Document:

exv10w01

 

EXHIBIT 10.01

AMENDMENT NUMBER ONE

TO THE

TECHNOLOGY SOLUTIONS COMPANY

1996 STOCK INCENTIVE PLAN

          WHEREAS, Technology Solutions Company (the “Company”) has heretofore
adopted and maintains the Technology Solutions Company 1996 Stock Incentive
Plan (the “Plan”); and

          WHEREAS, the Company desires to amend the Plan in certain respects.

          NOW, THEREFORE, pursuant to the power of amendment contained in Section
6.2 of the Plan, the Plan is hereby amended as follows:

          1. Effective as of the date hereof, Section 1.4 of the Plan is hereby
amended by deleting the second sentence thereof, and inserting the following
sentence in lieu thereof:

	 	 	For purposes of this Plan, references to employment shall also
mean an agency or independent contractor relationship and
references to employment by the Company shall also mean employment
by a Subsidiary or such other employer designated in the Agreement
evidencing the award.

          2. Effective with respect to options granted on or after the date hereof,
Sections 5.2 and 5.3 of the Plan are hereby deleted, and the following sections
are inserted in lieu thereof:

	 	 	5.2 Grants of Stock Options. Each Non-Employee Director shall be
granted Non-Statutory Stock Options as follows:

    (a) Time of Grant. On the date on which a person is first
elected or begins to serve as a Non-Employee Director (other than
by reason of termination of employment), and, thereafter, if such
person is then a Non-Employee Director,

 

 

on the date that an option granted to such person pursuant to
this Article V becomes exercisable in full in accordance with
Section 5.2(b) hereunder, such person shall be granted an option
to purchase 40,500 shares of Common Stock at a purchase price per
share equal to the Fair Market Value of a share of Common Stock on
the date of grant of such option.

    (b) Option Period and Exercisability. Except as otherwise
provided herein, each option granted under this Article V (an
“Automatic Non-Employee Director’s Option”) shall not be
exercisable until the last day of the calendar month following the
calendar month in which such option is granted (the “Initial Date
of Exercisability”). Each Automatic Non-Employee Director’s
Option shall become exercisable as to 1,125 shares of Common Stock
on the date of its Initial Date of Exercisability and as to an
additional 1,125 shares of Common Stock on the last day of each of
the next thirty-five calendar months following the Initial Date of
Exercisability. An exercisable option, or portion thereof, may be
exercised in whole or in part only with respect to whole shares of
Common Stock. Automatic Non-Employee Director’s Options shall be
exercisable in accordance with Section 2.1(c).

	 	 	5.3 Option Period and Termination of Directorship. (a) Term and
Termination of Option. The maximum term of each Automatic
Non-Employee Director’s Option shall be the date which is 10 years
after the date on which it was granted (the “Expiration Date”).
Each Automatic Non-Employee Director’s Option shall terminate, to
the extent not exercised or earlier terminated pursuant to the
terms of this Article V, on its Expiration Date. In no event may
an Automatic Non-Employee Director’s Option be exercised, in whole
or in part, after it terminates.

          (b) Termination of Directorship Other than by Death,
Disability or Retirement. If the holder of an Automatic
Non-Employee Director’s Option ceases to be a director of the
Company for any reason other than death, Disability, or
Retirement, the option shall remain exercisable with respect to
the number of shares subject to such option that are exercisable
upon the effective date of such holder’s ceasing to be a director
and may thereafter be exercised for a period of 90 days from the
effective date of such holder’s ceasing to be a director or until
the Expiration Date, whichever period is shorter, after which the
Automatic Non-Employee Director’s Option shall terminate in its
entirety.

          (c) Death. If the holder of an Automatic Non-Employee
Director’s Option ceases to be a director of the Company by reason
of death, the option shall become exercisable as of the date of
death with respect to any or all of the shares subject to such
option and may thereafter be exercised for a period of one year
from the date of death or until the Expiration Date, whichever
period is shorter, after which the Automatic Non-Employee
Director’s Option shall terminate in its entirety.

2

 

          (d) Disability. If the holder of an Automatic Non-Employee
Director’s Option ceases to be a director of the Company by reason
of Disability, the option shall become exercisable as of the
effective date of such holder’s ceasing to be a director with
respect to any or all of the shares subject to such option and may
thereafter be exercised for a period of 90 days from the effective
date of such termination or until the Expiration Date, whichever
period is shorter, after which the Automatic Non-Employee
Director’s Option shall terminate in its entirety. For purposes
of this Article V, “Disability” shall mean the inability of an
individual to fully perform the duties of a director of the
Company for a continuous period in excess of 360 days, as
determined by the Board in its sole discretion.

          (e) Retirement. If the holder of an Automatic Non-Employee
Director’s Option ceases to be a director of the Company by reason
of retirement after such holder has completed five years of
service as a director of the Company and is at least 55 years of
age (“Retirement”), the option shall remain exercisable with
respect to the number of shares subject to such option that are
exercisable upon the effective date of such Retirement, and may
thereafter be exercised for a period of two years from the
effective date of such Retirement or until the Expiration Date,
whichever period is shorter, after which the Automatic
Non-Employee Director’s Option shall terminate in its entirety.

          (f) Death After Termination of Directorship. If the holder
of an Automatic Non-Employee Director’s Option dies after he or
she has ceased to be a director of the Company, the option shall
be exercisable only to the extent that it is exercisable on the
date of such holder’s death and may thereafter be exercised only
for that period of time for which the option is exercisable
immediately prior to the holder’s death pursuant to Sections
5.3(b) through (e).

          IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officer on this 22 day of July    , 1999.

	 	 	 	 
	 
	 	Technology Solutions Company
	 
	 	 	 
	 
	 	By:	  /s/ PAUL R. PETERSON
	 
	 	 	

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                                                                   EXHIBIT 10.26

                               SINGLE TENANT LEASE

         This SINGLE TENANT LEASE ("Lease") is made as of August 18, 2004
("Effective Date"), between BMR-9885 Towne Centre Drive LLC, a Delaware limited
liability company ("Landlord"), and Illumina, Inc., a Delaware corporation
("Tenant"), who agree as follows:

         This Lease is executed by Landlord and Tenant in contemplation of the
following facts and circumstances:

         A. Landlord is the owner of three (3) parcels of real property located
in the City of San Diego, County of San Diego, State of California, legally
described as Parcels 1, 2 and 3 of Parcel Map 18286 filed with the San Diego
County Recorder on June 21, 1999 (together with any easements and appurtenances
thereto, the "Land"). The Land consists of approximately 10.781 gross acres and
is improved with two (2) buildings and an atrium on Parcels 1 and 2 and one (1)
building on Parcel 3 (collectively, the "Building") consisting of 115,870 square
feet of space and commonly known as 9855 through 9885 (and consecutive
addresses), Towne Centre Drive, San Diego, California. The Land and the Building
are shown on the site plan attached hereto as Exhibit A and made a part of this
Lease. The Land and the Building are collectively referred to as the "Premises."

         B. Tenant desires to lease from Landlord, and Landlord is willing to
lease to Tenant, the Premises upon the terms and conditions contained herein.

         NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

         1. DEFINITIONS. The terms defined in this paragraph, for all purposes
of this Lease, shall have the meanings herein specified. Terms defined elsewhere
in this Lease shall have the meanings as defined thereunder.

                  1.1 "Applicable Law" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, permits,
licenses, regulations, ordinances, judgments, decrees, directions and
injunctions affecting the Premises or any portion thereof or the use or
occupancy thereof, whether now or hereafter enacted or in force, whether
ordinary or extraordinary, foreseen or unforeseen.

                  1.2 "Claims" shall mean any and all liabilities (statutory or
otherwise), obligations, claims, demands, damages, penalties, causes of action,
costs, expenses (including attorneys' fees and expenses), losses and injuries
arising from the subject matter of an indemnity granted herein.

                  1.3 "Default Rate" shall mean the greater of (i) ten percent
(10%) per annum, or (ii) five percent (5%) per annum plus the discount rate of
the Federal Reserve Bank situated nearest the Premises; provided, however, in no
event shall the Default Rate exceed the maximum interest rate permitted under
applicable law.

                  1.4 "HVAC" shall mean all heating, ventilation and air
conditioning equipment and all equipment and fixtures related thereto.

                  1.5 "Lease Commencement Date" shall be the date Landlord
acquires ownership of the Premises.

                  1.6 "Lease Term" shall mean the period commencing with the
Lease Commencement Date and ending after the term described in Paragraph 4.1.

                  1.7 "Lender" shall mean any lender whose loan is secured by a
deed of trust on any part of the Premises or this leasehold interest.

                  1.8 "Rent" shall include all Monthly Rent, Additional Rent and
all other sums of any and every sort payable hereunder to Landlord by Tenant.

                  1.9 "Security Deposit" shall be One Million Nine Hundred
Eleven Thousand Eight Hundred Fifty-Five Dollars ($1,911,855.00) or as may be
adjusted pursuant to

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Paragraph 5.

                  1.10 "Subtenant" shall mean any tenant, assignee, subtenant,
licensee, concessionaire or other occupant of the Premises (other than Tenant),
and the term "sublease" shall mean any lease, assignment, sublease, license or
other agreement for the use or occupancy of any such space (other than this
Lease).

                  1.11 "Taking" shall mean a taking or voluntary conveyance of
title to or any interest in all or any part of the Premises, or the right to use
all or any part thereof, pursuant to, as a result of, or in lieu or in
anticipation of, the exercise of the right of condemnation, expropriation or
eminent domain; and upon such a Taking the Premises, or such part thereof, shall
be deemed to have been "taken."

                  1.12 "Taxes" shall mean all government impositions including,
without limitation, property tax costs consisting of real and personal property
taxes and assessments (including amounts due under any improvement bond upon the
Premises or the Building, including the parcel or parcels of real property upon
which the Building is located or assessments levied in lieu thereof) imposed by
any governmental authority or agency on the Premises or improvements thereon,
any tax on or measured by gross rentals received from the rental of space in the
Building (which is in the nature of a property tax rather than a franchise or
income tax), or tax based on the square footage of the Premises or the Building,
as well as any parking charges, utilities surcharges, or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any federal, state,
regional, municipal or local government authority in connection with the use or
occupancy of the Building or the parking facilities serving the Building;
provided, however, that "Taxes" shall in no event include any franchise or
income tax or any tax based on rentals or income received from the rental of
space in the Building which is in the nature of a franchise or income tax.

         2. FUNDAMENTAL LEASE PROVISIONS.

                  Initial Lease Term:               10 years

                  Rentable Area:                    115,870 square feet

                  Initial Monthly Rent:             $318,642.50, subject to
                                                    annual adjustment pursuant
                                                    to Paragraph 5

                  Security Deposit:                 $1,911,855, subject to
                                                    adjustment pursuant to
                                                    Paragraph 5

                  Lease Commencement Date:          The date Landlord acquires
                                                    the Premises

                  Parking:                          3.3 per 1000 square feet of
                                                    rentable area

                  Address for Notices:

                           To Landlord:             Bernardo Property Advisors,
                                                    Inc.
                                                    Attn: Gary A. Kreitzer
                                                    17140 Bernardo Center Drive,
                                                    Suite 195
                                                    San Diego, CA 92128

                           To Tenant:               Illumina, Inc.
                                                    Attn: Timothy M. Kish
                                                    9885 Towne Centre Drive
                                                    San Diego, CA 92121

                  Exhibits:                         A (Legal Description)
                                                    B (Site Plan)
                                                    C (Acknowledgement of Lease
                                                    Commencement Date)

         In the event of any conflict between any Fundamental Lease Provision
and the balance of

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this Lease, the latter shall control.

         3. AGREEMENT TO LEASE. Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the Premises, under the terms and conditions of
this Lease.

         4. TERM AND POSSESSION.

                  4.1 Lease Term. The initial Lease Term shall begin as of the
Lease Commencement Date and shall continue until ten (10) years after the Lease
Commencement Date unless sooner terminated or renewed as provided in this Lease.
Provided that no Default has occurred and is continuing at the time Tenant
elects to extend the Lease Term, Tenant, at its sole option, may extend the
Lease Term for three (3) additional periods of five (5) years each
(individually, an "Extension Period"), subject to all the provisions of this
Lease, except, however, the Monthly Rent (as defined in Paragraph 5 below) shall
be adjusted at the commencement of each Extension Period to an amount equal to
the then current fair market rental rate if the then current fair market rental
rate is more one hundred ten percent (110%) or less than ninety percent (90%) of
the Monthly Rent then currently payable. Otherwise, such rent shall be adjusted
to the Monthly Rent payable immediately preceding the commencement of such
Extension Period, plus 3%. If, after thirty (30) days following delivery of the
written extension notice described in Paragraph 4.2 below, Landlord and Tenant
are unable to agree upon the fair market rental value of the Premises, Tenant
shall obtain at its expense and deliver to Landlord an independent appraisal of
the fair market rental value of the Premises as of the commencement of the
Extension Period. Following its receipt of Tenant's appraisal, Landlord may
elect to obtain at its expense and deliver to Tenant a second independent
appraisal of the fair market rental value of the Premises as of the commencement
of the Extension Period. If Landlord elects not to obtain a second appraisal, or
if Landlord's appraisal is no more than five percent (5%) greater than Tenant's
appraisal, Tenant's appraisal shall be conclusive. If Landlord's appraisal is
more than five percent (5%) greater than Tenant's appraisal, the two appraisers
shall appoint a third appraiser to appraise the fair market rental value of the
Premises as of the commencement of the Extension Period, and the fair market
rental value of the Premises shall be the arithmetical average of the two
appraisals closest in their determination of fair market rental value. Landlord
and Tenant shall bear equally the expense of the third appraiser. The Monthly
Rent as so determined for each Extension Period shall be increased annually by
three percent (3%) as provided in Paragraph 5.1.4 below. All references in this
Lease to "Lease Term" shall be considered to include both the initial term of
this Lease and any properly executed Extension Period, and all references to
termination or to the end of the Lease Term shall be considered to mean the
termination or end of the initial term of this Lease or any exercised Extension
Period, as the case may be.

                  4.2 Procedure to Extend Term. Tenant may exercise its option
with respect to each Extension Period by complying with the following procedure:
At least eighteen (18) months before the last day of the then applicable Lease
Term (the "Exercise Period"), Tenant shall deliver written notice to Landlord
setting forth Tenant's irrevocable election to exercise the option to extend.

4.3 Tenant's Default. Notwithstanding the foregoing, if a Default has occurred
and is continuing at the time Tenant elects to extend the Lease Term, Tenant
shall have no right to extend the Lease Term as herein provided unless and until
the Default is cured; provided, nothing in this Paragraph 4.3 shall increase or
extend the Exercise Period.

         5. RENT; SECURITY DEPOSIT.

                  5.1      Monthly Rent.

                           5.1.1 Tenant shall pay the Monthly Rent to Landlord
during the Lease Term, commencing as of the Lease Commencement Date, without
deduction, setoff, prior notice or demand. Tenant shall pay the Monthly Rent in
advance on the first day of each calendar month during the Lease Term. Rent for
any partial months will be prorated based upon the number of days in the month,
and will be paid in advance on the first day of each month.

                           5.1.2 Upon the Lease Commencement Date, Tenant shall
pay to Landlord the Rent due and payable for the first full calendar month of
the Lease Term. If the

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Lease Commencement Date is not on the first day of a calendar month, Tenant
shall pay to Landlord the prorated Rent for the first partial month of the Lease
Term.

                           5.1.3 All Rent payable hereunder shall be paid to
Landlord in lawful money of the United States of America which shall be legal
tender at the time of payment at Landlord's office or to such other person or at
such other place as Landlord from time to time may designate in writing.

                           5.1.4 The Initial Monthly Rent shall be the amount
set forth in Paragraph 2. Effective upon the first (1st) anniversary date of the
Lease Commencement Date and each year thereafter during the Lease Term
(including any Extension Period), on the anniversary of the Lease Commencement
Date, the Monthly Rent shall be increased by three percent (3%) of its then
current amount, subject to the provisions of Paragraph 4.1 regarding the
determination of Monthly Rent for the first year of any Extension Period.

                  5.2 Additional Rent. Commencing upon the Lease Commencement
Date Tenant shall pay to Landlord (unless otherwise expressly required hereunder
to pay directly to a third party), as additional rent ("Additional Rent"), all
sums of money of any and every sort required to be paid by Tenant under this
Lease, whether or not the same are designated as Additional Rent. If such
amounts or charges are not paid at the time provided in this Lease, they shall
nevertheless be collectible as Additional Rent with the next installment of
Monthly Rent thereafter falling due, but nothing herein contained shall be
deemed to suspend or delay the payment of any amount of money or charge at the
time the same becomes due and payable hereunder, or limit any other remedy of
Landlord.

                  5.3 Late Payment. If Tenant shall fail to pay any Rent, when
the same is due and payable (after giving effect to any applicable notice and
cure period), such unpaid amounts shall bear interest at the Default Rate from
thirty (30) days after the date due to the date of payment. Tenant further
acknowledges that late payment of Monthly Rent will cause Landlord to incur
certain costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impractical to determine with certainty. For this
reason, in addition to interest, if Tenant shall fail to pay (which for purposes
of this paragraph, "pay" shall mean actual receipt of the payment by Landlord)
any installment of Monthly Rent by the fifth (5th) day of the calendar month for
which such installment is due, a late charge equal to five percent (5%) of the
overdue installment of Monthly Rent automatically shall be due without further
notice, and shall be in addition to all other sums due. The Parties agree that
this additional late charge represents a fair and reasonable estimate of the
costs Landlord will incur by reason of late payment by Tenant.

                  5.4 No Right to Setoff. Tenant shall pay to Landlord,
throughout the Lease Term, the Rent and other sums payable hereunder, free of
any charges, assessments, deductions or reductions of any kind, and without
abatement, deduction or setoff except as otherwise expressly provided for
herein.

                  5.5 Payment of Security Deposit. Upon the Lease Commencement
Date, Tenant shall deposit the Security Deposit with Landlord. The Security
Deposit shall be held by Landlord in a segregated, interest-bearing bank account
(with interest accruing for the benefit of Tenant) in a federally insured bank
or savings institution, and shall be held for the faithful performance of all of
the provisions and conditions of this Lease to be kept and performed by Tenant
hereunder. Provided that at the time of the request Tenant is not in Default
under the Lease, at any time Tenant shall have reported in its periodic filings
with the Securities and Exchange Commission three (3) consecutive calendar
quarters of positive net income, the Security Deposit, at the written request of
Tenant, shall be reduced to Nine Hundred Fifty Five Thousand Nine Hundred Twenty
Seven Dollars ($955,927).

                  5.6 Use of Security Deposit. If Tenant defaults with respect
to the payment of Rent or any other covenant contained herein, Landlord may use
or retain all or any part of the Security Deposit for the payment of any Monthly
Rent, Additional Rent or any other sum in default, or for the payment of any
amount which Landlord may spend or become obligated to spend by reason of
Tenant's Default. Landlord also may apply the Security Deposit toward costs
incurred to repair damages to the Premises or to clean the Premises upon
termination of this Lease. If any portion of the Security Deposit is so applied
or used prior to the termination of this Lease, Tenant shall, within five (5)
days after written notice thereof, deposit an additional

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<PAGE>

amount with Landlord sufficient to restore the Security Deposit to the amount
set forth above, and Tenant's failure to do so shall constitute a material
breach of this Lease. The Security Deposit (including interest thereon), or the
balance thereof, shall be returned to Tenant (or, at Landlord's option to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease,
subject to the provisions of Paragraph 27.

                  5.7 Letter of Credit. The Security Deposit may be delivered
either in cash or in the form of letter of credit reasonably acceptable to
Landlord.

                           5.7.1 In lieu of depositing cash as the Security
Deposit, Tenant shall have the right to deliver to Landlord an unconditional,
irrevocable standby letter of credit in the amount of the cash Security Deposit
otherwise required hereunder, which letter of credit shall (i) be in a form
reasonably acceptable to Landlord, (ii) be issued by a financial institution
selected by Tenant and reasonably acceptable to Landlord, (iii) be for the
benefit of Landlord, but shall be assignable by Landlord to any subsequent
purchaser or encumbrancer of the Building or the Project, (iv) be automatically
renewable from year to year throughout the Lease Term, (v) be payable by draft
sight in a location reasonably acceptable to Landlord upon presentation of a
certification signed by an officer of Landlord which states that a default under
the Lease has occurred and has not been cured after any applicable notice and
within any applicable cure period, and (vi) be payable in the event such letter
of credit is not renewed on or before the date which is thirty (30) days prior
to its expiration. Any amounts of cash drawn on a letter of credit Security
Deposit will thereafter be treated as a cash Security Deposit hereunder.

                           5.7.2 Tenant shall have the right at any time during
the Lease Term upon thirty (30) days prior written notice to Landlord (i) to
replace a cash Security Deposit with a letter of credit which complies with all
the terms of Section 5.7.1, or (ii) to replace a letter of credit Security
Deposit with an applicable amount of cash.

         6. PERMITTED USE.

                  6.1 Permitted Use. Tenant shall use the Premises for the
purposes of laboratory research, administration, pharmaceutical, diagnostic,
manufacturing and related health care and other research uses (and only such
purposes), and for any other lawful purpose permitted by (i) the City of San
Diego Land Development Code, (ii) any other laws, regulations, ordinances, and
permits applicable to the Premises, and (iii) all covenants, conditions and
restrictions recorded against the Land (the "Permitted Use"). During the Lease
Term, the Premises and every part thereof shall be kept by the Tenant in a clean
and wholesome condition, free of any noises or activities which constitute any
nuisance. Tenant shall comply with all Applicable Law in all respects and at all
times during the Lease Term.

                  6.2 No Violations. Tenant shall not use or occupy the Premises
in violation of any federal, state and local laws and regulations, zoning
ordinances, or the certificate of occupancy issued for the Building, and shall,
upon five (5) days written notice from Landlord, discontinue any use of the
Premises upon demand of any governmental authority having jurisdiction which
declares or claims a violation of law, regulation or zoning ordinance or of such
certificate of occupancy. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant's use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof; provided, however, Tenant shall not be deemed to be in default of the
foregoing obligation if it has the right to appeal a governmental directive and
prosecutes such appeal in a timely fashion and in a manner that does not impose
or threaten to impose any lien, charge or other obligation on Landlord or any
portion of the Premises.

                  6.3 Exterior Appearance. No awnings or other projection shall
be attached to any outside wall of the building, and neither the interior nor
exterior of any windows shall be coated or otherwise sunscreened, without the
express written consent of Landlord. No equipment, furniture or other items of
personal property shall be placed on any exterior balcony without the express
written consent of Landlord.

                  6.4 Signs. Tenant may at its expense install signage in
conformity with the City of San Diego sign ordinance on the Building and the
monument serving the Building with the consent of Landlord. Interior signs on
doors and the directory tablet shall be inscribed,

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<PAGE>

painted or affixed by Tenant at its expense.

                  6.5 Structural Integrity. Tenant shall cause any office
equipment or machinery to be installed in the Premises so as to reasonably
prevent sounds or vibrations therefrom from extending outside the Building.
Further, no equipment or machinery weighing five hundred (500) pounds or greater
shall be placed above the first floor of the Premises without the advanced
notice to Landlord. Such equipment or machinery shall be placed only at a
location designed to carry the weight of such equipment.

                  6.6 ADA. Notwithstanding any other provision herein to the
contrary, Tenant shall be responsible for all liabilities, costs and expenses
arising out of or in connection with the compliance of the Premises with the
Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq. (together with
regulations promulgated pursuant thereto, "ADA"), and Tenant shall indemnify,
defend and hold Landlord harmless from and against any loss, cost, liability or
expense (including reasonable attorneys' fees and disbursements) arising out of
any failure of the Premises to comply with the ADA; provided, however, Tenant
shall not be required to make improvements, alterations, repairs or replacements
to comply with the ADA unless and until required to do so by order of a
government entity or court of law exercising proper jurisdiction with regard
thereto, subject to any right to appeal or otherwise contest any such order, or
as required in connection with the construction of alternations or improvements
to the Premises by Tenant.

         7. OPERATING EXPENSES.

                  7.1 Payment of Real Property Taxes. Commencing with the Lease
Commencement Date and continuing for each calendar year, or tax year at
Landlord's option (such "tax year" being a period of twelve (12) consecutive
calendar months for which the applicable taxing authority levies or assesses
Taxes), for the balance of the Lease Term, Tenant shall pay to Landlord the
amount of all Taxes levied and assessed for any such year upon the Premises.
Such sum for any partial year of the Lease Term shall be prorated on the basis
of the number of days of such partial year. Payment shall be made in the
following manner: Tenant shall pay to Landlord the amount of all Taxes levied
and assessed upon the Premises, including improvements and the underlying realty
for any calendar year, or at Landlord's option any tax year, within thirty (30)
days after Landlord gives notice to Tenant of the amount of such Taxes payable
by Tenant (or not less than thirty (30) days prior to delinquency, whichever is
later). Landlord also shall provide Tenant with a copy of the applicable Tax
bill or Tax statement from the taxing authority. Notwithstanding the foregoing,
if applicable law allows such Taxes to be paid in installments, then Tenant may
make such payments to Landlord in installments, provided that each such
installment shall be payable to Landlord not less than thirty (30) days prior to
the date upon which payment of the applicable installment to the taxing
authority becomes delinquent. In addition to any other amounts due from Tenant
to Landlord, if Tenant fails to pay the Taxes to Landlord as herein required,
Tenant shall pay to Landlord the amount of any interest, penalties or late
charges imposed for late payment. Landlord, at its option, may require Tenant to
pay all Taxes directly to the appropriate taxing authority under the same manner
and subject to the provisions set forth in this Paragraph 7.1 (as if the
governmental authority were "Landlord"). Tenant shall provide to Landlord
verification (reasonably acceptable to Landlord) of said payment within five (5)
days of payment.

                           7.1.1 If the Premises are separately assessed, Tenant
shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of Taxes, any special assessment, or the
validity of any Taxes or of any change in assessment or tax rate; provided,
however, that prior to any such challenge Tenant must either (a) pay the taxes
alleged to be due in their entirety and seek a refund from the appropriate
authority, or (b) post bond in an amount sufficient to insure full payment of
the Taxes. In any event, upon a final determination with respect to such contest
or protest, Tenant shall promptly pay all sums found to be due with respect
thereto. In any such protest or contest, Tenant may act in its own name, and at
the request of Tenant, Landlord shall cooperate with Tenant in any way Tenant
may reasonably require in connection with such contest or protest, including
signing such documents as Tenant reasonably shall request, provided that such
cooperation shall be at no expense to Landlord and shall not require Landlord to
attend any appeal or other hearing. Any such contest or protest shall be at
Tenant's sole expense, and if any penalties, interest or late charges become
payable with respect to the Taxes as a result of such contest or protest, Tenant
shall pay the

                                       6
<PAGE>

same.

                           7.1.2 If Tenant obtains a refund as the result of
Tenant's protest or contest and subject to Tenant's obligation to pay Landlord's
costs (if any) associated therewith, Tenant shall be entitled to such refund to
the extent it relates to the Premises during the Lease Term.

                  7.2 Personal Property Taxes. Tenant shall be solely
responsible for the payment of any and all taxes levied upon personal property
and trade fixtures located upon the Premises and shall pay the same at least ten
(10) days prior to delinquency.

                  7.3 Other Taxes. If at any time during the Lease Term under
the laws of the United States Government, state, county or city, or any
political subdivision thereof in which the Premises are situated, a tax or
excise on rent or any other tax, however described, is levied or assessed by any
such political body against Landlord on account of rentals payable to Landlord
hereunder, such tax or excise shall be considered "Taxes" for the purposes of
this Paragraph 7, excluding, however, from such tax or excise any amount
assessed against Landlord as state or federal income tax, or in the nature of a
franchise or income tax.

                  7.4 Tax and Insurance Escrows. To the extent Landlord is
required by Lender, Tenant shall timely pay all tax and insurance impound
payments due on the Premises.

                  7.5 Payment of Operating Expenses.

                           7.5.1 As used herein, the term "Operating Expenses"
shall include:

                                    (a) Taxes as defined in Paragraph 1.12
above.

                                    (b) All other costs of any kind paid or
incurred by Landlord in connection with the operation and maintenance of the
Building and the Premises including, by way of examples and not as a limitation
upon the generality of the foregoing, costs of repairs and replacements to
improvements within the Premises as appropriate to maintain the Premises as
required hereunder; reserves as provided in Paragraph 11.4; costs of utilities
furnished to the Premises; sewer fees; cable TV, when applicable; trash
collection; cleaning, including windows; costs of maintaining HVAC; maintenance
of landscape and grounds, drives and parking areas; security services and
devices; building supplies; maintenance and replacement to equipment utilized
for operation and maintenance of the Premises; license, permit and inspection
fees; sales, use and excise taxes on goods and services purchased by Landlord in
connection with the operation, maintenance or repair of the Premises and
Building systems and equipment; capital replacements (provided, however, with
respect to capital replacements in excess of One Hundred Thousand Dollars
($100,000), the portion of the cost in excess of One Hundred Thousand Dollars
($100,000) shall be amortized (and payable by Tenant monthly) over the useful
life of the capital replacement, as such useful life is determined under
Internal Revenue Service Treasury regulations, and the pro rata portion of the
cost thereof attributable to the period following the expiration of the Lease
Term shall not be included as Operating Expenses; provided, however, if Tenant
exercises an option to extend the Lease Term, Landlord may recover (and Tenant
shall continue to pay monthly) as an Operating Expense the portion of such cost
previously excluded to the extent it falls within the Extension Period);costs of
complying with any applicable laws; hazard waste remediation, rules or
regulations; insurance premiums for liability and property insurance; insurance
premiums for terrorism, flood, environmental remediation and rental loss
insurance if carried by Landlord, provided that the premiums for terrorism and
environmental remediation insurance shall change annually at no more than 15%
per annum, with the total initial year premium amount to be no more than
$10,000; portions of insured losses paid by Landlord as part of deductible
portion of loss by reason of insurance policy terms; service contracts; costs of
services of independent contractors retained to do work of nature before
referenced; costs of compensation (including employment taxes and fringe
benefits) of all persons to the extent of regular and recurring duties connected
with the day-to-day operation and maintenance of the Premises, its equipment,
the adjacent walks, landscaped areas, drives, and parking areas, including
without limitation, janitors, floor waxers, window-washers, watchmen, gardeners,
sweepers, and handymen; and costs of management services not to exceed two
percent (2%) of Monthly Rent due from Tenant, whether or not Landlord incurs
fees payable to any third party to provide such services and without regard to
the actual costs incurred by Landlord for such services.

                                       7
<PAGE>

                                    (c) Notwithstanding the foregoing, Operating
Expenses shall not include, and Tenant shall not be responsible for payment of,
the following costs and expenses:

                                            (1) costs incurred for the repair,
maintenance or replacement of the structural components of the footings,
foundation, ground floor slab, roof and load bearing walls of the Premises (but
excluding painting and ordinary maintenance and repair of exterior surfaces);

                                            (2) interest, principal, points and
other fees on debt or amortization of any debt secured in whole or part by all
or any portion of the Premises;

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

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

                                            (5) depreciation on the Premises or
any portion thereof, or any equipment or machinery owned by Landlord;

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

                                            (7) leasing commissions, attorneys'
fees and other costs and expenses incurred in connection with the leasing of the
Premises;

                                            (8) advertising, marketing, media
and promotional expenditures regarding the Premises and costs of signs in or on
the Building identifying the owner, lender or any contractor thereof, or
otherwise placed by Landlord on the Premises;

                                            (9) any fees or salaries of the
principals of Landlord;

                                            (10) the amounts of any payments to
Landlord or to subsidiaries or affiliates of Landlord for goods or services in
the Building in excess of the cost of such goods or services if they were
provided by unaffiliated third parties on a competitive basis;

                                            (11) any bad debt loss, rent loss,
or reserves for bad debts or rent loss;

                                            (12) costs associated with the
operating of the business of the entity which constitutes the Landlord, as the
same are distinguished from the costs of operation of the Premises (which shall
specifically include, but not be limited to, accounting costs associated with
the operation of the Premises, costs of entity accounting and legal matters,
costs of defending any lawsuits with any mortgagee, costs of selling,
syndicating, financing, mortgaging or hypothecating any of the Landlord's
interest in the Premises, and costs incurred in connection with any disputes
between Landlord and its employees, between Landlord and Premises management, or
between Landlord and other tenants or occupants, and Landlord's general
corporate overhead and general and administrative expenses);

                                            (13) costs arising from Landlord's
charitable and political contributions;

                                            (14) any gifts provided to any
entity whatsoever, including but not limited to, Tenant, other tenants,
employees, vendors, contractors, prospective tenants and agents;

                                            (15) any costs covered by any
warranty, rebate, guarantee or service contract which are actually collected by
Landlord (which shall not prohibit Landlord for passing through the costs of any
such service contract if otherwise included in

                                       8
<PAGE>

Operating Expenses);

                                            (16) all items and services that
Tenant reimburses Landlord for;

                                            (17) any expense resulting from the
willful act or gross negligence of Landlord, its agents, contractors or
employees; and

                                            (18) reserves for anticipated future
expenses, except as required by Lender pursuant to Paragraph 7.4 and as
permitted under Paragraph 11.4.

                                            (19) Premiums and deductables for
earthquake insurance, if carried by Landlord.

                           7.5.2 Tenant shall pay to Landlord on the first day
of each calendar month of the Lease Term, as Additional Rent, Landlord's
estimate of Operating Expenses with respect to the Premises for such month.
Notwithstanding the foregoing, at the election of Landlord, Tenant shall pay all
or certain Operating Expenses (as designated by Landlord) directly to the
appropriate vendor, service provider or governmental authority.

                                    (a) Within ninety (90) days after the
conclusion of each calendar year (or such longer period as may be reasonably
required), Landlord shall furnish to Tenant a statement showing in reasonable
detail the actual Operating Expenses for the previous calendar year. Any
additional sum due from Tenant to Landlord shall be immediately due and payable.
If the amounts paid by Tenant pursuant to Paragraph 7.5.2 exceed the Operating
Expense for the previous calendar year, the difference shall be credited by
Landlord against the Rent next due and owing from Tenant; provided that if the
Lease Term has expired, Landlord shall accompany said statement with payment for
the amount of such difference.

                                    (b) Any amount due under this Paragraph
7.5.2 for any period which is less than a full month shall be prorated (based on
a 30-day month) for such fractional month.

                           7.5.3 Landlord's annual statement shall be final and
binding upon Tenant unless Tenant, within ninety (90) days after Tenant's
receipt thereof, shall contest any item therein by giving written notice to
Landlord, specifying each item contested and the reason therefor. If, during
such period, Tenant reasonably and in good faith questions or contests the
correctness of Landlord's statement of Operating Expenses, Landlord will provide
Tenant with access to Landlord's books and records and such information as
Landlord reasonably determines to be responsive to Tenant's questions. In the
event that after Tenant's review of such information, Landlord and Tenant cannot
agree upon the amount of Operating Expenses, then Tenant shall have the right to
have an independent public accounting firm hired by Tenant (at Tenant's sole
cost and expense) and approved by Landlord (which approval shall not be
unreasonably withheld or delayed) audit and/or review such Landlord's books and
records for the year in question (the "Independent Review"). The results of any
such Independent Review shall be binding on Landlord and Tenant. If the
Independent Review shows that Operating Expenses actually paid for the calendar
year in question exceeded Tenant's obligations for such calendar year, Landlord
shall, at Tenant's option, either (1) credit the excess to the next succeeding
installments of Monthly Rent or (2) pay the excess to Tenant within thirty (30)
days after delivery of such statement. If the Independent Review shows that
Tenant's payments of Operating Expenses for such calendar year were less than
Tenant's obligation for the calendar year, Tenant shall pay the deficiency to
the Landlord within thirty (30) days after delivery of such statement. If the
Independent Review shows that Operating Expenses claimed by Landlord for such
calendar year were five percent (5%) or more greater than Tenant's obligation
for the calendar year, Landlord will reimburse Tenant for the reasonable
expenses of the Independent Review.

                           7.5.4 Tenant acknowledges and agrees that Tenant, as
owner of the Premises immediately prior to the execution of this Lease, is
solely responsible for the payment

                                       9
<PAGE>

of all Taxes, utility charges, insurance premiums, maintenance costs, and any
other Operating Expense due and payable and pertaining to the Premises prior to
the Lease Commencement Date (the "Prior Expenses"). Tenant shall indemnify and
hold harmless Landlord from and against all Claims arising out of or related to
the Prior Expenses. Without waiving any rights to damages under Paragraph 22,
the responsibility of Tenant for Operating Expenses shall continue to the latest
of (i) the date of termination of the Lease, or (ii) the date Tenant has fully
vacated the Premises.

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

         8. CONDITION OF PREMISES.

                  8.1 Condition of Premises. Tenant has determined to lease the
Premises after a full and complete investigation and examination thereof. Tenant
accepts the Premises and all other rights under this Lease "as is." Except as is
expressly provided herein, Landlord shall not be required to furnish any
services or facilities or to make any repairs or alterations in or to the
Premises throughout the Lease Term. Tenant acknowledges that Tenant is the prior
owner of the Premises and as such is fully aware of the current condition of the
Premises.

                  8.2 No Warranties. Landlord has not made and makes no
representations or warranties to Tenant of any kind regarding the Premises
including, without limitation, any representation or warranty regarding the
physical condition of the Premises, its suitability for Tenant's intended use,
or the availability or capacity of utilities or sewer to the Premises.

                  8.3 Parking Facilities. Landlord shall provide parking for the
Premises in a ratio of not less than three and three tenths 3.3 spaces for each
one thousand (1,000) square feet of rentable area, which shall be provided to
Tenant without charge during the initial and any Extension Period.

         9. ALTERATIONS AND IMPROVEMENTS.

                  9.1 Construction Requirements. Any alterations or improvements
to the Premises of any kind by Tenant, the cost of which exceeds One Hundred
Thousand Dollars ($100,000), or which alters, affects, or modifies Building
systems (including, without limitation, mechanical, electrical, plumbing, or
HVAC systems), structural components, or the exterior of the Building, shall be
subject to satisfaction of each of the following conditions:

                           9.1.1 Architectural Review.  Prior to commencement of
any work, Tenant shall submit its proposed final plans and specifications to
Landlord for Landlord's consent, which consent shall not be unreasonably
withheld, delayed or conditioned. Landlord agrees to respond to Tenant's
proposed final plans and specifications within fifteen (15) days after its
receipt of such final plans and specifications. Landlord's failure to approve or
disapprove within said fifteen (15) days shall be deemed approval.

                           9.1.2 Code Compliance.  Tenant shall comply with all
Applicable Law, and Tenant shall obtain all required permits and approvals,
including, but not limited to, any grading permits, building permits, zoning and
planning requirements and approvals from any and all necessary governmental
agencies and bodies.

                           9.1.3 Insurance. Tenant shall deliver to Landlord
certificates of insurance evidencing that Tenant or the general contractor has
obtained builder's all-risk insurance in an amount not less than Four Million
Dollars ($4,000,000). Tenant also shall deliver to Landlord evidence of worker's
compensation insurance coverage for all persons employed in connection with the
construction and with respect to whom death or personal injury claims could be
asserted against Landlord or the Premises. Tenant also shall deliver to Landlord
evidence that Tenant has paid or caused to be paid all premiums for the
insurance described in this paragraph. Tenant shall maintain or cause to be paid
all premiums required to maintain and keep in force all insurance described in
this paragraph at all times during which the

                                       10
<PAGE>

construction is in progress.

                           9.1.4 Construction Requirements.  Once any work of
construction has begun, Tenant shall prosecute with reasonable diligence the
same to conclusion. All construction shall be performed in a good and
workmanlike manner, shall comply with all Applicable Law and shall be completed
in conformance with the plans and specifications approved by Landlord.

                           9.1.5 Notice of Construction; Mechanics' Liens.
Landlord and its representatives shall have the right to go upon and inspect the
Premises at all reasonable times upon reasonable prior notice and shall have the
right to post and keep posted thereon notices of nonresponsibility, or such
other notices which Landlord may deem to be proper for the protection of
Landlord's interest in the Premises; provided, however, that such rights shall
not unreasonably interfere with Tenant's use or possession of the Premises.
Before the commencement of any work which might result in any lien, Tenant shall
give to Landlord written notice of its intention to do so in sufficient time to
enable the posting of such notices. Subject to Tenant's right to contest any
Claim or lien, Tenant shall keep the Premises and the Building free and clear of
any and all liens and encumbrances which may arise at any time in connection
with the improvement of the Premises by Tenant or its agents and contractors.
Subject to Tenant's right to contest any Claim or lien, Tenant shall pay and
discharge all expenses incurred by Tenant for the services of mechanics and for
the cost of goods and materials supplied by materialmen, and Tenant shall
defend, indemnify and hold harmless Landlord and the Premises from and against
any Claims by such mechanics or materialmen for labor or services performed or
goods supplied at the request of Tenant. Furthermore, subject to Tenant's right
to contest any Claim or lien, Tenant shall, at its cost and expense, remove all
such mechanics' liens by bond or otherwise within ten (10) working days after
the filing thereof. If Tenant desires to contest any Claim or lien, it shall be
entitled to do so on the condition that Tenant first shall either (1) furnish
Landlord a bond of a responsible corporate surety approved by Landlord in such
amount as is sufficient to cause discharge of the lien of record, and
conditioned on the discharge of the lien, or (2) furnish Landlord with other
assurances satisfactory to Landlord that Landlord will be protected from the
effect of such Claim or lien. If a final judgment establishing the validity or
existence of a lien for any amount is entered, Tenant shall pay and satisfy the
same at once. If Tenant shall not have paid, as and when required by this
Paragraph 9.1.5, any charge for which a mechanic's lien claim and suit to
foreclose the lien have been filed, or if Tenant shall not have given Landlord
security to protect the Premises and Landlord against such Claim or lien as
required by this Paragraph 9.1.5, Landlord, upon five (5) days notice to Tenant,
may (but shall not be required to) pay said lien or Claim including any costs,
in which event the amount so paid, together with reasonable attorneys' fees
incurred in connection therewith, shall be immediately due and owing from Tenant
to Landlord. Tenant shall pay the same to Landlord together with interest on the
full amount thereof at the Default Rate from the date of Landlord's payment
until paid. If any Claims or liens are filed against the Premises or, if any
action affecting title to the Premises is commenced, the party receiving notice
of such lien or action shall forthwith give the other party written notice
thereof.

                           9.1.6 Notice of Completion.  Upon completion of any
construction, Tenant shall file or cause to be filed a notice of completion.
Tenant hereby appoints Landlord as Tenant's attorney-in-fact solely for the
purpose of filing the notice of completion if Tenant fails to do so after the
construction has been Substantially Completed.

                           9.1.7 As-Built Plans.  On completion of any
construction, Tenant shall give Landlord notice of all changes in plans or
specifications made during the course of the work and, at the same time and in
the same manner, shall supply Landlord with "as built" drawings accurately
reflecting all such changes.

                           9.1.8 Ownership of Improvements. All improvements and
fixtures existing on the Premises, including (without limiting the generality of
the foregoing) all wallcoverings, carpeting, flooring, built-in cabinet work,
paneling and the like, all electrical, mechanical, and plumbing equipment and
related ducts, shafts, and conduits, all exterior venting fume hoods, walk-in
freezers and refrigerators, clean-rooms, climatized rooms, electrical panels and
power back-up distribution systems, shall be the property of Landlord and shall
remain upon, and be surrendered with the Premises, as a part thereof, at the end
of the Lease Term. In the event that Tenant desires to make any alterations,
additions or improvements upon the Premises during the Lease Term, Tenant shall
submit to Landlord proposed final plans therefor, together

                                       11
<PAGE>

with an identification (the "Identification Notice") of which of the proposed
alterations, additions or improvements Tenant elects to remain property of
Tenant to be removed by Tenant at the end of the Lease Term (each a
"Tenant-Owned Alteration"). If Landlord fails to respond in writing to the
Identification Notice within fifteen (15) days after Landlord's receipt of the
Identification Notice, then Landlord shall be deemed to have consented that any
proposed alteration, addition or improvement expressly designated as a
Tenant-Owned Alteration shall become property of Tenant. All other proposed
alterations, additions and improvements shall become the property of Landlord
(each a "Landlord-Owned Alteration"). If Tenant thereafter elects to make such
proposed alterations, additions or improvements, then (a) all Landlord-Owned
Alterations shall become property of Landlord and shall remain upon, and be
surrendered with the Premises, as a part thereof, at the end of the Lease Term,
and (b) all Tenant-Owned Alterations shall remain the property of Tenant and
shall be removed by Tenant at or prior to the end of the Lease Term. Tenant
shall repair all damage resulting from its removal of Tenant-Owned Alterations,
and restore the affected area to the condition existing prior to installation of
Tenant-Owned Alterations. Nothing in the foregoing shall be construed to imply
that Tenant's Equipment (as defined in Paragraph 13.2 below) or other property
of Tenant may become the property of Landlord. All articles of personal
property, business and trade fixtures, machinery and equipment, furniture and
movable partitions owned by Tenant or installed by Tenant at its expense in the
Premises shall be and remain the property of Tenant and may be removed by Tenant
at any time during the term of this Lease, provided that removal of the same
shall not materially affect or damage the Building's electrical, mechanical, or
plumbing systems. Any items of Tenant's improvements which are paid for by
Landlord shall belong to Landlord and shall not be regarded as owned by Tenant.
If Tenant shall fail to remove all of its effects from the Premises upon
termination of this Lease for any cause whatsoever, Landlord, at its option,
upon written notification to Tenant, may remove the same in any manner that
Landlord shall choose and store said effects without liability to Tenant for
loss thereof. In such event, Tenant agrees to pay Landlord upon demand any and
all expenses incurred in such removal, including court costs and reasonable
attorneys' fees and storage charges on such effects, for any length of time that
the same shall be in Landlord's possession. If Tenant shall fail to remove all
of its effects from the Premises upon termination of this Lease, Landlord, at
its option, without notice, may sell said effects, or any of the same, at
private sale and without legal process, for such price as Landlord may obtain
and apply the proceeds of such sale upon the amounts due under this Lease from
Tenant to Landlord and upon the expense incident to the removal and sale of said
effects.

                  9.2 Landlord Not Responsible. Landlord's approvals as required
by this Lease shall not make Landlord responsible for the improvement with
respect to which an approval is given or the construction thereof, and Tenant
shall indemnify, defend (by counsel reasonably acceptable to Landlord), and hold
Landlord and the Premises harmless from and against any Claims arising out of or
in connection with any construction in, on or about the Premises or any labor
dispute arising in connection therewith.

         10. UTILITIES AND SERVICES.

                  10.1 Tenant's Responsibility. Tenant shall be responsible for
all utility and other services to the Premises, at Tenant's sole cost and
expense. All such utility services shall be separately metered, and Tenant shall
pay all costs therefor, including, without limitation, connection charges and
billing deposits. Tenant shall pay (directly to the provider and prior to
delinquency) for all water, gas, electricity, sewer, telephone, cable television
and other utilities which may be furnished to the Premises during the term of
this Lease. Tenant shall indemnify and hold harmless Landlord against any Claims
of third parties for any damages to such third parties as may result from any
failure or interruption of utility service to such third parties arising out of
or attributable to the installation, maintenance or operation of Tenant's
utilities.

                  10.2 Landlord Not Responsible. Landlord shall not be liable in
damages or otherwise for any failure or interruption of any utility service .;
provided, however, Tenant may terminate this Lease if the failure or
interruption of any utility service is the fault of Landlord, persists for more
than ninety (90) days, and materially interferes with Tenant's ability to
conduct its business on the Premises; provided further, Tenant may not terminate
this Lease if the failure or interruption of any utility service is the fault of
neither Landlord nor Tenant. However, in all events, Tenant shall be entitled to
abate Monthly Rent on account of any failure or interruption that persists for
more than 30 days to the extent rental interruption insurance proceeds are

                                       12
<PAGE>

available to and received by Landlord.

         11. MAINTENANCE AND REPAIRS.

                  11.1 Maintenance and Repair of the Premises.

                           11.1.1 Tenant, at its sole cost and expense, shall
maintain and keep the Premises, all improvements thereon, and all appurtenances
thereto, including but not limited to sidewalks, parking areas, curbs, roads,
driveways, lighting standards, landscaping, sewers, water, gas and electrical
distribution systems and facilities, drainage facilities, and all signs, both
illuminated and non-illuminated that are now or hereafter on the Premises, in
first class condition and in a manner consistent with the Permitted Use (as
defined in Paragraph 6.1 above). Tenant shall make all such repairs,
replacements and improvements including, without limitation, all HVAC, plumbing,
and electrical repairs, replacements and improvements required and shall keep
the same free and clear from all rubbish and debris. All repairs made by Tenant
shall be at least equal in quality to the original work, shall be made only by a
licensed, bonded contractor approved in advance by Landlord; provided, however,
that such contractor need not be bonded or approved by Landlord if the
non-structural alterations, repairs, additions or improvements to be performed
do not exceed One Hundred Thousand Dollars ($100,000) in value. Landlord may
impose reasonable restrictions and requirements with respect to such repairs.
Tenant shall not take or omit to take any action, the taking or omission of
which shall cause waste, damage or injury to the Premises. Tenant shall
indemnify, defend (by legal counsel acceptable to Landlord) and hold harmless
Landlord from and against any and all Claims arising out of the failure of
Tenant or Tenant's Agents to perform the covenants contained in this paragraph.
"Tenant's Agents" shall be defined to include Tenant's officers, directors,
employees, affiliates, agents, contractors, invitees, customers and
subcontractors.

                           11.1.2 Tenant shall maintain the lines designating
the parking spaces in good condition and paint the same as often as may be
necessary, so that they are easily discernable at all times; resurface the
parking areas as necessary to maintain it in good condition; paint any exterior
portions of the Building as necessary to maintain them in good condition;
maintain the roof in good condition; and to take all reasonable precautions to
insure that the drainage facilities of the roof are not clogged and are in good
operable condition at all times.

                           11.1.3 Tenant shall at all times during the term of
this Lease, and at Tenant's expense, maintain the exterior of the Building, the
parking areas, landscaping, drainage systems, sprinklers and all other portions
of the Premises visible from the surrounding streets in a commercially
reasonable condition, and shall maintain attractive screens, barricades or
enclosures around any waste or storage areas.

                           11.1.4 Notwithstanding the foregoing, Landlord shall
be responsible at its cost and expense for repairs, maintenance and replacement
of the structural components of the footings, foundation, ground floor slab,
roof and load bearing walls.

                           11.1.5 There shall be no abatement of Rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Premises, or in or to improvements, fixtures, equipment
and personal property therein.

                  11.2 Landlord's Right to Maintain. During the Lease Term,
except as expressly provided in the Lease, Landlord shall not be required to
maintain or make any repairs or replacements of any nature or description
whatsoever to the Premises, except for repairs, maintenance and replacement of
the structural components of the footings, foundation, ground floor slab, roof
and load bearing walls. Tenant hereby expressly waives the right to make repairs
at the expense of Landlord as provided for in any statute or law in effect at
the time of execution of this Lease, or in any other statute or law which
hereafter may be enacted. Notwithstanding the foregoing, if Tenant shall fail,
after reasonable notice, to maintain or to commence and thereafter to proceed
with diligence to make any repair or replacement required of it pursuant to the
terms of this Lease, Landlord, without being under any obligation to do so and
without thereby waiving such Default, may so maintain or make such repair or
replacement and may charge Tenant for the cost thereof. Any expense reasonably
incurred by Landlord in connection with the making of such repairs may be billed
by Landlord to Tenant monthly, or immediately, at Landlord's option, and shall
be due and payable within ten (10) days after such billing, or at Landlord's
option, may

                                       13
<PAGE>

be deducted from the Security Deposit.

                  11.3 Landlord's Right of Entry for Repairs. Landlord and
Landlord's agents shall have the right to enter upon the Premises, or any part
thereof, for the purpose of performing any repairs or maintenance Landlord is
permitted or required to make pursuant to this Lease, and of ascertaining the
condition of the Premises or whether Tenant is observing and performing Tenant's
obligations hereunder, all without unreasonable interference from Tenant or
Tenant's Agents. Except for emergency maintenance or repairs, the right of entry
contained in this paragraph shall be exercisable at reasonable times, at
reasonable hours and on reasonable notice.

                  11.4 Reserve Account. In the event, at any time, Tenant's cash
balance, including cash equivalent short and long term investments (as disclosed
in its filings with the Securities and Exchange Commission) drops below
$25,000,000, Tenant shall, on the first day of each calendar month thereafter of
the Lease Term, deposit into a segregated, interest bearing bank account in a
federally insured bank or savings institute an amount equal to one percent (1%)
of the Monthly Rent due for that month, to provide for future replacements to
improvements and fixtures within the Premises (the "Reserve Account"). The
Reserve Account shall remain the property of Tenant, but disbursements from the
Reserve Account shall be made only by joint check executed by Landlord and
Tenant upon the mutual consent of Landlord and Tenant, which consent shall not
be unreasonably withheld. Landlord shall, within ten (10) days after the receipt
of a written request, either sign any such check or convey in writing to Tenant
any objections to signing the check, and shall thereafter diligently work with
Tenant to resolve any differences with regard to the disbursement.
Notwithstanding the foregoing, if Tenant, pursuant to the Lease, is required to
make certain repairs, improvements, or replacements to the Premises but fails to
do so within the time allowed hereunder (subject to any applicble cure period),
then Landlord, as provided under the Lease, may make such repairs, improvements,
or replacements, and may disburse funds from the Reserve Account, without
Tenant's consent or signature on the disbursement check(s), to pay for the cost
of the repairs, improvements, or replacements. Any amount in the Reserve Account
remaining at the expiration of the Lease shall remain the property of Tenant.
The Reserve Account shall have a maximum balance of One Hundred Thousand Dollars
($100,0000), however, should disbursements from the Reserve Account thereafter
reduce the balance thereof below One Hundred Thousand Dollars ($100,000), then
Tenant must recommence making the full monthly deposits required hereunder until
such time, if ever, the Reserve Account again reaches said maximum balance or
Tenant's cash balance equals or exceeds $25,000,000.

         12. ADVERTISING SIGNS. Tenant may construct and maintain reasonable
signage on the Premises. Such construction and maintenance shall comply with all
Applicable Law. Notwithstanding anything to the contrary herein, signage on the
Premises as of the Effective Date shall be deemed approved by Landlord.

         13. FIXTURES AND PERSONAL PROPERTY.

                  13.1 Removal of Fixtures. Except as provided in Paragraphs
9.1.8 or 13.2 herein, Tenant shall not remove any fixtures belonging to Landlord
from the Premises without Landlord's prior written consent (not to be
unreasonably withheld, conditioned or delayed); provided, however, Tenant shall
have the right to sell or dispose of any existing building machinery, equipment
or fixtures subject to this Lease which may have become obsolete or unfit for
use or which are no longer useful, necessary or profitable in the conduct of
Tenant's business, so long as (i) the Premises retain its primary use consistent
with the Permitted Use, and (ii) Tenant shall have substituted or promptly shall
substitute for the property so removed from the Premises other building
machinery, equipment or fixtures not necessarily of the same character but at
least of equal quality in the performance of the particular function in question
as that of the property so removed unless, in Tenant's reasonable opinion, the
property so removed was performing an obsolete function and replacement thereof
is not necessary or appropriate to maintain the operation or character of the
Premises or its overall value without impairment. Tenant shall give Landlord
written notice of each material fixture removed by Tenant. All built-ins and
fixtures installed in or attached to the Premises by Tenant must be new or like
new when so installed or attached.

                  13.2 Trade Fixtures and Personal Property. Any trade fixtures,
equipment, stock, inventory, machines (other than HVAC or other built-in
machines or machinery, as provided in Paragraph 9.1.8), signs and other personal
property of Tenant not permanently

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<PAGE>

affixed to the Premises ("Tenant's Equipment") shall remain the property of
Tenant. Landlord agrees that Tenant shall have the right, at any time, and from
time to time, to remove any and all of Tenant's Equipment which it may have
stored or installed in the Premises. Tenant, at its sole cost and expense,
immediately shall repair any damage occasioned to the Premises by reason of the
removal of Tenant's Equipment and, upon the last day of the Lease Term or upon
earlier termination of this Lease, shall leave the Premises in a neat and clean
condition, free of debris, and in as good a condition as that existing on the
Lease Commencement Date, reasonable wear and tear excepted, with all HVAC and
other Building systems in good and operable condition.

                  13.3 Taxes on Trade Fixtures and Personal Property. Tenant
shall pay before delinquency all taxes, assessments, license fees and public
charges levied, assessed or imposed upon its business operation, as well as upon
its trade fixtures, leasehold improvements (including, but not limited to, those
Tenant is allowed or required to make in accordance with the provisions of this
Lease), merchandise and other personal property in, on or upon the Premises. If
any such items of property are assessed together with property owned by
Landlord, then, and in such event, such assessment shall be equitably divided
between Landlord and Tenant.

                  13.4 Ownership of Tenant's Equipment. All Tenant's Equipment
shall be and remain the property of Tenant during the Lease Term. Tenant shall
bear all costs and expenses incurred in installing, removing, storing or
disposing of Tenant's Equipment pursuant to this paragraph and Paragraph 27 and
shall repair at its expense all damage to the Premises caused by the
installation and removal thereof, whether effectuated by Tenant or Landlord (as
provided in Paragraph 27).

         14. TENANT'S COVENANT. Tenant covenants and agrees that as to its
leasehold estate and use and occupancy of the Premises, Tenant and all persons
in possession or holding under Tenant shall conform to and shall not violate any
Applicable Law.

         15. INDEMNITY - WAIVER OF SUBROGATION.

                  15.1 Indemnification. Tenant shall indemnify, defend, and hold
Landlord and its agents, employees, directors, officers, managers, members,
partners, affiliates, independent contractors, and property managers
(collectively, "Landlord's Agents" or "Agents") harmless from and against any
and all claims, demands, liability, loss or damage, whether for injury to or
death of persons or damage to real or personal property, arising out of or in
connection with the Premises, Tenant's use of the Premises, any activity, work,
or other thing done, permitted, or suffered by Tenant in or about the Building,
or arising from any reason or cause whatsoever in connection with the use or
occupancy of the Premises by any party during the term of this Lease, except to
the extent caused by the willful act or gross negligence of the Landlord or its
Agents. Tenant shall further indemnify, defend, and hold Landlord and Landlord's
Agents harmless against and from any and all claims arising from any breach or
default in the performance of any obligation on Tenant's part to be performed
under the terms of this Lease, or arising from any act or negligence of Tenant
or any officer, agent, employee, guest, or invitee of Tenant, and from and
against all costs, attorneys' fees, expenses, and liabilities incurred as a
result of any such claim or any action or proceeding brought thereon. In any
case, action, or proceeding brought against Landlord or Landlord's Agents by
reason of any such claim, Tenant, upon notice from Landlord, shall defend the
same at Tenant's expense by counsel satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in, upon, or about the Premises from any
cause arising prior to the later of the termination of this Lease or the date
Tenant is no longer in possession of the Premises (except for such damage or
injury caused by Landlord's or its Agents' willful misconduct or gross
negligence), and Tenant hereby waives all claims in respect thereof against
Landlord and Landlord's Agents. Tenant's obligation to indemnify under this
paragraph shall include attorneys' fees, investigation costs, and other
reasonable costs, expenses, and liabilities incurred by Landlord and Landlord's
Agents. If the ability of Tenant to use the Premises or the Building is
interrupted for any reason, Landlord and Landlord's Agents shall not be liable
to Tenant for any loss or damages occasioned by such loss of use, except to the
extent such loss or damages is caused by Landlord's or its Agents' willful
misconduct or gross negligence. Landlord shall indemnify, defend, and hold
Tenant and Tenant's Agents harmless from and against any and all claims,
demands, liability, loss or damage, whether for injury to or death of persons or
damage to real or personal property, arising out of or in connection with the
Premises, the use of the Premises, any activity, work, or other thing done,
permitted, or suffered by in or about the Building, or arising from any reason
or cause whatsoever in connection with the use or

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<PAGE>

occupancy of the Premises by any party during the term of this Lease, to the
extent caused by the willful act or gross negligence of Landlord or its Agents.

                  15.2 Limitation on Landlord Liability. Neither Landlord nor
Landlord's Agents shall be liable for loss or damage to any property by theft or
otherwise, or for any injury to or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water, or rain which
may leak from any part of the Building or from the pipes, appliances, or
plumbing works therein or from the roof, street, or subsurface or from any other
place resulting from dampness or any other cause whatsoever, except to the
extent caused by or due to the gross negligence or intentional acts of Landlord
or Landlord's Agents. Except as otherwise provided herein, neither Landlord nor
Landlord's Agents, shall be liable for interference with the light or other
rights or loss of business by Tenant, nor shall Landlord or Landlord's Agents be
liable for any latent defect in the Premises. Tenant shall give prompt notice to
Landlord in case of fire or accidents in the Premises or in the Building or of
defects therein or in the fixtures or equipment belonging to Landlord.

                  15.3 Waiver of Subrogation. Landlord and Tenant hereby waive
any rights each may have against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be, their respective property
or the Premises, caused by or resulting from risks insured against under any
policies carried by the parties; provided, however, that this paragraph shall be
inapplicable if it would have the effect, but only to the extent that it would
have the effect, of invalidating any insurance coverage of Landlord or Tenant.
To the extent available, the parties shall cause each insurance policy obtained
by it hereunder to provide a waiver of subrogation. Tenant's insurer shall
either waive subrogation rights against Landlord or, if Tenant's insurance
company does not waive the right of subrogation against Landlord and its
insurance company, Tenant shall (a) maintain during the Lease Term fire and
commercial liability coverage with respect to the Premises, and (b) pay to
Landlord upon demand Landlord's cost incurred in securing fire and commercial
liability insurance protecting Landlord upon the destruction of Tenant's
property.

         16. INSURANCE.

                  16.1 Property Insurance. During the Lease Term and to the
extent not contracted for directly by Landlord pursuant to Paragraph 16.11,
Tenant shall keep and maintain, or cause to be kept and maintained, at Tenant's
sole cost and expense, a policy or policies of insurance on the Premises
insuring the same against loss or damage by the following risks: fire and
extended coverage, vandalism, malicious mischief, plate glass and sprinkler
leakage (if sprinklers are required in the Building under applicable building
code provisions, or are installed by Tenant in the absence of such requirement)
in amounts at all times sufficient to prevent Landlord or Tenant from becoming a
co-insurer under the terms of the applicable policies, but in any event in an
amount payable thereunder not less than Full Replacement Value of the Premises.
The term "Full Replacement Value" shall mean actual replacement cost, including
changes required by new building codes or ordinances (exclusive of the cost of
excavation, foundations and footings). Such insurance shall show, as a loss
payee in respect of the Premises, Landlord, Tenant and any Lender required to be
named pursuant to its mortgage documents, as their interests may appear.

                  16.2 Comprehensive Liability Insurance. During the Lease Term,
Tenant shall keep and maintain, or cause to be kept and maintained, at Tenant's
sole cost and expense, a policy or policies of comprehensive general public
liability insurance, showing, as an additional insured in respect of the
Premises, Landlord, Tenant, any management company retained by Landlord to
manage the Premises, any ground lessor and any mortgagee of Landlord required to
be named pursuant to its mortgage documents. Such policy shall insure against
any and all Claims for injuries to persons, loss of life and damage to property
occurring upon, in or about the Premises (including coverage for liability
caused by independent contractors of Tenant or Subtenant working in or about the
Premises), with minimum coverage in an amount not less than a Five Million
Dollars ($5,000,000) combined single limit with respect to all bodily injury,
death or property damage in any one accident or occurrence. In the event of a
Claim relating to the Premises, the amount of any deductible or self-insured
retention and/or any award in excess of the policy limits shall be the sole
responsibility of Tenant. The insurance shall include a broad form contractual
liability endorsement insuring Tenant's indemnity obligation under Paragraph
15.1, and a boiler and machinery liability endorsement.

                                       16
<PAGE>

                  16.3 Other Insurance.

                           16.3.1 In addition to all other insurance required to
be carried by Tenant, Tenant, throughout the Lease Term, shall provide and keep
in force at Tenant's sole cost and expense:

                                    (a) Such further insurance against such
other hazards and risks and in such amounts as the ground lessor or the holder
of any mortgage or deed of trust lien may require under to the terms of such
liens consistent with commercially reasonable practice.

                                    (b) To the extent not contracted for
directly by Landlord pursuant to Paragraph 16.11, Rental value insurance with
respect to the Premises, covering risk of loss of rental due to the Landlord
from the occurrence of any of the hazards described above in Paragraph 16.1, in
an amount not less than the aggregate requirements for the period of eighteen
(18) months following the occurrence of the casualty for Rent and premiums on
the insurance required to be carried pursuant to this Paragraph 16;

                                    (c) Worker's Compensation insurance to the
full extent required under the law of the State of California;

                                    (d) Insurance on Tenant's Equipment,
personal property and other contents in, on or about the Premises insuring
against loss or damage by all risks referred to in Paragraph 16.1 in amounts
equal to ninety percent (90%) of their full replacement value;

                                    (e) During any period of construction in the
Premises and any other construction, Builder's All Risk Insurance with Completed
Operations Coverage; and

                                    (f) Other insurance required by Landlord,
including, terrorism, flood, earthquake and environmental remediation, in types
and amounts consistent with commercially reasonable practice, but excluding
earthquake coverage, and to the extent not contracted for directly by Landlord
pursuant to Paragraph 16.11.

                  16.4 Insurers; Primary Insurance. All policies of insurance
provided for herein shall be on an occurrence basis and shall be issued by
insurance companies with a general policy holder's rating of not less than A-
and a financial rating of not less than Class XV as rated in the most current
available "Best's" Insurance Reports. Such insurance companies shall be
qualified to do business in the State of California. All such policies shall be
issued in the names of Landlord, Tenant, any ground lessor and Lender (or its
successors and assigns), and shall be for the mutual and joint benefit and
protection of Landlord, Tenant, any ground lessor and Landlord's mortgagee or
beneficiary. All public liability and property damage policies shall contain a
provision that Landlord, although named as an insured, nevertheless shall be
entitled to recovery under said policies for any loss occasioned to it, its
servants, agents and employees by reason of the negligence of Tenant. As often
as any such policy shall expire or terminate, renewal or additional policies
shall be procured and maintained by Tenant in like manner and to like extent.
All policies of insurance must contain a provision that the company writing said
policy will give to Landlord thirty (30) days notice in writing in advance of
any cancellation or lapse or the effective date of any reduction in the amounts
of insurance. All public liability, property damage and other casualty policies
shall be written as primary policies, not contributing with and not in excess of
coverage which Landlord may carry. Tenant shall, upon request from Landlord from
time to time, immediately deliver to Landlord copies of all insurance policies
(including the declarations pages) in effect with respect to Tenant's business
and the Premises.

                  16.5 Blanket Policy. Notwithstanding anything to the contrary
contained within this Paragraph 16, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Tenant; provided,
however, that Landlord, any ground lessor and Lender shall be named as an
additional insured thereunder as their interests appear, the coverage afforded
Landlord will not be reduced or diminished by reason of the use of such blanket
policy of insurance, and the requirements set forth herein are otherwise
satisfied.

                  16.6 Deductibles. The deductible amounts, if any, with respect
to all insurance, which Tenant is required to maintain hereunder, shall not
exceed One Hundred Thousand Dollars ($100,000) per claim or occurrence, except
in the case of earthquake insurance, which deductibles may exceed this amount if
consistent with commercially reasonable

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<PAGE>

practice. The amount of the deductibles, if any, within this limitation shall be
a business decision by Tenant; under no circumstances shall Landlord be required
to reimburse Tenant for the amount of any deductible incurred by Tenant in
connection with any insured event, even if the event resulting in the claim was
caused or contributed to by Landlord's or Landlord's Agents' gross negligence or
willful misconduct.

                  16.7 Certificates. Upon the execution and delivery of this
Lease and thereafter not less than thirty (30) days prior to the expiration
dates of the expiring policies theretofore maintained, Tenant shall deliver to
Landlord certificates of insurance with respect to the policies of insurance
required by this Lease or duplicate originals of all such policies. Landlord,
upon reasonable notice, may inspect and copy any policies of insurance, and any
records relating thereto kept and maintained by Tenant.

                  16.8 No Separate Insurance. Tenant shall not take out separate
insurance with respect to the Premises, concurrent in form or contributing in
the event of loss with that required to be furnished by Tenant under this Lease,
unless Landlord, and such other persons required to be named as insureds as
provided in this Lease, are also included therein as named insureds,
respectively, with loss payable as provided in this Lease. Tenant immediately
shall notify Landlord of the taking out of any such separate insurance and shall
deliver a certificate or certificates therefor to Landlord.

                  16.9 Adjustment in the Event of Loss. Except as otherwise
provided herein, and subject to the rights of Lender, all insurance proceeds
payable with respect to any damage or destruction to the Premises (but not with
respect to Tenant's personal property, it being understood that insurance
proceeds allocable to Tenant's personal property shall be payable directly to
Tenant) shall be payable to Landlord. If Tenant undertakes to repair said damage
in accordance with Paragraph 17 below, the proceeds shall be made available to
Tenant and used to fund the reconstruction. In all other events, the proceeds
shall be the sole property of Landlord except otherwise expressly provided
herein. Tenant shall be entitled to compromise, adjust or settle, with
Landlord's approval, any and all claims with respect to the Premises. Each party
agrees to execute and deliver to the other party such releases, endorsements and
other instruments as the other party reasonably may require in order to
compromise, adjust or settle any insurance claim which such other party shall be
entitled to compromise, adjust or settle pursuant to this paragraph and to
enable the other party or its designee to collect such insurance proceeds as are
payable in respect of such claim.

                  16.10 Proration Upon Termination. If any of the insurance
required to be carried by Tenant hereunder is still in effect at the termination
of this Lease, Landlord may elect to terminate such insurance, or Landlord shall
reimburse Tenant for the pro rata portion of the premium paid by Tenant for such
insurance based upon the number of days remaining unexpired in such insurance.

                  16.11 Landlord's Option to Maintain Coverage. Notwithstanding
anything to the contrary in this Paragraph 16, Landlord may, at its election and
upon ten (10) days notice to Tenant, keep and maintain any of the insurance
policies required hereunder, the cost of which shall be paid by Tenant as
Additional Rent, to the extent the cost is commercially reasonable and not
materially greater than the cost Tenant would otherwise have paid for such
coverage.

         17. DAMAGE OR DESTRUCTION.

                  17.1 Partial Destruction. If the Premises or the Building are
damaged by fire or other casualty to an extent not exceeding twenty-five percent
(25%) of the full replacement cost thereof, and Landlord's contractor reasonably
estimates in a writing delivered to Landlord and Tenant that the damage thereto
may be repaired, reconstructed or restored to substantially its design and
quality condition immediately prior to such damage within one hundred eighty
(180) days from the date of such casualty, and Landlord will receive insurance
proceeds sufficient to cover the costs of such repairs, reconstruction and
restoration (including proceeds from Tenant and/or Tenant's insurance which
Tenant is required to deliver to Landlord pursuant to subparagraph 17.5 below to
cover Tenant's obligation for the costs of repair, reconstruction and
restoration of any portion of Tenant's improvements or alterations for which
Tenant is responsible under this Lease), then Landlord agrees to commence and
proceed diligently with the work of repair, reconstruction and restoration and
this Lease will continue in full force and effect. Tenant agrees to assist
Landlord as required to ensure that such space is returned to its

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<PAGE>

original level of quality and functionality.

                  17.2 Substantial Destruction. Any damage or destruction to the
Premises or the Building which Landlord is not obligated to repair pursuant to
subparagraph 17.1 above will be deemed a substantial destruction. In the event
of a substantial destruction, Landlord may elect to either (i) repair,
reconstruct and restore the portion of the Building or the Premises damaged by
such casualty, in which case this Lease will continue in full force and effect,
subject to Tenant's termination right contained in subparagraph 17.4 below; or
(ii) terminate this Lease effective as of the date which is thirty (30) days
after Tenant's receipt of Landlord's election to so terminate.

                  17.3 Notice. Under any of the conditions of subparagraphs 17.1
or 17.2 above, Landlord agrees to give written notice to Tenant of its intention
to repair or terminate, as permitted in such paragraphs, within the earlier of
thirty (30) days after the occurrence of such casualty, or fifteen (15) days
after Landlord's receipt of the estimate from Landlord's contractor (the
applicable time period to be referred to herein as the "Notice Period").

                  17.4 Tenant's Termination Rights. If Landlord elects to
repair, reconstruct and restore pursuant to subparagraph 17.2 (i) hereinabove,
and if Landlord's contractor estimates that as a result of such damage, Tenant
cannot be given reasonable use of and access to the Premises within three
hundred sixty-five (365) days after the date of such damage, then Tenant may
terminate this Lease effective upon delivery of written notice to Landlord
within ten (10) days after Landlord delivers notice to Tenant of its election to
so repair, reconstruct or restore.

                  17.5 Tenant's Costs and Insurance Proceeds. In the event of
any damage or destruction of all or any part of the Premises, Tenant agrees to
immediately (i) notify Landlord thereof, and (ii) deliver to Landlord all
property insurance proceeds received by Tenant with respect to any Tenant
alterations or improvements installed by or at the cost of Tenant, but excluding
proceeds for Tenant's furniture, fixtures, equipment and other personal
property, whether or not this Lease is terminated as permitted in this Paragraph
17, and Tenant hereby assigns to Landlord all rights to receive such insurance
proceeds. If, for any reason (including Tenant's failure to obtain insurance for
the full replacement cost of any alterations or improvements installed by or at
the cost of Tenant from any and all casualties), Tenant fails to receive
insurance proceeds covering the full replacement cost of any tenant improvements
installed by or at the cost of Tenant and any alterations which are damaged,
Tenant will be deemed to have self-insured the replacement cost of such items,
and upon any damage or destruction thereto, Tenant agrees to immediately pay to
Landlord the full replacement cost of such items, less any insurance proceeds
actually received by Landlord from Landlord's or Tenant's insurance with respect
to such items

                  17.6 Abatement of Rent. In the event of any damage, repair,
reconstruction and/or restoration described in this Paragraph 17, Monthly Rent
will be abated or reduced, as the case may be, from the date of such casualty,
in proportion to the degree to which Tenant's use of the Premises is impaired
during such period of repair until such use is restored. Except for abatement of
Monthly Rent as provided here in above, Tenant will not be entitled to any
compensation or damages for loss of, or interference with, Tenant's business or
use or access of all or any part of the Premises or for lost profits or any
other consequential damages of any kind or nature, which result from any such
damage, repair, reconstruction or restoration.

                  17.7 Inability to Complete. Notwithstanding anything to the
contrary contained in this Paragraph 17, if Landlord is obligated or elects to
repair, reconstruct and/or restore the damaged portion of the Building or the
Premises pursuant to subparagraphs 17.1 or 17.2 (i) above, but is delayed from
completing such repair, reconstruction and/or restoration beyond the

                                       19
<PAGE>

date which is sixty (60) days after the date estimated by Landlord's contractor
for completion thereof by reason of any causes (other than delays caused by
Tenant, its subtenants, employees, agents or contractors or delays which are
beyond the reasonable control of Landlord which delays in no event shall exceed
a total of ninety (90) days), then either Landlord or Tenant may elect to
terminate this Lease upon ten (10) days prior written notice given to the other
after the expiration of such sixty (60) or ninety (90) day period.

                  17.8 Damage Near End of Term. Landlord and Tenant shall each
have the right to terminate this Lease if any damage to the Premises occurs
during the last twelve (12) months of the Term of this Lease where Landlord's
contractor estimates in a writing delivered to Landlord and Tenant that the
repair, reconstruction or restoration of such damage cannot be completed within
sixty (60) days after the date of such casualty. If either party desires to
terminate this Lease under this subparagraph 17.8, it shall provide written
notice to the other party of such election within ten (10) days after receipt of
Landlord's contractor's repair estimates.

                  17.9 Waiver of Termination Right. Landlord and Tenant agree
that the foregoing provisions of this Paragraph 17 are to govern their
respective rights and obligations in the event of any damage or destruction and
supersede and are in lieu of the provisions of any applicable law, statute,
ordinance, rule, regulation, order or ruling now or hereafter in force which
provide remedies for damage or destruction of leased premises (including,
without limitation, the provisions of California Civil Code Section 1932,
Subsection 2, and Section 1933, Subsection 4 and any successor statute or laws
of a similar nature).

                  17.10 Upon any termination of this Lease under any of the
provisions of this Paragraph 17, the parties will be released without further
obligation to the other from the date possession of the Premises is surrendered
to Landlord except for items which have accrued and are unpaid as of the date of
termination and matters which are to survive any termination of this Lease as
provided in this Lease.

         18. ASSIGNMENT AND SUBLETTING.

                  18.1 No Assignment. Tenant shall neither voluntarily nor by
operation of law assign, sell, encumber, pledge or otherwise transfer all or any
part of Tenant's leasehold estate hereunder, or permit any other person
(excepting Tenant's agents and employees) to occupy the Premises or any portion
thereof, without Landlord's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. Consent by Landlord to one or
more assignments of this Lease or to one or more sublettings of the Premises
shall not constitute a waiver of Landlord's right to require consent to any
subsequent assignment, subletting or other transfer. If Tenant is a corporation,
unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of forty-five percent (45%) of all
outstanding stock or interests, or liquidation thereof, shall be deemed an
assignment within the meaning and provisions of this paragraph; provided,
however, the transfer, assignment or hypothecation or any stock in a corporation
or partnership which is a reporting company under the Securities Exchange Act of
1934 shall not be deemed an assignment within the meaning and provisions of this
paragraph. The sale of all or substantially all of the assets of Tenant, or the
assignment of the Lease to an entity into which Tenant is merged or with which
Tenant is consolidated, shall be deemed an assignment within the meanings and
provisions of this paragraph, unless the successor entity has a net worth equal
to or greater than Tenant's net worth immediately prior to the transfer. Tenant
shall reimburse Landlord for all of Landlord's reasonable costs and attorneys'
fees incurred in conjunction with the processing and documentation of any
required consent to assignment, subletting, transfer, change of ownership or
hypothecation of this Lease or Tenant's interest in and to the Premises, in an
amount not to exceed Ten Thousand Dollars ($10,000) for any one transfer.
Notwithstanding the foregoing, Tenant shall have the right, without the consent
of Landlord, to assign its rights and obligations pursuant to this Lease to

                                       20
<PAGE>

a parent, subsidiary or affiliate, provided that Tenant remains obligated under
the Lease. For purposes of this Paragraph, the term "subsidiary" shall mean and
refer to any subsidiary of Tenant in which Tenant owns sixty percent (60%) or
more of the voting stock of such subsidiary. For purposes of this Paragraph, the
term "affiliate" shall mean and refer to any entity in which Tenant or parent of
Tenant owns sixty percent (60%) or more of the voting stock or ownership
interest of such entity. Landlord hereby consents to Tenant's sublease of
approximately 19,000 rentable space feet of the Premises to Ambit Biosciences
and 6000 rentable square feet of the Premises to Diversified Properties, and the
continued ability to renew the subleases of such space in the future.

                  18.2 Consent Required. Landlord's consent to any assignment,
sale, encumbrance, pledge or other transfer shall not be unreasonably withheld,
conditioned or delayed. It shall not be unreasonable for Landlord to base its
determination as to whether consent will be granted in any specific instance on,
without limitation, the following factors: (a) whether the transferee's use of
the Premises will be compatible with the provisions of this Lease; (b) the
financial capacity of the transferee; (c) the business reputation of the
transferee; (d) the quality and type of the business operations of the
transferee; and (e) the business experience of the proposed transferee. This
list of factors is not intended to be exclusive, and Landlord may rely on such
other reasonable basis for judgment as may apply from time to time.

                  18.3 Procedure to Obtain Consent. If Tenant desires at any
time to assign this Lease or to sublet the Premises or any portions thereof, it
first shall notify Landlord of its desire to do so and shall submit in writing
to Landlord (i) the name and legal composition of the proposed subtenant or
assignee; (ii) the nature of the proposed subtenant's or assignee's business to
be carried on in the Premises; (iii) the terms and provisions of the proposed
sublease or assignment and all transfer documents relating to the proposed
transfer; and (iv) such reasonable business and financial information as
Landlord may request concerning the proposed subtenant or assignee. Any request
for Landlord's approval of a sublease or assignment shall be accompanied with a
check in such reasonable amount (not to exceed Ten Thousand Dollars [$10,000])
as Landlord shall advise for the cost of review and preparation, including
reasonable attorneys' fees, of any documents relating to such proposed transfer.
The provisions and conditions of any proposed sublease or assignment must not be
inconsistent with any provision of this Lease, and must address all matters
contained in this Lease. In addition, any transferee other than a subtenant of
less than all of the Premises must expressly assume all of the obligations of
Tenant under this Lease. Notwithstanding the assumption of the obligations of
this Lease by the transferee, no subletting or assignment, even with the consent
of Landlord, shall relieve Tenant of its continuing obligation to pay the rent
and perform all the other obligations to be performed by Tenant hereunder. The
obligations and liability of Tenant hereunder shall continue notwithstanding the
fact that Landlord may accept rent and other performance from the transferee.
The acceptance of rent by Landlord from any other person shall not be deemed to
be a waiver by Landlord of any provision of this Lease or to be a consent to any
assignment or subletting.

                  18.4 Writing Required. Each permitted assignment or sublease
shall be consummated by an instrument in writing executed by the transferor and
transferee in form satisfactory to Landlord. Each assignee and subtenant (other
than a subtenant of less than all of the Premises) shall agree in writing for
the benefit of the Landlord herein to assume all obligations of Tenant
hereunder, including the payment of all amounts due or to become due under this
Lease directly to the Landlord. One executed copy of such written instrument
shall be delivered to the Landlord.

                  18.5 Transfer Premiums. If Tenant assigns or sublets its
rights under this Lease, Tenant shall pay to Landlord as Additional Rent, after
Tenant has recovered any relevant leasing commissions, costs of tenant
improvements and other expenses of the assignment or sublease, fifty percent
(50%) of all of such excess consideration due and payable to Tenant from said
assignment or sublease to the extent said consideration exceeds the Rent, or a
pro rata portion of the Rent in the event only a portion of the Premises is
sublet.

         19. NO ENCUMBRANCE. Without Landlord's prior written consent, Tenant
shall not mortgage, encumber or hypothecate its interest in this Lease, the
Premises or the Building.

         20. HAZARDOUS MATERIALS.

                                       21
<PAGE>

                  20.1 Hazardous Materials. Tenant shall not use, store, dispose
of or permit to remain on the Premises, the Building, the Land, or any adjacent
property other than in the normal course of business and in compliance with all
applicable laws, any solid, liquid or gaseous matter or any combination thereof,
which is or may become, hazardous, toxic or radioactive including, but not
limited to, any substance, gas, or waste, which is included in the definition of
"hazardous substance," "toxic substance," "hazardous waste," or "toxic waste"
under any federal, state, or local law, ordinance, or regulation, including
those materials identified in Sections 66680 through 66685 of Title 22 of the
California Administrative Code, Division 4, Chapter 30 (as may be amended from
time to time) or any material which, if discharged, leaked or emitted or
permitted to be discharged, leaked or emitted into the atmosphere, the ground or
any body of water, does or may (i) pollute or contaminate the same, or (ii)
adversely affect (A) the health or safety of persons, whether on the Premises or
anywhere else, (B) the condition, use or enjoyment of the Premises or anywhere
else, or (C) the Premises, the Building or any of the improvements thereon (all
of the foregoing collectively referred to herein as "Hazardous Materials").

                  20.2 Testing. At reasonable times and upon reasonable prior
notice, prior to the expiration or earlier termination of the Lease Term,
Landlord shall have the right to conduct (a) hazardous material and waste
investigation(s) of the Premises and (b) if Landlord has reasonable cause to
believe that any contamination exists on, in, under, or around the Building or
the Premises, such other tests of the Premises and the Building as are
reasonably necessary or desirable to demonstrate whether contamination has
occurred as a result of Tenant's use of the Premises. Tenant shall be solely
responsible for and shall defend, indemnify and hold the Landlord, its Agents
and contractors harmless from and against any and all Claims, arising out of or
in connection with any removal, clean up, restoration and materials required
hereunder to return the Premises and any other property of whatever nature to
their condition existing prior to the time of any such contamination, except for
Claims caused by Landlord's or its Agents' gross negligence or willful
misconduct. Tenant shall pay for the reasonable cost of the investigations and
other tests of the Premises.

                  20.3 Duty to Dispose. Tenant shall not keep any trash,
garbage, waste or other refuse on the Premises except in sanitary containers and
shall regularly and frequently remove the same from the Premises. Tenant shall
keep all incinerators, containers or other equipment used for the storage or
disposal of such matter in a clean and sanitary condition. Tenant shall properly
dispose of all sanitary sewage and shall not use the sewage disposal system of
the Building (i) for the disposal of anything except sanitary sewage, or (ii)
for disposal of sewage in excess of the lesser of the amount (A) reasonably
contemplated by the uses permitted under this Lease, or (B) permitted by any
governmental entity.

                  20.4 Hazardous Materials Laws. Tenant, at Tenant's own cost
and expense, shall comply with all existing and any hereinafter enacted federal,
state or local laws pertaining to or governing Hazardous Materials laws. Tenant,
at Tenant's own cost and expense, shall make all submissions to, provide all
information to and comply with all requirements of any appropriate governmental
authority ("Authority") under all federal, state or local laws pertaining to or
governing Hazardous Materials. In particular, Tenant shall comply with all laws
relating to the storage, use and disposal of Hazardous Materials. Should any
Authority require that a clean up or remediation plan be prepared or that a
clean up or any other remediation action be undertaken because of any spills or
discharges of Hazardous Materials at the Premises or on the Premises or any
adjacent property that occur during the Lease Term or after expiration of the
Lease Term as a result of Tenant's use of the Premises, then Tenant, at Tenant's
own expense, shall prepare and submit the required plans and financial
assurances and carry out the approved plans. At no expense to Landlord, Tenant
promptly shall provide all information requested by Landlord for preparation of
affidavits required by Landlord or for Landlord's own information, to determine
the applicability of the Hazardous Materials laws to the Premises and shall
execute affidavits promptly when requested to so by Landlord.

                  20.5 Tenant Indemnification. Tenant shall indemnify, defend
and hold harmless Landlord and Landlord's Agents from and against (i) Claims in
connection with or arising out of any release, spill or discharge of Hazardous
Materials due to, contributed to or caused by the activities of Tenant, Tenant's
Agents, third parties who have trespassed on the Premises during the Lease Term
or parties in contractual relationship with Tenant or any of them; and (ii) all
Claims arising out of Tenant's failure to provide all information, make all
submissions and take all steps required by any Authority, under any federal,
state or local laws pertaining to or governing Hazardous Materials laws or any
other environmental law. Tenant's obligations and

                                       22
<PAGE>

liabilities under this paragraph shall survive the expiration or earlier
termination of this Lease. Without limiting the foregoing, if the release,
spill, leakage, or discharge of any Hazardous Materials on or in the Premises or
the Building or any adjacent property, caused or permitted by Tenant results in
any contamination of the Premises or the Building or any adjacent property,
Tenant shall promptly take all actions at its sole expense as are necessary to
return the Premises or the Building or any adjacent property, to the condition
existing prior to the time of such contamination, provided that Landlord's
approval of such action shall first be obtained, which approval shall not
unreasonably be withheld, delayed or conditioned so long as such actions would
not potentially have any material adverse long-term or short-term effect on the
Premises or the Building. Notwithstanding the foregoing, the indemnification
herein shall not apply to the initial introduction of Hazardous Materials on or
to the Premises by anyone other than the Tenant from and after the date that
Tenant is neither the "Tenant" hereunder nor in possession of the Premises
("Tenant Relinquishment Date").

                  20.6 Obligation to Remediate Upon Expiration of Lease. Tenant
shall surrender the Premises at the expiration or earlier termination of this
Lease free of any Hazardous Materials or contamination and free and clear of all
judgments, liens, licenses, restrictions or encumbrances relating thereto and,
at its own cost and expense, shall repair all damage and clean up or perform any
remedial action necessary relating to any Hazardous Materials or contamination
caused by Tenant's operation. Tenant, at its sole cost and expense, shall,
following Landlord's request, remove any alterations or improvements that may be
contaminated or contain Hazardous Materials.

         21. CONDEMNATION.

                  21.1 Termination of Lease. If the Premises or any portion
thereof are Taken under the power of eminent domain, or sold by Landlord under
the threat of the exercise of such power, this Lease shall terminate as to the
part so Taken as of the date that the condemning authority takes possession.
This Lease shall remain in full force and effect with respect to the remaining
portion of the Premises. If more than fifty percent (50%) of the square footage
of the Building is taken or sold under such threat, either Landlord or Tenant
may terminate this Lease as of the date that the condemning authority takes
possession by delivery of written notice of such election within twenty (20)
days after such party has been notified of the Taking or, in the absence
thereof, within twenty (20) days after the condemning authority shall have taken
possession. Notwithstanding the foregoing, Tenant's right to terminate this
Lease under the preceding sentence is contingent upon all leasehold mortgages
(if any) of Tenant being paid in full.

                  21.2 Rent Reduction; Tenant's Obligation To Repair. If this
Lease is not terminated by Landlord or Tenant, it shall remain in full force and
effect as to the portion of the Premises remaining; provided, however, that the
Monthly Rent shall be reduced by the proportion that the floor area of the
Building taken bears to the original floor area of the Building. In such event
Tenant, at Tenant's sole cost and expense, but subject to the availability of
condemnation proceeds therefor, shall restore the Premises to a complete unit of
like quality and character, except as to size, as existed prior to the date on
which the condemning authority took possession.

                  21.3 Award. All awards for the Taking of any part of the
Premises or proceeds from the sale made under the threat of the exercise of the
power of eminent domain (other than the portions of such award expressly
attributed by the governmental authority to the diminution in value of the
leasehold estate which portion, subject to the rights of any ground lessor,
shall be the property of Tenant) shall be the property of Landlord, whether made
for the Taking of the fee, or as severance damages; provided, however, that
Tenant shall be entitled to any award which is made for damage to Tenant's trade
fixtures and removable personal property, which is allocated to Tenant's moving
expenses and loss of goodwill, which is allocated to the below-market value of
the Lease, and to a portion of the award necessary to restore the Premises as
provided in Paragraph 21.2 above.

         22. DEFAULT PROVISIONS.

                  22.1 Events of Default. The occurrence of any of the following
shall constitute a default hereunder ("Default"):

                                       23
<PAGE>

                           22.1.1 The failure of Tenant to pay or cause to be
paid when past due, within five (5) days after notice, any Rent, monies or other
charge required by this Lease to be paid by Tenant;

                           22.1.2 Any default (after expiration of any
applicable notice and cure period) by Tenant under the terms of any leasehold
mortgage;

                           22.1.3 The failure of Tenant, within thirty (30) days
after notice, to do or cause to be done any act required by this Lease, or the
failure to observe and perform any other provision of this Lease to be observed
or performed by Tenant, other than payment of Rent, monies or charges required
by this Lease. If a cure cannot be made within thirty (30) days, Tenant shall
have an additional reasonable amount of time necessary to complete the cure
using its diligent efforts. Notwithstanding the foregoing, if any such failure
on the part of Tenant affects the health or safety of others, or would result in
the destruction of property, Tenant shall immediately begin to cure and shall
use its diligent and best efforts in pursuing said cure to completion;

                           22.1.4 Tenant's causing or permitting, without the
prior written consent of Landlord, any act for which this Lease requires
Landlord's prior consent, or if this Lease prohibits such act;

                           22.1.5 Any act of bankruptcy caused, suffered or
permitted by Tenant or, if Tenant is a partnership, any general partner of
Tenant. For purposes of this Lease, an "act of bankruptcy" shall include the
following: (i) any general assignment or general arrangement for the benefit of
creditors; (ii) the filing of any petition by or against Tenant to have Tenant
adjudged a bankrupt, or a petition for reorganization or arrangement under any
law relating to bankruptcy, unless such petition is filed against Tenant and the
same is dismissed within ninety (90) days; (iii) the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this Lease; or (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease.

                  22.2 Rights of Landlord. Upon the occurrence, and during the
continuance, of any Default, and in addition to any or all other rights or
remedies of the Landlord hereunder or by law, Landlord, without further notice
or demand of any kind to Tenant or any other person, shall have the following
rights and remedies:

                           22.2.1 Landlord has the remedy described in
California Civil Code Section 1951.4 (Landlord may continue this Lease in effect
after Tenant's breach and abandonment and recover rent as it becomes due, if
Tenant has right to sublet or assign, subject only to reasonable limitations).
Landlord may continue this Lease in full force and effect and enforce all
Landlord's rights and remedies under this Lease, including the right to recover
the Rent as it becomes due and any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which, in the ordinary course of things, would
be likely to result therefrom. Landlord may sue monthly, annually or after such
equal or unequal periods as Landlord desires for such amounts due.

                           22.2.2 Landlord (whether Landlord elects to continue
this Lease in effect or terminate this Lease and Tenant's right to possession
hereunder) may reenter the Premises or take possession pursuant to legal
proceedings or pursuant to any notice provided by law, and thereafter collect
rent from existing sub-tenants of the Premises, if any, and(or) relet the
Premises, in whole or in part, to third parties for Tenant's account at such
rent and upon such conditions and for such term as Landlord sees fit. Tenant
shall pay to Landlord all costs actually and reasonably incurred in reletting
the Premises or improvements thereon, including, without limitation, broker's
commissions, repairs, expenses of remodeling required by the reletting and like
costs. Landlord may do all other acts necessary to maintain or preserve the
Premises as Landlord deems reasonable and necessary, including removal of all
persons and property, which property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant. If Landlord
shall elect to so relet, rentals received by Landlord from such reletting shall
be applied in the following order: (i) to the payment of any indebtedness other
than Rent due hereunder from Tenant to Landlord; (ii) to the payment of any cost
of such reletting; (iii) to the payment of the cost of any alterations and
repairs; (iv) to the payment of Rent due and unpaid hereunder; (v) to the
payment of any obligations of Tenant under any

                                       24
<PAGE>

leasehold mortgage; and (vi) the residue, if any, shall be held by Landlord and
applied in payment of future Rent as the same may become due and payable
hereunder. If reletting results in the actual payment of rentals at less than
the Rent payable during that month by Tenant as required hereunder, Tenant shall
pay such deficiency to Landlord from time to time immediately upon demand
therefor by Landlord.

                           22.2.3 Landlord, by written notice to Tenant, may
terminate this Lease and Tenant's right to possession of the Premises. No act by
Landlord other than giving written notice to Tenant shall terminate this Lease.
Acts of maintenance, reletting, or the appointment of a receiver on Landlord's
initiative shall not terminate this Lease. If Landlord elects to terminate this
Lease, Landlord may recover all of the following:

                                    (a) The worth at the time of award of the
unpaid Rent which had been earned at the time of termination. "Worth at the time
of award" shall be computed by allowing interest to accrue at the Default Rate
from the first day a breach occurs.

                                    (b) The worth at the time of award of the
amount by which the unpaid Rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that the Tenant
proves could have been reasonably avoided. "Worth at the time of award" shall be
determined by allowing interest at the Default Rate from the first day a breach
occurs.

                                    (c) The worth at the time of award of the
amount by which the unpaid Rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Tenant proves could be
reasonably avoided. "Worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank
situated nearest the Premises at the time of award plus six percent (6%).

                                    (d) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of events would
be likely to result therefrom including, but not limited to, expenses of
reletting, attorneys' fees, costs of alterations and repairs, recording fees,
filing fees and any other expenses customarily resulting from obtaining
possession of Premises and releasing.

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

                           22.2.4 If Tenant shall be in Default in the
observance or performance of any term or covenant on Tenant's part to be
observed or performed under this Lease, Landlord may perform (but is not
obligated to do so) the same for the account of Tenant, and if Landlord makes
expenditures or incurs any obligation for the payment of money thereby,
including, but not limited to, attorneys' fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or obligations incurred, with
interest thereon at the Default Rate, shall be deemed to be Additional Rent
hereunder and shall be paid by Tenant to Landlord (without offset) immediately
upon demand therefor.

                           22.2.5 Landlord, where permitted by applicable law,
may seek to restrain any breach or threatened breach of any of Tenant's
obligations hereunder and/or may exercise any and all rights and remedies of a
secured party under applicable law with respect to any property in which
Landlord is granted a security interest under this Lease or otherwise.

                  22.3 Cumulative Remedies. Any right or remedy of Landlord
under this Lease and any other right or remedy that Landlord may have at law, in
equity or otherwise upon any Default or breach of any of the Tenant's
obligations hereunder shall be distinct, separate and cumulative rights or
remedies and no right or remedy, whether exercised or not, shall be deemed to be
in exclusion of any other.

                  22.4 Waiver. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition on any subsequent breach by Tenant. The
acceptance of Rent hereunder by Landlord after any such breach shall not be
deemed to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
rental so accepted, regardless of Landlord's knowledge of such preceding

                                       25
<PAGE>

breach at the time of acceptance of such Rent. No covenant, term or condition of
this Lease or breach thereof by Tenant shall be deemed to have been waived by
Landlord unless such waiver is in a writing executed by Landlord.

                  22.5 Curing of Default. Notwithstanding any other provision of
this Paragraph 22, if an event of Default, other than for the payment of Rent or
other monies owing from Tenant to Landlord hereunder, is of such a nature that
the same cannot be cured upon demand by Landlord as specified in any written
notice relating thereto, then such event of Default shall be deemed to be cured
if Tenant upon such notice shall have commenced to cure such Default and shall
continue thereafter with all due diligence to so cure and does so complete the
same within a reasonable period of time.

                  22.6 Landlord's Default. If Landlord shall neglect or fail to
perform or observe any of the covenants, provisions or conditions contained in
this Lease on its part to be performed or observed within thirty (30) days after
written notice of default (or if more than thirty (30) days shall be required
because of the nature of the default, if Landlord shall fail to proceed
diligently to cure such default after written notice thereof), Landlord shall be
responsible to Tenant for any foreseeable and unavoidable damages sustained by
Tenant as a result of Landlord's breach.

                  22.7 Tenant's Right to Perform. If, after such notice to
Landlord and Assignee (as defined in Paragraph 22.9 below), if any, Landlord and
Assignee shall fail to cure such default as provided herein, Tenant shall have
the right, but not the obligation, to cure any such default at Landlord's sole
cost and expense including in such expenditure all costs and attorneys' fees
incurred to cure such default or breach of Lease. Tenant shall have no right to
terminate this Lease for any such default by Landlord unless otherwise
specifically provided in this Lease.

                  22.8 Abatement. Except as expressly otherwise provided herein,
Landlord and Tenant hereby waive the provisions of any statutes, regulations,
ordinances, or court decisions which relate to the abatement of rent or
termination of leases when leased property is damaged or destroyed and agree
that such event shall be exclusively governed by the terms of this Lease.

                  22.9 Tenant to Notify Mortgagees. If Landlord's estate in the
Premises or any part thereof is at any time subject to a mortgage or a deed of
trust, and if this Lease or the rentals due from Tenant hereunder are assigned
to such mortgagee, trustee or beneficiary (called an "Assignee" for purposes of
this paragraph 22 only) and if Tenant is given written notice thereof, including
the post office address of such Assignee, Tenant shall give written notice to
such Assignee, specifying the default of Landlord in reasonable detail and
affording such Assignee a reasonable opportunity to render performance for and
on behalf of Landlord. If and when the Assignee has rendered performance on
behalf of Landlord, such default shall be deemed cured.

         23. LIMITATION OF LANDLORD'S LIABILITY. If Landlord is in default of
this Lease, and as a consequence, Tenant recovers a money judgment against
Landlord, the judgment shall be satisfied only out of the proceeds of sale
received on execution of the judgment and levy against the right, title, and
interest of Landlord in the Premises, and out of rent or other income from the
Premises receivable by Landlord or out of the consideration received by Landlord
from the sale or other disposition of all or any part of Landlord's right,
title, and interest in the Premises. Neither Landlord nor Landlord's Agents
shall be personally liable for any deficiency except to the extent liability is
based upon willful and intentional misconduct. If Landlord is a partnership,
joint venture, or limited liability company, the partners or members of such
partnership or limited liability company, as the case may be, shall not be
personally liable and no partner or member of Landlord (or of any affiliated
entity) shall be sued or named as a party in any suit or action, or service of
process be made against any partner or member of Landlord (or of any affiliated
entity), except as may be necessary to secure jurisdiction of the partnership,
joint venture, or limited liability company or to the extent liability is caused
by willful and intentional misconduct. If Landlord is a corporation, the
shareholders, directors, officers, employees, and/or agents of such corporation
shall not be personally liable and no shareholder, director, officer, employee,
or agent of Landlord shall be sued or named as a party in any suit or action, or
service of process be made against any shareholder, director, officer, employee
or agent of Landlord, except as may be necessary to secure jurisdiction of the
corporation. No partner, member, shareholder, director, employee, or agent of
Landlord (or of any affiliated entity) shall be required to answer or otherwise
plead to any service of process and no judgment will be taken or writ of
execution levied against any partner, member shareholder, director,

                                       26
<PAGE>

employee, or agent of Landlord.

         24. SUBORDINATION-ATTORNMENT.

                  24.1 Tenant to Give Evidence of Subordination. Upon written
request of Landlord or Tenant, or any mortgagee or deed of trust beneficiary, or
lessor of Landlord, Tenant in writing shall subordinate its rights hereunder to
the lien of any mortgage or deed of trust now or hereafter in force against the
land and buildings comprised of the Premises of which the Premises are a part,
and upon any building hereafter placed upon the Premises, and to all advances
made or hereafter to be made upon the security thereof; provided that Tenant
obtains a non-disturbance agreement reasonably acceptable to Tenant from any
such mortgagee or deed of trust beneficiary. On or before the Lease Commencement
Date, Landlord, Tenant and existing Lender as of the Lease Commencement Date
shall execute and cause to be recorded a subordination and non-disturbance
agreement pursuant to his paragraph.

                  24.2 Attornment. If any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed of trust made by or to which the Landlord is subject covering
the Premises, Tenant shall attorn to the purchaser or lessor under said lease
upon any such foreclosure, sale or lease termination and recognize such
purchaser or lessor as the Landlord under this Lease; provided, however, that
the purchaser or lessor shall acquire and accept the Premises subject to this
Lease.

                  24.3 Execution of Documents by Tenant. Landlord and Tenant,
upon request of the other party or a Lender, shall duly execute in recordable
form such instruments and certificates as are necessary to carry out the intent
of this Paragraph 24.

         25. QUIET POSSESSION. Subject to the provisions and matters referred to
in Paragraph 14 of this Lease, Tenant, upon paying the Rent and performing the
covenants and conditions of this Lease, may quietly have, hold and enjoy the
Premises during the Lease Term and any Extension Period. Landlord during the
Lease Term and any Extension Period shall have the right to develop the unused
portion of Parcel 3 without Tenant's prior written consent; provided, however,
Landlord (i) assigns reasonable allocations to Landlord of Taxes, insurance and
other Operating Expenses reasonably attributable to the portion of Parcel 3 to
be developed, including a reasonable allocation of the expenses of the fitness
facilities on Parcel 3 which will remain part of the Premises (but only to the
extent the tenants of the to-be-constructed building are provided access to said
fitness facility), all of which shall be reviewed with and be subject to the
reasonable consent of Tenant; (ii) grants Tenant a right of first refusal to
lease space in the building to be constructed on Parcel 3; (iii) exercises
reasonable care and restrictions on the marshaling, staging and construction of
improvements on Parcel 3 so as not to unreasonably interfere with parking,
ingress and egress, or otherwise with Tenant's use and occupancy of the
Premises; and (iv) pays to Tenant as a development fee (the "Development Fee")
the sum of one million dollars ($1,000,000.00) if development is commenced
within the first five (5) years of the Lease Term, one million three hundred
thousand dollars ($1,300,000.00) as the Development Fee if development is
commenced within the last five years of the initial Lease Term, and no
Development Fee if development is commenced thereafter For purposes of this
paragraph, the term "commenced" shall mean commencement of grading operations on
Parcel 3. The Development Fee shall be paid to Tenant at the time development is
commenced. In no event shall Landlord have the right to construct improvements
on Parcels 1 or 2.

26. MISCELLANEOUS.

                  26.1 Captions and Terms. The captions to all paragraphs of
this Lease are for convenience only, are not a part of this Lease, and do not in
any way limit or amplify the terms and provisions of this Lease. The masculine
pronoun used herein shall include the feminine or the neuter as the case may be,
and the use of the singular shall include the plural when appropriate.

                  26.2 Obligations of Successors. Each of the provisions hereof
are to be construed as covenants and agreements as though the words importing
such covenants and agreements were used in each separate paragraph hereof, and
all of the provisions hereof shall bind and inure to the benefit of the parties
hereto, and their respective heirs, legal representatives,

                                       27
<PAGE>

successors and assigns (subject to any restrictions on assignment).

                  26.3 No Joint Venture. Nothing contained in this Lease shall
be deemed or construed as creating a partnership, joint venture or any other
relationship between the parties hereto other than Landlord and Tenant according
to the provisions contained herein, or cause Landlord to be responsible in any
way for the debts or obligations of Tenant or any other party.

                  26.4 Authority of Tenant. If Tenant is a corporation, the
persons executing this Lease on behalf of Tenant hereby covenant and warrant
that they have the authority to enter into this Lease, that Tenant is a
corporation in good standing in the state of its origination, all steps have
been taken prior to the date hereof to qualify Tenant to do business in the
State of California, all franchise and corporate taxes have been paid to date,
and that all future forms, reports, fees and other documents necessary to comply
with applicable laws will be filed when due.

                  26.5 No Right of Redemption. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present or future laws
in the event of Tenant being lawfully evicted or dispossessed for any cause, or
in the event of Landlord obtaining possession of the premises by reason of a
Default by Tenant hereunder.

                  26.6 Holding Over. If Tenant remains in possession of the
Premises (a) after the expiration of the Lease Term without executing a new
lease, or (b) after Landlord has declared a forfeiture by reason of a Default by
Tenant, then such holding over shall be construed as a tenancy at sufferance
from month-to-month, subject to all the conditions, provisions and obligations
of this Lease insofar as they are applicable to a month-to-month tenancy, except
that the Monthly Rent shall be one hundred twenty-five percent (125%) of the
Monthly Rent last due, payable monthly in advance.

                  26.7 Brokers. Tenant and Landlord each warrants and represents
that it has had no dealings with any real estate brokers or agents in connection
with the negotiation of this Lease, and it knows of no other real estate broker
or agent who is entitled to a commission in connection with this Lease. Tenant
and Landlord each shall defend, indemnify and hold the other harmless from and
against any and all Claims by any person for any finder's fees or brokerage fees
incurred as a result of any action by such indemnifying party.

                  26.8 Non-Merger. There shall be no merger of this Lease, or of
the leasehold estate created hereby, with the fee estate in and to the Premises
by reason of the fact that this Lease, or the leasehold estate created hereby,
or any interest in either thereof, may be held directly or indirectly by or for
the account of any person who shall own the fee estate in and to the Premises,
or any portion thereof, and no such merger shall occur unless and until all
persons at the time having any interest in the fee estate and all persons having
any interest in this Lease or the leasehold estate, shall join in a written
instrument effecting such merger.

                  26.9 Recordation of Lease. Promptly upon the Lease
Commencement Date, Landlord and Tenant shall record a memorandum of this Lease
with the County Recorder of San Diego County.

                  26.10 Notices. No notice, request, demand, instruction or
other document to be given hereunder to any party shall be effective for any
purpose unless personally delivered to the person or delivered by reputable
overnight courier, to the addresses set forth in Paragraph 2 above. Notice shall
be deemed to have been given when received, if by personal delivery, or the next
business day after the date of the courier's receipt of mailing, if by reputable
overnight courier. Notice shall not be deemed given unless and until, under the
preceding sentence, notice shall be deemed given to all addressees to whom
notice must be sent. The addresses and addressees for the purpose of this
paragraph may be changed by giving written notice of such change in the manner
herein provided for giving notice. Unless and until such written notice is
received, the last address and addressee as stated by written notice, or
provided herein if no written notice of change has been sent or received, shall
be deemed to continue in effect for all purposes hereunder.

                  26.11 Attorneys' Fees. If any action or proceeding (judicial
or nonjudicial) is commenced to enforce or interpret this Lease, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs,
together with all other costs and fees incurred by it in attempting to enforce
the other party's obligations and/or to protect its rights under this

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Lease, whether or not such action or proceeding proceeds to judgment.

                  26.12 No Other Agreements. This Lease represents the entire
agreement between the parties hereto and supersedes any and all previous written
or oral agreements or discussions between said parties and any other person or
legal entity concerning the transactions contemplated herein. There are no
representations, warranties or agreements except as specifically set forth in
this Lease or to be set forth in the instruments or other documents delivered or
to be delivered hereunder.

                  26.13 Amendments. No change in or addition to, or waiver or
termination of this Lease, or any part hereof, shall be valid unless in writing
and signed by or on behalf of the parties hereto.

                  26.14 No Third Party Benefit. The parties acknowledge and
agree that the provisions of this Lease are for the sole benefit of Landlord and
Tenant, and not for the benefit, directly or indirectly, of any other person or
entity, except as otherwise expressly provided herein.

                  26.15 Exhibits. Each of the Exhibits attached hereto is hereby
incorporated herein by this reference.

                  26.16 Severability. If any one or more of the provisions of
this Lease are held to be invalid, illegal or unenforceable in any respect or
for any reason, the validity, legality and enforceability of such provision or
provisions in every other respect and of the remaining provisions of this Lease
shall not in any way be impaired.

                  26.17 Governing Law/Jurisdiction. This Lease shall, in all
respects, be interpreted, enforced and governed by and under the laws of the
State of California.

                  26.18 Venue. The parties hereby expressly acknowledge and
agree that if an action is brought with respect to this Lease, sole and proper
venue for such action shall be in San Diego County, California.

                  26.19 Time. Time is hereby expressly made of the essence with
respect to each and every term and condition of this Lease.

                  26.20    Entry By Lessor.

                           26.20.1 Inspection. Tenant shall permit Landlord and
Landlord's agents to enter the Premises at all reasonable times after reasonable
notice for the purpose of inspecting the same and for the purpose of exercising
any of its other rights or performing any of its obligations under this Lease.

                           26.20.2 Sale or Lease of Premises.  Landlord may at
any time place on or about the Premises any ordinary "For Sale" signs, and at
any time within Eighteen (18) months prior to the expiration of this Lease, if
Tenant has not elected to extend the Lease Term as set forth in Paragraph 4.1
above, place on or about the Premises any usual or ordinary "For Lease" signs.
Landlord may enter the Premises at reasonable times upon reasonable prior notice
during the Lease Term to show the Premises to prospective tenants, lenders,
investors, or purchasers. In exercising its rights under this Paragraph 26.20.2,
Landlord shall not unreasonably interfere with Tenant's use or occupancy of the
Premises.

                           26.20.3 Waiver. Landlord shall be permitted to enter
upon the Premises in accordance with the terms hereof for any of the purposes
stated herein without any liability to Tenant for any loss of occupation or
quiet enjoyment resulting therefrom, except resulting from Landlord's or its
Agents' gross negligence or willful misconduct, and Tenant hereby waives any
claim for abatement of rent or for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment,
or any other loss occasioned thereby.

                  26.21 Estoppel Certificates. Tenant shall at any time during
the Lease Term, within ten (10) days after written request from Landlord,
execute and deliver to Landlord a statement in writing in any reasonable form
requested by Landlord, certifying that this Lease is unmodified and in full
force and effect or, if modified, stating the nature of such modification.

                                       29
<PAGE>

Tenant's statement shall include such other details as may be reasonably
requested by Landlord. Any such statement may be relied upon conclusively by any
existing or prospective purchaser or lender.

                  26.22 No Surrender. Except to the extent expressly provided
for herein, no event or occurrence during the Lease Term, whether foreseen or
unforeseen, however extraordinary, shall permit Tenant to surrender or terminate
this Lease or shall relieve Tenant from any of its obligations hereunder, and
Tenant waives any rights now or hereafter conferred upon it by statute or
otherwise, except any rights set forth herein, to surrender or terminate this
Lease or to claim any abatement or suspension of Rent or other sums payable
hereunder on account of any such event or occurrence.

                  26.23 Consent of Landlord and Tenant. Whenever Landlord or
Tenant is required to give its consent or approval to any action on the part of
the other, such consent or approval shall not be unreasonably withheld,
conditioned or delayed, unless otherwise expressly provided.

                  26.24 Binding Effect. This Lease shall not be effective until
fully executed by both Landlord and Tenant.

                  26.25 Covenants and Conditions. Each provision and obligation
set forth in this Lease to be performed by Tenant shall be deemed both a
covenant and a condition.

                  26.26 Furnishing of Financial Statements and Tenant's
Representations. To induce Landlord to enter into this Lease, Tenant agrees that
it shall promptly furnish to Landlord, from time to time, upon Landlord's
written request, the most recent audited year-end financial statements
reflecting Tenant's current financial condition. Tenant represents and warrants
that all financial statements, records and information furnished by Tenant to
Landlord in connection with this Lease are true, correct and complete in all
respects.

                  26.27 Interpretation. This Lease has been negotiated at arm's
length and between persons sophisticated and knowledgeable in the matters dealt
with in this Lease. In addition, each party has been represented by experienced
and knowledgeable legal counsel. Accordingly, any rule of law (including
California Civil Code Section 1654) or legal decision that would require
interpretation of any ambiguities in this Lease against the party that has
drafted it is not applicable and is waived. The provisions of this Lease shall
be interpreted in a reasonable manner to effect the purpose and intent of the
parties to this Lease.

                  26.28 Waiver of Jury Trial and Counterclaims. THE PARTIES
HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY
MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
AND OR ANY CLAIM OF INJURY OR DAMAGE.

         27. END OF TERM.

                  27.1 Surrender of Premises.

                           27.1.1 Upon the expiration of the Lease Term or
earlier termination hereof through the exercise of any option to terminate this
Lease granted herein (collectively referred to as the "Surrender Date"), title
to the Building and the Premises shall be vested in Landlord. Thereupon, Tenant
shall peaceably and quietly vacate the entire Premises, including the Building
(a) in good order, condition and repair, except for normal wear and tear, and
(b) free and clear of all lettings, occupancies, agreements, easements,
encumbrances or other liens other than those to which this Lease was subject on
the Lease Commencement Date and those caused, created by or consented to in
writing by Landlord or otherwise permitted by the terms hereof.

                           27.1.2 Notwithstanding the exercise by either party
of any option contained herein to terminate this Lease, any unsatisfied
obligations of Tenant accruing on or

                                       30
<PAGE>

prior to the Surrender Date and the indemnification provisions of Tenant
contained in Paragraphs 15.1 and 20.5 shall survive the Surrender Date.

                  27.2 Re-Entry by Landlord. Upon the Surrender Date, Landlord,
without further notice, may enter upon, re-enter, possess and repossess itself
of the Premises, by summary proceedings, ejectment or otherwise, may dispossess
and remove Tenant and all other persons and property from the Premises, and may
have, hold and enjoy the Premises and the right to receive all Rent and other
income of and from the same. As used in this Lease, the words "enter" and
"re-enter" are not restricted to their technical legal meanings.

                  27.3 Tenant's Equipment. Any of Tenant's Equipment (as defined
in Paragraph 13.2 above) or other personal property which shall remain on the
Premises after the Surrender Date and the removal of Tenant from the Premises,
at the option of Landlord, may be deemed to have been abandoned by Tenant or any
Subtenant and either may be retained by Landlord as its property or be disposed
of, without accountability, in such manner as Landlord may see fit. However,
Landlord also shall have the right to require Tenant to remove any such
equipment or other personal property at any time after the Surrender Date and
the removal of Tenant from the Premises at Tenant's own cost and expense and to
repair any damage to the Premises resulting from such removal. From and after
the Surrender Date, Landlord shall not be responsible for any loss or damage
occurring to any property owned by Tenant or any Subtenant.

                  27.4 Survival. The provisions of this Paragraph 27 shall
survive the Surrender Date.

         WHEREFORE, the parties hereto have executed this Lease on the dates set
forth below effective on the Effective Date first set forth above.

LANDLORD:

Dated: August 18, 2004

BMR-9885 TOWNE CENTRE DRIVE LLC,
a Delaware limited liability company

By:      BIOMED REALTY, L.P.,
         a Maryland limited partnership

By:      BioMed Realty Trust, Inc.,
         a Maryland corporation,
         its General Partner

         By:    /s/ Gary A. Kreitzer
                ----------------------
         Name:  Gary A. Kreitzer
         Title: E.V.P.

TENANT:

Illumina, Inc.
A Delaware corporation

By:         /s/ Timothy M. Kish
         ------------------------
         Name: Timothy M. Kish
         Title: V.P. & CFO

                                       31
<PAGE>

                                   EXHIBIT "A"

                                    SITE PLAN

                                       32

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