Document:

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                                                                    Exhibit 10.8

                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

            STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
               (DO NOT USE THIS FORM FOR MULTI-TENANT PROPERTY)

1.   BASIC PROVISIONS ("BASIC PROVISIONS")

     1.1  PARTIES: This Lease ("LEASE"), dated for reference purposes only,
February 26, 1999, is made by and between PlyProperties, a partnership
-----------------                         ----------------------------
("LESSOR") and TheraSense Inc., a California corporation ("LESSEE"),
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(collectively the "PARTIES", or individually a "PARTY").

     1.2  PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 1360-1380 South Loop Road, Alameda located in the
                               ----------------------------------
County of Alameda State of California and generally described as (describe
          -------          ----------
briefly the nature of the property) that certain 7.5 acre real property, shown
                                    ------------------------------------------
outlined in red on Exhibit "A" hereto, together with the improvements thereon
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which presently include a 54,475 square foot, one-story manufacturing/R & D
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industrial building ("PREMISES"). (See Paragraph 2 for further provisions.)
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     1.3  TERM: Ten (10) years and 0 months ("ORIGINAL TERM") commencing May 1,
                --------           -                                     ------
1999 ("COMMENCEMENT DATE") and ending April 30, 2009 ("EXPIRATION DATE"). (See
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Paragraph 3 for further provisions.)

     1.4  EARLY POSSESSION: see paragraph 49.c. ("EARLY POSSESSION DATE"). (See
                            -------------------
Paragraphs 3.2 and 3.3 for further provisions.)

     1.5  BASE RENT: $ 62,500.00 per month ("BASE RENT"), payable on the first
                       ---------                                         -----
day of each month commencing May 1, 1999 (commencement date of Lease) See also
                             -------------------------------------------------
paragraph 49.c. (See Paragraph 4 for further provisions.) [X] If this box is
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checked, there are provisions in this Lease for the Base Rent to be adjusted.

     1.6  BASE RENT PAID UPON EXECUTION: $0 as Base Rent for the period_________
_______________________________________________________________________________.

     1.7  SECURITY DEPOSIT: $ 62,500.00 ("SECURITY DEPOSIT"). (See Paragraph 5
                              ---------
for further provisions.)

     1.8  PERMITTED USE: Corporate administration, sales, research and
                         ---------------------------------------------
development, and sensor manufacturing, and related uses (See Paragraph 6 for
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further provisions.)

     1.9  INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise stated
herein. (See Paragraph 8 for further provisions.)
<PAGE>

     1.10 REAL ESTATE BROKERS: The following real estate brokers (collectively,
the "BROKERS") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes): John H. McManus, Grubb &
                                                      ------------------------
Ellis represents [_] Lessor exclusively ("LESSOR'S BROKER"); [X] both Lessor and
-----
Lessee, and __________________________________________________________________
represents [_] Lessee exclusively ("LESSEE'S BROKER"); [X] both Lessee and
Lessor. (See Paragraph 15 for further provisions.)

     1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by _________________________________________________ ("GUARANTOR").
(See Paragraph 37 for further provisions.)

     1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 63 and Exhibits "A", "B" (4 pages), and "C" all of which
           --         --              ---  ----------------------
constitute a part of this Lease.

2.   PREMISES.

     2.1  LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental, is an approximation which Lessor and
Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.

     2.2  CONDITION. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a non-
compliance with said warranty exists as of the Commencement Date, Lessor shall,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense.

     2.3  COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense.

     2.4  ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.

3.   TERM.

     3.1  TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
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     3.2  EARLY POSSESSION.

                                 See paragraph 49.c.

                                                Initials /s/ Signature Illegible

NET                                           PAGE 1     /s/ Signature Illegible

(C) 1990 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION       FORM 204N-R-12/91
<PAGE>

     3.3  DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. See paragraph 49.

4.   RENT. See also paragraph 50.

     4.1  BASE RENT. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.

5.   SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee is in
breach under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount
due Lessor or to reimburse or compensate Lessor for any liability, cost,
expense, loss or damage (including attorney's fees) which Lessor may suffer or
incur by reason thereof. If Lessor uses or applies all or any portion of said
Security Deposit, Lessee shall within ten (10) days after written request
therefor deposit moneys with Lessor sufficient to restore said Security Deposit
to the full amount required by this Lease. shall not be required to keep all or
any part of the Security Deposit separate from its general accounts. Lessor
shall, at the expiration or earlier termination of the term hereof and after
has vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.

See also paragraph 57.

6.   USE.

     6.1  USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the improvements on
the Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days give a written notification
of same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use. See para. 58.

     6.2  HAZARDOUS SUBSTANCES. See also paragraphs 53 and 59.

          (a)  REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect is either: (i)
potentially injurious to the public health, safety
<PAGE>

or welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to asbestor
containing materials hydrocarbons, petroleum, gasoline, crude oil or any
products, by-products or fractions thereof. Lessee shall not engage in any
activity in, on or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances and compliance in a timely manner
(at Lessee's sole cost and expense) with all Applicable Law (as defined in
Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering of occupying the Premises or
neighboring properties. Lessee may, without Lessor's prior consent, but in
compliance with all Applicable Law, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of Lessee's
business permitted on the Premises,

          (b)  DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Premises, in
violation of Applicable Requirement, Lessee shall immediately give written
notice of such fact to Lessor. Lessee shall also immediately give Lessor a copy
of any statement, report, notice, registration, application, permit, business
plan, license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.

          (c)  INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, tenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance released or emitted onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.

     6.3  LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provide in the
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, relating in any
manner to the Premises excluding changes required to the foundation sidewalls on
roof (including but not limited to matters pertaining to (i) industrial hygiene,
(ii) environmental conditions on, in, under or about the Premises, including
soil and groundwater conditions, and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill
or release of any Hazardous Substance or storage tank), now in effect or which
may hereafter come into effect, and whether or not reflecting a change in policy
from any previously existing policy. Lessee shall, within five (5) days after
receipt of Lessor's written request, provide Lessor with copies of all documents
and information, including, but not limited to, permits, registrations,
manifests, applications, reports and certificates, evidencing Lessee's
compliance with any Applicable Law specified by Lessor, and shall immediately
upon receipt, notify Lessor in writing (with copies of any documents involved)
of any threatened or actual
<PAGE>

claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Law.

     6.4  INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent or
contamination. In any such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.

7.   MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERNATIONS.

     7.1  LESSEE'S OBLIGATIONS.

          (a)  Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as
to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc),

                                               Initials /s/ Signature Illegible

                                                        /s/ Signature Illegible
<PAGE>

7.2  (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, and non-structural (whether or not such portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, without limiting the generality of the foregoing,
all equipment or facilities serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire sprinkler and/or standpipe and hose or other
automatic fire extinguishing system, including fire alarm and/or smoke detection
systems and equipment, fire hydrants, fixtures, walls (interior and exterior),
but excluding structural repairs required of foundations and sidewalls
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foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights
landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks
and parkways located in, on, about, or adjacent to the Promises. Lessee shall
not cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including through the plumbing or sanitary sewer
system) and shall promptly, at Lessee's expense; take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises, the elements surrounding same, or
neighboring properties, that was caused or materially contributed to by Lessee,
or pertaining to or involving any Hazardous Substance and/or storage tank
brought onto the Premises by or for Lessee or under its control. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair. If Lessee occupies the Premises for seven (7) years or more, Lessor may
require Lessee to repaint the exterior of the buildings on the Premises as
reasonably required, but not more frequently than once every seven (7) years.

          (b)  Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.

     7.2  LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof except that Lessor shall perform structural repairs
required of the foundations and sidewalls. It is the intention of the Parties
that the terms of this Lease govern the respective obligations of the Parties as
to maintenance and repair of the Premises Lessee and Lessor expressly waive the
benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease with respect to, or which affords
Lessee the right to make repairs at the expense of Lessor or to terminate this
Lease by reason of any needed repairs.

     7.3  UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

          (a)  DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
is used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on
<PAGE>

or about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERNATIONS" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alternations and/or Utility Installations made by lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a) Lessee shall not make any Alternations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof), as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000.

          (b)  CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $25,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.

          (c)  INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.

     7.4  OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.

          (a)  OWNERSHIP. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.

          (b)  REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been
<PAGE>

consented to by Lessor. Lessor may require the removal at any time of all or any
part of any Lessee Owned Alterations or Utility Installations made without the
required consent of Lessor.

          (c)  SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good service practice. Lessee's Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee subject to its obligation to
repair and restore the Premises per this Lease.

8.   INSURANCE; INDEMNITY. See also paragraph 61

     8.1  PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee is
the insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $2,000,000 aggregate $1,000,000 per occurrence.
Premiums for policy periods commencing prior to or extending beyond the Lease
term shall be prorated to correspond to the Lease term. Payment shall be made by
Lessee to Lessor within thirty (30) days following receipt of an invoice for any
amount due.

     8.2  LIABILITY INSURANCE.

          (a)  CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said Insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.

          (b)  CARRIED BY LESSOR. In the event Lessor is the insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a),
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.

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<PAGE>

     8.3  PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.

          (a)  BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("Lender(s)"), insuring loss or damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $5,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss, as defined in Paragraph 9.1(c).

          (b)  RENTAL VALUE. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the full
rental and other charges payable by Lessee to Lessor under this Lease for one
(1) year (including all real estate taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.

          (c)  ADJACENT PREMISES. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omissions, use or occupancy of the Premises.

          (d)  TENANT'S IMPROVEMENTS. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall Insure Lessee Owned Alterations
and Utility Installations.

     8.4  LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee
<PAGE>

shall be the insuring Party with respect to the Insurance required by this
Paragraph 8.4 and shall provide Lessor with written evidence that such insurance
is in force.

     8.5  INSURANCE POLICIES. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender having a lien
on the Premises, as set forth in the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8. If Lessee is the
Insuring Party, Lessee shall cause to be delivered to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of such insurance with the insureds and loss payable clauses as required by this
Lease. No such policy shall be cancellable or subject to modification except
after thirty (30) days prior written notice to Lessor. Lessee shall at least
thirty (30) days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand. If the Insuring Party
shall fail to procure and maintain the insurance required to be carried by the
Insuring Party under this Paragraph 8, the other Party may, but shall not be
required to, procure and maintain the same, but at Lessee's expense.

     8.6  WAIVER OF SUBROGATION. Notwithstanding anything to the contrary in
this Lease, Without affecting any other rights or remedies, Lessee and Lessor
("Waiving Party") each thereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss of or damage to the Waiving Party's property arising out of or
incident to the perils required to be insured against under Paragraph 8. The
effect of such releases and waivers of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any deductibles
applicable thereto.

     8.7  INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, Judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.

     8.8  EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.

9.   DAMAGE OR DESTRUCTION.
<PAGE>

     9.1  DEFINITIONS.

          (a)  "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than 50%
of the then Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.

          (b)  "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations the
repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.

          (c)  "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.

          (d)  "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.

          (e)  "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

     9.2  PARTIAL DAMAGE-INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore the
unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance hereof, within ten (10) days following receipt
of written notice of such shortage and request therefor. If Lessor receives said
funds or adequate assurance thereof within said ten (10) day period, the party
responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If Lessor does
not receive such funds or assurance within said period, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect. If in such case Lessor does not so elect, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for

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<PAGE>

any funds contributed by Lessee to repair any such damage or destruction.

     9.3  PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above this Lease shall terminate
as of the date specified in Lessor's notice of termination.

     9.4  TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.

     9.6  ABATEMENT OF RENT; LESSEE'S REMEDIES.

          (a)  In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues, shall be abated in proportion
to the degree to which Lessee's use of the Premises is impaired. Except for
abatement of Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, as aforesaid, all other obligations of Lessee hereunder shall
be performed by Lessee, and Lessee shall have no claim against Lessor for any
damage suffered by reason of any such repair or restoration.

          (b)  If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.

     9.7  HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance
<PAGE>

Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the investigation and remediation of such Hazardous Substance
Condition totally at Lessee's expense and without reimbursement from Lessor
except to the extent of an amount equal to twelve (12) times the then monthly
Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with
the funds required of Lessee or satisfactory assurance thereof within thirty
(30) days following Lessee's said commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the
required funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination. If a
Hazardous Substance Condition occurs for which Lessee is not legally
responsible, there shall be abatement of Lessee's obligations under this Lease
to the same extent as provided in Paragraph 9.6(a) for a period of not to exceed
twelve (12) months.

     9.8   TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor,
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.

     9.9   WALVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.

10.  REAL PROPERTY TAXES. See also paragraph 56.

     10.1  (a)  PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessor shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.

           (b)  ADVANCE PAYMENT. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right, at
Lessor's option, if Lessee incurs more than two late charges on rent to estimate
the current Real Property Taxes applicable to the Premises, and to require such
current year's Real Property Taxes to be paid in advance to Lessor by Lessee,
either: (i) in a lump sum amount equal to the installment due, at least twenty
(20) days prior to the applicable delinquency date, or (ii) monthly in advance
with the payment of the Base Rent. If Lessor elects to require payment monthly
in advance, the monthly payment shall be that equal monthly amount which, over
the number of months remaining before the months in which the applicable tax
installment would become delinquent (and without interest thereon), would
provide a fund large enough to fully discharge before delinquency the estimated
installment of taxes to be paid. When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payment shall be
adjusted as required to provide the fund needed to pay the applicable taxes
before delinquency. If the amounts paid to Lessor by Lessee under the provisions
of this Paragraph are insufficient to discharge the obligations of Lessee to pay
<PAGE>

such Real Property Taxes as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligations. All moneys paid to Lessor under this Paragraph may be intermingled
with other moneys of Lessor and shall not bear Interest.

     10.2  DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL PROPERTY TAXES" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.

     10.3  JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations

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<PAGE>

assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.

     10.4  PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).

11.  UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.

12.  ASSIGNMENT AND SUBLETTING. See also paragraph 62.

     12.1  LESSOR'S CONSENT REQUIRED.

           (a)  Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.

           (c)  The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, of Lessee as it was represented to Lessor at the time of the execution
by Lessor of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "NET WORTH OF
LESSEE" for purposes of this Lease shall be the net worth of Lessee (excluding
any guarantors) established under generally accepted accounting principles
consistently applied.

           (d)  An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market rental value or one hundred ten percent (110%) of the Base Rent then
in effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same
<PAGE>

ratio as the new market rental bears to the Base Rent in effect immediately
prior to the market value adjustment.

          (e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and injunctive relief.

     12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

          (a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.

          (b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.

          (c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.

          (d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.

          (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any,

          (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.

     12.3  ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents
<PAGE>

from a sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a Breach exists in the
performance of Lessee's obligations under this Lease, to pay to Lessor the rents
and other charges due and to become due under the sublease. Sublessee shall rely
upon any such statement and request from Lessor and shall pay such rents and
other charges to Lessor without any obligation or right to inquire as to whether
such Breach exists and notwithstanding any notice from or claim from Lessee to
the contrary. Lessee shall have no right or claim against said sublessee, or,
until the Breach has been cured, against Lessor, for any such rents and other
charges so paid by said sublessee to Lessor.

          (b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior Defaults
or Breaches of such sublessor under such sublease.

          (c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.

          (d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.

13.  DEFAULT; BREACH; REMEDIES.

     13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "Default" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"

                                                Initials /s/ Signature Illegible

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<PAGE>

is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:

          (a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises See para. 63.

          (b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of five
(5) days following written notice thereof by or on behalf of Lessor to Lessee.

          (c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable evidence (ii) the inspection,
maintenance and service contracts required under Paragraph 7.1(b), (iii) the
recission of an unauthorized assignment or subletting per Paragraph 12.1(b),
(iv) a Tenancy Statement per Paragraphs 16 or 37, (v), (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information which
Lessor may reasonably require of Lessee under the terms of this Lease, where any
such failure continues for a period of ten (10) day following written notice by
or on behalf of Lessor to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.

          (e) The occurrence of any of the following events: (i) The making by
lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.

          (f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.

          (g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
<PAGE>

     13.2  REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within the time periods abo (or in case
of an emergency, without notice), Lessor may at its option (but without
obligation to do so), perform such duty or obligation on Lessee's behalf
including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. reasonable
expenses of any such performance by Lessor shall be due and payable by Lessee to
Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not
be honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:

           (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%). Efforts by Lessor to mitigate damages
caused by Lessee's Default or Breach of this Lease shall not waive Lessor's
right to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve therein the right to recover all or
any part thereof in a separate suit for such rent and/or damages.

           (b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.

           (c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.

           (d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.

     13.3  INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
<PAGE>

of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.

     13.4  LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after
Lessee's receipt of written notice of the delinquent, without any requirement
for notice to Lessee, Lessee shall pay to Lessor a late charge equal to six
percent (6%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Lessor will incur
by reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with respect
to such overdue amount, nor prevent Lessor 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 Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance .

     13.5  BREACH BY LESSOR. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by the holders of any ground lease, mortgage or deed of trust covering the
Premises whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this Lease
if performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.

14.  CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes

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NET
<PAGE>

and said taking materially affects Lessee's ability to operate its business
within the demised Premises, title or possession, whichever first occurs. If
more than ten percent (10%) of the floor area of the Premises, or more than
twenty-five percent (25%) of the land area not occupied by any building, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in the same proportion as the rentable floor
area of the Premises taken bears to the total rentable floor area of the
building located on the Premises No reduction of Base Rent shall occur if the
only portion of the Premises taken is land on which there is no building. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above the legal and other expenses
incurred by Lessor in the condemnation matter, repair any damage to the Premises
caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.

15.  BROKER'S FEE. See paragraph 51.

     15.6  Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.

16.  TENANCY STATEMENT.

     16.1  Each Party (as "RESPONDING PARTY") shall within ten (10) days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

     16.2  If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements if readily
available of Lessee and such Guarantors as may be reasonably required by such
lender or purchaser, including but not limited to Lessee's financial statements
for the past three (3) years. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall be used only for the
purposes herein set forth.

17.  LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
<PAGE>

18.  SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19.  INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.

20.  TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

21.  RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22.  NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.

23.  NOTICES.

     23.1  All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may be
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.

     23.2  Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given 3 business days after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.

24.  WAIVERS. No waiver of the Default or Breach of any term, covenant or
condition hereof by either party shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by the
other of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
<PAGE>

25.  RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.

26.  NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.

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<PAGE>

27.  CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.  COVENANTS AND CONDITIONS. All provisions of this Lease are both covenants
and conditions.

29.  BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.  SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

     30.1  SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.

     30.2  ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.

     30.3  NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.

     30.4  SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

31.  ATTORNEY'S FEES. If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) or Broker in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorney's fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term, "PREVAILING PARTY" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorney's fees
award shall not be computed in accordance with any court fee schedule, but shall
be such as to fully reimburse all attorney's fees reasonably incurred. Lessor
shall be entitled to attorney's fees, costs and expenses incurred in the
preparation and service of notices of Default and
<PAGE>

consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.

32.  LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.

33.  AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34.  SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.

35.  TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.

36.  CONSENTS.

          (a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will
incur in considering and responding to Lessee's request. Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgement that no Default
or Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.

          (b) All conditions to Lessor's consent specifically authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of
<PAGE>

consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given.

37.  GUARANTOR.

     37.1  If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most recently published by the American Industrial Real Estate Association,
and each said Guarantor shall have the same obligations as Lessee under this
Lease, including but not limited to the obligation to provide the Tenancy
Statement and information called for by Paragraph 16.

     37.2  It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signature of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.

38.  QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.

39.  OPTIONS.

     39.1  DEFINITION. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.

     39.2  OPTIONS PERSONAL TO ORIGINAL LESSEE OR LESSEE'S SUCCESSOR. Each
Option granted to Lessee in this Lease is personal to the original Lessee or
Lessee's successor named in Paragraph 1.1 hereof, and cannot be voluntarily or
involuntarily assigned or exercised by any person or entity other than said
original Lessee or Lessee's successor while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, except for Lessee's successor by merger, sale, acquisition or
similar and no Option may be separated from this Lease in any manner, by
reservation or otherwise.

                                               Initials /s/ Signature Illegible
<PAGE>

     39.3  MULTIPLE OPTIONS. In the event that Lessee has any Multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.

     39.4  EFFECT OF DEFAULT ON OPTIONS.

          (a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of Default under Paragraph 13.1, whether or not the Defaults
are cured, during the twelve (12) month period immediately preceding the
exercise of the Option.

          (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

          (c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of Default under Paragraph 13.1 during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.

41.  SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

42.  RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested any Lessor to
effectuate any such easement rights, dedication, map or restrictions.

43.  PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.

44.  AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

45.  CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
<PAGE>

46.  OFFER. Preparation of this Lease by Lessor or Lessor's agent and submission
of same to Lessee shall not be deemed an offer to lease to Lessee. This Lease is
not intended to be binding until executed by all Parties hereto.

47.  AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially increase obligations hereunder, or decrease Lessee's rights
hereunder, or otherwise affect Lessee's use or occupancy of the Premises. Lessee
agrees to make such reasonable non-monetary modifications to this Lease as may
be reasonably required by an institutional, insurance company, or pension plan
Lender in connection with the obtaining of normal financing or refinancing of
the property of which the Premises are a part.

48.  MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEW THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

     IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
     YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
     EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
     ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
     RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
     OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
     LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
     TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
     ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
     LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
     AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
     CONSULTED.

The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.

EXECUTED AT San Leandro, CA                  EXECUTED AT Alameda, CA
            ---------------                              -----------

on 3/12/99                                   on 3/12/99
   -------                                      -------

BY LESSOR:                                   BY LESSEE:
          PlyProperties                                 TheraSense Inc.
           -------------                                ---------------
__________________                           __________________________

By /s/ Signature Illegible                   By /s/ Signature Illegible
Name Printed: Donald L. Jones                Name Printed: W. Mark Lortz
              ---------------                              -------------
TITLE: Managing Partner                      TITLE: President and CEO
       ----------------                             -----------------

By ___________________________               By /s/ Signature Illegible
Name Printed: ________________               Name Printed Fredric C. Colman
                                                          -----------------
TITLE: _______________________               TITLE: Vice President
                                                    --------------
<PAGE>

ADDRESS: 2081 Adams Avenue                 ADDRESS: * 1311 Harbor Bay Parkway,
         -----------------                          --------------------------
         San Leandro, CA 94577                      Suite 1000 Alameda, CA 94502
         ---------------------                      ----------------------------

TEL. NO. (510) 562-2580 FAX NO.(510) 569-9333TEL. NO. (510) 749-5444 FAX NO.
          -------------         ---  --------          ---  --------
(510) 749-5401
 ---  --------

                                      *address to change to demised Premises
                                      upon commencement of this Lease

                                    PAGE 10

NET

NOTICE: These forms are often modified to meet changing requirements of law and
        industry needs. Always write or call to make sure you are utilizing the
        most current form: American Industrial Real Estate Association, 345
        South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777.
        Fax. No. (213) 687-8616.

 (c)    Copyright 1990-By American Industrial Real Estate Association. All
        Rights Reserved
<PAGE>

ADDENDUM TO STANDARD INDUSTRIAL LEASE DATED FEBRUARY 26, 1999, BY AND BETWEEN
PLYPROPERTIES, AS LESSOR, AND THERASENSE INC., AS LESSEE.

49.  Construction of Improvements/Prior Occupancy/Commencement of Lease.
     ------------------------------------------------------------------

     a.  Lessor agrees, in accordance with the attached Work Letter, at its sole
cost and expense except as provided for below, and as soon as it can reasonably
be accomplished following the execution of this Lease, to (1) complete and
submit plans and specifications for the improvement of the subject Premises to
Lessee for its approval, which approval shall not be unreasonably withheld, said
improvements to be in conformity with the preliminary specifications set forth
in Exhibit "B" to this Lease (for all intent and purposes and for their mutual
benefit Lessor and Lessee shall work together in preparing said plans and
specifications); (2) apply for and secure appropriate building permits; and (3)
commence and prosecute to completion in a diligent and good and workmanlike
manner the construction and delivery of said improvements to Lessee. The parties
hereto are aiming toward substantial completion and delivery of Lessee's
Premises by May 1, 1999, provided Lessor is not delayed by causes beyond its
control, which shall include but not be limited to any unanticipated delays in
obtaining construction drawings and in securing permits; delays in construction
due to fires, unusually severe weather, labor problems, including strikes or
slowdowns; acts of God, and other similar causes, and delays caused by the
Lessee or its agents and/or sub-contractors.

Should Lessor fail to deliver the Premises by May 1, 1999, then this Lease shall
commence upon the date Lessor does substantially complete the above work and
delivers possession to Lessee.

If the actual commencement date of this Lease is other than that set forth in
paragraph 3 above, then Lessor and Lessee shall prepare and execute an Amendment
to Lease setting forth the revised commencement date of the Lease term, but
failure to execute such an amendment shall not affect the actual commencement
date.

     b.  "Substantial completion" or "substantially completing" shall be the
date as agreed between Lessor and Lessee, or, if the parties cannot so agree,
then it shall be upon execution of a certification from the architect or
engineer supervising the construction of the Premises that all of the
improvements hereto above described have been on the date specified in said
certification substantially completed in accordance with the plans and
specifications to the extent that Lessee can reasonably and conveniently use and
occupy the building and appurtenances for the conduct of its ordinary business
and, if required, the issuance of a certificate, or temporary certificate, of
occupancy for the Premises. It is understood that Lessee may commence its work
within the Premises before Lessor substantially completes its construction;
however, Lessee agrees that its work shall not interfere with or delay Lessor's
construction, including the date of substantial completion, and shall be subject
to the provisions of sub-paragraph c. below. Nor shall substantial completion be
delayed due to Lessee's delay or failure to complete any improvements it
undertakes or to perform its tasks.

     c.  Early Possession. If the above improvements are not substantially
         ----------------
completed by the scheduled commencement date of this Lease of May 1, 1999, then
Lessee shall be granted prior occupancy of the demised Premises, effective May
1, 1999, for the purposes of setting up its manufacturing equipment and
operations; and, effective upon that date or the date that the manufacturing
portion of the subject building has been sufficiently completed to permit Lessee
to begin setting up its manufacturing operations, whichever occurs later, Lessee
shall pay beginning on that date, as additional consideration for Lessor's
entering into this Lease, a partial rent of $40,000 per month, which partial
rent shall include real estate taxes and insurance expenses on the property,
until the commencement date of the Lease as defined above, at which time Lessee
will begin paying its base rent, per the terms of the Lease, at the $62,500 per
month rate. All other terms and conditions of the Lease shall be in effect
during such early possession period, including Lessee's obligation to carry
liability insurance and to indemnify the Lessor. The above "early possession"
payments due under this section shall be deemed to be payments of additional
rent and any failure to
<PAGE>

make such payments when due may, in Lessor's discretion, be deemed to be a
default under this Lease.

50.  Cost Overruns/Rental Adjustments/IDB Financing Credits/Equipment
     ----------------------------------------------------------------
Purchases/Credit if Surplus Land Sold.
-------------------------------------

     a.  T.I. Allowance/Cost Overruns/Lessee's Cash Payments. Notwithstanding
         ---------------------------------------------------
any provision of this Lease to the contrary, it is understood and agreed that
Lessee shall pay to Lessor in cash, within thirty (30) days after Lessor
delivers possession of the Premises to Lessee or within thirty (30) days of the
construction and payment by Lessor of any work specifically ordered by Lessee
that is outside of the scope of Lessor's work set forth in Exhibit "B" to this
Lease, any construction costs paid or incurred by Lessor in excess of the tenant
improvement ("T.I.") allowance of $25 per footprint square footage that is
provided for in Exhibit "B". It is understood and agreed that said $25 includes
a portion of T.I. type improvements that have either already been installed or
are stored on site, as described in Exhibit "B".

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

Prior to the start of major tenant improvement work, Lessor will provide Lessee
with budget estimates for the work described in Section 49.a. above. Such
estimates shall represent Lessor's reasonable estimates based on contractor
estimates or information then known by Lessor, but Lessee agrees that such
estimates are subject to change based upon (i) change in design; (ii) time;
(iii) actual bids received; (iv) delays in construction; or (v) other reasonable
changes or adjustments. Lessor makes no representation that the budget estimates
will set forth the actual costs that will be incurred. Lessor will reasonably
advise Lessee from time to time as to material changes in the budget or actual
costs.

     b.  IDB Financing Credits. Financing of the subject project has, in part,
         ---------------------
been funded through the State's Industrial Development Bond ("IDB") Program that
is designed to lower the cost of manufacturing in California. Such financing has
historically assessed a lower interest rate and sometimes a longer amortization
schedule than conventional financing. Lessor agrees to credit or to otherwise
pay back to Lessee, from the monthly rent collected herein, an amount equal to
the difference between the IDB's "effective" debt service (including but not
limited to bond interest, amortization, trustee and similar fees, and the cost
of the Letter of Credit from a bank), and the debt service that would be in
effect on a conventional loan, assuming that said loan was in an amount equal to
the principal amount of the bond financing allocated to land and improvements
(real estate) at a seven and three-quarters (7.75%) percent per annum interest
rate and a 25 year amortization schedule (the "Differential"); provided,
however, that (i) any difference in principal reduction (equity build-up)
between the IDB and hypothetical conventional financing will be debited or
credited from the Differential, and (ii) if the IDB financing is also used to
purchase equipment by and for the Lessee under the conditions set forth in sub-
section "c" below, or tenant improvements in excess of Lessee's tenant
improvement allowance per Exhibit "B" that are designed for Lessee's specific
use and would not likely be used by a future tenant, under in effect a loan of a
portion of the IDB financing by the Lessor to the Lessee, then said Differential
shall be reduced by a risk factor, recognizing the increased credit risk to the
Lessor from both the increased bond amount and an allocation of a portion of it
to non-real estate purposes, equal to 50 basis points for every $1 million of
the IDB financing that is allocated to such equipment purchases or special
improvements.

By way of example, assume that the IDB financing allocated to the land and
improvements equals $5,000,000, and that the "effective" debt service, as
defined above, on that sum is based on a merged interest rate of 5.5% and a 30
year amortization schedule. The resultant monthly debt service on the IDB's
would be $28,389.45. Assume further that the bond principal has not been used to
purchase equipment, or special improvements in excess of Lessee's T.I.
allowance. The corresponding monthly debt service on the hypothetical 7.75%, 25
year amortized conventional loan would be $37,766.44, resulting in a credit to
the Lessee of $9,376.99 per month, before any adjustments for differences in
principal reduction. Based on the above two loans, the principal reduction in
the first year with the IDB financing example would be $67,349, whereas with the
conventional loan $68,076. Therefore, the Lessee's first year credit of
$9,376.99 x 12 = $112,523.88, in the above example, would be reduced by the $727
difference in principal reduction.

Assume further that the IDB financing equals $6,000,000, and that $1 million of
that amount has been used to purchase equipment or special improvements over and
above Lessee's T.I. allowance. The monthly debt service on the increased IDB
loan would be $34,067.34; and the hypothetical rate on the conventional
financing would be decreased from 7.75% to 7.25% to reflect the increased risk
factor - deriving a monthly debt service of $43,368.41. The resultant credit to
the Lessee would, therefore, equal $9,301.07 per month, before any adjustments
for differences in principal reduction.

     c.  Equipment Purchases from IDB funds. Notwithstanding the right of either
         ----------------------------------
or both the Lessor and its Letter of Credit Bank to approve or disapprove, at
either of their sole discretion, any use of the IDB financing for the purchase
of equipment to be used in the subject building for and by the Lessee, if any of
the Industrial Development Bonds are so used to purchase such equipment, said
financing will, in effect, be in the form of a loan from Lessor to Lessee
subject to agreements between the parties hereto and the Letter of Credit bank;
and:
<PAGE>

          (1) Lessee agrees to pay to Lessor as additional monthly rent that
portion of the IDB debt service that is attributable to servicing such equipment
purchases and loan(s); and

          (2) Lessee agrees, at the end of the lease term or upon the earlier
termination of this Lease, to pay off any principal portion of the IDB bond
financing that remains allocated to the equipment purchases.

     d.   Rental Adjustments. The base rental of $62,500.00 per month will be
          ------------------
adjusted every two and one-half years during the primary term of the lease as
follows:

          (1) Months 31 through 60: The initial base monthly rent of $62,500.00
shall be adjusted at the beginning of the 31st month, and the base rent as so
adjusted shall be payable each succeeding month until the end of the 60th month,
as follows: The base for computing the adjustment is the Consumer Price Index
for All Urban Consumers, San Francisco-Oakland, published by the United States
Department of

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

Labor, Bureau of Labor Statistics ("Index"), which is published for the month of
January, 1999 ("Beginning Index"). If the Index published for the month of July
immediately preceding the 31st month adjustment date ("31st Month Adjustment
Index") is increased over the Beginning Index, the base monthly rent payable for
each month of the term commencing with the 31st month, and continuing through
the 60th month, shall be set by multiplying the initial or original base rent by
a fraction, the numerator of which is the 31st Month Adjustment Index and the
denominator of which is the Beginning Index.

Notwithstanding the foregoing, in no event shall the base rent be increased
pursuant to this paragraph by less than five (5%) percent every two and one-half
years (2% per year, non-compounded), or greater than seven and one-half (7.5%)
percent every two and one-half years (3% per year, non-compounded).

          (2) Months 61 through 90; and 91 through 120: To be adjusted based on
the same formula or method described above.

          (3) If the Index is changed so that the base year differs from 1982-84
= 100, the Index shall be converted in accordance with the conversion factor
published by the United States Department of Labor, Bureau of Labor Statistics.
If the Index is discontinued or otherwise revised during the Lease term, such
other governmental Index or computation with which it is replaced will be used
in order to obtain substantially the same result as would be obtained if the
Index would not have been revised or discontinued.

     e.   Rent Reduction if Surplus Land Sold. If Lessor and Lessee mutually
          -----------------------------------
agree to sell, lease, or otherwise divest itself of all or part of Parcel 4 of
the subject real property, shown outlined in blue on Exhibit "A" hereto, then
the base rental as established above shall be reduced, in the case of a lease,
by the net effective rent received (either by Lessee or Lessor) or attributable
to that divestiture; or, in the case of a sale, by an annual amount equal to 75%
of the sale's net proceeds received by Lessor multiplied by 10%.

51.  Brokers. Each party represents that it has not had dealings with any real
     -------
estate broker, agent, finder, or other person with respect to this Lease in any
manner, except for Grubb & Ellis. Each party shall hold harmless the other party
from all damages resulting from any claims that may be asserted against the
other party by any broker, agent, finder, or other person with whom such
indemnifying party has or purportedly has dealt. Lessor shall be liable for any
commission or fee payable to Grubb & Ellis.

Lessor and Lessee acknowledge that Grubb & Ellis has represented both parties to
this lease transaction.

52.  Limit on Liability. Lessor herein is a partnership, and it is understood
     ------------------
and agreed that any claims by Lessee against Lessor shall be limited to the
assets of the partnership, and furthermore, Lessee expressly waives any and all
rights to proceed against the individual partners or the officers, directors or
shareholders of any corporate partner, except to the extent of their interest in
said partnership.

53.  Environmental. Notwithstanding the provisions of paragraph 6.2 of the
     -------------
Lease, Lessee shall be under no obligation to indemnify Lessor for any damages
resulting from toxic contamination on the site not caused by Lessee.

54.  Option to Renew. Lessor grants to Lessee an option to renew this Lease for
     ---------------
an additional five (5) year period on the same terms, conditions, covenants,
agreements or amendments, if any, then in force pursuant to this Lease except
for the amount of the rental which shall be determined either by agreement
between the parties or by arbitration based on the fair market rent value of the
Premises. For the purposes of this clause, fair market rent shall be defined as
the probable triple net rent that the Premises should bring in a competitive and
open market at the time that this option is exercised, with the landlord and
<PAGE>

a "highest and best use" tenant acting prudently and knowledgeably, based on the
"as is" condition of the Premises at that time and upon lease terms and
conditions consistent with those that govern this Lease extension.

If Lessor and Lessee are unable to agree upon said fair market rent value within
thirty (30) days from notice of exercise of the option herein granted, then it
will be set either by a qualified MAI appraiser chosen by the parties, or by
arbitration as follows:

     a.  Within five (5) days after written notice by either party to the other
requesting arbitration, one arbitrator shall be appointed by each party. Notice
in writing of such appointment, when made, shall be given by each party to the
other. The two arbitrators so named shall meet promptly and seek to reach a
conclusion as to the fair market rent value of the Premises, and their decision
rendered in writing and delivered to the parties hereto shall be final and
binding on the parties.

     b.  If said two (2) arbitrators shall fail to reach a decision within
fifteen (15) days after appointment of the second arbitrator, then the two
arbitrators shall forthwith choose a third arbitrator within five (5) days to
act with them. If they fail to select a third arbitrator within said five (5)
days, the third arbitrator shall

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

be promptly appointed by the Presiding Judge of the Superior Court, State of
California, County of Alameda. The party making such application to said Judge
shall give the other party hereto five (5) days written notice thereof.

     c.  The arbitration shall proceed with due dispatch. The third arbitrator
shall select the value submitted by one of the initial two arbitrators that is
closest to the value determined by the third arbitrator. The decision of third
arbitrator, reached accordingly, shall be binding, final and conclusive on the
parties hereto. Such decision shall be in writing and delivered to the parties.

     d.  If either party fails to appoint an arbitrator as herein provided, then
the arbitrator that has been appointed shall be the sole arbitrator.

     e.  The expense of any such arbitration shall be borne equally between the
parties hereto, except that the cost of any attorney's fees incurred by the
parties are their own respective responsibilities.

     f.  The arbitration shall be conducted in accordance with the applicable
statutes of the State of California then in effect.

Lessee shall exercise this option by serving written notice upon Lessor of its
intent to exercise the option at least six (6) months prior to the expiration of
the initial ten year term of this Lease. Lessee shall have the right to exercise
this option only in the event that Lessee is not in default in its performance
of any material term or condition of the Lease.

55.  Expansion. The parties wish to anticipate the possible expansion of the
     ---------
Premises as generally shown on the Site Development Plan, attached hereto as
Exhibit "C". Upon delivery of written notice (the "Expansion Notice") from
Lessee to Lessor describing the desired expansion (the "Expansion Space") and
provided that (i) Lessee at Lessor's reasonable discretion is financially sound
enough to warrant the increased liability and/or risk of the expanded building
and is not in default under any of the terms and conditions contained herein,
(ii) Lessor is able to obtain reasonable third-party financing for the
construction of the Expansion Space, (iii) the Expansion Space is generally in
conformance with the Site Development Plan, and (iv) building permits and all
other necessary permits or approvals can be reasonably obtained, then Lessor
shall endeavor to construct the Expansion Space.

The rent and terms for the Expansion Space and/or the modification at that time
of the Lease in general, shall be negotiated between the parties based on fair
market conditions, or arbitrated similar to the provisions for arbitration set
forth above; and shall take into consideration, but shall not be limited to, the
number of years remaining on the Lease or any extension thereof, the cost of
third-party financing, the financial strength of the Lessee at the time, and the
special or general nature of the improvements.

56.  Taxes & Assessments. Notwithstanding the provisions of paragraph 10 of this
     -------------------
Lease, and although the Lessee shall be responsible for paying all Harbor Bay
Business Park, City of Alameda and/or other governmental assessments against the
Premises or the operations of the Lessee, including but not limited to the
Landscape & Lighting District, Urban Runoff, Harbor Bay Business Park
Association dues and fees, the Lessee shall not be responsible for paying the
principal and interest on the existing Harbor Bay Business Park Series A.D. 92-1
Assessment Bonds that were assumed by the Lessor in its purchase of the subject
land.

Lessee's responsibility for tax increases that are a result of a sale or change
of ownership of the property that triggers a re-assessment of the real estate
pursuant to Chapter 3.5 of the California Revenue and Taxation Code, as amended,
shall be limited to a five (5) percent per year increase in the assessed value
of the property over its first full year of assessment, including the
improvements set forth in Exhibit "B" to this Lease.

57.  Security Deposit. Notwithstanding the provisions of paragraph 5 of this
     ----------------
Lease, Lessee

<PAGE>

shall, to further secure its obligations under this Lease, provide a letter of
credit acceptable to Lessor from a bank or other credit worthy financial
institution, in the principal amount of $500,000, guarantying its performance
under the terms of this Lease. Said letter of credit is for the purpose, in the
event of a default on the part of the Lessee in its obligations to pay rent
under the Lease, of reimbursing the Lessor for a portion of the T.I. investment
it shall have made in the Premises on behalf of the Lessee; and, therefore, said
Letter of Credit amount shall be payable to Lessor upon Lessee's material
default under the terms of this Lease without cure. Lessee's obligation to
provide said Letter of Credit shall cease upon (a) the increase in Lessee's net
worth to an amount of $5 million, or more, net of capital raised and earmarked
but not yet expended for equipment purchases or other capital assets related to
Lessee's business, and based on standard accounting reporting practices; and/or
(b) Lessee's satisfactory performance under the terms and conditions of this
Lease for a period of five (5) years, provided that the Lessee is not then
evidencing any significant credit or financial problems that might reflect its
inability to fulfill its obligations under this Lease. In substitution of the
above, under the same basic terms and conditions and intents, Lessee may either
(a) deposit $500,000 in an interest bearing escrow account payable or

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

forfeitable to Lessor in the event of Lessee's material default under the terms
of this Lease without cure; or (b) pay $500,000 toward Lessor's share of tenant
improvements, as defined in Exhibit "B", at which time Lessee's base triple net
rent would decrease by $4,375.00 per month.

58.  Use of Premises. Lessor represents and warrants that Lessee's use of the
     ---------------
Premises is and will be permitted by all Applicable Requirements. If the
Premises should become unsuitable for Lessee's use as a consequence of cessation
of utilities, interference with access to the Premises, legal restrictions or
any Hazardous Substance Condition, which does not result from Lessee's release
or emission of such Hazardous Substance, and in any of the foregoing instances
the interference with Lessee's use of the Premises persists for seven (7)
consecutive calendar days, then Lessee shall be entitled to an equitable
abatement of rent to the extent of the interference with Lessee's use of the
Premises occasioned thereby. If such interference persists for more than ninety
(90) consecutive calendar days in any 360 day period, Lessee man terminate the
Lease by delivery of written notice to Lessor at any time hereafter until such
interference ceases.

59.  Environmental Condition.
     -----------------------

     a.  Lessor's Representations. Except as disclosed in the reports listed on
         ------------------------
Exhibit A, attached hereto and made a part hereof, true and correct copies of
which have been delivered by Lessor to Lessee, to the best knowledge of Lessor,
(i) no Hazardous Substance is present on the Premises or the soil, surface water
or groundwater thereof, (ii) no underground storage tanks or asbestos-containing
building materials are present on the Premises, and (iii) no action, proceeding,
or claim is pending or threatened concerning the Premises concerning any
Hazardous Substance or pursuant to any Applicable Requirements. Lessor has
delivered to Lessee all reports and environmental assessments of the Premises
conducted at the request of or otherwise available to Lessor and Lessor has
complied with all environmental disclosure obligations imposed upon Lessor by
Applicable Requirements with respect to this transaction.

     b.  Lessor's Indemnity. Lessor shall indemnify, defend with counsel
          ------------------
reasonably acceptable to Lessee, protect, and hold harmless Lessee, its
employees, agents, contractors, stockholders, officers, directors, sublessees,
successors and assigns (collectively the "Lessee Indemnitees") from and against
all claims, actions, suits, proceedings, governmental orders, judgments, losses,
costs, personal injuries, damages, liabilities, deficiencies, fines, penalties,
damages, attorney's fees, consultants' fees, and expenses of every type and
nature ("Claims"), to the extent arising in connection with (i) any Hazardous
Substance Condition (other than a Hazardous Substance condition resulting from
Lessee's disposal, release or emission of such Hazardous Substance), and/or (ii)
the violation of any Applicable Requirements governing the use, storage,
disposal, emission, transportation, sale or release of a Hazardous Substance at
the Premises by any person other than Lessee, its agents, employees or
contractors. Notwithstanding anything to the contrary in this Lease, Lessee
shall have no other liability to Lessor or any of its officers, agents,
partners, lenders-or tenants as a consequence of the presence of Hazardous
Substances in or about the Premises not caused by Lessee.

     c.  Lessee's and Lessor's Obligations. Lessee's obligation to comply with
          ---------------------------------
all Applicable Requirements shall not include the obligation to take action
required by any Applicable Requirements governing any Hazardous Substance not
brought onto the Premises by Lessee or any Hazardous Substance Condition that
does not result from Lessee's disposal, emission or release of such Hazardous
Substances.

60.  Entry by Lessor. Lessor and Lessor's agents, except in the case of
     ---------------
emergency, shall provide Lessee with twenty-four (24) hours' notice prior to
entry of the Premises. Any such entry by Lessor and Lessor's agents shall comply
with all reasonable security measures of
<PAGE>

Lessee and shall not impair Lessee's operations more than reasonably necessary.
During any such entry, Lessor and Lessor's agents shall at all times be
accompanied by a representative of Lessee.

61.  Property Insurance. Notwithstanding the provisions of paragraph 8 of the
     ------------------
Lease, in no event shall Lessee have any obligation to pay or reimburse Lessor
for any premiums or deductibles for flood or earthquake insurance.

62.  Assignment and Subletting.
     -------------------------

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

63.  Default Clause. In reference to paragraph 13.1.(a), if Lessee vacates the
     --------------
Premises for more than sixty (60) days, the Lessor shall have the right but not
the requirement to terminate this Lease on thirty (30) days written notice.

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

                                SOUTH LOOP ROAD

                                  Exhibit "A"

                               [EXHIBIT OMITTED]

                                 "Floor Plan"

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

EXHIBIT "B" TO LEASE BETWEEN PLYPROPERTIES, AS LESSOR, AND THERASENSE INC., AS
LESSEE, DATED JANUARY 4, 1999, COVERING THE PREMISES AT 1360 - 1380 SOUTH LOOP
ROAD, ALAMEDA, CA.

The Shell portion of the subject, 54,475 square foot building, has been
completed. Shell work includes, but is not necessarily limited to, site
preparation, utilities and meters, paving, landscaping, and similar on-site and
off-site costs; and the construction of the shell building including
foundations, slabs, walls, columns, roof structure and roofing, store fronts and
glazing, man doors, truck doors, and the basic electrical service, rough
plumbing, and sprinkler systems.

It is understood and agreed that some tenant improvement (T.I.) work has already
been installed or is being stored on-site. Those T.I.'s, which cost $700,805
including general conditions and the builder's overhead and profit, primarily
consist of (i) HVAC equipment stored on-site plus plenums and ducting that have
already been installed to heat and cool the entire building; (ii) electrical
switch gear, including 5 transformers, 8 sub-panels and under-floor conduit,
designed to distribute power throughout the building; a master lighting panel,
with computer controlled modules; high intensity lighting using a combination of
400 and 250 watt metal halide fixtures installed throughout most of the
building; plus miscellaneous material (sub-panels; wire; indirect office
lighting fixtures; etc.) stored on-site; (iii) a glass wall and mullion system,
which might be included in the design of the future offices or the R & D area;
and (iv) standard office wall system material to be used in the construction of
future offices.

Lessor agrees, at its sole cost and expense except as provided for below and in
the Lease, to construct Lessee's (i) administrative and sales offices, which are
estimated to consist of approximately 4,000 to 5,000 square feet of GNA and
5,000 to 6,000 square feet of Sales offices; (ii) R & D area, containing
approximately 18,000 to 19,000 square feet of which about 60% will contain wet
and dry labs; (iii) manufacturing area of approximately 16,000 to 17,,000 square
feet, of which about 5,625 square feet will be enclosed by walls and ceilings to
house laboratory and semi-clean manufacturing operations; (iv) three (3)
restroom facilities (two serving primarily the office and R & D areas, and one
the manufacturing area); and (v) dock high truck spot with leveler. A
preliminary breakdown, by area and rooms, is provided in TheraSense's fax, dated
December 2, 1998, attached as page 2 of this Exhibit "B".

As set forth in paragraph 50.a. of this Lease, Lessor's cost responsibility for
these interior tenant improvements (T.I.'s), as defined herein, shall be limited
to $25 per footprint square foot of the building, or $1,361,875. It is
understood and agreed that said $25 allowance shall include a minimum cost of
$490,000 allocated to those T.I. improvements have already been installed or
stored on-site, as described above, and it is further understood and agreed that
both Lessor and Lessee, in the design of the T.I.'s, shall endeavor in good
faith to use as much of the existing $700,805 of tenant improvement in the
construction of Lessee's T.I.'s. The latter assumes using open ceilings whenever
possible (i.e. in the R & D and manufacturing areas) to maximize use of the
existing boxcar HVAC units and plenums, the existing metal halide lighting, and
the main electrical system and distribution.

T.I. items include, but are not necessarily limited to, interior partitions that
separate Lessee's functions; offices and restrooms; wet and dry labs; HVAC
systems; plant and office lighting and power distribution; telephone and
communication systems; the conversion to one dock high truck spot; tenant
signage; and all other special work that is specific to Lessee's particular use
and occupancy of the demised Premises. T.I. costs shall also include design and
engineering, and the cost of building permits. Construction drawings for the
above, when completed, shall be attached hereto and made a part of this Lease.

Guideline specifications, dated 10/25/98, are attached as pages 3 and 4 of this
Exhibit "B".

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

New Facility Private office and Conference Room Estimate

<TABLE>
<CAPTION>
                                                   Rough                                               Total
CONFERENCE ROOMS                                 Dimensions                       SQ FT                SQ FT
---------------                                  ----------                       -----                -----
<S>                                              <C>                              <C>                 <C>
  Board Room                                     16"24                            384
  Messenger Team Room                            14"18                            252
  Colossus Team Room                             14"18                            252
  Technical Library                              14"18                            252
  Small Conference Room                          14"18                            252
  Interview Rooms (2)                            12"12                            288
                                                                                                      ---------
                                                                                                           1680

MISC. SERVICE ROOMS
-------------------
  Copier & Office Supply Room                    12"16                             192
  Mail Room                                      12"16                             192
  Cafateria                                      25"40                            1000
  Janitorial Closets (2)                         4"6                                48
  Chemical Storage Room                          12"14                             168
  Computer/Telcom Room                           16"16                             256
  Lobby                                          20"20                             400
  Lobby Conference Room                          14"18                             252
                                                                                                      ---------
                                                                                                           2508

PRIVATE OFFICES                                  14"16                            224                      4480
---------------
  W. Lortz (President)
  F. Colman (VP R&D)
  E. Conner (VPR&QA)
  E. Heller (VP Bus. Devlop)
  A. Heller (Chief Scientist)
  VP Marketing
  CFO
  VP Manufacturing
  VP Human Resources
  C. Liamos (Dir Finance & Purchasing)
  P. Plante (Dir Process Devlop)
  G. McGarragh (Chemistry Fellow)
  K. Lipman (Mgr National Sales)
  J. Colburn (Dir Messenger Project)
  Colossus Project Director
  Dir Marketing
  Dir QA
  Dir Manufacturing
  HR Benefits Coordinator
  Dir Human Resourses

Open Offices                                     80 10"12                         120                      9600
R&D LABS
--------
     Chemistry Labs (Wet) (5)                    30"40                           1200                      6000
     Mechanical Lab                              30"40                           1200                      1200
     Electrical Lab (2)                          30"30                            900                      1800
     Machine Shop                                25"40                           1000                      1000
     QA Environmental Lab                        30"40                           1200                      1200
</TABLE>
<PAGE>

<TABLE>
<S>                                                   <C>            <C>                              <C>
     Blood Lab                                        20"30               600                               600
                                                                                                      ---------
Total R&D Labs                                                                                            11800

MANUFACTURING
-------------
  Manufacturing Area (Enclosed Space)                                    6000
  Mfg Chemistry Lab (Within MFG Area)                 30"30               900
  Warehouse, Packaging,Reciving Inspect, Stockrooms                     10000
                                                                     --------
                                                                                                      ---------
Total Mfg Space                                                                                           16000

                                                                                                      ---------
Total Space                                                                                               46068

                                                                                                      ---------

THERASENSE CONFIDENTIAL                                               12/1/98
</TABLE>

  Exh "B", page 2

                                                         page 1

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

DONALD L. JONES COMPANY

Commercial Property Development
Consulting, Brokerage & Investments

PROPERTY:  1360-80 South Loop Road, Alameda

TENANT:    TheraSense Inc.

DATE:      October 25, 1998

RE:        General Specifications for the Purpose of Rough Estimating T.I.'s

A.   General Offices: The attached block space plan delineates approximately
     ---------------
9,850 square feet of office space (TheraSense's initial requirement is for about
8,500 square feet). It would roughly be divided between administrative offices
at about 35%, and marketing or sales at about 65%. Marketing and sales, where
the largest growth is expected, would at least in part be located along the
Easterly side of the building so that it could be expanded Southerly, as shown.

In general, the specifications of the offices to be built, as described below,
would be similar in quality to that of other R & D type offices developed in
Harbor Bay Business Park (versus premium quality offices built in a Class A
downtown buildings, or laboratory space built for biotech companies).

     1.   Approximately 65% of the offices would be open space, including
circulation; the balance would be made up of private offices, conference rooms,
supply, lunch and similar core rooms Office systems to be installed in open
space would be the responsibility of the tenant.

     2.   Office restrooms are shown located approximately where rough plumbing
has already been installed in the slab. Count is projected at two water closets,
two urinal, and two lavs in the men's room; and three water closets and two lavs
in the women's room. For pricing, assume coved linoleum flooring, FRP wainscoted
walls, hard ceilings, and fairly standard accessories.

     3.   Assume standard framed and gypboard walls (fire taped, textured and
painted); suspended ceilings with 2 x 4 grid and second look acoustical tiles,
dropped in fluorescent fixtures, and fire sprinklers; carpeted floors (or VCT in
work rooms); with fairly typical allowances for electrical, telephone, and data
cabling requirements. Assume that sidelights would be installed in private
offices and conference rooms to enhance natural light.

     4.   Re-use or adapt existing boxcar HVAC units to provide fairly standard
office building conditions.

     5.   An alternate study is requested to look at the possibility of building
a mezzanine structure over the first floor offices, as shown with dotted lines
in the Northeast corner of the building, to house future office expansion.

B.   Research and Development. R & D is projected at 17,000 to 18,500 square
     ------------------------
feet, of which about 60% would be wet and dry labs. The balance would generally
be sub-divided into office type rooms housing, among other functions,
electronics, computer related services, testing, and a machine shop.

                                                                 Exh "B", page 3

2081 Adams Avenue
San Leandro, California 94577

Telephone 510 562 2580
<PAGE>

Facsimile 510 569 9333

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

     1.   The tenant would install (a) initially, four, self contained fume hood
units, and ultimately over time up to eight; (b) dry benches, hanging cabinets,
and wet benches with sinks; and (c) all miscellaneous gas supplies. The landlord
would be responsible for connecting to rough plumbing and providing electrical
outlets. Note approximate location of existing rough plumbing lines. In
addition, space planning should take into consideration the fact that
ventilation has been pre-installed along portions of the west wall of the
building, and that water supply and floor drains also exist in portions of the
building.

     2.   Probably two to three emergency showers would be required throughout
the premises.

     3.   The balance of the R & D space would basically be built-out similar to
offices, with slightly higher electrical requirements, except that whenever
possible the space planning should endeavor to use open ceilings to maximize re-
use of existing T.I.'s.

C.   Manufacturing and Warehousing. Initially projected at 15,000 to 16,500
     -----------------------------
square feet, as shown, composed of 3,000 to 4,000 square feet of warehousing
space open to the general production area, and approximately 5,625 square feet
of cleaner manufacturing and laboratory area separated from the remainder of the
production by framed walls and suspended ceilings. The latter area would be
composed of open manufacturing area (approximately 75% of the total), a wet lab,
and a couple offices. Also required in this cleaner manufacturing area would be
floor drains (+- four), epoxy coated floors, and washable walls and ceilings
(possibly either epoxy painted or pre-fabricated vinyl wall and ceiling panels).

     1.   Assume that the wall separating manufacturing from R & D is full
height, floor to roof structure; and that there will be open access between the
manufacturing area and the future "Expansion" area.

     2.   Assume that the existing light fixtures will be used throughout the
production area with the exception of the approximately 5,625 square foot
isolated area that will have suspended ceilings and dropped in fluorescent
fixtures.

     3.   VCT tiles or painted floors would be utilized in all but the 3,000 to
4,000 square feet of the production area devoted to warehousing in order to
minimize dust.

     4.   HVAC. The entire production area, and warehouse, are to be designed
for 72 degrees. The area is to be semi-protected from open truck doors through
the use of vestibule walls and plastic flaps or curtains. The existing spiral
ducts are to be utilized whenever possible.

     5.   Construct a recessed truck well for one truck spot. Therefore,
ultimately there would be one dock-high spot and two drive-in doors.

     6.   The Expansion area would remain as-is, utilizing the existing HVAC
ducting and metal halide lighting.

D.   Plant Restrooms. Assume one restroom located between Mfg/Whse and R&D (in
     ---------------
addition to the two restrooms serving primarily the office and R & D areas.

                                                                 Exh "B", page 4

                                                         /s/ Signature Illegible

                                                         /s/ Signature Illegible
<PAGE>

                                  Exhibit "C"

                         MASTER DEVELOPMENT SITE PLAN

                               [EXHIBIT OMITTED]

                                 "Floor Plan"
<PAGE>

                                RIDER TO LEASE

RIDER TO THAT CERTAIN LEASE ("THE AGREEMENT") DATED FEBRUARY 26, 1999 BY AND
BETWEEN PLYPROPERTIES, A PARTNERSHIP (LESSOR) AND THERASENSE, INC., A CALIFORNIA
CORPORATION (LESSEE) FOR THE PREMISES AS 1360-1380 SOUTH LOOP ROAD, ALAMEDA,
CALIFORNIA 94502.

The following terms and conditions are incorporated by reference into The
Agreement. Reference numbers in the margin refer to paragraph numbers in The
Agreement, or represent new paragraph numbers, which are incorporated by
reference into The Agreement.

1.3    Subject to a approval of the LC Lender/Bank Term: The term of the Lease
is ten (10) years (120 months). Notwithstanding the foregoing, Lessee shall have
the right, by providing prior written notice, to terminate the Lease after
eighty-four (84) months. To exercise this right, Lessee shall provide written
notice to Lessor no sooner that the first day of the seventy-fifth (75th) month
and no later than the last day of the seventy-eighth (78th) month of the lease,
that it intends to exercise its right to cancel. In consideration for this
right, if exercised, Lessee agrees to pay to Lessor, in lawful money of the
United States, prior to the last day of the eighty-fourth (84th) month, all
unamortized costs of the lease, which shall include but may not be limited to:
tenant improvements, brokerage commissions and equipment financing under
paragraph 50c. of the lease.

62.    In the event that Lessee elects and Lessor consents to Sublease or Assign
its Leasehold interest in accordance with the terms of paragraph 12 of the The
Agreement, all "profits" resulting from Sublease or Assignment, if any, shall be
shared equally (50% / 50%) between Lessor and Lessee. "Profits" for the purpose
of this Lease shall be defined as all rent received from Sublessee in excess of
the Base Rent defined in paragraphs 1.5 of the Lease, and the excess over any
costs due from Lessee under this lease for operating expenses which are not paid
by Sublessee or Assignee (and not including any credit for IDB financing), plus
any other sums paid to or consideration received by Lessee from Sublessee or
Assignee after deducting Lessee's actual out-of-pocket costs resulting from such
sublease which may include but shall not be limited to tenant improvements,
marketing costs and brokerage commissions, if any.

50AA.  In the event the work described in paragraph 49a. exceeds the tenant
improvement allowance of $25.00 per square foot set forth in paragraph 50a. then
Lessee shall have the right to amortize over the ten(10) year lease term an
additional four dollars ($4.00) per square foot ($217,900.00) at ten percent
(10%) per annum.

50BB.  The rental credit outlined in paragraph 50b. has been offered to Lessee
as an inducement to enter into this Lease. Therefore, unless Lessee acts to make
itself ineligible or otherwise for any reason becomes ineligible for IDB
financing, Lessee shall have the right to a rental credit as outlined in
paragraph 50b. for the first thirty-six months of this Lease (until May 1, 2002)
regardless of whether Lessor continues to maintain IDB financing for its own
benefit. The interest rate for such credit shall be based upon the blended rate
of interest Lessor would have paid had Lessor actually chosen to maintain the
IDB financing.

                                  Page 1 of 2
<PAGE>

56.  The "first full year of assessment" shall be understood to be tax year
1999-2000.

AGREED AND ACKNOWLEDGED:

PlyProperties, a partnership       Therasense, Inc., A California Corp.

By: /s/ Signature Illegible        By: /s/ Signature Illegible
    -----------------------           -------------------------

Its: Managing Partner              Its: President & CEO
     ----------------                  ----------------

Date: 3/12/99                      Date: 3/12/99
      -------                            -------

                                   By: /s/ Signature Illegible
                                      ------------------------

                                   Its: Vice President, R & D
                                       ----------------------

                                   Date: 3-12-99
                                        --------

                                  Page 2 of 2
<PAGE>

                                  WORK LETTER

     1.   Lessor shall construct the tenant improvements (the "Improvements") in
accordance with the preliminary plans (the "Preliminary Plans") attached hereto
and in accordance with the terms of this work letter.

     2.   Lessor shall cause a minimum of two subcontractors to bid for
construction of any Improvements over $10,000.00. The General Contractor is the
contractor only of Lessor and Lessee shall have no liability to the General
Contractor on the construction contract.

     3.   Lessor shall cause to be prepared, as quickly as possible, final
plans, specifications and work drawings of the Improvements ("Final Plans"), as
well as an estimate of the total cost for the Improvements ("Cost Estimate"),
all of which conform to or represent logical evolutions of or developments from
the Preliminary Plans. As soon as approved by Lessor and Lessee, Lessor shall
submit the Final Plans to all appropriate governmental agencies and thereafter
the Lessor shall use its best efforts to obtain required governmental approvals
as soon as practical.

     4.   After the Final Plans have been approved by Lessor and Lessee as
provided above, neither party shall have the right to require extra work or
change orders with respect to the construction of the Improvements without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed. All change orders shall specify any change in the Cost
Estimate as a consequence of the change order.

     5.   Lessor shall thereafter commence construction of the Improvements and
shall diligently prosecute such construction to completion. The Improvements
shall be constructed by Lessor in accordance with all rules, regulations, codes,
ordinances, statutes, and laws of any governmental or quasi-governmental
authority and in accordance with the Final Plans as amended.

     6.   When the Improvements are complete, Lessor shall deliver possession of
the Premises to Lessee.

     7.   Notwithstanding anything to the contrary in the lease, effective upon
delivery of the Premises to Lessee, Lessor does hereby warrant that (a) the
construction of the Improvements was performed in accordance with all rules,
regulations, codes, statutes, ordinances, and laws of all governmental and
quasi-governmental authorities, in accordance with the Final Plans, and in a
good and workmanlike manner, (b) all material and equipment installed therein
conformed to the Final Plans and was new and otherwise of good quality, (c) the
electrical, plumbing, and mechanical systems servicing the Premises are in
working order and in good condition, and (d) the roof is in good condition and
water tight.

     8.   The cost the Initial Improvements to be provided at Lessor's sole
expense shall not include (and Lessee shall have no responsibility for the
Allowance shall not be used for) the following: (a) costs attributable to
improvements installed outside the demising walls of the Premises; (b) costs for
improvements which are not shown on or described in the Final Plans unless
otherwise approved by Lessee; (c) costs incurred to remove Hazardous Materials
from the Premises or the surrounding area; (d) attorneys' fees incurred in
connection with negotiation of construction contracts, and attorneys' fees,
experts' fees and other costs in connection with disputes with third parties;
(e) interest and other costs of financing construction costs; (f) costs
<PAGE>

incurred as a consequence of delay (unless the delay is caused by Lessee),
construction defects or default by a contractor; (g) costs recoverable by Lessor
upon account of warranties and insurance; (h) restoration costs in excess of
insurance proceeds as a consequence of casualties; (i) penalties and late
charges attributable to Lessor's failure to pay construction costs; (j) costs to
bring the Premises into compliance with applicable laws and restrictions,
including, without limitation, the Americans with Disabilities Act and
environmental laws; (k) wages, labor and overhead for overtime and premium time;
(l) offsite management or other general overhead costs incurred by Lessor; and
(m) construction management, profit and overhead charges in excess of 8% of the
total cost of the Improvements.

     9.   So long as such occupancy does not interfere with Lessor's
construction of the Improvements, Lessee shall have the right to occupy the
Premises prior to the completion of the Improvements for the purpose of
installing its equipment, data, telecommunications systems and trade fixtures.

                                       2
<PAGE>

Recording requested by:
and when recorded mail to:

Alexis S. M. Chiu, Esq.
HOLLAND & KNIGHT LLP
44 Montgomery Street, Suite 4050
San Francisco, California 94104-4801

________________________________________________________________________________
                                                (Space above for Recorder's use)

            SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

     THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") is made as of August 1, 1999, by and among Therasense, Inc., a
California corporation ("Tenant"), PLYPROPERTIES, a California general
partnership ("Landlord"), and Wells Fargo Bank, National Association
("Beneficiary").

                                  WITNESSETH:

     WHEREAS, Landlord is the owner and holder of fee simple title in and to
certain real property (the "Premises") situated in the County of Alameda,
California, and described in Exhibit A attached hereto and by this reference
made a part hereof.

     WHEREAS, Landlord and Tenant have entered into that certain Lease, dated
February 26, 1999 (the "Lease"), with respect to the Premises.

     WHEREAS, Landlord and Beneficiary have heretofore entered into that certain
Reimbursement Agreement dated as of May 1, 1997 (the "Original Reimbursement
Agreement").

     WHEREAS, Landlord and Beneficiary have heretofore entered into that certain
First Amendment to Reimbursement Agreement dated as of May 22, 1998 (the "First
Amendment to Reimbursement Agreement").

     WHEREAS, Landlord and Beneficiary are concurrently herewith entering into
that certain Second Amendment to Reimbursement Agreement dated as of August 1,
1999 (the "Second Amendment to Reimbursement Agreement") (the Original
Reimbursement Agreement, as amended by the First Amendment to Reimbursement
Agreement and the Second Amendment to Reimbursement Agreement, and as it may be
further amended from time to time, being the "Reimbursement Agreement").

     WHEREAS, Landlord has heretofore executed and delivered that certain Deed
of Trust, Security Agreement, Assignment of Leases and Rents and Fixture Filing
(Construction Trust

                                       1
<PAGE>

Deed), dated as of May 1, 1997, for the benefit of Beneficiary, recorded on
December 22, 1997, as Instrument No. 97-340090 in the Recorder's Office of
Alameda County, California (the "Original Deed of Trust").

     WHEREAS, Landlord is concurrently herewith executing and delivering that
certain First Amendment to Deed of Trust, Security Agreement, Assignment of
Leases and Rents and Fixture Filing (Construction Trust Deed), dated as of
August 1, 1999 (the "First Amendment to Deed of Trust") (the Original Deed of
Trust, as amended by the First Amendment to Deed of Trust, and as it may be
further amended from time to time, the "Deed of Trust").

     NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency whereof
are hereby acknowledged, Tenant, Landlord, and Beneficiary, intending to be
legally bound hereby, covenant and agree as follows:

     1.   The Lease and Tenant's leasehold estate created thereby, shall be and
are completely and unconditionally subject and subordinate to the lien of the
Deed of Trust and to all of the terms, conditions and provisions thereof, to all
advances made or to be made thereunder and under the Reimbursement Agreement,
and to any renewals, extensions, modifications or replacements thereof.

     2.   In the event Beneficiary obtains title to the Premises through
foreclosure, deed in lieu of foreclosure under the Deed of Trust or by any other
manner, so long as there shall then exist no breach, default or event of default
(after the expiration of any applicable cure periods) on the part of Tenant
under the Lease, the leasehold interest of Tenant under the Lease shall not be
extinguished or terminated by reason of such foreclosure, but rather the Lease
shall continue in full force and effect, and Beneficiary and any successor in
interest to Beneficiary shall recognize and accept Tenant as the tenant under
the Lease subject to the terms and provisions of the Lease except as modified by
this Agreement.

In the above event, and in the event any other transferee obtains title to the
Premises from Beneficiary or through foreclosure or in any other manner whereby
such other transferee succeeds to the interest of a landlord under the Lease,
Tenant agrees, for the benefit of Beneficiary and/or such other transferee, that
Tenant shall be bound to Beneficiary or such other transferee in accordance with
all of the terms of the Lease for the balance of the term thereof, and Tenant
hereby attorns to Beneficiary and/or such other transferee as its landlord, such
attornment to be effective and self-operative without the execution of any
further instrument immediately upon Beneficiary or such other transferee
succeeding to the landlord's interest in the Lease and giving written notice
thereof to Tenant. Tenant agrees to provide written confirmation of the
foregoing upon request of Beneficiary or such other transferee.

     3.   By virtue of the Deed of Trust, Beneficiary shall be entitled, but not
obligated, to exercise the claims, rights, powers, privileges, options and
remedies of the landlord under the Lease and shall be further entitled to the
benefits of, and to receive and enforce performance of, all of the covenants to
be performed by Tenant under the Lease as though Beneficiary were named therein
as the landlord. Beneficiary shall not, by virtue of the Deed of Trust or this
Agreement, be or become subject to any liability or obligation to Tenant under
the Lease or otherwise, until Beneficiary shall have obtained title to the
Premises, by foreclosure or otherwise, and then only to the extent of
liabilities or obligations accruing subsequent to the date that Beneficiary has
obtained title to the Premises and prior to the date that Beneficiary has

                                       2
<PAGE>

transferred title to the Premises to a subsequent transferee. Beneficiary shall
not be liable for or subject to any offsets or defenses that Tenant may have by
reason of any act or omission of any prior landlord (including Landlord) except
that Tenant shall be entitled to the rights provided to it by the express terms
of the Lease with respect to any continuing defaults of a prior landlord
(including Landlord) such as a continuing failure to perform maintenance and
repair.

     4.   Tenant shall not pay an installment of rent or any part thereof more
than one month prior to the due date of such installment, and Beneficiary shall
be entitled to recover from Tenant, as rent under the Lease, any payment of rent
or additional rent made by Tenant to Landlord for more than one month in
advance.

     5.   Tenant agrees that in the event of Landlord's default with respect to
any obligation of Landlord under the Lease, Tenant shall give Beneficiary notice
of Landlord's default and allow Beneficiary not less than thirty (30) days
following receipt of such notice to cure such default before invoking any
remedies Tenant may have by reason thereof; provided, however, that Beneficiary
will not be obligated to cure any default.

     6.   After notice is given to Tenant by Beneficiary that the rentals under
the Lease should be paid to Beneficiary, Tenant shall pay to Beneficiary, or in
accordance with the directions of Beneficiary, all rentals and other monies due
and to become due to the Landlord under the Lease, and Landlord hereby expressly
authorizes Tenant to make such payments to Beneficiary and hereby releases and
discharges Tenant of and from any liability to Landlord on account of any such
payments.

     7.   The term "Beneficiary" or any similar term shall include Beneficiary,
the trustee under any deed of trust affecting the Premises, any nominee of
Beneficiary, and successors or assigns of the foregoing, including, without
limitation, any party that succeeds to Beneficiary's interest by foreclosure of
the Deed of Trust, deed in lieu of foreclosure, sale under a private power
contained in the Deed of Trust, or in any other proceeding. The term "Deed of
Trust" or any similar term shall include the Deed of Trust and any amendments or
addenda. The term "Landlord" shall include Landlord and the successors and
assigns of Landlord. The term "Tenant" shall include Tenant and the successors,
assigns, and sublessees of Tenant. The term "Lease" shall include the Lease and
all permitted amendments, addenda, extensions, and renewals.

     8.   Landlord and Tenant agree not to change, alter, amend or otherwise
modify the Lease in any material respect without the prior written consent of
Beneficiary.

     9.   Landlord agrees that as between Landlord and Tenant, nothing contained
in this Agreement shall impair limit, abrogate, or otherwise modify the
obligations of Landlord to Tenant under the Lease and the liability of Landlord
under the Lease to Tenant shall survive the any foreclosure of the Deed of Trust
or sale of the Premises by deed in lieu of foreclosure.

     10.  Tenant hereby represents and warrants to Beneficiary as follows:

                                       3
<PAGE>

     (a)  A true and complete copy of the Lease, together with all amendments,
supplements, extensions and other modifications thereto of every nature, has
been delivered by Tenant to Beneficiary concurrently with the execution of this
Agreement.

     (b)  The Lease is in full force and effect, and there has been no
amendment, supplement, extension or other modification of any nature to the
Lease.

     (c)  Tenant is the only current and intended tenant under the Lease.

     (d)  To date, Tenant has not paid any rent under the Lease more than one
(1) month in advance. The next monthly rent payment is due on September 1, 1999
and the base monthly rent is $62,500.

     (e)  To the best of Tenant's knowledge, there is no existing uncured
default by Landlord under the Lease, nor has any event occurred which, with the
passage of time or the giving of notice or both, would constitute such a
default, except as follows (if none, state "None"):

     (f)  To the best of Tenant's knowledge, there is no condition or event
(except as set forth in the Lease) that would prevent the Lease from becoming
effective or would permit a cancellation or termination of the Lease by Tenant
or by Landlord.

     (g)  Tenant hereby consents to the execution and delivery of the First
Amendment to Deed of Trust by Landlord to Beneficiary, and any assignment by
Landlord of its interest in the Lease, as security for the performance by
Landlord of its obligations under the Reimbursement Agreement.

     (h)  To the best of Tenant's knowledge, it presently has no defense to the
enforcement of the Lease against it.

     11.  This Agreement may not be modified other than by an agreement in
writing signed by the parties or by their respective successors in interest.

     12.  If any party commences any action against any other party based on
this Agreement, the prevailing party shall be entitled to expenses and costs of
suit, including reasonable attorneys' fees.

     13.  In this Agreement, wherever it is required or permitted that notice
and demand be given by any party to another party, that notice or demand shall
be given in writing and forwarded by personal delivery, overnight delivery
service or certified mail, addressed as follows:

                                       4
<PAGE>

     For Tenant:         Therasense, Inc.
                         1360 South Loop Road
                         --------------------
                         Alameda CA 94502
                         ----------------
                         C. Liamos
                         ---------
                         Attn: C.F.O.
                               ------

     For Landlord:       Plyproperties
                         2081 Adams Avenue
                         San Leandro, California 94577
                         Attn: Donald L. Jones,
                               Managing General Partner

     For Beneficiary:    Wells Fargo Bank, National Association
                         Commercial Banking Office
                         420 Montgomery Street
                         San Francisco, California 94163
                         Attn: Peter D. Gruebele,
                         Vice President

     Any party may change an address given for notice by giving written notice
of that change in the manner set forth in this Section 14 to all other parties.

     14.  This Agreement shall be binding on and inure to the benefit of the
parties and their respective heirs, successors, and assigns.

     15.  If any party is a limited liability company, corporation or
partnership, such party represents and warrants that all individuals executing
this Agreement on behalf of a limited liability company, corporation or
partnership represent and warrant that they are authorized to execute and
deliver this Agreement on behalf of the limited liability company, corporation
or partnership and that this Agreement is binding upon the limited liability
company, corporation or partnership.

     16.  In the event any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. This Agreement shall be governed by and construed according to the laws
of the State of California.

     17.  This Agreement may be signed in any number of counterparts, each of
which shall be an original with the same effect as if the signatures thereto and
hereto were upon the same instrument.

                                       5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed the day and year first above written.

                                         TENANT:

                                         Therasense, Inc.,
                                         a California corporation

                                         By: /s/ Signature Illegible

                                         Name: Charles T Liamos
                                               ----------------

                                         Title: V.P. Finance & CFO
                                                ------------------

                                         By: /s/ Signature Illegible

                                         Name: W. MARK LORTZ
                                               -------------

                                         Title: PRESIDENT & CEO
                                                ---------------

                                         LANDLORD:

                                         PLYPROPERTIES,
                                         a California general partnership

                                         By: ______________________________
                                               Donald L. Jones,
                                               Its Managing General Partner

                                         BENEFICIARY:

                                         Wells Fargo Bank,
                                         National Association

                                         By: /s/ Signature Illegible
                                               Peter D. Gruebele,
                                               Vice President

                                       6
<PAGE>

                                   EXHIBIT A
                                   ---------

                               LEGAL DESCRIPTION

     The property is situated in the State of California, County of Alameda, and
is described as follows:

     CITY OF ALAMEDA

     PARCEL A:

     PARCELS 1, 3 & 4, PARCEL MAP 4890, FILED MARCH 4, 1987, MAP BOOK 168, PAGES
     20 AND 21. SERIES NO. 87-062851, ALAMEDA COUNTY RECORDS.

     EXCEPTING AND RESERVING THEREFROM:

     ALL OVERLYING AND OTHER WATER RIGHTS, INCLUDING, WITHOUT LIMITATIONS, THE
     RIGHT TO APPROPRIATE WATER AND DISTRIBUTE IT TO OTHER PROPERTY, WITHOUT ANY
     RIGHT TO THE USE OF OR RIGHTS IN OR TO ANY PORTION OF THE SURFACE OF SAID
     LAND. THE OWNER OF THE RESERVED WATER RIGHTS, HOWEVER, COVENANTS THAT IT
     WILL NOT EXERCISE THE RIGHTS RESERVED OVER THE SURFACE OF THE PROPERTY
     DESCRIBED ABOVE, OR WITHIN THE SUBSURFACE OF SUCH PROPERTY ABOVE A DEPTH OF
     100 FEET BELOW THE SURFACE OF SAID PROPERTY. BREACH OF THE FOREGOING
     COVENANT SHALL NOT TERMINATE OR FORFEIT THE RIGHTS SO RESERVED, BUT
     INJUNCTIVE RELIEF MAY BE SOUGHT AND OBTAINED TO PREVENT OR REMEDY ANY SUCH
     BREACH;

     ALL OIL, GAS, MINERAL, GEOTHERMAL AND HYDROCARBON SUBSTANCES IN AND UNDER,
     OR THAT MAY BE REPRODUCED BELOW A DEPTH OF 500 FEET BELOW THE SURFACE OF
     SAID PROPERTY, WITHOUT ANY RIGHT OF ENTRY UPON THE SURFACE OF SAID LAND FOR
     THE PURPOSES OF MINING, DRILLING, EXPLORING OR EXTRACTING SUCH OIL, GAS,
     MINERAL, GEOTHERMAL OR HYDROCARBON SUBSTANCES, AND, EXCEPT AS PROVIDED
     ABOVE WITH RESPECT TO WATER RIGHTS, WITHOUT ANY RIGHT TO THE USE OF OR
     RIGHTS IN OR TO ANY PORTION OF THE SURFACE OF SAID LAND TO A DEPTH OF 500
     FEET BELOW THE SURFACE THEREOF.

     AS RESERVED IN THE GRANT DEED TO SATELLITE BAY ASSOCIATES, A JOINT VENTURE,
     RECORDED APRIL 30, 1986, SERIES NO. 86-103018, ALAMEDA COUNTY RECORDS.

     PARCEL B:

     A NON-EXCLUSIVE EASEMENT FOR CONSTRUCTION, RECONSTRUCTION, MAINTENANCE,
     REPAIR AND USE OF INGRESS AND EGRESS FACILITIES AND PUBLIC AND PRIVATE
     UTILITIES, SANITARY SEWERS AND STORM DRAINAGE FACILITIES, OVER THAT PORTION
     OF PARCEL TWO, PARCEL MAP 4728, FILED APRIL 30, 1986, MAP BOOK 159, PAGE
     94, ALAMEDA COUNTY RECORDS, DESIGNATED AS EASEMENT "A" ON SAID MAP, AS
     GRANTED TO SATELLITE BAY ASSOCIATES, A JOINT VENTURE, BY DEED RECORDED MAY
     30, 1986, SERIES NO. 86-126239, ALAMEDA COUNTY RECORDS.

     ASSESSOR'S PARCEL NOS.   074-1339-011
                              074-1339-013
                              074-1339-014

                                       7
<PAGE>

STATE OF CALIFORNIA  )
                     ) ss.
COUNTY OF Alameda    )
          --------

     On January 20, 2000, before me Lillian J. Walters, personally appeared W.
                                    ------------------                      --
Mark Lortz, personally known to me (or proved to me on the basis of satisfactory
----------
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

                                    Witness my hand and official seal.

                                    [STAMP OMITTED]

                                    Notary Public in and for the County of
                                    Alameda, State of California
                                    -------

SF1 #32409 v2<PAGE>

[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]

                                                                    EXHIBIT 10.9

                           MASTER PURCHASE AGREEMENT

                FOR Electronic Assembly & System Kit Packaging

     This Master Purchase Agreement is effective as of November 3, 1999 (the
"Effective Date"), by and between TheraSense, Inc., a California corporation
having its principal place of business at 1360 South Loop Road Alameda,
California 94502, ("TheraSense") and Flextronics International USA Inc.,
corporation, having a place of business at 2090 Fortune Drive San Jose, CA
95131.

                                   RECITALS

     WHEREAS, Flextronics is a leader in the field of contract manufacturing for
electrical devices and provider of engineering services related to device
manufacturing design, and has the manufacturing system capability to provide
warehousing and distribution services;

     WHEREAS, TheraSense develops and manufactures advanced blood glucose
monitoring devices for diabetics;

     WHEREAS, TheraSense wishes to contract with Flextronics for certain
engineering design and manufacturing services for TheraSense's new Messenger and
Freestyle blood glucose monitoring devices, as defined and described in the
Specifications provided as Exhibit C hereto, and to purchase the resulting
products from Flextronics; and

     WHEREAS, Flextronics desires to provide such services and products for
TheraSense;

     NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree to the terms and conditions specified below as follows:

                                   AGREEMENT

     The terms and conditions of this agreement and Exhibits A through C hereof,
(collectively the "Agreement") and any Purchase Order(s) issued hereunder, shall
govern all sale and purchase transactions, pertaining to the subject matter
hereof, that may be entered into by TheraSense and Flextronics, from time to
time hereafter, unless expressly otherwise agreed in writing.

     1.   Definitions.
          -----------

          1.1 "Acceptance" shall mean the successful completion of a mutually
agreed upon inspection and test procedure for Products (as defined hereinafter)
which confirms that the tested Product meets the Specifications (as defined
hereinafter). Acceptance testing shall be performed by TheraSense at Flextronics
facilities in Fremont California.

          1.2  "Affiliate" shall mean any entity that directly or indirectly
controls, is under common control with, or is controlled by, one of the parties
to this Agreement. An entity shall be deemed to be in control of another entity
only if, and for so long as, it owns or controls more than fifty-one percent
(51%) of the shares of the subject entity entitled to vote in the election of
the
<PAGE>

directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).

          1.3  "Engineering Change" shall mean any mechanical, radio frequency
design, electrical software, electromechanical or process change to any
Product(s), including printed circuit boards, or the manufacturing, kiting, or
assembly process for any Product. An Engineering Change includes changes
originating from TheraSense or Flextronics which would affect the safety,
performance, reliability, serviceability, appearance, dimensions, tolerances,
materials, and composition of any bill of material of the Product (as
hereinafter defined).

          1.4  "FDA" shall mean the United States Department of Health and Human
Services Food and Drug Administration.

          1.5  "Flextronics' Proprietary Rights" shall mean all of Flextronics'
trade secrets, know-how and the like which are for or are used in the
manufacture of the Product or any Product Improvements or Engineering Changes,
including any technology or know-how property incidental thereto, such as
technical information, data, specifications, drawings, manuals and the like and
shall include any patents or patent rights Flextronics may acquire with respect
to the foregoing. However, the foregoing specifically excludes technical
information, data, specifications, drawings, manuals and the like, as well as
any patents, patent rights, or other intellectual property owned or provided by
TheraSense.

          1.6  "Force Majeure" shall mean any act of God, earthquake, fire,
natural disaster, accident, act of government, or an act that is beyond the
reasonable control of either party.

          1.7  "Manufacturing Services" shall mean the assembly, packaging, and
kitting of the electronic components manufactured by Flextronics.

          1.8  "Product" shall mean the electronic assemblies for the Messenger
or Freestyle systems as described in Exhibit C.

          1.9  "Product Improvements" shall mean any modifications to the
Product or manufacturing assembly process including system kiting to enhance
performance and/or provide comparable performance at lower cost. All Product
Improvements must be approved in writing by TheraSense prior to implementation.

          1.10 "Purchase Order" shall mean written order(s) from TheraSense to
Flextronics for the Product, specifically referencing this Agreement and
including the description, quantity, shipping destination, and requited delivery
date at the destination.

          1.11 "Specifications" shall mean the mutually agreed upon
specifications (including storage requirements) for the electronic assemblies
for the Messenger and Freestyle systems, as set forth in Exhibit C.

          1.12 "Quality Plan" shall mean the mutually agreed upon in-process and
final product test and inspection plans as set forth in Exhibit D.

                                      -2-
<PAGE>

          1.13 "Territory" shall mean North America.

     2.   Supply Requirements.
          -------------------

          2.1  During the term of this Agreement, Flextronics shall supply
TheraSense with those quantities of the Product ordered by TheraSense in a
Purchase Order submitted to Flextronics pursuant to this Agreement. The Product
shall comply with the Specifications and all jointly developed Quality Plans

          2.2  In consideration for the services and support provided by
Flextronics during the development of the Messenger and Freestyle product lines,
the projected business volume offered to Flextronics hereunder, and competitive
pricing offered to TheraSense hereunder. TheraSense agrees, to purchase all its
Manufacturing Services for the Messenger and Freestyle product lines exclusively
from Flextronics for a period of five (5) years from the Effective Date.
TheraSense shall not be obligated hereunder if the Products fail to conform in
all respects to the Specifications, this Agreement is terminated pursuant to
Section 15, or, in market based benchmarking, Flextronics fails to maintain
competitive pricing to warrant such exclusivity. Flextronics and TheraSense
shall work jointly to develop a Quality Plan for Flextronics' manufacturing line
with the ultimate goal to achieve within reasonable economic limits a process
capability index (Cpk) of 1.67 or higher on all key parameters of the Product
Specifications.

     Flextronics agrees to implement process improvements and process
validations using the TheraSense process control methodology as outlined below.
          ***
          2.3  Flextronics shall share process data with TheraSense by
submitting Certificates of Analysis that include process control charts, for
every Product shipment.

     3.   Forecasts and Orders.  Starting on the Effective Date, and every three
          --------------------
(3) months thereafter, TheraSense shall provide Flextronics with a non-binding
written forecast of TheraSense's expected needs for the Product for no less than
a six (6) month period from the date thereof (the "Forecast"). At least
semiannually, TheraSense shall place a binding six (6) month Purchase Order with
Flextronics for the Product.

     4.   Material Procurement.
          --------------------

          4.1  Purchase Orders.  TheraSense's accepted Purchase Orders will
               ---------------
constitute authorization for Flextronics to procure, using standard purchasing
practices the components, materials and supplies necessary for the manufacture
of Products ("Inventory") covered by such Purchase Orders.

          4.2  Special Inventory.  Subject to the conditions below, Flextronics
               -----------------
may purchase, in amounts beyond the amount necessary to fill accepted purchase
---
orders, the components, materials, and supplies: (i) which require greater than
ninety (90) days from the time they are ordered to the time they are delivered
to Flextronics ("Long Lead Time Components") plus 30 days to account for the
order, shipment, receipt and manufacturing and, (ii) purchased in quantities
above the currently required amount in order to achieve price targets ("Economic
Order Inventory"), and (iii) purchased in excess of current requirements because
of minimum lot sizes available from manufacturers

*** Confidential treatment requested

                                      -3-
<PAGE>

("Minimum Order Inventory"). Collectively, these components, materials, and
supplies are termed "Special Inventory".

               (1)  Flextronics may purchase Long Lead-Time Components
sufficient to meet requirements for the Purchase Orders and Forecast in effect
at the time Flextronics places an order with its supplier.

               (2)  Flextronics may reasonably purchase Minimum Order Inventory
as required by its suppliers' minimum order requirements.

               (3)  Flextronics may purchase Economic Order Inventory only upon
the prior approval of TheraSense.

               (4)  Flextronics will, from time to time, hold Long Lead-Time
Components and finished goods in inventory to increase TheraSense's production
flexibility. The components and quantities of all such inventory will be
mutually agreed to in writing by the parties prior to Flextronics placing such
items into inventory.

               (5)  TheraSense will be responsible for all non-cancelable/non-
returnable materials as procured on TheraSense's behalf to support Purchase
Orders and Forecasts subject to Section 4.2.

               (6)  TheraSense will be responsible for all Inventory and Special
Inventory purchased by Flextronics under this Section but subject to the
conditions provided elsewhere in this Agreement.

          4.3  Delivery.  All Products delivered pursuant to the terms of this
               --------
Agreement shall be suitably packed for shipment in accordance with TheraSense's
Specifications, marked for shipment to TheraSense's destination specified in the
applicable purchase order and delivered to a carrier or forwarding agent.

          4.4  Quantity Increases and Shipment Schedule Changes.  For any
               ------------------------------------------------
accepted Purchase Order, TheraSense may (i) increase the quantity of Products or
(ii) reschedule the quantity of Products and their delivery date as provided in
the table below:

     Maximum Allowable Variance From Purchase Order Quantities/Delivery Dates
     ------------------------------------------------------------------------
          # of days before    Allowable          Maximum           Maximum
          Delivery Date       Quantity           Reschedule        Reschedule
          on Purchase         Increases          Quantity          Period
                              -----------------  ----------------  -------------
          Order               ***                ***               ***
          ------------------
          ***

*** Confidential treatment requested

                                      -4-
<PAGE>

     Any purchase order quantities increased or rescheduled pursuant to this
Section may not be subsequently increased or rescheduled without the prior
written approval of Flextronics.  Quantity increases of a greater percentage may
be provided if agreed to by both parties.  All other changes in quantity or
shipment date require Flextronics' prior written consent. Inventory excess to
original schedule shall be subject to an inventory carrying charge of *** for
the price of finished Product. Although Flextronics will use reasonable
commercial efforts to satisfy TheraSense's requested quantity increases,
Flextronics' ability to do so is subject to material availability. Should
TheraSense require increases beyond the above, a TheraSense owned buffer stock
of Long Lead-Time Components may be required. The components and quantities of
all such inventory will be agreed to separately in writing by both Flextronics
and TheraSense If there are extra costs required to meet a schedule increase in
excess of the above limits, Flextronics will seek approval from TheraSense in
advance of incurring such costs. If the forecast for any period is significantly
less than the previous forecast supplied over the same period, so that
Flextronics has inventory for TheraSense with no requirements, that amount will
be considered canceled and TheraSense will be responsible for any Special
Inventory purchased or ordered by Flextronics to support the forecast.

     4.5  Cancellation.  TheraSense may not cancel any portion of the quantity
          ------------
of an accepted purchase order without Flextronics' prior written approval, which
shall not be unreasonably withheld. If the parties agree upon a cancellation,
TheraSense will pay Flextronics for Products, Inventory, and Special Inventory
affected by the cancellation as follows: (i) *** of the contract price for all
finished Products in Flextronics' possession; (ii) *** of the cost of all
Inventory and Special Inventory in Flextronics' possession and not returnable to
the supplier or usable for other Flextronics products, whether in raw form or
work in process, *** *** (iii) *** of the cost of all Inventory and Special
Inventory on order and not cancelable and not otherwise usable for other
Flextronics products; ***; (iv)***; and (v) ***. Flextronics will use reasonable
commercial efforts to return unused Inventory and Special Inventory and to
cancel pending orders for such inventory, and to otherwise mitigate the amounts
payable by TheraSense in case of cancellation.

     5.   Engineering Changes.
          -------------------

          5.1  TheraSense Requests.  TheraSense may request, in writing, that
               -------------------
Flextronics incorporate an Engineering Change into the Product. Such request
will include a description of the proposed Engineering Change sufficient to
permit Flextronics to evaluate its feasibility, impacts, and cost. Flextronics'
evaluation shall be in writing and shall state the costs and time of
implementation and the impact on the manufacturing, delivery, schedule, and
pricing of the Product and shall be delivered to TheraSense within ten (10) days
of receiving the request. TheraSense shall have thirty (30) days after receipt
of Flextronics' evaluation to decide whether or not to implement the requested
Engineering Change. Flextronics will not be obligated to proceed with the
engineering change until the parties have agreed upon the changes to the
Product's Specifications, delivery, schedule and Product pricing and upon the
implementation costs to be borne by the TheraSense including, without
limitation, the cost of Inventory and Special Inventory on-hand and on-order
that becomes obsolete.

*** Confidential treatment requested

                                      -5-
<PAGE>

Flextronics will use best efforts to implement all TheraSense required changes
per TheraSense requests.

          5.2  Flextronics Requests.  If Flextronics desires to make any
               --------------------
Engineering Change (including manufacturing processes, raw materials and
suppliers thereof), it will notify TheraSense not less than six (6) months prior
to such change to enable TheraSense to determine conformity of the changed
Product with TheraSense's manufacturing requirements and obligations with
respect to regulatory authorities. If Flextronics changes the Product or process
to create non-conforming Product or Product which falls to conform to
TheraSense's regulatory constraints, further processing needs, or performance
standards for finished goods, then Flextronics agrees to continue to supply
unchanged Product for the duration of the Agreement or until TheraSense can
alter its process, standards for finished goods or take seek appropriate
regulatory approval to accommodate the changed Product or process. ECO
implementation shall otherwise follow the standard Flextronics procedure.

     6.   Purchase Price
          --------------

     TheraSense's target purchase price with respect to the Product shall be as
specified in Exhibit B.  The price for Products to be manufactured will be set
quarterly for the first year and semi-annually thereafter by reviewing actual
component and assembly costs at Flextronics and making adjustments based upon
the changes.  All prices quoted are exclusive of federal, state and local
excise, sales, use and similar taxes, and any duties, and TheraSense shall be
responsible for all such items.  Payment for any Products, Manufacturing
Services or other costs to be paid by TheraSense hereunder is due thirty (30)
days net form the date of the shipment therefor and shall be made in lawful U.S.
currency. TheraSense agrees to pay *** on all late payments. Furthermore, if
TheraSense is in arrears more than thirty (30) days for two (2) consecutive
months with respect to payments, Flextronics may require prepayment from
TheraSense or may delay shipments or suspend work until assurances of payment
satisfactory to Flextronics are received.

     7.   Delivery
          --------

          7.1  Purchases of Product made hereunder by Purchase Orders shall
initially be F.O.B. Seller's factory in Fremont, CA. During this initial period,
TheraSense will specify the carrier and shipments will be made freight collect.
TheraSense and Flextronics agree to establish a Kanban system whereby
Flextronics will keep an amount to be determined of finished product at it's
facility awaiting shipment to TheraSense customers. Upon completion of this,
payment terms will become five (5) days net from the date product is completed
and transferred into the Kanban. Such change will include a separate price to
cover freight charges paid by Seller and any other justifiable costs incurred by
Seller. Title and risk of loss of Product shall pass to TheraSense at the F.O.B.
point. Partial shipments, with TheraSense prior approval, will be accepted. A
certificate of conformance shall accompany each shipment made hereunder.

          7.2  Late Delivery.  Time is of the essence with regard to deliveries
               -------------
of Product purchased hereunder. Flextronics shall use its best efforts to
maintain 100% on-time delivery of Products. Flextronics shall notify TheraSense
as soon as practicable if for any reason Flextronics fails to comply, or
anticipates that it may fail to comply with the terms of this Agreement or of a

*** Confidential treatment requested

                                      -6-
<PAGE>

Purchase Order (including but not limited to failure to meet a delivery date
required in the Purchase Order or delivery of less than the required quantity of
Products). If Flextronics fails to deliver any Product (other than as a result
of a Force Majeure event as set forth in Section 20.1 herein), then, TheraSense
may request and Flextronics shall agree to work any necessary overtime at no
additional cost to TheraSense to minimize such delay, or TheraSense may request
Flextronics to ship the Product by premium transportation at no additional cost
to TheraSense and Flextronics will comply with such request.

          7.3  Delivery Documentation.  Flextronics shall include an invoice for
               ----------------------
every delivery of Products which includes the following information for every
unit of Product delivered; a complete noun description in the English language,
a statement as to the country of origin of the goods; TheraSense's Purchase
Order number, the value of the Products therein; Flextronics' identification
number, or in the absence of such number, the full address of Flextronics; and
the terms of sale.

     8.   Payments
          --------

          8.1  Invoice payment terms applicable to Purchase Orders issued
hereunder shall be net thirty (30) days FOB Flextronics. In addition to the
invoice documentation to accompany each delivery of Product, for payment
purposes, Flextronics shall issue an invoice directly to TheraSense upon Product
shipment. The parties will use reasonable commercial efforts to incorporate an
electronic data interchange process to allow for wire transfer of funds at that
time.

          8.2   ***

     9.   Warranty
          --------

          9.1  Flextronics warrants that the Product will be new, merchantable,
free from material defects in materials and workmanship and will conform to the
Specifications under normal and intended use for a period of (6) six months
after acceptance by TheraSense. Materials used in the Product are warranted to
the same extent that the original manufacturer warrants the materials. This
express limited warranty does not apply to (a) materials consigned or supplied
by TheraSense to Flextronics; (b) defects resulting from TheraSense's
Specifications or the design of the Products; or (c) Product that has been
abused, damaged, altered or misused by any person or entity after the title
passes to TheraSense. With respect to first articles, prototypes, pre-production
units, test units or other similar Products, Flextronics makes no
representations or warranties whatsoever.

*** Confidential treatment requested

                                      -7-
<PAGE>

Notwithstanding anything else in this Agreement, Flextronics assumes no
liability for, or obligation related to, the performance, accuracy,
specifications, failure to meet specifications or defects of or due to tooling,
designs, or instructions produced or supplied by TheraSense and TheraSense shall
be liable for costs or expenses incurred by Flextronics related thereto. Upon
any failure of a Product to comply with the above warranty, Flextronics' sole
obligation, and TheraSense's sole remedy, is for Flextronics, at its option, to
promptly repair or replace such unit and return it to TheraSense freight pre-
pad. TheraSense shall return Products covered by the warranty freight pre-paid
after completing a failure report and obtaining a return material authorization
number from Flextronics to be displayed on the shipping container.

          9.2  Flextronics further represents and warrants that its supplying of
Product to TheraSense under this Agreement does not conflict with any other
agreement to which Flextronics is a party and, further, that the Product
supplied hereunder does not, to the best off Flextronics' knowledge, infringe
the proprietary rights of any third party.

          9.3  Flextronics further represents and warrants that it has, and
shall maintain during the term of this Agreement, adequate equipment and
facilities to guarantee sufficient manufacturing capacity to meet TheraSense's
demand for Product as represented in TheraSense's Forecast as described in
Section 3 of this Agreement.

          9.4  Flextronics has stated that its manufacturing facilities are ISO
9002 registered and Flextronics will use all commercially reasonable efforts to
assure that such facilities and any new Flextronics facilities used for the
production of Product will continue to be registered under ISO 9002 during the
term of this Agreement. "Registered" as used herein shall mean certified and
approved.

          9.5  Flextronics further warrants that title to all Products shipped
to TheraSense or drop shipped directly to TheraSense's customers pursuant to
this Agreement shall pass to TheraSense or a TheraSense customer, as the case
may be, free and clear of any liens, charges, encumbrances, restrictions or
rights created in, by or against the Products or against Flextronics, except any
Proprietary Rights of Flextronics identified in writing to TheraSense in the
Products, if any. Provided that TheraSense has paid all associated fees for the
Products, TheraSense and TheraSense's customers shall have quiet enjoyment of
the Products.

          9.6  Flextronics further warrants that: (a) it shall comply In all
material respects with all legal requirements in fulfilling its obligations
under this Agreement, including, but not limited to, lawful manufacturing
practices and its treatment of its personnel and compliance; (b) there are no
lawsuits, claims, suits, proceedings or investigations pending or, to
Flextronics' knowledge, threatened against or affecting Flextronics in respect
of its operations or processes used therein, nor to Flextronics' knowledge, is
there any basis for the same; and (c) there is no action, suit or proceeding
pending or, to Flextronics' knowledge, threatened which questions the legality
of the transactions contemplated by this Agreement. Flextronics warrants that it
owns, holds or possesses and shall maintain all material licenses, franchises,
permits, privileges, immunities, approvals and other authorizations from a
governmental body which are necessary to entitle it to carry on and conduct its
operations as contemplated herein.

                                      -8-
<PAGE>

          9.7  Flextronics warrants that all equipment used in the manufacturing
and planning of TheraSense Products is Year 2000 compliant.

          9.8  OTHER THAN THE WARRANTEES IN THIS SECTION 9, FLEXTRONICS MAKES NO
OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR
IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH CUSTOMER, AND
FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITIONS OF OR
FITNESS FOR A PARTICULAR PURPOSE.

     10.  Regulatory Requirements
          -----------------------

     During the term of this Agreement Flextronics will:

          A.   Comply with the pertinent Quality System Regulations ("QSR") as
               such may be determined by the United States Department of Health
               and Human Services Food and Drug Administration and all
               applicable United States government regulatory requirements.

          B.   Submit to periodic quality audits; TheraSense's Quality Assurance
               department may, at its sole option, perform audits of
               Flextronics' compliance with Quality System Regulations, with the
               quality control requirements specified herein and attached hereto
               as Exhibit D, together with any other quality systems and
               specifications mutually agreed upon.  Flextronics acknowledges
               that the preceding sentence granting TheraSense certain audit
               rights in no way relieves Flextronics of any of its obligations
               under this Agreement, nor shall such provision require TheraSense
               to conduct any such audits.

               (1)  Any audits shall be conducted during normal business hours
                    after reasonable notice (a minimum of two weeks) to
                    Flextronics and not more frequently than once in any one
                    hundred twenty (120) day period.  Except that TheraSense may
                    conduct a limited audit in less than one hundred twenty
                    (120) days of a previous audit for the limited purpose of
                    reviewing any deficiencies discovered in a previous audit.

               (2)  Any out of compliance observations noted during these audits
                    must be corrected expeditiously.  Flextronics shall, within
                    thirty (30) days following receipt of an audit report that
                    recommends corrective actions, provide TheraSense with a
                    corrective action plan and schedule for carrying it out.

               (3)  Following a TheraSense quality audit, Flextronics will be
                    assigned an overall rating of acceptable, marginal or
                    unacceptable.  In the event Flextronics receives an
                    unacceptable rating TheraSense will re-audit Flextronics
                    within six (6) months.  ***

*** Confidential treatment requested

                                      -9-
<PAGE>

               (4)  Flextronics agrees to provide to TheraSense any observations
                    and corrective actions implemented as the result of any
                    audits conducted by the FDA.

               (5)  Flextronics shall have the right to refuse access to areas
                    where Flextronics customer confidentiality issues may arise.

     11.  Acceptance
          ----------

          11.1 Acceptance testing shall be performed by TheraSense in accordance
with the procedures agreed upon in writing by the parties and incorporated in
the Specifications. TheraSense shall notify Flextronics of any defects or non-
conformance as soon as reasonably possible after same are discovered by
TheraSense, and Flextronics shall have an opportunity to inspect and test the
Product claimed to be defective or non-conforming. Flextronics agrees to
promptly replace (at no additional charge to TheraSense) any Product supplied to
TheraSense hereunder which does not fully comply with the Specifications. Upon
the successful completion of Acceptance testing the Product will be considered
accepted. If within ten (10) business days after receipt TheraSense does not
reject the Product or notify Flextronics that it will reject them, then such
Product will be deemed accepted.

          11.2 Except as set forth in Section 11.1, TheraSense shall not be
obligated to accept or pay for any Product that does not comply with the
Specifications or any rules or regulations referred to above. TheraSense's
failure to inspect, test, or reject any particular shipment shall not constitute
a waiver by TheraSense of any of its rights to inspect and reject any subsequent
shipment, or of Flextronics' responsibilities to provide subsequent shipments,
of Product in accordance with the Specifications. With the exception of
TheraSense's manufacturing processes required to use the Product, Flextronics
shall not be liable for Product altered outside of its factory by someone other
than Flextronics or for Product subjected, by an entity other than Flextronics,
to misuse, abuse, improper alteration, accident or negligence in use, storage,
transportation or handling. Notwithstanding the above, Flextronics shall not be
responsible in any way for modifications to the Product made by TheraSense
during TheraSense's subsequent manufacturing process.

     12.  Limitation of Liability
          -----------------------

     EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT AND FOR INTENTIONAL ACTS OR
GROSS NEGLIGENCE, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE DESIGN, MANUFACTURE,
PACKAGING, DELIVERY, STORAGE OR USE OF THE PRODUCT.

                                      -10-
<PAGE>

     13.  Intellectual Property Indemnification
          -------------------------------------

          13.1   Indemnification by TheraSense.  Flextronics agrees to notify
                 -----------------------------
TheraSense promptly of all claims actions, whether actual or potential, alleging
that the Product infringes on the intellectual property rights of any third
party (a "Claim"). TheraSense shall defend and indemnify Flextronics against any
Claim and will have the sole expense and control of the defense of any Claim.
Flextronics shall give TheraSense, at TheraSense's expense, all assistance
reasonably requested in defending or settling a Claim. Notwithstanding the
foregoing, TheraSense shall not be required to defend any Claim based upon, (i)
the use of the Product by Flextronics as part of any procedure or in testing or
experimenting other than with the prior written agreement of TheraSense.

          13.2   THIS SECTION 13 STATES THE PARTIES' TOTAL RESPONSIBILITIES,
LIABILITIES, AND REMEDIES TO ONE ANOTHER FOR ANY ACTUAL OR ALLEGED INFRINGEMENT
OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD
PARTIES.

     14.  General Indemnity
          -----------------

          14.1   Indemnification by Flextronics. Flextronics shall hold harmless
                 ------------------------------
and indemnify TheraSense, its directors, officers, agents, and employees, from
any and all third party claims, suits, losses and expenses, including attorneys
fees, provided that any such claim, suit, loss or expense is attributable to
bodily injury, sickness, disease, or death, or injury to property which is
caused by Flextronics' failure to comply with federal, state or local law
including but not limited to the Civil Rights Act of 1964, 42 U.S.C. (S)2000e
et. seq. ("Title VII"), the Age Discrimination in Employment Act, 29 U.S.C.
(S)621 et. seq., the American with Disabilities Act, the Civil Rights Act of
1966, the Civil Rights Act of 1991, Executive order 11246, as amended, and any
other statute, regulation or ordinance prohibiting illegal discrimination or
retaliation. Except as otherwise provided in this Agreement, Flextronics shall
defend, indemnify and hold TheraSense, its, directors, officers, employees, and
agents harmless from and against any and all claims, injuries, liabilities,
judgments, and damages, including but not limited to property damage, personal
injury and death, including all reasonable costs and expenses (including
attorneys fees), as a result, whether direct or indirect, of any injury or
damage to a third party caused or alleged to be caused on account of
Flextronics' failure to meet manufacturing workmanship Specifications.

          14.2   Indemnification by TheraSense.  Except as otherwise provided in
                 -----------------------------
this Agreement, TheraSense shall defend, idemnify and hold harmless Flextronics
from and against any and all claims, injuries, liabilities, judgments, and
damages, including but not limited to property damage, personal injury and
death, including all reasonable costs and expenses (including attorney fees), as
a result, whether direct or indirect, of any injury or damage to a third party
caused or alleged to be caused on account of any alleged defect of the Product,
other than a defect related to workmanship.

          14.3   Limits to Indemnification.  These obligations to defend and
                 -------------------------
indemnify (in 14.1, 14.2 & 14.3) do not extend to claims, injuries or damages to
the extent resulting from the negligent or intentional conduct, act, omission or
obligation of the party seeking indemnification.

                                      -11-
<PAGE>

          14.4  Cooperation. The indemnified party agrees to cooperate with the
                -----------
indemnifying party in the defense of any such claim, lawsuit or action and to
make available to each other at the indemnifying party's expense such of the
documents, employees and expertise as are necessary in defense of such action.
Each party agrees to notify the other of such a claim or suit promptly upon
learning that same is within the scope of the indemnification set forth herein.
The Indemnifying party shall control the management of any such claim or suit.

     15.  Term and Termination
          --------------------

          15.1  Term. The term of this Agreement shall commence on the
                ----
Effective Date and shall continue for five (5) years thereafter (the "Initial
Term") unless earlier terminated as provided in Section 15.2 or 20.1. After the
expiration of the Initial Term hereunder (unless this Agreement has been earlier
terminated) this Agreement shall be automatically renewed for separate but
successive one-year terms (each a "Renewal Term").

          15.2  Termination. This Agreement may be terminated by either party:
                -----------
(a) for any reason upon a one (1) year written notice to the other, or (b) if
the other party defaults in any payment to the terminating party and such
default continues for a period of fifteen (15) days after the delivery of
written notice thereof by the non-defaulting party to the other party, (c) if
the other party defaults in the performance of any other material term or
condition of this Agreement and such default continues for a period of sixty
(60) days after the delivery of written notice thereof by the terminating party
to the other party, or (d) commences a voluntary or has involuntary proceeding
commenced under any federal or state, law or similar law and if involuntary,
such is not set aside within sixty (60) days of its being commenced; (ii)
appoints or is appointed a receiver, trustee or similar official or a general
assignment for the benefit of such party's creditors; (iii) proceeds to
dissolve, wind up or liquidate; or (iv) becomes unable to pay its debts either
because it is subject to a suspension of payments order, bankruptcy, or other
insolvency proceeding, Pursuant to Section 20.1 termination of this Agreement
for any reason shall not affect the obligations of either party that exist as of
the date of termination. Upon termination under Section 15.2, TheraSense shall
be responsible for the finished Products, Inventory, and Special Inventory in
existence at the date of termination or expiration in the same mariner as for
cancellations as set forth in Section 4.5. Notwithstanding termination or
expiration of this Agreement, Sections 9, 12, 15, and 20 shall survive said
termination or expiration.

          15.3  After following the dispute resolution procedure set forth in
Section 19, TheraSense may following the initial twelve (12) months of this
Agreement and upon six (6) months notice, terminate this Agreement for
convenience without liability except for the raw materials inventory, work in
process, unamortized Flextronics Development Funding and production special
tooling charges and Product on order, in transit or received, but not paid for
as of the date of termination.

     16.  Raw Materials Inventory
          -----------------------

          ***

*** Confidential treatment requested
                                      -12-
<PAGE>

     17.  Confidentiality
          ---------------

          17.1  Flextronics and TheraSense both agree that in the performance of
this contract there may be the need for one or the other party to disclose its
confidential information to the other.

          17.2  "Confidential Information" shall include information supplied to
the receiving party in written form and clearly marked "Confidential" and
information disclosed orally, provided that the disclosing party provides within
thirty (30) days of the first disclosure a document that identifies the topic of
the information considered confidential and states that it is "Confidential."

          17.3  Each party agrees to keep Confidential Information transferred
to it in strict confidence and not to disclose or otherwise use such Information
for any purpose other than determining conformance to Specifications, processing
Products into TheraSense's products or otherwise fulfilling its obligations
under this Agreement without the prior written consent of the other party. All
such documents provided by the disclosing party containing Confidential
Information shall at either party's request be returned to it except that one
(1) copy shall be retained by counsel for that party to ensure compliance
hereunder.

          17.4  The above notwithstanding, each party's obligation of the
confidence with respect to the Confidential Information disclosed hereunder,
shall not include:

                (1)  Information which, at the time of disclosure to the
receiving party is published, known publicly or is otherwise in the public
domain;

                (2)  Information which, after disclosure to the receiving party
is published or becomes known publicly or otherwise becomes part of the public
domain, through no fault of the receiving party;

                (3)  Information, which, prior to the time of disclosure to the
receiving party, was known to the receiving party, as evidenced by its written
records;

                (4)  Information which has been or is disclosed to the receiving
party in good faith by a third party who was not, or is not, under any
obligation of confidence or secrecy to the receiving party at the time said
third party discloses to the receiving party; and

                (5)  Information which is independently developed by or on
behalf of the receiving party, without reliance on the Information received
hereunder.

                                      -13-
<PAGE>

          17.5  The above provisions notwithstanding, each party agrees to keep
in strict confidence and not to disclose the identity, interest and
participation of the other party in the work or evaluation and the relationship
of the parties hereunder except to the extent as required by law.

          17.6  Each party represents that it is under no obligation to any
third party that would interfere with its disclosing the above-described
Information to the other party and further, that any Information which it
transmits or otherwise discloses to the other party is not Information with
respect to which that party is under any obligation to keep confidential or
which that party knows to be the proprietary property of any third party.

          17.7  Except as specifically provided in this Agreement, no right to
use any Information disclosed hereunder, either express or implied, is granted
by either party.

          17.9  The obligations of confidentiality and nonuse set forth herein
shall remain in effect for a period of five (5) years after the expiration of
this Agreement or any extension of it.

          17.10 Flextronics shall not issue any publicity, news release,
technical article or other public announcement relating to this Agreement and
the products or services of TheraSense without, in any case, obtaining the prior
written consent of TheraSense.

     18.  Patents and Trademarks
          ----------------------

          18.1  It is agreed that all patentable inventions made, conceived or
acquired by TheraSense relating to the Product will be the exclusive property of
TheraSense. TheraSense will pay all expenses relating to the securing and
maintaining of appropriate patent protection with respect to such patentable
inventions. It shall be in the sole discretion of TheraSense to determine what
patent protection, if any, on such invention should be sought and/or maintained.
TheraSense shall grant to Flextronics ***, which license shall expire upon
termination or expiration of this Agreement.

     19.  Disputes
          --------

     The Director of Purchasing and Flextronics' Business Development
representative shall initially review any and all disputes between the parties
relating to this Agreement. The two individuals shall meet and conduct good
faith discussions to attempt to resolve the dispute. If they are unsuccessful,
review shall be escalated to the TheraSense Director of Purchasing and
Flextronics' Vice President of Marketing, who shall conduct a similar good faith
meeting. If still unsuccessful after a reasonable time, the matter will be
escalated to the TheraSense Vice President of Operations and the President of
Flextronics for a good faith meeting to attempt to resolve the dispute. If
settlement has not been reached thereafter, then the dispute shall be settled by
binding arbitration. Such arbitration shall be conducted in San Francisco,
California in accordance with the then current rules of the American Arbitration
Association with a panel of three arbitrators. Each party shall choose one
member of the panel, and both shall agree on the third member of the panel. The
arbitrators shall be selected from the National Panel of Arbitrators of the
American Arbitration Association. Reasonable discovery as determined by the
arbitrators shall apply to the arbitration proceeding. The laws of the State of
California shall apply to the arbitration proceedings. Judgment

*** Confidential treatment requested

                                      -14-
<PAGE>

upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The prevailing party, as determined by the arbitration
panel, shall have its arbitration costs and reasonable attorney fees paid by the
other party.

     20.  General
          -------

          20.1  Force Majeure. Neither party will be deemed in default of this
                -------------
Agreement to the extent that performance of its obligations or attempts to cure
any breach are delayed or prevented by reason of a Force Majeure, provided that
such party gives the other party written notice thereof promptly and, in any
event, within ten (10) days of discovery thereof and uses its commercially
reasonable efforts to continue to so perform or cure. In the event of such a
Force Majeure, the time for performance or cure will be extended for a period
equal to the duration of the Force Majeure, but in no event more than sixty (60)
calendar days.

          20.2  Assignment. The rights and liabilities of the parties hereto
                ----------
will bind and inure to the benefit to their respective successors, executors and
administrators, as the case may be; provided that, as TheraSense has
specifically contracted for Flextronics' services, Flextronics may not assign or
delegate its obligations, other than as specified herein, under this Agreement
either in whole or in part, without the prior written consent of TheraSense. Any
attempted assignment in violation of the provisions of this Section 20.2 will be
void.

          20.3  Severability. If for any reason a court of competent
                ------------
jurisdiction finds any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of this Agreement shall be enforced to the maximum
extent permissible so as to effect the intent of the parties, and the remainder
of this Agreement shall continue if full force and effect.

          20.4  No Waiver. All rights and remedies conferred under this
                ---------
Agreement or by any other instrument or law shall be cumulative, and may be
exercised singularly or concurrently. Failure by either party to enforce any
provision of this Agreement shall not be deemed a waiver of future enforcement
of that or any other provision.

          20.5  Notices. All notices required or permitted under this Agreement
                -------
will be in writing, will reference this Agreement and will be deemed given when:
(i) delivered personally (ii) when sent by confirmed telex or facsimile; (iii)
five (5) days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iv) one (1) day after deposit with a
commercial overnight carrier, with written verification of receipt. All
communications will be sent to the addresses set forth below to or such other
address as may be designated by a party by giving written notice to the other
party pursuant to this Section 20.5:

                TheraSense, Inc.                  Flextronics, International
                1360 South Loop Road              2090 Fortune Drive
                Alameda CA 94502                  San Jose CA 95131
                Attn.: John Purlee                Attn-: Greg Keese
                Director of Purchasing            Director Business Development

                                      -15-
<PAGE>

          20.6  Compliance with Laws and Regulations. Flextronics and TheraSense
                ------------------------------------
agree to comply with all Federal, State and local laws and regulations that are
applicable to the Products in the Territory in which the Products are intended
for use.

          20.7  Governing Law. This Agreement shall be governed by and construed
                -------------
in accordance with the laws of the United States and the State of California, as
applied to agreements entered into and to be performed entirely within
California between California residents excluding its choice of law principals.
Any and all disputes between the parties relating in any way to the entering
into of this Agreement and/or the validity, construction, meaning,
enforceability, or performing of this Agreement or any of its provisions, or the
intent of its provisions or any dispute relating to patent validity or
infringement arising under this Agreement shall be settled by arbitration as
provided in Section 17 hereof.

          20.8  Interpretation. This Agreement will be fairly interpreted in
                --------------
accordance with its terms and without any strict construction in favor of or
against either party. The headings and captions are included for reference
purposes only and do not affect the interpretation of the provisions hereof.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original but all of which shall be deemed to constitute only
one Agreement. When used herein, the word "including" will not be construed as
limiting. When the application warrants, the term "TheraSense" shall mean
"TheraSense and/or its authorized subcontractors" and the term "Flextronics"
shall mean "Flextronics or its authorized subcontractors".

          20.9  Status. The relationship between Flextronics and TheraSense is
                ------
that of independent contractors. Neither is the legal representative, agent,
partner, joint venturer or employee of the other for any purpose whatsoever, and
has no right or authority to create any obligations of any kind or to make any
representations or warranties, whether express or implied, in respect of the
other or to bind the other in any respect whatsoever. This agreement shall be
deemed to have been drafted by both parties.

          20.10 Reports. Each month during the term of this Agreement,
                -------
Flextronics shall provide the TheraSense buyer with a report of the deliveries
made that month, cumulative deliveries to date, and amount of raw materials
available in inventory.

          20.11 Complete Agreement. This Agreement, including all Exhibits and
                ------------------
any Purchase Order(s) issued hereunder, constitute the entire Agreement between
the parties in connection with the subject matter hereof, and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, between the parties. In the event of a conflict, this Agreement shall
take precedence over the preprinted terms and conditions on the reverse side of
TheraSense's Purchase Order or any acknowledgment of Flextronics. No amendment
to or modification of this Agreement will be binding unless in writing and
signed by a duly authorized representative of both parties.

                                      -16-
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.

TheraSense, Inc.                        Flextronics International USA, Inc.

By: /s/ W. Mark Lortz                   By: /s/ illegible signature
    ----------------------------            ----------------------------

Name: W. Mark Lortz                     Name: __________________________
     ---------------------------

Title: President & CEO                  Title: _________________________
       -------------------------

Date: Dec. 7, 1999                      Date: __________________________
      --------------------------

                                      -17-
<PAGE>

                                   EXHIBIT A

                     PRODUCT AND MANUFACTURING DEVELOPMENT

     In support of TheraSense's development of the Freestyle and Messenger
System Flextronics will provide the following services in accordance with the
terms outlined below:

                                                          Projected
Service                      Terms                        Expenses
--------------------------   ---------------------------  ----------------------
PCB Layout

RF Design Services (*)       ***                          ***

Digital Design
(Including Test Engineering
And other engineering
Services)
        Digital Design       ***                          ***

        Test Engineering     ***                          ***

Mechanical Design            ***                          ***

Test Equipment Development
& Procurement
 . Std. Material O/H &
  Markup
 . Equipment Capital Cost
  100% amortized. (Cost to
  be preapproved by
  TheraSense)
 . Total Amortized amount
  not to exceed

Prototype Assembly (*)      ***                          ***
        Freestyle
        Messenger           ***                          ***

(*) ***

Flextronics will provide TheraSense a quarterly summary of the total expenses
incurred for the project and the balance in the deferred expenses. Flextronics
will add a *** cost of money factor *** on the deferred expense balance and
recover *** deferred expense balance over the first two years of production and
sale by TheraSense or first *** systems manufactured which ever occurs first. In
the event TheraSense sales volume does not reach

*** Confidential treatment requested

<PAGE>

*** units in the first two years of manufacturing the un-amortized balance
of deferred expenses will be converted to a loan, and repaid over a period not
to exceed 15 months for the date the loan is originated.

In addition to the services and manufacturing support Flextronics will provide
in the development of the *** and *** products, Flextronics will also work with
TheraSense to Co-develop the information management interfaces to process
manufacturing production releases and sales order/TheraSense distribution
processing.

*** Confidential treatment requested

                                      -2-
<PAGE>

                                   EXHIBIT B

                                PRODUCT PRICING

     Meter Assembly target price based upon the following cost data supplied by
Flextronics.  This cost does not include any ancillary products or packaging of
any type.  The cost will be revised as these items are identified and added to
the cost of the product.

     Meter Only              ***               ***           ***
--------------------------------------------------------------------------------
 Product Costs               ***               ***           ***

 Material Cost               ***               ***           ***
 Attrition/Other
 Subtotal Material

 Material Overhead           ***               ***           ***
 Freight
 Total Material O/H,
 Other

 Direct Labor (PCBA)         ***               ***           ***
 Direct Labor Overhead
 Subtotal Labor/Overhead

 Test Labor                  ***               ***           ***
 Test Labor Overhead
 Subtotal Test/Overhead

 Sales, G&A                  ***               ***           ***
 Profit

 Final Selling Price         ***               ***           ***
--------------------------------------------------------------------------------

*** Confidential treatment requested
<PAGE>

                                   EXHIBIT C

                     PRODUCT DEFINITION AND SPECIFICATIONS

                                      TBD
<PAGE>

                                   EXHIBIT D

                         QUALITY CONTROL REQUIREMENTS

                                      TBD

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