Document:

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                                                                    Exhibit 10.5

                                     LEASE

                                By and Between

                     Utah State Retirement Investment Fund
                                 ("Landlord")

                                      AND

                                  eBenX, Inc.
                                  ("Tenant")

                           Multi-Tenant Office Lease
<PAGE>

                               TABLE OF CONTENTS

ARTICLE 1 -     TERM......................................................   1

ARTICLE 2 -     USE.......................................................   1

ARTICLE 3 -     RENTALS...................................................   2

ARTICLE 4 -     CONSTRUCTION..............................................   2

ARTICLE 5 -     POSSESSION................................................   2

ARTICLE 6 -     TENANT'S PRO RATA SHARE OF REAL ESTATE TAXES AND
                 OPERATING EXPENSES.......................................   3

ARTICLE 7 -     UTILITIES AND SERVICE.....................................   4

ARTICLE 8 -     NON-LIABILITY OF LANDLORD.................................   4

ARTICLE 9 -     CARE OF PREMISES..........................................   5

ARTICLE 10 -    RESTRICTIONS CONCERNING USE...............................   5

ARTICLE 11 -    INSPECTION................................................   6

ARTICLE 12 -    ALTERATIONS...............................................   6

ARTICLE 13 -    SIGNS.....................................................   6

ARTICLE 14 -    COMMON AREAS..............................................   7

ARTICLE 15 -    ASSIGNMENT AND SUBLETTING.................................   8

ARTICLE 16 -    LOSS BY CASUALTY..........................................   9

ARTICLE 17 -    WAIVER OF SUBROGATION.....................................  10

ARTICLE 18 -    EMINENT DOMAIN............................................  10

ARTICLE 19 -    SURRENDER.................................................  10

ARTICLE 20 -    NON-PAYMENT OF RENT, DEFAULTS.............................  11

ARTICLE 21 -    LANDLORD'S DEFAULT........................................  12

ARTICLE 22 -    HOLDING OVER..............................................  12

ARTICLE 23 -    SUBORDINATION.............................................  12

ARTICLE 24 -    INDEMNITY, INSURANCE AND SECURITY.........................  13
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ARTICLE 25 -    NOTICES...................................................  14

ARTICLE 26 -    APPLICABLE LAW............................................  14

ARTICLE 27 -    MECHANICS' LIEN...........................................  14

ARTICLE 28 -    SUPPLEMENTAL SECURITY INTEREST DEPOSIT....................  14

ARTICLE 29 -    BROKERAGE.................................................  14

ARTICLE 30 -    SUBSTITUTION..............................................  15

ARTICLE 3l -    ESTOPPEL CERTIFICATES.....................................  15

ARTICLE 32 -    GENERAL...................................................  15

ARTICLE 33 -    EXCULPATION...............................................  16

ARTICLE 34 -    AMERICANS WITH DISABILITIES ACT...........................  16
<PAGE>

                              LEASE SUMMARY SHEET

   1.    Landlord: Utah State Retirement Investment Fund, an
                   independent agency of the State of Utah

                   CB Richard Ellis Investors
                   865 South Figueroa Street
                   Suite 3500
                   Los Angeles, California  90017
                   Attn:  Director of Asset Management

                   with a copy to:

                   United Properties
                   3500 West 80th Street
                   Bloomington, Minnesota  55431

   2.    Tenant:  eBenX, Inc., a Minnesota corporation

   3.    Tenant's Address:
              A.   Prior to the commencement of the Term:
                        eBenX, Inc.
                        5500 Wayzata Boulevard
                        Suite 1450
                        Minneapolis, MN  55416-1241
                        Attention:  President

              B.   Subsequent to commencement of the Term if different from the
                   address of the Premises:
                        eBenX, Inc.
                        605 Waterford Park, Suite ___
                        Plymouth, MN
                        Attention:  President

   4.    Premises:

         A.  Initial Premises:
                        91,134 rentable square feet on the lower level
                        and on the entire 5th, 6th , 7th, 8th, and 12th floors
                        of the building, as shown on Exhibit A-4.

         B. Additional Premises:
                        18,149 rentable square feet on the 4th floor
                        of the building, as shown on Exhibit A-5 will be added
                        to the Premises no later than May 1, 2001.
   5.    Term of Lease:

         A. Initial Premises: Sixty-three (63) months commencing  May 1, 2000
            and terminating July 31, 2005

         B. Additional Premises: No less than Fifty-one (51) months commencing
            no later than May 1, 2001 and terminating July 31, 2005.
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   6.    Rent:
                         Months 1 - 16:  $14.00 per rentable square foot
                         Months 17-28:   $14.25 per rentable square foot
                         Months 29-40:   $14.50 per rentable square foot
                         Months 41-52:   $14.75 per rentable square foot
                         Months 53-63:   $15.00 per rentable square foot

         Rent Abatement: Tenant shall receive three (3) months of gross rent
                         abatement for the months of May, June and July, 2000.

   7.    Security Deposit:
                          In the form of a Lease Bond, issued by a surety, in an
                          amount and containing such terms and conditions as
                          deemed acceptable to Landlord in Landlord's sole
                          discretion.

   This Lease Summary Sheet information is incorporated into and made a part of
the Lease Agreement attached hereto. In the event of any conflict between any
Summary Sheet information and the Lease Agreement, the Lease Agreement shall
control. This Lease Agreement includes the following Exhibits, all of which are
made a part of this Lease Agreement. Exhibits: Exhibit A-1 (Graphic Location of
the Premises); Exhibit A-2 (Legal Description for the Building); Exhibit A-3, if
attached (Plans and/or Description for Construction of Improvements to the
Premises); Exhibit B, if attached (Tenant Work Fundings); Exhibit A-4 (Initial
Premises); Exhibit A-5 (Additional Premises on 4th Floor); Exhibit A-6 (Lower
Level Storage Area); Exhibit C (Option to Extend Term); Exhibit D (Right of
First Offer for Additional Space); Exhibit E (Fiber Optic Cable and Generator);
Exhibit F (Exclusions from Operating Expenses).
<PAGE>

                   MULTI-TENANT OFFICE LEASE AGREEMENT (NET)

THIS LEASE AGREEMENT (hereinafter called the "Lease Agreement") made as of the
21st day of January, 2000, by and between Utah State Retirement Investment Fund,
an independent agency of the State of Utah, having offices at c/o United
Properties LLC, 3500 West 80th Street, Bloomington, Minnesota, 55431
(hereinafter called the "Landlord"), and eBenX, Inc., a Minnesota corporation
(hereinafter called the "Tenant").

                                   WITNESSETH
                                   ----------

   FOR AND IN CONSIDERATION of the sum of One Dollar ($1.00) in hand paid by
each of the parties to the other, and other good and valuable consideration,
receipt and sufficiency of which is hereby acknowledged, Landlord does hereby
lease and let unto Tenant, and Tenant does hereby hire, lease and take from
Landlord, that area outlined in red on Exhibit A-1 attached hereto, and by this
reference incorporated herein, which shall be deemed to be 86,500 rentable
square feet, (determined based upon BOMA standard method for measuring floor
area and office building) described as follows:

     A.  Initial Premises:
                         91,134 rentable square feet on the lower level and on
                         the entire 5th, 6th, 7th, 8th, and 12th floors of the
                         building, as shown on Exhibit A-4 ("Initial Premises");
                         and

     B.  Additional Premises:
                         18,149 rentable square feet on 4th floor of the
                         building, as shown on Exhibit A-5 commencing no later
                         than May 1, 2001 ("Additional Premises").

   The Initial Premises and the Additional Premises are sometimes hereinafter
referred to collectively as the "Premises" at 605 Waterford Park (hereinafter
called the "Building") in the City of Plymouth, County of Hennepin, State of
Minnesota. The term Building as it is used herein shall consist of the land and
building(s) set forth in Exhibit A-2 hereto.  Tenant shall also lease the area
on the lower level of the Building as described and pursuant to the terms set
forth in Exhibit A-6 hereto.

ARTICLE 1 - TERM

   To have and to hold said Premises for a term, upon the rentals and subject to
the conditions set forth in this Lease Agreement, and the Exhibits attached
hereto for a term, as follows:

   Initial Premises:  Five (5 ) years and three (3) months, commencing May 1,
2000 and terminating July 31, 2005 ("Initial Premises Term");

   Additional Premises: For a term commencing on the earlier of May 1, 2001, or
60 days after the date of written notice from Tenant of its intent to occupy the
Additional Premises and terminating July 31, 2005  ("Additional Premises Term").

   The Initial Premises Term and the Additional Premises Term are hereinafter
sometimes collectively called the "Term". The commencement and termination dates
are specifically subject to the provisions of Article 5 hereof.

ARTICLE 2 - USE
   The Premises shall be used by the Tenant solely for the following purposes:
General Office Use.

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ARTICLE 3 - RENTALS

   Tenant agrees to pay to Landlord as minimum rental (hereinafter called
"Minimum Rental") for the Premises, without notice set-off or demand,  the
Minimum Rental determined by multiplying the number of rentable square feet
included in the definition of Premises adjusted at such time the Tenant begins
to lease the Additional Premises and again if Tenant leases the Expansion Area
(as defined in Exhibit D), multiplied by the annual rent per rentable square
foot in accordance with the following schedule, divided by 12 to determine the
amount of Minimum Rental due and payable per month:

               Months 1 -16:  $14.00 per rentable square foot
               Months 17-28:  $14.25 per rentable square foot
               Months 29-40:  $14.50 per rentable square foot
               Months 41-52:  $14.75 per rentable square foot
               Months 53-63:  $15.00 per rentable square foot

   Provided Tenant shall faithfully perform all terms and conditions of this
Lease Agreement during the Term hereof and any extensions thereto, including the
Option Term, if any, Tenant's obligation to pay Minimum Rent and Additional Rent
shall be abated for a period of three (3) months commencing May 1, 2000, through
and including July 31, 2000.  In the absence of such faithful performance by
Tenant as required herein, Landlord shall not be deemed to have forgiven Minimum
Rent or Additional Rent as would otherwise accrue during the aforesaid period,
but, in addition to such remedies as may be provided in this Lease Agreement or
at law or in equity, Landlord shall be entitled to recovery of such abated Rent.

   The rent per square foot for the Additional Premises will be the same rent as
charged for the Initial Premises.  The Additional Premises shall be charged
Minimum Rental commencing 60 days after the commencement of the Additional
Premises term, provided however, notwithstanding language to the contrary set
forth above, rent for the Additional Premises shall commence no later than May
1, 2001. Said monthly installments to be due and payable by Tenant in advance on
the first day of each calendar month during the Term of this Lease Agreement, or
any extension or renewal thereof, at the office of Landlord set forth in the
preamble to this Lease Agreement or at such other place as Landlord may
designate. In the event of any fractional calendar month, Tenant shall pay for
each day in such partial month a rental equal to 1/30 of the Minimum Rental.
Tenant agrees to pay, as Additional Rent, which shall be collectible to the same
extent as Minimum Rental, all amounts which may become due to Landlord hereunder
and any tax, charge or fee that may be levied, assessed or imposed upon or
measured by the rents reserved hereunder by any governmental authority acting
under any present or future law before any fine, penalty, interest or costs may
be added thereto for non-payment. Pursuant to Article 6 hereof, Landlord's
estimated Operating Expenses for 2000, are $5.63 per rentable square foot and
estimated Real Estate Taxes payable in 2000 are $6.12 per rentable square foot.

ARTICLE 4 - CONSTRUCTION

   If any improvements to the Premises ("Tenant Improvements") are to be made,
the provisions governing the planning, construction, scope of work and terms and
payment, shall be set forth in Exhibit B, which, if attached hereto, is
incorporated herein by this reference. If the parties have agreed to plans
and/or a description for said Tenant Improvements, the same will be attached
hereto as Exhibit A-3 and, if so attached, is incorporated herein by this
reference.

ARTICLE 5 - POSSESSION

   Landlord shall deliver possession of the Initial Premises on the date hereof
for the purpose of allowing Tenant to complete its work, provided, if Tenant
completes its work and commences occupancy of the Initial Premises for the
purposes of commencing business thereon prior to May 1, 2000, Tenant shall pay
the Minimum Rental and Additional Rental during such early occupancy period from
and after the seventh day Tenant commences business within the Initial Premises.
Tenant shall pay Minimum

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Rental and Additional Rental due as a result of such early occupancy within ten
(10) days of receipt of Landlord's invoice for such payment. Prior to the
commencement of the Term, Landlord shall have no responsibility or liability for
loss or damage to fixtures, facilities or equipment installed or left on the
Premises. By occupying the Premises as a Tenant, or to install fixtures,
facilities or equipment, or to perform finishing work, Tenant shall be
conclusively deemed to have accepted the same and to have acknowledged that the
Premises are in the condition required by this Lease Agreement. Should the
commencement of the rental obligations of Tenant under this Lease Agreement
occur for any reason on a day other than the first day of a calendar month, then
in that event solely for the purposes of computing the Term of this Lease
Agreement, the commencement date of the Term shall become and be the first day
of the first full calendar month following the date when Tenant's rental
obligation commences, or the first day of the first full calendar month
following the commencement date set out in Article 1 (if such is other than the
first date of a calendar month).

ARTICLE 6 - TENANT'S PRO RATA SHARE OF REAL ESTATE TAXES AND OPERATING EXPENSES

       A. During each full or partial calendar year during the Term of this
   Lease Agreement, Tenant shall pay to Landlord, as Additional Rental, an
   amount equal to the Real Estate Taxes and Operating Expenses (both as
   hereinafter defined) per square foot of rentable area in the Building
   multiplied by the number of square feet of rentable area, from time to time,
   in the Premises prorated for the period that Tenant occupied the Premises.
   Notwithstanding the preceding sentence, Tenant's share of the following
   Operating Expenses shall be computed on the basis of the cost of said
   expenses per rentable square foot of area within the Building actually
   occupied: cleaning, management, and energy expenses.

       B. Landlord shall, each year during the Term of this Lease Agreement,
   give Tenant an estimate of Operating Expenses and Real Estate Taxes payable
   per square foot of rentable area for the coming calendar year. Tenant shall
   pay, as Additional Rental, along with its monthly Minimum Rental payments
   required hereunder, one-twelfth (1/12) of such estimated Operating Expenses
   and Real Estate Taxes and such Additional Rental shall be payable until
   subsequently adjusted for the following year pursuant to this Article.

       C. As soon as possible after the expiration of each calendar year,
   Landlord shall determine and certify to Tenant the actual Operating Expenses
   and Real Estate Taxes for the previous year per square foot of rentable area
   in the Building and the amount applicable to the Premises. If such statement
   shows that Tenant's share of Operating Expenses and Real Estate Taxes exceeds
   Tenant's estimated monthly payments for the previous calendar year, then
   Tenant shall, within twenty (20) days after receiving Landlord's
   certification, pay such deficiency to Landlord. In the event of an
   overpayment by Tenant, such overpayments shall be refunded to Tenant, at the
   time of certification, in the form of an adjustment in the Additional Rental
   next coming due, or if at the end of the Term so that an adjustment in the
   Additional Rental would not be possible, by a refund.

       D. For the purposes of this Article, the term "Real Estate Taxes" means
   the total of all taxes, fees, charges and assessments, general and special,
   ordinary and extraordinary, foreseen or unforeseen, which become due or
   payable upon the Building. All costs and expenses incurred by Landlord during
   negotiations for or contests of the amount of Real Estate Taxes shall be
   included within the term "Real Estate Taxes." For purposes of this Article,
   the term "Operating Expenses" shall be deemed to mean all costs and expenses
   directly related to the Building incurred by Landlord in the repair,
   operation, management and maintenance of the Building including interior and
   exterior and common area

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<PAGE>

   maintenance, management fees, cleaning expenses, energy expenses, insurance
   premiums, and the amortization of capital investments made to reduce
   operating costs or that are necessary due to governmental requirements, all
   in accordance with generally accepted accounting principles. Items identified
   on the attached "Exclusions from Operating Expenses," attached as Exhibit F,
   shall be specifically excluded from the term Operating Expenses.

       E. Landlord may at any time designate a fiscal year in lieu of a calendar
   year and in such event, at the time of such a change, there may be a billing
   for the fiscal year, which is less than 12 calendar months, such change shall
   not cause an increase in Additional Rent hereunder.

       F. Landlord reserves, and Tenant hereby assigns to Landlord, the sole and
   exclusive right to contest, protest, petition for review, or otherwise seek a
   reduction in the Real Estate Taxes.

ARTICLE 7 - UTILITIES AND SERVICE

       A. Landlord agrees to furnish water, electricity, elevator service, and
   janitorial service. In the event Tenant's requirements and/or usage of such
   utilities and services is substantially greater than is customarily supplied
   to a typical tenant in the Building. Tenant agrees to pay to Landlord the
   reasonable costs attributable to the difference in such requirement and/or
   usage within twenty (20) days after receipt of a written statement setting
   forth such costs.

       B. Landlord agrees to furnish heat during the usual heating season and
   air conditioning during the usual air conditioning season, all during normal
   business hours as defined in this Lease Agreement.

       C. No temporary interruption or failure of such services incidental to
   the making of repairs, alterations or improvements, or due to accidents or
   strike or conditions or events not under Landlord's control, shall be deemed
   as an eviction of the Tenant or relieve the Tenant from any of the Tenant's
   obligations hereunder, provided, however, if the interruption or failure is
   to such an extent as to cause a material reduction in the usability of the
   Premises in the manner in which it was used prior to the interruption or
   failure and the interruption or failure continues for more than five (5)
   business days, then all rent payable hereunder shall abate for the period
   beginning with the interruption or failure and ending with the date when the
   services are restored.

       D. For the purposes of this Article 7, normal business hours shall be
   deemed to mean the period of time between 7:00 a.m. and 6:00 p.m., Monday
   through Friday, 8:00 a.m. to 1:00 p.m., Saturday, and specifically excluding
   Sundays and legal holidays.

       E. Tenant shall have no right of access to the roof of the Premises or
   the Building and shall not install, repair or replace any aerial, fan, air
   conditioner, or other device on the roof of the Premises or the Building
   without the prior written consent of Landlord.

ARTICLE 8 - NON-LIABILITY OF LANDLORD

   Except in the event of the gross negligence of Landlord, its agents,
employees or contractors, Landlord shall not be liable for any loss or damage
for failure to furnish heat, air conditioning, electricity, elevator service,
water, sprinkler system or janitorial service. Landlord shall not be liable for
personal

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injury, death or any damage from any cause about the Premises or the Building
except if caused by Landlord's gross negligence.

ARTICLE 9 - CARE OF PREMISES

   A.  Tenant agrees:
           1. To keep the Premises in as good condition and repair as they were
       in at the time Tenant took possession of same, reasonable wear and tear
       and damage from fire and other casualty for which insurance is normally
       procured excepted;
           2. To keep the Premises in a clean and sanitary condition;
           3. Not to commit any nuisance or waste on the Premises, overload the
       Premises or the electrical, water and/or plumbing facilities in the
       Premises or Building, throw foreign substances in plumbing facilities, or
       waste any of the utilities furnished by Landlord;
           4. To abide by such uniformly applied rules and regulations as may
       from time to time be reasonably promulgated by Landlord;
           5. To preserve and protect all carpeted areas and to provide and use
       carpet protector mats in all locations within the Premises where chairs
       with castors are used; and
           6. To obtain Landlord's prior approval of the interior design of any
       portion of the Premises visible from the common areas on multi-tenant
       floors or from the outside of the Building. "Interior design" as used in
       the preceding sentence shall include but not be limited to floor and wall
       coverings, furniture, office design, artwork and color scheme.

       B. If Tenant shall fail to keep and preserve the Premises in the state of
   condition required by the provisions of this Article 9, the Landlord may,
   after not less than 30 days notice an opportunity to cure (except in the
   event of an emergency in which case no notice is required), at its option put
   or cause the same to be put into the condition and state of repair agreed
   upon, and in such case the Tenant, on demand, shall pay the cost thereof.

ARTICLE 10 - RESTRICTIONS CONCERNING USE

   Tenant covenants not to introduce any hazardous or toxic materials onto the
Premises without complying with all applicable Federal, State and local laws or
ordinances pertaining to the transportation, storage, use or disposal of such
materials, including but not limited to obtaining proper permits. If Tenant's
transportation, storage, use or disposal of hazardous or toxic materials on the
Premises results in the contamination of the soil or surface or ground water or
loss or damage to person(s) or property, then Tenant agrees to:

       i)  Notify Landlord immediately of any contamination, claim or
   contamination, loss or damage;

       ii) After consultation with the Landlord, clean up the contamination in
   full compliance with all applicable statutes, regulations and standards; and

       iii)  Indemnify, defend and hold Landlord harmless from and against any
   claims, suits, causes of action, costs and fees, including attorneys' fees
   and costs, arising from or connected with any such contamination, claim of
   contamination, loss or damage.

   This provision shall survive termination, cancellation or expiration of this
Lease Agreement. For purposes of this Article, the terms "hazardous materials"
or "toxic materials" shall mean any substance or

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<PAGE>

material which has been determined by any state, federal or local governmental
authority to be capable of posing a risk of injury to health, safety or
property, including all of those materials and substances designated as
hazardous or toxic by the city in which the Premises are located, the U.S.
Environmental Protection Agency, the Consumer Product Safety Commission, the
Food and Drug Administration, and any federal agencies that have overlapping
jurisdiction with such state agencies, or any other governmental agency now or
hereafter authorized to regulate materials and substances in the environment.
Landlord represents and warrants, to the best of its knowledge after due
inquiry, that the Premises, and the land underlying the same are free of
hazardous materials. Landlord shall indemnify defend and hold Tenant harmless
from and against any claims, suits, causes of action, costs and fees, including
attorneys' fees and costs, arising from or connected with any hazardous
materials existing on the Premises and the land underlying the same prior to the
date of this Lease. Landlord agrees to use good faith and commercially
reasonable efforts to keep the Building free from hazardous materials during the
term of this Lease.

ARTICLE 11 - INSPECTION

   The Landlord or its employees or agents shall have the right without any
diminution of rent or other charges payable hereunder by Tenant to enter the
Premises at all reasonable times after not less than 30 days notice an
opportunity to cure (except in the event of an emergency in which case no notice
shall be required) for the purpose of exhibiting the Premises to prospective
tenants or purchasers, inspection, cleaning, repairing, testing, altering or
improving the same or said Building, but nothing contained in this Article shall
be construed so as to impose any obligation on the Landlord to make any repairs,
alterations or improvements.

ARTICLE 12 - ALTERATIONS

   Tenant will not make any alterations, repairs, additions or improvements in
or to the Premises or add, disturb or in any way change any locks, plumbing or
wiring therein without the prior written consent of the Landlord as to the
character of the alterations, additions or improvements to be made, the manner
of doing the work, and the contractor doing the work. Tenant's request for
Landlord's written consent to any such alterations, repairs, additions, or
improvements to the Premises ("Alterations") shall be accompanied by reasonably
detailed plans and specifications for the Alterations. Landlord shall provide
its written consent within ten (10) business days of receipt of such reasonably
detailed plans and specifications or shall provide to Tenant, in writing, its
reasons for rejection of such proposed Alterations.  If Landlord fails to
provide such written consent or provide reasons for rejection within said ten
(10) business day period, Landlord shall be deemed to have consented to the
Alterations.  Notwithstanding the above, Tenant shall be entitled to make
cosmetic and decorating Alterations to the Premises wherein the aggregate cost
of such Alterations are less than $25,000.00 without Landlord's consent,
provided, Tenant must, in all events, notify Landlord of Tenant's Alterations
and provide to Landlord copies of plans and specifications detailing the
Alterations.   Such consent shall not be unreasonably withheld, if such
alterations, repairs, additions or improvements are the obligations of Tenant
pursuant to this Lease Agreement. All such work shall comply with the applicable
governmental laws, ordinances, rules and regulations. The Landlord as a
condition to said consent may require a surety performance and/or payment bond
from the Tenant for said actions. Tenant agrees to indemnify and hold Landlord
free and harmless from any liability, loss, cost, damage or expense (including
attorney's fees) by reasons of any said alteration, repairs, additions or
improvements.

ARTICLE 13 - SIGNS

   Tenant agrees that no signs or other advertising materials shall be erected,
attached or affixed to any portion of the interior or exterior of the Premises
or the Building without the express prior written consent of Landlord.  Landlord
agrees to provide Tenant suite entry signage and a reasonable amount of space on
the building directory in the lobby of the Building.  In addition, Tenant shall
have exclusive Building and non-exclusive monument signage commencing on the
commencement date of the Initial Premises Term

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and continuing as long as (i) Tenant occupies at a minimum four (4) floors and
continues to lease at a minimum one (1) additional floor, (ii) Tenant is the
largest occupant of square footage in the Building, and (iii) Tenant is not in
default of the terms of this Lease. Notwithstanding the foregoing, all signage
is contingent upon Tenant obtaining, at it sole cost and expense, City approvals
if necessary, and provided Landlord approves, in it's reasonable discretion, of
the appearance, size, color, and method of installation of such signage.

ARTICLE 14 - COMMON AREAS

       A. Tenant agrees that the use of all corridors, passageways, elevators,
   toilet rooms, parking areas and landscaped area in and around said Building,
   by the Tenant or Tenant's employees, visitors or invitees, shall be subject
   to such reasonable and uniformly applied rules and regulations as may from
   time to time be made by Landlord for the safety, comfort and convenience of
   the owners, occupants, tenants and invitees of said Building. Tenant agrees
   that no awnings, curtains, drapes or shades shall be used upon the Premises
   except as may be approved by Landlord.

       B. In addition to the Premises, Tenant shall have the right of non-
   exclusive use, in common with others, of: (a) all unrestricted automobile
   parking areas (subject to the provisions set forth below), driveways and
   walkways; and (b) loading facilities, freight elevators and other facilities
   as may be constructed in the Building, all to be subject to the terms and
   conditions of this Lease Agreement and to reasonable and uniformly applied
   rules and regulations for the use thereof as prescribed from time to time by
   Landlord.

       C. Landlord shall have the right to make changes or revisions in the site
   plan and in the Building so as to provide additional leasing area. Landlord
   shall also have the right to construct additional buildings on the land
   described on Exhibit A-2 for such purposes as Landlord may deem appropriate.
   If there is an increased leasing area, Tenant's share of operating expenses
   and taxes shall be proportionally reduced. Landlord also reserves all
   airspace rights above, below and to all sides of the Premises, including the
   right to make changes, alterations or provide additional leasing areas.

       D. Landlord and Tenant agree that Landlord will not be responsible for
   any loss, theft or damage to vehicles, or the contents thereof, parked or
   left in the parking areas of the Building and Tenant agrees to so advise its
   employees, visitors or invitees who may use such parking areas.

       E. The parking areas shall include those areas designated by Landlord, in
   its sole discretion, as either restricted or unrestricted parking areas.
   Tenant, its employees and invitees shall have the right to park in the
   unrestricted parking areas in common with other tenants of the Building upon
   such terms and conditions adopted by Landlord from time to time, including
   the imposition of a reasonable parking charge, if the same is established by
   Landlord at any time during the Term (provided, however, Tenant or its
   employees and invitees shall not be charged a parking charge during the
   initial Term of this Lease). Tenant agrees not to overburden the unrestricted
   parking areas and agrees to cooperate with Landlord and other tenants in the
   use of the unrestricted parking areas. Landlord reserves the right in its
   absolute discretion to determine whether the parking areas are becoming
   overburdened and to allocate and assign parking spaces among Tenant and other
   tenants, and to reconfigure the parking areas and modify the existing ingress
   to and egress from the parking areas as Landlord shall deem appropriate. Any
   restricted parking areas shall be leased only by separate license agreement
   with Landlord. Tenant further agrees not to use or permit its employees,
   visitors or invitees to use the parking areas for overnight storage of

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   vehicles. Notwithstanding the foregoing, Tenant shall be entitled to a
   proportionate share of parking spaces in the unrestricted parking areas at a
   Building ratio of 4.0 stalls per 1,000 rentable square feet of leased space,
   provided Tenant's proportionate share shall be adjusted from time to time, in
   the event of an increase in the number of parking stalls, or a decrease of
   the number of parking stalls resulting from condemnation, or the enforcement
   of other property rights which affect parking areas, provided, however,
   Tenant's parking ratio of four (4) stalls per 1,000 rentable square feet
   shall not be decreased as a result of any site plan modifications initiated
   by Landlord.   If there is a decrease of the number of parking stalls
   resulting from condemnation, to the extent Landlord has received an award in
   condemnation for such loss of parking, Landlord shall use its best efforts to
   replace the lost parking stalls, provided Landlord shall not be required to
   expend more for the replacement of the lost parking stalls than Landlord
   received in the condemnation award for loss of such parking stalls.  Tenant
   shall have the right to lease climate-controlled stalls at a rate not to
   exceed $100.00 per month per stall plus tax throughout the primary term (but
   not the Option Term) of the Lease, subject to availability of such stalls.
   If parking availability becomes problematic for Tenant, Landlord agrees to
   assist Tenant to obtain additional parking near the Premises.  Any cost
   associated with additional parking for Tenant shall be Tenant's sole
   responsibility.

ARTICLE 15 - ASSIGNMENT AND SUBLETTING

       A. Tenant shall not assign this Lease Agreement, or sublease all or any
   part of the Premises, or permit the use of the Premises by any party other
   than Tenant, without the prior written consent of Landlord. When Tenant
   requests Landlord's consent to such assignment or sublease, it shall notify
   Landlord in writing of the name and address of the proposed assignee or
   subtenant and the nature and character of the business of the proposed
   assignee or subtenant and shall provide financial information, including
   financial statements of the proposed assignee or subtenant, if obtainable
   from the proposed assignee or subtenant. Tenant shall also provide Landlord
   with a copy of the proposed sublet or assignment agreement. Landlord shall
   have the option (to be exercised within fifteen days from the submission of
   Tenant's request) to cancel this Lease Agreement as to the space proposed to
   be sublet or assigned as of the commencement date stated in the proposed
   sublease or assignment. If Landlord shall not exercise its option within the
   time set forth above, its consent to any proposed assignment or sublease
   shall not be unreasonably withheld, provided, however, if the proposed
   sublease or assignment is for less than the entire Premises, and/or is for a
   term less than the balance of the Term of this Lease Agreement (excluding any
   Option Term), then, within ten (10) days of receipt of Landlord's
   notification of exercise of option to cancel the Lease Agreement, Tenant
   shall be entitled to withdraw such request for consent to sublease or
   assignment.

       B. If Landlord approves an assignment or sublease as herein provided,
   Tenant shall pay to Landlord, as additional rent due under this Lease
   Agreement, fifty percent (50%) of the difference, if any, between the Minimum
   Rent plus Additional Rent allocable to that part of the Premises affected by
   such assignment or sublease pursuant to this Lease Agreement, and the rent
   and any additional rent payable by the assignee or subtenant to Tenant. Prior
   to such payment, Tenant shall be entitled to recover from such rental
   difference, the amount of actual Tenant improvements cost and commission
   expenses paid by Tenant in such assignment or sublet.  No consent to any
   assignment or sublease shall constitute a further waiver of the provisions of
   this Article, and all subsequent assignments or subleases may be made only
   with the prior written consent of Landlord. An assignee of Tenant, at the
   option of Landlord, shall become directly liable to Landlord for all
   obligations of Tenant hereunder, but no sublease or assignment by Tenant
   shall relieve

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<PAGE>

   Tenant of any liability hereunder. Any assignment or sublease without
   Landlord's consent shall be void, and shall, at the option of the Landlord,
   constitute a default under this Lease Agreement. In the event that Landlord
   shall consent to a sublease or assignment hereunder, Tenant shall pay
   Landlord's reasonable fees, not to exceed Two Hundred Fifty and no/100ths
   Dollars ($250.00) per transaction, incurred in connection with the processing
   of documents necessary to the giving of such consent.

       C. Landlord's right to assign this Lease Agreement is and shall remain
   unqualified upon any sale or transfer of the Building and, providing the
   purchaser succeeds to the interests and assumes the obligations of Landlord
   under this Lease Agreement, Landlord shall thereupon be entirely freed of all
   obligations of the Landlord hereunder and shall not be subject to any
   liability resulting from any act or omission or event occurring after such
   conveyance. Tenant agrees to attorn to any such assignee or transferee of
   Landlord's interest in this Lease Agreement or the Building.

       D. Notwithstanding the above, Tenant may assign or sublet the Premises,
   or any portion thereof, without Landlord's consent, to any corporation that
   controls, is controlled by, or is under common control with Tenant, or to any
   corporation resulting from a merger or consolidation with Tenant, or to any
   person or entity that acquires all the assets of Tenant as a going concern of
   the business that is being conducted on the Premises, all of which are
   referred to as a "Tenant Affiliate," provided that before such assignment or
   sublet is effective, said assignee or sublessee shall assume, in full, the
   obligations of Tenant under this Lease.  Any such assignment or subletting
   shall not in any way affect or limit the liability of Tenant under the terms
   of this Lease even if after such assignment or subletting the terms of this
   Lease are materially changed or altered without the consent of Tenant, the
   consent of whom shall not be necessary.

ARTICLE 16 - LOSS BY CASUALTY

       A. If the Premises shall be destroyed or damaged by fire or other
   casualty to the extent that more than fifty percent (50%) thereof is rendered
   untenantable Landlord may, at its option, (i) terminate this Lease Agreement
   effective as of the date of such damage or destruction, or (ii) provided
   restoration can be completed within 150 days from the date of discovery of
   the casualty, restore the Premises to their previous condition, and in the
   meantime the rent shall be abated in the same proportion as the untenantable
   portion of the Premises bears to the whole thereof, and this Lease Agreement
   shall continue in full force and effect. In the event the Premises are
   damaged or destroyed by fire or other casualty to the extent that more than
   fifty percent (50%) thereof is rendered untentantable, and the time of
   restoration thereof cannot be completed within 150 days from the date of
   discovery of the casualty, either Landlord or Tenant may terminate this Lease
   Agreement, provided, if the Tenant terminates pursuant to this provision,
   such termination shall not be effective until sixty (60) days after delivery
   of written notice to Landlord of such termination during which 60-day period
   Landlord may attempt to restore the Premises to their previous condition.  If
   Landlord is successful in restoring the Premises to their previous condition
   within said 60-day period, Tenant's written notice to terminate shall be
   deemed to be withdrawn and this Lease shall continue in full force and
   effect.

       B. If the Building shall be destroyed or damaged by fire or other
   casualty insured against under Landlord's fire and extended coverage
   insurance policy to the extent that more than fifty percent (50%) thereof is
   rendered untenantable, or if the Building shall be materially destroyed or
   damaged by any other casualty other than those covered by such insurance
   policy, notwithstanding that the Premises may be unaffected directly by such

                                       9
<PAGE>

   destruction or damage, Landlord may, at its election, terminate this Lease
   Agreement by notice in writing to Tenant within sixty (60) days after such
   destruction or damage. Such notice shall be effective thirty (30) days after
   receipt thereof by Tenant.

       C. Other than rental abatement provided in paragraph A of this Article,
   no damages, compensation or claim shall be payable by Landlord for
   inconvenience or loss of business arising from interruption of business,
   repair or restoration of the Building or Premises.

       D. Landlord's obligations, should it elect to repair, shall be limited to
   the base Building, common areas and the interior improvements installed by
   Landlord. Anything herein to the contrary notwithstanding, if the Premises
   are destroyed or damaged during the last twelve (12) months of the Term of
   this Lease Agreement, then Landlord may, at its option, cancel and terminate
   this Lease Agreement as of the date of the occurrence of such damage.

ARTICLE 17 - WAIVER OF SUBROGATION

   Landlord and Tenant each hereby release and relieve the other with respect
to, and waive their entire right of recovery against the other for, loss or
damage arising out of or incident to the perils insured against which perils
occur in, on, or about the Premises, whether due to the negligence of Landlord
or Tenant or their agents, employees, contractors and/or invitees.  Landlord and
Tenant shall, upon obtaining the policies of insurance required, give notice to
the insurance carrier or carriers that the foregoing mutual waiver of
subrogation as contained in this Lease.

ARTICLE 18 - EMINENT DOMAIN

   If the entire Building is taken by eminent domain, this Lease Agreement shall
automatically terminate as of the date of taking. If a portion of the Building
is taken by eminent domain, the Landlord shall have the right to terminate this
Lease Agreement, provided it gives written notice thereof to the Tenant within
ninety (90) days after the date of taking. If a portion of the Premises is taken
by eminent domain and this Lease Agreement is not terminated by Landlord, the
Landlord shall, at its expense, restore the Premises to as near the condition
which existed immediately prior to the date of taking as reasonably possible,
and the rentals shall abate during such period of time as the Premises are
untenantable, in the proportion that the untenantable portion of the Premises
bears to the entire Premises. All damages awarded for such taking under the
power of eminent domain shall belong to and be the sole property of Landlord,
irrespective of the basis upon which they are awarded, provided, however, that
nothing contained herein shall prevent Tenant from making a separate claim to
the condemning authority for its moving expenses and trade fixtures. For
purposes of this Article, a taking by eminent domain shall include Landlord's
giving of a deed under threat of condemnation.

ARTICLE 19 - SURRENDER

    On the last day of the Term of this Lease Agreement or on the sooner
termination thereof in accordance with the terms hereof, Tenant shall peaceably
surrender the Premises in good condition and repair consistent with Tenant's
duty to make repairs as provided in Article 9 hereof. On or before said last
day, Tenant shall at its expense remove all of its equipment from the Premises,
repairing any damage caused thereby, and any property not removed shall be
deemed abandoned. At the time any alterations, additions, and fixtures, except
Tenant's trade fixtures, are constructed or installed on the Premises, Landlord
agrees to notify Tenant whether Tenant must remove such alterations, additions,
or fixtures at the expiration of the Term.  All alterations, additions and
fixtures other than Tenant's trade fixtures, which have been made or installed
by either Landlord or Tenant upon the Premises which Landlord has identified to
remain as Landlord's property shall be surrendered with the Premises as a part
thereof.  Those alterations, additions, and fixtures, except Tenant's trade
fixtures, which Landlord identifies to be

                                      10
<PAGE>

removed by Tenant at the expiration of the Term shall, be removed by Tenant at
its expense, and Tenant shall repair any damage caused thereby. Notwithstanding
the foregoing, Landlord reserves the right, upon thirty (30) days written notice
to Tenant prior to the expiration of the Term, to modify its previously
articulated requirement as to which alterations, additions, and fixtures must be
removed by Tenant at the expiration of the Term, provided this right applies
only to alterations, additions and fixtures which Landlord had previously
indicated must be removed at the expiration of the Term. It is specifically
agreed that any and all telephonic, coaxial, ethernet, or other computer,
wordprocessing, facsimile, or electronic wiring installed by Tenant within the
Premises (hereafter "Wiring") shall be removed at Tenant's cost at the
expiration of the Term, unless Landlord has specifically requested in writing
that said Wiring shall remain, whereupon said Wiring shall be surrendered with
the Premises as Landlord's property. If the Premises are not surrendered at the
end of the Term or the sooner termination thereof, Tenant shall indemnify
Landlord against loss or liability resulting from delay by Tenant in so
surrendering the Premises, including, without limitation, claims made by any
succeeding tenant founded on such delay. Tenant shall promptly surrender all
keys for the Premises to Landlord at the place then fixed for payment of rental
and shall inform Landlord of combinations on any locks and safes on the
Premises.

ARTICLE 20 - NON-PAYMENT OF RENT, DEFAULTS
       A.  If any one or more of the following occurs:

           1. A rent payment or any other payment due from Tenant to Landlord
       shall be and remain unpaid in whole or in part for more than five (5)
       days after written notice that the same is due and payable;

           2. Tenant shall violate or default on any of the other covenants,
       agreements, stipulations or conditions herein, or in any parking
       agreement(s) or other agreements between Landlord and Tenant relating to
       the Premises, and such violation or default shall continue for a period
       of thirty (30) days after written notice from Landlord of such violation
       or default; or

           3. If Tenant shall commence or have commenced against Tenant
       proceedings under a bankruptcy, receivership, insolvency or similar type
       of action.

   then it shall be optional for Landlord, without further notice or demand, to
   cure such default or to declare this Lease Agreement forfeited and the said
   Term ended, or to terminate only Tenant's right to possession of the
   Premises, and to re-enter the Premises, with or without process of law, using
   such force as may be necessary to remove all persons or chattels therefrom,
   and Landlord shall not be liable for damages by reason of such re-entry or
   forfeiture; but notwithstanding re-entry by Landlord or termination only of
   Tenant's right to possession of the Premises, the liability of Tenant for the
   rent and all other sums provided herein shall not be relinquished or
   extinguished for the balance of the Term of this Lease Agreement and Landlord
   shall be entitled to periodically sue Tenant for all sums due under this
   Lease Agreement or which become due prior to judgment, but such suit shall
   not bar subsequent suits for any further sums coming due thereafter. Tenant
   shall be responsible for, in addition to the rentals and other sums agreed to
   be paid hereunder, the cost of any necessary maintenance, repair,
   restoration, reletting (including related cost of removal or modification of
   tenant improvements) or cure as well as reasonable attorney's fees incurred
   or awarded in any suit or action instituted by Landlord to enforce the
   provisions of this Lease Agreement, regain possession of the Premises, or the
   collection of the rentals due Landlord hereunder. Tenant agrees to pay
   interest at the highest permissible rate of interest

                                      11
<PAGE>

   allowed under the usury statutes of the State of Minnesota, or in case no
   such maximum rate of interest is provided, at the rate of 12% per annum, on
   all rentals and other sums due Landlord hereunder not paid within ten (l0)
   days from the date same become due and payable.

       B. Tenant hereby acknowledges that late payment to Landlord of Minimum
   Rent, Additional Rent or other sums due hereunder will cause Landlord to
   incur costs not contemplated by this Lease Agreement, the exact amount of
   which will be extremely difficult to ascertain. Tenant shall be liable to
   Landlord for the payment of a late charge in the amount of 10% of the rental
   installment or other sum due Landlord hereunder, plus any attorneys' fees and
   costs incurred by Landlord by reason of Tenant's failure to pay said amount,
   if said payment has not been received within ten (10) days from the date said
   payment becomes due and payable, or cleared by Landlord's bank within three
   (3) business days after deposit as a result of dishonor of the Tenant's draft
   by Tenant's depository bank. The parties agree that such late charges
   represent a fair and reasonable estimate of the costs that Landlord will
   incur by reason of Tenant's late payment. Landlord's acceptance of such late
   charges shall not constitute a waiver of Landlord's default with respect to
   such overdue amount or estop Landlord from exercising any of the other rights
   and remedies granted hereunder. Each right or remedy of Landlord provided for
   in this Lease Agreement shall be cumulative and shall be in addition to every
   other right or remedy provided for in this Lease Agreement now or hereafter
   existing at law or in equity or by statute or otherwise.

ARTICLE 21 - LANDLORD'S DEFAULT

   Landlord shall not be deemed to be in default under this Lease Agreement
until Tenant has given Landlord written notice specifying the nature of the
default and Landlord does not cure such default within thirty (30) days after
receipt of such notice or within such reasonable time thereafter as may be
necessary to cure such default where such default is of such a character as to
reasonably require more than thirty (30) days to cure.  If Landlord is in
default under this Lease Agreement, beyond applicable cure periods, and such
default materially impacts Tenant's use and quite enjoyment of the Premises,
Tenant may undertake to cure such default in a commercially reasonable manner,
and any reasonable expense necessary to cure such default may be deducted from
the Minimum Rental next becoming due, provided, however, in no event shall
Tenant be permitted to offset in any one month more than twenty five percent
(25%) of the Minimum Rent due in such month.

ARTICLE 22 - HOLDING OVER

   Tenant will, at the expiration of this Lease Agreement, whether by lapse of
time or termination, give up immediate possession to Landlord. Tenant's holdover
shall create a tenancy at sufferance. In any such event the tenancy shall be
upon the terms and conditions of this Lease Agreement, except that the Minimum
Rental shall be equal to 150% of the Minimum Rental Tenant was obligated to pay
Landlord under this Lease Agreement immediately prior to termination (in the
case of tenancy at sufferance such Minimum Rental shall be prorated on the basis
of a 365 day year for each day Tenant remains in possession); excepting further
that in the case of a tenancy at sufferance, no notices shall be required prior
to commencement of any legal action to gain repossession of the Premises. Tenant
shall also pay to Landlord all damages sustained by Landlord resulting from
retention of possession by Tenant. The provisions of this paragraph shall not
constitute a waiver by Landlord of any right of re-entry as otherwise available
to Landlord; nor shall receipt of any rent or any other act in apparent
affirmance of the tenancy operate as a waiver of the right to terminate this
Lease Agreement for a breach by Tenant hereof.

ARTICLE 23 - SUBORDINATION

   Provided Landlord provides to Tenant a Non-Disturbance agreement in a form
reasonably acceptable to Landlord, Tenant agrees that this Lease Agreement shall
be subordinate to any mortgage(s)

                                      12
<PAGE>

that may now or hereafter be placed upon the Building or any part thereof, and
to any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, and extensions thereof, provided the mortgagee named
in such mortgage(s) shall agree to recognize this Lease Agreement or Tenant in
the event of foreclosure provided the Tenant is not in default. In confirmation
of such subordination, Tenant shall promptly execute and deliver any instrument,
in recordable form, as required by Landlord's mortgagee, which reflects the
above-referenced recognition of Lease Agreement or Tenant. In the event of any
mortgagee electing to have the Lease Agreement a prior incumbrance to its
mortgage, then and in such event upon such mortgagee notifying Tenant to that
effect, this Lease Agreement shall be deemed prior in incumbrance to the said
mortgage, whether this Lease Agreement is dated prior to or subsequent to the
date of said mortgage. Landlord represents that as of the date of this Lease
there is no mortgage encumbering the Building.

ARTICLE 24 - INDEMNITY, INSURANCE AND SECURITY

       A. Tenant will keep in force at its own expense for so long as this Lease
   Agreement remains in effect public liability insurance with respect to the
   Premises in which Landlord shall be named as an additional insured, in
   companies and in form acceptable to Landlord with a minimum combined limit of
   liability of Two Million Dollars ($2,000,000.00). This limit shall apply per
   location. Said insurance shall also provide for contractual liability
   coverage by endorsement. Tenant shall further provide for business
   interruption insurance to cover a period of not less than six (6) months.
   Tenant will further deposit with Landlord the policy or policies of such
   insurance or certificates thereof, or other acceptable evidence that such
   insurance is in effect, which evidence shall provide that Landlord shall be
   notified in writing thirty (30) days prior to cancellation, material change,
   or failure to renew the insurance. If Tenant shall not comply with its
   covenants made in this Article 24, Landlord may, at its option, cause
   insurance as aforesaid to be issued and in such event Tenant agrees to pay
   the premium for such insurance promptly upon Landlord's demand.

       B. Tenant further covenants and agrees to indemnify and hold Landlord and
   Landlord's manager of the Building harmless for any claim, loss or damage,
   including reasonable attorney's fees, suffered by Landlord, Landlord's
   manager or Landlord's other tenants caused by: i) any act or omission by
   Tenant, Tenant's employees or anyone claiming through or by Tenant in, at, or
   around the Premises or the Building; ii) the conduct or management of any
   work or thing whatsoever done by Tenant in or about the Premises or from
   transactions of the Tenant concerning the Premises; or iii) Tenant's failure
   to comply with any and all governmental laws, rules, ordinances or
   regulations applicable to the use of the Premises and its occupancy.

       C. Tenant shall be responsible for the security and safeguarding of the
   Premises and all property kept, stored or maintained in the Premises.
   Landlord will make available to Tenant, at Tenant's request, the plans and
   specifications for construction of the Building and the Premises. Tenant
   represents that it is satisfied that the construction of the Building and the
   Premises, including the floors, walls, windows, doors and means of access
   thereto are suitable for the particular needs of Tenant's business. Tenant
   further represents that it is satisfied with the security of said Building
   and Premises for the protection of any property which may be owned, held,
   stored or otherwise caused or permitted by Tenant to be present upon the
   Premises. The placement and sufficiency of all safes, vaults, cash or
   security drawers, cabinets or the like placed upon the Premises by Tenant
   shall be at the sole responsibility and risk of Tenant. Tenant shall maintain
   in force throughout the Term, insurance upon all contents of the Premises,
   including that owned by others and Tenant's

                                      13
<PAGE>

   equipment and any alterations, additions, fixtures, or improvements in the
   Premises acknowledged by Landlord to be the Tenant's.

       D. Landlord shall carry and cause to be in full force and effect a fire
   and extended coverage insurance policy on the Building, but not contents
   owned, leased or otherwise in possession of Tenant. The cost of such
   insurance shall be an Operating Expense.

ARTICLE 25 - NOTICES

   All notices from Tenant to Landlord required or permitted by any provisions
of this Lease Agreement shall be directed to Landlord postage prepaid, certified
or registered mail, at the address provided for Landlord in the preamble to this
Lease Agreement or at such other address as Tenant shall be advised to use by
Landlord. All notices from Landlord to Tenant required or permitted by any
provision of this Lease Agreement shall be directed to Tenant, postage prepaid,
certified or registered mail, at the Premises and at the address, if any, set
forth prior to Tenant's signature line of this Lease Agreement. Landlord and
Tenant shall each have the right at any time and from time to time to designate
one (1) additional party to whom copies of any notice shall be sent.

ARTICLE 26 - APPLICABLE LAW

   This Lease Agreement shall be construed under the laws of the State of
Minnesota.

ARTICLE 27 - MECHANICS' LIEN

   In the event any mechanic's lien shall at any time be filed against the
Premises or any part of the Building by reason of work, labor, services or
materials performed or furnished to Tenant or to anyone holding the Premises
through or under Tenant, Tenant shall forthwith cause the same to be discharged
of record. If Tenant shall fail to cause such lien forthwith to be discharged
within thirty (30) days after being notified of the filing thereof, then, in
addition to any other right or remedy of Landlord, Landlord may, but shall not
be obligated to, discharge the same by paying the amount claimed to be due, or
by bonding, and the amount so paid by Landlord and all costs and expenses,
including reasonable attorney's fees incurred by Landlord in procuring the
discharge of such lien, shall be due and payable in full by Tenant to Landlord
on demand.

ARTICLE 28 - SUPPLEMENTAL SECURITY INTEREST DEPOSIT

   Tenant shall deliver to Landlord quarterly balance sheets and statements of
profit and loss for each of Tenant's fiscal quarters within five business days
after the same are published. Tenant shall be obligated to deliver to Landlord a
Supplemental Security Deposit ("SSD") if the following financial test shall not
be met.  The financial test shall be a determination that the  cumulative
aggregate net operating cash flow for the most recent four quarters shall be a
negative number and that the positive expression of that negative times four
shall be an amount greater than the most recent quarterly reported amount of net
working capital; provided, however, so long as the most recent reported net
working capital shall be at least $20,000,000.00 no SSD shall be required.  If a
SSD is required then the amount of the SSD shall be equal to the Minimum Rental
and Additional Rental  for the Premises for the next nine months of the term.
Each time a quarterly statement is delivered to Landlord the need for and amount
of the SSD shall be redetermined and the amount of the SSD shall be increased or
decreased accordingly.  The SSD shall take the form of an unconditional letter
of credit from a bank reasonable acceptable to Landlord.  The letter of credit
shall be delivered to Landlord within fifteen (15) days of written notice from
Landlord to Tenant of the requirement of a SSD.

ARTICLE 29 - BROKERAGE

   Tenant represents and warrants to Landlord that neither it nor its officers
or agents, nor any one acting on its behalf has engaged any real estate broker
other than The Keewaydin Group, Inc.  ("Tenant's Broker") in the negotiating or
making of this Lease Agreement. Tenant agrees to indemnify and hold

                                      14
<PAGE>

Landlord, its agents, employees, partners, directors, shareholders and
independent contractors harmless from all liabilities, costs, demands,
judgments, settlements, claims and losses, including reasonable attorneys' fees
and costs, incurred by Landlord in conjunction with any such claim or claims of
any other broker or brokers claiming to have been engaged by Tenant. Landlord
represents and warrants to Tenant that neither it nor its officers or agents,
nor anyone acting on its behalf, has dealt with any real estate broker other
than United Properties Brokerage LLC ("UPB") in the negotiating or making of
this Lease Agreement. The brokers' commission and/or finders' fees arising out
of this Lease Agreement on behalf of Tenant's Broker and UPB shall be paid as
follows: Landlord shall pay to Tenant's Broker a brokerage commission of $3.00
per square foot on the Initial and Additional Premises outlined in Paragraph 4
of the Lease Summary Sheet above and any additional space acquired by Tenant
during the first three (3) years of the Term, provided, however, in the event
Tenant has engaged a broker other than Tenant's Broker at the time of
acquisition of such additional space, no commission shall be due for such
additional space to Tenant's Broker. One-half of said fee shall be paid upon
execution of this Lease and the receipt of the Security Deposit and first
month's rent, and the balance paid to Tenant's Broker upon occupancy and
commencement of payment of Minimum Rental by Tenant as provided herein.

ARTICLE 30 - SUBSTITUTION - Intentionally Deleted

ARTICLE 3l - ESTOPPEL CERTIFICATES

       A. Each party hereto agrees that at any time, and from time to time
   during the Term of this Lease Agreement (but not more often than twice in
   each calendar year), within fifteen (15) days after request by the other
   party hereto, it will execute, acknowledge and deliver to such other party or
   to any prospective purchaser, assignee or mortgagee designated by such other
   party, an estoppel certificate in a form reasonably acceptable to Landlord.
   If Tenant fails to respond within fifteen (15) days of receipt by Tenant of a
   written request by Landlord as herein provided, Tenant shall be deemed to
   have given such estoppel certificate as above provided, without modification
   and shall be deemed to have admitted the accuracy of any information supplied
   by Landlord to any prospective purchaser, mortgagee, assignee or ground
   lessor of the Building.

       B. Tenant agrees to provide Landlord (but not more often than twice in
   any calendar year), within fifteen (15) days of request, the then most
   current financial statements of Tenant and any guarantors of this Lease
   Agreement, which shall be certified by Tenant, and if available, shall be
   audited and certified by a certified public accountant. Landlord shall keep
   such financial statements confidential, except Landlord shall, in confidence,
   be entitled to disclose such financial statements to existing or prospective
   mortgagees or purchasers of the Building.

ARTICLE 32 - GENERAL

   This Lease Agreement does not create the relationship of principal and agent
or of partnership or of joint venture or of any association between Landlord and
Tenant, the sole relationship between Landlord and Tenant being that of landlord
and tenant. No waiver of any default of Tenant hereunder shall be implied from
any omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver and that only for the
time and to the extent therein stated. The covenants of Tenant to pay the
Minimum Rental and the Additional Rental are each independent of any other
covenant, condition, or provision contained in this Lease Agreement. The
marginal or topical headings of the several Articles, paragraphs and clauses are
for convenience only and do not define, limit or construe the contents of such
Articles, paragraphs or clauses. All preliminary negotiations are merged into
and incorporated in this Lease Agreement. This Lease Agreement can only be
modified or amended by an agreement in writing signed by the parties hereto. All
provisions hereof shall be binding upon the heirs,

                                      15
<PAGE>

successors and assigns of each party hereto. If any term or provision of this
Lease Agreement shall to any extent be held invalid or unenforceable, the
remainder shall not be affected thereby, and each other term and provision of
this Lease Agreement shall be valid and be enforced to the fullest extent
permitted by law. If Tenant is a corporation, each individual executing this
Lease Agreement on behalf of said corporation represents and warrants that he is
duly authorized to execute and deliver this Lease Agreement on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease Agreement is binding upon said corporation in
accordance with its terms. No receipt or acceptance by Landlord from Tenant of
less than the monthly rent herein stipulated shall be deemed to be other than a
partial payment on account for any due and unpaid stipulated rent; no
endorsement or statement of any check or any letter or other writing
accompanying any check or payment of rent to Landlord shall be deemed an accord
and satisfaction, and Landlord may accept and negotiate such check or payment
without prejudice to Landlord's rights to (i) recover the remaining balance of
such unpaid rent or (ii) pursue any other remedy provided in this Lease
Agreement. (Neither party shall record this Lease Agreement or any memorandum
thereof, and any such recordation shall be a breach of this Lease Agreement
void, and without effect.) Time is of the essence with respect to the due
performance of the terms, covenants and conditions herein contained. Submission
of this instrument for examination does not constitute a reservation of or
option for the Premises, and this Lease Agreement shall become effective only
upon execution and delivery thereof by Landlord and Tenant.

ARTICLE 33 - EXCULPATION

   Notwithstanding anything in this Lease Agreement to the contrary, the
covenants, undertakings and agreements herein made on the part of Landlord are
made and intended not for the purpose of binding Landlord personally, or the
assets of Landlord, but are made and intended to bind only the Landlord's
interest in the Premises and the Building, as the same may, from time to time,
be encumbered, and no personal liability shall at any time be asserted or
enforced against Landlord or its stockholders, officers, or partners, or their
respective heirs, legal representatives, successors and assigns, on account of
this Lease Agreement or on account of any covenant, undertaking or agreement of
Landlord in this Lease Agreement.

ARTICLE 34 - AMERICANS WITH DISABILITIES ACT

   Landlord shall be responsible, at its sole cost and expense, for any exterior
alteration to the Building, or alterations to the Building's common area,
including curb cuts, ramps, signage, or striping required pursuant to the
Americans with Disabilities Act, 42 U.S.C. (S)(S) 12101-12213, as amended
(including administrative, judicial, and legislative interpretations, rulings,
and clarifications relating thereto), unless said alteration is required as a
result of Tenant's or Tenant's agents' acts; Tenant's change of use of the
Premises; alterations or improvements to the Premises made by or for Tenant;
Tenant's application for any permit or governmental approval; or accommodations
requested or required by Tenant, Tenant's agents, employees, or invitees.

                        [Signatures Appear on Next Page]

                                      16
<PAGE>

   IN WITNESS WHEREOF, this Lease Agreement has been duly executed by the
parties hereto as of the day and year indicated above.

Address for Notices, if other than the Premises:

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

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

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

TENANT:                                LANDLORD:

eBenX, Inc.,                           Utah State Retirement Investment Fund,
a Minnesota corporation                an independent agency of the State of
                                       Utah

By   /s/ Scott P. Halstead             By  CB Richard Ellis Investors L.L.C.
     -------------------------------
Name Scott P. Halstead                 Its Agent
     -------------------------------
Its  Chief Financial Officer
     -------------------------------
                                       By   /s/ James E. Bell
                                            ----------------------------------
                                       Name James E. Bell
                                            ----------------------------------
                                       Its  Authorized Signatory
                                            ----------------------------------

                                       By
                                            ----------------------------------
                                       Name
                                            ----------------------------------
                                       Its
                                            ----------------------------------

                                      17
<PAGE>

                                  EXHIBIT A-1
                          GRAPHIC LOCATION OF PREMISES
                                 [LOWER LEVEL]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                [FOURTH FLOOR]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                 [FIFTH FLOOR]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                 [SIXTH FLOOR]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                [SEVENTH FLOOR]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                [EIGHTH FLOOR]

                                  ----------

                              EXHIBIT A-1 (CONT.)
                          GRAPHIC LOCATION OF PREMISES
                                [TWELFTH FLOOR]

<PAGE>

                                  EXHIBIT A-2
                               LEGAL DESCRIPTION

The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:

Lot 1, Block 1, GROVES OFFICE PARK 2ND ADDITION together with that part of
vacated 8th Avenue accruing thereto by reason of the vacation thereof, according
to the plats thereof on file and of record, Hennepin County, Minnesota, lying
East and North of the Plat of GROVES OFFICE PARK ANNEX; South of Lot 1, Block 1,
GROVES OFFICE PARK 2ND ADDITION and West of State Highway 18, Plat 19, together
with the benefits contained in the following easement agreement:

     Declaration of Access and Driveway Easement dated September 30, 1986,
     recorded October 10, 1986 as Document Number 5169175 as amended by
     instrument dated December 30, 1988, record March 8, 1989, Document Number
     5513370;

     Mutual Truck Turn Around Easement Agreement dated December 30, 1988,
     recorded March 8, 1989, as Document Number 5513371;

     Declaration of Transformer and Compactor Easement dated December 30, 1988,
     recorded March 8, 1989, as Document Number 5513375; and

     Mutual Walk Way Easement Agreement dated December 30, 1988, recorded March
     8, 1989, as Document Number 5513372.
<PAGE>

                                  EXHIBIT A-3
                                     PLANS

None
<PAGE>

                                  EXHIBIT A-4
                               INITIAL PREMISES
                              [LOWER LEVEL PLAN]

                                  ----------

                              EXHIBIT A-4 (CONT.)
                               INITIAL PREMISES
                                 [FIFTH FLOOR]

                                  ----------

                              EXHIBIT A-4 (CONT.)
                               INITIAL PREMISES
                                 [SIXTH FLOOR]

                                  ----------

                              EXHIBIT A-4 (CONT.)
                               INITIAL PREMISES
                                [SEVENTH FLOOR]

                                  ----------

                              EXHIBIT A-4 (CONT.)
                               INITIAL PREMISES
                                [EIGHTH FLOOR]

                                  ----------

                              EXHIBIT A-4 (CONT.)
                               INITIAL PREMISES
                                [TWELFTH FLOOR]

<PAGE>

                                  EXHIBIT A-5
                        ADDITIONAL PREMISES ON 4TH FLOOR
<PAGE>

                                  EXHIBIT A-6
                           LOWER LEVEL STORAGE SPACE

   In addition to the Premises, during the initial term of the Lease, Tenant
shall lease two areas on the lower level of the Building consisting of
approximately 781 rentable square feet and 291 rentable square feet as
identified on the attached Floor Plan ("Storage Space"), at a gross rental rate,
including all Operating Costs and Real Estate Taxes, of Twelve and 25/100
Dollars ($12.25) per rentable square foot, payable in monthly installments
pursuant to the terms and conditions contained in Article 3 of the Lease.  No
Tenant Improvement Allowance shall apply to the Storage Space and it is not
intended that Tenant shall be required to make improvements to the Storage Space
in order to make reasonable Storage Space use thereof, provided Tenant shall be
permitted to make improvements to the 781 rentable square foot area and occupy
the same for business purposes provided Tenant has complied with all laws, rules
and ordinances governing such space and occupancy thereof.  Tenant takes the
Storage Space in its "AS IS" condition and for a term ending coterminous with
the initial term of the Lease.
<PAGE>

                   EXHIBIT TO A-6 - LOWER LEVEL STORAGE SPACE
                             LOWER LEVEL FLOOR PLAN

<PAGE>

                                   EXHIBIT B
                              TENANT WORK FUNDINGS

I.  FOR INITIAL PREMISES:

   Landlord shall provide Tenant with a cash allowance for Tenant Improvements
("Tenant Work Funding") in an amount of $16.10 per Rentable Square Foot of the
Initial Premises. Said allowance may be used by Tenant for demolition, architect
and design fees, contractor fees, project management fees, engineering, plans
and permits and the actual construction of improvements, including all HVAC work
and built-ins ("Tenant Work"), which improvements have been approved by Landlord
in writing, for the Initial Premises.

   Tenant may use its own contractor and subcontractors (together the
"Contractors") to perform all Tenant Work.   Landlord's construction manager
shall have the right to submit a proposal for the construction of the Tenant
work.  The names of all subcontractors, together with proof they are licensed,
are bonded and have worker's compensation insurance shall be provided as hired.

   Tenant shall have a right to access the Initial Premises for construction of
Tenant Work immediately following execution by Landlord and Tenant of this Lease
Agreement, until the commencement of the Initial Premises Term on May 1, 2000
("Access Period").  No rent or operating expenses shall be due and payable
during the Access Period.  Landlord agrees to provide to Tenant during the
Access Period utilities, hoisting, heat, air-conditioning (when essential), and
general building security at no cost to Tenant.  Landlord agrees not to charge
Tenant a Landlord supervision fee during the Access Period.

   Prior to the commencement of the Tenant Work, the Tenant shall provide the
following to the Landlord, all of which shall be to the Landlord's reasonable
satisfaction:

       1. Plans and specifications for the Tenant Work.

       2. An estimated budget and cost breakdown for the Tenant Work.

       3. Estimated completion schedule for the Tenant Work.

       4. The General Contractor to be used in the construction of the Tenant
   work, including its address, telephone number, and proof of worker's
   compensation insurance, licensing and bonding.

       5. Copies of all required permits for the Tenant Work, including a
   building permit issued by the City of Plymouth.

   The Tenant shall be solely responsible for the construction and completion of
the Tenant Work to the reasonable satisfaction of Landlord and for the payment
of all amounts due and payable in connection therewith, without cost or expense
to Landlord except for Landlord's obligation to make Tenant Work Fundings.
Tenant shall diligently proceed with the construction and completion of the
Tenant Work in accordance with the plans, specifications, and completion
schedule approved by Landlord. Tenant shall secure all licenses and permits
necessary for performance of the Tenant Work and for occupancy of the Premises.
No material changes shall be made from the plans, specifications, and completion
schedule approved by the Landlord, without the Landlord's prior written consent,
which consent shall not be unreasonably withheld or delayed.
<PAGE>

   No materials or fixtures shall be installed upon the Initial Premises
pursuant to any agreement by which another party has a security interest or
rights to remove or repossess such items, without the prior written consent of
Landlord. Tenant may lease its equipment, furniture and personal property
provided, however, such items shall be considered part of Tenant Work entitled
to reimbursement from the cash allowance.

   Landlord shall at all times have a right to inspect the Tenant Work and
Tenant shall immediately cease work upon written notice from the Landlord;
provided, however, if there is no cause shown, Landlord shall reimburse Tenant
for the additional cost actually incurred by such work stoppage.

   Tenant shall pay and discharge promptly and fully all claims for labor done
and materials and services furnished in connection with the Tenant Work. Tenant
shall obtain from each Contractor and provide to Landlord a mechanic's lien
waiver in form suitable for recording.

   The Tenant shall indemnify, defend and save and hold the Landlord harmless
against any and all claims, demands, lawsuits, expenses, damages and causes of
action asserted by any person arising out of, caused by or relating to the
Tenant Work, the Tenant Work Funding or the Tenant's use or operation of the
Initial Premises. The foregoing indemnity shall include all expenses in
connection with any such claim. The provisions of this paragraph shall survive
the termination of the Lease.

   The Tenant shall maintain, or cause to be maintained, during the performance
of the Tenant Work, at its sole cost and expense, insurance of the types and in
the amounts specified in this Lease Agreement, together with builders' risk
insurance for the amount of completed value of the Tenant Work on an all-risk
non-reporting form covering all Tenant Improvements under construction,
including building materials, and other insurance, in amounts and against such
risks as the Landlord shall reasonably require in connection with the Tenant
Work.

   Landlord shall pay to Tenant up to 90% of the Tenant Work Funding in monthly
installments upon Tenant's providing Landlord with mechanic's lien waivers for
that portion of such Tenant Work Funding previously paid by Landlord. Payments
shall be made on the fifteenth day of the month for all requests for funding
which have been submitted by the first day of that month together with a cost
breakdown, invoices and receipts of the work to be funded. All payments shall be
made by wire transfer. Tenant shall provide Landlord with wiring instructions
prior to the first payment of the Tenant Work Funding. Landlord may make
payments jointly payable to Tenant and to Contractors in the event Tenant is
unable to provide mechanic's lien waivers or in the event mechanic's liens are
filed against the Building. The remaining 10% of the Tenant Work Funding shall
be payable as provided below.

   Landlord has the additional right to expeditiously salvage any buildout
improvements in the Premises existing at the date hereof, but slated by Tenant
for demolition or removal, which improvements may be removed by Landlord in an
expeditious manner, so long as such removal does not cause an unreasonable delay
to Tenant.

   Landlord reserves the right to establish reasonable rules and regulations for
the use of the Building during the course of the Tenant Work, including, but not
limited to, construction parking, storage of materials, hours of work, use of
elevators, and clean-up of construction related debris.

   Upon completion of the Tenant Work and occupancy of the Initial Premises by
Tenant, the Tenant may request funding by Landlord of the remaining amount due
for the Tenant Work Funding. Landlord shall have no obligation to make any
advances with respect to the Tenant Work Funding until Landlord has received the
following, all of which shall be to the Landlord's reasonable satisfaction:
<PAGE>

       1. Any certificates required for occupancy, including a permanent and
   complete Certificate of Occupancy issued by the City of Plymouth.

       2. A Certificate of Completion signed by the architect who prepared the
   plans and specifications approved by the Landlord.

       3. An estoppel certificate signed by the Tenant, in form satisfactory to
   the Landlord, and stating that the Tenant has taken occupancy of the Premises
   and that there are no defaults under the Lease, and such other matters as
   Landlord may reasonably require.

       4. A cost breakdown itemizing all expenses for the Tenant Work for which
   the Tenant seeks Tenant Work Funding, together with invoices and receipts for
   the same.

       5. Mechanic's lien waivers for all Tenant Work.

   Within thirty (30) days of the receipt of the foregoing, the Landlord shall
fund to the Tenant the lowest of:

           A.   Tenant's actual costs for the Tenant Work; or

           B.   $16.10 a Rentable Square Foot.

   Less any amounts paid in monthly installments as progress payments , and less
any amounts previously advanced to Tenant or Tenant's contractors by Landlord
for space planning as provided in the Letter of Intent dated October 28, 1999
and fully executed on November 30, 1999.

II.  FOR ADDITIONAL PREMISES:

   Landlord shall provide Tenant with a cash allowance for Tenant Improvements
("Tenant Work Funding") in an amount not to exceed the following formula:

         Sixteen and No/100 Dollars times the number of months Tenant leases
         the Additional Premises ("x"), divided by Sixty-three  ("$16.00 (x) /
         63") ("Formula").

   Said allowance may be used by Tenant for demolition, architect and design
fees, contractor fees, project management fees, engineering, plans and permits
and the actual construction of improvements, including all HVAC work and built-
ins ("Tenant Work"), which improvements have been approved by Landlord in
writing, for the Additional Premises.

   Tenant may use its own contractor and subcontractors (together the
"Contractors") to perform all Tenant Work.   Landlord's construction manager
shall have the right to submit a proposal for the construction of the Tenant
work.  The names of all subcontractors, together with proof they are licensed,
are bonded and have worker's compensation insurance shall be provided as hired.

   No rent or operating expenses shall be due and payable during the Additional
Premises Access Period.  Landlord agrees to provide to Tenant during the
Additional Premises Access Period utilities, hoisting, heat, air-conditioning
(when essential), and general building security at no cost to Tenant.

   Prior to the commencement of the Tenant Work, the Tenant shall provide the
following to the Landlord, all of which shall be to the Landlord's reasonable
satisfaction:
<PAGE>

       1. Plans and specifications for the Tenant Work.

       2. An estimated budget and cost breakdown for the Tenant Work.

       3. Estimated completion schedule for the Tenant Work.

       4. The General Contractor to be used in the construction of the Tenant
   work, including its address, telephone number, and proof of worker's
   compensation insurance, licensing and bonding.

       5. Copies of all required permits for the Tenant Work, including a
   building permit issued by the City of Plymouth.

   The Tenant shall be solely responsible for the construction and completion of
the Tenant Work to the reasonable satisfaction of Landlord and for the payment
of all amounts due and payable in connection therewith, without cost or expense
to Landlord except for Landlord's obligation to make Tenant Work Fundings.
Tenant shall diligently proceed with the construction and completion of the
Tenant Work in accordance with the plans, specifications, and completion
schedule approved by Landlord. Tenant shall secure all licenses and permits
necessary for performance of the Tenant Work and for occupancy of the Premises.
No material changes shall be made from the plans, specifications, and completion
schedule approved by the Landlord, without the Landlord's prior written consent.

   No materials or fixtures shall be delivered to or installed upon the
Additional Premises pursuant to any agreement by which another party has a
security interest or rights to remove or repossess such items, without the prior
written consent of Landlord.

   Landlord shall at all times have a right to inspect the Tenant Work and
Tenant shall immediately cease work upon written notice from the Landlord;
provided, however, if there is no cause shown, Landlord shall reimburse Tenant
for the additional cost actually incurred by such work stoppage..

   Tenant shall pay and discharge promptly and fully all claims for labor done
and materials and services furnished in connection with the Tenant Work. Tenant
shall obtain from each Contractor and provide to Landlord, prior to such
Contractor's commencement of work on the Additional Premises, a mechanic's lien
waiver in form suitable for recording.

   The Tenant shall indemnify, defend and save and hold the Landlord harmless
against any and all claims, demands, lawsuits, expenses, damages and causes of
action asserted by any person arising out of, caused by or relating to the
Tenant Work, the Tenant Work Funding or the Tenant's use or operation of the
Additional Premises. The foregoing indemnity shall include all expenses in
connection with any such claim. The provisions of this paragraph shall survive
the termination of the Lease.

   The Tenant shall maintain or cause to be maintained during the performance of
the Tenant Work, at its sole cost and expense, insurance of the types and in the
amounts specified in this Lease Agreement, together with builders' risk
insurance for the amount of completed value of the Tenant Work on an all-risk
non-reporting form covering all Tenant Improvements under construction,
including building materials, and other insurance, in amounts and against such
risks as the Landlord shall reasonably require in connection with the Tenant
Work.

   Landlord shall pay to Tenant up to 90% of the Tenant Work Funding in monthly
installments upon Tenant's providing Landlord with mechanic's lien waivers for
that portion of such Tenant Work Funding previously paid by Landlord. Payments
shall be made on the fifteenth day of the month for all requests for
<PAGE>

funding which have been submitted by the first day of that month together with a
cost breakdown, invoices and receipts of the work to be funded. All payments
shall be made by wire transfer. Tenant shall provide Landlord with wiring
instructions prior to the first payment of the Tenant Work Funding. Landlord may
make payments jointly payable to Tenant and to Contractors in the event Tenant
is unable to provide mechanic's lien waivers or in the event mechanic's liens
are filed against the Building. The remaining 10% of the Tenant Work Funding
shall be payable as provided below.

   Landlord has the additional right to expeditiously salvage by Tenant any
buildout improvements in the Premises existing at the date hereof, but slated
for demolition or removal, which improvements may be removed by Landlord in an
expeditious manner.

   Landlord reserves the right to establish reasonable rules and regulations for
the use of the Building during the course of the Tenant Work, including, but not
limited to, construction parking, storage of materials, hours of work, use of
elevators, and clean-up of construction related debris.

   Upon completion of the Tenant Work and occupancy of the Additional Premises
by Tenant, the Tenant may request funding by Landlord of the remaining amount
due for the Tenant Work Funding. Landlord shall have no obligation to make any
advances with respect to the Tenant Work Funding until Landlord has received the
following, all of which shall be to the Landlord's reasonable satisfaction:

       1. Any certificates required for occupancy, including a permanent and
   complete Certificate of Occupancy issued by the City of Plymouth.

       2. A Certificate of Completion signed by the architect who prepared the
   plans and specifications approved by the Landlord.

       3. An estoppel certificate signed by the Tenant, in form satisfactory to
   the Landlord, and stating that the Tenant has taken occupancy of the Premises
   and that there are no defaults under the Lease, and such other matters as
   Landlord may reasonably require.

       4. A cost breakdown itemizing all expenses for the Tenant Work for which
   the Tenant seeks Tenant Work Funding, together with invoices and receipts for
   the same.

       5. Mechanic's lien waivers for all Tenant Work.

   Within thirty (30) days of the receipt of the foregoing, the Landlord shall
fund to the Tenant the lowest of:

          A.  Tenant's actual costs for the Tenant Work; or

          B.  $ the amount determined by the Formula.

   Less any amounts paid in monthly installments as progress payments.
<PAGE>

                                   EXHIBIT C
                             OPTION TO EXTEND TERM

   Landlord hereby grants to Tenant one (1) option ("Option") to extend the Term
of this Lease for a period of five (5) years ("Option Term") immediately
following the initial Term.  The Option shall be exercised, if at all, by
written notice ("Option Notice") delivered by Tenant to Landlord not later than
twelve (12) months prior to the end of the initial Term.  Further, the Option
shall not be deemed to be properly exercised if, as of the date of the Option
Notice or at the end of the initial Term, Tenant (i) is in uncured default under
the Lease, (ii) has assigned this Lease or its interest therein, or (iii) has
sublet more than fifty percent (50%) of the Premises, provided, however, this
provision shall not apply to an assignment or sublet to a Tenant Affiliate as
defined within the Lease Agreement.  Provided Tenant has properly and timely
exercised the Option, the initial Term of this Lease shall be extended by the
Option Term, and all terms, covenants and conditions of the Lease shall remain
unmodified and in full force and effect, except for the Minimum Rent, which
shall be adjusted to the "Fair Market Rental Value" of the Premises, as
reasonably determined by Landlord.  As used herein, "Fair Market Rental Value"
shall mean the projected prevailing rental rate as of the first day of the
Option Term for similar office space situated in similar first class, high-rise
office buildings in the South and West Suburban market area of Minneapolis,
Minnesota.  Notwithstanding the foregoing provisions of this paragraph, in no
event shall the Minimum Rent during the Option Term be less than the Minimum
Rent payable by Tenant during the last year of the initial Term.

   Landlord shall notify Tenant in writing of such determination of Fair Market
Rental Value within thirty (30) days after Landlord's receipt of the Option
Notice.  If Tenant shall dispute Landlord's determination of Fair Market Rental
Value, then Tenant shall have the right to submit the issue of Landlord's
reasonableness (but not the Fair Market Rental Value) for neutral binding
arbitration (and not by court action) to the American Arbitration Association in
accordance with the rules of such Association then in effect.  Tenant shall
exercise such right of arbitration by delivering written notice of such election
within thirty (30) days after receipt of Landlord's notice of Fair Market Rental
Value.  If the arbitrator shall decide that Landlord's determination of Fair
Market Rental Value was reasonable, then the Fair Market Rental Value shall be
the amount previously determined by Landlord.  If the arbitrator shall determine
that Landlord acted unreasonably, then Landlord shall redetermine the Fair
Market Rental Value in its sole but reasonable discretion, provided that Tenant
shall again have the right to challenge Landlord's reasonableness in the manner
set forth above.  In no event shall the arbitrators be permitted to determine
Fair Market Rental Value.  The decision of the arbitrator shall be binding upon
both parties, provided, however, if Tenant disagrees with the decision of the
arbitrator, Tenant can, within thirty (30) days of receipt of the arbitrator's
decision, withdraw its Option Notice of exercise of the Option.  Each party
shall share equally the cost of the arbitration process, provided however, if
the arbitrator rules that Landlord's determination of Fair Market Rental Value
was unreasonable, Landlord shall pay total of the arbitration process.
<PAGE>

                                   EXHIBIT D
                   RIGHT OF FIRST OFFER FOR ADDITIONAL SPACE

     Tenant shall have the following rights with respect to rentable space on
the 3rd floor of the Building ("Expansion Area"):

     (i)  Upon the terms and provisions set forth in this Lease, the Tenant
shall have an ongoing right of "first offer" during the Term of this Lease to
lease the available Expansion Area.  If the Tenant fails to exercise such right
of first offer as provided herein with regard to any part of the available
Expansion Area, the Landlord thereafter may lease all or a portion of  such
space to any party or parties and upon any terms the Landlord deems necessary or
desirable.  In the event the Expansion Area or a portions thereof again becomes
available for lease during the Term of this Lease, Tenant shall once again have
the right of "first offer", subject to the rights of third parties to the
Expansion Area or portions thereof, provided Tenant exercises its right of first
offer as provided herein.

   (ii)  For the purposes of this Section, "first offer" shall mean a right by
the Tenant to lease such space under this Lease following the expiration or non-
renewal of the Landlord's lease with the current tenant of such space; for
purposes of this section, space becomes "available space" in the building when
the lease of such space has expired or otherwise terminated, and the prior
occupant of such space has physically vacated and surrendered possession of the
space to the Landlord.

   (iii)  The Tenant may not exercise any right of first offer with respect to
less than all of the available Expansion Area which is offered to Tenant.  The
Tenant shall exercise such right of first offer by delivering written notice of
exercise to the Landlord not later than fifteen (15) days following the date of
delivery by the Landlord to the Tenant of notice ("Notice of Availability") that
the space identified in the Notice of Availability is becoming available on the
expected date specified in the Notice.  The Notice of Availability shall state
the Minimum Rent and Tenant Improvement Allowance offered by Landlord for the
available Expansion Area.

   (iv)  If Tenant exercises its right to lease the available Expansion Area,
the available Expansion Area shall become a part of the Premises 60 days after
the date when Landlord shall deliver possession of the area to Tenant free and
clear of rights of third parties. The additional area shall be subject to the
same terms and conditions of this Lease, except as modified by the terms of the
Notice of Availability, including a term coterminous with the remaining term of
this Lease including possible renewals, provided, however, in the event there is
less than three (3) years remaining on the Initial Term of the Lease, the
available Expansion Area shall be offered to Tenant at Market Rate in its "AS
IS" condition without obligation by Landlord to provide a Tenant Improvement
Allowance.
<PAGE>

                                   EXHIBIT E
                        FIBER OPTIC CABLE AND GENERATOR

   Landlord agrees, acting in a commercially reasonable manner  and in good
faith, to allow access in and through the Building for the installation by
Tenant, at Tenant's sole cost and expense, of fiber optic cable in and around
the Premises to the extent necessary for Tenant's business.   Failure to have
fiber optic available to the Premises by the commencement of the Term shall not
entitle Tenant to terminate this Lease.

   Tenant's Generator.  In the event Tenant determines a need to install a
generator on the Building grounds, Landlord agrees to cooperate with Tenant in
determining a mutually acceptable location for such generator.  Landlord shall
be entitled to review and approve the size, location and vertical distribution
required by the installation of the generator.  All costs associated with the
generator installation and operation shall be the sole expense of Tenant.
Tenant will agree to any reasonable expense charged by Landlord for the areas
impacted by the presence of the generator.
<PAGE>

                                   EXHIBIT F
                       EXCLUSIONS FROM OPERATING EXPENSES

1.  Original Construction. All costs incurred in connection with or directly
    related to the original construction (as distinguished from operation,
    repair and maintenance) of the project.

2.  Initial Development. Legal and other fees, leasing commissions, advertising
    expenses and other costs incurred in connection with acquisition of the
    land, or the original development or original leasing of the project.

3.  Costs Caused by Construction. Any expenses incurred during construction of
    the building or any improvements therein in excess of those that would be
    expended if construction were completed and the building were fully
    occupied.

4.  Hazardous Substances and Remediation Costs. All costs related to the removal
    of substances or materials from the Building or the project which are
    presently, or at any time in the future may be, deemed hazardous to either
    people or the environment, including, without limitation, any asbestos,
    urea-formaldehyde, chlorofluorocarbons (CFCs), or substances controlled by
    CERCLA. All costs related to any remediation or retrofitting caused by
    cessation of use of any such materials shall also be excluded.

5.  Employee Limitation. All costs for any employees (i) above the rank of
    building manager, (ii) above the reasonable allocation of the costs of all
    employees at or below the rank of building manager whose duties include work
    on other buildings or projects, or (iii) on activities the costs of which
    are otherwise excluded from operating costs.

6.  Capital Costs. The costs of any alteration, addition, change, replacement,
    improvement, repair, or other item which are properly capitalized under
    either generally accepted accounting principles or under federal income tax
    accounting principles, provided the amortization of such cost over the
    useful life of any item required by change of law or installed with the
    intent to reduce operating expenses shall be included in operating expenses.

7.  Depreciation.  Any charge for depreciation or amortization of any of the
    initial improvements.

8.  Ground Leases and Easements.  Any charges for ground leases or other
    underlying leases, easements or any other similar or dissimilar use fees or
    other costs related to the use of the land.

9.  Financing Costs.  Financing and refinancing costs, interest on debt or
    amortization payments on any mortgage or mortgages.

10. Damage by Other Tenants. The cost of any repair to remedy damage caused by
    or resulting from the negligence of any other tenants in the project,
    employees or invitees, to the extent the Landlord has recovered such cost
    from the negligent party.

11. Leasing Costs. All costs related to any leasing or re-leasing of the
    project. In the event the building management company is responsible for
    leasing or re-leasing of the building, a reasonably allocable share of the
    management fee shall be therefore excluded.

12. Improvements to Rentable Areas. Costs incurred in renovating or otherwise
    improving or decorating or redecorating space (including painting, carpet
    shampooing, drapery cleaning and wall washing) for tenants or other
    occupants in the building or vacant rentable space in the building or costs
    related
<PAGE>

    thereto and costs incurred by landlord, whether or not reimbursed to
    landlord, by other tenants in connection with maintenance or repair of
    above-shell condition improvements.

13. Bad Debts or Rent Loss. A bad debt loss, rent loss or reserves for bad debts
    or rent loss, provided, however, the cost of purchasing rent loss insurance
    to cover losses occasioned by a casualty shall not be excluded.

14. Affiliates - Excessive Payments. Any item of cost, including a building
    management fee, which represents an amount paid to an affiliate of landlord
    or an affiliate of any partner or shareholder of landlord, to the extent the
    same is in excess of the reasonable cost of said item or service in an arms
    length transaction. For the purposes hereof "affiliate" shall include
    subsidiaries of landlord or any person or entity that directly or indirectly
    through one or more intermediaries controls or is controlled by or is under
    common control with landlord.

15. Bad Faith Payments - Kickbacks. Costs or expenses incurred by landlord which
    represents amounts spent by landlord or its agents in bad faith or an amount
    equal to any costs which represent any payments received by landlord or the
    building manager, or the employees or officers of either, from suppliers of
    good or services as kick-backs, finders fees, expediting fees or other
    similar and dissimilar fees.

16. Operation of Landlord's Business; Preservation of Asset. Any and all costs
    (including legal fees and costs of lawsuits) associated with the operation
    of the business of the entity which constitutes landlord or preservation of
    the landlord's interest in the building; excluded items shall specifically
    include, but shall not be limited to, formation of the entity, internal
    accounting and legal matters, including but not limited to preparation of
    tax returns and financial statements and gathering of data therefor, costs
    of defending any lawsuits with any mortgagee, costs of selling, syndication,
    financing, mortgaging or hypothecating any of the landlord's interest in the
    project, costs of any disputes between landlord and its employees (if any),
    costs of disputes between landlord and managers of the project, costs of
    collecting rent or other charges, and costs of disputes between landlord and
    tenants within the project including, without limitation, the lessee.

17. Tenant Specific Cost. All costs and expenses arising solely out of the
    specific needs or character of a particular tenant or such tenant's
    officers, employees, agents or customers, whether or not landlord recovers
    such costs from tenant, unless a benefit is derived by all tenants of the
    Building, in which event the cost shall be included as operating expenses.
    And, any increased costs resulting from landlord permitting third parties to
    use the common elements of the project for income producing activities.

18. Disproportionate Costs; Excess Services. All costs and expenses resulting
    from the delivery to other tenants of services, utilities, or the use of
    building facilities or other benefits which are either substantially greater
    in quantity or substantially higher in quality than those delivered to
    Tenant, unless the cost of such services is recovered by Landlord from such
    other Tenant.

19. Excess HVAC. Landlord's costs of excess electricity, incremental heating,
    ventilation or air conditioning and other services sold or provided to
    tenants which are substantially greater than those provided to Tenant
    whether or not landlord is entitled to be reimbursed by such tenants.

20. Landlord's Negligence. Any expense incurred as a result of the gross
    negligence of landlord, its agents, servants, or employees or arising out of
    landlord's gross negligent failure to manage the project consistently with
    the standards required by this lease.
<PAGE>

21. Reimbursed Costs. Any items not otherwise excluded to the extent landlord is
    reimbursed therefore by insurance or otherwise compensated, including direct
    reimbursement by any tenant, less the out-of-pocket cost of collection.

22. Duplicate Charges. Any costs which would duplicate other costs theretofore
    included in building operating costs.

23. Rent Insurance.  The cost of rent insurance which insures against Rent loss
    for a period in excess of 24 months.<PAGE>

                                                                    EXHIBIT 10.1
                                                                    ------------

                   LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT

         THIS LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT is made as of August
2, 2000, by and between MGI PHARMA, INC., a Minnesota corporation having its
principal place of business at 6300 West Old Shakopee Road, Suite 110,
Bloomington, MN, U.S.A. 55438-2318 ("MGI"); and MethylGene Inc., a corporation
organized under the laws of the Province of Quebec having its principal place of
business at Suite 200, 7220 Frederick-Banting, Montreal, Quebec, Canada, H4S 2A1
("MethylGene").

                                    Recitals
                                    --------

         A. MethylGene has acquired rights to certain patents, patent
applications and know-how, and developed certain data, relating to
pharmaceutical products containing a compound known as MG98, and relating to
pharmaceutical products resulting from MethylGene's DNA methyltransferase
research program.

         B. MGI desires to obtain, and MethylGene is willing to grant to MGI, an
exclusive license under such intellectual property for the United States and its
territories and possessions, Canada and its provinces and territories, and
Mexico, all on the terms set forth herein.

         NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto have agreed as follows:

Article 1         INTRODUCTORY PROVISIONS

         1.1 Defined Terms. The following terms, when used in capitalized form
in this Agreement, shall have the meanings set forth below:

                  (a) "Affiliate" when used with reference to either party shall
mean any entity controlling, controlled by or under common control with such
party. For purposes hereof, "control" shall mean ownership, directly or
indirectly, of more than fifty percent (50%) of the securities having the right
to vote for election of directors, in the case of a corporation, and more than
fifty percent (50%) of the beneficial interest in the capital, in the case of an
entity other than a corporation.

                  (b) "Best Efforts" shall mean those efforts that would be made
by a reasonably prudent business person acting in good faith and in the exercise
of reasonable commercial judgment based on acceptable practice, process and
speed found in the pharmaceutical industry and taking into account the potential
commercial market for the applicable products in the Territory.

                  (c) "Confidential Information" shall mean all information and
data, in any form, including but not limited to any information or data on
assays, chemical structures, clinical trial results, diagnostics, biological
markers, protein structures, mechanisms of action, analytical techniques,
chemical synthesis, enzymology, computational models, manufacturing processes,

                                      -1-
<PAGE>

markets, customers, suppliers, patents or patent applications, inventions,
know-how, trade secrets, products, procedures, designs, formulas, business
plans, financial projections, organizations, employees, consultants or any other
similar aspects of a party's present or future business, the secrecy of which
confers a competitive advantage upon that party.

                  (d) "DNA MT Product" shall mean any pharmaceutical compound
derived from the Research Program.

                  (e) "Effective Date" shall mean the date first above written.

                  (f) "FDA" shall mean the United States Food and Drug
Administration.

                  (g) "FTE" shall mean a minimum of forty (40) hours per week
for individual MethylGene employees assigned to the Research Program, or its
equivalent if a given employee is assigned on a less than forty (40) hours per
week basis and therefore multiple employees are added to provide a single FTE.

                  (h) "Health Registration Dossier" shall mean all documentation
which is now or shall hereafter be on file with the FDA, or any Regulatory
Authority, which comprises the information and data submitted to such agency in
support of an application made by either party, or a sublicensee of either
party, to such agency for Marketing Authorization for any Licensed Product for
treatment of any indication.

                  (i) "Hybridon" shall mean Hybridon, Inc. or its successor.

                  (j) "Hybridon Agreement" shall mean the License Agreement
between Hybridon and MethylGene effective as of January 4, 1996, as amended on
November 26, 1997, December 15, 1997 and May 5, 1998.

                  (k) "IDT" shall mean Integrated DNA Technologies Inc.

                  (l) "IDT Agreement" shall mean the Licensing Agreement between
IDT and Hybridon, bearing an effective date of March 12, 1999.

                  (m) "Licensed Know-How" shall mean all Confidential
Information which is owned or controlled by or licensed (with right of
sublicense) to MethylGene as of the Effective Date or at anytime during the term
of this Agreement and is necessary or useful to the development, use or sale of
the Licensed Products.

                  (n) "Licensed Patents" shall mean the following, which are
owned or controlled by or licensed (with right of sublicense) to MethylGene: (i)
those patents and patent applications listed on Exhibit A hereto and any patents
issuing therefrom; (ii) any patents and patent applications conceived or reduced
to practice during the term of this Agreement and covering the manufacture (with
respect only to the DNA MT Products), use, importation or sale of any of the
Licensed Products, including any jointly-owned patents and patent applications
as

                                      -2-

<PAGE>

provided in Section 7.1, and (iii) all reissues, continuations,
continuations-in-part, extensions, reexaminations, and foreign counterparts
thereof.

                  (o) "Licensed Products" shall mean the MG98 Product and all
DNA MT Products, collectively.

                  (p) "Marketing Authorization" shall mean any authorization
which is legally required under applicable laws, regulations or administrative
decisions to put a proprietary medicinal product on the market in any country
for use in treatment of any indication; including, without limitation, any
governmental price approval or reimbursement approved under a national health
insurance system.

                  (q) "McGill MG98 Agreement" means the License Agreement
between McGill University and Hybridon, bearing an effective date of October 13,
1994, as amended on December 15, 1995, February 25, 1998 and February 27, 1998.

                  (r) "McGill DNA MT Agreement" means the License Agreement
between McGill University and Hybridon, bearing an effective date of December
15, 1995, as amended, February 25, 1998 and February 27, 1998.

                  (s) "MG98 Product" shall mean any pharmaceutical compound
containing as an active ingredient the compound currently known as MG98.

                  (t) "Net Sales Revenue" shall mean (i) with respect to MGI's
obligations under Section 5.3, the gross sale price of all Licensed Products,
sold by MGI, its sublicensees and/or their respective Affiliates, to third
parties, as reflected in invoices issued by all such sellers during that period
of time, or (ii) with respect to MethylGene's obligations under Section 5.4, the
gross sale price of all Licensed Products sold by MethylGene, its sublicensees
and/or their respective Affiliates, to third parties, in the applicable country
or countries, as reflected in invoices issued by all such sellers during that
period of time; less in each case (A) credit for returns, including withdrawals
and recalls; (B) sales rebates allowed or paid; (C) volume discounts to the
extent that the same are not reflected in the invoiced price; (D) sales,
value-added and other taxes that are payable by the buyer and are included in
the invoiced price; (E) customs duties related to sales made by the seller to
its customers.

                  (u) "R&D Costs" shall mean: (i) salaries and benefits for the
MethylGene FTEs assigned to the Research Program pursuant to Section 3.4(a);
(ii) overhead allocable to such MethylGene FTEs, consisting of lease, utilities,
insurance and research & development management, but excluding general and
administrative expenses; (iii) the actual costs of third party research to the
extent approved by the R&D Steering Committee; (iv) the actual, out-of-pocket
costs of prosecuting the Licensed Patents for the Licensed Products in the
Territory; (v) equipment, materials and supplies dedicated to the Research
Program (provided that purchases of equipment in excess of $5,000 shall be
subject to approval of the R&D Steering Committee); and (vi) travel and lodging
for MethylGene's members to attend R&D Steering Committee meetings, all as in
accordance with generally accepted accounting principles.

                                      -3-
<PAGE>

                  (v) "R&D Plan" shall mean that certain research and
development plan to be determined by the R&D Steering Committee as provided in
Section 3.1(b).

                  (w) "Regulatory Authority" shall mean, in respect of any
country, any agency responsible for the issuance of Marketing Authorizations for
pharmaceutical products marketed in that country.

                  (x) "Research Program" shall mean that program of DNA
methyltransferase research being carried out by MethylGene pursuant to the terms
of the R&D Plan.

                  (y) "Supporting Data" shall mean all data and information
owned or controlled by either party or a sublicensee of either party relating to
(i) the pharmacological or toxicological properties of any Licensed Product,
(ii) any pre-clinical or clinical testing and experience in relation to any
Licensed Product and (iii) the chemical composition, manufacturing processes and
quality control testing of any Licensed Product, to the extent reasonably
required for purposes of any application for Marketing Authorization. Supporting
Data shall also include, but is not limited to, copies of annual reports,
integrated study reports, protocols for clinical research and GLP pre-clinical
studies, protocol changes and amendments, CMC sections and amendments, safety
data, CRO databases, case report forms and access to patient records, GLP
toxicity, safety and metabolism reports and data, and GLP pharmacokinetic data
and reports owned or controlled by either party or a sublicensee of either party
and relating to any Licensed Product, as well as, in general, data or
information owned or controlled by either party or a sublicensee of either party
which would be useful for a person pursuing clinical research and regulatory
approval, or which would typically be part of any submission to FDA or other
Regulatory Authority for the purpose of obtaining approval of any Licensed
Product for any indication.

                  (z) "Territory" shall mean the United States and its
territories and possessions, Canada and its provinces and territories, and
Mexico.

                  (aa) "Third Party Agreements" shall mean those agreements
listed on Exhibit B hereto and any other license agreements that the parties
from time to time mutually determine are necessary or required for the
development, manufacture (with respect only to the DNA MT Products) or sale of
the Licensed Products in the Territory, as contemplated herein.

                  (bb) "TPC Agreement" means the Technology Partnerships Canada
agreement between Her Majesty the Queen in Right of Canada, as represented by
the Minister of Industry, bearing a commencement date September 1, 1997, as
amended on March 27, 1998.

                  (cc) "UMASS" means the Worcester Foundation for Experimental
Biology Inc. in its capacity as Licensor under the UMASS Agreement and its
successors in such capacity.

                                      -4-
<PAGE>

                  (dd) "UMASS Agreement" means the License Agreement between
UMASS and Hybridon, Inc. effective February 21, 1990, as restated on September
8, 1993 and amended on December 18, 1995 and July 1, 1999.

                  1.2 Other Rules of Interpretation. Unless the context clearly
indicates otherwise, the following rules shall govern the interpretation of this
Agreement:

                  (a) The definitions of all terms defined herein shall apply
equally to the singular, plural, and possessive forms of such terms.

                  (b) All references to "Sections," or "Exhibits" shall mean the
corresponding Sections of and Exhibits to this Agreement.

Article 2         LICENSE GRANTS

         2.1 License to MG98 Product. Subject to the terms and conditions of
this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing
license for all indications, with rights to sublicense (subject to Article 16
below), under all Licensed Patents and Licensed Know-How, to develop, use,
import, sell and offer to sell the MG98 Product in the Territory.

         2.2 License to DNA MT Products. Subject to the terms and conditions of
this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing
license for the oncology and rheumatology indications, with rights to sublicense
(subject to Article 16 below), under all Licensed Patents and Licensed Know-How,
to develop, make, have made, use and sell DNA MT Products within the Territory.

         2.3 Transfer of Licensed Patents, Supporting Data and Confidential
Information. Promptly after the Effective Date, MethylGene shall provide to MGI
copies of all Licensed Patents, Supporting Data and Confidential Information
that is material to the management of the Research Program and not previously
disclosed to MGI.

Article 3         RESEARCH AND DEVELOPMENT

         3.1      R&D Steering Committee.
                  ----------------------

                  (a) Within sixty (60) days after the Effective Date, the
parties shall form an R&D steering committee ("R&D Steering Committee") to
manage the research and development collaboration with respect to the Licensed
Products. The R&D Steering Committee will be composed of an equal number of
members from both parties, at not less than 2 members each, and will meet on a
quarterly basis, on an alternating basis between MGI's and MethylGene's
facilities.

                  (b) The R&D Steering Committee shall establish a written R&D
Plan for the Licensed Products, to be mutually agreed by the parties within
sixty (60) days after the Effective Date. The R&D Plan will detail each party's
responsibilities in the research and development of

                                      -5-
<PAGE>

the Licensed Products, including without limitation, the Research Program to be
carried out by MethylGene, and will be updated annually. Additional
responsibilities of the R&D Steering Committee shall include overseeing the
planning, budgeting and monitoring of the research program and all clinical
development of the Licensed Products. The R&D Steering Committee shall consider
and exploit (to the extent available) any tax advantages and economic
efficiencies applying to the conduct of any clinical studies in Canada. If the
R&D Steering Committee cannot resolve an issue within its purview, the CEOs of
both parties will meet to settle such issue; provided, however, that if the CEOs
are not able to amicably settle any such issues, MGI will have the deciding vote
for the settlement of such issue.

                  (c) At MGI's request, MethylGene's Head of Research and
Director of Chemistry will be available for a reasonable amount of consulting
with MGI on acylfulvene analogs. Such consulting shall be provided at no
additional charge to MGI, provided, however, that MGI shall bear the reasonable
travel and lodging expenses incurred by MethylGene's Head of Research and
Director of Chemistry in connection with providing such consulting services.

         3.2      Development of MG98 and DNA MT Products.
                  ---------------------------------------

                  (a) MGI will use its Best Efforts to develop the MG98 Product
and one or more DNA MT Products and to obtain Marketing Authorizations therefor
in the Territory, at MGI's expense. During the term of this Agreement, MGI shall
not research, develop or commercialize, itself or with any third party, any
compound or product that directly inhibits the enzyme DNA methyltransferase or
the mRNA of DNA methyltransferase (or any replacement target chosen pursuant to
Section 3.4(b)), except with the prior written consent of MethylGene.

                  (b) The parties may determine that the MG98 Product and one or
more DNA MT Products have applications outside of the field of oncology and
rheumatology. If so, the parties shall jointly determine whether it is
commercially feasible and prudent to partner with an appropriate third party
capable of developing and commercializing the applicable compound for such
indication or indications in the Territory. Such transaction will be based on a
mutually agreed value sharing agreement between MGI and MethylGene, to be
negotiated in good faith; provided that the payments under such agreement shall
be in lieu of any royalties otherwise payable to MethylGene hereunder. If MGI
elects not to participate in such a mutually agreed value sharing agreement and
so notifies MethylGene in writing, the rights with respect to such Licensed
Product in such indication shall automatically revert to MethylGene.

                  (c) MethylGene shall perform, at a minimum, at least 40% of
the Phase II portion of the R&D Plan for the MG98 Product in the U.S. and /or
Canada, on the behalf of MGI, as set forth in the R&D Plan. The amount of work
to be funded by MGI and performed by MethylGene shall be equivalent to a minimum
of *** in R&D Costs. This amount will partially cover contracted work and
supplies already dedicated to Phase II clinical trials in the U.S. & Canada.
MethylGene shall use its Best Efforts to obtain and contribute all applicable
government support as an expenditure under the R&D Plan.

*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

                                      -6-
<PAGE>

         3.3 Reimbursement for Past R&D. In order to reimburse MethylGene for
its past research and development with respect to the Licensed Products, MGI
shall pay to MethylGene the following:

                  (a) U.S. $3,475,000 for past research and development work on
the MG98 Product. Such amount will be payable as follows: U.S. $1,618,750 within
two (2) days of the Effective Date, and the balance in three equal installments
on September 28, 2000, November 28, 2000 and February 28, 2001; and

                  (b) U.S. $2,225,000 for past research and development work on
the DNA methyltransferase research program. Such amount will be payable in four
equal installments on the Effective Date hereof, September 28, 2000, November
28, 2000 and February 28, 2001. Within thirty (30) days after receipt of FDA
approval of an Investigational New Drug Application in the U.S. for the first
DNA MT Product, MGI will pay MethylGene an additional U.S. $1 million as
compensation for past research and development work on the DNA methyltransferase
research program.

         3.4      On-Going Research Support
                  -------------------------

                  (a) MethylGene will continue the Research Program and will
dedicate 8 FTEs to such research. MGI will fund MethylGene's R&D Costs for the
performance of the Research Program, up to U.S. $6 million over the two year
period starting on the Effective Date. Such funding shall be made semi-annually
in arrears, and at MGI's sole option, may be paid in cash (U.S. dollars) or
shares of MGI common stock; provided, however, that no more than U.S. $1.5
million of such funding will consist of common shares of MGI in any year.

                  (b) MGI shall have an option, exercisable no earlier than six
(6) months and no later than eighteen (18) months after the Effective Date, to
pursue another research target (other than a target under investigation by
MethylGene) agreed upon by the R&D Steering Committee in lieu of the DNA
methyltransferase target. If the option is exercised to replace the target, MGI
will continue to fund MethylGene's development work with respect to all research
targets pursued for a minimum of an additional eighteen (18) months after the
date of exercise, and a minimum of *** after the date of exercise, payable as
set forth in Section 3.4(a).

                  (c) MethylGene acknowledges that any shares received from MGI
in payment of its funding obligation under Section 3.4(a) may be "restricted
securities" within the meaning of Rule 144 under the U.S. Securities Act of
1933, that such shares will not be transferable in the U.S. markets unless and
until such shares are either registered under the U.S. Securities Act of 1933 or
an exemption from such registration requirement is available, and that, in
connection with any issuance of such shares, MethylGene will be required to make
reasonable and customary representations to MGI concerning its investment intent
and status as an "accredited investor" under U.S. securities laws. If and to the
extent that MGI elects to make such payments in shares, MGI agrees to file a
registration statement on Form S-3 to register such shares under the Securities
Act of 1933 for resale by MethylGene within 15 calendar days after delivery of

*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

                                      -7-
<PAGE>

such shares to MethylGene and to use its best efforts to have such registration
statement declared effective as soon as possible after the filing thereof.
Notwithstanding any such registration, MethylGene agrees that, in connection
with any sale of such shares on the Nasdaq National Market (or on any securities
exchange or other public trading market on which MGI's common stock is then
traded), the number of shares of MGI common stock sold by MethylGene on any day
will not exceed 10% of the average daily trading volume of MGI's common shares
in that market for the preceding five trading days. MGI agrees that, if and to
the extent that MethylGene sells any shares of MGI common stock received
hereunder on the Nasdaq National Market (or on any securities exchange or other
public trading market on which MGI's common stock is then traded) at a price
that is less than the price used to determine the number of shares to be
received by MethylGene in payment of such funding obligation, then MGI shall
make a cash payment to MethylGene (within five days after receipt from
MethylGene of evidence of such sale reasonably satisfactory to MGI) in U.S.
dollars equal to the aggregate decrease in the value of such shares sold by
MethylGene; provided, however, that MGI's obligation to make such payments shall
terminate and not apply to any sale of shares by MethylGene occurring after the
day on which, assuming MethylGene were selling as many shares as possible each
day subject to the registration requirements of the U.S. Securities Act of 1933
and the volume limitations agreed to above, MethylGene could have disposed of
all of its shares in such market.

         3.5 Mutual Assistance. The parties agree to provide to each other such
assistance as the other party shall reasonably request for purposes of obtaining
Marketing Authorizations for the Licensed Products. Such assistance shall
include (i) making its personnel available, both in person and by telephone, for
reasonable periods of time, to advise personnel of the other party in connection
with its applications for Marketing Authorization for the Licensed Products;
(ii) collaborating in interpreting Supporting Data provided by either party to
the other, and (iii) providing the other party with copies of all regulatory
documentation and submissions prepared by the other party.

         3.6 Coordination of Testing and Trials. The parties shall keep one
another fully and currently informed as to all tests and trials that they intend
to carry out for purposes of compliance with regulatory requirements and shall
cooperate in the design of such tests and trials in order to ensure to the
maximum possible extent that duplication of effort will be avoided, and, that
the results will be suitable for filing with Regulatory Authorities inside and
outside of the Territory. Without limiting the generality of the foregoing, the
parties shall use their Best Efforts to ensure that all clinical trials of the
Licensed Products that they shall undertake after the Effective Date shall be
designed and conducted in accordance with good clinical practices and good
laboratory practices as established for both inside and outside of the
Territory.

         3.7 Nonsolicitation. During the term of the Research Program and for a
one (1) year period thereafter but in any event for at least three (3) years
from the Effective Date, neither party nor its Affiliates shall directly or
indirectly seek to employ any senior scientist or member of senior management
who was employed by the other party or its Affiliates during such period or any
other individual employed by the other party or its Affiliates who worked at any
time on the Research Program; provided, however, that nothing herein shall
restrict a party from making general solicitations for job applicants (e.g.,
help wanted ads).

                                      -8-
<PAGE>

         3.8 Contribution and Reimbursement. In the event that MethylGene does
not obtain acceptance of the Phase II protocol in respect of the MG98 Product
from the FDA or other Regulatory Authority in the Territory on or before October
1, 2000, MethylGene will contribute U.S. $1 million to the Research Program.
Upon MethylGene obtaining such FDA or other Regulatory Authority approval after
October 1, 2000, MGI shall reimburse MethylGene the amount of U.S. $1 million as
compensation for past research and development work for the MG98 Product.

Article 4         MARKETING AND MANUFACTURE

         4.1 Efforts to Commercialize. Once Marketing Authorization has been
received for the applicable Licensed Product and subject to the availability of
sufficient commercial supplies of such Licensed Product for commercial launch,
MGI shall use its Best Efforts to promote, market and sell the MG98 Product and
one or more DNA MT Products in the Territory. In the event MGI fails to meet its
obligations under this Section 4.1 with respect to the MG98 Product or one or
more DNA MT Products in the Territory, MethylGene may notify MGI in writing
thereof. Such notice shall specify the nature of MGI's noncompliance under this
Section 4.1, including, without limitation, the basis upon which MethylGene has
made such determination. MGI shall have sixty (60) days following receipt of
such notice to cure such non-compliance and if such non-compliance is not cured
within such period, MethylGene shall have the right within its sole discretion
to terminate MGI's licenses hereunder granted, on a product-by-product basis,
for the applicable Licensed Product, by giving written notice to MGI.

         4.2 Copromotion Option. MethylGene shall have the right and option at
its discretion to co-promote the MG98 Product or the DNA MT Products in the
Territory using its own resources and/or a third party sales force acceptable to
MGI. If MethylGene desires to so co-promote any of the Licensed Products, it
shall so notify MGI in writing. Such co-promotion shall be subject to the terms
of a separate co-promotion agreement between the parties, which agreement shall
include a co-promotion split based on the relative financial and resources
contributions of each party to the development and commercialization of the MG98
Product or the DNA MT Products (including, without limitation, research,
development, commercial launch and on-going commercial and medical support).
Such co-promotion split shall be in lieu of royalties otherwise payable by MGI
to MethylGene hereunder with respect to such Licensed Product. The parties
acknowledge that to achieve an appropriate co-promotion split, MethylGene or its
third-party sales force may be required to make an up-front payment to MGI in
partial compensation for MGI's financial and resources contribution to the
development of the MG98 Product or the DNA MT Products, as applicable.

         4.3 Compliance with Laws. MGI shall ensure that the marketing,
promotion and sale of the Licensed Products complies with the conditions and
requirements of any applicable Marketing Authorizations, and with all other
applicable legal and regulatory requirements in the Territory.

                                      -9-
<PAGE>

         4.4 Manufacture of MG98 Product. MGI acknowledges and agrees that it
shall not have the right to manufacture the MG98 Product. MGI intends to
contract for such supply directly with Hybridon, MethylGene's supplier of the
MG98 Product. At MGI's request, MethylGene shall provide reasonable assistance
in such discussions with Hybridon and shall be entitled to review and comment on
the terms of the proposed supply agreement. In addition, MethylGene shall be
entitled to obtain a copy of the final, executed supply agreement, subject to
MGI's confidentiality obligations to Hybridon; provided that MGI shall use its
Best Efforts to obtain Hybridon's consent to the disclosure of the supply
agreement to MethylGene and its sublicensees outside of the Territory. To the
extent commercially feasible and reasonable, MGI shall make reasonable efforts
to negotiate a worldwide supply agreement for the supply of MG98 Product, which
negotiations will include MethylGene. If, for any reason, MGI is unable to
negotiate a satisfactory supply agreement with Hybridon, MethylGene shall assign
and provide to MGI all rights available to it relating to the Territory under
that certain supply agreement between MethylGene and Hybridon, dated as of
January 4, 1996, as amended on December 15, 1997 and May 5, 1998, including,
without limitation, pricing terms, product warranties and contingent rights of
manufacturing. The parties acknowledge that, in any of the cases described
above, the manufacture and supply of the MG98 Product must comply with all Third
Party Agreements.

Article 5         MILESTONES AND ROYALTIES

         5.1 Milestone Payments. MGI shall pay MethylGene the following
milestone payments upon the attainment of the following milestones for the MG98
Product and the first DNA MT Product to meet the applicable milestones. Such
payments shall be made once with respect to each milestone for the MG98 Product
and once with respect to each milestone for the first DNA MT Product to meet the
applicable milestones, within thirty (30) days after the occurrence of the
applicable event:

                                                                  Amount
                           Event                              (U.S. Dollars)
                           -----                              --------------

                  Commence Phase II (DNA MT Product only)     ***
                  Commence Phase III                          ***
                  NDA filing in U.S.                          ***
                  NDA filing in Canada                        ***
                  Approval in U.S.                            ***
                  Approval in Canada                          ***
                  Approval of 2nd U.S. indication             ***
                  Approval of 2nd Canadian indication         ***
                  1st calendar year Net Sales Revenue > ***   ***

         5.2 Running Royalties. MGI shall pay MethylGene the following royalties
on Net Sales Revenue in the Territory, as set forth below, within forty five
(45) days of the end of each calendar quarter. In addition, MethylGene and MGI
will each be responsible for paying 50% of any third party royalties applicable
to the MG98 Product or any DNA MT Product from time to

*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

                                      -10-
<PAGE>

time under the Third Party Agreements (the "MethylGene Third Party Royalty" and
"MGI Third Party Royalty", respectively).

         Net Sales Revenue of MG98 Product
         ---------------------------------

         *** on calendar year Net Sales Revenue of up to U.S. $ 100 million
         *** on calendar year Net Sales Revenue over U.S. $ 100 million to U.S.
             $150 million
         *** on calendar year Net Sales Revenue over U.S. $150 million to U.S.
             $250 million
         *** on calendar year Net Sales Revenue over U.S. $250 million

         Net Sales Revenue of DNA MT Products in the field of oncology and
         -----------------------------------------------------------------
rheumatology
------------

         *** on calendar year Net Sales Revenue of up to U.S. $ 150 million
         *** on calendar year Net Sales Revenue over U.S. $ 150 million

MGI's obligation to pay royalties hereunder shall expire, on a
country-by-country basis, at such time as (i) all of the Licensed Patents have
expired in such country or (ii) ten (10) years from the first commercial sale of
any Licensed Product, whichever is longer.

         5.3      Milestone Payments and Royalty Reductions.
                  -----------------------------------------

                  (a) Upon MethylGene licensing each of the MG98 Product and the
DNA MT Products outside of the Territory, the following will be payable to MGI
within thirty (30) days of the occurrence of the applicable milestone event, if
MethylGene or the third party who licenses the product in the following
territories utilizes any Supporting Data created during the collaboration and
funded by MGI:

<TABLE>
<CAPTION>
                                                                       Amount
         Event                                                     (U.S. Dollars)
         -----                                                     --------------
                                                     European Union (E.U.)     Japan
                                                     ---------------------     -----
         <S>                                         <C>                       <C>
         Execution of an Agreement with a            ***                       ***
               third party licensee
         Commencement of Phase III trials or         ***                       ***
              a pivotal trial equivalent
         1st Approval                                ***                       ***
</TABLE>

                  (b) MGI's royalty on sales of the MG98 Product and DNA MT
Products as set forth in Section 5.2 will be reduced as follows: Royalty reduced
by *** upon 1st calendar year with combined E.U. and Japanese Net Sale Revenues
of each such product between U.S. $ 25 million and U.S. $50 million and further
reduced by an additional *** (for a total reduction of ***) for combined E.U.
and Japanese Net Sales Revenues of each such product above U.S. $50 million.
MethylGene shall notify MGI in writing when combined E.U. and Japanese Net Sales
Revenues of each such product reach the foregoing levels, and MGI shall be
entitled thereafter to use such adjusted royalty rate in calculating its royalty
obligations under Section 5.2.

*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

                                      -11-
<PAGE>

                  (c) If MGI's gross margin on the MG98 Product is less than
***, MGI's royalty on Net Sales Revenues of the MG98 Product shall be reduced by
the percentage amount that MGI's gross margin is less than ***, provided that in
no event shall the royalty rate payable to MethylGene be less than ***, plus an
amount equal to the MethylGene Third Party Royalty and provided that MGI shall
remain obligated to pay the MGI Third Party Royalty. Gross margin shall include
all manufacturing costs, including bulk active pharmaceutical ingredient, third
party royalties and royalties due MethylGene.

                  (d) In the event that there is Generic Competition (as defined
below) with respect to a Licensed Product in any country in the Territory, the
royalty payable by MGI on Net Sales Revenue of the applicable Licensed
Product(s) shall thereafter be reduced in such country by ***, provided that MGI
shall remain obligated to pay the MGI Third Party Royalty. In this Section
5.3(d), "Generic Competition" means the introduction in a country, in the field
of oncology or rheumatology, of a product that is identical in structure and
composition to a Licensed Product and that has achieved, in the most recent
completed calendar year, a *** market share by quantity in the relevant market
in which such Licensed Product and such other product compete.

         5.4 Reports. MGI shall provide to MethylGene, on or before the date
which shall be forty-five (45) days after the end of each calendar quarter
during the term of this Agreement, a report which shall show (a) the calculation
of Net Sales Revenue for such calendar quarter in the Territory and the
calculation of the royalties payable thereon and (b) the calculation of MGI's
gross margin on the MG98 Product. If actual Net Sales Revenue of any sublicensee
for that quarter is unavailable at the time such quarterly report is due, MGI
shall include in its report for that quarter a good faith estimate of such Net
Sales Revenue, and an appropriate adjustment for the difference between the
actual and estimated Net Sales Revenue shall be made in the report for the
following quarter, with a corresponding adjustment in the amount of royalties
payable in respect of that quarter.

         5.5 Exchange Rates. All payments hereunder shall be made in U.S.
dollars. For purposes of determining the amount of Net Sales Revenue during any
calendar quarter, the total of all sales in each other currency during such
quarter shall be converted into dollars at the rate in effect at the time such
payment is due and payable hereunder, as reported by the Wall Street Journal.

         5.6 Books and Records. During the term of the Agreement and for three
(3) years thereafter, each party shall keep accurate and complete records
showing all sales of Licensed Products by it and its sublicensees, and in the
case of MGI, its gross margin on the MG98 Product, and in the case of
MethylGene, its R&D Costs. Such records shall include all information necessary
to verify the total amount and computation of any amounts owing hereunder, and
shall be open to inspection and audit, during reasonable business hours, to the
extent necessary to verify the amount of such royalties. Such inspection and
audit shall be conducted at the request and expense of the auditing party by an
independent Certified Public Accountant appointed by the auditing party and
reasonably acceptable to the audited party. In the

*** Denotes confidential information that has been omitted from the exhibit and
filed separately, accompanied by a confidential treatment request, with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.

                                      -12-
<PAGE>

normal course, such inspection and audit shall be made not more often than once
in each calendar year. Such Certified Public Accountant shall undertake a
confidentiality obligation to the audited party permitting it to disclose to the
auditing party, and only the auditing party, the amount of the sales, Net Sales
Revenue, gross margin, R&D Costs or royalties due hereunder (as applicable), and
no other information. The auditing party shall bear the costs of any such
inspection and audit; provided that if any inspection and audit reveals an
underpayment or underreporting of more than five percent (5%), the audited party
shall reimburse the auditing party for its out-of-pocket costs for such
inspection and audit.

         5.7 Taxes. All payments to be made pursuant to this Agreement represent
net amounts that the party being paid is entitled to receive and shall not be
subject to withholding or deduction for any reason whatever. In the event that
such payments become subject to duties, taxes or charges of whatever kind or
nature levied by any country other than the United States, such payments shall
be increased to such an extent as to allow the party being paid to receive the
net amounts due under this Agreement.

         5.8 Payments. Each such payment shall be made in U.S. dollars by wire
transfer to the account of the party receiving same at a bank designated in
writing by that party from time to time. Any overdue amounts hereunder shall
bear interest at the rate of twelve percent (12%) per annum, or the maximum
legal interest rate, whichever is lower.

Article 6         Regulatory Matters

         6.1 Marketing Authorizations. MGI shall be responsible for obtaining
all Marketing Authorizations for the Licensed Products in the Territory, in its
own name and at its own expense. To the extent permitted by law, MethylGene
shall promptly take all necessary actions with the FDA and the Canadian
Regulatory Authority to name MGI as the applicant on all active INDs for the
Licensed Products and shall provide MGI with a right of reference and access to
any and all Supporting Data owned or controlled by MethylGene, solely for MGI's
regulatory purposes in the Territory. MGI shall provide MethylGene with a right
of reference and access to any and all Supporting Data owned or controlled by
MGI, solely for MethylGene's regulatory purposes in and outside the Territory. A
receiving party shall treat any Supporting Data owned or controlled by and
received from the other party as Confidential Information of the other party,
provided however, such receiving party shall be permitted to disclose such
Confidential Information to its officers or employees and, with respect to
MethylGene, (a) to any Regulatory Authority outside the Territory and, (b) upon
the expiry or termination of this Agreement for any reason, to any Regulatory
Authority, whether in or outside the Territory.

         6.2 Other Information and Data. Each party shall provide to the other
party complete and accurate copies of all documentation containing Supporting
Data, Adverse Experience Data (as defined below) and other data relating to the
Licensed Products, which is prepared or acquired by such party or any of its
respective sublicensees during the term of this Agreement. Copies of Supporting
Data shall be forwarded by first class mail or faster means of transmission
within thirty (30) days after it shall have been prepared or acquired. Copies of
Adverse Experience Data shall be forwarded by facsimile or courier as quickly as
may be necessary to

                                      -13-
<PAGE>

permit the recipient to comply with any applicable legal requirements and in no
event later than the earlier of (i) seven (7) days after such Adverse Experience
Data is prepared or acquired and (ii) the date on which such Adverse Experience
Data is provided to any Regulatory Authority. Any information or documentation
is required to be provided to MGI by MethylGene hereunder shall be provided to
MGI in English. As used herein, the term "Adverse Experience Data" shall mean
all data concerning any serious or unexpected adverse effects, side-effects and
contraindications of any Licensed Product which come to the attention of either
party or its sublicensee and which is of such a nature and magnitude that it is
required under the laws of the any country in the Territory to be collected,
maintained and reported to Regulatory Authority.

         6.3 Regulatory Rights and Obligations upon Reversion of License Grant.
In the event of the license grants under Sections 2.1 and 2.2 reverting to
MethylGene, all rights to MethylGene and obligations of MGI pursuant to Sections
6.1 and 6.2 above shall survive this Agreement. MGI agrees to assign to
MethylGene any Marketing Authorizations for the Licensed Products and to name
MethylGene as the applicant for all active INDs. MGI shall take all necessary
actions with the FDA and the Canadian Regulatory Authority to effect such
assignment and naming of MethylGene.

Article 7         INTELLECTUAL PROPERTY

         7.1 Joint Inventions. Any inventions relating to the Licensed Products
or arising from the parties' efforts under this Agreement that are jointly made
by both parties (i.e., an invention in which one or more inventors from each
party, including individuals normally obliged to assign an invention to a party,
have made an inventive contribution as determined by United States Patent Law),
and any patents thereof, shall be jointly owned by the parties.

         7.2 Patent Prosecution. The parties intend that the filing, prosecution
and maintenance of any patent applications for the Licensed Patents (including
any joint inventions as set forth in Section 7.1) will be effected and remain
under the control of MethylGene and MethylGene shall have the right (but not the
obligation) to undertake such filings, prosecutions and maintenance at its sole
expense (except reimbursement as provided in the definition of R&D Costs),
provided that: (a) MethylGene notifies MGI within one (1) month prior to the
filing of any patent application by MethylGene; (b) MethylGene provides MGI
promptly with copies of all communications received from or filed in patent
office(s) with respect to such filings; and (c) MethylGene provides MGI a
reasonable time prior to taking or failing to take any action that would affect
the scope or validity of rights under any patent applications or patents
(including but not limited to substantially narrowing or canceling any claim,
abandoning any patent or not filing or perfecting the filing of any patent
application in any country), with notice of such proposed action or inaction so
that MGI has a reasonable opportunity to review and make comments. If MethylGene
decides, in its sole discretion, to abandon a patent or patent application (or
particular claims therein) within the Licensed Patents, then it shall so notify
MGI in writing at least sixty (60) days prior to any filing or bar date, and MGI
may take whatever action it deems necessary at its expense to maintain such
patent or patent application.

                                      -14-
<PAGE>

         7.3 Prosecution. On request of the party performing the filing of any
patents hereunder, the other party will cooperate in all reasonable ways, in
connection with the prosecution of all patents resulting from inventions. The
party performing the filing agrees to assign the patents to the other party,
should it no longer be interested in prosecuting or maintaining them, and should
the other party desire such assignment from case to case.

         7.4      Enforcement.
                  -----------

                  (a) MGI shall have the first right, but not the obligation, in
its discretion and at its sole expense, to prosecute any alleged infringement,
misappropriation or misuse of the Licensed Patents and Licensed Know-How in the
Territory. MethylGene shall have the right to participate in such action at its
own expense, and shall be consulted regarding any proposed settlement. In any
such legal action, any monies recovered shall be allocated as follows: (i)
first, to reimburse MGI for its costs and expenses incurred in such action, and
(ii) second, if any balance is remaining, to reimburse MethylGene for any
royalties remaining on the remaining balance, as calculated in accordance with
Section 5.2 and subject to Section 5.3. MGI shall be entitled to retain any
amounts left after payment of the foregoing.

                  (b) If MGI decides at any time not to commence or actively
continue prosecution of such a legal action, it shall so notify MethylGene in
writing, and MethylGene shall have the right, in its absolute discretion and
sole expense, to commence or continue prosecution of such action. In any such
legal action, MethylGene shall be entitled to retain all monies recovered;
provided, however, that if MGI decides, upon the recommendation of the R&D
Steering Committee, not to commence or continue prosecution of such action in
order to permit MethylGene to do so with respect to such infringement,
misappropriation or misuse both inside and outside the Territory, MGI shall have
the right to participate in such action at its own expense and shall be
consulted regarding any proposed settlement, and any monies recovered shall be
allocated as follows: (i) first, to reimburse MethylGene for its costs and
expenses incurred in such action; (ii) second, if any balance is remaining, to
reimburse MethylGene for any royalties owing on the remaining balance, as
calculated in accordance with Section 5.2 and subject to Section 5.3; and (iii)
third, if any further balance is remaining, to compensate MGI for lost profits
resulting from such infringement, misappropriation or misuse. MethylGene shall
be entitled to retain any amounts left after payment of the foregoing.

Article 8         REPRESENTATIONS & WARRANTIES

         8.1 By MethylGene. MethylGene hereby represents and warrants to MGI as
follows:

                  (a) MethylGene has been duly organized and is validly existing
as a corporation in good standing under the laws of the province of Quebec,
Canada, with corporate power to conduct any lawful business activity. MethylGene
has the corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.

                                      -15-
<PAGE>

                  (b) The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated by this Agreement, by
MethylGene have been duly and validly authorized by all requisite corporate
action. This Agreement has been duly executed and delivered by MethylGene and
constitutes the legal, valid and binding obligations of MethylGene, enforceable
against MethylGene in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting the rights of creditors generally, and by
general principles of equity.

                  (c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by
MethylGene do not conflict with or result in any breach of any of the provisions
of, constitute a default under, result in a violation of, give rise to any right
of termination under, or require any authorization, consent (except as may have
been obtained), approval, exemption or other action by or notice to any court or
governmental body, under the provisions of MethylGene's Articles of
Incorporation or bylaws or any indenture, mortgage, lease, loan agreement,
license or other agreement or instrument to which MethylGene is a party
(including without limitation the Third Party Agreements), or of any law,
statute, rule or regulation or order, judgment or decree to which MethylGene is
subject.

                  (d) It has provided to MGI true and correct copies of each of
the Third Party Agreements, together with all amendments and modifications
thereto; MethylGene has received no notice from any of third party licensors (or
their licensors) that it is in material breach of any of its obligations under
the Third Party Agreements, and it is not aware of any material breach of the
Third Party Agreements; and MethylGene is in compliance in all material respects
with the Third Party Agreements.

                  (e) It (i) is the owner of the entire right, title and
interest in and to, or has licensed sufficient rights to, the Licensed Patents
and Licensed Know-How, free and clear of any liens or encumbrances and (ii) has
not assigned and/or granted licenses to the Licensed Patents or Licensed
Know-How, or entered into any inconsistent prior obligations, to any other
person or entity that would restrict or impair the rights granted hereunder.

                  (f) To the best of its knowledge, (i) the Licensed Patents and
Licensed Know-How are valid and enforceable and the Licensed Patents and
Licensed Know-How are not infringed by any third party and (ii) the manufacture,
use or sale of a Licensed Product in the Territory will not infringe any
patents, property or proprietary rights of any third party (the parties
acknowledging Hybridon's exclusive right to manufacture the MG98 Product).
MethylGene has not received any notice from any person or entity claiming to
have any right, title or interest in or to the Licensed Patents and Licensed
Know-How and to the best of its knowledge, there is no reason to expect that any
such notice is forthcoming. To the best of its knowledge, there are no third
party claims that would challenge or impair the license of the rights granted to
MGI herein, including, without limitation, any claims based upon patents,
copyrights or trade secret laws in the Territory.

                                      -16-
<PAGE>

                  (g) There are no actions, suits, proceedings or inquiries
pending or threatened in writing against or affecting MethylGene at law or in
equity or before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which may in any way materially adversely affect MethylGene
or the transactions contemplated hereby.

         8.2 By MGI. MGI hereby represents and warrants to MethylGene as
follows:

                  (a) MGI has been duly organized and is validly existing as a
corporation under the laws of Minnesota, with corporate power to conduct the
business contemplated by this Agreement. MGI has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement.

                  (b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by MGI
have been duly and validly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by MGI and constitutes the legal,
valid and binding obligations of MGI, enforceable against MGI in accordance with
its terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting the
rights of creditors generally, and by general principles of equity.

                  (c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by MGI
do not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, or require any
authorization, consent (except as may have been obtained), approval, exemption
or other action by or notice to any court or governmental body, under the
provisions of MGI's Restated Articles of Incorporation or bylaws or any
indenture, mortgage, lease, loan agreement, license or other agreement or
instrument to which MGI is a party, or of any law, statute, rule or regulation
or order, judgment or decree to which MGI is subject.

Article 9         INDEMNIFICATION

         9.1 Indemnification by MGI. MGI shall indemnify, defend and hold
harmless MethylGene from and against any and all liabilities, damages, losses,
costs or expenses (including attorneys' and professional fees and other expenses
of litigation and/or arbitration) ("Liabilities") resulting from a claim, suit
or proceeding made or brought by a third party against MethylGene arising from
or occurring as a result of (a) any breach of the representations and warranties
set forth in Section 8.2; (b) any research, development, testing, importation,
use, offer for sale, sale or other distribution of any Licensed Product by MGI
or its Affiliates or sublicensees (including without limitation, product
liability claims), or (c) failure of MGI or any of its Affiliates or
sublicensees to comply with any provision of this Agreement, or with any
applicable laws, regulations and/or administrative decisions relating to the
Licensed Products, except in each case to the extent caused by the negligence or
willful misconduct of MethylGene.

                                      -17-
<PAGE>

         9.2 Indemnification by MethylGene. MethylGene shall indemnify, defend
and hold harmless MGI and its sublicensees from and against any and all
Liabilities resulting from a claim, suit or proceeding made or brought by a
third party against MGI arising from or occurring as a result of (a) any breach
of the representations and warranties set forth in Section 8.1; (b) any
research, development, testing, manufacture, importation, use, offer for sale,
sale or other distribution of any Licensed Product by MethylGene or any of its
Affiliates, contract manufacturers or sublicensees (including without
limitation, product liability claims) or (c) failure of MethylGene or any of its
Affiliates, contract manufacturers or sublicensees to comply with any provision
of this Agreement, or with any applicable laws, regulations and/or
administrative decisions relating to the Licensed Products, except in each case
to the extent caused by the negligence or willful misconduct of MGI.
Notwithstanding the foregoing, MethylGene's obligation to indemnify, defend and
hold MGI and its sublicensees harmless with respect to Liabilities resulting
from the manufacture by contract manufacturers of the MG98 Product shall be
limited to the assignment and subrogation in favor of MGI or its sublicensee, as
the case may be, of MethylGene's rights against such contract manufacturers.

         9.3 Subrogation. In the event that any indemnified party intends to
claim indemnification under this Article 9 it shall promptly notify the other
party (the "indemnifying party") in writing of such alleged claim. The
indemnifying party shall have the sole right to control the defense and
settlement thereof. The indemnified party shall cooperate with the indemnifying
party and its legal representatives in the investigation of any action, claim or
liability covered by this Article 9. The indemnified party shall not, except at
its own cost, voluntarily make any payment or incur any expense with respect to
any claim or suit without the prior written consent of the indemnifying party,
which the indemnifying party shall not be required to give. In addition, the
indemnifying party shall be subrogated to the rights of the indemnified party
against any third party, and such indemnified party hereby assigns to the
indemnifying party all claims, causes of action and other rights which the
indemnified party may then have against any third party, including Affiliates
and sublicensees and, in the case of MethylGene, against any contract
manufacturer of Licensed Products, with respect to the claim, suit or
proceeding. Conversely, and without in any way limiting the obligation of either
party to indemnify the other party as herein provided, to the extent that either
party shall fail to perform its indemnification obligations under Section 9.1 or
Section 9.2, such party owing a duty of indemnification hereby assigns to the
other party all claims, cause of action and other rights which the party owing
such duty may then have against any third party, including Affiliates and
sublicensees and, in the case of MethylGene, against any contract manufacturer
of Licensed Products, with respect to the claim, suit or proceeding.

         9.4 Insurance. Each party agrees to procure and maintain in full force
and effect during the term of this Agreement valid and collectible insurance
policies in connection with its activities as contemplated hereby, which
policies shall provide coverage in an amount not less than U.S.$5 million per
calendar year. Upon request, each party shall provide to the other party a
certificate of coverage or other written evidence reasonably satisfactory to
such other party of such insurance coverage.

Article 10        CONFIDENTIALITY

                                      -18-
<PAGE>

         10.1 Non-Use and Non-Disclosure. Each party acknowledges and agrees
that all the other party's Confidential Information is confidential and
proprietary to the disclosing party. Without the consent of the other party,
neither party shall use or disclose to any third party in connection with the
other party's Confidential Information for any purpose other than as permitted
or required hereunder; provided that each party can disclose Supporting Data and
information with respect to the Health Registration Dossier to its respective
sublicensees or potential sublicensees so long as such sublicensees or potential
sublicensees have executed a non-use and non-disclosure agreement with terms
comparable to the terms hereof. Each party shall take the same reasonable
measures necessary to prevent any disclosure by its employees, agents,
contractors, or consultants of the other party's Confidential Information as it
applies to the protection of its own Confidential Information.

         10.2 Publications. Prior to the publication or presentation of any
information or data arising from the Research Program, the publishing party
shall submit to the other party (the "reviewing party") a summary of the
proposed publication or presentation at least sixty (60) days prior to the
submission thereof for publication or presentation. The purposes for such prior
submission are: (i) to provide the reviewing party with the opportunity to
review and comment on the contents of the proposed publication or presentation,
and (ii) to identify any Confidential Information of the reviewing party to be
deleted from the proposed publication or presentation. The reviewing party shall
provide any comments to the publishing party or identify any of the reviewing
party's Confidential Information to be deleted from the proposed publication or
presentation within thirty (30) days of receipt of the proposed publication or
presentation. If so requested by the reviewing party, the publishing party shall
delete any of the reviewing party's Confidential Information and shall delay
publication or presentation for an additional sixty (60) days to allow for
filing a patent application or taking such other measures as the reviewing party
deems appropriate to establish and preserve its proprietary rights. If the
reviewing party fails to comment within the thirty (30) day review period, the
publishing party shall be free to proceed with publication or presentation.

         10.3 Exclusions. Information shall not be considered Confidential
Information hereunder if it:

                  (a) was already in the possession of the receiving party prior
to its receipt from the disclosing party, as shown by the receiving party's
books and records;

                  (b) is, or becomes, part of the public knowledge or literature
through no fault, act or omission of the receiving party, provided, Confidential
Information shall not be deemed to have entered the public domain by reason of
its having been filed with any Regulatory Authority;

                  (c) is, or becomes, available to the receiving party from a
source other than the disclosing party, which source has rightfully obtained the
same information and has no obligation of confidentiality to the disclosing
party with respect to it;

                                      -19-
<PAGE>

                  (d) is made available on an unrestricted basis by the
disclosing party to a third party unaffiliated with the disclosing party; or

                  (e) is required to be revealed pursuant to law, provided,
however, the receiving party which is under any such requirement of law shall
give reasonable notice to the disclosing party of such requirement and shall
cooperate with the disclosing party in reasonable legal efforts to limit or
mitigate any such revelation so as to preserve the proprietary nature of any
Confidential Information contained therein.

         10.4 Duration; Surviving Obligation. Each party's obligations of
non-use and non-disclosure of the other party's Confidential Information shall
apply during the term of this Agreement and shall also survive its termination
or expiration for any reason.

Article 11        FORCE MAJEURE

         11.1 Definition and Notice. "Force Majeure" shall mean any event, not
existing as of the Effective Date and not reasonably within the control of the
parties as of such date, which, in whole or in material part, prevents or makes
commercially unreasonable one party's performance of its obligations under this
Agreement. Force Majeure shall include, without limitation: fire, storm,
earthquake, flood, acts of State or other governmental action, war or civil
unrest, strikes, and prolonged shortage of energy or any other supplies. A party
affected by an event of Force Majeure shall promptly provide the other party
with written notice describing the event, its cause and foreseeable duration,
and its possible consequences upon performance under this Agreement.

         11.2 Suspension of Performance. After an affected party has given
notice under Section 11.1, that party shall be relieved of any liability under
this Agreement, except for the obligation to pay amounts due and owing, but only
to the extent and only for so long as the Force Majeure prevents performance.
The other party may likewise suspend the performance of all or part of its
obligations, except for the obligation to pay any amounts due and owing, to the
extent that such suspension is commercially reasonable.

         11.3 Termination. If the period of Force Majeure continues for more
than one (1) year, either party may terminate this Agreement upon giving notice
to the other party without incurring liability other than the obligation to make
payments due to such date.

Article 12        TERM AND TERMINATION

         12.1 Term of Agreement. The term of this Agreement shall commence on
the Effective Date and unless earlier terminated in accordance with the
provisions of Article 12, shall continue in full force and effect on a
country-by-country basis and a Licensed Product-by-Licensed Product basis, until
at such time as (i) all of the Licensed Patents have expired in such country or
(ii) ten (10) years from the first commercial sale of any Licensed Product,
whichever is longer.

                                      -20-
<PAGE>

         12.2 Termination for Breach. Either party shall have the right to
terminate this Agreement by written notice to the other party, if such other
party (the "breaching party") is in material breach of its obligations under
this Agreement and has failed to cure such breach within thirty (30) days after
its receipt of written notice thereof from the non-breaching party in the case
of breach of any obligation to make payment as and when due hereunder, or within
sixty (60) days after its receipt of such written notice in the case of breach
of any other material obligation hereunder.

         12.3 Termination for Bankruptcy. If voluntary or involuntary
proceedings by or against a party are instituted in bankruptcy under any
insolvency law, or a receiver or custodian is appointed for such party, or
proceedings are instituted by or against such party for corporate reorganization
or the dissolution of such party, which proceedings, if involuntary, shall not
have been dismissed within sixty (60) days after the date of filing, or if such
party makes an assignment for the benefit of creditors, or substantially all of
the assets of such party are seized or attached and not released within sixty
(60) days thereafter, the other party may immediately terminate this Agreement
effective upon notice of such termination. The parties intend that upon
MethylGene's termination of this Agreement pursuant to this Section, all rights
granted hereunder to MGI shall be terminated and revert to MethylGene. The
parties acknowledge and agree that all rights and licenses granted pursuant to
this Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(52) of the Bankruptcy Code, and that MGI, as a
licensee hereunder, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code, subject to the terms of Third Party
Agreements.

         12.4 Termination without Cause. MGI may terminate this Agreement on a
Licensed Product-by-Licensed Product basis for any reason by ninety (90) days
written notice to MethylGene, which notice may not be given before the date
twenty four (24) months after the Effective Date, provided that in the event MGI
shall have exercised its option under Section 3.4(b), such notice shall not be
given before the date that is eighteen (18) months after such exercise.

                  12.5 Effect of Termination or Expiration. Upon any termination
or expiration of this Agreement, the following provisions shall apply:

                  (a) Termination or expiration of this Agreement shall not
release either party from the obligation to make payment of all amounts then or
thereafter due and payable to the other party hereunder.

                  (b) The licenses granted to MGI hereunder shall terminate on
the effective date of such termination and MethylGene shall have the right to
purchase from MGI any inventory of bulk Licensed Products at the price paid by
MGI for such inventory; provided, however, that notwithstanding any such
termination or expiration, MGI and its sublicensees shall have the right to sell
any remaining inventory of finished Licensed Products in the ordinary course of
business, subject to the payment of royalties hereunder and until such inventory
can be reasonably transferred to MethylGene.

                                      -21-
<PAGE>

                  (c) Promptly after termination or expiration of this Agreement
for any reason, in addition to the terms of Section 6.3, each party shall return
to the other party all of such other party's Confidential Information, or at the
request of the disclosing party, shall destroy such disclosing party's
Confidential Information and shall certify such destruction in writing to the
disclosing party.

                  (d) The parties' respective rights and obligations under
Article 6 (Regulatory Matters), 9 (Indemnification), 10 (Confidentiality), 13
(Limitation of Liability), 14 (Dispute Resolution) and 17(Miscellaneous) shall
survive termination or expiration of this Agreement.

Article 13        LIMITATION OF LIABILITY

         13.1 Limitation of Liability. EXCEPT FOR ANY BREACH OF ARTICLE 10
(CONFIDENTIALITY), IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
HEREUNDER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES, EVEN IF SUCH PARTY SHALL HAVE BEEN ADVISED IN ADVANCE OF THE
POSSIBILITY OF SUCH POTENTIAL LOSSES OR DAMAGES.

Article 14        DISPUTE RESOLUTION

         14.1 Negotiation. The parties agree to consult and negotiate in good
faith to try to resolve any dispute, controversy or claim that arises out of or
relates to this Agreement. Except as provided in Section 14.2, no formal dispute
resolution shall be used by either party unless and until the chief executive
officers of each party shall have attempted to meet in person to achieve such an
amicable resolution.

         14.2 Reservation for Litigation. Notwithstanding Section 14.3 below,
each party expressly reserves the right to seek judicial relief from a court of
competent jurisdiction if the other party is or appears to be in violation of
such other party's obligations of non-use and non-disclosure under Article 10
above, including, without limitation, any injunction or other preliminary
relief.

         14.3 Arbitration. Subject to the reservation of the parties under
Section 14.2 above, any dispute, controversy or claim that arises out of or
relates to this Agreement that is not resolved under Section 14.1 shall be
settled by final and binding arbitration in accordance with the International
Arbitration Rules of the American Arbitration Association ("AAA") in effect on
the Effective Date, as modified by Section 14.4 below. Judgment upon the award
rendered by the arbitrators may be entered in any court of competent
jurisdiction. The place of arbitration shall be Minneapolis, Minnesota, U.S.A.
The arbitration shall be conducted in the English language by three (3) neutral
arbitrators selected by mutual agreement of the parties or, if that is not
possible within thirty (30) days of the initial demand for such arbitration, by
the AAA. At least one (1) arbitrator shall have knowledge of and experience in
the ethical pharmaceutical

                                      -22-
<PAGE>

industry, and at least one (1) arbitrator shall have knowledge of and experience
in international law and technology licensing.

         14.4 Special Rules. Notwithstanding any provision to the contrary in
the AAA's International Arbitration Rules, the parties hereby stipulate that any
arbitration hereunder shall be subject to the following special rules: (a) the
arbitrators may not award or assess punitive damages against either party; and
(b) each party shall bear its own costs and expenses of the arbitration and
one-half (1/2) of the fees and costs of the arbitrators, subject to the power of
the arbitrators, in their sole discretion, to award all such reasonable costs,
expenses and fees to the prevailing party.

         14.5 Survival. The duty of the parties to arbitrate any dispute,
controversy or claim under this Article 14 shall survive the termination of this
Agreement for any reason.

Article 15        THIRD PARTY AGREEMENTS

         15.1 Third Party Agreements. During the term of this Agreement,
MethylGene agrees fully to comply in all material respects with its obligations
under the Third Party Agreements to the extent necessary to preserve its
exclusive rights in the Territory thereunder and to preserve its rights to
supply of the MG98 Product unless and until MGI and Hybridon enter into a
separate supply agreement, except to the extent that such compliance is
dependent upon MGI and its sublicensees. MethylGene agrees to provide MGI with
copies of any amendments to or modifications of any of the Third Party
Agreements that may be proposed from time to time, sufficiently in advance of
execution to allow MGI a reasonable time to comment. MethylGene shall not
terminate any of the Third Party Agreements, or agree to any amendment to or
modification of any of the Third Party Agreements, which may adversely affect
any rights of MGI under this Agreement or the ability of MethylGene to perform
its obligations hereunder this Agreement, without the prior written consent of
MGI, which consent shall not unreasonably be withheld.

Article 16.  ACKNOWLEDGEMENTS OF SUBLICENCE

         16.1 Acknowledgement of Third Party Agreements. MGI acknowledges that
certain of the rights granted to it by MethylGene in this Agreement derive from
Third Party Agreements and are subject to the terms thereof. In particular, and
without limiting the generality of the foregoing, MGI acknowledges that:

                  (a) this Agreement is subject to Subsections 2.2(a), 2.2(b),
2.6,2.7 and 12.4(a) of the UMASS Agreement, substituting MGI for Hybridon and to
Section 6.3 of the TPC Agreement;

                  (b) it has been advised of the rights of UMASS under
Subsections 2.2(c) and 10.4 of the UMASS Agreement;

                                      -23-
<PAGE>

                  (c) in accordance with Subsection 2.2(c) of the UMASS
Agreement, in the event of the termination of the UMASS Agreement, UMASS will
recognize the rights granted under this Agreement and any sublicenses hereof
provided that UMASS has the right to receive payments or other consideration
payable to MethylGene under this Agreement or to the licensor under any
sublicense agreement, as the case may be, and UMASS shall have the right to
terminate this Agreement or the sublicense upon 60 days' notice of a material
breach by MGI or the sublicensee, as the case may be, which is not cured prior
to the expiration of such 60 day period and provided further that UMASS shall
not be responsible to MGI or any sublicensee for any representations, warranties
or obligations of MethylGene to MGI or any sublicensee other than the licenses
under the Patent Rights (as defined in the UMASS Agreement) as authorized in the
UMASS Agreement;

                  (d) McGill University retains rights under Sections 3.3 of
each of the McGill MG98 Agreement and the McGill DNA MT Agreement;

                  (e) to the extent that MethylGene does not enforce the terms
and conditions of this Agreement, Hybridon may do so; and

                  (f) this Agreement is subject to the terms of the IDT
Agreement.

         16.2 Patent Marking. MGI agrees to mark and cause any sublicensees to
mark, any Licensed Products made, used or sold by it or them with any notice of
patent rights necessary or desirable under applicable law to enable the patent
rights to be enforced to the maximum degree in any country where Licensed
Products are made, used or sold.

         16.3 Enforcement and Defense. MGI and its sublicensees shall advise
MethylGene of any claims or infringements subject to the provisions of Article
IX of the UMASS Agreement, whether MGI or the sublicensee, as the case may be,
will handle the enforcement and/or defense of such claims or infringements in
the manner provided in Article IX of the UMASS Agreement and that MGI or its
sublicensee, as the case may be, shall cooperate in the defense and/or
enforcement if such claims at the expense of the party or parties conducting
such defense or enforcement.

                  16.4 Sublicense Provisions. MGI shall not sublicense the
Licensed Patents and Licensed Know-How unless the following conditions have been
met:

                                      -24-
<PAGE>

                  (a) MGI shall provide MethylGene notice of the identity of the
sublicensee at least 14 days prior to the grant of the sublicense, and shall
provide MethylGene a copy of each such sublicense agreement within 30 days after
the grant thereof;

                  (b) All sublicenses shall be in writing and shall:

                           (i) include provisions that, in MGI's good faith
business judgment, require the sublicensee to use Best Efforts to bring the
subject matter of the sublicense into commercial use as quickly as is reasonably
possible;

                           (ii) provide for payments to MGI which, in MGI's good
faith business judgment are commercially reasonable amounts, for the rights
granted; and

                           (iii) prohibit further sublicensing except on terms
containing substantially comparable provisions to those in Section 5.6 and
Article 16.

Article 17        MISCELLANEOUS

         17.1 Entire Agreement. This Agreement, including Exhibits A through B
attached hereto and incorporated as an integral part of this Agreement,
constitute the entire agreement of the parties with respect to the subject
matter hereof, and supersede all previous agreements by and between the parties,
including, without limitation, that certain letter of intent between the parties
dated as of June 28, 2000 (the "Letter of Intent") as well as all proposals,
oral or written, and all prior or contemporaneous negotiations, conversations or
discussions between the parties related to this Agreement.

         17.2 Relationship. The parties are independent contractors and shall
not be deemed to have formed any partnership, joint venture or other
relationship. Neither party shall make, or represent to any other person that it
has the power or authority to make, any financial or other commitment on behalf
of the other party.

         17.3 Assignment. Neither party shall have the right to assign or
otherwise transfer its rights and obligations under this Agreement except with
the prior written consent of the other party, provided that a successor in
interest by merger, operation of law, assignment, purchase or otherwise of
substantially all of the business and assets of either party shall acquire all
rights and obligations of such party hereunder without any such consent. Any
prohibited assignment shall be null and void.

         17.4 Notices; Language. Except as may be otherwise provided in this
Agreement, any notice, demand or request given, made or required to be made
shall be in writing and shall be effective, unless otherwise provided herein,
when received after delivery by (a) registered air mail, postage prepaid; (b)
facsimile with electronic confirmation of receipt; or (c) a reputable
international courier such as Federal Express or DHL at the addresses set forth
below or to any other address that a party specifies in writing. All reports,
notices and communications required or permitted hereunder shall be in the
English language. The parties hereto confirm that they

                                      -25-
<PAGE>

have agreed that this Agreement and all documents relating hereto be drafted in
English only. Les parties aux presentes conferment qu'elles ont accepte que la
presente convention de meme que tous les documents s'y rattachant soient rediges
en anglais seulement.

         If to MGI:               MGI PHARMA, INC.
                                  6300 West Old Shakopee Road, Suite 110
                                  Bloomington, MN, U.S.A. 55438-2318
                                  Facsimile: 952-346-4920
                                  Attention:  Executive Vice President

                                  With copy to:
                                  Dorsey & Whitney LLP
                                  220 South Sixth Street
                                  Minneapolis, Minnesota U.S.A. 55402
                                  Facsimile: 612-340-8827
                                  Attention: Tim Hearn

         If to MethylGene:        MethylGene Inc.
                                  Suite 200
                                  7220 Frederick-Banting
                                  Montreal, Quebec, Canada, H4S 2A1
                                  Facsimile:  514-337-4194
                                  Attention:  President

                                  With copy to:
                                  Goodman Phillips & Vineberg
                                  1501, Avenue McGill College
                                  26e Etage
                                  Montreal, Quebec, Canada H3A 3N9
                                  Facsimile:  514-841-6499
                                  Attention:  Elias Benhamou

         17.5 Governing Law. This Agreement shall be governed by, and
interpreted and construed in accordance with, the law of the State of Minnesota,
USA, excluding its choice of law rules and the U.N. Convention on the
International Sale of Goods.

         17.6 Amendment. This Agreement may not be modified or amended, in whole
or in part, except by written agreement signed by both parties.

         17.7 Severability. If one or more of the provisions of this Agreement
is subsequently declared invalid or unenforceable, this Agreement shall be
treated as though that provision were not in this Agreement, and this shall not
affect the validity or enforceability of the remaining provisions of this
Agreement (unless those provisions that are invalidated or unenforceable are
clearly material and inseparable from the other provisions). The Agreement as
modified shall be

                                      -26-
<PAGE>

applied and construed to reflect substantially the good faith intent of the
parties and to achieve the economic effects originally intended by the terms
hereof.

         17.8 Counterparts. This Agreement shall be executed in two or more
counterparts, and each such counterpart shall be deemed an original hereof.

         17.9 Waiver. No failure by either party to take any action or assert
any right hereunder shall be deemed to be a waiver of such right in the event of
the continuation or repetition of the circumstances giving rise to such right.

            [The remainder of this page is left intentionally blank]

                                      -27-
<PAGE>

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

MGI PHARMA, INC.                                 METHYLGENE INC.

By /s/ Leon O. Moulder, Jr.                      By /s/ Donald F. Corcoran
   -------------------------------------            ----------------------------
   Leon O. Moulder, Jr.                             Donald F. Corcoran
   Executive Vice President                         President and CEO

By /s/ William C. Brown
   -------------------------------------
   William C. Brown
   Chief Financial Officer and Secretary

EXHIBITS
A.       Licensed Patents
B.       List of Third Party Agreements

                                      -28-

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