor unreasonably
withholds its consent to any assignment.

57. Lessor Right to Excess Rents.


     Fifty percent of all rent received by Lessee from its subtenants in excess
of the Base Rent payable by Lessee to Lessor under this Lease shall be paid to
Lessor, and any sums to be paid by an assignee to Lessee in consideration of the
assignment of this Lease shall be paid to Lessor. The preceding provision shall
not apply where the subtenant or assignee is the parent, wholly owned subsidiary
or commonly controlled affiliate of Lessee. The term "controlled" or "control"
means direct or indirect ownership of fifty percent (50%) or more of the
outstanding voting stock of a corporation, or other majority equity and control
interest if the entity is not a corporation.

Executed as of this 28th day of December, 2001.
                    Lessee's Initial             Lessor' Initials




<PAGE>


                                    EXHIBIT A


                              Property Description


                    (a plan of the property is inserted here)




<PAGE>


                                    EXHIBIT B


                             Personal Property List




                  Approximately 110 Herman Miller partitions/dividers


                  Approximately 60 table tops (Herman Miller)


Homaco   Telecommunications Rack Assembly (which, if Lessee determines prior to
         occupancy it does not desire, will be removed by Lessor)




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                                    EXHIBIT A

                              Property Description




<PAGE>



                                    EXHIBIT B

                             Personal Property List



1.   Approximately 110 Herman Miller partitions/dividers
2.   Approximately 60 table tops (Herman Miller)
3.   Homaco Telecommunications Rack Assembly (which, if Lessee determines prior
     to occupancy it does not desire, will be removed by Lessor)


<PAGE>




                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
                                GUARANTY OF LEASE


     WHEREAS, Temescal, L.P. and Contra Costa Industrial Park Ltd., hereinafter
"Lessor", and XOMA (US) LLC, hereinafter "Lessee", are about to execute a
document entitled "Lease" dated December 28, 2001 concerning the premises
commonly known as 2850 7th Street, Second Floor, Berkeley, CA wherein Lessor
will lease the premises to Lessee, and

     WHEREAS, XOMA Ltd., a Bermuda company with limited liability hereinafter
"Guarantors" have a financial interest in Lessee, and

     WHEREAS, Lessor would not execute the Lease if Guarantors did not execute
and deliver to Lessor this Guarantee of Lease.

     NOW THEREFORE, in consideration of the execution of the foregoing Lease by
Lessor and as a material inducement to Lessor to execute said Lease, Guarantors
hereby jointly, severally, unconditionally and irrevocably guarantee the prompt
payment by Lessee of all rents and all other sums payable by Lessee under said
Lease and the faithful and prompt performance by Lessee of each and every one of
the terms, conditions and convenants of said Lease to be kept and performed by
Lessee.

     It is specifically agreed that the terms of the foregoing Lease may be
modified by agreement between Lessor and Lessee, or by a course of conduct, and
said Lease may be assigned by Lessor or any assignee of Lessor without consent
or notice to Guarantors and that this Guaranty shall guarantee the performance
of said Lease as so modified.

     This Guaranty shall not be released, modified or affected by the failure or
delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.

     No notice of default need to be given to Guarantors, it being specifically
agreed that the guarantee of the undersigned is a continuing guarantee under
which Lessor may proceed immediately against Lessee and/or against Guarantors
following any breach or default by Lessee or for the enforcement of any rights
which Lessor may have as against Lessee under the terms of the lease or at law
or in equity.

     Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding against
Lessee and without previous notice to or demand upon either Lessee or
Guarantors.


<PAGE>


     Guarantors hereby waive (a) notice of acceptance of this Guaranty, (b)
demand of payment, presentation and protest, (c) all right to assert or plead
any statue of limitations relating to this Guaranty or the Lease, (d) any right
to require the Lessor to proceed against the Lessee or any other Guarantor or
any other person or entity liable to Lessor, (e) any right to require Lessor to
apply to any default any security deposit or other security it may hold under
the Lease, (f) any right to require Lessor to proceed under any other remedy
Lessor may have before proceeding against Guarantors, (g) any right of
subrogation.

     Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease and this
Guaranty.

     If a Guarantor is married, such Guarantor expressly agrees that recourse
may be had against his or her separate property for all of the obligations
hereunder.

     The obligations of Lessee under the Lease to execute and deliver estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same.

     The term "Lessor" refers to and means the Lessor named in the Lease and
also Lessor's successors and assigns. So long as Lessor's interest in the Lease,
the leased premises or the rents, issues and profits therefrom, are subject to
any mortgage or deed of trust or assignment for security, no acquisition by
Guarantors of the Lessor's interest shall affect the continuing obligation of
Guarantors under this Guaranty which shall nevertheless continue in full force
and effect for the benefit of the mortgagee, beneficiary, trustee or assignee
under such mortgage, deed of trust or assignment and their successors and
assigns.

     The term "Lessee" refers to and means the Lessee named in the Lease and
also Lessee's successors and assigns.

     In the event any action be brought by said Lessor against Guarantors
hereunder to enforce the obligation of Guarantors hereunder, the unsuccessful
party in such action shall pay to the prevailing party therein a reasonable
attorney's fee which shall be fixed by the court.


<PAGE>


     If this Form has been filed in, it has been prepared for submission to your
attorney for his approval. No representation or recommendation is made by the
American Industrial Real Estate Association, the real estate broker or its
agents or employees as to the legal sufficiency, legal effect, or tax
consequences of this Form or the transaction relating thereto.

Executed at Berkeley, CA
on December 28, 2001
XOMA Ltd. a Bermuda company w/ ltd liability
"GUARANTORS"
By: //Christopher J. Margolin//
Address: Attn:  Chris Margolin
2910 Seventh St.
Berkeley, CA  94710