Document:

<PAGE>

                                                                   Exhibit 10.22

                                INDUSTRIAL LEASE

                                 DEFINED TERMS.

Effective Date:                     November 18, 1996.

Landlord:                           ARCADIA-TAVISTOCK, L.C., a
                                    Virginia limited liability company,
                                    doing business as Arcadia-Tavistock LLC

Landlord's Address
      For Notice:                   c/o Freestone Properties, Inc.
                                    4400 Bohannon Drive
                                    Suite 260
                                    Menlo Park, CA 94025
                                    Attention: Mr. Michael Tamas
                                    Telephone: (415) 329-9030
                                    Fax: (415) 329-0129

Tenant:                             VERSICOR, INC.,
                                    a Delaware corporation

Tenant's Address
      For Notice:

        Before
        Commencement Date:          270 East Grand Ave.
                                    San Francisco, CA 94080
                                    Attn: Dr. Eric M. Gordon
                                    Telephone: (415) 829-7000
                                    Fax: (415) 635-0973

        After
        Commencement Date:          The Premises.

Property:                           Lot 3 of Parcel Map 6773, filed December 16,
                                    1994, Map Book 216, Pages 18 and 20, in the
                                    official Records of Alameda County situated
                                    in Fremont, California, as more particularly
                                    described in Exhibit A.

Building:                           A single-story building to be constructed on
                                    the Property consisting of approximately
                                    fifty-five thousand four hundred forty-two
                                    (55,442) rentable

                                       i.
<PAGE>

                                    square feet of space, as shown on Exhibit
                                    B-1.

Premises:                           The Building and the Property.

Term:                               Twelve (12) years and ninety (90) days.

Estimated Shell
Delivery Date:                      August 15, 1997.

Commencement Date:                  The date on which Landlord delivers
                                    possession of the Premises to Tenant in
                                    Delivery Condition (as defined in
                                    Exhibit B).

Rent Commencement Date:             The ninetieth (90th) day after the
                                    Commencement Date.

(Initial) Base Rent
Per Month:                          Thirty-Five Thousand Four Hundred
                                    Dollars ($35,400.00) (subject to
                                    adjustment pursuant to Section 3.2)

Security Deposit:                   Seventy-Seven Thousand Two Hundred
                                    Seventy-Five Dollars ($77,275.00).

Brokers:                            Catalyst Real Estate Group and Cornish &
                                    Carey Commercial

Parking Spaces:                     Two hundred ten (210) spaces.

Permitted Uses:                     For use as a laboratory research and
                                    development facility, including, without
                                    limitation, wet chemistry and biology
                                    labs, clean rooms, pilot scale, clinical
                                    scale and GMP scale manufacturing,
                                    storage and use of toxic and radioactive
                                    materials and laboratory animals. No
                                    other uses shall be permitted without
                                    the prior written consent of Landlord.

                                      ii.
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EXHIBITS

      A    - Property
      B    - Work Letter
      B-1  - Building Shell
      B-2  - Outline Specifications
      C    - Commencement Date Memorandum
      D    - Rules and Regulations
      E    - Hazardous Materials
      F    - Estoppel Certificate

            The Defined Terms set forth above and the Exhibits attached hereto
      are incorporated into and made a part of this Lease. Each reference in
      this Lease to any of the Defined Terms shall mean the respective
      information above and shall be construed to incorporate all of the terms
      provided under the particular Lease paragraph pertaining to such
      information. In the event of any conflict between the Defined Terms and
      the provisions of this Lease, the latter shall control.

               LANDLORD  ( /s/ XXX   )  AND TENANT  ( /s/ XXX    )  AGREE.
                          -----------                ------------
                            initial                    initial

                                      iii.
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                               Table of Contents.

                                                                            Page
                                                                            ----

1.      PREMISES...............................................................1
        1.1    Premises........................................................1
        1.2    Rentable Square Footage.........................................1
        1.3    Reserved Rights.................................................1

2.      TERM   ................................................................2
        2.1    Commencement Date...............................................2
        2.2    Failure to Deliver Possession...................................2
        2.3    No Representations..............................................3
        2.4    Commencement Date Memorandum....................................3
        2.5    Early Entry.....................................................4

3.      RENT   ................................................................4
        3.1    Base Rent.......................................................4
        3.2    Adjustments in Base Rent........................................4
        3.3    Rent Commencement Date..........................................5
        3.4    Late Charge and Interest........................................5
        3.5    Security Deposit................................................5

4.      UTILITIES..............................................................5

5.      TAXES  ................................................................6
        5.1    Real Property Taxes.............................................6
        5.2    Definition of Real Property Taxes...............................6
        5.3    Right to Contest Taxes..........................................7
        5.4    Personal Property Taxes.........................................7

6.      OPERATING EXPENSES.....................................................7
        6.1    Operating Expenses..............................................7
        6.2    Definition of Operating Expenses................................7
        6.3    Exclusions from Operating Expenses..............................8
        6.4    Audit Rights....................................................8

7.      ESTIMATED EXPENSES.....................................................9
        7.1    Payment.........................................................9
        7.2    Adjustment......................................................9

8.      INSURANCE.............................................................10
        8.1    Landlord.......................................................10
        8.2    Tenant.........................................................10
        8.3    General........................................................11
        8.4    Tenant's Indemnity.............................................12
        8.5    Exemption of Landlord from Liability...........................13
        8.6    Landlord's Indemnity...........................................13

9.      REPAIRS AND MAINTENANCE...............................................13
        9.1    Tenant.........................................................13
        9.2    Landlord.......................................................13

                                      iv.
<PAGE>

        9.3    Services.......................................................14

10.     ALTERATIONS...........................................................14
        10.1   Trade Fixtures; Alterations....................................14
        10.2   Damage; Removal................................................15
        10.3   Liens..........................................................15

11.     USE    ...............................................................15

12.     ENVIRONMENTAL MATTERS.................................................16
        12.1   Environmental Laws.............................................16
        12.2   Hazardous Materials............................................16
        12.3   Use............................................................17
        12.4   Compliance With Laws; Handling of Hazardous
               Materials......................................................17
12.5    Compliance With Insurance Retirements.................................18

13.     DAMAGE AND DESTRUCTION................................................20
        13.1   Casualty.......................................................20
        13.2   Wilful Misconduct..............................................22
        13.3   Uninsured Casualty.............................................22
        13.4   Waiver.........................................................22

14.     EMINENT DOMAIN........................................................22
        14.1   Total Condemnation.............................................22
        14.2   Partial Condemnation...........................................22
        14.3   Award..........................................................23
        14.4   Temporary Condemnation.........................................23

15.     DEFAULT...............................................................23
        15.1   Events of Defaults.............................................23
        15.2   Remedies.......................................................24
        15.3   Cumulative.....................................................26

16.     ASSIGNMENT AND SUBLETTING.............................................26
        16.1   Consent Required...............................................26
        16.2   Bonus Rent.....................................................27
        16.3   No Release.....................................................27
        16.4   Consent Not Required...........................................28

17.     ESTOPPEL, ATTORNMENT AND SUBORDINATION................................28
        17.1   Estoppel.......................................................28
        17.2   Attornment.....................................................29
        17.3   Subordination..................................................29

18.     Extension Option......................................................29
        18.1   Option to Extend...............................................29
        18.2   Exercise of Option.............................................30
        18.3   Determination of Fair Market Rent..............................30

                                       v.
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19.     MISCELLANEOUS.........................................................32
        19.1   General........................................................32
        19.2   Signs..........................................................33
        19.3   Waiver.........................................................34
        19.4   Financial Statements...........................................34
        19.5   Limitation of Liability........................................34
        19.6   Notices........................................................34
        19.7   Brokerage Commission...........................................35
        19.8   Authorization..................................................35
        19.9   Holding Over...................................................35
        19.10  Joint and Several..............................................36
        19.11  Covenants and Conditions.......................................36
        19.12  Quiet Enjoyment................................................36
        19.13  Financing of Equipment and Personal Property...................36

                                      vi.
<PAGE>

                                INDUSTRIAL LEASE

      THIS INDUSTRIAL LEASE (this "Lease"), dated as of the Effective Date, is
made and entered into by and between ARCADIA-TAVISTOCK, L.C., a Virginia limited
liability company ("Landlord"), doing business as Arcadia-Tavistock LLC, and
VERSICOR, INC., a Delaware corporation ("Tenant"), on the terms and conditions
set forth below:

1. PREMISES.

      1.1 Premises. Landlord hereby leases to Tenant the Premises as shown on
Exhibits A and B-1.

      1.2 Rentable Square Footage. Upon Substantial Completion of the Building
Shell (as each term is defined in Exhibit B), Landlord's Architect (as defined
in Exhibit B) shall determine the rentable square footage of the Building and
promptly notify Landlord and Tenant in writing of the total rentable square
footage of the Building. The determination by Landlord's Architect of the
rentable square footage of the Building shall be binding on Landlord and Tenant
for all purposes under this Lease.

      1.3 Reserved Rights. Landlord reserves the right to enter the Premises
upon reasonable notice (i.e., at least twenty-four (24) hours' prior notice) to
Tenant (except in case of an emergency in which event Landlord shall notify
Tenant as soon as is practicable) and/or to undertake the following: inspect the
Premises and/or the performance by Tenant of the terms and conditions hereof;
change the boundary lines of the Property; install, use, maintain, repair,
alter, relocate or replace any pipes, ducts, conduits, wires, equipment and
other facilities in the Building; grant easements on the Property; change the
name of the Building and/or the Property; and show the Premises to prospective
lenders, purchasers and, during the last nine (9) months of the Term, tenants.
In exercising its rights hereunder, Landlord shall, to the extent practicable,
run any such pipes, ducts, conduits, wires, equipment and other facilities above
ceilings, below floors and in sound proofed mechanical rooms, and Landlord shall
use otherwise diligent efforts to minimize or prevent inconvenience or
disruption to Tenant. Landlord shall not expand or enlarge the Building without
the prior written consent of Tenant, which consent may be withheld in Tenant's
sole discretion. In addition, Landlord shall not construct any other
improvements on the Property without the prior written consent of Tenant, which
consent shall not be unreasonably withheld.

                                       1.
<PAGE>

2. TERM.

      2.1 Commencement Date. The Term shall commence (the "Commencement Date")
on the date on which Landlord delivers possession of the Premises to Tenant in
Delivery Condition (as defined in Exhibit B), and shall continue in full force
and effect for the period of time specified as the Term or until this Lease is
terminated as otherwise provided herein. Landlord shall arrange for the
construction of Landlord's Work (as defined in Exhibit B) in accordance with and
subject to the terms of the Work Letter.

      2.2 Failure to Deliver Possession.

            2.2.1 Termination Right. If Landlord fails to deliver possession of
the Premises to Tenant in Delivery Condition on or prior to the Estimated Shell
Delivery Date, this Lease shall remain in effect and Landlord shall not be
subject to any liability therefor. Notwithstanding the foregoing, (i) if
Landlord has not delivered possession of the Premises to Tenant in Delivery
Condition by November 15, 1997, which date shall be extended one (1) day for
each day Landlord is delayed in completing Landlord's Work or delivering
possession of the Premises to Tenant in Delivery Condition as a result of Tenant
Delays (as defined in Exhibit B) or an event of force majeure (as described in
Exhibit B, Section VIII) (hereinafter referred to as the "Tenant Termination
Date"), Tenant shall have the right to terminate this Lease by written notice to
Landlord at any time prior to the date on which Landlord delivers possession of
the Premises to Tenant in Delivery Condition and (ii) if Landlord has not
delivered possession of the Premises to Tenant in Delivery Condition by December
15, 1996, which date shall be extended one (1) day for each day Landlord is
delayed in completing Landlord's Work or delivering possession of the Premises
to Tenant in Delivery Condition as a result of Tenant Delays, but not as a
result of an event of force majeure (hereinafter referred to as the "Ultimate
Tenant Termination Date"), Tenant shall have the right to terminate this Lease
by written notice to Landlord at any time prior to the date on which Landlord
delivers possession of Premises to Tenant in Delivery Condition.

            2.2.2 Notice. If Landlord reasonably determines at any time prior to
the Commencement Date that Landlord will not be able to deliver possession of
the Premises to Tenant in Delivery Condition by the Tenant Termination Date or
the Ultimate Tenant Termination Date (as such dates may have been extended by
Tenant Delays or events of force majeure as provided in Section 2.2.1), Landlord
shall notify Tenant in writing (the "New Estimated Shell Delivery Date Notice")
of the date on which Landlord reasonably expects to deliver possession of the
Premises to Tenant in Delivery Condition (the "New Estimated Shell Delivery
Date").

                                       2.
<PAGE>

Tenant shall have ten (10) days after Tenant's receipt of the New Estimated
Shell Delivery Date Notice to terminate this Lease by written notice to
Landlord. If Tenant fails to exercise its right to terminate this Lease within
the ten (10) day period, then (i) the Tenant Termination Date for all purposes
under this Lease shall be the New Estimated Shell Delivery Date (subject to
further extension due to Tenant Delays and events of force majeure as provided
above) and (ii) the Ultimate Termination Date shall be the later of (A) December
15, 1996 or (B) the New Estimated Shell Delivery Date (subject to further
extension due to Tenant Delays, but not due to events of force majeure, as
provided above).

            2.2.3 Tenant Improvements. Notwithstanding anything to the contrary
contained in Section 2.2, if Tenant or Tenant's Contractor (as defined in
Exhibit B) commences any of Tenant's Work in the Building or constructs any
Tenant Improvements in the Building prior to the Commencement Date, Tenant's
right to terminate this Lease pursuant to Section 2.2 shall terminate and be of
no further force or effect.

            2.3 No Representations. Tenant has determined that the Premises are
acceptable for Tenant's use; and acknowledges that, except asset forth herein
and in the Work Letter, Landlord has made no representations or warranties in
connection with the physical condition of the Premises or Tenant's use of the
same upon which Tenant has relied directly or indirectly for any purpose.
Landlord represents and warrants to Tenant that (i) Landlord has delivered to
Tenant all environmental reports and studies in Landlord's possession relating
to the environmental condition of the Property, (ii) Landlord holds fee simple
title to the Property, (iii) Landlord has the full capacity and authority to
enter into this Lease and perform its obligations hereunder, (iv) neither this
Lease nor the transactions contemplated hereunder conflict with or violate the
provisions of any instrument or any agreement to which Landlord is a party, (v)
Landlord shall obtain all of the necessary permits in order to construct the
Building Shell, and the Building Shell shall be constructed in accordance with
all of the applicable governmental permits and as provided in Exhibit B and (vi)
to the best of Landlord's knowledge, the Building Shell (once constructed in
accordance with the terms of Exhibit B) shall be in compliance with all
applicable zoning, environmental and land use laws in effect as of the date of
this Lease.

            2.4 Commencement Date Memorandum. Landlord and Tenant shall, upon
request of either party, execute and deliver to the other party a Commencement
Date Memorandum in the form attached hereto as Exhibit C, acknowledging (i) the
Commencement Date, (ii) the final rentable square footage of the Building, and
(iii) Tenant's acceptance of the Premises.

                                       3.
<PAGE>

      2.5 Early Entry. Upon the execution and delivery of this Lease and the
satisfaction of all conditions precedent to the obligations of Landlord
hereunder, Tenant may, at Tenant's sole risk and cost, enter upon the Premises
prior to the Commencement Date for the purpose of installing fixtures,
furniture, laboratory equipment, computer equipment, telephone lines, low
voltage data wiring and personal property; provided, however, (i) Tenant shall
indemnify and hold harmless Landlord and its officers, directors, shareholders,
partners, members, agents and employees from any loss, expense, liability or
other damages arising out of Tenant's activities; (ii) Tenant shall provide
evidence of insurance satisfactory to Landlord; (iii) Tenant shall pay all
utility charges associated with such activities and (iv) Tenant shall not
interfere with the construction of the Building Shell or the Parking Lot (as
defined in Exhibit B.

3. RENT.

      3.1 Base Rent. Commencing on the Rent Commencement Date (defined in
Section 3.3), Tenant shall pay to Landlord, at such address as Landlord shall
from time to time designate in writing to Tenant for the payment of Rent
(defined below), the Base Rent, without notice, demand, offset or deduction, on
the first day of each calendar month. Upon the execution of this Lease, Tenant
shall pay to Landlord the first full calendar month's Base Rent (i.e.,
Thirty-Five Thousand Four Hundred Dollars ($35,400.00)). If the Rent
Commencement Date occurs on a date other than the first day of a month or the
Term ends on a date other than the last day of a month, the amount of Base Rent
due on the Rent Commencement Date or first day of the last month of the Term
shall be a pro rata portion of Base Rent, prorated on a per diem basis with
respect to the portion of the month within the Term. All amounts other than Base
Rent which Tenant is obligated to pay under this Lease shall be deemed to be
additional rent due hereunder, whether or not such amounts are designated
"additional rent." The term "Rent" means the Base Rent and all additional rent
payable hereunder.

      3.2 Adjustments in Base Rent. The monthly Base Rent shall be increased on
the sixty-first (61st) day after the Rent Commencement Date to Sixty-Four
Thousand Nine Hundred Dollars ($64,900.00). Thereafter, the monthly Base Rent
shall be increased on each anniversary of the Rent Commencement Date during the
Term by Two Thousand Seven Hundred Fifty Dollars ($2,750.00). For example, (i)
the monthly Base Rent shall be increased on the first anniversary of the Rent
Commencement Date to an amount equal to Sixty-Seven Thousand Six Hundred Fifty
Dollars ($67,650.00) and (ii) the monthly Base Rent shall be increased on the
second anniversary of the Rent Commencement Date to Seventy Thousand Four
Hundred Dollars ($70,400.00).

                                       4.
<PAGE>

      3.3 Rent Commencement Date. Tenant's obligation to pay Base Rent under
this Lease shall commence on the date (the "Rent Commencement Date") that is the
ninetieth (90th) day after the Commencement Date.

      3.4 Late Charge and Interest. The late payment of any Rent will cause
Landlord to incur additional costs, including administration and collection
costs and processing and accounting expenses and increased debt service. If
Landlord has not received any installment of Rent within five (5) days after
notice to Tenant that the installment of Rent is past due, Tenant shall pay a
late charge of five percent (5%) of the delinquent amount, which is agreed to
represent a reasonable estimate of the costs incurred by Landlord. In addition,
all such delinquent amounts shall bear interest from the date such amount was
due until paid in full at a rate per annum (the "Applicable Interest Rate")
equal to the greater of (a) five percent (5%) per annum plus the then federal
discount rate on advances to member banks in effect at the Federal Reserve Bank
of San Francisco on the twenty-fifth (25th) day of the month preceding the date
of this Lease or (b) ten percent (10%); provided, in no event shall the
Applicable Interest Rate exceed the maximum interest rate permitted by law which
may be charged under such circumstances. Landlord and Tenant recognize that the
damage which Landlord shall suffer as a result of Tenant's failure to pay such
amounts is difficult to ascertain and said late charge and interest are the best
estimate of the damage which Landlord shall suffer in the event of late payment.

      3.5 Security Deposit. Upon the execution of this Lease, Tenant shall
deliver to Landlord cash in the amount of Seventy-Seven Thousand Two Hundred
Fifty Dollars ($77,250.00) as security (the "Security Deposit") for the
performance by Tenant of its obligations under this Lease. Landlord may use and
commingle the Security Deposit with other funds of Landlord. If Tenant fails to
perform any of Tenant's obligations hereunder, Landlord may, but without
obligation, after notice to Tenant, apply all or any portion of the Security
Deposit toward fulfillment of Tenant's unperformed obligations. If Landlord does
so apply any portion of the Security Deposit, Tenant shall immediately pay
Landlord sufficient cash to restore the Security Deposit to the full original
amount.

4. UTILITIES. Tenant shall pay all charges for heat, water, sewage, gas,
electricity and any other utilities supplied to the Premises. Landlord shall not
be liable to Tenant for interruption in or curtailment of any utility service,
nor shall any such interruption or curtailment constitute constructive eviction
or grounds for rental abatement except as provided below. Upon any interruption
in utilities, provided that Tenant has first exhausted Tenant's business
interruption insurance for

                                       5.
<PAGE>

the payment of Rent hereunder, the Rent shall abate by an amount equal to the
amount of the rental abatement insurance proceeds (if any) received by Landlord
as a result of the interruption in utilities.

5. TAXES.

      5.1 Real Property Taxes. Commencing on the Commencement Date and ending on
the expiration or earlier termination of this Lease, Tenant shall pay to
Landlord the Real Property Taxes for each calendar year.

      5.2 Definition of Real Property Taxes. "Real Property Taxes" shall be the
sum of the following: all real property taxes, possessory interest taxes,
business or license taxes or fees, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit charges, housing
fund assessments, open space charges, childcare fees, school fees or any other
assessments, levies, fees or charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen (including fees "in-lieu" of any
such tax or assessment) which are assessed, levied, charged, confirmed or
imposed by any public authority upon the Premises (or any real property
comprising any portion thereof) or its operations, but excluding so-called
"exaction fees," "impact fees," "development fees," "linkage fees" or other fees
payable in connection with the initial development (as opposed to occupancy) of
the Building Shell, together with all taxes, assessments or other fees imposed
by any public authority upon or measured by any Rent or other charges payable
hereunder, including any gross income tax or excise tax levied by the local
governmental authority/ the federal government or any other governmental body
with respect to receipt of such rental, or upon, with respect to or by reason of
the development, possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof, or upon this transaction or any document to which Tenant is a party
creating or transferring an interest in the Premises, together with any tax
imposed in substitution, partially or totally, of any tax previously included
within the aforesaid definition or any additional tax the nature of which was
previously included within the aforesaid definition, together with the costs and
expenses (including attorneys' fees) of challenging any of the foregoing or
seeking the reduction in or abatement, redemption or return of any of the
foregoing, but only to the extent of any such reduction, abatement, redemption
or return. Nothing contained in this Lease shall require Tenant to pay any
franchise, corporate, estate or inheritance tax of Landlord, or any income,
profits or revenue tax or charge upon the net income of Landlord.

                                       6.
<PAGE>

      5.3 Right to Contest Taxes. Tenant, at its sole cost and expense, shall
have the right, from time to time during the term of this Lease, to prosecute
proceedings for abatements of real property taxes imposed upon the Premises so
long as Tenant shall in good faith contest the amount of the real property taxes
imposed on the Premises by appropriate legal proceedings that will not result in
the tax sale of the Premises and Tenant shall pay to Landlord the Real Property
taxes when due in accordance with the terms of this Lease. Tenant shall notify
Landlord in writing of its intent to prosecute any proceedings for the abatement
of real property taxes. Landlord shall cooperate reasonably with Tenant in
connection with the exercise of Tenant's right to prosecute such proceedings;
provided, however, Landlord shall not be required to incur any expense in
cooperating with Tenant in the proceedings. If the result of the proceedings is
adverse to Tenant, Tenant shall pay and discharge the amounts involved in or
affected by the proceedings (if any), together with any penalties, fines,
interest, costs and expenses that may have accrued thereon.

      5.4 Personal Property Taxes. Prior to delinquency, Tenant shall pay all
taxes and assessments levied upon trade fixtures, alterations, additions,
improvements, inventories and other personal property located and/or installed
on the Premises by Tenant; and Tenant shall provide Landlord copies of receipts
for payment of all such taxes and assessments. To the extent any such taxes are
not separately assessed or billed to Tenant, Tenant shall pay the amount thereof
as invoiced by Landlord.

6. OPERATING EXPENSES.

      6.1 Operating Expenses. Commencing on the Commencement Date and ending on
the expiration or earlier termination of this Lease, Tenant shall pay to
Landlord the Operating Expenses for each calendar year.

      6.2 Definition of Operating Expense. The term "Operating Expenses" shall
include all expenses paid or incurred by Landlord in the operation, maintenance,
repair and management of the Premises, including, but not limited to, (a)
non-structural repairs to the exterior walls of the Building; (b) repair,
maintenance, utility costs and landscaping of the Property; (c) insurance
premiums relating to the insurance maintained by Landlord with respect to the
Building and the Property and any deductible amounts due under such policies;
(d) an administrative fee to Landlord for accounting and property management
services relating to the Premises in an amount equal to three percent (3%) of
the annual Base Rent; and (e) any dues, assessments or fees assessed the
Premises by the Ardenwood Technology Park Property Owner's Association or under
the Declaration of Protective Covenants for Ardenwood Technology Park dated
March 27, 1984, and

                                       7.
<PAGE>

recorded in the Official Records of Alameda County, California, as subsequently
amended, or any other similar instrument affecting the Premises.

      6.3 Exclusions from Operating Expenses. Notwithstanding anything to the
contrary contained in Section 6.2, the term "Operating Expenses" shall not
include (a) expenses to the extent Landlord receives reimbursement for such
expenses from proceeds of insurance, other tenants (if any), condemnation
awards, warranties or any sources other than Tenant, (b) brokerage commissions,
(c) taxes, (d) costs in the nature of fees, fines or penalties arising out of
the breach of any obligation, contractual or at law, by Landlord or its
contractors, employees or agents, including attorneys' fees, except to the
extent Landlord's breach is attributable to Tenant's negligent acts or omissions
or breach of its obligations under this Lease, (e) the cost of Landlord's Work,
(f) costs or expenses relating to correction of latent defects in the Building
Shell and which are identified by Tenant in a written notice to Landlord within
one (1) year after the Commencement Date, (g) costs relating to environmental
compliance or remediation, except to the extent caused by Tenant or Tenant's
employees, agents, contractors or invitees, (h) capital improvements or repairs,
(i) reserves for future expenditures not yet incurred, (j) attorneys' fees and
other costs and expenses incurred in connection with negotiations or disputes
with present or prospective tenants of the Premises, (k) overhead and profit
paid to Landlord or any affiliate of Landlord to the extent the same exceed
market rates, (1) interest, principal, points and fees on any debt or loans; (m)
advertising and promotional expenditures, (n) so-called "development fees,"
"linkage fees," "exaction fees" and "impact fees" payable in connection with the
initial development (as opposed to occupancy) of the Building Shell and (o)
depreciation on the Building Shell.

      6.4 Audit Rights. Tenant, at its sole cost and expense, shall have the
right to audit the applicable records of Landlord not more than once in any
twelve (12) month period to confirm that the charges billed to Tenant under this
Lease are proper and conform to the provisions of this Lease. Such right shall
be exercisable by Tenant within sixty (60) days after Tenant's receipt of
Landlord's annual statement of such charges. Landlord shall cooperate with
Tenant in providing Tenant reasonable access to Landlord's books and records
during normal business hours to enable Tenant to audit Landlord's books and
records as they relate to any costs or expenses passed through to Tenant
pursuant to any provisions of this Lease. If the audit discloses any overpayment
on the part of Tenant, then Tenant shall be entitled to a credit on the next
succeeding installment of Rent for an amount equal to the overcharge plus
interest on the amount of such overcharge from the date on which same was paid
by Tenant

                                       8.
<PAGE>

until the date refunded by Landlord at the Applicable Interest Rate, and such
credit shall be extended to succeeding installments of Rent in the event such
overcharge exceeds the amount of the next succeeding such installment. If the
term of this Lease has expired or been earlier terminated, then Tenant shall be
entitled to a refund of such excess from Landlord within thirty (30) days after
such date of expiration or earlier termination. If the audit discloses an
underpayment on the part of Tenant, Tenant shall pay to Landlord the amount of
the underpayment within ten (10) days. In addition, if such audit by Tenant
discloses such an overcharge in excess of the five percent (5%) of the amount
payable in accordance with this Lease, then Landlord shall pay to Tenant the
reasonable costs and expenses of such audit.

7. ESTIMATED EXPENSES.

      7.1 Payment. The term "Estimated Expenses" for any particular year shall
mean Landlord's estimate of Operating Expenses and Real Property Taxes for a
calendar year. On or prior to the Commencement Date (or as soon thereafter as is
reasonably practical) and on or about the last month of each calendar year,
Landlord shall give Tenant notice of the Estimated Expenses for the ensuing
calendar year. Tenant shall pay the Estimated Expenses with installments of Base
Rent in monthly installments on the first day of each calendar month during such
year. If at any time Landlord determines that Operating Expenses and Real
Property Taxes are projected to vary from the then Estimated Expenses by more
than five percent (5%), Landlord may, by notice to Tenant, revise the Estimated
Expenses, and Tenant's monthly installments for the remainder of the year shall
be adjusted so that by the end of the calendar year Tenant has paid to Landlord
the revised estimate for the year.

      7.2 Adjustment. The term "Operating Expenses and Real Property Taxes
Adjustment" (or "Adjustment") shall mean the difference between Estimated
Expenses and the Operating Expenses and Real Property Taxes for a calendar year.
Within ninety (90) days after the end of each calendar year, Landlord shall
deliver to Tenant a statement of Operating Expenses and Real Property Taxes for
the prior calendar year, accompanied by a computation of the Adjustment. If
Tenant's payments are less than the actual amount of Operating Expenses and Real
Property Taxes, then Tenant shall pay to Landlord the difference within thirty
(30) days after receipt of Landlord's statement. If. Tenant's payments exceed
the actual amount of Operating Expenses and Real Property Taxes, then Landlord
shall credit such amount to the next installment of Rent due and, to the extent
necessary, any successive installments of Rent due.

                                       9.
<PAGE>

8. INSURANCE.

      8.1 Landlord. Landlord shall maintain "Special Form" property insurance or
equivalent if "Special Form" property insurance is not available including, at
Landlord's option, vandalism, hazardous materials and malicious mischief
coverage, earthquake/volcanic action, flood and/or surface water coverage, a
sprinkler leakage endorsement, an inflation endorsement and a building ordinance
endorsement, covering the Building (but excluding any built-in equipment which
is pledged as security for any loan or equipment financing obtained by Tenant)
for the full replacement cost of the Building, with deductibles and the form and
endorsements of such coverage as selected by Landlord, together with rental
value insurance against loss of Rent in an amount equal to the amount of Rent
for a period of at least twelve (12) months commencing on the date of loss.
Landlord may also carry such other insurance as Landlord may deem prudent or
advisable, including, without limitation, liability insurance in such amounts
and on such terms as Landlord shall determine. Upon Tenant's written request,
Landlord shall deliver to Tenant certificates evidencing the coverage required
under this Section.

      8.2 Tenant. Tenant shall, at Tenant's expense, obtain and keep in force at
all times the following insurance:

            8.2.1 Commercial General Liability Insurance (Occurrence Form). A
policy of Commercial General Liability insurance (occurrence form) having a
combined single limit of not less than Two Million Dollars ($2,000,000.00) per
occurrence and Two Million Dollars ($2,000,000.00) aggregate per location if
Tenant has multiple locations, providing coverage for, among other things,
blanket contractual liability, premises, products/completed operations and
personal injury coverage;

            8.2.2 Automobile Liability Insurance. Comprehensive automobile
liability insurance having a combined single limit of not less than Two Million
Dollars ($2,000,000.00) per occurrence and insuring Tenant against liability for
claims arising out of ownership, maintenance, or use of any owned, hired or
non-owned automobiles;

            8.2.3 Workers' Compensation and Employer's Liability Insurance.
Workers' compensation insurance having limits not less than those required by
state statute and federal statute, if applicable, and covering all persons
employed by Tenant in the conduct of its operations on the Premises (including
the all states endorsement and, if applicable, the volunteers endorsement),
together with employer's liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000.00);

                                      10.
<PAGE>

            8.2.4 Property Insurance. "Special Form" property insurance or
equivalent if "Special Form" property insurance is not available including
vandalism and malicious mischief coverage and boiler and machinery comprehensive
form, if applicable, covering damage to or loss of any personal property,
fixtures and equipment, including electronic data processing equipment, of
Tenant (and coverage for the full replacement cost thereof) (the "Tenant's
Property"), together with, if the property of Tenant's invitees is to be kept in
the Premises, warehouser's legal liability or bailee customers insurance for the
full replacement cost of the property belonging to invitees and located in the
Premises;

            8.2.5 Business Income/Extra Expense Insurance. Business Income With
Extra Expense insurance (form CP 0030 or equivalent) with a minimum fifty
percent (50%) Coinsurance Percentage and the Agreed Value option.

            8.2.6 Additional Insurance. Any such other insurance as Landlord or
Landlord's lender may reasonably require.

      8.3 General.

            8.3.1 Insurance Companies. Insurance required to be maintained by
Tenant shall be written by companies licensed to do business in California and
having a "General Policyholders Rating" of at least A:X or better (or such
higher rating as may be required by a lender having a lien on the Premises) as
set forth in the most current issue of "Best's Insurance Guide" or "Best's Key
Rating Guide."

            8.3.2 Increased Coverage. Landlord, upon written notice to Tenant,
may require Tenant to increase the amount of any insurance coverage maintained
by Tenant under Section 8.2 to the amount of insurance coverage that landlords
of similar buildings located in Alameda and Santa Clara Counties customarily
require tenants to maintain.

            8.3.3 Certificates of Insurance. Tenant shall deliver to Landlord
certificates of insurance with the Additional Insured Endorsement and the
Primary Insurance Endorsement(s) attached for all insurance required to be
maintained by Tenant, no later than seven (7) days prior to the date of
possession of the Premises. Tenant shall, at least ten (10) days prior to
expiration of the policy, furnish Landlord with certificates of renewal or
"binders" thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except after thirty
(30) days' prior written notice to the parties named as additional insureds in
this Lease (except in the case of cancellation for nonpayment of premium in
which case cancellation shall not take effect until at least (10) days'

                                      11.
<PAGE>

notice has been given to Landlord). If Tenant fails to maintain any insurance
required in this Lease, Tenant shall be liable for all losses and cost
resulting from said failure.

            8.3.4 Additional Insureds. Landlord, any property management
company of Landlord for the Premises and any other party designated by
Landlord shall be named as additional insureds under all of the policies
required by Section 8.2.1. The policies required under Section 8.2.1 shall
provide for severability of interest.

            8.3.5 Primary Coverage. All insurance to be maintained by Tenant
shall, except for workers' compensation and employer's liability insurance, be
primary, without right of contribution from insurance of Landlord. Any umbrella
liability policy or excess liability policy (which shall be in "following form")
shall provide that if the underlying aggregate is exhausted, the excess coverage
will drop down as primary insurance. The limits of insurance maintained by
Tenant shall not limit Tenant's liability under this Lease.

            8.3.6 Waiver of Subroqation. Landlord and Tenant waive any right to
recover against the other for damages covered by insurance or which would have
been covered by insurance had the applicable party maintained the insurance
required to be maintained by that party under the terms of this Lease. This
provision is intended to waive fully, and for the benefit of Landlord or Tenant,
as applicable, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier. The coverages obtained by
Landlord and Tenant pursuant to this Lease shall include, without limitation,
waiver of subrogation endorsements.

      8.4 Tenant's Indemnity. Tenant shall indemnify, protect and defend by
counsel reasonably satisfactory to Landlord and hold harmless Landlord and
Landlord's officers, directors, shareholders, employees, partners, members,
lenders and successors and assigns from and against any and all claims arising
from (i) Tenant's use of the Premises, the conduct of Tenant's business or any
activity, work or things done, permitted or suffered by Tenant in or about the
Premises and (ii) any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, arising from any
negligence of Tenant or any of Tenant's agents, contractors or employees,
including all costs, attorneys' fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon. Tenant,
as a material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon or about the Premises arising
from any cause; and Tenant hereby waives all claims in respect thereof against
Landlord; except to

                                      12.
<PAGE>

the extent such claims are caused by Landlord's gross negligence or wilful
misconduct.

      8.5 Exemption of Landlord from Liability. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the property of Tenant, Tenant's employees,
invitees, customers or any other person in or about the Premises, nor shall
Landlord be liable for injury to the person of Tenant, Tenant's employees,
agents or contractors, whether such damage or injury is caused by fire, steam,
electricity, gas, water or rain, or from the breakage, leakage or other defects
of sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said damage or injury results from
conditions arising upon the Premises or from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant.

      8.6 Landlord's Indemnity. Landlord shall indemnify, protect and defend by
counsel reasonably satisfactory to Tenant and hold harmless Tenant and Tenant's
officers, directors, shareholders, employees and successors and assigns from and
against any and all claims arising from Landlord's gross negligence or wilful
misconduct.

9. REPAIRS AND MAINTENANCE.

      9.1 Tenant. Tenant, at Tenant's sole cost and expense, shall keep and
maintain the Premises (except for those portions of the Premises required to be
maintained by Landlord pursuant to Sections 9.2), including the roof, building
systems, including the HVAC system, floors and floor coverings, interior
plumbing, electrical wiring, fixtures and equipment, in good repair and in a
clean and safe condition, and repair and/or replace any and all of the foregoing
in a good and workmanlike manner. Without limiting the foregoing, Tenant shall,
at Tenant's sole expense, (a) immediately replace all broken glass in the
Premises with glass equal to or in excess of the specification and quality of
the original glass; and (b) repair any area damaged by Tenant, Tenant's agents,
employees, invitees and visitors, including any damage caused by any roof
penetration, whether or not such roof penetration was approved by Landlord. In
addition, Tenant shall enter into and maintain during the Term a regularly
scheduled maintenance contract for the maintenance of the HVAC system in the
Building. Tenant shall furnish to Landlord a copy of the maintenance contract
upon Landlord's written request therefor.

      9.2 Landlord. Landlord, at Landlord's sole cost and expense, shall repair
damage to the foundation and the structural portions of the Building; provided,
however, if such damage is

                                      13.
<PAGE>

caused by the negligent act or omission of Tenant, then such repairs shall be at
Tenant's sole expense. There shall be no abatement of Rent during the
performance of such work. Subject to Tenant's right to receive a Rent abatement
in certain circumstances as set forth in Section 4, Landlord shall not be liable
to Tenant for injury or damage that may result from any defect in the
construction or condition of the Premises, nor for any damage that may result
from interruption of Tenant's use of the Premises during any repairs by
Landlord. Tenant waives any right to repair at the expense of Landlord under any
applicable governmental laws, ordinances, statutes, orders or regulations now or
hereafter in effect respecting the Premises.

      9.3 Services. Landlord shall be responsible for administering the
maintenance and repair of the landscaping of the Property and the Parking Lot
(the costs of which shall be included as Operating Expense). All other services,
including security and janitorial services, shall be the responsibility of
Tenant.

10. ALTERATIONS.

      10.1 Trade Fixtures; Alterations. Tenant may install trade fixtures,
equipment and furniture in the Premises, provided that such items are installed
and are removable without structural damage thereto. Other than Tenant's Work
and except as expressly provided below, Tenant shall not make, or allow to be
made, any alterations or physical additions in, about or to the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld. Tenant shall have the right to make non-structural
alterations to the interior of the Premises costing in the aggregate not in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00) over the term of this
Lease without the prior written consent of Landlord, provided that (i) Tenant
furnishes to Landlord, at least ten (10) days prior to commencing such
non-structural alterations documents substantiating the proposed alterations,
(ii) Tenant has obtained all of the necessary governmental permits for the
proposed alterations and (iii) the proposed alterations do not materially impair
the value of the Premises, as reasonably determined by Landlord. Tenant shall
reimburse Landlord for all commercially reasonable costs which Landlord may
incur in connection with granting approval to Tenant for any such alterations
and additions (without mark-up), including any costs or expenses which Landlord
may incur in electing to have outside architects and engineers review said
matters. Tenant shall provide Landlord with a set of "as-built" drawings for any
such work, together with copies of all permits obtained by Tenant in connection
with performing any such work, within thirty (30) days of completing such work.

                                      14.
<PAGE>

      10.2 Damage; Removal. Tenant assumes the risk of damage to any of Tenant's
fixtures, equipment, furniture or alterations. Tenant shall repair all damage to
the Premises caused by the installation or removal of such items. Upon the
termination of this Lease, Tenant shall remove any or all alterations,
additions, improvements and partitions made or installed by Tenant and restore
the Premises to their condition existing prior to the construction of any such
items. Notwithstanding the foregoing, Tenant may request in writing at the time
Tenant requests Landlord's consent to a proposed alteration or, if Landlord's
prior consent is not required, at the time Tenant notifies Landlord of the
proposed alteration that Landlord determine whether the proposed alteration must
be removed by Tenant at the expiration or termination of the Lease. Landlord
shall have seven (7) days from Landlord's receipt of Tenant's written request in
which to respond. If Landlord fails to respond to Tenant's written request
within the seven (7) day period, Tenant shall be required to remove the proposed
alteration at the expiration or termination of this Lease. Except for any
alterations or additions which Tenant is required or permitted to remove at the
expiration or termination of the Term, all alterations or additions made by
Tenant to the Premises shall become part of the Premises and the property of
Landlord on the date that the alterations or additions are completed. All items
removed by Tenant or any restoration to the Premises required to be completed by
Tenant shall be accomplished in a good and workmanlike manner and so as not to
cause any damage to the Premises.

      10.3 Liens. Tenant shall pay, discharge or record a release bond executed
by an admitted surety insurer authorized to issue surety bonds in the State of
California within ten (10) days after the filing of any lien, all claims for
labor performed, supplies furnished and services rendered at the request of
Tenant and shall keep the Premises free of all mechanics' and materialmen's
liens in connection therewith. Tenant shall provide at least seven (7) days'
prior written notice to Landlord before any labor is performed, supplies
furnished or services rendered on or at the Premises and Landlord shall have the
right to post on the Premises notices of non-responsibility. If any lien is
filed, Landlord may take such action as may be necessary to remove such lien and
Tenant shall pay Landlord such amounts expended by Landlord together with
interest thereon at the Applicable Interest Rate from the date of expenditure.

11. USE. The Premises shall be used only for the Permitted Uses and for no other
uses and otherwise consistent with any applicable governmental laws, ordinances
statutes, orders and regulations and any declaration of covenants, conditions
and restrictions or any supplement thereto which has been recorded in any
official or public records with respect to the Premises or

                                      15.
<PAGE>

any portion thereof. Tenant shall comply with all applicable governmental laws,
ordinances and statutes, including, without limitation, compliance with any
governmental laws, ordinances and statutes which require structural
modifications to the Building, modifications to the Building systems or the
installation of new building service equipment in the Building. In addition,
Tenant shall comply with the rules and regulations attached hereto as Exhibit D,
together with such additional rules and regulations as Landlord may from time to
time prescribe. Tenant shall not commit waste, overload the floors, roof or
structure of the Premises, subject the Premises to any use which would damage
the same or raise or violate any insurance coverage, permit any unreasonable
odors, smoke, dust, gas, substances, noise or vibrations to emanate from the
Premises, take any action which would constitute a nuisance, take any action
which would abrogate any warranties, or use or allow the Premises to be used for
any unlawful purpose. Tenant shall promptly comply with the reasonable
requirements of any board of fire insurance underwriters or other similar body
now or hereafter constituted.

12. ENVIRONMENTAL MATTERS.

      12.1 Environmental Laws. As used herein, "Environmental Laws" means any
and all federal, state or local laws, ordinances, rules, decrees, orders,
regulations or court decisions relating to hazardous substances, hazardous
materials, hazardous waste, toxic substances, environmental conditions on, under
or about the Premises, or soil and ground water conditions, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), as amended, 42 U.S.C.ss.9601, et seq., the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. 36901, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. 31801, et seq., the California Hazardous
Waste Control Act, Cal. Health and Safety Code 325100, et seq., the
Carpenter-Presley-Tanner Hazardous Substances Account Act, Cal. Health and
Safety Code 325300, et seq., the Safe Drinking Water and Toxic Enforcement Act,
Cal. Health and Safety Code 325249.5, et seq., the Porter-Cologne Water Quality
Control Act, Cal. Water Code 313000, et seq., any amendments to the foregoing,
and any similar federal, state or local laws, ordinances, rules, decrees, orders
or regulations.

      12.2 Hazardous Materials. As used herein, "Hazardous Materials" means any
chemical, compound, material, substance or other matter that: (a) is defined as
a hazardous substance, hazardous material, hazardous waste or toxic substance
under any Environmental Laws; (b) is controlled or governed by any Environmental
Laws or gives rise to any reporting, notice or publication requirements
hereunder, or gives rise to any liability, responsibility or duty on the part of
Tenant or Landlord with respect to any third person hereunder; or (c) is
flammable or explosive material, oil, asbestos, urea formaldehyde, radioactive
material, nuclear medicine material, drug, vaccine, bacteria, virus, hazardous
waste, toxic substance, or related injurious or potentially injurious material
(by itself or in combination with other materials).

                                      16.
<PAGE>

      12.3 Use. Tenant shall not cause, or allow any of Tenant's employees,
agents, customers, visitors, invitees, licensees, contractors, assignees or
subtenants (collectively, "Tenant's Parties") to cause or permit, any Hazardous
Materials to be brought upon, stored, manufactured, generated, blended, handled,
recycled, treated, disposed or used on, under or about the Premises, except for
(i) the Hazardous Materials listed in Exhibit E, (ii) Hazardous Materials other
than those listed on Exhibit E which have been approved in writing by Landlord,
which approval shall not be unreasonably withheld, delayed or conditioned, and
(iii) routine office and janitorial supplies in usual and customary quantities;
all of which shall be stored, used and disposed of in accordance with all
applicable Environmental Laws. Landlord's approval may be subject to reasonable
conditions to protect the Premises and Landlord's interests. Landlord may
withhold its approval or may revoke its approval if Landlord determines in its
reasonable discretion that such proposed use involves a material risk of a
release or discharge of Hazardous Materials or a violation of any Environmental
Laws or that Tenant has not provided reasonable assurances of its ability to
remedy such a violation and fulfill its obligations under this Section 12.

      12.4 Compliance With Laws; Handling of Hazardous Materials. Tenant and
Tenant's Parties shall strictly comply with, and shall maintain the Premises in
compliance with, all Environmental Laws. Tenant shall obtain, maintain in effect
and comply with the conditions of all permits, licenses and other governmental
approvals required for Tenant's operations on the Premises under any
Environmental Laws, including, but not limited to, the discharge of
appropriately treated Hazardous Materials into or through any sanitary sewer
serving the Premises. At Landlord's request, Tenant shall deliver copies of all
such permits, licenses and approvals and any applications for any permits,
licenses and approvals. Prior to occupancy of the Premises, Tenant shall submit
to Landlord a copy of the Hazardous Materials Management Plan for its operations
to the extent Tenant is required to prepare a Hazardous Materials Management
Plan under applicable Environmental Laws. If requested by Landlord, Tenant shall
submit a copy of an updated Hazardous Materials Management Plan to Landlord
annually on the anniversary date of this Lease. Tenant shall dispose of all
waste that is or may contain Hazardous Materials at permitted off-site
treatment, storage or disposal facilities in accordance with all applicable
Environmental Laws and shall provide Landlord with a copy of any hazardous waste
manifests. All Hazardous Materials removed from the Premises shall be removed
and transported by duly licensed haulers to duly licensed disposal facilities,
in compliance with all Environmental Laws. Tenant shall perform any monitoring,
investigation, clean-up, removal, detoxification, preparation of closure or
other required plans and any other remedial work (collectively, "Remedial Work")
required as a result of any release or discharge of Hazardous Materials
affecting the Premises or any violation of Environmental Laws by Tenant,
Tenant's Parties or any successor or sublessee of Tenant or Tenant's Parties.
Landlord shall have the right to intervene in any governmental action or
proceeding involving any Remedial Work, and to approve performance of the work,
in order to protect

                                      17.
<PAGE>

Landlord's interests. Tenant shall not enter into any settlement agreement,
consent decree or other compromise with respect to any claims relating to
Hazardous Materials without notifying Landlord and providing ample opportunity
for Landlord to intervene.

      12.5 Compliance With Insurance Requirements. Tenant shall comply with the
requirements of Landlord's and Tenant's insurers regarding Hazardous Materials
and with such insurers' recommendations based upon prudent industry practices
regarding management of Hazardous Materials.

      12.6 Notice; Reporting. Tenant shall notify Landlord, in writing, within
five (5) days after any of the following: (a) Tenant has knowledge, or has
reasonable cause to believe, that any Hazardous Material has been released,
discharged or is located on, under or about the Premises in violation of
Environmental Laws or which is required to be reported to a public agency; (b)
Tenant receives any order of a governmental agency requiring any Remedial Work
pursuant to any Environmental Laws; (c) Tenant receives any warning, notice of
inspection, notice of violation or alleged violation, or Tenant receives notice
or knowledge of any proceeding, investigation of enforcement action, pursuant to
any Environmental Laws; or (d) Tenant receives notice or knowledge of any claims
made or threatened by any third party against Tenant or the Premises relating to
any loss or injury resulting from Hazardous Materials. If the potential risk of
any of the foregoing events is material, Tenant shall deliver immediate oral
notice to Landlord, in addition to written notice as set forth above. Tenant
shall deliver to Landlord copies of all test results, reports and business or
management or closure plans required to be filed with any governmental agency
pursuant to any Environmental Laws.

      12.7 Termination/Expiration. At Landlord's election, Tenant shall have a
Phase II Environmental Site Assessment performed of the Premises by an
independent consulting firm mutually acceptable to Tenant and Landlord any time
during the last twelve (12) months of the term this Lease or, if this Lease is
terminated early for any reason, immediately following the termination of this
Lease. Such Phase II Environmental Site Assessment shall include, without
limitation, subsurface testing, soil and groundwater testing, and other tests in
locations where Hazardous Materials have been used or stored, necessary to (i)
investigate the condition of the Premises, (ii) determine compliance with all
Environmental Laws, and (iii) determine whether any Hazardous Materials have
been disposed or otherwise released on the Premises. Tenant and Landlord shall
each pay one-half of the cost of obtaining the Phase II Environmental Site
Assessment; provided, however, Tenant shall pay one hundred percent (100%) of
the cost of any work required by any governmental agency in order to obtain
closure of the site. Tenant shall provide Landlord with a copy of the
independent consultant's Phase II Environmental Site Assessment Report and
copies of all data obtained by the independent consultant, or by or on behalf of
Tenant, within thirty (30) days after Tenant's receipt of such report or data.
Prior to the termination or expiration of this Lease, Tenant, at Landlord's
election, and at

                                      18.
<PAGE>

Tenant's cost, shall remove any equipment, improvements or storage facilities
utilized in connection with any Hazardous Materials and shall clean up,
detoxify, repair and otherwise restore the Premises to a condition free of
Hazardous Materials, to the extent the condition is caused by Tenant or any
successor or sublessee of Tenant or their respective agents, contractors,
employees, licensee or invitees.

      12.8 Indemnity. Tenant shall indemnify, protect, defend and hold harmless
Landlord and its partners, members, officers, directors, shareholders, employees
and agents from and against any and all liabilities, claims, suits, judgments,
actions, investigations, proceedings, costs and expenses (including attorneys'
fees and court costs) arising out of or in connection with any breach of any
provisions of this Section 12 or directly or indirectly arising out of the use,
generation, storage, release, disposal or transportation of Hazardous Materials
by Tenant or Tenant's Parties on, under or about the Premises during the Term.
Any defense of Landlord pursuant to this Section 12 shall be by counsel
reasonably acceptable to Landlord. Neither the consent by Landlord to the use,
generation, storage, release, disposal or transportation of Hazardous Materials
nor the strict compliance with all Environmental Laws shall excuse Tenant from
Tenant's indemnification obligations pursuant to this Section 12. The foregoing
indemnity shall be in addition to and not a limitation of the indemnification
provisions of Section 8.4 of this Lease. Tenant's obligations pursuant to this
Section 12 shall survive the termination or expiration of this Lease.

      12.9 Entry and Inspection; Cure. Landlord, and its agents, employees and
contractors, shall have the right, but not the obligation, to enter the Premises
upon not less than twenty-four (24) hours' prior notice to Tenant, except in
case of an emergency (whereupon notice shall be given as soon as is practicable)
or if Landlord has reasonable cause to believe that violations of this Section
12 have occurred, to inspect the Premises and Tenant's compliance with the terms
and conditions of this Section 12, or to conduct investigations and tests. If
any non-compliance by Tenant under this Section 12 is not cured within thirty
(30) days after notice from Landlord or such earlier time if immediate remedial
action is required, Landlord shall have the right, but not the obligation, to
remedy any violation by Tenant of the provisions of this Section 12 or to
perform any Remedial Work which is necessary or appropriate as a result of any
governmental order, investigation or proceeding. Tenant shall pay, upon demand,
all costs incurred by Landlord in remedying such violations or performing all
Remedial Work, plus interest thereon at the Interest Rate from the date of
demand until the date paid by Tenant. If Tenant is not occupying the Premises or
Tenant is occupying the Premises and Landlord's reasonable estimate of the cost
of the Remedial Work exceeds Fifty Thousand Dollars ($50,000.00), then Tenant
shall pay to Landlord such amount in advance of Landlord performing any Remedial
Work, based upon Landlord's reasonable estimate of the cost of the Remedial
Work. Upon completion of the Remedial work by Landlord, Tenant shall pay to
Landlord either the cost of the Remedial Work or any shortfall promptly after
Landlord's written

                                      19.
<PAGE>

request therefor or Landlord shall refund to Tenant any excess deposit, as the
case may be.

      12.10 Default. The release or discharge of any Hazardous Material or the
violation of any Environmental Laws by Tenant or any successor or sublessee of
Tenant shall be a material default by Tenant under this Lease.

13. DAMAGE AND DESTRUCTION.

      13.1 Casualty. If the Premises should be damaged or destroyed by fire or
other casualty, Tenant shall give immediate written notice to Landlord. Within
thirty (30) days after receipt thereof, Landlord shall notify Tenant whether
such repairs can reasonably be made: (1) within one hundred twenty (120) days;
(2) in more than one hundred twenty (120) days but in less than two hundred
seventy (270) days; or (3) in more than two hundred seventy (270) days from the
date of such notice.

            13.1.1 Less Than 120 Days. If the Premises should be damaged only to
such extent that rebuilding or repairs can be reasonably completed within one
hundred twenty (120) days, this Lease shall not terminate and Landlord shall
repair the Premises, except that Landlord shall not be required to rebuild,
repair or replace any alterations, partitions, fixtures, additions and
improvements which may have been placed in, on or about the Premises by or for
the benefit of Tenant (other than those improvements constructed as part of
Tenant's Work which are not pledged as security for any loan or equipment
financing obtained by Tenant); provided, however, if the Premises is damaged
during the last six (6) years of the term of this Lease and insurance proceeds
(excluding the deductible amount) are not available to fully repair the
Premises, Landlord shall have the right to terminate this Lease upon written
notice to Tenant. If Landlord elects to terminate this Lease pursuant to this
Section 13.1.1, Tenant shall have the right to exercise its right to extend the
term pursuant to Section 18 by written notice to Landlord within thirty (30)
days of Tenant's receipt of Landlord's termination notice provided that the
balance of the Term (including the extended term) would extend at least five (5)
years beyond the date on which Landlord reasonably estimates the restoration of
the Premises will be substantially completed. If Tenant timely exercises its
right to extend the term of this Lease as provided above, this Lease shall
continue in full force and effect notwithstanding Landlord's election to
terminate this Lease and Landlord shall be required to repair the Premises as
provided above. The Rent payable hereunder shall be abated proportionately from
the date Tenant vacates the Premises only to the extent rental abatement
insurance proceeds are received by Landlord and the Premises are unfit for
occupancy.

            13.1.2 Greater Than 120 Days. If the Premises should be damaged only
to such extent that rebuilding or repairs can be reasonably completed in more
than one hundred twenty (120) days but in less than two hundred seventy (270)
days, then Landlord shall have the option of: (1) terminating this Lease
effective upon the occurrence of such damage, in which event the Rent shall be
abated from the date Tenant vacates the Premises; or (2)

                                      20.
<PAGE>

electing to repair the Premises, except that Landlord shall not be required to
rebuild, repair or replace any part of the alterations, partitions, fixtures,
additions and other improvements which may have been placed in, on or about the
Premises by or for the benefit of Tenant (other than those improvements
constructed as part of Tenant's Work which are not pledged as security for any
loan or equipment financing obtained by Tenant). The Rent payable hereunder
shall be abated proportionately from the date Tenant vacates the Premises only
to the extent rental abatement insurance proceeds are received by Landlord and
the Premises are unfit for occupancy.

            13.1.3 Greater Than 270 Days. If the Premises should be so damaged
that rebuilding or repairs cannot be completed within two hundred seventy (270)
days, either Landlord or Tenant may terminate this Lease by giving written
notice to the other party within ten (10) days after notice from Landlord
regarding the time period of repair; and this Lease and the Rent shall be abated
from the date Tenant vacates the Premises. In the event that neither party
elects to terminate this Lease, Landlord shall promptly commence and diligently
prosecute to completion the repairs to the Premises provided that insurance
proceeds are available to fully repair the damage, except that Landlord shall
not be required to rebuild, repair or replace any alterations, partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the Premises by or for the benefit of Tenant, (other than those
improvements constructed as part of Tenant's Work which are not pledged as
security for any loan or equipment financing obtained by Tenant). During the
time when Landlord is prosecuting such repairs to completion, the Rent payable
hereunder shall be abated proportionately from the date Tenant vacates the
Premises only to the extent rental abatement insurance proceeds are received by
Landlord and only during the period that the Premises are unfit for occupancy.

            13.1.4 Tenant's Election to Repair. If Landlord elects to terminate
this Lease pursuant to Sections 13.1.1, 13.1.2 or 13.1.3, Tenant, by written
notice to Landlord within ten (10) days after Tenant's receipt of Landlord's
notice electing to terminate this Lease, may elect to repair the Premises at
Tenant's own cost and expense, if Tenant elects to repair the Premises, then (i)
this Lease shall continue in full force and effect notwithstanding Landlord's
election to terminate and (ii) Tenant shall promptly commence and diligently
prosecute to completion the repair of the Premises.

            13.1.5 Failure to Repair. If Landlord either is required to or
elects to repair the Premises in accordance with this Section 13.1 and Landlord
fails to substantially complete such repairs within three hundred sixty (360)
days after the date on which Landlord notifies Tenant of Landlord's estimate of
the

                                      21.
<PAGE>

time required to complete the repairs to the Premises, then, Tenant, by written
notice to Landlord given within ten (10) days after the expiration of the three
hundred sixty (360) day period, may elect to terminate this Lease effective as
of the thirtieth (30th) day after Landlord's receipt of Tenant's notice.

      13.2 Wilful Misconduct. If any portion of the Premises is damaged
resulting from the wilful misconduct of Tenant or any of Tenant's Parties, Rent
shall not be diminished during the repair of such damage. In addition, if any
portion of the Premises is damaged resulting from the wilful misconduct, fault,
negligence or breach of this Lease by Tenant or any of Tenant's Parties, Tenant
shall not have the right to terminate this Lease pursuant to this Section 13.

      13.3 Uninsured Casualty. In the event that any portion of the Premises is
damaged and is not fully covered by insurance proceeds received by Landlord or
insurance which Landlord is required to obtain under this Lease, or in the event
that the holder of any indebtedness secured by the Premises requires that the
insurance proceeds be applied to such indebtedness, and Landlord elects not to
pay the difference between the amount of insurance proceeds received by Landlord
and the cost of the repairs to the Premises, then Tenant shall have the right to
terminate this Lease by delivering written notice of termination to Landlord
within thirty (30) days after the date of notice to Tenant of any such event. In
the event that Tenant does not elect to terminate this Lease and Tenant elects
not to pay such difference, Landlord shall have the right to terminate this
Lease by delivering written notice to Tenant within thirty (30) days after such
election by Tenant or Tenant's failure to elect, as applicable, whereupon this
Lease shall terminate effective as of the date of Landlord's notice.

      13.4 Waiver. With respect to any damage or destruction which Landlord is
obligated to repair or may elect to repair, Tenant waives all rights to
terminate this Lease pursuant to rights otherwise presently or hereafter
accorded by law.

14. EMINENT DOMAIN.

      14.1 Total Condemnation. If all of the Premises is condemned by eminent
domain, inversely condemned or sold in lieu of condemnation for any public or
quasi-public use or purpose ("Condemned"), this Lease shall terminate as of the
date of title vesting in such proceeding and Rent shall be adjusted to the date
of termination.

      14.2 Partial Condemnation. If any portion of the Premises is Condemned and
such partial condemnation renders the Premises unusable for Tenant's business,
this Lease shall terminate as of

                                      22.
<PAGE>

the date of title vesting or order of immediate possession in such proceeding
and Rent shall be adjusted to the date of termination. If such partial
condemnation does not render the Premises unusable for the business of Tenant,
Landlord shall promptly restore the Premises to the extent of any condemnation
proceeds recovered by Landlord, excluding the portion thereof lost in such
condemnation, and this Lease shall continue in full force and effect except that
after the date of such title vesting Rent shall be equitably adjusted.

      14.3 Award. If the Premises are wholly or partially Condemned, Landlord
shall be entitled to the entire award paid for such condemnation, and Tenant
waives any claim to any part of the award from Landlord or the condemning
authority; provided that Tenant shall have the right to recover from the
condemning authority such compensation as may be separately awarded to Tenant in
connection with the value of Tenant's merchandise, furniture, fixtures and
non-built-in equipment and/or the costs of moving to a new location.

      14.4 Temporary Condemnation. In the event of a temporary condemnation,
this Lease shall remain in effect, Tenant shall continue to pay Rent and Tenant
shall receive any award made for such condemnation. If a temporary condemnation
remains in effect at the expiration or earlier termination of this Lease, Tenant
shall pay Landlord the reasonable cost of performing any obligations required of
Tenant with respect to the surrender of the Premises. If a temporary
condemnation is for a period which extends beyond the Term, this Lease shall
terminate as of the date of occupancy by the condemning authority and any such
award shall be distributed in accordance with the preceding section.

15. DEFAULT.

      15.1 Events of Defaults. The occurrence of any of the following events
shall, at Landlord's option, constitute an "Event of Default":

            15.1.1 Failure to Pay Rent. Failure to pay Rent within five (5) days
after written notice from Landlord that the Rent is past due;

            15.1.2 Failure to Perform. Failure to commence to cure a default in
the performance of any of Tenant's covenants hereunder (except default in the
payment of Rent) within thirty (30) days after written notice from Landlord; or

            15.1.3 Bankruptcy. The making of a general assignment by Tenant for
the benefit of creditors, the filing of a voluntary petition by Tenant or the
filing of an involuntary petition by any of Tenant's creditors seeking the
rehabilitation, liquidation

                                      23.
<PAGE>

or reorganization of Tenant under any law relating to bankruptcy, insolvency or
other relief of debtors and, in the case of an involuntary action, the failure
to remove or discharge the same within sixty (60) days of such filing, the
appointment of a receiver or other custodian to take possession of substantially
all of Tenant's assets or this leasehold, Tenant's insolvency or inability to
pay Tenant's debts or failure generally to pay Tenant's debts when due, any
court entering a decree or order directing the winding up or liquidation of
Tenant or of substantially all of Tenant's assets, Tenant taking any action
toward the dissolution or winding up of Tenant's affairs, the cessation or
suspension of Tenant's use of the Premises, or the attachment, execution or
other judicial seizure of substantially all of Tenant's assets or this
leasehold.

      15.2 Remedies.

            15.2.1 Termination. In the event of the occurrence of any Event of
Default, Landlord shall have the right to give a written termination notice to
Tenant and, on the date specified in such notice, this Lease shall terminate
unless on or before such date all arrears of Rent and all other sums payable by
Tenant under this Lease and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all other Events of
Default at the time existing shall have been fully remedied.

                  15.2.1.1 Repossession. Following termination, without
prejudice to other remedies Landlord may have, Landlord may (i) peaceably
re-enter the Premises upon voluntary surrender by Tenant or remove Tenant
therefrom and any other persons occupying the Premises, using such legal
proceedings as may be available; (ii) repossess the Premises or relet the
Premises or any part thereof for such term (which may be for a term extending
beyond the Term), at such rental and upon such other terms and conditions as
Landlord in Landlord's sole discretion shall determine, with the right to make
reasonable alterations and repairs to the Premises; and (iii) remove all
personal property therefrom, subject to the rights of any lender or equipment
lender who has a security interest in Tenant's personal property.

                  15.2.1.2 Unpaid Rent. Landlord shall have all the rights and
remedies of a landlord provided by applicable law, including the right to
recover from Tenant: (a) the worth, at the time of award, of the unpaid Rent
that had been earned at the time of termination, (b) the worth, at the time of
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination until the time of award exceeds the amount of loss of
rent that Tenant proves could have been reasonably avoided, (c) the worth, at
the time of award, of the amount by which the unpaid Rent for the balance of the
Term after

                                      24.
<PAGE>

the time of award exceeds the amount of the loss of rent that Tenant proves
could have been reasonably avoided, and (d) any other amount, and court costs,
necessary to compensate Landlord for all detriment proximately caused by
Tenant's default. The phrase "worth, at the time of award," as used in (a) and
(b) above, shall be computed at the greater of ten percent (10%) per annum or
five percent (5%) per annum plus the federal discount rate on advances to member
banks in effect at the Federal Reserve Bank of San Francisco on the twenty-fifth
(25th) day of the month preceding the date of this Lease, and as used in (c)
above, shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

            15.2.2 Continuation. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession; and Landlord may enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
Rent as it becomes due, and Landlord, without terminating this Lease, may,
during the period Tenant is in default, enter the Premises and relet the same,
or any portion thereof, to third parties for Tenant's account and Tenant shall
be liable to Landlord for all reasonable costs Landlord incurs in reletting the
Premises, including, without limitation, brokers' commissions, expenses of
remodeling the Premises and like costs. Reletting may be for a period shorter or
longer than the remaining Term. Tenant shall continue to pay the Rent on the
date the same is due. Landlord has the remedy described in California Civil Code
Section 1951.4 (i.e., Landlord may continue this Lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations).

            15.2.3 Application of Rent. No act by Landlord hereunder, including
acts of maintenance, preservation or efforts to lease the Premises or the
appointment of a receiver upon application of Landlord to protect Landlord's
interest under this Lease, shall terminate this Lease unless Landlord notifies
Tenant that Landlord elects to terminate this Lease. In the event that Landlord
elects to relet the Premises, the rent that Landlord receives from reletting
shall be applied to the payment of, first, any indebtedness from Tenant to
Landlord other than Base Rent and Operating Expenses and Real Property Taxes;
second, all costs, including maintenance, incurred by Landlord in reletting;
and, third, Base Rent and Operating Expenses and Real Property Taxes under this
Lease. After deducting the payments referred to above, any sum remaining from
the rental Landlord receives from reletting shall be held by Landlord and
applied in payment of future Rent as Rent becomes due under this Lease. In no
event shall Tenant be entitled to any excess rent received by Landlord.

                                      25.
<PAGE>

If, on the date Rent is due under this Lease, the rent received from the
reletting is less than the Rent due on that date, Tenant shall pay to Landlord,
in addition to the remaining Rent due, all costs, including maintenance,
Landlord incurred in reletting that remain after applying the rent received from
reletting as provided hereinabove. So long as this Lease is not terminated,
Landlord shall have the right to remedy any default of Tenant, to maintain or
improve the Premises, to cause a receiver to be appointed to administer the
Premises and new or existing subleases and to add to the Rent payable hereunder
all of Landlord's reasonable costs in so doing, with interest at the Applicable
Interest Rate from the date of such expenditure.

      15.3 Cumulative. Each right and remedy of Landlord provided for herein or
now or hereafter existing at law, in equity, by statute or otherwise shall be
cumulative and shall not preclude Landlord from exercising any other rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity, by statute or otherwise. No payment by Tenant of a lesser amount than
the Rent nor any endorsement on any check or letter accompanying any check or
payment as Rent shall be deemed an accord and satisfaction of full payment of
Rent; and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies.

16. ASSIGNMENT AND SUBLETTING.

      16.1 Consent Required. Tenant shall not assign or sublet, whether
voluntarily or involuntarily or by operation of law, the Premises or any part
thereof without Landlord's prior written approval, which shall not be
unreasonably withheld. The transfer of any controlling or managing ownership or
beneficial interest in Tenant shall constitute an assignment hereunder. If
Tenant desires to assign this Lease or sublet any or all of the Premises, Tenant
shall give Landlord written notice thirty (30) days prior to the anticipated
effective date of the assignment or sublease. Landlord shall then have a period
of thirty (30) days following receipt of such notice and all related documents
and agreements associated with the assignment or sublease, including without
limitation, the financial statements of any proposed assignee or subtenant, to
notify Tenant in writing that Landlord elects: (1) to permit Tenant to assign
this Lease or sublet such space, subject however to Landlord's prior written
approval of the proposed assignee or subtenant and of any related documents or
agreements associated with the assignment or sublease received by Landlord
hereunder or reasonably requested by Landlord; or (2) to disapprove such
proposed assignment or subletting. If Landlord should fail to notify Tenant in
writing of such election, Landlord shall be deemed to have elected option (2).
This Lease may not be assigned by operation of law. Any

                                      26.
<PAGE>

purported assignment or subletting contrary to the provisions hereof shall be
void.

      16.2 Bonus Rent. If Tenant receives monthly rent or other consideration
for any transfer in excess of the monthly Rent due under this Lease or, in case
of the sublease of a portion of the Premises, in excess of the monthly Rent that
is fairly allocable to such portion, Tenant shall pay to Landlord fifty percent
(50%) of the difference between each payment of monthly rent or other
consideration and the monthly Rent due hereunder. Prior to allocating between
Landlord and Tenant any monthly rent or other consideration paid by any assignee
or subtenant, in addition to deducting the monthly Rent that is allocable to the
portion of the Premises subject to the assignment or sublease, the amortized
portion of the Transfer Expenses (as hereinafter defined) shall also be deducted
from the monthly rent or other consideration payable by the assignee or
subtenant in connection with the assignment or sublease. The transfer expenses
(the "Transfer Expenses") consist of (i) the actual, documented and reasonable
out-of-pocket costs paid or incurred by Tenant for attorneys' fees and brokerage
commissions in connection with the assignment or subletting and (ii) an amount
equal to the product of (A) the amount of the Tenant Improvements (defined in
Exhibit B) constructed in the Premises and paid for by Tenant (excluding those
Tenant Improvements paid for out of the Tenant Improvement Allowance (defined in
Exhibit B)) and (B) a fraction, the numerator of which is the number of months
remaining in the original Term and the denominator of which is one hundred
forty-four (144) (i.e., the number of months in the original Term). The Transfer
Expenses shall be amortized on a straight-line basis without interest over the
remaining Term. Landlord may, without waiving any rights or remedies, collect
rent from the assignee, subtenant or occupant and apply the net amount collected
to the Rent herein reserved and apportion any excess rent so collected in
accordance with the terms of the preceding sentence.

      16.3 No Release. In the event Tenant assigns all or any part of its
interest in this Lease or subleases all or any portion of the Premises, Tenant
shall continue to be liable as a principal, and not merely as a guarantor or
surety, to the same extent as though no assignment or subletting had been made.
Landlord may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease by assignees of Tenant without
notifying Tenant or any successor of Tenant and without obtaining their consent.
No permitted assignment shall be effective until there has been delivered to
Landlord an original of the transfer instrument in which the transferee agrees
to be and remain jointly and severally liable with Tenant for the payment of
Rent pertaining to the space and for the performance of all the terms and
provisions of this Lease relating thereto arising on or after the date of the
transfer.

                                      27.
<PAGE>

Tenant shall not do any act which shall in any way encumber the title of
Landlord in and to the Premises.

      16.4 Consent Not Required. Notwithstanding anything to the contrary
contained in this Section 16, an assignment or subletting of all or any portion
of the Premises to or by a "Permitted Affiliate" (defined below) shall not be
deemed an assignment or subletting under this Lease and, as a result, shall not
be subject to Landlord's consent or Landlord's right to receive excess rent in
connection with the assignment or subletting. Tenant shall provide Landlord with
not less than ten (10) days' prior written notice of any assignment or
subletting to a Permitted Affiliate. As used in this Lease, the term "Permitted
Affiliate" shall mean (i) any person, corporation or other entity which is
controlled by, controls or is under common control with Tenant, or (ii) any
entity which merges or consolidates with Tenant or its successor in interest
under this Lease or acquires all or substantially all of Tenant's or such
successor's stock or assets, provided that such person, corporation or entity
has a creditworthiness and net worth as of the effective date of such transfer
of not less than the creditworthiness and net worth of Tenant as of the
effective date of the proposed transfer. The term "control" as used in this
Section 16 shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person or entity.

17. ESTOPPEL, ATTORNMENT AND SUBORDINATION.

      17.1 Estoppel. Within ten (10) days after request by Landlord, Tenant
shall deliver an estoppel certificate duly executed (and acknowledged if
required by any lender), in the form attached hereto as Exhibit F, to any
proposed mortgagee, purchaser or Landlord. If Tenant fails to deliver to
Landlord the estoppel certificate within the ten (10) day period referenced
above, Landlord shall send to Tenant (with a copy to Tenant's attorney at the
address noted below) a second request for Tenant to execute the estoppel
certificate. If Tenant fails to deliver the executed estoppel certificate to
Landlord within five (5) days after Landlord's second request therefor, Tenant's
failure to deliver the executed estoppel certificate to Landlord within such
time period shall be conclusive upon Tenant that (a) this Lease is in full force
and effect, without modification except as may be represented by Landlord; (b)
there are no uncured defaults in Landlord's performance and Tenant has no right
of offset, counterclaim or deduction against Rent hereunder; and (c) no more
than one period's Base Rent has been paid in advance. Landlord reserves the
right to substitute a different form of estoppel certificate upon the reasonable
request of any proposed mortgagee or purchaser.

                                      28.
<PAGE>

      Hale and Dorr
      60 State Street
      Boston, MA 02109
      Attn: Mark Borden, Esq.

      17.2 Attornment. In the event of a foreclosure proceeding, the exercise of
the power of sale under any mortgage or deed of trust or the termination of a
ground lease, Tenant shall, if requested, attorn to the purchaser thereupon and
recognize such purchaser as Landlord under this Lease; provided, however,
Tenant's obligation to attorn to such purchaser shall be conditioned upon
Tenant's receipt of a commercially reasonable non-disturbance agreement.

      17.3 Subordination. Provided and on the condition that Tenant receives
from the beneficiary under any mortgage or deed of trust which encumbers the
Premises or Landlord's interest therein or any ground lessor of the Property a
commercially reasonable non-disturbance agreement, this Lease and Tenant's
interest in the Premises shall be subordinate to the beneficiaries' or ground
lessor's interest in the Premises and to the applicable deed of trust, mortgage
or ground lease and any amendments thereto, all without the necessity of
Tenant's executing further instruments to effect such subordination. If
requested, Tenant shall execute whatever documentation may be required to
further effect the provisions of this paragraph.

18. Extension Option.

      18.1 Option to Extend. Tenant shall have two (2) options to extend the
Term for a period of five (5) years each (hereinafter referred to as the "First
Extension Term" and the "Second Extension Term", respectively), provided that at
the time Tenant's Extension Notice (defined below) is given and at the time the
First Extension Term and the Second Extension Term (each of which are sometimes
hereinafter referred to as the "Extension Term") is to commence (i) Tenant is
not in default under the Lease after the expiration of all applicable grace or
cure periods and (ii) Versicor, Inc., or a Permitted Affiliate of Versicor,
Inc., is in occupancy of at least fifty percent (50%) of the Premises. Tenant
shall exercise such option, if at all, by written notice ("Tenant's Extension
Notice") to Landlord not later than twelve (12) months, nor earlier than fifteen
(15) months (except as provided in Section 13.1.1), prior to the expiration of
the original Term or the First Extension Term, as the case may be. Tenant's
failure to deliver Tenant's Extension Notice to Landlord in a timely manner
shall be deemed a waiver of Tenant's option to extend the Term and any future
extension option shall lapse and be of no force or effect.

                                      29.
<PAGE>

      18.2 Exercise of Option.

            18.2.1 First Extension Term. If Tenant exercises its extension
option for the First Extension Term, the Term shall be extended for an
additional period of five (5) years on all of the terms and conditions of this
Lease, except (i) Tenant's options to further extend the Term shall be reduced
in number by one, (ii) the monthly Base Rent at the commencement of the First
Extension Term shall be the greater of (A) ninety-five percent (95%) of the
"Fair Market Rent" prevailing at the commencement of the First Extension Term or
(B) the monthly Base Rent in effect at the end of the original Term; subject to
increase on an annual basis by the amount of Two Thousand Seven Hundred Fifty
Dollars ($2,750.00). Landlord shall not be responsible for any brokerage
commission or finder's fee in connection with Tenant's exercise of its option to
extend the Term. The parties hereby acknowledge that Brokers are not entitled to
any real estate commission or finder's fee in connection with Tenant's exercise
of its option to extend the Term.

            18.2.2 Second Extension Term. If Tenant exercises its extension
option for the Second Extension Term, the Term shall be extended for an
additional period of five (5) years on all of the terms and conditions of this
Lease, except (i) Tenant shall have no further option to extend the term of this
Lease, (ii) the monthly Base Rent at the commencement of the Second Extension
Term shall be the greater of (A) ninety-five percent (95%) of the "Fair Market
Rent" prevailing at the commencement of the Second Extension Term or (B) the
monthly Base Rent in effect at the end of the First Extension Term; subject to
increase on an annual basis by the amount of Two Thousand Seven Hundred Fifty
Dollars ($2,750.00). Landlord shall not be responsible for any brokerage
commission or finder's fee in connection with Tenant's exercise of its option to
extend the Term. The parties hereby acknowledge that Brokers are not entitled to
any real estate commission or finder's fee in connection with Tenant's exercise
of its option to extend the Term.

      18.3 Determination of Fair Market Rent.

            18.3.1 Agreement on Rent. For the purposes of this Amendment, "Fair
Market Rent" means the fair market monthly Base Rent expected to prevail as of
the commencement of the Extension Term with respect to leases of
industrial/research and development space within buildings located in Ardenwood
Corporate Commons in Fremont, California, of a quality and age and with interior
improvements (other than those constructed and paid for by Tenant), parking,
site amenities, building systems, location, identity and access all comparable
to that of the Premises, for a term of approximately five (5) years. Within
fifteen (15) days after Landlord's receipt of Tenant's Extension Notice, by
written

                                      30.
<PAGE>

notice to Tenant ("Landlord's Rent Notice"), Landlord shall advise Tenant as to
Landlord's determination of the Fair Market Rent if such amount is in excess of
the Base Rent in effect at the expiration of the original Term or First
Extension Term, as applicable. If Tenant disagrees with Landlord's
determination; within fifteen (15) days after Tenant's receipt of Landlord's
Rent Notice, by written notice to Landlord ("Tenant's Rent Notice"), Tenant
shall advise Landlord as to Tenant's determination of the Fair Market Rent. If
Tenant shall fail to timely send Tenant's Rent Notice, Tenant shall be bound by
Landlord's determination as set forth in Landlord's Rent Notice. If Tenant shall
timely send to Landlord Tenant's Rent Notice, Landlord and Tenant shall attempt
in good faith to reach agreement as to the Fair Market Rent within fifteen (15)
days of Landlord's receipt of Tenant's Rent Notice.

            18.3.2 Selection of Appraisers. If Landlord and Tenant are unable to
agree as to the Fair Market Rent within the aforementioned fifteen (15) day
period as evidenced by a written amendment to the Lease executed by them, then,
within ten (10) days after the expiration of the fifteen (15) day period,
Landlord and Tenant each, at its cost and by giving notice to the other party,
shall appoint a competent and disinterested real estate appraiser with
membership in the Appraisal Institute and M.A.I. designation and with at least
five (5) years' full-time commercial appraisal experience in the Fremont area to
appraise and set the monthly Base Rent during the Extension Term. If either
Landlord or Tenant does not appoint an appraiser within ten (10) days after the
other party has given notice of the name of its appraiser, the single appraiser
appointed shall be the sole appraiser and shall set the monthly Base Rent during
the Extension Term. If two (2) appraisers are appointed by Landlord and Tenant
as stated in this Section, they shall attempt to select a third appraiser
meeting the qualifications stated in this Section within ten (10) days. If they
are unable to agree on the third appraiser, either Landlord or Tenant, by giving
ten (10) days' notice to the other party, can apply to the then president of the
real estate board of the county in which the Building is located, or to the
Presiding Judge of the Superior Court of the county in which the Building is
located, for the selection of a third appraiser who meets the qualifications
stated in this paragraph. Landlord and Tenant each shall bear one-half (1/2) of
the cost of appointing the third appraiser and of paying the third appraiser's
fee. The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either Landlord or Tenant.

            18.3.3 Value Determined By Three (3) Appraisers. The Appraisers
shall determine the Fair Market Rent by using the "Market Comparison Approach"
with the relevant market being buildings located in Ardenwood Corporate Commons,
in Fremont,

                                      31.
<PAGE>

California, of a quality and age and with interior improvements (other than
those constructed and paid for by Tenant), parking, site amenities, building
systems, location, identity and access all comparable to that of the Building.
Within thirty (30) days after the selection of the third appraiser, Landlord's
appraiser shall arrange for the simultaneous delivery to Landlord of written
appraisals from each of the appraisers and the three (3) appraisals shall be
added together and their total divided by three (3); the resulting quotient
shall be the Fair Market Rent. If, however, the low appraisal and/or the high
appraisal are/is more than ten percent (10%) lower and/or higher than the middle
appraisal, the low appraisal and/or the high appraisal shall be disregarded. If
only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be
added together and their total divided by two (2); the resulting quotient shall
be the monthly Base Rent for the Premises during the Extension Term. If both the
low appraisal and the high appraisal are disregarded as stated in this Section,
the middle appraisal shall be the Fair Market Rent.

      18.3.4 Notice to Landlord and Tenant. After the Fair Market Rent has been
set, the appraisers immediately shall notify Landlord and Tenant, and Landlord
and Tenant immediately shall execute an amendment to the Lease stating the
monthly Base Rent.

19. MISCELLANEOUS.

      19.1 General.

            19.1.1 Entire Agreement. This Lease sets forth all the agreements
between Landlord and Tenant concerning the Premises; and there are no agreements
either oral or written other than as set forth herein.

            19.1.2 Time of Essence. Time is of the essence of this Lease.

            19.1.3 Attorneys' Fees. In any action which either party brings to
enforce its rights hereunder, the unsuccessful party shall pay all costs
incurred by the prevailing party including reasonable attorneys' fees, to be
fixed by the court, and said costs and attorneys' fees shall be a part of the
judgment in said action.

            19.1.4 Severable. If any provision of this Lease or the application
of any such provision shall be held by a court of competent jurisdiction to be
invalid, void or unenforceable to any extent, the remaining provisions of this
Lease and the application thereof shall remain in full force and effect and
shall not be affected, impaired or invalidated.

                                      32.
<PAGE>

            19.1.5 Law. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.

            19.1.6 No Option. Submission of this Lease to Tenant for examination
or negotiation does not constitute an option to lease, offer to lease or a
reservation of, or option for, the Premises; and this document shall become
effective and binding only upon the execution and delivery hereof by Landlord
and Tenant.

            19.1.7 Successors and Assigns. This Lease shall be binding upon and
inure to the benefit of the successors and assigns of Landlord and, to the
extent assignment is approved by Landlord, the successors and assigns of Tenant.

            19.1.8 Third Party Beneficiaries. Nothing herein is intended to
create any third party benefit.

            19.1.9 Memorandum of Lease. Tenant shall not record this Lease or a
short form memorandum hereof without Landlord's prior written consent.

            19.1.10 Agency, Partnership or Joint Venture. Nothing contained
herein shall be deemed or construed by the parties hereto, nor by any third
party, as creating the relationship of principal and agent or of partnership or
of joint venture by the parties hereto, it being understood and agreed that no
provision contained in this Lease or any acts of the parties hereto shall be
deemed to create any relationship other than the relationship of landlord and
tenant.

            19.1.11 Merger. The voluntary or other surrender of this Lease by
Tenant or a mutual cancellation thereof or a termination by Landlord shall not
work a merger and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.

            19.1.12 Waiver of Jury Trial. The parties hereto each waive trial by
jury in any action or other proceeding (including counterclaims), whether at law
or equity, brought by one party against the other on matters arising out of or
in any way related to or connected with this Lease.

      19.2 Signs. Tenant shall have the right, at its sole cost and expense, to
construct an exterior sign on the Building and in front of the entrance to the
Building, displaying its corporate name and logo. All signs and graphics of
every kind visible in or from public view or the exterior of the Premises shall
be subject to Landlord's prior written approval and shall be subject

                                      33.
<PAGE>

to (i) any applicable governmental laws, ordinances and regulations (ii) any
covenants, conditions and restrictions now or hereinafter recorded against the
Property and (iii) in compliance with the reasonable requirements of Landlord's
signage program. Tenant shall remove all such signs and graphics prior to the
termination of this Lease. Such installations and removals shall be made in such
manner as to avoid injury or defacement of the Premises; and Tenant shall repair
any injury or defacement, including without limitation, discoloration caused by
such installation or removal.

      19.3 Waiver. No waiver of any default or breach hereunder shall be implied
from any omission to take action on account thereof, notwithstanding any custom
and practice or course of dealing, and no waiver shall affect any default other
than the default specified in the waiver and then said waiver shall be operative
only for the time and to the extent therein stated. Waivers of any covenant
shall not be construed as a waiver of any subsequent breach of the same. No
waiver by either party of any provision under this Lease shall be effective
unless in writing and signed by such party.

      19.4 Financial Statements. Tenant shall provide to Landlord, Landlord's
lender or any potential purchaser of Landlord's interest in the Premises a copy
of Tenant's most recent audited financial statements, including income
statement, balance sheet and cash flow statement, and any quarterly statement if
available. Tenant's audited financial statements shall not be dated more than
eighteen (18) months prior to Landlord's request therefor.

      19.5 Limitation of Liability. The obligations of Landlord under this Lease
are not personal obligations of the individual partners, directors, officers,
shareholders, agents or employees of Landlord; and Tenant shall look solely to
the Premises for satisfaction of any liability and shall not look to other
assets of Landlord nor seek recourse against the assets of the individual
partners, directors, officers, shareholders, agents or employees of Landlord.
Whenever Landlord transfers its interest, Landlord shall be automatically
released from further performance under this Lease and from all further
liabilities and expenses hereunder provided that the transferee of Landlord's
interest shall assume in writing all liabilities and obligations of Landlord
hereunder (including those related to the Security Deposit) from the date of
such transfer.

      19.6 Notices. All notices to be given hereunder shall be in writing and
mailed postage prepaid by certified or registered mail, return receipt
requested, or delivered by personal or courier delivery, to Landlord's Address
and Tenant's Address, or to such other place as Landlord or Tenant may designate
in a

                                      34.
<PAGE>

written notice given to the other party. As long as Sepracor, Inc. is
guarantying the performance by Tenant of its obligations under this Lease,
Landlord shall deliver a copy of any notice sent to Tenant to Sepracor, Inc.,
111 Locke Drive, Marlborough, MA 01752; Attn: Chief Financial Officer. Notices
shall be deemed served upon the earlier of receipt or refusal of delivery.

      19.7 Brokerage Commission. Landlord shall pay a brokerage commission to
Brokers in accordance with a separate agreement between Landlord and Brokers.
Tenant warrants to Landlord that Tenant's sole contact with Landlord or with the
Premises in connection with this transaction has been directly with Landlord and
Brokers, and that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and
Tenant. Tenant and Landlord, respectively, shall each indemnify, defend by
counsel acceptable to the other, protect and hold each other harmless from and
against any loss, cost or expense, including, but not limited to, attorneys'
fees and costs, resulting from any claim for a fee or commission by any broker
or finder in connection with the Premises and this Lease other than Brokers.

      19.8 Authorization. Tenant shall furnish to Landlord, within ten (10) days
after written request, evidence satisfactory to Landlord that the person who
executed this Lease on behalf of Tenant was duly authorized to do so. Tenant
represents and warrants to Landlord that (i) Tenant has the full capacity and
authority to enter into this Lease and perform its obligations hereunder and
(ii) neither this Lease nor the transactions contemplated hereunder conflict
with or violate the provisions of any agreement to which Tenant is bound.

      19.9 Holding Over; Surrender.

            19.9.1 Hold Over. If Tenant holds over the Premises or any part
thereof after expiration of the Term, such holding over shall constitute a
month-to-month tenancy, at a rent equal to one hundred fifty percent (150%) of
the Base Rent in effect immediately prior to such holding over. This paragraph
shall not be construed as Landlord's permission for Tenant to hold over.
Acceptance of Rent by Landlord following expiration or termination shall not
constitute a renewal of this Lease.

            19.9.2 Surrender. Upon the termination of this Lease or Tenant's
right to possession of the Premises, Tenant will surrender the Premises,
together with all keys, in good condition and repair, reasonable wear and tear
excepted. Tenant shall remove all of Tenant's non-built-in equipment, trade
fixtures and personal property from the Premises prior to the expiration of this
Lease. In addition, upon expiration of this Lease, Tenant shall have the right
to remove any lab benches, fume hoods or

                                      35.
<PAGE>

cold rooms in the Premises that were paid for and installed by Tenant. In the
event this Lease is terminated as a result of Tenant's default of its
obligations hereunder, Tenant shall not have the right to remove any lab
benches, fume hoods or cold rooms from the Premises, and the lab benches, fume
hoods and cold rooms shall remain part of the Premises and the property of
Landlord, except to the extent the lab benches, fume hoods or cold rooms are
pledged as security for a loan or equipment financing entered into by the Tenant
as provided in Section 19.13. Tenant shall repair any damage caused to the
Premises as a result of Tenant's removal of its equipment, trade fixtures and
personal property. Conditions existing because of Tenant's failure to perform
maintenance, repairs or replacements shall not be deemed "reasonable wear and
tear."

      19.10 Joint and Several. If Tenant consists of more than one person, the
obligation of all such persons shall be joint and several.

      19.11 Covenants and Conditions. Each provision to be performed by Tenant
hereunder shall be deemed to be both a covenant and a condition.

      19.12 Quiet Enjoyment. So long as no Event of Default exists hereunder,
Tenant's enjoyment of the Premises shall not be disturbed, hindered or molested
by Landlord in any manner.

      19.13 Financing of Equipment and Personal Property.

            19.13.1 Non-Built-In Equipment and Personal Property. Tenant shall
have the right to pledge as security for any loan or financing agreement entered
into by Tenant all or any portion of Tenant's interest in Tenant's personal
property or non-built-in equipment located on or in the Premises (collectively,
"Tenant's Personal Property"). Landlord agrees to subordinate to Tenant's lender
or equipment lenders (collectively, "Tenant's Lender") all of Landlord's right,
title and interest in and to Tenant's Personal Property, subject to the terms
and conditions set forth in Section 19.13.3. Landlord shall execute and deliver
to Tenant a written subordination of Landlord's interest in Tenant's Personal
Property, subject to the conditions contained herein, within fourteen (14) days
after Tenant's written request therefor.

            19.13.2 Built-In Equipment. Tenant shall have the right to pledge as
security for any loan or financing agreement entered into by Tenant its interest
in the lab benches, fume hoods and cold rooms constructed in or on the Premises
(collectively, the "Built-In Equipment") as provided herein. The initial cost of
the Built-In Equipment pledged by Tenant as security for any loan or financing
agreement entered into by

                                      36.
<PAGE>

Tenant may not exceed the lesser of (i) the total amount expended by Tenant for
Tenant Improvements (excluding the Tenant Improvements paid for out of the
Tenant Improvement Allowance and all trade fixtures, furniture, furnishings,
non-built-in equipment, and any other personal property of Tenant) multiplied by
fifteen percent (15%) or (ii) One Million Dollars ($1,000,000.00). Landlord
agrees to subordinate to Tenant's Lender all of Landlord's right, title and
interest in and to the Built-In Equipment encumbered by Tenant as provided in
this section, subject to the terms and conditions set forth in Section 19.13.3.
Landlord shall execute and deliver to Tenant a written subordination of
Landlord's interest in the Built-In Equipment, subject to the conditions
contained herein, within fourteen (14) days after Tenant's written request
therefor.

            19.13.3 Conditions to Landlord's Subordination. Landlord shall
subordinate to Tenant's Lender all of Landlord's right, title and interest in
and to Tenant's Personal Property and the Built-In Equipment provided that each
of the following conditions are met:

                  19.13.3.1 Tenant's Personal Property. With respect to
Landlord's subordination of its interest in Tenant's Personal Property, Tenant's
Lender agrees in writing that:

                        (a) Tenant's Lender shall notify Landlord in writing of
any default by Tenant under the terms of its loan or financing agreement;

                        (b) Tenant's Lender shall provide Landlord with not less
than ten (10) days' prior written notice of its intent to enter the Premises and
remove its collateral;

                        (c) Tenant's Lender shall enter the Premises only when
accompanied by a representative of Landlord;

                        (d) Tenant's Lender shall not commit, or permit to be
committed, any structural damage to the Premises or any improvement of which the
Premises are a part in removing any collateral from the Premises;

                        (e) Tenant's Lender shall immediately repair any damage
to the Premises caused by Tenant's Lender's removal of its collateral and
restore the Premises to its condition existing immediately prior to the
installation of the collateral removed by Tenant's Lender;

                        (f) Tenant shall advise Landlord in writing within
twenty (20) days after the expiration or earlier termination of the loan or
financing arrangement between Tenant's Lender and Tenant; and

                                      37.
<PAGE>

                        (g) Tenant's Lender shall indemnify, protect, defend by
counsel satisfactory to Landlord and hold harmless Landlord from and against all
claims, costs, expenses and liabilities (including reasonable attorneys' fees)
incurred in connection with all claims arising from or as a result of the death
of or any accident, injury, loss or damage whatsoever caused to any person or to
the property of any person as shall occur on the Premises as a result of any
action taken by Tenant's Lender in entering the Premises and removing its
collateral.

                  19.13.3.2 Built-In Equipment. With respect to Landlord's
subordination of its interest in the Built-In Equipment,

                        (a) All of the conditions set forth in Section 19.13.3.1
(a) through (g) have been met for the Built-In Equipment;

                        (b) Tenant provides Landlord with a detailed list of the
Built-In Equipment pledged as security for Tenant's loan or financing agreement,
a diagram indicating locations thereof, and an itemized cost breakdown with
supporting invoices; and

                        (c) Tenant shall request the inclusion of the following
provisions within any financial document with Tenant's Lender and employ
reasonable efforts to obtain Tenant's Lender's agreement to same.

                              (i) Tenant's Lender shall not exercise any remedy
to which Tenant's Lender is entitled under its loan or financing agreement with
Tenant for a period of ninety (90) days after written notice to Landlord of
Tenant's default thereunder;

                              (ii) In the event Tenant defaults under its loan
or financing agreement with Tenant's Lender, Landlord shall have the right to
(i) cure Tenant's default and assume all of Tenant's rights and obligations
under the loan or financing agreement provided the creditworthiness of Landlord
is approved by Tenant's Lender and (ii) assign to any third party all of
Landlord's rights and obligations under the loan or financing agreement provided
that the assignee meets Tenant's Lender's commercial credit standards for
similar transactions (whereupon Tenant's Lender shall release Landlord from any
further liability under the loan or financing agreement); and

                              (iii) Landlord shall have an option to purchase
the collateral from Tenant's Lender following a default by Tenant on its loan or
financing agreement. The purchase price of the collateral shall be an amount
equal to the

                                      38.
<PAGE>

net amount Tenant's Lender would realize from the repossession and sale of the
collateral after deducting the estimated cost of repossession, removing,
transporting and selling the collateral (including the cost of any estimated
repairs that would have to be made to the Premises as a result of Tenant's
Lender's removal of the collateral.) Landlord shall be required to exercise such
option by written notice to Tenant's Lender at any time prior to Tenant's
Lender's removal of the collateral from the Premises.

            Landlord acknowledges and agrees that Tenant's sole obligation under
this Section 19.3.3.2(c) is to request the inclusion of the above provisions and
employ reasonable efforts to obtain Tenant's Lender's agreement to the same.

            IN WITNESS WHEREOF, the parties have executed this Lease as of the
date set forth above.

                                       "Landlord"

                                       ARCADIA-TAVISTOCK, L.C., a Virginia
                                       limited liability company, doing
                                       business as Arcadia-Tavistock, LLC
                                       By: ARCADIA BUILDING COMPANY, MANAGER

                                       By: /s/ Eli Reinhard
                                           -------------------------------------
                                           Name: Eli Reinhard
                                           Its: Secretary

                                       "Tenant"

                                       VERSICOR, INC., a Delaware
                                       corporation

                                       By: /s/ Timothy J. Barberich
                                           -------------------------------------
                                           Name: Timothy J. Barberich
                                           Its: Chairman

                                      39.
<PAGE>

                                    EXHIBIT A

                                    PROPERTY

Real Property in the City of Fremont, County of Alameda, State of California,
described ~ follows:

PARCEL ONE:

Parcel 3 Parcel Map 6773, filed December 16, 1994, Map Book 216, Pages 19 and
20, Alameda County Records.

A.P. Nos. 543-0439-143

PARCEL TWO:

A non-exclusive easement for underground storm drainage pipelines to Convey
storm drainage runoff water as granted by TriNet Essential Facilities X, Inc., a
Maryland corporation in that certain Drainage Easement Agreement recorded
September 20, 1996, Series No. 96238192, as more particularly described as
follows:

Being a portion of Parcel 2 as said parcel is shown upon that certain Parcel Map
6773, filed on December 16, 1994, in Book 216 of Maps, at Pages 19-20, Alameda
County Records, and being more particularly described as follows:

Being a strip of land 10 feet in width, the centerline of said strip being
described as follows:

Commencing at the Westernmost comer of said Parcel 2 said point also being on
the Northeasterly right of way line of Dumbarton Circle (78.00 feet wide) as
shown upon said map;

Thence along said Northeasterly right of way line and along the arc of a 313.00
foot curve to the right whose center point bears South 24(degree) 13' 22" West,
through a central angle of 11(degree) 23' 21", an arc distance of 62.22 feet to
the true point of beginning;

Thence departing said Northeasterly right of way line, North 35(degree)40' 25"
West, 25.91 feet;

Thence North 09(degree)22' 07" East, 98.34 feet;

Thence North 37(degree) 59' 10" East, 183.67 feet to the general Northeasterly
line of said parcel and the terminus of said strip being described.

The sidelines of said 10 foot wide strip shall be lengthened or shortened so as
to terminate on the Southwest at said Northeasterly right of way line and on the
Northeast at said genera/Northeasterly line of said Parcel 2.

<PAGE>

                                    EXHIBIT B

                                   WORK LETTER

      This Work Letter sets forth Landlord's and Tenant's responsibilities,
respectively, for the construction of the Premises.

      I. Defined Terms. Unless provided to the contrary herein, the following
defined terms shall have the meanings set forth below and the remaining defined
terms shall have the meanings set forth in the Lease:

      Landlord's Representative:  Michael E. Tamas

      Tenant's Representative:    ________________________________________

      Tenant Improvement
      Allowance:                  One Million One Hundred
                                  Thousand Dollars
                                  ($1,100,000.00).

      II. Landlord's Work.

            A. Building Shell. Landlord, at its sole cost and expense, shall
arrange for the construction by Landlord's contractor ("Landlord's Contractor")
of (i) a single-story building (the "Building Shell") of concrete "tilt-up"
construction, consisting of approximately fifty-five thousand four hundred
forty-two (55,442) rentable square feet of space, in accordance with plans to be
prepared by Landlord, as more particularly described in Exhibit B-1 attached
hereto and incorporated herein by reference, and (ii) a parking lot (the
"Parking Lot") located on the Property, containing not less than two hundred ten
(210) parking spaces. The construction of the Building Shell and the Parking Lot
is hereinafter referred to as "Landlord's Work."

            B. Additional Costs. Landlord shall pay for all fees incurred in
connection with the construction of the Building Shell and the Parking Lot,
including architectural, engineering, consultant, utility, loan, development,
transaction and building permit and impact fees. Tenant shall pay any and all
costs incurred in connection with the design, permitting and construction of the
Tenant Improvements (defined below), including architectural, engineering,
consultant, utility, loan, development, transaction and building permit and
impact fees (subject to Landlord's obligation to provide the Tenant Improvement
Allowance as set forth below), and all trade fixtures, equipment, furniture or
other improvements installed by

                                       1.
<PAGE>

Tenant in the Premises. In addition, Tenant shall pay to Landlord within ten
(10) days of Landlord's written request therefor Landlord's reasonable estimate
of any additional costs that Landlord reasonably estimates it will incur in
connection with the construction of the Building Shell as a result of any
changes to the Building Shell requested by Tenant and approved by Landlord.

            C. Delivery Condition. The Premises shall be in "Delivery Condition"
when the Building Shell is "Substantially Complete" and Landlord delivers
possession of the Premises to Tenant. The Building Shell shall be deemed
"Substantially Complete" when (i) Landlord's Contractor has substantially
completed the Building Shell, even though minor items may remain to be
installed, finished or corrected, provided such minor items do not have any
material effect on the ability of Tenant to utilize the Building Shell for its
intended purpose and (ii) Landlord delivers to Tenant a certificate from
Landlord's architect ("Landlord's Architect"), certifying (a) that the Building
Shell is "Substantially Complete" in accordance with the terms of this Work
Letter and (b) the date on which the Building Shell was Substantially Completed.
Landlord shall use diligent efforts to obtain and furnish Tenant with a
"finaled" building permit with respect to the Building Shell after completing
the Building Shell. Substantial Completion shall have occurred notwithstanding
Tenant's submission of a punchlist to Landlord, which Tenant and Landlord shall
develop jointly within thirty (30) days after the Commencement Date. The
punchlist shall be based upon an inspection of the Premises by Landlord's
Representative and Tenant's Representative. Landlord shall commence and use
commercially reasonable efforts to complete any items of Landlord's Work not
completed as of the Commencement Date within ninety (90) days after the
Commencement Date.

            D. Warranty. Upon written request from Tenant, Landlord shall assign
to Tenant all of Landlord's rights under any warranty received from Landlord's
Contractor with respect to the construction of the Building Shell.

      III. Tenant Improvements.

            A. Tenant Improvements.

                  1. Description of Improvements. Tenant shall construct or
cause Tenant's Contractor (defined below) to construct in the Building (i)
general purpose administrative improvements (the "Office Improvements") covering
approximately ten thousand (10,000) rentable square feet of space in the
Building (including restroom facilities sufficient to accommodate a Building
containing up to two hundred twenty (220) occupants), (ii) laboratory
improvements (the "Laboratory Improvements")

                                       2.
<PAGE>

covering approximately thirty-five thousand (35,000) rentable square feet of
space in the Building and (c) shipping/receiving and service area improvements
(the "Service Area Improvements") covering approximately ten thousand (10,000)
rentable square feet of space in the Building. The Office Improvements shall
conform to the outline specifications (the "Outline Specifications") described
in Exhibit B-2 attached hereto and incorporated herein by reference. The
Laboratory Improvements shall conform to the Outline Specifications with the
following additions: (i) the flooring may be a seamless synthetic flooring, and
(ii) the Laboratory Improvements may include special improvements such as
laboratory cabinetry, exhaust hoods and laboratory plumbing, including air,
vacuum, natural gas, deionized water, neutralization and fused PVC industrial
waste. The Service Area Improvements may include (i) an open ceiling to the
underside of the roof of the Building, (ii) lighting fixtures commonly used with
such an application and (iii) sealed concrete flooring. The Office Improvements,
the Laboratory Improvements and the Service Area Improvements are collectively
referred to as the "Tenant Improvements." The design, permitting and
construction of the Tenant Improvements is hereinafter referred to as "Tenant's
Work."

                  2. Construction Phases. Tenant shall construct or cause
Tenant's contractor to construct the Tenant Improvements in not more than three
(3) phases. The first phase of construction is referred to as the "Phase 1
Construction". The remaining phases of construction are referred to as the
"Remaining Construction Phases". The Phase i Construction shall consist of the
construction of Tenant Improvements (the "Phase 1 Tenant Improvements") in
thirty thousand (30,000) or more rentable square feet of space in the Building.
The Remaining Construction Phases shall consist of the construction of Tenant
Improvements (the "Remaining Tenant Improvements") in the remainder of the
rentable space in the Building (i.e., the rentable space in the Building that
was not improved by Tenant during the Phase 1 Construction). The Phase 1
Construction and the Remaining Construction Phases must be completed by the time
limit set forth in Section IV below.

            B. Tenant's Architect and Contractor. Prior to commencing Tenant's
Work, Tenant shall obtain Landlord's prior written consent to Tenant's architect
and contractor. Landlord shall not unreasonably withhold its approval of any
architect or contractor selected by Tenant. Tenant's architect and contractor
must each be licensed to do business in California. The architect and the
contractor selected by Tenant and approved by Landlord (as provided above) are
hereinafter referred to as "Tenant's Architect" and "Tenant's Contractor,"
respectively.

                                       3.
<PAGE>

            C. Phase 1 Construction.

                  1. Phase 1 Preliminary Plans. Tenant shall submit to Landlord
preliminary plans and specifications (the "Phase 1 Preliminary Plans") for the
construction of the Phase 1 Tenant Improvements on or prior to the date set
forth in Section IV below. Tenant shall deliver to Landlord any information
reasonably requested by Landlord in connection with the preparation of the Phase
1 Preliminary Plans within five (5) days after Landlord's request therefor.
Landlord shall approve or disapprove of the Phase 1 Preliminary Plans by written
notice to Tenant within twenty (20) days after Landlord's receipt of the Phase 1
Preliminary Plans. If Landlord fails to approve or disapprove of the Phase 1
Preliminary Plans within twenty (20) days after Landlord's receipt of the Phase
1 Preliminary Plans, Landlord shall be deemed to have approved the Phase 1
Preliminary Plans. If Landlord disapproves of the Phase 1 Preliminary Plans,
Tenant shall revise the Phase 1 Preliminary Plans to address Landlord's comments
and proposed changes thereto and resubmit the Phase 1 Preliminary Plans to
Landlord for its review and approval within fifteen (15) days in accordance with
the procedure provided above. The Phase 1 Preliminary Plans approved by Landlord
are hereinafter refereed to as the "Approved Phase 1 Preliminary Plans."

                  2. Phase 1 Working Drawings. Upon Landlord's approval of the
Phase 1 Preliminary Plans, Tenant shall (i) arrange for Tenant's Architect to
prepare working drawings and specifications, including architectural,
mechanical, electrical, plumbing and other shop drawings, (the "Phase 1 Working
Drawings"), for the Phase 1 Tenant Improvements based on the Approved Phase 1
Preliminary Plans and (ii) deliver to Landlord a copy of the Phase 1 Working
Drawings. Landlord shall approve or disapprove of the Phase 1 Working Drawings
by written notice to Tenant within twenty (20) days after Landlord's receipt of
the Phase 1 Working Drawings. Landlord shall provide sufficient information to
Tenant so that Tenant may revise the Phase 1 Working Drawings if Landlord
disapproves of the Phase 1 Working Drawings. If Landlord fails to approve or
disapprove of the Phase 1 Working Drawings within twenty (20) days after
Landlord's receipt of the Phase 1 Working Drawings, Landlord shall be deemed to
have approved the Phase 1 Working Drawings. If Landlord disapproves of the Phase
1 Working Drawings, Tenant shall revise the Phase 1 Working Drawings to address
Landlord's comments and proposed changes thereto and resubmit the revised Phase
1 Working Drawings to Landlord for its review and approval within fifteen (15)
days in accordance with the procedure provided above. The Phase 1 Working
Drawings approved by Landlord are hereinafter referred to as the "Approved Phase
1 Working Drawings."

                                       4.
<PAGE>

                  3. Changes. Tenant may not make any material changes to the
Approved Phase 1 Working Drawings without Landlord's prior written approval,
which approval shall not be unreasonably withheld or delayed. All material
changes to the Approved Phase 1 Working Drawings must be in writing and signed
by both Landlord and Tenant prior to the change being made. Tenant shall be
responsible for all additional costs attributable to changes to the Approved
Phase 1 Working Drawings requested by Tenant, including, without limitation,
additional architectural fees and increases in construction costs of the
Building Shell or the Phase 1 Tenant Improvements.

                  4. Phase 1 Construction. Tenant shall use diligent efforts to
cause Tenant's Contractor to construct the Phase 1 Tenant Improvements in a good
and workmanlike manner by the date set forth in Section IV below.

            D. Remaining Construction Phases

                  1. Additional Preliminary Plans. Tenant shall submit to
Landlord preliminary plans and specifications (the "Additional Phase Preliminary
Plans") with respect to the Remaining Tenant Improvements to be constructed
during the next phase of construction prior to commencing construction. In
addition, Tenant shall deliver to Landlord any information reasonably requested
by Landlord in connection with the preparation of the Additional Phase
Preliminary Plans within five (5) days after Landlord's request therefor.
Landlord shall approve or disapprove of the Additional Phase Preliminary Plans
by written notice to Tenant within twenty (20) days after Landlord's receipt of
the Additional Phase Preliminary Plans. If Landlord fails to approve or
disapprove of the Additional Phase Preliminary Plans within twenty (20) days
after Landlord's receipt of the Additional Phase Preliminary Plans, Landlord
shall be deemed to have approved the Additional Phase Preliminary Plans. If
Landlord disapproves of the Additional Phase Preliminary Plans, Tenant shall
revise the Additional Phase Preliminary Plans to address Landlord's comments and
proposed changes thereto and resubmit the Additional Phase Preliminary Plans to
Landlord for Landlord's review and approval within fifteen (15) days in
accordance with the procedure provided above. The Additional Phase Preliminary
Plans approved by Landlord are hereinafter refereed to as the "Approved
Additional Phase Preliminary Plans."

                  2. Additional Phase Working Drawings. Upon Landlord's approval
of the Additional Phase Preliminary Plans, Tenant shall (i) arrange for
Architect to prepare working drawings and specifications, including
architectural, mechanical, electrical, plumbing and other shop drawings (the
"Additional Phase Working Drawings"), for the Remaining Tenant Improvements

                                       5.
<PAGE>

based on the Approved Additional Phase Preliminary Plans and (ii) deliver to
Landlord a copy of the Additional Phase Working Drawings. Landlord shall approve
or disapprove of the Additional Phase Working Drawings by written notice to
Tenant within twenty (20) days after Landlord's receipt of the Additional Phase
Working Drawings. Landlord shall provide sufficient information to Tenant so
that Tenant may revise the Additional Phase Working Drawings if Landlord
disapproves of the Additional Phase Working Drawings. If Landlord fails to
approve or disapprove of the Additional Phase Working Drawings within twenty
(20) days after Landlord's receipt of the Additional Phase Working Drawings,
Landlord shall be deemed to have approved the Additional Phase Working Drawings.
If Landlord disapproves of the Additional Phase Working Drawings, Tenant shall
revise the Additional Phase Working Drawings to address Landlord's comments and
proposed changes thereto and resubmit the revised Additional Phase Working
Drawings to Landlord for its review and approval within fifteen (15) days in
accordance with the procedure provided above. The Additional Phase Working
Drawings approved by Landlord are hereinafter referred to as the "Approved
Additional Phase Working Drawings."

                  3. Changes. Tenant may not make any material changes to the
Approved Additional Phase Working Drawings without Landlord's prior written
approval, which approval shall not be unreasonably withheld or delayed. All
material changes to the Approved Additional Phase Working Drawings must be in
writing and signed by both Landlord and Tenant prior to the change being made.
Tenant shall be responsible for all additional costs attributable to changes
requested by Tenant, including, without limitation, additional architectural
fees and increases in construction costs of the Building Shell or the Remaining
Tenant Improvements.

                  4. Construction. Tenant shall use diligent efforts to cause
Tenant's Contractor to construct the Remaining Tenant Improvements in a good and
workmanlike manner by the date set forth in Section IV below.

            E. Notice. Tenant shall provide Landlord with not less than ten (10)
days' prior written notice prior to the commencement of any Tenant's Work and
permit Landlord to post on the Premises such notices of nonresponsibility as may
be required or otherwise available to Landlord. Landlord, at its option, may
require Tenant to provide to Landlord, at Tenant's sole cost and expense, a lien
and completion bond in an amount equal to the estimated cost of the Tenant
Improvements (as reasonably determined by Landlord) to insure Landlord against
liability for mechanics' and materialmen's liens and to insure completion of the
Tenant Improvements.

                                       6.
<PAGE>

            F. Costs. Tenant shall promptly pay any and all costs and expenses
in connection with or arising out of Tenant's Work and shall furnish to Landlord
evidence of such payment upon request. Upon completion of Tenant's Work, Tenant
shall deliver to Landlord a release and waiver of lien executed by each
contractor, subcontractor and materialman concerned with Tenant's Work. In the
event any lien is filed against the Premises or any portion thereof or against
Tenant's leasehold interest therein, Tenant shall record in the Official Records
of Alameda County a release bond executed by an admitted surety insurer
authorized to issue surety bonds in the State of California with respect to the
lien or shall obtain the release and/or discharge of the lien within seven (7)
days after the filing thereof. In the event Tenant fails to do so, Landlord may,
after notice to Tenant, obtain the release and/or discharge of the lien and
Tenant shall indemnify Landlord for the costs thereof, including reasonable
attorneys' fees, together with interest at the Applicable Interest Rate form the
date of demand.

            G. Indemnity. Tenant shall indemnify, protect, defend (with counsel
satisfactory to Landlord) and hold harmless Landlord and its officers,
directors, employees, shareholders, partners and members from and against any
and all suits, claims, actions, loss, costs or expense (including claims for
workers' compensation, attorneys' fees and costs) based on personal injury or
property damage caused in, or contract claims (including, claims for breach of
warranty) arising from, the performance of Tenant's Work. Tenant shall repair or
replace any portion of the Building or item of Landlord's equipment or
Landlord's Contractor's equipment or any of Landlord's real or personal property
damaged, lost or destroyed in the performance of Tenant's Work.

            H. Insurance. Within fifteen (15) days after the approval of
Tenant's Contractor, Tenant and Tenant's Contractor shall obtain and provide
Landlord with certificates evidencing workers' compensation, public liability
and property damage insurance in amounts and forms and with companies
satisfactory to Landlord.

      IV. Time Limits. The following maximum time limits and periods shall be
allowed for the indicated matters:

                                                       Time Limit After
                Action                           Completion of Preceding Item
                ------                           ----------------------------
o   Tenant submits Phase 1
    Preliminary Plans to
    Landlord for approval                        January 2, 1997

                                       7.
<PAGE>

                                                       Time Limit After
                Action                           Completion of Preceding Item
                ------                           ----------------------------
o   Landlord approves or                Within twenty (20) days after Landlord's
    disapproves of Phase 1              receipt of the Phase 1 Preliminary Plans
    Preliminary Plans
o   Landlord approves or                Within twenty (20) days after Landlord's
    disapproves of Phase 1              receipt of the Phase 1 Preliminary Plans
    Preliminary Plans
o   Tenant submits Phase 1              Within twenty (20) days after Landlord's
    Working Drawings to                 approval of the Phase 1 Preliminary
    Landlord for approval               Plans
o   Landlord approves or                Within twenty (20) days after Landlord's
    disapproves of Phase 1              receipt of the Phase 1 Working Drawings
    Working Drawings
o   Building permit is issued for       Within twenty (20) days after Landlord's
    Phase 1 Tenant Improvements         approval of the Phase 1 Working Drawings
o   Construction of the Phase 1         Within six (6) months after the
    Tenant Improvements is completed    Commencement Date
o   Tenant submits Additional           On or before such date as is reasonably
    Phase Preliminary Plans to          necessary in order for Tenant to be able
    Landlord for approval               to complete all of the Remaining Tenant
                                        Improvements by the end of the fifth
                                        (5th) year of the Term.
o   Landlord approves or                Within twenty (20) days after Landlord's
    disapproves of Additional Phase     receipt of the Additional Phase
    Preliminary Plans                   Preliminary Plans
o   Tenant submits Additional           Within twenty (20) days after Landlord's
    Phase Working Drawings to Landlord  approval of the Additional Phase
    for approval                        Preliminary Plans
o   Landlord approves or                Within twenty (20) days after Landlord's
    disapproves of Additional Phase     receipt of the Additional Phase Working
    Working Drawings                    Drawings
o   Building permit is issued for       Within twenty (20) days after Landlord's
    Remaining Tenant Improvements       approval of the Additional Phase Working
                                        Drawings
o   Construction of all of the          Within five (5) years after the
    Remaining Tenant Improvements is    Commencement Date.
    completed.

                                       8.
<PAGE>

      V. Cooperation. Landlord and Tenant shall cooperate and diligently assist
(i) Landlord's Architect in completing the preliminary plans and working
drawings and specifications for the Building Shell and the Parking Lot, (ii)
Landlord's Contractor in completing the Building Shell and Parking Lot, (iii)
Tenant's Architect in completing the Phase 1 Preliminary Plans, the Phase 1
Working Drawings, the Additional Phase Preliminary Plans and the Additional
Phase Working Drawings and (iv) Tenant's Contractor in completing the Tenant
Improvements. Tenant shall not interfere with Landlord's construction of the
Building Shell and the Parking Lot in constructing the Tenant Improvements.

      VI. Tenant Improvement Allowance.

            A. Allowance. Landlord shall pay to Tenant upon the terms and
conditions set forth below a tenant improvement allowance (the "Tenant
Improvement Allowance") in the amount of One Million One Hundred Thousand
Dollars ($1,100,000.00). The amount of the Tenant Improvement Allowance paid by
Landlord to Tenant with respect to the Phase 1 Construction and the Remaining
Construction Phases shall not exceed thirty-three percent (33%) of Tenant's
actual expenses for Tenant Improvement Allowance Items (defined below) incurred
in connection with the applicable phase of construction. Tenant agrees to expend
at least Two Million Two Hundred Thousand Dollars ($2,200,000.00) in the
Building (in addition to the Tenant Improvement Allowance) for Tenant
Improvement Allowance Items in connection with the construction of the Tenant
Improvements.

            B. Tenant Improvement Allowance Items. The term "Tenant Improvement
Allowance Items" shall include work performed and materials furnished in
connection with the construction of the Tenant Improvements by Tenant pursuant
to this Work Letter. Tenant Improvement Allowances Items shall not include trade
fixtures, furniture, furnishings, equipment (except electrical, mechanical and
plumbing systems, including HVAC systems), equipment which is leased or pledged
as security, decorations, signs, inventory or other personal property, or
interest or financing costs, or design, engineering, architectural, utility and
permit fees, administrative or overhead costs and expenses paid or incurred by
Tenant in connection with the Tenant Improvements.

            C. Payment of Tenant Improvement Allowance. Landlord shall pay the
Tenant Improvement Allowance for the Phase 1 Construction to Tenant in two (2)
installments. Landlord shall pay the first installment of the Tenant Improvement
Allowance to Tenant when the Phase 1 Construction is fifty percent (50%)
complete and the second installment of the Tenant Improvement Allowance to
Tenant when the Phase 1 Construction is one hundred percent (100%) complete, as
provided below. Landlord shall pay

                                       9.
<PAGE>

the remaining Tenant Improvement Allowance for the Remaining Construction Phases
upon completion of each phase of construction as provided below. Landlord shall
pay each installment of the Tenant Improvement Allowance to Tenant within thirty
(30) days after Landlord receives from Tenant its written request therefor,
provided that (i) Tenant has completed the Phase 1 Tenant Improvements (or fifty
percent (50%) thereof, as applicable) or Tenant has completed the Remaining
Tenant Improvements which were to be completed during the applicable phase of
construction, as applicable, in accordance with this Work Letter, (ii) Tenant is
not in default under the terms of this Lease after the expiration of all
applicable grace or cure periods and (iii) Tenant's written request is
accompanied by the following: (1) copies of invoices paid by Tenant for Tenant
Improvement Allowance Items for the applicable phase of construction in an
amount equal to three hundred percent (300%) of the amount requested by Tenant,
(2) unconditional lien waivers from Tenant's Contractor and all subcontractors,
materialmen and suppliers that have performed work or supplied materials for
work performed and materials installed by or for Tenant prior to the date of
Tenant's request, (3) a certificate from Tenant's Architect identifying the
Tenant Improvements and Tenant Improvement Allowance Items (or portion thereof
in the event of payment of the first installment of the Tenant Improvement
Allowance for the Phase 1 Construction) that have been completed and certifying
that those Tenant Improvements and Tenant Improvement Allowance Items (or
portion thereof in the event of payment of the first installment of the Tenant
Improvement Allowance for the Phase 1 Construction) have been completed, (4) a
certificate from Tenant's construction manager certifying that the applicable
Tenant Improvements and Tenant Improvement Allowance Items (or portion thereof
in the event of payment of the first installment of the Tenant Improvement
Allowance for the Phase 1 Construction) have been completed, (5) following the
completion of each phase of construction, a copy of the "finaled" building
permit with respect to the Tenant Improvements that have been completed and a
certificate of occupancy for the Premises.

            D. Allocation of Tenant Improvement Allowance

                  1. Allocation Amonq Construction Phases. The Tenant
Improvement Allowance shall be allocated among the Phase 1 Construction and the
Remaining Construction Phases based on the proportionate amount of rentable
square footage of space in the Building which is improved by Tenant during the
applicable construction phase. For example, if Tenant constructs the Phase 1
Tenant Improvements and otherwise improves thirty thousand (30,000) rentable
square feet of space in the Building Shell during the Phase 1 Construction (and
the entire Building Shell consists of fifty-five thousand four hundred forty-two
(55,442) rentable square feet of space), then Five Hundred

                                      10.
<PAGE>

Ninety-Five Thousand Two Hundred Ten Dollars ($595,210.00) or fifty-four and
11/100ths percent (54.11%) of the Tenant Improvement Allowance shall be
allocated to the Phase 1 Construction and Five Hundred Four Thousand Seven
Hundred Ninety Dollars ($504,790.00) or forty-five and 89/100ths percent
(45.89%) of the Tenant Improvement Allowance shall be allocated to the Remaining
Construction Phases.

                  2. Credit Towards Remaining Construction Phase. Tenant may not
use more than the proportionate share of the Tenant Improvement Allowance
allocated to the Phase 1 Construction in connection with the construction of the
Phase 1 Tenant Improvements. If Tenant does not use the entire portion of the
Tenant Improvement Allowance allocated to the Phase 1 Construction for the
construction of the Phase 1 Tenant Improvements, Tenant may apply the unused
portion to the Tenant Improvement Allowance toward the construction of the
Remaining Tenant Improvements during the Remaining Construction Phases. Tenant
shall not be entitled to a credit against Rent or to receive a cash or other
payment if Tenant does not use the entire portion of the Tenant Improvement
Allowance in connection with the construction of the Tenant Improvements during
the Phase 1 Construction and the Remaining Construction Phases. In addition,
Tenant may not use any portion of the Tenant Improvement Allowance to pay for
any Tenant Improvements constructed after the fifth (5th) year of the Term.

      VII. Tenant Delays. If Landlord fails to deliver the Premises to Tenant in
Delivery Condition on or before the Estimated Shell Delivery Date, or
thereafter, and if the cause of the delay in Landlord delivering the Premises to
Tenant in Delivery Condition by the Estimated Shell Delivery Date, or
thereafter, is attributable to Tenant, then the Commencement Date for all
purposes under the Lease will be the day on which the Premises would have been
in Delivery Condition absent such Tenant Delays (defined below). Delays
attributable to Tenant ("Tenant Delays") shall include any interference with or
delay in the completion of Landlord's Work caused by Tenant, Tenant's Architect,
Tenant's Contractor or any representative, employee, agent or subcontractor of
any of the aforementioned parties or attributable to Tenant's early entry in the
Premises or failure to perform its obligations under this Lease.

      VIII. Force Majeure. Whenever a period of time or a specific date is
herein prescribed for action to be taken by Landlord or Tenant (other than
Tenant's obligation to pay Rent and complete the Remaining Tenant Improvements),
neither Landlord nor Tenant shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time (or the
specified date shall be deferred by the number of days of) any delays in the
obtaining of any permits for and in

                                      11.
<PAGE>

the construction of the Building Shell, the Parking Lot or the Tenant
Improvements caused by any unforeseeable action, claim, inaction, order, ruling,
moratorium, regulation, statute, condition or other decision of any governmental
agency having jurisdiction over any portion of the Premises, over the
construction anticipated to occur thereon or over any uses thereof or by fire,
flood, inclement weather, strikes, lockouts or other labor or industrial
disturbance (whether or not on the part of agents or employees of either party
hereto engaged in the construction of the Building Shell, the Parking Lot or the
Tenant Improvements), civil disturbance, order of any government, court or
regulatory body claiming jurisdiction or otherwise, act of public enemy, war,
riot, sabotage, blockade, embargo, unforeseeable failure or inability to secure
materials, supplies or labor through ordinary sources by reason of shortages or
priority or similar regulation, order of any government or regulatory body,
lightning, earthquake, storm, hurricane, tornado, washout, explosion or any
cause whatsoever beyond the reasonable control of the party where performance is
required, or any of its contractors or other representatives, whether or not
similar to any of the causes hereinabove stated. Notwithstanding the foregoing,
the parties shall use diligent efforts to perform, by alternative means if
commercially reasonable, those obligations the performance of which is hindered
on account of an event of force majeure.

      IX. Representatives.

            A. Tenant's Representative. Tenant has designated Tenant's
Representative as its sole representative with respect to the matters set forth
in this Work Letter, who shall have full authority and responsibility to act on
behalf of the Tenant as required in this Work Letter. Tenant shall not change
the Tenant's Representative without notice to Landlord.

            B. Landlord's Representative. Landlord has designated Landlord's
Representative as its sole representative with respect to the matters set forth
in this Work Letter, who shall have full authority and responsibility to act on
behalf of Landlord as required in this Work Letter. Landlord shall not change
Landlord's Representative without notice to Tenant.

      X. No Representations or Warranties. Notwithstanding anything to the
contrary contained in the Lease or this Work Letter, Landlord's participation in
the preparation of the Approved Phase 1 Preliminary Plans, the Approved
Additional Phase Preliminary Plans, the Approved Phase I Working Drawings and
the Approved Additional Phase Working Drawings and the construction of the
Tenant Improvements shall not constitute any representation or warranty, express
or implied, that (i) the Approved Phase 1 Preliminary Plans, the Approved
Additional Phase

                                      12.
<PAGE>

Preliminary Plans, the Approved Phase 1 Working Drawings and the Approved
Additional Phase Working Drawings are in conformity with applicable governmental
codes, regulations or rules or (ii) the Tenant Improvements, if built in
accordance with the Approved Phase 1 Working Drawings and the Approved
Additional Phase Working Drawings, will be suitable for Tenant's intended
purpose. Tenant acknowledges and agrees that the Premises is intended for use by
Tenant and the specification and design requirements for the Tenant Improvements
are not within the special knowledge or experience of Landlord.

                                      13.
<PAGE>

                                   EXHIBIT B-1

                                 BUILDING SHELL

      The Building Shell shall be a single story structure with approximately
seventy percent (70%) of the perimeter containing glass. Perimeter glass may
have a thirty (30) inch sill, but must be at ten feet (10') above finished
floor. The Building Shell shall include the following.

1. Building Structure.

      (a)   All foundations to include footings, foundation walls or other
            building foundation components required to support the entire
            building structure for a complete waterproof building shell.

      (b)   All columns shall be steel tube.

      (c)   Columns, beams, joists, purlins, headers, or other training members
            to support the roof and roofing membrane.

      (d)   Five inch (5") thick concrete slab on grade with welded Wire mesh
            and any other reinforcing or structural connections that may be
            necessary or required as specified by structural engineer. The slab
            on grade shall include a vapor barrier.

      (e)   Exterior walls that enclose the perimeter of the building, with
            steel reinforcing and structural connections that may be necessary
            or required.

      (f)   All exterior glass and glazing with anodized aluminum frames with
            soffits and overhangs. Glass to be tinted as appropriate to the
            aesthetic design of the building and Title 24 requirements. All
            exterior doors, door closer and locking devices necessary for proper
            functioning.

      (g)   Panelized wood roof system including 2" x 6" subperlins and 5/8"
            plywood and including roof drainage plumbing. Roof designed with
            additional 5 lbs/s.f, dead load.

      (h)   Four (4) ply built-up roofing with cap sheet (bondable to ten (10)
            years) and all flashing by Owens-Coming, John Manville, or equal.

      (i)   Exterior painting of all concrete with Tex-Coat or Kel-Tex textural
            paint, all caulking of exterior concrete joints in preparation for
            painting.

                                       1.
<PAGE>

      (j)   A metal roof screen not exceeding six hundred linear feet (600') to
            a height of eight feet (8') above the top of the exterior wall.

      (k)   A building interior minimum clear height of sixteen feet (16') to
            underside of structure.

      (1)   One (1) 12' x 14' roll-up door.

      (m)   An allowance for an exterior service yard and enclosure in the
            amount of $15,000.00.

2. Plumbing.

      (a)   Underground sanitary sewer laterals connected to the city sewer main
            in the street and piped into the Building and under the concrete
            slab on grade for the length of the Building. Main four inch (4")
            waste lines totalling three hundred fifty feet (350') under the slab
            will be at a location in as close proximity as possible to the
            Building rest room locations.

      (b)   Domestic water mains connected to the city water main in the street
            and stubbed to the Building. Domestic water main to the Building
            shall be a two and 1/2 inch (2-1/2") line not more than one hundred
            twenty linear feet (120') with a two inch (2") water meter.

      (c)   Roof drain leaders piped and draining onto paved areas or connected
            to the site storm drainage system.

      (d)   Gas lines and primary electrical shall be provided by PG&E in a
            joint trench not exceeding three hundred fifty linear feet (350')
            connected to the city or public utility mains and run to gas meters
            adjacent to, or in proximity to, the Building. Meter supplied by
            utility company.

3. Electrical.

      (a)   A primary electrical service provided by PG&E in a joint trench not
            exceeding three hundred fifty linear feet (350') including
            underground conduit, wire feeders, transformer and transformer pad.
            Underground conduits and secondary feeders from transformer pads to
            the location of the Building's main switchgear electrical room. The
            electrical characteristics of the secondary conduit sized for a
            transformer with a rated capacity of 2,000 amps at 277/480 volts.

                                       2.
<PAGE>

      (b)   Underground pull section, meter and house panel for exterior
            lighting and landscaping.

      (c)   An electrically operated landscape irrigation system, with
            controller, such that it is a complete and functioning system.

      (d)   Underground conduit from the Building to the main fire protection
            system shut-off valve (PIV) for installation of supervisory alarm
            wiring.

4. Fire protection (Sprinklers).

      (a)   A complete and fully functional overhead system distributed
            throughout the Building. The systems shall be classified ordinary
            hazard group 11.

      (b)   System shall include all upright pendant sprinkler heads (i.e.,
            "uppers") with plugged tee's for future sprinkler head drops.

      (c)   Site sprinkler main to be sized adequately to support required
            densities.

5. Sitework.

      (a)   All work outside the Building perimeter walls shall be considered
            site work for the Building Shell and shall include grading, asphalt
            concrete, paving, landscaping, landscape irrigation, storm drainage,
            utility service laterals, curbs, gutters, sidewalks, specialty
            paving (if required, i.e. reinforced roadway section to truck
            doors), retaining walls and trash enclosures.

      (b)   Paving sections for automobile and truck access shall be according
            to the Geologic Soils Report.

      (c)   All parking lot striping to include handicap signage, wheel stops
            and spaces.

      (d)   Underground site storm drainage system shall be connected to the
            city storm system main.

      (e)   Trash enclosure with double doors to accommodate an oversize
            dumpster.

                                       3.
<PAGE>

                                   Exhibit B-1

                                   [Site Plan]

<PAGE>

                                   EXHIBIT B-2

                             OUTLINE SPECIFICATIONS

                                       1.

<PAGE>

                                                                     Exhibit B-2

ARDENWOOD CORPORATE COMMONS                                          Page 1 of 2
Tenant Improvement Standards                                  September 24, 1996

<TABLE>
------------------------------------------------------------------------------------------------
<S>       <C>                  <C>                                 <C>
1.        Carpet               Manufactured by Designweave "New    Throughout u.o.n.
                               Sabre", 38 oz. cut pile, glue
                               down.
------------------------------------------------------------------------------------------------
2.        Base                 Burke 21/2inch top set base.        Throughout u.o.n.
------------------------------------------------------------------------------------------------
3.        Doors                Solid wood core door with           As indicated on plans
                               Nevermar plastic laminate rustic
                               quartered oak, full height
                               10'-0" door.
------------------------------------------------------------------------------------------------
4.        Frames               Manufactured by Eclipse, painted    As indicated on plans.
                               aluminum, standard building
                               finish.
------------------------------------------------------------------------------------------------
5.        Hardware             Manufactured by Schlage, latchset   As indicated on plans.
                               (L-series 03A, Style: Lever) in
                               bright chrome. (Lockset not
                               included u.o.n.)
------------------------------------------------------------------------------------------------
6.        Suspended Ceiling    USG Donn Fineline grid system.      Throughout u.o.n.
          System               2'x2' module size. Armstrong
                               Tegular Cortega, Minatone 2x2 No.
                               704A; White
------------------------------------------------------------------------------------------------
7.        Lighting             2'X4' parabolume fixture (18        1 each per 110 usable sq. ft.
                               cell) Upgrade: Recessed
                               incandescent light fixtures as
                               indicated on plan.
------------------------------------------------------------------------------------------------
8.        Wall Finishes        Smooth wall gyp. board painted      Throughout u.o.n.
                               with light roller finish.
                               Building standard 2 coats or
                               paint to cover, Kelly Moore or
                               Fuller O'Brien or equal, flat
                               latex or latex eggshell enamel.
------------------------------------------------------------------------------------------------
9.        Window Covering      Mini-blinds Building standard,      Throughout the u.o.n.
                               Riviera #310 Sand.
------------------------------------------------------------------------------------------------
10.       Vinyl Tiles          VCT: Azrock or equal                As indicated on plans
------------------------------------------------------------------------------------------------
11.       Electrical Power     Duplex power receptacles: Wall
                               mounted                             2 duplex receptacles.
                                         Typical Office            3 duplex receptacles.
                                        Conference Room            As indicated on plans.
                               Open Office Area - Ceiling J-Box
                                               or
                                    base feed to electrified
                                      furniture partition.
------------------------------------------------------------------------------------------------
12.       Telephone/Data       Combination telephone and data
                               receptacle, note all data
                               receptacles shall be double gang
                               size. Ring and pull wire - wall
                               mounted.                            1 receptacle
                               Typical Office and Conference Room. As indicated on plans.
                                        Open Office Area
------------------------------------------------------------------------------------------------
13.       Glass                Glass sidelight adjacent to door,   location shown on space plan.
                               2'-0" wide
------------------------------------------------------------------------------------------------
14.       HVAC System          Variable volume system, or          Throughout u.o.n.
                               package units, with economizer
                               cycle. Ducted supply and return
                               air to each office. Package units
                               not to exceed Within twenty (20)
                               days after  tons.
------------------------------------------------------------------------------------------------
15.       Fire Sprinkler       Building standard, semi recessed    Throughout u.o.n.
                               pendant heads designed for normal
                               office use (light hazard), chrome
                               or white escutcheon.
------------------------------------------------------------------------------------------------
</TABLE>

                                       1.
<PAGE>

Outline Specifications (continued)                                   Page 2 of 2
TOILET CORES                                                  September 24, 1996

--------------------------------------------------------------------------------
1.   Wall Finishes/Ceiling         Smooth wall gypsum board with light roller
                                   finish. Two coats of paint to cover, Kelly
                                   Moore or Fuller O'Brien or equal, eggshell
                                   enamel. Ceiling height shall be 9'-0".

--------------------------------------------------------------------------------
2.   Wall Finishes-Wet Walls       Ceramic tile.
--------------------------------------------------------------------------------
3.   Flooring                      Ceramic tile flooring.
--------------------------------------------------------------------------------
4.   Toilet Partitions             Ceiling hung with plastic laminate finish.
--------------------------------------------------------------------------------
5.   Fixtures                      Water closets and urinals shall be wall
                                   mounted with flushometer valves.
--------------------------------------------------------------------------------
6.   Accessories                   Bobrick semirecessed, brushed stainless steel
                                   finish. Provide floor drain at each toilet
                                   room.
--------------------------------------------------------------------------------
7.   Lavatories                    Plastic laminate counters with bullnosed
                                   edges, covered splash and wall supported at
                                   each end. Vitreous china lavatory, counter
                                   mounted
--------------------------------------------------------------------------------
8.   Lighting                      Incandescent or flourescent downlights and
                                   eggcrate soffitt lighting above lavatory.
--------------------------------------------------------------------------------

                                       2.
<PAGE>

                                    EXHIBIT C

                          COMMENCEMENT DATE MEMORANDUM

            With respect to that certain lease ("Lease") between
______________________, a __________________________ ("Tenant"), and
__________________, a ______________, ("Landlord"), whereby Landlord leased to
Tenant and Tenant leased from Landlord approximately _________________________
rentable square feet of the building located at _________________________
("Premises") in accordance with that certain lease dated ______________________,
199_, Tenant hereby acknowledges and certifies to Landlord as follows:

            (1) The Lease commenced on ____________________, 19__ (the
"Commencement Date");

            (2) The Premises contain ________ rentable square feet of space; and

            (3) Subject to applicable warranty provisions contained in the
Lease, Tenant has accepted and is currently in possession of the Premises.

            IN WITNESS WHEREOF, this Commencement Date Memorandum is executed
this _______ day of ___________________, 199_.

                                       "Tenant"

                                       ______________________________________, a
                                       ______________________________________

                                       By:______________________________________
                                          Its: _________________________________

                                       By:______________________________________
                                          Its: _________________________________

                                       1.
<PAGE>

                                    EXHIBIT D

                              RULES AND REGULATIONS

1. The sidewalks, driveways and entrances, lobbies, stairways and public
corridors shall be used only as a means of ingress and egress and shall remain
unobstructed at all times. The entrance and exit doors of buildings and all
suites are to be kept closed at all times except as required for orderly
passage. Loitering in any part of the Building or obstruction of any means of
ingress or egress is not permitted.

2. Plumbing fixtures shall not be used for any purposes other than those for
which they were constructed, and no rubbish, newspapers, trash or other
inappropriate substances of any kind shall be deposited therein. Personal
articles, equipment and clothing shall not be left in common areas.

3. No awning, shade, sign, advertisement or notice shall be inscribed, coated,
painted, displayed or affixed on, in or to any window, door or wall or any other
part of the outside or inside of the Building Lot, or the demised Premises
without the prior written consent of Landlord. No window displays or other
public displays shall be permitted without the prior written consent of
Landlord. All tenant identification on public walls or doors will be installed
by Landlord for Tenant with the cost borne by Tenant. No lettering or signs will
be permitted on public corridor walls or doors excepting the name of Tenants,
with the size, type and color of letters and the manner of attachment, style of
display and location thereof to be prescribed by Landlord.

4. The weight, size and position of all safes and other unusually densely
weighted or heavy objects used or placed in the Building shall be subject to
approval by Landlord prior to installation and shall, in all cases, be supported
and braced as prescribed by Landlord and as otherwise required by law. The
repair of any damage done to the Building or property therein by the
installation, removal or maintenance of such safes or other unusually heavy
objects shall be paid for by Tenant. Tenant shall bear the cost of any
consultant services employed by Landlord in the evaluation of placement,
location or bracing of unusually heavy items.

5. No improper or unusually loud noises, vibrations or odors are permitted
inside or outside the Building. No person shall be permitted to interfere in any
way with tenants or those having business with them. No person will be permitted
to bring or keep within the Building any animal or motor driven cycle or vehicle
except with the prior written consent of Landlord. Bicycles of

<PAGE>

Tenant, its employees, agents and invitees shall be stored only in designated
bicycle racks outside of the Building and in no other locations. No person shall
dispose of trash, refuse, cigarettes or other substances of any kind any place
inside or outside of the Building except in the appropriate refuse containers
provided therefor. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated or under
the influence of alcohol or drugs or who shall do any act in violation of these
rules and regulations.

6. All keying of office doors, after Tenant's occupancy, and all reprogramming
of any Security Access Cards will be at the expense of Tenant.

7. Any Tenant, agent, employee or invitee thereof using the Premises after
regular business hours or non-business days shall not open or hold open any
building entrance or suite entrance door to the Building. No door or passageway
may be obstructed.

8. The normal business hours of the common areas within the Building shall be
8:30 a.m. to 5:30 p.m., Monday through Friday (holidays excepted).

9. Automobile parking shall only be in designated areas. Parking shall be "nose
in" only (backing into parking stalls is Prohibited), and entirely within
painted parking spaces. Overnight parking and parking by Tenant or its employees
within areas marked "visitor" is prohibited. The servicing or repairing of
vehicles on the Lot is prohibited. Tenant, its employees, agents and invitees
shall obey traffic signs of the Lot. Vehicle speed limit within the Lot is
fifteen miles per hour.

10. Tenant and Tenant's employees, agents, invitees, etc., shall not hang or
display any items from the Building's exterior, or in any area outside of the
Premises.

ll. Neither Tenant nor any of Tenant's servants, employees, agents, visitors,
invitees or licensees, shall at any time transport to or from, or keep upon the
Premises any foul or obnoxious, flammable, combustible, explosive, toxic or
hazardous fluid, chemical or substance, except for normal office supplies or as
may be specifically approved in writing by Landlord and as further required by
law.

12. All equipment of any electrical or mechanical nature shall be placed and
maintained by Tenant in the Premises in settings approved by Landlord, to absorb
or prevent any vibration, noise interference, or annoyance to Landlord or
others, and shall not overload any circuit, nor draw more power than has been
previously allocated to Tenant.

<PAGE>

13. Except as provided in this Lease, no modification of any building
electrical, mechanical, plumbing or security system is permitted without the
prior written consent of Landlord. Tenants are responsible for the proper
maintenance and servicing of fire extinguishers and fire protection equipment
within the Premises.

14. No storage, staging, display, nor placing of any material, product or
equipment outside of the Premises is permitted except as may be expressly
approved in writing by Landlord.

15. Trash containers and trash enclosures for each Building are common area
facilities and Tenant, its employees, agents and invitees may not dispose of any
refuse or other waste material except within trash containers for the Building
of which the Premises are a part, and then only in compliance with applicable
law and regulations. Tenants may not place any articles within a trash enclosure
other than within a trash bin. Tenant shall be responsible for closing and
securing trash enclosure gates after use by Tenant.

16. Tenant shall notify Landlord immediately of any leak or electrical or
equipment malfunction, fire or other damage to the Premises or the Building.

17. Landlord shall have the right, exercisable with notice to Tenant, to make
reasonable modifications to these rules and regulations.

18. Tenant shall protect dock areas and pavements from damage due to trucks and
trailers.

19. Tenant shall not store trucks or trailers on the Lot, nor park trucks or
trailers in the automobile parking areas, traffic aisles, walkways or the public
street adjacent to the Lot.

20. Tenant is encouraged to participate in local waste recycling programs when
feasible.

21. Tenant shall be deemed to have read these Rules and Regulations and agrees
to inform its employees, agents and invitees thereof, and agrees to abide by
them as a covenant of its lease of the Premises.

<PAGE>

                                                                       Exhibit E

                      Versicor-List of Hazardous Materials

Organic Solvents

                                    Acetone, Methanol, Ethanol, Hexane,
                                    Ethyl Acetate,
                                    Dichloromethane, Isopropanol, Toluene,
                                    Tetrahydrofuran,
                                    Dioxane, Ether, Acetonitrile,
                                    N, N-Dimetheylformamide, Pyridine,
                                    Carbon tetrachloride, 1,2-Dichloroethane

Chemicals (representative compounds)

      Amines
                           triethylamine, butylamine, diaminopropane,
                           aminopyrrolidine, aniline, aminophthalimide,
                           aminonaphthaline

      Carboxylic Acids
                           benzoic acid, propionic acid,
                           naphthylacetic acid

      lsocyanates
                           phenylisocyanate, benzy] isocyanate

      Sulfonyl Chlorides
                           benzonesuffonyl chloride,
                           methanesulfonyl chloride

      Anhydrides
                           phthalic anhydride, succinic anhydride,
                           isatoic anhydride

      Alkyl halides
                           iodomethane, benzyl bromide

      Aldehydes
                           benzaldehyde, propionaldehyde

<PAGE>

Acids
                           hydrochloric acid, sulfuric acid, nitric acid,
                           trifluoroaceticacid, acetic acid

Reducing Agents
                           tributyltin hydride, borane-THF complex,
                           sodium borohydride,
                           sodium cyanoborohydride, tin (II) chloride

Oxidizing Agents
                           sodium periodate, 3-chloroperoxybenzoic acid

Catalysts
                           palladium on carbon, palladium acetate,
                           palladium hydroxide

Chloroformates
                           benzyl chloroformate, ethyl chloroformate,
                           Fmoc chloride, p-nitrophenyl chloroformate

<PAGE>

Other
                           phosgene (20% in toluene),
                           lithium bis(trimethylsilyl)amine, triphenylphosphene,
                           collidine, diethylazodicarboxylate, potassium
                           cyanide, ammonia, hydrazine, methylhydrazine, boron
                           trifluoride etherate

Isotopes
                           Hydrogen 3
                           Carbon 14
                           Phosphorous 32
                           Sulfur 35

<PAGE>

                                    EXHIBIT F

                              ESTOPPEL CERTIFICATE

__________________________
__________________________
__________________________
__________________________

      Re:   Lease dated _________________, 19__ ("Lease") by
            and between __________________________
            ("Landlord") and ____________________________
            ("Tenant").

Gentlemen:

      Reference is made to the above-described Lease in which the undersigned is
the Tenant. We understand that you are entering into a transaction with the
Landlord which relates to, among other things, this Lease; and we hereby, as a
material inducement for you to enter into such transaction with Landlord,
represent that:

      1. A true and correct copy of the Lease is attached hereto as Exhibit 1.

      2. There are no modifications, amendments, supplements, arrangements, side
letters or understandings, oral or written, of any sort, modifying, amending,
altering, supplementing or changing the terms of the Lease except as follows:
__________________________.

      3. The Lease is in full force and effect, and the Lease has been duly
executed and delivered by, and is a binding obligation of, the Tenant as set
forth therein.

            4. The undersigned acknowledges (a) that rent on the Lease has been
paid up to and including ___________, 19__, (b) that monthly rent during the
____________ (___) years of the term of the Lease is ________________ Dollars
($_______________) per month and (c) that rent has not been paid for any period
after _________________, 19__, and shall not be paid for a period in excess of
one (1) month in advance.

<PAGE>

        5. The Lease is not in default, and, to Tenant's knowledge, Landlord has
performed the obligations required to be performed by Landlord under the terms
thereof through the date hereof.

Dated: _________________, 19__           Very truly yours,

                                         "Tenant"

                                         _______________________________________
                                         a _____________________________________

                                         By: ___________________________________
                                              Its:______________________________<PAGE>

                                                                  EXHIBIT 10.23

                               INDEMNITY AGREEMENT

         THIS AGREEMENT is made and entered into this 29th day of October, 1999
by and between VERSICOR INC., a Delaware corporation (the "Corporation"), and
Thomas C. McConnell ("Agent").

                                    RECITALS

         WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a member of the Board of Directors of the Corporation;

         WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");

         WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and

         WHEREAS, in order to induce Agent to continue to serve as capacity as a
member of the Board of Directors of the Corporation, the Corporation has
determined and agreed to enter into this Agreement with Agent;

         NOW, THEREFORE, in consideration of Agent's continued service as
capacity as a member of the Board of Directors after the date hereof, the
parties hereto agree as follows:

                                    AGREEMENT

         1.        SERVICES TO THE CORPORATION. Agent will serve, at the will
of the Corporation or under separate contract, if any such contract exists,
as capacity as a member of the Board of Directors of the Corporation or as a
director, officer or other fiduciary of an affiliate of the Corporation
(including any employee benefit plan of the Corporation) faithfully and to
the best of his ability so long as he is duly elected and qualified in
accordance with the provisions of the Bylaws or other applicable charter
documents of the Corporation or such affiliate; PROVIDED, HOWEVER, that Agent
may at any time and for any reason resign from such position (subject to any
contractual obligation that Agent may have assumed apart from this Agreement)
and that the Corporation or any affiliate shall have no obligation under this
Agreement to continue Agent in any such position.

         2.        INDEMNITY OF AGENT. The Corporation hereby agrees to hold
harmless and indemnify Agent to the fullest extent authorized or permitted by
the provisions of the Bylaws and the Code, as the same may be amended from
time to time (but, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than the Bylaws or the
Code permitted prior to adoption of such amendment).

         3.        ADDITIONAL INDEMNITY. In addition to and not in limitation
of the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further
agrees to hold harmless and indemnify Agent:

                                       1.
<PAGE>

                   (a)  against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that Agent becomes legally obligated to pay because of
any claim or claims made against or by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in
the right of the Corporation) to which Agent is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that Agent
is, was or at any time becomes a director, officer, employee or other agent
of Corporation, or is or was serving or at any time serves at the request of
the Corporation as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; and

                   (b)  otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 41 of the Bylaws.

         4.        LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant
to Section 3 hereof shall be paid by the Corporation:

                   (a)  on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities
of the Corporation pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state or local statutory law;

                   (b)  on account of Agent's conduct that is established by
a final judgment as knowingly fraudulent or deliberately dishonest or that
constituted willful misconduct;

                   (c)  on account of Agent's conduct that is established by
a final judgment as constituting a breach of Agent's duty of loyalty to the
Corporation or resulting in any personal profit or advantage to which Agent
was not legally entitled;

                   (d)  for which payment is actually made to Agent under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;

                   (e)  if indemnification is not lawful (and, in this
respect, both the Corporation and Agent have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

                   (f)  in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding
was authorized by the Board of Directors of the Corporation, (iii) such
indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.

         5.        CONTINUATION OF INDEMNITY. All agreements and obligations
of the Corporation contained herein shall continue during the period Agent is
a director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) and shall continue thereafter so
long as Agent shall be subject to any possible claim or

                                       2.
<PAGE>

threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the
fact that Agent was serving in the capacity referred to herein.

         6.        PARTIAL INDEMNIFICATION. Agent shall be entitled under
this Agreement to indemnification by the Corporation for a portion of the
expenses (including attorneys' fees), witness fees, damages, judgments, fines
and amounts paid in settlement and any other amounts that Agent becomes
legally obligated to pay in connection with any action, suit or proceeding
referred to in Section 3 hereof even if not entitled hereunder to
indemnification for the total amount thereof, and the Corporation shall
indemnify Agent for the portion thereof to which Agent is entitled.

         7.        NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty
(30) days after receipt by Agent of notice of the commencement of any action,
suit or proceeding, Agent will, if a claim in respect thereof is to be made
against the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to
which Agent notifies the Corporation of the commencement thereof:

                   (a)  the Corporation will be entitled to participate
therein at its own expense;

                   (b)  except as otherwise provided below, the Corporation
may, at its option and jointly with any other indemnifying party similarly
notified and electing to assume such defense, assume the defense thereof,
with counsel reasonably satisfactory to Agent. After notice from the
Corporation to Agent of its election to assume the defense thereof, the
Corporation will not be liable to Agent under this Agreement for any legal or
other expenses subsequently incurred by Agent in connection with the defense
thereof except for reasonable costs of investigation or otherwise as provided
below. Agent shall have the right to employ separate counsel in such action,
suit or proceeding but the fees and expenses of such counsel incurred after
notice from the Corporation of its assumption of the defense thereof shall be
at the expense of Agent unless (i) the employment of counsel by Agent has
been authorized by the Corporation, (ii) Agent shall have reasonably
concluded, and so notified the Corporation, that there is an actual conflict
of interest between the Corporation and Agent in the conduct of the defense
of such action or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Agent's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Agent shall have made the conclusion provided for in clause (ii)
above; and

                   (c)  the Corporation shall not be liable to indemnify
Agent under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent, which shall not be
unreasonably withheld. The Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Agent without Agent's written
consent, which may be given or withheld in Agent's sole discretion.

         8.        EXPENSES. The Corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by Agent in connection with such proceeding upon receipt of
an undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.

         9.        ENFORCEMENT. Any right to indemnification or advances
granted by this Agreement to Agent shall be enforceable by or on behalf of
Agent in any court of competent jurisdiction if (i) the claim

                                       3.
<PAGE>

for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request
therefor. Agent, in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim.
It shall be a defense to any action for which a claim for indemnification is
made under Section 3 hereof (other than an action brought to enforce a claim
for expenses pursuant to Section 8 hereof, PROVIDED THAT the required
undertaking has been tendered to the Corporation) that Agent is not entitled
to indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or
its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.

         10.       SUBROGATION. In the event of payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of
the rights of recovery of Agent, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
the Corporation effectively to bring suit to enforce such rights.

         11.       NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent
by this Agreement shall not be exclusive of any other right which Agent may
have or hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.

         12.       SURVIVAL OF RIGHTS.

                   (a)  The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
and shall inure to the benefit of Agent's heirs, executors and administrators.

                   (b)  The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Corporation, expressly
to assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform if no such
succession had taken place.

         13.       SEPARABILITY. Each of the provisions of this Agreement is
a separate and distinct agreement and independent of the others, so that if
any provision hereof shall be held to be invalid for any reason, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof. Furthermore, if this Agreement
shall be invalidated in its entirety on any ground, then the Corporation
shall nevertheless indemnify Agent to the fullest extent provided by the
Bylaws, the Code or any other applicable law.

         14.       GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.

         15.       AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.

                                       4.
<PAGE>

         16.       IDENTICAL COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute but one and the
same Agreement. Only one such counterpart need be produced to evidence the
existence of this Agreement.

         17.       HEADINGS. The headings of the sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction hereof.

         18.       NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the date
on which such communication was mailed if mailed by certified or registered
mail with postage prepaid:

                   (a)  If to Agent, at the address indicated on the
                        signature page hereof.

                   (b)  If to the Corporation, to

                           Versicor Inc.
                           37490 Ardentech Court
                           Fremont, CA 94555

or to such other address as may have been furnished to Agent by the
Corporation.

                                       5.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on and as of the day and year first above written.

                                     VERSICOR INC.

                                     By:      /s/ G.F. Horner III
                                         -------------------------------
                                     Title:  PRESIDENT AND CEO
                                           -----------------------------

                                     THOMAS C. MCCONNELL

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

                                     Address:

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

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

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on and as of the day and year first above written.

                                     VERSICOR INC.

                                     By:
                                        --------------------------------
                                     Title:
                                           -----------------------------

                                     THOMAS C. MCCONNELL

                                          /s/ Thomas C. McConnell
                                     -----------------------------------

                                     Address:

                                          2490 Sand Hill Road
                                     -----------------------------------

                                          Menlo Park, CA 94025
                                     -----------------------------------

                                       6.

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