Document:

<PAGE>

December 31, 1999

Ms. Carol Turchin
140 West End Ave., #29
New York, NY 10023

Dear Carol:

This letter sets forth the terms and conditions of our agreement (the
"Agreement") regarding your voluntary resignation of employment with Dot Hill
Systems Corp., (formerly Box Hill Systems Corp. (the "Company"). You and the
Company hereby agree as follows as of the date set forth above.

1. RESIGNATION. Effective October 25, 1999 (the "Separation Date"), you tendered
and the Company accepted your voluntary resignation as Executive Vice President
Sales, an employee and any and all other positions you may have held with the
Company and/or its affiliates, other than: (i) Vice Chairman of the Board of
Directors of the Company and (ii) Consultant to the Company.

2. ACCRUED SALARY AND VACATION. The Company agrees that it will pay you all
accrued salary, and all accrued and unused vacation benefits earned through the
Separation Date, if any, subject to standard payroll deductions, withholding
taxes and other obligations. You are entitled to this payment regardless of
whether or not you sign this Agreement. You will also be eligible to receive (a)
pro-rated portion of the performance bonus provided for in your employment
agreement with Company dated August 2, 1999 (with such pro-rated portion
determined by dividing the number of days from October 1, 1999 through the
Separation Date by 91), subject to and in accordance with the terms provided for
in such employment agreement.

3. EXPENSE REIMBURSEMENT. Within ninety (90) days of your execution of this
Agreement, you agree that you will submit your documented expense reimbursement
statement reflecting all business expenses you incurred prior to and including
the Separation Date, if any, for which you seek reimbursement. The Company shall
promptly reimburse such expenses pursuant to Company policy and regular business
practice.

                                   Page 1 of 6

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4. INSURANCE BENEFITS. To the extent provided by federal law or, if applicable,
state insurance laws, and by the Company's current group health insurance
policies, you will be eligible to continue your health insurance benefits at you
own expense. Later, you may be able to convert to an individual policy through
the provider of the Company's health insurance, if you wish. You will be
provided with a separate notice of your rights in this regard.

5. CONSULTING TERMS. In exchange for the promises and covenants set forth
herein, you and the Company agree that you shall serve as an outside consultant
until December 31, 2000 (the "Consulting Period") subject to the terms herein.

     (a) During the Consulting Period, upon reasonable prior notice, you will be
required to provide consultation services in New York, NY to the Company on a
limited basis with respect to such matters as Chief Executive Officer of the
Company may reasonably request from time to time. You will report exclusively to
the Co- Chief Executive Officers of the Company.

     (b) During the Consulting Period, as payment for your Performance of
consulting services, the Company shall pay you in monthly installments at
the rate of Twenty-Five Thousand Dollars ($25,000) per quarter. Company will
make each monthly payment within ten (10) day of your submission of an
invoice for such month of the Consulting Period.

     (c) You will be entitled to expense reimbursement from the Company for
expenses incurred by you on behalf of the Company in accordance with the expense
reimbursement policies of the Company. The defense and indemnity obligations of
the Company owing to you as a member of the Board of Directors of the Company
shall similarly be applicable to you in your capacity as a Consultant to the
Company.

     (d) During the Consulting Period, you will be solely responsible for all
tax returns and payments required to be filed with or made to any federal,
state, or local tax authority with respect to your performance of services and
the receipt of fees under this Agreement. The Company will regularly report
amounts paid to you by filing Form 1099-MISC with the Internal Revenue Service
as required by law. The Company will not withhold or make payments for Social
Security, make employment insurance or disability insurance contributions, or
obtain workers' compensation insurance on your behalf.

                                   Page 2 of 6

<PAGE>

     (e) During the Consulting Period, you agree to accept exclusive liability
for complying with all applicable state and federal laws governing self-employed
individuals, including obligations such as payment of taxes, Social Security,
disability and other contributions based on fees paid to you under this
Agreement.

     (f) The Consulting Period shall be renewed and extended, from year to year,
unless either party gives the other party written notice of its intention not to
renew and extend the Consulting Period, on or before October 1 of any year.

     (g) The special payroll function provided by the Company for your benefit
and the benefit of your husband Benjamin Monderer, which has existed to present,
shall continue, as directed by you.

6. DIRECTOR TERMS. As of the Separation Date, you shall be Vice Chairman and a
member of the Board of Directors of the Company. You shall receive such like
compensation, expense reimbursement, perks and benefits as the other outside
directors of the Company shall receive during your tenure.

7. COMPANY PROPERTY. Upon the Separation Date, you agree to return to the
Company all Company documents, except to the extent that your retention of any
such documents is reasonably appropriate for the performance of your obligations
as Vice Chairman of the Board of Directors of the Company and Consultant to the
Company. You agree not to disclose Company Proprietary Information outside of
the Company except as directed by the Company and agree not to use such Company
Proprietary Information except for the performance of your obligations to the
Company, as Vice Chairman of the Board of Directors of the Company and
Consultant to the Company.

8. CONFIDENTIALITY AND PUBLICITY AS TO AGREEMENT. The provisions of this
Agreement shall be held in strictest confidence by you and the Company and shall
not be publicized or disclosed in any manner whatsoever, provided, that: (a) you
may disclose this Agreement, in confidence, to your immediate family; (b) the
parties may disclose this Agreement in confidence to their respective attorneys,
accountants, auditors, tax preparers, and financial advisors; (c)

                                   Page 3 of 6

<PAGE>

the Company may disclose this Agreement, as necessary to fulfill standard or
legally required corporate reporting or disclosure requirements; and (d) the
parties may disclose this Agreement insofar as such disclosure may be necessary
to enforce its terms or as otherwise required by law.

9. ENTIRE AGREEMENT. This Agreement constitutes the complete, final exclusive
embodiment of the entire agreement between you and the Company with regard to
the subject matter hereof. It is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein. It
may not be modified, except in a writing signed by you and a duly authorized
officer of the Company. Each party has carefully read this Agreement, has been
afforded the opportunity to be advised of its meaning and consequences by his or
its respective attorneys, and signed the same of his or its free will. Nothing
herein or otherwise shall diminish the Company's defense and indemnity
obligations (past, present and future) to you and the Company does hereby
reaffirm such, including, its obligation to continue to maintain appropriate
forms and levels of insurance. You shall be afforded the same form and level of
defense and indemnity, as is afforded to the other officers and directors of the
Company.

10. SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs, personal
representatives, successors, assigns, executors, and administrators of each
party, and inure to the benefit of each party, its agents, directors, officers,
employees, servants, heirs, successors and assigns.

11. APPLICABLE LAW. This Agreement shall be deemed to have been entered into and
shall be construed and enforced in accordance with the laws of the State of New
York as applied to contracts made and to be performed entirely within New York.

12. ARBITRATION. To ensure rapid and economical resolution of any disputes which
may arise under this Agreement, you and the Company agree that any and all
disputes or controversies of any nature whatsoever, arising from or regarding
the interpretation, performance, enforcement or breach of this Agreement shall
be resolved by confidential, final and binding arbitration (rather than trial by
jury or court or resolution in some other forum) to the fullest extent permitted
by law. Any arbitration proceeding pursuant to this Agreement shall be conducted
by the American Arbitration Association ("AAA") under the then existing AAA

                                   Page 4 of 6

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employment-related arbitration rules and in New York, NY. If for any reason all
or part of this arbitration provision is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other portion of this arbitration provision or any other jurisdiction, but
this provision will be enformed, construed and enforced in such jurisdiction as
if such invalid, illegal or reformed, construed and enforced in such
jurisdiction as if such invalid, illegal, or unenforceable part or parts of this
provision had never been contained herein, consistent with the general intent of
the parties insofar as possible.

13. RELEASE OF CLAIMS. Except as to those obligations and liabilities created by
this Agreement and further except as to those matters stated herein below, the
Company releases you and you release the Company, as of the Separation Date,
from any and all claims, liabilities, demands, causes of actions, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every kind
and nature, in law, equity or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or in any way relating to
agreements, acts or conduct, at any time, prior to the Separation Date. Excluded
from your release to the Company are any matters pertaining to; (i) benefit
plans of any and all forms whether such are qualified or non-qualified, (ii)
stock, stock option or warrant ownership as to any stock of the Company, (iii)
any right, title or interest derived through your spouse in respect of his
association with the Company, and/or (iv) any right, title or interest, as to
indemnity or contribution (including , any and all insurance coverage relating
directly or indirectly thereto), which you have by operation or law, contract or
otherwise as to any matter as a result of your individual status or your status
as a representative, employee, officer and/or director of the Company: (a) in
which you are an actual or potential defendant or third party defendant
(directly or indirectly) and/or (b) the Company is an actual or potential
defendant or third party (directly or indirectly) irrespective of whether a) or
b) is in the nature of a derivative action or otherwise; including, but not
limited to certain actions by the shareholders of the Company known as Lawrence
Milman, et al. v. Box Hill Systems Corp., et al., Federal District Court,
Southern District of New York, CV98-8640.

                                   Page 5 of 6

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14. SEVERABILITY. If a court of competent jurisdiction determines that any term
or provision of this Agreement is invalid or unenforceable, in whole or in part,
then the remaining terms and provisions hereof shall be unimpaired. Such court
will have the authority to modify or replace the invalid or unenforceable term
or provisions with a valid and enforeable term or provision that most accurately
represents the parties' intention with respect to the invalid or unenforceable
term or provision.

15. COUNTERPARTS. This Agreement may be executed in one or more counterparts
(which may be delivered by facsimile), each of which shall be deemed an
original, all of which together shall constitute one and the same instrument.

16. SECTION HEADINGS. The section and paragraph headins contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

Please confirm your assent to the foregoing terms and conditions of our
Agreement by signing and returning a copy of this letter to me.

Sincerely,

DOT HILL SYSTEMS CORP.

/s/ James L. Lambert                        /s/ Philip Black
-----------------------------               -----------------------------
James L. Lambert                            Philip Black
Co-Chief Executive Officer,                 Co-Chief Executive Officer
President and COO

HAVING READ REVIEWED THE FOREGOING, I HEREBY AGREE AND ACCEPT THE TERMS AND
CONDITIONS OF THIS AGREEMENT AS STATED ABOVE.

Dated: June 12, 2000                        /s/ Carol Turchin
      ----------------------------          ----------------------------
                                            Carol Turchin

                                   Page 6 of 6<PAGE>

                                                                   Exhibit 10.54

                                  Lease between
              Abgenix, Inc. and Ardenwood Corporate Park Associates
                          (6701 Kaiser Drive, Fremont)
<PAGE>

Section...........................................................Page #
Parties................................................................1
Premises...............................................................1
Use....................................................................1
   Permitted Uses......................................................1
   Uses Prohibited.....................................................1
   Advertisements and Signs............................................1
   Covenants, Conditions and Restrictions..............................2
Term and Rental........................................................2
   Base Monthly Rent...................................................2
   Late Charges........................................................2
   Security Deposit....................................................2
Construction...........................................................3
   Building Shell Construction.........................................3
   Tenant Improvement Construction.....................................3
   Building Shell Costs................................................4
   Tenant Improvement Costs............................................4
   Insurance...........................................................4
   Punch List & Warranty...............................................4
   Other Work by Tenant................................................4
Acceptance of Possession and Covenants to Surrender....................5
   Delivery and Acceptance.............................................5
   Condition Upon Surrender............................................5
   Failure to Surrender................................................5
Alterations and Additions..............................................6
   Tenant's Alterations................................................6
   Free From Liens.....................................................6
   Compliance With Governmental Regulations............................6
Maintenance of Premises................................................7
   Landlord's Obligations..............................................7
   Tenant's Obligations................................................7
   Waiver of Liability.................................................7
   Reimbursable Site Operating Costs...................................7
Hazard Insurance.......................................................7
   Tenant's Use........................................................7
   Landlord's Insurance................................................7
   Tenant's Insurance..................................................8
   Waiver..............................................................8

                                     Page i
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Taxes..................................................................8
Utilities..............................................................9
Toxic Waste and Environmental Damage...................................9
   Tenant's Responsibility.............................................9
   Tenant's Indemnity Regarding Hazardous Materials....................9
   Actual Release by Tenant...........................................10
   Environmental Monitoring...........................................10
   Landlord's Indemnity Regarding Hazardous Materials.................10
Tenant's Default......................................................10
   Remedies...........................................................11
   Right to Re-enter..................................................11
   Abandonment........................................................11
   No Termination.....................................................11
   Non-Waiver.........................................................12
   Performance by Landlord............................................12
   Habitual Default...................................................12
Landlord's  Liability.................................................12
   Limitation on Landlord's Liability.................................12
   Limitation on Tenant's Recourse....................................12
   Indemnification of Landlord........................................13
Destruction of Premises...............................................13
   Landlord's Obligation to Restore...................................13
   Limitations on Landlord's Restoration Obligation...................13
Condemnation..........................................................13
Assignment or Sublease................................................14
   Consent by Landlord................................................14
   Assignment or Subletting Consideration.............................14
   No Release.........................................................14
   Reorganization of Tenant...........................................15
   Permitted Transfers................................................15
   Effect of Default..................................................15
   Effects of Conveyance..............................................15
   Successors and Assigns.............................................15
Option to Extend the Lease Term.......................................15
   Grant and Exercise of Option.......................................15
   Determination of Fair Market Rental................................16
   Resolution of a Disagreement over the Fair Market Rental...........16
   Personal to Tenant.................................................17
General Provisions....................................................17
   Attorney's Fees....................................................17
   Authority of Parties...............................................17
   Brokers............................................................17
   Choice of Law......................................................17
   Dispute Resolution.................................................17
   Entire Agreement...................................................18
   Entry by Landlord..................................................18
   Estoppel Certificates..............................................18
   Exhibits...........................................................19
   Interest...........................................................19

                                     Page ii
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   Modifications Required by Lender...................................19
   No Presumption Against Drafter.....................................19
   Notices............................................................19
   Property Management................................................19
   Rent...............................................................19
   Representations....................................................19
   Rights and Remedies................................................19
   Severability.......................................................19
   Submission of Lease................................................19
   Subordination......................................................20
   Survival of Indemnities............................................20
   Time...............................................................20
   Waiver of Right to Jury Trial......................................20
EXHIBIT A - Premises & Building.......................................22
EXHIBIT A-1 -New Site Plan............................................23
EXHIBIT B - Draft Letter of Credit....................................24
EXHIBIT C - Shell Plans and Specifications............................25
EXHIBIT D - Tenant Improvement Plans and Specifications...............26
EXHIBIT E - Hazardous Materials List..................................27

                                    Page iii
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1. PARTIES: THIS LEASE, is entered into on this ___ day of February, 2000,
("Effective Date") between Ardenwood Corporate Park Associates, a California
Limited Partnership, whose address is 10600 North De Anza Blvd., # 200,
Cupertino, California, 95014, and Abgenix, Inc., a Delaware Corporation, whose
address is 7601 Dumbarton Circle, Fremont, California, 94555, hereinafter called
respectively Landlord and Tenant.

2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord
those certain Premises with the appurtenances, situated in the City of Fremont,
County of Alameda, State of California, commonly known and designated as 6701
Kaiser Drive, consisting of 100,103 rentable square feet ("Building") including
parking for approximately 361 cars as outlined in red on Exhibit "A" and all
improvements located therein including but not limited to buildings, parking
areas and structures, landscaping, loading docks, sidewalks, service areas and
other facilities. The Building is located adjacent to land upon which a second
building ("Building B") will be constructed and leased to Tenant by Landlord.
Unless expressly provided otherwise, the term Premises as used herein shall
include the Tenant Improvements (defined in Section 5.B) constructed by Tenant
pursuant to Section 5.B. Tenant acknowledges Landlord's right to and hereby
consents to construction of Building B as generally shown on the attached
Exhibit "A-1" ("New Site Plan").

Notwithstanding the current configuration of the Premises as defined in this
Section 2 and as shown on Exhibit "A", Tenant acknowledges and agrees that as
part of construction of Building B, the Premises will be modified to a new
configuration as generally shown on the New Site Plan, outlined in red. Such
modification will include, but not be limited to: (i) moving the existing
property line to the approximate location highlighted in green on the New Site
Plan; (ii) demolishing parking areas and other exterior areas of the Premises;
(iii) construction of new parking areas and landscaped areas as shown on the New
Site Plan; and (iv) creation of private utility easements and access easement.
Tenant shall not be entitled to rent abatement or any other form of compensation
or recompense associated with construction of the New Site Plan improvements,
nor shall any dates specified in this Lease be affected thereby.

3. USE:

      A. Permitted Uses: Tenant shall use the Premises only for the following
purposes and shall not change the use of the Premises without the prior written
consent of Landlord: Office, research and development (including laboratories),
marketing, light manufacturing, pharmaceutical manufacturing (to the extent
permitted by governmental authority), ancillary storage and other incidental
uses. Tenant shall use only the number of parking spaces allocated to Tenant
under this Lease. All commercial trucks and delivery vehicles shall (i) be
parked at the rear of the Building, (ii) loaded and unloaded in a manner which
does not interfere with the businesses of surrounding tenants, and (iii)
permitted to remain within the Premises only so long as is reasonably necessary
to complete the loading and unloading. Landlord makes no representation or
warranty that any specific use of the Premises desired by Tenant is permitted
pursuant to any Laws.

      B. Uses Prohibited: Tenant shall not commit or suffer to be committed on
the Premises any waste, nuisance, or other act or thing which may disturb the
quiet enjoyment of any other tenant in or around the Premises, nor allow any
sale by auction or any other use of the Premises for an unlawful purpose. Tenant
shall not (i) damage or overload the electrical, mechanical or plumbing systems
of the Premises as the same may be augmented from time to time pursuant to Lease
Sections 5 and 7 below, (ii) attach, hang or suspend anything from the ceiling,
walls or columns of the building in such a way as would adversely affect the
structure or integrity of the Building, or set any load on the floor in excess
of the load limits for which such items are designed, or (iii) generate dust,
fumes or waste products which create a fire or health hazard or damage the
Premises, including without limitation the soils or ground water in or around
the Premises. No materials, supplies, equipment, finished products or
semi-finished products, raw materials or articles of any nature, or any waste
materials, refuse, scrap or debris, shall be stored upon or permitted to remain
on any portion of the Premises outside of the Building without Landlord's prior
approval, which approval may be withheld in its sole discretion.

      C. Advertisements and Signs: Tenant will not place or permit to be placed,
in, upon or about the Premises any signs not approved by the city and other
governing authority having jurisdiction.

                                     Page 1
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Tenant will not place or permit to be placed upon the Premises any signs,
advertisements or notices without the written consent of Landlord as to type,
size, design, lettering, coloring and location, which consent will not be
unreasonably withheld. Any sign placed on the Premises shall be removed by
Tenant, at its sole cost, prior to the Expiration Date or promptly following the
earlier termination of the Lease, and Tenant shall repair, at its sole cost, any
damage or injury to the Premises caused thereby, and if not so removed, then
Landlord may have same so removed at Tenant's expense.

      D. Covenants, Conditions and Restrictions: This Lease is subject to the
effect of (i) any covenants, conditions, restrictions, easements, mortgages or
deeds of trust, ground leases, rights of way of record and any other matters or
documents of record; and (ii) any zoning laws of the city, county and state
where the Building is situated (collectively referred to herein as
"Restrictions") and Tenant will conform to and will not violate the terms of any
such Restrictions. In addition to existing Restrictions affecting the Premises,
Tenant agrees to the creation of future private utility easements and
ingress/egress easements affecting the Premises to the extent necessitated by
Landlord's construction of Building B.

4. TERM AND RENTAL:

      A. Base Monthly Rent: The term ("Lease Term") shall be for one hundred
eighty (180) months, commencing on June 1, 2000 (the "Commencement Date"), and
ending one hundred eighty (180) months thereafter, ("Expiration Date").
Notwithstanding the Parties agreement that the Lease Term begins on the
Commencement Date, this Lease and all of the obligations of Landlord and Tenant
shall be binding and in full force and effect from and after the Effective Date.
In addition to all other sums payable by Tenant under this Lease, Tenant shall
pay base monthly rent ("Base Monthly Rent") for the Premises according to the
following schedule:

      Months 01-12:   $160,165.00 per month
      Months 13-24:   $165,771.00 per month
      Months 25-36:   $171,573.00 per month
      Months 37-48:   $177,578.00 per month
      Months 49-60:   $183,793.00 per month
      Months 61-72:   $190,226.00 per month
      Months 73-84:   $196,883.00 per month
      Months 85-96:   $203,774.00 per month
      Months 97-108:  $210,906.00 per month
      Months 109-120: $218,288.00 per month
      Months 121-132: $225,928.00 per month
      Months 133-144: $233,836.00 per month
      Months 145-156: $242,020.00 per month
      Months 157-168: $250,491.00 per month
      Months 169-180: $259,258.00 per month

Base Monthly Rent shall be due in advance on or before the first day of each
calendar month during the Lease Term. All sums payable by Tenant under this
Lease shall be paid to Landlord in lawful money of the United States of America,
without offset or deduction and without prior notice or demand, at the address
specified in Section 1 of this Lease or at such place or places as may be
designated in writing by Landlord during the Lease Term. Base Monthly Rent for
any period less than a calendar month shall be a pro rata portion of the monthly
installment. Concurrently with Tenant's execution of this Lease, Tenant shall
pay to Landlord the sum of One Hundred Sixty Thousand One Hundred Sixty Five
Dollars ($160,165.00) as prepaid rent for the first month of the Lease.

      B. Late Charges: Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include but are not limited to:
administrative, processing, accounting, and late charges which may be imposed on
Landlord by the terms of any contract, revolving credit, mortgage, or trust deed
covering the Premises. Accordingly, if any installment of Base Monthly Rent
shall not be received by Landlord or its designee within five (5) business days
after the Base Monthly Rent is due, or any other sum due from Tenant shall not
be received by Landlord or its designee within five (5) business days after
written notice from Landlord that such sum is due, Tenant shall pay to Landlord
a late charge equal to five (5%) percent of such overdue amount, which late
charge shall be due and payable on the same date that the overdue amount was
due. The parties agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by Tenant,
excluding interest and attorneys fees and costs. If any rent or other sum due
from Tenant remains delinquent for a period in excess of thirty (30) days then,
in addition to such late charge, Tenant shall pay to Landlord interest on any
rent that is not paid when due at the Agreed Interest Rate specified in Section
19.J following the date such amount became due until paid. Acceptance by
Landlord of such late charge shall not constitute a waiver of Tenant's default
with respect to such overdue amount nor prevent Landlord from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Monthly Rent, then the Base Monthly Rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding any provision of this Lease to the contrary.

      C. Security Deposit: On or before June 1, 2000, Tenant agrees to deposit
with Landlord the sum of Two Hundred Fifty Thousand Dollars

                                     Page 2
<PAGE>

($250,000.00), subject to increase during the Lease Term as provided in the
Lease ("Security "Deposit"). Landlord shall not be deemed a trustee of the
Security Deposit, may use the Security Deposit in business, and shall not be
required to segregate it from its general accounts. Tenant shall not be entitled
to interest on the Security Deposit. If Tenant defaults with respect to any
provisions of the Lease, including but not limited to the provisions relating
to: (i) payment of Base Monthly Rent or other charges, (ii) removal of Tenant's
equipment and fixtures (including lab benches, casework and fume hoods, if
installed pursuant to Section 5.B below), and (iii) removal of Specialized
Improvements as defined in Section 5.B. below; then Landlord may, to the extent
reasonably necessary to remedy Tenant's default, use any or all of the Security
Deposit towards payment of the following: (i) Base Monthly Rent or other charges
in default; (ii) any other amount which Landlord may spend or become obligated
to spend by reason of Tenant's default including, but not limited to Tenant's
failure to restore or clean the Premises following vacation thereof. If any
portion of the Security Deposit is so used or applied, Tenant shall, within ten
(10) days after written demand from Landlord, deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its full original amount,
and shall pay to Landlord such other sums as necessary to reimburse Landlord for
any sums paid by Landlord. Tenant may not assign or encumber the Security
Deposit without the consent of Landlord. Any attempt to do so shall be void and
shall not be binding on Landlord. The Security Deposit shall be returned to
Tenant within thirty (30) days after the Expiration Date and surrender of the
Premises to Landlord, less any amount deducted in accordance with this Section,
together with Landlord's written breakdown itemizing the amounts and purposes
for such deduction. In the event of termination of Landlord's interest in this
Lease, Landlord may deliver or credit the Security Deposit to Landlord's
successor in interest in the Premises and thereupon be relieved of further
responsibility with respect to the Security Deposit.

Landlord agrees that in lieu of a cash Security Deposit, Tenant may deposit a
letter of credit ("Letter of Credit") substantially in the form attached hereto
as Exhibit "B". Landlord shall be entitled to draw against the Letter of Credit
at any time provided only that Landlord certifies to the issuer of the Letter of
Credit that Tenant is in default under the Lease. Tenant shall keep the letter
of credit in effect during the entire Lease Term, as the same may be extended,
plus a period of four (4) weeks after expiration of the Lease Term. At least
thirty (30) days prior to expiration of any Letter of Credit, the term thereof
shall be renewed or extended for a period of at least one (1) year. Tenant's
failure to so renew or extend the Letter of Credit shall be a material default
of this Lease by Tenant. In the event Landlord draws against the Letter of
Credit, Tenant shall replenish the existing Letter of Credit or cause a new
Letter of Credit to be issued such that the aggregate amount of letters of
credit available to Landlord at all times during the Lease Term is the amount of
the Security Deposit originally required.

5. CONSTRUCTION:

      A. Building Shell Construction: Landlord has completed construction of the
Building shell ("Building Shell"), the scope of which improvements are outlined
in the plans and specifications attached as Exhibit "C" ("Shell Plans and
Specifications"). Landlord agrees that, on the Commencement Date, the Building
Shell shall be substantially complete and that all elements of the Building to
be maintained by Landlord pursuant to this Lease shall be in good operating
condition and repair.

      B. Tenant Improvement Construction: Tenant shall contract directly with a
general contractor selected by Tenant, subject to Landlord's approval ("General
Contractor"), to cause improvements to the Premises ("Tenant Improvements") to
be constructed in accordance with plans and outline specifications to be
attached as Exhibit "D" ("Tenant Improvement Plans and Specifications"). The
General Contractor shall use union labor. For purposes of this Lease, the
"Building Core" means those items typically associated in the industry with an
office building core including elevators, restrooms, fire sprinklers, HVAC and
electrical systems distributed to each floor, exiting stair finishes, and a
finished building lobby. The Tenant Improvements Plans and Specifications shall
be prepared at Tenant's expense by an architect selected by Tenant ("Tenant's
Architect"). The Tenant Improvement Plans and Specifications shall be completed
for all aspects of the work with all detail necessary for submittal to the city
for issuance of building permits and for construction and shall include any
information required by the relevant agencies regarding Tenant's use of
Hazardous Materials. The Tenant Improvements shall consist of all items not
included within the Building Shell but shall not, in any event, include any of
Tenant's equipment or trade fixtures including lab benches, laboratory casework,
and fume hoods. All Tenant Improvements that materially affect or are directly
related to the Building Core shall be subject to Landlord's approval, which
approval which shall not be unreasonably withheld, conditioned or delayed. The
Tenant Improvement Plans and Specifications shall provide for a minimum
build-out in all areas of the Premises consisting of: (i) the Building Core,
(ii) fire sprinklers, (iii) floor coverings, (iv) t-bar suspended ceiling (v)
distribution of the HVAC system, (vi) 2' x 4' drop-in florescent lighting, and
(vii) any other work required by the City of

                                     Page 3
<PAGE>

Fremont necessary to obtain a Certificate of Occupancy. Further, the Tenant
Improvement Plans and Specifications shall provide that no more than fifteen
percent (15%) of Building interior contains Specialized Improvements.
"Specialized Improvements" are defined as biopharmaceutical improvements
associated with Tenant's use of the Premises including, but not limited to, cold
rooms, clean rooms, laboratories, lab benches, fume hoods, and laboratory
casework. Prior to commencing construction of the Tenant Improvements, Tenant
shall: (i) obtain all required governmental approvals and permits; and (ii)
provide Landlord ten (10) business days' prior notice so that Landlord may post
a notice of nonresponsibility. The Tenant Improvement Plans and Specifications
shall be prepared in sufficient detail to allow General Contractor and Tenant to
enter into a construction contract ("Tenant Improvement Budget"), a copy of
which shall be provided to Landlord prior to commencement of construction.

Tenant shall use its best efforts to obtain a building permit from the City of
Fremont as soon as possible and thereafter diligently supervise the construction
of Tenant Improvements until they are substantially complete as hereinafter
defined. The Tenant Improvements shall be deemed substantially complete
("Substantially Complete" or "Substantial Completion") when the Tenant
Improvements have been substantially completed in accordance with the Tenant
Improvement Plans and Specifications, as evidenced by the completion of a final
inspection or the issuance of a certificate of occupancy or its equivalent by
the appropriate governmental authority. Installation of Tenant's data and phone
cabling or furniture shall not be required in order to deem the Premises
Substantially Complete. All Tenant Improvement work shall be conducted at
Tenant's risk and in accordance with all Laws. Tenant shall indemnify and hold
Landlord harmless from and against all costs, damages, claims, liabilities and
expenses (including attorneys' fees) suffered by or claimed against Landlord,
directly or indirectly, based on, arising out of or resulting from Tenant's
construction of the Tenant Improvements. Immediately upon completion of the
Tenant Improvements, Tenant agrees to provide Landlord a complete set of
half-size (15" x 21") vellum as-built drawings for the Tenant Improvements and a
certificate of occupancy for the Premises. The Tenant Improvements shall not be
removed or altered by Tenant except as may be required or permitted by Landlord
pursuant to Sections 6 and 7 below. During the Lease Term, the Tenant
Improvements shall be the property of Tenant and Tenant shall have the right to
depreciate and claim and collect any investment tax credits in the Tenant
Improvements. At the expiration of the Lease Term or any earlier termination of
the Lease, the Tenant Improvements shall become the property of Landlord and
shall remain upon and be surrendered with the Premises (subject to Landlord's
right to require removal pursuant to Section 6 below), and title thereto shall
automatically vest in Landlord without any payment therefore.

      C. Building Shell Costs: Landlord shall pay all costs associated with the
Building Shell.

      D. Tenant Improvement Costs: As an inducement to Tenant to enter into this
Lease, Landlord has agreed to provide Tenant an allowance ("Work Allowance") to
be utilized by Tenant towards the cost of construction of Tenant Improvements in
the amount of One Million Five Hundred One Thousand Five Hundred Forty Five and
No/100 Dollars ($1,501,545.00). Tenant shall pay all costs associated with the
Tenant Improvements less the Work Allowance provided herein. The cost of Tenant
Improvements shall include the following to the extent actually incurred by
General Contractor in connection with the construction of Tenant Improvements:
construction costs, all permit fees, and construction taxes or other costs
imposed by governmental authorities related to the Tenant Improvements. The Work
Allowance shall be paid by Landlord to Tenant within fifteen (15) days following
Substantial Completion of the Premises and occupancy by Tenant.

In addition to the Work Allowance, Landlord agrees to reimburse Tenant up to
$100,000.00 towards the cost of either: (i) Tenant's application of a mutually
acceptable sealant to the surface of the concrete slab foundation of the
Building Shell, or (ii) such other mutually acceptable work to mitigate
potential seepage through the Building slab. Tenant shall be obligated to apply
the sealant or perform such other work prior to commencement of construction of
Tenant Improvements.

      E. Insurance: Landlord shall cause the General Contractor to procure (as a
cost of the Building Shell) a "Broad Form" liability insurance policy in the
amount of Three Million Dollars ($3,000,000.00). Landlord shall also procure (as
a cost of the Building Shell) builder's risk insurance for the full replacement
cost of the Building Shell and Tenant Improvements while the Building and Tenant
Improvements are under construction, up until the date that the casualty
insurance policy described in Section 9 is in full force and effect.

      F. Punch List & Warranty: After the Tenant Improvements are Substantially
Complete, Tenant shall cause the General Contractor to immediately correct any
construction defects or other "punch list" items which require attention. The
General Contractor shall provide a standard contractor's warranty with respect
to the Tenant Improvements for one (1) year from the Commencement Date.

      G. Other Work by Tenant: All work not

                                     Page 4
<PAGE>

described in the Shell Plans and Specifications or Tenant Improvement Plans and
Specifications, such as furniture, telephone equipment, telephone wiring and
office equipment work, shall be furnished and installed by Tenant at Tenant'
cost. Prior to Substantial Completion, Tenant shall be obligated to (i) provide
active phone lines to any elevators, and (ii) contract with a firm to monitor
the fire system. Any contractor or other authorized representatives used by
Tenant in connection with such entry and installation work prior to Substantial
Completion shall use union labor.

6. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER:

      A. Delivery and Acceptance: On the Commencement Date, Landlord shall
deliver and Tenant shall accept possession of the Premises and enter into
occupancy of the Premises on the Commencement Date. Immediately after the
Effective Date, Tenant shall be allowed full access to the Premises ("Early
Access") for purposes of designing, installing and/or constructing the Tenant
Improvements. Such Early Access shall be subject to all the terms and conditions
of this Lease, other than the obligations of Tenant to pay Base Monthly Rent.
Tenant acknowledges that it has had an opportunity to conduct, and has
conducted, such inspections of the Premises as it deems necessary to evaluate
its condition. Except as otherwise specifically provided herein, Tenant agrees
to accept possession of the Premises in its then existing condition, subject to
all Restrictions and without representation or warranty by Landlord. Landlord
agrees that as of the Commencement Date, all elements of the Building to be
maintained by Landlord pursuant to Section 8.A. below shall be in good operating
condition and repair. At the time Landlord delivers possession of the Premises
to Tenant, Landlord and Tenant shall together execute an acceptance agreement.
Landlord shall have no obligation to deliver possession, nor shall Tenant be
entitled to take occupancy, of the Premises until such acceptance agreement has
been executed, and Tenant's obligation to pay Base Monthly Rent and Additional
Rent shall not be excused or delayed because of Tenant's failure to execute such
acceptance agreement. Within eleven (11) months after the Commencement Date,
Tenant agrees to be in occupancy of at least fifty percent (50%) of the rentable
square footage of the Premises.

      B. Condition Upon Surrender: Tenant further agrees on the Expiration Date
or on the sooner termination of this Lease, to surrender the Premises to
Landlord in good condition and repair, normal wear and tear excepted. In this
regard, "normal wear and tear" shall be construed to mean wear and tear caused
to the Premises by the natural aging process which occurs in spite of prudent
application of commercially reasonable standards for maintenance, repair
replacement, and janitorial practices, and does not include items of neglected
or deferred maintenance. In any event, Tenant shall cause the following to be
done prior to the Expiration Date or sooner termination of this Lease: (i) all
interior walls shall be painted or cleaned so that they appear freshly painted,
(ii) all tiled floors shall be cleaned and waxed, (iii) all carpets shall be
cleaned and shampooed, (iv) all broken, marred, stained or nonconforming
acoustical ceiling tiles shall be replaced, (v) all cabling placed above the
ceiling by Tenant or Tenant's contractors shall be removed, (vi) all windows
shall be washed; (vii) the HVAC system shall be serviced by a reputable and
licensed service firm and left in "good operating condition and repair" as so
certified by such firm, (viii) the plumbing and electrical systems and lighting
shall be placed in good order and repair (including replacement of any burned
out, discolored or broken light bulbs, ballasts, or lenses. On or before the
Expiration Date or sooner termination of this Lease, Tenant shall remove all its
personal property and trade fixtures from the Premises. All property and
fixtures not so removed shall be deemed as abandoned by Tenant. Tenant shall
ascertain from Landlord within ninety (90) days before the Expiration Date
whether Landlord desires Tenant to remove any Alterations not previously
consented to by Landlord in accordance with Section 7, or to cause Tenant to
surrender such Alterations (as defined in Section 7) in place to Landlord. If
Landlord shall so desire, Tenant shall, at Tenant's sole cost and expense,
remove such Alterations as Landlord requires and shall repair and restore said
Premises or such parts thereof before the Expiration Date. Such repair and
restoration shall include causing the Premises to be brought into compliance
with all applicable building codes and laws in effect at the time of the removal
to the extent such compliance is necessitated by the repair and restoration
work.

Notwithstanding anything in the Lease to the contrary, Tenant shall be required
at the Expiration Date or earlier termination of this Lease to remove: (i) all
lab benches, fume hoods, and laboratory casework; and (ii) at Landlord's
election, other Specialized Improvements designated by Landlord. If Landlord
shall so desire, Tenant shall, at Tenant's sole cost and expense, remove such
designated Specialized Improvements and restore the affected areas of the
Premises to either their condition as of the Effective Date or to an open office
layout, whichever is preferred by Landlord. Such repair and restoration shall
further include causing the Premises to be brought into compliance with all
applicable building codes and laws in effect at the time of the removal to the
extent such compliance is necessitated by removal of the Specialized
Improvements.

      C. Failure to Surrender: If the Premises are not surrendered at the
Expiration Date or sooner termination of this Lease in the condition required

                                     Page 5
<PAGE>

by this Section 6, Tenant shall be deemed in a holdover tenancy pursuant to this
Section 6.C and Tenant shall indemnify, defend, and hold Landlord harmless
against loss or liability resulting from delay by Tenant in so surrendering the
Premises including, without limitation, any losses due to claims made by any
succeeding tenant founded on such delay and costs incurred by Landlord in
returning the Premises to the required condition, plus interest at the Agreed
Interest Rate. Any holding over after the termination or Expiration Date with
Landlord's express written consent, shall be construed as month-to-month
tenancy, terminable on thirty (30) days written notice from either party, and
Tenant shall pay as Base Monthly Rent to Landlord a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month preceding
the termination or Expiration Date, plus all other amounts payable by Tenant
under this Lease. Any holding over shall otherwise be on the terms and
conditions herein specified, except those provisions relating to the Lease Term
and any options to extend or renew, which provisions shall be of no further
force and effect following the expiration of the applicable exercise period. If
Tenant remains in possession of the Premises after the Expiration Date or sooner
termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as rent during the holdover period an amount equal to one hundred fifty percent
(150%) of the Base Monthly Rent due in the month preceding the termination or
Expiration Date, plus all other amounts payable by Tenant under this Lease. This
provision shall survive the termination or expiration of the Lease.

7. ALTERATIONS AND ADDITIONS:

      A. Tenant's Alterations: Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises after completion of the initial Tenant
Improvements ("Alterations"), or any part thereof, without obtaining Landlord's
prior written consent and delivering to Landlord the proposed architectural and
structural plans for all such Alterations at least fifteen (15) days prior to
the start of construction. If such Alterations affect the structure of the
Building, Tenant additionally agrees to reimburse Landlord its reasonable
out-of-pocket costs incurred in reviewing Tenant's plans. As a condition to
Landlord's consent to Alterations which add Specialized Improvements to the
Premises, Landlord shall require Tenant to first increase the Security Deposit
by an amount equal to the product of: (i) the square footage of the Premises
affected by the installation of Specialized Improvements; and (ii) $20.00 per
square foot. After obtaining Landlord's consent, Tenant shall not proceed to
make such Alterations until Tenant has obtained all required governmental
approvals and permits, and provides Landlord reasonable security, in form
reasonably approved by Landlord, to protect Landlord against mechanics' lien
claims. Tenant agrees to provide Landlord (i) written notice of the anticipated
and actual start-date of the work, (ii) a complete set of half-size (15" X 21")
vellum as-built drawings for all Alterations which are material in extent; and
(iii) a certificate of occupancy for the work upon completion of the
Alterations, if required. All Alterations shall be constructed in compliance
with all applicable building codes and laws including, without limitation, the
Americans with Disabilities Act of 1990 as amended from time to time. Upon the
Expiration Date, all Alterations, except movable furniture and trade fixtures,
shall become a part of the realty and belong to Landlord but shall nevertheless
be subject to removal by Tenant as provided in Section 6 above. Alterations
which are not deemed as trade fixtures include heating, lighting, electrical
systems, air conditioning, walls, carpeting, or any other installation which has
become an integral part of the Premises. All Alterations shall be maintained,
replaced or repaired by Tenant at its sole cost and expense. Notwithstanding the
foregoing, Tenant shall be entitled, without obtaining Landlord's consent, to
make Alterations which do not affect the structure of the Building and which do
not cost more than One Hundred Thousand Dollars ($100,000.00) per Alteration
("Permitted Alteration"); provided, however, that Tenant shall still be required
to comply with all other provisions of this paragraph, and such Permitted
Alterations are subject to removal by Tenant at Landlord's election pursuant to
Section 6 above at the expiration or earlier termination of the Lease.
Notwithstanding the foregoing, for purposes of ownership or removal during the
Lease Term and subject to Tenant's surrender obligations contained in Section 6,
the term "Alterations" shall not include, in any case, any of Tenant's equipment
or trade fixtures.

      B. Free From Liens: Tenant shall keep the Premises free from all liens
arising out of work performed, materials furnished, or obligations incurred by
Tenant or claimed to have been performed for Tenant. In the event Tenant fails
to discharge any such lien within ten (10) days after receiving notice of the
filing, Landlord shall be entitled to discharge the lien at Tenant's expense and
all resulting costs incurred by Landlord, including attorney's fees shall be due
from Tenant as additional rent.

      C. Compliance With Governmental Regulations: The term Laws or Governmental
Regulations shall include all federal, state, county, city or governmental
agency laws, statutes, ordinances, standards, rules, requirements, or orders now
in force or hereafter enacted, promulgated, or issued. The term also includes
government measures regulating or enforcing public access, traffic mitigation,
occupational, health, or safety standards for employers, employees, landlords,
or tenants. Tenant, at Tenant's sole

                                     Page 6
<PAGE>

expense shall make all repairs, replacements, alterations, or improvements
needed to comply with all Governmental Regulations. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action or proceeding
against Tenant (whether Landlord be a party thereto or not) that Tenant has
violated any such law, regulation or other requirement in its use of the
Premises shall be conclusive of that fact as between Landlord and Tenant.

8. MAINTENANCE OF PREMISES:

      A. Landlord's Obligations: Landlord at its sole cost and expense, shall
maintain in good condition, order, and repair, and replace as and when
necessary, the foundation, exterior load bearing walls and roof structure of the
Building Shell.

      B. Tenant's Obligations: Tenant shall clean, maintain, repair and replace
when necessary the Premises and every part thereof through regular inspections
and servicing, including but not limited to: (i) all plumbing and sewage
facilities, (ii) all heating ventilating and air conditioning facilities and
equipment, (iii) all fixtures, interior walls floors, carpets and ceilings, (iv)
all windows, door entrances, plate glass and glazing systems including caulking,
and skylights, (v) all electrical facilities and equipment, (vi) all automatic
fire extinguisher equipment, (vii) the parking lot and all underground utility
facilities servicing the Premises, (viii) all elevator equipment, (ix) the roof
membrane system, and (x) all waterscape, landscaping and shrubbery. All wall
surfaces and floor tile are to be maintained in an as good a condition as when
Tenant took possession free of holes, gouges, or defacements. With respect to
items (ii), (viii) and (ix) above, Tenant shall provide Landlord a copy of a
service contract between Tenant and a licensed service contractor providing for
periodic maintenance of all such systems or equipment in conformance with the
manufacturer's recommendations. Tenant shall provide Landlord a copy of such
preventive maintenance contracts and paid invoices for the recommended work if
requested by Landlord.

      C. Waiver of Liability: Failure by Landlord to perform any defined
services, or any cessation thereof, when such failure is caused by accident,
breakage, repairs, strikes, lockout or other labor disturbances or labor
disputes of any character or by any other cause, similar or dissimilar, shall
not render Landlord liable to Tenant in any respect, including damages to either
person or property, nor be construed as an eviction of Tenant, nor cause an
abatement of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. Should any equipment or machinery utilized in supplying the
services listed herein break down or for any cause cease to function properly,
upon receipt of written notice from Tenant of any deficiency or failure of any
services, Landlord shall use reasonable diligence to repair the same promptly,
but Tenant shall have no right to terminate this Lease and shall have no claim
for rebate of rent or damages on account of any interruptions in service
occasioned thereby or resulting therefrom. Tenant waives the provisions of
California Civil Code Sections 1941 and 1942 concerning the Landlord's
obligation of tenantability and Tenant's right to make repairs and deduct the
cost of such repairs from the rent. Landlord shall not be liable for a loss of
or injury to person or property, however occurring, through or in connection
with or incidental to furnishing, or its failure to furnish, any of the
foregoing. Notwithstanding the foregoing, nothing contained in this Section 8.C.
is intended to absolve Landlord from its gross negligence or willful misconduct
under this Lease.

      D. Reimbursable Site Operating Costs: In the event that Tenant does not
also lease the building immediately adjacent to the Building (shown on Exhibit
"A" as "Building "B") from Landlord at any point during the Lease Term, Landlord
agrees to assume responsibility for the maintenance, repair and replacement of
the site improvements shared by the Building and Building B which are properly
allocable to both Buildings ("Reimbursable Site Operating Costs") and Tenant
agrees to reimburse Landlord for Tenant's Allocable Share of costs and expenses
paid by Landlord related to the Reimbursable Site Operating Costs. Tenant's
Allocable Share of Reimbursable Site Operating Costs shall be computed by
multiplying the Reimbursable Site Operating Costs by a fraction, the numerator
of which is the rentable square footage of the Premises and the denominator of
which is the aggregate rentable square footage of the Building and the Building
B.

9. HAZARD INSURANCE:

      A. Tenant's Use: Tenant shall not use or permit the Premises, or any part
thereof, to be used for any purpose other than that for which the Premises are
hereby leased; and no use of the Premises shall be made or permitted, nor acts
done, which will cause an increase in premiums or a cancellation of any
insurance policy covering the Premises or any part thereof, nor shall Tenant
sell or permit to be sold, kept, or used in or about the Premises, any article
prohibited by the standard form of fire insurance policies. Tenant shall, at its
sole cost, comply with all requirements of any insurance company or organization
necessary for the maintenance of reasonable fire and public liability insurance
covering the Premises and appurtenances.

      B. Landlord's Insurance: Landlord agrees to purchase and keep in force
fire, extended coverage insurance in an amount equal to the

                                     Page 7
<PAGE>

replacement cost of the Building (not including any Tenant Improvements or
Alterations paid for by Tenant from sources other than the Work Allowance) as
determined by Landlord's insurance company's appraisers. If commercially
available and carried by other owners of commercial properties in the area, such
fire and property damage insurance may be endorsed to cover loss caused by such
additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and shall contain reasonable deductibles. Additionally
Landlord may maintain a policy of (i) commercial general liability insurance
insuring Landlord (and such others designated by Landlord) against liability for
personal injury, bodily injury, death and damage to property occurring or
resulting from an occurrence in, on or about the Premises or Project in an
amount as Landlord determines is reasonably necessary for its protection, and
(ii) rental lost insurance covering a twelve (12) month period. Tenant agrees to
pay Landlord as additional rent, on demand, the full cost of said insurance as
evidenced by insurance billings to Landlord, and in the event of damage covered
by said insurance, the amount of any deductible under such policy; provided,
however, that Tenant shall not be required to pay any deductible amount on
earthquake coverage in excess of ten percent (10%) of the replacement cost of
the Premises. Payment shall be due to Landlord within ten (10) days after
written invoice to Tenant. It is understood and agreed that Tenant's obligation
under this Section will be prorated to reflect the Lease Commencement and
Expiration Dates.

      C. Tenant's Insurance: Tenant agrees, at its sole cost, to insure its
personal property, Tenant Improvements (for which it has paid from sources other
than the Work Allowance), and Alterations for their full replacement value
(without depreciation) and to obtain worker's compensation and public liability
and property damage insurance for occurrences within the Premises with a
combined single limit of not less than Five Million Dollars ($5,000,000.00).
Tenant's liability insurance shall be primary insurance containing a
cross-liability endorsement, and shall provide coverage on an "occurrence"
rather than on a "claims made" basis, except for product liability. Tenant shall
name Landlord and Landlord's lender as an additional insured and shall deliver a
copy of the policies and renewal certificates to Landlord. All such policies
shall provide for thirty (30) days' prior written notice to Landlord of any
cancellation, termination, or reduction in coverage. Notwithstanding the above,
Landlord retains the right to have Tenant provide other forms of insurance which
may be reasonably required to cover future risks.

      D. Waiver: Landlord and Tenant hereby waive all rights each may have
against the other on account of any loss or damage sustained by Landlord or
Tenant, as the case may be, or to the Premises or its contents, which may arise
from any risk covered by their respective insurance policies (or which would
have been covered had such insurance policies been maintained in accordance with
this Lease) as set forth above. The Parties shall use their reasonable efforts
to obtain from their respective insurance companies a waiver of any right of
subrogation which said insurance company may have against Landlord or Tenant, as
the case may be.

10. TAXES: Tenant shall be liable for and shall pay as additional rental, prior
to delinquency, the following: (i) all taxes and assessments levied against
Tenant's personal property and trade or business fixtures; (ii) all real estate
taxes and assessment installments or other impositions or charges which may be
levied on the Premises or upon the occupancy of the Premises, including any
substitute or additional charges which may be imposed applicable to the Lease
Term; and (iii) real estate tax increases due to an increase in assessed value
resulting from a sale, transfer or other change of ownership of the Premises as
it appears on the City and County tax bills during the Lease Term. All real
estate taxes shall be prorated to reflect the Lease Commencement and Expiration
Dates. If, at any time during the Lease Term a tax, excise on rents, business
license tax or any other tax, however described, is levied or assessed against
Landlord as a substitute or addition, in whole or in part, for taxes assessed or
imposed on land or Buildings, Tenant shall pay and discharge its pro rata share
of such tax or excise on rents or other tax before it becomes delinquent; except
that this provision is not intended to cover net income taxes, inheritance, gift
or estate tax imposed upon Landlord. In the event that a tax is placed, levied,
or assessed against Landlord and the taxing authority takes the position that
Tenant cannot pay and discharge its pro rata share of such tax on behalf of
Landlord, then at Landlord's sole election, Landlord may increase the Base
Monthly Rent by the exact amount of such tax and Tenant shall pay such increase.
If by virtue of any application or proceeding brought by Landlord, there results
a reduction in the assessed value of the Premises during the Lease Term, Tenant
agrees to pay Landlord a fee consistent with the fees charged by a third party
appeal firm for such services, but in no event more than the reasonable value of
such services. Tenant, at its cost, shall have the right at any time to seek a
reduction in or otherwise contest any Taxes which it is obligated to pay
hereunder, by action or proceeding against the entity with authority to assess
or impose the same. Landlord shall not be required to join in any proceeding or
action brought by Tenant unless the provisions of applicable law or regulations
require that such proceeding or action be brought by or in the name of Landlord,
in which event Landlord shall join in such proceeding or action or permit it to
be brought in Landlord's name, provided that Tenant agrees to protect, indemnify
and hold Landlord free and harmless from and against any liability, cost or
expense in

                                     Page 8
<PAGE>

connection with such proceeding or contest.

11. UTILITIES: Tenant shall pay directly to the providing utility all water,
gas, electric, telephone, and other utilities supplied to the Premises. Landlord
shall not be liable for loss of or injury to person or property, however
occurring, through or in connection with or incidental to furnishing or the
utility company's failure to furnish utilities to the Premises, and in such
event Tenant shall not be entitled to abatement or reduction of any portion of
Base Monthly Rent or any other amount payable under this Lease.

12. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

      A. Tenant's Responsibility: Without the prior written consent of Landlord,
Tenant or Tenant's agents, employees, contractors and invitees ("Tenant's
Agents") shall not bring, use, or permit upon the Premises, or generate, create,
release, emit, or dispose (nor permit any of the same) from the Premises any
chemicals, toxic or hazardous gaseous, liquid or solid materials or waste,
including without limitation, material or substance having characteristics of
ignitability, corrosivity, reactivity, or toxicity or substances or materials
which are listed on any of the Environmental Protection Agency's lists of
hazardous wastes or which are identified in Division 22 Title 26 of the
California Code of Regulations as the same may be amended from time to time or
any wastes, materials or substances which are or may become regulated by or
under the authority of any applicable local, state or federal laws, judgments,
ordinances, orders, rules, regulations, codes or other governmental
restrictions, guidelines or requirements. ("Hazardous Materials") except for
those substances customary in typical office uses for which no consent shall be
required. The foregoing does not apply to underground migration from other
sources over which Tenant has no control. In order to obtain consent, Tenant
shall deliver to Landlord its written proposal describing the toxic material to
be brought onto the Premises, measures to be taken for storage and disposal
thereof, safety measures to be employed to prevent pollution of the air, ground,
surface and ground water. Landlord's approval may be withheld in its reasonable
judgment. In the event Landlord consents to Tenant's use of Hazardous Materials
on the Premises or such consent is not required, Tenant represents and warrants
that it shall comply with all Governmental Regulations applicable to Hazardous
Materials including doing the following: (i) adhere to all reporting and
inspection requirements imposed by Federal, State, County or Municipal laws,
ordinances or regulations and will provide Landlord a copy of any such reports
or agency inspections; (ii) obtain and provide Landlord copies of all necessary
permits required for the use and handling of Hazardous Materials on the
Premises; (iii) enforce Hazardous Materials handling and disposal practices
consistent with industry standards; (iv) surrender the Premises free from any
Hazardous Materials arising from Tenant's bringing, using, permitting,
generating, creating, releasing, emitting or disposing of Hazardous Materials;
and (v) properly close the facility with regard to Hazardous Materials including
the removal or decontamination of any process piping, mechanical ducting,
storage tanks, containers, or trenches which have come into contact with
Hazardous Materials and obtain a closure certificate from the local
administering agency prior to the Expiration Date. Landlord hereby consents to
Tenant's use on the Premises of the Hazardous Materials listed on the attached
Exhibit "E" in the approximate quantities listed thereon, subject to the terms
and conditions of this Section 12.

      B. Tenant's Indemnity Regarding Hazardous Materials: Tenant shall, at its
sole cost and expense, comply with all laws pertaining to, and shall with
counsel reasonably acceptable to Landlord, indemnify, defend and hold harmless
Landlord and Landlord's trustees, shareholders, directors, officers, employees,
partners, affiliates, and agents from, any claims, liabilities, costs or
expenses incurred or suffered arising from the bringing, using, permitting,
generating, emitting or disposing of Hazardous Materials by Tenant, Tenant's
Agents or a third party through the surface soils of the Premises during the
Lease Term or the violation of any Governmental Regulation or environmental law,
by Tenant or Tenant's Agents. Tenant's indemnification, defense, and hold
harmless obligations include, without limitation, the following: (i) claims,
liability, costs or expenses resulting from or based upon administrative,
judicial (civil or criminal) or other action, legal or equitable, brought by any
private or public person under common law or under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Resource Conservation and Recovery Act of 1980 ("RCRA") or any
other Federal, State, County or Municipal law, ordinance or regulation now or
hereafter in effect; (ii) claims, liabilities, costs or expenses pertaining to
the identification, monitoring, cleanup, containment, or removal of Hazardous
Materials from soils, riverbeds or aquifers including the provision of an
alternative public drinking water source; (iii) all costs of defending such
claims; (iv) losses attributable to diminution in the value of the Premises or
the Building; (v) loss or restriction of use of rentable space in the Building;
(vi) Adverse effect on the marketing of any space in the Building; and (vi) all
other liabilities, obligations, penalties, fines, claims, actions (including
remedial or enforcement actions of any kind and administrative or judicial
proceedings, orders or judgments), damages (including consequential and punitive
damages), and costs (including attorney, consultant, and expert fees and
expenses) resulting from the

                                     Page 9
<PAGE>

release or violation. This Section 12.B shall survive the expiration or
termination o this Lease.

      C. Actual Release by Tenant: Tenant agrees to notify Landlord of any
lawsuits or orders known to Tenant which relate to the remedying of or actual
release of Hazardous Materials on or into the soils or ground water at or under
the Premises. Tenant shall also provide Landlord all notices required by Section
25359.7(b) of the Health and Safety Code and all other notices required by law
to be given to Landlord in connection with Hazardous Materials. Without limiting
the foregoing, Tenant shall also deliver to Landlord, within twenty (20) days
after receipt thereof, any written notices from any governmental agency alleging
a material violation of, or material failure to comply with, any federal, state
or local laws, regulations, ordinances or orders, the violation of which or
failure to comply with poses a foreseeable and material risk of contamination of
the ground water or injury to humans (other than injury solely to Tenant or
Tenant's Agents.

In the event of any release on or into the Premises or into the soil or ground
water under the Premises or the Building of any Hazardous Materials used,
treated, stored or disposed of by Tenant or Tenant's Agents, Tenant agrees to
comply, at its sole cost, with all laws, regulations, ordinances and orders of
any federal, state or local agency relating to the monitoring or remediation of
such Hazardous Materials. In the event of any such release of Hazardous
Materials Tenant shall immediately give verbal and follow-up written notice of
the release to Landlord, and Tenant agrees to meet and confer with Landlord and
its Lender to attempt to eliminate and mitigate any financial exposure to such
Lender and resultant exposure to Landlord under California Code of Civil
Procedure Section 736(b) as a result of such release, and promptly to take
reasonable monitoring, cleanup and remedial steps given, inter alia, the
historical uses to which the Property has and continues to be used, the risks to
public health posed by the release, the then available technology and the costs
of remediation, cleanup and monitoring, consistent with acceptable customary
practices for the type and severity of such contamination and all applicable
laws. Nothing in the preceding sentence shall eliminate, modify or reduce the
obligation of Tenant under 12.B of this Lease to indemnify, defend and hold
Landlord harmless from any claims liabilities, costs or expenses incurred or
suffered by Landlord. Tenant shall provide Landlord prompt written notice of
Tenant's monitoring, cleanup and remedial steps.

In the absence of an order of any federal, state or local governmental or
quasi-governmental agency relating to the cleanup, remediation or other response
action required by applicable law, any dispute arising between Landlord and
Tenant concerning Tenant's obligation to Landlord under this Section 12.C
concerning the level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall
be resolved by mediation and/or arbitration pursuant to this Lease.

      D. Environmental Monitoring: Landlord and its agents shall have the right
to inspect, investigate, sample and monitor the Premises including any air,
soil, water, ground water or other sampling or any other testing, digging,
drilling or analysis to determine whether Tenant is complying with the terms of
this Section 12. If Landlord discovers that Tenant is not in compliance with the
terms of this Section 12, any such costs incurred by Landlord, including
attorneys' and consultants' fees, shall be due and payable by Tenant to Landlord
within five (5) days following Landlord's written demand therefore.

      E. Landlord's Indemnity Regarding Hazardous Materials: Landlord shall
indemnify and hold Tenant harmless from any claims, liabilities, costs or
expenses incurred or suffered by Tenant related to the removal, investigation,
monitoring or remediation of Hazardous Materials which are present at the
Premises as of the Effective Date. Landlord's indemnification and hold harmless
obligations include, without limitation, (i) claims, liability, costs or
expenses resulting from or based upon administrative, judicial (civil or
criminal) or other action, legal or equitable, brought by any private or public
person under common law or under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Resource Conservation and
Recovery Act of 1980 ("RCRA") or any other Federal, State, County or Municipal
law, ordinance or regulation, (ii) claims, liabilities, costs or expenses
pertaining to the identification, monitoring, cleanup, containment, or removal
of Hazardous Materials from soils, riverbeds or aquifers including the provision
of an alternative public drinking water source, and (iii) all costs of defending
such claims. In no event shall Landlord be liable for any consequential damages
suffered or incurred by Tenant as a result of the presence of Hazardous
Materials at the Premises as of the Effective Date.

13. TENANT'S DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant: (i) Tenant's failure to pay
the Base Monthly Rent including additional rent or any other payment due under
this Lease, where such failure continues for five (5) business days after
written notice from Landlord that such amount is due, (ii) the abandonment of
the Premises by Tenant; (iii) Tenant's failure to observe and perform any other
required provision of this Lease, where such failure continues for thirty (30)
days after written notice from Landlord; (iv) Tenant's making of any general
assignment for the benefit of creditors; (v) the filing

                                    Page 10
<PAGE>

by or against Tenant of a petition to have Tenant adjudged a bankrupt or of a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
after the filing); (vi) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant
within sixty (60) days; or (vii) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
sixty (60) days.

      A. Remedies: In the event of any such default by Tenant, then in addition
to other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder
by giving written notice of such intention to terminate. In the event Landlord
elects to so terminate this Lease, Landlord may recover from Tenant all the
following: (i) the worth at time of award of any unpaid rent which had been
earned at the time of such termination; (ii) the worth at 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 for the same
period that Tenant proves could have been reasonably avoided; (iii) the worth at
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 be reasonably avoided; (iv) any other amount necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease, or which in the ordinary course of
things would be likely to result therefrom; including the following: (x)
expenses for repairing, altering or remodeling the Premises for purposes of
reletting, (y) broker's fees, advertising costs or other expenses of reletting
the Premises, and (z) costs of carrying the Premises such as taxes, insurance
premiums, utilities and security precautions; and (v) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted by applicable California law. The term "rent", as used herein, is
defined as the minimum monthly installments of Base Monthly Rent and all other
sums required to be paid by Tenant pursuant to this Lease, all such other sums
being deemed as additional rent due hereunder. As used in (i) and (ii) above,
"worth at the time of award" shall be computed by allowing interest at a rate
equal to the discount rate of the Federal Reserve Bank of San Francisco plus
five (5%) percent per annum. As used in (iii) above, "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 (1%)
percent.

      B. Right to Re-enter: In the event of any such default by Tenant, Landlord
shall have the right, after terminating this Lease, to re-enter the Premises and
remove all persons and property. Such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Tenant, and
disposed of by Landlord in any manner permitted by law.

      C. Abandonment: If Landlord does not elect to terminate this Lease as
provided in Section 13.A or 13.B above, then the provisions of California Civil
Code Section 1951.4, (Landlord may continue the lease in effect after Tenant's
breach and abandonment and recover rent as it becomes due if Tenant has a right
to sublet and assign, subject only to reasonable limitations) as amended from
time to time, shall apply and Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes due or relet the
Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. In the event that Landlord elects to so relet, rentals received by
Landlord from such reletting shall be applied in the following order to: (i) the
payment of any indebtedness other than Base Monthly Rent due hereunder from
Tenant to Landlord; (ii) the payment of any reasonable cost of such reletting;
(iii) the payment of the cost of any alterations and repairs to the Premises
necessary to relet; and (iv) the payment of Base Monthly Rent due and unpaid
hereunder. The residual rentals, if any, shall be held by Landlord and applied
in payment of future Base Monthly Rent as the same may become due and payable
hereunder. Landlord shall the obligation to market the space but shall have no
obligation to relet the Premises following a default if Landlord has other
comparable available space within the Building or Project. In the event the
portion of rentals received from such reletting which is applied to the payment
of rent hereunder during any month be less than the rent payable during that
month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand. Such deficiency shall be calculated and paid monthly.
Tenant shall also pay to Landlord, as soon as ascertained, any costs and
expenses reasonably incurred by Landlord in such reletting or in making such
alterations and repairs necessary to relet not covered by the rentals received
from such reletting.

      D. No Termination: Landlord's re-entry or taking possession of the
Premises pursuant to 13.B or 13.C shall not be construed as an election to
terminate this Lease unless written notice of such intention is given to Tenant
or unless the termination is decreed by a court of competent jurisdiction.
Notwithstanding any reletting without termination

                                    Page 11
<PAGE>

by Landlord because of any default by Tenant, Landlord may at any time after
such reletting elect to terminate this Lease for any such default.

      E. Non-Waiver: Landlord may accept Tenant's payments without waiving any
rights under this Lease, including rights under a previously served notice of
default. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment of rent due shall be deemed as other than payment on account of the
amount due. If Landlord accepts payments after serving a notice of default,
Landlord may nevertheless commence and pursue an action to enforce rights and
remedies under the previously served notice of default without giving Tenant any
further notice or demand. Furthermore, the Landlord's acceptance of rent from
the Tenant when the Tenant is holding over without express written consent does
not convert Tenant's Tenancy from a tenancy at sufferance to a month to month
tenancy. No waiver of any provision of this Lease shall be implied by any
failure of Landlord to enforce any remedy for the violation of that provision,
even if that violation continues or is repeated. Any waiver by Landlord of any
provision of this Lease must be in writing. Such waiver shall affect only the
provision specified and only for the time and in the manner stated in the
writing. No delay or omission in the exercise of any right or remedy by Landlord
shall impair such right or remedy or be construed as a waiver thereof by
Landlord. No act or conduct of Landlord, including, without limitation, the
acceptance of keys to the Premises, shall constitute acceptance of the surrender
of the Premises by Tenant before the Expiration Date. Only written notice from
Landlord to Tenant of acceptance shall constitute such acceptance of surrender
of the Premises. Landlord's consent to or approval of any act by Tenant which
requires Landlord's consent or approvals shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.

      F. Performance by Landlord: If Tenant fails to perform any obligation
required under this Lease or by law or governmental regulation, Landlord in its
sole discretion may, with prior notice to Tenant, without waiving any rights or
remedies and without releasing Tenant from its obligations hereunder, perform
such obligation, in which event Tenant shall pay Landlord as additional rent all
sums paid by Landlord in connection with such substitute performance, including
interest at the Agreed Interest Rate (as defined in Section 19.J) within ten
(10) days of Landlord's written notice for such payment.

      G. Habitual Default: The provisions of Section 13 notwithstanding, the
Parties agree that if Tenant shall have defaulted in the performance of any (but
not necessarily the same) material term or condition of this Lease for four or
more times during any twelve (12) month period during the Lease Term and
Landlord shall have given Tenant notice of such default, then such conduct
shall, at the election of the Landlord, represent a separate event of default
which cannot be cured by Tenant. Tenant acknowledges that the purpose of this
provision is to prevent repetitive defaults by Tenant, which work a hardship
upon Landlord and deprive Landlord of Tenant's timely performance under this
Lease.

14. LANDLORD'S LIABILITY:

      A. Limitation on Landlord's Liability: In the event of Landlord's failure
to perform any of its covenants or agreements under this Lease, Tenant shall
give Landlord written notice of such failure and shall give Landlord thirty (30)
days to cure or commence to cure such failure prior to any claim for breach or
resultant damages, provided, however, that if the nature of the default is such
that it cannot reasonably be cured within the 30-day period, Landlord shall not
be deemed in default if it commences within such period to cure, and thereafter
diligently prosecutes the same to completion. In addition, upon any such failure
by Landlord, Tenant shall give notice by registered or certified mail to any
person or entity with a security interest in the Premises ("Mortgagee") that has
provided Tenant with notice of its interest in the Premises, and shall provide
Mortgagee a reasonable opportunity to cure such failure, including such time to
obtain possession of the Premises by power of sale or judicial foreclosure, if
such should prove necessary to effectuate a cure. Tenant agrees that each of the
Mortgagees to whom this Lease has been assigned is an expressed third-party
beneficiary hereof. Tenant waives any right under California Civil Code Section
1950.7 or any other present or future law to the collection of any payment or
deposit from Mortgagee or any purchaser at a foreclosure sale of Mortgagee's
interest unless Mortgagee or such purchaser shall have actually received and not
refunded the applicable payment or deposit. Tenant Further waives any right to
terminate this Lease and to vacate the Premises on Landlord's default under this
Lease. Tenant's sole remedy on Landlord's default is an action for damages or
injunctive or declaratory relief.

      B. Limitation on Tenant's Recourse: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity, then (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives except to
the extent of their interest in the Premises. Tenant shall have recourse only to
the interest of Landlord in the Premises or for the satisfaction of the
obligations of Landlord and shall not have recourse to any other assets of
Landlord for the satisfaction of such

                                    Page 12
<PAGE>

obligations.

      C. Indemnification of Landlord: As a material part of the consideration
rendered to Landlord, Tenant hereby waives all claims against Landlord for
damages to goods, wares and merchandise, and all other personal property in,
upon or about said Premises and for injuries to persons in or about said
Premises, from any cause arising at any time to the fullest extent permitted by
law, and Tenant shall indemnify, defend with counsel reasonably acceptable to
Landlord and hold Landlord, and their shareholders, directors, officers,
trustees, employees, partners, affiliates and agents from any claims,
liabilities, costs or expenses incurred or suffered arising from the use of
occupancy of the Premises or any part of the Project by Tenant or Tenant's
Agents, the acts or omissions of Tenant or Tenant's Agents, Tenant's breach of
this Lease, or any damage or injury to person or property from any cause, except
to the extent caused by the willful misconduct or active negligence of Landlord
or from the failure of Tenant to keep the Premises in good condition and repair
as herein provided, except to the extent due to the gross negligence or willful
misconduct of Landlord. Further, in the event Landlord is made party to any
litigation due to the acts or omission of Tenant and Tenant's Agents, Tenant
will indemnify, defend (with counsel reasonably acceptable to Landlord) and hold
Landlord harmless from any such claim or liability including Landlord's costs
and expenses and reasonable attorney's fees incurred in defending such claims.

15. DESTRUCTION OF PREMISES:

      A. Landlord's Obligation to Restore: In the event of a destruction of the
Premises during the Lease Term Landlord shall repair the same to a similar
condition to that which existed prior to such destruction. Such destruction
shall not annul or void this Lease; however, Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while repairs are being made, such
proportionate reduction to be based upon the extent to which the repairs
interfere with Tenant's business in the Premises, as reasonably determined by
Landlord. In no event shall Landlord be required to replace or restore
Alterations, Tenant Improvements paid for by Tenant from sources other than the
Work Allowance or Tenant's fixtures or personal property. With respect to a
destruction which Landlord is obligated to repair or may elect to repair under
the terms of this Section, Tenant waives the provisions of Section 1932, and
Section 1933, Subdivision 4, of the Civil Code of the State of California, and
any other similarly enacted statute, and the provisions of this Section 15 shall
govern in the case of such destruction.

      B. Limitations on Landlord's Restoration Obligation: Notwithstanding the
provisions of Section 15.A, Landlord shall have no obligation to repair, or
restore the Premises if any of the following occur: (i) if the repairs cannot be
made in one hundred eighty (180) days from the date of receipt of all
governmental approvals necessary under the laws and regulations of State,
Federal, County or Municipal authorities, as reasonably determined by Landlord,
(ii) if the holder of the first deed of trust or mortgage encumbering the
Building elects not to permit the insurance proceeds payable upon damage or
destruction to be used for such repair or restoration (unless Tenant, within 45
days after the casualty, agrees in writing to pay all costs associated with
rebuilding), (iii) the damage or destruction is not fully covered by the
insurance required to be maintained by Landlord hereunder (unless Tenant, within
45 days after the casualty, agrees in writing to contribute any shortfall), (iv)
the damage or destruction occurs in the last eighteen (18) months of the Lease
Term, (v) Tenant is in default pursuant to the provisions of Section 13, or (vi)
Tenant has vacated the Premises for more than ninety (90) days. In any such
event Landlord may elect either to (i) complete the repair or restoration, or
(ii) terminate this Lease by providing Tenant written notice of its election
within sixty (60) days following the damage or destruction. Tenant shall also
have the right to terminate this Lease in the event of either (i) or (iv) above,
by providing Landlord with written notice of its election to do so within thirty
(30) days following the damage or destruction.

16. CONDEMNATION: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and only a part thereof remains which is susceptible
of occupation hereunder, this Lease shall, as to the part so taken, terminate as
of the day before title vests in the condemnor or purchaser ("Vesting Date") and
Base Monthly Rent payable hereunder shall be adjusted so that Tenant is required
to pay for the remainder of the Lease Term only such portion of Base Monthly
Rent as the value of the part remaining after such taking bears to the value of
the entire Premises prior to such taking. Further, in the event of such partial
taking, Landlord shall have the option to terminate this Lease as of the Vesting
Date. If all of the Premises or such part thereof be taken so that there does
not remain a portion susceptible for occupation hereunder, this Lease shall
terminate on the Vesting Date. If part or all of the Premises be taken, all
compensation awarded upon such taking shall go to Landlord, and Tenant shall
have no claim thereto; except Landlord shall cooperate with Tenant, without cost
to Landlord, to recover compensation for damage to or taking of any Alterations,
Tenant Improvements paid for by Tenant from sources other than the Work
Allowance, or for Tenant's moving costs. Tenant hereby waives the provisions of
California Code of Civil Procedures Section 1265.130 and any other

                                    Page 13
<PAGE>

similarly enacted statue, and the provisions of this Section 16 shall govern in
the case of a taking. Nothing contained herein shall be deemed or construed to
prevent Tenant from interposing and prosecuting in any condemnation proceedings,
a claim for the value of any fixtures or improvements installed in, or made to
the Premises by Tenant, or for its costs of moving or loss of business by reason
of such condemnation. Notwithstanding anything to the contrary set forth in this
Section, in the event that Tenant's leasehold estate only shall be so taken or
appropriated, and the taking or appropriation shall be for a period of less than
the balance of the Lease Term, this Lease shall continue in full force and
effect, Tenant shall receive any award or consideration paid by the condemning
or appropriating authority, and Tenant shall continue to pay Landlord all sums
due under this Lease.

17. ASSIGNMENT OR SUBLEASE:

      A. Consent by Landlord: Except as specifically provided in this Section
17.E, Tenant may not assign, sublet, hypothecate, or allow a third party to use
the Premises without the express written consent of Landlord, which shall not be
unreasonably withheld, delayed or conditioned. In the event Tenant desires to
assign this Lease or any interest herein or sublet the Premises or any part
thereof, Tenant shall deliver to Landlord (i) executed counterparts of any
agreement and of all ancillary agreements with the proposed assignee/subtenant,
(ii) current financial statements of the transferee covering the preceding three
years (if available), (iii) the nature of the proposed transferee's business to
be carried on in the Premises, (iv) a statement outlining all consideration to
be given on account of the Transfer, and (v) a current financial statement of
Tenant. Landlord may condition its approval of any Transfer on receipt of a
certification from both Tenant and the proposed transferee of all consideration
to be paid to Tenant in connection with such Transfer. At Landlord's request,
Tenant shall also provide additional information reasonably required by Landlord
to determine whether it will consent to the proposed assignment or sublease.
Landlord shall have a ten (10) day period following receipt of all the foregoing
within which to notify Tenant in writing that Landlord elects to: (i) permit
Tenant to assign or sublet such space to the named assignee/subtenant on the
terms and conditions set forth in the notice; or (ii) refuse consent. If
Landlord should fail to notify Tenant in writing of such election within the
10-day period, Landlord shall be deemed to have elected option (ii) above. In
the event Landlord elects option (ii) above, Landlord's written consent to the
proposed assignment or sublease shall not be unreasonably withheld, provided and
upon the condition that: (i) the proposed assignee or subtenant is engaged in a
business that is limited to the use expressly permitted under this Lease; (ii)
the proposed assignee or subtenant is a company with sufficient financial worth
and management ability to undertake the financial obligation of this Lease and
Landlord has been furnished with reasonable proof thereof; (iii) the proposed
assignment or sublease is in form reasonably satisfactory to Landlord; (iv)
Tenant reimburses Landlord on demand for any reasonable costs that may be
incurred by Landlord in connection with said assignment or sublease, including
the costs of making investigations as to the acceptability of the proposed
assignee or subtenant and legal costs incurred in connection with the granting
of any requested consent (not to exceed $6,000.00); and (vi) Tenant shall not
have advertised or publicized in any way the availability of the Premises
without prior notice to Landlord. In the event all or any one of the foregoing
conditions are not satisfied, Landlord shall be considered to have acted
reasonably if it withholds its consent.

      B. Assignment or Subletting Consideration: Any rent or other economic
consideration realized by Tenant under any sublease and assignment, in excess of
the Base Monthly Rent payable hereunder and reasonable subletting and assignment
costs, and after deduction of the unamortized cost of Tenant Improvements not
paid for out of the Work Allowance, shall be divided and paid fifty percent
(50%) to Landlord and fifty percent (50%) to Tenant. Tenant's obligation to pay
over Landlord's portion of the consideration constitutes an obligation for
additional rent hereunder. The above provisions relating to the allocation of
excess rent are independently negotiated terms of the Lease which constitute a
material inducement for the Landlord to enter into the Lease, and are agreed by
the Parties to be commercially reasonable. No assignment or subletting by Tenant
shall relieve it of any obligation under this Lease. Any assignment or
subletting which conflicts with the provisions hereof shall be void.

      C. No Release: Any assignment or sublease shall be made only if and shall
not be effective until the assignee or subtenant shall execute, acknowledge, and
deliver to Landlord an agreement, in form and substance reasonably satisfactory
to Landlord, whereby the assignee or subtenant shall assume all the obligations
of this Lease on the part of Tenant to be performed or observed and shall be
subject to all the covenants, agreements, terms, provisions and conditions in
this Lease. Notwithstanding any such sublease or assignment and the acceptance
of rent by Landlord from any subtenant or assignee, Tenant and any guarantor
shall remain fully liable for the payment of Base Monthly Rent and additional
rent due, and to become due hereunder, for the performance of all the covenants,
agreements, terms, provisions and conditions contained in this Lease on the part
of Tenant to be performed and for all acts and omissions of any licensee,
subtenant, assignee or any other person claiming under or through any

                                    Page 14
<PAGE>

subtenant or assignee that shall be in violation of any of the terms and
conditions of this Lease, and any such violation shall be deemed a violation by
Tenant. Tenant shall indemnify, defend and hold Landlord harmless from and
against all losses, liabilities, damages, costs and expenses (including
reasonable attorney fees) resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any real estate brokers or
other persons claiming compensation in connection with the proposed assignment
or sublease.

      D. Reorganization of Tenant: The provisions of this Section 17.D shall
apply if Tenant is a corporation and: (i) there is a dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, where Tenant is
not the surviving corporation, or (ii) there is a sale or transfer to one person
or entity (or to any group of related persons or entities) of stock possessing
more than 50% of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding and entitled to vote for the election of
directors, and after such sale or transfer of stock Tenant's stock is no longer
publicly traded. In a transaction under clause (i) the surviving corporation
shall promptly execute and deliver to Landlord an agreement in form reasonably
satisfactory to Landlord under which such surviving corporation assumes the
obligations of Tenant hereunder, and in a transaction under clause (ii) the
transferee or buyer shall promptly execute and deliver to Landlord an agreement
in form reasonably satisfactory to Landlord under which such transferee or buyer
assumes the obligations of Tenant under the Lease.

      E. Permitted Transfers: Notwithstanding anything contained in this Section
17, so long as Tenant otherwise complies with the provisions of this Article,
Tenant may enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior consent, and Landlord shall not be entitled to
terminate the Lease or to receive any part of any subrent resulting therefrom
that would otherwise be due pursuant to Sections 17.A and 17.B. Tenant may
sublease all or part of the Premises or assign its interest in this Lease to (i)
any corporation which controls, is controlled by, or is under common control
with the original Tenant to this Lease by means of an ownership interest of more
than 50%; (ii) a corporation which results from a merger, consolidation or other
reorganization in which Tenant: (a) is the surviving corporation; or (b) is not
the surviving corporation, so long as the surviving corporation has a net worth
at the time of such assignment that is equal to or greater than the net worth of
Tenant immediately prior to such transaction; and (iii) a corporation which
purchases or otherwise acquires all or substantially all of the assets of Tenant
so long as such acquiring corporation has a net worth at the time of such
assignment that is equal to or greater than the net worth of Tenant immediately
prior to such transaction.

      F. Effect of Default: In the event of Tenant's default, Tenant hereby
assigns all rents due from any assignment or subletting to Landlord as security
for performance of its obligations under this Lease, and Landlord may collect
such rents as Tenant's Attorney-in-Fact, except that Tenant may collect such
rents unless a default occurs as described in Section 13 above. A termination if
the Lease due to Tenant's default shall not automatically terminate an
assignment or sublease then in existence; rather at Landlord's election, such
assignment or sublease shall survive the Lease termination, the assignee or
subtenant shall attorn to Landlord, and Landlord shall undertake the obligations
of Tenant under the sublease or assignment; except that Landlord shall not be
liable for prepaid rent, security deposits or other defaults of Tenant to the
subtenant or assignee, or for any acts or omissions of Tenant and Tenant's
Agents.

      G. Conveyance by Landlord: As used in this Lease, the term "Landlord" is
defined only as the owner for the time being of the Premises, so that in the
event of any sale or other conveyance of the Premises or in the event of a
master lease of the Premises, Landlord shall be entirely freed and relieved of
all its covenants and obligations hereunder, and it shall be deemed and
construed, without further agreement between the Parties and the purchaser at
any such sale or the master tenant of the Premises, that the purchaser or master
tenant of the Premises has assumed and agreed to carry out any and all covenants
and obligations of Landlord hereunder. Such transferor shall transfer and
deliver Tenant's security deposit and any other prepaid sums to the purchaser at
any such sale or the master tenant of the Premises, and thereupon the transferor
shall be discharged from any further liability in reference thereto.

      F. Successors and Assigns: Subject to the provisions this Section 17, the
covenants and conditions of this Lease shall apply to and bind the heirs,
successors, executors, administrators and assigns of all Parties hereto; and all
Parties hereto comprising Tenant shall be jointly and severally liable
hereunder.

18. OPTION TO EXTEND THE LEASE TERM:

      A. Grant and Exercise of Option: Landlord grants to Tenant, subject to the
terms and conditions set forth in this Section 18.A, two (2) options (the
"Options") to extend the Lease Term for an additional term (each an "Option
Term"). Each Option Term shall be for a period of sixty (60) months and shall be
exercised, if at all, by written notice to Landlord no earlier than eighteen
(18) months prior to the date the Lease Term would expire but for such exercise
but no later than twelve

                                    Page 15
<PAGE>

(12) months prior to the date the Lease Term would expire but for such exercise,
time being of the essence for the giving of such notice. If Tenant exercises the
Option, all of the terms, covenants and conditions of this Lease except for the
grant of additional Options pursuant to this Section, provided that Base Monthly
Rent for the Premises payable by Tenant during the Option Term shall be the
greater of (i) the Base Monthly Rent applicable to the period immediately prior
to the commencement of the Option Term, and (ii) ninety five percent (95%) of
the Fair Market Rental as hereinafter defined. Notwithstanding anything herein
to the contrary, if Tenant is in monetary or material non-monetary default under
any of the terms, covenants or conditions of this Lease either at the time
Tenant exercises the Option or at any time thereafter prior to the commencement
date of the Option Term, Landlord shall have, in addition to all of Landlord's
other rights and remedies provided in this Lease, the right to terminate the
Option upon notice to Tenant, in which event the Lease Term shall not be
extended pursuant to this Section 18.A. As used herein, the term "Fair Market
Rental" is defined as the rental and all other monetary payments, including any
escalations and adjustments thereto (including without limitation Consumer Price
Indexing) that Landlord could obtain during the Option Term from a third party
desiring to lease the Premises, based upon an office/R&D use of the Premises, as
determined by the rents then being obtained for new leases of space comparable
in age and quality to the Premises in the same real estate submarket in Fremont
as the Building. The appraisers shall be instructed that: (1) the foregoing five
percent (5%) discount is intended to offset comparable rents that include the
following costs which Landlord will not incur in the event Tenant exercises its
option (i) brokerage commissions, (ii) tenant improvement allowances, (iii)
building improvement costs, and (iv) vacancy costs; and (2) no premium shall be
factored in or value attributed for Tenant's specialized laboratory and
manufacturing improvements, but rather those areas of the Premises shall be
assumed as general office improvements for the purposes of appraisal.

      B. Determination of Fair Market Rental: If Tenant exercises the Option,
Landlord shall send Tenant a notice setting forth the Fair Market Rental for the
Option Term within thirty (30) days following the Exercise Date. If Tenant
disputes Landlord's determination of Fair Market Rental for the Option Term,
Tenant shall, within thirty (30) days after the date of Landlord's notice
setting forth Fair Market Rental for the Option Term, send to Landlord a notice
stating that Tenant either elects to terminate its exercise of the Option, in
which event the Option shall lapse and this Lease shall terminate on the
Expiration Date, or that Tenant disagrees with Landlord's determination of Fair
Market Rental for the Option Term and elects to resolve the disagreement as
provided in Section 18.C below. If Tenant does not send Landlord a notice as
provided in the previous sentence, Landlord's determination of Fair Market
Rental shall be the Base Monthly Rent payable by Tenant during the Option Term.
If Tenant elects to resolve the disagreement as provided in Section 18.C and
such procedures are not concluded prior to the commencement date of the Option
Term, Tenant shall pay to Landlord as Base Monthly Rent the Fair Market Rental
as determined by Landlord in the manner provided above. If the Fair Market
Rental as finally determined pursuant to Section 18.C is greater than Landlord's
determination, Tenant shall pay Landlord the difference between the amount paid
by Tenant and the Fair Market Rental as so determined in Section 18.C within
thirty (30) days after such determination. If the Fair Market Rental as finally
determined in Section 18.C is less than Landlord's determination, the difference
between the amount paid by Tenant and the Fair Market Rental as so determined in
Section 18.C shall be credited against the next installments of Base Monthly
Rent due from Tenant to Landlord hereunder.

      C. Resolution of a Disagreement over the Fair Market Rental: Any
disagreement regarding Fair Market Rental shall be resolved as follows:

            1. Within thirty (30) days after Tenant's response to Landlord's
notice setting forth the Fair Market Rental, Landlord and Tenant shall meet at a
mutually agreeable time and place, in an attempt to resolve the disagreement.

            2. If within the 30-day period referred to above, Landlord and
Tenant cannot reach agreement as to Fair Market Rental, each party shall select
one appraiser to determine Fair Market Rental. Each such appraiser shall arrive
at a determination of Fair Market Rental and submit their conclusions to
Landlord and Tenant within thirty (30) days after the expiration of the 30-day
consultation period described above.

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

            4. All appraisers specified pursuant to this Section shall be
members of the American Institute of Real Estate Appraisers with not less than
ten (10)

                                    Page 16
<PAGE>

years experience appraising office and industrial properties in the Santa Clara
Valley. Each party shall pay the cost of the appraiser selected by such party
and one-half of the cost of the third appraiser.

      D. Personal to Tenant: All Options provided to Tenant in this Lease are
personal and granted to Abgenix, Inc. and are not exercisable by any third party
(other than a third party resulting from a Permitted Transfer) should Tenant
assign or sublet all or a portion of its rights under this Lease, unless
Landlord consents to permit exercise of any option by any assignee or subtenant,
in Landlord's sole and absolute discretion. In the event Tenant has multiple
options to extend this Lease, a later option to extend the Lease cannot be
exercised unless the prior option has been properly exercised.

19. GENERAL PROVISIONS:

      A. Attorney's Fees: In the event a suit or alternative form of dispute
resolution is brought for the possession of the Premises, for the recovery of
any sum due hereunder, to interpret the Lease, or because of the breach of any
other covenant herein; then the losing party shall pay to the prevailing party
reasonable attorney's fees including the expense of expert witnesses,
depositions and court testimony as part of its costs which shall be deemed to
have accrued on the commencement of such action. The prevailing party shall also
be entitled to recover all costs and expenses including reasonable attorney's
fees incurred in enforcing any judgment or award against the other party. The
foregoing provision relating to post-judgment costs is severable from all other
provisions of this Lease.

      B. Authority of Parties: Tenant represents and warrants that it is duly
formed and in good standing, and is duly authorized to execute and deliver this
Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with
the by-laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. At Landlord's request, Tenant shall
provide Landlord with corporate resolutions or other proof in a form acceptable
to Landlord, authorizing the execution of the Lease.

      C. Brokers: Tenant represents it has not utilized or contacted a real
estate broker or finder with respect to this Lease other than CRESA Partners and
Tenant agrees to indemnify, defend and hold Landlord harmless against any claim,
cost, liability or cause of action asserted by any other broker or finder
claiming through Tenant. Landlord agrees that it will be responsible for all
real estate fees or commissions due to CRESA Partners pursuant to a separate
agreement between Landlord and CRESA Partners. Landlord agrees to indemnify,
defend and hold Tenant harmless against any claim, cost, liability or cause of
action asserted by any other broker or finder claiming through Landlord.

      D. Choice of Law: This Lease shall be governed by and construed in
accordance with California law. Except as provided in Section 19.E, venue shall
be Santa Clara County.

      E. Dispute Resolution: Landlord and Tenant and any other party that may
become a party to this Lease or be deemed a party to this Lease including any
subtenants agree that, except for any claim by Landlord for unlawful detainer or
any claim within the jurisdiction of the small claims court (which small claims
court shall be the sole court of competent jurisdiction), any controversy,
dispute, or claim of whatever nature arising out of, in connection with or in
relation to the interpretation, performance or breach of this Lease, including
any claim based on contract, tort, or statute, shall be resolved at the request
of any party to this agreement through a two-step dispute resolution process
administered by J.A.M.S. or another judicial mediation service mutually
acceptable to the parties located in Santa Clara County, California. The dispute
resolution process shall involve first, mediation, followed, if necessary, by
final and binding arbitration administered by and in accordance with the then
existing rules and practices of J.A.M.S. or other judicial mediation service
selected. In the event of any dispute subject to this provision, either party
may initiate a request for mediation and the parties shall use reasonable
efforts to promptly select a J.A.M.S. mediator and commence the mediation. In
the event the parties are not able to agree on a mediator within thirty (30)
days, J. A. M. S. or another judicial mediation service mutually acceptable to
the parties shall appoint a mediator. The mediation shall be confidential and in
accordance with California Evidence Code ss. 1119 et. seq. The mediation shall
be held in Santa Clara County, California and in accordance with the existing
rules and practice of J. A. M. S. (or other judicial and mediation service
selected). The parties shall use reasonable efforts to conclude the mediation
within sixty (60) days of the date of either party's request for mediation. The
mediation shall be held prior to any arbitration or court action (other than a
claim by Landlord for unlawful detainer or any claim within the jurisdiction of
the small claims court which are not subject to this mediation/arbitration
provision and may be filed directly with a court of competent jurisdiction).
Should the prevailing party in any dispute subject to this Section 19.E attempt
an arbitration or a court action before attempting to mediate, the prevailing
party shall not be entitled to attorney's fees that might otherwise be available
to them in a court action or arbitration and in addition thereto, the party who
is determined by the arbitrator to have resisted mediation, shall be sanctioned
by the arbitrator or judge.

                                    Page 17
<PAGE>

IF A MEDIATION IS CONDUCTED BUT IS UNSUCCESSFUL, IT SHALL BE FOLLOWED BY FINAL
AND BINDING ARBITRATION ADMINISTERED BY AND IN ACCORDANCE WITH THE THEN EXISTING
RULES AND PRACTICES OF J.A.M.S. OR THE OTHER JUDICIAL AND MEDIATION SERVICE
SELECTED, AND JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR(S) MAY BE
ENTERED BY ANY STATE OR FEDERAL COURT HAVING JURISDICTION THEREOF AS PROVIDED BY
CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET. SEQ, AS SAID STATUTES THEN
APPEAR, INCLUDING ANY AMENDMENTS TO SAID STATUTES OR SUCCESSORS TO SAID STATUTES
OR AMENDED STATUTES, EXCEPT THAT IN NO EVENT SHALL THE PARTIES BE ENTITLED TO
PROPOUND INTERROGATORIES OR REQUEST FOR ADMISSIONS DURING THE ARBITRATION
PROCESS. THE ARBITRATOR SHALL BE A RETIRED JUDGE OR A LICENSED CALIFORNIA
ATTORNEY. THE VENUE FOR ANY SUCH ARBITRATION OR MEDIATION SHALL BE IN SANTA
CLARA COUNTY, CALIFORNIA.

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED
IN A COURT OR fURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES" PROVISION.
IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY
BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "MEDIATION AND ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.

LANDLORD:  ______      TENANT:  _______

      F. Entire Agreement: This Lease and the exhibits attached hereto contains
all of the agreements and conditions made between the Parties hereto and may not
be modified orally or in any other manner other than by written agreement signed
by all parties hereto or their respective successors in interest. This Lease
supersedes and revokes all previous negotiations, letters of intent, lease
proposals, brochures, agreements, representations, promises, warranties, and
understandings, whether oral or in writing, between the parties or their
respective representatives or any other person purporting to represent Landlord
or Tenant.

      G. Entry by Landlord: Upon prior notice to Tenant and subject to Tenant's
reasonable security regulations, Tenant shall permit Landlord and his agents to
enter into and upon the Premises at all reasonable times, and without any rent
abatement or reduction or any liability to Tenant for any loss of occupation or
quiet enjoyment of the Premises thereby occasioned, for the following purposes:
(i) inspecting and maintaining the Premises; (ii) making repairs, alterations or
additions to the Premises; (iii) erecting additional building(s) and
improvements on the land where the Premises are situated or on adjacent land
owned by Landlord; (iv) performing any obligations of Landlord under the Lease
including remediation of Hazardous Materials if determined to be the
responsibility of Landlord, (v) posting and keeping posted thereon notices of
non-responsibility for any construction, alteration or repair thereof, as
required or permitted by any law, and (vi) showing the Premises to Landlord's or
the Master Landlord's existing or potential successors, purchaser, tenants and
lenders. Tenant shall permit Landlord and his agents, at any time within one
hundred eighty (180) days prior to the Expiration Date (or at any time during
the Lease if Tenant is in default hereunder), to place upon the Premises "For
Lease" signs and exhibit the Premises to real estate brokers and prospective
tenants at reasonable hours. Landlord's right pursuant to this Paragraph 19.F.
shall be subject to the condition that exercise of any of such rights shall not
unreasonably interfere with Tenant's use of the Premises.

      H. Estoppel Certificates: At any time during the Lease Term, Tenant shall,
within ten (10) days following written notice from Landlord, execute and deliver
to Landlord a written statement certifying, if true, the following: (i) that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification); (ii) the date to which rent and other charges
are paid in advance, if any; (iii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on Landlord's part hereunder (or specifying such
defaults if they are claimed); and (iv) such other information as Landlord may
reasonably request. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of Landlord's interest in the Premises.
Tenant's failure

                                    Page 18
<PAGE>

to deliver such statement within such time shall be conclusive upon the Tenant
that this Lease is in full force and effect without modification, except as may
be represented by Landlord, and that there are no uncured defaults in Landlord's
performance. Tenant agrees to provide, within five (5) business days of
Landlord's request, Tenant's most recent three (3) years of audited financial
statements (if available) for Landlord's use in financing or sale of the
Premises or Landlord's interest therein.

      I. Exhibits: All exhibits referred to are attached to this Lease and
incorporated by reference.

      J. Interest: All rent due hereunder, if not paid when due, shall bear
interest at the rate of the Reference Rate published by Bank of America, San
Francisco Branch, plus two percent (2%) per annum from that date until paid in
full ("Agreed Interest Rate"). This provision shall survive the expiration or
sooner termination of the Lease. Despite any other provision of this Lease, the
total liability for interest payments shall not exceed the limits, if any,
imposed by the usury laws of the State of California. Any interest paid in
excess of those limits shall be refunded to Tenant by application of the amount
of excess interest paid against any sums outstanding in any order that Landlord
requires. If the amount of excess interest paid exceeds the sums outstanding,
the portion exceeding those sums shall be refunded in cash to Tenant by
Landlord. To ascertain whether any interest payable exceeds the limits imposed,
any non-principal payment (including late charges) shall be considered to the
extent permitted by law to be an expense or a fee, premium, or penalty rather
than interest.

      K. Modifications Required by Lender: If any lender of Landlord or ground
lessor of the Premises requires a modification of this Lease that will not
increase Tenant's cost or expense or materially or adversely change Tenant's
rights and obligations, this Lease shall be so modified and Tenant shall execute
whatever documents are required and deliver them to Landlord within ten (10)
business days after the request.

      L. No Presumption Against Drafter: Landlord and Tenant understand, agree
and acknowledge that this Lease has been freely negotiated by both Parties; and
that in any controversy, dispute, or contest over the meaning, interpretation,
validity, or enforceability of this Lease or any of its terms or conditions,
there shall be no inference, presumption, or conclusion drawn whatsoever against
either party by virtue of that party having drafted this Lease or any portion
thereof.

      M. Notices: All notices, demands, requests, or consents required to be
given under this Lease shall be sent in writing by U.S. certified mail, return
receipt requested, or by personal delivery addressed to the party to be notified
at the address for such party specified in Section 1 of this Lease, or to such
other place as the party to be notified may from time to time designate by at
least fifteen (15) days prior notice to the notifying party. When this Lease
requires service of a notice, that notice shall replace rather than supplement
any equivalent or similar statutory notice, including any notices required by
Code of Civil Procedure Section 1161 or any similar or successor statute. When a
statute requires service of a notice in a particular manner, service of that
notice (or a similar notice required by this Lease) shall replace and satisfy
the statutory service-of-notice procedures, including those required by Code of
Civil Procedure Section 1162 or any similar or successor statute.

      N. Property Management: In addition, Tenant agrees to pay Landlord along
with the expenses to be reimbursed by Tenant a monthly fee for management
services rendered by either Landlord or a third party manager engaged by
Landlord (which may be a party affiliated with Landlord), in the amount of four
percent (4%) of the Base Monthly Rent.

      O. Rent: All monetary sums due from Tenant to Landlord under this Lease,
including, without limitation those referred to as "additional rent", shall be
deemed as rent.

      P. Representations: Tenant acknowledges that neither Landlord nor any of
its employees or agents have made any agreements, representations, warranties or
promises with respect to the Premises or with respect to present or future
rents, expenses, operations, tenancies or any other matter. Except as herein
expressly set forth herein, Tenant relied on no statement of Landlord or its
employees or agents for that purpose.

      Q. Rights and Remedies: Subject to Section 14 above, All rights and
remedies hereunder are cumulative and not alternative to the extent permitted by
law, and are in addition to all other rights and remedies in law and in equity.

      R. Severability: If any term or provision of this Lease is held
unenforceable or invalid by a court of competent jurisdiction, the remainder of
the Lease shall not be invalidated thereby but shall be enforceable in
accordance with its terms, omitting the invalid or unenforceable term.

      S. Submission of Lease: Submission of this document for examination or
signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in favor
of Tenant. This document is not effective as a lease or otherwise until executed
and delivered by both Landlord and Tenant.

                                    Page 19
<PAGE>

      T. Subordination: This Lease is subject and subordinate to ground and
underlying leases, mortgages and deeds of trust (collectively "Encumbrances")
which may now affect the Premises, to any covenants, conditions or restrictions
of record, and to all renewals, modifications, consolidations, replacements and
extensions thereof; provided, however, if the holder or holders of any such
Encumbrance ("Holder") require that this Lease be prior and superior thereto,
within seven (7) days after written request of Landlord to Tenant, Tenant shall
execute, have acknowledged and deliver all documents or instruments, in the form
presented to Tenant, which Landlord or Holder deems necessary or desirable for
such purposes. Landlord shall have the right to cause this Lease to be and
become and remain subject and subordinate to any and all Encumbrances which are
now or may hereafter be executed covering the Premises or any renewals,
modifications, consolidations, replacements or extensions thereof, for the full
amount of all advances made or to be made thereunder and without regard to the
time or character of such advances, together with interest thereon and subject
to all the terms and provisions thereof; provided only, that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, Holder agrees to recognize Tenant's rights under this Lease as
long as Tenant is not then in default and continues to pay Base Monthly Rent and
additional rent and observes and performs all required provisions of this Lease.
Within ten (10) days after Landlord's written request, Tenant shall execute any
documents reasonably required by Landlord or the Holder to make this Lease
subordinate to any lien of the Encumbrance. If Tenant fails to do so, then in
addition to such failure constituting a default by Tenant, it shall be deemed
that this Lease is so subordinated to such Encumbrance. Notwithstanding anything
to the contrary in this Section, Tenant hereby attorns and agrees to attorn to
any entity purchasing or otherwise acquiring the Premises at any sale or other
proceeding or pursuant to the exercise of any other rights, powers or remedies
under such encumbrance, provided only that such entity agrees to recognize this
Lease. As of the Effective Date, there is no lender on the Premises.

      U. Survival of Indemnities: All indemnification, defense, and hold
harmless obligations of Landlord and Tenant under this Lease shall survive the
expiration or sooner termination of the Lease.

      V. Time: Time is of the essence hereunder.

      W. Waiver of Right to Jury Trial: Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.

                                    Page 20
<PAGE>

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

Landlord:  Ardenwood Corporate Park Associates, Tenant:  Abgenix, Inc.
a California Limited Partnership                         a Delaware Corporation

By:  _____________________________              * By:  _________________________

Its:  _____________________________              Its:  _________________________

                                                * By:  _________________________

                                                 Its:  _________________________

* NOTE: This lease must be signed by two (2) officers of such corporation: one
being the chairman of the board, the president, or a vice president, and the
other being the secretary, an assistant secretary, the chief financial officer
or an assistant treasurer. If one (1) individual is signing in two (2) of the
foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer and in such event, Tenant must deliver to Landlord a
certified copy of a corporate resolution authorizing the signatory to execute
this Lease.

                                    Page 21
<PAGE>

                        EXHIBIT "A" - Premises & Building

                                    Page 22
<PAGE>

                          EXHIBIT "A-1" - New Site Plan

                                    Page 23
<PAGE>

                      EXHIBIT "B" - Draft Letter of Credit

                                    Page 24
<PAGE>

                  EXHIBIT "C" - Shell Plans and Specifications

           (reference attached plans prepared by ArcTec dated 4/15/98)

                                    Page 25
<PAGE>

            EXHIBIT "D" - Tenant Improvement Plans and Specifications
                        (sheet references to be attached)

                                    Page 26
<PAGE>

                     EXHIBIT "E" - Hazardous Materials List

                                    Page 27

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