Document:

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                                                                   EXHIBIT 10.46

                                  OFFICE LEASE
                                  ------------

                                LNR WARNER CENTER
                                -----------------

                           WOODLAND HILLS, CALIFORNIA
                           ---------------------------

                   DCA HOMES, INC., A FLORIDA CORPORATION, AND
              LENNAR ROLLING RIDGE, INC., A CALIFORNIA CORPORATION,

                                  AS LANDLORD,

                                       AND

                                   HEALTH NET,
                            A CALIFORNIA CORPORATION,

                                    AS TENANT

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                              PAGE
<S>             <C>                                                                                          <C>
ARTICLE 1         REAL PROPERTY/PROJECT, BUILDINGS AND PREMISES.................................................1

ARTICLE 2         LEASE TERM...................................................................................16

ARTICLE 3         BASE RENT....................................................................................17

ARTICLE 4         ADDITIONAL RENT..............................................................................18

ARTICLE 5         USE OF PREMISES..............................................................................30

ARTICLE 6         SERVICES AND UTILITIES.......................................................................31

ARTICLE 7         REPAIRS......................................................................................34

ARTICLE 8         ADDITIONS AND ALTERATIONS....................................................................35

ARTICLE 9         COVENANT AGAINST LIENS.......................................................................37

ARTICLE 10        INSURANCE....................................................................................38

ARTICLE 11        DAMAGE AND DESTRUCTION.......................................................................40

ARTICLE 12        NONWAIVER....................................................................................42

ARTICLE 13        CONDEMNATION.................................................................................43

ARTICLE 14        ASSIGNMENT AND SUBLETTING....................................................................44

ARTICLE 15        SURRENDER OF PREMISES; OWNERSHIP  AND REMOVAL OF TRADE FIXTURES..............................47

ARTICLE 16        HOLDING OVER.................................................................................48

ARTICLE 17        ESTOPPEL CERTIFICATES........................................................................48

ARTICLE 18        SUBORDINATION................................................................................48

ARTICLE 19        DEFAULTS; REMEDIES...........................................................................49

ARTICLE 20        COVENANT OF QUIET ENJOYMENT..................................................................51

ARTICLE 21        SIGNS........................................................................................51

ARTICLE 22        COMPLIANCE WITH LAWS.........................................................................54

ARTICLE 23        ENTRY BY LANDLORD............................................................................54

ARTICLE 24        TENANT PARKING...............................................................................55

ARTICLE 25        MISCELLANEOUS PROVISIONS.....................................................................56

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EXHIBITS

A        OUTLINE OF PREMISES

A-1      SITE PLAN OF REAL PROPERTY

B        TENANT WORK LETTER

C        AMENDMENT TO LEASE

D        RULES AND REGULATIONS

                                      (iv)

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E        FORM OF TENANT'S ESTOPPEL CERTIFICATE

F        PARKING RULES AND REGULATIONS

G        SNDA (US BANK)

H        SNDA (EXISTING LENDER)

I        TENANT'S BROKER COMMISSION AGREEMENT

J        TOTAL NEW FHS BUILDING COSTS (SAMPLE LINE ITEM DETAIL)

K        JANITORIAL AND WINDOW WASHING SPECIFICATIONS

L        HVAC TEMPERATURE DESIGN CONDITIONS

M        FIRST FLOOR FIRST OFFER SPACE

EXTENSION OPTION RIDER

                                      (v)
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                                INDEX OF CERTAIN
                                ----------------

                                 DEFINED TERMS
                                 -------------

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                                                                                                            PAGE(S)
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<S>                                                                                                        <C>
Acceptable Changes.............................................................................................36
Additional Building C Exterior Sign............................................................................52
Additional Rent................................................................................................18
Affiliates.....................................................................................................46
Alterations....................................................................................................35
Amortization Interest Rate.....................................................................................20
Base Rent......................................................................................................18
Base Year......................................................................................................18
BOMA Standard...................................................................................................3
Building B Exterior Signs......................................................................................52
Building B Monument Sign.......................................................................................52
Building C Exterior Sign.......................................................................................52
Building C Monument............................................................................................52
Buildings.......................................................................................................1
Calendar Year..................................................................................................18
Claims.........................................................................................................38
Comparable Buildings............................................................................................7
Connecting Equipment...........................................................................................61
Construction...................................................................................................61
Cost Pools.....................................................................................................20
Current Premises...............................................................................................14
Direct Expenses................................................................................................18
Election Date...................................................................................................8
Eligibility Period.............................................................................................33
Entitlements....................................................................................................2
Environmental Laws..............................................................................................4
Environmental Reports...........................................................................................4
Estimate.......................................................................................................27
Estimate Statement.............................................................................................27
Estimated Excess...............................................................................................27
Excess.........................................................................................................26
Excluded Claims................................................................................................38
Existing Buildings..............................................................................................1
Existing Lender................................................................................................49
Existing Lender SNDA...........................................................................................49
Expense Year...................................................................................................18
Exterior Signs.................................................................................................52
Fair Market Allowance...........................................................................................7
Fair Market Rental Rate....................................................................Extension Option Rider
FHS.............................................................................................................9
FHS Commencement Date..........................................................................................14
FHS Expansion Space.............................................................................................9
FHS Tenant Improvement Costs/Allowance.........................................................................12
First Offer Commencement Date...................................................................................9
First Offer Notice..............................................................................................5
First Offer Space...............................................................................................4
First Offer Space Rent..........................................................................................6
First Year FHS Base Rent.......................................................................................11
Force Majeure..................................................................................................58
Hazardous Materials.............................................................................................4
Holidays.......................................................................................................31
HVAC...........................................................................................................21
Interest Rate..................................................................................................28
Land Cost Amount...............................................................................................12
Landlord........................................................................................................1
Landlord Parties...............................................................................................38
Landlord's Broker..............................................................................................59
Laws...........................................................................................................54

</TABLE>

                                      (vi)

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<TABLE>
<CAPTION>
                                                                                                            PAGE(S)
                                                                                                            ------
<S>                                                                                                        <C>
Lease...........................................................................................................1
Lease Commencement Date........................................................................................16
Lease Expiration Date..........................................................................................16
Lease Term.....................................................................................................16
Lease Year.....................................................................................................16
New Building....................................................................................................9
Notices........................................................................................................58
Operating Expenses.............................................................................................18
Option Term................................................................................Extension Option Rider
Parking Facilities..............................................................................................1
Parking Facility Spaces........................................................................................55
Permitted Sublease.............................................................................................47
Permitted Subtenant............................................................................................47
Phase I Parking Structure.......................................................................................1
Post-Third Year Offer Space.....................................................................................7
Pre-Existing Building...........................................................................................9
Premises........................................................................................................1
Pre-Occupancy Period...........................................................................................17
Pre-Third Year Offer Space......................................................................................6
Project.........................................................................................................1
Real Property...................................................................................................1
Reduction Right................................................................................................15
Reduction Space................................................................................................15
Related Improvements...........................................................................................11
Renewed Space..............................................................................Extension Option Rider
Rent...........................................................................................................18
Statement......................................................................................................26
Surface Spaces.................................................................................................55
Systems and Equipment..........................................................................................24
Tax Expenses...................................................................................................24
Telecommunication Devices......................................................................................61
Telecommunication Equipment....................................................................................61
Tenant..........................................................................................................1
Tenant's Broker................................................................................................59
Tenant's Broker Commission Agreement...........................................................................60
Tenant's Building B Share......................................................................................25
Tenant's Building C Monument Sign..............................................................................52
Tenant's Building C Share......................................................................................25
Tenant's Election Notice........................................................................................8
Tenant's Share.................................................................................................18
Third Party Lease...............................................................................................4
Total New FHS Building Costs...................................................................................11
Transfer Notice................................................................................................44
Transfer Premium...............................................................................................45
Transferee.....................................................................................................44
Transfers......................................................................................................44
US Bank Deed of Trust..........................................................................................49
US Bank SNDA...................................................................................................49
Utilities Costs................................................................................................25

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                                     (vii)

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                                LNR WARNER CENTER
                                -----------------

                                  OFFICE LEASE
                                  ------------

     This Office Lease, which includes the preceding Summary attached hereto and
incorporated herein by this reference (the Office Lease and Summary to be known
sometimes collectively hereafter as the "LEASE"), dated as of the date set forth
in Section 1 of the Summary, is made by and between DCA HOMES, INC., a Florida
corporation, and LENNAR ROLLING RIDGE, INC., a California corporation
(collectively, "LANDLORD"), and HEALTH NET, a California corporation ("TENANT").

                                    ARTICLE 1

                  REAL PROPERTY/PROJECT, BUILDINGS AND PREMISES

     1.1  REAL PROPERTY/PROJECT, BUILDINGS AND PREMISES.

          1.1.1 PREMISES. Upon and subject to the terms, covenants and
conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord the premises set forth in Section 6.2 of
the Summary (the "PREMISES"), which Premises shall be located in those two
certain "BUILDINGS" set forth in Section 6.1 of the Summary to be constructed on
the Real Property. The outline of the floor plan of the Premises is set forth in
EXHIBIT A attached hereto.

          1.1.2 BUILDINGS AND REAL PROPERTY/PROJECT. The Buildings, when
constructed, shall be part of a multi-building office building project known as
"LNR Warner Center" and located on the approximately 35 acre site at the
northeast corner of Canoga Avenue and Burbank Boulevard in Woodland Hills,
California. Such office building project (i) currently contains two (2) existing
office buildings located thereon whose addresses are 5800 Canoga Avenue and
21261 Burbank Boulevard, Woodland Hills, California, respectively (collectively,
the "EXISTING BUILDINGS") and related surface parking areas and other
facilities, (ii) is to be expanded to include the Buildings, additional surface
parking areas surrounding the Buildings, a 5.5 level above-grade parking
structure located northeast of Building C (the "PHASE I PARKING STRUCTURE"),
landscaping, driveways, plazas, walkways, courtyards, public and private streets
and other improvements and facilities which Landlord is or will be constructing
as part of "Phase I" thereof, and (iii) may further be expanded, at Landlord's
sole and absolute discretion, to include additional office and other buildings,
parking structures, parking facilities, landscaping, driveways, plazas,
walkways, courtyards, public and private streets and other improvements and
facilities. As used in this Lease, the terms "REAL PROPERTY" and "PROJECT",
shall mean, collectively: (A) the Existing Buildings; (B) the Buildings; (C) any
outside plaza areas, walkways, driveways, courtyards, public and private
streets, transportation facilitation areas and other improvements and facilities
now or hereafter constructed surrounding and/or servicing the Buildings and
Existing Buildings, including the Phase I Parking Structure, surface parking
facilities and other parking structures and surface parking facilities now or
hereafter servicing the Buildings, the Existing Buildings and any other
buildings which may be constructed within LNR Warner Center (collectively, the
"PARKING FACILITIES"), which are designated from time to time by Landlord as
common areas (or parking facilities, as the case may be) appurtenant to or
servicing the Buildings, the Existing Buildings and any such other buildings;
(D) any additional buildings, improvements, facilities, parking areas and
structures and common areas which Landlord (and/or any common area association
formed by Landlord or Landlord's assignee for LNR Warner Center) may add thereto
from time to time within or as part of LNR Warner Center; and (E) the land upon
which any of the foregoing are situated. The site plan depicting the current
configuration of the Real Property and proposed Phase I of LNR Warner Center
(which Phase I includes the Buildings, the Phase I Parking Structure, surface
parking areas, landscaping, driveways, plazas, walkways, courtyards, public and
private streets and common areas, and which may be revised by Landlord as
provided in the Tenant Work Letter) is set forth in EXHIBIT A-1 attached hereto.
Landlord has no obligation to expand or otherwise make any improvements within
the Project other than as set forth in Section 1.1.4 below, and other than
Landlord's obligations set forth in the Tenant Work Letter to construct (1) the
Base, Shell and Core of the Buildings and the other improvements within the
Phase I Project (as such term is defined in the Tenant Work Letter) as set forth
in the Phase I Project Plans (as defined in the

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Tenant Work Letter) as the same may be modified by Landlord pursuant to the
provisions of the Tenant Work Letter, and (2) the initial Tenant Improvements
for the Premises pursuant to the provisions of the Tenant Work Letter.

     1.1.3 TENANT'S AND LANDLORD'S RIGHTS. Tenant is hereby granted the right to
the nonexclusive use of the common corridors and hallways, stairwells,
elevators, restrooms and other public or common areas located within Building C,
and the non-exclusive use of the areas located on the Real Property designated
by Landlord from time to time as common areas for the Buildings; provided,
however, that (i) Tenant's use thereof shall be subject to (A) the provisions of
any covenants, conditions and restrictions regarding the use thereof now or
hereafter recorded against the Real Property (subject, however, to the
limitations contained in clauses (i) and (ii) in Section 5.1 below), and (B)
such reasonable, non-discriminatory rules, regulations and restrictions as
Landlord may make from time to time (which shall be provided in writing to
Tenant), and (ii) subject to Tenant's rights in Section 25.30 below, Tenant may
not go on the roof of Buildings without Landlord's prior consent and without
being accompanied by a representative of Landlord. Subject to the limitations in
Section 25.30 below, Landlord reserves the right from time to time to use any of
the common areas of the Real Property, and the roof, risers and conduits of the
Buildings for telecommunications and/or any other purposes, and to do any of the
following, as long as such acts (including any acts undertaken by Landlord as
the "Declarant" under any covenants, conditions and restrictions recorded
against the Real Property) are performed in accordance with all applicable Laws
(as defined in Article 22 below) and do not materially and adversely interfere
with Tenant's permitted use of or access to the Premises or materially increase
Tenant's obligations under this Lease: (1) make any changes, additions,
improvements, repairs and/or replacements in or to the Real Property or any
portion or elements thereof, including, without limitation, (x) changes in the
location, size, shape and number of driveways, entrances, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas, walkways, public
and private streets, plazas, courtyards, transportation facilitation areas and
common areas, and, subject to Article 24 below, parking spaces, parking
structures and parking areas, and (y) expanding or decreasing the size of the
Real Property and any common areas and other elements thereof, including adding
or deleting buildings thereon and therefrom; (2) close temporarily any of the
common areas while engaged in making repairs, improvements or alterations to the
Real Property; (3) form a common area association or associations under
covenants, conditions and restrictions to own, manage, operate, maintain, repair
and/or replace all or any portion of the landscaping, driveways, walkways,
parking areas, public and private streets, plazas, courtyards, transportation
facilitation areas and/or other common areas located outside of the Buildings,
and, subject to Section 4.2.5 below, include the common area assessments, fees
and taxes charged by the association(s) and the cost of maintaining, managing,
administering and operating the association(s), in Direct Expenses; and (4)
perform such other acts and make such other changes with respect to the Real
Property as Landlord may, in the exercise of good faith business judgment, deem
to be appropriate.

     1.1.4 FOOD SERVICE; CHILD CARE FACILITY. Subject to the applicable
conditional use permits, project approvals issued by the City of Los Angeles,
covenants and agreements with the City of Los Angeles and other entitlements for
the Project which permit Landlord to develop the Project, which may be amended
from time to time (collectively, the "ENTITLEMENTS"), and subject to all other
applicable Laws (as defined in Article 22 below), Landlord shall use
commercially reasonable efforts to substantially complete (punch-list items
excepted) construction of a facility in the Project from which a retail food
service business may be operated on or before the first (1st) anniversary of the
Lease Commencement Date. In addition, subject to the Entitlements and all other
applicable Laws, Landlord shall use commercially reasonable efforts to
substantially complete (punch-list items excepted) construction of a child care
facility in the Project as soon as reasonably possible following the
satisfaction or waiver of the conditions set forth in the immediately succeeding
sentence. Tenant hereby acknowledges that Landlord has advised Tenant that the
Entitlements for the Project described above restrict Landlord from commencing
construction of such child care facility until the following have been
completed: (i) the development and construction of Phase I of the Project; (ii)
if and when constructed by Landlord, at Landlord's option, the portion of the
Project which Landlord constructs as "Phase II"; and (iii) if and when performed
by Landlord, at Landlord's option, the grading of the portion of the Project
which Landlord constructs as "Phase III". Tenant agrees that in connection with
Landlord's financing, transfer or sale of all or any portion of the Real
Property, or for any other reason determined by Landlord, Landlord may, at any
time after execution of this Lease, remove this Section 1.1.4 (and Landlord's
obligations hereunder) from

                                      -2-
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this Lease and instead include the provisions of this Section 1.1.4 and
Landlord's obligations hereunder in a separate written agreement independent
from this Lease (which separate agreement shall, at Landlord's election, only
pertain to such portions of the Real Property owned by Landlord [which may be
less than the entire Real Property] and designated by Landlord to be the
property upon which Landlord may construct the restaurant and child care
facility). Tenant shall promptly execute such separate agreement, as well as an
amendment to this Lease deleting this Section 1.1.4 therefrom (and otherwise
modifying this Lease to delete any references to Section 1.1.4 and the
restaurant and child care facility), following Landlord's election and
submission of such documents to Tenant, provided that the form and substance of
such separate agreement and amendment to Lease are reasonably acceptable to
Tenant.

     1.2  RENTABLE AND USABLE SQUARE FEET. The rentable and usable square feet
of the Premises are approximately as set forth in Section 6.2 of the Summary.
For purposes hereof, the "usable square feet" of the Premises and the "rentable
square feet" of the Premises and the Buildings shall be calculated by Landlord
pursuant to the Standard Method for Measuring Floor Area in Office Buildings,
ANSI Z65.1-1996 (the "BOMA STANDARD"). The rentable square feet of the Buildings
is estimated to be 356,490 rentable square feet. The usable square feet of the
Premises and the rentable square feet of the Premises and the Buildings shall be
certified to Landlord and Tenant with reasonably particularized supporting
calculations by Landlord's planner/designer prior to the Lease Commencement
Date, and such certification shall be made in accordance with the provisions of
this Section 1.2 (the "CERTIFICATION"); provided, however, that in the event
that Tenant's architect disputes the number of usable or rentable square feet in
the Premises or the rentable square feet in the Buildings as set forth in the
Certification, written notice of such dispute shall be provided to Landlord
within thirty (30) days after Tenant's receipt of the Certification. If Tenant
fails to deliver to Landlord written notice of such dispute within such 30-day
period, Tenant shall be deemed to have approved the Certification. To resolve
any such dispute, Landlord's planner/designer, Tenant's architect, Tenant and
Landlord shall meet to attempt to reach agreement on the number of rentable and
usable square feet in the Premises and the number of rentable square feet in the
Buildings. If such parties cannot agree on such numbers, then the parties shall
promptly submit the dispute to binding arbitration under the auspices of
JAMS/ENDISPUTE (or any successor to such organization) in Los Angeles,
California, according to the then rules of commercial arbitration for such
organization but with reference to the BOMA Standard, and the arbitrators
resolving such dispute shall only have jurisdiction to determine the square
footage of the Premises and Buildings in dispute, and shall not have
jurisdiction to modify the terms of this Lease. During the period from the Lease
Commencement Date until any dispute regarding the square footage of the Premises
and Buildings is resolved, the rentable and usable square footage amounts set
forth in Section 6.2 of the Summary and this Section 1.2 shall be utilized for
all purposes under this Lease. In the event that following such dispute it is
mutually determined by the parties or pursuant to such arbitration that the
rentable and usable square footage amounts of the Premises and/or Buildings are
other than those set forth in Section 6.2 of the Summary and/or this Section
1.2, all amounts, percentages and figures appearing or referred to in this Lease
based upon such incorrect rentable and/or usable square footage amounts
(including, without limitation, the amount of the Base Rent, the Tenant
Improvement Allowance and Tenant's Building C Share, but specifically excluding
Tenant's Building B Share) shall be modified in accordance with such
determination. If such determination is made, it will be confirmed in writing by
Landlord to Tenant. At either party's discretion, the number of rentable and
usable square feet of any First Offer Space and/or FHS Expansion Space leased by
Tenant pursuant to Sections 1.5 and/or 1.6 of this Lease, and of the remainder
of any partial floor space following a reduction pursuant to Section 1.7 of this
Lease, if applicable, shall be subject to verification, and such verification
shall be made in accordance with the BOMA Standard and the provisions of this
Section 1.2; in the event that it is determined that the rentable and/or usable
square feet of any such space pursuant to the BOMA Standard shall be different
from the amounts thereof set forth in this Lease or as may be initially
determined by Landlord, Landlord shall modify all amounts, percentages and
figures with respect to such space appearing or referred to in this Lease to
conform to such corrected square footage amounts therefor (including, without
limitation, the amount of the Base Rent, Tenant's Share of Direct Expenses and
any tenant improvement allowances applicable to such space).

     1.3  CONDITION OF THE PREMISES; HAZARDOUS MATERIALS. Except as specifically
set forth in this Lease and in the Tenant Work Letter attached hereto as
EXHIBIT B, (i) Landlord shall not be obligated to provide or pay for any
improvement work or services related to the improvement of the Premises, the
Buildings, the Existing Buildings or the Real Property, and (ii) Landlord has

                                      -3-
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made no representation or warranty regarding the condition of the Premises, the
Buildings, the Existing Buildings or the Real Property. Notwithstanding the
foregoing, Landlord hereby represents and warrants to Tenant that, to Landlord's
actual knowledge without duty of investigation or inquiry, as of the date of
execution of this Lease, the individual parcels of land within Phase I of the
Real Property upon which the Buildings are to be constructed (as depicted on
EXHIBIT A-1) do not currently contain any Hazardous Materials (as defined below
in this Section 1.3) in violation of existing applicable Environmental Laws (as
defined below in this Section 1.3), except as described in the Environmental
Reports (as such term is defined below in this Section 1.3) copies of which have
been delivered by Landlord to Tenant; such representation and warranty pertains
only to the land within Phase I upon which the Buildings shall be constructed,
and not to the land upon which the Existing Buildings are constructed or any
other land on the Real Property, nor the Existing Buildings or any other
improvements now or hereafter located on the Real Property. Landlord further
covenants that Landlord shall observe and comply with all applicable
Environmental Laws in connection with Landlord's activities on the Real Property
(including, without limitation, Landlord's actions undertaken pursuant to
Sections 1.1.3 and 25.29 of this Lease), and in connection therewith, Landlord
shall not cause any Hazardous Materials to be introduced in, on or under the
Real Property by Landlord, its agents, employees or contractors in violation of
Environmental Laws in effect at the time of such introduction. Landlord shall
also use commercially reasonable efforts to cause the tenants of the Project
(other than Tenant) who have introduced any Hazardous Materials in, on or under
the Real Property in violation of Environmental Laws to clean-up and/or
remediate such Hazardous Materials, at no cost to Tenant, to the extent required
by applicable Environmental Laws. Landlord shall indemnify, defend, reimburse
and hold Tenant harmless from and against the cost of remediation of any
Hazardous Materials to the extent (i) existing on the Real Property as of the
date of execution of this Lease in violation of applicable Environmental Laws at
such time (including as a result of Landlord's utilization thereof in connection
with the original construction of the Phase I Project), and/or (ii) resulting
from Landlord's breach of its representations and/or covenants in this Section
1.3. Such indemnity shall survive the expiration or earlier termination of this
Lease. For purposes hereof, "costs of remediation" shall mean the costs
associated with the investigation, testing, monitoring, containment, removal,
remediation, cleanup and/or abatement of any release of any such Hazardous
Materials described in the immediately preceding sentence as necessary to comply
with any applicable Environmental Laws. As used in this Lease, the term
"HAZARDOUS MATERIALS" shall mean and include any substance that is or contains
petroleum, asbestos, polychlorinated biphenyls, lead, or any other substance,
material or waste which is now or is hereafter classified or considered to be
hazardous or toxic under any federal, state or local law, rule, regulation or
ordinance relating to pollution or the protection or regulation of human health,
natural resources or the environment (collectively, "ENVIRONMENTAL LAWS"). As
used in this Section 1.3, the term "ENVIRONMENTAL REPORTS" collectively refers
to the following reports prepared with respect to the Real Property: (A) that
certain letter dated June 8, 1998 from American Environmental Specialists, Co.
to Mr. Kevin Read at Lennar Partners; (B) that certain Bulk Asbestos Survey
dated August 22, 1997 prepared by McLaren/Hart; and (C) that certain Phase I
Environmental Assessment dated August 22, 1997 prepared by McLaren/Hart.

     1.4  INTENTIONALLY DELETED.

     1.5  RIGHT OF FIRST OFFER. Tenant shall have a right of first offer to
lease certain space in Building C as follows:

          1.5.1 RIGHT OF FIRST OFFER; FIRST OFFER SPACE. During the period of
time from and after the date of execution of this Lease until the end of the
initial Lease Term as may be extended for the First Option Term only ("FIRST
OFFER ELIGIBILITY PERIOD"), Tenant shall have a right of first offer to lease
the remaining space in Building C not leased by Tenant at the time Landlord
delivers the First Offer Notice, as such term is defined in Section 1.5.2 below
(including, without limitation, any Reduction Space [as such term is defined in
Section 1.7 below] provided that Landlord has entered into a Third Party Lease
[as such term is defined below in this Section 1.5.1] with a third party after
the time that Tenant returns possession of such Reduction Space to Landlord
pursuant to Tenant's reduction rights set forth in Section 1.7 below) (the
"FIRST OFFER SPACE"), when such space (or applicable portion thereof) becomes
available for lease as provided hereinbelow as reasonably determined by
Landlord. For purposes hereof, the applicable First Offer Space shall only
become available for lease to Tenant (i) after Landlord has entered into a lease
with a third party for such First Offer Space (a "THIRD PARTY

                                      -4-
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LEASE"), and (ii) following the expiration or earlier termination of such Third
Party Lease and after such third party has vacated such space.

               1.5.1.1 Notwithstanding the foregoing, with respect to that
certain space located on the first floor of Building C as depicted on EXHIBIT M
attached hereto containing approximately 14,847 rentable square feet (the "FIRST
FLOOR FIRST OFFER SPACE"), in addition to Tenant's right of first offer to lease
the First Floor First Offer Space after such space becomes available for lease
following Landlord's lease of such space to a third party with a Third Party
Lease as provided in Section 1.5.1 above, Tenant shall also have the one-time
right of first offer pursuant to this Section 1.5.1.1 to lease the First Floor
First Offer Space prior to the first time Landlord has entered into a Third
Party Lease with any third party therefor which is other than Aetna Life
Insurance Company or its affiliate or designee ("AETNA"), when such space
becomes available for lease as reasonably determined by Landlord as provided
hereinbelow. The First Floor First Offer Space shall become available for lease
pursuant to the immediately preceding sentence prior to the first time Landlord
intends to submit to a third party which is other than Aetna a bona fide
proposal or letter of intent to lease all or any portion of the First Floor
First Offer Space.

               1.5.1.2 Further, if Landlord determines, in its sole discretion,
to terminate lease negotiations with Aetna for that certain space (the "AETNA
FIRST OFFER SPACE") which consists of the second (2nd) floor of Building C and
the balance of the first floor of Building C which is other than the First Floor
First Offer Space described in Section 1.5.1.1 above, in addition to Tenant's
right of first offer to lease the Aetna Space after such space becomes available
for lease following Landlord's lease of such space to a third party with a Third
Party Lease as provided in Section 1.5.1 above, Tenant shall also have the
one-time right of first offer pursuant to this Section 1.5.1.2 to lease the
Aetna Space prior to the first time Landlord has entered into a Third Party
Lease with any third party therefor, when such space becomes available for lease
as reasonably determined by Landlord as provided hereinbelow. The Aetna Space
shall become available for lease pursuant to the immediately preceding sentence
prior to the first time Landlord intends to submit to a third party which is
other than Aetna a bona fide proposal or letter of intent to lease all or any
portion of the Aetna Space.

               1.5.1.3 Any First Floor First Offer Space or Aetna Space leased
by Tenant pursuant to Sections 1.5.1.1 or 1.5.1.2 above (but not pursuant to
Section 1.5.1 above) shall be collectively referred to herein as the "SPECIAL
FIRST OFFER SPACE".

               1.5.1.4 Tenant's right of first offer shall be on the terms and
conditions set forth in this Section 1.5 and, at Tenant's election, (A) shall be
for the entire amount of the First Offer Space which becomes available for lease
as determined by Landlord as provided herein, and not a portion thereof, or (B)
with respect to any First Offer Space which is other than the First Floor First
Offer Space, shall be for not less than contiguous full floor portions of such
First Offer Space starting with the highest floor contiguous to the remainder of
the Premises in Building C leased by Tenant as of the date Tenant delivers its
applicable Tenant's Election Notice (as defined below) exercising Tenant's right
of first offer for such space (for example, if the First Offer Notice indicates
that the available First Offer Space consists of Floors 1 and 2 of Building C
and as of the date of Tenant's Election Notice the portion of the Premises in
Building C that Tenant is leasing consists only of Floors 3, 4 and 5 of Building
C, then Tenant may elect pursuant to this clause (B) to lease either (x) all of
Floor 1, (y) all of Floor 2, or (z) all of Floors 1 and 2). In the event that
only a portion of the First Offer Space becomes available for lease (as
reasonably determined by Landlord), Tenant's right of first offer shall continue
as to the remainder of the First Offer Space, when such remainder becomes
available (as reasonably determined by Landlord) on the terms and conditions set
forth in this Section 1.5. Notwithstanding anything herein to the contrary,
Tenant's right of first offer set forth in this Section 1.5 shall be subject to
the rights of the third party tenant under a Third Party Lease to renew the
lease term of the Third Party Lease, but only if such renewal is consummated
pursuant to an express provision in such lease or any modification of any
express renewal provision that may be agreed upon by Landlord and such party (so
long as such modification does not provide for a longer renewal term than
originally provided in such express renewal provision).

          1.5.2 FIRST OFFER NOTICE; TERMS OF LEASE OF FIRST OFFER SPACE. During
the First Offer Eligibility Period, Landlord shall give Tenant written notice
(the "FIRST OFFER NOTICE") when the First Offer Space (or any portion thereof)
is expected to become or has become available for lease by Tenant during the
First Offer Eligibility Period (as such availability is

                                      -5-
<PAGE>

reasonably determined by Landlord) pursuant to the terms of Tenant's right of
first offer, as set forth in this Section 1.5. With respect to any First Offer
Space which is other than the Special First Offer Space leased by Tenant
pursuant to Sections 1.5.1.1 or 1.5.1.2 above, Landlord shall use its best
efforts to deliver the First Offer Notice at least six (6) months prior to the
date Landlord anticipates that the applicable First Offer Space will become
available for lease by Tenant; provided, however, that Landlord shall not be
liable to Tenant in the event that such notice is inaccurate as to the precise
availability date, so long as Landlord exercised good faith and reasonable
judgment in determining such anticipated delivery date identified in the First
Offer Notice. Landlord's First Offer Notice shall describe the First Offer Space
so offered to Tenant and the rentable and usable square footage thereof as
determined by Landlord pursuant to Section 1.3, and shall also set forth the
annual Base Rent for the First Offer Space (the "FIRST OFFER SPACE RENT") and
the other material terms upon which Landlord would lease the First Offer Space
to Tenant; provided, however, that:

               (i)  the lease term for the First Offer Space shall be
coterminous with the Lease Term for the original Premises (as may be extended
pursuant to the Extension Option Rider) unless, if by making the term of the
lease for the First Offer Space coterminous with the Lease Term for the original
Premises, the term of the lease for the First Offer Space would be less than
five (5) years, then the lease term for the First Offer Space shall be, at
Landlord's election, either five (5) years or such shorter period as Landlord
shall so specify in Landlord's First Offer Notice; however, if Landlord so
specifies a term which is shorter than five (5) years and Tenant objects thereto
concurrently with Tenant's delivery of Tenant's Election Notice (as such term is
defined in Section 1.5.3 below), the term of the lease for the First Offer Space
shall be coterminous with the Lease Term for the original Premises;

               (ii) except for any Special First Offer Space leased by Tenant
pursuant to Sections 1.5.1.1 or 1.5.1.2 above, subject to such tenant
improvement allowance to be provided to Tenant for such First Offer Space as
determined pursuant to the following provisions of this Section 1.5.2, Tenant
shall take such First Offer Space in its "as-is" condition as of the date of
delivery of such space, and the construction of improvements in such First Offer
Space shall be Tenant's sole responsibility, with any such construction to
comply with the terms of Article 8 of this Lease; and

               (iii) with respect to any Special First Offer Space leased by
Tenant pursuant to Sections 1.5.1.1 or 1.5.1.2 above, Landlord shall construct
the initial tenant improvements for such Special First Offer Space (and the
base, shell and core if not already constructed for such space) pursuant to a
tenant work letter substantially the same as the Tenant Work Letter attached to
this Lease as Exhibit B, except that: (A) the time deadlines for submittal and
approval of plans and specifications and other actions required to be performed
by Landlord and Tenant shall be revised with respect to the Special First Offer
Space pursuant to a schedule mutually approved by the parties and set forth in
the amendment to Lease described in Section 1.5.4 below (except that there shall
be no staged delivery or Delivery condition provisions with respect to any
portion of the Special First Offer Space); (B) Sections 5.4 and 5.5 of the
Tenant Work Letter shall not apply with respect to the Special First Offer
Space; (C) the tenant improvement allowance for the Special First Offer Space
shall be determined as part of the Fair Market Rental Rate for the Special First
Offer Space as provided in Section 1.5.2.2 below; and, unless otherwise mutually
agreed to by Landlord and Tenant, Tenant shall not be entitled to use any
portion of such tenant improvement allowance for any of Tenant's Property or
Moving/Personal Property Costs as provided in the Tenant Work Letter; (D) the
fixed fees and general conditions for the Contractor if Landlord selects Snyder
Langston as the Contractor currently set forth in the Tenant Work Letter, and
the provisions requiring Landlord to enter into a guaranteed maximum
construction contract with the Contractor shall not apply with respect to the
Special First Offer Space unless otherwise mutually approved by Landlord and
Tenant; and (E) the terms and conditions of the Tenant Work Letter attached to
this Lease which conflict with the terms and conditions of this Section
1.5.2(iii) shall not apply.

               1.5.2.1 LEASE OF FIRST OFFER SPACE DURING THE FIRST THREE YEARS
OF THE LEASE TERM. In the event that the First Offer Commencement Date for the
applicable First Offer Space leased by Tenant (which is other than the Special
First Offer Space leased by Tenant pursuant to Sections 1.5.1.1 or 1.5.1.2
above) occurs prior to the last day of the third (3rd) year of the initial Lease
Term, Tenant's lease of such First Offer Space (sometimes referred to herein as
the "PRE-THIRD YEAR OFFER SPACE") shall be upon the same terms and conditions of
this Lease as applicable to the original Premises, except that the Tenant Work
Letter attached hereto

                                      -6-
<PAGE>

as EXHIBIT B and the Tenant Improvement Allowance set forth therein shall not
apply with respect to such Pre-Third Year Offer Space, but the tenant
improvement allowance for the applicable Pre-Third Year Offer Space shall equal
the Fair Market Allowance (as such term is defined below) therefor.
Specifically, (i) the annual Base Rent payable for the Pre-Third Year Offer
Space shall be at the same base rental rate per rentable square foot as Tenant
is paying for the original Premises and shall be subject to increases at the
same time and at the same base rental rate per rentable square foot as the
annual Base Rent is increased for the original Premises; (ii) the Base Year used
for determining Tenant's obligation to pay Direct Expenses for the Pre-Third
Year Offer Space shall be the same as the Base Year used for determining
Tenant's obligation to pay Direct Expenses for the original Premises; (iii)
Tenant's Share shall be increased to take into account the rentable square feet
of the Pre-Third Year Offer Space; and (iv) Tenant shall be entitled to rent, at
no charge during the initial Lease Term, additional unreserved, undesignated
parking spaces in the Parking Facilities at the ratio of four (4) unreserved,
undesignated parking spaces for each 1,000 rentable square feet of the Pre-Third
Year Offer Space so leased by Tenant. In lieu of the Tenant Improvement
Allowance provided in the Tenant Work Letter, Landlord shall provide Tenant with
a tenant improvement allowance for such Pre-Third Year Offer Space equal to the
tenant improvement allowance provided to non-equity tenants, as of the
commencement of the lease term for such Pre-Third Year Offer Space, who are
leasing non-sublease, non-equity, unencumbered space on a full-service gross
basis comparable in size, location and quality to the Pre-Third Year Offer Space
for a comparable term, which comparable space is located in the Project and in
other first-class office buildings in Woodland Hills, California (collectively,
the "COMPARABLE BUILDINGS") (but in determining any such tenant improvement
allowance, the quality and quantity of tenant improvements in the Pre-Third Year
Offer Space shall be taken into account and the value thereof deducted from such
allowance to the extent the same can be used by a general office user), and
taking into consideration that Tenant's lease of such Pre-Third Year Offer Space
shall be subject to the Base Rent and Base Year specified in clauses (i) and
(ii), respectively, of the immediately preceding sentence (the "FAIR MARKET
ALLOWANCE"); provided, however, in no event shall the Fair Market Allowance
provided to Tenant be less than $10.00 per usable square foot of the Pre-Third
Year Offer Space.

               1.5.2.2 LEASE OF SPECIAL FIRST OFFER SPACE AND FIRST OFFER SPACE
AFTER THE FIRST THREE YEARS OF THE LEASE TERM. In the event that the First Offer
Commencement Date for the applicable First Offer Space leased by Tenant (which
is other than the Special First Offer Space leased by Tenant pursuant to
Sections 1.5.1.1 or 1.5.1.2 above) occurs after the last day of the third (3rd)
year of the initial Lease Term, the First Offer Space Rent payable for such
First Offer Space (sometimes referred to herein as the "POST-THIRD YEAR OFFER
SPACE") shall be equal to ninety-five percent (95%) of the "FAIR MARKET RENTAL
RATE" for such Post-Third Year Offer Space (as such term is defined in Section 2
of the Extension Option Rider). The First Offer Space Rent payable for any
Special First Offer Space leased by Tenant pursuant to Sections 1.5.1.1 and/or
1.5.1.2 above shall be equal to the Fair Market Rental Rate for such Special
First Offer Space. The Base Year used for determining Tenant's obligations to
pay Direct Expenses for any such Post-Third Year Offer Space and Special First
Offer Space leased by Tenant hereunder shall be the calendar year in which the
First Offer Commencement Date therefor occurs; provided, however, that if the
First Offer Commencement Date for such Post-Third Year Offer Space or Special
First Offer Space, as the case may be, occurs after the month of September of
such calendar year, then the Base Year therefor shall be the calendar year
immediately following the calendar year in which such First Offer Commencement
Date occurs. All of the other terms of the lease for such applicable Post-Third
Year Offer Space and Special First Offer Space, as the case may be, shall be
upon the same terms and conditions of this Lease as applicable to the original
Premises, except that (i) the Tenant Work Letter and Tenant Improvement
Allowance set forth therein shall not apply with respect to any such Post-Third
Year Offer Space leased by Tenant hereunder (as the tenant improvement allowance
for such Post-Third Year Offer Space shall be determined as a component of the
Fair Market Rental Rate therefor as set forth in Section 1.5.2 above), (ii) the
Tenant Work Letter and tenant improvement allowance for the Special First Offer
Space leased by Tenant pursuant to Sections 1.5.1.1 and/or 1.5.1.2 above shall
be as set forth in Section 1.5.2(iii) above, and (iii) Tenant's Share shall be
increased to take into account the rentable square feet of such Post-Third Year
Offer Space or Special First Offer Space, as the case may be leased by Tenant
hereunder. Tenant shall be entitled to rent, at the prevailing parking rates, if
any, charged by Landlord or Landlord's parking operator from time to time as set
forth in Section 24.2 below, additional parking spaces in such locations within
the Parking Facilities as Landlord shall determine from time to time, at the
ratio

                                      -7-
<PAGE>

of four (4) parking spaces for each 1,000 rentable square feet of any
Post-Third Year Offer Space and Special First Offer Space so leased by Tenant;
five percent (5%) of such parking spaces shall be reserved for Tenant's use in
such locations in the Parking Facilities as shall be reasonably determined by
Landlord from time to time, while the remainder shall be unreserved,
undesignated parking spaces.

               1.5.3 PROCEDURE FOR ACCEPTANCE. On or before the date which is
ten (10) business days after Tenant's receipt of Landlord's First Offer Notice
(the "ELECTION DATE") (such ten (10) business day period shall be reduced to
five (5) business days with respect to Landlord's First Offer Notice for any
Special First Offer Space described in Section 1.5.1 above), Tenant shall
deliver written notice to Landlord ("TENANT'S ELECTION NOTICE") pursuant to
which Tenant shall have the right to elect either to: (i) lease the entire First
Offer Space described in the First Offer Notice (or with respect to any space
other than the First Floor First Offer Space, such contiguous full floor(s)
thereof as described in Section 1.5.1(B) above) at the First Offer Space Rent
and upon the other terms therefor set forth in the First Offer Notice (if Tenant
desires to lease less then the entire First Offer Space pursuant to this clause
(i) or clause (ii) hereinbelow, Tenant shall designate in Tenant's Election
Notice which contiguous full floor portion(s) thereof Tenant so desires to lease
pursuant to Section 1.5.1(B) above, but if Tenant fails to indicate its desire
to lease less than the entire First Offer Space, Tenant shall be deemed to have
elected to lease the entire First Offer Space); (ii) lease the entire First
Offer Space (or, with respect to any space other than the First Floor First
Offer Space, such contiguous full floor(s) thereof as described in Section
1.5.1(B) above) upon the terms set forth in the First Offer Notice, except that
Tenant may concurrently object to Landlord's determination of the Fair Market
Allowance with respect to any Pre-Third Year Offer Space or the Fair Market
Rental Rate for any Post-Third Year Offer Space, as the case may be; provided
that not timely objecting to Landlord's determination of the Fair Market
Allowance or the Fair Market Rental Rate, as applicable, shall be deemed
Tenant's acceptance of same; or (iii) refuse to lease the entire or any such
contiguous full floor portions of the First Offer Space identified in the First
Offer Notice. If Tenant does not respond in writing to Landlord's First Offer
Notice by the Election Date, Tenant shall be deemed to have elected not to lease
any of such First Offer Space. If Tenant elects or is deemed to have elected not
to lease any of such First Offer Space, then Tenant's right of first offer set
forth in this Section 1.5 shall terminate with respect to all of the First Offer
Space specified in the First Offer Notice and Landlord shall thereafter have the
right to lease all or any portion of such First Offer Space to anyone to whom
Landlord desires on any terms Landlord desires; provided, however, Tenant shall
have a subsequent right of first offer to lease the applicable First Offer Space
identified in such First Offer Notice if such First Offer Space subsequently
becomes available for lease (as reasonably determined by Landlord) during the
First Offer Eligibility Period (A) after Landlord has entered into a subsequent
lease for such First Offer Space with a third party or third parties following
Tenant's failure to exercise such first offer right with respect to such space
and the expiration or earlier termination of the original Third Party Lease
therefor (including renewals, whether or not such renewal is pursuant to an
express provision in such lease or otherwise), and (B) following the expiration
or earlier termination of such subsequent third party lease and after the
applicable third party has vacated such space. If Tenant elects to lease the
entire First Offer Space, or with respect to any space other than the First
Floor First Offer Space, contiguous full floor(s) thereof identified in the
First Offer Notice, but objects to Landlord's determination of the Fair Market
Allowance or the Fair Market Rental Rate, as applicable, for the applicable
First Offer Space pursuant to clause (ii) hereinabove, then Landlord and Tenant
shall use the procedure set forth in Section 4 of the Extension Option Rider to
determine such Fair Market Rental Rate and/or Fair Market Allowance, as
applicable.

               1.5.4 AMENDMENT TO LEASE. If Tenant timely and validly exercises
its right of first offer to lease any First Offer Space pursuant to this
Section 1.5: (i) the applicable First Offer Space shall become part of the
Premises leased by Tenant under this Lease as of the applicable First Offer
Commencement Date therefor, pursuant to the terms of this Section 1.5 and the
other terms of this Lease which are not inconsistent therewith; (ii) with
respect to any space other than the Special First Offer Space leased by Tenant
pursuant to Sections 1.5.1.1 and/or 1.5.1.2 above, Landlord shall deliver the
applicable First Offer Space to Tenant on a date selected by Landlord (the
"PROJECTED DELIVERY DATE") that is no sooner than ninety (90) days and no later
than one (1) year after the date Landlord delivered to Tenant the applicable
First Offer Notice to Tenant, which outside Projected Delivery Date shall be
extended until the date the existing tenant vacates and surrenders possession of
such First Offer Space to Landlord; Landlord shall not be liable to Tenant or
otherwise be in default under this Lease if Landlord is

                                      -8-
<PAGE>

unable to deliver the applicable First Offer Space to Tenant by the outside
Projected Delivery Date due to the failure of any other tenant to timely vacate
and surrender to landlord such First Offer Space or any portion thereof (with
respect to any First Offer Space which is Special First Offer Space, the
foregoing provisions of this clause (ii) shall not apply, as Landlord shall
deliver the Special First Offer Space following the date Landlord substantially
completes the tenant improvements therefor in accordance with the provisions of
Section 1.5.2(iii) above); and (iii) Landlord and Tenant shall promptly after
such exercise by Tenant execute an amendment to this Lease covering the First
Offer Space and the lease terms thereof. The lease term for the applicable First
Offer Space so leased by Tenant (which is other than the Special First Offer
Space leased by Tenant pursuant to Sections 1.5.1.1 and/or 1.5.1.2 above), shall
commence upon the date (the "FIRST OFFER COMMENCEMENT DATE") which is the
earlier of (A) the date Tenant commences business operations in such First Offer
Space or (B) the date which is forty-five (45) days after Landlord's delivery of
such First Offer Space to Tenant in its "AS-IS" condition as set forth above.
The lease term for any Special First Offer Space leased by Tenant pursuant to
Sections 1.5.1.1 and/or 1.5.1.2 above shall commence upon the First Offer
Commencement Date therefor, which date shall, notwithstanding the immediately
preceding sentence to the contrary, be the earlier of (1) the date Tenant
commences business operations in such Special First Offer Space or (2) the date
Landlord substantially completes the tenant improvements for such Special First
Offer Space (subject to acceleration for any Tenant caused delays as provided in
the tenant work letter for such Special First Offer Space).

               1.5.5 SUSPENSION OF RIGHT OF FIRST OFFER. Notwithstanding
anything in the foregoing to the contrary, at Landlord's option, and in addition
to all of Landlord's remedies under this Lease, at law or in equity, the right
of first offer herein above granted to Tenant shall not be deemed to be properly
exercised if, as of the date Tenant exercises its right of first offer, Tenant
is in monetary or material non-monetary default under this Lease beyond any
applicable notice and cure period; provided, however, that Tenant shall be
entitled to an additional five (5) business days from the date of Tenant's
receipt of Landlord's notice to cure any such monetary or material non-monetary
default in order to preserve Tenant's first offer right so exercised by Tenant
to lease the applicable First Offer Space thereunder. In addition, Tenant's
right of first offer to lease the First Offer Space is personal to the original
tenant executing this Lease (the "ORIGINAL TENANT") and any assignee (including
an Affiliate) to which Tenant's entire interest in this Lease has been assigned
pursuant to Article 14 of this Lease (and not by any sublessee or other
transferee of Tenant's interest in the Lease), and shall only be available to
and exercisable by the Tenant when the Original Tenant or such assignee is in
actual and physical possession of all of the rentable area located in
Building B.

     1.6  FHS EXPANSION SPACE. Landlord hereby grants to Tenant the right to
lease between approximately 100,000 and 125,000 rentable square feet of space,
which space (the "FHS EXPANSION SPACE") shall be located, at Landlord's sole
election, either (i) entirely in an existing building in the Project (a
"PRE-EXISTING BUILDING") or (ii) entirely in a new building to be constructed by
Landlord and added to the Project (a "NEW BUILDING"), upon the terms and
conditions set forth in this Section 1.6. The precise amount of the FHS
Expansion Space (within such rentable square footage parameters) and the exact
location of the FHS Expansion Space shall be designated by Landlord (it being
acknowledged that the FHS Expansion Space must be contiguous space if located in
a New Building, or in a Pre-Existing Building which is other than Building C,
but may or may not be contiguous space if located in Building C, as determined
by Landlord in Landlord's sole discretion). In the event that Tenant exercises
its rights under this Section 1.6, the Original Tenant, and/or Foundation Health
Systems ("FHS") through a sublease entered into by Tenant and FHS pursuant to
the following provisions of this Section 1.6, shall initially occupy the FHS
Expansion Space. In the event that Tenant subleases to FHS all or any portion of
the FHS Expansion Space, Landlord shall have no right to consent to such
sublease, provided that (A) Tenant gives Landlord at least ten (10) days' prior
notice of any such sublease, (B) any such sublease shall be subject and
subordinate to all of the terms and provisions of this Lease and FHS shall
expressly assume, in a written sublease delivered to Landlord on or prior to the
effective date of such sublease, all of the obligations of Tenant under this
Lease with respect to the FHS Expansion Space subleased to FHS (other than the
amount of Base Rent payable by FHS with respect to such sublease), and (C)
Tenant shall remain fully liable for all obligations to be performed by Tenant
under this Lease.

          1.6.1 METHOD OF EXERCISE. The expansion option contained in this
Section 1.6 shall be exercised by Tenant only in the following manner:

                                      -9-
<PAGE>

          (i)  Tenant shall deliver written notice to Landlord ("TENANT'S FHS
INTEREST NOTICE") not later than June 1, 2002, stating that Tenant may be
interested in exercising its expansion option;

          (ii) Landlord, within ninety (90) days after receipt of Tenant's FHS
Interest Notice, shall deliver notice (the "FHS EXPANSION RENT NOTICE") to
Tenant setting forth (A) whether the FHS Expansion Space will be located in a
Pre-Existing Building or New Building and, in either case, the approximate
location of the space Landlord shall designate as the FHS Expansion Space, if
leased by Tenant, (B) the approximate rentable and usable square footage of the
space Landlord shall designate as the FHS Expansion Space, which shall be not
less than approximately 100,000 rentable square feet and not more than
approximately 125,000 rentable square feet, (C) in the event that the FHS
Expansion Space shall be located in a Pre-Existing Building, Landlord's
determination of the Fair Market Rental Rate (as defined in the Extension Option
Rider attached hereto) for the FHS Expansion Space, (D) in the event the FHS
Expansion Space shall be located in a New Building, Landlord's estimate of the
Total New FHS Building Costs and the estimated annual Base Rent payable by
Tenant therefor based upon and in accordance with the yield on cost formula set
forth in Section 1.6.4 below, and (E) Landlord's estimate of the date Landlord
will deliver possession of the FHS Expansion Space to Tenant pursuant to Section
1.6.2 below; provided, however, if Tenant delivers Tenant's FHS Interest Notice
at any time during the period from and after March 1, 2002 through and including
June 1, 2002, then, notwithstanding anything to the contrary set forth in this
Section 1.6, (1) Landlord shall have until September 1, 2002 to deliver to
Tenant the FHS Expansion Rent Notice described above, and (2) if Landlord
determines that the FHS Expansion Space will be located in a New Building, the
Base Rent payable by Tenant for the FHS Expansion Space in the New Building
shall be calculated based upon the lesser of (x) the actual Total New FHS
Building Costs incurred by Landlord therefor or (y) the estimated Total New FHS
Building Costs set forth in Landlord's FHS Expansion Rent Notice (including
reserves and contingencies), as such estimated amounts may be increased to the
extent such estimates are based on dates or other factors which are variable in
nature (e.g., interest, financing and carrying costs which vary based upon the
length of the construction process and/or the actual date of substantial
completion and delivery of the FHS Expansion Space) and/or due to acts or
omissions of Tenant or Tenant's agents, employees or contractors, including any
Tenant Delays and/or changes in the base, shell and core of the New Building
required due to changes in the plans therefor proposed by Tenant or required in
connection with the tenant improvements for the FHS Expansion Space; and

          (iii) if Tenant wishes to exercise its expansion option for the FHS
Expansion Space designated by Landlord in the FHS Expansion Rent Notice, Tenant
shall, on or before the date occurring thirty (30) days after Tenant's receipt
of the FHS Expansion Rent Notice, exercise the expansion option by delivering
written notice thereof (the "FHS EXPANSION EXERCISE NOTICE") to Landlord, and,
in the event that the FHS Expansion Space shall be located in a Pre-Existing
Building as designated by Landlord, upon and concurrent with such exercise,
Tenant may, at its option, object to Landlord's determination of the Fair Market
Rental Rate for the FHS Expansion Space contained in the FHS Expansion Rent
Notice, in which case the parties shall follow the procedure and the Fair Market
Rental Rate for the FHS Expansion Space shall be determined as set forth in
Section 4 of the Extension Option Rider attached hereto. If Tenant does not
timely object to Landlord's determination of the Fair Market Rental Rate for the
FHS Expansion Space, Landlord's determination thereof shall be conclusive and
the arbitration procedures in Section 4 of the Extension Option Rider shall not
be applicable but only if the FHS Expansion Rent Notice so states.

          1.6.2 DELIVERY OF THE FHS EXPANSION SPACE. Promptly after Landlord
substantially completes Landlord's construction obligations for the FHS
Expansion Space as described in Section 1.6.5 below, Landlord shall deliver the
FHS Expansion Space to Tenant in the condition required in Section 1.6.5.
Landlord shall endeavor to so deliver the FHS Expansion Space on or prior to
October 1, 2004, but, subject to Section 1.6.5 below, Landlord shall not be
liable to Tenant nor shall Tenant have any right to terminate this Lease or
Tenant's lease of the FHS Expansion Space as a result of Landlord's failure to
so deliver the FHS Expansion Space by such date.

          1.6.3 TERMS OF TENANT'S LEASE OF THE FHS EXPANSION SPACE. In the event
that Landlord shall elect to locate the FHS Expansion Space in a Pre-Existing
Building, (i) the annual Base Rent payable by Tenant for the FHS Expansion Space
shall be equal to ninety-five percent (95%) of the Fair Market Rental Rate for
the FHS Expansion Space, and (ii) the term of

                                      -10-
<PAGE>

Tenant's lease of the FHS Expansion Space shall be eight (8) years commencing
upon the FHS Commencement Date (as defined below). In the event that Landlord
shall elect to locate the FHS Expansion Space in a New Building, (A) the annual
Base Rent payable by Tenant for the FHS Expansion Space shall be determined in
accordance with the yield on cost formula set forth in Section 1.6.4 below,
subject, however to the provisions in Section 1.6.1(ii) above, and (B) the term
of Tenant's lease of the FHS Expansion Space shall be ten (10) years commencing
upon the FHS Commencement Date. Regardless of whether Landlord elects to locate
the FHS Expansion Space in a Pre-Existing Building or a New Building, (1) the
Base Year used for determining Tenant's obligation to pay Direct Expenses for
the FHS Expansion Space shall be the calendar year in which the FHS Commencement
Date occurs (provided, however, that if the FHS Commencement Date occurs after
the month of September of such calendar year, then the Base Year therefor shall
be the calendar year immediately following the calendar year in which the FHS
Commencement Date occurs), and (2) Tenant shall be entitled to rent, at the
prevailing parking rates, if any, charged by Landlord or Landlord's parking
operator from time to time as set forth in Section 24.2 below, additional
parking spaces in such locations within the Parking Facilities as Landlord shall
determine from time to time, at the ratio of four (4) parking spaces for each
1,000 rentable square feet of the FHS Expansion Space so leased by Tenant; five
percent (5%) of such parking spaces shall be reserved for Tenant's use in such
locations in the Parking Facilities as shall be determined by Landlord from time
to time, while the remainder shall be unreserved, undesignated parking spaces.

          1.6.4 FHS BASE RENT FOR FHS EXPANSION SPACE IN NEW BUILDING.

               1.6.4.1 YIELD ON COST FORMULA. In the event that Landlord elects
to locate the FHS Expansion Space in a New Building, the annual Base Rent
payable by Tenant for the FHS Expansion Space for the first (1st) year of the
lease term therefor (the "FIRST YEAR FHS BASE RENT") shall equal an amount which
shall yield Landlord, on an annual basis during the initial lease term for the
FHS Expansion Space, a net revenue return on the Total New FHS Building Costs
(as defined below) per rentable square foot per year of the greater of (i)
eleven percent (11%) or (ii) the sum of (A) the Ten-Year Treasury Rate in effect
at the date of commencement of construction of the New Building plus (B) five
percent (5%). During each year of the initial lease term for the FHS Expansion
Space commencing with the second (2nd) year thereof, the annual Base Rent
payable for the FHS Expansion Space shall equal the First Year FHS Base Rent,
increased by two percent (2%) per year on a cumulative and compounded basis.

               1.6.4.2 TOTAL NEW FHS BUILDING COSTS. The term "TOTAL NEW FHS
BUILDING COSTS" shall mean the total of all soft and hard costs, determined
on a per rentable square foot basis based upon the rentable square feet of
the FHS Expansion Space in the New Building, paid or incurred by Landlord in
connection with the acquisition, design, construction and development of the
New Building and the FHS Expansion Space therein, and the related utilities,
parking structures, parking areas, site, infrastructure, streets, roadways,
driveways, plazas, courtyards, transportation facilitation areas, accessways
and common area improvements and facilities associated or constructed in
connection therewith (collectively, the "RELATED IMPROVEMENTS"); provided,
however, to the extent any of the Related Improvements are directly used by
or benefit any buildings located on the Real Property (or elsewhere) in
addition to the New Building, any such costs and expenses pertaining to the
Related Improvements shall be allocated on a pro-rata basis, as reasonably
determined by Landlord, to the Total New FHS Building Costs. The Total New
FHS Building Costs shall include, without limitation: (i) all architectural,
engineering, contractor, subcontractor, governmental, license, permit,
school, art, marketing, traffic impact, parking, sewer, utilities, legal and
accounting fees and expenses, and the cost of all labor, supplies and
materials; (ii) Landlord's costs and expenses related to acquiring the land
upon which the New Building and such Related Improvements are or shall be
constructed or located (which land costs and expenses the parties agree shall
equal the "Land Cost Amount" [as defined below] per square foot of land area
upon which the New Building and such Related Improvements are or shall be
constructed or located, and which land area for any land located outside the
New Building upon which any Related Improvements are located shall be
allocated to the land area of the land upon which the New Building is located
on a pro rata basis, as reasonably determined by Landlord, to the extent any
such Related Improvements are directly used by or benefit any buildings
located on the Real Property in addition to the New Building); (iii) any
costs incurred by Landlord for designing and constructing the initial tenant
improvements for the FHS Expansion Space and any tenant improvement allowance
provided by Landlord to Tenant in connection with Tenant's lease of the FHS
Expansion Space (collectively,

                                      -11-
<PAGE>

the "FHS TENANT IMPROVEMENT COSTS/ALLOWANCE"), provided, however, Landlord's
contribution for the FHS Tenant Improvement Costs/Allowance shall be fixed at
$35.00 per usable square foot of the FHS Expansion Space, and Tenant shall be
responsible for paying for all of the costs of the design and construction of
the initial tenant improvements for the FHS Expansion Space in excess of such
amount, which payment shall be made directly to Landlord during the design
and construction of the initial tenant improvements for the FHS Expansion
Space and not as a part of the annual Base Rent for the FHS Expansion Space
or the Total New FHS Building Costs; (iv) any interest expenses and tax and
insurance payments incurred during such construction process; (v) the cost of
grading, demolition, site work, lighting and landscaping; (vi) any loan or
mortgage fees and other financing costs; (vii) leasing commissions; (viii)
developer fees and development management fees; and (ix) any other costs,
fees or expenses incurred in connection with such acquisition, design,
construction and development. Without limitation, examples of some of the
line items and categories of the Total New FHS Building Costs are shown on
EXHIBIT J attached to this Lease. For purposes hereof, the "LAND COST AMOUNT"
shall equal the sum of (A) $45.00 per square foot of the applicable land
area, plus (B) all loan interest expenses and carrying costs incurred or
imputed by Landlord with respect to such land area during the period from the
date of mutual execution and delivery of this Lease until the FHS
Commencement Date.

               1.6.4.3 FINAL RENT NOTICE. Landlord shall deliver to Tenant a
notice (the "FINAL RENT NOTICE") indicating the actual amount of the Total New
FHS Building Costs and resulting annual Base Rent payable in connection
therewith based upon the foregoing yield on cost formula (and the provisions of
Section 1.6.1(ii) above) following Landlord's determination of same. If the
Final Rent Notice is delivered by Landlord to Tenant after the FHS Commencement
Date, then until such notice is delivered to Tenant, Tenant shall pay annual
Base Rent for the FHS Expansion Space pursuant to this Section 1.6.4 at the
estimated amount set forth in the FHS Expansion Rent Notice delivered by
Landlord to Tenant pursuant to Section 1.6.1 above, and within thirty (30) days
after delivery of the Final Rent Notice, Tenant shall pay to Landlord the total
amount of any underpayment of such annual Base Rent applicable to the period
from the FHS Commencement Date until such payment is made, or Landlord shall
credit against the annual Base Rent next coming due and payable for the FHS
Expansion Space any overpayment of such annual Base Rent actually paid by Tenant
applicable to such period.

               1.6.4.4 TOTAL NEW FHS BUILDING COSTS AUDIT RIGHT. In the event
Tenant disputes the actual amount of the Total New FHS Building Costs set forth
on the Final Rent Notice, Tenant shall have the right, at Tenant's cost, after
reasonable notice to Landlord, to have Tenant's authorized employees inspect, at
Landlord's office in Los Angeles and/or Orange Counties during normal business
hours, Landlord's books, records and supporting documents concerning the Total
New FHS Building Costs set forth on the Final Rent Notice; provided, however,
Tenant shall have no right to conduct such inspection, have an audit performed
by the FHS Building Accountant as described below, or object to or otherwise
dispute the amount of the Total New FHS Building Costs set forth on the Final
Rent Notice unless Tenant notifies Landlord of such objection and dispute,
completes such inspection, and has the FHS Building Accountant (as defined in
this Section 1.6.4.4 below) commence and complete such audit within one hundred
twenty (120) days following Landlord's delivery of the Final Rent Notice (the
"FHS REVIEW PERIOD"); provided, further, that notwithstanding any such timely
objection, dispute, inspection, and/or audit, and as a condition precedent to
Tenant's exercise of its right of objection, dispute, inspection and/or audit as
set forth in this Section 1.6.4.4, Tenant shall not be permitted to withhold
payment of, and Tenant shall timely pay to Landlord, the full amounts as
required by the provisions of this Section 1.6.4 in accordance with the Final
Rent Notice. However, such payment may be made under protest pending the
resolution of any such dispute pursuant to the following provisions of this
Section 1.6.4. In connection with any such inspection by Tenant, Landlord and
Tenant shall reasonably cooperate with each other so that such inspection can be
performed pursuant to a mutually acceptable schedule, in an expeditious manner
and without undue interference with Landlord's operation and management of the
Real Property. If after such inspection and/or request for documentation, Tenant
still disputes the amount of the Total New FHS Building Costs set forth in the
Final Rent Notice, Tenant shall have the right, within the FHS Review Period, to
cause an independent certified public accountant (which is not paid on a
commission or contingency basis) selected by Tenant and reasonably approved by
Landlord (the "FHS BUILDING ACCOUNTANT") to complete an audit of Landlord's
books and records to determine the amount of the Total New FHS Building Costs
incurred and the amount of the First Year FHS Base Rent. Such audit by the FHS
Building

                                      -12-
<PAGE>

Accountant shall be final and binding upon Landlord and Tenant, unless
Landlord objects thereto in a written notice delivered to Tenant within sixty
(60) days after Tenant delivers the results of such audit to Landlord. If
Landlord timely objects to the results of such audit, then the parties shall
promptly submit the dispute to binding arbitration under the auspices of
JAMS/ENDISPUTE (or any successor to such organization) in Los Angeles,
California, according to the then rules of commercial arbitration for such
organization but with reference to the Total New FHS Building Costs, and the
arbitrators resolving such dispute shall only have jurisdiction to determine the
Total New FHS Building Costs and corresponding First Year FHS Base Rent in
dispute, and shall not have jurisdiction to modify the terms of this Lease.
Within thirty (30) days following the resolution of such dispute based upon the
audit or binding arbitration, as the case may be, (i) if it is determined that
Tenant has overpaid Landlord for the First Year FHS Base Rent, Landlord shall
reimburse to Tenant the amount of such over-payment together with interest on
the amount of the over-payment at the Interest Rate (as defined in Section 4.5
below), or (ii) if it is determined that Tenant has underpaid Landlord for the
First Year FHS Base Rent, Tenant shall pay to Landlord the amount of such
under-payment (without interest). Tenant agrees to pay the cost of such audit
unless it is subsequently determined pursuant to this Section 1.6.4.4 that
Landlord's Final Rent Notice overstated the Total New FHS Building Costs by four
percent (4%) or more of the actual Total New FHS Building Costs. The payment by
Tenant of any amounts pursuant to this Section 1.6.4.4 shall not preclude Tenant
from questioning, during the FHS Review Period, the correctness of the Final
Rent Notice, but the failure of Tenant to object thereto, conduct and complete
its inspection and have the FHS Building Accountant conduct the audit as
described above prior to the expiration of the FHS Review Period shall be
conclusively deemed Tenant's approval of the Final Rent Notice and the amount of
the Total New FHS Building Costs set forth thereon. If following Tenant's
delivery to Landlord of a written request to make Landlord's books and records
regarding the Total New FHS Building Costs reasonably available to Tenant and/or
the FHS Building Accountant to conduct any such inspection and/or audit
described above in this Section 1.6.4.4, Landlord fails to make Landlord's books
reasonably available for such purposes during Landlord's normal business hours,
and such failure continues for one (1) business day after Tenant notifies
Landlord thereof, then the FHS Review Period shall be extended one (1) day for
each such day that Tenant and/or the FHS Building Accountant, as the case may
be, is so prevented from accessing such books and records. In connection with
any inspection and/or audit conducted by Tenant pursuant to this Section
1.6.4.4, Tenant agrees to keep, and to cause all of Tenant's employees and
consultants and the FHS Building Accountant to keep, all of Landlord's books and
records and the audit, and all information pertaining thereto and the results
thereof, strictly confidential (except if required by any court to disclose such
information or if such information is available from an inspection of public
records or as otherwise may be necessary for Tenant to enforce its rights under
this Lease), and in connection therewith, Tenant shall cause such employees,
consultants and the FHS Building Accountant to execute such reasonable
confidentiality agreements as Landlord may require prior to conducting any such
inspections and/or audits.

               1.6.5 CONSTRUCTION IN FHS EXPANSION SPACE. If Tenant leases the
FHS Expansion Space pursuant to the terms of this Section 1.6, Landlord shall
deliver the FHS Expansion Space to Tenant following the date Landlord
substantially completes the base, shell and core and the initial tenant
improvements for the FHS Expansion Space (to the extent the FHS Expansion Space
is in an Existing Building and the base, shell and core of the Existing Building
has been constructed, Landlord shall have no obligation to construct the base,
shell and core of the Existing Building). If the FHS Expansion Space is located
in a New Building, the plans and specifications for the base, shell and core
thereof shall be developed by Landlord in the exercise of Landlord's sole
discretion; provided, however, that the base, shell and core for the New
Building shall be substantially similar to the Base, Shell and Core for the
Buildings (except for changes required by applicable Laws or governmental
authorities or to comply with any covenants, conditions or restrictions recorded
against the Real Property, and except that the finishes, number of floors and
rentable/usable square footage for the New Building may be different, at
Landlord's discretion), and, to the extent that Landlord anticipates that the
base, shell and core for the New Building shall be substantially different from
the Base, Shell and Core for the Buildings, Landlord shall describe such
differences in the FHS Expansion Rent Notice. Tenant shall pay for the costs of
the design and construction of the initial tenant improvements for the FHS
Expansion Space, subject to Landlord's contribution of a tenant improvement
allowance therefor. If the FHS Expansion Space is located in a Pre-Existing
Building, such tenant improvement allowance shall be determined as part of the
Fair Market Rental Rate for the FHS Expansion Space; if the FHS Expansion Space
is located in a New Building, such tenant

                                      -13-
<PAGE>

improvement allowance shall be an amount equal to $35.00 per usable square foot
of the FHS Expansion Space. Landlord shall be responsible for constructing the
tenant improvements for the FHS Expansion Space (and the base, shell and core if
not already constructed for the FHS Expansion Space if located in the New
Building) pursuant to a tenant work letter substantially the same as the Tenant
Work Letter attached to this Lease as Exhibit B, except that: (i) the time
deadlines for submittal and approval of plans and specifications and other
actions required to be performed by Landlord and Tenant (including staged
delivery of floors, if applicable) shall be revised with respect to the FHS
Expansion Space pursuant to a schedule mutually approved by the parties and set
forth in the amendment to Lease (or separate lease) described in Section 1.6.7
below; (ii) Sections 5.4, 5.5.2 and 5.5.3 of the Tenant Work Letter shall not
apply with respect to the FHS Expansion Space; (iii) Tenant's termination right
in Section 5.5.1 of the Tenant Work Letter shall apply with respect to the FHS
Expansion Space, but shall be revised such that (A) the Second Outside Date
referenced therein shall mean January 1, 2006 with respect to the FHS Expansion
Space, and (B) such termination right provided to Tenant in connection with the
FHS Expansion Space shall be limited to the termination of Tenant's proposed
lease of the FHS Expansion Space, only, and shall not include any right to
terminate this Lease with respect to the original Premises or any other space
leased by Tenant; (iv) the definition of the base, shell and core for the FHS
Expansion Space shall be as determined by Landlord as set forth hereinabove; (v)
the tenant improvement allowance for the FHS Expansion Space shall be determined
as set forth hereinabove, and, unless otherwise mutually agreed to by Landlord
and Tenant, Tenant shall not be entitled to use any portion of such tenant
improvement allowance for any of Tenant's Property or Moving/Personal Property
Costs as provided in the Tenant Work Letter; (vi) the fixed fees and general
conditions for the Contractor if Landlord selects Snyder Langston as the
Contractor currently set forth in the Tenant Work Letter, and the provisions
requiring Landlord to enter into a guaranteed maximum construction contract with
the Contractor shall not apply with respect to the FHS Expansion Space unless
otherwise mutually approved by Landlord and Tenant; and (vii) the terms and
conditions of the Tenant Work Letter attached to this Lease which conflict with
the terms and conditions of this Section 1.6.5 shall not apply.

               1.6.6 FHS COMMENCEMENT DATE. As used herein, the "FHS
COMMENCEMENT DATE" shall mean the date which is the earlier of: (i) the date
Tenant commences business operations in all or any portion of the FHS Expansion
Space; and (ii) the later of (A) the date of substantial completion (as defined
in the Tenant Work Letter for the FHS Expansion Space) of the FHS Expansion
Space, as such date shall be accelerated for Tenant caused delays pertaining to
the FHS Expansion Space, or (B) January 1, 2005.

               1.6.7 AMENDMENT TO LEASE. If Tenant timely exercises Tenant's
right to lease the FHS Expansion Space as set forth herein, Landlord and Tenant
shall promptly thereafter execute an amendment to this Lease memorializing
Tenant's lease of the FHS Expansion Space upon the terms and conditions set
forth in this Section 1.6. Such amendment shall modify (i) the definition of
"Buildings" set forth in Section 6.1 of the Summary to include in such
definition the building in which the FHS Expansion Space is located if such FHS
Expansion Space is located in any building which is other than Building C, and
(ii) such other provisions of this Lease as is reasonably necessary to cause any
terms and conditions set forth in this Lease to also apply to the building in
which the FHS Expansion Space is located if not located in Building C.
Notwithstanding the foregoing, in lieu of such an amendment to this Lease,
Landlord may, at its election, provide for Tenant's lease of the FHS Expansion
Space in a separate lease, independent from this Lease, upon all of the terms
and conditions contained in this Section 1.6 and any other provisions of this
Lease (excluding Section 14.8 of this Lease which shall not apply to the FHS
Expansion Space) which do not conflict with this Section 1.6 and are applicable
to the FHS Expansion Space, and Tenant shall execute such separate lease
promptly following Landlord's delivery of same to Tenant. Further, Tenant agrees
that in connection with Landlord's financing, transfer or sale of all or any
portion of the Real Property, or for any other reason determined by Landlord,
Landlord may, at any time after execution of this Lease, remove this Section 1.6
(and Landlord's obligations hereunder) from this Lease and instead include the
provisions of this Section 1.6 and Landlord's obligations and Tenant's rights
hereunder in a separate written agreement independent from this Lease (which
separate agreement shall, at Landlord's election, only pertain to such portions
of the Real Property [which may be less than the entire Real Property] owned by
Landlord and designated by Landlord to be the property upon which Landlord shall
provide the FHS Expansion Space to Tenant if Tenant exercises its right to lease
the FHS Expansion Space hereunder). Tenant shall promptly execute such separate
agreement, as well as an amendment to this Lease deleting this Section 1.6
therefrom (and otherwise

                                      -14-
<PAGE>

modifying this Lease to delete any references to Section 1.6 and the FHS
Expansion Space), following Landlord's election and submission of such documents
to Tenant, provided that the form and substance of such separate agreement and
amendment to Lease are reasonably acceptable to Tenant. Landlord agrees that the
execution of any such separate agreement or separate lease described hereinabove
shall not relieve Landlord of its obligations to pay any brokerage commissions
to Tenant's Broker (as defined in Section 25.25 below) to the extent Landlord
would have been obligated to pay such commissions to Tenant's Broker pursuant to
Section 25.25 had such separate agreement and/or separate lease not been so
executed.

               1.6.8 SUSPENSION OF FHS EXPANSION SPACE RIGHT. Notwithstanding
anything to the contrary contained in this Section 1.6, the rights to lease the
FHS Expansion Space contained in this Section 1.6 are personal to the Original
Tenant and any Affiliate to which Tenant's entire interest in this Lease has
been assigned pursuant to Section 14.7 below, and may not be assigned or
exercised, voluntarily or involuntarily, to or by, any other person or entity
other than the Original Tenant or such Affiliate assignee, as the case may be.
In addition, at Landlord's option, and in addition to all of Landlord's remedies
under this Lease, at law or in equity, Tenant shall not have the right to lease
the FHS Expansion Space as provided in this Section 1.6 if, as of the date of
the attempted exercise of such expansion right by Tenant, Tenant is in monetary
default or material non-monetary default under this Lease beyond any applicable
notice and cure periods; provided, however, that Tenant shall be entitled to an
additional five (5) business days from the date of Tenant's receipt of
Landlord's notice to cure any such monetary or material non-monetary default in
order to preserve Tenant's FHS Expansion Option exercised by Tenant.

     1.7  TENANT'S REDUCTION RIGHT. During the first six (6) years of the Lease
Term, Tenant shall have five (5) separate rights (each, a "REDUCTION RIGHT") to
reduce the rentable square feet of the Premises then leased by Tenant in
Building C upon the terms and conditions set forth in this Section 1.7.

          1.7.1 REDUCTION SPACE. Each such Reduction Right shall pertain to
one-half (1/2) contiguous full floor increments of space in Building C, starting
with the lowest floor then leased by Tenant in Building C, except that: (i) the
first (1st) Reduction Right shall pertain to either one-half (1/2) of a full
floor or a full floor, as elected by Tenant; (ii) if Tenant does not exercise a
Reduction Right for any particular one-year period, the amount of space which
Tenant may elect to reduce pursuant to Tenant's next applicable Reduction Right
shall include, at Tenant's election, an additional one-half (1/2) contiguous
floor increment of space (provided, however, in no event may Tenant elect to
reduce the Premises in any one-year period by more than one (1) contiguous full
floor); and (iii) in no event shall the total cumulative space which Tenant may
reduce in Building C pursuant to the exercise of all of Tenant's Reduction
Rights under this Section 1.7 exceed two and one-half (1/2) floors. In addition,
if at any time Tenant exercises a Reduction Right with respect to one-half (1/2)
of a particular floor in Building C, the next time Tenant elects to exercise a
Reduction Right, Tenant must include in the exercise of such right the remaining
one-half (1/2) of the space on such floor. The applicable space for which Tenant
has elected to exercise any Reduction Right shall be referred to herein as the
"REDUCTION SPACE".

          1.7.2 PROCEDURE. Each applicable Reduction Right shall be exercised by
Tenant, if at all, by delivering to Landlord written notice thereof (each, a
"REDUCTION NOTICE") on or before the following applicable dates (each, a
"REDUCTION EXERCISE DATE"), which Reduction Notice shall include Tenant's
determination of the amount and a floor plan depicting the location of the
applicable Reduction Space for which Tenant is exercising its applicable
Reduction Right, and if Tenant timely delivers to Landlord a Reduction Notice
with respect to any applicable Reduction Right, then this Lease shall terminate
with respect to the applicable Reduction Space upon the following applicable
delivery date therefor (each, a "REDUCTION DELIVERY DATE"):

<TABLE>
<CAPTION>

           REDUCTION RIGHT                     REDUCTION EXERCISE DATE                REDUCTION DELIVERY DATE
           ---------------                     -----------------------                ------------------------
<S>                                            <C>                                    <C>
                 1st                               January 1, 2003                       December 31, 2003

                 2nd                               January 1, 2004                       December 31, 2004

                 3rd                               January 1, 2005                       December 31, 2005

                 4th                               January 1, 2006                       December 31, 2006
</TABLE>

                                      -15-
<PAGE>

<TABLE>
<CAPTION>

           REDUCTION RIGHT                     REDUCTION EXERCISE DATE                REDUCTION DELIVERY DATE
           ---------------                     -----------------------                ------------------------
<S>                                            <C>                                    <C>
                 5th                               January 1, 2007                       December 31, 2007

</TABLE>

However, if the Lease Commencement is later than January 1, 2002, then each
Reduction Exercise Date and Reduction Delivery Date shall be extended
day-for-day for each day after January 1, 2002 that the Lease Commencement
occurs. As consideration to Landlord for the exercise by Tenant of any such
Reduction Right, Tenant shall deliver to Landlord, on or prior to the applicable
Reduction Delivery Date, cash in the amount of the "Reduction Consideration" (as
defined below), payable with respect to the Reduction Space for which Tenant is
exercising such Reduction Right. As used herein, the "REDUCTION CONSIDERATION"
for each applicable Reduction Space shall mean the sum of: (A) the costs to be
incurred by Landlord to separately demise the Reduction Space from the remainder
of the Premises on such floor if such Reduction Space pertains to the first
one-half (1/2) of floor space reduced on such floor (as reasonably estimated by
Landlord), excluding, however, costs of the wall coverings to finish the
non-common area sides of the corridor walls and any other tenant improvements
constructed for the tenants of the Reduction Space; plus (B) the unamortized
amount of the Tenant Improvement Allowance and brokerage commissions paid or
incurred by Landlord with respect to such Reduction Space as determined by
Landlord on a pro-rata per square foot basis, and such pro-rata amount shall be
amortized on a straight-line basis, together with interest at the rate of ten
percent (10%) per annum, over the scheduled initial Lease Term for such
Reduction Space, and the unamortized amount shall be calculated based upon the
unexpired portion of the initial Lease Term which would have been remaining as
of the applicable Reduction Delivery Date had Tenant not exercised its Reduction
Right for such Reduction Space. Landlord shall notify Tenant of the amount of
the applicable Termination Consideration for each Reduction Space at least
thirty (30) days prior to the applicable Reduction Delivery Date.

          1.7.3 AMENDMENT TO LEASE. If Tenant timely exercises its Reduction
Right for any Reduction Space hereunder, (i) this Lease shall terminate with
respect to such Reduction Space upon the applicable Reduction Delivery Date
therefor, and Tenant shall vacate and surrender exclusive possession of such
Reduction Space to Landlord on or before such Reduction Delivery Date in the
condition required in Article 15 below, and (ii) Landlord and Tenant shall
promptly execute an amendment to this Lease reducing such Reduction Space from
the Premises leased in Building C under this Lease. All provisions of this Lease
which vary based upon the rentable and usable square footage of the Premises
(including Base Rent, Tenant's Share and Tenant's allocated number of parking
spaces) shall be adjusted in such amendment to reflect the reduction of such
Reduction Space from the Premises.

                                    ARTICLE 2

                                   LEASE TERM

     2.1  TERM. The terms and provisions of this Lease shall be effective as of
the date of this Lease except for the provisions of this Lease relating to the
payment of Rent or as otherwise stated in this Lease (for example, Tenant shall
have no obligation to obtain insurance until the Insurance Start Date, as
defined in Section 10.3 below, and Tenant's indemnity of Landlord in Section
10.1.1(i) below with respect to any occurrences in the Premises not resulting
from the acts, omissions or negligence of Tenant or Tenant's contractors,
agents, servants, employees, licensees or invitees, shall not be applicable
until the Insurance Start Date). The term of this Lease (the "LEASE TERM") shall
be as set forth in Section 7.1 of the Summary and shall commence on the date
(the "LEASE COMMENCEMENT DATE") set forth in Section 7.2 of the Summary subject,
however, to the terms of the Tenant Work Letter, and shall terminate on the date
(the "LEASE EXPIRATION DATE") set forth in Section 7.3 of the Summary, unless
this Lease is sooner terminated as hereinafter provided or extended pursuant to
the Extension Option Rider attached to this Lease. For purposes of this Lease,
the term "LEASE YEAR" shall mean each consecutive twelve (12) month period
during the Lease Term, provided that the last Lease Year shall end on the Lease
Expiration Date. Promptly following the Lease Commencement Date, Landlord shall
execute and deliver to Tenant an amendment in the form as set forth in EXHIBIT
C, attached hereto, which amendment Tenant shall execute and return to Landlord
within fifteen (15) business days after receipt thereof.

                                      -16-
<PAGE>

     2.2  EARLY OCCUPANCY. Tenant shall have the right to occupy and commence
business operations in portions or all of the Premises, at any time after
Landlord has delivered such portion of the Premises in the applicable Delivery
Condition therefor (as defined in the Tenant Work Letter), but prior to the
Lease Commencement Date (the "PRE-OCCUPANCY PERIOD"), provided that (i)
Substantial Completion (as such term is defined in the Tenant Work Letter) of
such portion of the Premises shall have occurred, (ii) Tenant has installed
Tenant's Fixturizing Work (as defined in the Tenant Work Letter) in such portion
of the Premises in compliance with all applicable Laws and the Approved Working
Drawings therefor, (iii) such occupancy and business operations do not interfere
with or delay Landlord's completion of construction of the Tenant Improvements
and Base, Shell and Core work for such portion of the Premises occupied by
Tenant and/or the remainder of the Premises not so occupied by Tenant, (iv) a
temporary certificate of occupancy or its equivalent shall have been issued by
the appropriate governmental authorities for each such portion(s) of the
Premises to be occupied, and (v) during such occupancy of such portion(s) of the
Premises by Tenant, and until the Lease Commencement Date occurs, all of the
terms and conditions of this Lease shall apply, including, without limitation,
Tenant's obligation to pay to Landlord all sums and charges required to be paid
by Tenant under this Lease (including, without limitation (A) charges for
overstandard utilities consumed in such portions of the Premises so occupied
pursuant to Section 6.2 of this Lease and (B) charges for additional services
provided to such portions of the Premises so occupied pursuant to Section 6.4 of
this Lease), as though the Lease Commencement Date had occurred (although the
Lease Commencement Date shall not actually occur until the occurrence of the
same pursuant to the terms of Section 7.2 of the Summary); provided however,
during such Pre-Occupancy Period, (1) Tenant shall not be obligated to pay to
Landlord any Base Rent for the portion of the Premises so occupied, and (2)
Tenant shall be obligated to pay to Landlord a per diem amount equal to $0.01
per rentable square foot of the portion of the Premises so occupied by Tenant,
calculated on a half-floor or full-floor basis as described hereinbelow (the
"OCCUPANCY RENT"); provided, however, if the Lease Commencement Date has not
occurred during the Pre-Occupancy Period as a result of Force Majeure events,
then from and after the date during such Pre-Occupancy Period that the Lease
Commencement Date would have occurred but for such Force Majeure events, the per
diem Occupancy Rent amount set forth hereinabove shall be adjusted to equal
Tenant's Share of Direct Expenses with respect to the portions of the Premises
so occupied by Tenant, calculated on a half-floor or full-floor basis as
described hereinbelow and determined on a net basis (and not on a full service
gross basis) without regard to (or subtracting from such obligation the Direct
Expenses incurred in) the Base Year. For purposes of calculating the Occupancy
Rent payable by Tenant as defined hereinabove, (x) for each portion of a floor
so occupied by Tenant which is equal to or less than one-half (1/2) of such
floor, until Tenant occupied more than one-half (1/2) of such floor in which
case the provisions of clause (y) below shall then apply, Tenant shall be deemed
to have occupied one-half (1/2) of such floor, and the Occupancy Rent therefor
shall be determined based upon the rentable square feet of one-half (1/2) of
such floor upon which Tenant has occupied space (not just for the space on such
floor so occupied), (y) for each portion of a floor so occupied by Tenant which
is greater than one-half (1/2) of such floor, Tenant shall be deemed to have
occupied the entire floor, and the Occupancy Rent therefor shall be determined
based upon the rentable square feet of the entire floor upon which Tenant has
occupied space (not just the space on such floor so occupied), and (z) Tenant
shall be obligated to pay the Occupancy Rent for such half-floor or full floor
portion(s) of the Premises (as the case may be) during the entire part of the
Pre-Occupancy Period commencing as of the first day of occupancy by Tenant of
space on such floor which (I) with respect to clause (x) hereinabove pertains to
space which is equal to or less than one-half (1/2) floor, and (II) with respect
to clause (y) hereinabove, pertains to more than one-half (1/2) of such floor,
notwithstanding Tenant may thereafter cease occupancy of all or any portion (and
with respect to clause (y), less than one-half)_of such floor. Tenant's early
entry in the Premises to install Tenant's Fixturizing Work pursuant to the
Tenant Work Letter shall be set forth in and subject to the applicable
provisions of the Tenant Work Letter, which provisions shall not apply with
respect to Tenant's rights of early occupancy to commence business operations in
the Premises pursuant to this Section 2.2.

                                    ARTICLE 3

                                    BASE RENT

     Tenant shall pay, without notice or demand, to Landlord or Landlord's agent
at the management office of the Real Property, or at such other place as
Landlord may from time to

                                      -17-

<PAGE>

time designate in writing, in currency, by wire transfer or a check for currency
which, at the time of payment, is legal tender for private or public debts in
the United States of America, base rent ("BASE RENT") as set forth in Section 8
of the Summary, payable in equal monthly installments as set forth in Section 8
of the Summary in advance on or before the first day of each and every month
during the Lease Term, without any setoff or deduction except as otherwise
expressly provided in this Lease. The Base Rent for the first (1st) full month
of the Lease Term shall be paid by Tenant to Landlord no later than June 30,
2001. If any rental payment date (including the Lease Commencement Date) falls
on a day of the month other than the first day of such month or if any rental
payment is for a period which is shorter than one month, then the rental for any
such fractional month shall be a proportionate amount of a full calendar month's
rental based on the proportion that the number of days in such fractional month
bears to the number of days in the calendar month during which such fractional
month occurs. All other payments or adjustments required to be made under the
terms of this Lease that require proration on a time basis shall be prorated on
the same basis. All increases in Base Rent set forth in Section 8 of the Summary
shall be tied to the applicable anniversary of the actual Lease Commencement
Date as set forth therein, and any time periods or specific dates for exercising
any rights or taking any action described in this Lease which are measured or
derived from the Lease Commencement shall be based upon the actual Lease
Commencement Date as determined pursuant to Section 7.2 of the Summary.

                                    ARTICLE 4

                                 ADDITIONAL RENT

     4.1  ADDITIONAL RENT. In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay to Landlord as additional rent the sum
of the following: (i) "Tenant's Building B Share" of the annual "Direct
Expenses" (as those terms are defined below in this Article 4) allocated to
Building B pursuant to Section 4.3.4, which are in excess of the amount of
Direct Expenses allocated to Building B and applicable to the "Base Year" (as
that term is defined below); plus (ii) "Tenant's Building C Share" (as such term
is defined below) of the annual Direct Expenses allocated to Building C pursuant
to Section 4.3.4, which are in excess of the amount of Direct Expenses allocated
to Building C and applicable to the Base Year. Tenant's Building B Share and
Tenant's Building C Share shall hereafter collectively be referred to as
"TENANT'S SHARE." Such additional rent, together with any and all other amounts
payable by Tenant to Landlord pursuant to the terms of this Lease, shall be
hereinafter collectively referred to as the "ADDITIONAL RENT." The Base Rent and
Additional Rent are herein collectively referred to as the "RENT." All amounts
due under this Article 4 as Additional Rent shall be payable for the same
periods and in the same manner, time and place as the Base Rent. Without
limitation on other obligations of Tenant which shall survive the expiration of
the Lease Term, but subject to the limitations set forth in Section 4.3.2 below,
the obligations of Tenant to pay the Additional Rent provided for in this
Article 4 shall survive the expiration of the Lease Term for a period of two (2)
years from the date of expiration or termination of this Lease.

     4.2  DEFINITIONS. As used in this Article 4, the following terms shall have
the meanings hereinafter set forth:

          4.2.1 "BASE YEAR" shall mean the year set forth in Section 9.1 of the
Summary.

          4.2.2 "CALENDAR YEAR" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.

          4.2.3 "DIRECT EXPENSES" shall mean the sum of the "Operating
Expenses", "Tax Expenses" and "Utilities Costs", as such terms are defined
below.

          4.2.4 "EXPENSE YEAR" shall mean each Calendar Year.

          4.2.5 "OPERATING EXPENSES" shall mean all expenses, costs and amounts
which Landlord shall pay during any Expense Year because of or in connection
with the ownership, management, maintenance, repair, replacement, restoration or
operation of the Real Property, including, without limitation, any amounts paid
for: (i) the cost of operating, maintaining, repairing, renovating and managing
the utility systems, mechanical systems, sanitary and storm drainage systems,
and any escalator and/or elevator systems, and the cost of

                                      -18-
<PAGE>

supplies and equipment and maintenance and service contracts in connection
therewith; (ii) the cost of licenses, certificates, permits and inspections and
the cost of contesting the validity or applicability of any governmental
enactments which affect Operating Expenses, and the costs incurred in connection
with the implementation and operation (by Landlord or any common area
association(s) formed for LNR Warner Center) of any government mandated
transportation demand management program (including any such program required to
be implemented for the Project by the City of Los Angeles as a condition to the
City's approvals of the development of the Project); (iii) the cost of insurance
carried by Landlord, in such amounts as Landlord may reasonably determine or as
may be required by any mortgagees or the lessor of any underlying or ground
lease affecting the Real Property; (iv) the cost of landscaping, relamping, and
all supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Real Property; (v) the cost of parking area repair,
restoration, and maintenance, including, but not limited to, resurfacing,
repainting, restriping, and cleaning; (vi) fees, charges and other costs,
including consulting fees, legal fees and accounting fees, of all contractors
engaged by Landlord or otherwise reasonably incurred by Landlord in connection
with the management, operation, maintenance and repair of the Real Property;
(vii) any management agreements, including the cost of any management fee and
the fair rental value of any on-site management office space (not exceeding
2,500 rentable square feet) provided thereunder; provided, however, (I) the
management fee shall not exceed the greater of three percent (3%) of the gross
revenues (excluding unapplied security deposits and unearned prepaid rent) of
the Real Property or the management fees customarily paid to independent third
party management companies by landlords of Comparable Buildings, and (II) in no
event shall the management fee during the Base Year be less than one and
one-half percent (1 1/2%) of total gross revenues of the Real Property
(excluding unapplied security deposits and unearned prepaid rent); (viii) wages,
salaries and other compensation and benefits of all persons engaged in the
operation, management, maintenance or security of the Real Property, and
employer's Social Security taxes, unemployment taxes or insurance, and any other
taxes which may be levied on such wages, salaries, compensation and benefits;
provided, that if any employees of Landlord provide services for more than one
project of Landlord, then a prorated portion of such employees' wages, benefits
and taxes shall be included in Operating Expenses based on the portion of their
working time devoted to the Real Property; (ix) payments under any easement,
license, operating agreement, declaration, restrictive covenant, underlying or
ground lease (excluding rent), or instrument pertaining to the sharing of costs
by the Real Property or any portion thereof, including, without limitation, any
covenants, conditions or restrictions now or hereafter recorded against or
affecting the Real Property (provided, however, that the foregoing provisions of
this clause (ix) shall not permit Landlord to include in Operating Expenses
costs for services or other costs [other than standard association dues,
administrative charges, and assessments] to the extent the same would be
specifically excluded from or subject to limitations on inclusion in Operating
Expenses pursuant to this Section 4.2.5 [including, without limitation, Section
4.2.5.3 below] if such services or costs were incurred by Landlord directly and
not as a pass-through under such covenants, conditions or restrictions);
(x) operation, repair, maintenance and replacement of all "Systems and
Equipment," as that term is defined in Section 4.2.6 of this Lease, and
components thereof; (xi) the cost of janitorial service, alarm and security
service, window cleaning, trash removal, maintenance of curbs and walkways, and
repairs to roofs and re-roofing; (xii) amortization (including interest on the
unamortized cost at the Amortization Interest Rate, as defined below) of the
cost of acquiring, or the rental expense of renting, personal property used in
the maintenance, operation and repair of the Real Property; and (xiii)
amortization (including interest on the unamortized cost at the Amortization
Interest Rate) of the cost of any capital alterations, capital additions,
capital repairs and capital improvements (I) which are intended as a
labor-saving device or to effect other economies in the operation or maintenance
of the Real Property, but only to the extent of the cost savings reasonably
anticipated by Landlord to result therefrom, (II) made to the Real Property
after the Lease Commencement Date that are required under any governmental law
or regulation (or amendment thereof) not in effect on the Lease Commencement
Date (except as otherwise expressly provided in Section 4.2.5.1(q) below), (III)
pertaining to replacement of wall and floor coverings, ceiling tiles and
fixtures in lobbies, corridors, restrooms and other common or public areas or
facilities, or (IV) which are reasonably determined by Landlord to be reasonably
required to maintain the functional character of the Real Property as a
first-class office building project (except that in no event shall the amortized
amount of the cost which Landlord may include in Operating Expenses pursuant to
this Section 4.2.5(xiii)(IV) exceed $100,000.00 in any particular Expense Year);
all such costs described in this Section 4.2.5(xiii) and the amortization of any
other capital expenditures under this Section 4.2.5 (including, without
limitation, Sections 4.2.5.1(q) and (v)

                                      -19-
<PAGE>

below) shall be amortized over the useful life of the particular capital item in
question as Landlord shall reasonably determine in accordance with standard real
estate management and accounting practices consistently applied by Landlord and
consistent with standard real estate management and accounting practices used by
landlords of ""Comparable Buildings (provided, however, that for purposes of
this Section 4.2.5, such amortization period with respect to any particular
capital expenditures having a cost in excess of $30,000.00 shall not be less
than five (5) years). As used herein, the "AMORTIZATION INTEREST RATE" shall
mean a rate equal to the floating commercial loan rate announced from time to
time by Bank of America, a national banking association, or its successor, as
its reference rate, plus one percent (1%) per annum.

     If, during all or any part of any Expense Year or the Base Year, Landlord
shall not furnish any particular items of work or service (the cost of which, if
performed by Landlord, would be included in Operating Expenses) to a tenant
(including Tenant) who has undertaken to perform such item of work or service in
lieu of the performance thereof by Landlord, Operating Expenses shall be deemed
to be increased by an amount equal to the additional Operating Expenses which
would reasonably have been incurred during such period by Landlord if Landlord
had at its own expense furnished such item of work or service to such tenant. In
addition, if Building B is less than 100% occupied and/or Building C (and during
the period of time when any other buildings are fully constructed and ready for
occupancy and are included by Landlord within the Project) is (are) less than
95% occupied during all or a portion of any Expense Year (including the Base
Year), Landlord shall make an appropriate adjustment to the variable components
of Operating Expenses for such year or applicable portion thereof, employing
sound accounting and management principles, to determine the amount of Operating
Expenses that would have been paid had Building B been 100% occupied and
Building C (and any of such other buildings, as applicable) been 95% occupied;
and the amount so determined shall be deemed to have been the amount of
Operating Expenses for such year, or applicable portion thereof. In determining
such adjustment pursuant to the immediately preceding sentence, any gross
receipts taxes, management fees or other expenses that are tied to the receipt
of rental income shall be determined as if the applicable buildings described
above were 100% or 95% occupied (as the case may be) during any Expense Year
(including the Base Year) and all tenants were paying the full rental initially
payable under their respective leases (as opposed to half-rent or abated rent).

     Subject to the provisions of Section 4.3.4 below, Landlord shall have the
right, from time to time, to equitably allocate some or all of the Direct
Expenses among the Buildings and the Existing Buildings and/or among different
tenants of the Project, and/or among different and additional buildings of the
Project, as and when such different and/or additional buildings are constructed
and added to (and/or excluded from) the Project or otherwise (collectively, the
"COST POOLS"). Such Cost Pools may include, but shall not be limited to, the
office space tenants and retail space tenants (and if applicable, child care
tenants or occupants) of the Project. Such Cost Pools may also include
allocation of certain Direct Expenses within or under covenants, conditions and
restrictions affecting the Project. In addition, Landlord shall have the right
from time to time, in its reasonable discretion, to include or exclude existing
or future buildings in the Project for purposes of determining Direct Expenses
and/or the provision of various services and amenities thereto, including
allocation of Direct Expenses in any such Cost Pools.

          4.2.5.1 Notwithstanding the foregoing, for purposes of this Lease,
Operating Expenses shall not include the following:

                    (a)  brokerage commissions, space planning costs, finders'
fees, attorneys' fees and other costs incurred by Landlord in connection with
leasing or attempting to lease space within the Real Property;

                    (b)  costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant improvements made for any
tenants in the Real Property or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of the Real Property.

                    (c)  interest, points, fees and principal payments on any
mortgages encumbering the Real Property, and other debt costs, if any, except as
specifically included in Sections 4.2.5(xii) and (xiii) above and Sections
4.2.5.1(q) and (v) below;

                                      -20-
<PAGE>

                    (d)  costs of correcting defects in, or significant design
error relating to, the initial design or construction of the Buildings, the
Phase I Parking Structure, the Parking Facilities or any other improvements to
the Real Property;

                    (e)  advertising and promotional expenditures;

                    (f)  costs of any items (including, but not limited to,
costs incurred by Landlord with respect to goods, services and utilities sold
and/or supplied to tenants and occupants of the Real Property, and/or for the
repair of damage to the Buildings for items which are reimbursable under any
contractor, manufacturer or supplier warranty) to the extent Landlord receives
reimbursement from insurance or condemnation proceeds or from a contractor,
manufacturer, supplier or any other third party (other than reimbursement by
tenants pursuant to the Operating Expenses pass-through provisions of their
leases); such proceeds shall be credited to Operating Expenses in the year in
which received;

                    (g)  expenses in connection with services or other benefits
which are not offered to Tenant or for which Tenant is charged directly but
which are provided to any other tenant or occupant of the Real Property at no
cost;

                    (h)  attorneys' fees and other costs and expenses incurred
in connection with negotiations or disputes with present or prospective tenants
or other occupants or prospective occupants of the Real Property (including
costs incurred due to violations by tenants of the terms and conditions of their
leases), or any other attorneys' fees incurred in connection with the Real
Property except (A) as specifically enumerated as an Operating Expense in this
Lease or (B) to the extent the expenditure of such attorneys' fees generally
benefits all of the tenants of the Real Property;

                    (i)  the wages and benefits of any employee who does not
devote substantially all of his or her employed time to the operation and
management of the Buildings or Real Property unless such wages and benefits are
prorated to reflect time spent on operating and managing the Buildings and Real
Property VIS-A-vis time spent on matters unrelated to operating and managing the
Buildings and Real Property;

                    (j)  compensation (including benefits) of any employee of
Landlord above the grade of Project manager or Project engineer;

                    (k)  costs of capital additions, capital alterations,
capital repairs or capital improvements, except those set forth in Sections
4.2.5(xii) and (xiii) above, and except as provided in Sections 4.2.5.1(q) and
(v) below;

                    (l)  rentals and other related expenses for leasing heating,
ventilation and air conditioning ("HVAC") systems, elevators, or other items
(except when needed in connection with normal repairs and maintenance of the
Buildings and/or Real Property and/or to an ameliorate an emergency condition in
the Buildings and/or Real Property) which if purchased, rather than rented,
would constitute a capital improvement not included in Operating Expenses
pursuant to this Lease;

                    (m)  costs and overhead and profit increment paid to
Landlord or to subsidiaries or affiliates of Landlord for goods and/or services
in or to the Real Property to the extent the same exceeds typical costs and
overhead and profit increment of such goods and/or services rendered by
qualified unaffiliated third parties on a competitive basis;

                    (n)  any costs for which Landlord has been reimbursed (other
than through the Operating Expenses pass-through provisions of other tenants'
leases) or for which Landlord receives a credit, refund or discount;

                    (o)  costs of signs (other than building directories and
signage for various equipment rooms and common areas) in or on the Real Property
or any buildings located on the Real Property which identify the owner of the
Real Property or other tenants' signs;

                    (p)  costs incurred in installing, operating, and
maintaining any specialty service that is not necessary for Landlord's
provision, management, maintenance, and repair of required services for the
operation of the Real Property or any

                                      -21-
<PAGE>

associated Parking Facilities. The following are examples of these specialty
services: observatory; broadcasting facilities (other than the life-support and
security systems for the Buildings and Real Property); luncheon club, cafeteria,
or other dining facility; newsstand; flower service; shoeshine service; carwash;
athletic or recreational club; and helicopter pad (other than the Buildings' or
Real Property's emergency and life-safety helicopter facilities);

                    (q)  costs of cleanup, removal, investigation and/or
remediation (collectively, "REMEDIATION COSTS") of any Hazardous Materials (as
such term is defined in Article 5 below) in, on or under the Real Property
required to comply with Environmental Laws; notwithstanding the foregoing,
Landlord may include in Operating Expenses any such Remediation Costs which are
(1) incurred by Landlord after the Lease Commencement Date that are required to
comply with any Environmental Laws not in effect on the Lease Commencement Date
(but only with respect to Hazardous Materials located in Buildings B and C and
not any areas of the Real Property outside Buildings B and C), and (2) not the
result of the introduction by Landlord or any of Landlord's agents, employees,
contractors or tenants of the Real Property of any such Hazardous Materials in,
on or under the Real Property in violation of Environmental Laws in effect at
the time of such introduction (such Remediation Costs which may be so included
in Operating Expenses are collectively referred to herein as the "PERMITTED
REMEDIATION COSTS"), as follows: (A) Landlord may include in Operating Expenses
the first $1,000,000.00 of such Permitted Remediation Costs incurred, in the
aggregate, (B) Landlord shall have no right to include in Operating Expenses the
next $1,000,000.00 of such Permitted Remediation Costs so incurred, in the
aggregate, and (C) Landlord may include in Operating Expenses fifty percent
(50%) of those Permitted Remediation Costs so incurred which exceed
$2,000,000.00, in the aggregate (provided that to the extent that any of such
Permitted Remediation Costs are reasonably categorized as being costs for a
capital alteration, capital addition, capital repair or capital improvement,
such costs shall be amortized, together with interest at the Amortization
Interest Rate, in the manner described in Section 4.2.5(xiii) above); provided,
however, Landlord may not include any such Permitted Remediation Costs in
Operating Expenses to the extent such Permitted Remediation Costs are covered by
insurance maintained by Landlord as part of Operating Expenses unless and until
Landlord's insurance company denies coverage therefor despite Landlord's
commercially reasonable efforts to obtain proceeds therefor from such insurance
company;

                    (r)  interest, penalties or other costs arising out of
Landlord's failure to make timely payment of any of its obligations under this
Lease, including, without limitation, Landlord's failure to make timely payment
of any item that is included in Direct Expenses;

                    (s)  reserves of any kind, including replacement reserves
for bad debt loss or lost rent (but Operating Expenses may include reasonable
reserves imposed upon the Real Property as part of the assessments under any
covenants, conditions and restrictions recorded against the Real Property);

                    (t)  any costs expressly excluded from Operating Expenses
elsewhere in this Lease;

                    (u)  any ground lease rental;

                    (v)  depreciation and amortization, except as expressly
provided in this Section 4.2.5, and except on materials, tools, supplies and
vendor-type equipment purchased by Landlord to enable Landlord to supply
services Landlord might otherwise contract for with a third party, and when
depreciation or amortization is permitted or required, the item shall be
amortized over its useful life as determined by Landlord in the manner described
in Section 4.2.5(xiii) above, together with interest on the unamortized costs at
the Amortization Interest Rate;

                    (w)  costs (including, without limitation, fines, penalties,
interest, and costs of repairs, replacements, alterations and/or improvements)
incurred in bringing the Real Property into compliance with building codes and
other laws in effect as of the Lease Commencement Date and as interpreted by
applicable governmental authorities as of such date, including, without
limitation, any costs to correct building code violations pertaining to the
initial design or construction of the Buildings, the Phase I Parking Structure,
the Parking Facilities or any other improvements to the Real Property, to the
extent such violations exist as

                                      -22-
<PAGE>

of the Lease Commencement Date under any applicable building codes in effect and
as interpreted by applicable governmental authorities as of such date;

                    (x)  any and all costs incurred by Landlord in connection
with the transfer or disposition of Landlord's interest in any portion of the
Real Property, but the foregoing exclusion shall not apply to any real estate
tax expenses (other than documentary or local transfer taxes) resulting from or
otherwise imposed in connection with any such transfer or disposition, which
taxes may be included in Tax Expenses pursuant to Section 4.2.7 below;

                    (y)  costs incurred by Landlord due to the violation by
Landlord of the terms and conditions of any lease of space within the Real
Property;

                    (z)  Landlord's general corporate overhead, except as it
relates to the specific management of the Real Property;

                    (aa) costs arising out of the operation, management,
maintenance or repair of any retail premises in the Project or any other retail
areas operated by Landlord or its agents, contractors or vendors to the extent
such costs are uniquely attributable (and separately identifiable) to such
retail premises or areas (as opposed to general office use tenancies) or are
extraordinary, separately identifiable expenses arising in connection therewith;

                    (bb) any cost or expense solely and uniquely attributable
(and separately identifiable) to a building not leased, occupied or used by
Tenant and not part of the common areas of the Project (such as for example, any
repair costs for an office building leased to a single tenant other than Tenant,
unless such repair costs are pooled together under a common maintenance contract
for the Buildings and such other building);

                    (cc) any costs resulting from any condemnation pertaining to
the Real Property;

                    (dd) any costs or repair in excess of $25,000.00 resulting
from any casualty damage pertaining to the Real Property or any portion thereof,
including costs which are self-insured by Landlord or covered under an insurance
deductible obtained by Landlord;

                    (ee) any Tax Expenses or Utilities Costs.

               4.2.5.2 Landlord hereby agrees that the cost of any new type or
increased amount of insurance coverage (or increased limits of insurance or
decrease in the amount of deductibles) which is obtained or effected by Landlord
during any Expense Year after the Base Year (but is not obtained or effected
during the Base Year) shall be added to the Operating Expenses for the Base Year
(but at the rate which would have been in effect during the Base Year or the
rate in effect during such subsequent Expense Year, whichever is lower) prior to
the calculation of Tenant's Share of Operating Expenses for each such Expense
Year in which such change in insurance is obtained or effected.

               4.2.5.3 Landlord further agrees that any costs incurred in any
Expense Year after the Base Year because of any added new type of discretionary
services which were readily available during the Base Year and customarily
provided by landlords of Comparable Buildings during the Base Year (but not by
Landlord) and not included in the Base Year, shall be added to and included in
the Base Year for purposes of determining the Excess payable for such Expense
Year in which such added new type of discretionary services are so provided, as
if such services were provided in the Base Year (but at the rate for such
services which would have been in effect during the Base Year or the rate in
effect during such subsequent Expense Year, whichever is lower); provided,
however, the foregoing provision shall not apply to the costs of (i) any capital
additions, capital alterations, capital repairs or capital improvements which
shall be governed by the provisions of Sections 4.2.5 (xii) and (xiii) and
Sections 4.2.5.1 (k), (q) and (v) above, or (ii) security and/or parking control
services required to operate the Project as a first-class office building
project and added as a result of the expansion of the Project to include
additional improvements and/or phases beyond the Phase I Project.

               4.2.5.4 Notwithstanding the foregoing provisions of this
Article 4 to the contrary, Landlord will not collect or be entitled to collect
Direct Expenses from all of its tenants

                                      -23-
<PAGE>

in an amount which is in excess of one hundred percent (100%) of the Direct
Expenses actually paid by Landlord in connection with the operation of the
Buildings and the Real Property, and Landlord shall make no profit from the
collection of Direct Expenses.

               4.2.5.5 Landlord hereby agrees that in the event that during the
Base Year the cost of any maintenance contract is covered by a warranty and as a
result thereof the cost of such maintenance contract is not included in the Base
Year, the cost of any such maintenance contract shall be added to and included
in the Base Year for purposes of determining the Excess payable for each Expense
Year after the Base Year in which Landlord paid the cost of such maintenance
contract (but at the rate for such maintenance contract which would have been in
effect during the Base Year or the rate in effect during such subsequent Expense
Year, whichever is lower).

          4.2.6 "SYSTEMS AND EQUIPMENT" shall mean any plant, machinery,
transformers, duct work, cable, wires, and other equipment, facilities, and
systems designed to supply heat, ventilation, air conditioning and humidity or
any other services or utilities, or comprising or serving as any component or
portion of the electrical, gas, steam, plumbing, sprinkler, communications,
alarm, security, or fire/life safety systems or equipment, or any other
mechanical, electrical, electronic, computer or other systems or equipment which
serve either or both of the Buildings in whole or in part.

          4.2.7 "TAX EXPENSES" shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Real
Property), which Landlord shall pay during any Expense Year because of or in
connection with the ownership, leasing and operation of the Real Property or
Landlord's interest therein (including any tax expenses, assessments and other
charges allocated to the Real Property under any declaration, restriction
covenant or other instrument pertaining to the sharing of costs by the Real
Property or any portion thereof, including any covenants, conditions or
restrictions now or hereafter recorded against or affecting the Real Property).
For purposes of this Lease, Tax Expenses for the Expense Base Year and each
Expense Year thereafter shall be calculated as if the Buildings, the tenant
improvements therein (at a Building-standard amount) and the Phase I Parking
Structure to be constructed as part of the Phase I Project (as described in the
Tenant Work Letter) were fully constructed and the Phase I Project, the
Buildings, such tenant improvements therein and the Phase I Parking Structure
were fully assessed for real estate tax purposes.

               4.2.7.1 Tax Expenses shall include, without limitation:

                    (i)  any tax on Landlord's rent, right to rent or other
income from the Real Property or as against Landlord's business of leasing any
of the Real Property;

                    (ii) any assessment, tax, fee, levy or charge in addition
to, or in substitution, partially or totally, of any assessment, tax, fee, levy
or charge previously included within the definition of real property tax, it
being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("Proposition 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants. It is the intention of
Tenant and Landlord that all such new and increased assessments, taxes, fees,
levies, and charges and all similar assessments, taxes, fees, levies and charges
be included within the definition of Tax Expenses for purposes of this Lease;

                    (iii) any assessment, tax, fee, levy, or charge allocable to
or measured by the area of the Premises or the rent payable hereunder,
including, without limitation, any gross income tax upon or with respect to the
possession, leasing, operating,

                                      -24-
<PAGE>

management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof; and

                    (iv) any assessment, tax, fee, levy or charge, upon this
transaction or any document to which Tenant is a party, creating or transferring
an interest or an estate in the Premises.

               4.2.7.2 Landlord shall make such reasonable efforts as Landlord
shall in its reasonable discretion deem reasonably necessary to minimize the
amount of Tax Expenses, including challenging the amount of Tax Expenses with
the applicable governmental authority if Landlord reasonably determines a
reduction in Tax Expenses is likely to result therefrom. Any expenses incurred
by Landlord in attempting to protest, reduce or minimize Tax Expenses shall be
included in Tax Expenses in the Expense Year such expenses are paid but not in
excess of the reduction in Tax Expenses achieved as a result thereof. All tax
refunds pertaining to any Tax Expenses for any particular Expense Year shall be
deducted from Tax Expenses with respect to such Expense Year to which the
reduction relates.

               4.2.7.3 Notwithstanding anything to the contrary contained in
this Section 4.2.7, there shall be excluded from Tax Expenses: (i) all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord's general or net income (as opposed to
rents, receipts or income attributable to operations at the Real Property); (ii)
any items included as Operating Expenses; (iii) any items paid by Tenant under
Section 4.4 of this Lease; (iv) Tax Expenses attributable to the tenant
improvements of other tenants' or occupants' premises in the Real Property in
excess of the Cut-Off Point, as that term is defined in Section 4.4 below, but
only to the extent such taxes in excess of the Cut-Off Point are directly billed
to and collected from such tenants or occupants; and (v) penalties, interest and
late charges attributable to Landlord's delinquent payment of any Tax Expenses.

          4.2.8 "TENANT'S BUILDING B SHARE" shall mean the percentage set forth
in Section 9.2 of the Summary. Tenant's Building B Share was calculated by
dividing the number of rentable square feet of the portion of the Premises
located in Building B by the total rentable square feet in Building B. Since
Tenant is leasing all of the rentable square feet of Building B, Tenant's
Building B Share equals 100% and shall not be subject to adjustment.

          4.2.9 "TENANT'S BUILDING C SHARE" shall mean the percentage set forth
in Section 9.3 of the Summary. Tenant's Building C Share was calculated by
dividing the number of rentable square feet of the portion of the Premises
located in Building C by the total rentable square feet in Building C. In the
event either the rentable square feet of the portion of the Premises located in
Building C and/or the total rentable square feet of Building C is changed,
Tenant's Building C Share shall be appropriately adjusted, and, as to the
Expense Year in which such change occurs, Tenant's Building C Share for such
year shall be determined on the basis of the number of days during such Expense
Year that each such Tenant's Building C Share was in effect.

          4.2.10 "UTILITIES COSTS" shall mean all actual charges for utilities
for the Buildings and the Project which Landlord shall pay during any Expense
Year, including, but not limited to, the costs of water, sewer and electricity,
and the costs of HVAC and other utilities (but excluding those charges for which
tenants directly reimburse Landlord or pay directly to the utility company) as
well as related fees, assessments and surcharges. Utilities Costs shall be
calculated assuming Building B is at least 100% occupied and Building C (and
during the period of time when any other buildings are fully constructed and
ready for occupancy and are included by Landlord within the Project), is (are)
at least 95% occupied. If, during all or any part of any Expense Year (including
the Base Year), Landlord shall not provide any utilities (the cost of which, if
provided by Landlord, would be included in Utilities Costs) to a tenant
(including Tenant) who has undertaken to provide same instead of Landlord,
Utilities Costs shall be deemed to be increased by an amount equal to the
additional Utilities Costs which would reasonably have been incurred during such
period by Landlord if Landlord had at its own expense provided such utilities to
such tenant. Utilities Costs shall include any costs of utilities which are
allocated to the Real Property under any declaration, restrictive covenant, or
other instrument pertaining to the sharing of costs by the Real Property or any
portion thereof, including any covenants, conditions or restrictions now or
hereafter recorded against or affecting the Real Property. For purposes of
determining Utilities Costs incurred for the Base Year, if there is a
deregulation of

                                      -25-

<PAGE>

the electricity utilities industry during the Base Year, then after calendar
years 2003 and 2004 have occurred and Landlord has determined the electricity
cost component of the Utilities Costs for the Base Year and calendar years 2003
and 2004, the electricity cost component of the Utilities Costs for the Base
Year shall be recalculated to equal the average of the electricity cost
component of the Utilities Costs incurred during the Base Year and calendar
years 2003 and 2004, and based upon such recalculation (which shall be made by
Landlord in the Statement delivered by Landlord pursuant to Section 4.3.2 below
for calendar year 2004), Landlord shall revise the Direct Expenses for the Base
Year. If such recalculation results in an overpayment or underpayment by Tenant
of Direct Expenses for calendar years 2003 and/or 2004, Landlord shall refund to
Tenant or Tenant shall pay to Landlord the amount of overpayment or
underpayment, as the case may be, within thirty (30) days after Landlord's
delivery of the Statement setting forth such recalculation. Notwithstanding the
foregoing to the contrary, Utilities Costs shall not include any penalties,
interest or late charges attributable to Landlord's delinquent payment of any
Utilities Costs.

     4.3  CALCULATION AND PAYMENT OF ADDITIONAL RENT.

          4.3.1 CALCULATION OF EXCESS. If for any Expense Year ending or
commencing within the Lease Term, Tenant's Share of Direct Expenses allocated to
the Buildings pursuant to Section 4.3.4 below for such Expense Year exceeds
Tenant's Share of Direct Expenses allocated to the Buildings for the Base Year,
then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2,
below, and as additional rent, an amount equal to such excess (the "EXCESS").
For any partial year within the Lease Term, the Excess shall be calculated by
comparing Tenant's Share of Direct Expenses for such partial Expense Year, to
the comparable prorata portion of Tenant's Share of Direct Expenses applicable
to the Base Year.

          4.3.2 STATEMENT OF ACTUAL DIRECT EXPENSES. Following the end of each
Expense Year, Landlord shall give to Tenant a statement (the "STATEMENT") which
shall state the amount of Direct Expenses actually incurred or accrued for that
Expense Year and which shall indicate the amount, if any, of any Excess for that
Expense Year. Such Statement shall be itemized on a line item by line item
basis, showing the Direct Expenses for such Expense Year as well as the Expense
Year immediately prior to such Expense Year. Within thirty (30) days after
Tenant's receipt of the Statement for such preceding Expense Year, if an Excess
is present, Tenant shall pay to Landlord the full amount of the Excess for such
preceding Expense Year, less the amounts, if any, actually paid by Tenant to
Landlord with respect to such preceding Expense Year as "ESTIMATED EXCESS," as
that term is defined in Section 4.3.3 below. If any Statement reflects that the
amount of Estimated Excess paid by Tenant to Landlord for such Expense Year is
greater than the actual amount of the Excess for such Expense Year, then
Landlord shall, at its option, either credit such overpayment toward Tenant's
next rent payment(s) then due and payable under this Lease, or remit such
overpayment to Tenant within thirty (30) days after such applicable Statement is
delivered to Tenant. Even though the Lease Term has expired and Tenant has
vacated the Premises, if the Statement for the Expense Year in which this Lease
terminates reflects that Tenant's payment to Landlord of Estimated Excess for
such Expense Year was greater than or less than the actual amount of Excess for
such last Expense Year, then within thirty (30) days after Landlord's delivery
of such Statement to Tenant, Landlord shall refund to Tenant any such
overpayment, or Tenant shall pay to Landlord any such underpayment, as the case
may be. Landlord shall endeavor to deliver the applicable Statement to Tenant
within one hundred twenty (120) days after the end of the Expense Year in
question, but the failure of Landlord to furnish such Statement within such 120
day period shall not prejudice Landlord from enforcing its rights under this
Article 4; provided, however, Landlord's failure to provide Tenant with a
Statement for a particular Expense Year within two (2) years after the end of
the Expense Year in question, shall constitute a waiver of Landlord's right to
collect any Excess payable for such Expense Year; provided further, however,
that such limitation on Landlord's ability to collect any Excess as a result of
any late delivery of such Statement shall not preclude Landlord from modifying
any Statement once such Statement is timely delivered, as provided hereinabove,
to correct any errors or reflect any new information received by Landlord with
respect to the Direct Expenses shown on such Statement (including, without
limitation, as a result of any new or supplemental tax bills issued by the
applicable taxing authority or any audit conducted by Tenant or any other tenant
of the Real Property), so long as Landlord delivers such revised Statement to
Tenant within two (2) years after Landlord becomes aware of such errors or
receives such new information. In the event that any such revised Statement so
delivered shows that an additional Excess is present, then Tenant shall pay to
Landlord, within thirty (30) days of receipt of the revised Statement, the
amount of the

                                      -26-
<PAGE>

additional Excess. If any such revised Statement reflects that Tenant has
overpaid Tenant's Share of Direct Expenses for such Expense Year, Landlord
shall, at its option either credit such overpayment toward Tenant's next rent
payment(s) under this Lease, or refund the overpayment to Tenant within thirty
(30) days after such applicable revised Statement is delivered to Tenant. The
provisions of this Section 4.3.2 shall survive the expiration or earlier
termination of the Lease Term for a period of two (2) years thereafter, but
without derogating from the 2-year limitation set forth hereinabove.

          4.3.3 STATEMENT OF ESTIMATED DIRECT EXPENSES. Prior to that date which
is thirty (30) days prior to the first day of a new Expense Year, Landlord shall
endeavor to give Tenant a yearly expense estimate statement (the "ESTIMATE
STATEMENT") which shall set forth Landlord's reasonable estimate (the
"Estimate") of what the total amount of Direct Expenses allocated to the
Buildings pursuant to Section 4.3.4 below for the new Expense Year shall be and
the estimated Excess (the "ESTIMATED EXCESS"), as calculated by comparing
Tenant's Share of Direct Expenses allocated to the Buildings, which shall be
based upon the Estimate, to Tenant's Share of Direct Expenses allocated to the
Buildings for the Base Year. Such Statement shall be itemized on a line item by
line item basis, showing the estimated Direct Expenses for such new Expense Year
as well as the estimated Direct Expenses for the Expense Year immediately prior
to such new Expense Year. The failure of Landlord to timely furnish the Estimate
Statement for any Expense Year shall not preclude Landlord from enforcing its
rights under this Article 4. Tenant shall pay to Landlord the Estimated Excess
for each such Expense Year, in monthly installments of one-twelfth (1/12)
thereof on the first day of each calendar month during such Expense Year;
provided, however, if such Estimate Statement is delivered to Tenant after the
start of such new Expense Year, Tenant shall pay to Landlord, with its next
installment of Base Rent due, a fraction of the Estimated Excess for the
then-current Expense Year (reduced by any amounts paid pursuant to the last
sentence of this Section 4.3.3). Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year to the month of
such payment, both months inclusive, and shall have twelve (12) as its
denominator. If at any time Landlord determines that the Excess for an Expense
Year is projected to vary from the then Estimated Excess for such Expense Year,
Landlord may, by notice to Tenant, revise such Estimated Excess, and Tenant's
monthly installments for the remainder of such Expense Year shall be adjusted so
that by the end of such Expense Year Tenant shall have paid to Landlord the
revised Estimated Excess for such Expense Year. Until a new Estimate Statement
is furnished, Tenant shall pay monthly, with the monthly Base Rent installments,
an amount equal to one-twelfth (1/12) of the Estimated Excess set forth in the
previous Estimate Statement delivered by Landlord to Tenant.

          4.3.4 ALLOCATION OF DIRECT EXPENSES TO THE BUILDINGS. The parties
acknowledge that when constructed the Buildings will be part of a multi-building
project consisting of the Buildings, the Existing Buildings, and such other
buildings as Landlord may elect to construct and include as part of the Project
from time to time (collectively, the "OTHER BUILDINGS"), and that certain of the
costs and expenses incurred in connection with the Real Property (i.e., certain
of the Direct Expenses) shall be shared among the Existing Buildings, the
Buildings and such Other Buildings, while certain other costs and expenses which
are solely attributable or exclusively pertaining to the Buildings, the Existing
Buildings and/or such Other Buildings, as applicable, shall be allocated
directly to the Buildings, Existing Buildings and/or such Other Buildings,
respectively. Accordingly, as set forth in Sections 4.1 and 4.2 above, Direct
Expenses are determined annually for the Real Property as a whole, and a portion
of the Direct Expenses, which portion shall be reasonably determined by Landlord
on an equitable basis, shall be allocated to the Buildings (as opposed to the
Existing Buildings and any such Other Buildings), and such portion so allocated
shall be the amount of Direct Expenses payable with respect to the Buildings
upon which the applicable Tenant's Share shall be calculated. Such portion of
the Direct Expenses allocated to the Buildings and payable by Tenant hereunder
shall include all Direct Expenses which are attributable solely to the
Buildings, and an equitable portion of the Direct Expenses attributable to the
Real Property as a whole. In addition, as a further allocation of those Direct
Expenses allocated to the Buildings, Landlord shall allocate to Building B,
separately, those Direct Expenses, if any, which have been so allocated to the
Buildings but which are solely attributable to Building B (and not Building C),
and Landlord shall allocate to Building C, separately, those Direct Expenses, if
any, which have been so allocated to the Buildings but which are solely
attributable to Building C (and not Building B). As an example of such
allocation of Direct Expenses it is anticipated that Landlord may receive
separate tax bills which separately assess the improvements component of Tax
Expenses for each

                                      -27-
<PAGE>

office building in the Project, and/or Landlord may receive separate utilities
bills from the utilities companies identifying the Utilities Costs for certain
of the utilities costs directly incurred by each such office building (as
measured by separate meters installed for such building), and such separately
assessed Tax Expenses and separately metered Utilities Costs shall be calculated
for and allocated separately to each such applicable office building. In
addition, in the event Landlord elects, at its sole option, to subdivide certain
common area portions of the Real Property such as landscaping, public and
private streets, driveways, walkways, courtyards, plazas, transportation
facilitation areas, accessways and/or parking areas into a separate parcel or
parcels of land (and/or separately convey all or any of such parcels to a common
area association to own, operate and/or maintain same), the Direct Expenses for
such common area parcels of land should be aggregated and then reasonably
allocated by Landlord to the Buildings, Existing Buildings and such Other
Buildings on an equitable basis as Landlord (and/or any applicable covenants,
conditions and restrictions for any such common area association) shall provide
from time to time.

          4.3.5 PAYMENT IN INSTALLMENTS. All assessments and premiums which are
not specifically charged to Tenant because of what Tenant has done, which can be
paid by Landlord in installments without the imposition of fees, penalties or
interest, shall be paid by Landlord in the maximum number of installments that
are permitted by law without the imposition of fees, penalties or interest and
not included as Direct Expenses except in the Expense Year in which the
assessment or premium installment is actually paid; provided, however, that if
the prevailing practice in Comparable Buildings is to pay such assessments or
premiums on an earlier basis, and Landlord pays on such earlier basis, such
assessments or premiums shall be included in Direct Expenses as paid by
Landlord.

     4.4  TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
Tenant shall reimburse Landlord within thirty (30) days after demand for any and
all taxes or assessments required to be paid by Landlord (except to the extent
included in Tax Expenses by Landlord), excluding state, local and federal
personal or corporate income taxes measured by the net income of Landlord from
all sources and estate and inheritance taxes, whether or not now customary or
within the contemplation of the parties hereto, when:

          (i)  said taxes are measured by or reasonably attributable to the cost
or value of Tenant's equipment, furniture, fixtures and other personal property
located in the Premises, or by the cost or value of any leasehold improvements
made in or to the Premises by or for Tenant, to the extent the cost or value of
such leasehold improvements exceeds the amount per square foot which Landlord
uses as a base value above which Landlord charges other tenants of the Real
Property for real estate taxes attributable to the cost or value of leasehold
improvements located in such tenants' premises (the "CUT-OFF POINT");

          (ii) said taxes are assessed upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises or any portion of the Real Property
(including the Parking Facilities); or

          (iii) said taxes are assessed upon this transaction or any document to
which Tenant is a party creating or transferring an interest or an estate in the
Premises.

     4.5  LATE CHARGES. If any installment of Rent or any other sum due from
Tenant shall not be received by Landlord or Landlord's designee within five (5)
business days after written notice from Landlord that said amount is past due,
then Tenant shall pay to Landlord a late charge equal to five percent (5%) of
the amount due or in the case of a delinquent installment of Base Rent, two
percent (2%) of the delinquent amount; provided, however, that if Landlord has
given Tenant two (2) such delinquency notices in the preceding twelve (12) month
period, then the late charge shall be imposed for any subsequent delinquent
payment of Rent by Tenant, without requirement of any notice or cure period. The
late charge shall be deemed Additional Rent and the right to require it shall be
in addition to all of Landlord's other rights and remedies hereunder or at law
and shall not be construed as liquidated damages or as limiting Landlord's
remedies in any manner. In addition to the late charge described above, any Rent
or other amounts owing hereunder which are not paid within five (5) business
days after written notice from Landlord that said amount is past due shall bear
interest from the date due until paid at a rate (the "INTEREST RATE") equal to
the lower of (i) the then-current prime interest rate as such rate is announced
by The Wall Street Journal plus two (2) percentage points, or (ii) the highest
rate permitted by applicable law; provided, however, that if Landlord has given
Tenant two

                                      -28-
<PAGE>

(2) such delinquency notices in the preceding twelve (12) month period, then
interest shall be imposed for any subsequent delinquent payment of Rent by
Tenant, without requirement of any notice or cure period.

     4.6  BOOKS AND RECORDS. Landlord shall maintain in a safe and orderly
manner books and records, or make available such books and records, in Los
Angeles and/or Orange Counties in accordance with sound accounting and
management practices, reflecting the Direct Expenses. Landlord shall maintain
such books and records for the Direct Expenses for each Expense Year for the
entirety of the period which ends two (2) years following Landlord's delivery to
Tenant of each such Statement, except that Landlord shall maintain such books
and records with respect to each applicable Base Year during the entire Lease
Term plus two (2) years after the expiration or sooner termination of the Lease
Term.

     4.7  AUDIT RIGHTS. In the event Tenant disputes the amount of the Direct
Expenses set forth in the Statement for the particular Expense Year delivered by
Landlord to Tenant pursuant to Section 4.3.2 above, Tenant shall have the right,
at Tenant's cost, after reasonable notice to Landlord, to have Tenant's
authorized employees inspect, at Landlord's office in Los Angeles and/or Orange
Counties during normal business hours, Landlord's books, records and supporting
documents concerning the Direct Expenses set forth in such Statement; provided,
however, Tenant shall have no right to conduct such inspection, have an audit
performed by the Accountant as described below, or object to or otherwise
dispute the amount of the Direct Expenses set forth in any such Statement unless
Tenant notifies Landlord of such objection and dispute, completes such
inspection, and has the Accountant commence and complete such audit within two
(2) years immediately following Landlord's delivery of the particular Statement
in question (the "REVIEW PERIOD"); provided, further, that notwithstanding any
such timely objection, dispute, inspection, and/or audit, and as a condition
precedent to Tenant's exercise of its right of objection, dispute, inspection
and/or audit as set forth in this Section 4.7, Tenant shall not be permitted to
withhold payment of, and Tenant shall timely pay to Landlord, the full amounts
as required by the provisions of this Article 4 in accordance with such
Statement. However, such payment may be made under protest pending the outcome
of any audit which may be performed by the Accountant as described below. In
connection with any such inspection by Tenant, Landlord and Tenant shall
reasonably cooperate with each other so that such inspection can be performed
pursuant to a mutually acceptable schedule, in an expeditious manner and without
undue interference with Landlord's operation and management of the Real
Property. If after such inspection and/or request for documentation, Tenant
still disputes the amount of the Direct Expenses set forth in the Statement,
Tenant shall have the right, within the Review Period, to cause an independent
certified public accountant (which is not paid on a commission or contingency
basis) selected by Tenant and reasonably approved by Landlord (the "ACCOUNTANT")
to complete an audit of Landlord's books and records to determine the proper
amount of the Direct Expenses incurred and amounts payable by Tenant for the
Expense Year which is the subject of such Statement. Such audit by the
Accountant shall be final and binding upon Landlord and Tenant. If Landlord and
Tenant cannot mutually agree as to the identity of the Accountant within thirty
(30) days after Tenant notifies Landlord that Tenant desires an audit to be
performed, then the Accountant shall be of the "BIG 5" accounting firms (which
is not paid on a commission or contingency basis), as selected by Tenant and
reasonably approved by Landlord. If such audit reveals that Landlord has
over-charged Tenant, then within thirty (30) days after the results of such
audit are made available to Landlord, Landlord shall reimburse to Tenant the
amount of such over-charge, together with interest on the amount of the
over-charge at the Interest Rate (as defined in Section 4.5 above). If the audit
reveals that the Tenant was under-charged, then within thirty (30) days after
the results of such audit are made available to Tenant, Tenant shall reimburse
to Landlord the amount of such under-charge. Tenant agrees to pay the cost of
such audit unless it is subsequently determined that Landlord's original
Statement which was the subject of such audit overstated Direct Expenses by four
percent (4%) or more of the actual Direct Expenses which was the subject of such
audit. The payment by Tenant of any amounts pursuant to this Article 4 shall not
preclude Tenant from questioning, during the Review Period, the correctness of
the particular Statement in question provided by Landlord, but the failure of
Tenant to object thereto, conduct and complete its inspection and have the
Accountant conduct the audit as described above prior to the expiration of the
Review Period for such Statement shall be conclusively deemed Tenant's approval
of the Statement in question and the amount of Direct Expenses shown thereon. If
following Tenant's delivery to Landlord of a written request to make Landlord's
books and records regarding the Direct Expenses reasonably available to Tenant
and/or the Accountant to conduct any such inspection and/or audit described

                                      -29-
<PAGE>

above in this Section 4.7, Landlord fails to make Landlord's books reasonably
available for such purposes during Landlord's normal business hours, and such
failure continues for one (1) business day after Tenant notifies Landlord
thereof, then the Review Period shall be extended one (1) day for each such day
that Tenant and/or the Accountant, as the case may be, is so prevented from
accessing such books and records. In connection with any inspection and/or audit
conducted by Tenant pursuant to this Section 4.7, Tenant agrees to keep, and to
cause all of Tenant's employees and consultants and the Accountant to keep, all
of Landlord's books and records and the audit, and all information pertaining
thereto and the results thereof, strictly confidential (except if required by
any court to disclose such information or if such information is available from
an inspection of public records), and in connection therewith, Tenant shall
cause such employees, consultants and the Accountant to execute such reasonable
confidentiality agreements as Landlord may require prior to conducting any such
inspections and/or audits.

                                    ARTICLE 5

                                 USE OF PREMISES

     5.1  USE. Tenant shall use the Premises solely for general office and
administrative purposes consistent with the character of the Real Property as a
first-class, multi-tenant office building project, and Tenant shall not use or
permit the Premises to be used for any other purpose or purposes whatsoever.
Tenant further covenants and agrees that it shall not use, or suffer or permit
any person or persons to use, the Premises or any part thereof for any use or
purpose contrary to the provisions of EXHIBIT D, attached hereto, or in
violation of applicable Laws (as defined in Article 22 below). Tenant shall
comply with all recorded covenants, conditions and restrictions, and the
provisions of all ground or underlying leases, now or hereafter affecting the
Real Property (including, without limitation, that certain proposed Agreement
and Declaration of Covenants, Conditions and Restrictions for LNR Warner Center
(the "PROPOSED CC&R'S") [a draft copy of the latest version of which dated
September 13, 2000 has been provided to Tenant], in its final form as and when
recorded against the Real Property, and as thereafter amended from time to
time), so long as the same (including any actions undertaken by Landlord
thereunder as "Declarant", and/or any amendments thereto unilaterally effected
by Landlord as "Declarant" thereunder) (i) do not materially derogate from the
rights of Tenant under this Lease, including, without limitation, the rights
granted to Tenant pursuant to Sections 21.5 and 25.30 below, or (ii) result in
an assessment of any additional material monetary obligations directly upon
Tenant (as opposed to a pass-through of Direct Expenses described in Article 4
above). In connection with Tenant's compliance obligations under any such Laws
and/or such recorded covenants, conditions and restrictions, and to the extent
expressly required thereunder, Tenant agrees to: (A) develop an active recycling
program to reduce solid waste, and participate in any such recycling program
developed by Landlord or any common area association with or under in such
covenants, conditions and restrictions, and/or developed by any local
municipalities or governmental agencies having jurisdiction over the Real
Property; (B) use reasonable efforts to cooperate in and comply with programs
which may be undertaken by Landlord independently, or in cooperation with local
municipalities or governmental agencies or other property owners in the vicinity
of LNR Warner Center, to reduce peak levels of commuter traffic; such programs
may include, but shall not be limited to, carpools, vanpools and other ride
sharing programs, public and private transit, and flexible work hours; (C) to
the extent any such traffic mitigation programs are deemed mandatory by such
local municipalities or government agencies, to comply with such programs
(including any programs implemented by Landlord or any common area association
under any covenants, conditions and restrictions recorded against the Real
Property); and (D) in connection with Tenant's obligations under clauses (B) and
(C) hereinabove, Tenant agrees to appoint one of its employees to act as a
liaison to the transportation coordinators in any buildings in the Real Property
occupied or leased by Tenant. Landlord covenants and represents to Tenant that:
(1) Tenant's use of the Premises for general office and administrative purposes
is permitted under the Proposed CC&R's and will be permitted under any recorded
covenants, conditions and restrictions and the provisions of all ground or
underlying leases now or hereafter affecting the Real Property (collectively,
the "RECORDED DOCUMENTS"); (2) to the extent Tenant is required to obtain
approvals under any such Recorded Documents to have the full benefit of all
rights specifically provided to Tenant under this Lease (including with respect
to Tenant's signage rights in Section 21.5 and Tenant's Telecommunication
Equipment in Section 25.30) and Tenant must seek such approvals through Landlord
as owner of the Real Property because Tenant has no standing under any such
Recorded Documents to directly obtain such approvals on its own behalf, Landlord
shall use reasonable efforts (subject to Tenant reimbursing Landlord or

                                      -30-
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paying directly for any reasonable out-of-pocket costs incurred by Landlord) to
seek such approvals on Tenant's behalf to the extent not inconsistent with
Landlord's rights or any other provisions of this Lease; and (3) the
indemnification obligations contained in Section 3.4 of the Proposed CC&R's (or
the version thereof recorded against the Real Property), and any amendments
thereto to shall not apply to Tenant.

     5.2  HAZARDOUS MATERIALS. Tenant shall not use or allow another person or
entity to use any part of the Premises for the storage, use, treatment,
manufacture or sale of Hazardous Material (as defined in Section 1.3 above).
Landlord acknowledges, however, that Tenant will maintain products in the
Premises which are incidental to the operation of its general office use,
including, without limitation, photocopy supplies, secretarial supplies and
limited janitorial supplies, which products contain chemicals which are
categorized as Hazardous Materials. Landlord agrees that the use of such
products in the Premises in the manner in which such products are designed to be
used and in compliance with applicable laws shall not be a violation by Tenant
of this Article 5.

                                    ARTICLE 6

                             SERVICES AND UTILITIES

     6.1  STANDARD TENANT SERVICES. Landlord shall provide the following
services on all days during the Lease Term in a first-class manner, unless
otherwise stated below. Unless otherwise provided below, Landlord shall manage
the Buildings and such services shall be supplied in a first-class manner
consistent with other Comparable Buildings.

          6.1.1 Subject to reasonable changes implemented by Landlord (which,
with respect to such changes Landlord may desire to implement for Building B
only, Tenant shall have the right to reasonably approve same in advance of their
implementation) and to all governmental rules, regulations and guidelines
applicable thereto, Landlord shall provide HVAC for normal office use in the
Premises during the Business Hours (as defined below) so as to maintain
temperatures within the Premises within the range of temperatures that are
consistent with the design capacity of the HVAC system installed by Landlord as
part of the Base, Shell and Core as specified in EXHIBIT L attached to this
Lease, subject to extraordinary hot or cold weather periods, unusual heat loads
caused by Tenant's use of the Premises, any use of the Premises for other than
general office use, brown-outs and/or other Force Majeure events. As used
herein, the "BUSINESS HOURS" shall mean 8:00 a.m. to 6:00 p.m. Monday through
Friday, and 9:00 a.m. to 1:00 p.m. on Saturday, except for the date of
observation of New Year's Day, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day (collectively, the "HOLIDAYS");
provided, however, that with respect to Tenant's use of HVAC in Building B,
Landlord shall change the Business Hours for Building B, only, to any other
hours requested by Tenant so long as (i) Landlord is reasonably able to make
such change, (ii) Tenant gives Landlord at least thirty (30) days' advance
written notice of such requested change, (iii) Tenant's request does not exceed
fifty-five (55) hours per week, (iv) Landlord shall not be obligated to cause
the Building's HVAC system to maintain the temperatures within the ranges set
forth hereinabove during any such hours which are not the original Business
Hours specified hereinabove, unless Tenant is compensating Landlord for
non-Business Hours usage pursuant to Section 6.2 below and then only with
respect to the areas within the Premises for which Tenant is so compensating
Landlord for such non-Business Hours usage (but subject to any start-up period
of time for such areas to reach a stabilized temperature range), and (v) Tenant
pays for any increased cost of providing HVAC during any such changed hours as
compared to the cost which would reasonably have been incurred in providing such
HVAC during the original Business Hours prior to such change (for example, in
the summer, if HVAC is only provided to the Premises during a non-Holiday
weekday for 10 consecutive hours, it is anticipated that the cost to provide
such HVAC during the 10-hour period from 8:00 a.m. to 6:00 p.m. on such day will
be substantially less expensive than providing HVAC during the 10-hour period
from 10:00 a.m. to 8:00 p.m. on the same day due to, for example, higher rates
and warmer temperatures in effect during the latter 10-hour period).

          6.1.2 Landlord shall provide adequate electrical wiring and facilities
and power for normal general office use as reasonably determined by Landlord.
Upon request, Landlord shall replace lamps, starters and ballasts for Building
standard lighting fixtures (with Building standards to be determined based upon
the standard tenant improvement Specifications, as defined in the Tenant Work
Letter, for lighting fixtures in Building C), the cost of which shall

                                      -31-
<PAGE>

be included in Operating Expenses. Tenant shall bear the cost of replacement of
all lamps, starters and ballasts for non-Building standard lighting fixtures
within the Premises.

          6.1.3 Landlord shall provide city water from the regular building
outlets for drinking, lavatory and toilet purposes for normal office use, and
for use in kitchen and other eating areas within the Premises for normal office
use.

          6.1.4 Landlord shall provide (i) janitorial services five (5) days per
week, except the date of observation of the Holidays, in and about the Premises
and (ii) window washing services, all in accordance with the janitorial and
window washing specifications attached hereto as EXHIBIT K (which are subject to
change provided that the overall level of the janitorial and window washing
services provided by Landlord is not reduced below the level set forth in the
specifications attached as EXHIBIT K or below the level provided at Comparable
Buildings).

          6.1.5 Landlord shall provide nonexclusive automatic passenger elevator
service at all times; provided, however, while Tenant is leasing the entire
rentable area of Building B as part of the Premises under this Lease such
passenger elevator service within Building B shall be exclusive, except that
Landlord and its employees, agents and contractors shall have the right to use
such elevators for purposes reasonably related to the performance of Landlord's
obligations and exercise of Landlord's rights under this Lease without
unreasonable interference with Tenant's permitted use of the Premises.

     6.2  OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's prior
written consent, (i) use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system, or (ii) increase the water
normally furnished for the normal office use for the Premises by Landlord
pursuant to the terms of Section 6.1.3 above. In addition, Tenant shall not use
electricity in the Premises in excess of the capacity of the electricity feeders
and risers serving the Premises. If Tenant uses water or HVAC in excess of the
quantities to be provided by Landlord for normal office use pursuant to Section
6.1 above, or if Tenant's consumption of electricity shall exceed five (5) watts
per usable square foot of the Premises for connected electrical load of 120/208
voltage power equipment and one and one half (1 1/2) watts per usable square
foot of the Premises for connected electrical load for 277/480 voltage power
equipment, calculated on an average annualized basis for Business Hours
described in Section 6.1.1 above, then Tenant shall pay to Landlord, within
thirty (30) days after billing, the sum of (A) the actual cost of such excess
consumption plus a five percent (5%) surcharge on such costs to cover Landlord's
administrative costs, plus (B) the cost of the installation, operation, and
maintenance of equipment which is installed in order to supply such excess
consumption, plus (C) the cost of the increased wear and tear and depreciation
on existing equipment caused by such excess consumption; Landlord may reasonably
install devices to separately meter any such excess use, and in such event
Tenant shall pay to Landlord the cost of such additional metering devices within
thirty (30) days after demand therefor. If Tenant desires to use HVAC in the
Premises during hours other than the Business Hours pursuant to the terms of
Section 6.1.1 above: (x) Tenant shall give Landlord such prior notice, as
Landlord shall from time to time establish as appropriate (which notice is
anticipated to be accomplished through telephonic dial-up and access via
computer codes), of Tenant's desired use thereof; (y) Landlord shall supply such
after-hours HVAC to Tenant at such hourly cost to Tenant as Landlord shall from
time to time establish; such hourly cost shall be determined on a per floor
basis and shall equal the actual cost incurred by Landlord to supply such
after-hours HVAC on an hourly basis, including (1) the cost of the utilities
consumption plus a five percent (5%) surcharge on such costs to cover Landlord's
administrative costs, (2) increased wear and tear and depreciation on equipment
to provide such after-hours HVAC, and (3) maintenance costs; and (z) Tenant
shall pay such cost to Landlord as Additional Rent within thirty (30) days after
billing.

     6.3  INTERRUPTION OF USE. Subject to Landlord's indemnity of Tenant in
Section 10.1.2 below and subject to the abatement provisions in Section 6.5
below, Tenant agrees that Landlord shall not be liable for damages, by abatement
of Rent or otherwise, for failure to furnish or delay in furnishing any service
(including telephone and telecommunication services), or for any diminution in
the quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole or in part, by repairs, replacements, or improvements, by
any strike, lockout or other labor trouble, by inability to secure electricity,
gas, water, or other fuel at the

                                      -32-
<PAGE>

Buildings or Real Property, by any accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any other cause; and such failures or
delays or diminution shall never be deemed to constitute an eviction or
disturbance of Tenant's use and possession of the Premises or relieve Tenant
from paying Rent (except as provided in Section 6.5 below) or performing any of
its obligations under this Lease. Furthermore, except as expressly provided in
Section 10.1 below, Landlord shall not be liable under any circumstances for a
loss of, or injury to, property or for injury to, or interference with, Tenant's
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to a failure to furnish any of the
services or utilities as set forth in this Article 6.

     6.4  ADDITIONAL SERVICES. Provided that Landlord can provide such services
(i) at a competitive price, (ii) at a comparable level of quality and (iii)
within a comparable period of time (as compared to third party providers of such
services to Comparable Buildings), Landlord shall also have the exclusive right,
but not the obligation, to provide any additional services which may be required
by Tenant, including, without limitation, locksmithing, lamp replacement,
additional janitorial service, and additional repairs and maintenance, provided
that Tenant shall pay to Landlord within thirty (30) days after billing, the sum
of all costs to Landlord of such additional services plus an administration fee
equal to five percent (5%) of such costs. Charges for any service for which
Tenant is required to pay from time to time hereunder shall be deemed Additional
Rent hereunder, and shall be billed on a monthly basis. In the event that
Landlord fails to meet any of the three (3) criteria set forth in the first
clause of the first sentence of this Section 6.4, then Tenant shall have the
right to select a third party which provides such services to Comparable
Buildings, subject to Landlord's reasonable approval.

     6.5  ABATEMENT OF RENT WHEN TENANT IS PREVENTED FROM USING PREMISES. In the
event that Tenant is actually prevented from using, and does not use, the
Premises or any portion thereof, for five (5) consecutive business days or
fifteen (15) business days in any consecutive 12-month period (the "ELIGIBILITY
PERIOD") as a result of (i) any construction, repair, maintenance or alteration
performed by Landlord after the Lease Commencement Date, (ii) any failure to
provide to the Premises any of the essential utilities and services required to
be provided in Sections 6.1.1 or 6.1.2 above, (iii) any failure to provide
access to the Premises, (iv) any failure by Landlord to perform Landlord's
repair obligations under Section 7.2 below prior to the expiration of the
Outside Repair Period (as defined in Section 7.3 below), (v) any entry onto the
Premises by Landlord pursuant to Article 23 below, or (vi) because of the
presence of Hazardous Materials in, on or around the Building, the Premises or
the Real Property which were not caused or introduced by Tenant or Tenant's
agents, employees, licensees or invitees, and which Hazardous Materials pose a
material and significant health risk to occupants of the Premises as determined
by applicable governmental authorities pursuant to applicable Environmental Laws
by written notice delivered to Landlord and Tenant, which notice specifically
prohibits occupancy of the Premises (or portions thereof) as a result of such
Hazardous Materials, then Tenant's obligation to pay Base Rent and Tenant's
Share of increases in Direct Expenses shall be abated or reduced, as the case
may be, from and after the first (1st) day following the Eligibility Period and
continuing until such time that Tenant continues to be so prevented from using,
and does not use, the Premises or a portion thereof, in the proportion that the
rentable square feet of the portion of the Premises that Tenant is prevented
from using, and does not use, bears to the total rentable square feet of the
Premises. If Tenant's right to rent abatement pursuant to this Section 6.5
occurs during a free rent period which arises after the Lease Commencement Date,
Tenant's free rent period shall be extended for the number of days that the
abatement period overlapped the free rent period (the "OVERLAP PERIOD"), and
Landlord shall have the right to extend the Lease Expiration Date for a period
of time equal to the Overlap Period if Landlord notifies Tenant of such election
in writing within thirty (30) days after the end of the extended free rent
period. To the extent Tenant shall be entitled to abatement of rent because of a
damage or destruction pursuant to Article 11 or a taking pursuant to Article 13,
then the Eligibility Period shall not be applicable.

     6.6  ACCESS TO PREMISES. Subject to all of the terms and conditions of this
Lease, including the Rules and Regulations attached hereto as EXHIBIT D, and all
applicable Laws, Tenant shall have access to the Premises twenty-four (24) hours
per day, seven (7) days per week.

                                      -33-
<PAGE>

                                    ARTICLE 7

                                     REPAIRS

     7.1  TENANT'S REPAIRS. Subject to Landlord's repair obligations in
Section 7.2 and to the provisions of Articles 11 and 13 below, Tenant shall, at
Tenant's own expense, keep the Premises and all portions thereof, including all
improvements, fixtures, equipment and furnishings therein (including, without
limitation, all non-Base, Shell and Core systems and equipment within the
Premises, including all components and equipment and systems providing
distribution from the Base, Shell and Core systems and equipment), in good
order, repair and condition at all times during the Lease Term, except for
ordinary wear and tear and casualty damage which is not specifically made the
responsibility of Tenant under this Lease. In connection with such repair
obligations, Tenant shall, at Tenant's own expense but subject to the prior
approval of Landlord (which approval shall not be unreasonably withheld or
delayed), and within any reasonable period of time specified by Landlord,
promptly and adequately repair all damage to the Premises and replace or repair
all damaged or broken fixtures and appurtenances; provided however, that, at
Landlord's option, or if Tenant fails to make such repairs within a reasonable
period of time and after Landlord has notified Tenant of its intention to do so,
Landlord may, but need not, make such repairs and replacements, and Tenant shall
pay to Landlord, within thirty (30) days after invoice, the actual, reasonable
and documented costs thereof, plus an administration fee equal to five percent
(5%) of such costs. Landlord may, but shall not be required to, enter the
Premises at all reasonable times, and upon reasonable prior notice to Tenant (or
without notice in case of emergency), to make such repairs, alterations,
improvements and additions to the Premises or to the Buildings or to any
equipment located in the Buildings as shall be necessary or desirable in
connection with the first-class management and operation standards for the
Buildings set forth herein, and/or as may be required for Landlord to comply
with the provisions of this Lease and/or as may be required by applicable laws
and/or governmental or quasi-governmental authority or court order or decree.
Landlord shall use commercially reasonable efforts to minimize interference with
Tenant's use of and access to the Premises during Landlord's entry into the
Premises to perform such work pursuant to the foregoing provisions of this
Section 7.1.

     7.2  LANDLORD'S REPAIRS. Anything contained in Section 7.1 above to the
contrary notwithstanding, subject to Articles 11 and 13 below, at all times
during the Lease Term Landlord shall repair and maintain (including
replacements) in good order, condition and repair and in a manner generally
consistent with the maintenance and repair (including replacements) standards of
Comparable Buildings, the structural portions of the Buildings, the exterior
windows of the Buildings, the roof of each Building, the Base, Shell and Core
components of the Buildings (including the restrooms originally installed as
part of the Base, Shell and Core) and the common areas of Building C (and the
common areas of the Real Property until such time as such repair and maintenance
obligations therefor are made the obligation of any common area association);
provided, however, to the extent such Landlord-required maintenance and repairs
are required to be performed as a result of the act, neglect, fault of or
omission of any duty by Tenant, its agents, employees or invitees, Tenant shall
pay to Landlord as additional rent, the reasonable cost of such maintenance and
repairs (but only to the extent such cost is not covered by Landlord's insurance
obtained pursuant to Section 10.2 of this Lease). Subject to Landlord's
indemnity of Tenant in Section 10.1.2 below and subject to the abatement
provisions in Section 6.5 above, there shall be no abatement of rent and no
liability of Landlord (including any liability for any injury to or interference
with Tenant's business) arising from the making of or failure to make any
repairs, alterations or improvements in or to any portion of the Real Property,
the Buildings or the Premises or in or to fixtures, appurtenances and equipment
therein. Subject to Section 7.3 below, Tenant hereby waives and releases its
right to make repairs at Landlord's expense under Sections 1941 and 1942 of the
California Civil Code, or under any similar law, statute, or ordinance now or
hereafter in effect.

     7.3  TENANT'S SELF-HELP RIGHTS. Notwithstanding anything to the contrary
set forth in this Article 7, if Tenant provides written notice to Landlord of
the need for repairs and/or maintenance which are Landlord's obligation to
perform under the terms of this Lease, and Landlord fails to undertake such
repairs and/or maintenance within a reasonable period of time, given the
circumstances, after receipt of such notice, but in any event not later than
thirty (30) days after receipt of such notice (or such longer time as is
reasonably necessary if more than thirty (30) days are reasonably required to
complete such repairs and Landlord commences such repairs within such 30-day
period and thereafter diligently attempts to complete same), then

                                      -34-
<PAGE>

Tenant may proceed to undertake such repairs and/or maintenance upon delivery of
an additional five (5) days' notice (or an additional two (2) business days,
notice in the event of emergency) to Landlord that Tenant is taking such
required action. If such repairs and/or maintenance were required under the
terms of this Lease to be performed by Landlord and are not performed by
Landlord prior to the expiration of such 5-day period or 2-day period, as the
case may be (the "OUTSIDE REPAIR PERIOD"), then Tenant shall be entitled to
reimbursement by Landlord of Tenant's actual, reasonable, and documented costs
and expenses in performing such maintenance and/or repairs. Such reimbursement
shall be made within thirty (30) days after Landlord's receipt of invoice of
such costs and expenses, and if Landlord fails to so reimburse Tenant within
such 30-day period, then Tenant shall be entitled to offset against the Rent
payable by Tenant under this Lease the amount of such invoice together with
interest thereon, at the Interest Rate, which shall have accrued on the amount
of such invoice during the period from and after Tenant's delivery of such
invoice to Landlord through and including the earlier of the date Landlord
delivers the payment to Tenant or the date Tenant offsets such amount against
the Rent; provided, however, that notwithstanding the foregoing to the contrary,
if (i) Landlord delivers to Tenant prior to the expiration of the applicable
Outside Repair Period described above, a written objection to Tenant's right to
receive any such reimbursement based upon Landlord's good faith claim that such
action did not have to be taken by Landlord pursuant to the terms of this Lease,
or (ii) Landlord delivers to Tenant, within thirty (30) days after receipt of
Tenant's invoice, a written objection to the payment of such invoice based upon
Landlord's good faith claim that such charges are excessive (in which case,
Landlord shall reimburse Tenant, within such 30-day period, the amount Landlord
contends would not be excessive), then Tenant shall not be entitled to such
reimbursement or offset against Rent, but Tenant, as its sole remedy, may
proceed to institute legal proceedings to determine and collect the amount, if
any, of such reimbursement. In the event Tenant prevails in such legal
proceedings and receives a monetary judgment against Landlord, then Landlord
shall pay such judgment to Tenant within thirty (30) days of date such monetary
judgment is entered. If such monetary judgment is not so paid, then,
notwithstanding any contrary provision of this Lease, Tenant shall be entitled
to offset against the Rent payable under this Lease the amount of such monetary
judgment together with interest which shall have accrued on such monetary
judgment during the period from and after the day after the date such monetary
judgment was received through and including the date that Tenant offsets against
the Rent the amount of such monetary judgment, at the Interest Rate. In the
event Tenant undertakes such repairs and/or maintenance, and such work will
affect the Systems and Equipment, any structural portions of the Buildings, any
common areas of the Real Property or other areas outside the Buildings and/or
the exterior appearance of the Buildings or Real Property (or any portion
thereof), Tenant shall use only those unrelated third party contractors used by
Landlord in the Buildings for such work unless such contractors are unwilling or
unable to perform such work at competitive prices, in which event Tenant may
utilize the services of any other qualified contractor which normally and
regularly performs similar work in Comparable Buildings. Tenant shall comply
with the other terms and conditions of this Lease if Tenant takes the required
action, except that Tenant is not required to obtain Landlord's consent for such
repairs.

                                    ARTICLE 8

                            ADDITIONS AND ALTERATIONS

     8.1  LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make any
improvements, alterations, additions or changes to the Premises (collectively,
the "ALTERATIONS") without first procuring the prior written consent of Landlord
to such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof. Landlord shall not
unreasonably withhold or delay its consent for any Alterations, except that
Landlord may withhold its consent, in its sole and absolute discretion, with
respect to such Alterations which (i) are located on the roof of the Building(s)
(including any telecommunications and/or other equipment thereon), (ii) can be
seen from outside the Premises or either of the Buildings, and/or (iii) are
likely to have an adverse effect on the structural components or Systems and
Equipment of the Buildings. Tenant shall pay for all overhead, general
conditions, fees and other costs and expenses of the Alterations, and shall pay
to Landlord a Landlord supervision fee of two percent (2%) of the cost of the
Alterations excluding any of Tenant's movable fixtures and equipment which are
not affixed to the Premises. The supervision fee described in the immediately
preceding sentence shall also apply to the initial build-out by or for Tenant of
any First Offer Space and/or FHS Expansion Space leased by Tenant pursuant to
this Lease.

                                      -35-
<PAGE>

Notwithstanding anything to the contrary contained in this Section 8.1, Tenant
may make non-structural interior alterations, additions or improvements to the
interior of the Premises (collectively, the "ACCEPTABLE CHANGES") without
Landlord's consent, provided that: (i) Tenant delivers to Landlord written
notice of such Acceptable Changes at least ten (10) days prior to the
commencement thereof; (ii) the aggregate cost of all such Acceptable Changes
during any twelve (12) consecutive month period does not exceed One Hundred
Fifty Thousand Dollars ($150,000.00); (iii) such Acceptable Changes shall be
performed by or on behalf of Tenant in compliance with the other provisions of
this Article 8; (iv) such Acceptable Changes do not require the issuance of a
building permit or other governmental approval; (v) such Acceptable Changes do
not affect any Systems and Equipment or the ground floor lobby areas of the
Buildings, and cannot be seen from outside the Premises; and (vi) such
Acceptable Changes shall be performed by qualified contractors and
subcontractors which normally and regularly perform similar work in Comparable
Buildings. The construction of the initial improvements to the Premises (and the
Landlord supervision fee therefor) shall be governed by the terms of the Tenant
Work Letter and not the terms of this Article 8.

     8.2  MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
consent to all Alterations or repairs of the Premises or about the Premises,
such commercially reasonable requirements as Landlord may deem desirable (and
which are not inconsistent with the rights of Tenant under this Lease),
including, but not limited to, the requirement that Tenant utilize for such
purposes only contractors, materials, mechanics and materialmen reasonably
approved by Landlord, except that Landlord may designate the contractors and
subcontractors to perform all work affecting the structural components of the
Buildings or the Systems and Equipment provided such contractors and
subcontractors are unrelated to Landlord and agree to perform such work at
competitive prices and pursuant to Tenant's reasonable scheduling requirements.
Tenant shall construct such Alterations and perform such repairs in conformance
with any and all applicable rules and regulations of any federal, state, county
or municipal code or ordinance and pursuant to a valid building permit, issued
by the city in which the Real Property is located, in conformance with
Landlord's reasonable, non-discriminatory construction rules and regulations.
Landlord's approval of the plans, specifications and working drawings for
Tenant's Alterations shall create no responsibility or liability on the part of
Landlord for their completeness, design sufficiency, or compliance with all
laws, rules and regulations of governmental agencies or authorities. All work
with respect to any Alterations must be done in a good and workmanlike manner
and diligently prosecuted to completion to the end that the Premises shall at
all times be a complete unit except during the period of work. In performing the
work of any such Alterations, Tenant shall have the work performed in such
manner as not to unreasonably obstruct access to the Buildings or Real Property
or the common areas for any other tenant of the Real Property, and as not to
obstruct the business of Landlord or other tenants in the Real Property, or
interfere with the labor force working on the Real Property. In the event that
Tenant makes any Alterations, Tenant agrees to carry "Builder's All Risk"
insurance in an amount reasonably approved by Landlord covering the construction
of such Alterations, and such other insurance as Landlord may reasonably
require, it being understood and agreed that all of such Alterations shall be
insured by Tenant pursuant to Article 10 of this Lease immediately upon
completion thereof. In addition, with respect to any Alterations to be made in
Building C which cost in excess of $50,000.00 and with respect to any
Alterations to be made in Building B which cost in excess of $150,000.00, if
such Alterations are made by any Transferee of Tenant which is other than an
Affiliate of Tenant, Landlord may, in its discretion, require such Transferee to
obtain a lien and completion bond, or, at such Transferee's option, some
alternate form of security reasonably satisfactory to Landlord, in an amount
sufficient to ensure the lien-free completion of such Alterations and naming
Landlord as a co-obligee. Upon completion of any Alterations, Tenant agrees to
cause a Notice of Completion to be recorded in the office of the Recorder of the
county in which the Real Property is located in accordance with Section 3093 of
the Civil Code of the State of California or any successor statute, and Tenant
shall deliver to the management office for the Real Property a reproducible copy
of the "as built" drawings of the Alterations.

     8.3  LANDLORD'S PROPERTY. All Alterations, improvements and/or fixtures
(excluding trade fixtures) which may be installed or placed in or about the
Premises, from time to time, shall be at the sole cost of Tenant and shall
become the property of Landlord upon expiration of the Lease Term or earlier
termination of this Lease; provided, however: (i) Tenant may not remove any
Tenant Improvements or Alterations paid for by Landlord with Landlord's own
funds or out of any tenant improvement allowances provided by Landlord (except
any such removal made in

                                      -36-
<PAGE>

connection with Alterations approved by Landlord); and (ii) Landlord may, by
written notice delivered to Tenant concurrently with Landlord's approval of the
final working drawings for any Alterations (or for the initial tenant
improvements constructed for any portion of the Premises located in Building C
or any other building in the Project other than in Building B which are made to
ready such space for Tenant's initial occupancy), identify those Alterations (or
initial tenant improvements for Tenant's initial occupancy, as the case may be)
which Landlord will require Tenant to remove at the expiration or earlier
termination of this Lease; provided further, however, that Tenant shall in no
event be required to remove any such Alterations (or initial tenant
improvements, as the case may be) other than (A) any raised floors, internal
stairwells, vaults and other similar special use tenant improvements
(collectively, "SPECIAL USE IMPROVEMENTS"), and/or (B) those other improvements
or alterations which are of such specialized nature or application that the same
are not reasonably suited for use by a successor occupant of the Premises. In no
event shall Tenant be required to remove any of the initial Tenant Improvements
constructed in Building B pursuant to the Tenant Work Letter. If Landlord
requires Tenant to remove any such Alterations (or any such initial tenant
improvements which are located in Building C or any other building in the
Project other than in Building B), Tenant, at its sole cost and expense, shall
remove the identified Alterations and improvements on or before the expiration
or earlier termination of this Lease and repair any damage to the Premises
caused by such removal. If Tenant fails to complete such removal and/or to
repair any damage caused by the removal of any Alterations or improvements,
Landlord may do so and may charge the cost thereof to Tenant.

     8.4  EQUIPMENT LEASING AND FINANCING. Notwithstanding any provision of this
Lease to the contrary, Tenant may enter into leases for, and/or grant security
interests in, Tenant's trade fixtures, equipment and personal property in the
Premises pursuant to commercially reasonable leases and/or security agreements,
and Landlord shall (i) subordinate any landlord lien rights it may have in and
to such items to the interest of the lessors and lenders therein and, in the
case of trade fixtures, waive any claim that the same are part of the Real
Property by virtue of being affixed thereto, and (ii) permit the lessors and
lenders under any such leases and security agreements to remove the leased or
encumbered property upon default by Tenant under such leases and security
agreements, so long as such removal work is performed on or prior to the
expiration or termination of this Lease and each such party repairs any damage
to the Premises caused by such removal.

                                    ARTICLE 9

                             COVENANT AGAINST LIENS

     Tenant has no authority or power to cause or permit any lien or encumbrance
of any kind whatsoever, whether created by act of Tenant, operation of law or
otherwise, to attach to or be placed upon the Real Property, Buildings or
Premises, and any and all liens and encumbrances created by Tenant shall attach
to Tenant's interest only. Landlord shall have the right at all times to post
and keep posted on the Premises any notice which it deems necessary for
protection from such liens. Tenant covenants and agrees not to suffer or permit
any lien of mechanics or materialmen or others to be placed against the Real
Property, the Buildings or the Premises with respect to work or services claimed
to have been performed for or materials claimed to have been furnished to Tenant
or the Premises, and, in case of any such lien attaching or notice of any lien,
Tenant covenants and agrees to cause it to be released and removed of record (by
payment, statutory bond or other lawful means) within ten (10) business days
after Tenant has notice of such lien. Notwithstanding anything to the contrary
set forth in this Lease, in the event that such lien is not released and removed
of record within such 10-business day period, then Landlord, at its sole option,
may immediately take all action necessary to release and remove such lien,
without any duty to investigate the validity thereof, and all reasonable sums,
costs and expenses, including reasonable attorneys' fees and costs, incurred by
Landlord in connection with such lien shall be deemed Additional Rent under this
Lease and shall be paid by Landlord to Tenant within thirty (30) days after
written demand by Landlord.

                                      -37-
<PAGE>

                                   ARTICLE 10

                                    INSURANCE

     10.1 INDEMNIFICATION AND WAIVER.

          10.1.1 Except as expressly provided in Section 10.1.2 below, Tenant
hereby assumes all risk of damage to property and injury to persons, in, on, or
about the Premises from any cause whatsoever and agrees that Landlord, and its
partners and subpartners, and their respective officers, agents, property
managers, employees, and independent contractors (collectively, "LANDLORD
PARTIES") shall not be liable for, and are hereby released from any
responsibility for, any damage to property or injury to persons or resulting
from the loss of use thereof, which damage or injury is sustained by Tenant or
by other persons claiming through Tenant. In addition, except as expressly
provided in Section 10.1.2 below, Tenant shall indemnify, defend, protect, and
hold harmless the Landlord Parties from any and all loss, cost, damage, expense
and liability, including without limitation court costs and reasonable
attorneys' fees (collectively, "CLAIMS") incurred in connection with or arising
from (i) any cause in, on or about the Premises (including, without limitation,
Tenant's installation, placement and removal of Alterations, improvements,
fixtures and/or equipment in, on or about the Premises), and (ii) any acts,
omissions or negligence of Tenant or of any person claiming by, through or under
Tenant, or of the contractors, agents, servants, employees, licensees or
invitees of Tenant or any such person, in, on or about the Premises, Buildings
and Real Property; provided, however, such indemnity shall not include any lost
profits, loss of business or other consequential damages.

          10.1.2 Notwithstanding the provisions of Section 10.1.1 above to the
contrary, the assumption of risk and release by Tenant set forth in Section
10.1.1 above, and Tenant's indemnity of Landlord in Section 10.1.1 above, shall
not apply to: (i) any Claims to the extent resulting from the negligence or
willful misconduct of the Landlord Parties and not insured or required to be
insured by Tenant under this Lease (collectively, the "EXCLUDED CLAIMS"); or
(ii) any loss of or damage to Landlord's property to the extent Landlord has
waived such loss or damage pursuant to Section 10.4 below. In addition, Landlord
shall indemnify, defend, protect and hold Tenant harmless from all such Excluded
Claims, except for (A) any loss or damage to Tenant's property to the extent
Tenant has waived such loss or damage pursuant to Section 10.4 below, and (B)
any lost profits, loss of business or other consequential damages.

          10.1.3 The provisions of this Section 10.1 shall survive the
expiration or sooner termination of this Lease.

     10.2 LANDLORD'S INSURANCE AND TENANT'S COMPLIANCE WITH INSURANCE
REQUIREMENTS. Landlord shall, from and after the date hereof until the
expiration of the Lease Term, maintain in effect the following insurance: (i)
physical damage insurance (including a rental loss endorsement) providing
coverage in the event of fire, vandalism, malicious mischief and all other risks
normally covered under "special form" policies in the geographical area of the
Buildings, covering the Buildings (excluding, at Landlord's option, the property
required to be insured by Tenant pursuant to Section 10.3 below) in an amount
not less than one hundred percent (100%) of the full replacement value (less
reasonable deductibles) of the Buildings, together with such other risks as
Landlord may from time to time determine (provided however, that Landlord shall
have the right, but not the obligation, to obtain earthquake and/or flood
insurance); and (ii) commercial general liability insurance including a
Commercial Broad Form Endorsement or the equivalent in the amount of at least
Ten Million Dollars ($10,000,000.00), against claims of bodily injury, personal
injury or property damage arising out of Landlord's operations, assumed
liabilities (including the liabilities assumed by Landlord under this Lease),
contractual liabilities, or use of the Buildings, common areas and Parking
Facilities. Such coverages may be carried under blanket insurance policies. The
insurers providing such insurance shall be licensed to do business in the State
of California and rated A-VII or better in "Best's Key Rating Guide," and the
policies of insurance with respect to property loss or damage by fire or other
casualty shall contain a waiver of subrogation as provided in Section 10.4
below. Upon written request from Tenant, but no more than one (1) time during
any Calendar Year, Landlord shall provide Tenant with evidence that Landlord is
carrying the insurance Landlord is required to maintain pursuant to this Section
10.2. Tenant shall, at Tenant's expense, comply as to the Premises with all
insurance company requirements pertaining to the use of the Premises. If
Tenant's conduct or use of the Premises causes any increase in the premium for
Landlord's insurance policies, then Tenant shall reimburse Landlord for any such
increase. Tenant, at
                                      -38-

<PAGE>

Tenant's expense, shall comply with all rules, orders, regulations or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and with any similar body where applicable due to Tenant's
Alterations or use of the Premises.

     10.3 TENANT'S INSURANCE. From and after the date (the "INSURANCE START
DATE") which is the earlier of (i) the date Landlord delivers possession of any
portion of the Premises to Tenant in the condition required under this Lease,
(ii) the date Tenant enters any portion of the Premises to commence occupancy
thereof or perform any work under this Lease or install any of Tenant's
furniture systems and other Tenant's Property therein, or (iii) the Lease
Commencement Date, and continuing thereafter throughout the Lease Term, Tenant
shall maintain the following coverages in the following amounts.

          10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage arising out
of Tenant's operations, assumed liabilities or use of the Premises, including a
Broad Form Commercial General Liability endorsement covering the insuring
provisions of this Lease and the performance by Tenant of the indemnity
agreements set forth in Section 10.1 of this Lease, for limits of liability not
less than:

        Bodily Injury and                       $5,000,000.00 each occurrence
        Property Damage Liability               $5,000,000.00 annual aggregate

        Personal Injury Liability               $5,000,000.00 each occurrence
                                                $5,000,000.00 annual aggregate

          10.3.2 Physical Damage Insurance covering (i) all office furniture,
trade fixtures, office equipment, merchandise and all other items of Tenant's
property on the Premises installed by, for, or at the expense of Tenant, (ii)
the Tenant Improvements, including any Tenant Improvements which Landlord
permits to be installed above the ceiling of the Premises or below the floor of
the Premises, and (iii) all other improvements, Alterations and additions to the
Premises, including any improvements, Alterations or additions installed at
Tenant's request above the ceiling of the Premises or below the floor of the
Premises. Such insurance shall be written on a "physical loss or damage" basis
under a "special form" policy, for the full replacement cost value new without
deduction for depreciation of the covered items and in amounts that meet any
co-insurance clauses of the policies of insurance and shall include a vandalism
and malicious mischief endorsement, and sprinkler leakage coverage.

          10.3.3 Business interruption, loss-of-income and extra expense
insurance in such amounts as will reimburse Tenant for direct or indirect loss
of earnings attributable to all perils commonly insured against by prudent
tenants or attributable to prevention of access to the Premises or to the
Buildings as a result of such perils.

          10.3.4 FORM OF POLICIES. The minimum limits of policies of insurance
required to be carried by Landlord and Tenant under this Lease shall in no event
limit the liability of Tenant or Landlord under this Lease. Tenant's insurance
shall: (i) name Landlord, and any property manager and mortgagee of Landlord, as
additional insureds, as their respective interests may appear; (ii) specifically
cover the liability assumed by Tenant under this Lease to the extent insurable
by a commercially reasonably available Commercial General Liability Policy,
including, but not limited to, Tenant's obligations under Section 10.1.1 of this
Lease; (iii) be issued by an insurance company having a rating of not less than
A-VII in Best's Insurance Guide or which is otherwise acceptable to Landlord and
licensed to do business in the State of California; (iv) be primary insurance as
to all claims thereunder and provide that any insurance carried by Landlord is
excess and is non-contributing with any insurance requirement of Tenant; (v)
provide that said insurance shall not be canceled or coverage changed unless
thirty (30) days' prior written notice shall have been given to Landlord and any
mortgagee or ground or underlying lessor of Landlord; (vi) contain a
cross-liability endorsement or severability of interest clause reasonably
acceptable to Landlord; and (vii) include commercially reasonable deductibles,
which shall in no event exceed $25,000.00 for the insurance required in Sections
10.3.2(ii) and (iii) above for the first (1st) year of the initial Lease Term
(such $25,000.00 maximum deductible may be increased after the first (1st) year
of the initial lease Term to higher commercially reasonable amounts permitted by
landlords of Comparable Buildings with respect to tenants leasing space therein
of comparable size as the Premises). Tenant shall deliver certificates of such
policies to Landlord on or before the Insurance Start Date and at least thirty
(30) days before the expiration dates thereof. In the event Tenant shall

                                      -39-
<PAGE>

fail to procure such insurance, or to deliver such policies or certificate
within such time periods, Landlord may, at its option after written notice to
Tenant, procure such policies for the account of Tenant, and the cost thereof
shall be paid to Landlord as Additional Rent within thirty (30) days after
delivery to Tenant of bills therefor.

     10.4 SUBROGATION. Landlord and Tenant agree to have their respective
insurance companies issuing property damage insurance waive any rights of
subrogation that such companies may have against Landlord or Tenant, as the case
may be. Anything in this Lease to the contrary notwithstanding (including the
provisions of Section 10.1 above), Landlord and Tenant hereby waive and release
each other of and from any and all rights of recovery, claims, actions or causes
of actions against each other, their respective agents, officers and employees,
for any loss or damage that may occur to the Premises, Buildings or Real
Property, or personal property within the Buildings, regardless of cause or
origin, including the negligence of Landlord and Tenant and their respective
agents, officers and employees, but only to the extent the releasing party's
loss or damage is covered under casualty insurance policies in effect at the
time of such loss or damage or would have been covered by the casualty insurance
required to be carried under Sections 10.2 and 10.3 above had the releasing
party complied with its applicable insurance obligations thereunder. Each party
agrees to give immediately to its respective insurance company which has issued
policies of insurance covering any risk of direct physical loss, written notice
of the terms of the mutual waivers contained in this Section 10.4, and to have
such insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverage by reason of said waivers.

     10.5 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain at
any time following the first three (3) years of the initial Lease Term, at
Tenant's sole cost and expense, increased amounts of the insurance required to
be carried by Tenant pursuant to this Article 10, and such other reasonable
types of insurance coverage and in such reasonable amounts covering the Premises
and Tenant's operations therein, as may be reasonably requested by Landlord;
provided, however, that in no event shall such increased coverage be in excess
of that required by landlords of tenants leasing comparable-sized space in
Comparable Buildings.

                                   ARTICLE 11

                             DAMAGE AND DESTRUCTION

     11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly notify
Landlord after Tenant becomes aware of any damage to the Premises resulting from
fire or any other casualty. If the Premises or any common areas of the Buildings
or Real Property serving or providing access to the Premises shall be damaged by
fire or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord's
reasonable control, and subject to all other terms of this Article 11, restore
the Base, Shell, and Core of the Premises and such common areas. Such
restoration shall be to substantially the same condition of the Base, Shell, and
Core of the Premises and common areas prior to the casualty, except for
modifications required by zoning and building codes and other laws, or any other
modifications to the common areas deemed desirable by Landlord provided access
to the Premises and any common restrooms serving the Premises shall not be
materially impaired thereby. Notwithstanding any other provision of this Lease,
upon the occurrence of any damage to the Premises, Tenant shall assign to
Landlord (or to any party designated by Landlord) all insurance proceeds payable
to Tenant under Tenant's insurance required under Sections 10.3.2(ii) and (iii)
of this Lease, and Landlord shall repair any injury or damage to the Tenant
Improvements and Alterations installed in the Premises and shall return such
Tenant Improvements and Alterations to their original condition; provided that
if the cost of such repair by Landlord (based on competitive pricing by all
contractors and subcontractors and without any profit mark-up or supervision
fees to Landlord) exceeds the amount of insurance proceeds received by Landlord
from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs
shall be paid by Tenant to Landlord on a progress payment basis with the first
such payment being due from Tenant after Landlord's commencement of the repair
of the damage. In connection with such repairs and replacements, Tenant shall,
prior to the commencement of construction, submit to Landlord, for Landlord's
reasonable review and approval, all plans, specifications and working drawings
relating thereto, and Landlord shall select the contractors to perform such
improvement work pursuant to Landlord's standard competitive bidding procedures.
Landlord shall not be liable for any inconvenience or annoyance to Tenant or its
visitors, or injury to Tenant's business resulting in any way from such damage
or the repair

                                      -40-
<PAGE>

thereof; provided however, that if such fire or other casualty shall have
damaged the Premises or common areas necessary to Tenant's occupancy to such a
degree that Tenant is prevented from using, and does not use, all or any part of
the Premises as a result thereof, then Landlord shall allow Tenant a
proportionate abatement of Rent during the time and to the extent Tenant is so
prevented from using and does not use the Premises as a result thereof, and such
abatement period shall continue until Tenant has been given sufficient time and
sufficient access to the Premises to rebuild such portions of the Premises
Tenant is required to rebuild, to install its property, furniture, fixtures and
equipment to the extent the same shall have been removed and/or damaged as a
result of such damage or destruction, and to move in over one (1) weekend.
Landlord shall use commercially reasonable efforts to minimize any such
inconvenience, annoyance or interference to Tenant resulting from Landlord's
repair of any damage pursuant to this Section 11.1.

     11.2 LANDLORD'S OPTION TO REPAIR. Within sixty (60) days after Landlord
becomes aware of such damage, Landlord shall notify Tenant in writing
("LANDLORD'S DAMAGE NOTICE") of the estimated time, in Landlord's reasonable
judgment, required to substantially complete the repairs of such damage (the
"ESTIMATED REPAIR Period"). Notwithstanding the terms of Section 11.1 of this
Lease, Landlord may elect not to rebuild and/or restore the Premises and/or
Buildings and instead terminate this Lease (subject, however, to the terms of
Section 11.3 below) by notifying Tenant in writing of such termination within
sixty (60) days after Landlord becomes aware of such damage, but Landlord may so
elect only if one or both of the Buildings shall be damaged by fire or other
casualty or cause, whether or not the Premises are affected (subject, however,
to the terms of Section 11.3 below), and one or more of the following conditions
is present: (i) repairs cannot in Landlord's opinion, as set forth in Landlord's
Damage Notice, reasonably be completed within one (1) year after the date
Landlord becomes aware of such damage (when such repairs are made without the
payment of overtime or other premiums); or (ii) the damage is not fully covered
by Landlord's insurance policies obtained or required to be obtained by Landlord
pursuant to Section 10.2 above and the cost of repairing such uninsured or
underinsured damage, including deductibles, exceeds the "Threshold Amount" (as
that term is defined below). As used herein, the "THRESHOLD AMOUNT" shall mean
$600,000.00 with respect to Building B and $300,000.00 with respect to Building
C, except that if at the time of such damage or destruction, Tenant is leasing
all of Building C, the Threshold Amount for Building C shall also equal
$600,000.00. If (A) Landlord does not elect to terminate this Lease pursuant to
Landlord's termination right as provided above, (B) the damage constitutes a
Tenant Damage Event (as defined below), and (C) the repair of such damage
cannot, in the reasonable opinion of Landlord, as set forth in Landlord's Damage
Notice, be completed within one (1) year after Landlord becomes aware of such
damage, then Tenant may elect to terminate this Lease (subject, however, to the
terms of Section 11.3 below) by delivering written notice thereof to Landlord
within thirty (30) days after Tenant's receipt of Landlord's Damage Notice,
which termination shall be effective as of the date of such termination notice
thereof to Landlord. As used herein, a "TENANT DAMAGE EVENT" shall mean damage
to all or any part of the Premises or any common areas of the Buildings
providing access to the Premises by fire or other casualty, which damage (x) is
not the result of the gross negligence or willful misconduct of Tenant or any of
Tenant's employees, agents, contractors, licensees or invitees, (y)
substantially interferes with Tenant's use of or access to the Premises AND (z)
would entitle Tenant to an abatement of Rent pursuant to Section 11.1 above. In
addition, in the event of a Tenant Damage Event, and if neither Landlord nor
Tenant has elected to terminate this Lease as provided hereinabove, but Landlord
fails to substantially complete the repair and restoration of such Tenant Damage
Event within the Estimated Repair Period plus ninety (90) days, plus the number
of days of delay, if any, attributable to events of "Force Majeure," as that
term is defined in Section 25.17 hereof, plus the number of days of delay, if
any, as are attributable to the acts or omissions of Tenant or Tenant's
employees, agents, contractors, licensees or invitees, then Tenant shall have an
additional right to terminate this Lease (subject, however, to the terms of
Section 11.3 below) by delivering written termination notice to Landlord within
fifteen (15) days after the expiration of such period. Further, in the event
that the Premises or the Buildings are destroyed or damaged to any substantial
extent during the last twelve (12) months of the Lease Term (except that, in the
event that Tenant shall have exercised its option to renew pursuant to the
Extension Option Rider attached to this Lease, such twelve (12) month period
shall be the last twelve (12) months of the applicable Option Term), then
notwithstanding anything contained in this Article 11, Landlord shall have the
option to terminate this Lease (subject, however, to the terms of Section 11.3
below), and to the extent such destruction or damage constitutes a Tenant Damage
Event and the repair of same is reasonably expected by Landlord to require more
than sixty (60) days to

                                      -41-
<PAGE>

substantially complete, Tenant shall have the option to terminate this Lease
(subject, however, to the terms of Section 11.3 below), by giving written
termination notice to the other party of the exercise of such option within
thirty (30) days after the date such party becomes aware of such damage or
destruction. If either Landlord or Tenant exercises any of its options to
terminate this Lease as provided above in this Section 11.2: (1) this Lease
shall cease and terminate as of the date set forth in such party's termination
notice (subject, however, to the terms of Section 11.3 below), which termination
date shall be no less than thirty (30) days and no more than one hundred twenty
(120) days after such termination notice is delivered to the other party;
provided, however, that if the termination notice is delivered as a result of a
casualty damage occurring during the last twelve (12) months of the Lease Term,
such termination date shall be no less than ten (10) days and no more than
thirty (30) days after such termination notice is delivered to such other party;
and if Landlord is the party delivering such termination notice at any time
other than during the last twelve (12) months of the Lease Term, Tenant shall
have the right to extend the termination date to a date which is one hundred
twenty (120) days after such termination notice is delivered to Tenant if
Landlord selects a termination date which is shorter than such one hundred
twenty (120) day period; (2) Tenant shall pay the Base Rent and Additional Rent,
properly apportioned up to such date of termination; and (3) subject to the
terms of Section 11.3 below, both parties hereto shall thereafter be freed and
discharged of all further obligations hereunder, except as provided for in
provisions of this Lease which by their terms survive the expiration or earlier
termination of the Lease Term.

     11.3 PARTIAL TERMINATION. Notwithstanding the foregoing provisions of
Section 11.2 to the contrary, if Landlord or Tenant would only have such right
to terminate this Lease as provided in Section 11.2 above solely as a result of
the damage caused to Building C and not to Building B, the terminating party may
only elect to terminate this Lease, if at all, on a partial basis, as to all of
the Premises then leased by Tenant in Building C and not with respect to
Building B; if the terminating party elects to terminate this Lease as to
Building C, only, in accordance with the foregoing, this Lease shall continue in
full force and effect with respect to Building B and the parties shall promptly
execute an amendment confirming such partial termination and modifying the
rentable and usable square feet, the Base Rent and Tenant's Share accordingly;
provided, however, in the event as of the date of any such damage caused to
Building C which would permit Landlord to terminate this Lease with respect to
Building C, only, pursuant to Section 11.2 and this Section 11.3, Building C is
a multi-tenant building, and the damage to Building C only affects those areas
of Building C located outside of the Premises in Building C and does not affect
the Premises in Building C, then, Landlord shall only have the right to
terminate Tenant's lease as to Building C, only, in accordance with the
foregoing in the event that Landlord also terminates all of the leases
respecting space in Building C of all of the tenants of Building C which are
situated similarly to Tenant. In determining whether other tenants of Building C
are situated similarly to Tenant, in addition to other relevant factors, an
analysis shall be made of (i) such tenants' and Landlord's rights to terminate
such leases in the event of a casualty as set forth in such leases and (ii) the
level of damage, if any, to Building C and/or such other tenants' premises.

     11.4 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Buildings or any other portion of the Real Property, and
any statute or regulation of the state in which the Real Property is located,
including, without limitation, Sections 1932(2) and 1933(4) of the California
Civil Code, with respect to any rights or obligations concerning damage or
destruction in the absence of an express agreement between the parties, and any
other statute or regulation, now or hereafter in effect, shall have no
application to this Lease or any damage or destruction to all or any part of the
Premises, one or both of the Buildings or any other portion of the Real
Property.

                                   ARTICLE 12

                                    NONWAIVER

     No waiver of any provision of this Lease shall be implied by any failure of
a party to enforce any remedy on account of the violation of such provision,
even if such violation shall continue or be repeated subsequently, any waiver by
a party of any provision of this Lease may only be in writing, and no express
waiver shall affect any provision other than the one specified in such waiver
and that one only for the time and in the manner specifically stated. No receipt
of monies by Landlord from Tenant after the termination of this Lease shall in
any way alter the

                                      -42-
<PAGE>

length of the Lease Term or of Tenant's right of possession hereunder or after
the giving of any notice shall reinstate, continue or extend the Lease Term or
affect any notice given Tenant prior to the receipt of such monies, it being
agreed that after the service of notice or the commencement of a suit or after
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of said Rent shall not waive or affect said
notice, suit or judgment.

                                   ARTICLE 13

                                  CONDEMNATION

     13.1 PERMANENT TAKING. If all or any portion of the Premises, the Buildings
or the Real Property shall be taken by power of eminent domain or condemned by
any competent authority for any public or quasi-public use or purpose, or if
Landlord shall grant a deed or other instrument in lieu of such taking by
eminent domain or condemnation, Landlord shall have the option to terminate this
Lease (subject, however, to the terms of Section 13.2 below) upon ninety (90)
days' notice to Tenant, provided such notice is given no later than one hundred
eighty (180) days after the date of such taking, condemnation, reconfiguration,
vacation, deed or other instrument. If more than twenty-five percent (25%) of
the rentable square feet of the Premises is taken, if access to more than
twenty-five (25%) of the Premises is substantially impaired, or if more than
twenty-five percent (25%) of the parking spaces described in Section 10 of the
Summary attached to this Lease are taken and Landlord is unable to relocate such
spaces within the Project or within a two (2) block radius of the Project,
Tenant shall have the option to terminate this Lease (subject, however, to the
terms of Section 13.2 below) upon ninety (90) days' notice to Landlord, provided
such notice is given no later than one hundred eighty (180) days after the date
of such taking; provided, however, if any of Tenant's parking spaces are taken
and Tenant does not exercise its rights to terminate this Lease pursuant to this
Article 13, Landlord shall use commercially reasonable efforts to provide Tenant
with replacement parking spaces within the Project or within a two (2) block
radius of the Project. Landlord shall be entitled to receive the entire award or
payment in connection with any such taking, except that (i) Tenant shall have
the right to file any separate claim available to Tenant for (A) any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
(B) Tenant's moving expenses and (C) interruption to or damage to Tenant's
business, and (ii) Landlord and Tenant shall each be entitled to receive fifty
percent (50%) of the "bonus value" of the leasehold estate in connection
therewith, which bonus value shall be equal to the difference between the Rent
payable under this Lease and the sum established by the condemning authority as
the award for compensation for the leasehold estate. All Rent shall be
apportioned as of the date of such termination, or the date of such taking,
whichever shall first occur. If any part of the Premises shall be taken, and
this Lease shall not be so terminated, the Rent shall be equitably abated and
Landlord shall at its sole expense restore the Buildings in which the remainder
of the Premises are located to any architecturally complete and functional
condition. Tenant hereby waives any and all rights it might otherwise have
pursuant to Section 1265.130 of the California Code of Civil Procedure.

     13.2 PARTIAL TERMINATION. Notwithstanding the foregoing provisions of
Section 13.1 to the contrary, if Landlord or Tenant would only have such right
to terminate this Lease as provided in Section 13.1 above solely as a result of
a taking of all or any portion of Building C and not a taking with respect to
Building B, the terminating party may only elect to terminate this Lease, if at
all, on a partial basis, as to all of the Premises then leased by Tenant in
Building C and not with respect to Building B; if the terminating party elects
to terminate this Lease as to Building C, only, in accordance with the
foregoing, this Lease shall continue in full force and effect with respect to
Building B and the parties shall promptly execute an amendment confirming such
partial termination and modifying the rentable and usable square feet, the Base
Rent and Tenant's Share accordingly.

     13.3 TEMPORARY TAKING. Notwithstanding anything to the contrary contained
in this Article 13, in the event of a temporary taking of all or any portion of
the Premises or access thereto for a period of one (1) year or less, then this
Lease shall not terminate but the Base Rent and the Additional Rent shall be
abated for the period of such taking in proportion to the ratio that the amount
of rentable square feet of the Premises taken bears to the total rentable square
feet of the Premises. Landlord shall be entitled to receive the entire award
made in connection with any such temporary taking.

                                      -43-
<PAGE>

                                   ARTICLE 14

                            ASSIGNMENT AND SUBLETTING

     14.1 TRANSFERS. Except as provided in Sections 14.7 and 14.8 below, Tenant
shall not, without the prior written consent of Landlord, assign, mortgage,
pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise
transfer, this Lease or any interest hereunder, permit any assignment or other
such foregoing transfer of this Lease or any interest hereunder by operation of
law, sublet the Premises or any part thereof, or permit the use of the Premises
by any persons other than Tenant and its employees (all of the foregoing are
hereinafter sometimes referred to collectively as "TRANSFERS" and any person to
whom any Transfer is made or sought to be made is hereinafter sometimes referred
to as a "TRANSFEREE"). If Tenant shall desire Landlord's consent to any
Transfer, Tenant shall notify Landlord in writing, which notice (the "TRANSFER
NOTICE") shall include (i) the proposed effective date of the Transfer, which
shall not be less than twenty (20) days nor more than nine (9) months after the
date of delivery of the Transfer Notice, (ii) a description of the portion of
the Premises to be transferred (the "SUBJECT SPACE"), (iii) all of the terms of
the proposed Transfer and the consideration therefor, including a calculation of
the "TRANSFER PREMIUM," as that term is defined in Section 14.3 below, in
connection with such Transfer, the name and address of the proposed Transferee,
and, insofar as the same is then available, a copy of all existing and/or
proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such Transfer, and (iv) current financial
statements of the proposed Transferee certified by an officer, partner or owner
thereof, and any other information reasonably required by Landlord pursuant to
written notice delivered to Tenant within five (5) business days after
Landlord's receipt of the Transfer Notice, which will enable Landlord to
determine the financial responsibility, character, and reputation of the
proposed Transferee, nature of such Transferee's business and proposed use of
the Subject Space. Except as provided in Sections 14.7 and 14.8 below, any
Transfer made without Landlord's prior written consent shall, at Landlord's
option, be null, void and of no effect, and shall, at Landlord's option,
constitute a default by Tenant under this Lease. Whether or not Landlord shall
grant consent, Tenant shall pay Landlord's actual, documented and reasonable
legal fees (not to exceed $2,500.00 in any one instance) incurred by Landlord,
within thirty (30) days after written request by Landlord.

     14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Landlord shall notify Tenant of
Landlord's consent or reasonable disapproval of any such Transfer within twenty
(20) days after Landlord's receipt of the Transfer Notice and all other
information required to be delivered by Tenant to Landlord in connection with
such proposed Transfer as set forth in Section 14.1 above. In the event Landlord
does not provide Tenant notice of its approval or disapproval of a Transfer
within such 20-day period, and such failure continues for five (5) business days
after notice thereof from Tenant, such failure shall be deemed to be Landlord's
consent to such Transfer. The parties hereby agree that it shall be reasonable
under this Lease and under any applicable law for Landlord to withhold consent
to any proposed Transfer where one or more of the following apply, without
limitation as to other reasonable grounds for withholding consent:

          14.2.1 The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Buildings or the Real
Property as a first-class multi-tenant office building project;

          14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;

          14.2.3 The Transferee is either a governmental agency or
instrumentality thereof (i) which is that of a foreign country, or (ii) which is
of a character or reputation, is engaged in a business, or is of, or is
associated with, a political orientation or faction, which is materially
inconsistent with the quality of the Project, or which would otherwise
reasonably offend a landlord of a Comparable Building, or (iii) which is capable
of exercising the power of eminent domain or condemnation, unless, and only to
the extent, Landlord has previously approved such an occupant for other space in
the Buildings;

                                      -44-
<PAGE>

          14.2.4 The Transfer will result in more than a lawfully authorized
number of occupants per floor within the Subject Space;

          14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities assumed by such
Transferee on the date consent is requested, taking into account Tenant's
continuing liability hereunder;

          14.2.6 The terms of the proposed Transfer will allow the Transferee to
exercise a right of renewal, right of expansion, right of first offer, or other
similar right held by Tenant, in violation of the express terms of this Lease;
or

          14.2.7 Either the proposed Transferee, or any person or entity
which directly or indirectly, controls, is controlled by, or is under common
control with, the proposed Transferee, (i) occupies space in the Project at the
time of the request for consent and Landlord in fact has sufficient space in the
Project meeting such proposed transferee's space requirements, or (ii) is
negotiating with Landlord to lease space in the Project at such time and
Landlord in fact has sufficient space in the Project meeting such proposed
transferee's space requirements.

         If Landlord consents to any Transfer pursuant to the terms of this
Section 14.2, Tenant may, within nine (9) months after Landlord's consent, but
not later than the expiration of said nine (9)-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be materially more favorable to the Transferee than the terms set
forth in Tenant's original Transfer Notice, Tenant shall again submit the
Transfer to Landlord for its approval, which Landlord shall grant or withhold
within ten (10) business days after resubmittal by Tenant.

     14.3 TRANSFER PREMIUM. Except as otherwise provided in Sections 14.6 and
14.7 below, if Landlord consents to a Transfer, as a condition thereto which the
parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent
(50%) of any "Transfer Premium," as that term is defined in this Section 14.3,
received by Tenant from such Transferee. "TRANSFER PREMIUM" shall mean all rent,
additional rent, parking charges and other consideration received from such
Transferee in excess of the Rent and Additional Rent payable by Tenant under
this Lease on a per rentable square foot basis if less than all of the Premises
is transferred, after deducting (as a first priority item) the actual,
reasonable and documented expenses incurred by Tenant for (i) any changes,
alterations and improvements made to the Premises, and/or any tenant improvement
allowance provided by Tenant to the Transferee, in connection with the Transfer,
(ii) any brokerage commissions and advertising expenses in connection with the
Transfer, and (iii) reasonable legal fees incurred by Tenant in negotiating the
Transfer and obtaining Landlord's consent thereto. "Transfer Premium" shall also
include, but not be limited to, key money and bonus money paid by Transferee to
Tenant in connection with such Transfer, and any payment in excess of fair
market value for (A) services rendered by Tenant to Transferee or (B) assets,
fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee
in connection with such Transfer.

     14.4 INTENTIONALLY DELETED.

     14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the terms
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv)
no Transfer relating to this Lease or agreement entered into with respect
thereto, whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of this Lease from liability under this Lease. Landlord or its
authorized representatives shall have the right at all reasonable times and upon
prior reasonable notice to Tenant to audit the books, records and papers of
Tenant relating to any Transfer, and shall have the right to make copies
thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency together with interest thereon at the Interest Rate, and if

                                      -45-
<PAGE>

found understated by more than five percent (5%), Landlord's actual, reasonable
and documented costs of such audit.

     14.6 ADDITIONAL TRANSFERS. Except as provided in Section 14.7 below, for
purposes of this Lease, the term "TRANSFER" shall also include: (i) if Tenant is
a partnership, the withdrawal or change, voluntary, involuntary or by operation
of law, of fifty percent (50%) or more of the partners, or transfer of fifty
percent (50%) or more of partnership interests, within a twelve (12)-month
period, or the dissolution of the partnership without immediate reconstitution
thereof; and (ii) if Tenant is a closely held corporation (i.e., whose stock is
not publicly held and not traded through an exchange or over the counter), (A)
the dissolution, merger, consolidation or other reorganization of Tenant, (B)
the sale or other transfer of more than an aggregate of fifty percent (50%) of
the voting shares of Tenant within a twelve (12)-month period (other than
transfer of voting shares to immediate family members by reason of gift or
death) or (C) the sale, mortgage, hypothecation or pledge of more than an
aggregate of fifty percent (50%) of the value of the unencumbered assets of
Tenant within a twelve (12) month period. Notwithstanding the foregoing, to the
extent that the Transfer is of a type described in this Section 14.6, the terms
and conditions of Section 14.3 shall not apply with respect thereto.

     14.7 AFFILIATED COMPANIES/RESTRUCTURING OF BUSINESS ORGANIZATION. The
assignment or subletting by Tenant of all or any portion of this Lease or the
Premises to (i) FHS, (ii) a parent or subsidiary of Tenant, or (iii) any person
or entity which controls, is controlled by or under common control with Tenant,
or (iv) any entity which purchases all or substantially all of the assets of
Tenant, or (v) any entity into which Tenant is merged or consolidated (all such
persons or entities described in (i), (ii), (iii), (iv) and (v) being sometimes
hereinafter referred to as "AFFILIATES") shall not be deemed a Transfer under
this Article 14, and thus shall not be subject to Landlord's right to receive
any Transfer Premium pursuant to Section 14.3 above, provided that:

          14.7.1 any such Affiliate was not formed as a subterfuge to avoid the
obligations of this Article 14;

          14.7.2 Tenant gives Landlord at least ten (10) days' prior notice of
any such assignment or sublease to an Affiliate, which notice shall include
current financial statements of Tenant and the Affiliate evidencing satisfaction
of the net worth requirement in Section 14.7.3 below, and certified as accurate
by an independent certified public accounting firm;

          14.7.3 with respect to any assignment of this Lease to an Affiliate
(including an assignment of this Lease in connection with or resulting from a
merger, consolidation, reorganization, and/or asset purchase), or any sublease
to an Affiliate which when aggregated with all prior subleases to such Affiliate
pertain to more than one (1) floor of the Premises, Tenant and such Affiliate
assignee or subtenant have as of the effective date of any such assignment or
sublease a tangible net worth, in the aggregate, computed in accordance with
generally accepted accounting principles (but excluding goodwill as an asset),
which is sufficient to meet the obligations of Tenant under this Lease AND is
equal to or greater than the amount which is equal to the product of (i) three
(3) multiplied by (ii) the economic responsibilities for the space which is
proposed to be assigned or subleased hereunder for the portion of the Lease Term
remaining at the time of such proposed assignment or sublease;

          14.7.4 any such assignment or sublease shall be subject and
subordinate to all of the terms and provisions of this Lease, and such assignee
or sublessee shall assume, in a written document reasonably satisfactory to
Landlord and delivered to Landlord upon or prior to the effective date of such
assignment or sublease, all the obligations of Tenant under this Lease with
respect to the Subject Space which is the subject of such Transfer (other than
the amount of Base Rent payable by Tenant with respect to a sublease), and any
Affiliate assignee expressly remakes the representations and warranties of
Tenant and assumes the obligations and indemnities of Tenant set forth in
Section 25.25 below; and

          14.7.5 Tenant shall remain fully liable for all obligations to be
performed by Tenant under this Lease.

     14.8 PERMITTED SUBLEASES. Notwithstanding anything to the contrary set
forth in this Article 14, Tenant may, without Landlord's prior consent but
subject to Landlord's right to receive fifty percent (50%) of any Transfer
Premium received by Tenant in connection therewith pursuant to Section 14.3
above, sublease in the aggregate, up to, but no more than, three (3)

                                      -46-
<PAGE>

contiguous full floors of the Premises to any person or entity which is not an
Affiliate (each, a "PERMITTED SUBTENANT") so long as: (i) the proposed Permitted
Subtenant(s) do not have any of the characteristics described in Sections
14.2.1, 14.2.3, 14.2.5 or 14.2.7 above and/or the proposed sublease to the
Permitted Subtenant would not result in any of the events described in Sections
14.2.2, 14.2.4 or 14.2.6 above; (ii) the Permitted Subtenant(s) shall have no
right to subsequently sublease or assign all of any portion of their interests
in this Lease or in the Premises; (iii) occupancy by the Permitted Subtenant(s)
shall be subject and subordinate to all of the terms of this Lease, including,
without limitation, Section 14.3 above; and (iv) at least ten (10) days prior to
the date such Permitted Subtenant(s) take occupancy of the Premises, Tenant
delivers to Landlord a copy of the sublease agreement by and between Tenant and
the applicable Permitted Subtenant which sublease agreement shall include a
written acknowledgment by the Permitted Subtenant that the Permitted Subtenant
is subject and subordinate to all of the terms and conditions of this Lease and
assumes all obligations of Tenant with respect to the subleased space (other
than the obligations to Base Rent which shall be as set forth in such sublease).
Any sublease entered into by Tenant with a Permitted Subtenant in accordance
with this Section 14.8 shall be referred to herein as a "PERMITTED SUBLEASE".
Nothing in this Section 14.8 shall permit Tenant, without first obtaining
Landlord's prior consent thereto or otherwise complying with Section 14.7 above,
to sublease to any person or entity either (A) portions of full floors, (B)
non-contiguous floors or (C) more than three (3) contiguous full floors in the
aggregate at any time (I.E., no such sublease, when combined with all other
subleases previously entered into by Tenant pursuant to this Section 14.8, shall
pertain to more than three (3) contiguous full floors). Tenant may also enter
into a Permitted Sublease with an Affiliate pursuant to this Section 14.8
without having to comply with the provisions of Section 14.7 above (including
the net worth requirement set forth in Section 14.7.3 above) as long as Tenant
complies with the provisions of this Section 14.8 with respect thereto; if
Tenant so enters into a Permitted Sublease with an Affiliate and elects to have
such transaction governed by this Section 14.8 instead of Section 14.7, Tenant
shall notify Landlord thereof and the available space which Tenant may sublease
to non-Affiliates pursuant to this Section 14.8 shall be reduced accordingly.

                                   ARTICLE 15

                        SURRENDER OF PREMISES; OWNERSHIP
                          AND REMOVAL OF TRADE FIXTURES

     15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in a writing signed by Landlord. The delivery of keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord, and notwithstanding
such delivery Tenant shall be entitled to the return of such keys at any
reasonable time upon request until this Lease shall have been properly
terminated. The voluntary or other surrender of this Lease by Tenant, whether
accepted by Landlord or not, or a mutual termination hereof, shall not work a
merger, and at the option of Landlord shall operate as an assignment to Landlord
of all subleases or subtenancies affecting the Premises.

     15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear and
repairs, casualty damage and condemnation damage which are specifically made the
responsibility of Landlord hereunder excepted. Upon such expiration or
termination, Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises all debris and rubbish, and such items of furniture,
equipment, free-standing cabinet work and other articles of personal property
owned by Tenant or any person claiming under Tenant or installed or placed by
Tenant (or other person claiming under Tenant) (but not permanently affixed to
the Premises) at its expense in the Premises, as Landlord may, in its sole
discretion, require to be removed, and Tenant shall repair at its own expense
all damage to the Premises and Buildings resulting from such removal. Tenant
shall have no obligation to remove any of its cabling or other wiring at the end
of the Lease Term, but shall be obligated to remove same, at Tenant's cost, with
respect to any Reduction Space removed from the Premises pursuant to Section 1.7
above.

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<PAGE>

                                   ARTICLE 16

                                  HOLDING OVER

     If Tenant holds over after the expiration of the Lease Term hereof, with or
without the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension
for any further term, and in such case Base Rent shall be payable at a monthly
rate equal to one hundred fifty percent (150%) of the Base Rent applicable
during the last rental period of the Lease Term under this Lease. Such
month-to-month tenancy shall be subject to every other term, covenant and
agreement contained herein. Landlord hereby expressly reserves the right to
require Tenant to surrender possession of the Premises to Landlord as provided
in this Lease upon the expiration or other termination of this Lease. The
provisions of this Article 16 shall not be deemed to limit or constitute a
waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender the Premises upon the termination or expiration of
this Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall protect, defend, indemnify and hold Landlord harmless from all
loss, costs (including reasonable attorneys' fees) and liability resulting from
such failure, and such indemnification by Tenant shall specifically include,
without limitation, "RENTAL LOSS DAMAGES" which for purposes hereof shall mean
any claims made by any succeeding tenant founded upon such failure to surrender,
any lost profits to Landlord resulting therefrom, and any liability or loss
Landlord may reasonably expect to incur in connection with the delay of the
delivery of the Premises to the successor tenant; provided, however, that
notwithstanding the foregoing, Landlord shall not be entitled to recover any
such Rental Loss Damages from Tenant with respect to the first two (2) months of
such holdover and Landlord shall only be entitled to recover any such Rental
Loss Damages with respect to any holdover after such two (2) month period to the
extent Tenant has failed to surrender the Premises within thirty (30) days after
Landlord has notified Tenant that Landlord has executed a letter of intent or
lease with another tenant for all or any portion of the Premises and Landlord
has provided Tenant with information concerning the length of lease term and
basic rental of such letter of intent or lease.

                                   ARTICLE 17

                              ESTOPPEL CERTIFICATES

     Within twenty (20) days following a request in writing by a party, the
other party shall execute and deliver to the requesting party an estoppel
certificate, which shall be substantially in the form of EXHIBIT E, attached
hereto (or such other commercially reasonable form as may be reasonably required
by any prospective mortgagee or purchaser of the Project, or any portion
thereof, if Landlord is the requesting party, or by any Transferee or proposed
Transferee of Tenant if Tenant is the requesting party), indicating therein any
exceptions thereto that may exist at that time, and shall also contain any other
information reasonably requested by the requesting party. Failure of a party to
execute and deliver such estoppel certificate within such 20-day period, where
such failure continues for an additional five (5) days after a subsequent notice
of such failure is delivered by the requesting party to such party, shall
constitute an acknowledgment by such party that statements included in the
estoppel certificate delivered to such party by the requesting party made in
connection with a proposed sale or financing by Landlord or proposed Transfer by
Tenant, as the case may be, are true and correct, without exception.

                                   ARTICLE 18

                                  SUBORDINATION

     18.1 SUBORDINATION. This Lease is subject and subordinate to all present
and future ground or underlying leases of the Real Property and to the lien of
any mortgages or trust deeds, now or hereafter in force against the Real
Property and the Buildings, if any, and to all renewals, extensions,
modifications, consolidations and replacements thereof, and to all advances made
or hereafter to be made upon the security of such mortgages or trust deeds,
unless the holders of such mortgages or trust deeds, or the lessors under such
ground lease or underlying leases, require in writing that this Lease be
superior thereto. Notwithstanding any contrary provision of this Article 18, a
condition precedent to the subordination of this Lease to any future mortgage,
deed of trust, ground or underlying lease is that Landlord shall obtain for the
benefit of Tenant a

                                      -48-
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commercially reasonable subordination, non-disturbance and attornment agreement
from the mortgagee, beneficiary or lessor under such future instrument which
shall be the US Bank SNDA described below with respect to the US Bank Deed of
Trust if recorded as described below. Tenant covenants and agrees in the event
any proceedings are brought for the foreclosure of any such mortgage, or if any
ground or underlying lease is terminated, to attorn, to the purchaser upon any
such foreclosure sale, or to the lessor of such ground or underlying lease, as
the case may be, if required to do so pursuant to any subordination,
non-disturbance and attornment agreement executed by Tenant pursuant to this
Article 18, and to recognize such purchaser or lessor as the lessor under this
Lease. Tenant shall, within thirty (30) days of request by Landlord, execute
such further instruments or assurances as Landlord may reasonably deem necessary
to evidence or confirm the subordination or superiority of this Lease to any
such mortgages, trust deeds, ground leases or underlying leases. The parties
acknowledge that Landlord is in the process of obtaining new financing for the
Real Property from US Bank, which new financing, if completed, will be secured
by a deed of trust encumbering the Real Property to be recorded after the date
of execution of this Lease (the "US BANK DEED OF TRUST"). In the event that
Landlord obtains such new financing from US Bank, Tenant shall, within ten (10)
days after request by Landlord (or at Landlord's option, concurrently with
Tenant's execution of this Lease) sign, notarize and deliver to Landlord a
subordination, non-disturbance and attornment agreement substantially in the
form of EXHIBIT G attached hereto (the "US BANK SNDA"). If such new financing
with US Bank is completed, then within ninety (90) days after the later of (i)
the date the US Bank Deed of Trust is recorded, and/or (ii) the date Tenant
delivers to Landlord the US Bank SNDA executed and notarized by Tenant, Landlord
shall cause US Bank to execute the US Bank SNDA and deliver such executed US
Bank SNDA to Tenant. The effectiveness of the US Bank SNDA executed by Tenant
shall be conditioned upon the execution and delivery of the US Bank SNDA by
Landlord and US BANK to Tenant within such 90-day time period.

     18.2 EXISTING MORTGAGE. Landlord represents and warrants to Tenant that as
of the date of execution of this Lease, the Real Property is encumbered by a
deed of trust in favor of LNR Florida Funding, Inc., a Florida corporation
("EXISTING LENDER"), and there are no other deeds of trust or ground leases
encumbering the Real Property. Prior to or concurrently with the execution of
this Lease, Landlord and Tenant shall execute, and Landlord shall cause the
Existing Lender to execute, and deliver to the other party a subordination,
non-disturbance and attornment agreement in the form of EXHIBIT H attached
hereto (the "EXISTING LENDER SNDA").

                                   ARTICLE 19

                               DEFAULTS; REMEDIES

     19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute a default of this Lease by Tenant:

          19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, within five business
(5) days after written notice of delinquency; or

          19.1.2 Any failure by Tenant to observe or perform any other
provision, covenant or condition of this Lease to be observed or performed by
Tenant where such failure continues for thirty (30) days after written notice
thereof from Landlord to Tenant; provided, however, that if the nature of such
default is such that the same cannot reasonably be cured within a thirty (30)
day period, Tenant shall not be deemed to be in default if it diligently
commences such cure within such period and thereafter diligently proceeds to
rectify and cure said default as soon as possible; any such notice delivered by
Landlord shall, at Landlord's option, be in lieu of, and not in addition to, any
notice required under California Code of Civil Procedure Section 1161 or any
similar successor law; or

     19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any default by Tenant
pursuant to Section 19.1 above which remains uncured after expiration of the
applicable notice and cure period set forth in Section 19.1 above, Landlord
shall have, in addition to any other remedies available to Landlord at law or in
equity, the option to pursue any one or more of the following remedies, each and
all of which shall be cumulative and nonexclusive, without any notice or demand
whatsoever.

                                      -49-
<PAGE>

          19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:

                    (i)  The worth at the time of award of any unpaid rent which
has been earned at the time of such termination; plus

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

                    (iii) The worth at the time of award of the amount by which
the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus

                    (iv) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, specifically including but not limited to, brokerage
commissions and advertising expenses incurred, and expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a
different use; and

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

     The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the Interest Rate (as defined in Section 4.5 of this
Lease). As used in Paragraph 19.2.1(iii) above, the "worth at the time of award"
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%).

          19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.

          19.2.3 Landlord may, but shall not be obligated to, make any such
payment or perform or otherwise cure any such obligation, provision, covenant or
condition on Tenant's part to be observed or performed (and may enter the
Premises for such purposes). Any such actions undertaken by Landlord pursuant to
the foregoing provisions of this Section 19.2.3 shall not be deemed a waiver of
Landlord's rights and remedies as a result of Tenant's failure to perform and
shall not release Tenant from any of its obligations under this Lease.

     19.3 PAYMENT BY TENANT. Tenant shall pay to Landlord, within thirty (30)
days after delivery by Landlord to Tenant of statements therefor, sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with Landlord's performance or cure of any of Tenant's obligations pursuant to
the provisions of Section 19.2.3 above. Tenant's obligations under this Section
19.3 shall survive the expiration or sooner termination of the Lease Term.

     19.4 SUBLESSEES OF TENANT. If Landlord elects to terminate this Lease on
account of any default by Tenant as set forth in this Article 19, Landlord shall
have the right to terminate any and all subleases, licenses, concessions or
other consensual arrangements for possession entered into by Tenant and
affecting the Premises or may, in Landlord's sole discretion, succeed to
Tenant's interest in such subleases, licenses, concessions or arrangements. In
the event of

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Landlord's election to succeed to Tenant's interest in any such subleases,
licenses, concessions or arrangements, Tenant shall, as of the date of notice by
Landlord of such election, have no further right to or interest in the rent or
other consideration receivable thereunder.

     19.5 WAIVER OF DEFAULT. No waiver by Landlord or Tenant of any violation or
breach of any of the terms, provisions and covenants herein contained shall be
deemed or construed to constitute a waiver of any other or later violation or
breach of the same or any other of the terms, provisions, and covenants herein
contained. Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default. The acceptance of any Rent hereunder by
Landlord following the occurrence of any default, whether or not known to
Landlord, shall not be deemed a waiver of any such default, except only a
default in the payment of the Rent so accepted.

     19.6 EFFORTS TO RELET. For the purposes of this Article 19, Tenant's right
to possession shall not be deemed to have been terminated by efforts of Landlord
to relet the Premises, by its acts of maintenance or preservation with respect
to the Premises, or by appointment of a receiver to protect Landlord's interests
hereunder. The foregoing enumeration is not exhaustive, but merely illustrative
of acts which may be performed by Landlord without terminating Tenant's right to
possession.

     19.7 LANDLORD'S DEFAULT. Landlord's failure to perform any of its
obligations under this Lease shall constitute a default by Landlord under this
Lease if the failure continues for thirty (30) days after Landlord receives
written notice of such failure from Tenant. If the required performance cannot
be completed within such thirty (30) day period, Landlord's failure to perform
shall not constitute a default under this Lease unless Landlord fails to attempt
to cure the failure within such thirty (30) day period and thereafter fails to
diligently and continuously attempt to complete such cure as soon as reasonably
possible thereafter.

     19.8 TENANT'S SPECIAL OFFSET RIGHT. In the event Tenant obtains a monetary
judgment from a court of competent jurisdiction against Landlord resulting from
Landlord's default under this Lease, and Landlord fails to pay the amount of
such monetary judgment to Tenant within thirty (30) days after such judgment is
entered against Landlord, and such failure continues for an additional thirty
(30) days after notice from Tenant, that Tenant intends to exercise its rights
under this Section 19.8, Tenant may offset against the Rent next due and payable
under this Lease, the amount of such monetary judgment so entered against
Landlord; provided, however, in no event shall Tenant be entitled to offset
against the Rent at any one time an amount which would exceed fifty percent
(50%) of the Rent next due and payable. For example, if the monetary judgment
amount for which Tenant is entitled to offset pursuant to this Section 19.8
equals $1,000,000.00, and the Rent next due and payable under this Lease equals
$500,000.00 per month, Tenant would only be required to offset $250,000.00
against the Rent next due and payable for each of the four (4) months following
the expiration of the second thirty (30) day period described hereinabove.

                                   ARTICLE 20

                           COVENANT OF QUIET ENJOYMENT

     Landlord covenants that Tenant, so long as Tenant is not in default under
this Lease and any applicable notice of such default has been delivered and any
applicable cure period has expired, shall, during the Lease Term, peaceably and
quietly have, hold and enjoy the Premises subject to the terms, covenants,
conditions, provisions and agreements hereof without interference by any persons
lawfully claiming by or through Landlord. The foregoing covenant is in lieu of
any other covenant express or implied.

                                   ARTICLE 21

                                      SIGNS

     21.1 FULL FLOOR TENANTS. Subject to Landlord's prior written approval,
which approval shall not be unreasonably withheld, conditioned or delayed, and
provided all signs are in keeping with the quality, design and style of the Real
Property, if any portion of the Premises comprises an entire floor of one or
both of the Buildings, Tenant, at its sole cost and expense, may install
identification signage anywhere on such full floor(s) of the Premises, including
the elevator

                                      -51-
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lobby of such full floor(s), provided that such signs are not visible from the
exterior of either of the Buildings.

     21.2 MULTI-TENANT FLOOR TENANTS. If Tenant occupies less than an entire
floor which is part of the Premises, Tenant's (or Tenant's assignee's or
subtenants') identifying signage on such floor shall be provided by Landlord, at
Tenant's sole cost and expense, and such signage shall comply with Landlord's
building standard signage program and be subject to Landlord's prior approval.

     21.3 BUILDING DIRECTORY. With respect to Building C, Tenant shall be
entitled to place its name and location in Building C in the Building C ground
floor lobby directory (or its equivalent) to be located in the Building C ground
floor lobby. Tenant shall have the exclusive right to display Tenant's name and
location and the names of Tenant's employees on any Building lobby directory (or
its equivalent) located in the ground floor lobby of Building B.

     21.4 PROHIBITED SIGNAGE AND OTHER ITEMS. Except as expressly provided in
this Article 21, Tenant may not install any signs, notices, logos, pictures,
names or advertisements on the exterior or roof of the Buildings or the common
areas of the Buildings or the Real Property or anywhere which can be seen from
outside the Premises. Any signs, window coverings, or blinds (even if the same
are located behind the Landlord approved window coverings for the Buildings), or
other items visible from the exterior of the Premises or Buildings are subject
to the prior approval of Landlord, in its sole discretion. Any such signs,
notices, logos, pictures, names, advertisements, window coverings, blinds or
other items visible from the exterior of the Premises or Buildings which are
installed and that have not been individually approved by Landlord pursuant to
this Article 21 or otherwise may be removed without notice by Landlord at the
sole expense of Tenant.

     21.5 EXTERIOR SIGNS. Subject to the approval of all applicable governmental
authorities, and compliance with all applicable Laws (as defined in Article 22
below) and all recorded covenants, conditions and restrictions affecting the
Real Property, and the terms of this Section 21.5, Tenant shall have the right
to install, at Tenant's cost: two (2) signs displaying Tenant's name, "Health
Net", on the top of the exterior of Building B (each of which signs shall be on
a different side of Building B), with the exact locations of such signs to be
mutually approved by Landlord and Tenant (collectively, the "BUILDING B EXTERIOR
SIGNS"); (ii) one (1) single-tenant signage monument for Building B in the
approximate location depicted on EXHIBIT A-1 attached hereto and Tenant's
identification sign thereon (which shall be the only tenant's identification
sign thereon until Tenant transfers its right to such sign as provided in
Section 21.5.1 below) displaying Tenant's name, "Health Net" (such monument sign
for Building B and Tenant's identification sign thereon is collectively referred
to herein as the "BUILDING B MONUMENT SIGN"); (iii) following the date Tenant
leases from Landlord pursuant to this Lease at least three (3) full floors in
Building C, (A) one (1) sign displaying Tenant's name, "Health Net", on the top
of the exterior of Building C on such side of Building C as Landlord shall
designate (the "BUILDING C EXTERIOR SIGN") and (B) one (1) multi-tenant shared
signage monument for Building C (the "BUILDING C MONUMENT") in the approximate
location depicted on EXHIBIT A-1 attached hereto (unless such signage monument
has already been installed by Landlord, in which case, such signage monument
shall be in such location as already installed) and Tenant's identification sign
thereon (which shall be in addition to any other tenants' identification signs
theretofore or thereafter placed on the Building C Monument by Landlord)
displaying the name, "Health Net" (Tenant's identification sign on the Building
C Monument shall be referred to herein as "TENANT'S BUILDING C MONUMENT SIGN");
and (iv) following the date Tenant leases from Landlord pursuant to this Lease
at least four (4) full floors in Building C, one (1) sign displaying Tenant's
name, "Health Net", on the top of the exterior of Building C on such side of
Building C as Landlord shall designate but which side shall be different from
the side of Building C on which the Building C Exterior sign is located (the
"ADDITIONAL BUILDING C EXTERIOR SIGN"). The graphics, materials, color, design,
lettering, lighting, size, specifications, manner of affixing and exact location
of the Building B Exterior Signs, the Building C Exterior Sign (if any), the
Building B Monument Sign, the Tenant's Building C Monument Sign (if any) and the
Additional Building C Exterior Sign (if any) (collectively, the "EXTERIOR
SIGNS") and the Building C Monument, if any, shall be subject to Landlord's
reasonable approval. If Tenant changes the name of its company from "Health Net"
to another name, Tenant shall have the right, at Tenant's sole cost and expense,
to change the Exterior Signs to reflect such new name as long as Landlord
reasonably approves of such name change on the Exterior Signs. Tenant shall pay
for all costs and expenses related to the Exterior Signs and the Building C
Monument (if

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any), including, without limitation, costs of the design, construction,
installation, maintenance, insurance, utilities, repair and replacement thereof;
provided, however, Tenant shall only pay a pro-rata portion of such costs with
respect to the Building C Monument (as reasonably determined by Landlord or by
any common area association formed for LNR Warner Center which maintains the
Building C Monument) during the period that more than one tenant has an
identification sign thereon (although Tenant shall pay the full amount of such
costs as they pertain to Tenant's Building C Monument Sign thereon). Tenant
shall install and maintain the Exterior Signs in compliance with all laws and
subject to the applicable provisions of Articles 7 and 8 above.

          21.5.1 TRANSFERABILITY. The rights to the Exterior Signs are personal
to the Original Tenant and may not be transferred by the Original Tenant or used
by anyone else, except that Tenant shall have the right to transfer Tenant's
rights to the Exterior Signs to an Affiliate or an assignee of Tenant in
connection with Tenant's assignment of its entire interest in this Lease to such
Affiliate or assignee pursuant to Article 14 of this Lease, but any such
transfer of signage rights pursuant to this Section 21.5.1 shall be subject to
Landlord's reasonable approval of the name change on the Exterior Signs to
reflect the identity of such assignee. In addition, following the Lease
Commencement Date, Tenant shall only have such rights to the Exterior Signs and
the Building B Monument Sign when the Original Tenant or such assignee is in
actual and physical possession of at least four (4) full floors in Building B.
Further, if at any time following the date Tenant leases four (4) full floors in
Building C from Landlord pursuant to this Lease and thus had the right to the
Additional Building C Exterior Sign, either (i) Tenant no longer leases four (4)
full floors in Building C due to Tenant's exercise of its applicable Reduction
Right pursuant to Section 1.7 above, or (ii) the Original Tenant or any such
assignee is not in actual and physical possession of at least two (2) full
floors in Building C, then Tenant shall no longer have its right to the
Additional Building C Exterior Sign. Finally, if at any time following the date
Tenant leases three (3) full floors in Building C from Landlord pursuant to this
Lease and thus has the right to the Building C Exterior Sign and Building C
Monument Sign, either (A) Tenant no longer leases three (3) full floors in
Building C due to Tenant's exercise of its applicable Reduction Right pursuant
to Section 1.7 above, or (B) the Original Tenant or any such assignee is not in
actual and physical possession of at least two (2) full floors in Building C,
Tenant shall no longer have its right to the Building C Exterior Sign or the
Tenant's Building C Monument Sign.

          21.5.2 INSURANCE/MAINTENANCE/REMOVAL. Tenant shall be responsible for
maintaining insurance on the Exterior Signs as part of the insurance required to
be carried by Tenant pursuant to Section 10.3.2 above. Should the Exterior Signs
require maintenance, repairs and/or replacement as determined in Landlord's
reasonable judgment, Landlord shall have the right to provide written notice
thereof to Tenant and Tenant shall cause such repairs, replacement and/or
maintenance to be performed within twenty (20) days after receipt of such notice
from Landlord, at Tenant's sole cost and expense; provided, however, if such
repairs, replacement and/or maintenance are reasonably expected to require
longer than twenty (20) days to perform, Tenant shall commence such repairs,
replacement and/or maintenance within such twenty (20) day period and shall
diligently prosecute such repairs, replacement and maintenance to completion.
Should Tenant fail to perform such maintenance, repairs and/or replacement
within the periods described in the immediately preceding sentence, Landlord
shall have the right to cause such work to be performed and to charge Tenant as
Additional Rent for the costs of such work including interest at the Interest
Rate. Upon the expiration or earlier termination of this Lease (or prior to such
expiration or earlier termination, upon Tenant's loss of its rights to any of
the Exterior Signs pursuant to Section 21.5.1 above) Tenant shall, at Tenant's
sole cost and expense, cause to be removed all such Exterior Signs (or prior to
such expiration or earlier termination, those Exterior Signs for which Tenant
has lost such rights, as the case may be) and Tenant shall repair all damage
occasioned thereby and restore the affected areas to their original condition
prior to the installation of such signage so required to be removed; provided,
however, with respect to the Building B Monument Sign Landlord may elect to
require Tenant to remove only Tenant's identification sign thereon, but not the
monument itself, in which event Tenant shall have no obligation to make any
repairs or restoration to the Building B monument resulting from such removal.
If Tenant fails to remove such signage and repair and restore the affected areas
as provided in the immediately preceding sentence within ten (10) days following
the expiration or earlier termination of this Lease, then Landlord may perform
such work, and all costs and expenses incurred by Landlord in so performing such
work shall be reimbursed by Tenant to Landlord within twenty (20) days after
Tenant's receipt of invoice therefor including

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interest at the Interest Rate. The immediately preceding sentence shall survive
the expiration or earlier termination of this Lease.

                                   ARTICLE 22

                              COMPLIANCE WITH LAWS

     Tenant shall not do anything or suffer anything to be done in or about the
Premises or Buildings which will in any way conflict with any federal, state or
local laws, statutes, ordinances or other governmental rules, regulations or
requirements now in force or which may hereafter be enacted or promulgated,
including, without limitation, the Americans with Disabilities Act of 1990 and
the Entitlements defined in Section 1.1.4 above (collectively, the "LAWS"). At
its sole cost and expense, Tenant shall promptly comply with all such Laws,
including, without limitation, the making of any alterations and improvements to
the Premises. Notwithstanding the foregoing to the contrary, Landlord shall be
responsible for making all alterations and improvements required by applicable
Laws with respect to the items which are Landlord's responsibility to repair and
maintain pursuant to Section 7.2 of this Lease (i.e., the structural portions of
the Buildings, the exterior windows of the Buildings, the roof of each Building,
the Base, Shell and Core components of the Buildings and the common area of the
Real Property), and for otherwise complying with all Laws in the performance of
Landlord's other obligations under this Lease; provided, however, that Tenant
shall reimburse Landlord, within thirty (30) days after invoice, for the costs
of any such improvements and alterations and other compliance costs to the
extent necessitated by or resulting from (i) any Alterations or Tenant
Improvements installed by or on behalf of Tenant, (ii) any specific act,
omission or negligence of tenant or Tenant's agents, contractors, employees or
licensees, and/or (iii) Tenant's specific manner of use of the Premises (as
distinguished from general office use). The judgment of any court of competent
jurisdiction or the admission of Tenant in any judicial action, regardless of
whether Landlord is a party thereto, that Tenant has violated any of said Laws,
shall be conclusive of that fact as between Landlord and Tenant.

                                   ARTICLE 23

                                ENTRY BY LANDLORD

     Landlord reserves the right at all reasonable times and upon at least 48
hours' advance written notice to Tenant (except no such notice shall be required
in emergencies) to enter the Premises to: (i) inspect them; (ii) show the
Premises to prospective purchasers, or mortgagees, or to the ground or
underlying lessors and, during the last twelve (12) months of the Lease Term, to
prospective tenants; (iii) post notices of nonresponsibility; and/or (iv) alter,
improve or repair the Premises or the Buildings if necessary to comply with
current building codes or other applicable laws, or for structural alterations,
repairs or improvements to the Buildings which Landlord is required to perform
under this Lease. Notwithstanding anything to the contrary contained in this
Article 23, Landlord may enter the Premises at any time to (A) perform regularly
scheduled services required of Landlord; and (B) perform any covenants of Tenant
which Tenant fails to perform. Any such entries shall be without the abatement
of Rent (except as expressly provided in Section 6.5 of this Lease) and shall
include the right to take such reasonable steps as required to accomplish the
stated purposes. Subject to Landlord's indemnity of Tenant in Section 10.1.2
above, Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant's business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the above purposes, Landlord shall at all times have a key
with which to unlock all the doors in the Premises, excluding Tenant's vaults,
safes and special security areas designated in advance by Tenant. In an
emergency, Landlord shall have the right to use any means that Landlord may deem
proper to open the doors in and to the Premises. Any entry into the Premises in
the manner hereinbefore described shall not be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.
Notwithstanding anything to the contrary set forth above, Landlord agrees to use
commercially reasonable efforts to minimize interference with Tenant's use of
and access to the Premises as a result of Landlord's exercise of its entry
rights under this Article 23.

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                                   ARTICLE 24

                                 TENANT PARKING

     24.1 TENANT'S PARKING SPACES. Tenant shall have the right to use the number
and type of parking spaces set forth in Section 10 of the Summary for parking by
Tenant's employees in the Parking Facilities. Eighty percent (80%) of such
parking spaces set forth in Section 10 of the Summary shall be located in the
Phase I Parking Structure (the "PARKING STRUCTURE SPACES"), and twenty percent
(20%) of such parking spaces set forth in Section 10 of the Summary, shall be
located in the surface parking areas of the Project's Parking Facilities as
designated by Landlord from time to time (the "SURFACE SPACES"). Notwithstanding
anything to the contrary set forth in this Lease, with respect to the original
Premises only, (i) five percent (5%) of Tenant's Parking Structure Spaces shall
be reserved for Tenant's exclusive use and such reserved spaces shall be located
immediately adjacent to the elevator lobby on the second (2nd) floor of the
Phase I Parking Structure, and (ii) five percent (5%) of Tenant's Surface Spaces
shall be reserved for Tenant's exclusive use and such reserved parking spaces
shall be located in the area of the surface parking areas of Phase I which is
immediately adjacent to Building B. If Tenant leases additional space in the
Real Property pursuant to Sections 1.5 and/or 1.6 of this Lease, Tenant shall be
entitled to use additional reserved and unreserved parking spaces in the amounts
and locations within the Parking Facilities as set forth therein. Tenant hereby
acknowledges that Landlord shall have no obligation to ensure (or enforce
against other tenants) that Tenant's reserved parking spaces are used only as
designated by Tenant. Landlord shall not grant to other tenants in the Project
the right to use parking spaces located in the Phase I Parking Structure which
when aggregated with the number of Parking Structure Spaces originally allocated
to Tenant hereinabove would exceed the number of parking spaces located in the
Phase I Parking Structure. Subject to all of the terms and conditions of this
Lease, including Sections 1.1.3, 24.4 and 25.29 and Articles 11 and 13, the
Rules and Regulations attached hereto as EXHIBIT D, the Parking Rules and
Regulations attached hereto as EXHIBIT F and all applicable Laws, Tenant shall
have access to Tenant's allocated parking spaces described in this Section 24.1
twenty-four (24) hours per day, seven (7) days per week.

     24.2 PARKING CHARGES. Tenant shall not be charged any parking charges for
the use of Tenant's parking spaces set forth in Section 10 of the Summary (and
any additional parking spaces leased by Tenant as a result of the addition of
any Pre-Third Year Offer Space pursuant to Section 1.5 above) during the initial
Lease Term, but Tenant shall be charged for the use of any such parking spaces
during the applicable Option Term(s) at the prevailing parking rates, if any,
charged by Landlord and/or Landlord's parking operator from time-to-time for
parking (at reserved and unreserved rates, as applicable) in the Parking
Facilities. In addition, Tenant shall be charged for the use of any additional
parking spaces leased by Tenant as a result of the addition of any Post-Third
Year Offer Space, Special First Offer Space and/or FHS Expansion Space leased by
Tenant pursuant to Sections 1.5 and 1.6 above at the prevailing parking rates,
if any, charged by Landlord and/or Landlord's parking operator from time-to-time
(at reserved and unreserved rates, as applicable). To the extent Tenant is
charged for parking during an Option Term or for any Post-Third Year Offer
Space, Special First Offer Space or FHS Expansion Space, Tenant shall have the
right, following written request made by Tenant to Landlord at least sixty (60)
days prior to the applicable commencement date for such Option Term or for such
space, to have such parking charges included by Landlord in the calculation of,
and as an increase in, the Base Rent payable for such Option Term, Post-Third
Year Offer Space, Special First Offer Space or FHS Expansion Space, as the case
may be, instead of as a separate parking charge; if Tenant makes such request,
Landlord shall notify Tenant of any such increase in the applicable Base Rent at
least thirty (30) days prior to such applicable commencement date (which
increase shall be based upon the parking rates in effect as such applicable
commencement date) and at least thirty (30) days prior to the date any
subsequent increase in the applicable Base Rent shall be effected based upon any
subsequent increases in the parking rates charged by Landlord for the applicable
parking spaces from time to time.

     24.3 ADDITIONAL PARKING SPACES. Further, subject to availability as
determined by Landlord in Landlord's sole discretion, Tenant shall have the
right to lease additional unreserved, undesignated parking spaces in the Parking
Facilities on a month-to-month basis (with Landlord and Tenant having the right
to terminate any such month-to-month lease(s) upon thirty (30) days' prior
notice to the other), subject to Tenant's payment to Landlord of the prevailing
monthly parking rates, if any, charged by Landlord and/or Landlord's parking
operator from time-to-time for such additional spaces so leased by Tenant.

                                      -55-
<PAGE>

     24.4 LIMITATIONS ON TENANT'S PARKING RIGHTS. Tenant shall abide, and cause
its employees and visitors who utilize the Parking Facilities to abide, by the
Parking Rules and Regulations attached hereto as EXHIBIT F, as may be modified
by Landlord from time to time. Landlord specifically reserves the right to
change the location, size, configuration, design, layout and all other aspects
of the Parking Facilities at any time (including without limitation,
implementing paid visitor parking) and Tenant acknowledges and agrees that
Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, close-off or restrict
access to the Parking Facilities for purposes of permitting or facilitating any
such construction, alteration or improvements; provided, however, that Landlord
shall not reduce the number of Tenant's parking spaces on a permanent basis
below the number set forth in Section 10 of the Summary and Landlord shall act
reasonably to avoid or minimize any unreasonable disruption to Tenant's use of
Tenant's allocated parking spaces in the Parking Facilities. The parking rights
provided to Tenant pursuant to this Article 28 are provided solely for use by
Tenant's own personnel and such rights may not be transferred, assigned,
subleased or otherwise alienated by Tenant without Landlord's prior approval,
except in connection with an assignment of this Lease or sublease of the
Premises made in accordance with Article 14 above. All visitor parking by
Tenant's visitors shall be subject to availability, as reasonably determined by
Landlord, parking in such visitor parking areas as may be designated by Landlord
from time to time, and payment by such visitors of the prevailing visitor
parking rate charged by Landlord from time to time.

                                   ARTICLE 25

                            MISCELLANEOUS PROVISIONS

     25.1 TERMS. The necessary grammatical changes required to make the
provisions hereof apply either to corporations or partnerships or individuals,
men or women, as the case may require, shall in all cases be assumed as though
in each case fully expressed.

     25.2 BINDING EFFECT. Subject to Section 25.5 below, each of the provisions
of this Lease shall extend to and shall, as the case may require, bind or inure
to the benefit not only of Landlord and of Tenant, but also of their respective
successors or assigns, provided this clause shall not permit any assignment by
Tenant contrary to the provisions of Article 14 of this Lease.

     25.3 NO AIR RIGHTS. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily
darkened or the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Buildings, the same shall
be without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.

     25.4 Intentionally Deleted

     25.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord has
the right to transfer all or any portion of its interest in the Real Property,
the Buildings and/or this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall be released from all liability under this Lease arising
after the effective date of such transfer (to the extent such liability relates
to the interest transferred) provided such obligations are expressly assumed by
the transferee, and Tenant agrees to look solely to such transferee for the
performance of Landlord's obligations hereunder arising after the date of
transfer. Notwithstanding the foregoing, Tenant acknowledges that Landlord
anticipates that it will transfer all of its interest under this Lease to an
affiliate of DCA Homes, Inc., Lennar Rolling Ridge, Inc. or LNR Property
Corporation, or any entity in which any of the foregoing has an ownership
interest (an "LNR AFFILIATE"), in which event the original Landlord executing
this Lease shall be released from all liability under this Lease whether or not
such liability arose prior to or arises after the date of transfer provided such
obligations are expressly assumed by the LNR Affiliate transferee, and Tenant
agrees to look solely to such LNR Affiliate transferee for the performance of
Landlord's obligations. The liability of any transferee of Landlord shall be
limited to the interest of such transferee in the Real Property and Buildings
and such transferee shall be without personal liability under this Lease, and
Tenant hereby expressly waives and releases such personal liability on behalf of
itself and all persons claiming by, through or under Tenant. Tenant further
acknowledges that Landlord may assign its interest in this Lease to a mortgage
lender as additional security and agrees that such an assignment shall not
release Landlord from its

                                      -56-
<PAGE>

obligations hereunder and that Tenant shall continue to look to Landlord for the
performance of its obligations hereunder. Notwithstanding the foregoing
provisions to the contrary, Tenant acknowledges that Landlord's obligations to
construct a restaurant and child care facility pursuant to Section 1.1.4 of this
Lease, and Landlord's obligation to provide FHS Expansion Space to Tenant
pursuant to Section 1.6 of this Lease, shall not be binding upon: (i) any
mortgagee (other than the Existing Lender, as defined in Section 18.2) who
forecloses upon all or any portion of the Real Property or receives a deed in
lieu of foreclosure thereof (a "FORECLOSING MORTGAGEE") or any portion of the
Real Property transferred to such Foreclosing Mortgagee in such foreclosure
proceedings or deed in lieu of foreclosure, except to the extent such
Foreclosing Mortgagee has expressly assumed or agreed to be bound by such
obligations in a subordination, non-disturbance and attornment agreement
delivered to Landlord and Tenant pursuant to Article 18 of this Lease; or (ii)
any other transferee of the Real Property which is other than an LNR Affiliate
(or the portion of the Real Property transferred to such transferee) if
following such transfer Landlord (or any LNR Affiliate assignee) retains
ownership of any portion of the Real Property upon which Landlord may construct
the restaurant and child care facility and/or provide the FHS Expansion Space to
Tenant, as the case may be; provided that to the extent any transferee which
acquires any portion of the Real Property from Landlord or an LNR Affiliate
expressly assumes Landlord's obligations under Section 1.1.4 and/or 1.6,
Landlord shall be relieved of such obligations with respect to all of the Real
Property then retained by Landlord or the LNR Affiliate.

     25.6 PROHIBITION AGAINST RECORDING. Neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by Tenant or
by anyone acting through, under or on behalf of Tenant, and the recording
thereof in violation of this provision shall make this Lease null and void at
Landlord's election.

     25.7 LANDLORD'S TITLE. Landlord's title is and always shall be paramount to
the title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord beyond such encumbrances
as are created by this Lease.

     25.8 CAPTIONS. The captions of Articles and Sections are for convenience
only and shall not be deemed to limit, construe, affect or alter the meaning of
such Articles and Sections.

     25.9 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant, it being expressly understood and
agreed that neither the method of computation of Rent nor any act of the parties
hereto shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.

     25.10 APPLICATION OF PAYMENTS. Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.

     25.11 TIME OF ESSENCE. Time is of the essence of this Lease and each of its
provisions.

     25.12 PARTIAL INVALIDITY. If any term, provision or condition contained in
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

     25.13 NO WARRANTY. In executing and delivering this Lease, neither Landlord
nor Tenant has relied on any representation or any warranty or any statement of
the other party which is not set forth herein or in one or more of the exhibits
or riders attached hereto.

     25.14 LANDLORD EXCULPATION. It is expressly understood and agreed that
notwithstanding anything in this Lease to the contrary, and notwithstanding any
applicable law to the contrary, the liability of Landlord and the Landlord
Parties hereunder (including any successor landlord) and any recourse by Tenant
against Landlord or the Landlord Parties shall be limited solely and exclusively
to an amount which is equal to the interest of Landlord in the Real Property,
and

                                      -57-
<PAGE>

neither Landlord, nor any of the Landlord Parties shall have any personal
liability therefor, and Tenant hereby expressly waives and releases such
personal liability on behalf of itself and all persons claiming by, through or
under Tenant.

     25.15 ENTIRE AGREEMENT. It is understood and acknowledged that there are no
oral agreements between the parties hereto affecting this Lease and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease
(including the exhibits and riders which are attached hereto and constitute an
integral part of this Lease) and any side letter or separate agreement executed
by Landlord and Tenant in connection with this Lease and dated of even date
herewith contain all of the terms, covenants, conditions, warranties and
agreements of the parties relating in any manner to the rental, use and
occupancy of the Premises, shall be considered to be the only agreement between
the parties hereto and their representatives and agents, and none of the terms,
covenants, conditions or provisions of this Lease can be modified, deleted or
added to except in writing signed by the parties hereto. All negotiations and
oral agreements acceptable to both parties have been merged into and are
included herein. There are no other representations or warranties between the
parties, and all reliance with respect to representations is based totally upon
the representations and agreements contained in this Lease.

     25.16 RIGHT TO LEASE. Landlord reserves the absolute right to effect such
other tenancies in the Buildings, the Existing Buildings and/or any other
portion of the Real Property as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Real Property.
Tenant does not rely on the fact, nor does Landlord represent, that any specific
tenant or type or number of tenants shall, during the Lease Term, occupy any
space in the Real Property.

     25.17 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, rain or other inclement weather, acts of God,
inability to obtain services, labor, or materials or reasonable substitutes
therefor, governmental actions or inactions, including, without limitation, any
delays in obtaining permits or approvals from the applicable governmental
authorities, civil commotions, fire or other casualty, and other causes beyond
the reasonable control of the party obligated to perform, except with respect to
the obligations imposed on Tenant under the Tenant Work Letter or with regard to
Rent and other charges to be paid by Tenant pursuant to this Lease, or monetary
amounts required to be paid by Landlord pursuant to this Lease (collectively,
the "FORCE MAJEURE"), notwithstanding anything to the contrary contained in this
Lease, shall excuse the performance of such party for a period equal to any such
prevention, delay or stoppage and, therefore, if this Lease specifies a time
period for performance of an obligation of either party, that time period shall
be extended by the period of any delay in such party's performance caused by a
Force Majeure.

     25.18 CONSENTS AND APPROVALS. Any time the consent or approval of Landlord
or Tenant is required under this Lease (including any approval rights of
Landlord while acting as "Declarant" under any covenants, conditions or
restrictions recorded against the Real Property to the extent such approval
pertains to rights granted to Tenant under this Lease), such consent or approval
shall not be unreasonably withheld, conditioned or delayed, and whenever this
Lease grants Landlord or Tenant the right to take action, exercise discretion,
establish rules and regulations or make an allocation or other determination,
Landlord and Tenant shall act reasonably and in good faith. Notwithstanding the
foregoing, (i) Landlord shall be entitled to grant or withhold its consent or
approval or exercise its discretion in its sole and absolute discretion with
respect to (A) matters which could affect the common areas of the Real Property
or the exterior appearance of the Buildings or Real Property, (B) actions taken
by Landlord pursuant to Article 19 of this Lease, or (C) matters which could
have an adverse effect on the structural components or Systems and Equipment of
the Buildings, and (ii) Landlord and Tenant shall grant or withhold its consent
or exercise its discretion with respect to matters for which there is a standard
of consent, approval or discretion specifically set forth in this Lease in
accordance with such specific standards.

     25.19 NOTICES. All notices, demands, statements or communications
(collectively, "NOTICES") given or required to be given by either party to the
other hereunder shall be in writing, shall be sent by United States certified or
registered mail, postage prepaid, return receipt requested, or delivered
personally or sent by nationally recognized overnight courier (i) to

                                      -58-
<PAGE>

Tenant at the appropriate address set forth in Section 5 of the Summary, or to
such other place as Tenant may from time to time designate in a Notice to
Landlord; or (ii) to Landlord at the addresses set forth in Section 3 of the
Summary, or to such other firm or to such other place as Landlord may from time
to time designate in a Notice to Tenant. Any Notice will be deemed given (A) on
the date which is three (3) business days after it is mailed as provided in this
Section 25.19, or (B) upon the date personal delivery is made, or (C) upon the
date which is one (1) business day after it is sent by nationally recognized
overnight courier, as the case may be. If Tenant is notified of the identity and
address of Landlord's mortgagee or ground or underlying lessor, Tenant shall
give to such mortgagee or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease by registered or certified
mail, and such mortgagee or ground or underlying lessor shall be given a
reasonable opportunity to cure such default prior to Tenant's exercising any
remedy available to Tenant.

     25.20 JOINT AND SEVERAL. If there is more than one Tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.

     25.21 AUTHORITY. Each party hereby represents and warrants to the other
party that the representing party is a duly formed and existing corporation
qualified to do business in the State of California and that the representing
party has full right and authority to execute and deliver this Lease and that
each person signing on behalf of the representing party is authorized to do so.
Each party is making the foregoing representations knowing that the other party
will rely thereon.

     25.22 ATTORNEYS' FEES JURY TRIAL. IF EITHER PARTY COMMENCES LITIGATION
AGAINST THE OTHER FOR THE SPECIFIC PERFORMANCE OF THIS lEASE, FOR DAMAGES FOR
THE BREACH HEREOF OR OTHERWISE FOR ENFORCEMENT OF ANY REMEDY HEREUNDER, THE
PARTIES HERETO AGREE TO AND HEREBY DO WAIVE ANY RIGHT TO A TRIAL BY JURY AND, IN
THE EVENT OF ANY SUCH COMMENCEMENT OF LITIGATION, THE PREVAILING PARTY SHALL BE
ENTITLED TO RECOVER FROM THE OTHER PARTY SUCH COSTS AND REASONABLE ATTORNEYS'
FEES AS MAY HAVE BEEN INCURRED, INCLUDING ANY AND ALL COSTS INCURRED IN
ENFORCING, PERFECTING AND EXECUTING SUCH JUDGMENT.

     25.23 GOVERNING LAW. This Lease shall be construed and enforced in
accordance with the laws of the State of California.

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

     25.25 BROKERS.

          25.25.1 REPRESENTATIONS, COVENANTS, PAYMENT AND Indemnity. Tenant
hereby represents and warrants to Landlord that: (i) Tenant has had no dealings
with any real estate broker or agent in connection with the negotiation of this
Lease on Tenant's behalf, excepting only Cushman & Wakefield of California, Inc.
("TENANT'S BROKER"); (ii) Tenant has engaged and will continue to engage
Tenant's Broker as the exclusive broker representing Tenant and any Affiliate
assignee of Tenant in connection with this Lease with respect to any space
leased by Tenant and/or such Affiliate assignee in the Project for the first
fifteen (15) years of the Lease Term (inclusive of renewals and extensions)
commencing as of the Lease Commencement Date, whether or not pursuant to any
formal renewal or expansion provisions (including but not limited to any first
offer or first refusal rights) contained in this Lease, including, without
limitation, (A) any renewals of this Lease pursuant to the Extension Option
Rider attached to this Lease (but not with respect to any renewals beyond such
15-year period), and (B) the leasing of any additional space pursuant to
Sections 1.5 and/or 1.6 of this Lease (whether or not such leasing is pursuant
to an amendment to this Lease or a separate lease therefor and whether or not
Section 1.6 of this Lease is removed from this Lease and put into a separate
lease agreement pursuant to Section 1.6.7); and (iii) Tenant has no actual
knowledge of any other real estate broker or agent who is or in the future will
be entitled to a commission in connection with this Lease or any such renewals
or expansions on Tenant's or such Affiliate assignee's behalf. Landlord
represents and warrants to Tenant that Landlord has engaged Lee & Associates-Los
Angeles North, Inc. ("LANDLORD'S BROKER") as Landlord's broker in connection
with the

                                      -59-
<PAGE>

execution of this Lease, and Landlord shall pay the brokerage commissions owing
to Landlord's Broker in connection with the transactions contemplated by this
Lease pursuant to the terms of a separate written agreement between Landlord and
Landlord's Broker. Landlord shall pay the brokerage commissions owing to
Tenant's Broker in connection with the transactions contemplated by this Lease
pursuant to that certain Commission Agreement for Health Net dated September 13,
2000 between Landlord and Tenant's Broker, a copy of which is attached hereto as
EXHIBIT I (the "TENANT'S BROKER COMMISSION AGREEMENT"). If Tenant or any such
Affiliate assignee subsequently engages any real estate broker or agent other
than Tenant's Broker in connection with this Lease and/or any renewals,
expansions or other transactions for which Landlord or any grantee or successor
of Landlord would be obligated to pay Tenant's Broker a commission pursuant to
Tenant's Broker Commission Agreement, Tenant (and with respect to any such
transactions involving an Affiliate assignee, such Affiliate assignee) shall be
solely responsible for and shall pay to such other brokers all commissions and
other fees and compensation owing or alleged to be owing to such other brokers
in connection therewith. Tenant (and with respect to any such transactions
described above involving an Affiliate assignee, such Affiliate assignee) shall
indemnify, defend, protect and hold Landlord harmless from and against any and
all costs, expenses, liabilities, demands, actions, causes of action and claims,
including, without limitation, reasonable attorneys' fees and court costs (1)
arising out of or related to any breach by Tenant (or such Affiliate assignee,
as the case may be) of any representations, warranties and/or covenants set
forth in this Section 25.25, and (2) with respect to any leasing or brokerage
commissions, fees or equivalent compensation alleged to be owing to any real
estate broker or agent other than Tenant's Broker on account of Tenant's and/or
such Affiliate assignee's dealings with any such other real estate broker or
agent in connection with this Lease, any renewals or expansions pursuant to the
Extension Option Rider and/or Sections 1.5 and/or 1.6 of this Lease, and/or any
renewals, expansions or other transactions for which Landlord or any grantee or
successor of Landlord would be obligated to pay a commission to Tenant's Broker
pursuant to Tenant's Broker Commission Agreement. The terms of this Section
25.25 shall survive the expiration or earlier termination of this Lease. Any
Affiliate succeeding to Tenant's interest in this Lease shall, upon succeeding
to Tenant's interest, automatically be bound by the provisions, and assume the
obligations and indemnifications of Tenant set forth in this Section 25.25
without the need for any further documentation therefor.

          25.25.2 LNR GUARANTY. If Landlord fails to timely pay the commissions
owing to Tenant's Broker pursuant to Section 2a of the Tenant's Broker
Commission Agreement with respect to the initial Leased Premises leased by
Tenant under this Lease (I.E., the Premises located in Building B and floors 3,
4 and 5 of Building C) for the initial 10-year Lease Term therefor, within
thirty (30) days after the execution and delivery of this Lease by Landlord and
Tenant as provided in Section 2a (the "INITIAL COMMISSION PAYMENT"), Tenant may
make such Initial Commission Payment to Tenant's Broker and the amount of the
Initial Commission Payment so made by Tenant shall be repaid by Landlord to
Tenant within ten (10) days after written demand by Tenant to Landlord, which
repayment obligation shall be guaranteed by LNR Property Corporation in the LNR
Guaranty attached to the Tenant Work Letter as SCHEDULE 3. Tenant's payment
rights and Landlord's repayment obligations to be guaranteed by LNR Property
Corporation pursuant to this Section 25.25.2 shall not apply to any commissions
payable to Tenant's Broker with respect to expansions or renewals under Section
6 of the Tenant's Broker Commission Agreement.

     25.26 INDEPENDENT COVENANTS. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord; provided, however, that the foregoing shall in no
way impair Tenant's express rights as stated elsewhere in this Lease; provided,
further, however, that the foregoing shall also not impair the right of Tenant
to commence a separate action against Landlord for any violation by Landlord of
the provisions hereof so long as notice is first given to Landlord and any
holder of a mortgage or deed of trust covering the Buildings, Real Property or
any portion thereof, of whose address Tenant has theretofore been notified, and
an opportunity is granted to Landlord and such holder to correct such violations
as provided above.

     25.27 BUILDING NAME AND SIGNAGE. Landlord shall have the right at any time
to change or designate the name of Building C and the Real Property and to
install, affix and maintain any and all signs on the exterior of the Real
Property and on the exterior and interior of Building C,

                                      -60-
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but after the Lease Commencement Date Landlord shall have no right to place or
allow any signs identifying any tenant or any owner on Building B or on the
Building B Monument Sign described in Section 21.5 above.

     25.28 TRANSPORTATION MANAGEMENT. In addition to Tenant's obligations in
Section 5.1 above, if required by law, Landlord and Tenant shall fully comply
with all present or future programs intended to manage parking, transportation
or traffic in and around the Real Property, and in connection therewith, Tenant
shall take responsible action for the transportation planning and management of
all employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other
transportation-related committees or entities.

     25.29 LANDLORD'S CONSTRUCTION. Tenant acknowledges that prior to and during
the Lease Term, Landlord (and/or any common area association) will be completing
construction and/or demolition work pertaining to various portions of the
Buildings and Real Property, including without limitation, the Phase I Parking
Structure, landscaping and tenant improvements for premises for other tenants
and, at Landlord's sole election, such other buildings, parking facilities,
improvements, landscaping and other facilities within or as part of the Project
as Landlord (and/or such common area association) shall from time to time desire
(collectively, the "CONSTRUCTION"). In connection with such Construction,
Landlord (and/or any common area association) may, among other things, erect
scaffolding or other necessary structures in the Buildings, limit or eliminate
access to portions of the Real Property, including portions of the common areas,
access roads and parking facilities, or perform work in or around the Buildings
or Real Property, which work may create noise, dust or leave debris. Tenant
hereby agrees that such Construction and Landlord's (and/or such common area
association's) actions in connection with such Construction shall in no way
constitute a constructive eviction of Tenant nor (except as provided in Section
6.5) entitle Tenant to any abatement of Rent. Landlord shall have no
responsibility or for any reason be liable to Tenant for any direct or indirect
injury to or interference with Tenant's business arising from the Construction,
nor shall Tenant be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises or of Tenant's personal
property or improvements resulting from the Construction or Landlord's (and/or
such common area association's) actions in connection with such Construction, or
for any inconvenience or annoyance occasioned by such Construction or Landlord's
(and/or such common area association's) actions in connection with such
Construction; provided, however, that (i) Landlord agrees to use commercially
reasonable efforts to minimize interference with Tenant's use of and access to
the Premises as a result of such Construction, (ii) Landlord shall perform such
Construction in compliance with all applicable Laws in effect as of any time
such Construction is performed, including, without limitation, all Environmental
Laws and (iii) except in emergencies, after the Lease Commencement Date,
Landlord shall direct that all construction trucks used in connection with such
Construction not access the Real Property during such Construction over the
proposed private street leading from Burbank Boulevard as depicted on EXHIBIT
A-1 attached hereto.

     25.30 ROOFTOP RIGHTS.

          25.30.1 Subject to (i) the approval of all applicable governmental
agencies, (ii) Tenant's compliance with all applicable Laws, (iii) the
provisions of this Lease, and (iv) the provisions, and Tenant's compliance with
and obtaining all approvals required under, all covenants, conditions and
restrictions now or hereafter recorded against or affecting the Real Property,
Landlord hereby agrees that Tenant shall have the non-exclusive right, at
Tenant's sole cost and expense, to install on the roof of Building B and
Building C, in such locations as shall be reasonably approved by Landlord, one
(1) or more telecommunication antennae, satellite dishes and similar
telecommunication equipment (collectively, the "TELECOMMUNICATION DEVICES"). In
addition, Tenant shall have the right, subject to available capacity of Building
B and Building C, to install such connection equipment, such as conduits,
cables, risers, feeders and materials (collectively, the "CONNECTING EQUIPMENT")
in the shafts, ducts, conduits, chases, utility closets and other facilities of
Building B and Building C, respectively, as is reasonably necessary to connect
the Telecommunication Devices to Tenant's other machinery and equipment in the
Premises, subject however, to the provisions of Section 25.30.2 below. Tenant
shall also have the right of access, consistent with Section 25.30.2 below, to
the areas where any such Connecting Equipment is located for the purposes of
maintaining, repairing, testing and replacing the same. The Telecommunication
Devices and the Connecting Equipment shall be referred to herein together or
separately as the "TELECOMMUNICATION EQUIPMENT".

                                      -61-
<PAGE>

Notwithstanding the foregoing to the contrary, (A) Tenant shall only have the
rights to install and have access to the Telecommunication Equipment with
respect to Building C while Tenant is leasing space in Building C, and (B) the
area of the roof of Building C upon which Tenant may install its
Telecommunication Devices shall not exceed one hundred fifty (150) square feet
in the aggregate. None of the rights granted to Tenant pursuant to this Section
25.30, including without limitation, Tenant's right to install on the roof of
Building B the Telecommunication Devices, shall derogate from the rights granted
to Landlord pursuant to Section 1.3 above. Landlord agrees that in exercising
its rights as "Declarant" under any covenants, conditions and restrictions
recorded against the Real Property, Landlord shall not act (or fail to act) in a
manner (including without limitation, enacting any amendment thereto while
Landlord has the unilateral right to do so as Declarant thereunder) which would
materially diminish Tenant's rights under this Section 25.30.

          25.30.2 The installation of the Telecommunication Equipment shall
constitute work and shall be performed in accordance with and subject to the
provisions of Article 8 of this Lease, including, without limitation, Tenant's
obligation to obtain Landlord's prior written consent to the specifications and
manner of installation of the Telecommunication Equipment, and the
Telecommunication Equipment shall be treated for all purposes of this Lease as
if the same were Tenant's property. In no event shall Tenant be permitted to
penetrate the roof of the Buildings or void any warranties pertaining to the
Buildings in connection with Tenant's installation of the Telecommunication
Equipment. For the purposes of determining Tenant's obligations with respect to
its use of the roof herein provided, the portion of the roof and the exterior of
the Buildings affected by the Telecommunication Equipment shall be deemed to be
a portion of Tenant's Premises; consequently, all of the provisions of this
Lease respecting Tenant's obligations hereunder shall apply to the installation,
use and maintenance of the Telecommunication Equipment, including, without
limitation, provisions relating to compliance with requirements as to insurance,
indemnity, repairs and maintenance. Landlord shall have no obligation with
regard to the portions of the roof where the Telecommunications Equipment is
located.

          25.30.3 It is expressly understood that Landlord retains the right to
use the roof of each of the Buildings for any reasonable purpose whatsoever
including to perform Landlord's obligations under this Lease and/or install or
permit other tenants and other parties to install telecommunications equipment
thereon, provided that Tenant shall have reasonable access to, and Landlord
shall not unduly interfere with Tenant's use of, the Telecommunication Equipment
located thereon.

          25.30.4 Tenant shall install, use, maintain and repair the
Telecommunication Equipment so as not to cause damage to or interfere with (i)
the operation of the Buildings or the Project's Systems and Equipment and/or
(ii) the operation of the businesses of other tenants, or occupants or licensees
of the Project or the systems and equipment of such tenants, occupants or
licensees located in the Project, and Tenant hereby agrees to indemnify, defend
and hold Landlord harmless from and against any and all claims, costs, damages,
expenses and liabilities (including attorney's fees) arising out of Tenant's
failure to comply with the provisions of this Section 25.30.4.

          25.30.5 Landlord shall not have any obligations with respect to the
Telecommunication Equipment or compliance with any requirements relating thereto
nor shall Landlord be responsible for any damage that may be caused to the
Telecommunication Equipment, except to the extent caused by the gross negligence
or willful misconduct of Landlord and not insured or required to be insured by
Tenant under this Lease. Landlord makes no representation that the
Telecommunication Equipment will be able to receive or transmit communication
signals without interference or disturbance, and Tenant agrees that Landlord
shall not be liable to Tenant therefor. Landlord agrees to use good faith
efforts to minimize interference or disturbance to the Telecommunication
Equipment.

          25.30.6 Tenant, at Tenant's sole cost and expense, shall paint and
maintain the Telecommunication Equipment in such color(s) as Landlord shall
determine and shall install such fencing, screening and other protective
equipment on or about the Telecommunication Equipment as Landlord may reasonably
determine and/or as may be required under any covenants, conditions and
restrictions now or hereafter recorded against the Real Property.

                                      -62-
<PAGE>

          25.30.7 Tenant shall (i) be solely responsible for any damage caused
as a result of the Telecommunication Equipment, (ii) promptly pay any tax,
license or permit fees charged pursuant to any requirements in connection with
the installation, maintenance or use of the Telecommunication Equipment and
comply with all precautions and safeguards recommended by all governmental
authorities, and (iii) make necessary repairs, replacements or maintenance of
the Telecommunication Equipment.

          25.30.8 If any of the conditions set forth in this Section 25.30 are
not complied with by Tenant, then without limiting Landlord's rights and
remedies it may otherwise have under this Lease, Tenant shall correct such
noncompliance within thirty (30) days after receipt of written notice thereof.
If Tenant fails to correct noncompliance within such thirty (30) period, then
Tenant shall immediately discontinue its use of the Telecommunication Equipment
and remove the same.

          25.30.9 Upon the expiration of this Lease or upon any earlier
termination of this Lease, Tenant shall, subject to the control of and direction
from Landlord, remove the Telecommunication Equipment, repair any damage caused
thereby, and restore the roof and other facilities of the Buildings to their
condition existing prior to the installation of the Telecommunication Equipment.

          25.30.10 Tenant's rights under this Section 25.30 shall be personal to
the Original Tenant, any assignee of Tenant (including an Affiliate) to which
Tenant has assigned all of its interests under this Lease pursuant to Article 14
above, and any subtenants of Tenant subleasing portions of the Premises who are
Affiliates of Tenant pursuant to Section 14.7 above. In the event that Tenant
shall seek to allow a subtenant subleasing any portion of the Premises who is
not an Affiliate to use or exercise the rights granted to Tenant hereunder,
Tenant must first obtain Landlord's prior consent thereto, which shall not be
unreasonably withheld or delayed. Notwithstanding anything in this Section 25.30
to the contrary, the rights granted hereunder may only be used in connection
with the use of the Premises by Tenant or any such assignee or approved
subtenant of Tenant permitted by Article 5 above.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.

                               "Landlord":

                               DCA HOMES, INC., a Florida corporation

                               By:      /s/ DAVID O. TEAM
                                   -------------------------------------
                                      Name:    DAVID O. TEAM
                                      Its:    VICE PRESIDENT

                               By:      /s/ CURTIS J. STEPHENSON
                                   -------------------------------------
                                      Name:    CURTIS J. STEPHENSON
                                      Its:    ASSISTANT VICE PRESIDENT

                               LENNAR ROLLING RIDGE, INC., a California
                                corporation

                               By:      /s/ DAVID O. TEAM
                                   -------------------------------------
                                      Name:    DAVID O. TEAM
                                      Its:    VICE PRESIDENT

                               By:      /s/ CURTIS J. STEPHENSON
                                   -------------------------------------
                                      Name:    CURTIS J. STEPHENSON
                                      Its:    ASSISTANT VICE PRESIDENT

                               "Tenant":

                               HEALTH NET,
                               a California corporation

                               By:      /s/ DEE JAY MAILER
                                   -------------------------------------
                                      Name:    DEE JAY MAILER
                                      Its:    SENIOR VICE PRESIDENT AND COO

                               By:      /s/ GEORGE DI SALVO
                                   -------------------------------------
                                      Name:    GEORGE DI SALVO
                                      Its:    SENIOR VICE PRESIDENT AND CFO

                                      -64-<PAGE>

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                                                     EXHIBIT 4.7

                                  AEROGEN, INC.

                                       AND

                          BECTON, DICKINSON AND COMPANY

                            STOCK PURCHASE AGREEMENT

                                  MAY 10, 2000

<PAGE>

                            STOCK PURCHASE AGREEMENT

         THIS AGREEMENT is made effective as of the 10th day of May, 2000, by
and between AEROGEN, INC., a Delaware corporation with its principal place of
business at 1310 Orleans Drive, Sunnyvale, California 94089 (the "Company"), and
BECTON, DICKINSON AND COMPANY a New Jersey corporation with its principal office
at 1 Becton Drive, Franklin Lakes, New Jersey 07417-1866 ("BD"). AeroGen and BD
are sometimes referred to herein individually as a "Party" and collectively as
the "Parties."

                                    RECITALS

         WHEREAS, the Company and BD have entered into that certain Insulin
Inhaler Development Agreement of even date herewith (the "Development
Agreement", and together with this Agreement, the "Transactional Agreements");
and

         WHEREAS, in connection with the Development Agreement, the Company
desires to sell to BD and BD desires to purchase from the Company an aggregate
of 961,539 shares of Series E Convertible Preferred Stock of the Company
("Series E Stock"), having the rights and preferences as set forth in the
Company's Amended and Restated Certificate of Incorporation (attached as Exhibit
A) (the "Restated Certificate"), for an aggregate price of two million five
hundred thousand one dollars and forty cents ($2,500,001.40) on the terms and
subject to the conditions set forth in this Agreement, and to give the Company
an option, under certain circumstances, to require BD to purchase another three
million dollars ($3,000,000) of stock on the terms set forth below. For the
purposes of this Agreement "Series E Stock" will include the Series E
Convertible Preferred Stock purchased by BD hereunder and any Common Stock
issued upon conversion thereof, and "Financing Stock" (as hereinafter defined)
shall also include any Common Stock into which such stock may be convertible.

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, do hereby agree as follows:

         1.       PURCHASE OF SERIES E STOCK.

                  1.1      INITIAL PURCHASE OF SERIES E STOCK. Subject to the
terms and conditions of this Agreement at the Closing (as hereinafter defined)
the Company agrees to sell to BD and BD agrees to purchase from the Company, for
a price of two million five hundred thousand one dollars and forty cents
($2,500,001.40), an aggregate of 961,539 shares of Series E Stock, free and
clear of all liens and encumbrances, at the purchase price per share of $2.60.
The Company shall have thirty (30) days following the later of the closing of
the Next Financing (as hereinafter defined) and the achievement of the First
Milestone (as hereinafter defined) to exercise its option under Section 1.2 by
giving written notice thereof to BD on or prior to such thirtieth (30th) day.

                  1.2      ADDITIONAL STOCK PURCHASE UPON THE ACHIEVEMENT OF A
MILESTONE.

                           (a)      Subject to the terms and conditions of this
Agreement and in reliance on the representations and warranties contained
herein, BD agrees to purchase from the

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       2
<PAGE>

Company, at the Company's option, at the later of the achievement of the First
Milestone (as hereinafter defined) by the Company, or upon the closing of the
Company's Next Financing (as hereinafter defined), an aggregate of three million
dollars ($3,000,000) of the same series or class of stock sold in the Next
Financing (the "Financing Stock") at the same price per share and upon the same
terms (i.e., receiving the same representations, warranties, covenants, legal
opinions, etc.) as sold to purchasers in such financing, provided that both the
achievement of the First Milestone and the closing of the Next Financing shall
have occurred on or prior to December 31, 2000. The closing of such sale shall
occur at such time and place as shall be agreed by the Company and BD, but in no
event more than five business days following written notice to BD from the
Company that it is exercising its option. The Financing Stock purchased by BD
shall have the same rights, preferences and privileges as given by the Company
to purchasers of Financing Stock in the Next Financing.

                           (b)      For purposes of this Section 1.2, the "First
Milestone" shall mean the allowance by the Food and Drug Administration of an
Investigational New Drug Application for inhaled insulin with a device that
is able to deliver [ * ] of bio-available insulin [ * ].

                           (c)      For purposes of this Section 1.2, the "Next
Financing" shall mean a transaction or series of related transactions in which
convertible preferred stock or Common Stock of the Company is sold (other than
the sale to BD contemplated hereby) after the date hereof resulting in aggregate
gross proceeds to the Company (excluding the sale to BD contemplated hereby) of
not less than $5,000,000 with not less than $3,000,000 of such proceeds
resulting from the purchase of such stock from an institutional investor or
investors which is (are) neither an equity investor(s) in the Company as of the
date hereof nor "strategic investors" or "corporate partners"(as those terms are
commonly used) with the Company.

                  1.3      HART-SCOTT-RODINO COMPLIANCE. Notwithstanding
anything else in this Section 1, it shall also be a condition to the Initial
Closing, and any Milestone Closing (as hereinafter defined), as applicable, that
the waiting period under the premerger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
applicable to the aforementioned transactions shall have expired or been
terminated and any approvals required thereunder shall have been obtained. The
parties shall cooperate in promptly filing premerger reports and in taking all
steps necessary to obtain early termination of any applicable HSR Act waiting
periods.

         2.       CLOSING DATE; DELIVERY.

                  2.1      CLOSING; CLOSING DATE. Subject to the terms of
Section 5, the closing of the sale and purchase of shares of Series E Stock (or
Financing Stock, as the case may be) under Sections 1.1 and 1.2 of this
Agreement (the "Initial Closing," or the "Milestone Closing," each of which may
be referred to individually as "Closing") shall be held at 9:00 a.m. (Pacific
Time on the applicable closing date at the offices of Cooley Godward, 5 Palo
Alto Square, 8th Floor, Palo Alto, California, or at such other time and place
as the Company and BD may agree. The date of the Initial Closing ("Initial
Closing Date") shall be the day of the signing of this Agreement. The date of
the Milestone Closing, shall be as set forth in Section 1.2 above.

                  2.2      DELIVERY. At the Initial Closing and at the Milestone
Closing, subject to the terms and conditions hereof, the Company will deliver to
BD a stock certificate, in the name

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       3
<PAGE>

of BD or its designee, representing, respectively, the shares of Series E Stock
(or Financing Stock, as the case may be) deliverable at such Closing, dated as
of the Initial Closing or the Milestone Closing, as applicable, against payment
of the purchase price therefor by wire transfer, unless other means of payment
shall have been agreed upon by BD and the Company.

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company hereby represents and warrants to BD that, except as set
forth on a Schedule of Exceptions attached as Exhibit B (the "Schedule of
Exceptions"), specifically identifying the relevant subsection hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:

                  3.1      ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.

                  3.2      CAPITALIZATION. The authorized capital of the Company
immediately prior to the Closing will consist of:

                           (a)      PREFERRED STOCK. 31,642,430 shares of
Preferred Stock (the "Preferred Stock"), of which 3,846,156 shares have been
designated Series A Preferred Stock, all of which are issued and outstanding
immediately prior to the Closing; of which 4,487,182 shares have been designated
Series B Preferred Stock, all of which are issued and outstanding immediately
prior to the Closing; of which 9,375,300 shares have been designated Series C
Preferred Stock, 9,245,300 of which are issued and outstanding immediately prior
to the Closing; of which 10,285,714 shares have been designated Series D
Preferred Stock, all of which are issued and outstanding immediately prior to
the Closing; and of which 3,648,078 shares have been designated Series E
Preferred Stock, of which 961,539 shares are issued and outstanding immediately
prior to the Closing. The rights, privileges and preferences of the Preferred
Stock and Common Stock are as stated in the Restated Certificate.

                           (b)      COMMON STOCK. 53,000,000 shares of Common
Stock ("Common Stock"), of which 6,928,821 shares are issued and outstanding
immediately prior to the Closing and 31,642,430 shares are reserved for issuance
upon conversion of Preferred Stock.

                           (c)      Except for the conversion privileges of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock outstanding, the Series E
Stock to be issued under this Agreement (and the conversion privileges thereof),
outstanding options to purchase 3,930,202 shares of Common Stock, warrants to
purchase 32,051 shares of Common Stock and warrants to purchase 65,000 shares of
Series C Preferred Stock, as of the date of this Agreement, (i) no person will
have any right to subscribe for or to purchase (including conversion or
preemptive rights), or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or other claims of any character relating to, any capital stock or
any

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       4
<PAGE>

stock or securities convertible into or exchangeable for any capital stock of
the Company; (ii) except as set forth in this Section 3.2, the Company will not
have any capital stock, equity interests or other securities reserved for
issuance for any purpose; and (iii) the Company will not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any convertible securities, rights or
options of the type described in the preceding clause (i). No outstanding
option, warrant or other security directly or indirectly exercisable for or
convertible into any class or series of the Company's capital stock requires
anti-dilution adjustment by reason of the transactions contemplated by this
Agreement. To the best knowledge of the Company, there are no agreements among
the Company's stockholders with respect to the voting or transfer of the
Company's capital stock, other than the agreements regarding voting contained in
the Amended and Restated Voting Agreement dated August 25, 1998, (the "Voting
Agreement") and the agreements regarding transfer contained in the Co-Sale
Agreement, dated August 25, 1998, (the "Co-Sale Agreement"). Schedule 3.2(c)
sets forth a complete and correct list of the name of each of the Directors,
Officers and five percent shareholders of the Company and the amount of stock
each owns in the Company. The Company has reserved 5,800,000 shares of Common
Stock under its 1994 and 1996 Stock Option Plans, for issuance upon the exercise
of options to be granted under such stock plans. 819,029 shares of Common Stock
remain in the employee reserve pool.

                  3.3      SUBSIDIARIES. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.

                  3.4      AUTHORIZATION. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company under this Agreement and the authorization, issuance
and delivery of the Series E Stock (and the Common Stock issuable upon
conversion of the Stock) has been taken or will be taken prior to the Closing,
and this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms.

                  3.5      VALID ISSUANCE OF SECURITIES.

                           (a)      The Series E Stock that is being issued to
BD hereunder, when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, (i) will be duly and validly
issued, fully paid and nonassessable and (ii) will be free of any pledges,
liens, security interests, claims or encumbrances of any kind. Based in part
upon the representations of BD in this Agreement, the Series E Stock will be
issued in compliance with all applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Series E Stock has been duly and
validly reserved for issuance, and upon issuance in accordance with the terms of
the Restated Certificate (i) will be duly and validly issued, fully paid and
non-assessable, (ii) will be issued in compliance with all applicable federal
and state securities laws and (iii) will be free of any pledges, security
interests, claims or encumbrances of any kind.

                           (b)      The outstanding shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       5
<PAGE>

Preferred Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.

                  3.6      GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filings pursuant to (i) Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder, (ii) Rule 506 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Act"), and (iii) any other post-Closing filings
with any other jurisdictions required under applicable state securities laws,
which filings will be timely effected in accordance with such sections and/or
rules.

                  3.7      LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of the Transaction Agreements or the right of the Company to enter
into them, or to consummate the transactions contemplated thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the assets, condition or affairs of the Company, financially or otherwise, or
any change in the current equity ownership of the Company, nor is the Company
aware that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

                  3.8      EMPLOYEE AGREEMENT. Each employee and officer of the
Company and each consultant to the Company has executed an agreement with the
Company regarding confidentiality and proprietary information. The Company,
after reasonable investigation, is not aware that any of its employees are in
violation thereof, and the Company will use its best efforts to prevent any such
violation.

                  3.9      PATENTS AND TRADEMARKS. The Company has sufficient
title to and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement upon the rights of others. The
patents, patent applications, trademarks, service marks, trade names and
copyrights owned by the Company and that the Company has rights to use are set
forth on the Schedule of the Exceptions. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any communications alleging
that the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       6
<PAGE>

The Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of the employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.

                  3.10     COMPLIANCE WITH OTHER INSTRUMENTS.

                           (a)      The Company is not in violation or default
of any provisions of its Restated Certificate or Bylaws or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or of any material provision of any federal or state statute, rule or
regulation applicable to the Company. Without limiting the generality of the
foregoing, the Company is in compliance with all material federal, state and
local laws, rules and regulations relating to the development, manufacture,
safety, sale, labeling, marketing and, if required, governmental approval of its
products. The execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or without the, passage of
time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.

                           (b)      The Company has avoided every condition, and
has not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution or other agreement.

                  3.11     AGREEMENTS; ACTION.

                           (a)      There are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.

                           (b)      Except for the Transactional Agreements,
there are no agreements, understandings, instruments, contracts or proposed
transactions to which the Company is a party or by which it is bound that
involve (i) obligations of, or payments to the Company in excess of $50,000, or
(ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company, or (iii) obligations of, or payments by, the
Company to any officer, director, employee or family member of any such
individual.

                           (c)      The Company has not (i) declared or paid any
dividends, or authorized or made distribution upon or with respect to any class
or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in

                                       7
<PAGE>

excess of $50,000 or in excess of $100,000 in the aggregate, (iii) made any
loans or advances to any person, or (iv) sold, exchanged or otherwise disposed
of any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.

                           (d)      The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its Restated Certificate or Bylaws, that adversely affects its business as
now conducted or as proposed to be conducted, its properties or its financial
condition.

                           (e)      The Company has not engaged in the past
three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the merger of the Company with or into any
such corporation or corporations, (ii) with any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of, or (iii)
regarding any other form of liquidation, dissolution or winding up of the
Company.

                           (f)      All contracts to which the Company is a
party or by which its assets may be bound are valid, binding and in full force
and effect, and no material breach or default, or event which, with notice or
lapse of time or both, would constitute any such material breach or default by
the Company (or, to the best knowledge of the Company, by any other party
thereto), exists with respect thereto. The Company has received no notice of
cancellation or non-renewal of any material contract.

                  3.12     DISCLOSURE. Except for certain agreements that the
Company considers to be confidential or proprietary in nature, agreements which
the Company is under an obligation not to disclose, and agreements that the
Company believes contain nonessential details of the interference settlement,
the Company has provided BD or its counsel with all the information which BD has
requested for deciding whether to acquire the Series E Stock. No representation
or warranty of the Company contained in this Agreement and the Exhibits attached
hereto, or, any other written statement or certificate furnished or to be
furnished to BD in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Company has provided counsel to BD
access to complete and accurate copies of each agreement, except for the
agreements stated above, to which the Company is a party or to which it, its
assets or its properties are subject.

                  3.13     RIGHTS OF REGISTRATION AND FIRST OFFER. Except for
registration rights granted to the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and to be
granted to BD, in each case pursuant to the Third Amended and Restated
Information and Registration Rights Agreement dated August 25, 1998 (the
"Registration Rights Agreement"), the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
All rights of first offer granted by the Company related to its securities have
been satisfied or will be waived prior to the Closing.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

                  3.14     CORPORATE DOCUMENTS. The Restated Certificate and
By-laws of the Company are in the form provided to counsel to BD.

                  3.15     TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company`s ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.

                  3.16     FINANCIAL STATEMENTS. The Company has delivered to BD
its audited financial statements (balance sheet, profit and loss statement, cash
flows statement and statement of stockholder equity) for the year ended December
31, 1998 and its unaudited financial statements (balance sheet, profit and loss
statement, cash flows statement and statement of stockholder equity) for the
twelve months ended December 31, 1999 (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles and on a consistent basis throughout
the periods indicated and with each other. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject, in the case of the
unaudited financial statements, to normal year-end audit adjustments, which are
neither individually nor in the aggregate material. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise.

                  3.17     EMPLOYEE BENEFIT PLANS; ERISA.

                           (a)      Item 3.17 of the Schedule of Exceptions
contains a true and complete list of all "employee benefit plans," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and any other bonus, profit sharing, compensation,
severance, deferred compensation, fringe benefit, insurance, welfare, medical,
post-retirement health or welfare benefit, life, stock option, stock purchase,
disability, termination, retention or other plan, agreement, trust fund or
arrangement (whether written or unwritten), maintained, sponsored or contributed
to by the Company or any entity that would be deemed a "single employer" with
the Company under Section 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code") or Section 4001 of ERISA (an "ERISA Affiliate")
on behalf of any employee of the Company or any ERISA Affiliate (whether
current, former or retired) or their beneficiaries or with respect to which the
Company or any ERISA Affiliate has or has had any obligation on behalf of any
such employee or beneficiary (each a "Plan" and, collectively, the "Plans").

                           (b)      None of the ERISA Affiliates or the Company
has ever contributed to or contributes to, been required to contribute to, or
otherwise participated in or participates in (i) any "multiemployer plan"
(within the meaning of Section 4001(a)(3) of ERISA or Section 414(f) of the
Code), (ii) any single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) which is subject to Sections 4063 and 4064 of ERISA or
(iii) any plan subject to Title IV of ERISA or Section 412 of the Code.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                           (c)      The Company, each ERISA Affiliate, each Plan
and each "plan sponsor" (within the meaning of Section 3(16) of ERISA) and each
"employee benefit plan" (within the of section 3(3) of ERISA) has complied in
all material respects with applicable law including, without limitation, the
Code and ERISA and each Plan complies with and has been maintained and operated
in all material respects in accordance with its terms.

                           (d)      With respect to each of the Plans referenced
in item 3.17 of the Schedule of Exceptions: (i) all payments required by any
Plan or by law with respect to all periods through the date of the Closing have
been made prior to the Closing; (ii) no "prohibited transaction," within the
meaning of Section 4975 of the Code and Section 406 of ERISA, has occurred, or
to the best of the Company's knowledge is expected to occur, with respect to any
Plan which has subjected or could subject the Company, any officer, director or
employee thereof or any trustee, administrator or other fiduciary, to a tax or
penalty on prohibited transactions imposed by either Section 502 of ERISA or
Section 4975 of the Code, or any other liability with respect thereto; and (iii)
no Plan is under audit or investigation by the Internal Revenue Service or the
Department of Labor or any other governmental authority and no such completed
audit, if any, has resulted in the imposition of any tax or penalty.

                  3.18     TAX RETURNS AND PAYMENTS. The Company has filed all
tax returns and reports as required by law. These returns and reports are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company as shown in
the Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended (the "Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 1362(a) or Section 341(f) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a material adverse effect on the Company, its
financial condition, its business as currently conducted or as proposed to be
conducted or any of its properties or material assets.

                  3.19     INSURANCE. The Company has in full force and effect
fire and casualty insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed. The Company also has in full
force and effect product liability insurance and comprehensive general liability
insurance in amounts and with such coverages as are generally maintained by
responsible companies in the same industry.

                  3.20     LABOR AGREEMENTS AND ACTIONS. The Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, prospects or business of the
Company (as such business is currently conducted and as it is proposed to be
conducted), nor is the Company aware of any labor organization activity

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       10
<PAGE>

involving its employees. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment, with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. The employment of each officer
and employee of the Company is terminable at the will of the Company.

                  3.21     ABSENCE OF CHANGES. Except as specifically set forth
in this Agreement, since December 31, 1999, (a) the Company has not entered into
any transaction other than in the ordinary course of business and which is not,
individually or in the aggregate, material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
currently conducted and as it is proposed to be conducted), (b) the Company has
not changed any compensation arrangement or agreement with any of its key
employees or executive officers, or changed the rate of pay of its employees as
a group, (c) the Company has not changed or amended any contract by which the
Company or any of its respective assets are bound or subject which would have a
material adverse effect on the business of the Company, (d) there has been no
waiver by the Company of a valuable right or of a debt owing to the Company
which would have a material and adverse effect on the business of the Company,
(e) there has not been any satisfaction or discharge of any lien, claim or
encumbrance or any payment of any obligation by the Company except in the
ordinary course of business and which is not, individually or in the aggregate,
material to the assets, properties, financial condition, operating results or
business of the Company (as such business is currently conducted and as it is
proposed to be conducted), and (f) except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or otherwise,
other than obligations under contracts and commitments incurred in the ordinary
course of business not in excess of $50,000 individually and $100,000 in the
aggregate.

                  3.22     BROKERS. The Company has retained no finder, broker,
agent, financial adviser or other intermediary in connection with the
transactions contemplated by this Agreement and the Company agrees to indemnify
and hold harmless BD from liability for any compensation to any such
intermediary and the fees and expenses of defending against such liability or
alleged liability.

                  4.       REPRESENTATIONS AND WARRANTIES OF BD.

         BD hereby represents and warrants to the Company as follows:

                  4.1      LEGAL POWER. BD has the requisite corporate power to
enter into this Agreement and to carry out and perform its obligations under the
terms of this Agreement.

                  4.2      DUE EXECUTION. This Agreement has been duly
authorized, executed and delivered by BD, and, upon due execution and delivery
by the Company, this Agreement will be a valid and binding agreement of BD,
enforceable against BD in accordance with its terms.

                  4.3      INVESTMENT REPRESENTATIONS. In connection with any
sale of shares under this Agreement, BD makes the following representations:

                           (a)      BD is acquiring the shares of Series E Stock
under this Agreement for its own account, not as nominee or agent, for
investment and not with a view to, or for resale

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       11
<PAGE>

in connection with, any distribution or public offering thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").

                           (b)      BD understands that (i) the shares of Series
E Stock to be purchased under this Agreement have not been registered under the
Securities Act by reason of a specific exemption therefrom, that such securities
must be held by BD, and that BD must, therefore, bear the economic risk of such
investment, until a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; (ii) each certificate
representing such shares will be endorsed with the following legends:

                                    A.       THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                                    B.       THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING RESTRICTIONS ON
TRANSFERABILITY, OF THAT CERTAIN STOCK PURCHASE AGREEMENT, DATED ________, 2000.
A COPY OF SUCH STOCK PURCHASE AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER
OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO AEROGEN, INC. AT ITS
PRINCIPAL PLACE OF BUSINESS."

                                    C.       Any legend currently required to be
placed thereon under applicable state securities laws.

and (iii) the Company will instruct any transfer agent not to register the
transfer of the shares of Series E Stock purchased pursuant to this Agreement
(or any portion thereof) unless the conditions specified in the foregoing
legends are satisfied, until such time as a transfer is made, pursuant to the
terms of this Agreement, and in compliance with Rule 144 or pursuant to a
registration statement or, if the opinion of counsel referred to above is to the
further effect that such legend is not required in order to establish compliance
with any provisions of the Securities Act or this Agreement.

                           (c)      BD has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the shares of Series E Stock purchased hereunder.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       12
<PAGE>

                           (d)      BD is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D of the General Rules and Regulations
prescribed by the Securities and Exchange Commission pursuant to the Securities
Act.

                  4.4      BROKERS. BD has retained no finder, broker, agent,
financial advisor or other intermediary in connection with the transactions
contemplated by this Agreement and BD agrees to indemnify and hold harmless the
Company from liability for any compensation to any such intermediary and the
fees and expenses of defending against such liability or alleged liability.

         5.       CONDITIONS TO CLOSING.

                  5.1      CONDITIONS TO OBLIGATIONS OF BD AT INITIAL CLOSING.
BD's obligation to purchase the shares of the Company's Series E Stock at the
Closing is subject to the fulfillment to BD's satisfaction, on or prior to the
Closing, of all of the following conditions, any of which may be waived by BD:

                           (a)      REPRESENTATIONS AND WARRANTIES TRUE;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the
Company in Section 3 hereof shall be true and correct in all material respects
on the date of the Agreement and the Company shall have performed and complied
with all obligations and conditions herein required to be performed or complied
with by it on or prior to the Closing, and a Certificate duly executed by an
officer of the Company, to the effect of the foregoing, shall be delivered to
BD.

                           (b)      PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to counsel to BD, and counsel to
BD shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.

                           (c)      QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful sale and issuance of the shares to be issued pursuant
to this Agreement shall have been duly obtained and shall be effective on and as
of the Closing. No stop order or other order enjoining the sale of the shares to
be sold at such Closing shall have been issued and no proceedings for such
purpose shall be pending or, to the best knowledge of the Company, threatened by
the Securities and Exchange Commission, or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the shares of Series E Stock to be
sold thereat shall be legally permitted by all laws and regulations to which BD
and the Company are subject.

                           (d)      NO PENDING LITIGATION. There shall not be
any proceeding, hearing action, suit, arbitration or any investigation pending
or threatened or any legal requirement (including any federal, state, local,
municipal, foreign, international law, statute, rule or regulation) in effect
that would prevent the consummation of any of the transactions contemplated by
this Agreement.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       13
<PAGE>

                           (e)      OPINION OF COMPANY COUNSEL. BD shall have
received from Cooley Godward LLP, counsel for the Company, an opinion, dated as
of the Closing, in the form attached hereto as Exhibit C.

                           (f)      NECESSARY CONSENTS. The Company shall have
obtained, and shown by written evidence satisfactory to BD, all required
consents and approvals of third parties necessary to convey to BD all of the
shares of Series E Preferred Stock and to consummate the other transactions
contemplated by this Agreement.

                  5.2      CONDITIONS PRECEDENT TO BD'S INVESTMENT AT THE
MILESTONE CLOSING. In addition to the conditions provided for under Sections 1.2
and 1.3 hereof, the obligation of BD on the Milestone Closing to purchase the
Financing Stock as provided in Section 1.2(a) shall be subject to the
satisfaction, on or prior to the Milestone Closing, of each of the following
conditions precedent, any one or more of which may be waived by BD:

                           (a)      PERFORMANCE. The Company shall have
performed and complied in all material respects with all agreements and
conditions contained herein or in other ancillary documents incident to the
transactions contemplated by this Agreement required to be performed or complied
with by it prior to or at the Milestone Closing. No condition or event
constituting a breach under the Agreement or an event which, with notice or
lapse of time, or both, would constitute such a breach shall have occurred and
be continuing, or will result from the proceedings to be undertaken at the
Milestone Closing.

                           (b)      COMPLIANCE CERTIFICATES. The Company shall
have delivered to BD or its representative at the Milestone Closing an Officer's
Certificate to the effect that all conditions specified in Section 5.2(a) and
(d) that relate to the Company, have been fulfilled.

                           (c)      PROCEEDINGS AND DOCUMENTS; PRIOR CONDITIONS.
All corporate and other proceedings in connection with the Milestone Closing
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be reasonably satisfactory in substance and form to BD
and its counsel, and BD and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.

                           (d)      MILESTONE. The Company shall have achieved
the First Milestone.

                           (e)      OPINION OF COMPANY'S COUNSEL. BD shall have
received from Cooley Godward LLP, counsel for the Company, a favorable opinion,
dated as of the Milestone Closing and satisfactory in form and substance to BD
and its counsel, confirming and restating (except as to any changes thereto
since the Initial Closing, including changes in applicable law) such portions of
the opinion rendered on the Initial Closing Date pursuant to Section 5.1(d) as
relate to the issuance and sale of Financing Stock pursuant to Section 1.2(a).

                           (f)      NO NOTICE OF TERMINATION UNDER THE
DEVELOPMENT AGREEMENT. The Development Agreement shall not have been terminated
by BD for breach of such agreement by the Company.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       14
<PAGE>

                  5.3      CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING.
The Company's obligation to issue and sell the shares of its Series E Stock at
the Closing is subject to the fulfillment to the Company's satisfaction, on or
prior to the Closing, of the following conditions, any of which may be waived by
the Company:

                           (a)      REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by BD in Section 4 hereof shall be true and
correct in all material respects at the date of the Closing.

                           (b)      PERFORMANCE OF OBLIGATIONS. BD shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by it on or before the Closing, and a Certificate
duly executed by an officer of BD, to the effect of the foregoing, shall be
delivered to the Company.

                           (c)      QUALIFICATIONS, LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in
connection with the lawful sale and issuance of the shares of Series E Stock to
be sold and issued pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of the Closing. No stop order or other order
enjoining the sale of such shares shall have been issued and no proceedings for
such purpose shall be pending or, to the best knowledge of the Company,
threatened by the Securities and Exchange Commission, or any commissioner of
corporations or similar officer of any state having jurisdiction over this
transaction. At the time of the Closing, the sale and issuance of the shares of
Series E Stock to be sold and issued at the Closing shall be legally permitted
by all laws and regulations to which BD and the Company are subject.

                           (d)      NO PENDING LITIGATION. There shall not be
any proceeding, hearing, action, suit, arbitration or any investigation pending
or threatened or any legal requirement (including any federal, state, local,
municipal, foreign, international law, statute, rule or regulation) in effect
that would prevent the consummation of any of the transactions contemplated by
this Agreement.

         6.       COVENANTS AND RIGHTS OF BD.

                  6.1      SALE RESTRICTION. BD hereby covenants and agrees that
it will not contract to sell, or otherwise transfer, loan, pledge or grant any
rights to acquire any shares of the Company's Series E Stock acquired pursuant
to this Agreement, or Common Stock issued on conversion thereof (or purchase or
sell any derivative security that has a similar effect or enter into any
contract that has a similar effect), without the prior written consent of the
Company until the earlier of (a) one year following the Closing of the initial
public offering of securities of the Company pursuant to an underwritten
registration under the Securities Act, as amended (the "IPO"), or (b) four years
after the date of this Agreement. Notwithstanding anything in this Section 6.1
to the contrary, if the Company sells its equity securities to another corporate
partner (defined as a corporation which is purchasing equity securities of the
Company in connection with entering into a commercial relationship with the
Company) and such corporate partner does not agree to a restriction on the sale
of equity securities of the Company for at least one year following the
Company's IPO, then subsection (a) above shall be modified to provide that BD'S

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       15
<PAGE>

sale restriction shall extend only for that length of time following an IPO as
the sale restriction of such corporate partner. Following the expiration of the
sale restriction set forth in this Section 6.1, BD agrees that it will give the
Company at least five (5) business days' advance notice of its intention to sell
the Company's equity securities, and will use commercially reasonable efforts to
cooperate with the Company and its designated market makers to find a buyer or
buyers for the Company's stock and conclude its sale of such stock in an orderly
manner. The Company agrees that, following its IPO, it will not make any public
announcement of BD's intention to sell the Company's securities prior to the
time such sale is commenced unless, on advice of counsel, it is legally required
to do so.

                  6.2      RIGHT OF FIRST OFFER.

                           (a)      Prior to the Company's IPO, BD shall not
transfer any shares of the Company's Series E Stock (or Common Stock issued on
conversion thereof) purchased pursuant to this Agreement, whether or not for
consideration, to a third party, without complying with the provisions of this
Section 6.2. The right of first offer herein shall be freely assignable by the
Company.

                           (b)      Prior to the Company's IPO, in the event BD
desires to transfer any shares of the Company then held by it, BD shall give
written notice to the Secretary of the Company of its intention to transfer the
shares (the "Company Notice"). The Company Notice must name the number of shares
of Series E Stock (or Common Stock issued on conversion thereof) involved in the
proposed transfer, the proposed purchase price per share, and any other terms
and conditions of the proposed transfer. Within fifteen (15) days after delivery
of the Company Notice, the Company shall have the right to elect to purchase all
(but not less than all) of the shares proposed to be transferred (the "Option
Shares") on substantially the same terms and conditions specified in the Company
Notice, by delivery to BD of a written notice.

                           (c)      In the event that the Company fails to
exercise the right to purchase set forth in foregoing paragraph (b) as to all
the Option Shares within the period specified above, BD shall have sixty (60)
days thereafter to sell the Option Shares at a price and upon terms no more
favorable to the purchaser thereof than specified in the Company Notice. In the
event that BD has not sold such shares within such sixty (60) day period, BD
shall not thereafter sell any of such shares without first offering such shares
to the Company in the manner provided above.

                           (d)      Anything in this Agreement to the contrary
notwithstanding, BD shall be permitted to transfer shares of Series E Stock,
Financing Stock or the Common Stock into which it may be converted owned by it
without complying with the provisions of Section 6.2 to any of its Affiliates;
provided that any permitted transferee referred to above shall have delivered to
the Company the written agreement of such transferee to be bound by all of the
provisions of this Agreement to the same extent as its transferor, and until
such delivery is made no such transferee shall, with respect to the shares being
transferred, be a stockholder and the Company shall not recognize any such
transferee as a stockholder for any purpose.

                  6.3      STANDSTILL AGREEMENT. Other than shares of Series E
Stock, which it is purchasing pursuant to this Agreement, and the Common Stock
issued upon conversion thereof,

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       16
<PAGE>

BD hereby covenants and agrees that it will not, nor will it permit any of its
direct or indirect majority-owned subsidiaries, to purchase or otherwise
acquire, directly or indirectly, any equity securities of the Company (or rights
or options to purchase such securities) without the prior written approval of
the Company. This provision shall terminate and be of no further force or effect
five years from the date hereof or such earlier date as shall be agreed to by
the Company; provided, that the undertaking of this Section 6.3 shall
automatically terminate upon the occurrence of any of the following events: (a)
the filing with the SEC of a Schedule 13D by any person or entity indicating
that a person or entity has acquired (x) more than 20% of any class of the
Company's voting equity securities, or (y) has acquired at least 5% of any class
of the Company's voting equity securities which Schedule 13D expresses the
filing party's intention to assume control of the Company, whether by tender
offer, merger, proxy contest or otherwise; (b) the commencement of a tender
offer by any person or entity to acquire 20% or more of the Company's
outstanding voting equity securities; or (c) the solicitation of proxies by any
party other than the Company to which Rule 14a-11 of the rules and regulations
under the Securities and Exchange Act of 1934, as amended, applies and is
intended to effect a change in the majority of members of the Company's Board of
Directors.

                  6.4      REGISTRATION. BD shall become a party to, and shall
be deemed a "Holder" under, the Registration Rights Agreement for all purposes
except Section 2 and Section 16 thereof.

         7.       COVENANTS OF THE COMPANY

                  7.1      INFORMATION RIGHTS. Until the closing of an IPO by
the Company, the Company covenants and agrees that for so long as BD owns,
beneficially or of record, at least 500,000 shares of the Company's Series E
Stock (or Common Stock issued on conversion thereof) (in each case as adjusted
for stock splits or combinations, stock dividends or similar events), the
Company shall furnish to BD the following reports:

                           (a)      ANNUAL REPORTS. As soon as available and in
any event within 90 days after the end of each fiscal year, consolidated and
consolidating financial statements of the Company including a balance sheet as
of the end of such fiscal year and statements of income and retained earnings
and of sources and applications of funds for such fiscal year, prepared in
reasonable detail and in accordance with generally accepted accounting
principles consistently applied and accompanied by the opinion thereon of a
recognized firm of independent certified public accountants as may be selected
by the Board of Directors of the Company.

                           (b)      INTERIM REPORTS. As soon as available, and
in any event within 45 days after the end of each of the first three quarters of
each of the Company's fiscal years beginning with the quarter ending March 31,
2000, consolidated and consolidating financial statements of the Company
including a cash flow statement, a balance sheet as of the end of such
accounting period and statements of income and retained earnings and of sources
and applications of funds for such accounting period and for the period from the
beginning of such fiscal year to the end of such accounting period, and setting
forth in comparative form the figures for the corresponding periods of the
preceding fiscal year, prepared in reasonable detail and in accordance with
generally accepted accounting principles consistently applied and certified as
correct by the chief executive officer and chief financial officer of the
Company.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       17
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                  7.2      PRESS RELEASES. Except as provided by law, each party
will secure advanced written approval from the other party of the decision to
issue and the content of any statement regarding or mentioning the transactions
contemplated hereby, whether in writing or otherwise to the public or press.
This provision shall not be deemed to have been breached if the disclosing party
acting on the advice of its securities or other regulatory counsel makes
disclosures to investors and potential investors or to any governmental or other
regulatory agency or organization.

         8.       MISCELLANEOUS.

                  8.1      GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the substantive laws of Delaware and the
United States of America, without regard to choice of law rules.

                  8.2      SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, and permitted assigns of the parties hereto.

                  8.3      ENTIRE AGREEMENT. This Agreement, the Development
Agreement and the Exhibits and Schedules hereto and thereto, and the other
documents delivered pursuant hereto, constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof and no party shall be liable or bound to any other party in any
manner by any representations, warranties, covenants, or agreements except as
specifically set forth herein or therein. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.

                  8.4      SEVERABILITY. Whenever possible, each provision of
the Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of the Agreement in the event of such invalidity, the
parties shall seek to agree on an alternative enforceable provision that
preserves the original purpose of this Agreement.

                  8.5      AMENDMENT AND WAIVER. Except as otherwise provided
herein, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), with the written consent of the Company and BD. Any amendment
or waiver effected in accordance with this Section shall be binding upon any
holder of any securities purchased under this Agreement (including securities
into which such securities have been convened), each future holder of all such
securities, and the Company.

                  8.6      NOTICES. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
effectively given and received (a) upon personal delivery, (b) on the fifth day
following mailing by registered or certified mail, return

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

receipt requested, postage prepaid, addressed to the Company and BD at their
respective addresses first above written, (c) upon transmission of telegram or
facsimile (with telephonic notice), or (d) upon confirmed delivery by overnight
commercial courier service.

                  8.7      FEES AND EXPENSES. The Company and BD shall bear
their own expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby.

                  8.8      TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

                  8.9      COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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         IN WITNESS WHEREOF, the foregoing Stock Purchase Agreement is hereby
executed as of the date first above written.

                                    AEROGEN, INC.

                                    By:  /s/          Jane E. Shaw
                                       -----------------------------------------
                                    Name:    Jane E. Shaw
                                         ---------------------------------------
                                    Title:  Chairman & CEO
                                          --------------------------------------

                                    BECTON, DICKINSON AND COMPANY

                                    By:  /s/          Gary M. Cohen
                                       -----------------------------------------
                                    Name:    Gary M. Cohen
                                         ---------------------------------------
                                    Title: President-Worldwide Medical Systems
                                          --------------------------------------

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                                    EXHIBIT A

                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                OF AEROGEN, INC.

         AeroGen, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:

         ONE:  The name of the corporation is AeroGen, Inc.

         TWO: The original Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on March 12, 1998
under the name AeroGen (Delaware), Inc.

         THREE: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:

                                    ARTICLE 1

         The name of this corporation is AEROGEN, INC.

                                    ARTICLE 2

         The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.

                                    ARTICLE 3

         The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.

                                    ARTICLE 4

         The total number of shares of stock and the classes of stock which the
corporation shall have authority to issue is as follows:

         A.       CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock to be designated "Common Stock" and "Preferred Stock." The
total number of shares which this corporation is authorized to issue is
Eighty-Four Million Six Hundred Forty-Two Thousand Four Hundred Thirty
(84,642,430) shares, of which Fifty Three Million (53,000,000) shares of the par
value of One-Tenth of One Cent ($.001) shall be Common Stock and Thirty-One
Million Six Hundred Forty-Two Thousand Four Hundred Thirty (31,642,430) shares
of the par value of One-Tenth of One Cent ($.001) shall be Preferred Stock. The
Preferred Stock authorized by this Certificate of Incorporation shall be issued
by series as set forth hereto. The first series of Preferred Stock shall be
designated "Series A Preferred Stock" and shall consist of Three Million Eight
Hundred Forty-Six Thousand One Hundred Fifty-Six (3,846,156) shares. The second
series of Preferred Stock shall be designated "Series B Preferred Stock" and
shall consist of Four

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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Million Four Hundred Eighty-Seven Thousand One Hundred Eighty-Two (4,487,182)
shares. The third series of Preferred Stock shall be designated "Series C
Preferred Stock" and shall consist of Nine Million Three Hundred Seventy-Five
Thousand Three Hundred (9,375,300) shares. The fourth series of Preferred Stock
shall be designated "Series D Preferred Stock" and shall consist of Ten Million
Two Hundred Eighty-Five Thousand Seven Hundred Fourteen (10,285,714) shares. The
fifth series of Preferred Stock shall be designated "Series E Preferred Stock"
and shall consist of three million six hundred forty-eight thousand
seventy-eight (3,648,078) shares.

         B.       POWERS, PREFERENCES AND RIGHTS, AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF PREFERRED STOCK. The Preferred Stock authorized
by this Certificate of Incorporation may be issued from time to time in series.
The powers, preferences and rights, and the qualifications, limitations and
restrictions granted to and imposed on the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock are as set forth below in this Division B of Article 4. The
Board of Directors is hereby authorized to fix or alter the powers, preferences
and rights, and the qualifications, limitations and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or of any of them.
Subject to compliance with applicable protective voting rights which have been
or may be granted to the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or
other series of Preferred Stock in certificate(s) of designation or this
Certificate of Incorporation, as amended from time to time ("Protective
Provisions"), but notwithstanding any other right of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or any other series of Preferred Stock, the
powers, preferences and rights of and the qualifications, limitations and
restrictions on, any such additional series may be subordinated to, pari passu
with (including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences and/or approval of matters by vote or
written consent), or senior to any of those of any present or future class or
series of Preferred or Common Stock. Subject to compliance with applicable
Protective Provisions, the Board of Directors is also authorized to increase or
decrease the number of shares of any series (other than the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock), prior or subsequent to the issue of any
shares of that series, but not below the number of shares of such series then
outstanding, in case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.

1.       DIVIDEND RIGHTS.

         The holders of the Preferred Stock shall be entitled to receive, out of
any funds legally available therefor, dividends on each outstanding share of
Preferred Stock payable in preference and priority to any payment of any
dividend on any shares of Common Stock of the corporation at an annual rate of
$.0312 per share of Series A Preferred Stock, $.0624 per share of Series B
Preferred Stock, $.08 per share of Series C Preferred Stock, $.14 per share of
Series D Preferred Stock, and $.208 per share of Series E Preferred Stock, when
and as declared by the Board of Directors. Dividends on the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be paid ratably to

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, based on
the number of shares held. The right to such dividends on the Preferred Stock
shall be noncumulative. No right shall accrue to holders of shares of Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior year, nor shall any undeclared or unpaid dividend bear or accrue any
interest. Dividends, if paid, or if declared and set apart for payment, must be
paid or declared and set apart for payment on all outstanding Preferred Stock
contemporaneously. Dividends shall be paid in cash. No shares of Common Stock
shall receive any dividend at a rate which is greater than the rate at which
dividends are simultaneously paid in respect of the Preferred Stock (based on
the number of shares of Common Stock into which the Preferred Stock is
convertible on the date of dividend).

         Dividends shall be paid by forwarding a check, postage prepaid, to the
address of each holder (or, in the case of joint holders, to the address of any
such holder) of Preferred Stock as shown on the books of the corporation, or to
such other address as such holder specifies for such purpose by written notice
to the corporation. The forwarding of such check shall satisfy all obligations
of the corporation with respect to such dividends, unless such check is not paid
upon timely presentation.

2.       LIQUIDATION RIGHTS

         In the event of any liquidation, dissolution or winding up of the
corporation, whether voluntary or not, each holder of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
and Series E Preferred Stock shall be entitled to receive, before any amount
shall be paid to holders of Common Stock, an amount per share equal to $0.39,
$.78, $1.00, $1.75, and $2.60, respectively (each, as adjusted for stock splits,
combinations or similar events and hereafter referred to as the "Original Issue
Price" of such series) plus all declared and unpaid dividends, if any. If upon
the occurrence of a liquidation, dissolution or winding up, the assets and
surplus funds distributed among the holders of Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount, then the entire assets and surplus funds of the corporation legally
available for distribution shall be distributed ratably among the holders of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock, in proportion to the
aggregate amount payable to each of such holders pursuant to the immediately
preceding sentence. If upon the occurrence of a liquidation, dissolution or
winding up, after the payment to the holders of Preferred Stock of the
preferential amount, assets or surplus funds remain in the corporation, the
holders of Preferred Stock and Common Stock shall be entitled to receive all
such remaining assets and surplus funds pro rata on an as-if-converted basis.

         No later than 20 days before any event that, pursuant to Section 5(a),
permits a holder of Preferred Stock to have each share of Preferred Stock held
by such holder treated for all purposes as if it had been converted into Common
Stock (for purposes of this Section 2, a "Merger or Sale of Corporation"), the
corporation shall deliver a notice to each holder of Preferred Stock setting
forth the principal terms of such Merger or Sale of Corporation. Such notice
shall be deemed delivered upon personal delivery or five days after deposit in
the United States mail, by registered or certified mail, addressed to a party at
its address as shown on the stock records of

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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the corporation. Such notice shall include a description of the amounts that
would be paid to holders of Preferred Stock under this Section 2 and of the
consideration that such holders would receive if they exercised their rights
under Section 5(a) to have shares of Preferred Stock treated as if they had been
converted into Common Stock. No later than ten days after delivery of the
notice, each holder of Preferred Stock may deliver an election to the
corporation notifying the corporation that the holder desires that such holder's
shares of Preferred Stock be treated, pursuant to Section 5, as if they had been
converted into shares of Common Stock and, if no such notice is delivered, such
holder shall receive such amounts as are provided for under this Section 2 as
any Merger or Sale of Corporation shall be deemed a liquidation, dissolution or
winding up of the corporation for the purposes of this Section 2.

3.       VOTING RIGHTS.

         (a)      VOTE OTHER THAN FOR DIRECTORS. Except as otherwise required by
law, the holders of Preferred Stock and the holders of Common Stock shall be
entitled to notice of any stockholders' meeting and to vote upon any matter
submitted to the stockholders for a vote, other than the election of directors,
as follows: (i) the holders of Preferred Stock shall have one vote for each full
share of Common Stock into which their respective shares of Preferred Stock are
convertible on the record date for the vote and (ii) the holders of Common Stock
shall have one vote per share of Common Stock.

         (b)      VOTING FOR DIRECTORS.

                  (i)      The holders of shares of Preferred Stock voting as a
class shall be entitled to elect two (2) directors. The holders of shares of
Common Stock voting as a class shall be entitled to elect two (2) directors. The
holders of shares of Series D Preferred Stock voting as a class shall be
entitled to elect one (1) director. The remaining director or directors shall be
elected by the affirmative vote of the holders of the Preferred Stock and of the
holders the Common Stock, voting together as a class with the holders of
Preferred Stock having one vote for each full share of Common Stock into which
their respective shares of Preferred Stock are convertible on the record date
for the vote. If no shares of Preferred Stock remain outstanding, then the
directors otherwise elected by the Preferred Stock as provided above in this
Section 3(b), shall be elected by the holders of Common Stock. In the case of
any vacancy in the office of a director elected by a specified group of
stockholders, a successor shall be elected to hold office for the unexpired term
of such director by the affirmative vote of a majority of the shares of such
specified group given at a special meeting of such stockholders duly called or
by an action by written consent for that purpose. Any director who shall have
been elected by a specified group of stockholders may be removed during the
aforesaid term of office, either for or without cause by, and only by, the
affirmative vote of the holders of a majority of the shares of such specified
group, given at a special meeting of such stockholders duly called or by an
action by written consent for that purpose, and any such vacancy thereby created
may be filled by the vote of the holders of a majority of the shares of such
specified group represented at such meeting or in such consent.

                  (ii)     No person entitled to vote at an election for
directors may cumulate votes to which such person is entitled, unless, at the
time of such election, the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"). During such time or

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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times that the corporation is subject to Section 2115(b) of the CGCL, every
stockholder entitled to vote at an election for directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (a) the names of such candidate or
candidates have been placed in nomination prior to the voting and (b) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest
number of votes, up to the number of directors to be elected, are elected.

4.       CERTAIN TAXES.

         The corporation shall pay any and all issuance and other taxes
(excluding any federal or state income taxes) that may be payable in respect of
any issuance or delivery of shares of Common Stock on conversion of Preferred
Stock. The corporation shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and delivery of
shares of Common Stock in a name other than that in which the shares of
Preferred Stock to which such issuance relates were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the corporation the amount of any such tax, or it is
established to the satisfaction of the corporation that such tax has been paid.

5.       CONVERSION TO COMMON STOCK.

         The Preferred Stock shall be convertible into Common Stock of the
corporation as follows:

         (a)      DEFINITIONS. For purposes of this Section 5 the following
definitions shall apply:

                  (i)      "COMMON STOCK EQUIVALENTS" shall mean Convertible
Securities and rights entitling the holder thereof to receive directly, or
indirectly, additional shares of Common Stock without the payment of any
consideration by such holder for such additional shares of Common Stock or
Common Stock Equivalents.

                  (ii)     "COMMON STOCK OUTSTANDING" shall mean the aggregate
of all Common Stock outstanding and all Common Stock issuable upon exercise of
all outstanding Options and conversion of all outstanding Convertible
Securities.

                  (iii)    "CONVERSION PRICE" with respect to a series of
Preferred Stock, shall mean the price, determined pursuant to this Section 5, at
which shares of Common Stock shall be deliverable upon conversion of such series
of Preferred Stock.

                  (iv)     "CONVERTIBLE SECURITIES" shall mean any indebtedness
or shares of stock or other securities convertible into or exchangeable for
Common Stock, including without limitation Preferred Stock.

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                  (v)      "CURRENT CONVERSION PRICE" with respect to a series
of Preferred Stock, shall mean the Conversion Price immediately before the
occurrence of any event, which, pursuant to Section 5(c), causes an adjustment
to the Conversion Price of such series of Preferred Stock.

                  (vi)     "ISSUANCE DATE" shall mean the first date on which
this Amended and Restated Certificate of Incorporation is filed with the
Secretary of State of the State of Delaware.

                  (vii)    "OPTIONS" shall mean any rights, warrants or options
to subscribe for or purchase or otherwise acquire Common Stock or Convertible
Securities.

         (b)      RIGHT TO CONVERT; INITIAL CONVERSION PRICE. Each holder of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock may, at any time, convert
any or all shares of such Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock,
as the case may be, into fully-paid and non-assessable shares of Common Stock at
the Conversion Price for such series of Preferred Stock. Each share of Series A
Preferred Stock shall be convertible into the number of shares of Common Stock
that results from dividing the Conversion Price in effect at the time of
conversion for Series A Preferred Stock into $0.39 for each share of Series A
Preferred Stock being converted; the Conversion Price of the Series A Preferred
Stock shall initially be $0.39 per share of Common Stock. Each share of Series B
Preferred Stock shall be convertible into the number of shares of Common Stock
that results from dividing the Conversion Price in effect at the time of
conversion for Series B Preferred Stock into $0.78 for each share of Series B
Preferred Stock being converted; the Conversion Price of the Series B Preferred
Stock shall initially be $0.78 per share of Common Stock. Each share of Series C
Preferred Stock shall be convertible into the number of shares of Common Stock
that results from dividing the Conversion Price in effect at the time of
conversion for Series C Preferred Stock into $1.00 for each share of Series C
Preferred Stock being converted; the Conversion Price of the Series C Preferred
Stock shall initially be $1.00 per share of Common Stock. Each share of Series D
Preferred Stock shall be convertible into the number of shares of Common Stock
that results from dividing the Conversion Price in effect at the time of
conversion for Series D Preferred Stock into $1.75 for each share of Series D
Preferred Stock being converted; the Conversion Price of the Series D Preferred
Stock shall initially be $1.75 per share of Common Stock. Each share of Series E
Preferred Stock shall be convertible into the number of shares of Common Stock
that results from dividing the Conversion Price in effect at the time of
conversion for Series E Preferred Stock into $2.60 for each share of Series E
Preferred Stock being converted; the Conversion Price of the Series E Preferred
Stock shall initially be $2.60 per share of Common Stock. The initial Conversion
Price of each series of Preferred Stock shall be subject to adjustment from time
to time in certain instances as hereinafter provided. No adjustments with
respect to conversion shall be made on account of any dividends that may be
accrued but unpaid on the Preferred Stock surrendered for conversion, but no
dividends shall thereafter be paid on the Common Stock unless such unpaid
dividends have first been paid to the holders entitled to payment at the time of
conversion of the Preferred Stock.

         Before any holder of Preferred Stock shall be entitled to convert the
same into Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, to the

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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office of the corporation or any transfer agent for such Preferred Stock and
shall give written notice to the corporation at such office that such holder
elects to convert the same. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to such holder's nominee or nominees, certificates for the number of full
shares of Common Stock to which such nominee shall be entitled, together with
cash in lieu of any fraction of a share as hereinafter provided, and, if less
than all of the shares of Preferred Stock represented by such certificate are
converted, a certificate representing the shares of Preferred Stock not
converted. Such conversion shall be deemed to have been made as of the date of
such surrender of the certificate for the Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock on such date. If the conversion is in connection with an offer
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Preferred Stock for
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, in which event the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Preferred Stock shall not be deemed
to have converted such Preferred Stock until immediately prior to the closing of
such sale of securities.

         (c)      ADJUSTMENTS TO CONVERSION PRICE. Subject to Section 5(c)(5),
the Conversion Price in effect from time to time for the Preferred Stock shall
be subject to adjustment in certain cases as follows below. Notwithstanding
anything else herein, Sections 5(c)(i), 5(c)(ii) and 5(c)(iii) below shall not
apply to holders of Series E Preferred Stock.

                  (i)      ISSUANCE OF SECURITIES. In the event the corporation
shall at any time after the Issuance Date issue or sell any Common Stock (or
shall be deemed to have issued Common Stock pursuant to Section 5(c)(i)(c)
below) for a consideration per share less than the Current Conversion Price with
respect to a series of Preferred Stock, then, and thereafter successively upon
each such issuance or sale, the Current Conversion Price of such series of
Preferred Stock shall simultaneously with such issuance or sale be adjusted
(downward only) to a Conversion Price (calculated to the nearest cent)
determined by dividing

                           (1)      an amount equal to (x) the total number of
shares of Common Stock Outstanding when the Current Conversion Price for such
series of Preferred Stock became effective multiplied by the Current Conversion
Price for such series of Preferred Stock, plus (y) the aggregate of the amount
of all consideration, if any, received by the corporation for the issuance or
sale of Common Stock since the Current Conversion Price for such series of
Preferred Stock became effective, including the aggregate consideration received
by the corporation for the Common Stock giving rise to such adjustment, by

                           (2)      the total number of shares of Common Stock
Outstanding immediately after such issuance or sale.

         Notwithstanding the previous sentence, in the event that the
corporation shall at any time within one year after the Issuance Date issue or
sell any additional shares of Common Stock (or be deemed to have issued Common
Stock) for consideration per share less than the Current Conversion Price of the
Series D Preferred Stock, then, and thereafter successively upon each such
issuance or sale within such one year period, the Current Conversion Price of
the Series D

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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Preferred Stock shall simultaneously with such issuance or sale be reduced, in
order to increase the number of shares of Common Stock into which the Series D
Preferred Stock is convertible, to a Conversion Price equal to the consideration
per share at which such additional shares of Common Stock are issued or deemed
issued; provided, however, that if and to the extent any adjustment made in
accordance with the formula contained in this sentence would reduce the
Conversion Price of the Series D Preferred Stock to less than $1.00 per share of
Common Stock, then, to the extent the Conversion Price of the Series D Preferred
Stock is reduced below $1.00, the Conversion Price of the Series D Preferred
Stock shall be adjusted in accordance with the formula contained in the
immediately preceding sentence except that the addend contained in subsection
5(c)(i)(1) shall be the total number of shares of Common Stock Outstanding when
the Current Conversion Price for the Series D Preferred Stock became effective
multiplied by the lesser of $1.00 or the Current Conversion Price for the Series
D Preferred Stock.

         For the purposes of this Section 5(c), the following provisions shall
also be applicable:

                  (a)      CASH CONSIDERATION. In the event of the issuance or
sale of additional Common Stock, Options or Convertible Securities for cash, the
consideration received by the corporation therefor shall be deemed to be the
amount of cash received by the corporation for such shares (or, if such
securities are offered by the corporation for subscription, the subscription
price, or, if such securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering price),
without deducting therefrom any compensation or discount paid or allowed to
underwriters or dealers or others performing similar services or for any
expenses incurred in connection therewith.

                  (b)      NON-CASH CONSIDERATION. In the event of the issuance
(otherwise than upon conversion or exchange of Convertible Securities) or sale
of additional Common Stock, Options or Convertible Securities for a
consideration other than cash or a consideration a part of which shall be other
than cash, the fair value of such consideration as determined by the Board of
Directors of the corporation in the good faith exercise of its business
judgment, irrespective of the accounting treatment thereof, shall be deemed to
be the value, for purposes of this Section 5, of the consideration other than
cash received by the corporation for such securities.

                  (c)      OPTIONS AND CONVERTIBLE SECURITIES. In the event the
corporation shall in any manner issue or grant any Options or any Convertible
Securities, the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities at the time such Convertible Securities
first become convertible or exchangeable shall (as of the date of issue or grant
of such Options or, in the case of the issue or sale of Convertible Securities
other than where the same are issuable upon the exercise of Options, as of the
date of such issue or sale) be deemed to be issued and to be outstanding for the
purpose of this Section 5(c)(i) and to have been issued for the sum of the
amount (if any) paid for such Options or Convertible Securities and the amount
(if any) payable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities at the time such Convertible Securities
first become convertible or exchangeable: provided that, subject to the
provisions of Section 5(c)(ii), no further adjustment of the Conversion Price of
a series of Preferred Stock shall be made upon the actual issuance of any such
Common Stock or Convertible Securities or upon the conversion or exchange of any
such Convertible Securities.

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                  (ii)     CHANGE IN OPTION PRICE OR CONVERSION RATE. In the
event that the purchase price provided for in any Option referred to in
subsection 5(c)(i)(c), or the rate at which any Convertible Securities referred
to in subsection 5(c)(i)(c) are convertible into or exchangeable for shares of
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution), the Current Conversion Price
of each series of Preferred Stock in effect at the time of such event shall
forthwith be readjusted to the Conversion Price that would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. In the
event that the purchase price provided for in any such Option referred to in
subsection 5(c)(i)(c), or the additional consideration (if any) payable upon the
conversion or exchange of any Convertible Securities referred to in subsection
5(c)(i)(c), or the rate at which any Convertible Securities referred to in
subsection 5(c)(i)(c) are convertible into or exchangeable for shares of Common
Stock, shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in case of the
delivery of shares of Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security, the Current Conversion
Price of a series of Preferred Stock then in effect hereunder shall, upon
issuance of such shares of Common Stock, be adjusted to such amount as would
have obtained had such Option or Convertible Security never been issued and had
adjustments been made only upon the issuance of the shares of Common Stock
delivered as aforesaid and for the consideration actually received for such
Option or Convertible Security and the Common Stock.

                  (iii)    TERMINATION OF OPTION OR CONVERSION RIGHT. In the
event of the termination or expiration of any right to purchase Common Stock
under any Option or of any right to convert or exchange Convertible Securities,
the Current Conversion Price of a series of Preferred Stock shall, upon such
termination, be changed to the Conversion Price of such series of Preferred
Stock that would have been in effect at the time of such expiration or
termination had such Option or Convertible Security, to the extent outstanding
immediately prior to such expiration or termination, never been issued, and the
shares of Common Stock issuable thereunder shall no longer be deemed to be
Common Stock Outstanding.

                  (iv)     STOCK SPLITS, DIVIDENDS, DISTRIBUTIONS AND
COMBINATIONS. In the event the corporation should at any time or from time to
time after the Issuance Date fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive any other distribution payable in
additional shares of Common Stock or Common Stock Equivalents, then, as of such
record date (or the date of such distribution, split or subdivision if no record
date is fixed), the Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of each series of Preferred Stock shall be increased in
proportion to such increase in the number of outstanding shares of Common Stock
(including for this purpose, Common Stock Equivalents). If the number of shares
of Common Stock outstanding at any time after the Issuance Date is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price of each series of
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of Preferred Stock shall be
decreased in proportion to such decrease in the number of outstanding shares of
Common Stock.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                  (v)      OTHER EVENTS ALTERING CONVERSION PRICE. Upon the
occurrence of any event not specifically denominated in this Section 5 as
reducing the Conversion Price of a series of Preferred Stock that, in the
reasonable exercise of the business judgment of the Board of Directors of the
corporation requires, on equitable principles, the reduction of the Conversion
Price of such series of Preferred Stock, such Conversion Price will be equitably
reduced.

                  (vi)     MISCELLANEOUS CONVERSION PRICE MATTERS. The
corporation shall at all times reserve and keep available out of its authorized
but unissued Common Stock the full number of shares of Common Stock deliverable
upon conversion of all the then outstanding Preferred Stock and shall, at its
own expense, take all such actions and obtain all such permits and orders as may
be necessary to enable the corporation lawfully to issue such Common Stock upon
the conversion of such Preferred Stock.

                  (vii)    EXCLUDED EVENTS. Notwithstanding anything in this
Section 5 to the contrary, the Conversion Price of a series of Preferred Stock
shall not be adjusted by virtue of (i) the conversion of shares of Preferred
Stock into shares of Common Stock, (ii) the repurchase of shares from the
corporation's employees, consultants, officers or directors at such person's
cost (or at such other price as may be agreed to by the corporation's Board of
Directors), or (iii) the issuance and sale of, or the grant of Options to
purchase, up to an aggregate of 7,837,500 shares, net of repurchases and the
lapse of options, of Common Stock (including the 5,141,471 shares and grants for
shares outstanding on the date hereof), to employees, advisors, directors,
officers or consultants of the corporation or its subsidiaries (including shares
issued or sold pursuant to the exercise of any stock option or purchase pursuant
to a grant under the corporation's stock option plan or stock purchase plan) at
any time after the initial issuance of Series D Preferred Stock at a price which
is less than the Conversion Price of such series of Preferred Stock at the time
of such issuance or sale (all as determined in accordance with this Section 5)
as may be approved by the Board of Directors, and none of such shares referenced
in clause (iii) shall be included in any manner in the computation from time to
time of such Conversion Price under Subsection 5(c)(i) or in Common Stock
Outstanding for purposes of such computation.

                  (viii)   CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the Conversion Price of a series of Preferred
Stock pursuant to this Section 5, the corporation, at its expense upon request
by any holder of such series of Preferred Stock, shall compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of such series of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any holder of a series of Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (a) such
adjustment and readjustment, (b) the Current Conversion Price of such series of
Preferred Stock at the time in effect, and (c) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.

         (d)      OTHER DIVIDENDS. In the event this corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (excluding cash dividends)
or options or rights for which such series of Preferred Stock are not entitled
to adjustment pursuant to subsection 5(c)(i)(c), then, in each such

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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case for the purpose of this Section 5(d), the holders of such series of
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of such series of Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of the corporation entitled to receive such
distribution.

         (e)      RECAPITALIZATIONS. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or a sale of assets transaction for which each series of
Preferred Stock (including, without limitation, the Series E Preferred Stock) is
entitled to adjustment pursuant to this Section 5), provision shall be made so
that the holders of Preferred Stock shall thereafter be entitled to receive upon
conversion of shares of Preferred Stock the number of shares of stock or other
securities or property of the corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of Preferred Stock after the recapitalization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of shares of
Preferred Stock) shall be applicable after that event as nearly equivalent as
may be practicable.

         (f)      SUCCESSIVE CHANGES. The above provisions of this Section 5
shall similarly apply to successive issuances, sales or other distributions,
subdivisions and combinations on or of the Common Stock after the Issuance Date.

         (g)      NO IMPAIRMENT. The corporation will not, by amendment of this
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of Preferred Stock against impairment.

         (h)      NO FRACTIONAL SHARES. No fractional shares shall be issued
upon conversion of shares of Preferred Stock and the number of shares of Common
Stock to be issued shall be rounded to the next smaller whole share. Whether or
not fractional shares are issuable upon such conversion shall be determined on
the basis of the total number of shares of Preferred Stock the holder is at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion. The value of any fractional share
issuable upon conversion shall be paid in cash by the corporation.

         (i)      AUTOMATIC CONVERSION. Immediately upon (a) the effectiveness
of the corporation's registration statement on Form S-1 pursuant to which Common
Stock is sold to the public by the corporation (or selling stockholders, if any)
in a public offering registered under the Securities Act of 1933, as amended, at
a per share public offering price of not less than $3.50 (equitably adjusted for
any stock split, combination or similar event) and an aggregate public offering
price not less than $15,000,000, or (b) the conversion of at least fifty percent
(50%) of

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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the then outstanding shares of Preferred Stock, each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price for such Preferred Stock then in effect. On and after said conversion
date, notwithstanding that any certificates for the shares of Preferred Stock
shall not have been surrendered for conversion, the shares of Preferred Stock
evidenced thereby shall be deemed to be no longer outstanding, and all rights
with respect thereto shall forthwith cease and terminate, except only the rights
of the holder (i) to receive the shares of Common Stock to which such holder
shall be entitled upon conversion thereof, (ii) to receive the amount of cash
payable in respect of any fractional share of Common Stock to which such holder
shall be entitled, and (iii) with respect to dividends declared but unpaid on
Preferred Stock prior to such conversion date, in the event that any holder of
Preferred Stock presents such holder's certificate therefor for surrender to the
Company or its transfer agent upon such conversion, a certificate for the number
of shares of Common Stock into which the shares of Preferred Stock surrendered
were convertible on such conversion date promptly will be issued and delivered
to such holder.

         (j)      MERGER: SALE OF CORPORATION. In the event, after the Issuance
Date of any proposed consolidation of the corporation with, or merger of the
corporation with or into another corporation (other than a consolidation or
merger in which the corporation is the continuing corporation and which does not
result in any reclassification of, or change in, the outstanding shares of
Common Stock), or in the event of any proposed sale or transfer to another
corporation of all or substantially all of the assets of the corporation, or in
the event of a sale or transfer of a majority of the voting power of the
corporation, any holder of Preferred Stock may, by delivery of election pursuant
to Section 2 above, elect to have each share of Preferred Stock held by such
holder treated for all purposes as if it had been converted into Common Stock on
the earlier of (i) the record date, if any, for voting by holders of Common
Stock on such event and (ii) the date of such event.

6.       REDEMPTION.  The Preferred Stock is not redeemable.

7.       COVENANTS. In addition to any other rights provided by law, the
corporation shall not take any of the following actions.

         (a)      HOLDERS OF PREFERRED STOCK. So long as any shares of Preferred
Stock shall be outstanding, the corporation shall not without first obtaining
the affirmative vote or written consent of the holders of not less than fifty
percent (50%) of the outstanding shares of Preferred Stock voting together as a
class:

                  (i)      amend or repeal any provision of, or add any
provision to, this Certificate of Incorporation or the corporation's By-laws if
such action would alter or change the preferences, rights, privileges or powers
of or the restrictions provided for the benefit of, the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock, or increase or decrease the number of shares
of Preferred Stock authorized hereby, provided that any such amendment or repeal
of, or addition to, this Certificate of Incorporation or the corporation's
By-laws which affects the preferences, rights, privileges or powers of one
series of Preferred Stock shall affect each other series of Preferred Stock in a
like manner and on a proportionate basis:

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                  (ii)     authorize or issue shares of any class or series of
stock not authorized herein having any preference or priority as to dividends or
assets superior to or on a parity with any such preference or priority of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock; or authorize or issue
shares of stock of any class or series of any bonds, debentures, notes or other
obligations convertible into or exchangeable for, or having option rights to
purchase, any shares of stock of this corporation having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, or Series E Preferred
Stock;

                  (iii)    reclassify any class or series of any Common Stock
into shares having any preference or priority as to dividends or assets superior
to or on a parity with any such preference or priority of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock;

                  (iv)     apply any of its assets to the redemption,
retirement, purchase or acquisition, directly or indirectly, through
subsidiaries (as defined in Section 425 of the Internal Revenue Code of 1986, as
amended (the "Code") or otherwise, of any shares of any class or series of
Common Stock, except from employees, advisors, officers, directors and
consultants of, and persons performing services for this corporation or its
subsidiaries on terms approved by the Board of Directors upon termination of
employment or association;

                  (v)      do any act or thing which would result in taxation of
the holders of shares of the Preferred Stock under Section 305 of the Code (or
any comparable provision of the Code as hereafter from time to time amended);

                  (vi)     If (i) sell, convey or otherwise dispose of all or
substantially all of its property or business, or (ii) merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation) or
effect any other transaction or series of related transactions disposing of more
than 50% of the voting power of the corporation;

                  (vii)    authorize, declare or pay any dividend on the Common
Stock before March 31, 1999; or

                  (viii)   increase or decrease the authorized number of shares
of Preferred Stock.

         (b)      HOLDERS OF SERIES D PREFERRED STOCK. So long as any shares of
Series D Preferred Stock shall be outstanding, the corporation shall not without
first obtaining the affirmative vote or written consent of the holders of not
less than a majority of the outstanding shares of Series D Preferred Stock
voting together as a class, apply any of its assets to the purchase of any
shares of any class or series of the corporation's stock having any preference
or priority junior to or on a parity with the Series D Preferred Stock, except
from employees, advisors, officers, directors and consultants of, and persons
performing services for, this corporation or its subsidiaries on terms approved
by the Board of Directors upon termination of employment or association.

         (c)      DIRECTORS.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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         Without first obtaining the approval of at least a majority of the
Board of Directors, the corporation shall not enter into any contracts with, or
make any investments in, persons not resident within North America.

                  (ix)     Without first obtaining the approval of a majority of
the directors elected by the holders of Preferred Stock, the corporation shall
not:

                           (1)      increase the number of shares reserved for
issuance to employees, consultants and directors of the corporation pursuant to
incentive plans or agreements;

                           (2)      incur indebtedness in principal amount in
excess of $1,000,000; or

                           (3)      commit or make any capital expenditures in
excess of $200,000 in the aggregate.

         C.       COMMON STOCK.

8.       DIVIDEND RIGHTS. Subject to the prior rights of holders of all classes
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.

9.       LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up of
the corporation, the assets, of the corporation shall be distributed as provided
in Section 2 of Division B of this Article 4.

10.      REDEMPTION.  The Common Stock is not redeemable.

11.      VOTING RIGHTS. The holder of each share of Common Stock shall have the
right to one vote and shall be entitled to notice of any stockholders' meeting
in accordance with the By-laws of this corporation, and shall be entitled to
vote upon such matters and in such manner as may be provided by law.

12.      NO PREEMPTIVE RIGHTS. The holders of the Common Stock shall not by
virtue of this Certificate of Incorporation have any preemptive rights.

                                    ARTICLE 5

         The corporation is to have perpetual existence.

                                    ARTICLE 6

         In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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         A.       The board of directors of the corporation is expressly
                  authorized to adopt, amend or repeal the By-laws of the
                  corporation; provided, however, that the By-laws may only be
                  amended in accordance with the provisions thereof.

         B.       Elections of directors need not be by written ballot unless
                  the By-laws of the corporation shall so provide.

         C.       The books of the corporation may be kept at such place within
                  or without the State of Delaware as the By-laws of the
                  corporation may provide or as may be designated from time to
                  time by the board of directors of the corporation.

                                    ARTICLE 7

         Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receivers appointed for the corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for the corporation
under the provisions of section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or the stockholders or class
of stockholders of the corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.

         A.       NO PERSONAL LIABILITY. A director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation and its
stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (3) under section 174 of
the Delaware General Corporation law, or (4) for any transaction from which the
director derived an improper personal benefit.

         B.       INDEMNIFICATION. Each person who is or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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harmless by the corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the corporation to provide broader indemnification rights than said law
permitted the corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in the
second paragraph hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof), was authorized by the
Board of Directors of the corporation. The right to indemnification conferred in
this section shall be a contract right and shall include the right to be paid by
the corporation for any expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this section or otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.

         If a claim under the first paragraph of this section is not paid in
full by the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense in any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the corporation to indemnity the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

         The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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any other right which any person may have or hereafter acquire under any
statute, provision of this Certificate of Incorporation, by-law, agreement, vote
of stockholders or disinterested directors or otherwise.

         C.       INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

         D.       REPEAL AND MODIFICATION. Any repeal or modification of the
foregoing provisions of this Article 7 shall not adversely affect any right or
protection of a director, officer, employee or agent of the corporation existing
at the time of such repeal or modification.

         E.       VOTE REQUIRED TO AMEND OR REPEAL. The amendment or repeal of
this Article 7 shall require the approval of the holders of shares representing
at least sixty six and two-thirds percent (66-2/3%) of the shares of the
corporation entitled to vote in the election of directors, voting as one class.

                                    ARTICLE 8

         Subject to the express provisions hereof, this corporation reserves the
right to amend or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon a stockholder herein are granted subject to this
reservation.

                                      *****
         FOURTH: This Amended and Restated Certificate of Incorporation was duly
adopted by the Board of Directors of the corporation.

         FIFTH: This Amended and Restated Certificate of Incorporation was duly
adopted by the written consent of a majority of the stockholders of the
corporation in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware and written notice of such action has been given as
provided in Section 228.

         IN WITNESS WHEREOF, AeroGen, Inc. has caused this certificate to be
signed by the undersigned officer, thereunto duly authorized, this 4TH day of
May, 2000.

                                     By:  /s/     Jane E. Shaw
                                        ----------------------------------------
                                         Jane Shaw
                                         Chairman and CEO

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                                    EXHIBIT B

                             SCHEDULE OF EXCEPTIONS

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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                                    EXHIBIT B
                             SCHEDULE OF EXCEPTIONS
                                  AEROGEN, INC.
                            STOCK PURCHASE AGREEMENT

         In connection with that certain Stock Purchase Agreement dated as of
May 10, 2000 by and among AEROGEN, INC. (the "Company") and BECTON, DICKINSON
AND COMPANY (the "Agreement"), the Company hereby delivers this Disclosure
Schedule to the Company's representations and warranties given in the Agreement.
The section numbers in this Schedule correspond to the section numbers in the
Agreement; PROVIDED, HOWEVER, that any information disclosed herein under any
section number with sufficient particularity shall be deemed to be disclosed and
incorporated in any other section of the Agreement where such disclosure would
be appropriate. Disclosure of any information or document herein is not a
statement or admission that it is material or required to be disclosed herein.
Capitalized terms used but not defined herein shall have the same meanings given
them in the Agreement.

3.2      Capitalization

         c)       The Company has offered or intends to offer employment or
                  consulting opportunities to various individuals. These
                  compensation packages will include options, which resulted in
                  an action by the Board of Directors and Shareholders to
                  increase the number of shares reserved for issuance under the
                  1996 Stock Option Plan by an additional 2,600,000 shares as of
                  March 10, 2000.

         Shares owned directly or indirectly by officers, directors or 5%
         shareholders are as follows:

                  Shares owned directly or indirectly by officers, directors or
         5% shareholders are as follows:

<TABLE>
                  <S>                                <C>
                  CMEA (Tom  Baruch - Director)      3,897,437
                  USVP (Phil Young - Director)       5,808,427
                  Advent                             2,546,584
                  Interwest Partners                 3,571,429
                  Ell &Co.                           2,276,326
                  Gerlach & Co. (Manufacturers Life) 2,714,286
                  Ehud Ivri (Officer and Director)   3,780,000
                  Jane Shaw (Officer and Director)   1,542,858
                  Casper de Clercq (Officer)         270,000
                  Deborah Karlson                    270,000
                  Michael Klimowicz                  270,000
</TABLE>

3.7      Litigation

                  The Company is a defendant in an action for breach of contract
         and specific performance entitled ALEX WERBER V. AEROGEN, INC. AND EHUD
         IVRI, ET AL., Civil Action No. CV 773704, filed in California Superior
         Court for the County of Santa Clara in April, 1998. The litigation has
         been tentatively settled and in connection with settlement Mr.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       40
<PAGE>

         Ivri agreed to transfer 70,000 shares of his Common Stock to Mr.
         Werber. There is no payment by the Company in connection with the
         tentative settlement of the litigation.

                  The Company was party to an Interference, commenced following
         the filing of a request by a predecessor in interest to AeroGen,
         between U.S. Patent Application Serial No. 08/163,850 assigned to the
         Company, and U.S. Patent No. 5,261,601 assigned to Bespak plc
         ("Bespak"). The Interference has been settled.

3.8  Employee Agreement

                  It is part of the hiring process for each employee and officer
         of the Company to execute an agreement with the Company regarding
         confidentiality and proprietary information.

3.9  Patents and Trademarks

                  Aerogen Patent Rights - See Attachment A

         ITEMS a-d BELOW REPRESENT EXCEPTIONS TO THE COMPANY'S REPRESENTATION
THAT THERE ARE NO LICENSES OR AGREEMENTS OF ANY KIND RELATING TO ITS
INTELLECTUAL PROPERTY, OR LICENSES OR AGREEMENTS BY WHICH ITS IS BOUND RELATING
TO THE INTELLECTUAL PROPERTY OF ANY OTHER PERSON OR ENTITY:

                  a. The Company has licensed its aerosol generator technology
         world-wide to a consumer company in the fields of air fresheners and
         insect repellants.

                  b. Reference is made to the Technology License and Supply
         Agreement, dated December 18, 1998, between the Company and Cerus Ltd.,
         an Irish corporation.

                  c. The Company entered into a Product Development and Supply
         Agreement with PathoGenesis Corporation, dated as of March 13, 2000.

                  d. In connection with the settlement of the Interference with
         Bespak, the Company and Bespak have entered into cross-licenses with
         respect to portions of the subject patent claims.

3.11     Agreements; Action

         a)   The Company has entered into or plans to enter into
              indemnification agreements with each of its directors.

                  Yehuda Ivri has executed promissory notes in favor of the
         Company in the amounts of $69,009 and $200,000. The first note was
         issued in connection with relocation expenses and allowances. The
         latter note is secured by a pledge of 500,000 shares of the Company's
         common stock and the purpose of the loan was to provide financing for
         the purchase of a residence near the Company's headquarters. The

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       41
<PAGE>

         Company has agreed to reimburse Mr. Ivri's travel and lodging expenses
         up to $25,000 per annum.

                  Dr. Shaw, Casper de Clercq, Deborah Karlson and Michael
         Klimowicz have executed promissory notes in favor of the Company in
         connection with purchases of the Company's common stock. Shares sold to
         these officers which have not yet vested (pursuant to a four-year
         vesting schedule) are subject to repurchase if the individual ceases to
         be employed by the Company.

         b)       The Company has entered into and anticipates spending
         significant additional amounts, in excess of $50,000 individually, on
         capital equipment, consultants, design and tooling firms, clinicians,
         medical and other facilities, research organizations etc., all of which
         it considers to be in the ordinary course of its business.

                  The Company has entered into a non-binding term sheet
         involving a small European acquisition. The Company is currently
         conducting its diligence review of the potential target.

                  The Company entered into a Product Development and Supply
         Agreement with PathoGenesis Corporation, dated as of March 13, 2000.

                  The Company has entered into and anticipates entering into
         additional licensing and/or development arrangements whereby it
         receives amounts in excess of $50,000, all of which it considers to be
         in the ordinary course of its business.

         c)   In conjunction with the Company's facility lease, the Company is
              obligated to return the lab space to shell condition at the end of
              the lease term at an estimated cost of $100,000. The Company has
              issued a letter of credit to its lessor for $90,000 in conjunction
              with this liability.

                  The Company has borrowed approximately $1,113,000 (original
         principal) against term loan facilities. Specific assets secure the
         outstanding borrowings.

3.12     Rights of Registration and First Offer

                  The holders of warrants issued in connection with equipment
         financing were added as parties to the Company's Information and
         Registration Rights Agreement and are deemed holders of Registrable
         Securities thereunder with respect to the registration rights granted
         therein.

3.15     Title to Property and Assets

                  See item 3.11(c)

3.17     Employee Benefit Plans

                  Reference is made to the Company's medical, dental, life
         insurance, long and short term disability, Section 125 (flexible
         spending and premium), and non-contributory 401(k) employee benefit
         plans, as well as the Company's stock option plan, PTO policy

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       42
<PAGE>

         and standard employment offer letter. Reference is made to a summary of
         the Company's employee benefits and policies as provided in a summary
         handout for applicants and in the AeroGen Employee Handbook.

3.19     Insurance

                  The Company currently holds $5million of product liability
         insurance ($1million basic and $4million excess) in addition to its $6
         million ($2million aggregate and $4 million umbrella) of general
         liability coverage which specifically excludes product liability.
         Reference is made to the individual policies for specifics of coverage.

3.21     Absence of Changes

         b)       All employees, including officers, received raises effective
         the first pay period in 2000.

         f)       See 3.11

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       43
<PAGE>

                                  ATTACHMENT A

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       44
<PAGE>

                              AEROGEN PATENT RIGHTS

ISSUED U.S. PATENTS AND FOREIGN COUNTERPARTS

U.S. PATENT NO. 5,164,740, Issued Nov. 17, 1992
Filed April 24, 1991

         FOREIGN COUNTERPARTS:

         Argentine Patent No. 247,686
         Brazilian Patent No. PI9201487
         Canadian Patent No. 2066838
         France 0510648
         Mexican Patent No. 179906
         EPC Patent No. 510648B1 (French and UK issued)
         German Patent No. DE 692 12 688.0-08
         Japan: pending

U.S. PATENT NO. 5,938,117, Issued August 17, 1999
Filed April 5, 1995

         FOREIGN COUNTERPARTS:

         Pending in Great Britain, France and Germany

U.S. PATENT NO. 5,586,550, Issued December 24, 1996
Filed August 13, 1995

         FOREIGN COUNTERPARTS:

         Pending in Australia, Brazil, Canada, Germany, France, Great Britain,
Netherlands, Sweden and Japan

U.S. PATENT NO. 5,758,637, Issued June 2, 1998
Filed February 21, 1996

         FOREIGN COUNTERPARTS:

         Pending in nine foreign counterparts of U.S. Patent No. 5,586,550

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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U.S. PATENT NO. 6,014,970, Issued January 18, 2000
Filed June 11, 1998

         FOREIGN COUNTERPARTS:

         Pending in Australia, Brazil, Canada, China, Europe (all designated
states), India, Japan, Mexico, New Zealand and Russia

PENDING U.S. PATENT APPLICATIONS

ULTRASONIC FLUID EJECTOR, filed May 20, 1997
Serial No. 08/859,525

         FOREIGN COUNTERPARTS:

         Covered by eight foreign patents for U.S. Patent No. 5,164,740

METHODS AND APPARATUS FOR DISPENSING LIQUIDS, filed May 27, 1999
Serial No. 09/318,552

         FOREIGN COUNTERPARTS:

         Pending in three foreign counterparts of U.S. Patent No. 5,938,117

DROPLET EJECTOR WITH OSCILATING TAPERED APERTURE, filed December 11, 1995
Serial No. 08/570,072

         FOREIGN COUNTERPARTS:

         None

LIQUID DISPENSING APPARATUS AND METHODS, filed April 10, 1998
Serial No. 09/058,344

         FOREIGN COUNTERPARTS:

         Pending in nine foreign counterparts of U.S. Patent No. 5,758,637

METHOD AND APPARATUS FOR STORING CHEMICAL COMPOUNDS, filed September 8, 1998
Serial No. 09/149,426

         FOREIGN COUNTERPARTS:

         Pending in nine foreign counterparts (and all designated states in
Europe) of U.S. Patent No. 6,014,970

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

METHOD AND APPARATUS FOR STORING CHEMICAL COMPOUNDS, filed May 18, 1999
Serial No. 09/313,914

         Will file foreign applications before May 18, 2000 deadline.

APERTURE PLATE AND METHOD OF CONSTRUCTION, filed September 9, 1999
Serial No. 09/392,180

         Will file foreign applications before September 9, 2000 deadline.

PENDING U.S. PATENT APPLICATIONS

METHOD AND APPARATUS FOR AEROSOLIZING A LIQUID, filed January 15, 2000
Serial No. 09/483,096

         Will file foreign applications before January 15, 2001 deadline.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

                                    EXHIBIT C

                       LEGAL OPINION OF COOLEY GODWARD LLP

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

May 10, 2000

Becton, Dickinson and Company
1Becton Drive
Franklin Lakes, NJ  07417-1880

Ladies and Gentlemen:

We have acted as counsel for AeroGen, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of the Company's Series E
Preferred Stock, as defined in the Agreement (the "Shares"), to Becton,
Dickinson and Company ("BD") under the Stock Purchase Agreement dated as of May
10, 2000 (the "Agreement") between the Company and BD. We are rendering this
opinion pursuant to Section 5.1(e) of the Agreement. Except as otherwise defined
herein, capitalized terms used but not defined herein have the respective
meanings given to them in the Agreement.

In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.

In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement), where authorization, execution and delivery
are prerequisites to the effectiveness of such documents. We have also assumed:
that all individuals executing and delivering documents had the legal capacity
to so execute and deliver; that you have received all documents you were to
receive under the Agreement; that the Agreement is an obligation binding upon
you; if you are a corporation or other entity, that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Agreement that would modify or interpret
the terms of the Agreement or the respective rights or obligations of the
parties thereunder.

Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California, the securities laws of
the State of New Jersey and, as to corporate matters, the General Corporation
Law of the State of Delaware. We express no

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

opinion as to whether the laws of any other jurisdiction apply, and we express
no opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. With respect to
the securities laws of New Jersey, we have based our opinion solely upon our
examination of such laws and the rules and regulations of the authorities
administering such laws, all as reported in unofficial compilations. Neither
special rulings of such authorities nor opinions of counsel in said jurisdiction
have been obtained. We are not rendering any opinion as to compliance with any
antifraud law, rule or regulation relating to securities, or to the sale or
issuance thereof.

With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.

On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:

1.       The Company has been duly incorporated and is a validly existing
         corporation in good standing under the laws of the State of Delaware.

2.       The Company has the requisite corporate power to own or lease its
         property and assets and to conduct its business as it is currently
         being conducted, is qualified as a foreign corporation to do business
         in California and, to the best of our knowledge, is not required to
         qualify as a foreign corporation to do business in any other
         jurisdiction in the United States where the failure to do so would have
         a material adverse effect.

3.       The Agreement has been duly and validly authorized, executed and
         delivered by the Company and constitutes a valid and binding agreement
         of the Company enforceable against the Company in accordance with its
         terms, except as enforcement may be limited by applicable bankruptcy,
         insolvency, reorganization, arrangement, moratorium or other similar
         laws affecting creditors' rights, and subject to general equity
         principles and to limitations on availability of equitable relief,
         including specific performance.

4.       The Company's authorized capital stock consists of: (a) fifty-three
         million (53,000,000) shares of Common Stock, with a par value of $.001,
         of which six million nine hundred twenty-eight thousand eight hundred
         twenty-one (6,928,821) shares are issued and outstanding and (b)
         thirty-one million six hundred and forty-two thousand four hundred
         thirty (31,642,430) shares of Preferred Stock, with a par value of
         $.001, of which three million eight hundred forty-six thousand one
         hundred fifty-six (3,846,156) shares have been designated Series A
         Preferred Stock, all of which are issued and outstanding; four million
         four hundred eighty-seven thousand one hundred and eighty-two
         (4,487,182) shares have been designated Series B Preferred Stock, all
         of which are issued and outstanding; nine million three hundred
         seventy-five thousand three hundred (9,375,300) shares have been
         designated Series C Preferred Stock, of which nine million two hundred
         forty-five thousand three hundred (9,245,300) are issued and
         outstanding; ten million two

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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       50
<PAGE>

         hundred eighty-five thousand seven hundred fourteen (10,285,714) shares
         have been designated Series D Preferred Stock, all of which are issued
         and outstanding; and three million six hundred forty-eight thousand
         seventy-eight (3,648,078) shares have been designated Series E
         Preferred Stock, of which nine hundred sixty-one thousand five hundred
         thirty-nine (961,539) shares are issued and outstanding. The
         outstanding shares of Common Stock and of Preferred Stock have been
         duly authorized and validly issued and are fully paid and
         nonassessable. The rights, preferences and privileges of the Series A
         Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
         Series D Preferred Stock and Series E Preferred Stock are as stated in
         the Amended and Restated Certificate of Incorporation. The Shares have
         been duly authorized, and upon issuance and delivery against payment
         therefor in accordance with the terms of the Agreement, the Shares will
         be validly issued, outstanding, fully paid and nonassessable. The
         shares of Common Stock issuable upon conversion of the Shares have been
         duly authorized, duly and validly reserved for issuance, and upon
         issuance and delivery against payment therefor in accordance with the
         terms of the Amended and Restated Certificate of Incorporation, will be
         validly issued, outstanding, fully paid and nonassessable. To the best
         of our knowledge, there are no options, warrants, conversion
         privileges, preemptive rights or other rights currently outstanding to
         purchase or otherwise acquire any of the authorized but unissued
         capital stock of the Company, other than the conversion privileges of
         the Series A Preferred Stock, Series B Preferred Stock, Series C
         Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
         rights set forth in the Agreement, options to purchase 3,930,202 shares
         of Common Stock pursuant to the Company's 1994 and 1996 Stock Option
         Plans, 819,029 shares reserved for issuance of additional options under
         the Company's 1994 and 1996 Stock Option Plans, and warrants to
         purchase 65,000 shares of Series C Preferred Stock and 32,051 shares of
         Common Stock.

5.       The execution, delivery and performance of the Agreement by the Company
         and the issuance of the Shares pursuant thereto do not violate any
         provision of the Company's Amended and Restated Certificate of
         Incorporation or Bylaws, and do not violate or contravene (a) any
         governmental statute, rule or regulation applicable to the Company or
         (b) any order, writ, judgment, injunction, decree, determination or
         award which has been entered against the Company and of which we are
         aware, the violation or contravention of which would materially and
         adversely affect the Company, its assets, financial condition or
         operations.

6.       To our knowledge, there is no action, proceeding or investigation
         pending or overtly threatened against or by the Company before any
         court or administrative agency that questions the validity of the
         Agreement or might result, either individually or in the aggregate, in
         any material adverse change in the assets, financial condition, or
         operations of the Company.

7.       All consents, approvals, authorizations, or orders of, and filings,
         registrations, and qualifications with any regulatory authority or
         governmental body in the United States required for the consummation by
         the Company of the transactions contemplated by the Agreement, have
         been made or obtained including the filing the Amended and Restated
         Certificate of Incorporation in the Office of the Secretary of State of
         the State of

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       51
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         Delaware, except (a) for the filing of a Form D pursuant to Securities
         and Exchange Commission Regulation D and (b) other Blue Sky filings
         that may be required.

8.       The offer and sale of the Shares is exempt from the registration
         requirements of the Securities Act of 1933, as amended subject to the
         timely filing of a Form D pursuant to Securities and Exchange
         Commission Regulation D.

This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.

Very truly yours,

Cooley Godward LLP

By:      /s/      Robert J. Brigham
   -----------------------------------------
         Robert J. Brigham

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE

<S>                                                                                                            <C>
1.       PURCHASE OF SERIES E STOCK...............................................................................2

         1.1      Initial Purchase of Series E Stock..............................................................2

         1.2      Additional Stock Purchase upon the Achievement of a Milestone...................................2

         1.3      Hart-Scott-Rodino Compliance....................................................................3

2.       CLOSING DATE; DELIVERY...................................................................................3

         2.1      Closing; Closing Date...........................................................................3

         2.2      Delivery........................................................................................4

3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................4

         3.1      Organization, Good Standing and Qualification...................................................4

         3.2      Capitalization..................................................................................4

         3.3      Subsidiaries....................................................................................5

         3.4      Authorization...................................................................................5

         3.5      Valid Issuance of Securities....................................................................5

         3.6      Governmental Consents...........................................................................6

         3.7      Litigation......................................................................................6

         3.8      Employee Agreement..............................................................................6

         3.9      Patents and Trademarks..........................................................................6

         3.10     Compliance with Other Instruments...............................................................7

         3.11     Agreements; Action..............................................................................7

         3.12     Disclosure......................................................................................8

         3.13     Rights of Registration and First Offer..........................................................8

         3.14     Corporate Documents.............................................................................9

         3.15     Title to Property and Assets....................................................................9

         3.16     Financial Statements............................................................................9

         3.17     Employee Benefit Plans; ERISA...................................................................9

         3.18     Tax Returns and Payments.......................................................................10

         3.19     Insurance......................................................................................10

         3.20     Labor Agreements and Actions...................................................................10

         3.21     Absence of Changes.............................................................................11

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       i.
<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

<CAPTION>
                                                                                                               PAGE
<S>                                                                                                            <C>
         3.22     Brokers........................................................................................11

4.       REPRESENTATIONS AND WARRANTIES OF BD....................................................................11

         4.1      Legal Power....................................................................................11

         4.2      Due Execution..................................................................................11

         4.3      Investment Representations.....................................................................12

         4.4      Brokers........................................................................................13

5.       CONDITIONS TO CLOSING...................................................................................13

         5.1      Conditions to Obligations of BD at Initial Closing.............................................13

         5.2      Conditions Precedent to BD's Investment at the Milestone Closing...............................14

         5.3      Conditions to Obligations of the Company at Closing............................................15

6.       COVENANTS AND RIGHTS  OF BD.............................................................................15

         6.1      Sale Restriction...............................................................................15

         6.2      Right of First Offer...........................................................................16

         6.3      Standstill Agreement...........................................................................17

         6.4      Registration...................................................................................17

7.       COVENANTS OF THE COMPANY................................................................................17

         7.1      Information Rights.............................................................................17

         7.2      Press Releases.................................................................................18

8.       MISCELLANEOUS...........................................................................................18

         8.1      Governing Law..................................................................................18

         8.2      Successors and Assigns.........................................................................18

         8.3      Entire Agreement...............................................................................18

         8.4      Severability...................................................................................18

         8.5      Amendment and Waiver...........................................................................18

         8.6      Notices........................................................................................19

         8.7      Fees and Expenses..............................................................................19

         8.8      Titles and Subtitles...........................................................................19

         8.9      Counterparts...................................................................................19
</TABLE>

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      ii.

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