Document:

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                                                                   EXHIBIT 10.13

                          REGISTRATION RIGHTS AGREEMENT

               This Registration Rights Agreement (the "Agreement") is made and
entered into as of February 4, 2000, by and among Incyte Pharmaceuticals, Inc.,
a Delaware corporation (the "Company"), Deutsche Bank Securities Inc. and
Warburg Dillon Read LLC (the "Initial Purchasers").

               This Agreement is made pursuant to the Purchase Agreement, dated
February 1, 2000 (the "Purchase Agreement"), between the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the Closing
under the Purchase Agreement.

               The parties hereby agree as follows:

               1.     Definitions

               Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

                      a.     Affiliate:  "Affiliate" means, with respect to any
specified Person, (i) any other Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, such specified
Person or (ii) any officer or director of such other Person. For purposes of
this definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power (whether or not exercised) to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.

                      b.     Common Stock:  The shares of common stock, par
value $0.001 per share, of the Company issuable or issued upon conversion of the
Notes and any Common Stock issued with respect thereto upon any stock dividend,
split or similar stock.

                      c.     Effectiveness Date:  The date that is 180 days
after the date of the Closing under the Purchase Agreement.

                      d.     Effectiveness Period:  See Section 2(a) hereof.

                      e.     Exchange Act:  The Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC promulgated
thereunder.

                      f.     Filing Date:  The date that is 90 days after the
date of the Closing under the Purchase Agreement.

                      g.     Indenture:  The Indenture, dated as of February 4,
2000, between the Company and State Street Bank and Trust Company, as trustee,
pursuant to which the Notes

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are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.

                      h.     Initial Shelf Registration:  See Section 2(a)
hereof.

                      i.     Losses:  See Section 5(a) hereof.

                      j.     Notes:  The 5.5% Convertible Subordinated Notes
Due 2007 of the Company being issued and sold pursuant to the Purchase Agreement
and the Indenture.

                      k.     Purchase Agreement:  See the second paragraph of
this Agreement.

                      l.     Prospectus:  The prospectus included in any
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
including, without limitation, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

                      m.     Initial Purchasers:  Deutsche Bank Securities Inc.
and Warburg Dillon Read LLC.

                      n.     Registrable Securities:  The Notes and the Common
Stock issuable upon conversion of the Notes, upon original issuance thereof and
at all times subsequent thereto, until, in the case of any such Note or share of
Common Stock, (i) it has been effectively registered under the Securities Act
and disposed of in accordance with the Registration Statement covering it, (ii)
it is saleable by the holder thereof pursuant to Rule 144(k) under the
Securities Act or (iii) it is distributed to the public pursuant to Rule 144
under the Securities Act.

                      o.     Registration Statement:  Any registration
statement of the Company which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

                      p.     Rule 144:  Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.

                      q.     Rule 144A:  Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.

                      r.     SEC:  The Securities and Exchange Commission.

                      s.     Securities Act:  The Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.

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                      t.     Special Counsel:  Latham & Watkins, or such other
special counsel to the Initial Purchasers or the holders of the Registrable
Securities as shall be specified by holders of a majority of the Registrable
Securities, the fees and expenses of which will be paid by the Company pursuant
to Section 4 hereof.

                      u.     Subsequent Shelf Registration:  See Section 2(b)
hereof.

                      v.     TIA:  The Trust Indenture Act of 1939, as amended.

                      w.     Trustee:  State Street Bank and Trust Company, as
trustee under the Indenture.

                      x.     Underwritten Offering:  A registration in which
the Registrable Securities are sold to an underwriter or underwriters for
reoffering and sale to the public.

               2.     Shelf Registration

                      a.     Shelf Registration.  The Company shall prepare and
file with the SEC on or prior to the Filing Date a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering the
resale from time to time by the holders thereof of all of the Registrable
Securities (the "Initial Shelf Registration"). The Initial Shelf Registration
shall be on Form S-3, Form S-1 or another appropriate form permitting
registration of such Registrable Securities for resale by such holders
(including one or more underwritten offerings). The Company shall use all
reasonable efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration continuously effective under the Securities
Act until the date that is two years from the last date of issuance of any of
the Notes (the "Effectiveness Period"), or such shorter period ending when (i)
all Registrable Securities covered by the Initial Shelf Registration have been
sold, or (ii) a Subsequent Shelf Registration covering all of the Registrable
Securities has been declared effective under the Securities Act or (iii) there
cease to be outstanding any Registrable Securities.

                      b.     If the Initial Shelf Registration or any
Subsequent Shelf Registration ceases to be effective for any reason at any time
during the Effectiveness Period (other than because of the sale of all of the
securities registered thereunder), the Company shall use all reasonable efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 30 days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Company shall use all reasonable
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective until the end of the Effectiveness Period.

                      c.     The Company shall supplement and amend the Shelf
Registration or Subsequent Shelf Registration, as the case may be, if required
by the rules, regulations or

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instructions applicable to the registration form used by the Company for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Initial Purchasers or by the Trustee on behalf of the holders
of the Registrable Securities covered by such Registration Statement or by any
managing underwriter of such Registrable Securities.

               3.     Registration Procedures

                      a.     In connection with the Company's registration
obligations under Section 2 hereof, the Company shall effect such registrations
to permit the sale of the Registrable Securities in accordance with the method
or methods of disposition thereof intended by the holders of such Registrable
Securities (including one or more Underwritten Offerings), and pursuant thereto
the Company shall as expeditiously as possible:

                             i.     Prepare and file with the SEC a
Registration Statement or Registration Statements on any appropriate form under
the Securities Act available for the sale of the Registrable Securities by the
holders thereof in accordance with the intended method or methods of
distribution thereof, and cause each such Registration Statement to become
effective and remain effective as provided herein; provided, that before filing
any such Registration Statement or Prospectus or any amendments or supplements
thereto (other than documents that would be incorporated or deemed to be
incorporated therein by reference and that the Company is required by applicable
securities laws or stock exchange requirements to file) the Company shall
furnish to the holders of the Registrable Securities covered by such
Registration Statement, the Initial Purchasers and the Special Counsel, copies
of all such documents proposed to be filed, which documents will be subject to
the review of such holders and the Special Counsel, and the Company shall not
file any such Registration Statement or amendment thereto or any Prospectus or
any supplement thereto (other than such documents which, upon filing, would be
incorporated or deemed to be incorporated by reference therein and that the
Company is required by applicable securities laws or stock exchange requirements
to file) to which the holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement, the Initial
Purchasers or the Special Counsel shall reasonably object on a timely basis.

                             ii.    Prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period specified in Section 2; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the methods of
disposition intended by the holders thereof set forth in such Registration
Statement as so amended or to such Prospectus as so supplemented.

                             iii.   Notify the selling holders of Registrable
Securities, the Initial Purchasers and the Special Counsel promptly, and (if
requested by any such Person) confirm such notice in writing, (a) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (b) of any request by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the

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Registration Statement for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (c) of the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (d) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (e) of the existence of any fact or the happening of any event or
circumstance which makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires the making
of any changes in such Registration Statement, Prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (f) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.

                             iv.    Use all reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment.

                             v.     Subject to Section 3(c), if reasonably
requested by the Initial Purchasers or the holders of a majority in aggregate
principal amount of the Registrable Securities being sold, (a) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the Company, the Initial Purchasers or such holders agree should
be included therein as required by applicable law, (b) make all required filings
of such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment, and (c)
supplement or make amendments to any Registration Statement consistent with
clause (a) or (b) above; provided, that the Company shall not be required to
take any actions under this Section 3(a)(v) that are not, in the opinion of
outside counsel for the Company, in compliance with applicable law.

                             vi.    Furnish to each selling holder of
Registrable Securities, the Initial Purchasers and the Special Counsel, without
charge, at least one conformed copy of the Registration Statement or Statements
and any post-effective amendment thereto, including financial statements and
schedules and, if the selling holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).

                             vii.   Deliver to each selling holder of
Registrable Securities, the Initial Purchasers and the Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses relating to such
Registrable Securities (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus or each amendment or supplement

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thereto by each of the selling holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.

                             viii.  Prior to any public offering of Registrable
Securities, to register or qualify or cooperate with the selling holders of
Registrable Securities and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any seller reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or take any action that would subject it to general service of process
or to taxation in any such jurisdiction where it is not then so subject.

                             ix.    Cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States, except as
may be required solely as a consequence of the nature of such selling holder, in
which case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals, as may be
necessary to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities.

                             x.     Upon the occurrence of any event
contemplated by Section 3(a)(iii)(e) or 3(a)(iii)(f) above during the period for
which the Company is required to maintain an effective Registration Statement,
the Company shall prepare a supplement or post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document (such as
Current Report on Form 8-K) so that, as thereafter delivered to the purchasers
of the Registrable Securities being sold thereunder, such Prospectus will not
(a) contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading or
(b) require amendment as provided in Section 3(a)(iii)(f) above.

                             xi.    In connection with a disposition of
Registrable Securities, (a) make available for inspection, at the offices where
normally kept during reasonable business hours, by a representative of the
holders of Registrable Securities being sold or by any Managing Underwriter
participating in any disposition of the Registrable Securities, if any, and any
attorney or accountant retained by such selling holders or Managing
Underwriters, financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as they may reasonably request,
and (b) cause the officers, directors, employees, accountants and auditors of
the Company and its subsidiaries to supply all information reasonably requested
by any such representative, managing underwriter, attorney or accountant in
connection with such disposition; provided, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or

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documents shall be kept confidential by such Persons, and such Persons shall so
agree in writing, unless (i) such records, information or documents are in the
public domain or otherwise publicly available, (ii) disclosure of such records,
information or documents is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities or (iii) disclosure
of such records, information or documents is otherwise required by law
(including, without limitation, pursuant to the requirements of the Securities
Act).

                             xii.   Cause the Indenture to be qualified under
the TIA not later than the effective date of the first Registration Statement
relating to the Registrable Securities; and in connection therewith, cooperate
with the Trustee and the holders of the Registrable Securities, to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use all
reasonable efforts to cause such Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents required to
be filed with the SEC to enable the Indenture to be so qualified in a timely
manner. In the event that such qualification would require the appointment of a
new trustee under the Indenture, the Company shall appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.

                             xiii.  Comply with all applicable rules and
regulations of the SEC and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period (or
90 days after the end of any 12-month period if such period is a fiscal year)
commencing on the first day of the first fiscal quarter of the Company, after
the effective date of a Registration Statement, which statements shall cover
said 12-month periods.

                             xiv.   Enter into such agreements (including, in
the event of an Underwritten Offering, an underwriting agreement in form, scope
and substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including, in the event of an underwritten
offering, those reasonably requested by the managing underwriters, if any, or
the holders of a majority of the Registrable Securities being sold) in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into, and
if the registration is an underwritten registration, (a) make such
representations and warranties, subject to the Company's ability to do so, to
the holders of such Registrable Securities and the underwriters with respect to
the business of the Company and its subsidiaries, the Registration Statement,
Prospectus and documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings and confirm the same
if and when requested; (b) use all reasonable efforts to obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, Special Counsel and the holders of a majority of the
Registrable Securities being sold) addressed to each of the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Special
Counsel and managing underwriters; (c) use all reasonable efforts to obtain
comfort letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other

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certified public accountants of any subsidiary of the Company or any business
acquired or to be acquired by the Company for which financial statements and
financial date is, or is required to be, included in the Registration
Statement), addressed to each of the managing underwriters, if any, such letters
to be in customary form and covering matters of the type customarily covered in
comfort letters in connection with Underwritten Offerings; and (d) deliver such
documents and certificates as may be reasonably requested by the holders of a
majority of the Registrable Securities being sold, the Special Counsel and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its subsidiaries made pursuant
to clause (a) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such underwriting or
similar agreement as and to the extent required thereunder.

                             xv.    Unless any Registrable Securities shall be
in book-entry only form, cooperate with the selling holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the holders may request.

                             xvi.   Provide a CUSIP number for all Registrable
Securities no later than the effective date of the Registration Statement and,
unless any Registrable Securities shall be in book-entry only form, provide the
Trustee under the Indenture and the transfer agent for the Common Stock with
printed certificates for the Registrable Securities which are in a form eligible
for deposit with The Depository Trust Company.

                             xvii.  Cause the Common Stock to be listed on each
securities exchange or quotation system on which the Company's Common Stock is
then listed no later than the date the Registration Statement is declared
effective and, in connection therewith, to the extent applicable, to make such
filings under the Exchange Act and to have such filings declared effective
thereunder.

                      b.     The Company may require each selling holder of
Registrable Securities as to which any registration is being effected, and such
selling holder of Registrable Securities agrees, to furnish to the Company such
information regarding the distribution of such Registrable Securities as is
called for in Appendix I to the Confidential Offering Memorandum dated February
1, 2000. The Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request. Each Holder of
Registrable Securities as to which any Registration Statement is being effected
agrees promptly to furnish to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not misleading. Any sale of any Registrable Securities by any
Holder shall constitute a representation and warranty by such Holder that the
information relating to such Holder and its plan of distribution is as set forth
in the Prospectus delivered by such Holder in connection with such disposition,
that such Prospectus does not as of the time of such sale contain any untrue
statement of a material fact relating to such Holder or its plan of distribution
and that such Prospectus does not as of the time of such sale omit to state any
material fact

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relating to such Holder or its plan of distribution necessary to make the
statement in such Prospectus, in light of the circumstances under which they
were made, not misleading.

                      c.     Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(a)(iii)(b), 3(a)(iii)(c), 3(a)(iii)(d), 3(a)(iii)(e) or 3(a)(iii)(f) hereof,
such holder will forthwith discontinue disposition of such Registrable
Securities covered by the applicable Registration Statement or Prospectus until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(a)(x) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.
The period of effectiveness of the Shelf Registration Statement provided for in
Section 2(a) above shall be extended by the number of days from and including
the date of giving such notice to and including the date when the Initial
Purchaser and the Holders shall have received such amended or supplemented
prospectus pursuant to this Section.

               4.     Registration Expenses

               All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any of the Registration Statements become effective and whether
or not any of the Registrable Securities are transferred pursuant to the
Registration Statement. Such fees and expenses shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc., (B) with respect to
designation of the Registrable Securities as eligible for trading on the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market or
on the Nasdaq National Market, and (C) of compliance with securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for selling holders of Registerable Securities in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the holders of a majority in aggregate principal amount of the
Registrable Securities being sold may designate), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses if the printing of Prospectuses is
requested by the Special Counsel or the holders of a majority in aggregate
principal amount of the Registrable Securities included in any Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and the Special Counsel for the selling
holders of Registrable Securities or the Initial Purchasers in connection with
the Shelf Registration (provided that the Company shall not be liable for the
reasonable fees and expenses of more than one separate firm for all parties
participating in any transaction hereunder), (v) fees and disbursements of all
independent certified public accountants, (vi) fees and expenses of any
qualified independent underwriter or other independent appraiser participating
in an offering pursuant to Section 3 of Schedule E to the Bylaws of the National
Association of Securities Dealers, Inc., (vii) rating agency fees in connection
with obtaining ratings of the Notes at the time of their original issuance,

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(viii) Securities Act liability insurance if the Company so desires such
insurance, and (ix) fees and expenses of all other Persons retained by the
Company. In addition, the Company will, in any event, bear its own internal
expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange on which
similar securities issued by the Company are then listed and the fees and
expenses of any Person, including special experts, retained by the Company.

               5.     Indemnification

                      a.     Indemnification by the Company.  The Company
shall, without limitation as to time, indemnify and hold harmless, to the
fullest extent permitted by law, each holder of Registrable Securities, the
officers, directors and agents and employees of each of them, each Person who,
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) such holder and the officers, directors, agents and
employees of any such controlling person, from and against all losses, claims,
damages, liabilities, costs (including, without limitation, the costs of
preparation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or based upon any untrue or allegedly untrue statement
of a material fact contained in any Registration Statement, Prospectus or form
of Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are based solely
upon information furnished in writing to the Company by such holder pursuant to
Section 3(b) hereof expressly for use in the Registration Statement; provided,
that the Company shall not be liable to any holder of Registrable Securities to
the extent that any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if either (A) (i) such holder failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale by such holder of a Registrable Security to the person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have completely corrected such untrue statement or alleged untrue statement or
such omission or alleged omission; or (B) (x) such untrue statement or alleged
untrue statement, omission or alleged omission is completely corrected in an
amendment or supplement to the Prospectus and (y) having previously been
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, such holder thereafter fails to deliver such Prospectus
as so amended or supplemented, prior to or concurrently with the sale of a
Registrable Security to the person asserting the claim from which such Losses
arise. The Company shall also indemnify each selling broker, dealer manager and
similar securities industry professional participating in the distribution, and
each of their officers, directors, agents and employees and each Person who
controls such Persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.

                      b.     Indemnification by Holder of Registrable
Securities. In connection with any Registration Statement in which a holder of
Registrable Securities is participating, such holder severally agrees to
indemnify, to the fullest extent permitted by law, the Company, its directors
and officers, agents and employees, each Person who controls the Company (within
the

                                       10
<PAGE>   11
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling persons,
from and against all Losses arising out of or based upon any untrue statement of
a material fact contained in any Registration Statement, Prospectus or
preliminary prospectus or arising out of or based upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in information so furnished in writing by
such holder to the Company pursuant to Section 3(b) hereof expressly for use in
such Registration Statement or Prospectus and that such information was solely
relied upon by the Company in preparation of such Registration Statement,
Prospectus or preliminary prospectus. In no event shall the liability of any
selling holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by such
holder upon the sale of Registrable Securities giving rise to such
indemnification obligation. The Company shall be entitled to receive indemnities
from selling brokers, dealer managers and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such Persons
expressly for use in any Prospectus or Registration Statement.

                      c.     Conduct of Indemnification Proceedings.  If any
Person shall be entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the "indemnifying party") of any claim or of the
commencement of any Proceeding with respect to which such indemnified party
seeks indemnification or contribution pursuant hereto; and the indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and shall pay the
reasonable fees and disbursements of such counsel related to such proceeding.
The failure to so notify the indemnifying party shall not relieve the
indemnifying party from any obligation or liability except and only to the
extent that such failure was prejudicial to the indemnifying party and the
indemnifying party was actually damaged or suffered any loss incurred any
additional expense as a result thereof. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (a) the fees and expenses of
more than one separate firm (in additional to any local counsel) for all Holders
and all persons, if any, who control any Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and (b) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, its officers who sign a Registration
Statement and each person, if any, who controls the Company within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. In the case of any such separate firm for the Company, and
such directors, officers and control persons of the Company, such firm shall be

                                       11
<PAGE>   12
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding affected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable or any settlement of any proceeding affected without its written consent
if (i) such settlement is entered into more than 30 days after receipt of such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. The indemnifying party shall not consent
to entry of any judgment or enter into any settlement or otherwise seek to
terminate any proceeding in which any indemnified party is or could be a party
and as to which indemnification or contribution could be sought by such
indemnified party under this Section 5, unless such judgment, settlement or
other termination includes as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release, in form and
substance satisfactory to the indemnified party, from all liability in respect
of such claim or litigation for which such indemnified party would be entitled
to indemnification hereunder.

                      d.     Contribution.  If the indemnification provided for
in this Section 5 is unavailable to an indemnified party under Section 5(a) or
5(b) hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall, jointly and severally, contribute to the amount
paid or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or indemnifying parties, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party or indemnifying parties, on the
one hand, and such indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding.

                      The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 5(d), an indemnifying
party that is a selling holder of Registrable Securities shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities sold by such indemnifying party and distributed
to the public were offered to the public exceeds the amount of any damages which
such indemnifying party has otherwise been

                                       12
<PAGE>   13
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

                      The indemnity, contribution and expense reimbursement
obligations of the Company hereunder shall be in addition to any liability the
Company may otherwise have hereunder, under the Purchase Agreement, the
Securities Act or otherwise. The provisions of this Section 5 shall survive so
long as Registrable Securities remain outstanding, notwithstanding any transfer
of the Registrable Securities by any holder or any termination of this
Agreement.

               6.     Information Requirements

                      a.     The Company shall file in a timely manner the
reports required to be filed by it under the Securities Act and the Exchange
Act, and if at any time the Company is not required to file such reports, it
will, upon the request of any holder of Registrable Securities, make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144 and Rule 144A under the Securities Act. The Company further covenants
that it will cooperate with any holder of Registrable Securities and take such
further action as any holder of Registrable Securities may reasonably request
(including without limitation making such representations as any such holder may
reasonably request), all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act. Upon the request of any holder of Registrable
Securities, the Company shall deliver to such holder a written statement as to
whether it has complied with such filing requirements. Notwithstanding the
foregoing, nothing in this Section 6 shall be deemed to require the Company to
register any of its securities under any section of the Exchange Act.

                      b.     The Company shall file in a timely manner the
reports required to be filed by it under the Exchange Act and shall comply with
all other requirements set forth in the instructions to Form S-3 in order to
allow the Company to be eligible to file registration statements on Form S-3
after February 1, 2000.

               7.     Liquidated Damages

                      a.     The parties hereto agree that the holders of
Registrable Securities will suffer damages and that it would not be feasible to
ascertain the extent of such damages with precision, if (i) the Initial Shelf
Registration has not been filed on or prior to the Filing Date, (ii) the Initial
Shelf Registration has not become effective on or prior to the Effectiveness
Date, (iii) prior to the end of the Effectiveness Period, the SEC shall have
issued a stop order suspending the effectiveness of any Shelf Registration or
proceedings have been initiated under Section 8(d) or 8(e) of the Securities
Act, or (iv) a notice under Section 3(a)(iii)(e) hereof is delivered and either
(A) such notice is delivered during the period from the effective date of the
Initial Shelf Registration until 90 days thereafter (the "Initial Resale
Period"), (B) the aggregate number of days since the Initial Resale Period for
which all notices delivered pursuant to Section 3(a)(iii)(e) hereof have been in
effect exceeds 90 days or (C) such notice is either the second such notice in
any three-month period or the third such notice in any twelve-month period

                                       13
<PAGE>   14
(individually referred to herein as an "Event") (the Filing Date in the case of
clause (i), the Effectiveness Date in the case of clause (ii), the date on which
the Registration Statement ceases to be effective or proceedings referred to
therein have been commenced in the case of clause (iii), and the date on which
such notice is delivered in the case of clause (iv)(A) or the date on which the
90-day limit is exceeded in the case of clause (iv)(B) or the date on which the
second or third notice, respectively, is delivered in the case of clause
(iv)(C), being referred to herein as an "Event Date").

               Accordingly, upon the occurrence of each Event, in addition to
agreeing to use all reasonable efforts to ensure that the use of the Prospectus
may be resumed as quickly as practicable, commencing on the Event Date, the
Company agrees to pay, as liquidated damages, and not as a penalty, to each
holder of a Registrable Security, an additional amount (the "Liquidated Damages
Amount") equal to one-half of one percent per annum (50 basis points) per $1,000
principal amount of Notes held by such holder and one-half of one percent per
annum (50 basis points) calculated on an amount equal to the product of (x) the
Conversion Price (as defined in the Indenture) times (y) the number of shares of
Common Stock held by such holder; provided, that such liquidated damages will,
in each case, cease to accrue on and after the date the Shelf Registration is
filed, becomes effective or resumes effectiveness, or the notice under clause
3(a)(iii)(e) is no longer in effect, as the case may be.

                      b.     The Company shall pay the liquidated damages due
on the Registrable Securities by depositing with the Trustee under the
Indenture, in trust, for the benefit of the holders thereof, at least one
business day prior to the applicable interest payment date, sums sufficient to
pay the liquidated damages then due. The liquidated damages amount due shall be
payable on each interest payment date to the record holder entitled to receive
the interest payment to be made on such date, provided that accrued liquidated
damages amounts shall be paid on the applicable redemption date upon the
redemption of any Note (to the extent accrued with respect to such Note) and, in
the event of redemption of all Notes, shall also be paid on such redemption date
to the holders of Common Stock (to the extent accrued with respect to such
Common Stock). The Trustee shall be entitled, on behalf of the holders of
Registrable Securities, to seek any available remedy for the enforcement of this
Agreement, including for the payment of such liquidated damages. All of the
Company's obligations set forth in this Section 7 which are outstanding with
respect to any Registrable Securities at the time such security ceases to be a
Registrable Security shall survive until such time as all such obligations with
respect to such security have been satisfied in full (notwithstanding
termination of the Agreement pursuant to Section 8(o).

                      c.     The parties hereto agree that the liquidated
damages provided for in this Section 7 constitute a reasonable estimate of the
damages that may be incurred by holders of Registrable Securities (other than
the Initial Purchasers) by reason of the failure of the Shelf Registration to be
filed, be declared effective or be available for use, as the case may be, in
accordance with the provisions hereof.

               8.     Miscellaneous

                      a.     Remedies.  In the event of a breach by the Company
of its obligations under this Agreement, each holder of Registrable Securities,
in addition to being

                                       14
<PAGE>   15
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

                      b.     No Inconsistent Agreements.  The Company has not,
as of the date hereof, and shall not, on or after the date of this Agreement,
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.

                      c.     Amendments and Waivers.  The provisions of this
Agreement, including the provisions of this sentence, may not be amended (other
than the last sentence of Section 8(g)), modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of the holders of a majority of the
then outstanding Common Stock constituting Registrable Securities (with holders
of Notes deemed to be the holders for purposes of this Section 8(c), of the
number of outstanding shares of Common Stock into which such Notes are then
convertible). Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Registrable Securities may be given by
holders of at least a majority of the Registrable Securities being sold by such
holders; provided, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

                      d.     Notices.  All notices and other communications
provided for or permitted hereunder shall be made in writing and shall be deemed
given (i) when made, if made by hand delivery, (ii) upon confirmation, if made
by telecopier or (iii) one business day after being deposited with a reputable
next-day courier, postage prepaid, to the parties as follows:

                                            (a)    if to a holder of
                        Registrable Securities, at the most current address
                        given by such holder to the Company in accordance with
                        the provisions of this Section 8(d); and

                                            (b)    if to the Company, to Incyte
                        Pharmaceuticals, Inc., 3174 Porter Drive, Palo Alto,
                        California 94304, Attention: General Counsel.

or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.

                      e.     Owner of Registrable Securities.  The Company will
maintain, or will cause its registrar and transfer agent to maintain, a register
with respect to the Registrable Securities in which all transfers of Registrable
Securities of which the Company has received notice will be recorded. The
Company may deem and treat the person in whose name

                                       15
<PAGE>   16
Registrable Securities are registered in such register of the Company as the
owner thereof for all purposes, including, without limitation, the giving of
notices under this Agreement.

                      f.     Approval of Holders.  Whenever the consent or
approval of holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) (other than the
Initial Purchasers or subsequent holders of Registrable Securities if such
subsequent holders are deemed to be such affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the holders of such required
percentage. For purposes of calculating the consent or approval of holders of a
majority of the then outstanding aggregate principal amount of Registrable
Securities, Registrable Securities which have been converted into shares of
Common Stock shall be deemed to bear the principal amount at which such
securities were converted.

                      g.     Successors and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of each of the parties and shall inure to the benefit of each holder of any
Registrable Securities. The Company may not assign its rights or obligations
hereunder without the prior written consent of each holder of any Registrable
Securities.

                      h.     Counterparts.  This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.

                      i.     Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                      j.     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

                      k.     Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use all reasonable efforts to find and employ an alternative means
to achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such which may be hereafter declared invalid, void or unenforceable.

                      l.     Entire Agreement.  This Agreement is intended by
the parties as a final expression of their agreement and is intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Notes sold
pursuant

                                       16
<PAGE>   17
to the Purchase Agreement and the Common Stock issuable upon conversion of the
Notes. Except as provided in the Purchase Agreement, there are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with
respect to the Notes or the Common Stock issuable upon conversion of the Notes.
This Agreement supersedes all prior agreements and understandings among the
parties with respect to such registration rights.

                      m.     Attorneys' Fees.  In any action or proceeding
brought to enforce any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party, as determined by
the court, shall be entitled to recover reasonable attorneys' fees in addition
to any other available remedy.

                      n.     Further Assurances.  Each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things reasonably necessary, proper or
advisable under applicable law, and execute and deliver such documents and other
papers, as may be required to carry out the provisions of this Agreement and the
other documents contemplated hereby and consummate and make effective the
transactions contemplated hereby.

                      o.     Termination.  This Agreement and the obligations
of the parties hereunder shall terminate at the end of the Effectiveness Period,
except for any liabilities or obligations under Sections 4 or 5 or the proviso
of Section 3(a)(xi) above, and the obligations to make payments of and provide
for liquidated damages under Section 7 hereof to the extent such damages accrue
prior to the end of the Effectiveness Period, each of which shall remain in
effect in accordance with their terms.

                                       17
<PAGE>   18

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

                                            Incyte Pharmaceuticals, Inc.

                                            By: /s/ John M. Vuko
                                            Title: Chief Financial Officer

Accepted as of the date first above written:

DEUTSCHE BANK SECURITIES INC.
WARBURG DILLON READ LLC

As the Initial Purchasers:

By: Deutsche Bank Securities Inc.

By:     /s/ James Scopa
Title:  Managing Director

                                       18<PAGE>   1
                                                                   EXHIBIT 10.14

                                      LEASE

                          THE BOARD OF TRUSTEES OF THE
                        LELAND STANFORD JUNIOR UNIVERSITY

                                     LESSOR

                          INCYTE PHARMACEUTICALS, INC.

                                     LESSEE

<PAGE>   2
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           ----
<S>                                                                                        <C>
1.    BASIC LEASE INFORMATION................................................................1

2.    DEFINITIONS............................................................................2

3.    PREMISES...............................................................................4

4.    TERM...................................................................................5

5.    BASE RENT; ADDITIONAL RENT.............................................................6

6.    EXPENSES AND REAL ESTATE TAXES.........................................................7

7.    USE OF PREMISES AND CONDUCT OF BUSINESS................................................8

8.    INITIAL IMPROVEMENT WORK; ACCEPTANCE; BUILDING CHANGES.................................9

9.    ALTERATIONS BY TENANT.................................................................11

10.   REPAIRS AND MAINTENANCE...............................................................13

11.   LIENS.................................................................................14

12.   UTILITIES.............................................................................15

13.   COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS.......................................15

14.   SUBORDINATION.........................................................................15

15.   LANDLORD'S INABILITY TO PERFORM.......................................................16

16.   DESTRUCTION...........................................................................17

17.   EMINENT DOMAIN........................................................................18

18.   ASSIGNMENT AND SUBLETTING.............................................................19

19.   DEFAULT...............................................................................21

20.   LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS............................................24

21.   INDEMNITY; INSURANCE..................................................................24

22.   LIMITATION OF LANDLORD'S LIABILITY....................................................27

23.   ACCESS TO PREMISES....................................................................27

24.   HAZARDOUS MATERIALS...................................................................28

25.   NOTICES...............................................................................30

26.   NO WAIVER; NO MODIFICATION............................................................30

27.   TENANT'S CERTIFICATES.................................................................31

28.   CONFIDENTIALITY.......................................................................31

29.   TAX ON TENANT'S PERSONAL PROPERTY.....................................................31

30.   SECURITY DEPOSIT......................................................................31

31.   PUBLIC TRANSIT INFORMATION............................................................32

32.   DEFAULT BY LANDLORD...................................................................32

33.   BROKERS...............................................................................32

34.   SIGNS.................................................................................32
</TABLE>

                                       i

<PAGE>   3
<TABLE>
<S>                                                                                        <C>
35.   FINANCIAL STATEMENTS..................................................................32

36.   QUIET ENJOYMENT.......................................................................33

37.   SALE OR ASSIGNMENT BY LANDLORD........................................................33

38.   LEASE MODIFICATIONS...................................................................33

39.   AUTHORITY.............................................................................33

40.   SURRENDER.............................................................................34

41.   USE OF NAME...........................................................................34

42.   MISCELLANEOUS.........................................................................34
</TABLE>

EXHIBITS

<TABLE>
<S>            <C>
Exhibit A      Location of Building and Parking
Exhibit B      Construction of Base Building and Tenant Improvement Work
Exhibit C-1    Notice of Commencement Date
Exhibit C-2    Notice of Rent Commencement Date and Expiration Date
Exhibit D      Determination of Prevailing Market Rental Rate
Exhibit E      Notice of Base Rent and Rentable Area
Exhibit F      Outline of Stanford Research Park
</TABLE>

                                       ii

<PAGE>   4
                                      LEASE

        THIS LEASE is entered into as of June 19, 1997 (the "EFFECTIVE DATE"),
by and between THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY
("LANDLORD"), and INCYTE PHARMACEUTICALS, INC., a Delaware corporation
("TENANT").

1.      BASIC LEASE INFORMATION

        The following is a summary of basic lease information. Each term or
matter in this Article 1 shall be deemed to incorporate all of the terms set
forth herein below pertaining to such matter or item and to the extent there is
any conflict between the provisions of this Article 1 and any more specific
provision of this Lease, such more specific provision shall control.

<TABLE>
<S>                                  <C>
Building Address:                   [3170] Porter Drive
                                    Palo Alto, California 94304

Address of Landlord:                Stanford Management Company
                                    2770 Sand Hill Road
                                    Menlo Park, CA 94025-3065

Address of Tenant:                  [3174] Porter Drive
                                    Palo Alto, California 94304

Key Contact for Tenant:             Dan Barbee          Telephone: 415-845-4540

Alternate Contact for Tenant:       Denise Gilbert      Telephone: 415-845-4515

Premises (Article 3):               (See Exhibit A)

Rentable Area of Premises (Article 3):      Approximately [85,000-95,000] sf
                                            (to be determined as provided in Section 5.1)

Term (Article 4):

        Commencement Date:           The date Landlord delivers the Premises to Tenant
                                     in accordance with Section 8.1

        Rent Commencement Date:     (See Article 2)

        Expiration Date:             The date 12 years after the Rent Commencement Date

Base Rent (Article 5): Annual: $36.00 per sq. ft.  Rentable Area (determined as provided in Sec. 5.1)
                       Monthly $3.00 per sq. ft.   Rentable Area

Base Rent Adjustment Dates (Article 5):            Each 12 month anniversary of the Rent Commencement Date

Tenant's Share (Article 6):         100%
</TABLE>

                                       1

<PAGE>   5
<TABLE>
<S>                                  <C>
Use (Article 7):                    Research and development and related administrative uses
                                    (subject to the limitations in Article 7)

Parking (Article 7):                Not less than 3.3 spaces per 1,000 sf

Security Deposit (Article 31):      $275,000         Type of Deposit:   Cash

Brokers (Article 33):               Cornish & Carey Commercial Real Estate Brokers
</TABLE>

2.      DEFINITIONS

        As used in this Lease, the following terms shall have the following
meanings, applicable, as appropriate, to both the singular and plural form of
the terms defined herein:

        "ADDITIONAL RENT" is defined in Section 5.3.

        "ADJUSTMENT DATES" is defined in Section 5.2.

        "AGENTS" means with respect to either Landlord or Tenant, its respective
agents, employees, officers, directors, trustees, contractors (and their
subcontractors), and, in the case of Tenant, its subtenants, assignees,
licensees and invitees, and any other person or entity claiming under Tenant.

        "ALTERATIONS " is as defined in Section 9.1.

        "APPLICABLE LAWS" means all applicable laws, statutes, codes,
ordinances, orders, rules, regulations, conditions of approval, and
requirements, of all federal, state, county, municipal and other governmental
authorities and the departments, commissions, boards, bureaus,
instrumentalities, and officers thereof, and all administrative or judicial
orders or decrees and all permits, licenses, approvals and other entitlements
issued by governmental entities, and rules of common law, relating to or
affecting the Building or the use, operation or occupancy of the Premises,
whether now existing or hereafter enacted, including, without limitation, all
Environmental Laws.

        "ASSIGNMENT" is defined in Section 18.1

        "BASE RENT" means the amount stated in Article 1, to be adjusted and
payable in accordance with Article 5.

        "BASE BUILDING WORK" is defined in attached Exhibit B.

        "BUILDING" is defined in Article 3.

        "BUILDING STRUCTURE" is defined in Article 10.

                                       2

<PAGE>   6
        "BUILDING SYSTEMS" means the heating, ventilating, air-conditioning,
plumbing, electrical, fire protection, life safety, security and other
mechanical, electrical and communications systems of the Building.

        "BUILDING COMMON AREA" is defined in Article 3.

        "COMMENCEMENT DATE" means the date Landlord delivers possession of the
Premises to Tenant in accordance with Section 8.1.

        "CONSTRUCTION SCHEDULE" is defined in Exhibit B.

        "DELIVERY OF THE PREMISES" is defined in Section 8.1.

        "ENVIRONMENTAL LAWS" means all Applicable Laws pertaining to the
protection of the environment or human or animal health or safety.

        "ENVIRONMENTAL ACTIVITY" is defined in Section 24.1.

        "EXPIRATION DATE" means the date specified in Article 1.

        "GROUND LEASE PROPERTY" is defined in Section 3.

        "GROUND LESSEE" is defined in Section 3.

        "HAZARDOUS MATERIAL" is defined in Section 24.1.

        "INTEREST RATE" means the lesser of one and one-half percent per month
or the highest lawful rate.

        "LANDLORD'S TAX STATEMENT" is defined in Section 6.2.

        "NOTICE OF PROPOSED TRANSFER" is defined in Section 18.2

        "REAL ESTATE TAXES" is defined in Section 6.1.

        "RENEWAL OPTION" is defined in Section 4.3.

        "RENEWAL TERM" is defined in Section 4.3.

        "RENT COMMENCEMENT DATE" means the earlier to occur of (i) the Scheduled
Date for Completion of the Tenant Improvement Work, as defined in Exhibit B, as
such date may be extended in accordance with the provisions of Exhibit B; or
(ii) the date Tenant commences business operations in the Premises.
Notwithstanding anything to the contrary contained herein, if Tenant has not
commenced business operations in the Premises and Tenant has completed the
Tenant Improvement Work, but Landlord has not achieved completion of the Base
Building Work (other than any landscaping or other external work that does not
interfere with Tenant's access, parking or use of the Premises), the Rent
Commencement Date shall not be deemed to occur until the earlier of the date
Tenant commences business operations in the

                                       3

<PAGE>   7
Premises or Landlord Completes the Base Building Work (other than any
landscaping or other external work that does not interfere with Tenant's access,
parking or use of the Premises).

        "RENTABLE AREA" means the enclosed areas of the Building measured to the
outside face of the exterior wall or glass line and second floor vertical
shafts, but excluding outside balconies, arcades or covered entrances. The
Rentable Area shall be determined by the architect for the Base Building Work.

        "SCHEDULED DATE FOR COMPLETION OF THE TENANT IMPROVEMENT WORK" is
defined in Exhibit B.

        "SCHEDULED DATE FOR DELIVERY OF THE PREMISES" is defined in Exhibit B.

        "STANFORD RESEARCH PARK" is the area outlined on attached Exhibit F.

        "SUBLEASE" is defined in Section 18.1

        "TAX YEAR" is defined in Section 6.1.

        "TENANT IMPROVEMENT ALLOWANCE" is defined in Exhibit B.

        "TENANT IMPROVEMENT WORK" is defined in Exhibit B.

        "TENANT'S HAZARDOUS MATERIALS" is defined in Section 24.1

        "TENANT'S PROPERTY" is defined in Section 9.5

        "TENANT'S SHARE" is 100%.

        "TENANT'S UNAVOIDABLE DELAY" is defined in Exhibit B.

        "TERM" is defined in Section 4.1.

        "TERMINATION DATE" means the earlier of the Expiration Date or the date
this Lease is terminated pursuant to any provision hereof.

        "TRANSFEREE" is defined in Section 18.2

3.      PREMISES

        3.1 Subject to the terms, covenants and conditions set forth in this
Lease, Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
those premises (the "PREMISES") shown on the site plan attached hereto as
Exhibit A which Premises are located within the building (the "BUILDING") shown
on Exhibit A and identified in Article 1. The Premises include the entire
interior of the Building and certain references to the Premises and the Building
may be used interchangeably. The areas adjacent to the Building specified in
Exhibit A for landscaping and parking for the exclusive use of the Premises are
herein called the "BUILDING COMMON AREA". The approximate total Rentable Area of
the Building is specified in Article 1. Landlord is the Ground Lessor and
Lockheed Martin ("GROUND LESSEE") is the

                                       4

<PAGE>   8
current ground lessee under a certain ground lease dated as of March 1, 1962 (as
amended, the "GROUND LEASE" which Ground Lease covers certain real property (the
"GROUND LEASE PROPERTY") including the Building and the Building Common Area and
the adjacent land and building occupied by the Ground Lessee. Prior to the
Commencement Date, Landlord will have subleased a portion of the land from the
Ground Lessee for the remainder of the term of the Ground Lease. After the
expiration of the term of the Ground Lease the entire Ground Lease Property will
revert to Landlord. The portion of the land subleased from the Ground Lessee
will be outlined in attached Exhibit A.

        3.2 Tenant shall have the right to the exclusive use of the number of
parking spaces specified in Article 1, and located as designated on attached
Exhibit A. Tenant shall have nonexclusive ingress and egress over the driveways
of the Ground Lease Property specifically designated for access on attached
Exhibit A.

        3.3 Exhibit A shall not be modified except (i) if required by the City
of Palo Alto Architectural Review Board (the "ARB"), in which case any required
modification shall be made; or (ii) if mutually agreed by Landlord and Tenant.

4.      TERM

        4.1 The Premises are leased for a term (the "TERM") commencing on the
Commencement Date and expiring on the Expiration Date specified in Article 1.
Landlord will give Tenant not less than ten business days prior notice of the
actual Commencement Date. If, for any reason whatsoever, Landlord cannot deliver
possession of the Premises to Tenant on or prior to the Scheduled Date for
Delivery of the Premises established in the Construction Schedule, then the
validity of this Lease and the obligations of Tenant under this Lease shall not
be affected and Tenant shall have no claim against Landlord arising out of
Landlord's failure to deliver possession of the Premises on the date originally
fixed therefor. The Term of this Lease shall end on the Expiration Date
specified in Article 1, or such earlier date on which this Lease terminates
pursuant to the terms hereof. If Landlord has not commenced construction of the
Base Building Work on or before July 31, 1998, or (ii) if Landlord does not
complete the Base Building Work to the extent necessary to permit the
commencement of the Tenant Improvement Work on or before March 31, 1999, then,
in either of such events, at any time prior to the time the aforesaid
commencement or completion of the Base Building Work occurs, Tenant may, by
written notice to Landlord, elect to terminate this Lease.

        4.2 Promptly following the Commencement Date, Landlord will deliver to
Tenant a notice in substantially the form attached hereto as Exhibit C-1
identifying the Commencement Date, a copy of which notice shall be executed by
Tenant and promptly returned to Landlord. Promptly following the Rent
Commencement Date, Landlord will deliver to Tenant a notice in substantially the
form attached hereto as Exhibit C-2 identifying the Rent Commencement Date and
the Expiration Date, a copy of which notice shall be executed by Tenant and
promptly returned to Landlord. A copy of each such notice shall be attached
hereto and be incorporated herein by this reference.

        4.3 Tenant shall have two separate options (each, a "RENEWAL OPTION") to
extend the term of this Lease for a period of five (5) years each (each, a
"RENEWAL TERM"). No Renewal Option shall be effective if there exists a default
by Tenant under any of the terms or conditions of this Lease, either at the time
of exercise of the Renewal Option or the time of commencement of the applicable
Renewal Term,

                                       5

<PAGE>   9
unless such default is cured prior to the expiration of any applicable cure
period. The first Renewal Option must be exercised, if at all, by written notice
from Tenant to Landlord given not less than twelve (12) months prior to the
expiration of the initial term of this Lease and the second Renewal Option must
be exercised, if at all, by written notice from Tenant to Landlord given not
less than twelve (12) months prior to the expiration of the preceding Renewal
Tenn. Each Renewal Term shall be upon the same terms and conditions as the
original Term, except that the annual Base Rent applicable beginning upon the
commencement of each Renewal Term shall be equal to the then Prevailing Market
Rental Rate (determined as provided in attached Exhibit D). The Renewal Options
are personal to Incyte Pharmaceuticals, Inc. and shall be inapplicable and null
and void if Incyte Pharmaceuticals, Inc. assigns its interest under this Lease
(except for an assignment permitted under Section 18.6) or subleases more than
50% of the Premises for substantially the balance of the then unexpired term of
the Lease.

5.      BASE RENT; ADDITIONAL RENT.

        5.1 Commencing upon the Rent Commencement Date, and thereafter during
the Term, Tenant shall pay to Landlord the monthly Base Rent specified in
Article 1 on or before the first day of each month, in advance, at the address
specified for payment of rent in Article 1, or at such other place as Landlord
shall designate, without any prior demand therefor and without any deductions or
setoff whatsoever. If the Rent Commencement Date occurs on a day other than the
first day of a calendar month, or the Termination Date occurs on a day other
than the last day of a calendar month, then the Base Rent for such fractional
month will be prorated on the basis of a thirty-day month. The Rentable Area of
the Premises shall be certified by the Base Building Architect upon Substantial
Completion of the Base Building Work. Tenant may dispute the determination of
the Rentable Area by written notice to Landlord given not later than five
business days after receipt of notice from Landlord of the Base Building
Architect's determination of the Rentable Area. In the event Tenant elects to
dispute the determination, Tenant shall, at Tenant's expense, engage an
independent architect, approved by Landlord in its reasonable discretion, who
shall determine the Rentable Area of the Premises. Upon such determination,
Landlord will deliver to Tenant a notice substantially in the form of attached
Exhibit E stating the Base Rent based upon the Rentable Area and attaching the
certificate executed by the Base Building Architect, or the independent
architect approved by Landlord, as applicable, stating the Rentable Area.

        5.2 On each twelve month anniversary of the Rent Commencement Date,
including during any Renewal Term (each, an "ADJUSTMENT DATE"), the Base Rent
shall be increased by 2.5% over the Base Rent for the immediately preceding
twelve month period.

        5.3 Tenant shall pay to Landlord all charges and other amounts required
under this Lease as additional rent ("ADDITIONAL RENT") including without
limitation the charges for Real Estate Taxes pursuant to Article 6 and insurance
maintained by Landlord pursuant to Section 21. All such Additional Rent shall be
payable to Landlord at the place where the Base Rent is payable. Landlord will
have the same remedies for a default in the payment of any Additional Rent as
for a default in the payment of Base Rent.

        5.4 Any unpaid Base Rent or Additional Rent hereunder shall bear
interest from the date due until paid at the Interest Rate. In addition, Tenant
recognizes that late payment of any Base Rent or Additional Rent due hereunder
will result in administrative expense to Landlord, the extent of which expense
is difficult and economically impracticable to determine. Therefore, Tenant
agrees that if Tenant fails to pay any Base Rent or Additional Rent within five
(5) business days after the date the same is due and payable, an additional late
charge of five percent (5%) of the sums so overdue shall become

                                       6

<PAGE>   10
immediately due and payable. Notwithstanding the foregoing, not more than one
time in any twelve (12) month period, Tenant shall be entitled to five (5)
business days prior written notice prior to such interest or late charge
applying. Tenant agrees that the late payment charge is a reasonable estimate of
the additional administrative costs and detriment that will be incurred by
Landlord as a result of such failure by Tenant. In the event of nonpayment of
interest or late charges on overdue Base Rent or Additional Rent, Landlord shall
have, in addition to all other rights and remedies, the rights and remedies
provided herein and by law for nonpayment of rent.

6.      EXPENSES AND REAL ESTATE TAXES

        6.1 This Lease is intended to be a net lease, and the Base Rent and
Additional Rent owing hereunder is to be paid by Tenant absolutely net of all
costs and expenses relating to Landlord's ownership and operation of the
Building and the Building Common Area, except as expressly otherwise provided
herein. The provisions of this Article 6 are intended to pass on to Tenant all
such costs and expenses. For purposes of this Article 6, the following terms
shall have the meanings hereinafter set forth:

               (a) "TENANT'S SHARE" means the percentage figure so specified in
Article 1.

               (b) "TAX YEAR" means each twelve (12) consecutive month period
commencing July 1 of each year during the Term, including any partial year
during which the Lease may commence.

               (c) "REAL ESTATE TAXES" means all taxes, assessments and charges
levied upon or with respect to the Building or any personal property of Landlord
used in the operation thereof, or Landlord's interest in the Building or such
personal property. For purposes of this definition of Real Estate Taxes only,
references to the "BUILDING" shall mean the Building and land thereunder, or, if
the Building and land thereunder are not separately assessed, references in this
definition to "Building" shall include the entire Ground Lease Property. (If the
Building and the land thereunder are not separately assessed, the allocation of
Real Estate Taxes among the buildings on the Ground Lease Property shall be
determined as provided in Section 6.2.) Real Estate Taxes shall include, without
limitation, all general real property taxes and general and special assessments,
charges, fees, or assessments for transit, housing, police, fire, or other
governmental services or purported benefits to the Building or the occupants
thereof, service payments in lieu of taxes, and any tax, fee, or excise on the
act of entering into this Lease or any other lease of space in the Building, or
on the use or occupancy of the Building or any part thereof, or on the rent
payable under any lease or in connection with the business of renting space in
the Building, that are now or hereafter levied or assessed against Landlord by
the United States of America, the State of California or any political
subdivision thereof, public corporation, district, or any other political or
public entity, and shall also include any other tax, fee or other excise,
however described, that may be levied or assessed as a substitute for, or as an
addition to, in whole or in part, any other Real Estate Taxes, whether or not
now customary or in the contemplation of the parties on the date of this Lease.
Real Estate Taxes shall not include franchise, transfer, inheritance, or capital
stock taxes or income taxes measured by the net income of Landlord from all
sources unless, due to a change in the method of taxation, any of such taxes is
levied or assessed against Landlord as a substitute for, or as an addition to,
in whole or in part, any other tax that would otherwise constitute a Real Estate
Tax, or, during the first five years of the Term, any increase in Real Estate
Taxes resulting from a transfer of the Building or Landlord's interest therein.
Real Estate Taxes shall also include reasonable legal fees, costs, and
disbursements incurred in connection with proceedings to contest, determine, or
reduce Real Estate Taxes.

                                       7

<PAGE>   11
        6.2 Commencing on the Rent Commencement Date, Tenant shall pay to
Landlord as Additional Rent one twelfth (1/12) of Tenant's Share of the Real
Estate Taxes for each Tax Year or portion thereof during the Term, in advance,
on or before the first day of each month during such Tax Year, in an amount
reasonably estimated by Landlord in a writing delivered to Tenant. Landlord may
revise such estimates from time to time and Tenant shall thereafter make
payments on the basis of such revised estimates. With reasonable promptness
after Landlord has received the tax bills for any Tax Year, Landlord will
furnish Tenant with a statement ("LANDLORD'S TAX STATEMENT") setting forth the
amount of Real Estate Taxes for such Tax Year and Tenant's Tax Share thereof. If
Tenant's Tax Share of the actual Real Estate Taxes for such Tax Year exceeds the
estimated Real Estate Taxes paid by Tenant for such Tax Year, Tenant shall pay
to Landlord (whether or not this Lease has terminated) the difference between
the amount paid by Tenant and Tenant's Tax Share of the actual Real Estate Taxes
within fifteen (15) days after the receipt of Landlord's Tax Statement; and if
the total amount of estimated Real Estate Taxes paid by Tenant for such Tax Year
exceeds Tenant's Tax Share of the actual Real Estate Taxes for such Tax Year,
such excess shall be credited against the next installments of Base Rent and/or
Additional Rent due from Tenant hereunder, or, if after the Termination Date,
such excess shall be refunded to Tenant concurrently with the furnishing of
Landlord's Tax Statement. If Real Estate Taxes are not separately assessed
between the buildings on the Ground Lease Property, Real Estate Taxes with
respect to the land (excluding the buildings) shall be apportioned pro rata
based on the respective square footage of the buildings and Real Estate Taxes
with respect to the buildings, shall be apportioned between the buildings based
on the respective valuations of the buildings, and Tenant's Share of Real Estate
Taxes shall be based on the amounts so allocated to the Building.

        6.3 If the Rent Commencement Date or Termination Date shall occur on a
date other than the first or last day, respectively, of a Tax Year, Tenant's Tax
Share of Real Estate Taxes for the Tax Year in which the Rent Commencement Date
or Termination Date occurs shall be prorated based on a 365-day year.

7.      USE OF PREMISES AND CONDUCT OF BUSINESS

        7.1 Tenant shall use and occupy the Premises during the Term of this
Lease solely for the uses specified in Article 1 and for no other purpose. At
all times during the Term not less than 75% of the Premises shall be used for
research and development and not more than 25% shall be used for related
administrative purposes. Tenant's use of the Premises shall in all respects
comply with all Applicable Laws. Tenant shall not use the Premises or allow the
Premises to be used so as to create waste, constitute a nuisance, or disturb
other occupants of the Ground Lease Property. Tenant shall not place any loads
upon the floors, walls, or ceiling, which endanger the structure, or place any
harmful fluids or other materials in the drainage system of the Building, or
overload existing electrical or other mechanical systems. No waste materials or
refuse shall be dumped upon or permitted to remain upon any part of the Premises
or outside of the Premises except in trash containers placed inside exterior
enclosures designated by Landlord for that purpose or inside of the Premises
where approved by Landlord. No materials, supplies, equipment, finished products
or semi-finished products, raw materials or articles of any nature shall be
stored upon or permitted to remain outside the Premises or on any portion of the
Building Common Area unless otherwise approved by Landlord in its sole
discretion. No loudspeaker or other device, system or apparatus which can be
heard outside the Premises shall be used in or at the Premises without the prior
written consent of Landlord.

                                       8

<PAGE>   12
        7.2 Tenant shall have the exclusive right to use the number stated in
Article 1 of parking spaces in the Building Common Area. Tenant agrees that
Tenant, Tenant's employees, agents, representatives and/or invitees shall not
use parking spaces in areas outside the Building Common Area. The initial
location of the parking spaces in the Building Common Area will be shown on
Exhibit A. Said parking spaces may be relocated by Landlord from time to time,
provided that there shall at all times be not less than 3.3 parking spaces per
1,000 square feet of space of the Building. Landlord shall give Tenant written
notice of any change in the location of the parking spaces; provided however,
that the parking spaces shall always be located on the Ground Lease Property.
Notwithstanding the foregoing, Landlord shall not make any changes to the
Building Common Area that would materially interfere with Tenant's use of the
Premises. Tenant agrees to assume responsibility for compliance by its employees
with the parking provisions contained herein.

8.      INITIAL IMPROVEMENT WORK; ACCEPTANCE; BUILDING CHANGES

        8.1 Landlord shall construct the shell and core of the Building and the
parking, landscaping and other improvements described as the "BASE BUILDING
WORK" as specified in and in accordance with the provisions of attached Exhibit
B. Landlord will use diligent efforts to cause the construction of the Base
Building Work to be completed to the extent necessary for the commencement of
the Tenant Improvement Work on or before the Scheduled Date for Delivery of the
Premises specified in Exhibit B, subject to delays in such date beyond
Landlord's reasonable control and provided that Landlord shall not be required
to incur overtime costs and expenses. The Base Building Work will continue to be
under progress during the construction of the Tenant Improvement Work and shall
be prosecuted in such a manner so as not to cause the completion of the Tenant
Improvement Work to be delayed beyond the Scheduled Date for Completion of the
Tenant Improvement Work (as defined in Exhibit B) as such date may be extended
as provided in Exhibit B. Landlord will, when construction progress so permits,
notify Tenant in advance of the approximate date on which the Premises will be
available to Tenant for the commencement of the Tenant Improvement Work, and
will notify Tenant when the Premises are in fact so available, which latter
notice shall constitute delivery of possession of the Premises to Tenant
("DELIVERY OF THE PREMISES") and notice of the Commencement Date of this Lease.
Landlord will provide Tenant a certificate furnished by Landlord's architect
certifying the date of completion of the Base Building Work. Notwithstanding the
foregoing provisions of this Section 8.1 to the contrary, if the contractor for
the Tenant Improvement Work is not the same contractor as the contractor for the
Base Building Work, then all of the Base Building Work with respect to the
interior of the Building shall be completed prior to the commencement of
construction of the Tenant Improvement Work.

        8.2 Tenant shall perform all of the Tenant Improvement Work as specified
in, and in accordance with, the provisions of attached Exhibit B. Landlord shall
provide an allowance (the "TENANT IMPROVEMENT ALLOWANCE") to be applied to the
Tenant Improvement Costs in the amount of up to $30.00 per square foot of
Rentable Area of the Premises. The exact amount of the Tenant Improvement
Allowance shall be determined at the time the Rentable Area of the Building is
determined pursuant to Section 5.1. The Tenant Improvement Allowance shall be
applied to the actual Tenant Improvement Costs. Any Tenant Improvement Costs in
excess of the Tenant Improvement Allowance shall be paid by Tenant. Upon
completion of the design and determination of the guaranteed maximum cost of the
Tenant Improvement Work, Landlord and Tenant shall establish the estimated total
costs for the Tenant Improvement Work as provided in Exhibit B. If the estimated
total costs of the Tenant Improvement Work exceeds the amount of the Tenant
Improvement Allowance, Tenant shall pay the amount of such difference as
provided in Exhibit B. Tenant shall use reasonable efforts to cause the
completion of the

                                       9

<PAGE>   13
Tenant Improvement Work to occur on or before the Scheduled Date for Completion
of the Tenant Improvement Work, as such date may be extended in accordance with
the provisions of Exhibit B. It is agreed that by occupying the Premises, Tenant
formally accepts the same and acknowledges that the Premises are in the
condition called for hereunder, subject to latent defects and the Punchlist
Items specified by Tenant to Landlord in writing in the certificate of
acceptance executed by Tenant pursuant to the provisions of Exhibit B.

        8.3 Without limitation of the foregoing, Tenant represents to Landlord
that Tenant is aware that detectable amounts of Hazardous Materials have come to
be located on, beneath and/or in the vicinity of the Premises. (See, for example
Department of Toxic Substances Control, Cal EPA Remedial Action Orders No. HSA
#90/91-020 dated 6/13/91 and Hillview - Porter HSA #88/89-016 dated 12/9/88, as
amended, and also HSA #90/91-007 (1681 Page Mill) dated 10/25/90, HSA #90/91-004
(3165 Porter) dated 8/6/90, and HSA #86/87-012EO (3176 Porter) dated 11/12/86).
Tenant has made such investigations and inquiries as it deems appropriate to
ascertain the effects, if any, of such substances and contaminants on its
operations and persons using the Building and the Building Common Area. Landlord
makes no representation or warranty with regard to the environmental condition
of the Building or the Ground Lease Property. Tenant, on behalf of itself and
Tenant's Agents and their respective successors and assigns, hereby releases
Landlord and Landlord's officers, directors, trustees, agents and employees from
any and all claims, demands, debts, liabilities, and causes of action of
whatever kind or nature, whether known or unknown or suspected or unsuspected
which Tenant or any of Tenant's Agents may have, claim to have, or which may
hereafter accrue against the released parties or any of them, arising out of or
relating to or in any way connected with Hazardous Materials presently in, on or
under, or now or hereafter emanating from or migrating onto the Building or the
Ground Lease Property, except that this release shall not extend to Landlord's
obligations under Section 8.4.

        In connection with the above release, Tenant hereby waives any and all
rights conferred upon it by the provisions of Section 1542 of the California
Civil Code, which reads as follows:

        "A general release does not extend to claims which the creditor does not
        know or suspect to exist in his favor at the time of executing the
        release, which if known by him must have materially affected his
        settlement with the debtor",

or by the provisions of any similar statute.

        8.4 Landlord agrees to indemnify, defend (by counsel reasonably
acceptable to Tenant), and hold Tenant and Tenant's officers, directors and
employees, harmless from and against any investigation and remediation costs to
the extent resulting from or arising out of the release, treatment, storage, use
or disposal of Hazardous Materials in, on or from the Ground Lease Property that
are not Tenant's Hazardous Materials including, without limitation, groundwater
contamination migrating onto or under the Ground Lease Property from other
properties. Landlord's indemnification obligations hereunder shall extend only
to actual "out of pocket" remediation costs (including reasonable attorneys'
fees, and investigation, oversight and response costs) but shall not include
consequential damages or incidental damages such as lost profits or any loss of
rental value of the Premises suffered or allegedly suffered by Tenant or any of
Tenant's Agents.

                                       10

<PAGE>   14
        8.5 Landlord reserves the right, at any time and from time to time, to
make alterations, additions or improvements to the arcades, plazas and walkways
outside the Building provided that any such alterations, additions or
improvements shall not materially diminish the quality or quantity of services
being provided to the Premises or adversely affect the functional utilization of
the Premises.

9.      ALTERATIONS BY TENANT

        9.1 After completion of the Tenant Improvement Work, Tenant shall not
make or permit any alterations to the Building Systems, and shall not make or
permit any alterations, installations, additions or improvements, structural or
otherwise (herein individually called an "ALTERATION" and collectively called
"ALTERATIONS") in or to the Premises or the Building without Landlord's prior
written consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Landlord's consent shall not be required in the
case of interior, non-structural Alterations the total cost of which does not
exceed Seventy-Five Thousand Dollars ($75,000). All Alterations shall be done at
Tenant's expense, in accordance with any design guidelines established by
Landlord and plans and specifications approved by Landlord (unless Landlord
approval is not required, in which case Tenant shall provide Landlord in advance
with all plans and specifications and other information describing in detail the
work to be performed), and subject to all other conditions which Landlord may in
its reasonable discretion impose. Landlord may condition its consent to any
proposed Alteration requiring Landlord's consent on Tenant's agreement to remove
such Alteration and to restore the Building to its condition prior to the making
of the Alteration on or before the Termination Date. Tenant shall be solely
responsible for obtaining at its sole cost and expense, all permits and
approvals required for any Alterations. Tenant shall pay to Landlord upon demand
Landlord's reasonable out-of-pocket costs incurred in reviewing plans and
specifications and otherwise in connection with Landlord's review of any
Alterations requiring Landlord's approval.

        9.2 The following provisions of this Section 9.2 shall apply only to
Alterations requiring Landlord's approval:

               (a) Prior to entering into a contract for such Alterations,
Tenant shall obtain Landlord's written approval, which approval shall not be
unreasonably withheld, of the identity of each of the design architect and the
general contractor.

               (b) Before commencing the construction of any such Alterations,
Tenant shall procure or cause to be procured the insurance coverage described
below in the limits hereinafter provided, and provide Landlord with certificates
of such insurance in form reasonably satisfactory to Landlord. All such
insurance shall comply with the following requirements of this Section 9.2(b)
and Article 21.

                      (i) During the course of construction, to the extent not
covered by property insurance maintained by Tenant pursuant to Article 21,
comprehensive "all risk" builder's risk insurance, including vandalism and
malicious mischief, excluding earthquake and flood, covering all improvements in
place on the Premises, all materials and equipment stored at the site and
furnished under contract, and all materials and equipment that are in the
process of fabrication at the premises of any third party or that have been
placed in due course of transit to the Premises when such fabrication or transit
is at the risk of, or when title to or an insurable interest in such materials
or equipment has passed to, Tenant or its construction manager, contractors or
subcontractors (excluding any contractors', subcontractors' and construction
managers' tools and equipment, and property owned by the employees of the
construction manager, any

                                       11

<PAGE>   15
contractor or any subcontractor), such insurance to be written on a completed
value basis in an amount not less than the full estimated replacement value of
Alterations.

                      (ii) Comprehensive liability insurance covering Tenant,
Landlord and each construction manager, contractor and subcontractor engaged in
any work on the Premises, which insurance may be effected by endorsement, if
obtainable, on the policy required to be carried pursuant to Article 21,
including insurance for completed operations, elevators, owner's, construction
manager's and contractor's protective liability, products completed operations
for three (3) years after the date of acceptance of the work by Tenant, broad
form blanket contractual liability, broad form property damage and full form
personal injury (including but not limited to bodily injury), covering the
performance of all work at or from the Premises by Tenant, its construction
manager, contractors and subcontractors, and in a liability amount not less than
the amount at the time carried by prudent owners of comparable construction
projects in the Santa Clara valley, but in any event not less than Two Million
Dollars ($2,000,000) combined single limit, which policy shall contain a
cross-liability clause or separation of insureds provision and an endorsement
deleting the property damage exclusion as to explosion, underground, and
collapse hazards, and shall include thereunder for the mutual benefit of
Landlord and Tenant, bodily injury liability and property damage liability
automobile insurance on any non-owned, hired or leased automotive equipment used
in the construction of any work.

                      (iii) Workers' Compensation Insurance, or self insurance
approved by the State of California, in the amounts and coverages required under
workers' compensation, disability and similar employee benefit laws applicable
to the Premises, and Employer's Liability Insurance with limits not less than
One Million Dollars ($ 1,000,000) or such higher amounts as may be required by
law.

        9.3    The following provisions of this Section 9.3 shall apply to all
Alterations:

               (a) All construction and other work in connection with any
Alterations shall be done at Tenant's sole cost and expense and in a prudent and
first class manner. Tenant shall construct the Alterations in strict accordance
with all Applicable Laws, and with plans and specifications that are in
accordance with the provisions of this Article 9 and all other provisions of
this Lease. Alterations shall be at least equal in quality to the Initial
Improvements as initially constructed.

               (b) Prior to the commencement of any construction, alteration,
addition, improvements, repair or landscaping in excess of Ten Thousand Dollars
($10,000), Landlord shall have the right to post in a conspicuous location on
the Premises as well as to record with the County of Santa Clara, a Notice of
Landlord's Nonresponsibility. Tenant covenants and agrees to give Landlord at
least ten (10) days prior written notice of the commencement of any such
construction, alteration, addition, improvement, repair or landscaping in order
that Landlord shall have sufficient time to post such notice.

               (c) Tenant shall take all necessary safety precautions during any
construction.

               (d) Tenant shall prepare and maintain (i) on a current basis
during construction, annotated plans and specifications showing clearly all
changes, revisions and substitutions during construction, and (ii) upon
completion of construction, as-built drawings showing clearly all changes,
revisions and substitutions during construction, including, without limitation,
field changes and the final location of all mechanical equipment, utility lines,
ducts, outlets, structural members, walls, partitions and other

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<PAGE>   16
significant features. These as-built drawings and annotated plans and
specifications shall be kept at the Premises and Tenant shall update them as
often as necessary to keep them current. The as-built drawings and annotated
plans and specifications shall be made available for copying and inspection by
Landlord at all reasonable times.

               (e) Upon completion of the construction of any Alterations in
excess of Ten Thousand Dollars ($10,000) during the Term, Tenant shall file for
recordation, or cause to be filed for recordation, a notice of completion and
shall deliver to Landlord evidence satisfactory to Landlord of payment of all
costs, expenses, liabilities and liens arising out of or in any way connected
with such construction (except for liens that are contested in the manner
provided herein).

        9.4 Except as provided in Section 9.5, all appurtenances, fixtures,
improvements, equipment, additions and other property attached to or installed
in the Premises at the commencement of or during the Term, whether temporary or
permanent in nature, shall immediately be and remain the property of Landlord
and at the end of the Term, all such appurtenances, fixtures, improvements,
equipment, additions and property shall, at Landlord's option, either remain on
the Premises without compensation to Tenant, or be removed in accordance with
Section 9.5. At the request of Tenant, Landlord will notify Tenant in writing at
the time of Landlord's approval whether or not the proposed Alterations will be
required to be removed. Tenant shall have no obligation to remove any (a) Tenant
Improvement Work, or (b) any Alterations that Landlord has specified in writing
would not be required to be removed.

        9.5 All furniture, furnishings, equipment and articles of movable
personal property installed in the Premises by or for the account of Tenant and
not paid for by the Tenant Improvement Allowance (except for ceiling and related
fixtures, HVAC equipment and floor coverings), and which can be removed without
structural or other material damage to the Building (all of which are herein
called "TENANT'S PROPERTY") shall be and remain the property of Tenant and may
be removed by it at any time during the Term; provided, however, that any
equipment or other property which was paid for by the Tenant Improvement
Allowance or which is a replacement for items originally paid for by the Tenant
Improvement Allowance shall not be considered Tenant's Property. Upon the
Termination Date, Tenant shall have removed from the Premises all of Tenant's
Property except such items as the parties have agreed are to remain and to
become the property of Landlord and, upon the request of Landlord, Tenant, at
its sole cost and expense, shall also remove any Alterations designated by
Landlord to be removed and not previously specified by Landlord as not required
to be removed. Tenant shall be entitled to remove any Alteration provided that
Tenant shall restore the Premises to its condition prior to the making of such
Alteration. Tenant shall repair or pay the cost of repairing any damage to the
Building resulting from such removal. If Tenant fails to perform such
obligations, Landlord, without limitation of any other right or remedy, may
perform such obligations at Tenant's expense and Tenant shall promptly reimburse
Landlord upon demand for all costs and expenses incurred by Landlord in
connection therewith. Tenant's obligations under this Section 9.5 shall survive
the termination of this Lease. Any items of Tenant's Property which shall remain
in the Premises after the Termination Date may, at the option of Landlord, be
deemed abandoned and in such case may either be retained by Landlord as its
property or be disposed of, without accountability, at Tenant's expense in such
manner as Landlord may see fit.

10.     REPAIRS AND MAINTENANCE

        10.1 Landlord, at Landlord's sole cost and expense, will repair and
maintain the foundation, structural walls and structural elements of the roof
(the "BUILDING STRUCTURE") in a first class condition in

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<PAGE>   17
accordance with the standards of the Stanford Research Park subject to ordinary
wear and tear, casualty and condemnation and any acts of Tenant. Landlord shall
not be liable for any failure to make any repair or to perform any maintenance
unless such failure shall persist for an unreasonable time after written notice
of the need for such repair or maintenance is received by Landlord. If
Landlord's failure to make such repair or undertake such maintenance within a
reasonable time after receipt of Tenant's notice of the need for such repair
poses a serious risk of harm to Tenant or Tenant's Agents or material
interference with the conduct of Tenant's operations in the Premises, Tenant
shall so notify Landlord and if Landlord fails to promptly commence such repair
or maintenance Tenant shall be entitled to undertake such repair or maintenance
and to make a claim against Landlord for reimbursement for the reasonable costs
of such repair or maintenance. There shall be no abatement of rent and, except
to the extent caused by the gross negligence or willful misconduct of Landlord,
no liability of Landlord, by reason of any injury to Tenant's business or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements to any portion of the Building or to fixtures,
appurtenances and equipment therein. In the conduct of any such repairs or
maintenance, Landlord shall use prudent efforts to minimize, to the extent
practicable, interference with the conduct of Tenant's operations in the
Premises. At Tenant's request, Landlord will conduct such repairs or maintenance
during non-business hours, provided that Tenant pays all overtime or other
additional costs resulting therefrom.

        10.2 During the Term, Tenant shall, at its own cost and expense and
without any cost or expense to Landlord, keep and maintain the Building (other
than the Building Structure) and the Building Common Area and every part
thereof, and the equipment, fixtures and improvements therein, including,
without limitation, the Building Systems, in a first class condition in
accordance with the standards of the Stanford Research Park, subject to ordinary
wear and tear, casualty and condemnation and any acts of Landlord, and in
compliance with all Applicable Laws. Tenant shall promptly make all repairs,
replacements and alterations necessary to maintain the Building (other than the
Building Structure) and the Building Common Area in such first class condition
and in compliance with all Applicable Laws and to avoid any structural damage or
injury to the Premises. All repairs and replacements by Tenant shall be made and
performed: (a) at Tenant's cost and expense, (b) by contractors or mechanics
approved by Landlord, (c) so that same shall be at least equal in quality, value
and utility to the original work or installation, and (d) in accordance with all
Applicable Laws. Except as otherwise expressly provided in this Lease, Landlord
shall not be obligated to make to the Premises any repairs, replacements or
renewals of any kind, nature or description whatsoever and Tenant hereby
expressly waives any right to terminate this Lease and any right to make repairs
at Landlord's expense under Sections 1932(l), 1941 and 1942 of the California
Civil Code, or any amendments thereof or any similar law, statute or ordinance
now or hereafter in effect.

11.     LIENS

        Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished or obligations incurred by or for Tenant. If
Tenant shall not, within ten (10) days following the imposition of any such
lien, cause the lien to be released of record by payment or posting of a proper
bond, Landlord shall have, in addition to all other remedies provided herein and
by law, the right but not the obligation to cause any such lien to be released
by such means as it shall deem proper, including payment of the claim giving
rise to such lien. All such sums paid by Landlord and all expenses incurred by
it in connection therewith (including, without limitation, reasonable counsel
fees) shall be payable to Landlord by Tenant upon demand. Landlord shall have
the right at all times to post and keep posted on the Premises any notices
permitted or required by law or that Landlord shall deem proper for the

                                       14

<PAGE>   18
protection of Landlord, the Premises, and the Building, from mechanics' and
materialmen's liens. Tenant shall give to Landlord at least five (5) business
days' prior written notice of commencement of any repair or construction on the
Premises.

12.     UTILITIES

        Tenant shall be solely responsible for and shall make and all
arrangements for and shall pay for all utilities and services furnished to or
used at the Premises, including, without limitation, all water, gas,
electricity, telephone and other electronic communications service, sewer
service, waste pick-up and any other utilities, materials or services furnished
directly to the Premises.

13.     COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS

        13.1 Tenant, at Tenant's cost and expense, shall comply with all
Applicable Laws. Without in any way limiting the generality of the foregoing
obligation of Tenant, except as expressly provided in attached Exhibit B with
respect to the Base Building Work, Tenant shall be solely responsible for
compliance with and shall make or cause to be made all such improvements and
alterations to the Premises (including, without limitation, removing such
barriers and providing such alternative services) as shall be required by the
Americans with Disabilities Act of 1990, 42 USC 12111 et seq. (the "ADA"), and
Title 24 of the California Code of Regulations as the same may be amended from
time to time, or by any similar or successor law and the rules promulgated
thereunder. Tenant's liability shall be primary and Tenant shall indemnify
Landlord in accordance with Section 21.1 in the event of any failure or alleged
failure of Tenant to comply. Any work or installations made or performed by or
on behalf of Tenant or any person or entity claiming through or under Tenant
pursuant to the provisions of this Article 13 shall be made in conformity with
and subject to the provisions of Article 9.

        13.2 Tenant shall not do anything, or permit anything to be done, in or
about the Premises that would: (a) invalidate or be in conflict with the
provisions of any fire or other insurance policies covering the Building or any
property located therein, or (b) result in a refusal by fire insurance companies
of good standing to insure the Building or any such property in amounts
reasonably satisfactory to Landlord, or (c) subject Landlord to any liability or
responsibility for injury to any person or property by reason of any business
operation being conducted in the Premises. Tenant, at Tenant's expense, shall
comply with all rules, orders, regulations or requirements of the American
Insurance Association (formerly the National Board of Fire Underwriters) and
with any similar body that shall hereafter perform the function of such
Association.

14.     SUBORDINATION

        14.1 Without the necessity of any additional documentation, this Lease
shall be subject and subordinate at all times to: (a) all reciprocal easement
agreements, the Ground Lease, the sublease between Landlord and the Ground
Lessee (the "SUBLEASE"), and any other ground leases or underlying leases which
may now exist or hereafter be executed affecting any or all of the Building
(provided that Landlord agrees not to enter into any easement agreement that
would materially interfere with Tenant's access to the Premises or use of
Tenant's parking area), and (b) the lien of any mortgage or deed of trust which
may now exist or hereafter be executed in any amount for which the Building, the
ground leases or underlying leases, or Landlord's interest or estate in any of
said items, is specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated to this Lease
any of the items

                                       15

<PAGE>   19
referred to in clause (a) or (b) above. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, (i) no
person or entity which as a result of the foregoing succeeds to the interest of
the Landlord under the Lease, (any such person or entity being herein referred
to as a "SUCCESSOR") shall be liable for any default by Landlord or any other
matter that occurred prior to the date such Successor succeeded to Landlord's
interest in this Lease, and (ii) Tenant shall, notwithstanding any
subordination, attorn to and become the tenant of the Successor. Notwithstanding
anything to the contrary contained herein, if the Ground Lease terminates for
any reason whatsoever, this Lease shall remain in full force and effect. The
provisions of this Article 14 shall be self-operative and no further instrument
shall be required. Tenant covenants and agrees, however, to execute and deliver,
upon demand by Landlord and in the form requested by Landlord, any reasonable
additional documents evidencing the priority or subordination of this Lease with
respect to any such ground leases, underlying leases, reciprocal easement
agreements or similar documents or instruments, or with respect to the lien of
any such mortgage or deed of trust and Tenant's failure to execute and deliver
any such document within ten (10) business days after such demand by Landlord
shall constitute an Event of Default under this Lease. Notwithstanding the
foregoing, Tenant shall not be required to effectuate such subordination unless
the mortgagee or trustee named in such mortgage, deed of trust or other
encumbrance or the parties to such ground or underlying lease, shall first agree
in writing, for the benefit of Tenant, that so long as Tenant is not in default
under any of the provisions, covenants or conditions of this Lease on the part
of Tenant to be kept and performed beyond any notice and applicable cure
periods, that neither this Lease nor any of Tenant's rights hereunder shall be
terminated or modified or be subject to termination or modification, nor shall
Tenant's possession of the Premises be disturbed or interfered with, by any
Trustee's sale or by an action or proceeding to foreclose said mortgage, deed of
trust or other encumbrance or termination of such ground or underlying lease.
Should a lender or prospective lender providing financing for the Building, or a
prospective purchaser of the Building require financial statements relating to
Tenant, Tenant shall submit to such lender or prospective lender or purchaser
any such financial statements, and shall keep such reports current so long as
such lender or prospective lender or purchaser shall require, provided that
Tenant shall not be required to produce any financial statements that Tenant
does not prepare and maintain in the normal course of its business. Landlord
agrees to use its best efforts to maintain the confidentiality of all
information regarding Tenant's business obtained pursuant to this Article 14.

15.     LANDLORD'S INABILITY TO PERFORM

        If Landlord is unable to perform, or is delayed in performing, any
construction, installations, decorations, repairs, alterations, additions or
improvements, under this Lease, or is unable to fulfill or is delayed in
fulfilling any of Landlord's other obligations under this Lease, by reason of
acts of God, accidents, breakage, repairs, strikes, lockouts, other labor
disputes, inability to obtain utilities or materials or by any other reason
beyond Landlord's reasonable control, then no such inability or delay by
Landlord shall constitute an actual or constructive eviction, in whole or in
part, or entitle Tenant to any abatement or diminution of Base Rent or
Additional Rent, or relieve Tenant from any of its obligations under this Lease,
or impose any liability upon Landlord or its agents by reason of inconvenience,
annoyance, interruption, injury or loss to or interference with Tenant's
business or use and occupancy or quiet enjoyment of the Premises or any loss or
damage occasioned thereby. Tenant hereby waives and releases any right to
terminate this Lease under Section 1932(l) of the California Civil Code or under
any similar law, statute or ordinance now or hereafter in effect.

                                       16

<PAGE>   20
16.     DESTRUCTION

        16.1 If the Premises or the Building or any portion thereof (whether or
not the Premises are affected) are damaged by fire or other casualty, Landlord
shall forthwith repair the same (including the Tenant Improvement Work and any
Tenant's Alterations that, pursuant to Section 9.4, Landlord has specified would
not be required to be removed) provided that such repairs can be made under the
laws and regulations of the federal, state and local governmental authorities
having jurisdiction thereof within six (6) months after the date of such damage
(or in the case of damage occurring during the last twelve (12) months of the
Term, provided that such repairs can be made within sixty (60) days after the
date of such damage) and are fully covered (except for any deductible) by
proceeds of insurance required to be maintained by Landlord pursuant to Section
21.7 hereof, and, in the case of damage resulting from earthquake, the cost of
such repairs that is not fully covered by insurance proceeds does not exceed
five percent (5%) of the replacement cost of the Building. In such event, this
Lease shall remain in full force and effect except that Tenant shall be entitled
to a proportionate reduction of Base Rent and Tenant's Share of Real Estate
Taxes from the date of such casualty and during the period such repairs are
being made by a proportionate amount based upon the extent of interference with
Tenant's operations in the Premises. As soon as reasonably practicable but in
any event within sixty (60) days after the date of such damage, Landlord shall
notify Tenant whether or not the aforesaid requirements are met. If such
requirements are not met, Landlord shall have the option, exercisable within
sixty (60) days after the date of such damage either to: (a) notify Tenant of
Landlord's intention to repair such damage, in which event this Lease shall
continue in full force and effect (unless terminated by Tenant pursuant to
Section 16.2 below); Landlord shall diligently prosecute such repairs to
completion, and the Base Rent and Tenant's Share of Real Estate Taxes shall be
reduced as provided herein; or (b) notify Tenant of Landlord's election to
terminate this Lease as of a date specified in such notice, which date shall be
not less than thirty (30) nor more than sixty (60) days after notice is given.
If such notice to terminate is given by Landlord, this Lease shall terminate on
the date specified in such notice.

        16.2 If the Premises are damaged by fire or other casualty, or the
Building is damaged by fire or other casualty to such extent that the Premises
are rendered inaccessible or substantially unusable by Tenant for the conduct of
its operations, Landlord has not exercised its right to terminate this Lease,
and Landlord has notified Tenant that the necessary repairs thereof cannot be
completed within nine (9) months (or in the case of damage occurring in the last
twelve (12) months of the Term, within sixty (60) days), then Tenant shall have
the option, exercisable within thirty (30) days after receipt of Landlord's
notice, to terminate this Lease as of a date specified in such notice which
shall not be more than sixty (60) days after such notice is given. If such
notice to terminate is given by Tenant, this Lease shall terminate on the date
specified in such notice.

        16.3 In case of termination pursuant to Sections 16.1 or 16.2 above, the
Base Rent and Tenant's Share of Real Estate Taxes shall be reduced by a
proportionate amount based upon the extent to which such damage interfered with
the business carried on by Tenant in the Premises, and Tenant shall pay such
reduced Base Rent and Real Estate Taxes up to the date of termination. Landlord
agrees to refund to Tenant any Base Rent and Additional Rent previously paid for
any period of time subsequent to such date of termination or otherwise in excess
of the amount due hereunder. The repairs to be made hereunder by Landlord shall
not include, and Landlord shall not be required to repair, any damage by fire or
other cause to the property of Tenant or the Tenant Improvement Work or any
damage caused by the negligence of Tenant, its contractors, agents, licensees or
employees or any repairs or replacements of any paneling,

                                       17

<PAGE>   21
decorations, railings, floor coverings, or any Alterations, additions, fixtures
or improvements installed on the Premises by or at the expense of Tenant.

        16.4 If Landlord elects or is required hereunder to repair, reconstruct
or restore the Premises after any damage or destruction thereto, Tenant shall be
responsible for, at its own expense and at its election, the repair and
replacement of Tenant's Property and any Alterations (other than any Alterations
that, pursuant to Section 9.4, Landlord has specified would not be required to
be removed). Tenant hereby waives the provisions of Section 1932(2) and Section
1933(4) of the California Civil Code, or any other statute or law that may be in
effect at the time of the occurrence of any such damage or destruction, under
which a lease is automatically terminated or a tenant is given the right to
terminate a lease upon such an occurrence.

        16.5 Tenant shall have no interest in or claim to any portion of the
proceeds of any insurance maintained by Landlord. If Landlord is entitled and
elects not to rebuild the Premises hereunder, Landlord shall relinquish to
Tenant such claim as Landlord may have for any part of the proceeds of any
insurance maintained by Tenant under Section 21.2(b) of this Lease. Except as
otherwise provided herein, Landlord shall have no interest in or claim to any
portion of the proceeds of any insurance maintained by Tenant under Section
21.2(b).

        16.6 If Landlord is required or elects to make any repairs,
reconstruction or restoration of any damage or destruction to the Premises under
any of the provisions of this Article 16, Tenant shall not be entitled to any
damages by reason of any inconvenience or loss sustained by Tenant as a result
thereof. During the period commencing with the date of any such damage or
destruction that Landlord is required or elects hereunder to repair, reconstruct
or restore, and ending with the completion of such repairs, reconstruction or
restoration the Base Rent and Tenant's Share of Real Estate Taxes shall be
proportionately reduced based upon the extent to which such damage and the
making of such repairs by Landlord shall interfere with the business carried on
by Tenant in the Premises. The full amount of Base Rent and Tenant's Share of
Real Estate Taxes shall again become payable immediately upon the completion of
such work of repair, reconstruction or restoration. Except as expressly
hereinabove provided, there shall be no reduction, change or abatement of any
rental or other charge payable by Tenant to Landlord hereunder, or in the method
of computing, accounting for or paying the same.

17.     EMINENT DOMAIN

        17.1 If all or any part of the Premises shall be taken as a result of
the exercise of the power of eminent domain or any transfer in lieu thereof,
this Lease shall terminate as to the part so taken as of the date of taking,
and, in the case of a partial taking of the Premises, either Landlord or Tenant
shall have the right to terminate this Lease as to the balance of the Premises
by written notice to the other within thirty (30) days after the eminent domain
proceeding is final, provided, however, that a condition to the exercise by
Tenant of such right to terminate shall be that the portion of the Premises
taken shall be of such extent and nature as substantially to handicap, impede or
impair Tenant's use of the balance of the Premises. If any material part of the
Building Common Area shall be taken as a result of the exercise of the power of
eminent domain or any transfer in lieu thereof, whether or not the Premises are
affected, Landlord shall have the right to terminate this Lease by written
notice to Tenant given within thirty (30) days after the date that the eminent
domain proceeding is final. If any material part of the Building Common Area
shall be taken as a result of the exercise of the power of eminent domain or any
transfer in lieu thereof, such that Tenant's access to or use of the Premises is
materially adversely affected, Tenant shall have the right

                                       18

<PAGE>   22
to terminate this Lease by written notice to Landlord given within thirty (30)
days after the date that the eminent domain proceeding is final. In the event of
any taking, Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection therewith, and Tenant shall have no claim against Landlord
for the value of any unexpired term of this Lease or otherwise; provided that
Landlord shall have no claim to any portion of the award that is specifically
allocable to Tenant's relocation expenses or the interruption of or damage to
Tenant's business or for Tenant's Property. In the event of a partial taking of
the Premises which does not result in a termination of this Lease, the Base Rent
thereafter to be paid shall be adjusted as follows:

               (a) During the period between the date of such actual taking and
the completion of said repairs, reconstruction or restoration, Tenant shall be
entitled to a reduction of Base Rent and Tenant's Share of Real Estate Taxes by
a proportionate amount based upon the extent of interference with Tenant's
operations in the Premises.

               (b) Upon completion of said repairs, reconstruction or
restoration, and thereafter throughout the remainder of the Lease Term, the Base
Rent shall be recalculated based on the remaining total number of square feet of
Rentable Area of the Premises.

               (c) A voluntary sale by Landlord of all or any part of the
Building or the Building Common Area to any public or quasi-public body, agency
or person, corporate or otherwise, having the power of eminent domain, either
under threat of condemnation or while condemnation proceedings are pending,
shall be deemed to be a taking under the power of eminent domain for the
purposes of this Article 17.

        17.2 Notwithstanding any other provision of this Article 17, if a taking
occurs with respect to all or any portion of the Premises for a period of twelve
months or less, this Lease shall remain unaffected thereby and Tenant shall
continue to pay Base Rent and Additional Rent and to perform all of the terms,
conditions and covenants of this Lease, provided that Tenant shall have the
right to terminate this Lease if the taking continues beyond twelve months. In
the event of any such temporary taking, and if this Lease is not terminated,
Tenant shall be entitled to receive all of the award which represents
compensation for the use or occupancy of the Premises during the Term.

        17.3 Tenant hereby waives and releases any right to terminate this Lease
in whole or in part under Sections 1265.120 and 1265.130 of the California Code
of Civil Procedure or under any similar law, statute or ordinance now or
hereafter in effect.

18.     ASSIGNMENT AND SUBLETTING

        18.1 Tenant shall not directly or indirectly (including, without
limitation, by merger, acquisition, or other transfer of any controlling
interest in Tenant), voluntarily or by operation of law, sell, assign, encumber,
pledge or otherwise transfer or hypothecate all or any part of its interest in
or rights with respect to the Premises or its leasehold estate hereunder
(collectively, "ASSIGNMENT", or permit all or any portion of the Premises to be
occupied by anyone other than itself or sublet all or any portion of the
Premises (collectively, "SUBLEASE" without Landlord's prior written consent in
each instance, as provided herein below, which consent, subject to the remaining
provisions of this Article 18, shall not be unreasonably withheld.

                                       19

<PAGE>   23
        18.2 If Tenant desires to enter into an Assignment of this Lease or a
Sublease of the Premises or any portion thereof, it shall give written notice
(herein called "NOTICE OF PROPOSED TRANSFER") to Landlord of Tenant's intention
to do so, which notice shall contain (i) the name and address of the proposed
assignee, subtenant or occupant ("TRANSFEREE"), (ii) the nature of the proposed
Transferee's business to be carried on in the Premises, (iii) the terms and
provisions of the proposed Assignment or Sublease and (iv) such financial
information as Landlord may reasonably request concerning the proposed
Transferee. Without limitation of any other provision hereof, it shall not be
unreasonable for Landlord to withhold its consent if (x) an Event of Default has
occurred, (y) the use of the Premises would not comply with the provisions of
this Lease, or (z) in Landlord's reasonable judgment, the proposed Transferee
does not have the financial capability to perform its obligations under the
Lease.

        18.3 Landlord shall use reasonable efforts to respond to Tenant's
request for approval within thirty (30) days after receipt of the Notice of
Proposed Transfer. If Landlord approves the proposed Assignment or Sublease,
Tenant may, not later than ninety (90) days thereafter, enter into such
Assignment or Sublease with the proposed Transferee upon the terms and
conditions set forth in the Notice of Proposed Transfer, and fifty percent (50%)
of the Excess Rent received by Tenant shall be paid to Landlord as and when
received by Tenant. For purposes hereof "EXCESS RENT" means any rent or other
consideration received by Tenant in excess of (i) the Base Rent and Additional
Rent payable hereunder (or the amount thereof proportionate to the portion of
the Premises subject to such Sublease in the case of a sublease of a portion of
the Premises) and (ii) reasonable brokerage commissions and tenant improvement
costs incurred in connection with such Sublease or Assignment. In addition
"EXCESS RENT" shall not include any portion of Rent payable by the Transferee
that is attributable to the value of Tenant Improvement Work paid for by Tenant.

        18.4 In addition to Landlord's other rights hereunder, Landlord shall
have the right at any time within thirty (30) days after Landlord's receipt of
the Notice of Proposed Transfer with respect to a sublease for substantially the
remaining term of this Lease or with respect to an Assignment, by written notice
to Tenant, to elect to terminate this Lease as to the portion (or all as
applicable) of the Premises that is specified in the Notice of Proposed
Transfer. If Landlord elects to terminate the Lease pursuant hereto, Landlord
shall be entitled to enter into a lease with respect to the Premises (or portion
thereof specified in said Notice of Proposed Transfer) with the proposed
Transferee identified in Tenant's notice.

        18.5 No Sublease or Assignment by Tenant nor any consent by Landlord
thereto shall relieve Tenant of any obligation to be performed by Tenant under
this Lease. Any Sublease or Assignment that is not in compliance with this
Article 18 shall be null and void and, at the option of Landlord, shall
constitute a noncurable default by Tenant under this Lease and Landlord shall be
entitled to pursue any right or remedy available to Landlord under the terms of
this Lease or under the laws of the State of California. The acceptance of any
rent or other payments by Landlord from a proposed Transferee shall not
constitute consent to such Sublease or Assignment by Landlord or a recognition
of any Transferee, or a waiver by Landlord of any failure of Tenant or other
Transferor to comply with this Article 18.

        18.6 Notwithstanding anything in this Article 18 to the contrary, but
subject to the provisions of Section 18.7 below, Landlord's prior written
consent shall not be required for a transfer of corporate shares by bequest or
inheritance between or among the present majority stockholders of Tenant, to
their immediate family, or any trust created for the benefit of such immediate
family member or members; or any assignment of this Lease to any of the
following: (i) a subsidiary, affiliate, division or corporation

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<PAGE>   24
controlled by, controlling, or under common control with Tenant; (ii) a
successor corporation related to Tenant by merger, consolidation, or
non-bankruptcy reorganization, (iii) a purchaser of substantially all of
Tenant's assets, or (iv) in the case of a public offering of the stock of
Tenant, the purchasers of Tenant's capital stock; provided that after such
assignment or transfer the operation of the business conducted in the Premises
shall be in the manner required by this Lease. For purposes of the preceding
sentence, the term "CONTROL" means owning directly or indirectly fifty percent
(50%) or more of the beneficial interest in such entity, or having the direct or
indirect power to control the management policies of such person or entity,
whether through ownership, by contract or otherwise.

        In addition, Landlord's consent shall not be required for the granting
of a security interest in any removable equipment installed by Tenant in the
Premises, provided that such security interest shall require that any
foreclosure and removal of such equipment shall be undertaken promptly and any
damage caused by such removal shall be repaired at no cost to Landlord.

        Tenant agrees to inform Landlord in writing within thirty (30) days of
any assignment or other transfer or granting of any security interest referred
to in this Section 18.6.

        18.7 With respect to any Assignment, any Transferee approved by Landlord
shall, from and after the effective date of the Assignment, assume all
obligations of Tenant under this Lease and shall be and remain liable jointly
and severally with Tenant for the payment of Rent and Additional Rent, and for
the performance of all of the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the Term. No Assignment shall be
binding on Landlord unless Tenant or Transferee shall deliver to Landlord a
counterpart of the Assignment and an instrument that contains a covenant of
assumption by such Transferee satisfactory in substance and form to Landlord,
and consistent with the requirements of this Section 18.7. Any failure or
refusal of such Transferee to execute such instrument of assumption shall
constitute a default under this Lease but shall not release or discharge such
Transferee from its liability as set forth above.

19.     DEFAULT

        19.1 The occurrence of any of the following shall be an Event of Default
on the part of Tenant hereunder:

               (a) Failure to pay any part of the Base Rent or Additional Rent
herein reserved, or any other sums of money that Tenant is required to pay
hereunder at the times or in the manner herein provided, when such failure shall
continue for a period of five (5) days after written notice thereof from
Landlord to Tenant; any such notice shall be deemed to be the notice required
under California Code of Civil Procedure Section 1161. No such notice shall be
deemed a forfeiture or a termination of this Lease unless Landlord expressly so
elects in such notice.

               (b) Failure to perform any nonmonetary provision of this Lease
when such failure shall continue for a period of thirty (30) days, or such other
period as is expressly set forth herein, after written notice thereof from
Landlord to Tenant; any such notice shall be deemed to be the notice required
under California Code of Civil Procedure Section 1161; provided that if the
nature of the default is such that more than thirty (30) days are reasonably
required for its cure, then an Event of Default shall not be deemed to have
occurred if Tenant shall commence such cure within said thirty (30) day period
and

                                       21

<PAGE>   25
thereafter diligently and continuously prosecute such cure to completion. No
such notice shall be deemed a forfeiture or a termination of this Lease unless
Landlord expressly so elects in such notice.

               (c) The abandonment of the Premises.

               (d) Tenant shall admit in writing its inability to pay its debts
generally as they become due, file a petition in bankruptcy, insolvency,
reorganization, dissolution or liquidation under any law or statute of any
government or any subdivision thereof either now or hereafter in effect, make an
assignment for the benefit of its creditors, consent to or acquiesce in the
appointment of a receiver of itself or of the whole or any substantial part of
the Premises.

               (e) A court of competent jurisdiction shall enter an order,
judgment or decree appointing a receiver of Tenant or of the whole or any
substantial part of the Premises and such order, judgment or decree shall not be
vacated, set aside or stayed within forty-five (45) days after the date of entry
of such order, judgment, or decree, or a stay thereof shall be thereafter set
aside.

               (f) A court of competent jurisdiction shall enter an order,
judgment or decree approving a petition filed against Tenant under any
bankruptcy, insolvency, reorganization, dissolution or liquidation law or
statute of the Federal government or any state government or any subdivision of
either now or hereafter in effect, and such order, judgment or decree shall not
be vacated, set aside or stayed within forty-five (45) days from the date of
entry of such order, judgment or decree, or a stay thereof shall be thereafter
set aside.

        19.2 Upon the occurrence of an Event of Default, Landlord shall have the
following rights and remedies:

               (a) The right to terminate this Lease, in which event Tenant
shall immediately surrender possession of the Premises in accordance with
Article 40, and pay to Landlord all Base Rent, Additional Rent and other charges
and amounts due from Tenant hereunder to the date of termination.

               (b) The rights and remedies described in California Civil Code
Section 1951.2, including without limitation, the right to recover the worth at
the time of award of the amount by which the Base Rent, Additional Rent and
other charges payable hereunder for the balance of the Term after the time of
award exceed the amount of such rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subdivision (b) of
said Section 1951.2, and the right to recover any amount 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 which, without limiting the generality of the
foregoing, includes unpaid taxes and assessments, any direct costs or expenses
incurred by Landlord in recovering possession of the Premises, maintaining or
preserving the Premises after such default, preparing the Premises for reletting
to a new tenant, any repairs or alterations to the Premises for such reletting,
leasing commissions, architect's fees and any other costs necessary or
appropriate either to relet the Premises or, if reasonably necessary in order to
relet the Premises, to adapt them to another beneficial use by Landlord and such
amounts in addition to or in lieu of the foregoing as may be permitted from time
to time by applicable California law.

                                       22

<PAGE>   26
               (c) The right's and remedies described in California Civil Code
Section 1951.4 that allow Landlord to continue this Lease in effect and to
enforce all of its rights and remedies under this Lease, including the right to
recover Base Rent, Additional Rent and other charges payable hereunder as they
become due, for so long as Landlord does not terminate Tenant's right to
possession. Acts of maintenance or preservation, efforts to relet the Premises
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.

               (d) The right and power, as attorney in fact for Tenant, to enter
and to sublet the Premises, to collect rents from all subtenants and to provide
or arrange for the provision of all services and fulfill all obligations of
Tenant under any permitted subleases and Landlord is hereby authorized on behalf
of Tenant, but shall have absolutely no obligation, to provide such services and
fulfill such obligations and to incur all such expenses and costs as Landlord
deems necessary in connection therewith. Tenant shall be liable immediately to
Landlord for all direct costs and expenses Landlord reasonably incurs in
collecting such rents and arranging for or providing such services or fulfilling
such obligations. Landlord is hereby authorized, but not obligated, to relet the
Premises or any part thereof on behalf of Tenant, to incur such expenses as may
be necessary to effect a relet and make said relet for such term or terms, upon
such conditions and at such rental as Landlord in its sole discretion may deem
proper. Tenant shall be liable immediately to Landlord for all reasonable costs
Landlord incurs in reletting the Premises including, without limitation,
brokers' commissions, expenses of remodeling the Premises required by the
reletting. If Landlord relets the Premises or any portion thereof, such
reletting shall not relieve Tenant of any obligation hereunder, except that
Landlord shall apply the rent or other proceeds actually collected by it as a
result of such reletting against any amounts due from Tenant hereunder to the
extent that such rent or other proceeds compensate Landlord for the
nonperformance of any obligation of Tenant hereunder. Such payments by Tenant
shall be due at such times as are provided elsewhere in this Lease, and Landlord
need not wait until the termination of this Lease, by expiration of the Term
hereof or otherwise, to recover them by legal action or in any other manner.
Landlord may execute any lease made pursuant hereto in its own name, and the
tenant thereunder shall be under no obligation to see to the application by
Landlord of any rent or other proceeds, nor shall Tenant have any right to
collect any such rent or other proceeds. Landlord shall not by any reentry or
other act be deemed to have accepted any surrender by Tenant of the Premises or
Tenant's interest therein, or be deemed to have otherwise terminated this Lease,
or to have relieved Tenant of any obligation hereunder, unless Landlord shall
have given Tenant express written notice of Landlord's election to do so as set
forth herein.

               (e) The right to have a receiver appointed upon application by
Landlord to take possession of the Premises and to collect the rents or profits
therefrom and to exercise all other rights and remedies pursuant to Section
19.2(d).

               (f) The right to enjoin, and any other remedy or right now or
hereafter available to a Landlord against a defaulting Tenant under the laws of
the State of California or the equitable powers of its courts, and not otherwise
specifically reserved herein.

        19.3 Except as otherwise expressly provided in this Article 19, Tenant
hereby expressly waives, so far as permitted by law, the service of any notice
of intention to enter or re-enter provided for in any statute, or of the
institution of legal proceedings to that end, and Tenant, for and on behalf of
itself and all persons claiming through or under Tenant, also waives any right
of redemption or relief from forfeiture

                                       23

<PAGE>   27
under California Code of Civil Procedure Sections 1174 or 1179, or under any
other present or future law, if Tenant is evicted or Landlord takes possession
of the Premises by reason of any Event of Default.

        19.4 The various rights and remedies reserved to Landlord herein,
including those not specifically described herein, shall be cumulative and shall
be in addition to every other right or remedy provided for in this Lease or now
or hereafter existing at law or in equity and the exercise of the rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity shall not preclude the simultaneous or later exercise by Landlord of any
or all other rights and remedies.

20.     LANDLORD'S RIGHT TO CURE TENANT'S DEFAULTS

        If Tenant shall fail or neglect to do or perform any act or thing herein
provided by it to be done or performed and such failure shall not be cured
within any grace period provided herein, then Landlord may, but shall not be
required to, make any payment payable by Tenant hereunder, discharge any lien,
take out, pay for and maintain any insurance required hereunder, or do or
perform or cause to be done or performed any such other act or thing (entering
upon the Premises for such purposes, if Landlord shall so elect), and Landlord
shall not be or be held liable or in any way responsible for any loss,
disturbance, inconvenience, annoyance or damage resulting to Tenant on account
thereof, and Tenant shall repay to Landlord upon demand the entire reasonable
cost and expense thereof, including, without limitation, compensation to the
agents, consultants and contractors of Landlord and reasonable attorneys' fees
and expenses. Landlord may act upon shorter notice or no notice at all if
necessary in Landlord's reasonable judgment to meet an emergency situation or
governmental or municipal time limitation or to protect Landlord's interest in
the Premises. Landlord shall not be required to inquire into the correctness of
the amount of validity or any tax or lien that may be paid by Landlord and
Landlord shall be duly protected in paying the amount of any such tax or lien
claimed and in such event Landlord also shall have the full authority, in
Landlord's sole judgment and discretion and without prior notice to or approval
by Tenant, to settle or compromise any such lien or tax. Any act or thing done
by Landlord pursuant to the provisions of this Article shall not be or be
construed as a waiver of any such default by Tenant, or as a waiver of any term,
covenant, agreement or condition herein contained or of the performance thereof.

21.     INDEMNITY; INSURANCE

        21.1 (a) Tenant shall indemnify, protect, defend, with attorneys
approved by Landlord in its reasonable discretion, and save and hold Landlord,
and its trustees, directors, officers, agents and employees, harmless, from and
against any and all losses, costs, liabilities, claims, damages and expenses,
including, without limitation, reasonable attorneys' fees and costs including
Landlord's in-house counsel, and reasonable investigation costs, incurred in
connection with or arising from: (a) any default by Tenant in the observance or
performance of any of the terms, covenants or conditions of this Lease on
Tenant's part to be observed or performed, or (b) the use or occupancy or manner
of use or occupancy of the Premises, or (c) the condition of the Premises or any
occurrence on the Premises from any cause whatsoever, except to the extent
caused by the gross negligence or willful misconduct of Landlord or Landlord's
Agents, or (d) any acts or omissions or negligence of Tenant or of Tenant's
Agents, in, on or about the Premises or the Building. In case any claim, action
or proceeding be brought, made or initiated against Landlord relating to any
matter covered by Tenant's indemnification obligations under this Section 21.1
or under Section 24.3 below, Tenant, upon notice from Landlord, shall at its
sole cost and expense, resist or defend such claim, action or proceeding.
Notwithstanding the foregoing, Landlord may retain its own attorneys to defend
or assist in defending any claim, action or proceeding involving potential
liability

                                       24

<PAGE>   28
of Five Million Dollars ($5,000,000) or more, and Tenant shall pay the
reasonable fees and disbursements of such attorneys. Tenant's obligations under
this Section 21.1 shall survive the termination of the Lease.

               (a) (b) Landlord shall indemnify and hold harmless Tenant from
all damages, liabilities, claims, judgments, actions, attorneys' fees,
consultants' fees, costs and expenses to the extent arising from the gross
negligence or willful misconduct of Landlord or Landlord's Agents or the breach
of Landlord's obligations under this Lease. In case any claim, action or
proceeding be brought, made or initiated against Tenant relating to any matter
covered by Landlord's indemnification obligations under this Section 21.1(b),
Landlord, upon notice from Tenant, shall at its sole cost and expense, resist or
defend such claim, action or proceeding by attorneys reasonably approved by
Tenant. Notwithstanding the foregoing, Tenant may retain its own attorneys to
defend or assist in defending any claim, action or proceeding involving
potential liability of Five Million Dollars ($5,000,000) or more, and Landlord
shall pay the reasonable fees and disbursements of such attorneys. Landlord's
obligations under this Section 21.1(b) shall survive the termination of the
Lease.

        21.2   Tenant shall procure at its sole cost and expense and keep in
effect during the Term:

               (a) commercial general liability insurance applying to the use
and occupancy of the Premises and the Building and any part thereof. Such
insurance shall include broad form contractual liability insurance coverage
insuring Tenant's obligations under this Lease. Such coverage shall have a
minimum combined single limit of liability of not less than Three Million
Dollars ($3,000,000.00). All such policies shall be written to apply to all
bodily injury, property damage, personal injury and other covered loss, however
occasioned occurring during the policy term, with at least the following
endorsements to the extent such endorsements are generally available: (i)
deleting any employee exclusion on personal injury coverage, (ii) including
employees as additional insureds, (iii) providing broad form property damage
coverage and products completed operations coverage (where applicable), and (iv)
providing for coverage of owned and non-owned automobile liability, if
applicable. Such insurance (other than automobile liability) shall name Landlord
and any other party designated by Landlord as an additional insured, shall
specifically include the liability assumed hereunder by Tenant, shall provide
that it is primary insurance, shall provide for severability of interests, shall
further provide that an act or omission of one of the named insureds which would
void or otherwise reduce coverage shall not reduce or void the coverage as to
any insured, shall afford coverage for claims based on acts, omissions, injury
or damage which occurred or arose (or the onset of which occurred or arose in
whole or in part during the policy period, and shall provide that Landlord will
receive thirty (30) days' written notice from the insurer prior to any
cancellation or material change of coverage;

               (b) standard fire and extended perils insurance, including
sprinkler leakages, vandalism and malicious mischief and plate glass damage
covering all the items specified as "TENANT'S PROPERTY" herein and property of
every description including stock-in-trade, furniture, fittings, installations,
alterations, additions, partitions and fixtures or anything in the nature of a
leasehold improvement made or installed by or on behalf of the Tenant in an
amount of not less than one hundred percent (100%) of the full replacement cost
thereof as shall from time to time be determined by Tenant in form reasonably
satisfactory to Landlord; and

               (c) Worker's Compensation Insurance in the amounts and coverages
required under worker's compensation, disability and similar employee benefit
laws applicable to the Premises and Employer's

                                       25

<PAGE>   29
Liability Insurance, with limits of not less than One Million Dollars
($1,000,000) or such higher amounts as may be required by law.

        21.3 All policies of insurance provided for herein shall be issued by
insurance companies with general policyholders' rating of not less than (VII)
and a financial rating of B+ as rated in the most current available "Best's
Insurance Reports," and qualified to do business in the State of California, and
shall, with the exception of Workers Compensation Insurance, include as
additional insureds Landlord, and such other persons or firms as Landlord
specifies from time to time. Such policies shall be for the mutual and joint
benefit and protection of Landlord, Tenant and others hereinabove mentioned, and
executed copies of such policies of insurance or certificates thereof shall be
delivered to Landlord within ten (10) days prior to the delivery of possession
of the Premises to Tenant and thereafter within thirty (30) days prior to the
expiration of the term of such policy. All commercial general liability and
property damage policies shall contain a provision that Landlord and any other
additional insured, although named as additional insureds, shall nevertheless be
entitled to recover under said policies for a covered loss occasioned by it, its
servants, agents and employees, by reason of Tenant's negligence. As often as
any policy shall expire or terminate, renewal or additional policies shall be
procured and maintained by Tenant in like manner and to like extent. All such
policies of insurance shall provide that the company writing said policy will
give to Landlord thirty (30) days notice in writing in advance of any
cancellation or lapse or of the effective date of any reduction in the amounts
of insurance. All commercial general liability, property damage and other
casualty policies shall be written on an occurrence basis. Landlord's coverage
shall not be contributory.

        21.4 Should Tenant fail to take out and keep in force each insurance
policy required under this Article 21, or should such insurance not be approved
by Landlord and should the Tenant not rectify the situation within forty-eight
(48) hours after written notice from Landlord to Tenant, Landlord shall have the
right, without assuming any obligation in connection herewith, to effect such
insurance at the sole cost of Tenant, and all outlays by the Landlord shall be
immediately payable by the Tenant to the Landlord as Additional Rent without
prejudice to any other rights and remedies of Landlord under this Lease.

        21.5 Notwithstanding anything to the contrary contained herein, to the
extent permitted by their respective policies of insurance and to the extent of
insurance proceeds received with respect to the loss, Landlord and Tenant each
hereby waive any right of recovery against the other party and against any other
party maintaining a policy of insurance with respect to the Building or any
portion thereof or the contents of any of the same, for any loss or damage
maintained by such other party with respect to the Building or the Premises or
any portion of any thereof or the contents of the same or any operation therein,
whether or not such loss is caused by the fault or negligence of such other
party. Either party shall notify the other party if the policy of insurance
carried by it does not permit the foregoing waiver. If any policy of insurance
relating to the Premises carried by Tenant does not permit the foregoing waiver
or if the coverage under any such policy would be invalidated as a result of
such waiver, Tenant shall, if possible, obtain from the insurer under such
policy a waiver of all rights of subrogation the insurer might have against
Landlord or any other party maintaining a policy of insurance covering the same
loss, in connection with any claim, loss or damage covered by such policy.

        21.6 No approval by Landlord of any insurer, or the terms or conditions
of any policy, or any coverage or amount of insurance or any deductible amount
shall be construed as a representation by Landlord of the solvency of the
insurer or the sufficiency of any policy or any coverage or amount of

                                       26

<PAGE>   30
insurance or deductible and Tenant assumes full risk and responsibility for any
inadequacy of insurance coverage or any failure of insurers.

        21.7 Landlord shall maintain in effect, a policy or policies of property
insurance covering loss or damage to the Building (including the Tenant
Improvement Work and any Tenant's Alterations that, pursuant to Section 9.4,
Tenant will not be required to remove), including fire and extended coverage,
vandalism, malicious mischief, special extended perils (all risk) and, if
obtainable at commercially reasonable rates, in Landlord's discretion,
earthquake in the amount of at least one hundred percent (100%) of the insurable
replacement cost thereof, less such deductible amounts as Landlord may
reasonably determine, and the cost thereof shall be payable as Additional Rent.
Such insurance may also include coverage for loss of rent from the Building for
up to twelve (12) months. Nothing herein shall require Landlord to carry any
insurance with respect to risks or property required to be insured by Tenant
under this Lease.

        21.8 If either party shall at any time deem the limits of any of
insurance required hereunder to either excessive or insufficient, the parties
shall endeavor to agree upon the proper and reasonable limits for such insurance
then carried and such insurance shall thereafter be carried with the limits thus
agreed upon until further change pursuant to the provisions of this section. If
the parties shall be unable to agree thereon, the proper and reasonable limits
of such insurance then to be carried shall be determined by arbitration in
accordance with the rules of the American Arbitration Association, but in no
event shall such limits be less than the coverages set forth above in this
Article 22. Tenant shall maintain the required insurance at the level that
Landlord has requested until there is a final decision in the arbitration, at
which time Tenant shall maintain the level of insurance determined by the
arbitration (but not less than the coverages set forth above in this Article
22).

22.     LIMITATION OF LANDLORD'S LIABILITY

        Landlord shall not be responsible for or liable to Tenant and Tenant
hereby releases Landlord and waives all claims against Landlord for any injury,
loss or damage to any person or property in or about the Premises by or from any
cause whatsoever (other than Landlord's negligent act or willful misconduct)
including, without limitation, acts or omissions of persons occupying adjoining
premises; theft; burst, stopped or leaking water, gas, sewer or steam pipes; or
gas, fire, oil or electricity in, on or about the Building or the Building
Common Area.

23.     ACCESS TO PREMISES

        23.1 Landlord reserves (for itself, and any designated agent,
representative, employee or contractor) the right to enter the Premises at all
reasonable times and, except in cases of emergency, after giving Tenant
reasonable notice, to inspect the Premises, to supply any service to be provided
by Landlord hereunder, to show the Premises to prospective purchasers,
mortgagees or, during the last year of the Term of this Lease, tenants, to post
notices of nonresponsibility, and to alter, improve or repair the Premises and
any portion of the Building, without abatement of Rent or Additional Rent, and
may for that purpose erect, use and maintain necessary structures in and through
the Premises and the Building, where reasonably required by the character of the
work to be performed, provided that the entrance to the Premises shall not be
blocked thereby, and further provided that the business of Tenant shall not be
interfered with unreasonably. Tenant hereby waives any claim for damages for any
injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the

                                       27

<PAGE>   31
Premises or any other loss occasioned thereby. All locks for all of the doors
in, upon and about the Premises, excluding Tenant's vaults and safes or special
security areas (designated in advance in writing by Tenant) shall at all times
be keyed to the Building master system and Landlord shall at all times have and
retain a key with which to unlock all of said doors. Landlord shall have the
right to use any and all means that Landlord may deem necessary or proper to
open said doors in an emergency in order to obtain entry to any portion of the
Premises, and any entry to the Premises or portions thereof obtained by Landlord
by any of said means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction, actual or constructive, of Tenant from the
Premises or any portion thereof.

        23.2 Without limitation of the provisions of Section 23.1 above Landlord
and its authorized agents and representative shall be entitled to enter the
Premises at all reasonable times during business hours for the purpose of
exhibiting the same to prospective purchasers and, during the last 12 months of
the Term, Landlord shall be entitled to exhibit the Premises for hire or for
rent and to display thereon in such manner as will not unreasonably interfere
with Tenant's business the usual "For Rent" or "For Lease" signs, and such signs
shall remain unmolested on the Premises.

24.     HAZARDOUS MATERIALS

        24.1 As used herein, the following terms shall have the following
meanings: "HAZARDOUS MATERIAL" shall mean any chemical, substance, medical or
other waste, living organism or combination thereof which is or may be hazardous
to the environment or human or animal health or safety due to its radioactivity,
ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity,
mutagenicity, phytotoxicity, infectiousness or other harmful or potentially
harmful properties or effects. "HAZARDOUS MATERIALS" shall include, without
limitation, petroleum hydrocarbons, including crude oil or any fraction thereof,
asbestos, radon, polychlorinated biphenyls (PCBs), methane and all substances
which now or in the future may be defined as "hazardous substances," "hazardous
wastes," "extremely hazardous wastes," "hazardous materials," "toxic
substances," "infectious wastes," "biohazardous wastes," "medical wastes,"
"radioactive wastes" or which are otherwise listed, defined or regulated in any
manner pursuant to any Environmental Laws. "ENVIRONMENTAL ACTIVITY" means any
storage, holding, release, emission, discharge, generation, processing,
abatement, removal, disposition, handling or transportation of any Hazardous
Materials from, into or on the Building or the Building Common Area. "TENANT'S
HAZARDOUS MATERIALS" means any Hazardous Materials resulting from the
Environmental Activity by Tenant or any of Tenant's Agents; provided, however,
that "TENANT'S HAZARDOUS MATERIALS" shall not include any Hazardous Materials
that merely migrate from, through, into or onto the Ground Lease Property,
unless such Hazardous Materials were or are introduced into the environment or
exacerbated by Tenant or any of Tenant's Agents.

        24.2 Tenant shall not cause or permit any Hazardous Materials to be
used, stored, discharged, released or disposed of in the Premises or cause any
Hazardous Materials to be used, stored, discharged, released or disposed of in,
from, under or about, the Building, or any other land or improvements in the
vicinity thereof excepting only, if applicable, such quantities of materials as
are normally used in research and development activities, and related office and
administrative activities, and then only in strict accordance with all
Applicable Laws, including all Environmental Laws. Without limitation of the
foregoing, Tenant shall, at its own expense, procure, maintain in effect and
comply with all conditions of any and all permits, licenses, and other
governmental and regulatory approvals required for Tenant's use

                                       28

<PAGE>   32
of Hazardous Materials at the Premises, including, without limitation, discharge
of appropriately treated materials or wastes into or through any sanitary sewer
serving the Building. Tenant shall in all respects handle, treat, deal with and
manage any and all Tenant's Hazardous Materials in total conformity with all
Applicable Laws and prudent industry practices regarding management of such
Hazardous Materials. Without limitation of the foregoing, if any Tenant's
Hazardous Materials result in contamination of the Building, or any soil or
groundwater in, under or about the Building, Tenant, at its expense, shall
promptly take all actions necessary to return the Building or portion thereof
affected, to the condition existing prior to the appearance of the Tenant's
Hazardous Material. Upon the Termination Date, Tenant shall cause all Tenant's
Hazardous Materials in, on, under or about the Building to be removed in
accordance with and in compliance with all Applicable Laws. Subject to the
requirements of Applicable Laws, Tenant shall promptly notify Landlord before
taking any remedial action in response to the presence of any Tenant's Hazardous
Materials or entering into any settlement agreement, consent decree or other
compromise with respect to any claims relating to Tenant's Hazardous Materials.

        24.3 Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect and hold Landlord and Landlord's Agents and their respective
successors and assigns, free and harmless from and against any and all claims,
liabilities, penalties, forfeitures, losses or expenses (including reasonable
attorneys' and consultants' fees and oversight and response costs) to the extent
arising from (A) Environmental Activity by Tenant or Tenant's Agents, or (B)
failure of Tenant or Tenant's Agents to comply with any Environmental Law with
respect to Tenant's Environmental Activity; or (C) Tenant's failure to remove
Tenant's Hazardous Materials as required herein.

        24.4 Tenant shall not suffer any lien to be recorded against the
Premises or the Ground Lease Property as a consequence of any Tenant's Hazardous
Materials, including any so called state, federal or local "super fund" lien
related to the "clean up" of any Tenant's Hazardous Materials in or about the
Building.

        24.5 In the event Hazardous Materials are discovered in or about the
Premises or the Ground Lease Property, and Landlord reasonably believes that
such Hazardous Materials are Tenant's Hazardous Materials, then Landlord shall
have the right to appoint a consultant to conduct an investigation to determine
the nature and extent of such Hazardous Materials and whether such Hazardous
Materials are Tenant's Hazardous Materials, and to determine the corrective
measures, if any, required to remove such Hazardous Materials. If such Hazardous
Materials are determined to be Tenant's Hazardous Materials, Tenant, at its
expense, shall comply with all investigation, remediation or other actions
required by any applicable governmental authority and shall promptly reimburse
Landlord for all costs incurred by Landlord in connection with such
investigation.

        24.6 Tenant shall immediately notify Landlord of any inquiry, test,
investigation or enforcement proceeding by or against Tenant or the Premises or
the Ground Lease Property known to Tenant concerning any Hazardous Materials.
Tenant acknowledges that Landlord, as the owner of the Ground Lease Property, at
its election, shall have the sole right subject to Tenant's prior approval,
which approval shall not be unreasonably withheld or delayed, at Tenant's
expense, to negotiate, defend, approve and appeal any action taken or order
issued with regard to Tenant's Hazardous Materials by any applicable
governmental authority.

                                       29

<PAGE>   33
        24.7 Tenant shall surrender the Premises to Landlord, upon the
expiration or earlier termination of the Lease, free of Tenant's Hazardous
Materials. If Tenant fails to so surrender the Premises, Tenant shall indemnify
and hold Landlord harmless from all losses, costs, claims, damages and
liabilities resulting from Tenant's failure to surrender the Premises as
required by this paragraph, including, without limitation, any claims or damages
in connection with the condition of the Premises including, without limitation,
damages occasioned by the inability to relet the Premises or a reduction in the
fair market and/or rental value of the Building or any portion thereof, by
reason of the existence of any Tenant's Hazardous Materials.

        24.8 Upon or prior to the Commencement Date, Tenant shall provide to
Landlord a complete list of any and all Hazardous Materials (excluding normal
office and janitorial supplies) expected to be employed by Tenant or any of
Tenant's Agents at the Premises. Throughout the Term, Tenant shall continue to
update this list of chemicals, contaminants and Hazardous Materials.

        24.9 The provisions of this Article 24 shall survive the termination of
this Lease.

25.     NOTICES

        Notices or other communications given or required to be given under this
Lease shall be effective only if rendered or given in writing, sent by certified
mail with a return receipt requested, or delivered in person or by courier: (a)
to Tenant at Tenant's address set forth in Article 1 hereof, or at any place
where Tenant or any agent, officer or employee of Tenant may be found if sent
subsequent to Tenant's vacating, deserting, abandoning or surrendering the
Premises; or (b) to Landlord at Landlord's address set forth in Article 1; or
(c) to such other address as either Landlord or Tenant may designate as its new
address for such purpose by notice given to the other in accordance with the
provisions of this Article 25. Any such notice or other communication shall be
deemed to have been rendered or given upon receipt, or when delivery is
attempted but refused. Each of the persons listed in Article 1 as contacts for
Tenant and in the address of Tenant for notices, and any other officer of Tenant
is hereby appointed by Tenant as special attorney-in-fact with full power and
authority to accept personal service on behalf of Tenant under Subdivision 1 of
Section 1162 of the California Code of Civil Procedure, as it may be amended.

26.     NO WAIVER; NO MODIFICATION

        26.1 No failure by Landlord to insist upon the strict performance of any
obligation of Tenant under this Lease or to exercise any right, power or remedy
consequent upon a breach thereof, no acceptance of full or partial Base Rent or
Additional Rent during the continuance of any such breach, and no acceptance of
the keys to or possession of the Premises prior to the expiration of the Term by
any employee or agent of Landlord shall constitute a waiver of any such breach
or of such term, covenant or condition or operate as a surrender of this Lease.

        26.2 Neither this Lease nor any term or provisions hereof may be
changed, waived, discharged or terminated orally, and no breach thereof shall be
waived, altered or modified, except by a written instrument signed by the party
against which the enforcement of the change, waiver, discharge or termination is
sought. No waiver of any breach shall affect or alter this Lease, but each and
every term, covenant and condition of this Lease shall continue in full force
and effect with respect to any other then existing or subsequent breach thereof.
The consent of Landlord given in any instance under the terms of

                                       30

<PAGE>   34
this Lease shall not relieve Tenant of any obligation to secure the consent of
Landlord in any other or future instance under the terms of this Lease.

27.     TENANT's CERTIFICATES

        Tenants, at any time and from time to time within ten. (10) business
days after receipt of written notice from Landlord shall execute, acknowledge
and deliver to Landlord or to any party designated by Landlord, a certificate of
Tenant stating: (a) that Tenant has accepted the Premises, (b) the Commencement
Date, the Rent Commencement Date and Expiration Date of this Lease, (c) that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, that same is in full force and effect as modified and stating the
modifications), (d) whether or not there are then existing any defenses against
the enforcement of any of the obligations of Tenant under this Lease (and, if
so, specify same), (e) whether or not there are then existing any defaults by
Landlord in the performance of its obligations under this Lease (and, if so,
specifying same), (f) the dates, if any, to which the Base Rent and Additional
Rent under this Lease have been paid, and (g) any other information that may
reasonably be required by any of such persons. Failure to deliver such
certificate shall constitute an Event of Default.

28.     CONFIDENTIALITY

        Landlord and Tenant agree that no information whatsoever shall be
released or conveyed to any third party, including limitation, the press or
media or other business entities, whether in the form of informal or formal
discussions, press releases, direct mail or other distributed announcements with
respect to any aspect of the negotiations, discussions relating to or provisions
of this Lease or any related agreements between the parties, without the prior
written consent of the other party. This restriction includes, without
limitation, any and all contacts with print or broadcast media as well as paid
advertising.

29.     TAX ON TENANT'S PERSONAL PROPERTY

        At least ten (10) days prior to delinquency, Tenant shall pay all taxes,
levied or assessed upon Tenant's Property and shall deliver satisfactory
evidence of such payment to Landlord. If the assessed value of Landlord's
property is increased by the inclusion therein of a value placed upon Tenant's
Property, Tenant shall pay to Landlord, upon written demand, the taxes so levied
against Landlord, or the portion thereof resulting from said increase in
assessment, as determined from time to time by Landlord.

30.     SECURITY DEPOSIT

        Upon execution of this Lease, Tenant shall deposit with Landlord the
amount specified in Article 1 as security for the faithful performance of all
terms, covenants and conditions of this Lease. Tenant agrees that Landlord may,
without waiving any of Landlord's other rights and remedies under this Lease
upon the occurrence of any of the events of default described in Article 19
hereof, apply the security deposit in whole or in part to remedy any failure by
Tenant to repair or maintain the Premises or to perform any other terms,
covenants or conditions, contained herein. Should Landlord so apply any portion
of the security deposit, Tenant shall forthwith replenish the security deposit
to the original amount. Landlord shall not be required to keep the security
deposit separate from its general funds, and Tenant shall not be entitled to
interest on any such deposit.

                                       31

<PAGE>   35
31.     PUBLIC TRANSIT INFORMATION

        Tenant shall establish and carry on during the Term a program to
encourage maximum use of public transportation by personnel of Tenant employed
on the Premises, including, without limitation, the distribution to such
employees of written materials explaining the convenience and availability of
public transportation facilities adjacent or proximate to the Building and
encouraging use of such facilities, all at Tenant's sole cost and expense.

32.     DEFAULT BY LANDLORD

        Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event
earlier than thirty (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.

33.     BROKERS

        Tenant warrants that it has had dealings with only the real estate
brokers or agents listed in Article 1 in connection with the negotiation of this
Lease and that it knows of no other real estate broker or agent who is entitled
to a commission in connection with this Lease. Landlord shall be responsible for
the payment of any applicable fees or commissions to the agent or broker listed
in Article 1 pursuant to a separate agreement. Each of Landlord and Tenant shall
indemnify, defend and hold the other party harmless from and against all
liabilities arising from any other claims of brokerage commissions or finder's
fees based on such party's dealings or contacts.

34.     SIGNS

        Without Landlord's written consent, which may be given or withheld in
Landlord's sole discretion, Tenant shall not place or permit to be placed on the
front of the Premises any sign, picture, advertisement, name, notice, marquee or
awning. Tenant shall be entitled to install an external sign identifying Tenant
and the Premises provided that the location of such sign shall be subject to
Landlord's reasonable approval and the design of such sign shall be subject to
Landlord's approval, in Landlord's sole discretion.

35.     FINANCIAL STATEMENTS

        Tenant shall provide Landlord upon ten (10) business days prior written
notice given prior to the execution of this Lease and any subsequent time in
connection with a proposed financing or transfer of Landlord's interest, with
true and correct copies of Tenant's most current audited financial statements.
Landlord shall be entitled to rely upon the information provided by Tenant and
Tenant hereby represents and warrants to Landlord that, as of the date hereof:
(i) all documents provided by Tenant to Landlord are true and correct copies of
the originals; (ii) Tenant has not withheld any information from Landlord that
is material to Tenant's credit worthiness, financial condition or ability to
perform its obligations hereunder; (iii) all information supplied by Tenant to
Landlord is true, correct and accurate; and (iv) no part of the

                                       32

<PAGE>   36
information supplied by Tenant to Landlord contains any misleading or fraudulent
statements. A default under this Article shall be a non-curable default by
Tenant and Landlord shall be entitled to pursue any right or remedy available to
Landlord under the terms of this Lease or available to Landlord under the laws
of the State of California. Such information shall be disclosed by Landlord only
to such prospective lender or transferee and their counsel and representatives,
and subject to reasonable confidentiality requirements.

36.     QUIET ENJOYMENT

        Landlord covenants that Tenant, upon paying the Base Rent and Additional
Rent due hereunder and performing all of its obligations under this Lease, shall
peaceably and quietly enjoy the Premises, subject to the terms and provisions of
this Lease.

37.     SALE OR ASSIGNMENT BY LANDLORD

        37.1 It is agreed that Landlord may at any time sell, assign or transfer
by lease or otherwise its interest as Landlord in and to this Lease, or any part
thereof, and may at any time sell, assign or transfer its interest in and to the
whole or any portion of the Premises or the Building. In the event of any
transfer of Landlord's interest in the Premises or the Building, the transferor
shall be automatically relieved of any and all of Landlord's obligations and
liabilities accruing from and after the date of such transfer provided that the
transferee assumes all of Landlord's obligations under this Lease.

        37.2 Tenant hereby agrees to attorn to Landlord's assignee, transferee,
or purchaser from and after the date of notice to Tenant of such assignment,
transfer or sale, in the same manner and with the same force and effect as
though this Lease were made in the first instance by and between Tenant and
other assignee, transferee or purchaser. In the event of the exercise of the
power of sale under, or the foreclosure of, any deed of trust, mortgage or other
encumbrances placed by Landlord against all or any portion of the Premises,
Tenant shall, upon demand, attorn to the purchaser upon the effective date of
any such sale or foreclosure of any such deed of trust, mortgagee or other
encumbrance, and shall recognize the purchaser or judgment creditor as the
Landlord under the Lease, provided the purchaser or judgment creditor recognizes
Tenant's rights under this Lease.

38.     LEASE MODIFICATIONS

        If Landlord in good faith determines that tax consequences to it of this
transaction are materially different than those now contemplated, or if Landlord
wishes to enter a financing transaction with respect to the Building and a
potential lender requires amendments to this Lease, Landlord may request
reasonable amendments to this Lease and Tenant will not unreasonably withhold,
delay or defer its consent thereto, provided that such modifications will not
increase Tenant's monetary obligations pursuant to this Lease, adversely affect
its beneficial use of the Premises, or otherwise materially increase Tenant's
non-monetary obligations hereunder, or materially adversely affect Tenant's
interests hereunder.

39.     AUTHORITY

        If Tenant is a corporation or a partnership, Tenant and each of the
persons executing this Lease on behalf of Tenant does hereby represent and
warrant as follows: Tenant is an entity as identified in Article 1, duly formed
and validly existing and in good standing under the laws of the state of
organization

                                       33

<PAGE>   37
specified in Article 1 and qualified to do business in the State of California.
Tenant has the power, legal capacity and authority to enter into and perform its
obligations under this Lease and no approval or consent of any person is
required in connection with the execution and performance hereof. The execution
and performance of Tenant's obligations under this Lease will not result in or
constitute any default or event that would be, or with notice or the lapse of
time would be, a default, breach or violation of the organizational instruments
governing Tenant or any agreement or any order or decree of any court or other
governmental authority to which Tenant is a party or to which it is subject.
Tenant has taken all necessary action to authorize the execution, delivery and
performance of this Lease and this Lease constitutes the legal, valid and
binding obligation of Tenant. Upon Landlord's request, Tenant shall provide
Landlord with evidence reasonably satisfactory to Landlord confirming the
foregoing representations and warranties.

40.     SURRENDER

        Upon the Termination Date, Tenant shall surrender the Premises to
Landlord in good order and repair, reasonable wear and tear excepted, free and
clear of all letting and occupancies and free of Hazardous Materials as required
pursuant to Section 24.7 above. Upon any termination of this Lease, all
improvements, except for Tenant's Property and except for any Alterations which
Tenant removes in accordance with the terms of this Lease, shall automatically
and without further act by Landlord or Tenant, become the property of Landlord,
free and clear of any claim or interest therein by Tenant, and without payment
therefor by Landlord.

41.     USE OF NAME

        Tenant acknowledges and agrees that the names "THE LELAND STANFORD
JUNIOR UNIVERSITY", "STANFORD" and "STANFORD UNIVERSITY," and all variations
thereof, are proprietary to Landlord. Tenant shall not use any such name or any
variation thereof or identify Landlord in any promotional advertising or other
promotional materials to be disseminated to the public or any portion thereof or
use any trademark, service mark, trade name or symbol of Landlord or that is
associated with it, without Landlord's prior written consent, which may be given
or withheld in Landlord's sole discretion. Notwithstanding the foregoing, Tenant
may use the term "Stanford Research Park" only to identify the location of the
Premises.

42.     MISCELLANEOUS

        42.1 The term "PREMISES" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The words
"LANDLORD" and "TENANT" as used herein shall include the plural as well as the
singular. If there is more than one Tenant, the obligations under this Lease
imposed on Tenant shall be joint and several. The captions preceding the
articles of this Lease have been inserted solely as a matter of convenience and
such captions in no way define or limit the scope or intent of any provision of
this Lease.

        42.2 The terms, covenants and conditions contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and, except as otherwise
provided herein, their respective personal representatives and successors and
assigns; provided, however, that upon the sale, assignment or transfer by
Landlord named herein (or by any subsequent landlord) of its interest in the
Building as owner or lessee, including, without limitation, any transfer by
Landlord of its interest in this Lease to a master tenant and any surrender of
the underlying ground lease, execution of a subsequent ground lease, or

                                       34

<PAGE>   38
transfer by operation of law, Landlord (or subsequent landlord) shall be
relieved from all subsequent obligations and liabilities arising under this
Lease subsequent to such sale, assignment or transfer.

        42.3 If any provision of this Lease or the application thereof to any
person, entity or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons, entities or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and each provision of this
Lease shall be valid and be enforced to the full extent permitted by law.

        42.4 This Lease shall be construed and enforced in accordance with the
laws of the State of California. Any action that in any way involves the rights,
duties and obligations of the parties under this Lease may (and if against
Landlord, shall) be brought in the Superior Court of Santa Clara County or the
United States District Court of the Northern District of California, and the
parties hereto hereby submit to the personal jurisdiction of said courts.

        42.5 This instrument, including the exhibits hereto, which are
incorporated herein and made a part of this Lease, contains the entire agreement
between the parties and all prior negotiations and agreements are merged herein.
Tenant hereby acknowledges that neither Landlord nor Landlord's agents have made
any representations or warranties with respect to the Premises, the Building,
the Ground Lease Property, or this Lease except as expressly set forth herein,
and no rights, easements or licenses are or shall be acquired by Tenant by
implication or otherwise unless expressly set forth herein.

        42.6 In the event that either Landlord or Tenant fails to perform any of
its obligations under this Lease or in the event a dispute arises concerning the
meaning or interpretation of any provision of this Lease, the defaulting party
or the party not prevailing in such dispute, as the case may be, shall pay any
and all costs and expenses incurred by the other party in enforcing or
establishing its rights hereunder, including, without limitation, court costs
and reasonable attorneys' fees including Landlord's or Tenant's in house
counsel. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
reasonable attorneys' fee including Landlord's in house counsel. Should Tenant
be named as a defendant in any suit brought against Landlord in connection with
or arising out of any foreclosure or mechanics lien not related to any Tenant
Improvement Work or Alterations, Landlord shall pay to Tenant its costs and
expenses incurred in such suit, including reasonable attorneys' fee including
Tenant's in house counsel.

        42.7 Tenant covenants and agrees that no diminution of light, air or
view by any structure that may hereafter be erected (whether or not by Landlord)
shall entitle Tenant to any reduction of the Rent or Additional Rent under this
Lease, result in any liability of Landlord to Tenant, or in any other way affect
this Lease or Tenant's obligations hereunder.

        42.8 Any holding over after the expiration of the Term with the consent
of Landlord shall be construed to automatically extend the Term of this Lease on
a month to month basis at a Base Rent equal to the greater of one hundred
twenty-five percent (125%) of the prevailing rate at which Landlord is then
offering space in buildings determined by Landlord to be most closely comparable
to the Building or one hundred fifty percent (150%) of the latest Base Rent
payable by Tenant hereunder prior to such expiration, together with an amount
estimated by Landlord for the monthly Additional Rent payable under this Lease,

                                       35

<PAGE>   39
and shall otherwise be on the terms and conditions herein specified so far as
applicable. Any holding over without Landlord's consent shall constitute a
default by Tenant and entitle Landlord to exercise any or all of its remedies as
provided in Article 19 hereof, notwithstanding that Landlord may elect to accept
one or more payments of Rent and Additional Rent from Tenant.

        42.9 At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant, any quitclaim deed or other document
required by any reputable title company, licensed to operate in the State of
California, to remove the cloud or encumbrance created by this Lease from the
real property of which Tenant's Premises are a part.

        42.10 Neither Landlord or Tenant shall record this Lease or a short form
memorandum hereof without the consent of the other.

        42.11 Clauses, plats and riders, if any, signed by Landlord and Tenant
and endorsed on or affixed to this Lease are a part hereof.

        42.12 The review, approval, inspection or examination by Landlord of any
item to be reviewed, approved, inspected or examined by Landlord under the terms
of this Lease or the exhibits attached hereto shall not constitute the
assumption of any responsibility by Landlord for either the accuracy or
sufficiency of any such item or the quality of suitability of such item for its
intended use. Any such review, approval, inspection or examination by Landlord
is for the sole purpose of protecting Landlord's interests in the and under this
Lease, and no third parties, including, without limitation, Tenant or any person
or entity claiming through or under Tenant, or the contractors, agents,
servants, employees, visitors or licensees of Tenant or any such person or
entity, shall have any rights hereunder with respect to such review, approval,
inspection or examination by Landlord.

        42.13 In the event of any default by Landlord hereunder, Tenant shall
look only to Landlord's interest in the Sublease and the Building for the
satisfaction of Tenant's remedies; and no other property or assets of Landlord
or any partner, member, officer or director thereof, disclosed or undisclosed,
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to this Lease.

        42.14 This Lease shall not confer or be deemed to confer upon any person
or entity other than the parties hereto, any right or interest, including
without limitation, any third party status or any right to enforce any provision
of this Lease.

                                       36

<PAGE>   40
        42.15 Except as provided in Articles 4 and 32 hereof, time is of the
essence in respect of all provisions of this Lease in which a definite time for
performance is specified.

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

                              LANDLORD:

                              THE BOARD OF TRUSTEES OF THE LELAND
                              STANFORD JUNIOR UNIVERSITY

                              By Stanford Management Company

                              By  /s/ Curtis F. Feeny
                                -----------------------------------------------
                              Name  Curtis F. Feeny
                                  ---------------------------------------------
                              Title  Executive Vice President, Real Estate
                                   --------------------------------------------
                              TENANT:

                              INCYTE PHARMACEUTICALS, INC.
                              a California corporation

                              By  /s/ Denise M. Gilbert
                                -----------------------------------------------
                              Name  Denise M. Gilbert
                                  ---------------------------------------------
                              Title  Executive Vice President & CFO
                                   --------------------------------------------

                              By
                                -----------------------------------------------
                              Name
                                  ---------------------------------------------
                              Title
                                   --------------------------------------------

                                       37

<PAGE>   41
                                    EXHIBIT A

                        LOCATION OF BUILDING AND PARKING

                                    [TO COME]

                                       38

<PAGE>   42
                                    EXHIBIT B

                              INITIAL IMPROVEMENTS

        The purpose of this Exhibit B is to delineate the responsibilities of
Landlord and Tenant with respect to the design and construction of the Base
Building Work and the Tenant Improvement Work.

        1.      Definitions. Terms defined in the Lease, including without
limitation, the exhibits thereto, and not otherwise defined in this Exhibit B
shall have the meanings assigned in the Lease. As used herein, the following
terms shall have the following meanings:

        "BASE BUILDING ARCHITECT" means the architect for the Base Building
designated by Landlord.

        "BASE BUILDING CONTRACTOR" means the general contractor for the Base
Building designated by Landlord.

        "BASE BUILDING PLANS" is as defined in Section 2.1.

        "BASE BUILDING WORK" means the shell structure and all grading,
landscaping; hardscaping; power and utilities to the Building; interior,
above-ceiling fire sprinklers; and all stairs required by the applicable
Building Codes. Base Building Work shall not include, without limitation, core
(roof- mounted HVAC units, primary HVAC distribution, common lobbies, bathrooms,
elevators or other stairs) or any Tenant Improvement Work.

        "BUILDING" means the approximately [85,000-95,000] square foot building
referred to in the Lease, together with the landscaping, parking and other site
improvements on the Building Common Area.

        "CONSTRUCTION SCHEDULE" means the schedule for the design and
construction of the Base Building Work and the Tenant Improvement Work , as
amended from time to time in accordance with this Exhibit B. The initial
Construction Schedule will be established on or about the time that the
preliminary approval of the City of Palo Alto Architectural Review Board
approval is obtained and will be attached hereto as Attachment 1. The
Construction Schedule shall be subject to the reasonable review and approval of
Tenant.

        "DESIGN PROBLEM" means an objection specified by Landlord to any
proposed elements of the Tenant Improvement Work.

        "FINAL COMPLETION OF THE BASE BUILDING" means, after Substantial
Completion of the Base Building Work, the completion of all Punch List Items.

        "FINAL PERMIT APPROVAL" means the issuance or certification by the City
of Palo Alto of the final permit for the Building allowing the legal occupancy
of the Building.

        "FINAL PLANS" is as defined in Section 3.3(b).

                                       39

<PAGE>   43
        "LANDLORD'S UNAVOIDABLE DELAY" means any delay in the construction of
the Base Building Work to the extent caused by circumstances beyond Landlord's
reasonable control, including, without limitation, Acts of God, strikes,
lock-outs, inability to obtain necessary equipment or materials, the
construction of the Tenant Improvement Work after the Commencement Date, delays
by the Base Building Contractor or any subcontractor not resulting from any act
or omission of Landlord, and any delay in the issuance of any necessary
governmental permit or approval where such delay is not the result of Landlord's
actions and exceeds the amount of time for such permit or approval included in
Landlord's Construction Schedule.

        "LEASE" means the Lease in and to which this Exhibit B is attached and
incorporated.

        "PROJECTED DELIVERY DATE" means the date specified in the Construction
Schedule for Substantial Completion of the Base Building Work, subject to
extension for Unavoidable Delay.

        "PUNCH LIST ITEMS" means any incomplete or defective items in the
construction of the Base Building Work that do not materially interfere with the
ability of the Tenant Improvement Contractor to commence and conduct, without
unreasonable interference, construction of the Tenant Improvement Work. For
purposes hereof, "MATERIAL INTERFERENCE" shall only be deemed to occur where the
Tenant Improvement Contractor cannot commence and conduct, without unreasonable
interference, the Tenant Improvement Work using normal construction practices
and after having made reasonable adjustments in the scheduling and location of
the Tenant Improvement Work to accommodate the completion of the Base Building
Work.

        "SCHEDULED DATE FOR COMPLETION OF THE TENANT IMPROVEMENT WORK" means the
date that is the specified number of days after the Commencement Date stated in
the Construction Schedule for completion of the Tenant Improvement Work, which
number of days may be extended by the number of days of delay directly resulting
from a Tenant's Excusable Delay or Tenant's Unavoidable Delay provided that for
Tenant's Excusable Delay, such extension shall not in any event exceed 45 days
in the aggregate.

        "SCHEDULED DATE FOR DELIVERY OF THE PREMISES" means the date established
in the Construction Schedule for completion of the Base Building Work to the
extent necessary to permit the commencement of the Tenant Improvement Work. The
Scheduled Date for Delivery of the Premises shall be extended for each day that
such completion is delayed due to any Landlord's Unavoidable Delay.

        "SPACE PLAN DELIVERY DATE" means the date specified in the Construction
Schedule.

        "TENANT IMPROVEMENT ALLOWANCE" means $30.00 per square foot of Rentable
Area of the Building (determined as provided in Section 5.1 of the Lease) which
shall be applied to the Tenant Improvement Costs.

        "TENANT IMPROVEMENT CONTRACT" means the guaranteed maximum cost contract
with the Tenant Improvement Contractor for the construction of the Tenant
Improvement Work.

        "TENANT IMPROVEMENT CONTRACTOR" means the general contractor for the
construction of the Tenant Improvement Work selected by Tenant and approved by
Landlord in Landlord's reasonable discretion.

                                       40

<PAGE>   44
        "TENANT IMPROVEMENT COSTS" means the actual costs of the Tenant
Improvement Work, including the fees and expenses payable to the Tenant's
Architect and consultants, design and development costs, fees for the Tenant
Improvement Permits and construction costs.

        "TENANT IMPROVEMENT PERMITS" means all permits, licenses and other
approvals necessary to construct the Tenant Improvement Work in compliance with
all Applicable Laws.

        "TENANT IMPROVEMENT PLANS" is as defined in Section 3.3(b).

        "TENANT IMPROVEMENT WORK" means all work required to finish the Premises
to a condition acceptable for the conduct of Tenant's business and not
specifically included in the Base Building Work.

        "TENANT'S ARCHITECT" means the licensed architect engaged by Tenant, and
approved by Landlord in its reasonable discretion, to develop the space plan and
working drawings for, and to oversee the construction of, the Tenant Improvement
Work.

        "TENANT'S ARCHITECT AGREEMENT" means the agreement between Tenant and
Tenant's Architect for the design and oversight of the Tenant Improvement Work.

        "TENANT'S EXCUSABLE DELAY" means any delay in the construction of the
Tenant Improvement Work to the extent caused by circumstances beyond Tenant's
reasonable control, including, without limitation, Acts of God (excluding
earthquake, fire, or other major casualty), strikes, lock-outs, inability to
obtain necessary equipment or materials, delays by the Tenant Improvement
Contractor or any subcontractor not resulting from any act or omission of
Tenant, any delay in the issuance of any necessary governmental permit or
approval where such delay is not the result of Tenant's actions and exceeds the
amount of time for such permit or approval included in Tenant's Construction
Schedule.

        "TENANT'S UNAVOIDABLE DELAY" means any delay in the construction of the
Tenant Improvement Work to the extent caused by the construction of the Base
Building Work after the Date of Delivery of the Premises, the failure of
Landlord to respond within ten (10) business days to a request for approval of
any change in Tenant's Plans and Specifications after their initial approval by
Landlord, or the failure to obtain the permit required for the legal occupancy
of the Building as a result of any matter relating to the Base Building Work
(and not relating to the Tenant Improvement Work), or earthquake, fire or other
major casualty.

        2.      Design and Construction of Base Building.

        2.1     At or around the time Landlord delivers the initial Construction
Schedule to Tenant, Landlord will deliver to Tenant for Tenant's review and
approval, the preliminary plans and specifications for the Base Building Work.
Tenant's approval shall not be unreasonably withheld or delayed and upon the
parties mutual approval, the plans and specifications will be listed and
attached hereto as Attachment 2 (as the same may be modified in accordance with
this Exhibit B, the "BASE BUILDING PLANS"). Landlord shall obtain all permits
and approvals for the Base Building Work and shall cause the Base Building Work
to be constructed in a first class manner and in compliance with all Applicable
Laws as of the date permits for the construction of the Base Building Work were
obtained and Landlord shall, at Landlord's sole cost and expenses, correct any
failure of the Base Building Work to comply with such Applicable Laws.

                                       41

<PAGE>   45
        Landlord shall diligently prosecute the construction of the Base
Building Work and use diligent efforts to achieve Substantial Completion of the
Base Building Work by the Projected Delivery Date, subject to Unavoidable
Delays.

        2.2     Landlord shall notify Tenant in writing upon receipt by Landlord
of notice from the Base Building Contractor that the Base Building Contractor
believes that Substantial Completion of the Base Building Work has occurred (or
will occur on a specified date). Representatives of Landlord and Tenant shall
accompany the Base Building Architect and the Base Building Contractor on a
walk-through and inspection of the Premises (the "SUBSTANTIAL COMPLETION
INSPECTION" to determine if Substantial Completion of the Base Building Work has
occurred and to identify any Punch List Items. Upon completion of the
Substantial Completion Inspection, provided that the Base Building Architect has
issued a certificate certifying that Substantial Completion of the Base Building
Work has occurred and identifying the Punch List Items, including any Punch List
Items identified by Landlord or Tenant, Tenant shall sign an acceptance form in
the form of Attachment 3 hereto acknowledging that Tenant has inspected the Base
Building Work and accepts the Premises for all purposes under the Lease, subject
only to completion of the Punch List Items identified in the Base Building
Architect's certificate. Substantial Completion of the Base Building work shall
be deemed to occur as of the date of the issuance of the Base Building
Architect's Certificate of Substantial Completion.

        2.3     Landlord shall diligently monitor the Base Building Contractor's
completion of the Punch List Items and use commercially reasonable efforts to
ensure that such Punch List Items will be completed promptly. Completion of the
Punch List Items shall be undertaken so as to minimize any material interference
with Tenant's construction of the Tenant Improvement Work. Landlord shall notify
Tenant upon receipt by Landlord of notice from the Base Building Contractor that
Final Completion of the Base Building Work has occurred. Representatives of
Landlord and Tenant shall accompany the Base Building Architect and the Base
Building Contractor on a walk through and inspection of the Premises to
determine if Final Completion of the Base Building Work has occurred. If there
are any remaining Punch List Items, Landlord shall cause the completion of such
items and the parties shall conduct an additional walk through and inspection.
Upon Final Completion the parties shall execute a written acknowledgment that
Final Completion of the Base Building Work has occurred.

        2.5     During the course of construction of the Base Building Work,
Landlord shall carry the following insurance, which insurance may be
self-insurance:

               (i) comprehensive "all risk" builder's risk insurance, including
vandalism and malicious mischief, excluding earthquake and flood, covering all
improvements in place on the Premises, all materials and equipment stored at the
site and furnished under contract, and all materials and equipment that are in
the process of fabrication at the premises of any third party or that have been
placed in due course of transit to the Premises when such fabrication or transit
is at the risk of, or when title to or an insurable interest in such materials
or equipment has passed to, Landlord or its construction manager, contractors or
subcontractors (excluding any contractors', subcontractors' and construction
managers' tools and equipment, and property owned by the employees of the
construction manager, any contractor or any subcontractor), such insurance to be
written on a completed value basis in an amount not less than the full estimated
replacement value of the Base Building Work.

                                       42

<PAGE>   46
               (ii) comprehensive liability insurance which insurance may be
effected by endorsement, if obtainable, including insurance for completed
operations, elevators, owner's, construction manager's and contractor's
protective liability, products completed operations for three (3) years after
the date of acceptance of the Base Building Work, broad form blanket contractual
liability, broad form property damage and full form personal injury (including
but not limited to bodily injury), covering the performance of all work at or
from the Premises by Landlord, its construction manager, contractors and
subcontractors, and in a liability amount not less than the amount at the time
carried by prudent owners of comparable construction projects in the Santa Clara
Valley, but in any event not less than Two Million Dollars ($2,000,000) combined
single limit, which policy shall contain a cross-liability clause or separation
of insureds provision and an endorsement deleting the property damage exclusion
as to explosion, underground, and collapse hazards, and shall include thereunder
for the mutual benefit of Landlord and Tenant bodily injury liability and
property damage liability automobile insurance on any non-owned, hired or leased
automotive equipment used in the construction of any work.

        3.      Design and Construction of the Tenant Improvement Work.

        3.1     Subject to the provisions of the Lease, Tenant shall be
responsible for the design and construction of the Tenant Improvement Work and
shall use diligent efforts to cause the construction of the Tenant Improvement
Work in a first class manner and in compliance with all Applicable Laws.

        3.2     Without limitation of any other provision of the Lease or this
Exhibit B, all of the provisions of Article 9 (Alterations by Tenant) and
Article 11 (Liens) shall apply to the Tenant Improvement Work. Prior to Tenant's
commencement of any Tenant Improvement Work, representatives of Landlord and
Tenant shall accompany the Base Building Architect and the Base Building
Contractor on a walk through and inspection to identify items of the
construction of the Base Building Work (other than improvements outside of the
Buildings) that are completed and that are not completed. The parties shall
execute a written acknowledgment of the status of such items prior to Tenant's
commencing construction of the Tenant Improvement Work.

        3.3     (a) Tenant shall use diligent efforts to submit to Landlord, for
Landlord's approval, on or before the Space Plan Delivery Date, a basic space
plan (the "SPACE PLAN") prepared by the Tenant's Architect for the layout of the
Tenant Improvement Work consistent with the design of the Base Building Work.
Within ten (10) business days after Landlord receives the Space Plan, Landlord
shall either approve the Space Plan or disapprove the Space Plan and, in the
event of disapproval, furnish a written statement of the Design Problems to
Tenant. Landlord's approval shall not be unreasonably withheld, provided that it
shall not be unreasonable for Landlord to withhold its approval if, in
Landlord's judgment, the Space Plan is not of a generic nature compatible with
use of the Premises by standard research and development tenants. In the event
of such disapproval, Tenant shall, as expeditiously as practicable, make the
changes necessary in order to correct the Design Problems and shall return the
Space Plan to Landlord. Landlord shall approve or disapprove such changes within
ten (10) business days after Landlord receives the revised Space Plan. This
procedure shall be repeated until the Space Plan is finally approved by Landlord
and written approval has been received by Tenant.

               (b) After the Space Plan is finally approved by Landlord, Tenant
shall submit to Landlord complete plans and specifications for the Tenant
Improvement Work, based upon the approved Space Plan,

                                       43

<PAGE>   47
including, without limitation, mechanical and electrical drawings (collectively
the "TENANT IMPROVEMENT PLANS"). The Tenant Improvement Plans shall be in a form
sufficient to secure necessary Tenant Improvement Permits. Tenant shall use
diligent efforts to obtain, on a timely basis in accordance with the
Construction Schedule, all Tenant Improvement Permits. Landlord shall, within
ten (10) business days after receipt of the Tenant Improvement Plans, approve
the same or designate by notice to Tenant the specific changes reasonably
required to be made to the Tenant Improvement Plans in order to correct any
Design Problem. Landlord shall not unreasonably withhold its consent, provided
the Tenant Improvement Plans are in substantial conformity with the Space Plan.
Within ten (10) business days thereafter, Tenant shall make the changes
necessary in order to correct any such Design Problem and shall return the
Tenant Improvement Plans to Landlord. Landlord shall approve or disapprove the
revised Tenant Improvement Plans within ten (10) business days after receipt by
Landlord. Landlord shall not unreasonably withhold its consent, provided the
Tenant Improvement Plans are in substantial conformity with the Space Plan. This
procedure shall be repeated until the Tenant Improvement Plans are finally
approved by Landlord and Tenant has received Landlord's written approval
thereof. The final Tenant Improvement Plans approved by Landlord, including any
changes, additions or alterations thereto approved by Landlord and Tenant as
provided in Section 3.4, are herein referred to as the "FINAL PLANS".

        3.4     If Tenant shall request any change, addition or alteration in
the Final Plans, the Tenant's Architect shall prepare plans and specifications
with respect to such change, addition or alteration, which plans and
specifications shall be submitted to Landlord for Landlord's review and
approval. The procedure set forth in Section 3.3(a) shall apply to any such
change, addition or alteration.

        4.      Construction of the Tenant Improvement Work.

        4.1     Tenant shall construct the Tenant Improvement Work in accordance
with all Applicable Laws and with the Final Plans approved by Landlord and the
requirements of Articles 8 and 9 of the Lease.

        4.2     Tenant shall commence construction of the Tenant Improvement
Work upon the Commencement Date and thereafter diligently prosecute the Tenant
Improvement Work to completion using diligent efforts to cause Substantial
Completion to occur by the Scheduled Date for Completion of the Tenant
Improvement Work. Landlord's written approval shall be obtained prior to
undertaking any work that deviates from the Final Plans approved by Landlord.

        4.3     Prior to commencement of construction of the Tenant Improvement
Work, Tenant shall obtain and deliver to Landlord all policies of insurance
required to be maintained by Tenant under the Lease.

        5.      Payment of Tenant Improvement Costs.

        5.1     Landlord shall provide to Tenant a Tenant Improvement Allowance
in the amount of $30.00 per square foot of Rentable Area. The Tenant Improvement
Allowance shall be disbursed as provided below.

        5.2     As a condition to the first disbursement of the Tenant
Improvement Allowance, Tenant shall have satisfied all of the following
conditions:

                                       44

<PAGE>   48
               (a) Tenant shall have delivered to Landlord duly executed
originals of each of the Tenant's Architect Agreement and the Tenant Improvement
Contract.

               (b) Landlord shall have approved, in Landlord's reasonable
discretion, the budget for the portion of the Tenant Improvement Work to be
funded by the Tenant Improvement Allowance.

               (c) The Final Plans shall have been completed and approved.

               (d) Tenant shall have obtained and be in compliance with all
Tenant Improvement Permits.

        5.3     Disbursements of the Tenant Improvement Allowance will be made
to a demand deposit account in the name of Tenant within twenty (20) days after
receipt by Landlord of the Draw Certifications required under Section 5.4 below,
but not more frequently than monthly, provided that (i) no default exists under
the Lease beyond any applicable cure period; (ii) no default exists under either
of the Tenant Improvement Contract or the Tenant's Architect Agreement beyond
any applicable cure period; (iii) no lien has been filed with respect to the
Tenant Improvement Work that has not been released or bonded over; (iv) Tenant
is in compliance with the Tenant Improvement Permits, and (v) all insurance
required under Articles 9 and 21 of the Lease is in full force and effect.

        5.4     As a condition to each funding, Tenant shall deliver to Landlord
all of the following:

               (a) Tenant's Construction Draw Certificate in the form of
Attachment 4 hereto;

               (b) The Tenant Improvement Contractor's Certificate in the form
of Attachment 5 hereto;

               (c) Conditional and unconditional lien releases, as applicable,
in the form required under California Civil Code Section 3262.

        5.5     The first disbursement may include all Tenant Improvement Costs
incurred prior to commencement of construction, including, without limitation,
fees for Tenant's Architect and Tenant Improvement Permit fees.

        5.6     Upon completion of the Tenant Improvement Work, Tenant shall
provide Landlord with certifications from the Tenant's Improvement Contractor
and the Tenant's Architect that the Tenant Improvement Work has been
substantially completed in accordance with the Final Plans and with copies of
final lien releases from all contractors and subcontractors.

                                       45

<PAGE>   49
                            ATTACHMENT 1 TO EXHIBIT B

                              CONSTRUCTION SCHEDULE
                                    [TO COME]

                                       46

<PAGE>   50
                            ATTACHMENT 2 TO EXHIBIT B

                           LIST OF BASE BUILDING PLANS
                                    [TO COME]

                                       47

<PAGE>   51
                            ATTACHMENT 3 TO EXHIBIT B

                                 ACCEPTANCE FORM

        This Acceptance form is executed with reference to that certain Lease
dated as of _______, 1997 by and between by and between THE BOARD OF TRUSTEES OF
THE LELAND STANFORD JUNIOR UNIVERSITY ("LANDLORD"), and INCYTE PHARMACEUTICALS,
INC. , a California corporation ("TENANT"). Terms defined in the Lease and the
exhibits thereto shall have the same meaning when used herein.

        Tenant hereby certifies to Landlord that Tenant has inspected the
Premises as of _________ (the "DATE OF INSPECTION") and that the Base Building
Work is Substantially Complete except only for Punch List Items listed in Base
Building Architect's Certificate of Substantial Completion, a copy of which is
attached hereto. Tenant further acknowledges that Tenant hereby accepts the
Premises in its existing condition, subject only to the completion of any Punch
List Items and any latent defects in the Base Building Work.

        The person executing this Acceptance Form on behalf of Tenant represents
and warrants to Landlord that such person is duly authorized to execute this
Acceptance Form and that this Acceptance Form has been duly authorized, executed
and delivered on behalf of Tenant.

        THIS ACCEPTANCE FORM is executed by Tenant as of the Date of Inspection.

INCYTE PHARMACEUTICALS, INC.,

By:
   -------------------------------------
Print Name:
           -----------------------------
Title:
      ----------------------------------
Date:
     -----------------------------------

                                       48

<PAGE>   52
                           ATTACHMENT 4 TO EXHIBIT B

                TENANT'S CONSTRUCTION DRAW CERTIFICATION

General Contractor:
                   ---------------------------
Design Architect:
                 -----------------------------
-------------------------------------------------------------------------------
<TABLE>
<S>     <C>                                                     <C>
1.      Original Contract Amount                                 $
2.      Additions to Contract                                    $
3.      Deductions from Contract                                 $
4.      Adjusted Amount of Contract                              $
5.      Total Completed or Stored to Date                        $
6.      Total Retainage                                          $
7.      Total Earned Less Retainage                              $
8.      Previous Payments                                        $
9.      Current Payment Due                                      $
</TABLE>

-------------------------------------------------------------------------------

                              TENANT CERTIFICATION

To induce Landlord to disburse proceeds of the Tenant Improvement Work pursuant
to the Lease, Tenant hereby certifies to Landlord as follows:

A.      The amount shown on Line 9 above as Current Payment due is the actual
amount presently payable to the General Contractor.

B.      No Event of Default presently exists under the Lease.

C.      Tenant has no knowledge of and has received no notices of liens or
claims of lien either filed or threatened against the premises, except:

-----------------------------------------------------------------------------
-----------------------------------------------

D.      All amounts shown on Line 8 above and in the column entitled "Previous
Payments" in the Disbursement Request Summary for this Draw Request have been
paid by Tenant.

E.      The Tenant approves all work and materials for which payment is due (as
shown on Line 9 above) and confirms that to Tenant's knowledge and belief such
work and materials conform with the Tenant Improvement Plans, as defined in the
Lease, as they may be modified by written change orders in compliance with the
requirements of the Lease.

                                       49

<PAGE>   53
F.      The amounts shown above indicate that sufficient funds remain available
under the construction contract to complete all work required under such
contract and the following approved change orders:

--------------------------------------------------------------------------------

G.      The following list identifies those change order requests or proposals
which have been submitted by the Tenant Improvement Contractor but are pending
approval:

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

I.      All permits, approvals and authorizations required by all governmental
authorities for the work covered by this draw request, the work which was the
subject of previous draw requests, and the work that is currently ongoing have
been obtained.

J.      Approximately _______% of the Tenant Improvement Work has been completed
as of this date.

WITNESS:

BY:
   -----------------------------------
TITLE:
      --------------------------------

                                       50

<PAGE>   54
                                 PAYMENT REQUEST

  (Attached to and forming a part of Tenant's Construction Draw Certification)

                           DISBURSEMENT NO.__________

                                                          DATE:
                                                               ----------------

<TABLE>
<CAPTION>

                                                       Revised
                                          Original     Estimate      Disbursed to    This        Total
Item Number             Description       Estimate     Date          Date            Request     Disbursement
-----------             -----------       --------     --------      ------------    -------     ------------
<S>                     <C>               <C>          <C>           <C>             <C>          <C>
Total
Reserve for
Contingencies
Total Funds
Available
</TABLE>

                                       51

<PAGE>   55
                            ATTACHMENT 5 TO EXHIBIT B

                  CONTRACTOR'S CONSTRUCTION DRAW CERTIFICATION

Project Name:                                        Date:
             ------------------------                     ---------------------
Location:                                         Draw No:
         ----------------------------                     ---------------------

Landlord: The Board of Trustees of the Leland Stanford Junior University
Tenant:
General Contractor:
Design Architect:

-------------------------------------------------------------------------------
<TABLE>

<S>     <C>                                 <C>
1.      Original Contract Amount            $___________
2.      Additions to Contract               $___________
3.      Deductions from Contract            $___________
4.      Adjusted Amount of Contract         $___________
5.      Total Completed or Stored to Date   $___________
6.      Total Retainage                     $___________
7.      Total Earned Less Retainage         $___________
8.      Previous Payments                   $___________
9.      Current Payment Due                 $___________
</TABLE>
-------------------------------------------------------------------------------

                     GENERAL CONTRACTOR CERTIFICATION

To induce Landlord to make a disbursement of the Initial Improvements Allowance
pursuant to its Lease with Tenant, the undersigned (General Contractor)
certifies to Landlord as follows:

a.      The information contained in all documents and supporting papers
prepared or signed by General Contractor and submitted to Landlord are true and
correct.

b.      The amount shown on Line 9 of the Draw Request Certification is the
amount presently due and payable under the contract with Tenant.

c.      The amount shown on Line 8 of the Draw Request Certification has been
received by the General Contractor and applied to the amount due under the
contract with Tenant.

d.      There has been no significant change in construction costs and the
balance due under the contract with Tenant is sufficient to complete the work
required under the contract.

                                       52

<PAGE>   56
e.      All work performed to date conforms with the contract with Tenant and
the Plans and Specifications prepared and coordinated by the Design Architect.

f.      There have been no change orders to the contract, proposed or approved,
except

---------------------------------------------

g.      All subcontracted items and material/equipment items are shown in the
Application for Payment breakdown accompanying this Draw Request.

BY:
   ----------------------------------
TITLE:
      -------------------------------

                                       53

<PAGE>   57
                                   EXHIBIT C-1

                           NOTICE OF COMMENCEMENT DATE

                   (Letterhead of Stanford Management Company)

(Date)

Incyte Pharmaceuticals, Inc.

---------------------------------
---------------------------------
Attention:
          -----------------------

Re:     Acknowledgment of Commencement Date,
        Lease between The Board of Trustees of the Leland Stanford
        Junior University (Landlord), and Incyte Pharmaceuticals, Inc.
        (Tenant), for premises located at 3_____ Porter Drive,
        Palo Alto, California

Gentlemen/Ladies:

        This letter will confirm that for all purposes of the Lease, the
Commencement Date (as defined in Section 4.1 of the Lease) is
___________________.

        Please acknowledge your acceptance of this letter by signing and
returning two copies of this letter.

                                         Very truly yours,

                                         Stanford Management Company

                                         By:
                                            -----------------------------------
                                         Its:
                                             ----------------------------------

ACCEPTED AND AGREED:

Incyte Pharmaceuticals, Inc.

By:
   ----------------------------------
Its:
    ---------------------------------
Dated:
      -------------------------------

                                       54

<PAGE>   58
                                   EXHIBIT C-2

              NOTICE OF RENT COMMENCEMENT DATE AND EXPIRATION DATE

(Date)

Incyte Pharmaceuticals, Inc.

---------------------------------
---------------------------------
Attention:
          -----------------------

Re:        Acknowledgment of Rent Commencement Date and Expiration Date,
           Lease between The Board of Trustees of the Leland Stanford
           Junior University (Landlord), and Incyte Pharmaceuticals, Inc.
           (Tenant), for premises located at 3_____ Porter Drive,
           Palo Alto, California

Gentlemen/Ladies:

        This letter will confirm that for all purposes of the Lease, the Rent
Commencement Date (as defined in Section 4.1 of the Lease) is __________ and the
Expiration Date (as defined in Section 4.1 of the Lease) is __________________.

        Please acknowledge your acceptance of this letter by signing and
returning two copies of this letter.

                                         Very truly yours,

                                         Stanford Management Company

                                         By:
                                            -----------------------------------
                                         Its:
                                             ----------------------------------

ACCEPTED AND AGREED:

Incyte Pharmaceuticals, inc.

By:
   ----------------------------------
Its:
    ---------------------------------
Dated:
      -------------------------------

                                       55

<PAGE>   59
                                    EXHIBIT D

                 DETERMINATION OF PREVAILING MARKET RENTAL RATE

        As used herein, the term "Prevailing Market Rental Rate" shall mean the
base monthly rental (net of all expenses) for space of comparable size and
location to the Premises and in buildings similar in age and quality to the
Building in the Stanford Research Park, taking into account any additional
rental and all other payments or escalations then being charged and allowances
being given in the Stanford Research Park for such comparable space over a
comparable term and excluding the value of any Alterations made by Tenant and
the excess costs of the Tenant Improvement Work paid by Tenant. If Tenant timely
exercises its Renewal Option, the Prevailing Market Rental Rate shall be
determined by Landlord and Landlord shall give Tenant written notice of such
determination not later than eleven (11) months prior to the expiration of the
initial term or the preceding Renewal Term, as applicable. If Tenant disputes
Landlord's determination of the Prevailing Market Rental Rate, Tenant shall so
notify Landlord within ten (10) days following Landlord's notice to Tenant of
Landlord's determination and, in such case, the Prevailing Market Rental Rate
shall be determined as follows:

        (a)     Within thirty (30) days following Landlord's notice to Tenant of
the Prevailing Market Rental Rate, Landlord and Tenant shall meet no less than
two (2) times, at a mutually agreeable time and place, to attempt to agree upon
the Prevailing Market Rental Rate.

        (b)     If within this thirty (30) day period Landlord and Tenant cannot
reach agreement as to the Prevailing Market Rental Rate, they shall each select
one appraiser to determine the Prevailing Market Rental Rate. Each such
appraiser shall arrive at a determination of the Prevailing Market Rental Rate
and submit his or her conclusions to Landlord and Tenant within thirty (30) days
after the expiration of the thirty (30) day consultation period described in (a)
above.

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

        (d)     Tenant shall have the right, exercisable by written notice to
Landlord given not later than five (5) days after receipt of the determination
of the Prevailing Market Rental Rate, to rescind Tenant's exercise of the
Renewal Option, in which case the Renewal Option shall be null and void and
Tenant shall have no further option to extend the term of the Lease. If Tenant
fails to exercise such right to rescind within such five (5) day period, the
Renewal Option shall be irrevocable.

        (e)     All appraisers specified pursuant hereto shall be members of the
American Institute of Real Estate Appraisers with not less than five (5) years
experience appraising office, research and development and industrial properties
in the Santa Clara Valley. Each party shall pay the cost of the appraiser
selected by such party and one-half of the cost of the third appraiser plus
one-half of any other costs incurred in the determination; provided that if
Tenant exercises its right to rescind the Renewal Option, Tenant shall pay one
hundred percent (100%) of the appraisal costs.

                                       56

<PAGE>   60
                                    EXHIBIT E

                      NOTICE OF BASE RENT AND RENTABLE AREA

(Date)

Incyte Pharmaceuticals, Inc.

---------------------------------
---------------------------------
Attention:
          -----------------------

Re:     Acknowledgment of Base Rent and Rentable Area,
        Lease between The Board of Trustees of the Leland Stanford
        Junior University (Landlord), and Incyte Pharmaceuticals, Inc.
        (Tenant), for premises located at 3170 Porter Drive,
        Palo Alto, California

Gentlemen/Ladies:

        This letter will confirm that for all purposes of the Lease:

        The Rentable Area of the Building is ___________ square feet.

        The Annual Base Rent is $ _____________ ($36.00 x RSF of the Building).

        The Monthly Base Rent is $__________ ($3.00 x RSF of the Building).

        As of the date hereof the Rentable Area of the other building on the
Ground Lease Property is ____________ square feet.

        Attached hereto is the certificate of the Architect confirming the above
square footages.

                                       57

<PAGE>   61
        Please acknowledge your acceptance of this letter by signing and
returning two copies of this letter.

                                         Very truly yours,

                                         Stanford Management Company

                                         By:
                                            -----------------------------------
                                         Its:
                                             ----------------------------------

ACCEPTED AND AGREED:

Incyte Pharmaceuticals, Inc.

By:
   ----------------------------------
Its:
    ---------------------------------
Dated:
      -------------------------------

                                       58

<PAGE>   62
                                    EXHIBIT F

                     OUTLINE OF STANFORD RESEARCH PARK AREA

                                       59

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