Document:

<PAGE>

                                                                   EXHIBIT 10.57

                             BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Principal      Loan Date   Maturity    Loan No  Call/Coll  Account Officer   Initials
<S>            <C>         <C>         <C>                         <C>     <C>
$5,000,000.00  01-27-2003  01-27-2006  02014155                    710
------------------------------------------------------------------------------------------
</TABLE>

     References in the shaded area are for Lender's use only and do not limit
     the applicability of this document to any particular loan or item. Any item
     above containing " *** " has been omitted due to text length limitations.
--------------------------------------------------------------------------------

<TABLE>

    <S>                                                         <C>
    Borrower: Kennedy-Wilson, Inc., a Delaware Corporation      Lender: Pacific Western National Bank
              9601 Wilshire Boulevard Suite 220                 Beverly Hills Office
              Beverly Hills, CA  90210                          9454 Wilshire Boulevard
                                                                Beverly Hills, CA 90212
=====================================================================================================
</TABLE>

THIS BUSINESS LOAN AGREEMENT dated January 27, 2003, is made and executed
between Kennedy-Wilson, Inc. ("Borrower") and Pacific Western National Bank
("Lender") on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans or other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement ("Loan"). Borrower
understands and agrees that: (A) in granting, renewing, or extending any Loan,
Lender is relying upon Borrower's representations, warranties, and agreements as
set forth in this Agreement; (B) the granting, renewing, or extending of any
Loan by Lender at all times shall be subject to Lender's sole judgment and
discretion; and (C) all such Loans shall be and remain subject to the terms and
conditions of this Agreement.

TERM. This Agreement shall be effective as of January 27, 2003, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.

     Loan Documents. Borrower shall provide to Lender the following documents
     for the Loan: (1) the Note; (2) together with all such Related Documents as
     Lender may require for the Loan; all in form and substance satisfactory to
     Lender and Lender's counsel.

     Borrower's Authorization. Borrower shall have provided in form and
     substance satisfactory to Lender properly certified resolutions, duly
     authorizing the execution and delivery of this Agreement, the Note and the
     Related Documents. In addition, Borrower shall have provided such other
     resolutions, authorizations, documents and instruments as Lender or its
     counsel, may require.

     Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
     charges, and other expenses which are then due and payable as specified in
     this Agreement or any Related Document.

     Representations and Warranties. The representations and warranties set
     forth in this Agreement, in the Related Documents, and in any document or
     certificate delivered to Lender under this Agreement are true and correct.

     No Event of Default. There shall not exist at the time of any Advance a
     condition which would constitute an Event of Default under this Agreement
     or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:

     Organization. Borrower is a corporation for profit which is, and at all
     times shall be, duly organized, validly existing, and in good standing
     under and by virtue of the laws of the State of Delaware. Borrower is duly
     authorized to transact business in all other states in which Borrower is
     doing business, having obtained all necessary filings, governmental
     licenses and approvals for each state in which Borrower is doing business.
     Specifically, Borrower is, and at all times shall be, duly qualified as a
     foreign corporation in all states in which the failure to so qualify would
     have a material adverse effect on its business or financial condition.
     Borrower has the full power and authority to own its properties and to
     transact the business in which it is presently engaged or presently
     proposes to engage. Borrower maintains an office at 9601 Wilshire Boulevard
     Suite 220, Beverly Hills, CA 90210. Unless Borrower has designated
     otherwise in writing, the principal office is the office at which Borrower
     keeps its books and records including its records concerning the
     Collateral. Borrower will notify Lender prior to any change in the location
     of Borrower's state of organization or any change in Borrower's name.
     Borrower shall do all things necessary to preserve and to keep in full
     force and effect its existence, rights and privileges, and shall comply
     with all regulations, rules, ordinances, statutes, orders and decrees of
     any governmental or quasi-governmental authority or court applicable to
     Borrower and Borrower's business activities.

     Assumed Business Names. Borrower has filed or recorded all documents or
     filings required by law relating to all assumed business names used by
     Borrower. Excluding the name of Borrower, the following is a complete list
     of all assumed business names under which Borrower does business: None.

     Authorization. Borrower's execution, delivery, and performance of this
     Agreement and all the Related Documents have been duly authorized by all
     necessary action by Borrower and do not conflict with, result in a
     violation of, or constitute a default under (1) any provision of Borrower's
     articles of incorporation or organization, or bylaws, or any agreement or
     other instrument binding upon Borrower or (2) any law, governmental
     regulation, court decree, or order applicable to Borrower or to Borrower's
     properties.

     Financial Information. Each of Borrower's financial statements supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     Legal Effect. This Agreement constitutes, and any instrument or agreement
     Borrower is required to give under this Agreement when delivered will
     constitute legal, valid, and binding obligations of Borrower enforceable
     against Borrower in accordance with their respective terms.

     Properties. Except as contemplated by this Agreement or as previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted by Lender, and except for property tax liens for taxes not
     presently due and payable, Borrower owns and has good title to all of
     Borrower's properties free and clear of all Security Interests, and has not
     executed any security documents or financing statements relating to such
     properties. All of Borrower's properties are titled in Borrower's legal
     name, and Borrower has not used or filed a financing statement under any
     other name for at least the last five (5) years.

     Hazardous Substances. Except as disclosed to and acknowledged by Lender in
     writing, Borrower represents and warrants that: (1) During the period of
     Borrower's ownership of Borrower's Collateral, there has been no use,
     generation, manufacture, storage, treatment, disposal, release or
     threatened release of any Hazardous Substance by any person on, under,
     about or from any of the Collateral. (2) Borrower has

<PAGE>

                             BUSINESS LOAN AGREEMENT
Loan No: 02014155                 (Continued)                             Page 2
================================================================================

     no knowledge of, or reason to believe that there has been (a) any breach or
     violation of any Environmental Laws; (b) any use, generation, manufacture,
     storage, treatment, disposal, release or threatened release of any
     Hazardous Substance on, under, about or from the Collateral by any prior
     owners or occupants of any of the Collateral; or (c) any actual or
     threatened litigation or claims of any kind by any person relating to such
     matters. (3) Neither Borrower nor any tenant, contractor, agent or other
     authorized user of any of the Collateral shall use, generate, manufacture,
     store, treat, dispose of or release any Hazardous Substance on, under,
     about or from any of the Collateral; and any such activity shall be
     conducted in compliance with all applicable federal, state, and local laws,
     regulations, and ordinances, including without limitation all Environmental
     Laws. Borrower authorizes Lender and its agents to enter upon the
     Collateral to make such inspections and tests as Lender may deem
     appropriate to determine compliance of the Collateral with this section of
     the Agreement. Any inspections or tests made by Lender shall be at
     Borrower's expense and for Lender's purposes only and shall not be
     construed to create any responsibility or liability on the part of Lender
     to Borrower or to any other person. The representations and warranties
     contained herein are based on Borrower's due diligence in investigating the
     Collateral for hazardous waste and Hazardous Substances. Borrower hereby
     (1) releases and waives any future claims against Lender for indemnity or
     contribution in the event Borrower becomes liable for cleanup or other
     costs under any such laws, and (2) agrees to indemnify and hold harmless
     Lender against any and all claims, losses, liabilities, damages, penalties,
     and expenses which Lender may directly or indirectly sustain or suffer
     resulting from a breach of this section of the Agreement or as a
     consequence of any use, generation, manufacture, storage, disposal, release
     or threatened release of a hazardous waste or substance on the Collateral.
     The provisions of this section of the Agreement, including the obligation
     to indemnify, shall survive the payment of the Indebtedness and the
     termination, expiration or satisfaction of this Agreement and shall not be
     affected by Lender's acquisition of any interest in any of the Collateral,
     whether by foreclosure or otherwise.

     Litigation and Claims. No litigation, claim, investigation, administrative
     proceeding or similar action (including those for unpaid taxes) against
     Borrower is pending or threatened, and no other event has occurred which
     may materially adversely affect Borrower's financial condition or
     properties, other than litigation, claims, or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns
     and reports that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental charges have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     Lien Priority. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the Collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     Binding Effect. This Agreement, the Note, all Security Agreements (if any),
     and all Related Documents are binding upon the signers thereof, as well as
     upon their successors, representatives and assigns, and are legally
     enforceable in accordance with their respective terms.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:

     Notices of Claims and Litigation. Promptly inform Lender in writing of (1)
     all material adverse changes in Borrower's financial condition, and (2) all
     existing and all threatened litigation, claims, investigations,
     administrative proceedings or similar actions affecting Borrower or any
     Guarantor which could materially affect the financial condition of Borrower
     or the financial condition of any Guarantor.

     Financial Records. Maintain its books and records in accordance with GAAP,
     applied on a consistent basis, and permit Lender to examine and audit
     Borrower's books and records at all reasonable times.

     Financial Statements. Furnish Lender with the following:

          Annual Statements. As soon as available, but in no event later than
          ninety (90) days after the end of each fiscal year, Borrower's balance
          sheet and income statement for the year ended, audited by a certified
          public accountant satisfactory to lender.

          Interim Statements. As soon as available, but in no event later than
          45 days after the end of each fiscal quarter, Borrower's balance sheet
          and profit and loss statement for the period ended, prepared by
          Borrower.

          Tax Returns. As soon as available after the applicable filing date for
          the tax reporting period ended, Federal and other governmental tax
          returns, prepared by a tax professional satisfactory to Lender.

     All financial reports required to be provided under this Agreement shall be
     prepared in accordance with GAAP, applied on a consistent basis, and
     certified by Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     as Lender may request from time to time.

     Financial Covenants and Ratios. Comply with the following covenants and
     ratios:

          Minimum Income and Cash Flow Requirements. Maintain not less than the
          following Minimum Net Income level: $1.00 per quarter.

          Tangible Net Worth Requirements. Other Net Worth requirements are as
          follows: Minimum Net Worth: $20,000.000. at any time during the
          agreement. In addition, Borrower shall comply with the following net
          worth ratio requirements:

               Debt / Worth Ratio. Maintain a ratio of Debt / Worth not in
               excess of 3.000 to 1.000. The ratio "Debt / Worth" means
               Borrower's Total Liabilities divided by Borrower's Tangible Net
               Worth. This leverage ratio should be maintained at all times and
               may be evaluated at any time.

          Except as provided above, all computations made to determine
          compliance with the requirements contained in this paragraph shall be
          made in accordance with generally accepted accounting principles,
          applied on a consistent basis, and certified by Borrower as being true
          and correct.

     Insurance. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts, coverages and with
     insurance companies acceptable to Lender. Borrower, upon request of Lender,
     will deliver to Lender from time to time the policies or certificates of
     insurance in form satisfactory to Lender, including stipulations that
     coverages will not be cancelled or diminished without at least thirty (30)
     days prior written notice to Lender. Each insurance policy also shall
     include an endorsement providing that coverage in favor of Lender will not
     be impaired in any way by any act, omission or default of Borrower or any
     other person. In connection with all policies covering assets in which
     Lender holds or is offered a security interest for the Loans, Borrower will
     provide Lender with such lender's loss payable or other endorsements as
     Lender may require.

     Insurance Reports. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (1) the
     name of the insurer; (2) the risks insured; (3) the amount of the policy;
     (4) the properties insured; (5) the then current property values on the
     basis of which insurance has been obtained,

<PAGE>

                             BUSINESS LOAN AGREEMENT
Loan No: 02014155                  (Continued)                            Page 3
================================================================================

     and the manner of determining those values; and (6) the expiration date of
     the policy. In addition, upon request of Lender (however not more often
     than annually), Borrower will have an independent appraiser satisfactory to
     Lender determine, as applicable, the actual cash value or replacement cost
     of any Collateral. The cost of such appraisal shall be paid by Borrower.

     Subordination. Prior to disbursement of any Loan proceeds, deliver to
     Lender a subordination agreement on Lender's forms, executed by Borrower's
     creditor named below, subordinating all of Borrower's indebtedness to such
     creditor, or such lesser amount as may be agreed to by Lender in writing,
     and any security interests in collateral securing that indebtedness to the
     Loans and security interests of Lender.

<TABLE>
<CAPTION>
     Name of Creditor                                     Total Amount of Debt
     ----------------                                     --------------------
<S>                                                       <C>
     Cahill, Warnock Strategic Partners Funds, L.P.       $2,773,000.00
</TABLE>

     Other Agreements. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other such agreements.

     Loan Proceeds. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

     Taxes, Charges and Liens. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits.

     Performance. Perform and comply, in a timely manner, with all terms,
     conditions, and provisions set forth in this Agreement, in the Related
     Documents, and in all other instruments and agreements between Borrower and
     Lender. Borrower shall notify Lender immediately in writing of any default
     in connection with any agreement.

     Operations. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner.

     Environmental Studies. Promptly conduct and complete, at Borrower's
     expense, all such investigations, studies, samplings and testings as may be
     requested by Lender or any governmental authority relative to any
     substance, or any waste or by-product of any substance defined as toxic or
     a hazardous substance under applicable federal, state, or local law, rule,
     regulation, order or directive, at or affecting any property or any
     facility owned, leased or used by Borrower.

     Compliance with Governmental Requirements. Comply with all laws,
     ordinances, and regulations, now or hereafter in effect, of all
     governmental authorities applicable to the conduct of Borrower's
     properties, businesses and operations, and to the use or occupancy of the
     Collateral, including without limitation, the Americans With Disabilities
     Act. Borrower may contest in good faith any such law, ordinance, or
     regulation and withhold compliance during any proceeding, including
     appropriate appeals, so long as Borrower has notified Lender in writing
     prior to doing so and so long as, in Lender's sole opinion, Lender's
     interests in the Collateral are not jeopardized. Lender may require
     Borrower to post adequate security or a surety bond, reasonably
     satisfactory to Lender, to protect Lender's interest.

     Inspection. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     Compliance Certificates. Unless waived in writing by Lender, provide Lender
     at least annually, with a certificate executed by Borrower's chief
     financial officer, or other officer or person acceptable to Lender,
     certifying that the representations and warranties set forth in this
     Agreement are true and correct as of the date of the certificate and
     further certifying that, as of the date of the certificate, no Event of
     Default exists under this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all respects
     with any and all Environmental Laws; not cause or permit to exist, as a
     result of an intentional or unintentional action or omission on Borrower's
     part or on the part of any third party, on property owned and/or occupied
     by Borrower, any environmental activity where damage may result to the
     environment, unless such environmental activity is pursuant to and in
     compliance with the conditions of a permit issued by the appropriate
     federal, state or local governmental authorities; shall furnish to Lender
     promptly and in any event within thirty (30) days after receipt thereof a
     copy of any notice, summons, lien, citation, directive, letter or other
     communication from any governmental agency or instrumentality concerning
     any intentional or unintentional action or omission on Borrower's part in
     connection with any environmental activity whether or not there is damage
     to the environment and/or other natural resources.

     Additional Assurances. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, assignments,
     financing statements, instruments, documents and other agreements as Lender
     or its attorneys may reasonably request to evidence and secure the Loans
     and to perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except federal, state or local income or franchise taxes
imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefore, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Indebtedness and Liens. (1) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by

<PAGE>

                             BUSINESS LOAN AGREEMENT
 Loan No: 02014155                (Continued)                             Page 4
================================================================================

     this Agreement, create, incur or assume indebtedness for borrowed money,
     including capital leases, (2) sell, transfer, mortgage, assign, pledge,
     lease, grant a security interest in, or encumber any of Borrower's assets
     (except as allowed as Permitted Liens), or (3) sell with recourse any of
     Borrower's accounts, except to Lender.

     Continuity of Operations. (1) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (2) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change its name, dissolve or transfer or sell
     Collateral out of the ordinary course of business, or (3) pay any dividends
     on Borrower's stock (other than dividends payable in its stock), provided,
     however that notwithstanding the foregoing, but only so long as no Event of
     Default has occurred and is continuing or would result from the payment of
     dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
     Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
     on its stock to its shareholders from time to time in amounts necessary to
     enable the shareholders to pay income taxes and make estimated income tax
     payments to satisfy their liabilities under federal and state law which
     arise solely from their status as Shareholders of a Subchapter S
     Corporation because of their ownership of shares of Borrower's stock, or
     purchase or retire any of Borrower's outstanding shares or alter or amend
     Borrower's capital structure.

     Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or
     assets, (2) purchase, create or acquire any interest in any other
     enterprise or entity, or (3) incur any obligation as surety or guarantor
     other than in the ordinary course of business.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

     Payment Default. Borrower fails to make any payment when due under the
     Loan.

     Other Defaults. Borrower fails to comply with or to perform any other term,
     obligation, covenant or condition contained in this Agreement or in any of
     the Related Documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Borrower or on Borrower's behalf under this
     Agreement or the Related Documents is false or misleading in any material
     respect, either now or at the time made or furnished or becomes false or
     misleading at any time thereafter.

     Insolvency. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     document to create a valid and perfected security interest or lien) at any
     time and for any reason.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the Loan. This includes
     a garnishment of any of Borrower's accounts, including deposit accounts,
     with Lender. However, this Event of Default shall not apply if there is a
     good faith dispute by Borrower as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding and if
     Borrower gives Lender written notice of the creditor or forfeiture
     proceeding and deposits with Lender monies or a surety bond for the
     creditor or forfeiture proceeding, in an amount determined by Lender, in
     its sole discretion, as being an adequate reserve or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any Guarantor of any of the Indebtedness or any Guarantor dies or
     becomes incompetent, or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness. In the event of a death, Lender,
     at its option, may, but shall not be required to, permit the Guarantor's
     estate to assume unconditionally the obligations arising under the guaranty
     in a manner satisfactory to Lender, and, in doing so, cure any Event of
     Default.

     Change in Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of the
     Loan is impaired.

     Right to Cure. If any default, other than a default on Indebtedness, is
     curable and if Borrower or Grantor, as the case may be, has not been given
     a notice of a similar default within the preceding twelve (12) months, it
     may be cured (and no Event of Default will have occurred) if Borrower or
     Grantor, as the case may be, after receiving written notice from Lender
     demanding cure of such default: (1) cure the default within fifteen (15)
     days; or (2) if the cure requires more than fifteen (15) days, immediately
     initiate steps which Lender deems in Lender's sole discretion to be
     sufficient to cure the default and thereafter continue and complete all
     reasonable and necessary steps sufficient to produce compliance as soon as
     reasonably practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.

ADDITIONAL PROVISION TO COMPLIANCE CERTIFICATE PROVISION. Lender hereby waives
the compliance certificate requirement outlined in this Loan Agreement.

<PAGE>

                             BUSINESS LOAN AGREEMENT
Loan No: 02014155                   (Continued)                           Page 5
================================================================================

SUBORDINATED DEBT.

All debt categorized as subordinated debt as listed on financial statements of
the Company shall be subordinate to Lender on terms and conditions reasonably
required by Bank and identified in a Convertible Subordinated Note Due 2006
dated 4/99; the subordinated debt consists of $2,773,000.00 due 6/06 bearing a
6.00% annual interest rate. The debt is due to Cahill, Warnock Strategic
Partners Fund, L.P., or its assignees.

PRIMARY DEPOSITORY RELATIONSHIP.

Borrower agrees to maintain its primary depository relationship with lender
subject to the Bank's applicable fees and charges.

DOWN-STREAMING OF FUNDS.

Borrower agrees to no down streaming of funds to affiliated entities -
KWIC-Japan or any of its subsidiaries.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
     Lender's costs and expenses, including Lender's attorneys' fees and
     Lender's legal expenses, incurred in connection with the enforcement of
     this Agreement. Lender may hire or pay someone else to help enforce this
     Agreement, and Borrower shall pay the costs and expenses of such
     enforcement. Costs and expenses include Lender's attorneys' fees and legal
     expenses whether or not there is a lawsuit, including attorneys' fees and
     legal expenses for bankruptcy proceedings (including efforts to modify or
     vacate any automatic stay or injunction), appeals, and any anticipated
     post-judgment collection services. Borrower also shall pay all court costs
     and such additional fees as may be directed by the court.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Consent to Loan Participation. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loan to one or more purchasers, whether related or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy Borrower may
     have with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such participation interests will be considered as the
     absolute owners of such interests in the Loan and will have all the rights
     granted under the participation agreement or agreements governing the sale
     of such participation interests. Borrower further waives all rights of
     offset or counterclaim that it may have now or later against Lender or
     against any purchaser of such a participation interest and unconditionally
     agrees that either Lender or such purchaser may enforce Borrower's
     obligation under the Loan irrespective of the failure or insolvency of any
     holder of any interest in the Loan. Borrower further agrees that the
     purchaser of any such participation interests may enforce its interests
     irrespective of any personal claims or defenses that Borrower may have
     against Lender.

     Governing Law. This Agreement will be governed by, construed and enforced
     in accordance with federal law and the laws of the State of California.
     This Agreement has been accepted by Lender in the State of California.

     Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
     request to submit to the jurisdiction of the courts of Los Angeles County,
     State of California.

     No Waiver by Lender. Lender shall not be deemed to have waived any rights
     under this Agreement unless such waiver is given in writing and signed by
     Lender. No delay or omission on the part of Lender in exercising any right
     shall operate as a waiver of such right or any other right. A waiver by
     Lender of a provision of this Agreement shall not prejudice or constitute a
     waiver of Lender's right otherwise to demand strict compliance with that
     provision or any other provision of this Agreement. No prior waiver by
     Lender, nor any course of dealing between Lender and Borrower, or between
     Lender and any Grantor, shall constitute a waiver of any of Lender's rights
     or of any of Borrower's or any Grantor's obligations as to any future
     transactions. Whenever the consent of Lender is required under this
     Agreement, the granting of such consent by Lender in any instance shall not
     constitute continuing consent to subsequent instances where such consent is
     required and in all cases such consent may be granted or withheld in the
     sole discretion of Lender.

     Notices. Any notice required to be given under this Agreement shall be
     given in writing, and shall be effective when actually delivered, when
     actually received by telefacsimile (unless otherwise required by law), when
     deposited with a nationally recognized overnight courier, or, if mailed,
     when deposited in the United States mail, as first class, certified or
     registered mail postage prepaid, directed to the addresses shown near the
     beginning of this Agreement. Any party may change its address for notices
     under this Agreement by giving formal written notice to the other parties,
     specifying that the purpose of the notice is to change the party's address.
     For notice purposes, Borrower agrees to keep Lender informed at all times
     of Borrower's current address. Unless otherwise provided or required by
     law, if there is more than one Borrower, any notice given by Lender to any
     Borrower is deemed to be notice given to all Borrowers.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be illegal, invalid, or unenforceable as to any
     circumstance, that finding shall not make the offending provision illegal,
     invalid, or unenforceable as to any other circumstance. If feasible, the
     offending provision shall be considered modified so that it becomes legal,
     valid and enforceable. If the offending provision cannot be so modified, it
     shall be considered deleted from this Agreement. Unless otherwise required
     by law, the illegality, invalidity, or unenforceability of any provision of
     this Agreement shall not affect the legality, validity or enforceability of
     any other provision of this Agreement.

     Subsidiaries and Affiliates of Borrower. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used in this Agreement shall include all of Borrower's subsidiaries and
     affiliates. Notwithstanding the foregoing however, under no circumstances
     shall this Agreement be construed to require Lender to make any Loan or
     other financial accommodation to any of Borrower's subsidiaries or
     affiliates.

     Successors and Assigns. All covenants and agreements contained by or on
     behalf of Borrower shall bind Borrower's successors and assigns and shall
     inure to the benefit of Lender and its successors and assigns. Borrower
     shall not, however, have the right to assign Borrower's rights under this
     Agreement or any interest therein, without the prior written consent of
     Lender.

     Survival of Representations and Warranties. Borrower understands and agrees
     that in making the Loan, Lender is relying on all representations,
     warranties, and covenants made by Borrower in this Agreement or in any
     certificate or other instrument delivered by Borrower to Lender under this
     Agreement or the Related Documents. Borrower further agrees that regardless
     of any investigation made by Lender, all such representations, warranties
     and covenants will survive the making of the Loan and delivery to Lender of
     the Related Documents, shall be continuing in nature, and shall remain in
     full force and effect until such time as Borrower's Indebtedness shall be
     paid in full, or until this Agreement shall be terminated in the manner
     provided above, whichever is the last to occur.

     Time is of the Essence. Time is of the essence in the performance of this
     Agreement.

     Waive Jury. All parties to this Agreement hereby waive the right to any
     jury trial in any action, proceeding, or counterclaim brought by any party
     against any other party.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not

<PAGE>

                             BUSINESS LOAN AGREEMENT
Loan No: 02014155                  (Continued)                            Page 6
================================================================================

otherwise defined in this Agreement shall have the meanings assigned to them in
accordance with generally accepted accounting principles as in effect on the
date of this Agreement:

     Advance. The word "Advance" means a disbursement of Loan funds made, or to
     be made, to Borrower or on Borrower's behalf on a line of credit or
     multiple advance basis under the terms and conditions of this Agreement.

     Agreement. The word "Agreement" means this Business Loan Agreement, as this
     Business Loan Agreement may be amended or modified from time to time,
     together with all exhibits and schedules attached to this Business Loan
     Agreement from time to time.

     Borrower. The word "Borrower" means Kennedy-Wilson, Inc., and all other
     persons and entities signing the Note in whatever capacity.

     Collateral. The word "Collateral" means all property and assets granted as
     collateral security for a Loan, whether real or personal property, whether
     granted directly or indirectly, whether granted now or in the future, and
     whether granted in the form of a security interest, mortgage, collateral
     mortgage, deed of trust, assignment, pledge, crop pledge; chattel mortgage,
     collateral chattel mortgage, chattel trust, factor's lien, equipment trust,
     conditional sale, trust receipt, lien, charge, lien or title retention
     contract, lease or consignment intended as a security device, or any other
     security or lien interest whatsoever, whether created by law, contract, or
     otherwise.

     Environmental Laws. The words "Environmental Laws" mean any and all state,
     federal and local statutes, regulations and ordinances relating to the
     protection of human health or the environment, including without limitation
     the Comprehensive Environmental Response, Compensation, and Liability Act
     of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
     Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
     ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
     1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
     Section 6901, et seq.. Chapters 6.5 through 7.7 of Division 20 of the
     California Health and Safety Code, Section 25100, et seq., or other
     applicable state or federal laws, rules, or regulations adopted pursuant
     thereto.

     Event of Default. The words "Event of Default" mean any of the events of
     default set forth in this Agreement in the default section of this
     Agreement.

     GAAP. The word "GAAP" means generally accepted accounting principles.

     Grantor. The word "Grantor" means each and all of the persons or entities
     granting a Security Interest in any Collateral for the Loan, including
     without limitation all Borrowers granting such a Security Interest.

     Guarantor. The word "Guarantor" means any guarantor, surety, or
     accommodation party of any or all of the Loan.

     Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender,
     including without limitation a guaranty of all or part of the Note.

     Hazardous Substances. The words "Hazardous Substances" mean materials that,
     because of their quantity, concentration or physical, chemical or
     infectious characteristics, may cause or pose a present or potential hazard
     to human health or the environment when improperly used, treated, stored,
     disposed of, generated, manufactured, transported or otherwise handled. The
     words "Hazardous Substances" are used in their very broadest sense and
     include without limitation any and all hazardous or toxic substances,
     materials or waste as defined by or listed under the Environmental Laws.
     The term "Hazardous Substances" also includes, without limitation,
     petroleum and petroleum by-products or any fraction thereof and asbestos.

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note or Related Documents, including all principal and interest
     together with all other indebtedness and costs and expenses for which
     Borrower is responsible under this Agreement or under any of the Related
     Documents.

     Lender. The word "Lender" means Pacific Western National Bank, its
     successors and assigns.

     Loan. The word "Loan" means any and all loans and financial accommodations
     from Lender to Borrower whether now or hereafter existing, and however
     evidenced, including without limitation those loans and financial
     accommodations described herein or described on any exhibit or schedule
     attached to this Agreement from time to time.

     Note. The word "Note" means the Note executed by Kennedy-Wilson, Inc. in
     the principal amount of $5,000,000.00 dated September 25, 2002, together
     with all renewals of, extensions of, modifications of, refinancing of,
     consolidations of, and substitutions for the note or credit agreement.

     Permitted Liens. The words "Permitted Liens" mean (1) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (2) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (3) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing obligations which are not yet delinquent; (4) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     indebtedness outstanding on the date of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens"; (5) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (6) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     Related Documents. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements, environmental agreements, guaranties,
     security agreements, mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Loan.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     Security Interest. The words "Security Interest" mean, without limitation,
     any and all types of collateral security, present and future, whether in
     the form of a lien, charge, encumbrance, mortgage, deed of trust, security
     deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel
     mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
     trust receipt, lien or title retention contract, lease or consignment
     intended as a security device, or any other security or lien interest
     whatsoever whether created by law, contract, or otherwise.

     Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
     assets excluding all intangible assets (i.e., goodwill, trademarks,
     patents, copyrights, organizational expenses, and similar intangible items,
     but including leaseholds and leasehold improvements) less total debt.

<PAGE>

                             BUSINESS LOAN AGREEMENT
Loan No: 02014155                  (Continued)                            Page 7
================================================================================

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED JANUARY 27, 2003.

BORROWER:

KENNEDY-WILSON, INC.

<TABLE>

<S>                                                       <C>
By: /s/ William J. McMorrow                               By: /s/ Freeman A. Lyle
   ---------------------------------------------             -------------------------------------------
   William J. McMorrow, Chairman of the Board of             Freeman A. Lyle, Chief Financial Officer of
   Kennedy-Wilson,Inc.                                       Kennedy-Wilson,Inc.
</TABLE>

LENDER:

PACIFIC WESTERN NATIONAL BANK

By: /s/ [ILLEGIBLE]
   ---------------------------------------------
   Authorized Signer

================================================================================

<PAGE>

                                 PROMISSORY NOTE

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Principal     Loan Date   Maturity    Loan No  Call/Coll  Account Officer Initials
<S>           <C>         <C>         <C>                           <C>   <C>
$5,000,000.00 01-27-2003  01-27-2006  02014155                      710   /s/ [ILLEGIBLE]
-----------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
     References in the shaded area are for Lender's use only and do not limit
     the applicability of this document to any particular loan or item. Any item
     above containing " *** " has been omitted due to text length limitations
--------------------------------------------------------------------------------

<TABLE>

    <S>                                             <C>
    Borrower: Kennedy-Wilson, Inc.                  Lender: Pacific Western National Bank
              9601 Wilshire Boulevard Suite 220             Beverly Hills Office
              Beverly Hills, CA  90210                      9454 Wilshire Boulevard
                                                            Beverly Hills, CA 90212
================================================================================
</TABLE>

Principal Amount:   $5,000,000.00              Date of Note:  January 27, 2003

PROMISE TO PAY. Kennedy-Wilson, Inc. ("Borrower") promises to pay to Pacific
Western National Bank ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Five Million & 00/100 Dollars
($5,000,000.00), together with interest on the unpaid principal balance from
January 27, 2003, until paid in full.

PAYMENT. Subject to any payment changes resulting from changes in the Index,
Borrower will pay this loan on demand. Payment in full is due immediately upon
Lender's demand. If no demand is made, Borrower will pay this loan in accordance
with the following payment schedule: 35 monthly consecutive interest payments,
beginning February 25, 2003, with interest calculated on the unpaid principal
balances at an interest rate based on the Pacific Western National Bank Base
Rate (currently 4.250%), plus a margin of 1.000 percentage points, resulting in
an initial interest rate of 5.250%; 2 annual consecutive principal payments of
$1,666,667.00 each, beginning January 27, 2004, with interest calculated on the
unpaid principal balances at an interest rate based on the Pacific Western
National Bank Base Rate (currently 4.250%), plus a margin of 1.000 percentage
points, resulting in an initial interest rate of 5.250%; and one principal and
interest payment of $1,674,686.83 on January 27, 2006, with interest
calculated on the unpaid principal balances at an interest rate based on the
Pacific Western National Bank Base Rate (currently 4.250%), plus a margin of
1.000 percentage points, resulting in an initial interest rate of 5.250%. This
estimated final payment is based on the assumption that all payments will be
made exactly as scheduled and that the Index does not change; the actual final
payment will be for all principal and accrued interest not yet paid, together
with any other unpaid amounts under this Note. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the Pacific Western National
Bank Base Rate (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If
the Index becomes unavailable during the term of this loan, Lender may designate
a substitute index after notifying Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. The interest rate change will not
occur more often than each day. Borrower understands that Lender may make loans
based on other rates as well. The Index currently is 4.250%. The interest rate
or rates to be applied to the unpaid principal balance of this Note will be the
rate or rates set forth herein in the "Payment" section. Notwithstanding any
other provision of this Note, after the first payment stream, the interest rate
for each subsequent payment stream will be effective as of the last payment date
of the just-ending payment stream. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law. Whenever increases occur in the interest rate, Lender, at its option, may
do one or more of the following: (A) increase Borrower's payments to ensure
Borrower's loan will pay off by its original final maturity date, (B) increase
Borrower's payments to cover accruing interest, (C) increase the number of
Borrower's payments, and (D) continue Borrower's payments at the same amount and
increase Borrower's final payment.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum interest charge of $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, early payments will reduce
the principal balance due and may result in Borrower's making fewer payments.
Borrower agrees not to send Lender payments marked "paid in full", "without
recourse", or similar language. If Borrower sends such a payment, Lender may
accept it without losing any of Lender's rights under this Note, and Borrower
will remain obligated to pay any further amount owed to Lender. All written
communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes "payment in full" of the
amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: Pacific
Western National Bank, Beverly Hills Office, 9454 Wilshire Boulevard, Beverly
Hills, CA 90212.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $10.00, whichever is greater.

INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note by 5.000 percentage points.

DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:

     Payment Default. Borrower fails to make any payment when due under this
     Note.

     Other Defaults. Borrower fails to comply with or to perform any other term,
     obligation, covenant or condition contained in this Note or in any of the
     related documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Borrower or on Borrower's behalf under this Note or
     the related documents is false or misleading in any material respect,
     either now or at the time made or furnished or becomes false or misleading
     at any time thereafter.

     Insolvency. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the loan.

<PAGE>

                                 PROMISSORY NOTE
Loan Np:02014155                   (Continued)                            Page 2
================================================================================

     This includes a garnishment of any of Borrower's accounts, including
     deposit accounts, with Lender. However, this Event of Default shall not
     apply if there is a good faith dispute by Borrower as to the validity or
     reasonableness of the claim which is the basis of the creditor or
     forfeiture proceeding and if Borrower gives Lender written notice of the
     creditor or forfeiture proceeding and deposits with Lender monies or a
     surety bond for the creditor or forfeiture proceeding, in an amount
     determined by Lender, in its sole discretion, as being an adequate reserve
     or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to any guarantor, endorser, surety, or accommodation party of any of the
     indebtedness or any guarantor, endorser, surety, or accommodation party
     dies or becomes incompetent, or revokes or disputes the validity of, or
     liability under, any guaranty of the indebtedness evidenced by this Note.
     In the event of a death, Lender, at its option, may, but shall not be
     required to, permit the guarantor's estate to assume unconditionally the
     obligations arising under the guaranty in a manner satisfactory to Lender,
     and, in doing so, cure any Event of Default.

     Change In Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of
     this Note is impaired.

     Cure Provisions. If any default, other than a default in payment is curable
     and if Borrower has not been given a notice of a breach of the same
     provision of this Note within the preceding twelve (12) months, it may be
     cured (and no event of default will have occurred) if Borrower, after
     receiving written notice from Lender demanding cure of such default: (1)
     cures the default within fifteen (15) days; or (2) if the cure requires
     more than fifteen (15) days, immediately initiates steps which Lender deems
     in Lender's sole discretion to be sufficient to cure the default and
     thereafter continues and completes all reasonable and necessary steps
     sufficient to produce compliance as soon as reasonably practical.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of California. This Note
has been accepted by Lender in the State of California.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Los Angeles County, State of
California.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: Pacific Western
National Bank P. 0. Box 131207 Carlsbad, CA 92013-1207

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive any applicable statute of limitations, presentment, demand
for payment, and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

KENNEDY-WILSON, INC.

<TABLE>

<S>                                                       <C>
By: /s/ William J. McMorrow                               By: /s/ Freeman A. Lyle
   ---------------------------------------------             -------------------------------------------
   William J. McMorrow, Chairman of the Board of             Freeman A. Lyle, Chief Financial Officer of
   Kennedy-Wilson,Inc.                                       Kennedy-Wilson,Inc.
</TABLE>

================================================================================

<PAGE>

                 CORPORATE RESOLUTION TO BORROW

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Principal      Loan Date   Maturity    Loan No  Call/Coll  Account  Officer   Initials
<S>            <C>         <C>         <C>                           <C>     <C>
$5,000,000.00  01-27-2003  01-27-2006  02014155                      710     /s/ [ILLEGIBLE]
------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
     References in the shaded area are for Lender's use only and do not limit
     the applicability of this document to any particular loan or item. Any item
     above containing " *** " has been omitted due to text length limitations
--------------------------------------------------------------------------------

<TABLE>

    <S>                                             <C>
    Borrower: Kennedy-Wilson, Inc.                  Lender: Pacific Western National Bank
              9601 Wilshire Boulevard Suite 220             Beverly Hills Office
              Beverly Hills, CA  90210                      9454 Wilshire Boulevard
                                                            Beverly Hills, CA 90212
================================================================================
</TABLE>

WE, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION'S EXISTENCE. The complete and correct name of the Corporation is
Kennedy-Wilson, Inc. ("Corporation"). The Corporation is a corporation for
profit which is, and at all times shall be, duly organized, validly existing,
and in good standing under and by virtue of the laws of the State of Delaware.
The Corporation is duly authorized to transact business in all other states in
which the Corporation is doing business, having obtained all necessary filings,
governmental licenses and approvals for each state in which the Corporation is
doing business. Specifically, the Corporation is, and at all times shall be,
duly qualified as a foreign corporation in all states in which the failure to so
qualify would have a material adverse effect on its business or financial
condition. The Corporation has the full power and authority to own its
properties and to transact the business in which it is presently engaged or
presently proposes to engage. The Corporation maintains an office at 9601
Wilshire Boulevard Suite 220, Beverly Hills, CA 90210. Unless the Corporation
has designated otherwise in writing, the principal office is the office at which
the Corporation keeps its books and records. The Corporation will notify Lender
prior to any change in the location of the Corporation's state of organization
or any change in the Corporation's name. The Corporation shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or court applicable to the Corporation and the Corporation's business
activities.

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the
Corporation is a close corporation having no Board of Directors then at a
meeting of the Corporation's shareholders, duly called and held on January 27,
2003, at which a quorum was present and voting, or by other duly authorized
action in lieu of a meeting, the resolutions set forth in this Resolution were
adopted.

OFFICERS. The following named persons are officers of Kennedy-Wilson, Inc.:

<TABLE>
<CAPTION>

          NAMES                  TITLES                      AUTHORIZED              ACTUAL SIGNATURES
          -----                  ------                      ----------              -----------------
     <S>                         <C>                         <C>             <C>
     William J. McMorrow         Chairman of the Board           Y           X  /s/ William J. McMorrow
                                                                               ----------------------------

     Freeman A. Lyle             Chief Financial Officer         Y           X  /s/ Freeman A. Lyle
                                                                               ----------------------------
</TABLE>

ACTIONS AUTHORIZED. Any two (2) of the authorized persons listed above may enter
into any agreements of any" nature with Lender, and those agreements will bind
the Corporation. Specifically, but without limitation any two (2) of such
authorized persons are authorized, empowered, and directed to do the following
for and on behalf of the Corporation:

     Borrow Money. To borrow, as a cosigner or otherwise, from time to time from
     Lender, on such terms as may be agreed upon between the Corporation and
     Lender, such sum or sums of money as in their judgment should be borrowed,
     without limitation.

     Execute Notes. To execute and deliver to Lender the promissory note or
     notes, or other evidence of the Corporation's credit accommodations, on
     Lender's forms, at such rates of interest and on such terms as may be
     agreed upon, evidencing the sums of money so borrowed or any of the
     Corporation's indebtedness to Lender, and also to execute and deliver to
     Lender one or more renewals, extensions, modifications, refinancings,
     consolidations, or substitutions for one or more of the notes, any portion
     of the notes, or any other evidence of credit accommodations.

     Execute Security Documents. To execute and deliver to Lender the forms of
     mortgage, deed of trust, pledge agreement, hypothecation agreement, and
     other security agreements and financing statements which Lender may require
     and which shall evidence the terms and conditions under and pursuant to
     which such liens and encumbrances, or any of them, are given; and also to
     execute and deliver to Lender any other written instruments, any chattel
     paper, or any other collateral, of any kind or nature, which Lender may
     deem necessary or proper in connection with or pertaining to the giving of
     the liens and encumbrances. Notwithstanding the foregoing, any one of the
     above authorized persons may execute, deliver, or record financing
     statements.

     Negotiate Items. To draw, endorse, and discount with Lender all drafts,
     trade acceptances, promissory notes, or other evidences of indebtedness
     payable to or belonging to the Corporation or in which the Corporation may
     have an interest, and either to receive cash for the same or to cause such
     proceeds to be credited to the Corporation's account with Lender, or to
     cause such other disposition of the proceeds derived there from as they may
     deem advisable.

     Further Acts. In the case of lines of credit, to designate additional or
     alternate individuals as being authorized to request advances under such
     lines, and in all cases, to do and perform such other acts and things, to
     pay any and all fees and costs, and to execute and deliver such other
     documents and agreements, including agreements waiving the right to a trial
     by jury, as the officers may in their discretion deem reasonably necessary
     or proper in order to carry into effect the provisions of this Resolution.

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or
filings required by law relating to all assumed business names used by the
Corporation. Excluding the name of the Corporation, the following is a complete
list of all assumed business names under which the Corporation does business:
None.

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may designate
from time to time) prior to any (A) change in the Corporation's name; (B) change
in the Corporation's assumed business name(s); (C) change in the management of
the Corporation; (D) change in the authorized signer(s); (E) change in the
Corporation's

<PAGE>

                         CORPORATE RESOLUTION TO BORROW
Loan No: 02014155                   (Continued)                           Page 2
================================================================================

principal office address; (F) change in the Corporation's state of organization;
(G) conversion of the Corporation to a new or different type of business entity;
or (H) change in any other aspect of the Corporation that directly or indirectly
relates to any agreements between the Corporation and Lender. No change in the
Corporation's name or state of organization will take effect until after Lender
has received notice

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officers named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set opposite their respective names. This
Resolution now stands of record on the books of the Corporation, is in full
force and effect, and has not been modified or revoked in any manner whatsoever.

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal
is affixed to this Resolution.

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and
performed prior to the passage of this Resolution are hereby ratified and
approved. This Resolution shall be continuing, shall remain in full force and
effect and Lender may rely on it until written notice of its revocation shall
have been delivered to and received by Lender at Lender's address shown above
(or such addresses as Lender may designate from time to time). Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

IN TESTIMONY WHEREOF, We have hereunto set our hand and attest that the
signatures set opposite the names listed above are their genuine signatures.

We each have read all the provisions of this Resolution, and we each personally
and on behalf of the Corporation certify that all statements and representations
made in this Resolution are true and correct. This Corporate Resolution to
Borrow / Grant Collateral is dated January 27, 2003.

THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS
AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
LAW.

                                    CERTIFIED TO AND ATTESTED BY:

                                    By: /s/ William J. McMorrow
                                      ----------------------------------(Seal)
                                     Authorized Signer for Kennedy-Wilson,Inc.

                                   By: /s/ Freeman A. Lyle
                                      ----------------------------------(Seal)
                                     Authorized Signer for Kennedy-Wilson,Inc.

NOTE: If the officers signing this Resolution are designated by the foregoing
document as one of the officers authorized to act on the Corporation's behalf,
it is advisable to have this Resolution signed by at least one non-authorized
officer of the Corporation.

================================================================================<PAGE>

                                                                     EXHIBIT 4.1

                THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.

                THIS WARRANT IS SUBJECT TO THE TERMS AND PROVISIONS OF THE
SECURITIES PURCHASE AGREEMENT AMONG SEATTLE GENETICS, INC. AND THE SIGNATORIES
THERETO DATED AS OF MAY 12, 2003, AS AMENDED FROM TIME TO TIME, AND IS ENTITLED
TO THE BENEFITS THEREOF. A COPY OF THE SECURITIES PURCHASE AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.

                THIS WARRANT IS SUBJECT TO AN INVESTOR RIGHTS AGREEMENT DATED AS
OF [____________], 2003 AMONG SEATTLE GENETICS, INC. AND CERTAIN OF ITS
STOCKHOLDERS, AS THE SAME MAY BE AMENDED FROM TIME TO TIME. THE TERMS OF SUCH
INVESTOR RIGHTS AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON
TRANSFERS. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT
CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.

                                                              Warrant No. [____]

                                     WARRANT

                           to Purchase Common Stock of

                             SEATTLE GENETICS, INC.

                THIS IS TO CERTIFY THAT _________________, or its registered
assigns, is entitled to purchase in whole or in part from time to time from
SEATTLE GENETICS, INC., a Delaware corporation (the "Issuer"), at any time on or
after the date hereof (the "Effective Date"), but not later than 5:00 p.m., New
York time, on December 31, 2011 (the "Expiration Date"), that number of shares
of the Issuer's common stock, $0.001 par value per share (the "Common Stock") as
set forth below at a purchase price of $6.25 per share (the "Exercise Price"),
subject to the terms and conditions provided herein and in the Purchase
Agreement (as hereinafter defined).

                This Warrant is issued pursuant to the Securities Purchase
Agreement dated as of May 12, 2003 (as modified, amended and supplemented and in
effect from time to time, the "Purchase Agreement") among the Issuer and the
signatories thereto.

<PAGE>

                The aggregate number of shares of Common Stock for which this
Warrant shall initially be exercisable shall be [_____________]./1/ The number
of shares of Common Stock for which this Warrant shall be exercisable and the
Exercise Price are subject to adjustment from time to time as provided herein.

        SECTION 1.      Certain Definitions.

                (a)     Each capitalized term used herein without definition
shall have the meaning assigned thereto (or incorporated by reference) in the
Purchase Agreement.

                (b)     As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1 or in other provisions
of this Warrant in the singular have the same meanings when used in the plural
and vice versa):

                "Common Stock" has the meaning assigned to such term in the
first paragraph of this Warrant.

                "Effective Date" has the meaning assigned to such term in the
first paragraph of this Warrant.

                "Exercise Notice" has the meaning assigned to such term in
Section 2(a)(i) hereof.

                "Exercise Price" has the meaning assigned to such term in the
first paragraph of this Warrant.

                "Expiration Date" has the meaning assigned to such term in the
first paragraph of this Warrant.

                "Fair   Market Value Per Share" means, for a share of Common
Stock, as of any date of determination:

                (a)     if such share of Common Stock is Publicly Traded as of
the date of determination, the price determined by computing the average of the
VWAP, over a period consisting of the most recent four (4) Trading Days
occurring on or prior to the date of determination (but excluding any trades or
quotations that are not bona fide, arm's length transactions); and

                (b)     if the Common Stock is not Publicly Traded as of the
date of determination, the Board will present to the Holder a written good faith
estimate of the fair market value of such Common Stock. Such estimate shall be
deemed to be the fair market value of such Common Stock unless the Holder shall
deliver a written objection to such estimate to the Issuer within ten (10)
Business Days of receipt of such estimate, which notice shall set forth the
Holder's good faith estimate of the fair market value of such Common Stock. If
the Issuer receives such an objection notice from the Holder, the Issuer and the
Holder shall attempt in

----------
/1/ Each warrant will be exercisable for a number of shares that represents
12.5% of the Common Stock into which the Series A Preferred Stock purchased by
the Holder is initially convertible.

                                       -2-

<PAGE>

good faith to agree upon the fair market value of such Common Stock; provided,
however, that if no resolution is reached within ten (10) Business Days of the
Issuer's receipt of such objection notice, the Issuer shall engage a nationally
recognized investment bank (which investment bank shall be reasonably acceptable
to the Requisite Series A Preferred Holders) experienced in the valuation of
business securities to determine the fair market value of such Common Stock, and
the written determination of such investment bank shall be deemed to be the fair
market value of such Common Stock. The parties hereto agree that for purposes of
any such appraisal, the value of such Common Stock shall not be discounted to
reflect (i) the lack of a public trading market in such Common Stock or (ii) if
applicable, that the amount of Common Stock in question represents a minority
equity interest in the Issuer. The fees and expenses of an investment bank
engaged pursuant to this provision shall be borne equally by the Issuer, on the
one hand, and the Holder, on the other hand; provided, however, that if the
Issuer's calculation of the fair market value of such Common Stock is within 20%
of the investment bank's determination and that of the Holder is not, then such
fees and expenses of the investment bank shall be borne entirely by the Holder;
provided, further, that if the Holder's calculation of the fair market value of
such Common Stock is within 20% of the investment bank's determination and that
of the Issuer is not, then such fees and expenses of the investment bank shall
be borne entirely by the Issuer. For purposes of this provision, the fair market
value of such Common Stock shall be determined as of the date such payment is
made.

                "Holder" means the registered holder of this Warrant including
any Transferees of such Holder.

                "include" and "including" shall be construed as if followed by
the phrase ", without being limited to,".

                "Issuer" has the meaning assigned to such term in the first
paragraph of this Warrant.

                "Material Sale" means (i) the sale (in one or a series of
related transactions) of all or substantially all of the Issuer's assets to a
Person or a group of Persons acting in concert (including, without limitation,
the sale of a division of the Issuer or such assets of the Issuer that would
materially change the nature or composition of the Issuer's business lines),
(ii) the sale or transfer (in one or a series of related transactions) of a
majority of the outstanding capital stock of the Issuer, to one Person or a
group of Persons acting in concert, or (iii) the merger or consolidation of the
Issuer with or into another Person that is not an Affiliate of the Issuer, in
each case in clauses (ii) and (iii) above under circumstances in which the
holders of a majority in voting power of the outstanding capital stock of the
Issuer immediately prior to such transaction own less than a majority in voting
power of the outstanding capital stock of the Issuer, or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction; provided, however, that a debt or equity financing where (x)
the Issuer is the surviving corporation and (y) individuals who served as
members of the Board immediately prior to such financing constitute at least
three-fourths (3/4) of the members of the Board (rounded up to the nearest whole
number) after such financing, shall not be deemed a Material Sale. A sale (or
multiple related sales) of one or more Subsidiaries (whether by way of merger,
consolidation, reorganization or sale of all or substantially all assets or
securities) which constitutes all or substantially all of the consolidated
assets of the Issuer shall be deemed a Material Sale.

                                       -3-

<PAGE>

                "Publicly Traded" means, with respect to the Common Stock, that
such Common Stock is (a) listed on a domestic securities exchange, (b) quoted on
the Nasdaq National Market or the Nasdaq Small-Cap Market or (c) traded in the
domestic OTC Bulletin Board Market and its successor the Bulletin Board
Exchange, which trades are reported through systems maintained by the National
Association of Securities Dealers, Inc. or (d) traded in the domestic
over-the-counter "pink sheet" market, which trades are reported by the National
Quotation Bureau, Incorporated.

                "Purchase Agreement" has the meaning assigned to such term in
the second paragraph of this Warrant.

                "Requisite Holders" means those Holders holding Warrants
representing the right to purchase at least sixty-six and two-thirds percent (66
2/3%) of the Warrant Stock issuable upon exercise of all outstanding Warrants
issued pursuant to the Purchase Agreement, and held by all Holders.

                "Trading Day" means any day in which the principal stock
exchange (or Nasdaq) upon which the Common Stock is traded is open for business.

                "Transfer", as to any Warrant or Warrant Stock, means to sell,
or in any other way transfer, assign, pledge, distribute, encumber or otherwise
dispose of, such Warrant or Warrant Stock (or any economic interest in any
Warrant or Warrant Stock), or any equity interest in any Person owning any such
Warrant or Warrant Stock, directly or indirectly, either voluntarily or
involuntarily, whether with or without consideration.

                "VWAP"  means, as of any Trading Day, the volume weighted
average price on such day for a share of Common Stock:

                        (i)     on all domestic national securities exchanges on
        which the Common Stock may be listed if such exchanges are the primary
        securities markets for the Common Stock;

                        (ii)    if there have been no sales on any such domestic
        national securities exchange on such Trading Day, on the immediately
        preceding Trading Day on all such exchanges, if such exchanges are the
        primary securities markets for the Common Stock;

                        (iii)   if on such Trading Day the Common Stock is not
        listed on any such domestic national securities exchange, on the Nasdaq
        National Market or the Nasdaq Small-Cap Market, as applicable;

                        (iv)    if there have been no sales on the Nasdaq
        National Market or the Nasdaq Small-Cap Market, as the case may be, on
        such Trading Day, then on the immediately preceding Trading Day quoted
        on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the
        case may be; or

                        (v)     if on such Trading Day the Common Stock is not
        quoted on the Nasdaq National Market or Nasdaq Small-Cap Market, then,
        as applicable (A) the domestic OTC Bulletin Board Market and its
        successor the Bulletin Board Exchange,

                                       -4-

<PAGE>

        which trades are reported through systems maintained by the National
        Association of Securities Dealers, Inc. or (B) the domestic
        over-the-counter "pink sheet" market, which trades are reported by the
        National Quotation Bureau, Incorporated, or any similar successor
        organization;

provided, however, that for purposes of calculating the VWAP for any period of
two or more consecutive Trading Days (including in connection with determining
Fair Market Value Per Share), if the VWAP for any of such Trading Days is
determined pursuant to clause (ii) or (iv) above and the immediately preceding
Trading Day has already been considered pursuant to clause (i) or (iii) above,
then the VWAP for such immediately preceding Trading Day shall be determined by
substituting the day next preceding such immediately preceding Trading Day that
has yet to be considered.

                For the purposes of (1) any determination of the "Fair Market
Value Per Share" of any share of Common Stock, on or for any day after the "ex"
date or any similar date for any dividend or distribution paid or to be paid
with respect to the Common Stock, any VWAP of the Common Stock on a day prior to
such "ex" date or similar date shall be appropriately reduced by the fair market
value of the per share amount of such dividend or distribution, as determined by
the Board in good faith and on a reasonable, customary and consistent basis, and
(2) any determination of the "Fair Market Value Per Share" of any share of
Common Stock, on or for any day after (i) the effective day of any subdivision
(by stock split or otherwise) or combination (by reverse stock split or
otherwise) of outstanding shares of Common Stock or (ii) the "ex" date or any
similar date for any dividend or distribution paid or to be paid with respect to
the Common Stock in additional shares of Common Stock, any VWAP of a share of
Common Stock on a day prior to such effective date or "ex" date or similar date
shall be appropriately adjusted by the Board in good faith and on a reasonable,
customary and consistent basis to reflect such subdivision, combination,
dividend or distribution.

                "Warrant" means this Warrant originally issued by the Issuer
pursuant to the Purchase Agreement and all warrants issued upon Transfer,
division, or combination of, or in substitution for, this Warrant.

                "Warrant Stock" means (a) all shares of Common Stock issued or
issuable from time to time upon exercise of this Warrant, (b) all other
securities or other property issued or issuable upon any such exercise and (c)
any securities distributed with respect to the securities referred to in the
preceding clauses (a) and (b): provided, however, that the term "Warrant Stock"
shall not include shares of Common Stock or other securities following the time
such shares or other securities have been sold in a public offering registered
under the Securities Act or sold under Rule 144 promulgated thereunder.

        SECTION 2.      Exercise of Warrant.

                (a)     On and after the Effective Date and until 5:00 p.m., New
York City time, on the Expiration Date, the Holder may exercise this Warrant, on
one or more occasions, on any Business Day, in whole or in part, by delivering
to the Issuer, at its office maintained for such purpose pursuant to Section
6(a) hereof,

                                       -5-

<PAGE>

                        (i)     a written notice of the Holder's election to
        exercise this Warrant, which notice shall be substantially in the form
        of Annex A attached hereto and shall be properly completed (the
        "Exercise Notice"),

                        (ii)    payment of the Exercise Price (payable as set
        forth in Section 2(b) below) for the Warrant Stock as to which this
        Warrant is being exercised, and

                        (iii)   this Warrant.

                Except to the extent necessary to cause the number of shares of
Common Stock deliverable as provided in Section 2(b) to be a whole number of
shares, this Warrant shall be exercisable in part only for a whole number of
shares.

                (b)     At the option of the Holder, the Exercise Price shall be
payable

                        (i)     in cash by wire transfer to an account
        designated by the Issuer or by certified or official bank check payable
        to the order of the Issuer; or

                        (ii)    by delivery of this Warrant to the Issuer for
        cancellation in accordance with the further provisions of this Section
        2(b)(ii). In exchange for the portion of this Warrant that is being
        exercised at such time, the Holder shall receive the number of shares of
        Common Stock determined by multiplying (A) the number of shares of
        Common Stock for which this Warrant is being exercised at such time by
        (B) a fraction, (1) the numerator of which shall be the difference
        between (x) the Fair Market Value Per Share of Common Stock at such time
        and (y) the Exercise Price per share of Common Stock, and (2) the
        denominator of which shall be the Fair Market Value Per Share of Common
        Stock at such time. The Issuer shall issue a new Warrant for the
        portion, if any, of this Warrant not being exercised as provided in
        Section 2(f).

                (c)     Subject to the provisions of Section 2(d), upon receipt
of an Exercise Notice, the aggregate Exercise Price payable and this Warrant,
the Issuer shall, as promptly as practicable and in any event within five (5)
Business Days thereafter, issue one or more stock certificates representing the
aggregate number of shares of Common Stock to which the Holder is entitled and
transfer to the Holder of this Warrant appropriate evidence of ownership of
other securities or property (including any cash) to which the Holder is
entitled, in such denominations, and registered or otherwise placed in, or
payable to the order of, such name or names, as may be directed in writing by
the Holder, and shall deliver such stock certificates, evidence of ownership and
any other securities or property (including any cash) to the person or persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share (or fractional interest in any other security), as
hereinafter provided. The Issuer shall pay all expenses in connection with, and
any and all documentary, stamp or similar issue taxes of the United States or
any state thereof payable in respect of, the issuance or delivery of the Warrant
Stock upon exercise of this Warrant. However, the Issuer shall not be required
to pay any tax or other charge imposed in connection with any assignment or
Transfer involved in the issue of any certificate or other evidence of ownership
of Warrant Stock.

                (d)     The Holder's election to exercise this Warrant may, in
the sole discretion of the Holder, be conditioned upon, and in such event, the
exercise shall be subject in all respects

                                       -6-

<PAGE>

to, the consummation of a Material Sale, the public offering of any class of the
Issuer's Common Stock registered under the Securities Act or other similar
transaction involving the Issuer, as specified in the Exercise Notice. If any
exercise of this Warrant is so conditioned, then, subject to delivery of the
items required by Section 2(c), the Issuer shall deliver the certificates and
other evidence of ownership of other securities or other property in such manner
as the Holder shall direct as required in connection with the consummation of
the transaction upon which the exercise is conditioned. At any time that the
Issuer shall give notice to the Holder that such transaction has been abandoned
or the Holder has withdrawn from participation in such transaction, the Issuer
shall return the items delivered pursuant to Section 2(c) and the Holder's
election to exercise this Warrant shall be deemed rescinded.

                (e)     The stock certificate or certificates or other evidence
of ownership of Warrant Stock to be delivered pursuant to Section 2(c) hereof
shall be deemed to have been issued, and the Holder or any other Person so
designated to be named therein shall, to the extent permitted by law, be deemed
to have become a holder of record of the Warrant Stock represented thereby,
including having the right to vote any voting securities included therein or to
consent or to receive notice as a stockholder, as of the date on which the last
of the Exercise Notice, payment of the Exercise Price and this Warrant is
received by the Issuer as aforesaid, (subject, in the case of any exercise to
which Section 2(d) applies, to the consummation of the transaction upon which
such exercise is conditioned) notwithstanding that the transfer books of the
Issuer shall then be closed or that such certificates or other evidence of
ownership shall not then actually have been delivered to the Holder.

                (f)     If this Warrant shall have been exercised only in part,
the Issuer shall, at the time of delivery of the certificate or certificates or
other evidence of ownership of Warrant Stock, execute and deliver to the Holder,
without charge, a new Warrant evidencing the rights of the Holder to purchase
the unpurchased Warrant Stock called for by this Warrant, which new Warrant
shall in all other respects be identical to this Warrant, except for any legend
hereon to the extent no longer required pursuant to the Purchase Agreement.

                (g)     The Issuer shall not be required to issue any fractional
share of Common Stock (or fractional interest in any other security) upon
exercise of this Warrant. As to any fraction of a share (or fractional interest
in any other security) that the Holder would otherwise be entitled to receive
upon such exercise, the Issuer shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the Fair Market Value Per
Share of Common Stock (and/or other security) on the date of exercise; provided,
however, that in the event that the Issuer undertakes a reduction in the number
of shares of Common Stock or other securities outstanding, it shall be required
to issue fractional shares or fractional interests in such other securities to
the Holder if the Holder exercises all (but not part) of this Warrant, unless
the Holder shall have consented in writing to such reduction and provided the
Issuer with a written waiver of its right to receive fractional shares or
interests in accordance with this paragraph. If the Holder shall exercise more
than one Warrant in the same transaction, any payment in respect of fractional
shares (or other fractional interests) shall be based on the final fraction
resulting from aggregating all such exercises.

                (h)     The Issuer hereby agrees at all times to keep reserved
for issuance and delivery upon exercise of this Warrant such number of its
authorized but unissued shares (or

                                       -7-

<PAGE>

treasury shares) of Common Stock or other securities of the Issuer from time to
time issuable upon exercise of this Warrant as will be sufficient to permit the
exercise in full of this Warrant. All such shares and other securities shall be
duly authorized and, when issued upon exercise of this Warrant in accordance
with the terms hereof, shall be validly issued, fully paid and non-assessable,
free and clear of all liens, security interests, charges and other encumbrances
or restrictions on sale and free and clear of all preemptive or similar rights.

                (i)     If the issuance of any shares of Common Stock or other
securities required to be reserved for purposes of the exercise of this Warrant
requires the registration with, or approval of, any Governmental Authority or
requires listing on any national securities exchange or national market system
before such shares or other securities may be so issued, the Issuer shall at its
expense use its best efforts to cause such shares to be duly registered,
approved or listed, as the case may be, so that such shares or other securities
may be issued in accordance with the terms hereof.

                (j)     The Issuer and the Holder intend that if the Holder
exercises this Warrant as contemplated by Section 2(b)(ii) hereof, such method
of exercise shall be treated for all Tax purposes as a "reorganization" pursuant
to Section 368(a)(1)(E) of the Code. The Issuer and the Holder intend that the
Holder (and its direct and indirect beneficial owners) will neither realize nor
recognize any taxable income or gain as a result of its exercise of the Warrant
by such method, and that for Federal income tax purposes, the Holder's holding
period for property received as a result of such exercise shall include such
Holder's holding period in the Warrant. None of the parties hereto will take any
position in their respective Tax or other financial or accounting filings that
are contrary to or inconsistent with the foregoing, unless otherwise required by
Applicable Law, as evidenced by the opinion of a nationally recognized law or
accounting firm.

        SECTION 3.      Transfer, Division and Combination.

                (a)     Subject to the Holder's compliance with the terms and
conditions of the Purchase Agreement and the other Documents, this Warrant and
all rights hereunder are assignable and transferable (subject to any restrictive
legends hereon), at any time in whole or in part, without the consent of the
Issuer, to any Person or Persons, upon surrender of this Warrant to the Issuer,
together with a written assignment of this Warrant substantially in the form of
Annex B attached hereto, duly executed by the Holder hereof or such Holder's
agent or attorney; provided, however, that this Warrant may only be transferred
by the Holder (including any transferees of such Holder): (i) to a Person that
is not an Affiliate of such Holder (or such transferee) either (A) in whole or
(B) in part, up to a maximum of five times, provided that any transfers pursuant
to this clause (B) by any Affiliates of such Holder (or such transferee) shall
be included in determining whether such maximum number has been met or (ii) to a
Person that is an Affiliate of such Holder (or such transferee) in whole or in
part. In the event of any transfer of this Warrant, the new holder hereof shall
agree to be bound by all of the terms and conditions of this Warrant, the
Purchase Agreement and the other Documents applicable to the Warrant Shares.
Upon such surrender, the Issuer shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees (and, if the
Holder's entire interest is not being assigned, in the name of the Holder), and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be canceled.

                                       -8-

<PAGE>

                (b)     This Warrant may be exchanged for, or combined with,
other Warrants upon presentation of this Warrant and any other Warrants with
which this Warrant is to be combined to the Issuer, together with a written
notice specifying the denominations in which a new Warrant or Warrants are to be
issued, signed by the Holder. The Issuer shall execute and deliver a new Warrant
or Warrants to the Holder in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.

                (c)     The Issuer shall maintain books for the registration and
Transfer of the Warrants, and shall allow each Holder to inspect such books at
such reasonable times as such holder shall request.

        SECTION 4.      Adjustments.

                (a)     Subdivisions and Combinations. If at any time the Issuer
shall

                        (i)     take a record of the holders of its Common Stock
        for the purpose of entitling them to receive a dividend or other
        distribution of Common Stock;

                        (ii)    subdivide, split or reclassify its outstanding
        shares of Common Stock into a larger number of shares of Common Stock;
        or

                        (iii)   combine its outstanding shares of Common Stock
        into a smaller number of shares of Common Stock;

then immediately after the occurrence of any such event (A) the number of shares
of Common Stock issuable upon exercise of this Warrant shall be adjusted so as
to equal the number of shares of Common Stock the Holder would have held
immediately after the occurrence of such event (in the case of an event referred
to in clause (i), after giving effect to such dividend or distribution) if the
Holder had exercised this Warrant immediately prior to the occurrence of such
event and (B) the Exercise Price shall be adjusted to be equal to (x) the
Exercise Price immediately prior to the occurrence of such event multiplied by
(y) a fraction (1) the numerator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to the adjustment
in clause (A) and (2) the denominator of which is the number of shares of Common
Stock issuable upon exercise of this Warrant immediately after the adjustment in
clause (A).

                (b)     Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock issuable upon exercise of
this Warrant:

                        (i)     In computing adjustments under this Section,
        fractional interests in Common Stock shall be taken into account to the
        nearest one-thousandth of a share.

                        (ii)    If the Issuer shall take a record of the holders
        of its Common Stock for the purpose of entitling them to receive a
        dividend or distribution or subscription or purchase rights and shall,
        thereafter and before the payment of such dividend or distribution or
        the granting of such subscription or purchase rights, legally abandon
        its plan to pay or deliver such dividend, distribution, subscription or
        purchase rights, then

                                       -9-

<PAGE>

        thereafter no adjustment shall be required by reason of the taking of
        such record and any such adjustment previously made in respect thereof
        shall be rescinded and annulled.

                (c)     Merger, Consolidation or Disposition of Assets. If the
Issuer shall merge, consolidate or effect a share exchange with another entity,
or shall sell, transfer or otherwise dispose of all or substantially all of its
assets to another entity and pursuant to the terms of such merger,
consolidation, share exchange or disposition of assets, cash, shares of Common
Stock or other securities of the successor or acquiring entity, or property of
any nature is to be received by or distributed to the holders of Common Stock of
the Issuer, then the Holder shall be entitled to receive upon exercise of the
Warrant at any time thereafter, the amount of cash, shares of Common Stock,
other securities or other property that it would have been entitled to receive
if such Holder had exercised this Warrant in full immediately prior to the
occurrence of such merger, consolidation, share exchange or disposition of
assets. In the case of any such merger, consolidation, share exchange or
disposition of assets, the successor or acquiring entity (and any Affiliate
thereof issuing securities) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board and reasonably acceptable
to the Requisite Holders) in order to provide for adjustments of the Warrant
Stock issuable upon exercise of this Warrant that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 4. The foregoing
provisions shall similarly apply to successive mergers, consolidations, share
exchanges and dispositions of assets.

                (d)     Capital Reorganization or Capital Reclassification. If
the Issuer shall effect any capital reorganization or any reclassification of
its capital stock (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), then in each case the Issuer
shall cause effective provision to be made so that this Warrant shall be
exercisable for the kind and number of shares of stock, other securities, cash
or other property to which a holder of the Warrant Stock deliverable upon
exercise of this Warrant would have been entitled upon such reorganization or
reclassification and any such provision shall include adjustments in respect of
such stock, securities or other property that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4 with
respect to this Warrant.

                (e)     Other Action Affecting Common Stock. If at any time or
from time to time the Issuer shall take any action affecting its Common Stock,
other than any action described in this Section 4, then, unless such action will
not have an adverse effect upon the Holder's rights, the number of shares of
Warrant Stock issuable upon exercise of this Warrant and the Exercise Price
therefor shall be adjusted in such manner and at such time as the Board shall in
good faith determine (such determination to be reasonably acceptable to the
Requisite Holders) to be equitable in the circumstances.

                (f)     Notice of Adjustments. Whenever the number of shares of
Warrant Stock issuable upon exercise of this Warrant shall be adjusted pursuant
to this Warrant, the Issuer shall forthwith prepare a certificate setting forth,
in reasonable detail, the event requiring the adjustment, the method by which
such adjustment was calculated and specifying the number of shares of Warrant
Stock issuable upon exercise of this Warrant after giving effect to such

                                      -10-

<PAGE>

adjustment. The Issuer shall promptly cause a signed copy of such certificate to
be delivered to the Holder. The Issuer shall keep at its office maintained for
purposes of Section 6(a) hereof copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by the Holder or any prospective purchaser of a Warrant designated by the
registered Holder hereof.

                (g)     Notice of Certain Corporate Action. If the Issuer shall
propose

                        (i)     to pay any dividend to the holders of its Common
        Stock or to make any other distribution to the holders of its Common
        Stock;

                        (ii)    to offer to the holders of its Common Stock
        rights to subscribe for or to purchase any additional shares of Common
        Stock or any other Securities;

                        (iii)   to effect any reorganization or reclassification
        of its Common Stock;

                        (iv)    to effect any other capital reorganization;

                        (v)     to effect any recapitalization, consolidation,
        merger or share exchange or any sale, transfer or other disposition of
        all or substantially all of its assets; or

                        (vi)    to effect the liquidation, dissolution or
        winding up of the Issuer,

then, in each such case, the Issuer shall give to the Holder a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such dividend, distribution or rights offer, or the date on
which such reclassification, issuance, reorganization, consolidation, merger,
share exchange, sale, transfer, disposition, liquidation, dissolution or winding
up is to take place and the date of participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall also set forth the
material terms with respect thereto as shall be reasonably necessary to indicate
the effect of such action on the Common Stock, and the number of shares of
Warrant Stock that are issuable upon exercise of this Warrant after giving
effect to any adjustment that will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clauses (i) or
(ii) above at least 15 days prior to the record date for determining holders of
the Common Stock for purposes of such action, and in the case of any other such
action, at least 15 days prior to the date of the taking of such proposed
action. Failure to give any such notice or any defect therein shall not affect
the validity of the proceedings, actions or events described in clauses (i)
through (vi) hereof.

                (h)     No Impairment. The Issuer will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Issuer, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such actions as may be necessary or
appropriate in order to protect the exercise rights of the Holder against
impairment.

                                      -11-

<PAGE>

                (i)     Miscellaneous. The computations of all amounts under
this Section 4 shall be made assuming that all other anti-dilution or similar
adjustments to be made to all other securities resulting from the transaction
causing an adjustment pursuant to this Section 4 have previously been made so as
to maintain the relative percentage ownership (on a fully-diluted basis) of this
Warrant vis a vis all other securities issued by the Issuer.

                (j)     Par Value. The Issuer shall take or cause to be taken
such steps as shall be necessary to ensure that the par value per share of
Common Stock is at all times less than or equal to the Exercise Price.

        SECTION 5.      Dividend and Distributions.

                If, at any time prior to the full exercise of the Warrants, the
Issuer pays any dividend or makes any distribution (whether in cash, property or
securities of the Issuer) on the Common Stock which does not result in an
adjustment under Section 4 or, if the Requisite Holders notify the Issuer that
the anti-dilution provisions of Section 4 are waived in connection with such
dividend or distribution, then, in either event the Issuer shall simultaneously
pay to the Holder of each Warrant, the dividend or distribution which would have
been paid to such Holder on the Warrant Shares receivable upon exercise in full
of the Warrant had the Warrant been fully exercised immediately prior to the
record date for such dividend or distribution or if no record is taken, the date
as of which the record holder of Common Stock entitled to such dividend or
distribution are to be determined.

        SECTION 6.      Miscellaneous.

                (a)     Office of Issuer. So long as this Warrant remains
outstanding, the Issuer shall maintain an office in the continental United
States where the Warrants may be presented for exercise, Transfer, division or
combination as provided in this Warrant. Such office shall be at 21823 30th
Drive S.E., Bothell, Washington 98021, unless and until the Issuer shall
designate and maintain some other office for such purposes and give notice
thereof to the Holder.

                (b)     Notices Generally. Any notices and other communications
pursuant to the provisions hereof shall be sent in accordance with the
provisions of Section 10.6 of the Purchase Agreement.

                (c)     Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflicts of laws rules. The Issuer agrees that it may be served with
process in the State of New York or the State of Delaware and any action for
breach of this Warrant may be prosecuted against it in the courts of either
State or any Federal court located in either State. Notwithstanding the
foregoing provisions of this Section 6(c), those provisions of this Warrant that
relate to the internal governance of the Issuer and are required by Delaware
corporate law to be governed by such, shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware.

                (d)     Voting Rights. Except as otherwise provided herein, this
Warrant does not entitle the Holder to any voting rights or other rights of a
stockholder of the Issuer, as a stockholder.

                                      -12-

<PAGE>

                (e)     Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the Exercise Price or as a
stockholder of the Issuer, whether such liability is asserted by the Issuer, by
any creditor of the Issuer or any other Person.

                (f)     Loss or Destruction of Warrant. Upon receipt by the
Issuer of evidence satisfactory to it (in the exercise of its reasonable
discretion) of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction), if requested by the Issuer, of
reasonably satisfactory indemnification (if the Holder is a financial
institution or an Affiliate thereof, its own agreement being satisfactory), or
(in the case of mutilation) upon surrender and cancellation of this Warrant, the
Issuer shall, without charge, execute and deliver a new Warrant exercisable for
the same amount of Warrant Stock.

                (g)     Amendments and Waivers. Any provision of this Warrant
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Issuer and the Requisite Holders
and, in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

                                     * * * *

                                      -13-

<PAGE>

                IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.

Dated:  [_______ __], 2003

                                                     SEATTLE GENETICS, INC.

                                                   By:
                                                        ------------------------
                                                        Name: Clay B. Siegall
                                                        Title: President & CEO

<PAGE>

                                                              ANNEX A TO WARRANT

                             FORM OF EXERCISE NOTICE

                (To be executed by the registered holder hereof)

                The undersigned registered owner of this Warrant exercises this
Warrant for the purchase of ________ shares of Common Stock of Seattle Genetics,
Inc., a Delaware corporation, and herewith makes payment therefor of $__________
(such payment being made [check one] (x) [ ] in cash or by certified or official
bank check or (y) [ ] by acceptance of a reduced number of shares of Common
Stock upon cancellation of this Warrant as provided in Section 2(b) of this
Warrant, all on the terms and conditions specified in this Warrant, and requests
that

                        (i)     certificates and/or other instruments covering
        such shares of Common Stock be issued in accordance with the
        instructions given below; and

                        (ii)    if such shares of Common Stock shall not include
        all of the shares of Common Stock to which the Holder is entitled under
        this Warrant, that a new Warrant for the unpurchased balance of the
        shares of Common Stock issuable hereunder be delivered to the
        undersigned. References in this Exercise Notice to "Common Stock" shall
        include other securities or other property to the extent included in
        Warrant Stock.

                The undersigned agrees that the shares to be issued upon
exercise of this Warrant may not be offered, sold, assigned, pledged,
hypothecated or otherwise transferred or disposed of except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
and applicable provisions of state securities laws.

                [This Exercise Notice is being delivered contingent upon the
consummation of [describe transaction] as contemplated by Section 2(d) of this
Warrant].*

Dated:________________________

                                         ---------------------------------------
                                         (Signature of Registered Holder)**

Instructions for issuance and
registration of shares of Common Stock:

---------------------------------------   Social Security or Other
Name of Registered Holder                         Identifying Number:___________
(please print)

Please deliver certificate to
the following address
Street
City, State and Zip Code

----------
*Include if applicable.

**The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.

<PAGE>

                                                              ANNEX B TO WARRANT

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder hereof)

                FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the assignee named below all
the rights of the undersigned under this Warrant with respect to the number of
shares of Common Stock covered thereby set forth below to:

                                                             Number of
                                                             Shares of
                Name of Assignee          Address           Common Stock
                ----------------------------------------------------------------

and hereby irrevocably constitutes and appoints _______________ as agent and
attorney-in-fact to transfer such portion of said Warrant on the books of the
within-named Issuer, with full power of substitution in the premises.

                References in this Exercise Notice to "Common Stock" shall
include other securities or other property to the extent included in Warrant
Stock.

Dated:__________________________

                                         ---------------------------------------
                                         (Signature of Registered Holder)*

                                         ---------------------------------------
                                         Name of Registered Holder
                                         (Please Print)

        By its signature below, the assignee hereby agrees to be bound by all of
the terms and conditions of this Warrant, the Purchase Agreement and the other
Documents applicable to the Warrant Shares.

                                         ---------------------------------------
                                         (Signature of Assignee)

                                         ---------------------------------------
                                         Name of Assignee
                                         (Please Print)

----------
*The signature must correspond with the name as written upon the face of the
attached Warrant in every particular, without alteration.

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