Document:

AMENDED AND RESTATED
                   FIRST NATIONAL BANK OF NORTHERN CALIFORNIA
                          SALARY CONTINUATION AGREEMENT

         THIS AGREEMENT is adopted this 9th day of September, 2004, by and
between FIRST NATIONAL BANK OF NORTHERN CALIFORNIA, a nationally-chartered
commercial bank located in South San Francisco, California (the "Company"), and
JAMES B. RAMSEY (the "Executive"), amending and restating FIRST NATIONAL BANK OF
NORTHERN CALIFORNIA SALARY CONTINUATION AGREEMENT dated December 31, 1999, and
the FIRST AMENDMENT dated December 14, 2001, between the Company and the
Executive.

                                  INTRODUCTION

         To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.

                                    AGREEMENT

         The Company and the Executive agree as follows:

                                    Article 1
                                   Definitions

         Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:

         1.1      "Change of Control" means (a) any merger or consolidation of
the Company in which the Company is not the surviving corporation; or (b) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) of any assets of the Company having an
aggregate fair market value of fifty percent (50%) or more of the total value of
the assets of the Company' and its consolidated subsidiaries reflected in the
most recent balance sheet of the Company; or (c) any person (as such term is
defined in Section 13(d) and 14(d)(2) of the Securities and Exchange Act of
1934) becomes a beneficial owner, directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities.

         1.2      "Code" means the Internal Revenue Code of 1986, as amended.

         1.3      "Disability" means that the Executive is permanently disabled,
due to an illness or injury, so that the Executive is unable to perform to a
material degree his or her current or later designated duties as an Executive
Officer of the Company. Such disability shall be determined by an independent
physician in the event of physical disability or by an independent psychiatrist
in the event of mental disability, selected with the approval of the Company and
the Executive. If they cannot agree on the selection, each shall submit a list
of three physicians or psychiatrists as applicable, each shall strike two from
the other's list, and the final choice shall be selected by lot (coin flip).

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         1.4      "Early Involuntary Termination" means that the Executive,
prior to Normal Retirement Age, has been notified in writing that employment
with the Company is terminated for reasons other than an approved leave of
absence, Termination for Cause, Disability, or Early Voluntary Termination.

         1.5      "Early Termination" means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability, Termination for
Cause or following a Change of Control.

         1.6      "Early Voluntary Termination" means that the Executive, prior
to Normal Retirement Age, has terminated employment with the Company for reasons
other than Termination for Cause, Disability, or Early Involuntary Termination.

         1.7      "Early Termination Date" means the month, day and year in
which Early Termination occurs.

         1.8      "Effective Date" means November 1, 2003.

         1.9      "Normal Retirement Age" means the Executive attaining age
sixty-five (65).

         1.10     "Normal Retirement Date" means the later of the Normal
Retirement Age or Termination of Employment.

         1.11     "Plan Year" means a twelve-month period commencing on January
1 and ending on December 31 of each year. The initial Plan Year shall begin on
the Effective Date of this Agreement.

         1.12     "Termination for Cause" shall be defined as set forth in
Article 5.

         1.13     "Termination of Employment" means that the Executive ceases to
be employed by the Company for any reason, voluntary or involuntary, other than
by reason of a leave of absence approved by the Company.

         1.14     "Years of Service" means the total number of Plan years during
which the Executive is employed on a full-time basis by the Company, inclusive
of any approved leave of absence. Employed on a full-time basis means that the
Executive is considered by the Company to be employed to work at minimum forty
(40) hours a week which is determined on the first and last days of the Plan
Year.

                                    Article 2
                                Lifetime Benefits

         2.1      Normal Retirement Benefit. Upon Termination of Employment on
or after the Normal Retirement Age for reasons other than death, the Company
shall pay to the Executive the benefit described in this Section 2.1 in lieu of
any other benefit under this Agreement.

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                  2.1.1    Amount of Benefit. The annual benefit under this
         Section 2.1 is $70,000 (Seventy Thousand Dollars). The Company, in its
         sole discretion, may increase the annual benefit under this Section
         2.1.1; however, any increase shall require the recalculation of
         Schedule A.

                  2.1.2    Payment of Benefit. The Company shall pay the annual
         benefit to the Executive in twelve (12) equal monthly installments
         commencing with the first of the month following the Executive's Normal
         Retirement Date, paying the annual benefit to the Executive for a
         period of twenty (20) years.

         2.2      Early Voluntary Termination Benefit. The Company shall not pay
an Early Voluntary Termination Benefit under this Agreement.

         2.3      Early Involuntary Termination Benefit. Upon Early Involuntary
Termination, the Company shall pay to the Executive the benefit described in
this Section 2.3 in lieu of any other benefit under this Agreement.

                  2.3.1    Amount of Benefit. If the Executive has completed at
         least one Year of Service, the benefit under this Section 2.2 is the
         Early Voluntary Termination amount set forth on Schedule A for the Plan
         Year ending immediately prior to the Early Termination Date, determined
         by vesting the Executive in one hundred percent (100%) of the Accrual
         Balance for said Plan Year. Any increase in the annual benefit under
         Section 2.1.1 shall require the recalculation of this benefit on
         Schedule A. This benefit is determined by calculating a twenty-year
         fixed annuity from said Accrual Balance, crediting interest on the
         unpaid balance at an annual rate of 6%, compounded monthly, subject to
         change at the Board's discretion.

                  2.3.2    Payment of Benefit. The Company shall pay the annual
         benefit to the Executive in twelve (12) equal monthly installments
         commencing with the first of the month following the Executive's
         attaining Normal Retirement Age, paying the annual benefit to the
         Executive for a period of twenty (20) years.

         2.4      Disability Benefit. If the Executive terminates employment due
to Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.

                  2.4.1    Amount of Benefit. The benefit under this Section 2.4
         is the Disability amount set forth on Schedule A for the Plan Year
         ending immediately prior to Termination of Employment (except during
         the first Plan Year, the benefit is the amount set forth for Plan Year
         1), determined by vesting the Executive in one hundred percent (100%)
         of the Accrual Balance for said Plan Year. Any increase in the annual
         benefit under Section 2.1.1 would require the recalculation of this
         Disability benefit on Schedule A. This benefit is determined by
         calculating a twenty-year fixed annuity from said Accrual Balance,
         crediting interest on the unpaid balance at an annual rate of 6%,
         compounded monthly, subject to change at the Board's discretion.

                  2.4.2    Payment of Benefit. The Company shall pay the annual
         benefit to the Executive in twelve (12) equal monthly installments
         commencing with the first of the month following the Executive's
         Termination of Employment, paying the annual benefit to the Executive
         for a period of twenty (20) years.

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         2.5      Change of Control Benefit. Upon a Change of Control, followed
within twelve (12) months by the Executive's Termination of Employment for
reasons other than death, Disability or retirement, the Company shall pay to the
Executive the benefit described in this Section 2.5 in lieu of any other benefit
under this Agreement.

                  2.5.1    Amount of Benefit. The benefit under this Section 2.5
         is the Change of Control amount set forth on Schedule A for the Plan
         Year ending immediately prior to Termination of Employment (except
         during the first Plan Year, the benefit is the amount set forth for
         Plan Year 1), determined by vesting the Executive one hundred percent
         (100%) in the Normal Retirement Benefit described in Section 2.1.1.

                  2.5.2    Payment of Benefit. The Company shall pay the annual
         benefit to the Executive in twelve (12) equal monthly installments
         commencing with the first of the month following the Executive
         attaining Normal Retirement Age, paying the annual benefit to the
         Executive for a period of twenty (20) years.

                                    Article 3
                                 Death Benefits

         The Company shall not pay a death benefit under this Agreement while
the Executive is employed by the Company or during the payment of any benefit
under this Agreement. A death benefit may be provided according to the terms of
a separate Split Dollar Agreement entered into by the Company and the Executive.

                                    Article 4
                               General Limitations

         4.1      Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement if the Company terminates the Executive's employment for:

                  (a)      Willful breach of duty in the course of employment,
                           unless waived by the Company;
                  (b)      Dishonest or illegal conduct of the Executive; or
                  (c)      Habitual neglect by the Executive of the Executive's
                           employment duties, unless waived by the Company.

         4.2      Excess Parachute Payment. Notwithstanding any provision of
this Agreement to the contrary, the Company will reduce any benefit under this
Agreement by an amount necessary to avoid an excise tax under the excess
parachute rules of Section 280G of the Code.

         4.3      Misstatement. No benefits shall be payable under this
Agreement if the Executive has made any material misstatement of fact on any
application for life insurance purchased by the Company, which results in the
Company being denied its death benefit.

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                                    Article 5
                           Claims and Review Procedure

         5.1      For all claims other than disability benefits:

                  5.1.1    Claims Procedure. Any person or entity that makes a
         claim ("Claimant") who has not received benefits under the Plan that
         they believe should be paid shall make a claim for such benefits as
         follows:

                           5.1.1.1  Initiation - Written Claim. The Claimant
                  initiates a claim by submitting to the Company a written claim
                  for the benefits.

                           5.1.1.2  Timing of Company Response. The Company
                  shall respond to such Claimant within 90 days after receiving
                  the claim. If the Company determines that special
                  circumstances require additional time for processing the
                  claim, the Company can extend the response period by an
                  additional 90 days by notifying the Claimant in writing, prior
                  to the end of the initial 90-day period, that an additional
                  period is required. The notice of extension must set forth the
                  special circumstances and the date by which the Company
                  expects to render its decision.

                           5.1.1.3  Notice of Decision. If the Company denies
                  part or all of the claim, the Company shall notify the
                  Claimant in writing of such denial. The Company shall write
                  the notification in a manner calculated to be understood by
                  the Claimant. The notification shall set forth:

                           (a)      The specific reasons for the denial,
                           (b)      A reference to the specific provisions of
                                    the Plan on which the denial is based,
                           (c)      A description of any additional information
                                    or material necessary for the Claimant to
                                    perfect the claim and an explanation of why
                                    it is needed,
                           (d)      An explanation of the Plan's review
                                    procedures and the time limits applicable to
                                    such procedures, and
                           (e)      A statement of the Claimant's right to bring
                                    a civil action under ERISA Section 502(a)
                                    following an adverse benefit determination
                                    on review.

                  5.1.2    Review Procedure. If the Company denies part or all
         of the claim, the Claimant shall have the opportunity for a full and
         fair review by the Company of the denial, as follows:

                           5.1.2.1  Initiation - Written Request. To initiate
                  the review, the Claimant, within 60 days after receiving the
                  Company's notice of denial, must file with the Company a
                  written request for review.

                           5.1.2.2  Additional Submissions - Information Access.
                  The Claimant shall then have the opportunity to submit written
                  comments, documents, records and other information relating to
                  the claim. The Company shall also provide the Claimant, upon
                  request and free of charge, reasonable access to, and copies
                  of, all documents, records and other information relevant (as
                  defined in applicable ERISA regulations) to the Claimant's
                  claim for benefits.

                           5.1.2.3  Considerations on Review. In considering the
                  review, the Company shall take into account all materials and
                  information the Claimant submits relating to the claim,
                  without regard to whether such information was submitted or
                  considered in the initial benefit determination.

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                           5.1.2.4  Timing of Company Response. The Company
                  shall respond in writing to such Claimant within 60 days after
                  receiving the request for review. If the Company determines
                  that special circumstances require additional time for
                  processing the claim, the Company can extend the response
                  period by an additional 60 days by notifying the Claimant in
                  writing, prior to the end of the initial 60-day period, that
                  an additional period is required. The notice of extension must
                  set forth the special circumstances and the date by which the
                  Company expects to render its decision.

                           5.1.2.5  Notice of Decision. The Company shall notify
                  the Claimant in writing of its decision on review. The Company
                  shall write the notification in a manner calculated to be
                  understood by the Claimant. The notification shall set forth:

                           (a)      The specific reasons for the denial,
                           (b)      A reference to the specific provisions of
                                    the Plan on which the denial is based,
                           (c)      A statement that the Claimant is entitled to
                                    receive, upon request and free of charge,
                                    reasonable access to, and copies of, all
                                    documents, records and other information
                                    relevant (as defined in applicable ERISA
                                    regulations) to the Claimant's claim for
                                    benefits, and
                           (d)      A statement of the Claimant's right to bring
                                    a civil action under ERISA Section 502(a).

         5.2      For disability claims:

                  5.2.1    Claims Procedures. Any person or entity that makes a
         claim ("Claimant") who has not received benefits under the Plan that
         they believe should be paid shall make a claim for such benefits as
         follows:

                           5.2.1.1  Initiation - Written Claim. The Claimant
                  initiates a claim by submitting to the Company a written claim
                  for the benefits.

                           5.2.1.2  Timing of Company Response. The Company
                  shall notify the Claimant in writing or electronically of any
                  adverse determination as set out in this Section.

                           5.2.1.3  Notice of Decision. If the Company denies
                  part or all of the claim, the Company shall notify the
                  Claimant in writing of such denial. The Company shall write
                  the notification in a manner calculated to be understood by
                  the Claimant. The notification shall set forth:

                           (a)      The specific reasons for the denial,
                           (b)      A reference to the specific provisions of
                                    the Plan on which the denial is based,
                           (c)      A description of any additional information
                                    or material necessary for the Claimant to
                                    perfect the claim and an explanation of why
                                    it is needed,
                           (d)      An explanation of the Plan's review
                                    procedures and the time limits applicable to
                                    such procedures,
                           (e)      A statement of the Claimant's right to bring
                                    a civil action under ERISA Section 502(a)
                                    following an adverse benefit determination
                                    on review,
                           (f)      [See ss.2560.503-1(g)(v)] Any internal rule,
                                    guideline, protocol, or other similar
                                    criterion relied upon in making the adverse
                                    determination, or a statement that such a
                                    rule, guideline, protocol, or other similar
                                    criterion was relied upon in making the
                                    adverse determination and that the Claimant
                                    can request and receive free of charge a
                                    copy of such rule, guideline, protocol or
                                    other criterion from the Company, and

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<PAGE>

                           (g)      If the adverse benefit determination is
                                    based on a medical necessity or experimental
                                    treatment or similar exclusion or limit,
                                    either an explanation of the scientific or
                                    clinical judgment for the determination,
                                    applying the terms of the Plan to the
                                    Claimant's medical circumstances, or a
                                    statement that such explanation will be
                                    provided free of charge upon request.

                           5.2.1.4  Timing of Notice of Denial/Extensions. The
                  Company shall notify the Claimant of denial of benefits in
                  writing or electronically not later than 45 days after receipt
                  of the claim by the Plan. The Company may elect to extend
                  notification by two 30-day periods subject to the following
                  requirements:

                           (a)      For the first 30-day extension, the Company
                                    shall notify the Claimant (1) of the
                                    necessity of the extension and the factors
                                    beyond the Plan's control requiring an
                                    extension; (2) prior to the end of the
                                    initial 45-day period; and (3) of the date
                                    by which the Plan expects to render a
                                    decision.
                           (b)      If the Company determines that a second
                                    30-day extension is necessary based on
                                    factors beyond the Plan's control, the
                                    Company shall follow the same procedure in
                                    (a) above, with the exception that the
                                    notification must be provided to the
                                    Claimant before the end of the first 30-day
                                    extension period.
                           (c)      For any extension provided under this
                                    section, the Notice of Extension shall
                                    specifically explain the standards upon
                                    which entitlement to a benefit is based, the
                                    unresolved issues that prevent a decision on
                                    the claim, and the additional information
                                    needed to resolve those issues. The Claimant
                                    shall be afforded 45 days within which to
                                    provide the specified information.

                  5.2.2    Review Procedures - Denial of Benefits. If the
         Company denies part or all of the claim, the Claimant shall have the
         opportunity for a full and fair review by the Company of the denial, as
         follows:

                           5.2.2.1  Initiation of Appeal. Within 180 days
                  following notice of denial of benefits, the Claimant shall
                  initiate an appeal by submitting a written notice of appeal to
                  Company.

                           5.2.2.2  Submissions on Appeal - Information Access.
                  The Claimant shall be allowed to provide written comments,
                  documents, records, and other information relating to the
                  claim for benefits. The Company shall provide to the Claimant,
                  upon request and free of charge, reasonable access to, and
                  copies of, all documents, records, and other information
                  relevant (as defined in applicable ERISA regulations) to the
                  Claimant's claim for benefits.

                           5.2.2.3  Additional Company Responsibilities on
                  Appeal. On appeal, the Company shall:

                           (a)      [See ss.2560.503-1(h)(3)(i)-(v)]Take into
                                    account all materials and information the
                                    Claimant submits relating to the claim,
                                    without regard to whether such information
                                    was submitted or considered in the initial
                                    benefit determination;

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<PAGE>

                           (b)      Provide for a review that does not afford
                                    deference to the initial adverse benefit
                                    determination and that is conducted by an
                                    appropriate named fiduciary of the Plan who
                                    is neither the individual who made the
                                    adverse benefit determination that is the
                                    subject of the appeal, nor the subordinate
                                    of such individual;
                           (c)      In deciding an appeal of any adverse benefit
                                    determination that is based in whole or in
                                    part on a medical judgment, including
                                    determinations with regard to whether a
                                    particular treatment, drug, or other item is
                                    experimental, investigational, or not
                                    medically necessary or appropriate, consult
                                    with a health care professional who has
                                    appropriate training and experience in the
                                    field of medicine involved in the medical
                                    judgment;
                           (d)      Identify medical or vocational experts whose
                                    advise was obtained on behalf of the Plan in
                                    connection with a Claimant's adverse benefit
                                    determination, without regard to whether the
                                    advice was relied upon in making the benefit
                                    determination; and
                           (e)      Ensure that the health care professional
                                    engaged for purposes of a consultation under
                                    subsection (c) above shall be an individual
                                    who was neither an individual who was
                                    consulted in connection with the adverse
                                    benefit determination that is the subject of
                                    the appeal, nor the subordinate of any such
                                    individual.

                           5.2.2.4  Timing of Notification of Benefit Denial -
                  Appeal Denial. The Company shall notify the Claimant not later
                  than 45 days after receipt of the Claimant's request for
                  review by the Plan, unless the Company determines that special
                  circumstances require an extension of time for processing the
                  claim. If the Company determines that an extension is
                  required, written notice of such shall be furnished to the
                  Claimant prior to the termination of the initial 45-day
                  period, and such extension shall not exceed 45 days. The
                  Company shall indicate the special circumstances requiring an
                  extension of time and the date by which the Plan expects to
                  render the determination on review.

                           5.2.2.5  Content of Notification of Benefit Denial.
                  The Company shall provide the Claimant with a notice
                  calculated to be understood by the Claimant, which shall
                  contain:

                           (a)      The specific reason or reasons for the
                                    adverse determination;
                           (b)      Reference to the specific plan provisions on
                                    which the benefit determination is based;
                           (c)      A statement that the Claimant is entitled to
                                    receive, upon request and free of charge,
                                    reasonable access to, and copies of all
                                    documents, records, and other relevant
                                    information (as defined in applicable ERISA
                                    regulations);
                           (d)      A statement of the Claimant's right to bring
                                    an action under ERISA Section 502(a);
                           (e)      [See ss.2560.503-1(j)(5)] Any internal rule,
                                    guideline, protocol, or other similar
                                    criterion relied upon in making the adverse
                                    determination, or a statement that such a
                                    rule, guideline, protocol, or other similar
                                    criterion was relied upon in making the
                                    adverse determination and that the Claimant
                                    can request and receive free of charge a
                                    copy of such rule, guideline, protocol or
                                    other criterion from the Company;

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<PAGE>

                           (f)      If the adverse benefit determination is
                                    based on a medical necessity or experimental
                                    treatment or similar exclusion or limit,
                                    either an explanation of the scientific or
                                    clinical judgment for the determination,
                                    applying the terms of the Plan to the
                                    Claimant's medical circumstances, or a
                                    statement that such explanation will be
                                    provided free of charge upon request; and
                           (g)      The following statement: "You and your plan
                                    may have other voluntary alternative dispute
                                    resolution options such as mediation. One
                                    way to find out what may be available is to
                                    contact your local U.S. Department of Labor
                                    Office and your state insurance regulatory
                                    agency."

                                    Article 6
                           Amendments and Termination

         6.1      This Agreement may be amended or terminated only by a written
agreement signed by the Company and the Executive.

         6.2      Notwithstanding Section 6.1, the Company may amend or
terminate this Agreement at any time if, pursuant to legislative, judicial or
regulatory action, continuation of the Agreement would (i) cause benefits to be
taxable to the Executive prior to actual receipt, or (ii) result in significant
financial penalties or other significantly detrimental ramifications to the
Company (other than the financial impact of paying the benefits).

                                    Article 7
                                  Miscellaneous

         7.1      Binding Effect. This Agreement shall bind the Executive and
the Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.

          7.2     No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.

         7.3      Non-Transferability. Benefits under this Agreement cannot be
sold, transferred, assigned, pledged, attached or encumbered in any manner.

         7.4      Reorganization. The Company shall not merge or consolidate
into or with another company, or reorganize, or sell substantially all of its
assets to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of the
Company under this Agreement. Upon the occurrence of such event, the term
"Company" as used in this Agreement shall be deemed to refer to the successor or
survivor company.

         7.5      Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.

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         7.6      Applicable Law. The Agreement and all rights hereunder shall
be governed by the laws of the State of California, except to the extent
preempted by the laws of the United States of America.

         7.7      Unfunded Arrangement. The Executive and beneficiary are
general unsecured creditors of the Company for the payment of benefits under
this Agreement. The benefits represent the mere promise by the Company to pay
such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's life
is a general asset of the Company to which the Executive and beneficiary have no
preferred or secured claim.

         7.8      Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive as to the subject matter hereof.
No rights are granted to the Executive by virtue of this Agreement other than
those specifically set forth herein.

         7.9      Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:

                  (a)      Establishing and revising the method of accounting
                           for the Agreement;
                  (b)      Maintaining a record of benefit payments;
                  (c)      Establishing rules and prescribing any forms
                           necessary or desirable to administer the Agreement;
                           and
                  (d)      Interpreting the provisions of the Agreement.

         7.10     Named Fiduciary. The Company shall be the named fiduciary and
plan administrator under this Agreement. It may delegate to others certain
aspects of the management and operational responsibilities including the
employment of advisors and the delegation of ministerial duties to qualified
individuals.

         IN WITNESS WHEREOF, the Executive and the Company have signed this
Agreement.

EXECUTIVE:                             COMPANY:

                                       FIRST NATIONAL BANK OF NORTHERN
                                       CALIFORNIA

/s/ JAMES B. RAMSEY                    By /s/ THOMAS C. MCGRAW
----------------------------------        --------------------------------------
James B. Ramsey                           Thomas C. McGraw
                                          Title: Chief Executive Officer

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                   FIRST NATIONAL BANK OF NORTHERN CALIFORNIA
                             SPLIT DOLLAR AGREEMENT

          (ADDENDUM A TO THE FIRST NATIONAL BANK OF NORTHERN CALIFORNIA
                         SALARY CONTINUATION AGREEMENT)

         THIS AGREEMENT is adopted this 9th day of September, 2004, by and
between FIRST NATIONAL BANK OF NORTHERN CALIFORNIA, located in South San
Francisco, California (the "Company"), and JAMES B. RAMSEY (the "Executive").
This Agreement shall append the Split Dollar Endorsement entered into on even
date herewith or as subsequently amended, by and between the aforementioned
parties.

                                  INTRODUCTION

         To encourage the Executive to remain an employee of the Company, the
Company is willing to divide the death proceeds of a life insurance policy on
the Executive's life. The Company will pay life insurance premiums from its
general assets.

                                    AGREEMENT

         The Company and the Executive agree as follows:

                                    Article 1
                               General Definitions

The following terms shall have the meanings specified:

         1.1      "Insured" means the Executive.

         1.2      "Insurer" means each life insurance carrier in which there is
a Split Dollar Policy Endorsement attached to this Agreement.

         1.3      "Normal Retirement Age" means the Executive attaining
sixty-five (65) years of age.

         1.4      "Policy" means the specific life insurance policy or policies
issued by the Insurer.

         1.5      "Salary Continuation Agreement" means that Salary Continuation
Agreement between the Company and the Executive on even date herewith or as
subsequently amended.

         1.6      "Termination for Cause" shall be defined as set forth in
Article 7.

         1.7      "Termination of Employment" means that the Executive ceases to
be employed by the Company for any reason, other than by reason of a leave of
absence approved by the Company.

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<PAGE>

                                    Article 2
                           Policy Ownership/Interests

         2.1      Company Ownership. The Company is the sole owner of the Policy
and shall have the right to exercise all incidents of ownership. The Company
shall be the beneficiary of the remaining death proceeds of the Policy after the
Interest of the Executive or the Executive's transferee has been paid according
to Section 2.2 below.

         2.2      Executive's Interest. The Executive shall have the right to
designate the beneficiary of the death proceeds. The Executive shall also have
the right to elect and change settlement options that may be permitted. Upon the
termination of this Agreement according to Article 7 herein, the Executive, the
Executive's transferee or the Executive's beneficiary shall have no rights or
interests in the Policy and no death benefit shall be paid under this Section
2.2.

                  2.2.1    Death During Active Service. If the Executive dies
         while in the active service of the Company, the Company shall pay to
         the Executive's beneficiary the present value of the stream of payments
         the Executive would have received under the Salary Continuation
         Agreement if the Executive had reached Normal Retirement Age. This
         amount is payable in a lump sum upon the death of the Executive.

                  2.2.2    Death During Payment of a Benefit under the Salary
         Continuation Agreement. If the Executive dies after any benefit
         payments have commenced under Article 2 of the Salary Continuation
         Agreement but before receiving all such payments, the Company shall
         cease paying the remaining benefit, if any, and shall then pay to the
         Executive's beneficiary a split dollar death benefit equal to the
         present value of the remaining stream of payments under the Salary
         Continuation Plan.

                  2.2.3    Death After Termination of Employment But Before
         Commencement of Payment under the Salary Continuation Plan. If the
         Executive is entitled to a benefit under Article 2 of the Salary
         Continuation Agreement, but dies prior to the commencement of said
         benefit payments, the Company shall pay no benefit under the Salary
         Continuation Agreement but shall pay to the Executive's beneficiary a
         split dollar death benefit equal to the present value of the remaining
         stream of payments under the Salary Continuation Plan.

         2.3      Comparable Coverage. Upon execution of this Agreement, the
Company shall maintain the Policy in full force and effect and in no event shall
the Company amend, terminate or otherwise abrogate the Executive's interest in
the Policy, unless the Company replaces the Policy with a comparable insurance
policy to cover the benefit provided under this Agreement and the Company and
the Executive execute a new Split Dollar Policy Endorsement for said comparable
insurance policy. The Policy or any comparable policy shall be subject to the
claims of the Company's creditors.

                                    Article 3
                                    Premiums

         3.1      Premium Payment. The Company shall pay any premiums due on the
Policy.

                                       2
<PAGE>

         3.2      Economic Benefit. The Company shall determine the economic
benefit attributable to the Executive based on the life insurance premium factor
for the Executive's age multiplied by the aggregate death benefit payable to the
Executive's beneficiary. The "life insurance premium factor" is the minimum
factor applicable under guidance published pursuant to IRS Reg. ss.
1.61-22(d)(3)(ii) or any subsequent authority.

         3.3      Imputed Income. The Company shall impute the economic benefit
to the Executive on an annual basis.

                                    Article 4
                                   Assignment

         The Executive may assign without consideration all of the Executive's
interests in the Policy and in this Agreement to any person, entity or trust. In
the event the Executive transfers all of the Executive's interest in the Policy,
then all of the Executive's interest in the Policy and in the Agreement shall be
vested in the Executive's transferee, who shall be substituted as a party
hereunder and the Executive shall have no further interest in the Policy or in
this Agreement.

                                    Article 5
                                     Insurer

         The Insurer shall be bound only by the terms of the Policy. Any
payments the Insurer makes or actions it takes in accordance with the Policy
shall fully discharge it from all claims, suits and demands of all entities or
persons. The Insurer shall not be bound by or be deemed to have notice of the
provisions of this Agreement.

                                    Article 6
                           Claims and Review Procedure

         6.1      Claims Procedure. Any person or entity who has not received
benefits under the Plan that he or she believes should be paid (the "claimant")
shall make a claim for such benefits as follows:

                  6.1.1    Initiation - Written Claim. The claimant initiates a
         claim by submitting to the Company a written claim for the benefits.

                  6.1.2    Timing of Company Response. The Company shall respond
         to such claimant within 90 days after receiving the claim. If the
         Company determines that special circumstances require additional time
         for processing the claim, the Company can extend the response period by
         an additional 90 days by notifying the claimant in writing, prior to
         the end of the initial 90-day period that an additional period is
         required. The notice of extension must set forth the special
         circumstances and the date by which the Company expects to render its
         decision.

                  6.1.3    Notice of Decision. If the Company denies part or all
         of the claim, the Company shall notify the claimant in writing of such
         denial. The Company shall write the notification in a manner calculated
         to be understood by the claimant. The notification shall set forth:

                                       3
<PAGE>

                           (a)      The specific reasons for the denial,
                           (b)      A reference to the specific provisions of
                                    this Agreement on which the denial is based,
                           (c)      A description of any additional information
                                    or material necessary for the claimant to
                                    perfect the claim and an explanation of why
                                    it is needed,
                           (d)      An explanation of this Agreement's review
                                    procedures and the time limits applicable to
                                    such procedures, and (e) A statement of the
                                    claimant's right to bring a civil action
                                    under ERISA Section 502(a) (29 United States
                                    Code section 1132(a)) following an adverse
                                    benefit determination on review.

         6.2      Review Procedure. If the Company denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review by the
Company of the denial, as follows:

                  6.2.1    Initiation - Written Request. To initiate the review,
         the claimant, within 60 days after receiving the Company's notice of
         denial, must file with the Company a written request for review.

                  6.2.2    Additional Submissions - Information Access. The
         claimant shall then have the opportunity to submit written comments,
         documents, records and other information relating to the claim. The
         Company shall also provide the claimant, upon request and free of
         charge, reasonable access to, and copies of, all documents, records and
         other information relevant (as defined in applicable ERISA regulations)
         to the claimant's claim for benefits.

                  6.2.3    Considerations on Review. In considering the review,
         the Company shall take into account all materials and information the
         claimant submits relating to the claim, without regard to whether such
         information was submitted or considered in the initial benefit
         determination.

                  6.2.4    Timing of Company Response. The Company shall respond
         in writing to such claimant within 60 days after receiving the request
         for review. If the Company determines that special circumstances
         require additional time for processing the claim, the Company can
         extend the response period by an additional 60 days by notifying the
         claimant in writing, prior to the end of the initial 60-day period that
         an additional period is required. The notice of extension must set
         forth the special circumstances and the date by which the Company
         expects to render its decision.

                  6.2.5    Notice of Decision. The Company shall notify the
         claimant in writing of its decision on review. The Company shall write
         the notification in a manner calculated to be understood by the
         claimant. The notification shall set forth:

                           (a)      The specific reasons for the denial,
                           (b)      A reference to the specific provisions of
                                    this Agreement on which the denial is based,
                           (c)      A statement that the claimant is entitled to
                                    receive, upon request and free of charge,
                                    reasonable access to, and copies of, all
                                    documents, records and other information
                                    relevant (as defined in applicable ERISA
                                    regulations) to the claimant's claim for
                                    benefits, and
                           (d)      A statement of the claimant's right to bring
                                    a civil action under ERISA Section 502(a).

                                       4
<PAGE>

                                    Article 7
                           Amendments and Termination

         7.1      This Agreement may be amended or terminated only by a written
agreement signed by the Company and the Executive.

         7.2      In the event this Agreement is terminated under this Article
7, the Company shall not sell, surrender or transfer ownership of the Policy
without first giving the Executive or the Executive's transferee the option to
purchase the Policy for a period of sixty (60) days from written notice of such
intention. The purchase price shall be an amount equal to the cash surrender
value of the Policy.

         7.3      Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay any benefit under this Agreement if the
Company terminates the Executive's employment for:

                  (a)      Willful breach of duty in the course of employment,
                           unless waived by the Company;
                  (b)      Dishonest or illegal conduct of the Executive; or
                  (c)      Habitual neglect by the Executive of the Executive's
                           employment duties, unless waived by the Company.

         7.4      Suicide or Misstatement. The Company shall not pay any benefit
under this Agreement if the Executive commits suicide within three years after
the date of this Agreement.

                                    Article 8
                                  Beneficiaries

         8.1      Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive may
revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
received by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's estate.

         8.2      Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, such benefit will be paid in accordance with
the policies established by the Insurer, but may include payment of benefits to
the guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person.

                                       5
<PAGE>

                                   Article 9
                                 Miscellaneous

         9.1      Binding Effect. This Agreement shall bind the Executive and
the Company and their beneficiaries, survivors, executors, administrators and
transferees, and any Policy beneficiary.

         9.2      No Guarantee of Employment. This Agreement is not an
employment policy or contract. It does not give the Executive the right to
remain an employee of the Company, nor does it interfere with the Company's
right to discharge the Executive. It also does not require the Executive to
remain an employee nor interfere with the Executive's right to terminate
employment at any time.

         9.3      Applicable Law. The Agreement and all rights hereunder shall
be governed by and construed according to the laws of the State of California,
except to the extent preempted by the laws of the United States of America.

         9.4      Reorganization. The Company shall not merge or consolidate
into or with another company, or reorganize, or sell substantially all of its
assets to another company, firm or person unless such succeeding or continuing
company, firm or person agrees to assume and discharge the obligations of the
Company.

         9.5      Notice. Any notice, consent or demand required or permitted to
be given under the provisions of this Split Dollar Agreement by one party to
another shall be in writing, shall be signed by the party giving or making the
same, and may be given either by delivering the same to such other party
personally, or by mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his or her last known address as shown on
the records of the Company. The date of such mailing shall be deemed the date of
such mailed notice, consent or demand.

         9.6      Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Executive as to the subject matter hereof.
No rights are granted to the Executive by virtue of this Agreement other than
those specifically set forth herein.

         9.7      Administration. The Company shall have powers which are
necessary to administer this Agreement, including but not limited to:

                  (a)      Interpreting the provisions of this Agreement;
                  (b)      Establishing and revising the method of accounting
                           for this Agreement;
                  (c)      Maintaining a record of benefit payments; and
                  (d)      Establishing rules and prescribing any forms
                           necessary or desirable to administer this Agreement.

         9.8      Named Fiduciary. The Company shall be the named fiduciary and
plan administrator under the Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.

                                       6
<PAGE>

         IN WITNESS WHEREOF, the Executive and the Company consent to this
Agreement on the date above written.

EXECUTIVE:                             COMPANY:

                                       FIRST NATIONAL BANK OF NORTHERN
                                       CALIFORNIA

/s/ JAMES B. RAMSEY                    By /s/ THOMAS C. MCGRAW
----------------------------------        --------------------------------------
James B. Ramsey                           Thomas C. McGraw
                                          Title: Chief Executive Officer

                                       7
<PAGE>

                               POLICY ENDORSEMENT

Contract Owner:       FIRST NATIONAL BANK OF NORTHERN CALIFORNIA

The undersigned Owner requests that the policy(ies) shown in the attached
Schedule Page issued by CLARICA LIFE INSURANCE COMPANY (the "Insurer") provide
for the following beneficiary designation:

         1.       Upon the death of the Insured, proceeds shall be paid in one
sum to the Owner, its successors or assigns, as Beneficiary, to the extent
claimed by said Owner.

         2.       Any proceeds at the death of the Insured in excess of the
amount paid under the provisions of paragraph 1 of this Policy Endorsement shall
be paid in one sum in accordance with the written direction of the Owner. Such
direction will be provided to the Insurer at the time of claim. The Insurer will
be protected in relying solely on the Owner to provide the name(s) of the
party(ies) to pay any excess not paid under paragraph 1. If the Owner fails to
provide the name(s) of the party(ies) at the time of claim, then any proceeds
payable under this paragraph shall be paid in one sum to the Beneficiary.

         3.       It is hereby provided that (i) any payment made to the
Beneficiary or other party under paragraph 2 of this Policy Endorsement shall be
a full discharge of the Insurer to the extent thereof; (ii) such discharge shall
be binding on all parties claiming any interest under the Policy; and (iii) the
Insurer shall have no responsibility with respect to the amounts so claimed.

         4.       It is agreed by the undersigned that this designation shall be
subject in all respects to the contractual terms of the Policy.

The undersigned is signing in a representative capacity for the Owner and
warrants that he or she has the authority to bind the entity on whose behalf
this document is being executed.

Signed at __________________, California, this _____ day of _____________, 2____

OWNER:
FIRST NATIONAL BANK OF NORTHERN CALIFORNIA

By:     ____________________________     By:     ______________________________

Title:  ____________________________     Title:  ______________________________

                                     1 of 2
<PAGE>

                                  Schedule Page
                    Policy(ies) Subject to Policy Endorsement

--------------------------------------- ----------------------------------------
Policy Number                           Insured
--------------------------------------- ----------------------------------------
                                        James B. Ramsey
--------------------------------------- ----------------------------------------

                                     2 of 2
<PAGE>

                             BENEFICIARY DESIGNATION
                   FIRST NATIONAL BANK OF NORTHERN CALIFORNIA
                         SOUTH SAN FRANCISCO, CALIFORNIA
                             SPLIT DOLLAR AGREEMENT

I, ________________________________, designate the following as beneficiary of
benefits under the Agreement payable following my death:

________________________________________________________________________________
Primary:

________________________________________________________________       ______%

________________________________________________________________       ______%

________________________________________________________________________________
Contingent:

________________________________________________________________       ______%

________________________________________________________________       ______%

________________________________________________________________________________

Notes:

  o  Please PRINT CLEARLY or TYPE the names of the beneficiaries.
  o  To name a trust as beneficiary, please provide the name of the trustee(s)
     and the exact name and date of the trust agreement.
  o  To name your estate as beneficiary, please write "Estate of [your name]".
  o  Be aware that none of the contingent beneficiaries will receive anything
     unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a
new written designation to the Plan Administrator, which shall be effective only
upon receipt and acknowledgment by the Plan Administrator prior to my death. I
further understand that the designations will be automatically revoked if the
beneficiary predeceases me, or, if I have named my spouse as beneficiary and our
marriage is subsequently dissolved.

Name:  ______________________________________

Signature: __________________________________        Date:  _____________

________________________________________________________________________________

SPOUSAL CONSENT (Required if Spouse not named beneficiary):
________________________________________________________________________________

I consent to the beneficiary designation above, and acknowledge that if I am
named beneficiary and our marriage is subsequently dissolved, the designation
will be automatically revoked.
________________________________________________________________________________

Spouse Name:  _______________________________

Signature:    _______________________________        Date:  _____________

________________________________________________________________________________

Received by the Plan Administrator this _______ day of ___________________, 2___

By:    _________________________________

Title: _________________________________<PAGE>
EXHIBIT 10.13

                                     LEASE

               [San Diego Science Center / Aethlon Medical, Inc.]

         THIS LEASE ("LEASE") is dated for reference purposes only July 1, 2004,
by and between SAN DIEGO SCIENCE CENTER LLC, a California limited liability
company ("LANDLORD"), and AETHLON MEDICAL, INC., a Nevada corporation
("TENANT").

         1.       LEASE PREMISES.
                  ---------------

                  1.1 Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord during the term of this Lease, on the terms and conditions set
forth herein, those certain premises ("PREMISES") consisting of approximately
3,200 square feet of Rentable Area in the building (the "BUILDING") at 3030
Bunker Hill Street, San Diego, California, on real property legally described on
EXHIBIT A attached hereto and incorporated herein by this reference. The
Premises consist of approximately 811 square feet of Rentable Area on the third
floor of the Building and 2,389 square feet of Rentable Area on the first floor
of the Building. The Building consists of approximately 105,364 square feet of
Rentable Area. The Building, the real property upon which the Building is
located, and all landscaping, parking facilities, and other improvements and
appurtenances related thereto are hereinafter collectively referred to as the
"PROJECT." The site plan for the Project is attached hereto as EXHIBIT B, and
the Premises are outlined on EXHIBIT C. All portions of the Project which are
for the non-exclusive use of tenants of the Project, including without
limitation interior entrance ways, lobbies, corridors, stairwells, elevators,
equipment rooms, and rest rooms, and exterior roadways, driveways, sidewalks,
parking areas, and landscaped areas, are hereinafter referred to as "COMMON
AREAS."

         2.       BASIC LEASE PROVISIONS.
                  -----------------------

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

                           2.1.1    Rentable Area of the Premises:
                                    Approximately 3,200 square feet.

                           2.1.2    Basic Annual Rent:
                                    $90,240 ($2.35 per square foot per month for
                                    3,200 square feet of Rentable Area, subject
                                    to adjustment pursuant to Sections 6.1 and
                                    8.3)

                           2.1.3    Monthly Installment of Basic Annual Rent:
                                    $7,520 ($2.35 per square foot per month for
                                    3,200 square feet of Rentable Area, subject
                                    to adjustment pursuant to Sections 6.1 and
                                    8.3)

                                       1
<PAGE>

                           2.1.4    Tenant's Pro Rata Share:
                                    3.04% of the Operating Expenses as
                                    determined pursuant to Section 7.3(a) and
                                    subject to adjustment pursuant to Section
                                    8.3.

                           2.1.5    (a)     Term Commencement Date:
                                            July 9, 2004

                                    (b)     Term Expiration Date:
                                            July 8, 2006

                           2.1.6    Security Deposit:

                                    (a)     Cash in the amount of $12,000.00
                                            representing one (1) month's base
                                            rent and estimated Operating
                                            Expenses, and

                                    (b)     Cash in the amount of $1,000
                                            representing advance deposit on Exit
                                            Phase I Report as required per
                                            Section 39.12.

                           2.1.7    Permitted Use:
                                    Uses permitted in Section 10.1

                           2.1.8    Address for Rent Payment and Notices to
                                    Landlord:

                                    San Diego Science Center LLC
                                    c/o Phase 3 Properties, Inc.
                                    8910 University Center Lane, Suite 265
                                    San Diego, CA   92122

                                    Address for Notices to Tenant Prior to
                                    Occupancy:

                                    Jim Joyce
                                    Aethlon Medical, Inc.
                                    7825 Fay Avenue, Suite 200
                                    La Jolla, CA  92037

                                    Address for Notices to Tenant After
                                    Occupancy:

                                    Jim Joyce
                                    Aethlon Medical, Inc.
                                    3030 Bunker Hill Street, Suite 4000
                                    San Diego, CA  92109

                           2.1.9    (a)     Landlord's Broker:
                                            Phase 3 Properties, Inc.
                                            8910 University Center Lane,
                                            Suite 265
                                            San Diego, CA 92122

                                       2
<PAGE>

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

                          Exhibit A    Legal Description of Real Property
                          Exhibit B    Site Plan of the Project
                          Exhibit C    Outline of the Premises
                          Exhibit D    Acknowledgment of Term Commencement Date
                          Exhibit E    Schematic Showing Tenant Improvements
                          Exhibit F    Architectural Drawings of Tenant
                                       Improvements
                          Exhibit G    Rules and Regulations
                          Exhibit H    Services to be Provided by Landlord
                          Exhibit I    Fitness Center Waiver of Liability
                          Exhibit J    Approved Contractors
                          Schedule 1   List of Removable Property (Section 17.7)

         3.       TERM.
                  -----

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

                  3.2 The term of this Lease will be the period from the later
of the date set forth in Section 2.1.5(a) or execution of this Lease by both
parties pursuant to Section 3.1("TERM COMMENCEMENT DATE") (hereinafter sometimes
referred to as the "Term"), subject to earlier termination of this Lease as
provided herein. Landlord and Tenant shall execute a written acknowledgment of
the Term Commencement Date and the Term Expiration Date in substantially the
form attached hereto as EXHIBIT D and attach it to this Lease as EXHIBIT D-1;
however, failure to execute and deliver such acknowledgment shall not affect
Tenant's liability hereunder.

                  3.3 Landlord represents to Tenant that the Premises are
Substantially Complete. As used herein, the terms "SUBSTANTIALLY COMPLETE",
"SUBSTANTIALLY COMPLETED", and "SUBSTANTIAL COMPLETION" shall mean (i) the City
of San Diego has issued an interim or final right to occupy the Premises, and
(ii) Landlord has substantially completed construction of the Tenant
Improvements in accordance with EXHIBIT E and EXHIBIT F as certified by
Landlord's architect, including (a) the mechanical, electrical, plumbing and
other building systems which serve the Premises are in good working order, (b)
the lighting, ceiling tiles, and window coverings within the Premises are in
good working order, (c) all debris and clutter has been removed from the
Premises, (d) exterior windows of the Premises are washed inside and out, (e)
lobbies, corridors, stairwells and elevators serving the Premises are
substantially complete and in good working order, and (f) the Premises are in
compliance with Landlord's warranties set forth in Section 14.2; provided,
however, Tenant understands that construction of tenant improvements for other
tenants of the Building and in some Common Areas will be ongoing at the time of
Substantial Completion of the Tenant Improvements. ".

                                       3
<PAGE>

         4.       CONSTRUCTION AND POSSESSION.
                  ----------------------------

                  4.1 Landlord has constructed Tenant Improvements within the
Premises for Tenant's use and occupancy ("TENANT IMPROVEMENTS") in conformity
with the schematic attached hereto as EXHIBIT E and the architectural drawings
listed at EXHIBIT F at its cost and at no cost to Tenant. Tenant shall pay all
costs of changes to the Tenant Improvements requested by Tenant and approved by
Landlord, or improvements requested by Tenant and approved by Landlord which are
not included in EXHIBIT E or EXHIBIT F.

                  4.2 Prior to entry by Tenant onto the Premises before the Term
Commencement Date, for installing fixtures, placement of personal property, or
any other purpose, Tenant shall furnish to Landlord evidence satisfactory to
Landlord that insurance coverages required of Tenant under the provisions of
Article 21 are in effect. Entry by Tenant onto the Premises prior to the Term
Commencement Date for such purposes shall be subject to all of the terms and
conditions of this Lease other than the payment of Basic Annual Rent and
Operating Expenses, shall not interfere with the performance by Landlord or
Landlord's contractor with construction activities at the Project, shall be
limited to the last ten (10) days prior to the estimated Substantial Completion
of the Premises, and shall be made only with the advance written consent of
Landlord, which consent shall not be unreasonably withheld. In the event of
entry by Tenant or its agents onto the Premises prior to the Term Commencement
Date, Tenant agrees to indemnify, protect, defend and hold harmless Landlord and
its contractors and agents from any and all loss or damage to property,
completed work, fixtures, equipment, materials or merchandise, or from liability
for death of or injury to any person arising from Tenant's entry onto the
Premises, except to the extent caused by the gross negligence or willful
misconduct of Landlord or its agents or contractors.

         5.       RENT.
                  -----

                  5.1 Tenant agrees to pay Landlord as Basic Annual Rent for the
Premises the sum set forth in Section 2.1.2, subject to adjustment as set forth
in Section 6.1 and 8.3, in the equal monthly installments set forth in Section
2.1.3, subject to adjustment as set forth in Sections 6.1 and 8.3, each in
advance on the Term Commencement Date and on the first day of each and every
calendar month thereafter during the term of this Lease; provided, however, the
first two (2) months after the time period set for in Section 3.1 shall be free
of the monthly installment of Basic Annual Rent.

                  5.2 In addition to Basic Annual Rent, Tenant agrees to pay to
Landlord as additional rent ("ADDITIONAL RENT"), at the times hereinafter
specified in this Lease (i) Tenant's Pro Rata Share (as defined in Section
7.4(a) and as set forth in Section 2.1.4, subject to adjustment pursuant to
Section 8.3) of Operating Expenses as provided in Article 7 and (ii) all other
amounts that Tenant assumes or agrees to pay under the provisions of this Lease,
including but not limited to any and all other sums that may become due by
reason of any default of Tenant under this Lease or failure on Tenant's part to
comply with the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant.

                  5.3 Basic Annual Rent and Additional Rent shall together be
denominated "RENT." Except as expressly set forth in this Lease, Rent shall be
paid to Landlord, without notice, demand, abatement, suspension, deduction,
setoff, counterclaim, or defense, in lawful money of the United States of
America, at the office of Landlord as set forth in Section 2.1.8 or to such
other person or at such other place as Landlord may from time to time designate
in writing.

                                       4
<PAGE>

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

         6.       RENTAL ADJUSTMENTS.
                  -------------------

                  6.1 The Basic Annual Rent then in effect (and as previously
increased pursuant to this Section 6.1) shall be increased each year by three
percent (3%) on each annual anniversary of the Term Commencement Date for so
long as this Lease continues in effect.

         7.       OPERATING EXPENSES.
                  -------------------

                  7.1      As used herein, the term "OPERATING EXPENSES" shall
include:

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

                           (b) Except as set forth in Section 7.2 below, all
other costs paid or incurred by Landlord which, in accordance with generally
accepted accounting principles as applied to the operation and maintenance of
first class buildings, are properly chargeable to the maintenance and operation
of the Project including, by way of examples and not as a limitation upon the
generality of the foregoing, costs of (i) maintenance, repairs and replacements
to improvements within the Project as appropriate to maintain the Project in
first class condition; (ii) utilities furnished to the Project (except those
utilities which are separately metered and paid by individual tenants); (iii)
sewer fees; (iv) trash collection; (v) cleaning (including windows); (vi)
maintenance of landscape and grounds; (vii) maintenance of drives and parking
areas, including periodic resurfacing; (viii) reasonable and customary security
services; (ix) maintenance, repair, and replacement of reasonable and customary
security devices; (x) building supplies; (xi) maintenance, repair, and
replacement of equipment utilized for operation and maintenance of the Project;

                                       5
<PAGE>

(xii) costs of maintenance, repairs and replacements of mechanical, electrical,
plumbing, sprinkler, and other systems of the Project; (xiii) insurance
premiums; (xiv) portions of insured losses deductible by reason of insurance
policy terms (insurance deductibles); (xv) periodic review of Hazardous Material
Inventories (as defined in Section 39.6) to confirm compliance with applicable
building and fire code requirements; (xvi) service contracts for work of a
nature before referenced; (xvii) costs of services of independent contractors
retained to do work of a nature before referenced at reasonable and customary
rates; (xviii) costs of compensation (including employment taxes and fringe
benefits) of all persons who perform regular and recurring duties connected with
the day-to-day operation and maintenance of the Project at reasonable and
customary rates; and (xviii) reasonable costs of management services equal to
four percent (4%) of the Basic Annual Rent; provided, however, that any costs
for repairs or replacements which would be deemed of a "capital" nature under
generally accepted accounting principles shall be amortized over the useful life
of the repair or replacement as determined under Internal Revenue Service
guidelines, and Tenant shall pay only that portion of the costs which are
amortized over the balance of the term, payable at the time the costs are
incurred to the extent Tenant's share of the costs are less than $1.75 per
square foot of Rentable Area of the Premises, with the balance payable on a
monthly basis during the balance of the term.

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

                           (a) costs incurred for the construction of the
Project (including the current renovation of the Project into a biotech
facility);

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

                           (c) costs recovered under any construction or
materials warranty procured by Landlord, pursuant to Section 14.4 or otherwise,
to the extent paid pursuant to the warranty;

                           (d) costs of any kind, including attorneys fees,
incurred to correct any defects in design, materials or construction of the
Project;

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

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

                                       6
<PAGE>

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

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

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

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

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

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

                           (m) any wages, fees, salaries, benefits or other
compensation of the executive employees or principals of Landlord;

                           (n) any rentals and related expenses incurred in
leasing equipment which may be classified as capital expenditures under
generally accepted accounting principles; provided, however, leasing and other
expenses of the deionized water system will be included in Operating Expenses.

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

                           (p) expenses which relate to preparation of rental
space for other occupants of the Project, including without limitation building,
license and inspection costs, incurred with respect to the installation of
improvements made for other occupants of the Project or incurred in renovating
or otherwise improving, decorating, painting or redecorating vacant tenant space
in the Project for other occupants in the Project.

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

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

                                       7
<PAGE>

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

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

                           (u) Landlord's charitable or political contributions;

                           (v) the amount of any payments to subsidiaries and
affiliates of Landlord for services to the Project or for supplies or other
materials to the extent that the cost of such services, supplies or materials
exceeds the cost which would have been paid had the services, supplies or
materials been provided by unaffiliated parties on a competitive basis
(provided, however, any fee for management services paid to an affiliate of
Landlord shall be in the amount set forth in Section 7.1[b]); and

                           (w) electric power or other utility costs for which
Tenant directly contracts with a public service company.

                  7.3 Tenant shall pay to Landlord on the first day of each
calendar month of the Term of this lease, as Additional Rent, Landlord's written
good faith estimate of Tenant's Pro Rata Share (as set forth in 2.1.4) of
Operating Expenses with respect to the Project for such month.

                           (a) "TENANT'S PRO RATA SHARE" under this Lease shall
mean the percentage set forth in Section 2.1.4 (subject to adjustment pursuant
to Section 8.3), determined by dividing the Rentable Area of the Premises by the
total Rentable Area of the Project.

                           (b) Within sixty (60) days after the conclusion of
each calendar year, Landlord shall furnish to Tenant in writing a statement (the
"ANNUAL OPERATING EXPENSE STATEMENT") showing in reasonable detail the actual
Operating Expenses and Tenant's Pro Rata Share of Operating Expenses for the
previous calendar year. Any additional sum due from Tenant to Landlord shall be
due and payable within thirty (30) days of Tenant's receipt of such statement.
If the amounts paid by Tenant pursuant to this Section 7.3 exceed Tenant's Pro
Rata Share of Operating Expenses for the previous calendar year, the difference
shall be credited by Landlord against the Rent next due and owing from Tenant;
provided that, if the Lease term has expired, Landlord shall accompany said
statement with payment for the amount of such difference. (c) Any amount due
under this Section 7.3 for any period which is less than a full month shall be
prorated for such fractional month.

                           (d) Notwithstanding this Section 7.3, Operating
Expenses which can fairly and reasonably be allocated to one or more tenants of
the Project shall be so allocated, and shall be separately scheduled in the
Landlord's written good faith estimate and Landlord's Annual Operating Expense
Statement.

                  7.5 Tenant shall have the right, at Tenant's expense, upon
reasonable notice during reasonable business hours, to review that portion of
Landlord's books, records, invoices, and other data which are relevant to
preparation of the Annual Operating Expense Statement provided any request for
such review shall be furnished within one hundred eighty (180) days after

                                       8
<PAGE>

Tenant's receipt of such statement as to prior year's Operating Expenses. If the
amount of Operating Expenses relating to the Premises identified on such annual
statement is found to exceed the actual Operating Expenses of the Premises,
Landlord shall, within twenty (20) days after Tenant's request therefor, refund
to Tenant the amount of overpayment by Tenant. In addition, if such review
reveals that the Operating Expenses paid by Tenant in any year exceed one
hundred five percent (105%) of the actual Operating Expenses which should have
been paid by Tenant in such year, Landlord shall reimburse Tenant for the
reasonable cost of such review within 10 business days following Tenant's
written request for the cost of such review. In all other cases, Tenant shall
pay for the reasonable cost of the review.

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

         8.       RENTABLE AREA.
                  --------------

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

                  8.2 The term "RENTABLE AREA" when applied to the Premises is
the area to be occupied exclusively by Tenant plus a pro rata allocation of
Rentable Area within the Project which is not then utilized or expected to be
utilized exclusively by Tenant or other tenants of the Project, including but
not limited to the portions of the Building devoted to columns, projections,
vertical penetrations, entrance ways, lobbies, corridors, equipment rooms, rest
rooms, lunch rooms, conference rooms, library, and fitness center. If the
Premises are separated from space occupied by another tenant, the Rentable Area
shall be measured to the center of any interior demising walls.

                  8.3 The Rentable Area as set forth in Section 2.1.1 is an
estimate of the area which constitutes the Rentable Area of the Premises, which,
at the request of either Landlord or Tenant made within ninety (90) days after
the Term Commencement Date, shall be adjusted in accordance with measurement and

                                       9
<PAGE>

written certification of the Project architect. If the Rentable Area as
determined hereunder is more or less than the Rentable Area set forth in Section
2.1.1, Basic Annual Rent, monthly installments of Basic Annual Rent, and
Tenant's Pro Rata Share of Operating Expenses shall be adjusted upward or
downward, as the case may be, based on the actual Rentable Area of the Premises.

         9.       SECURITY DEPOSIT.
                  -----------------

                  9.1 Concurrently with the execution of this Lease, Tenant
shall deposit with Landlord cash in the amount set forth in Section 2.1.6, to be
held by Landlord as security for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term and any extension term hereof. If Tenant defaults with
respect to any provision of this Lease, including but not limited to any
provision relating to the payment of Rent, and subject to any notice
requirements and cure periods for Tenant's benefit set forth in Article 24,
Landlord may (but shall not be required to) draw from the security deposit the
amount required to cure the default, and to use, apply or retain the security
deposit for the payment of any Rent or any other sum in default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. The security deposit shall not be deemed to be held
by Landlord in trust, need not be segregated from other funds of Landlord, and
shall not bear interest. Landlord is hereby granted a security interest in the
security deposit pursuant to the provisions of the California Commercial Code,
which security interest shall be perfected by Landlord taking possession of the
security deposit.

                  9.2 In the event Landlord applies any portion of the security
deposit in accordance with the terms of this Lease, Tenant shall within ten (10)
days after another request therefor replenish the security deposit to the full
amount set forth above.

                  9.3 The security deposit shall be transferable by Landlord to
a successor Landlord and to Landlord's mortgage lender which is a beneficiary of
a deed of trust encumbering the Premises, provided such lender agrees to hold
the security deposit pursuant to the terms of this Lease.

                  9.4 In the event of bankruptcy or other debtor/creditor
proceedings against Tenant, the security deposit shall be deemed to be applied
first to the payment of Rent and other charges due Landlord for all periods
prior to the filing of such proceedings.

                  9.5 Landlord shall deliver the security deposit to any
purchaser of Landlord's interest in the Premises, and thereupon Landlord shall
be discharged from any further liability with respect thereto provided that such
purchaser has agreed to assume in writing the obligations of Landlord hereunder.
This provision shall also apply to any subsequent transfers.

                  9.6 The security deposit shall be returned to Tenant within
thirty (30) days following the later of the expiration of the Lease or the date
Tenant fully vacates the Premises, except for amounts which are needed by
Landlord to cure any default by Tenant.

                                       10
<PAGE>

         10.      USE.
                  ----

                  10.1 Tenant may use the Premises only for laboratory research
and development and related administrative, office and other ancillary uses as
permitted by (i) the applicable zone under the City of San Diego Land
Development Code, (ii) any other laws, regulations, ordinances, and permits
applicable to the Project, and (iii) all covenants, conditions and restrictions
recorded against the property, and shall not use the Premises, or permit or
suffer the Premises to be used for any other purpose without the prior written
consent of Landlord.

                  10.2 Tenant shall conduct its business operations and use the
Premises in compliance with all federal, state, and local laws, regulations,
ordinances, requirements, permits and approvals applicable to the Premises.
Tenant shall not use or occupy the Premises in violation of any law or
regulation or the certificate of occupancy issued for the Building, and shall,
upon five (5) days written notice from Landlord, discontinue any use of the
Premises which is declared by any governmental authority having jurisdiction to
be a violation of law or the certificate of occupancy. Tenant shall comply with
any direction of any governmental authority having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, impose any
duty upon Tenant or Landlord with respect to the Premises or with respect to
Tenant's particular use or occupation thereof. Tenant shall not be deemed to be
in default of the foregoing obligation if it has the right to appeal such
directive and Tenant prosecutes such appeal in a timely fashion and in a manner
that does not impose or threaten to impose any lien, charge or other obligation
on Landlord or any portion of the Project.

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

                  10.4 Subject to the warranty of Landlord in Section 14.3,
Tenant shall cause the Premises to comply with the Americans with Disabilities
Act of 1990 ("ADA"), and the regulations promulgated thereunder, as amended from
time to time. All responsibility for compliance with the ADA relating to the
Premises and the activities conducted by Tenant within the Premises after the
Term Commencement Date shall be exclusively that of Tenant and not of Landlord,
including any duty to make capital improvements, alterations, repairs and
replacements to the Premises; provided, however, (i) Landlord shall be
responsible for compliance with the ADA to the extent of a violation of
Landlord's warranty in Section 14.3; (ii) Landlord shall make all improvements
outside of the Premises required for compliance with the ADA (with only the
amortized costs of capital improvements payable by Tenant as an Operating
Expense under Section 7.1(b)); and (iii) neither Tenant nor Landlord shall be
required to make capital improvements, alterations, repairs or replacements to
comply with the ADA unless and until required to do so by order of a government
entity or court of law exercising proper jurisdiction with regard thereto,
subject to any right to appeal or otherwise contest any such order. Any
alterations to the Premises made by Tenant for the purpose of complying with the
ADA or which otherwise require compliance with the ADA shall be done in
accordance with Article 17; provided, that Landlord's consent to such

                                       11
<PAGE>

alterations shall not constitute either Landlord's assumption, in whole or in
part, of Tenant's responsibility for compliance with the ADA, or representation
or confirmation by Landlord that such alterations comply with the provisions of
the ADA.

                  10.5 Landlord shall identify Tenant on the Building directory
in the Building lobby, and shall identify Tenant on a plaque installed beside
the main door to the Premises. Tenant may not install any signage outside of the
Premises. The expense of the directory, plaque and any and all other signage, if
any, shall be paid by Tenant as an Operating Expense pursuant to Article 7.

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

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

                  10.8 Landlord shall provide services to the Project described
on Exhibit H attached hereto, subject to reimbursement by Tenant as Operating
Expenses pursuant to Section 7.1(b).

         11.      BROKERS.
                  --------

                  11.1 Landlord and Tenant represent and warrant one to the
other that there have been no dealings with any real estate broker or agent in
connection with the negotiation of this Lease other than the brokers set forth
in Section 2.1.9, whose commission(s) shall be paid by Landlord. Each shall
indemnify, defend, protect, and hold harmless the other from any claim of any
other broker as a result of any act or agreement of the indemnitor.

                  11.2 To the best of Tenant's knowledge, without investigation
or inquiry, Tenant represents and warrants that no broker or agent has made any
representation or warranty relied upon by Tenant in Tenant's decision to enter
into this Lease other than as contained in this Lease.

         12.      HOLDING OVER.
                  -------------

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

                                       12
<PAGE>

                  12.2 If Tenant remains in possession of all or any portion of
the Premises after the expiration or earlier termination of the term hereof
without the express written consent of Landlord, Tenant shall become a tenant at
sufferance upon the terms of this Lease except that monthly rental shall be
equal to one hundred twenty-five percent (125%) of the Monthly Installment of
Basic Annual Rent in effect during the immediately preceding calendar month.

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

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

         13.      TAXES ON TENANT'S PROPERTY
                  --------------------------

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

                  13.2 If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or, if the assessed
valuation of the Project is increased by the inclusion therein of a value
attributable to Tenant's personal property or trade fixtures, and if Landlord
after written notice to Tenant pays the taxes based upon such increase in the
assessed value, then Tenant shall, within thirty (30) days of receipt of
satisfactory evidence of such tax increase, repay to Landlord the taxes so
levied against Landlord.

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

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

         14.      CONDITION OF PREMISES.
                  ----------------------

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

                                       13
<PAGE>

                  14.2 Landlord warrants to Tenant that the Tenant Improvements
were built in a good and workmanlike manner and in compliance with EXHIBIT E and
EXHIBIT F, and all applicable building code requirements, laws, rules, orders,
ordinances, directions, regulations, permits, approvals, and requirements of all
governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and with the rules, orders, directions, regulations, and
requirements of any applicable fire rating bureau; that the mechanical,
electrical, plumbing and other building systems will be in good working order at
the commencement of the term; and that the Project and the Tenant Improvements
are free of patent and latent defects in design, materials and construction.
Promptly after notice from Tenant, Landlord shall correct any defect in the
Project or the Tenant Improvements in violation of the foregoing warranty which
interferes with Tenant's use or occupancy of the Premises.

                  14.3 Landlord warrants to Tenant that the Project and the
Tenant Improvements, at the time of initial completion, will be in compliance
with ADA and the regulations promulgated thereunder; provided, however, nothing
in this Lease shall be construed to require Landlord to make improvements,
alterations, repairs or replacements to comply with ADA unless and until
required to do so by order of any government entity or court of law exercising
proper jurisdiction with regard thereto, subject to any right to appeal or
otherwise contest any such order.

         15.      COMMON AREAS AND PARKING FACILITIES.
                  ------------------------------------

                  15.1 Tenant shall have the nonexclusive right, in common with
others, to use the Common Areas, subject to the rules and regulations adopted by
Landlord and attached hereto as EXHIBIT G together with such other reasonable
and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord (the "RULES AND REGULATIONS"); provided, however, that such rules and
regulations do not unreasonably interfere with Tenant's use and enjoyment of the
Premises and Common Areas. Without limiting the generality of the foregoing,
Tenant may allow its employees the nonexclusive right, in common with employees
of other tenants in the Building, to use the fitness facilities and equipment,
provided that Tenant ensures that each employee before using the fitness
facilities and equipment has executed and delivered to Landlord a waiver of
liability (the "FITNESS CENTER WAIVER OF LIABILITY") in the form attached hereto
as EXHIBIT I.

15.2 Tenant shall not place any storage facilities or water systems, mechanical
equipment, emergency generators or other facilities or property on the surface
parking area or otherwise outside of the Premises without the express written
consent of Landlord, and any space used for such facilities shall be deducted
from Tenant's Pro Rata Share of parking described below.

                  15.3 As an appurtenance to the Premises, Tenant, and its
employees and invitees, shall be entitled to use without charge three (3)
parking spaces (which includes a pro rata share of visitor and handicap parking
spaces) for each 1,000 square feet of usable area of the Premises in common with

                                       14
<PAGE>

other tenants of the Project. The Project shall have at least three (3) parking
spaces for each 1,000 square feet of usable area of the entire Project. The term
"usable area" as used herein refers not to the Rentable Area of the Premises,
but to the area actually occupied by Tenant.

         16.      UTILITIES AND SERVICES.
                  -----------------------

                  16.1 Tenant shall pay for all water, gas, electricity,
telephone, cable, and other utilities which may be furnished to the Premises
during the term of this Lease, together with any taxes thereon. If any such
utility is not separately metered to Tenant, Tenant shall pay Tenant's Pro Rata
Share of the costs thereof as an Operating Expense unless Landlord has installed
separate meters or measuring devices for the determination of Tenant's actual
use of such utility service. Utilities and services provided to the Premises
which are separately metered shall be paid by Tenant directly to the supplier of
such utility or service, and Tenant shall pay for such utilities and services
prior to delinquency during the term of this Lease. In the event one tenant of
the Project is using a disproportionate amount of any utility that is not
separately metered, Landlord shall allocate an equitable portion of such utility
cost directly to such tenant. The primary measurement for metering usage will be
based upon the cubic feet per minute of air supplied to the premises.

                  16.2 Landlord shall not be liable for, nor shall any eviction
of Tenant result from, any failure of any such utility or service, and in the
event of such failure Tenant shall not be entitled to any abatement or reduction
of Rent, nor be relieved from the operation of any covenant or agreement of this
Lease, and Tenant waives any right to terminate this Lease on account thereof.
Notwithstanding the foregoing:

                           (i) in the event that Landlord is unable to supply
any of the Building's sanitary, electrical, heating, air conditioning, water,
elevator, life safety or other essential systems serving the Premises
(collectively, the "ESSENTIAL SERVICES") from a cause within Landlord's
reasonable control, and such inability of Landlord materially impairs Tenant's
ability to carry on its business in the Premises for a period of ten (10)
consecutive calendar days, Basic Annual Rent and Additional Rent shall be abated
commencing with the eleventh (11th ) day of such material interference with
Tenant's business, based upon the extent to which such inability to supply
Essential Services materially impairs Tenant's ability to carry on its business
in the Premises. Such abatement shall continue until the Essential Services have
been restored to such extent that the lack of any remaining services no longer
materially impairs Tenant's ability to carry on its business in the Premises.
Tenant shall not be entitled to such an abatement to the extent that Landlord's
inability to supply Essential Services to Tenant is caused by Tenant or its
employees, contractors, agents, licensees or invitees; and

                           (ii) in the event that Landlord is unable to supply
any Essential Services by reason of acts of God, accidents, breakage, repairs,
strikes, lockouts, labor disputes, inability to obtain utilities or materials or
by any other reason beyond Landlord's reasonable control, and (i) such inability
of Landlord prevents Tenant from carrying on its business in the Premises for a
period of thirty (30) consecutive calendar days or (ii) such inability of
Landlord materially impairs Tenant's ability to carry on its business in the
Premises for a period of sixty (60) consecutive calendar days, then Basic Annual
Rent and Additional Rent shall be abated commencing with the day after such
thirty (30) or sixty (60) day period, as the case may be, based upon the extent

                                       15
<PAGE>

to which such inability to supply Essential Services materially impairs Tenant's
ability to carry on its business in the Premises. Such abatement shall continue
until the Essential Services have been restored to the extent that the lack of
any remaining services no longer materially impairs Tenant's ability to carry on
its business in the Premises. Tenant shall not be entitled to such an abatement
to the extent that Landlord's inability to supply Essential Services to Tenant
is caused by Tenant or its employees, contractors, agents, licensees or
invitees; and

                           (iii) in the event of any stoppage or interruption of
Essential Services to the Premises, Landlord shall use commercially reasonable
efforts to restore Essential Services to the Premises as soon as possible;
provided, that Tenant shall have the right, at its option, to terminate this
Lease by written notice to Landlord if such failure to provide Essential
Services by Landlord continues for any reason (other than the actions of Tenant
or its employees, contractors, agents, licensees or invitees) for more than one
hundred eighty (180) consecutive calendar days and such failure materially
impairs Tenant's ability to carry on its business in the Premises.

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

         17.      ALTERATIONS.
                  ------------

                  17.1 Tenant shall make no alterations, additions or
improvements (hereinafter in this article, "IMPROVEMENTS") in or to the Premises
without Landlord's prior written consent, which shall not be unreasonably
withheld; provided, however, it shall not be unreasonable for Landlord to
withhold consent if the proposed Improvements would in the opinion of Landlord
adversely affect the use of the Premises for generic laboratory-based research
and development space as part of an integrated Building plan after the
expiration or earlier termination of this Lease. Tenant shall deliver to
Landlord final plans and specifications and working drawings for the
Improvements to Landlord, and Landlord shall have ten (10) days thereafter to
grant or withhold its consent. If Landlord does not notify Tenant of its
decision within the ten (10) days, Landlord shall be deemed to have given its
approval.

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

                  17.3 The Improvements shall be constructed only by licensed
contractors or mechanics. Tenant shall use only those contractors listed on
EXHIBIT H for the trades listed thereon; all other contractors shall be approved
by Landlord, which approval shall not be unreasonably withheld or delayed. Any
such contractor must have in force a general liability insurance policy of not
less than $2,000,000 or such higher limits as Landlord may reasonably require,
which policy of insurance shall name Landlord as an additional insured. Tenant
shall provide Landlord with a copy of the contract with the contractor or
mechanic prior to the commencement of any construction requiring Landlord's
consent.

                                       16
<PAGE>

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

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

                  17.6 Before commencing any work, Tenant shall give Landlord at
least five (5) days' prior written notice of the proposed commencement of such
work.

                  17.7 At the time Landlord consents to the Improvements
pursuant to Section 17.1, Landlord shall identify those Improvements which
Tenant shall be required to remove upon the expiration or earlier termination of
the Lease, and Landlord and Tenant shall mutually identify those Improvements
which Tenant may remove upon the expiration or earlier termination of this
Lease. Landlord and Tenant shall list any such Improvements on SCHEDULE 1
attached hereto, designating those which Tenant shall be required to remove and
those which Tenant may remove. With respect to those Improvements not so
identified, Landlord and Tenant acknowledge and agree that Landlord's approval
of the final plans and specifications and working drawings for the Improvements
pursuant to Section 17.1 shall be deemed Landlord's and Tenant's agreement that
those Improvements not so identified shall become the property of Landlord upon
the expiration or earlier termination of this Lease, and shall remain upon and
be surrendered with the Premises as a part thereof. Those Improvements
identified as Improvements which Tenant may remove are included within the term
"Tenant's Removable Property" defined in Section 30.3. Notwithstanding the
provisions of Section 30.3, Tenant shall, at Landlord's election, upon the
expiration or earlier termination of this Lease, remove the Improvements which
are identified as Improvements which Tenant shall be required to remove, and
restore and return the Premises to the condition they were in when first
occupied by Tenant.

         18.      REPAIRS AND MAINTENANCE.
                  ------------------------

                  18.1 Landlord shall repair, replace and maintain the
structural and exterior portions of the Building and Project, including
foundations, exterior walls, load bearing walls, windows, plate glass, and
roofing, and the mechanical, electrical, plumbing, fire sprinkler, and elevator
systems of the Project, subject to reimbursement by Tenant as its Pro Rata Share
of Operating Expenses to the extent provided by Section 7.1. However, if such
maintenance or repairs are required because of any act, neglect, fault of or
omissions of any duty by Tenant, its agents, servants, employees or invitees,
Tenant shall pay to Landlord the entire cost of such maintenance and repairs
attributable to Tenant's act, neglect, fault or omission, unless such
maintenance and repairs are covered by insurance carried by Landlord.

                                       17
<PAGE>

                  18.2 Except as otherwise set forth in Section 18.1, Tenant
shall, throughout the term of this Lease, at Tenant's sole cost and expense,
keep the Premises and every part thereof in good condition and repair. Tenant
shall upon the expiration or earlier termination of the term hereof surrender
the Premises to Landlord in substantially the same condition as when received,
ordinary wear and tear and damage from casualty and causes beyond the reasonable
control of Tenant excepted.

                  18.3 Tenant hereby waives Civil Code Sections 1941 and 1942
relating to a landlord's duty to maintain the Premises in a tenantable
condition, and the under said sections or under any law, statute or ordinance
now or hereafter in effect to make repairs at Landlord's expense.

                  18.4 There shall be no abatement of Rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of any repairs, alterations or improvements in or to any
portion of the Premises, or in or to improvements, fixtures, equipment and
personal property therein, unless such injury or interference is unreasonable or
is the result of Landlord's grossly negligent or willful act or omission. If
repairs or replacements become necessary which by the terms of this Lease are
the responsibility of Tenant and Tenant fails to make the repairs or
replacements, after notice from Landlord and opportunity for Tenant to make such
repairs or replacements, Landlord may do so pursuant to the provisions of
Section 24.3.

                  18.5 Notwithstanding any of the foregoing, in the event of a
fire, earthquake, flood, war or other similar cause of damage or destruction,
this Article shall not be applicable and the provisions of Article 22, entitled
"Damage or Destruction," shall apply and control.

         19.      LIENS.
                  ------

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

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

                  19.3 In the event Tenant shall lease or finance the
acquisition of equipment, furnishings, or other personal property utilized by
Tenant in the operation of Tenant's business, Tenant warrants that any Uniform
Commercial Code financing statement executed by Tenant will upon its face or by
exhibit thereto indicate that such financing statement is applicable only to
personal property of Tenant specifically described in the financing statement.
In no event shall the address of the Building be furnished on the financing
statement without qualifying language as to applicability of the lien only to
removable property of Tenant described in the financing statement. Should any

                                       18
<PAGE>

holder of a security agreement executed by Tenant record or place of record a
financing statement which appears to constitute a lien against any interest of
Landlord, Tenant shall within ten (10) days after the filing of such financing
statement cause (i) copies of the security agreement or other documents to which
the financing statement pertains to be furnished to Landlord to facilitate
Landlord's being in a position to show such lien is not applicable to any
interest of Landlord, and (ii) the holder of the security interest to amend
documents of record so as to clarify that such lien is not applicable to any
interest of Landlord in the Premises. Landlord shall execute such documents as
are reasonably required by Tenant or Tenant's lenders or equipment lessors
provided the same do not in any way alter the rights of Landlord under this
Lease.

         20.      INDEMNIFICATION AND EXCULPATION.
                  --------------------------------

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

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

                  20.3 Notwithstanding any provision of this Article 20 to the
contrary, Landlord shall not be liable to Tenant and Tenant assumes all risk of
damage to and loss of any fixtures, goods, inventory, merchandise, equipment,
records, research, experiments, animals and other living organisms, computer
hardware and software, leasehold improvements, and other personal property of
any nature whatsoever, and Landlord shall not be liable for injury to Tenant's
business or any loss of income therefrom relative to such damage, other than to
the extent Landlord receives proceeds of insurance specifically allocated to
such damage or loss. Tenant acknowledges that it is Tenant's obligation to
procure insurance against any such damages or loss pursuant to Section 21.4, and
that it would be impractical for Landlord to procure any such insurance in that

                                       19
<PAGE>

the nature of Tenant's business makes the risks uncertain and difficult to
underwrite and the potential risks are greater than Landlord is willing to
assume. Therefore, regardless of the fault of Landlord, Landlord shall not be
liable for any such damage or loss, other than to the extent Landlord receives
proceeds of insurance specifically allocated to such damage or loss.

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

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

                  20.6 Neither Landlord nor Tenant shall be liable to the other
for any damages arising from any act or neglect of any other tenant or occupant
of the Building or Project.

         21.      INSURANCE - WAIVER OF SUBROGATION.
                  ----------------------------------

                  21.1 Commencing prior to Tenant's first entry onto the
Premises for purposes of installing any improvements, fixtures or personal
property, but no later than the Term Commencement Date, and continuing at all
times during the term of this Lease, Tenant shall maintain, at Tenant's expense,
commercial general liability insurance, on an occurrence basis, insuring Tenant
and Tenant's agents, employees and independent contractors against all bodily
injury, property damage, personal injury and other covered loss arising out of
the use, occupancy, improvement and maintenance of the Premises and the business
operated by Tenant, or any other occupant, on the Premises. Such insurance shall
have a minimum combined single limit of liability per occurrence of not less
than $2,000,000 and a general aggregate limit of $4,000,000. Such insurance
shall: (i) name Landlord, and Landlord's lenders if required by such lenders,
and any management company retained to manage the Project if requested by
Landlord, as additional insureds; (ii) include a broad form contractual
liability endorsement insuring Tenant's indemnity obligations under Section
20.1; (iii) provide that it is primary coverage and noncontributing with any
insurance maintained by Landlord or Landlord's lenders, which shall be excess
insurance with respect only to losses arising out of Tenant's negligence; and
(iv) provide for severability of interests or include a cross-liability
endorsement, such that an act or omission of an insured shall not reduce or
avoid coverage of other insureds.

                  21.2 At all times during the term of this Lease, Landlord
shall maintain, subject to reimbursement by Tenant as an Operating Expense under
Section 7.1(b), "all risk" insurance, including, but not limited to, coverage
against loss or damage by fire, vandalism, and malicious mischief covering the
Project (exclusive of excavations, foundations and footings, and including the

                                       20
<PAGE>

Tenant Improvements), in an amount equal to one hundred percent (100%) of the
full replacement value thereof. If any boilers or other pressure vessels or
systems are installed on the Premises, Landlord shall maintain, subject to
reimbursement by Tenant as an Operating Expense under Section 7.1(b), boiler and
machinery insurance in an amount equal to one hundred percent (100%) of the full
replacement value thereof. The insurance described in this Section 21.2 shall:
(i) insure Landlord, and Landlord's lenders if required by such lenders, as
their interests may appear; (ii) contain a Lender's Loss Payable Form (Form 438
BFU or equivalent) in favor of Landlord's lenders and name Landlord, or
Landlord's lender if required by such lender, as the loss payee; (iii) provide
for severability of interests or include a cross-liability endorsement, such
that an act or omission of an insured shall not reduce or avoid coverage of
other insureds; and (iv) provide that it is primary coverage and
non-contributing with any insurance maintained by Landlord or Landlord's
lenders, which shall be excess insurance. The full replacement value of the
Project, including the Tenant Improvements and other improvements and fixtures
insured thereunder, shall, for the purpose of establishing insurance limits and
premiums only, be determined by the company issuing the insurance policy and
shall be redetermined by said company within six (6) months after completion of
any material alterations or improvements to the Premises and otherwise at
intervals of not more than three (3) years. Landlord shall promptly increase the
amount of the insurance carried pursuant to this Section 21.2 to the amount so
redetermined. The proceeds of the insurance described in this Section shall be
used for the repair, replacement and restoration of the Project, including the
Tenant Improvements and other improvements and fixtures insured thereunder, as
further provided in Article 22; provided, however, if this Lease is terminated
after damage or destruction, the insurance policy or policies, all rights
thereunder and all insurance proceeds shall be assigned to Landlord

                  21.3 At all times during this Lease, Landlord shall maintain,
pursuant to requirements of its mortgage lender, subject to reimbursement by
Tenant as an Operating Expense under Section 7.1(b), commercial general
liability insurance, including coverage for death, bodily injury and broad form
property damage, with a combined single limit in an amount of not less than
$1,000,000 per occurrence and $2,000,000 in the aggregate; umbrella excess
liability coverage with a limit of not less than $20,000,000 over primary
insurance, which policy shall include coverage for water damage, assumed and
contractual liability coverage, premises medical payment, and automobile
liability; and rental and/or business interruption insurance to cover loss of
income in an amount not less than eighteen (18) months' projected receipts from
the entire Project.

                  21.4 At all times during the term of this Lease, Tenant shall
maintain, at Tenant's expense, "all risk" insurance against all damage and loss
to Tenant's Removable Property, including but not limited to fixtures, goods,
inventory, merchandise, equipment, records, research, experiments, animals and
other living organisms, computer hardware and software, leasehold improvements,
and other personal property of any nature whatsoever of Tenant or any subtenant
of Tenant that may be occupying the Premises, or any portion thereof, from time
to time, in an amount equal to the full replacement value thereof.
Notwithstanding anything to the contrary contained here, Tenant shall be
entitled to all proceeds from the insurance carried pursuant to this Section
21.4.

                                       21
<PAGE>

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

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

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

                  21.8 Landlord and Tenant each hereby waive any and all rights
of recovery against the other or against the officers, directors, members,
managers, partners, employees, agents, and representatives of the other, on
account of loss or damage to such waiving party or such waiving party's property
or the property of others under its control, to the extent that such loss or
damage is caused by or results from risks insured against under any insurance
policy which insures such waiving party's property at the time of such loss or
damage, which waiver shall continue in effect as long as the parties' respective
insurers so permit. Any termination of such waiver shall be by written notice as
hereinafter set forth. Prior to obtaining policies of insurance required or
permitted under this Lease, Landlord and Tenant shall give notice to the
insurers that the foregoing mutual waiver is contained in this Lease, and each
party shall use its best efforts to cause such insurer to approve such waiver in
writing and to cause each insurance policy obtained by it to provide that the
insurer waives all right of recovery by way of subrogation against the other

                                       22
<PAGE>

party. If such written approval of such waiver of subrogation cannot be obtained
from any insurer or is obtainable only upon payment of an additional premium
which the party seeking to obtain the policy reasonably determines to be
commercially unreasonable, the party seeking to obtain such policy shall notify
the other thereof, and the latter shall have twenty (20) days thereafter to
either: (i) identify other insurance companies reasonably satisfactory to the
other party that will provide the written approval and waiver of subrogation; or
(ii) agree to pay such additional premium. If neither (i) nor (ii) are done, the
mutual waiver set forth above shall not be operative, and the party seeking to
obtain the policy shall be relieved of the obligation to obtain the insurer's
written approval and waiver of subrogation with respect to such policy during
such time as such policy is not obtainable or is obtainable only upon payment of
a commercially unreasonable additional premium as described above. If such
policies shall at any subsequent time be obtainable or obtainable upon payment
of a commercially reasonable additional premium, neither party shall be
subsequently liable for failure to obtain such insurance until a reasonable time
after notification thereof by the other party. If the release of either Landlord
or Tenant, as set forth in the first sentence of this Section 21.8, shall
contravene any law with respect to exculpatory agreements, the liability of the
party in question shall be deemed not released but shall be secondary to the
other's insurer.

         22.      DAMAGE OR DESTRUCTION.
                  ----------------------

                  22.1 In the event of damage to or destruction of all or any
portion of the Project or the Premises or the improvements and fixtures thereon
(collectively, "IMPROVEMENTS") arising from a risk covered by the insurance
described in Section 21.2, Landlord shall within a reasonable time commence and
proceed diligently to repair, reconstruct and restore (collectively, "RESTORE")
the improvements to substantially the same condition as they were in immediately
prior to the casualty. Tenant shall be responsible for its Pro Rata Share of
insurance deductibles and for all costs of restoration in excess of insurance
proceeds as Operating Expenses pursuant to the provisions of Article 7,
provided, however, that any such costs which would be deemed of a "capital"
nature under generally accepted accounting principles shall be amortized over
the useful life of the repair or replacement as determined under Internal
Revenue Service guidelines, and Tenant shall pay only that portion of the costs
which are amortized over the balance of the term, payable at the time the costs
are incurred to the extent Tenant's share of the costs are less than $1.75 per
square foot of Rentable Area of the Premises, with the balance payable on a
monthly basis during the balance of the term. In no event shall Tenant be liable
for costs of restoration to the extent the inadequacy of insurance proceeds is
due to Landlord's failure to carry the insurance required to be carried by
Landlord pursuant to the terms of this Lease.

                  22.2 In the event of any damage to or destruction of all or
any portion of the improvements arising from a risk which is not covered by the
insurance required to be carried by Landlord pursuant to Section 21.2, Landlord
may elect at its cost to restore the improvements, in which event Landlord
shall, within a reasonable time, commence and proceed diligently to restore the
improvements to substantially the same condition as they were in immediately
prior to the casualty. In the event Landlord elects not to restore the
improvements, this Lease shall terminate as of the date of the damage or
destruction unless Tenant elects to pay the full cost of restoration.

                                       23
<PAGE>

                  22.3 In the event the improvements are restored pursuant to
Section 22.1 or Section 22.2, this Lease shall continue in full force and
effect, notwithstanding such damage or destruction; provided, however, that if
the damage or destruction (i) occurs during the last year of the term and the
expense of restoration exceeds $500,000, or (ii) occurs at any other time and
the expense of restoration (after application of insurance proceeds) exceeds
$1,000,000, Landlord may at its election terminate the Lease unless Tenant
elects to pay the full cost of restoration.

                  22.4 In satisfying its obligations under this Article 22,
Landlord shall be not be required to fulfill its restoration responsibilities
with improvements identical to those which were damaged or destroyed; rather,
with the consent of Tenant, which consent will not be unreasonably withheld or
delayed, Landlord may restore the damage or destruction with improvements
reasonably equivalent or of reasonably equivalent value to those damaged or
destroyed. Provided, however, that such restoration complies with all the then
existing applicable building codes.

                  22.5 In the event of damage, destruction and/or restoration as
herein provided, Tenant shall not be entitled to any compensation or damages
occasioned by any such damage, destruction or restoration, but Tenant shall be
entitled to an equitable abatement of rent in proportion to the extent the
Premises are not usable by Tenant. Notwithstanding the foregoing, in the event
restoration cannot reasonably be completed within six (6) months following the
damage or destruction as estimated by Landlord's architect, Landlord will give
notice thereof to Tenant within fifteen (15) days following such damage or
destruction, and Tenant at its election may by written notice to Landlord
terminate this Lease. In the event of such termination, Tenant shall have no
responsibility for contributing to the expense of restoration.

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

                  22.7 If an insured casualty occurs, Landlord shall make the
loss adjustment with the insurance company for the insurance carried by
Landlord.

                  22.8 Tenant waives the provisions of Civil Code Section
1932(2) and 1933(4) or any similar statute now existing or hereafter adopted
governing destruction of the Premises, so that the parties' rights and
obligations in the event of damage or destruction shall be governed by the
provisions of this Lease.

         23.      EMINENT DOMAIN.
                  ---------------

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

                                       24
<PAGE>

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

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

         24.      DEFAULTS AND REMEDIES.
                  ----------------------

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

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

                                       25
<PAGE>

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

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

                           (a) The failure by Tenant to make any payment of
Rent, as and when due, where such failure shall continue for a period of five
(5) days, without the necessity of notice thereof from Landlord to Tenant;

                           (b) The failure by Tenant to observe or perform any
obligation other than described in Section 24.4(a) to be performed by Tenant,
where such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
to cure the default, then Tenant shall not be deemed to be in default if Tenant
shall commence such cure within said thirty (30) day period and thereafter
diligently prosecute the same to completion. Such notice shall be in lieu of,
and not in addition to, any notice required under California Code of Civil
Procedure Section 1161;

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

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

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

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

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

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

                                       26
<PAGE>

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

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

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

                           (c) The worth at the time of award of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such rental loss which Tenant proves could have been
reasonably avoided; plus

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

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

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

                  24.6 In the event of a default by Tenant, and if Landlord does
not elect to terminate this Lease as provided in Section 24.5 or otherwise
terminate Tenant's right to possession of the Premises, Landlord shall have the
remedy described in Section 1951.4 of the Civil Code. Landlord may continue this
Lease in effect, as lessee has the right to sublet or assign, subject only to
reasonable limitations, pursuant to Section 25.1 and 25.2 for so long as
Landlord does not terminate Tenant's right to possession of the Premises, and
may enforce all of its rights and remedies under the Lease, including the right
from time to time to recover Rent as it becomes due under the Lease. At any time
thereafter, Landlord may elect to terminate this Lease and to recover damages to
which Landlord is entitled.

                                       27
<PAGE>

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

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

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

                  24.10 Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event later than thirty (30) days after written notice by Tenant specifying
wherein Landlord has failed to perform such obligation; provided, however, that
if the nature of Landlord's obligation is such that more than thirty (30) days
are required for performance, then Landlord shall not be in default if Landlord
advises Tenant in writing of the need for more than thirty (30) days to perform
such obligation, commences performance within ten (10) days after Tenant serves
the written notice of Landlord's failure to perform and thereafter diligently
prosecutes the same to completion.

                  24.11 In the event of any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any beneficiary of a
deed of trust or mortgagee of a mortgage covering the Premises whose address
shall have been furnished to Tenant, and shall offer such beneficiary and/or
mortgagee a reasonable opportunity to cure the default, but in no event less
than thirty (30) days after the notice is given or thirty (30) days beyond any
applicable cure period given to Landlord in this Article 24, whichever is later.

         25.      ASSIGNMENT OR SUBLETTING.
                  -------------------------

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

                                       28
<PAGE>

                  25.2 If Tenant desires to assign this Lease to an entity into
which Tenant is merged, with which Tenant is consolidated, or which acquires all
or substantially all of the assets of Tenant, provided that the successor
entity's net worth and liquid assets are equal or greater than Tenant's
immediately prior to the assignment, and further provided that the assignee
first executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this Lease
arising after the effective date of the transfer, then Landlord upon receipt of
proof of foregoing, will consent to the assignment; provided however, Landlord's
consent shall not be required if such transfers occur in a public stock
exchange.

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

                  25.4 Landlord in making its determination as to whether
consent should be given to a proposed assignment or sublease, may give
consideration to (i) the financial strength of such successor (but may not
withhold consent on this ground if the successor's net worth and liquid assets
are equal to or greater than Tenant's immediately prior to the assignment),
notwithstanding the assignor remaining liable for Tenant's performance, (ii) any
use which such successor proposes to make of the Premises, and (iii) whether the
proposed assignee or sublessee represents a potential risk of compromise of
trade secrets of another tenant of the Project. If Landlord fails to deliver
written notice of its determination to Tenant within fifteen (15) days following
receipt of the Assignment Notice and the information required under Section
25.4, Landlord shall be deemed to have approved the request. As a condition to
any assignment or sublease to which Landlord has given consent, any such
assignee or sublessee must execute, acknowledge and deliver to Landlord an
agreement whereby the assignee or sublessee agrees to be bound by all of the
covenants and agreements in this Lease.

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

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

                                       29
<PAGE>

                  25.7 If Tenant shall sublet the Premises or any part thereof,
Tenant hereby immediately and irrevocably assigns to Landlord, as security for
Tenant's obligations under this Lease, all rent from any subletting of all or a
part of the Premises, and Landlord as assignee of Tenant, or a receiver for
Tenant appointed on Landlord's application, may collect such rent and apply it
toward Tenant's obligations under this Lease; except that, until the occurrence
of an act of default by Tenant, Tenant shall have the right to collect such
rent. Furthermore, Tenant hereby immediately and irrevocably assigns to
Landlord, as security for Tenant's obligations under this Lease, any security
deposit received from the subtenant, which Landlord shall hold pursuant to the
terms of the sublease. The security deposit shall be transferable by Landlord to
a successor Landlord and to Landlord's mortgage lender which is the beneficiary
of a deed of trust encumbering the Premises, provided such lender agrees to hold
the security deposit pursuant to the terms of the sublease and this Lease.

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

                  25.9 Any sublease of the Premises shall be subject and
subordinate to the provisions of this Lease, shall not extend beyond the term of
this Lease, and shall provide that the sublessee shall attorn to Landlord, at
Landlord's sole option, in the event of the termination of this Lease. Landlord
and any lender shall upon Tenant's request provide any sublessee of the entirety
of the Premises with a recognition and nondisturbance agreement in the form
described in Article 35 on the condition that the sublessee agrees to attorn to
Landlord on exactly the same terms and conditions as this Lease. Any assignment
of the Lease or sublease of the Premises shall provide that the assignee or
sublessee shall provide financial statements to Landlord as reasonably required
by present and prospective lenders and purchasers of the Project.

                  25.10 In the event Tenant assigns, hypothecates or otherwise
transfer this Lease or sublets the Premises Tenant shall pay to Landlord, as
Additional Rent, fifty percent (50%) of the rent and other consideration
received from the transferee during the term of this Lease in excess of Rent
payable to Landlord under this Lease, after tenant has recouped any reasonable
commissions and legal expenses occasioned by such transfer and payable to third
parties.

                  25.11 Notwithstanding any of the foregoing provisions to the
contrary, in the event Tenant desires to assign this Sublease or sublet the
entire Premises to a transferee other than to a transferee describe in Section
25.2, Landlord may elect to terminate this Lease by written notice given by
Landlord to Tenant within fifteen (15) days following receipt of the Assignment
Notice and the information required under Section 25.3.

                                       30
<PAGE>

         26.      ARBITRATION/ATTORNEYS' FEES.
                  ----------------------------

                  26.1 Any and all disputes in any way arising out of or
relating to this Lease shall be submitted to binding arbitration before the
American Arbitration Association. The arbitration shall be presided over by one
arbitrator. The appointment of the arbitrator shall be in accordance with
California Code of Civil Procedure Section 1281.6. Prior to the arbitration
hearing, the Landlord and Tenant shall exchange all documents they intend to
rely on at the hearing. If approved by the arbitrator, the Landlord and Tenant
may also take depositions or engage in other forms of written discovery.

                  26.2 Notwithstanding the foregoing, Landlord may prosecute a
court action for unlawful detainer in order to effect an eviction of tenant to
the extent permitted by this Lease.

                  26.3 If either party commences an arbitration proceeding or
court action, the prevailing party shall be entitled to have and recover from
the other party reasonable attorneys' fees, expert witness fees and costs of
suit.

         27.      BANKRUPTCY.
                  -----------

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

         28.      DEFINITION OF LANDLORD.
                  -----------------------

                  28.1 The term "LANDLORD" as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be limited
to mean and include only Landlord or the successor-in-interest of Landlord under
this Lease at the time in question. In the event of any transfer, assignment or
conveyance of Landlord's title or leasehold, the Landlord herein named (and in
case of any subsequent transfers or conveyances, the then grantor and any prior
grantors) shall be automatically freed and relieved from and after the date of
such transfer, assignment or conveyance of all liability for the performance of
any covenants or obligations contained in this Lease thereafter to be performed
by Landlord and, without further agreement, the transferee of such title or
leasehold shall be deemed to have assumed and agreed to observe and perform any

                                       31
<PAGE>

and all obligations of Landlord hereunder, during its ownership of the Premises.
Landlord may transfer its interest in the Premises or this Lease without the
consent of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on the part of Landlord or the then grantor of any of the terms or
conditions of this Lease.

         29.      ESTOPPEL CERTIFICATE.
                  ---------------------

                  29.1 Each party shall, within fifteen (15) days of written
notice from the other party, execute, acknowledge and deliver to the other party
a statement in writing on a form reasonably requested by a proposed lender,
purchaser, assignee or subtenant (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so modified is in full force and
effect) and the dates to which the rental and other charges are paid in advance,
if any, (ii) acknowledging that there are not, to each party's knowledge, any
uncured defaults on the part of Landlord or Tenant hereunder (or specifying such
defaults if any are claimed) and (iii) setting forth such further information
with respect to this Lease or the Premises as may be reasonably requested
thereon. Any such statement may be relied upon by any prospective lender,
purchaser, assignee or subtenant of all or any portion of the Premises.

         30.      REMOVAL OF PROPERTY.
                  --------------------

                  30.1 Except as provided in Section 10.5 and in this Article
30, all fixtures and personal property owned by Tenant ("TENANT'S REMOVABLE
PROPERTY") shall be and remain the property of Tenant, and may be removed by
Tenant at any time. Landlord waives any and all rights, title and interest
Landlord now has, or hereafter may have, whether statutory or otherwise, in
Tenant's Removable Property. At the expiration or earlier termination of this
Lease, Tenant shall remove all Tenant's Removable Property in accordance with
this Lease, unless Landlord shall have otherwise agreed in writing.

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

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

                                       32
<PAGE>

addition or improvement thereunder. Should Tenant require any period beyond the
expiration or earlier termination of the Lease to complete such restoration,
Tenant shall be a tenant at sufferance subject to the provisions of Section 12.2
hereof, unless tenant obtains Landlord's consent pursuant to Section 12.1 prior
to the termination or earlier termination of the Lease.

                  30.4 If Tenant shall fail to remove any fixtures or personal
property which it is entitled to remove under this Article 30 from the Premises
prior to termination of this Lease, then Landlord may dispose of the property
under the provisions of Section 1980 et seq. of the California Civil Code, as
such provisions may be modified from time to time, or under any other applicable
provisions of California law.

         31.      LIMITATION OF LANDLORD'S LIABILITY.
                  -----------------------------------

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

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

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

                                       33
<PAGE>

         32.      CONTROL BY LANDLORD.
                  --------------------

                  32.1 Landlord reserves full control over the Project to the
extent not inconsistent with Tenant's quiet enjoyment and use of Premises. This
reservation includes the right to establish ownership of the Building separate
from fee title to the real property underlying the Building, to divide the
Project into more than one lot, and to construct other buildings or improvements
on the real property, provided Tenant's quiet enjoyment of the Premises is not
affected. Tenant shall, should Landlord so request, promptly join with Landlord
in execution of such documents as may be appropriate to assist Landlord to
implement any such action provided Tenant need not execute any document which is
of a nature wherein liability is created in Tenant or if by reason of the terms
of such document Tenant will be deprived of the quiet enjoyment and use of the
Premises as granted by this Lease.

                  32.2 Landlord reserves the right to enter the Premises, and to
cause its contractors to enter the Premises, upon reasonable prior written
notice to Tenant, to maintain, repair or replace mechanical (HVAC), electrical,
plumbing, sprinkler and other systems and equipment, and to install
improvements, within the Premises or within adjoining premises (including access
through the Premises to areas of the Building above and below the Premises).
Tenant acknowledges that because of the design and configuration of the
Building, and the nature of the Building as a multi-tenant biotech facility,
that temporary access through the Premises to other areas of the Building will
be reasonably necessary from time to time, and that such access may interfere
with Tenant's quiet enjoyment of the Premises; provided, however, that such
interference shall not materially interfere with Tenant's use and occupancy of
the Premises. There shall be no abatement of Rent and no liability of Landlord
by reason of any injury to or interference with Tenant's business arising from
the making of any repairs, alterations or improvements to adjoining premises
unless such injury or interference is unreasonable and is the result of
Landlord's grossly negligent or willful act or omission.

         33.      QUIET ENJOYMENT.
                  ----------------

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

         34.      QUITCLAIM DEED.
                  ---------------

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

                                       34
<PAGE>

         35.      SUBORDINATION AND ATTORNMENT.
                  -----------------------------

                  35.1 This lease shall be subject to and subordinate to the
lien of any mortgage or deed of trust now or hereafter in force against the
Project and Building of which the Premises are a part, and to all advances made
or hereafter to be made upon the security thereof without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination. However, if any such mortgagee or beneficiary so
elects at any time prior to or following a default by Tenant, this Lease shall
be deemed prior in lien to any such mortgage or deed of trust regardless of date
and Tenant will execute a statement in writing to such effect at Landlord's
request in a form reasonably satisfactory to Tenant

                  35.2 Notwithstanding the foregoing, Tenant shall execute and
deliver upon demand such further instrument or instruments evidencing such
subordination of this Lease to the lien of any such mortgage or deed of trust as
may be required by Landlord, provided that the lienholder, beneficiary, or
mortgagee concurrently therewith executes and delivers to Tenant a
non-disturbance agreement in recordable form.

                  35.3 In the event any proceedings are brought for foreclosure,
or in the event of the exercise of the power of sale under any mortgage or deed
of trust made by the Landlord covering the Premises, the Tenant shall at the
election of the purchaser at such foreclosure or sale attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Landlord
under this Lease in accordance with the terms of the non-disturbance Agreement.

         36.      SURRENDER.
                  ----------

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

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

         37.      WAIVER AND MODIFICATION.
                  ------------------------

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

         38.      HAZARDOUS MATERIAL.
                  -------------------

                  38.1 During the term, Tenant, at its sole cost, shall comply
with all federal, state and local laws, statutes, ordinances, codes, regulations
and orders relating to the receiving, handling, use, storage, accumulation,
transportation, generation, spillage, migration, discharge, release and disposal
of Hazardous Material (as defined below) in or about the Premises. Tenant shall

                                       35
<PAGE>

not cause or permit any Hazardous Material to be brought upon, kept or used in
or about the Premises by Tenant, its agents, employees, contractors, invitees or
subtenants, in a manner or for a purpose prohibited by any federal, state or
local agency or authority. The accumulation of Hazardous Material shall be in
approved containers and removed from the Premises by duly licensed carriers.

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

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

                  38.4 The indemnification of Landlord and Landlord's Agents by
Tenant pursuant to the preceding Section 39.3 includes, without limiting the
generality of Section 39.3, reasonable costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil,
subsoil, ground water, or elsewhere on, under or about the Premises, or on,
under or about any other property in the vicinity of the Project owned by
Landlord or an affiliate of Landlord, to the extent caused by Tenant. Without
limiting the foregoing, if the presence of any Hazardous Material on the
Premises caused or permitted by Tenant results in any contamination of the
Premises, or underlying soil or groundwater, Tenant shall promptly take all
actions at its sole expense as are necessary to return the Premises to that

                                       36
<PAGE>

condition required by applicable law as applied by any government entity with
proper jurisdiction with regard thereto, provided that Landlord's approval of
such action shall first be obtained, which approval shall not be unreasonably
withheld, except that Tenant shall not be required to obtain Landlord's prior
approval of any action of an emergency nature reasonably required or any action
mandated by a governmental authority, but Tenant shall give Landlord prompt
notice thereof.

                  38.5 Landlord acknowledges that it is not the intent of this
Article 39 to prohibit Tenant from operating its business as described in
Article 10 or to unreasonably interfere with the operation of Tenant's business.
Tenant may operate its business according to the custom of the industry so long
as the use or presence of Hazardous Material is strictly and properly monitored
according to all applicable governmental requirements. Any approval or consent
required by this Section 39.5 shall not be unreasonably withheld, conditioned or
delayed.

                  38.6 As a material inducement to Landlord to allow Tenant to
use Hazardous Material in connection with its business, Tenant agrees to provide
to Landlord a list identifying each type of Hazardous Material to be present in
or about the Premises and setting forth all governmental approvals or permits
required in connection with the presence of Hazardous Material in or about the
Premises ("HAZARDOUS MATERIAL INVENTORY"). Tenant shall deliver a Hazardous
Material Inventory to Landlord no later than twenty (20) days (i) prior to the
occupancy of any portion of the Premises or the placement of equipment anywhere
on the Project, (ii) prior to any increase in the types or amounts of Hazardous
Material, (iii) after a request of Landlord reasonably required for purposes of
monitoring the Project, and (iv) prior to the initiation by Tenant of any
changes in the Premises or elsewhere on the Project which involve any increase
in the types or amounts of Hazardous Material, and shall deliver a Hazardous
Material Inventory to Landlord in any event annually no later than December 31
of each year. For each type of Hazardous Material listed, the Hazardous Material
Inventory shall include the (i) chemical name; (ii) material state (solid,
liquid, gas, cryogen); (iii) concentration; (iv) storage amount and storage
condition (cabinets or no cabinets); (v) use amount and use condition (open use
or closed use); (vi) location (room number/identification); and (vii) chemical
abstract service (CAS) number, if known. In the event that Tenant's Hazardous
Material Inventory indicates non-compliance with this Lease or applicable
building and fire code requirements, Tenant shall at its expense diligently take
steps to bring its storage and use of Hazardous Material into compliance.

                  38.7 Tenant further agrees to make available to Landlord, upon
Landlord's reasonable request, true and correct copies of the following
documents ("HAZARDOUS MATERIAL DOCUMENTS"): governmental approvals or permits
required in connection with the presence of Hazardous Material on the Premises;
a copy of the Hazardous Material business plan prepared pursuant to Health and
Safety Code Section 25500 et seq.; documents relating to the handling, storage,
disposal and emission of Hazardous Material, including: permits; approvals;
reports and correspondence; notice of violations of any laws; plans relating to
the installation of any storage tanks to be installed in or under the Premises
(provided said installation of tanks shall be permitted only after Landlord has
given Tenant its written consent to do so, which consent may not be unreasonably
withheld); and all closure plans or any other documents required by any and all
federal, state and local governmental agencies and authorities for any storage
tanks installed in, on or about the Premises for the closure of any such tanks.
Tenant shall not be required, however, to provide Landlord with that portion of
any document which contains information of a proprietary nature and which, in

                                       37
<PAGE>

and of itself, does not contain a reference to any Hazardous Material which is
not otherwise identified to Landlord in such documentation, unless any such
Hazardous Material Document names Landlord as an "owner" or "operator" of the
facility in which Tenant is conducting its business. It is not the intent of
this subsection to provide Landlord with information which could be detrimental
to Tenant's business should such information become possessed by Tenant's
competitors. Landlord shall treat all information furnished by Tenant to
Landlord pursuant to this Article 39 as confidential and shall not disclose such
information to any person or entity, except as provided in this Article 39,
without Tenant's prior written consent, which consent shall not be unreasonably
withheld or delayed, except as required by law.

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

                  38.9 Notwithstanding the provisions of Article 25, if any
anticipated use of the Premises by a proposed assignee or subtenant involves the
generation or storage, use, treatment or disposal of Hazardous Material and (i)
the proposed assignee or sublessee has been required by any governmental
authority to take remedial action in connection with Hazardous Material
contaminating a property if the contamination resulted from such party's action
or use of the property in question and has failed to take such action, or (ii)
the proposed assignee or sublessee is subject to a final, unappealable
enforcement order issued by any governmental authority in connection with such
party's use, disposal or storage of Hazardous Material of a type such proposed
assignee or sublessee intends to use in the Premises and shall have failed to
comply with such order, it shall not be unreasonable for Landlord to withhold
its consent to an assignment or subletting to such proposed assignee or
sublessee.

                  38.10 Landlord represents that, to the best of its knowledge,
as of the date of this Lease, there is no Hazardous Material on the Premises.
Landlord shall provide Tenant with a current Phase I Environmental Site
Assessment, and any current Phase II Environmental Site Assessment recommended
therein, at the time of the completion of the current renovation of the Project
to a biotech facility. Should the environmental site assessment(s) disclose the
presence of Hazardous Material beyond legally permissible levels, Landlord shall
correct the deficiencies to Tenant's reasonable satisfaction and shall cause
updates to the environmental site assessment(s) to be issued reflecting the
remedy. The environmental site assessment(s) and all updates thereto are
hereinafter referred to as the "BASE LINE REPORT," and shall be deemed
conclusive as to the condition of the Premises, unless, within ninety (90) days
of receipt, Tenant causes an inspection of its own to be conducted, which
inspection discloses the presence of Hazardous Material materially different
from that disclosed in the Base Line Report.

                                       38
<PAGE>

                  38.11 At any time prior to the expiration or earlier
termination of the term of the Lease, Landlord shall have the right to enter
upon the Premises, upon reasonable prior notice to Tenant, at all reasonable
times and at reasonable intervals in order to conduct appropriate tests
regarding the presence, use and storage of Hazardous Material, and to inspect
Tenant's records with regard thereto. Tenant will pay the reasonable costs of
any such test which demonstrates that contamination in excess of permissible
levels has occurred and such contamination was caused by Tenant's use of the
Premises during the term of the Lease. Tenant shall correct any deficiencies
identified in any such tests in accordance with its obligations under this
Article 39 to the extent the result of Tenant's use of the Premises during the
term of this Lease.

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

                  38.13 Tenant's obligations under this Article 39 shall survive
the termination of the Lease.

                  38.14 As used herein, the term "HAZARDOUS MATERIAL" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance which is (i) defined as a "hazardous waste," "extremely
hazardous waste" or "restricted hazardous waste" under Sections 25515, 25117 or
25122.7, or listed pursuant to Section 25140, of the California Health and
Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii)
defined as a "hazardous substance" under Section 25316 of the California Health
and Safety Code, Division 2, Chapter 6.8 (Carpenter-Presly-Tanner Hazardous
Substance Account Act), (iii) defined as a "hazardous material," hazardous
substance" or "hazardous waste" under Section 25501 of the California Health and
Safety Code, Division 20, Chapter 6.95 (Hazardous Substances), (v) petroleum,
(vi) asbestos, (vii) listed under Article 9 and defined as hazardous or
extremely hazardous pursuant to Article 11 of Title 22 of the California
Administrative Code, Division 4, Chapter 20, (viii) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317), (ix) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et. seq. (42 U.S.C. Section 6903), or (x) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C.
Section 9601).

                                       39
<PAGE>

         39.      MISCELLANEOUS.
                  --------------

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

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

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

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

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

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

                  39.7 SEVERABILITY. Any provision of this Lease which shall
prove to be invalid, void, or illegal in no way affects, impairs or invalidates
any other provision hereof, and such other provisions shall remain in full force
and effect; provided, however, if the provisions of this Lease relating to
Tenant's stated use of the Premises shall be determined by any government agency
having jurisdiction to be invalid or unenforceable, this Lease, effective as of
the date of such determination, shall be deemed to be void and of no further
force and effect.

                  39.8 RECORDING. Either Landlord or Tenant may record a short
form memorandum hereof, subject to the requirement to execute and deliver a
quitclaim deed pursuant to the provisions of Section 34.1 hereof.

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

                  39.10 INUREMENT. Each of the covenants, conditions, and
agreements herein contained shall inure to the benefit of and shall apply to and
be binding upon the parties hereto and their respective heirs, legatees,
devisees, executors, administrators, successors, assigns, sublessees, or any
person who may come into possession of said Premises or any part thereof in any
manner whatsoever. Nothing in this Section 40.10 contained shall in any way
alter the provisions against assignment or subletting in this Lease provided.

                                       40
<PAGE>

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

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

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

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

LANDLORD:

Dated:   July 1, 2004

SAN DIEGO SCIENCE CENTER LLC
A California limited liability company

By:      SD Science Center, Inc.
         A California corporation
         Its Manager

         By:      ______________________________
                  John P. Bonanno
                  President

(Signatures continued on following page.)

                                       41
<PAGE>

TENANT:

Dated:   July ____, 2004

AETHLON MEDICAL, INC.
A Nevada corporation

By:      ______________________________
         Name: James A. Joyce
         Title: Chairman and Chief Executive Officer

                                       42
<PAGE>

                                    EXHIBIT A

                       LEGAL DESCRIPTION OF REAL PROPERTY
                       ----------------------------------

THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
SAN DIEGO, AND IS DESCRIBED AS FOLLOWS:

PARCEL A:

LOT 1 OF HANSEN'S TRACT, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, ACCORDING TO MAP THEREOF NO. 4515, FILED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, APRIL 20, 1960.

PARCEL B:

LOT 1 OF HARRISON TRACT, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, ACCORDING TO MAP THEREOF NO. 4786, FILED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, JUNE 2, 1961.

TOGETHER WITH THAT PORTION OF THE NORTHWESTERLY HALF OF BUNKER HILL STREET
ADJOINING A PORTON OF SAID LOT 1 ON THE SOUTHEAST AS VACATED AND CLOSED TO
PUBLIC USE BY RESOLUTION NO. 215408, RECORDED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY MARCH 2, 1976 AS FILE NO. 76-061804 OF OFFICIAL
RECORDS.

EXCEPTING THEREFROM THAT PORTION OF VACATED BUNKER HILL STREET LYING WITHIN THE
FOLLOWING DESCRIBED PARCEL:

THAT PORTION OF LOT 4 OF EUREKA LEMON TRACT, IN THE CITY OF SAN DIEGO, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 753, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 19, 1893, TOGETHER WITH A
PORTION OF THE NORTHWESTERLY 15.00 FEET OF THAT 30.00 FOOT WIDE UNNAMED ROAD
(NOW KNOWN AS BUNKER HILL STREET), LYING SOUTHEASTERLY OF AND ADJACENT TO SAID
LOT 4 AS VACATED AND CLOSED ON FEBRUARY 25, 1976 BY RESOLUTION NO. 215408 OF THE
COUNCIL OF THE CITY OF SAN DIEGO, RECORDED MARCH 2, 1976 AS FILE NO. 76-061804
OF OFFICIAL RECORDS AND BEING MORE PARTICULARLY DESCRIBED AS A WHOLE AS FOLLOWS:

COMMENCING AT THE MOST SOUTHERLY CORNER OF LOT 1 OF HARRISON TRACT, ACCORDING TO
MAP THEREOF NO. 4786, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, JUNE 2, 1961, BEING ALSO A POINT ON THE NORTHWESTERLY LINE OF THE
SOUTHEASTERLY 10.00 FEET OF SAID LOT 4 OF MAP NO. 753; THENCE ALONG THE
SOUTHEASTERLY LINE OF SAID MAP NO. 4786, NORTH 63(Degree)14'32" EAST (RECORD -
NORTH 62(Degree)40'35" EAST), 431.46 FEET TO THE BEGINNING OF A TANGENT 125.00

                                       43
<PAGE>

FOOT RADIUS CURVE, CONCAVE NORTHWESTERLY, BEING AN ANGLE POINT IN THE BOUNDARY
OF LAND DESCRIBED IN DIRECTOR'S DEED TO PACIFIC BEACH MEDICAL ASSOCIATES, LTD.,
RECORDED FEBRUARY 8, 1972 AS FILE NO. 31151 OF OFFICIAL RECORDS AND BEING THE
TRUE POINT OF BEGINNING; THENCE ALONG THE BOUNDARY OF SAID DIRECTOR'S DEED AS
FOLLOWS: NORTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF
40(Degree)31'54" A DISTANCE OF 88.43 FEET; AND NON-TANGENT TO SAID CURVE, NORTH
04(Degree)17'58" EAST, 46.82 FEET TO THE MOST NORTHERLY CORNER OF SAID LAND
BEING ALSO AN ANGLE POINT IN THE SOUTHWESTERLY BOUNDARY OF CALIFORNIA STATE
HIGHWAY II-SD-5, AS CREATED BY SAID DIRECTOR'S DEED; THENCE ALONG SAID
SOUTHWESTERLY BOUNDARY, SOUTH 39(Degree)36'43" EAST TO THE CENTER LINE OF THE
ORIGINAL 30.00 FOOT WIDE UNNAMED LYING SOUTHEASTERLY OF AND ADJACENT TO SAID LOT
4 AS SHOWN ON SAID MAP NO. 753; THENCE ALONG SAID CENTER LINE, SOUTH
63(Degree)14'32" WEST TO A POINT ON THE ARC OF THAT 70.00 FOOT RADIUS CURVE,
CONCAVE SOUTHWESTERLY IN THE NORTHEASTERLY LINE OF RELINQUISHMENT PARCEL 3 AS
SHOWN ON STATE HIGHWAY MAP NO. 100, FILED IN THE OFFICE OF THE COUNTY RECORDER
OF SAN DIEGO COUNTY, MAY 8, 1969 AS FILE NO. 81182 OF OFFICIAL RECORDS; THENCE
ALONG SAID NORTHEASTERLY LINE, NORTHWESTERLY ALONG THE ARC OF SAID CURVE TO A
LINE WHICH BEARS AT RIGHT ANGLES, SOUTH 26(Degree)45'28" EAST FROM THE TRUE
POINT OF BEGINNING, BEING ALSO A POINT ON THE SOUTHWESTERLY LINE OF THAT PORTION
OF CALIFORNIA STATE HIGHWAY XI-SD-2 (NOW INTERSTATE 5), AS DESCRIBED IN DEED TO
THE STATE OF CALIFORNIA, RECORDED MAY 18, 1953 AS DOCUMENT NO. 67093 IN BOOK
4857, PAGE 559 OF OFFICIAL RECORDS, AND BEING ALSO AN ANGLE POINT IN THE
BOUNDARY OF SAID DIRECTOR'S DEED, A RADIAL LINE OF SAID CURVE BEARS NORTH
10(Degree)30'29" WEST TO SAID ANGLE POINT; THENCE ALONG THE SOUTHWESTERLY LINE
OF SAID LAND DESCRIBED IN SAID DIRECTOR'S DEED, NORTH 26(Degree)45'28" WEST TO
THE TRUE POINT OF BEGINNING.

                                       44
<PAGE>

                                    EXHIBIT B

                            SITE PLAN OF THE PROJECT
                            ------------------------

                                       45
<PAGE>

                                    EXHIBIT C

                             OUTLINE OF THE PREMISES
                             -----------------------

                                       46
<PAGE>

                                    EXHIBIT D

                    ACKNOWLEDGMENT OF TERM COMMENCEMENT DATE
                    ----------------------------------------

         Pursuant to Section 3.3 of that certain Lease dated
____________________, 20___, by and between ____________________, a
____________________, Landlord, and ____________________, a
____________________, Tenant, for the Premises described in the Lease in the
Building at ____________________, we hereby acknowledge that the Term
Commencement Date of the Lease, as defined therein, is _______________, 20___,
and the Term Expiration Date of the Lease, as defined therein, is
_______________, 20___.

         IN WITNESS WHEREOF, the parties hereto have executed this
Acknowledgment of Term Commencement Date as of __________, 20___.

LANDLORD:

SAN DIEGO SCIENCE CENTER LLC
A California limited liability company

By:      SD Science Center, Inc.
         A California corporation
         Its Manager

         By:      ______________________________
                  W. Neil Fox, III
                  Chief Executive Officer

TENANT:

____________________
A __________________

By:      ______________________________
         Name: ________________________
         Title: _________________________

                                       47
<PAGE>

                                    EXHIBIT E

                      SCHEMATIC SHOWING TENANT IMPROVEMENTS
                      -------------------------------------

                                       48
<PAGE>

                                    EXHIBIT F

                  ARCHITECTURAL DRAWINGS OF TENANT IMPROVEMENTS
                  ---------------------------------------------

                        A1.1       SITE PLAN

                        A3.3       EXITING PLAN - LEVEL 3

                        A4.3       DIMENSION FLOOR PLAN - LEVEL 3

                        A5.3       DOOR / WALL PLAN - LEVEL 3

                        A6.3       REFLECTED CEILING PLAN - LEVEL 3

                        A7.1       SCHEDULES - LEVELS 1, 2, 3

                        A8.1       WALL TYPES / DETAILS

                        A8.2       DETAILS

                        A9.1       RESTROOM PLANS / DETAILS / NOTES

                                       49
<PAGE>

                                    EXHIBIT G

                              RULES AND REGULATIONS
                              ---------------------

NOTHING IN THESE RULES AND REGULATIONS SHALL SUPPLANT ANY PROVISION OF THE
LEASE. IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN THESE RULES AND
REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.

1.       Except as specifically provided in the Lease to which these Rules and
         Regulations are attached, no sign, placard, picture, advertisement,
         name or notice shall be installed or displayed on any part of the
         outside of the Premises or the Building without the prior written
         consent of Landlord. Landlord shall have the right to remove, at
         Tenant's expense and without notice, any sign installed or displayed in
         violation of this rule.

2.       If Landlord objects in writing to any curtains, blinds, shades, screens
         or hanging plants or other similar objects attached to or used in
         connection with any window or door of the Premises, or placed on any
         windowsill, which is visible from the exterior of the Premises, and
         which is not included in plans approved by Landlord, Tenant shall
         remove said object.

3.       Tenant shall not obstruct any sidewalks or entrances to the Building,
         or any halls, passages, exits, entrances, or stairways within the
         Premises, which are required to be kept clear for health and safety
         reasons.

4.       No deliveries shall be made which impede or interfere with other
         tenants or the operation of the Project.

5.       Tenant shall not place a load upon any floor of the Premises which
         exceeds the load per square foot which such floor was designed to carry
         and which is allowed by law. Fixtures and equipment which cause noise
         or vibration that may be transmitted to the structure of the Building
         to such a degree as to be objectionable to other tenants shall be
         placed and maintained by Tenant, at Tenant's expense, on vibration
         eliminators or other devices sufficient to eliminate such noise or
         vibration or reduce such noise and vibration to acceptable levels.

6.       Tenant shall not use any method of heating or air-conditioning other
         than that shown in Tenant Improvement plans.

7.       Tenant shall not install any radio, television or other antenna,, cell
         or other communications equipment or other devices on the roof or
         exterior walls of the Premises except to the extent shown on approved
         Tenant Improvement plans. Tenant shall not interfere with radio,
         television or other communications from or in the Premises or
         elsewhere.

                                       50
<PAGE>

8.       Canvassing, peddling, soliciting and distribution of handbills or any
         other written material in the Project outside of the Premises are
         prohibited, and Tenant shall cooperate to prevent such activities.

9.       Tenant shall store all its trash, garbage and Hazardous Material within
         its Premises or in designated receptacles outside of the Premises.
         Tenant shall not place in any such receptacle any material which cannot
         be disposed of in the ordinary and customary manner of trash, garbage
         and Hazardous Material disposal.

10.      The Premises shall not be used for any improper, immoral or
         objectionable purpose. No cooking shall be done or permitted on the
         Premises, except that use by Tenant of Underwriter's Laboratory
         approved equipment for brewing coffee, tea, hot chocolate and similar
         beverages or use of microwave ovens for employees use shall be
         permitted, or equipment shown on approved Tenant Improvement plans,
         provided that such equipment and use is in accordance with all
         applicable federal, state, county and city laws, codes, ordinances,
         rules and regulations.

11.      Without the written consent of the Landlord, Tenant shall not use the
         name of the Project, if any, in connection with or in promoting or
         advertising the business of Tenant except as Tenant's address.

12.      Tenant shall comply with all safety, fire protection and evacuation
         procedures and regulations established by Landlord or any governmental
         agency.

13.      Tenant assumes any and all responsibility for protecting its Premises
         from theft, robbery and pilferage, which includes keeping doors locked
         and other means of entry to the Premises closed.

14.      Landlord may waive any one or more of these Rules and Regulations for
         the benefit of Tenant or any other tenant, but no such waiver by
         Landlord shall be construed as a waiver of such Rules and Regulations
         in favor of Tenant or any other Tenant, nor prevent Landlord from
         thereafter enforcing any such Rules and Regulations against any or all
         of the tenants of the Project.

15.      These Rules and Regulations are in addition to, and shall not be
         construed to in any way modify or amend, in whole or in part, the
         terms, covenants, agreements and conditions of the Lease.

16.      Landlord reserves the right to make such other and reasonable rules and
         regulations as, in its judgment, may from time to time be needed for
         safety and security, for care and cleanliness of the Project, and for
         the preservation of good order therein, subject to prior notice to
         Tenant and Tenant's consent, which will not be unreasonably withheld,
         conditioned or delayed. Tenant agrees to abide by all such Rules and
         Regulations hereinabove stated and any additional rules and regulations
         which are adopted.

17.      Tenant shall be responsible for the observance of all of the foregoing
         rules by Tenant's employees, agents, clients, customers, invitees and
         guests.

                                       51
<PAGE>

                                    EXHIBIT H

                       SERVICES TO BE PROVIDED BY LANDLORD
                       -----------------------------------

         Landlord shall maintain, repair, and replace the following systems and
equipment, and shall provide the following services and utilities, in accordance
with the standards referenced below or, if no such standards are referenced,
then consistent with the standards of comparable buildings in San Diego,
California; provided, however, (i) Landlord reserves the right to adopt
nondiscriminatory modifications and additions hereto, (ii) the cost of all such
maintenance, repairs, replacements, services and utilities are subject to
reimbursement by Tenant as Operating Expenses to the extent set forth in Article
7 of the Lease, and (iii) such maintenance, repairs, replacements, services and
utilities are subject to any other applicable provisions of the Lease:

         1.       Heating, ventilation, and air conditioning systems, including
                  chillers, boilers, air handlers, ventilation and exhaust fans,
                  cooling towers, filtration, controls and control components
                  required to provide climate control to all usable areas of the
                  building, with cooled and heated air appropriate to the
                  seasons in the San Diego metropolitan area. Heating,
                  ventilation and air conditioning services shall be provided
                  twenty-four (24) hours per day each day of the year.

         2.       Plumbing to include hot and cold water supply pipes, valves,
                  and regulators, sanitary and waste piping, sump pumps and
                  associated holding reservoirs. Drain cleaning shall be limited
                  to normal maintenance and will not include cleaning required
                  by excessive use or abuse of plumbing by Tenant.

         3.       Emergency eyewashes and showers.

         4.       Electrical supply circuits to include main switches,
                  transformers and panels in mechanical spaces, local circuit
                  breaker panels and associated wiring, cables, switches, and
                  receptacles.

         5.       Emergency back-up power generators to include peripherals as
                  described in 4 (above), batteries, relays and other items
                  necessary to supply unit power when utility company fails to
                  do so.

         6.       Light bulbs, ballasts, wiring and fixtures.

         7.       Elevators, with service to be provided twenty-four (24) hours
                  per day each day of the year.

         8.       Steam boilers. Steam lines, valves, regulators and reheating
                  units supplying and located within the building.

         9.       Fire alarm system. Main panel in first floor lobby area,
                  wiring and local smoke, particle and heat detectors and pull
                  stations.

                                       52
<PAGE>

         10.      Fire hoses, valves, etc., affixed permanently to building and
                  sprinkler system.

         11.      Fire extinguishers including annual checks and recharging as
                  necessary.

         12.      Doors, knobs and hinges.

         13.      Floor tiles, carpeting and kick plates.

         14.      Repair of windows and annual exterior window cleaning.

         15.      Fume hoods, ducts, stacks, motors and fans.

         16.      Vacuum pumps, lines and valves located within the building.

         17.      Positive pressure air supply lines, compressors bleed valves,
                  regulators, and air supply condensing units.

         18.      Rest rooms. Toilets, urinals, showers and stalls, including
                  rest room facilities and necessary lavatory supplies, and
                  including hot and cold running water.

         19.      Sinks.

         20.      Gas lines, valves and regulators.

         21.      Basic security services, including periodic perimeter checks
                  of the Project, but excluding any internal readings or checks.

         22.      Site landscaping, including maintaining the planting areas,
                  walkways, ramps, gates, fences and parking areas.

         23.      Trash pick-up, limited to designated trash area(s).

         24.      Janitorial services in the Common Areas (Tenant is responsible
                  for janitorial services in the Premises).

         25.      Access to the Building will be provide twenty-four (24) hours
                  per day each day of the year (except in the case of
                  emergencies).

         26.      Bulk mail and express pickup services at a central receiving
                  area located on the lower level of the Building or such other
                  floor as Landlord designates.

                                       53
<PAGE>

                                    EXHIBIT I

                            SAN DIEGO SCIENCE CENTER
                       FITNESS CENTER WAIVER OF LIABILITY
                       ----------------------------------

         SAN DIEGO SCIENCE CENTER LLC, a California limited liability company
(the "OWNER"), the owner of the building (the "BUILDING") at 3030 Bunker Hill
Street, San Diego, California, grants to employees of tenants of the Building
the right to use and enjoy the fitness facilities and equipment located in the
Building on the terms and conditions of this waiver (this "WAIVER") and
otherwise in accordance with such other rules and regulations which Owner may
from time to time adopt.

         1. ASSUMPTION OF RISK. The undersigned understands that fitness
activities, especially strength and aerobic training, involve a potential risk
for physical injury and related damages. The undersigned understands that Owner
does not manufacture the fitness and other equipment used in the fitness center,
but purchases and/or leases the equipment from third parties. The undersigned
acknowledges that Owner will provide no supervision of his/her use of the
fitness facilities and equipment and other fitness activities in the fitness
center, and that he/she will be solely responsible for his/her safe and
appropriate use of the facility and equipment. The undersigned therefore
expressly agrees to assume the risk that he/she may suffer injury or damage as a
result of his/her use of the fitness facilities and equipment, and agrees for
himself/herself and on behalf of his/her personal representatives, successors
and assigns, that the Owner (including its members, managers, officers,
employees and agents) will not be liable for any damages nor injuries the
undersigned may suffer in or about the fitness center.

         2. WAIVER OF LIABILITY. The undersigned further agrees to hold the
Owner and its members, managers, officers, employees and agents harmless from
any injuries or damages sustained by the undersigned or the property of the
undersigned and to indemnify the Owner and its members, managers, officers,
employees and agents from any claims, demands, actions, injuries, liabilities or
damages whatsoever, including attorneys' fees, which result, directly or
indirectly, from the use of the fitness facilities and equipment by the
undersigned. The undersigned agrees to release and discharge the Owner and its
members, managers, officers, employees, and agents from all such claims,
demands, actions, injuries, liabilities, and damages. The failure or refusal of
the undersigned to inspect the fitness facilities and equipment constitutes a
waiver of any objection, contention or claim that might have been based on such
an inspection.

         3. LOSS, THEFT, DAMAGE. The undersigned agrees that neither the Owner
nor its members, managers, officers, employees or agents are responsible or
liable to the undersigned for articles damaged, lost or stolen in or about the
fitness facilities. The undersigned agrees not to store any valuable items in
lockers and to use the lockers solely for temporary clothing storage. The Owner
and its members, managers, employees and agents are not bailees and are not
responsible for protecting the valuables of the undersigned.

                                       54
<PAGE>

         4. PHYSICAL CONDITION. The undersigned warrants that he/she is in good
physical condition and to the best of his/her knowledge has no physical
impairment which would prevent him/her from engaging in any physical
conditioning available in the fitness center and that he/she has no condition
which might be aggravated by the use of the fitness facilities or equipment. The
undersigned acknowledges that a complete physical examination by a medical
doctor prior to beginning any work out program or strenuous new activity is
recommended.

         5. NO GUESTS. The undersigned acknowledges and agrees that guests,
including family members, are not permitted in the fitness center and may not
use the fitness facilities or equipment under any circumstances. Use of the
fitness facilities and equipment is limited to employees of tenants of the
Building.

         6. ATTIRE AND EQUIPMENT. The undersigned agrees to wear proper attire
when using the fitness facilities, and to wear a shirt and shoes in the fitness
facilities and all common areas of the Building. Attire must conform to
reasonable standards of decency and safety. Only equipment provided by Owner may
be used in the fitness center.

         7. LOCKERS. Lockers are available for day use only on a first come,
first served basis. Locks, though recommended, are not provided by Owner.

         8. DAMAGES. The undersigned agrees to pay for any damages to the
fitness facilities or equipment caused by the undersigned.

         9. SEVERABILITY. If any provision of this Waiver is ruled invalid or
unenforceable as applied to any person or circumstance, all other provisions of
this Waiver shall remain valid and enforceable as applied to all other persons
and circumstances.

         The undersigned acknowledges that he/she has read and understands the
terms and conditions of this Waiver and agrees to be bound by such terms and
conditions. The undersigned also agrees to read and comply with any other rules
and regulations governing use of the fitness facilities and equipment which may
be adopted or amended from time to time by the Owner and posted or otherwise
made available in the fitness facility or to the undersigned.

                           Dated: ____________________

                           Sign:  ______________________________________

                           Print Name: _________________________________

                           Employer: ___________________________________

                                       55
<PAGE>

                                    EXHIBIT J

                              APPROVED CONTRACTORS
                              --------------------

Casework:                  Doug Wessinger
                           Wesinco
                           P.O. Box 256
                           Irmo, SC   29063
                           803/749-0163
                           803/749-1703 (Facsimile)

Electrical:                Ron Wood
                           Berg Electric
                           650 Opper Street
                           Escondido, CA   92029
                           760/746-1003
                           760/741-918__ (Facsimile)

Mechanical/Plumbing:       Joe Mucher
                           Encompass Mechanical Services
                           7655 Convoy Street
                           San Diego, CA   92111
                           858/974-6500
                           858/941-6501 (Facsimile)

Phone/Data:                Rob Coulter
                           River Networks
                           5845 Avenida Encinas, Suite 130
                           Carlsbad, CA   92008
                           760/535-4837
                           619/449-1609

Janitorial Service:        Linsey A. Miller
                           Merchants Building Maintenance LLC
                           8380 Miramar Mall, Suite 125
                           San Diego, CA 92121
                           858/455-0163
                           858/455-0596 (Facsimile)

Environmental, Health
  and Safety:

                                       56
<PAGE>

                                   SCHEDULE 1

               LIST OF REMOVABLE PROPERTY PURSUANT TO SECTION 17.7
               ---------------------------------------------------

A.       PROPERTY TENANT IS REQUIRED TO REMOVE

B.       PROPERTY TENANT MAY REMOVE

                                       57

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