Document:

<PAGE>
                                                                   Exhibit 10.27

                              REDEMPTION AGREEMENT

      THIS REDEMPTION AGREEMENT (this "AGREEMENT") dated effective June 23,
2004, is entered into by and between NEKTAR THERAPEUTICS (FORMERLY KNOWN AS
INHALE THERAPEUTIC SYSTEMS, INC.), a Delaware corporation ("Nektar"), SCIMED
PROP III, INC., a California corporation ("GENERAL PARTNER"), 201 INDUSTRIAL
PARTNERSHIP, a California general partnership ("201 LIMITED PARTNER") and INHALE
201 INDUSTRIAL ROAD, L.P., a California limited partnership ("PARTNERSHIP") with
reference to the following facts:

                                    Recitals

      A. Nektar, Partnership and Bernardo Property Advisors, Inc., a California
corporation, entered into an Agreement for the Contribution of 201 Industrial
Road Project as of September 14, 2000, which provided for, among other things,
(i) the contribution of certain real property, commonly known as 201 Industrial
Road, San Carlos, California (the "REAL PROPERTY"), by Nektar to the Partnership
in return for Nektar receiving a 49.0% limited partnership interest in the
Partnership, and (ii) Partnership, as "Landlord," and Nektar, as "Tenant,"
entering into a Build-to-Suit Lease Agreement for the Real Property (the
"LEASE"). General Partner is currently the sole general partner of the
Partnership and 201 Limited Partner and Nektar are the sole limited partners of
the Partnership.

      B. In contemplation of and contingent upon a successful closing of the
proposed initial public offering of equity securities in BioMed Realty Trust,
Inc., a Maryland corporation (the "REIT"), the parties hereto propose to enter
into the transactions set forth in this Agreement.

      C. Pursuant to separate documents and concurrently with the Closing
(defined below), General Partner, intends to assign its general partnership
interest in the Partnership to BioMed Realty, L.P., a Maryland limited
partnership (the "OPERATING PARTNERSHIP"), an operating entity which is
controlled by the REIT.

      D. The parties now desire to enter into this Agreement for the redemption
of Nektar's limited partnership interest in the Partnership, the repayment of an
outstanding loan made by Nektar to the Partnership in the original principal
amount of $3,000,000 pursuant to the Agreement of Limited Partnership of the
Partnership, and the modification of the Lease, all as more particularly set
forth herein.

                                    Agreement

      NOW, THEREFORE, for valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the parties do hereby agree as follows:

      1. Cash Consideration Payable to Nektar. In partial consideration for the
covenants and agreements contained herein, at the Closing (as defined below) the
Partnership shall pay to Nektar the sum of $19,500,000, less the amount of
Nektar's capital account balance in the Partnership to be paid to Nektar
pursuant to Section 3 below, plus any Operating Cash Flow and Extraordinary Cash
Flow (as defined in the Limited Partnership Agreement) distributable pursuant to
Sections 8(b) and 8(c) of the Limited Partnership Agreement arising from the
period

<PAGE>

prior to the Closing and which was not distributed by the Partnership to Nektar
prior to the Closing.

      2. Repayment of Loan. At the Closing, the Partnership shall repay all
principal and interest then due and owing to Nektar from the Partnership
pursuant to that certain promissory note in the original principal amount of
Three Million Dollars ($3,000,000) executed by the Partnership in favor of
Nektar pursuant to Section 6(d) of the Agreement of Limited Partnership of the
Partnership.

      3. Transfer of Limited Partnership Interest; Return of Capital. At the
Closing, Nektar shall transfer its entire limited partnership interest in the
Partnership to the Partnership in complete termination of Nektar's interest in
the Partnership and the Partnership shall repay to Nektar the amount of Nektar's
capital account balance as of the date of the Closing plus the amount of any
accrued and unpaid Distributions payable to Nektar not reflected in Nektar's
capital account balance. The amounts paid by the Partnership to Nektar pursuant
to this Agreement shall be in full and complete satisfaction of all obligations
of Nektar under the Agreement of Limited Partnership of the Partnership and all
amounts due to Nektar pursuant to Nektar's position as a Limited Partner of the
Partnership or under any provisions of the Agreement of Limited Partnership of
the Partnership.

      4. Modification of the Lease. Effective at the Closing, Nektar and the
Partnership shall modify the Lease and shall execute the Amended and Restated
Lease Agreement attached hereto as Exhibit "A" (the "AMENDED AND RESTATED
LEASE").

      5. Conditions Precedent.

            (a) This entire Agreement and each of the covenants and agreements
of each party contained herein shall be contingent upon the closing of the
proposed initial public offering of equity securities of the REIT as described
in that Form S-11 Registration Statement filed with the U.S. Securities and
Exchange Commission (File No. 333-115204). If such initial public offering fails
to occur or does not occur prior to October 31, 2004, this Agreement shall be
null, void and of no effect. The Partnership shall provide prompt notice to
Nektar if the anticipated closing of such initial public offering on or before
October 31, 2004 reasonably appears in doubt. Partnership covenants and agrees
to give Nektar notice of any event or series of events which makes it unlikely
that such initial public offering will fail to occur by such date.

            (b) Notwithstanding anything in this Agreement to the contrary,
Partnership's obligations under this Agreement shall be subject to and
contingent upon the satisfaction of the following conditions precedent on or
before the Closing, any or all of which may be waived by Partnership in its sole
discretion:

                  (i) Nektar shall have performed and observed, in all material
respects, all covenants and agreements of this Agreement to be performed and
observed by Nektar as of the Closing;

                  (ii) No proceeding shall have been commenced against Nektar
under the federal Bankruptcy Code or any state law for relief of debtors;

                                       2
<PAGE>

                  (iii) Nektar shall have executed and delivered to Partnership
an Estoppel Certificate in substantially the form set forth in Exhibit "B"
attached hereto;

                  (iv) Nektar shall provide written consents in form reasonably
acceptable to Partnership of the transfers of the General Partner's interest in
the Partnership (as contemplated in Recital C above);

            (c) Notwithstanding anything in this Agreement to the contrary,
Nektar's obligations under this Agreement shall be subject to and contingent
upon the satisfaction of the following conditions precedent on or before the
Closing, any or all of which may be waived by Nektar in its sole discretion:

                  (i) Partnership, General Partner and 201 Limited Partner shall
have performed and observed, in all material respects, all covenants and
agreements of this Agreement to be performed and observed by each of them as of
the Closing;

                  (ii) No proceeding shall have been commenced against
Partnership, General Partner or 201 Limited Partner under the federal Bankruptcy
Code or any state law for relief of debtors;

                  (iii) General Partner and 201 Limited shall provide written
consents in form reasonably acceptable to Nektar the transfers contemplated
herein.

      6. Covenants Warranties and Representations.

            (a) Nektar's Covenants, Warranties and Representations.

                  (i) Nektar has good and marketable legal and beneficial title,
free and clear of any liens or encumbrances, to the entire 49.00% Limited
Partnership interest standing in Nektar's name on the books of the Partnership;

                  (ii) Upon consummation of the transactions contemplated herein
Nektar will transfer to Partnership all right, title and interest to the entire
49.00% Limited Partnership interest standing in Nektar's name on the books of
the Partnership;

                  (iii) Nektar is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;

                  (iv) Nektar has the power and authority to enter into and
perform this Agreement;

                  (v) The execution, delivery and performance of this Agreement
shall not violate any provision of law, any order of any court or other agency
of government, the corporate charter or other governing documents of Nektar;

                  (vi) This Agreement has been duly executed and delivered by
Nektar and constitutes the legal, valid and binding obligation of Nektar
enforceable in accordance with its terms, subject to laws of general application
regarding bankruptcy, insolvency and the relief

                                       3
<PAGE>

of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.

                  (vii) Nektar has had a full opportunity to seek any
information regarding the current and future prospects of the Partnership, to
review such information and to ask such questions as it deems appropriate of
representatives of Partnership, and has received satisfactory answers to all
such questions.

            (b) Partnership's Covenants, Warranties, and Representations.

                  (i) Partnership is a California limited partnership duly
organized, validly existing and in good standing under the laws of the State of
California;

                  (ii) Partnership has the power and authority to enter into and
perform this Agreement;

                  (iii) The execution, delivery and performance of this
Agreement shall not violate any provision of law, any order of any court or
other agency of government, the corporate charter or other governing documents
of General Partner;

                  (iv) This Agreement has been duly executed and delivered by
the Partnership and constitutes the legal, valid and binding obligation of the
Partnership enforceable in accordance with its terms, subject to laws of general
application regarding bankruptcy, insolvency and the relief of debtors and rules
of law governing specific performance, injunctive relief or other equitable
remedies.

            (c) General Partner's Covenants, Warranties, and Representations.

                  (i) General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;

                  (ii) General Partner has the power and authority to enter into
and perform this Agreement;

                  (iii) The execution, delivery and performance of this
Agreement shall not violate any provision of law, any order of any court or
other agency of government, the Agreement of Limited Partnership or Certificate
of Limited Partnership of the Partnership;

                  (iv) This Agreement has been duly executed and delivered by
General Partner and constitutes the legal, valid and binding obligation of
General Partner enforceable in accordance with its terms, subject to laws of
general application regarding bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies.

            (d) 201 Limited Partner's Covenants, Warranties, and
Representations.

                  (i) 201 Limited Partner is a California limited partnership
duly organized, validly existing and in good standing under the laws of the
State of California;

                                       4
<PAGE>

                  (ii) 201 Limited Partner has the power and authority to enter
into and perform this Agreement;

                  (iii) The execution, delivery and performance of this
Agreement shall not violate any provision of law, any order of any court or
other agency of government, the Agreement of Limited Partnership or Certificate
of Limited Partnership of 201 Limited Partner;

                  (iv) This Agreement has been duly executed and delivered by
201 Limited Partner and constitutes the legal, valid and binding obligation of
201 Limited Partner enforceable in accordance with its terms, subject to laws of
general application regarding bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies.

      7. Pre-Closing Covenants

            (a) Partnership's Actions Prior to the Closing. During the period
from the date of this Agreement to the Closing, the Partnership will conduct its
business and operations according to its ordinary course of business consistent
with past practice and not take any action in violation of the Lease.

            (b) Nektar's Actions Prior to the Closing. During the period from
the date of this Agreement to the Closing, Nektar will not encumber or transfer
any interest in the Partnership, nor take any action in violation of the Lease.

      8. The Closing.

            (a) Time of Closing. The closing of the transactions contemplated in
this Agreement (the "CLOSING") shall occur at the offices of the Partnership or
such other place as reasonably determined by the Partnership. The Closing shall
occur concurrently with the closing of the initial public offering of the REIT,
as specified in Section 5(a) above, and after the occurrence of the conditions
precedent set forth in Section 5.

            (b) Deliveries at the Closing.

                  (i) Deliveries by Nektar. At the Closing, Nektar shall deliver
to Partnership the following:

                        (A)   An executed Amended and Restated Lease, as
                              contemplated in Section 4 above;

                        (B)   An executed Estoppel Certificate, as contemplated
                              in Section 5(b)(iii) above; and

                        (C)   Nektar's consents to the assignments of the
                              General Partnership interest as contemplated in
                              Section 5(b)(iv) above.

                                       5
<PAGE>

                  (ii) Deliveries by Partnership. At the Closing, the
Partnership shall deliver to Nektar the following:

                        (A)   An executed Amended and Restated Lease, as
                              contemplated in Section 4 above;

                        (B)   All sums due to Nektar as specified under this
                              Agreement; and

                        (C)   General Partner's and 201 Limited Partnership's
                              consents to the assignments contemplated in this
                              Agreement.

            (c) Further Documentation. At or following the Closing, Partnership
and Nektar each shall execute any certificate or other instruments required by
law or local custom or otherwise reasonably requested by the other party to
effect the transaction contemplated by this Agreement.

      9. Withdrawal. Upon the consummation of the transactions contemplated
herein at the Closing, Nektar shall withdraw as a limited partner of the
Partnership and shall no longer be a partner of the Partnership.

      10. Indemnification.

            (a) As a material inducement for Nektar entering into this
Agreement, the Partnership agrees to indemnify and hold harmless Nektar from and
against any and all claims, judgments, causes of action, liabilities,
obligations, damages, losses, deficiencies, costs, penalties, interest and
expenses (including, without limitation, reasonable fees and expenses of
counsel) (collectively, "LOSSES") out of, based upon, attributable to, or
resulting from:

                  (i) the ownership of limited partnership interests in the
Partnership or having taken or failed to take any action in the capacity of a
limited partner of the Partnership on behalf of the Partnership or in connection
with the Partnership or its business;

                  (ii) the failure of any of the representations and warranties
of the Partnership, the General Partner or 201 Limited Partner contained herein
to be true and correct in all material respects; and

                  (iii) all claims, actions, suits, proceedings, investigations,
demands and assessments incident to any of the foregoing.

            (b) As a material inducement for the Partnership entering into this
Agreement, Nektar agrees to indemnify and hold the Partnership harmless from and
against any and all Losses arising out of, based upon, attributable to, or
resulting from:

                  (i) the failure of any of the representations and warranties
of Nektar contained herein to be true and correct in all material respects; and

                                       6
<PAGE>

                  (ii) all claims, actions, suits, proceedings, investigations,
demands and assessments incident to any of the foregoing.

            (c) Notwithstanding the foregoing, this Section 10 shall not modify
Nektar's or 201 Limited Partnership's obligations under the original Lease or
the Amended and Restated Lease.

      11. Miscellaneous

            (a) Brokerage Commissions and Finder's Fees. Each party to this
Agreement warrants to the other that no person or entity can properly claim a
right to a commission, finder's fee, acquisition fee or other commission-type
compensation (collectively, "COMMISSIONS") based upon the acts of that party
with respect to the transaction contemplated by this Agreement. Each party
hereby agrees to indemnify and defend the other against and to hold the other
harmless from any and all loss, cost, liability or expense (including but not
limited to attorneys' fees and returned commissions) resulting from any claim
for Commissions by any person or entity based upon such acts.

            (b) This Agreement shall not be altered, changed, modified, or
amended in any respect except by a writing executed by the parties hereto.

            (c) This Agreement is made and entered into in the County of San
Mateo, State of California (California), and shall, in all respects, be
interpreted, enforced, and governed by and under the laws of California. Nektar
and Partnership hereby irrevocably: (a) elect to avail themselves of the
privilege of doing business in California with respect to the subject
transactions; (b) acknowledge that their contacts with California are sufficient
to justify the assumption of jurisdiction over them by the courts of California;
(c) submit to the jurisdiction of all California courts (both Federal and State)
in any action concerning the subject transactions; and (d) acknowledge that,
with respect to the subject transactions, they are doing business within the
judicial district of the United States District Court for the Northern District
of California.

            (d) Paragraph captions have been inserted in this Agreement as a
matter of convenience for reference only, and shall not be used in the
interpretation of this Agreement.

            (e) This Agreement may be executed in one or more counterparts, all
of which together shall constitute one original document.

            (f) This Agreement memorializes and constitutes the final expression
and the complete and exclusive statement of agreement and understanding between
the parties. It supersedes and replaces all prior negotiations, proposed
agreements, and agreements, whether written or unwritten. Each of the parties to
this Agreement acknowledges that it has not executed this Agreement in reliance
upon any promise, representation, statement, or warranty whatsoever, express or
implied, which is not expressly contained in this Agreement nor in reliance upon
any belief as to any fact not expressly recited herein.

            (g) Any notice required or permitted to be given under this
Agreement shall be in writing and (i) personally delivered, (ii) sent by United
States mail, registered or certified mail, postage prepaid, return receipt
requested, (iii) sent by Federal Express or other reputable

                                       7
<PAGE>

overnight courier service, or (iv) transmitted by facsimile with a hard copy
sent within one (1) business day by any of the foregoing means, and in all cases
addressed as follows:

         TO PARTNERSHIP:      INHALE 201 INDUSTRIAL ROAD, L.P.
                              c/o Bernardo Property Advisors
                              17140 Bernardo Center Drive, Suite 195
                              San Diego, CA 92128
                              Attention: Alan D. Gold
                              Fax No.    (858) 485-9843
                              Phone No.  (858) 485- 9840

         with copies to:      David J. Dorne, Esq.
                              SELTZER CAPLAN McMAHON VITEK
                              750 B Street, Suite 2100
                              San Diego, California  92101
                              Fax No.    (619) 685-3100
                              Phone No.  (619) 685-3003

         TO NEKTAR:           NEKTAR THERAPEUTICS
                              150 Industrial Road
                              San Carlos, California  94070
                              Attn: A. Bansal
                              Chief Financial Officer
                              Fax No.    (650) 631-3150
                              Phone No.  (650) 631-3100

                              NEKTAR THERAPEUTICS
                              150 Industrial Road
                              San Carlos, California 94070
                              Attn: Paula Kasler
                              Associate General Counsel
                              Fax No.    (650) 631-3150
                              Phone No.  (650) 631-3100

         with copies to:      GREENBERG TRAURIG, LLP
                              Attn: Toni Wise, Esq.
                              2000 University Avenue
                              East Palo Alto, California 94303
                              Fax No.    (650) 328-8500
                              Phone No.  (650) 328-8508

Any such notice shall be deemed delivered as follows: (a) if personally
delivered, the date of delivery to the address of the person to receive such
notice; (b) if sent by "next business day" Federal Express or other reputable
overnight courier service, the next business day after being sent; or (c) if
sent by facsimile transmission, the date transmitted to the person to receive
such notice if sent by 5:00 p.m. Pacific Time and the next business day if sent
after 5:00 p.m. Pacific Time, provided in either case that there is evidence of
such transmission printed by the sending

                                       8
<PAGE>

machine. Any notice sent by facsimile transmission must be confirmed by
personally delivering or mailing a copy of the notice sent by facsimile
transmission. Any party may change its address for notice by written notice
given to the other at least three (3) business days before the effective date of
such change in the manner provided in this Section.

            (h) Nothing expressed or implied in this Agreement is intended, or
shall be construed, to confer upon or give any person, firm, corporation,
partnership, association or other entity, other than the parties hereto and
their respective successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.

                            [CONTINUED ON NEXT PAGE]

                                        9
<PAGE>

            (i) Time is of the essence of every provision contained in this
Agreement.

      In witness whereof, the Parties have executed this Agreement as of the
date first above written.

NEKTAR:                                   NEKTAR THERAPEUTICS (formerly known as
                                          Inhale Therapeutic Systems, Inc.), a
                                          Delaware corporation

                                          By:    /s/ AJIT GILL
                                                 -------------------------------
                                          Name:  Ajit Gill
                                                 -------------------------------
                                          Title: CEO
                                                 -------------------------------

                                          By:    /s/ AJAY BANSAL
                                                 -------------------------------
                                          Name:  Ajay Bansal
                                                 -------------------------------
                                          Title: CFO
                                                 -------------------------------

PARTNERSHIP:                              INHALE 201 INDUSTRIAL ROAD, L.P.,
                                          a California limited partnership

                                          By:   SciMed Prop III, Inc.,
                                                a California corporation

                                                By:    /s/ ALAN D. GOLD
                                                       -------------------------
                                                Name:  Alan D. Gold
                                                       -------------------------
                                                Title: President
                                                       -------------------------

                                                By:    /s/ GARY A. KREITZER
                                                       -------------------------
                                                Name:  Gary A. Kreitzer
                                                       -------------------------
                                                Title: Executive Vice President
                                                       -------------------------

                            [CONTINUED ON NEXT PAGE]

                                       10
<PAGE>

GENERAL PARTNER:                          SCIMED PROP III, Inc.,
                                          a California corporation

                                                By:    /s/ ALAN D. GOLD
                                                       -------------------------
                                                Name:  Alan D. Gold
                                                       -------------------------
                                                Title: President
                                                       -------------------------

                                                By:    /s/ GARY A. KREITZER
                                                       -------------------------
                                                Name:  Gary A. Kreitzer
                                                       -------------------------
                                                Title: Executive Vice President
                                                       -------------------------

201 LIMITED PARTNER                       201 INDUSTRIAL PARTNERSHIP,
                                          a California general partnership

                                          By:    /s/ ALAN D. GOLD
                                                 -------------------------------
                                          Name:  Alan D. Gold
                                                 -------------------------------
                                          Title: Partner
                                                 -------------------------------

                                          By:    /s/ GARY A. KREITZER
                                                 -------------------------------
                                          Name:  Gary A. Kreitzer
                                                 -------------------------------
                                          Title: Partner
                                                 -------------------------------

                                       11<PAGE>

                                                                   EXHIBIT 10.28

                              AMENDED AND RESTATED
                               BUILT-TO-SUIT LEASE

                                 BY AND BETWEEN

                        INHALE 201 INDUSTRIAL ROAD, L.P.

                      A CALIFORNIA LIMITED PARTNERSHIP, AS

                                    LANDLORD

                                       AND

           NEKTAR THERAPEUTICS (FKA INHALE THERAPEUTIC SYSTEMS, INC.),

                           A DELAWARE CORPORATION, AS

                                     TENANT

                               201 INDUSTRIAL ROAD
                              SAN CARLOS, CA 94070

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          PAGE
<S>                                                                                                       <C>
1.    PROPERTY........................................................................................     3
      1.1      Lease of Premises......................................................................     3
               (a)      Buildings, Real Property, Improvements........................................     3
               (b)      Use of Common Areas...........................................................     5
      1.2      [Deleted]..............................................................................     5

2.    TERM............................................................................................     5
      2.1      Term...................................................................................     5
      2.2      [Deleted]..............................................................................     5
      2.3      [Deleted]..............................................................................     5
      2.4      Acknowledgement of Rent Commencement...................................................     5
      2.5      Holding Over...........................................................................     5
      2.6      Options To Extend Term.................................................................     6

3.    RENTAL..........................................................................................     6
      3.1      Minimum Rental.........................................................................     6
               (a)      Commencement of Rental Obligations for Phase 1................................     6
               (b)      Commencement of Rental Obligations for Phase 2A...............................     7
               (c)      Rental Amounts for Phase 1A, Phase 1B, and Phase 2A:  Annual Increases........     7
               (d)      Rental Amounts During First Extended Term.....................................     7
               (e)      Rental Amounts During Second Extended Term....................................     8
      3.2      Late Charge............................................................................     8

4.    PARKING.........................................................................................     9

5.    CONSTRUCTION....................................................................................     9
      5.1      Construction of Improvements...........................................................     9
               (a)      Base Building Work; Performance and Payment...................................     9
               (b)      Tenant's Work; Phase 2A Improvements..........................................     9
               (c)      Compliance with Law...........................................................     9

6.    TAXES...........................................................................................     9
      6.1      Personal Property......................................................................     9
      6.2      Real Property Taxes....................................................................    10
               (a)      Real Property Taxes...........................................................    10
               (b)      Protests......................................................................    10
               (c)      Refunds.......................................................................    10
               (d)      Other Taxes...................................................................    10
               (e)      Tax and Insurance Escrows.....................................................    11

7.    OPERATING EXPENSES..............................................................................    11
      7.1      Payment of Operating Expenses..........................................................    11
               (a)      Tenant's Operating Cost Share.................................................    11
               (b)      Adjustment of Tenant's Operating Cost Share...................................    11
</TABLE>

                                        i
<PAGE>

<TABLE>
<S>                                                                                                       <C>
      7.2      Definition of Operating Expenses.......................................................    11
               (a)      Inclusions....................................................................    11
               (b)      Exclusions....................................................................    12
      7.3      Determination of Operating Expenses....................................................    14
      7.4      Final Accounting For Lease Year........................................................    14
               (a)      Annual Statement..............................................................    14
               (b)      Audit Rights..................................................................    14
      7.5      Proration..............................................................................    15
      7.6      Reserve Account........................................................................    15
      7.7      Property Management Fee................................................................    16

8.    UTILITIES.......................................................................................    16
      8.1      Payment................................................................................    16
      8.2      Interruption...........................................................................    16

9.    ALTERATIONS.....................................................................................    16
      9.1      Right To Make Alterations..............................................................    16
      9.2      Title To Alterations...................................................................    17
      9.3      Tenant Fixtures and Personal Property..................................................    17
      9.4      No Liens...............................................................................    17
      9.5      Signs..................................................................................    18

10.   MAINTENANCE AND REPAIRS.........................................................................    18
      10.1     Tenant's Obligation for Maintenance....................................................    18
               (a)      Good Order, Condition and Repair..............................................    18
               (b)      [Deleted].....................................................................    18
               (c)      Landlord's Remedy.............................................................    18
               (d)      Condition Upon Surrender......................................................    18
      10.2     Landlord's Obligation for Maintenance..................................................    19
               (a)      Good Order, Condition and Repair..............................................    19
               (b)      No Abatement..................................................................    19
               (c)      Landlords' Right of Entry for Repairs.........................................    19

11.   USE OF PROPERTY.................................................................................    19
      11.1     Permitted Use..........................................................................    19
      11.2     No Nuisance............................................................................    20
      11.3     Compliance With Laws...................................................................    20
      11.4     Environmental Matters..................................................................    20
               (a)      Definition of Hazardous Materials.............................................    20
               (b)      Tenant's Obligations Re:  Hazardous Substances................................    21
               (c)      Tenant's Indemnity............................................................    22
               (d)      Survival......................................................................    22

12.   INSURANCE AND INDEMNITY.........................................................................    22
      12.1     Landlord's Insurance...................................................................    22
      12.2     Tenant's Insurance.....................................................................    23
               (a)      Commercial General Liability Insurance........................................    23
               (b)      Tenant's Risk.................................................................    23
               (c)      Other Insurance...............................................................    23
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                       <C>
      12.3     Insurers; Primary Insurance............................................................    24
      12.4     Blanket Policy.........................................................................    24
      12.5     Deductibles............................................................................    24
      12.6     Certificates...........................................................................    25
      12.7     Adjustment in the Event of Loss........................................................    25
      12.8     Proration Upon Termination.............................................................    25
      12.9     Waiver of Subrogation..................................................................    25
      12.10    Indemnification........................................................................    26
               (a)      Tenant's Indemnification Obligations..........................................    26
               (b)      Landlord's Indemnification Obligations........................................    26
      12.11    Limitation on Landlord Liability.......................................................    27

13.   SUBLEASE AND ASSIGNMENT.........................................................................    27
      13.1     Assignment and Sublease of Building....................................................    27
               (a)      Consent Required..............................................................    27
               (b)      Permitted Transfers...........................................................    28
               (c)      Consent Required..............................................................    28
               (d)      Procedure to Obtain Consent...................................................    29
               (e)      Sublease of Phase 2A..........................................................    29
      13.2     Rights of Landlord:  Effect of Landlord's Consent......................................    29
      13.3     Advertising............................................................................    29
      13.4     Writing Required.......................................................................    30
      13.5     Transfer Premiums......................................................................    30

14.   RIGHT OF ENTRY AND QUIET ENJOYMENT..............................................................    30
      14.1     Right of Entry.........................................................................    30
      14.2     Quiet Enjoyment........................................................................    30

15.   CASUALTY AND TAKING.............................................................................    31
      15.1     Damage or Destruction..................................................................    31
               (a)      Termination Rights............................................................    31
               (b)      Limitations on Parties' Obligations...........................................    31
               (c)      Entitlement to Insurance Proceeds.............................................    32
               (d)      Abatement of Rent.............................................................    32
      15.2     Condemnation...........................................................................    32
               (a)      Termination Rights............................................................    32
               (b)      Limitations on Parties' Obligations...........................................    33
      15.3     Reservation of Compensation............................................................    33
      15.4     Restoration of Improvements............................................................    34

16.   DEFAULT.........................................................................................    34
      16.1     Events of Default......................................................................    34
               (a)      Nonpayment....................................................................    34
               (b)      Other Obligations.............................................................    34
               (c)      General Assignment............................................................    35
               (d)      Bankruptcy....................................................................    35
               (e)      Receivership..................................................................    35
               (f)      Attachment....................................................................    35
</TABLE>

                                       iii
<PAGE>

<TABLE>
<S>                                                                                                       <C>
               (g)      Insolvency....................................................................    35
      16.2     Remedies Upon Tenant's Default.........................................................    35
               (a)      Re-entry; Termination.........................................................    35
               (b)      Continuation of Lease.........................................................    36
               (c)      Remedies......................................................................    36
      16.3     Remedies Cumulative....................................................................    36
      16.4     Landlord's Default.....................................................................    36

17.   SUBORDINATION, ATTORNMENT AND SALE..............................................................    37
      17.1     Subordination to Mortgage..............................................................    37
      17.2     Sale of Landlord's Interest............................................................    38
      17.3     Estoppel Certificates..................................................................    38

18.   SECURITY........................................................................................    38
      18.1     Deposit................................................................................    38
      18.2     Pledge of Security Deposit.............................................................    39

19.   MISCELLANEOUS...................................................................................    39
      19.1     Notices................................................................................    39
      19.2     Successors and Assigns.................................................................    40
      19.3     No Waiver..............................................................................    40
      19.4     Severability...........................................................................    41
      19.5     Litigation Between Parties.............................................................    41
      19.6     Surrender..............................................................................    41
      19.7     Interpretation.........................................................................    41
      19.8     Entire Agreement.......................................................................    41
      19.9     Governing Law..........................................................................    41
      19.10    No Partnership.........................................................................    41
      19.11    Financial Information..................................................................    42
      19.12    Costs..................................................................................    42
      19.13    Time...................................................................................    42
      19.14    Brokers................................................................................    43
      19.15    Memorandum of Lease....................................................................    43
      19.16    Corporate Authority....................................................................    43
      19.17    Execution and Delivery.................................................................    43
      19.18    Survival...............................................................................    43
      19.19    Waiver of Jury Trial...................................................................    43
      19.20    Exclusivity............................................................................    43
      19.21    Tenant's Remedies......................................................................    43
      19.22    Security Measures......................................................................    43
</TABLE>

                                       iv
<PAGE>

                              AMENDED AND RESTATED

                               BUILD-TO-SUIT LEASE

      THIS AMENDED AND RESTATED BUILD-TO-SUIT LEASE ("LEASE") is made and
entered into as of _____________, 2004 by and between INHALE 201 INDUSTRIAL
ROAD, L.P., a California limited partnership ("LANDLORD"), and NEKTAR
THERAPEUTICS (FKA INHALE THERAPEUTIC SYSTEMS, INC.), a Delaware corporation
("TENANT").

                                    RECITALS

      A.    CONTRIBUTION AGREEMENT. Tenant and Landlord entered into that
certain Contribution Agreement dated as of September 14 2000 (the "CONTRIBUTION
AGREEMENT") pursuant to which, among other things: (i) Tenant agreed to
contribute, and Landlord agreed to accept, inter alia, that certain real
property situated at 201 Industrial Road, San Carlos, California, as partially
improved by Tenant (the "REAL PROPERTY"); and (ii) the parties agreed to enter
into a lease (the "ORIGINAL LEASE") as of the date of closing under the
Contribution Agreement. The Real Property is more particularly described in
EXHIBIT A attached hereto and incorporated herein by this reference.

      B.    BUILD-TO-SUIT. Pursuant to the lease and the plans, specifications,
and other documents required hereby, Landlord constructed and/or completed
certain improvements on the Real Property, including (i) two connected
four-story buildings containing an aggregate of approximately 390,000 square
feet, consisting of approximately 171,965 square feet of rentable area and two
lower stories primarily of parking for the foregoing buildings as well as for
adjacent property currently leased and occupied by Tenant located at 150
Industrial Road; (ii) site improvements; and (iii) certain other improvements.

      C.    AMENDMENT AND RESTATEMENT. The Landlord and Tenant now desire to
amend and restate the Original Lease as set forth in this Lease to provide for
certain modifications, including the deletion of Tenant's rights respecting
Phase 2B and certain other modifications, in complete replacement of the
Original Lease entered into in connection with the Contribution Agreement.

      D.    DEFINITIONS. Unless the context otherwise specifies or requires for
the purpose of this Lease, all words and phrases having their initial letters
capitalized herein shall have the meanings set forth below:

            AFFILIATE OF TENANT: shall have the meaning assigned in Section
            13.1(b).

            BUILDING COST: shall have the meaning assigned in Section 18.2.

            BUILDING 1: shall have the meaning assigned in Section 1.1(a)(ii).

            BUILDING 1 TERMINATION DATE: shall have the meaning assigned in
            Section 2.1.

            BUILDING 2: shall have the meaning assigned in Section 1.1(a)(ii).

                                       1
<PAGE>

            BUILDING 2 TERMINATION DATE: shall have the meaning assigned in
            Section 2.1.

            BUILDINGS: shall have the meaning assigned in Section 1.1(a).

            COMMON AREAS: shall mean the Interior and Exterior Common Areas,
            collectively, as indicated in Section 1.1 (a)(x).

            COSMETIC ALTERATIONS: shall have the meaning assigned in Section
            9.1.

            EFFECTIVE DATE: shall have the meaning assigned in Section 2.1.

            EXTERIOR COMMON AREAS: shall have the meaning assigned in Section
            1.1(a)(viii).

            FAIR MARKET RENTAL: shall have the meaning assigned in Section
            3.1(d).

            HAZARDOUS MATERIALS: shall have the meaning assigned in Section
            11.4(a).

            HVAC: shall have the meaning assigned in Section 7.2(a).

            IMPROVEMENTS: shall have the meaning assigned in Section
            1.1(a)(vii).

            INTERIOR COMMON AREAS: shall have the meaning assigned in Section
            1.1(a)(ix).

            LANDLORD: shall have the meaning assigned in the Introduction.

            LEASE YEAR: shall have the meaning assigned in Section 7.3.

            LEASE: shall have the meaning assigned in the Introduction.

            MINIMUM RENTAL: shall have the meaning assigned in Section 3.1(c).

            OPERATING EXPENSES: shall have the meaning assigned in Section
            7.2(a).

            PARKING LEASE: shall have the meaning assigned in Section 1.1(a).

            PERMITTED TRANSFER: shall have the meaning assigned in Section
            13.1(b).

            PHASE 1A: shall have the meaning assigned in Section 1.1(a)(iii).

            PHASE 1B: shall have the meaning assigned in Section 1.1(a)(iv).

            PHASE 2A: shall have the meaning assigned in Section 1.1(a)(v).

            PHASE 2B: shall have the meaning assigned in Section 1.1(a)(vi).

            PHASE 1 RENT COMMENCEMENT DATE: shall have the meaning assigned in
            Section 2.4.

                                       2
<PAGE>

            PHASE 2A RENT COMMENCEMENT DATE: shall have the meaning assigned in
            Section 2.4.

            PREMISES: shall have the meaning assigned in Section 1.1(a).

            PREVAILING PARTY: shall have the meaning assigned in Section 19.5.

            PROJECT: shall have the meaning assigned in Section 1.1(a)(vii).

            REAL PROPERTY: shall have the meaning assigned in Recital A.

            RENT COMMENCEMENT DATE: shall mean the Phase 1 Rent Commencement
            Date, or Phase 2A Rent Commencement Date, as defined in Section 2.4.

            REQUESTING PARTY: shall have the meaning assigned in Section 17.3.

            REQUIREMENTS: shall have the meaning assigned in Section 11.3.

            RESPONDING PARTY: shall have the meaning assigned in Section 17.3.

            SECURITY DEPOSIT: shall have the meaning assigned in Section 18.1.

            SITE PLAN: shall have the meaning assigned in Section 1.1(a)(ii).

            TENANT: shall have the meaning assigned in the Introduction.

            TENANT IMPROVEMENTS: shall mean improvements to or within the
            Premises, other than improvements constructed by Landlord as part of
            the Building, constructed from time to time by Tenant.

            TENANT'S OPERATING COST SHARE: shall have the meaning assigned in
            Section 7.1(a).

            TENANT'S EXTERIOR COMMON AREA OPERATING COST SHARE: shall have the
            meaning assigned in Section 7.1(a).

            TERM: shall have the meaning assigned in Section 2.1.

            USABLE SQUARE FEET: shall mean, with respect to each Phase shall
            mean the square feet indicated in Section 1.1(a) below.

      THE PARTIES AGREE AS FOLLOWS:

1.    PROPERTY.

      1.1   LEASE OF PREMISES.

            (a)   Buildings, Real Property, Improvements. Subject to the Parking
Lease dated as of September ___, 2000 (the "PARKING LEASE") by and between
Landlord and Tenant,

                                       3
<PAGE>

Landlord leases to Tenant and Tenant leases from Landlord, on the terms,
covenants and conditions hereinafter set forth, Phase 1A, Phase 1B, and Phase 2A
(all as defined below and referred to collectively herein as the "PREMISES").
Upon the Building 2 Termination Date, the Premises shall consist of Phase 1A and
Phase 1B only. The Premises, together with Phase 2B, were constructed by
Landlord; and are located in two connected four-story buildings containing an
aggregate of approximately 390,000 square feet, consisting of approximately
171,965 square feet of rentable area for office and laboratory research and
development and two lower stories primarily of parking (collectively, the
"BUILDINGS" and each a "BUILDING"). The Buildings were constructed on the Real
Property in connection with the Project.

                  (i)   The Real Property is located at 201 Industrial Road in
the City of San Carlos, County of San Mateo, State of California.

                  (ii)  The location of the Buildings on the Real Property is
substantially as shown on the site plans attached hereto as EXHIBIT B (the "SITE
PLAN"); the first BUILDING to be constructed ("BUILDING 1") was constructed on
the Real Property in the location depicted on the Site Plan, and the second
BUILDING was constructed ("BUILDING 2") on the Real Property in the location
depicted on the Site Plan.

                  (iii) The term "PHASE 1A" shall refer to that portion of
Building 1 consisting of approximately 39,077 rentable square feet (37,703
usable square feet) located on the fourth floor and the approximately 964
rentable square feet (930 usable square feet) located on the second floor and
shown on the Site Plan.

                  (iv)  The term "PHASE 1B" shall refer to that portion of
Building 1 consisting of approximately 39,876 rentable square feet (38,474
usable square feet) located on the third floor and shown on the Site Plan.

                  (v)   The term "PHASE 2A" shall refer to that portion of
Building 2 consisting of approximately 45,574 rentable square feet (43,972
usable square feet) located on the third floor and shown on the Site Plan.

                  (vi)  The term "PHASE 2B" shall refer to that portion of
Building 2 consisting of approximately 46,474 rentable square feet (44,840
usable square feet) located on the fourth floor and shown on the Site Plan.

                  (vii) The Buildings and the other improvements to be
constructed on the Real Property in connection with the Project, including the
Common Areas (defined below), are sometimes referred to collectively herein as
the "IMPROVEMENTS." The "PROJECT," when completed, will consist of the Real
Property and the Improvements.

                  (viii) The parking areas (whether inside or outside the
Buildings), courtyard, driveways, sidewalks, landscaped areas and other portions
of the Project, including any areas leased under the Parking Lease, that lie
outside the exterior walls of the Buildings to be constructed on the Real
Property, as depicted in the Site Plan and as hereafter modified by Landlord
from time to time in accordance with the provisions of this Lease, are sometimes
referred to herein as the "EXTERIOR COMMON AREAS."

                                       4
<PAGE>

                  (ix)  The term "INTERIOR COMMON AREAS" shall refer to the
interior lobby, elevators, stairwells, utility risers, and any mechanical rooms
located outside any tenant's premises in the Buildings.

                  (x)   The term "COMMON AREAS" shall refer collectively to the
Exterior Common Areas and the Interior Common Areas

            (b)   Use of Common Areas. As an appurtenance to Tenant's leasing of
the Premises pursuant to Section 1.1(a), Landlord hereby grants to Tenant, for
the benefit of Tenant and its employees, suppliers, shippers, customers and
invitees, during the Term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, (i) those portions of the Common Areas
improved from time to time for use as parking areas, driveways, courtyard,
sidewalks, landscaped areas, lobbies, elevators, stairwells, utility risers, any
mechanical rooms located outside any tenant's premises, or for other common
purposes, and (ii) all access easements and similar rights and privileges
relating to or appurtenant to the Real Property and created or existing from
time to time under any access easement agreements, declarations of covenants,
conditions and restrictions, or other written agreements now or hereafter of
record with respect to the Real Property, subject however to the rights granted
under the Parking Lease and any limitations applicable to such rights and
privileges under applicable law, under this Lease and/or under the written
agreements creating such rights and privileges.

      1.2   [DELETED].

2.    TERM.

      2.1   TERM. The term of this Lease (as it may be extended from time to
time, the "TERM") shall commence upon mutual execution of this Lease by Landlord
and Tenant (the "EFFECTIVE DATE") and shall terminate on August 31, 2016 as to
Phase 1A and Phase 1B (as it may be extended pursuant to Section 2.6, below, the
"BUILDING 1 TERMINATION DATE"), and ______________________ [three years from the
Effective Date] as to Phase 2A (the "BUILDING 2 TERMINATION DATE").

      2.2   [DELETED].

      2.3   [DELETED].

      2.4   ACKNOWLEDGEMENT OF RENT COMMENCEMENT. The Landlord and the Tenant
agree that the following dates are the Phase 1 Rent Commencement Date and the
Phase 2A Rent Commencement Date:

      Phase 1 Rent Commencement Date: September 1, 2000 (under Original Lease).

      Phase 2A Rent Commencement Date: October 6, 2002 (under Original Lease).

      2.5   HOLDING OVER. If Tenant holds possession of the Premises or any
portion thereof after the Term of this Lease with Landlord's written consent,
then except as otherwise specified in such consent, Tenant shall become a tenant
from month to month at one hundred and two percent (102%) of the rental and
otherwise upon the terms herein specified for the period

                                        5
<PAGE>

immediately prior to such holding over and shall continue in such status until
the tenancy is terminated by either party upon not less than one hundred twenty
(120) days prior written notice. If Tenant holds possession of the Premises or
any portion thereof after the Term of this Lease without Landlord's written
consent, then Landlord in its sole discretion may elect (by written notice to
Tenant) to have Tenant become a tenant either from month to month or at will, at
one hundred fifty percent (150%) of the rental (prorated on a daily basis for an
at-will tenancy, if applicable) and otherwise upon the terms herein specified
for the period immediately prior to such holding over, or may elect to pursue
any and all legal remedies available to Landlord under applicable law with
respect to such holding over by Tenant. Tenant shall indemnify and hold Landlord
harmless from any loss, damage, claim, liability, cost or expense (including
reasonable attorneys' fees) resulting from any delay by Tenant in surrendering
the Premises or any portion thereof (except to the extent such delay is with
Landlord's prior written consent), including, but not limited to, any claims
made by a succeeding tenant by reason of such delay. Acceptance of rent by
Landlord following expiration or termination of this Lease shall not constitute
a renewal of this Lease.

      2.6   OPTIONS TO EXTEND TERM. Tenant shall have the option to extend the
Term of this Lease for Phase 1A and Phase 1B only (but not Phase 2A), at the
Minimum Rental set forth in Section 3.1(b) and (c), below, and otherwise upon
all the terms and provisions set forth herein with respect to the initial term
of this Lease, for up to two (2) additional periods of ten (10) years each, the
first commencing upon the expiration of the initial term hereof and the second
commencing upon the expiration of the first extended term, if any. Exercise of
such option with respect to the first such extended term shall be by written
notice to Landlord at least eighteen (18) months prior to the expiration of the
initial term hereof, exercise of such option with respect to the second extended
term, if the first extension option has been duly exercised, shall be by written
notice to Landlord at least eighteen (18) months prior to the expiration of the
first extended term hereof. If Tenant is in material default hereunder, beyond
any applicable notice and cure periods, on the date of such notice or on the
date any extended term is to commence, then the exercise of the option shall be
of no force or effect, the extended term shall not commence and this Lease shall
expire at the end of the then current term hereof (or at such earlier time as
Landlord may elect pursuant to the default provisions of this Lease). If Tenant
properly exercises one or more extension options under this Section, then all
references in this Lease (other than in this Section 2.6) to the "term" of this
Lease shall be construed to include the extension term(s) thus elected by
Tenant. Except as expressly set forth in this Section 2.6, Tenant shall have no
right to extend the Term of this Lease beyond its prescribed term.

3.    RENTAL.

      Tenant shall cause payment of Minimum Rental and other rent or charges to
be received by Landlord on the first calendar day of each month of the Term of
this Lease in lawful money of the United States, without offset or deduction,
except as specifically provided herein. All amounts payable by Tenant hereunder
shall be deemed "Rent."

      3.1   MINIMUM RENTAL.

            (a)   Commencement of Rental Obligations for Phase 1. Tenant's
Minimum Rental obligations with respect to Phase 1A and Phase 1B shall commence
on the Phase 1 Rent

                                       6
<PAGE>

Commencement Date and Tenant's Operating Expense Obligations with respect to
Phase 1A and Phase 1B shall commence as of the Effective Date, and both shall
end on the Building 1 Termination Date, unless sooner terminated or extended as
hereinafter provided.

            (b)   Commencement of Rental Obligations for Phase 2A. Tenant's
Minimum Rental obligations with respect to Phase 2A shall commence on the
Effective Date and Tenant's Operating Expense obligations with respect to Phase
2A shall commence as of the Effective Date and both shall end on the Building 2
Termination Date, unless sooner terminated as hereinafter provided.

            (c)   Rental Amounts for Phase 1A, Phase 1B, and Phase 2A: Annual
Increases. Tenant shall pay to Landlord as minimum rental for the following
Phases, in advance, without deduction, offset, notice or demand, on or before
the respective Rent Commencement Date and on or before the first day of each
subsequent calendar month of the Term of this Lease, the following amounts per
month, subject to adjustment in accordance with the terms of this Section 3.1
("MINIMUM RENTAL"):

                  (i)   Phase 1A and 1B. Beginning on the Phase 1 Rent
Commencement Date, Tenant shall pay Minimum Rental for Phase 1 in an amount
equal to $287,701.20 ($3.60 per sq. ft. multiplied by 79,917).

                  (ii)  Phase 2A. Beginning on the Phase 2A Rent Commencement
Date, Tenant shall pay Minimum Rental for Phase 2A in an amount equal to
$164,066.40 ($3.60 per sq. ft. multiplied by 45,574).

                  (iii) [Deleted].

                  (iv)  Annual Increases. On the anniversary of each of
September 1 of each year (as to the Phase 1 Rent) and October 6 of each year (as
to the Phase 2A Rent), the then current Minimum Rental for the relevant Phase
shall be increased by two percent (2%).

                  (v)   Partial Months. If the obligation to pay Minimum Rental
hereunder commences on other than the first day of a calendar month or if the
Term of this Lease terminates on other than the last day of a calendar month,
the Minimum Rental for such first or last month of the Term of this Lease, as
the case may be, shall be prorated based on the number of days the Term of this
Lease is in effect during such month. If an increase in Minimum Rental becomes
effective on a day other than the first day of a calendar month, the Minimum
Rental for that month shall be the sum of the two applicable rates, each
prorated for the portion of the month during which such rate is in effect.

            (d)   Rental Amounts During First Extended Term. If Tenant properly
exercises its right to extend the Term of this Lease pursuant to Section 2.6
hereof, the Minimum Rental during the first year of the first extended term
shall be equal to one hundred percent (100%) of the fair market rental value (as
defined below), determined as of the commencement of such extended term in
accordance with this paragraph. Upon Landlord's receipt of a proper notice of
Tenant's exercise of its option to extend the Term of this Lease, the parties
shall have thirty (30) days in which to agree on the Fair Market Rental at the
commencement of the first extended term for the uses permitted hereunder. If the
parties agree on such Fair Market Rental,

                                       7
<PAGE>

they shall execute an amendment to this Lease stating the amount of the
applicable minimum monthly rental (including the indexed amounts applicable
during subsequent years of the first extended term as described above in Section
3.1(c)(iv)). If the parties are unable to agree on such rental within such
thirty (30) day period, then within thirty (30) days after the expiration of
such period each party, at its cost and by giving notice to the other party,
shall appoint a real estate appraiser with at least five (5) years experience
appraising similar commercial properties in the County in which the Real
Property is located to appraise and set the Fair Market Rental for the Premises
at the commencement of the first extended term in accordance with the provisions
of this Section 3.1(d). If either party fails to appoint an appraiser within the
allotted time, the single appraiser appointed by the other party shall be the
sole appraiser. If an appraiser is appointed by each party and the two
appraisers so appointed are unable to agree upon a Fair Market Rental within
thirty (30) days after the appointment of the second, the two appraisers shall
appoint a third similarly qualified appraiser within ten (10) days after
expiration of such 30-day period; if they are unable to agree upon a third
appraiser, then either party may, upon not less than five (5) days notice to the
other party, apply to the Presiding Judge of the Superior Court of the County in
which the Real Property is located for the appointment of a third qualified
appraiser. Each party shall bear its own legal fees in connection with
appointment of the third appraiser and shall bear one-half of any other costs of
appointment of the third appraiser and of such third appraiser's fee. The third
appraiser, however selected, shall be a person who has not previously acted for
either party in any capacity. Within thirty (30) days after the appointment of
the third appraiser, the third appraiser shall set the Fair Market Rental for
the first extended term by selecting the appraised value determined by the first
two appraisers which is closest to his own determination, and shall so notify
the parties, which determination shall be binding on the parties and shall be
enforceable in any further proceedings relating to this Lease. For purposes of
this Section 3.1(d), the "FAIR MARKET RENTAL" of the Premises shall be
determined with reference to the then prevailing market rental rates for
properties in the City of San Carlos with improvements and common area
improvements comparable to those then existing in the Premises and paid for by
Landlord.

            (e)   Rental Amounts During Second Extended Term. If Tenant properly
exercises its right to a second extended Term of this Lease pursuant to Section
2.6 hereof, the Minimum Rental during such second extended term shall be
determined in the same manner provided in the preceding paragraph for the first
extended term (including the rental increase provision for years after the first
year of such second extended term), except that the determination shall be made
as of the commencement of the second extended term.

      3.2   LATE CHARGE. If Tenant shall fail to pay, when the same is due and
payable (after giving effect to any applicable notice and cure period), any rent
or other amounts due Landlord hereunder, such unpaid amounts shall bear interest
for the benefit of the Landlord at a rate equal to the lesser of ten percent
(10%) per annum or the maximum rate permitted by law, from the date due to the
date of payment. Tenant further acknowledges that late payment of rent will
cause Landlord to incur certain costs not contemplated by this Lease, the exact
amount of such costs being extremely difficult and impractical to determine with
certainty. For this reason, in addition to interest, if Tenant shall fail to pay
(which for purposes of this paragraph, "pay" shall mean actual receipt of the
payment by Landlord) any installment of rent by the fifth (5th) day of the
calendar month for which such installment is due, a late charge equal to five
percent (5%) of the overdue installment of rent automatically shall be due
without further notice, and shall be in

                                       8
<PAGE>

addition to all other sums due. The parties agree that this additional late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant

4.    PARKING.

      Landlord and Tenant agree that the Common Areas of the Real Property shall
include not less than 690 parking spaces. Commencing on the Effective Date and
ending on the Building 2 Termination Date, Tenant shall be entitled to 361
spaces, and commencing on the Building 2 Termination Date and ending on the
Building 1 Termination Date, Tenant shall be entitled to 224 spaces, all in
addition to those spaces provided in and subject to the Parking Lease.

5.    CONSTRUCTION.

      5.1   CONSTRUCTION OF IMPROVEMENTS.

            (a)   Base Building Work; Performance and Payment. Landlord has
constructed Building 1 and Building 2 pursuant to its obligations under the
Original Lease and Landlord and Tenant agree, subject to Section 5.1(c) below,
that Landlord's obligations in connection with such construction have been fully
and satisfactorily performed.

            (b)   Tenant's Work; Phase 2A Improvements. Tenant has constructed
Tenant Improvements within Phase 1A Phase 1B of the Premises in accordance with
the prior lease, and may make such future improvements and modifications to the
same as set forth herein. Tenant and Landlord agreed under the Original Lease to
provide Tenant with a Tenant improvement Allowance for tenant improvements
within each Phase of the Premises equal to $100 per Usable Square Foot. Tenant
and Landlord agree that this obligation has been satisfied as to Phase 1, and
further agree Landlord shall construct improvements to Phase 2A pursuant to that
Work Letter attached hereto as EXHIBIT C, and that such improvements constructed
pursuant to the Work Letter shall meet Landlord's obligations as to $70 per
Usable Square Foot of Phase 2A, or such higher amount per Usable Square Foot
actually expended by Landlord in constructing improvements within Phase 2A.

            (c)   Compliance with Law. Landlord warrants to Tenant that the Base
Building Work and any other improvements constructed by Landlord from time to
time shall not violate any applicable law, building code, regulation or
ordinance in effect on the applicable Rent Commencement Date or at the time such
improvements are placed in service. If it is determined that any of these
warranties have been violated, then it shall be the obligation of the Landlord,
after written notice from Tenant, to correct the conditions(s) constituting such
violation promptly, at Landlord's sole cost and expense.

6.    TAXES.

      6.1   PERSONAL PROPERTY. Tenant shall be responsible for and shall pay
prior to delinquency all taxes and assessments levied against or by reason of
(a) any and all alterations, additions and items installed or placed on or in
the Premises and taxed as personal property rather than as real property, and/or
(b) all personal property, trade fixtures and other property placed by Tenant on
or about the Premises. Upon request by Landlord, Tenant shall furnish Landlord
with satisfactory evidence of Tenant's payment thereof. If at any time during
the Term

                                       9
<PAGE>

of this Lease any of said alterations, additions or personal property, whether
or not belonging to Tenant, shall be taxed or assessed as part of the Real
Property, then such tax or assessment shall be paid by Tenant to Landlord within
thirty (30) days after presentation by Landlord of copies of the tax bills in
which such taxes and assessments are included and shall, for the purposes of
this Lease, be deemed to be personal property taxes or assessments under this
Section 6.1.

      6.2   REAL PROPERTY TAXES.

            (a)   Real Property Taxes. Commencing with the Effective Date and
continuing for each calendar year, or tax year at Landlord's option (such "tax
year" being a period of twelve (12) consecutive calendar months for which the
applicable taxing authority levies or assesses real property taxes), for the
balance of the Lease Term, Tenant shall pay to Landlord the Tenant's Operating
Cost Share of all real property taxes, pursuant to Section 7.2(a) below. Such
sum for any partial year of the Lease Term shall be prorated on the basis of the
number of days of such partial year. Landlord also shall provide Tenant with a
copy of the applicable tax bill or tax statement from the taxing authority. In
addition to any other amounts due from Tenant to Landlord, if Tenant fails to
pay the real property taxes to Landlord as herein required, Tenant shall pay to
Landlord the amount of any interest, penalties or late charges caused by
Tenant's late payment.

            (b)   Protests. If the Premises are separately assessed, Tenant
shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of real property taxes, any special
assessment, or the validity of any real property taxes or of any change in
assessment or tax rate; provided, however, that prior to any such challenge
Tenant must either (a) pay the taxes alleged to be due in their entirety and
seek a refund from the appropriate authority, or (b) post bond in an amount
sufficient to insure full payment of the real property taxes. In any event, upon
a final determination with respect to such contest or protest, Tenant shall
promptly pay all sums found to be due with respect thereto. In any such protest
or contest, Tenant may act in its own name, and at the request of Tenant,
Landlord shall cooperate with Tenant in any way Tenant may reasonably require in
connection with such contest or protest, including signing such documents as
Tenant reasonably shall request, provided that such cooperation shall be at no
expense to Landlord and shall not require Landlord to attend any appeal or other
hearing. Any such contest or protest shall be at Tenant's sole expense, and if
any penalties, interest or late charges become payable with respect to the real
property taxes as a result of such contest or protest, Tenant shall pay the
same.

            (c)   Refunds. If Tenant obtains a refund as the result of Tenant's
protest or contest and subject to Tenant's obligation to pay Landlord's costs
(if any) associated therewith, Tenant shall be entitled to such refund to the
extent it relates to Phase 1 or Phase 2A (to the extent occupied by Tenant) of
the Premises during the Lease Term.

            (d)   Other Taxes. If at any time during the Lease Term under the
laws of the United States Government, state, county or city, or any political
subdivision thereof in which the Premises are situated, a tax or excise on rent
or any other tax however described is levied or assessed by any such political
body against Landlord on account of rentals payable to Landlord hereunder, such
tax or excise shall be considered "real property taxes" for the purposes of this

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<PAGE>

Section 6.2, excluding, however, from such tax or excise any amount assessed
against Landlord as state or federal income tax.

            (e)   Tax and Insurance Escrows. To the extent required by any
lender of Landlord, Tenant shall timely pay all tax and insurance impound
payments due on the Premises.

7.    OPERATING EXPENSES.

      7.1   PAYMENT OF OPERATING EXPENSES.

            (a)   Tenant's Operating Cost Share.

                  (i)   Commencing on the Effective Date through the Building 1
Termination Date or the Building 2 Termination Date, as applicable, Tenant shall
pay to Landlord, at the time and in the manner hereinafter set forth, as
additional rental: (i) an amount equal to Tenant's Operating Cost Share
multiplied by the Operating Expenses defined in Section 7.2, and (ii) an amount
equal to Tenant's Operating Cost Share multiplied by the Exterior Common Area
Cost.

                  (ii)  [Deleted]

                  (iii) [Deleted].

                  (iv)  The term "TENANT'S OPERATING COST SHARE" means 72.98%
through and until the Building 2 Termination Date and thereafter means 46.47%
through and until the Building 1 Termination Date. "TENANT'S EXTERIOR COMMON
AREA COST SHARE" shall be equal to the Tenant's Operating Cost Share as
established from time to time.

            (b)   Adjustment of Tenant's Operating Cost Share. If at any time
the percentage the gross square footage of the Premises as a part of the
combined gross square footage of Buildings 1 and 2 should change, then Tenant's
Operating Cost Share shall be adjusted to be equal to the new percentage
determined by dividing the new gross square footage of the Premises by the new
gross square footage of Buildings 1 and/or 2 (as applicable).

      7.2   DEFINITION OF OPERATING EXPENSES.

            (a)   Inclusions. Subject to the exclusions and provisions
hereinafter contained, the term "OPERATING EXPENSES" shall mean the total costs
and expenses incurred by Landlord or Tenant for operation and maintenance of the
Buildings and the Real Property, including, without limitation, costs and
expenses of:

                  (i)   insurance premiums for insurance carried by Landlord
pursuant to Section 12.1 (which may include, at Landlord's option, flood,
earthquake or environmental remediation insurance), insurance deductibles,
provided that any increase in premiums for flood, earthquake or environmental
remediation coverage which is in excess of twenty five percent of the previous
years' premium shall not be included in Operating Expenses;

                                       11
<PAGE>

                  (ii)  the operation, repair and maintenance of the Building
and Common Areas in a first class condition including but not limited to
sidewalks, parking areas, curbs, roads, driveways, lighting standards,
landscaping, sewers, water, gas and electrical distribution systems and
facilities, drainage facilities, and all signs, both illuminated and
non-illuminated that are now or hereafter in the Buildings and on the Real
Property;

                  (iii) all Common Area utilities and services not separately
metered to Tenant;

                  (iv)  real and personal property taxes and assessments or
substitutes therefor levied or assessed against the Real Property or any part
thereof, including (but not limited to any possessory interest, use, business,
license or other taxes or fees, any taxes imposed directly on rents or services,
any assessments or charges for police or fire protection, housing, transit, open
space, street or sidewalk construction or maintenance or other similar services
from time to time by any governmental or quasi-governmental entity, and any
other new taxes on landlords in addition to taxes now in effect;

                  (v)   supplies, equipment, utilities and tools used in the
operation and maintenance of the Real Property;

                  (vi)  capital improvements to the Real Property, the
Improvements or the Buildings including, without limitation, all structural,
roof, HVAC (defined as heating, ventilation, and air conditioning equipment and
fixtures related thereto) serving the Common Areas, plumbing and electrical
systems costing Seventy-Five Thousand Dollars ($75,000) or less, provided that
the cost of all other capital improvements shall be amortized over the useful
life of any such capital improvement (calculated in accordance with GAAP) and
included in Operating Expenses;

                  (vii) [Deleted]

                  (viii) market rate lease costs for equipment; and

                  (ix)  any other costs (including, but not limited to, any
parking or utilities fees or surcharges) allocable to or paid by Landlord, as
owner of the Real Property, Buildings or Improvements, pursuant to any
applicable laws, ordinances, regulations or orders of any governmental or
quasi-governmental authority or pursuant to the terms of any declaration of
covenants, conditions and restrictions now or hereafter affecting the Real
Property or any other property over which Tenant has non-exclusive use rights as
contemplated in Section 1.1(b) hereof.

            (b)   Exclusions. Notwithstanding anything to the contrary contained
in this Lease, the following shall not be included within Operating Expenses:

                  (i)   Leasing commissions, attorneys' fees, costs,
disbursements, and other expenses incurred in connection with negotiations or
disputes with tenants, or in connection with leasing, renovating or improving
space for tenants or other occupants or prospective tenants or other occupants
of the Real Property;

                                       12
<PAGE>

                  (ii)  The cost of any service sold to any tenant (including
Tenant) or other occupant for which Landlord is entitled to be reimbursed as an
additional charge or rental over and above the basic rent and operating expenses
payable under the lease with that tenant;

                  (iii) Any depreciation on the Buildings or on any other
improvements on the Real Property;

                  (iv)  Expenses in connection with services or other benefits
of a type that are not offered or made available to Tenant but that are provided
to another tenant of the Real Property or of any other property owned by
Landlord;

                  (v)   Costs incurred due to Landlord's violation of any terms
or conditions of this Lease or of any other lease relating to the Buildings or
to any other portion of the Real Property;

                  (vi)  Overhead profit increments paid to any subsidiary or
affiliate of Landlord for services other than management on or to the Real
Property, or for supplies or other materials to the extent that the cost of the
services, supplies or materials exceeds the cost that would have been paid had
the services, supplies or materials been provided by unaffiliated parties on a
competitive basis;

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

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

                  (ix)  Advertising and promotional expenditures;

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

                  (xi)  Property management fees;

                  (xii) Costs for sculpture, paintings or other objects of art,
and for any insurance thereon or extraordinary security in connection therewith
other than that provided in connection with the initial construction of the
Buildings or the Common Area improvements on the Real Property;

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

                                       13
<PAGE>

                  (xiv) The cost of containing, removing or otherwise
remediating any contamination of the Real Property (including the underlying
land and groundwater) by any toxic or Hazardous Materials (as defined in Section
11.4(a), below) for which Landlord is responsible under Section 11.4, below; and

                  (xv)  Premiums for earthquake, environmental remediation or
flood insurance coverage other than as permitted under Section 7.2(a), above.

                  (xvi) Operating Expenses shall not include any costs
attributable to the work for which Landlord is required to pay under Article 5
or EXHIBIT C, nor any costs attributable to the initial construction of the
Buildings or of Common Area improvements on the Real Property.

      7.3   DETERMINATION OF OPERATING EXPENSES. During the last month of each
calendar year of the Term of this Lease ("LEASE YEAR"), or as soon thereafter as
practical, Landlord shall provide Tenant notice of Landlord's estimate of the
Operating Expenses for the ensuing Lease Year or applicable portion thereof. On
or before the first day of each month during the ensuing Lease Year or
applicable portion thereof, beginning on the Phase 1 Rent Commencement Date,
Tenant shall pay to Landlord Tenant's Operating Cost Share of the portion of
such estimated Operating Expenses allocable (on a pro rata basis) to such month;
provided, however, that if such notice is not given in the last month of a Lease
Year, Tenant shall continue to pay on the basis of the prior year's estimate, if
any, until the month after such notice is given. If at any time or times it
appears to Landlord that the actual Operating Expenses will vary from Landlord's
estimate by more than four percent (4%), Landlord may, by notice to Tenant,
revise its estimate for such year and subsequent payments by Tenant for such
year shall be based upon such revised estimate.

      7.4   FINAL ACCOUNTING FOR LEASE YEAR.

            (a)   Annual Statement. Within ninety (90) days after the close of
each Lease Year, or as soon after such 90-day period as practicable, Landlord
shall deliver to Tenant a statement of Tenant's Operating Cost Share of the
Operating Expenses for such Lease Year prepared by Landlord from Landlord's
books and records, which statement shall be final and binding on Landlord and
Tenant (except as provided in Section 7.4(b)). If on the basis of such statement
Tenant owes an amount that is more or less than the estimated payments for such
Lease Year previously made by Tenant, Tenant or Landlord, as the case may be,
shall pay the deficiency to the other party within thirty (30) days after
delivery of the statement. Failure or inability of Landlord to deliver the
annual statement within such ninety (90) day period shall not impair or
constitute a waiver of Tenant's obligation to pay Operating Expenses, or cause
Landlord to incur any liability for damages.

            (b)   Audit Rights. At any time within one hundred twenty (120) days
after receipt of Landlord's annual statement of Operating Expenses as
contemplated in Section 7.4(a), Tenant shall be entitled, upon reasonable
written notice to Landlord and during normal business hours at Landlord's office
or such other places as Landlord shall designate, to inspect and examine those
books and records of Landlord relating to the determination of Operating
Expenses for the immediately preceding Lease Year covered by such annual
statement or, if Tenant so elects by written notice to Landlord, to request an
independent audit of such books and

                                       14
<PAGE>

records. The independent audit of the books and records shall be conducted by a
certified public accountant acceptable to both Landlord and Tenant or, if the
parties are unable to agree, by a certified public accountant appointed by the
Presiding Judge of the County Superior Court in which the Real Property is
located upon the application of either Landlord or Tenant (with notice to the
other party). In either event, such certified public accountant shall be one who
is not then employed in any capacity by Landlord or Tenant. The audit shall be
limited to the determination of the amount of Operating Expenses for the subject
Lease Year, and shall be based on generally accepted accounting principles and
tax accounting principles, consistently applied. If it is determined, by mutual
agreement of Landlord and Tenant or by independent audit, that the amount of
Operating Expenses billed to or paid by Tenant for the applicable Lease Year was
incorrect, then the appropriate party shall pay to the other party the
deficiency or overpayment, as applicable, within thirty (30) days after the
final determination of such deficiency or overpayment. All costs and expenses of
the audit shall be paid by Tenant unless the audit shows that Landlord
overstated Operating Expenses for the subject Lease Year by more than five
percent (5%), in which case Landlord shall pay all costs and expenses of the
audit. Each party agrees to maintain the confidentiality of the findings of any
such audit.

      7.5   PRORATION. If the Rent Commencement Date for Phase 1 or Phase 2A
falls on a day other than the first day of a Lease Year and/or if the Building 1
Termination Date or the Building 2 Termination Date falls on a day other than
the last day of a Lease Year, then the amount of Operating Expenses payable by
Tenant with respect to such first or last partial Lease Year shall be prorated
on the basis which the number of days during such Lease Year in which this Lease
is in effect bears to 365. The termination of this Lease shall not affect the
obligations of Landlord and Tenant pursuant to Section 7.4 to be performed after
such termination.

      7.6   RESERVE ACCOUNT. Tenant shall each month, commencing on the Phase 1
Rent Commencement Date and on the first day of each calendar month thereafter of
the Lease term, deposit into a segregated, interest bearing bank account in a
federally insured bank or savings institute an amount equal to one percent (1%)
of the monthly rent due for that month, to provide for future replacements to
improvements and fixtures within the Premises (the "RESERVE ACCOUNT"); provided
that if at any time the amount held in the Reserve Account is equal to the
product of thirty six months times the amount of the monthly contribution,
Tenant's obligation to make additional deposits shall be temporarily suspended.
Tenant's obligation to make such deposits shall resume at such time as the
amount in the Reserve Account drops below such amount. The Reserve Account shall
remain the property of Tenant, but disbursements from the Reserve Account shall
be made only by joint check executed by Landlord and Tenant upon the mutual
consent of Landlord and Tenant, which consent shall not be unreasonably
withheld, delayed or conditioned. Landlord shall, within ten (10) days after
receipt of a written request, either sign any such check or convey in writing to
Tenant any objections to signing the check, and shall thereafter diligently work
with Tenant to resolve any differences with regard to the disbursement.
Notwithstanding the foregoing, if Tenant, pursuant to the Lease, is required to
make certain repairs, improvements, or replacements to the Premises or Common
Area but fails to do so within the time allowed hereunder (subject to any
applicable cure period), then Landlord, as provided under the Lease, may make
such repairs, improvements, or replacements, and may disburse funds from the
Reserve Account, without Tenant's consent or signature on the disbursement
check(s), to pay for the cost of the repairs, improvements, or replacements. Any

                                       15
<PAGE>

amount in the Reserve Account remaining at the expiration of the Lease shall
remain the property of Tenant.

      7.7   PROPERTY MANAGEMENT FEE. Commencing with the execution of this
Lease, Tenant shall pay to Landlord a monthly fee ("MANAGEMENT FEE") to cover
costs of property management services in an amount not to exceed one percent
(1.00%) of the Minimum Rental for the Premises whether or not Landlord incurs
fees payable to any third party to provide such services and without regard to
the actual costs incurred by Landlord for such services.

8.    UTILITIES.

      8.1   PAYMENT. Commencing with the Phase 1 Rent Commencement Date and
thereafter throughout the Term of this Lease, Tenant shall pay, before
delinquency, all charges for water, trash collection, gas, heat, light,
electricity, power, sewer, telephone, alarm system, janitorial and other
services or utilities supplied to or consumed in or with respect to the
Premises, including any taxes on such services and utilities, and Tenant's
Operating Cost Share of all charges for water, gas, heat, light, electricity,
power, sewer, telephone, alarm system, janitorial and other services or
utilities supplied to or consumed in or with respect to the Common Areas. It is
the intention of the parties that to the extent feasible, all services provided
to the Premises (as opposed to the Common Areas and as the same shall exist from
time to time) shall be separately metered to the Premises.

      8.2   INTERRUPTION. There shall be no abatement of rent or other charges
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used with respect to the Premises because of accident, making of repairs,
alterations or improvements, severe weather, difficulty or inability in
obtaining services or supplies, labor difficulties or any other cause, except
the gross negligence or willful misconduct of Landlord, its employees and/or
agents.

9.    ALTERATIONS.

      9.1   RIGHT TO MAKE ALTERATIONS. Tenant shall make no alterations,
additions or improvements to the Premises, other than interior non-structural
alterations ("COSMETIC ALTERATIONS") costing less than One Hundred Thousand
Dollars ($100,000) in the aggregate during any twelve (12) month period, without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, delayed or conditioned, and if Tenant so requests, Landlord shall
specify whether Landlord intends to require that Tenant remove such Cosmetic
Alterations (or any specified portions thereof) upon expiration or termination
of this Lease. Landlord's failure to respond within fifteen (15) days of
Tenant's request or notice to Landlord shall be deemed Landlord's consent to
allow the Cosmetic Alterations to remain with the Premises at the end of the
Lease Term. Tenant shall provide to Landlord copies of any plans submitted to
any governmental agency in connection with the construction of any Cosmetic
Alterations, within thirty (30) days of such submittal. All alterations,
additions and improvements shall be completed with due diligence in a
first-class, workmanlike manner, in compliance with plans and specifications
approved in writing by Landlord and in compliance with all applicable laws,
ordinances, rules and regulations, and to the extent Landlord's consent is not
otherwise required hereunder for such alterations, additions or improvements,
Tenant shall

                                       16
<PAGE>

give prompt written notice thereof to Landlord. With respect to all proposed
alterations (other than Cosmetic Alterations or otherwise), Tenant shall provide
Landlord with a cost estimate to perform the alterations, a set of plans and
specifications for the proposed work, and a set of final "as built" plans of the
work actually performed. Tenant shall cause any contractors engaged by Tenant
for work in the Buildings or on the Real Property to maintain public liability
and property damage insurance, and other customary insurance, with such terms
and in such amounts as Landlord may reasonably require, naming as additional
insureds Landlord and any of its partners, shareholders, property managers and
lenders designated by Landlord for this purpose, and shall furnish Landlord with
certificates of insurance or other evidence that such coverage is in effect.
Notwithstanding any other provisions of this Section 9.1, under no circumstances
shall Tenant make any structural alterations or improvements, or any changes to
the roof or equipment installations on the roof, or any substantial changes or
alterations to the building systems, except Cosmetic Alterations, without
Landlord's prior written consent (which consent shall not be unreasonably
withheld, delayed or conditioned). Landlord's failure to respond within fifteen
(15) days following Tenant's request shall be deemed approval. Landlord shall
receive no fee for supervision, profit, overhead or general conditions, but
shall be entitled to be reimbursed by Tenant for any reasonable costs incurred
by Landlord in connection with its retention of third parties to assist in its
review of Tenant's request for consent in connection with any alterations,
additions or improvements constructed or installed by Tenant under this Lease
after the date hereof.

      9.2   TITLE TO ALTERATIONS. All alterations, additions and improvements
installed in, on or about the Premises at Tenant's expense shall belong to
Tenant during the Lease Term and upon expiration or earlier termination shall
become part of the Real Property and shall become the property of Landlord,
unless Landlord elects (at the time it grants consent to installation) to
require Tenant to remove the same upon the termination of this Lease; provided,
however, that the foregoing shall not apply to Tenant's movable furniture and
equipment and trade fixtures. Tenant shall promptly repair any damage caused by
its removal of any such alterations, additions and improvements, furniture,
equipment or trade fixtures. Landlord shall not be entitled to require removal
unless Landlord specified its intention to do so at the time of granting of
Landlord's consent to the requested alterations, additions or improvements.
Notwithstanding any other provisions of this Article 9, however, under no
circumstances shall Tenant have any obligation to remove from the Buildings or
the Real Property, at the expiration or termination of this Lease, any of the
Tenant Improvements constructed by Landlord.

      9.3   TENANT FIXTURES AND PERSONAL PROPERTY. Subject to Section 9.2 and to
Section 9.5, Tenant may install, remove and reinstall trade fixtures without
Landlord's prior written consent, except that installation and removal of any
fixtures which are affixed to the Buildings or the Real Property or which affect
the exterior or structural portions of the Buildings or the building systems
shall require Landlord's written approval, which approval shall not be
unreasonably withheld, delayed or conditioned.

      9.4   NO LIENS. Tenant shall at all times keep the Premises free from all
liens and claims of any contractors, subcontractors, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Buildings or the Real Property. Tenant may contest any
claim of lien, but only if, prior to such contest, Tenant either (i) posts
security in the amount of the claim, plus estimated costs and interest, or (ii)
records a bond of a

                                       17
<PAGE>

responsible corporate surety in such amount as may be required to release the
lien from the Buildings and the Real Property no later than the thirtieth day
following recordation of such lien. Tenant shall indemnify, defend and hold
Landlord harmless against any and all liability, loss, damage, cost and other
expenses, including, without limitation, reasonable attorneys' fees, arising out
of claims of any lien for work performed or materials or supplies furnished at
the request of Tenant or persons claiming under Tenant. Tenant shall at no time
voluntarily place any fixture filing or otherwise grant a security interest in
any alterations, additions or improvements installed in, on or about the
Premises.

      9.5   SIGNS. Tenant shall have the right to a proportionate share of
external and monument signage, in proportion to the ratio between the Useable
Square Footage in Tenant's Premises and the total Useable Square Footage on the
Real Property, provided however, Tenant shall have the right to continue to
display its corporate name and logo on the exterior of the Buildings in the size
and manner it is displayed as of the Effective Date (subject to changes in
applicable laws or regulations requiring a modification to such signage).

10.   MAINTENANCE AND REPAIRS.

      10.1  TENANT'S OBLIGATION FOR MAINTENANCE.

            (a)   Good Order, Condition and Repair.

                  (i)   In addition to Tenant's obligation to pay Tenant's
Operating Cost Share as required by Section 7, Tenant's repair and maintenance
obligation shall be limited to the repair and maintenance of the interior of the
Premises, as the same shall exist from time to time (being defined as the floor
surfaces, ceiling, interior wall surfaces, electrical, plumbing, HVAC equipment
exclusively serving the Premises and telephone and communications systems within
such interior).

            (b)   [Deleted].

            (c)   Landlord's Remedy. If Tenant, after notice from Landlord,
fails to make or perform promptly any repairs or maintenance which are the
obligation of Tenant hereunder, Landlord shall have the right, but shall not be
required, to enter the Buildings and make the repairs or perform the maintenance
necessary to restore the Buildings to good and sanitary order, in a first class
condition and repair. In such case, immediately on demand from Landlord, the
cost of such repairs shall be due and payable by Tenant to Landlord.

            (d)   Condition Upon Surrender. At the expiration or sooner
termination of this Lease, Tenant shall surrender the Premises, including any
additions, alterations and improvements thereto, broom clean, in good and
sanitary order, in a first class condition and repair, free from Hazardous
Materials caused to be present by Tenant, its agents or invitees (it being
understood and agreed that Tenant shall have no responsibility for Hazardous
Materials that have migrated onto the Real Property through the air, water or
soils), ordinary wear and tear excepted, and delivered free of radioactive
licenses or other restrictions on use, first, however, removing all goods and
effects of Tenant and all fixtures and items required to be removed or specified
to be removed at Landlord's election pursuant to this Lease, and repairing any
damage caused by such removal. Tenant expressly waives any and all interest in
any personal property

                                       18
<PAGE>

and trade fixtures not removed from the Premises by Tenant at the expiration or
termination of this Lease, agrees that any such personal property and trade
fixtures may, at Landlord's election, be deemed to have been abandoned by
Tenant, and authorizes Landlord (at its election and without prejudice to any
other remedies under this Lease or under applicable law) to remove and either
retain, store or dispose of such property at Tenant's cost and expense, and
Tenant waives all claims against Landlord for any damages resulting from any
such removal, storage, retention or disposal.

      10.2  LANDLORD'S OBLIGATION FOR MAINTENANCE.

            (a)   Good Order, Condition and Repair. Landlord, at its cost and
expense, but subject to Tenant's obligation to pay the Tenant's Operating Cost
Share as required by Section 7.1, shall keep and maintain in good and sanitary
order, in a first class condition and repair, all Common Areas and each such
Building and every part thereof, wherever located, including, but not limited to
the structural components of the Buildings, the roof, signs, exterior, interior,
walls, ceiling, electrical system, plumbing system, telephone and communications
systems of each such Building, all the HVAC equipment and related mechanical
systems serving each such Building, all doors, door checks, windows, plate
glass, door fronts, plumbing and sewage and other utility facilities, fixtures,
lighting, wall surfaces, floor surfaces and ceiling surfaces of each such
Building and all other interior repairs, foreseen and unforeseen, (except the
interior of the Premises and the systems designated for Tenant's exclusive use
required to be repaired and maintained by Tenant as required by Section 10.1(a)
above).

            (b)   No Abatement. There shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Premises or Common Areas, or in or to improvements,
fixtures, equipment and personal property therein.

            (c)   Landlords' Right of Entry for Repairs. Landlord and Landlord's
agents shall have the right to enter upon the Premises, or any part thereof, for
the purpose of performing any repairs or maintenance Landlord is permitted to
make pursuant to this Lease, and of ascertaining the condition of the Premises
or whether Tenant is observing and performing Tenant's obligations hereunder,
all without unreasonable interference from Tenant or Tenant's agents. Except for
emergency maintenance or repairs, the right of entry contained in this Section
shall be exercisable at reasonable times, at reasonable hours and on reasonable
notice (which shall not be less than twenty-four (24) hours).

11.   USE OF PROPERTY.

      11.1  PERMITTED USE. Subject to Sections 11.3, and 11.4 hereof, Tenant
shall use the Premises solely for an office and laboratory research and
development facility, including (but not limited to) storage and use of small
laboratory animals, and other lawful purposes reasonably related to or
incidental to such specified uses (subject in each case to receipt of all
necessary approvals from the City and County in which the Real Property is
located and other governmental agencies having jurisdiction over the Buildings
and uses therein), and for no other purpose.

                                       19
<PAGE>

      11.2  NO NUISANCE. Tenant shall not use the Premises for or carry on or
permit upon the Premises or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor commit or allow to be committed any waste
in, on or about the Premises. Tenant shall not do or permit anything to be done
in or about the Premises, nor bring nor keep anything therein, which will in any
way cause the Premises to be uninsurable with respect to the insurance required
by this Lease or with respect to standard fire and extended coverage insurance
with vandalism, malicious mischief and riot endorsements.

      11.3  COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit
the Premises to be used in whole or in part for any purpose or use that is in
violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Premises equipped
with all safety appliances required by law, ordinance or insurance on the
Premises, or any order or regulation of any public authority, because of
Tenant's particular use of the Premises. Tenant shall procure at its costs all
licenses and permits required for Tenant's use of the Premises. Tenant shall use
the Premises in strict accordance with all applicable ordinances, rules, laws
and regulations and shall comply, at its expense, with all requirements of all
governmental authorities now in force or which may hereafter be in force
pertaining to the use of the Premises by Tenant, including, without limitation,
regulations applicable to noise, water, soil and air pollution, and making such
structural and nonstructural alterations and additions thereto as may be
required from time to time by such laws, ordinances, rules, regulations and
requirements of governmental authorities or insurers of the Premises
(collectively, "REQUIREMENTS") because of Tenant's construction of improvements
in or other particular use of the Premises. The judgment of any court, or the
admission by Tenant in any proceeding against Tenant, that Tenant has violated
any law, statute, ordinance or governmental rule, regulation or requirement
shall be conclusive of such violation as between Landlord and Tenant.

      11.4  ENVIRONMENTAL MATTERS.

            (a)   Definition of Hazardous Materials. For purposes of this Lease,
"HAZARDOUS MATERIALS" shall mean the substances included within the definitions
of the term "hazardous substance" under (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections
9601 et seq., and the regulations promulgated thereunder, as amended, (ii) the
California Carpenter-Presley-Tanner Hazardous Substance Account Act, California
Health & Safety Code Sections 25300 et seq., and regulations promulgated
thereunder, as amended, (iii) the Hazardous Materials Release Response Plans and
Inventory Act, California Heath & Safety Code Sections 2-5500 et seq., and
regulations promulgated thereunder, as amended, and (iv) petroleum; "HAZARDOUS
WASTE" shall mean (i) any waste listed as or meeting the identified
characteristics of a "hazardous waste" under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 et seq., and regulations
promulgated pursuant thereto, as amended, (ii) any waste meeting the identified
characteristics of "hazardous waste," "extremely hazardous waste" or "restricted
hazardous waste" under the California Hazardous Waste Control Law, California
Health & Safety Code Sections 25 100 et seq., and regulations promulgated
pursuant thereto, as amended (collectively, the "CHWCL"), and/or (iii) any waste
meeting the identified characteristics of "medical waste" under California
Health &

                                       20
<PAGE>

Safety Code Sections 25015-25027.8, and regulations promulgated thereunder, as
amended; and "HAZARDOUS WASTE FACILITY" shall mean a hazardous waste facility as
defined under the CHWCL.

            (b)   Tenant's Obligations Re: Hazardous Substances.

                  (i)   Tenant shall not cause or permit any Hazardous Material
or hazardous waste to be brought upon, kept, stored or used in or about the
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, delayed or conditioned, except that Tenant, in
connection with its permitted use of the Premises as provided in Section 11.1,
may keep, store and use materials that constitute Hazardous Materials which are
customary for such permitted use, provided such Hazardous Materials are kept,
stored and used in quantities which are customary for such permitted use and are
kept, stored and used in full compliance with clauses (ii) and (iii) immediately
below.

                  (ii)  Tenant shall comply with all applicable laws, rules,
regulations, orders, permits, licenses and operating plans of any governmental
authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment and/or disposal of Hazardous Materials or
wastes by Tenant or its agents or employees.

                  (iii) Tenant shall not (A) operate on or about the Premises
any facility required to be permitted or licensed as a hazardous waste facility
or for which interim status as such is required, nor (B) store any hazardous
wastes on or about the Premises for ninety (90) days or more, nor (C) conduct
any other activities on or about the Premises that could result in the Premises
being deemed to be a "hazardous waste facility" (including, but not limited to,
any storage or treatment of Hazardous Materials or hazardous wastes which could
have such a result).

                  (iv)  Tenant shall comply with all applicable laws, rules,
regulations, orders and permits relating to underground storage tanks installed
by Tenant or its agents or employees or at the request of Tenant (including any
installation, monitoring, maintenance, closure and/or removal of such tanks) as
such tanks are defined in California Health & Safety Code Section 25281(x),
including, without limitation, complying with California Health & Safety Code
Sections 25280-25299.7 and the regulations promulgated thereunder, as amended.
Upon request by Landlord, Tenant shall furnish to Landlord copies of all
registrations and permits issued to or held by Tenant from time to time for any
and all underground storage tanks located on or under the Real Property.
Notwithstanding the foregoing, Tenant shall not install any underground storage
tanks at the Real Property without Landlord's prior written consent, which
Landlord may withhold in its reasonable discretion.

                  (v)   Tenant shall not keep any trash, garbage, waste or other
refuse on the Premises except in sanitary containers and shall regularly and
frequently remove the same from the Premises. Tenant shall keep all
incinerators, containers or other equipment used for the storage or disposal of
such matter in a clean and sanitary condition. Tenant shall properly dispose of
all sanitary sewage and shall not use the sewage disposal system of the
Buildings for the disposal of anything except as permitted by any governmental
entity.

                                       21
<PAGE>

                  (vi)  At reasonable times and upon reasonable prior notice,
prior to the expiration or earlier termination of the Lease Term, Landlord shall
have the right to conduct (a) an annual hazardous waste investigation of the
Premises and (b) if Landlord has reasonable cause to believe that any
contamination exists on, in, under, or around the Buildings or the Premises,
such other tests of the Premises and the Buildings as Landlord may deem
necessary or desirable to demonstrate whether contamination has occurred as a
result of Tenant's use of the Premises. Tenant shall be solely responsible for
and shall defend, indemnify and hold the Landlord, its agents and contractors
harmless from and against any and all claims, demands or actions, arising out of
or in connection with any removal, clean up, restoration and materials required
hereunder to return the Premises and any other property of whatever nature to
their condition existing prior to the time of any such contamination caused by
Tenant, its employees or agents. Landlord shall pay for the cost of the annual
investigation and other tests of the Premises, unless it has been determined
that Tenant, its employees or agents have caused contamination of the Premises
with Hazardous Materials, in which case Tenant shall bear such costs. Tenant
shall pay the reasonable costs required to perform or conduct any closure study,
exit audit or similar investigation required by then applicable laws.

                  (vii) Tenant shall surrender the Premises at the expiration or
earlier termination of this Lease free of any Hazardous Materials caused to be
present by Tenant, its employees or agents and free and clear of all judgments,
liens or encumbrances relating thereto and at its own cost and expense, shall
repair all damage and clean up or perform any remedial action necessary relating
to any Hazardous Materials caused to be present by Tenant, its employees or
agents. Tenant, at its sole cost and expense, shall, following Landlord's
request, remove any alterations or improvements that may be contaminated or
contain Hazardous Materials caused to be present by Tenant, its employees or
agents.

            (c)   Tenant's Indemnity. Tenant shall indemnify, defend and hold
Landlord harmless from and against any and all claims, losses (including, but
not limited to, loss of rental income and diminution in value), damages,
liabilities, costs, legal fees and expenses of any sort arising out of or
relating to (A) any failure by Tenant to comply with any provisions of this
Section 11.4, or (B) any receipt, use handling, generation, transportation,
storage, treatment, release and/or disposal of any Hazardous Material or waste
or any radioactive material or radiation on or about the Premises as a proximate
result of Tenant's use of the Premises or as a result of any intentional or
negligent acts or omissions of Tenant or of any agent, employee, vendor or
invitee of Tenant.

            (d)   Survival. The provisions of this Section 11.4 shall survive
the termination of this Lease.

12.   INSURANCE AND INDEMNITY.

      12.1  LANDLORD'S INSURANCE. During the Lease Term, Landlord shall keep and
maintain, or cause to be kept and maintained, as part of Operating Expenses, a
policy or policies of insurance on the Buildings insuring the same against loss
or damage by the following risks: fire and extended coverage, vandalism,
malicious mischief, sprinkler leakage (if sprinklers are required in the
Buildings under applicable building code provisions, or are installed by Tenant
in the absence of such requirement) in amounts not less than ninety percent
(90%) of Full

                                       22
<PAGE>

Replacement Value of the Buildings, (including both the Buildings and any tenant
improvements), or the amount of such insurance Landlord's lender requires
Landlord to maintain. The term "Full Replacement Value" shall mean actual
replacement cost, including changes required by new building codes or ordinances
(exclusive of the cost of excavation, foundations and footings). Such insurance
shall show, as a loss payee in respect of the Premises, Landlord, Tenant and any
ground lessor or mortgagee of Landlord required to be named pursuant to its
mortgage documents, as their interests may appear. Landlord, subject to
availability thereof and, as part of Operating Expenses, shall further insure as
Landlord deems appropriate coverage against flood, earthquake, environmental
remediation, loss or failure of building equipment, rental loss for a period of
eighteen (18) months for periods of repair or rebuild, workmen's compensation
insurance and fidelity bonds for employees employed to perform services.
Notwithstanding the foregoing, Landlord may, but shall not be deemed required
to, provide insurance as to any improvements installed by Tenant, provided that
such coverage does not duplicate coverages maintained by Tenant. Landlord, as
part of the Operating Expenses, shall further carry General Liability with
General Aggregate Amount & Per Occurrence Limit insurance with a single loss
limit of not less than Five Million Dollars ($5,000,000) for death or bodily
injury, or property damage with respect to the Real Property.

      12.2  TENANT'S INSURANCE.

            (a)   Commercial General Liability Insurance. During the Lease Term,
Tenant shall keep and maintain, or cause to be kept and maintained, at Tenant's
sole cost and expense, a policy or policies of Commercial General Liability
insurance, showing, as an additional insured in respect of the Premises,
Landlord, Tenant, any management company retained by Landlord to manage the
Premises, any ground lessor and any lender of Landlord required to be named
pursuant to its loan documents. Such policy shall insure against any and all
claims, demands or actions for injuries to persons, loss of life and damage to
property occurring upon, in or about the Premises (including coverage for
liability caused by independent contractors of Tenant or subtenants of Tenant
working in or about the Premises), with minimum coverage in an amount not less
than a Five Million Dollars ($5,000,000) combined single limit with respect to
all bodily injury, death or property damage in any one accident or occurrence.
In the event of a claim, action or demand relating to the Premises, the amount
of any deductible or self-insured retention and/or any award in excess of the
policy limits shall be the sole responsibility of Tenant.

            (b)   Tenant's Risk. Tenant assumes the risk of damage to any
fixtures, goods, inventory, merchandise and equipment, and Landlord shall not be
liable for injury to Tenant's business or any loss of income therefrom relative
to such damage except as more particularly heretofore set forth within this
Lease. Tenant at Tenant's cost may carry such insurance as Tenant desires for
Tenant's protection with respect to personal property of Tenant, business
interruption or other coverages.

            (c)   Other Insurance. In addition to all other insurance required
to be carried by Tenant hereunder, Tenant, throughout the Lease Term, shall
provide and keep in force at Tenant's sole cost and expense the following:

                  (i)   Workman's Compensation insurance to the full extent
required under the laws of the State of California;

                                       23
<PAGE>

                  (ii)  Insurance on Tenant's equipment, personal property and
other contents in, on or about the Premises insuring against loss or damage by
all risks covered by "special form" coverage, in amounts equal to ninety percent
(90%) of their full replacement value;

                  (iii) [Deleted]; and

                  (iv)  Other nonduplicative insurance required by Landlord, in
types and amounts consistent with commercially reasonable practice.

      12.3  INSURERS; PRIMARY INSURANCE. All policies of insurance provided for
herein shall be on an occurrence basis and shall be issued by insurance
companies with a general policy holder's rating of not less than A- and a
financial rating of not less than Class XV as rated in the most current
available "Best's" Insurance Reports. Such insurance companies shall be
qualified to do business in the State of California. All such policies carried
by Tenant shall name Landlord, any ground lessor and any lender (or its
successors and assigns) as additional insureds, and shall be for the mutual and
joint benefit and protection of Landlord, Tenant, any ground lessor and
Landlord's first mortgagee or beneficiary. All public liability and property
damage policies carried by Tenant shall contain a provision that Landlord,
although named as an insured, nevertheless shall be entitled to recovery under
said policies for any loss occasioned to it, its servants, agents and employees
by reason of the negligence of Tenant. As often as any such policy shall expire
or terminate, renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent. All policies of insurance must contain
a provision that the company writing said policy will give to Landlord thirty
(30) days notice in writing in advance of any cancellation or lapse. All public
liability, property damage and other casualty policies carried by Tenant shall
be written as primary policies, not contributing with and not in excess of
coverage which Landlord may carry. Tenant shall, upon request from Landlord from
time to time, immediately deliver to Landlord copies of all insurance policies
(including the declarations pages) in effect with respect to the Premises. All
liability policies shall contain endorsements for cross-liability, fire, legal
liability, broad form contractual liability, employer's automobile
non-ownership, products completed operation coverage and dram shop liability, as
applicable.

      12.4  BLANKET POLICY. Notwithstanding anything to the contrary contained
within this Section 12, Tenant's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant; provided, however, that
Landlord, any ground lessor and any lender shall be named as an additional
insured thereunder as their interests appear, the coverage afforded Landlord
will not be reduced or diminished by reason of the use of such blanket policy of
insurance, and the requirements set forth herein are otherwise satisfied.

      12.5  DEDUCTIBLES. The deductible amounts, if any, with respect to all
insurance, which Tenant is required to maintain hereunder, shall not exceed
Twenty Thousand Dollars ($20,000) per claim or occurrence. The amount of the
deductibles, if any, within this limitation shall be a business decision by
Tenant; under no circumstances shall Landlord be required to reimburse Tenant
for the amount of any deductible incurred by Tenant in connection with any
insured

                                       24
<PAGE>

event, except to the extent the event resulting in the claim was caused by
Landlord's or Landlord's agents' gross negligence or willful misconduct.

      12.6  CERTIFICATES. Upon the execution and delivery of this Lease and
thereafter not less than thirty (30) days prior to the expiration dates of the
expiring policies theretofore maintained, Tenant shall deliver to Landlord
certificates of insurance with respect to the policies of insurance required by
this Lease or duplicate originals of all such policies. Landlord, upon
reasonable notice, may inspect and copy any policies of insurance, and any
records relating thereto kept and maintained by Tenant.

      12.7  ADJUSTMENT IN THE EVENT OF LOSS. Except as otherwise provided
herein, all insurance proceeds payable with respect to any damage or destruction
to the Premises (but not with respect to Tenant's personal property, it being
understood that insurance proceeds allocable to Tenant's personal property shall
be payable directly to Tenant) shall be payable to Landlord and Tenant, jointly,
to be held in an interest bearing account. If Tenant and Landlord undertake to
repair said damage in accordance with Article 15 below, the proceeds shall be
made available to Tenant as to the tenant improvements and to Landlord as to the
Building and Common Area used to fund the reconstruction. In all other events,
the proceeds shall be the sole property of Landlord except otherwise expressly
provided herein. Landlord shall be entitled to compromise, adjust or settle any
and all claims with respect to insurance carried by it covering the Premises.
Each party agrees to execute and deliver to the other party such releases,
endorsements and other instruments as the other party reasonably may require in
order to compromise, adjust or settle any insurance claim which such other party
shall be entitled to compromise, adjust or settle pursuant to this paragraph and
to enable the other party or its designee to collect such insurance proceeds as
are payable in respect of such claim.

      12.8  PRORATION UPON TERMINATION. If any of the insurance required to be
carried by Tenant hereunder is still in effect at the termination of this Lease,
Landlord may elect to terminate such insurance, or Landlord shall reimburse
Tenant for the pro rata portion of the premium paid by Tenant for such insurance
based upon the number of days remaining unexpired in such insurance.

      12.9  WAIVER OF SUBROGATION. To the extent permitted by law and without
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
with respect to (i) damage to property, (ii) damage to the Premises or any part
thereof, or (iii) claims arising by reason of any of the foregoing, but only to
the extent that any of the foregoing damages and claims under clauses (i)-(iii)
hereof are covered, and only to the extent of such coverage, by casualty
insurance actually carried by either Landlord or Tenant. This provision is
intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance carrier.
Each party shall procure a clause or endorsement on any casualty insurance
policy denying to the insurer rights of subrogation against the other party to
the extent rights have been waived by the insured prior to the occurrence of
injury or loss. Coverage provided by insurance maintained by Tenant shall not be
limited, reduced or diminished by virtue of the subrogation waiver herein
contained.

                                       25
<PAGE>

      12.10 INDEMNIFICATION.

            (a)   Tenant's Indemnification Obligations. Tenant shall indemnify,
defend, and hold Landlord and its lenders, agents, employees, directors,
officers, managers, members, partners, affiliates, independent contractors, and
property managers (collectively, "LANDLORD'S AGENTS" or "AGENTS") harmless from
and against any and all claims, demands, liability, loss or damage, whether for
injury to or death of persons or damage to real or personal property, arising
out of or in connection with the Premises, Tenant's use of the Premises, any
activity, work, or other thing done, permitted, or suffered by Tenant in or
about the Buildings, or arising from any reason or cause whatsoever in
connection with the use or occupancy of the Premises by any party during the
Term of this Lease, except to the extent that the event giving rise to the
claim, demand, liability, loss or damage was caused by the gross negligence or
willful misconduct of Landlord or Landlord's Agents. Tenant shall further
indemnify, defend, and hold Landlord and Landlord's Agents harmless against and
from any and all claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act or negligence of Tenant or any officer, agent, employee,
guest, or invitee of Tenant, and from and against all costs, attorneys' fees,
expenses, and liabilities incurred as a result of any such claim or any action
or proceeding brought thereon. In any case, action, or proceeding brought
against Landlord or Landlord's Agents by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon, or about the Premises from any cause arising prior
to the later of the termination of this Lease or the date Tenant has performed
all obligations under Section 10.1(d) and is no longer in possession of the
Premises (except for such damage or injury caused by Landlord's or Landlord's
Agents' willful misconduct or gross negligence), and Tenant hereby waives all
claims in respect thereof against Landlord and Landlord's Agents. Tenant's
obligation to indemnify under this paragraph shall include attorneys' fees,
investigation costs, and other reasonable costs, expenses, and liabilities
incurred by Landlord and Landlord's Agents. If the ability of Tenant to use the
Premises or the Buildings is interrupted for any reason, Landlord and Landlord's
Agents shall not be liable to Tenant for any loss or damages occasioned by such
loss of use, except to the extent such loss or damages is caused by Landlord's
or its Agents' willful misconduct or gross negligence.

            (b)   Landlord's Indemnification Obligations. Landlord shall
indemnify, defend and hold Tenant and its members, partners, shareholders,
officers, directors, agents and employees harmless from any and all liability
for injury to or death of any person, or loss of or damage to the property of
any person, and all actions, claims, demands, costs (including, without
limitation, reasonable attorneys' fees), damages or expenses of any kind arising
therefrom which may be brought or made against Tenant or which Tenant may pay or
incur, to the extent such liabilities or other matters arise in, on or about the
Premises by reason of the gross negligence or willful misconduct or omission by
Landlord or Landlord's Agents. Landlord shall further indemnify, defend, and
hold Tenant and its members, partners, shareholders, officers, directors, agents
and employees harmless against and from any and all claims arising from any
breach or default in the performance of any obligation on Landlord's part to be
performed under the terms of this Lease, and from and against all costs,
attorneys' fees, expenses, and liabilities incurred as a result of any such
claim or any action or proceeding brought thereon. In any case, action, or
proceeding brought against Tenant or its members, partners, shareholders,
officers, directors,

                                       26
<PAGE>

agents and employees by reason of any such claim, Landlord, upon notice from
Tenant, shall defend the same at Landlord's expense by counsel reasonably
satisfactory to Tenant.

      12.11 LIMITATION ON LANDLORD LIABILITY. Neither Landlord nor Landlord's
Agents shall be liable for loss or damage to any property by theft or otherwise,
or for any injury to or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, or rain which may
leak from any part of the Buildings or from the pipes, appliances, or plumbing
works therein or from the roof, street, or subsurface or from any other place
resulting from dampness or any other cause whatsoever, except to the extent
caused by the gross negligence or willful misconduct of Landlord or Landlord's
Agents. Neither Landlord nor Landlord's Agents, shall be liable for interference
with or loss of business by Tenant. Tenant shall give prompt written notice to
Landlord in case of fire or accidents in the Premises or in the Buildings or of
defects therein or in the fixtures or equipment belonging to Landlord. If
Landlord is in default of this Lease, and as a consequence, Tenant recovers a
money judgment against Landlord, the judgment shall be satisfied only out of the
proceeds of sale received on execution of the judgment and levy against the
right, title, and interest of Landlord in the Premises, and out of rent or other
income from the Premises receivable by Landlord or out of the consideration
received by Landlord from the sale or other disposition of all or any part of
Landlord's right, title, and interest in the Premises. Landlord's Agents shall
not be personally liable for any deficiency except to the extent liability is
based upon willful misconduct. If Landlord is a partnership, joint venture, or
limited liability company, the partners or members of such partnership or
limited liability company, as the case may be, shall not be personally liable
and no partner or member of Landlord (or of any affiliated entity) shall be sued
or named as a party in any suit or action, or service of process be made against
any partner or member of Landlord (or of any affiliated entity), except as may
be necessary to secure jurisdiction of the partnership, joint venture, or
limited liability company or to the extent liability is caused by willful
misconduct. If Landlord is a corporation, the shareholders, directors, officers,
employees, and/or agents of such corporation shall not be personally liable and
no shareholder, director, officer, employee, or agent of Landlord shall be sued
or named as a party in any suit or action, or service of process be made against
any shareholder, director, officer, employee or agent of Landlord, except as may
be necessary to secure jurisdiction of the corporation. No partner, member,
shareholder, director, employee, or agent of Landlord (or of any affiliated
entity) shall be required to answer or otherwise plead to any service of process
and no judgment will be taken or writ of execution levied against any partner,
shareholder, director, employee, or agent of Landlord.

13.   SUBLEASE AND ASSIGNMENT.

      13.1  ASSIGNMENT AND SUBLEASE OF BUILDING.

            (a)   Consent Required. Except in connection with a Permitted
Transfer, Tenant shall neither voluntarily nor by operation of law assign, sell,
encumber, pledge or otherwise transfer all or any part of Tenant's leasehold
estate hereunder, or permit any other person (excepting Tenant's agents and
employees) to occupy the Premises or any portion thereof, without Landlord's
prior written consent, which consent shall be not be unreasonably withheld,
delayed or conditioned Consent by Landlord to one or more assignments of this
Lease or to one or more sublettings of the Premises shall not constitute a
waiver of Landlord's right to require

                                       27
<PAGE>

consent to any subsequent assignment, subletting or other transfer. If Tenant is
a corporation, unincorporated association or partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate in excess of twenty-five percent
(25%) of all outstanding stock or interests, or liquidation thereof, shall be
deemed an assignment within the meaning and provisions of this section and the
sale of all or substantially all of the assets of Tenant shall be deemed an
assignment within the meanings and provisions of this section. The foregoing
sentence shall not apply to: (i) any corporation or partnership which is a
reporting company under the Securities Exchange Act of 1934, or (ii) a sale to
an entity with a net worth, as designated in its most recent financial statement
(no older than 3 months), equal to or greater than Tenant's net worth on the
Effective Date. Tenant shall reimburse Landlord for all of Landlord's reasonable
costs and attorneys' fees incurred in conjunction with the processing and
documentation of any required consent to assignment, subletting, transfer,
change of ownership or hypothecation of this Lease or Tenant's interest in and
to the Premises, not to exceed One Thousand Dollars ($1,000) per request plus
reasonable out-of-pocket expenses payable to third parties. Any purported
sublease or assignment of Tenant's interest in this Lease requiring but not
having received Landlord's consent thereto (to the extent such consent is
required hereunder) shall be void.

            (b)   Permitted Transfers. Notwithstanding the foregoing, (i) any
bona fide financing or capitalization, including a public offering of the common
stock of Tenant, shall not be deemed to be an assignment hereunder; and (ii)
Tenant shall have the right to assign this Lease or sublet the Buildings, or any
portion thereof, without Landlord's consent, to any Affiliate of Tenant, or to
any entity which results from a merger, reorganization or consolidation with
Tenant, or to any entity which acquires substantially all of the stock or assets
of Tenant as a going concern (hereinafter each a "PERMITTED TRANSFER"). For
purposes of the preceding sentence, an "AFFILIATE" of Tenant shall mean any
entity in which Tenant owns at least a twenty five percent (25%) equity
interest, any entity which owns at least a twenty five percent (25%) equity
interest in Tenant and/or any entity which is related to Tenant by a chain of
ownership interests involving at least twenty five percent (25%) equity interest
at each level in the chain. Landlord shall have no right to terminate this Lease
in connection with, and shall have no right to any sums or other economic
consideration resulting from, any Permitted Transfer. The transferee under such
Permitted Transfer shall be and remain subject to all of the terms and
provisions of this Lease.

            (c)   Consent Required. Landlord's consent may be based upon a
determination that the same type, class, nature and quality of business,
services, management and financial soundness of ownership shall exist after the
proposed assignment or subletting and, provided further, that each and every
covenant, condition and obligation imposed upon Tenant by this Lease and each
and every right, remedy and benefit afforded Landlord by this Lease and the
underlying purpose of this Lease is not thereby impaired or diminished. The
determination by Landlord as to whether consent will be granted in any specific
instance may be based on, without limitation, the following factors, which shall
be in Landlord's reasonable discretion: (a) whether the transferee's use of the
Premises will be compatible with the provisions of this Lease; (b) the financial
capacity of the transferee; (c) the business reputation of the transferee; (d)
the quality and type of the business operations of the transferee; and (e) the
business experience of the proposed transferee. This list of factors is not
intended to be exclusive, and Landlord may rely on such other basis for judgment
as may apply from time to time.

                                       28
<PAGE>

            (d)   Procedure to Obtain Consent. If Tenant desires at any time to
assign this Lease or to sublet the Premises or any portions thereof, it first
shall notify Landlord of its desire to do so and shall submit in writing to
Landlord (i) the name and legal composition of the proposed subtenant or
assignee; (ii) the nature of the proposed subtenant's or assignee's business to
be carried on in the Premises; (iii) the terms and provisions of the proposed
sublease or assignment and all transfer documents relating to the proposed
transfer; and (iv) such reasonable business and financial information as
Landlord may request concerning the proposed subtenant or assignee. Any request
for Landlord's approval of a sublease or assignment shall be accompanied with a
check in such reasonable amount as Landlord shall advise for the cost of review
and preparation, including reasonable attorneys' fees, of any documents relating
to such proposed transfer, not to exceed One Thousand Dollars ($1,000) for each
transfer plus reasonable out-of-pocket expenses payable to third parties. The
provisions and conditions of any proposed sublease or assignment must not be
inconsistent with any provision of this Lease, and must address all matters
contained in this Lease. In addition, the transferee must expressly assume all
of the obligations of Tenant under this Lease. Notwithstanding the assumption of
the obligations of this Lease by the transferee, no subletting or assignment,
even with the consent of Landlord, shall relieve Tenant of its continuing
obligation to pay the rent and perform all the other obligations to be performed
by Tenant hereunder. The obligations and liability of Tenant hereunder shall
continue notwithstanding the fact that Landlord may accept rent and other
performance from the transferee. The acceptance of rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision of
this Lease or to be a consent to any assignment or subletting.

            (e)   Sublease of Phase 2A. In the event of any sublease of Phase
2A, in addition to any other payment obligation of Tenant hereunder, Tenant
shall remit to Landlord, as additional rent, as and when received by Tenant, all
net subrents received from a subtenant in excess of $2.00 per rentable square
foot per month. For purposes of this section "net subrents" are defined as all
rents received from a subtenant however designated, net of any out-of-pocket
costs incurred by Tenant to sublease the space and net of any payments received
from a subtenant as reimbursement of operating expenses, taxes, utilities or
service fees.

      13.2  RIGHTS OF LANDLORD: EFFECT OF LANDLORD'S CONSENT. Consent by
Landlord to one or more assignments of this Lease, or to one or more sublettings
of the Buildings or any portion thereof, or collection of rent by Landlord from
any assignee or sublessee, shall not operate to exhaust Landlord's rights under
this Article 13, nor constitute consent to any subsequent assignment or
subletting. No assignment of Tenant's interest in this Lease and no sublease
shall relieve Tenant of its obligations hereunder, notwithstanding any waiver or
extension of time granted by Landlord to any assignee or sublessee, or the
failure of Landlord to assert its rights against any assignee or sublessee, and
regardless of whether Landlord's consent thereto is given or required to be
given hereunder. In the event of a default by any assignee, sublessee or other
successor of Tenant in the performance of any of the terms or obligations of
Tenant under this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against any such assignee, sublessee or
other successor.

      13.3  ADVERTISING. In no event shall Tenant display on or about the
Premises any signs for the purpose of advertising the Premises for assignment,
subletting or other transfer of rights, without the Landlord's prior consent,
which shall not be unreasonably withheld or delayed.

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Landlord shall not display on or about the Premises any signs for the purpose of
advertising any of the Real Property for lease, subletting, assignment or rent
except with the consent of Tenant, which consent shall not be unreasonably
withheld or delayed.

      13.4  WRITING REQUIRED. Each Permitted Transfer, permitted assignment or
sublease shall be consummated by an instrument in writing executed by the
transferor and transferee in form satisfactory to Landlord. Each assignee and
subtenant shall agree in writing for the benefit of the Landlord herein to
assume all obligations of Tenant hereunder which are applicable to the space
subject to the assignment or sublease and any associated common areas, including
the payment of all amounts due or to become due under this Lease directly to the
Landlord. At least one executed copy of such written instrument shall be
delivered to the Landlord.

      13.5  TRANSFER PREMIUMS. If Tenant assigns or sublets its rights under
this Lease, Tenant shall pay to Landlord as additional rent, after Tenant has
recovered any relevant leasing commissions, costs of tenant improvements and
other expenses of the assignment or sublease, the unamortized (over the Term of
the Lease) costs of any tenant improvements consented to by Landlord paid for by
Tenant prior to such Transfer, one-half (1/2) of all such excess consideration
due and payable to Tenant from said assignment or sublease to the extent said
consideration exceeds the rent or a pro rata portion of the rent, in the event
only a portion of the Premises is sublet or assigned.

14.   RIGHT OF ENTRY AND QUIET ENJOYMENT.

      14.1  RIGHT OF ENTRY. Landlord and its authorized representatives shall
have the right to enter the Buildings at any time during the Term of this Lease
during normal business hours when accompanied by a representative of Tenant and
upon not less than twenty-four (24) hours prior notice, except in the case of
emergency (in which event no notice and no accompaniment shall be required and
entry may be made at any time), for the purpose of inspecting and determining
the condition of the Buildings or for any other proper purpose including,
without limitation, to make repairs, replacements or improvements which Landlord
may be entitled to make hereunder, to show the Buildings to prospective
purchasers, lenders and investors, to show the Buildings to prospective tenants
(but only during the final eighteen (18) months of the Term of this Lease), and
to post notices of nonresponsibility. Landlord shall not be liable for
inconvenience, annoyance, disturbance, loss of business, quiet enjoyment or
other damage or loss to Tenant by reason of making any repairs or performing any
work upon the Premises or by reason of erecting or maintaining any protective
barricades in connection with any such work, and the obligations of Tenant under
this Lease shall not thereby be affected in any manner whatsoever, provided,
however, Landlord shall use its best reasonable efforts to minimize the
inconvenience to Tenant's normal business operations caused thereby.

      14.2  QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying the
rent and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term of this Lease, or until this Lease is terminated as
provided by this Lease.

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15.      CASUALTY AND TAKING.

         15.1     DAMAGE OR DESTRUCTION.

                  (a)      Termination Rights. If the Buildings, or the Common
Areas necessary for Tenant's use and occupancy of the Premises, are damaged or
destroyed in whole or in part under circumstances in which (i) repair and
restoration is permitted under applicable governmental laws, regulations and
building codes then in effect and (ii) repair and restoration reasonably can be
completed within a period of one (1) year (or, in the case of an occurrence
during the last year of the Term of this Lease, within a period of sixty (60)
days) following the date of the occurrence, then Landlord, as to the Buildings
and Common Areas and the tenant improvements, shall commence and complete, with
all due diligence and as promptly as is reasonably practicable under the
conditions then existing, all such repair and restoration as may be required to
return the affected portions of the Real Property to a condition comparable to
that existing immediately prior to the occurrence. In the event of damage or
destruction the repair of which is not permitted under applicable governmental
laws, regulations and building codes then in effect, or if such damage or
destruction (despite being repaired to the extent then permitted under
applicable governmental laws, regulations and building codes) would materially
impair Tenant's ability to conduct its business in the Premises, then either
party may terminate this Lease as of the date of the occurrence by giving
written notice to the other within sixty (60) days after the date of the
occurrence; if neither party timely elects such termination, or if such damage
or destruction after being repaired would not materially impair Tenant's ability
to conduct its business in the Premises, then this Lease shall continue in full
force and effect, except that there shall be an equitable adjustment in monthly
Minimum Rental and of Tenant's Operating Cost Share, based upon the extent to
which Tenant's ability to conduct its business in the Premises is impaired, and
Landlord shall restore the Common Areas and Building and tenant improvements to
a complete architectural whole and to a functional condition. In the event of
damage or destruction which cannot reasonably be repaired within one (1) year
(or, in the case of an occurrence during the last twenty-four (24) months of the
Term of this Lease, within a period of sixty (60) days) following the date of
the occurrence, then either Landlord or Tenant, at its election, may terminate
this Lease as of the date of the occurrence by giving written notice to the
other within thirty (30) days after the date of the occurrence; if neither party
timely elects such termination, then this Lease shall continue in full force and
effect and Landlord shall repair and restore applicable portions of the Real
Property in accordance with the first sentence of this Section 15. Landlord and
Tenant agree that the terms of this Lease shall govern the effect of any damage
to or destruction of the Project with respect to termination of this Lease and
hereby waive the provisions of any present or future statute to the extent
inconsistent herewith.

                  (b)      Limitations on Parties' Obligations. The obligations
of Landlord pursuant to Section 15.1(a) are subject to the following
limitations:

                           (i)      If the occurrence results from a peril which
is required to be insured pursuant to Section 12.1(c) above, the obligations of
Landlord shall not exceed the amount of insurance proceeds received from
insurers (or, in the case of any failure to maintain required insurance,
proceeds that reasonably would have been available if the required insurance had
been maintained) by reason of such occurrence, plus the amount of the permitted
deductible (provided that Landlord shall be obligated to use its best efforts to
recover any available

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<PAGE>

proceeds from the insurance which it is required to maintain pursuant to the
provisions of Article 12, and, if such proceeds (including, in the case of a
failure to maintain required insurance, any proceeds that reasonably would have
been available) are insufficient, either party may terminate the Lease unless
the other party promptly elects and agrees, in writing, to contribute the amount
of the shortfall; and

                           (ii)     If the occurrence results from a peril which
is not required to be insured pursuant to Article 12 above and is not actually
insured, Landlord shall be required to repair and restore the Building and
Common Areas and tenant improvements to the extent necessary for Tenant's
continued use and occupancy of the Buildings, provided that Landlord's
obligation to repair and restore shall not exceed an amount equal to ten percent
(10%) of the replacement cost of the Building and Common Area improvements and
ten percent (10%) of the replacement cost of the tenant improvements; if the
cost to repair and restore exceeds such amount, then Landlord may terminate this
Lease unless the Tenant promptly elects and agrees, in writing, to contribute
the amount of the shortfall.

                  (c)      Entitlement to Insurance Proceeds. If this Lease is
terminated pursuant to the foregoing provisions of this Section 15.1 following
an occurrence which is a peril actually insured or required to be insured
against pursuant to Article 12, Landlord and Tenant agree (and any Lender shall
be asked to agree) that such insurance proceeds, after repayment of the loan,
shall be allocated between Landlord and Tenant in a manner which fairly and
reasonably reflects their respective ownership rights under this Lease, as of
the termination or expiration of the Term of this Lease, with respect to the
improvements, fixtures, equipment and other items to which such insurance
proceeds are attributable.

                  (d)      Abatement of Rent. From and after the date of an
occurrence resulting in damage to or destruction of the Buildings or of the
Common Areas necessary for Tenants use and occupancy of the Buildings, and
continuing until the earlier of the date repair and restoration thereof are
completed or the date on which rental loss insurance payments cease, there shall
be an equitable abatement of Minimum Rental and of Tenant's Operating Cost Share
of Operating Expenses based upon the degree to which Tenant's ability to conduct
its business in the Buildings is impaired.

         15.2     CONDEMNATION.

                  (a)      Termination Rights. If during the Term of this Lease
the Real Property or Improvements or any substantial part of either, is taken by
eminent domain or by reason of any public improvement or condemnation
proceeding, or in any manner by exercise of the right of eminent domain
(including any transfer in avoidance of an exercise of the power of eminent
domain), then (i) this Lease shall terminate as to the entire affected Premises
at Landlord's election by written notice given to Tenant within sixty (60) days
after the taking has occurred, and (ii) this Lease shall terminate as to the
entire affected Premises at Tenant's election, by written notice given to
Landlord within thirty (30) days after the nature and extent of the taking have
been finally determined, if the portion of the Premises taken is of such extent
and nature as substantially to handicap, impede or permanently impair Tenant's
use of the balance of the Premises, and (iii) this Lease shall remain in full
force and effect as to the remaining portion of the Premises. If Tenant elects
to terminate this Lease, as to the affected Premises, Tenant shall

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<PAGE>

also notify Landlord of the date of termination, which date shall not be earlier
than thirty (30) days nor later than ninety (90) days after Tenant has notified
Landlord of Tenant's election to terminate, except that this Lease shall
terminate on the date of taking if such date falls on any date before the date
of termination designated by Tenant. If neither party elects to terminate this
Lease as hereinabove provided, this Lease shall continue in full force and
effect (except that there shall be an equitable abatement of Minimum Rental and
of Tenant's Operating Cost Share of Operating Expenses based upon the degree to
which Tenant's ability to conduct its business in the Premises is impaired),
Landlord shall restore the Building and Common Area and tenant improvements to a
complete architectural whole and a functional condition and as nearly as
reasonably possible to the condition existing before the taking. In connection
with any such restoration, Landlord shall use its best efforts (including,
without limitation, any necessary negotiation or intercession with its lender,
if any) to ensure that any severance damages or other condemnation awards
intended to provide compensation for rebuilding or restoration costs are
promptly collected and made available to Tenant and Landlord subject only, to
such payment controls as either party or its lender may reasonably require in
order to ensure the proper application of such proceeds toward the restoration
of the Improvements. Each party waives the provisions of Code of Civil Procedure
Section 1265.130, allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial condemnation of the Buildings or
Real Property.

                  (b)      Limitations on Parties' Obligations. The obligations
of Landlord pursuant to Section 15.2(a) are subject to the following
limitations:

                           (i)      Landlord's obligation to repair and restore
shall not exceed, net of any condemnation awards or other proceeds available for
and allocable to such restoration as contemplated in Section 15.2(a), an amount
equal to ten percent (10%) of the replacement cost of the Building and Common
Area improvements and an amount equal to ten percent (10%) of the replacement
cost of the tenant improvements; if the replacement cost exceeds such amount,
then Landlord may terminate this Lease unless Tenant promptly elects and agrees,
in writing, to contribute the amount of the shortfall; and

                           (ii)     If this Lease is terminated pursuant to the
foregoing provisions of this Section 15.2, or if this Lease remains in effect
but any condemnation awards or other proceeds become available as compensation
for the loss or destruction of any of the Improvements, then Landlord and Tenant
agree (and any Real Property lender shall be asked to agree) that such proceeds
shall be allocated between Landlord and Tenant, respectively, in the respective
proportions in which Landlord and Tenant would have shared, under Section
15.1(c), the proceeds of any insurance proceeds following loss or destruction of
the applicable Improvements by an insured casualty.

         15.3     RESERVATION OF COMPENSATION. Landlord reserves, and Tenant
waives and assigns to Landlord, all rights to any award or compensation for
damage to the Improvements and the Real Property, but not the leasehold estate
created hereby, accruing by reason of any taking in any public improvement,
condemnation or eminent domain proceeding or in any other manner by exercise of
the right of eminent domain or of anything lawfully done by public authority,
except that (a) Tenant shall be entitled to any and all compensation or damages
expressly awarded to Tenant on account of Tenant's loss of the leasehold estate
and Tenant's

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<PAGE>

moving expenses, trade fixtures and equipment and any leasehold improvements
installed by Tenant in the Buildings at its own sole expense, but only to the
extent Tenant would have been entitled to remove such items at the expiration of
the Term of this Lease and then only to the extent of the then remaining
unamortized value of such improvements computed on a straight-line basis over
the Term of this Lease, and (b) any condemnation awards or proceeds described in
Section 15.2(b)(ii) shall be allocated and disbursed in accordance with the
provisions of Section 15.2(b)(ii), notwithstanding any contrary provisions of
this Section 15.3.

         15.4     RESTORATION OF IMPROVEMENTS. In connection with any repair or
restoration of Improvements following a casualty or taking as hereinabove set
forth, the party responsible for such repair or restoration shall, to the extent
possible, return such Improvements to a condition substantially equal to that
which existed immediately prior to the casualty or taking. To the extent such
party wishes to make material modifications to such Improvements, such
modifications shall be subject to the prior written approval of the other party
(not to be unreasonably withheld, delayed or conditioned), except that no such
approval shall be required for modifications that are required by applicable
governmental authorities as a condition of the repair or restoration, unless
such required modifications would substantially impair or impede Tenant's
conduct of its business in the Buildings (in which case any such modifications
in the Building shall require Tenant's consent, not unreasonably withheld,
delayed or conditioned) or would materially affect the exterior appearance, the
structural integrity or the mechanical or other operating systems of the
Buildings (in which case any such modifications shall require Tenant's consent,
not to be unreasonably withheld, delayed or conditioned).

16.      DEFAULT.

         16.1     EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an event of default on the part of Tenant:

                  (a)      Nonpayment. Failure to pay, when due, any amount
payable to Landlord hereunder, such failure continuing for a period of five (5)
business days after written notice of such failure;

                  (b)      Other Obligations. Failure to perform any obligation,
agreement or covenant under this Lease other than those matters specified in
subsection (a) hereof, such failure continuing for thirty (30) days after
written notice of such failure; provided, however, that if such failure is
curable in nature but cannot reasonably be cured within such 30-day period, then
Tenant shall not be in default if, and so long as, Tenant promptly (and in all
events within such 30-day period) commences such cure and thereafter diligently
pursues such cure to completion; and provided further, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 et seq., as amended from time to
time. Notwithstanding the foregoing, if any such failure on the part of Tenant
affects or threatens to affect the health or safety of others, or would result
in the destruction of property, Tenant shall immediately begin to cure and shall
use its diligent and best efforts in pursuing said cure to completion (it being
understood and agreed that Landlord shall not be entitled to exercise any remedy
to terminate this Lease unless and until such failure shall have continued for
thirty (30) days after written notice of such failure);

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<PAGE>

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

                  (d)      Bankruptcy. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary petition by Tenant's
creditors, which involuntary petition remains undischarged for a period of sixty
(60) days. In the event that under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction, cure all
defaults of Tenant hereunder outstanding as of the date of the affirmance of
this Lease and provide to Landlord such adequate assurances as may be necessary
to ensure Landlord of the continued performance of Tenant's obligations under
this Lease. Specifically, but without limiting the generality of the foregoing,
such adequate assurances must include assurances that the Buildings continue to
be operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect to
Tenant's use of the Premises and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy laws;

                  (e)      Receivership. The employment of a receiver appointed
by court order to take possession of substantially all of Tenants assets or its
interest in the Buildings, if such receivership remains undissolved for a period
of sixty (60) days;

                  (f)      Attachment. The attachment, execution or other
judicial seizure of all or substantially all of Tenant's assets or its interest
in the Buildings, if such attachment or other seizure remains undismissed or
undischarged for a period of sixty (60) days after the levy thereof; or

                  (g)      Insolvency. The admission by Tenant in writing of its
inability to pay its debts as they become due, the filing by Tenant of a
petition seeking any reorganization or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, the filing by Tenant of an answer admitting or failing timely
to contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within sixty (60) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.

         16.2     REMEDIES UPON TENANT'S DEFAULT.

                  (a)      Re-entry; Termination. Upon the occurrence of any
event of default described in Section 16.1 hereof, Landlord, in addition to and
without prejudice to any other rights or remedies it may have, shall have the
immediate right to re-enter the Buildings or any part thereof and repossess the
same, expelling and removing therefrom all persons and property (which property
may be stored in a public warehouse or elsewhere at the cost and risk of and for
the account of Tenant). In addition to or in lieu of such re-entry, and without
prejudice to any other rights or remedies it may have, Landlord shall have the
right either (i) to terminate this Lease and recover from Tenant all damages
incurred by Landlord as a result of Tenant's default,

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<PAGE>

as hereinafter provided, or (ii) to continue this Lease in effect and recover
rent and other charges and amounts as they become due.

                  (b)      Continuation of Lease. Even if Tenant has breached
this Lease and abandoned the Buildings, this Lease shall continue in effect for
so long as Landlord does not terminate Tenant's right to possession and Landlord
may enforce all of its rights and remedies under this Lease, including the right
to recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Buildings or
the appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.

                  (c)      Remedies. If Landlord terminates this Lease pursuant
to this Section 16.2, Landlord shall have all of the rights and remedies of a
landlord provided by Section 1951.2 of the Civil Code of the State of
California, or any successor Code section, which remedies include Landlord's
right to recover from Tenant (i) the worth at the time of award of the unpaid
rent and additional rent and Tenant's Operating Cost Share of Operating Expense
which had been earned at the time of termination, (ii) the worth at the time of
award of the amount by which the unpaid rent and additional rent and Tenant's
Operating Cost Share of Operating Expense which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided, (iii) the worth at the time of
award of the amount by which the unpaid rent and additional rent and Tenant's
Operating Cost Share of Operating Expense for the balance of the Term after the
time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided, and (iv) any other amount reasonably necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom, including, but not limited to, the cost of
recovering possession of the Buildings, expenses of reletting, including
necessary repair, renovation and alteration of the Buildings, reasonable
attorneys' fees, and other reasonable costs. The "worth at the time of award" of
the amounts referred to in clauses (i) and (ii) above shall be computed by
allowing interest at twelve percent (12%) per annum from the date such amounts
accrued to Landlord. The "worth at the time of award" of the amounts referred to
in clause (iii) above shall be computed by discounting such amount at one
percentage point above the discount rate of the Federal Reserve Bank of San
Francisco at the time of award.

         16.3     REMEDIES CUMULATIVE. All rights, privileges and elections or
remedies of Landlord contained in this Article 16 are cumulative and not
alternative to the extent permitted by law and except as otherwise provided
herein.

         16.4     LANDLORD'S DEFAULT. Landlord shall not be deemed to be in
default of this Lease unless Landlord fails within a reasonable time (or the
time specified herein, if applicable) to perform an obligation required to be
performed by it. Tenant agrees to give Landlord and any lender designated by
Landlord notice of any Landlord default, and a reasonable opportunity to cure
such default.

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<PAGE>

17.      SUBORDINATION, ATTORNMENT AND SALE.

         17.1     SUBORDINATION TO MORTGAGE. This Lease, and any sublease
entered into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security now or hereafter placed upon
the Buildings, the Real Property, or any of them, and the rights of any assignee
of Landlord or of any ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor under any of the foregoing, and to any and all advances made on
the security thereof and to ail renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that such subordination
in the case of any future ground lease, mortgage, deed of trust, sale/leaseback
transaction or any other hypothecation for security placed upon the Buildings,
the Real Property, or any of them shall be conditioned on Tenant's receipt from
the ground lessor, mortgagee, trustee, beneficiary or leaseback lessor of a
Non-Disturbance Agreement in a form reasonably acceptable to Tenant (i)
confirming that so long as Tenant is not in material default hereunder beyond
any applicable cure period (for which purpose the occurrence of any event of
default under Section 16.1 hereof shall be deemed to be "material"), Tenant's
rights hereunder shall not be disturbed by such person or entity and (ii)
agreeing that the benefit of such Non-Disturbance Agreement shall be
transferable to any transferee under a Permitted Transfer and to any other
assignee or subtenant that is acceptable to the ground lessor, mortgagee,
trustee, beneficiary or leaseback lessor at the time of transfer. Tenant agrees
to execute such other commercially reasonable documentation as may be required
by an institutional lender to evidence such subordination and to attorn to any
such ground lessor, mortgagee, trustee, beneficiary or leaseback lessor in the
event such party succeeds to Landlord's interest hereunder and agrees to
recognize this Lease. Moreover, Tenant's obligations under this Lease shall be
conditioned on Tenant's receipt within thirty (30) days after mutual execution
of this Lease, from any existing ground lessor, mortgagee, trustee, beneficiary
or leaseback lessor currently owning or holding a security interest in the Real
Property, of a Non-Disturbance Agreement in a form reasonably acceptable to
Tenant confirming (i) that so long as Tenant is not in material default
hereunder beyond any applicable cure period, Tenant's rights hereunder shall not
be disturbed by such person or entity and (ii) agreeing that the benefit of such
Non-Disturbance Agreement shall be transferable to any transferee under a
Permitted Transfer and to any other assignee or subtenant that is acceptable to
the ground lessor, mortgagee, trustee, beneficiary or leaseback lessor at the
time of transfer. If any mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or assignee elects in writing to have this Lease be an
encumbrance upon the Real Property prior to the lien of its mortgage, deed of
trust, ground lease or leaseback lease or other security arrangement and gives
notice thereof to Tenant, this Lease shall be deemed prior thereto, whether this
Lease is dated prior or subsequent to the date thereof or the date of recording
thereof. Tenant, and any sublessee, shall execute such documents as may
reasonably be requested by any mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or assignee to evidence the subordination herein set
forth, subject to the conditions set forth above, or to make this Lease prior to
the lien of any mortgage, deed of trust, ground lease, leaseback lease or other
security arrangement, as the case may be. Upon any default by Landlord in the
performance of its obligations under any mortgage, deed of trust, ground lease,
leaseback lease or assignment, Tenant (and any sublessee) shall, notwithstanding
any subordination hereunder, attorn to the mortgagee, trustee, beneficiary,
ground lessor, leaseback lessor or assignee thereunder upon demand and become
the tenant of the successor in interest to Landlord, at the

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<PAGE>

option of such successor in interest, and shall execute and deliver any
instrument or instruments confirming the attornment herein provided for.

         17.2     SALE OF LANDLORD'S INTEREST. Upon sale, transfer or assignment
of Landlord's entire interest in the Buildings and the Real Property, Landlord
shall be relieved of its obligations hereunder with respect to liabilities
accruing from and after the date of such sale, transfer or assignment.

         17.3     ESTOPPEL CERTIFICATES. Tenant or Landlord (the "RESPONDING
PARTY") as applicable, shall at any time and from time to time, within ten (10)
days after written request by the other party (the "REQUESTING PARTY"), execute,
acknowledge and deliver to the Requesting Party a certificate in writing
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the Requesting Party is not in default in the performance of any of its
obligations under this Lease, that the certifying party has given no notice of
default to the Requesting Party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder, or if the responding party alleges that any such default,
notice or event has occurred, specifying the same in reasonable detail; and (iv)
such other matters as may reasonably be requested by the Requesting Party or by
any institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Real Property, or
prospective sublessee or assignee of this Lease. Any such certificate provided
under this Section 17.3 may be relied upon by any lender, mortgagee, trustee,
beneficiary, assignee or successor in interest to the Requesting Party, by any
prospective purchaser, by any purchaser on foreclosure or sale, by any grantee
under a deed in lieu of foreclosure of any mortgage or deed of trust on the Real
Property, by any subtenant or assignee, or by any other third party. Failure to
execute and return within the required time any estoppel certificate requested
hereunder, if such failure continues for five (5) days after a second written
request by the Requesting Party for such estoppel certificate, shall be deemed
to be an admission of the truth of the matters set forth in the form of
certificate submitted to the Responding Party for execution.

18.      SECURITY.

         18.1     DEPOSIT. Upon execution of the original Lease, Tenant
deposited with Landlord the sum of $5,500,000. In lieu of a cash security
deposit, Tenant elected to provide one or more irrevocable letters of credit,
payable to Landlord, as a security deposit. Upon the execution of this Lease,
the amount of such deposit shall be reduced to $1,375,000. At Tenant's election,
in lieu of a cash security deposit, Tenant may continue to provide one or more
irrevocable letters of credit in amounts described above, payable to Landlord,
and issued by an institution and in form reasonably satisfactory to Landlord.
Such sums or the Letter of Credit (individually and collectively, the "SECURITY
DEPOSIT") shall be held by Landlord as security for the faithful performance of
all of the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the Term hereof; provided that if at any time Tenant
shall have maintained an investment grade credit rating of BBB or better by
Standard and Poors for a consecutive twelve month period, Landlord shall return
the Security Deposit to Tenant. Upon the execution of this Lease, Landlord shall
promptly obtain the release of any Letters of Credit pledged as permitted

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<PAGE>

in Section 18.2 below which exceed the amounts indicated above and shall return
such Letters of Credit to Tenant. Upon such release and return, Tenant shall
cause to be issued and delivered a substitute letter of credit in the amount of
the required security deposit. If Tenant defaults with respect to any provision
of this Lease, including, without limitation, the provisions relating to the
payment of rental and other sums due hereunder, Landlord shall have the right,
but shall not be required, to use, apply or retain all or any part of the
Security Deposit for the payment of rental, unreimbursed Operating Expenses or
any other amount which Landlord may spend or become obligated to spend by reason
of Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. Landlord may also apply the
Security Deposit toward costs incurred to repair damages to the Premises or to
clean and bring the Premises to good order, condition and repair during its
Lease Term and upon expiration or sooner termination of this Lease. If any
portion of the Security Deposit is so used or applied, Tenant shall, within five
(5) days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount and Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall be
required to keep any deposit under this Section separate from Landlord's general
funds in an interest bearing account reasonably acceptable to Tenant, and Tenant
shall be entitled to the interest thereon, to be paid to Tenant when and if the
Security Deposit is refundable to Tenant. If Tenant fully and faithfully
performs every provision of this Lease to be performed by it, the Security
Deposit, or any balance thereof, together with all accrued interest, shall be
returned to Tenant or, at Landlord's option, to the last assignee of Tenant's
interest hereunder, at the expiration of the Term of this Lease and after Tenant
has vacated the Premises. In the event of termination of Landlord's interest in
this Lease, Landlord shall transfer all deposits then held by Landlord under
this Section to Landlord's successor in interest, whereupon Tenant agrees to
release Landlord from all liability for the return of such deposit or the
accounting thereof.

         18.2     PLEDGE OF SECURITY DEPOSIT. The Security Deposit may be
pledged by Landlord as additional collateral to any lender having a security
interest in the Real Property. The lender may use, apply or retain all or any
part of the Security Deposit for the payment of Building Costs, but only in the
event that lender shall have notified Landlord and Tenant that such Building
Costs remain unpaid and the parties shall have failed within thirty (30) days
following receipt of such notice to cure such nonpayment. For purposes of this
Section, "BUILDING COST(s)" shall mean any and all costs actually incurred in
constructing the Building, Common Area and the related site improvements
including, but not limited to, costs for demolition, grading, utility fees,
architectural and engineering fees, permits, surveys, appraisals, insurance,
legal and accounting fees, development overhead, construction management,
blueprinting, equity fees, construction lender, permanent lender and mortgage
banker fees, interest carry, site improvements, off-site improvements and tenant
improvements. If any portion of the Security Deposit is so applied, upon the
Phase 1 Rent Commencement Date, Tenant shall deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount, and
Tenant's failure to do so shall constitute a material breach of this Lease.

19.      MISCELLANEOUS.

         19.1     NOTICES. All notices, consents, waivers and other
communications which this Lease requires or permits either party to give to the
other shall be in writing and shall be deemed given when delivered personally
(including delivery by private courier or express delivery

                                       39
<PAGE>

service) or three (3) days after deposit in the United States mail, registered
or certified mail, postage prepaid, assessed to the parties at their respective
addresses as follows:

         To Tenant:                 150 Industrial Road
                                    San Carlos, CA 94070
                                    Attn: Ajay Bansal, Chief Financial Officer

         with a copy to:            150 Industrial Road
                                    San Carlos, CA 94070
                                    Attn: Paula Kasler, Esq.

         and with a copy to:        Greenberg Traurig LLP
                                    Attn: Toni Wise, Esq.
                                    2000 University Avenue
                                    East Palo Alto, CA 94303
                                    Attn: Toni P. Wise, Esq.

         To Landlord:               Inhale 201 Industrial Road L.P.
                                    c/o Bernardo Property Advisors, Inc.
                                    17140 Bernardo Center Dr., Suite 195
                                    San Diego, CA 92128
                                    Attn: Alan D. Gold

         with a copy to:            Seltzer Caplan McMahon Vitek
                                    2100 Symphony Towers
                                    750 B Street
                                    San Diego, CA 92101
                                    Attn: David J. Dorne, Esq.

or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other address as Landlord may from time to time specify
in writing to Tenant, and shall be deemed to be paid only upon actual receipt.

         19.2     SUCCESSORS AND ASSIGNS. The obligations of this Lease shall
run with the land, and this Lease shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Real Property, and any liability for obligations accruing after
termination of such ownership shall terminate as of the date of such termination
of ownership and shall pass to the successor lessor.

         19.3     NO WAIVER. The failure of Landlord to seek redress for
violation, or to insist upon the strict performance, of any covenant or
condition of this Lease shall not be deemed a waiver of such violation, or
prevent a subsequent act which would originally have constituted a violation
from having all the force and effect of an original violation.

                                       40
<PAGE>

         19.4     SEVERABILITY. If any provision of this Lease or the
application thereof is held to be invalid or unenforceable, the remainder of
this Lease or the application of such provision to persons or circumstances
other than those as to which it is invalid or unenforceable shall not be
affected thereby, and each of the provisions of this Lease shall be valid and
enforceable, unless enforcement of this Lease as so invalidated would be
unreasonable or grossly inequitable under all the circumstances or would
materially frustrate the purposes of this Lease.

         19.5     LITIGATION BETWEEN PARTIES. In the event of any litigation or
other dispute resolution proceedings between the parties hereto arising out of
or in connection with this Lease, the prevailing party shall be reimbursed for
all reasonable costs, including, but not limited to, reasonable accountants'
fees and attorneys' fees, incurred in connection with such proceedings
(including, but not limited to, any appellate proceedings relating thereto) or
in connection with the enforcement of any judgment or award rendered in such
proceedings. "PREVAILING PARTY" within the meaning of this Section shall
include, without limitation, a party who dismisses an action for recovery
hereunder in exchange for payment of the sums allegedly due, performance of
covenants allegedly breached or consideration substantially equal to the relief
sought in the action.

         19.6     SURRENDER. A voluntary or other surrender of this Lease by
Tenant, or a mutual termination thereof between Landlord and Tenant, shall not
result in a merger but shall, at the option of Landlord, operate either as an
assignment to Landlord of any and all existing subleases and subtenancies, or a
termination of all or any existing subleases and subtenancies. This provision
shall be contained in any and all assignments or subleases made pursuant to this
Lease.

         19.7     INTERPRETATION. The provisions of this Lease shall be
construed as a whole, according to their common meaning, and not strictly for or
against Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.

         19.8     ENTIRE AGREEMENT. This written Lease, together with the
exhibits hereto, and that certain Redemption Agreement dated as of June 22,
2004, contains all the representations and the entire understanding between the
parties hereto with respect to the subject matter hereof and replaces any prior
agreements, including the prior lease, and any prior correspondence, memoranda
or agreements. This Lease may be modified only by an agreement in writing signed
by each of the parties.

         19.9     GOVERNING LAW. This Lease and all exhibits hereto shall be
construed and interpreted in accordance with and be governed by all the
provisions of the laws of the State of California.

         19.10    NO PARTNERSHIP. The relationship created by this lease between
Landlord and Tenant is solely that of a lessor and lessee. Nothing contained in
this Lease shall be construed as creating any type or manner of partnership,
joint venture or joint enterprise with or between Landlord and Tenant. Neither
party is the agent or representative of the other.

                                       41
<PAGE>

         19.11    FINANCIAL INFORMATION. From time to time Tenant shall promptly
provide directly to prospective lenders and purchasers of the Real Property
designated by Landlord such financial information pertaining to the financial
status of Tenant as Landlord may reasonably request; provided, Tenant shall be
permitted to provide such financial information in a manner which Tenant deems
reasonably necessary to protect the confidentiality of such information. In
addition, from time to time, Tenant shall provide Landlord with such financial
information pertaining to the financial status of Tenant as Landlord may
reasonably request. Landlord agrees that all financial information supplied to
Landlord by Tenant shall be treated as confidential material, and shall not be
disseminated to any party or entity (including any entity affiliated with
Landlord) without Tenant's prior written consent, except that Landlord shall be
entitled to provide such information, subject to reasonable precautions to
protect the confidential nature thereof, (i) to Landlord's partners and
professional advisors, solely to use in connection with Landlord's execution and
enforcement of this Lease, and (ii) to prospective lenders and/or purchasers of
the Real Property, solely for use in connection with their bona fide
consideration of a proposed financing or purchase of the Real Property, provided
that such prospective lenders and/or purchasers are not then engaged in
businesses directly competitive with the business then being conducted by
Tenant. For purposes of this Section, without limiting the generality of the
obligations provided herein, it shall be deemed reasonable for Landlord to
request copies of Tenant's most recent audited annual financial statements, or,
if audited statements have not been prepared, unaudited financial statements for
Tenant's most recent fiscal year, accompanied by a certificate of Tenant's chief
financial officer that such financial statements fairly present Tenant's
financial condition as of the date(s) indicated. Notwithstanding any other
provisions of this Section 19.11, during any period in which Tenant has
outstanding a class of publicly traded securities and is filing with the
Securities and Exchange Commission, on a regular basis, Forms 10Q and 10K and
any other periodic filings required under the Securities Exchange Act of 1934,
as amended, it shall constitute sufficient compliance under this Section 19.11
for Tenant to furnish Landlord with copies of such periodic filings
substantially concurrently with the filing thereof with the Securities and
Exchange Commission.

         Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and purchasers
of the Real Property financial information pertaining to, Tenant's financial
status. Landlord and Tenant agree to cooperate with each other in achieving
these needs within the context of the obligations set forth in this Section.

         19.12    COSTS. Notwithstanding anything to the contrary contained in
this Lease, if Tenant requests the consent of Landlord under any provision of
this Lease for any act that Tenant proposes to do hereunder, including, without
limitation, assignment or subletting of the Buildings or any portion thereof,
Tenant shall, as a condition to doing any such act and the receipt of such
consent, reimburse Landlord promptly for any and all reasonable costs and
expenses incurred by Landlord in connection therewith (including, without
limitation, reasonable attorneys' fees) up to a maximum of $1,000 per request.

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

                                       42
<PAGE>

         19.14    BROKERS. Each party represents and warrants that no other
broker participated in the consummation of this Amended and Restated Lease and
agrees to indemnify, defend and hold the other party harmless against any
liability, cost or expense, including, without limitation, reasonable attorneys'
fees, arising out of any claims for brokerage commissions or other similar
compensation in connection with any conversations, prior negotiations or other
dealings by the indemnifying party with any other person making such claim.

         19.15    MEMORANDUM OF LEASE. At any time during the Term of this
Lease, either party, at its sole expense, shall be entitled to record a
memorandum of this Lease and, if either party so elects, both parties agree to
cooperate in the preparation, execution, acknowledgement and recordation of such
document in reasonable form.

         19.16    CORPORATE AUTHORITY. Each person signing this Lease on behalf
of Tenant or Landlord warrants that he or she is fully authorized to do so and,
by so doing, to bind the entity on whose behalf he or she is signing.

         19.17    EXECUTION AND DELIVERY. This Lease may be executed in one or
more counterparts and by separate parties on separate counterparts, but each
such counterpart shall constitute an original and all such counterparts together
shall constitute one and the same instrument.

         19.18    SURVIVAL. Without limiting survival, provisions which would
otherwise be implied or construed under applicable law, the provisions of
Sections 2.5, 7.4, 9.2, 9.3, 9.4, 11.4, 12.10, 12.11, 19.5 and 19.11 hereof
shall survive the termination of this Lease with respect to matters occurring
prior to the expiration of this Lease.

         19.19    WAIVER OF JURY TRIAL. The parties hereto shall, and they
hereby do, waive trial by jury in any action or proceeding or counterclaim
brought by either of the parties hereto against the other on any matters arising
out of or in any way connected with this Lease.

         19.20    EXCLUSIVITY. Landlord agrees that it shall not, during the
Term of this Lease or any period during which Tenant occupies all or any portion
of the Premises, lease or allow the use or occupancy of any portion of the
Premises or the Buildings to or by any party which is a competitor of Tenant.

         19.21    TENANT'S REMEDIES. Except to the extent expressly provided
herein, no event or occurrence during the Lease Term is intended to allow Tenant
the right to surrender or terminate this Lease or to relieve Tenant from any of
its obligations hereunder, and Tenant waives any rights now or hereafter
conferred upon it by statute or otherwise (except for rights conferred herein)
to surrender or terminate this Lease or to claim any abatement or suspension of
Rent or other sums payable hereunder.

         19.22    SECURITY MEASURES. Tenant acknowledges that the Rent payable
to Landlord hereunder does not and will not include the cost of guard service or
other security services and that Landlord shall have no obligation whatsoever to
provide same. Tenant agrees that Landlord shall have no responsibility for the
protection of the Premises, Tenant, its agents and invitees or their property
from the acts of third parties.

                                       43
<PAGE>

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

"LANDLORD"                                  "TENANT"

INHALE 201 INDUSTRIAL ROAD, L.P.,           NEKTAR THERAPEUTICS (FKA INHALE
a California limited partnership            THERAPEUTIC SYSTEMS, INC.),
                                            a Delaware corporation

By SciMed Prop III, a California            By:   _____________________________
corporation, its General Partner            Name: _____________________________
                                            Its:  _____________________________

By:   _____________________________         By:   _____________________________
Name: _____________________________         Name: _____________________________
Its:  _____________________________         Its:  _____________________________

By:   _____________________________         By:   _____________________________
Name: _____________________________         Name: _____________________________
Its:  _____________________________         Its:  _____________________________

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