Document:

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                                                                   Exhibit 10.27
                              STANDARD FORM LEASE

1.   Basic Provisions

     1.1  Parties: This Lease, executed in duplicate at Cupertino, California,
on May  _____, 2000, by and between Mission West Properties, L.P., a Delaware
limited partnership, and ONI Systems Corporation, a Delaware Corporation,
hereinafter called respectively Lessor and Lessee, without regard to number or
gender.

     1.2  Letting: Lessor hereby leases to Lessee, and Lessee hires from Lessor,
the Premises, for the term, at the rental and upon all the terms and conditions
set forth herein.

     1.3  Use: Lessee may use the Premises  for the purpose of conducting
therein office, research and development, light manufacturing, and warehouse
activities, and any other legal activity.

     1.4  Premises: The real property with appurtenances as shown on Exhibit A
(the "Premises") situated in the City of San Jose, County of Santa Clara, State
of California, and more particularly described as follows:

     The Premises for Phase I includes three 98,500 square foot two story
     buildings and one 50,500 sq.ft. single story building totaling 346,000
     sq.ft. ("Phase I") including all improvements thereto, as shown on Exhibit
     A.1 including the right to use not less than 1211 unreserved parking
     spaces.  The address for the Premises is ____ Silver Creek, San Jose,
     California.  Lessee's pro-rata share of the Premises is 100%.

     The Premises for Phase II is one 98,500 square foot two story building
     ("Phase II"), including all improvements thereto, as shown on Exhibit A.1
     including the right to use not less than 345 unreserved parking spaces.
     The address of the Premises for Phase II is _____ Silver Creek, San Jose,
     California. Lessee's pro-rata share of the Premises for Phase II is 100%.

     The total combined Premises for Phase I and Phase II is four 98,500 square
     foot two story buildings and one 50,500 square foot single story building
     totaling 444,500 square feet ("Phase I and Phase II") including all
     improvements thereto, as shown on Exhibit A.1 including the right to use
     all of the available unreserved parking spaces.  Lessee's pro-rata share of
     the Premises is 100%.

     1.5  Term: The term shall be for one hundred twenty (120) months unless
extended pursuant to Section 35 of this Lease (the "Lease Term"), commencing on
the Commencement Date as defined in Section 1.11 and ending one hundred twenty
(120) months thereafter.

     Rent: Base rent shall be payable in monthly installments as follows:

<TABLE>
<CAPTION>
                                              Base rent   Estimated CAC*     Total
                                              ---------  ---------------    --------
<S>                                           <C>          <C>              <C>
     Months 1 through 12 (Phase I only)**      $615,880         $42,904*    $658,784
     Months 13 through 23 (Phase I only)**     $640,515         $44,620*    $685,135
     Month 24 (Phase I and Phase II)**         $822,858         $57,326*    $880,184
     Months 25 through 36 (Phase I & II)**     $855,773         $59,619*    $915,392
</TABLE>

Monthly base rent to increase by 4% on the annual anniversary of the
Commencement Date each year during the Lease Term over the prior year's rent
rounded to the nearest dollar.
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* CAC charges to be adjusted per Common Area Charges Section below

** Assumes Substantial Completion of Phase II twenty three months after Phase I

Base rent and CAC as scheduled above shall be payable in advance on or before
the first day of each calendar month during the Lease Term.  The term "Rent," as
used herein, shall be deemed to be and to mean the base monthly rent and all
other sums required to be paid by Lessee pursuant to the terms of this Lease.
Rent shall be paid in lawful money of the United States of America, without
offset or deduction, and shall be paid to Lessor at such place or places as may
be designated from time to time by Lessor.  Rent for any period less than a
calendar month shall be a pro rata portion of the monthly installment.  Upon
execution of this Lease, Lessee shall deposit with Lessor the first month's rent
( including estimated CAC) in the amount of $658,784 and the Security Deposit.

     1.7  Security Deposit: Lessee shall deposit with Lessor the sum of One
Million Three Hundred and Seventeen Thousand Five Hundred and Sixty Eight
Dollars ($1,317,568)  (the "Security Deposit").  The Security Deposit shall be
held by Lessor as security for the faithful performance by Lessee of all of the
terms, covenants, and conditions of this Lease applicable to Lessee.  If Lessee
commits a default as provided for herein, including but not limited to a default
with respect to the provisions contained herein relating to the condition of the
Premises, Lessor may (but shall not be required to) use, apply or retain all or
any part of the Security Deposit for the payment of any amount which Lessor may
spend by reason of default by Lessee.  If any portion of the Security Deposit is
so used or applied, Lessee shall, within ten days after written demand
therefore, deposit cash with Lessor in an amount sufficient to restore the
Security Deposit to its original amount.  Lessee's failure to do so shall be a
default by Lessee.  Any attempt by Lessee to transfer or encumber its interest
in the Security Deposit shall be null and void.  Upon occupancy of Phase II,
Lessee's Security Deposit shall be increased to One Million Eight Hundred and
Thirty Thousand Seven Hundred and Eight Four Dollars ($1,830,784).
Notwithstanding the above, Lessee may reduce the Security Deposit to an amount
equal to one month's rent and CAC provided Lessee has a shareholder's equity of
a minimum of $100 million based on their last 10-Q.  If at any time during this
Lease Term, Lessee's shareholder's equity is less than $100 million, Lessee
shall deposit with Lessor the Security Deposit referenced above within ten days
after the issuance of Lessee's financial statements indicating the reduction in
shareholder's equity below $100 million.  If Lessee fails to make the Security
Deposit as required, Lessee shall be deemed to be in default per Section 14.1
(a) of this Lease.

     1.8  Common Area Charges: Lessee shall pay to Lessor, as additional Rent,
an amount equal to Lessee's pro-rata share of the total common area charges of
the Premises as defined below (the common area charges for the Premises is
referred to herein as ("CAC").  Lessee shall pay to Lessor as Rent, on or before
the first day of each calendar month during the Lease Term, subject to
adjustment and reconciliation as provided hereinbelow, the sum of Forty Two
Thousand Nine Hundred and Four Dollars ($42,904) for Phase I and Fifty Seven
Thousand Three Hundred and Twenty Six Dollars ($57,326)for Phase I and Phase II
combined, said sum representing Lessee's estimated monthly payment of Lessee's
percentage share of CAC and includes a fixed monthly sum of Ten Thousand Three
Hundred and Eighty Dollars ($10,380) for Phase I and Thirteen Thousand Three
Hundred and Thirty Five Dollars ($13,335) for Phase I and Phase II combined
which represents the long term capital reserve for replacement of HVAC units,
parking lot, roof and painting of building exterior ("Capital Reserves").  It is
understood and agreed that Lessee's obligation under this paragraph shall be
prorated to reflect the Commencement Date and the end of the Lease Term.

Lessee's estimated monthly payment of CAC payable by Lessee during the calendar
year in which the Lease commences is set forth above.  At or prior to the
commencement of each succeeding calendar year term (or as soon as practical
thereafter), Lessor shall provide Lessee with Lessee's estimated monthly payment
for CAC which Lessee shall pay to Lessor as Rent.  Within 120 days of the end of
the calendar year and the end of the Lease Term, Lessor shall provide Lessee a
statement of actual CAC

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incurred including capital reserves for the preceding year or other applicable
period in the case of a termination year. If such statement shows that Lessee
has paid less than its actual percentage, then Lessee shall on demand pay to
Lessor the amount of such deficiency. If such statement shows that Lessee has
paid more than its actual percentage, then Lessor shall, at its option, promptly
refund such excess to Lessee or credit the amount thereof to the Rent next
becoming due from Lessee. Lessor reserves the right to revise any estimate of
CAC if the actual or projected CAC show an increase or decrease in excess of 10%
from an earlier estimate for the same period. In such event, Lessor shall
provide a revised estimate to Lessee, together with an explanation of the
reasons therefore, and Lessee shall revise its monthly payments accordingly.
Lessor's and Lessee's obligation with respect to adjustments at the end of the
Lease Term or earlier expiration of this Lease shall survive the Lease Term or
earlier expiration.

As used in this Lease, CAC shall include but is not limited to: (i) items as
specified in Sections 5(b), 6, and 31; (ii) all costs and expenses including but
not limited to supplies, materials, equipment and tools used or required in
connection with the operation and maintenance of the Premises; (iii) licenses,
permits and inspection fees; (iv) all other costs incurred by Lessor in
maintaining and operating the Premises; (v) Capital Reserves replacements and
government regulations imposed on the Premises not related to Lessee's use and
occupancy of the Premises; and (vi) an amount equal to three percent (3%) of the
base rent and CAC, as compensation for Lessor's accounting and management
services. Lessee shall have the right to review the basis and computation
analysis used to derive the CAC applicable to this Lease annually. The CAC shall
exclude maintenance and repair costs which are covered by any warranty,
insurance or other right of reimbursement; costs of correcting defects in the
design or construction of the building shells; any debt service or ground lease
rent; amounts paid to third parties which are affiliated with Lessor in excess
of what Lessor would have paid if the goods or services had been competitively
priced; cost for which the Capital Reserves have been established; and other
items or charges which are not customarily recovered or reimbursed as an
operating expense by owners of leased properties comparable to the Premises.

     1.9  Late Charges: Lessee hereby acknowledges that a late payment made by
Lessee to Lessor of Rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain.  Such costs include, but are not limited to,
processing and accounting charges, and late charges, which may be imposed on
Lessor according to the terms of any mortgage or trust deed covering the
Premises.  Accordingly, if any installment of Rent or any other sum due from
Lessee is not received by Lessor or Lessor's designee within five (5) days after
such amount is due, Lessee shall pay to Lessor a late charge equal to five (5%)
percent of such overdue amount.  The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payments made by Lessee.  Acceptance of such late charges by
Lessor shall in no event constitute a waiver of Lessee's default with respect to
such overdue amount, nor shall it prevent Lessor from exercising any of the
other rights and remedies granted hereunder.  Lessor shall allow two late
payments during any 12 month period as a result of accounting errors and give
Lessee a notice of delinquency and a five day cure period before any late charge
is imposed.

     1.10  Quiet Enjoyment: Lessor covenants and agrees with Lessee that upon
Lessee paying Rent and performing its covenants and conditions under this Lease,
Lessee shall and may peaceably and quietly have, hold and enjoy the Premises for
the Lease Term, subject, however, to the rights reserved by Lessor hereunder.

     1.11  Possession for Phase I: Possession shall be deemed tendered and the
term shall commence upon the first to occur of the following (the "Commencement
Date"): (i) the Premises are Substantially Complete or (ii) Lessee occupies the
Premises or (iii) if Lessor is prevented from or delayed in completing its work
under this Lease due to Lessee Delays, such work will be deemed Substantially
Complete as of the date on which it would have been Substantially Complete had
it not been for such Lessee Delays.  It is the intention of Lessee and Lessor
that February 1, 2001 shall be the Commencement Date.

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"Substantially Complete for Phase I" shall mean that: (i) Lessor has tendered
possession of Premises to Lessee, (ii) Lessor has met all requirements for
occupancy, (iii) The Lessee Interior Improvements are materially complete per
the approved plans including gas, electric, water and sewer service, exclusive
of telephone or other communication systems, punchlist items and there remains
no incomplete or defective items of work which would materially adversely affect
Lessee's intended use of the Premises of Phase I, (iv) the interior of each
building in Phase I is in a "broom clean" condition, and (v) completion of
parking facilities for Phase I.

     1.12  Possession for Phase II: Possession shall be deemed tendered and the
term shall commence for Phase II upon the first to occur of the following (the
"Commencement Date for Phase II"): (i) the Premises for Phase II are
Substantially Complete or (ii) Lessee occupies the Premises for Phase II and
commences to conduct business operations or (iii) if Lessor is prevented from or
delayed in completing its work under Section 2 of this Lease due to Lessee
Delays, such work will be deemed Substantially Complete for Phase II as of the
date on which it would have been Substantially Complete for Phase II had it not
been for such Lessee Delays.  It is the intention of Lessee and Lessor that
January 1, 2003 shall be the Commencement Date for Phase II.

"Substantially Complete for Phase II" shall mean that: (i) Lessor has tendered
possession of the Premises for Phase II to Lessee, (ii) Lessor has met all
requirements for occupancy of the Premises for Phase II, (iii) The Lessee
Interior Improvements for Phase II are materially complete per the approved
plans including gas, electric, water and sewer service, exclusive of telephone
or other communication systems, punch list items and there remains no incomplete
or defective items of work which would materially adversely affect Lessee's
intended use of the Premises for Phase II,  (iv) the interior of the building in
Phase II is in a "broom clean" condition, and  (v) completion of parking
facilities for Phase II.

     1.13  Commencement Date Memorandum for Phase I: When the actual
Commencement Date for Phase I is determined as provided for in this Lease, the
parties shall execute a Commencement Date Memorandum for Phase I setting forth
the Commencement Date for Phase I and the termination date but failure to do so
shall not affect the continuing validity and enforceability of this Lease, which
shall remain in full force and effect.

     1.14  Commencement Date Memorandum for Phase II: When the actual
Commencement Date for Phase II is determined as provided for in this Lease, the
parties shall execute a Commencement Date Memorandum for Phase II setting forth
the Commencement Date for Phase II and the termination date but failure to do so
shall not affect the continuing validity and enforceability of this Lease, which
shall remain in full force and effect.

2.   Lessee's Improvements

     2.1  Building Shell for Phase I: The "Building Shell for Phase I", as
defined in the attached Exhibit B shall be constructed at Lessor's sole cost and
expense by independent contractors to be employed by and under the supervision
of Lessor in accordance with the site plan, elevations, plans, specifications,
and working drawings to be prepared by Lessor, which have been approved by
Lessee,  with a list of such plans approved by Lessee being attached hereto as
Exhibit C (collectively the "Shell Plans for Phase I").  Lessor shall be
responsible for ensuring that Building Shell for Phase I conform to the approved
plans and all applicable statutes, rules, regulations, ordinances, and City of
San Jose Building Department interpretations necessary for occupancy.

     2.1.1  Lessee Interior Improvements for Phase I: The "Lessee Interior
Improvements for Phase I" shall be defined as all items not part of the Building
Shell for Phase I and shall be constructed by independent contractors to be
employed by and under the supervision of Lessor, in accordance with complete
plans and specifications prepared by Lessor for submission to the City of San
Jose ("Lessee Improvement Plans for Phase I"), complete with all mechanical and
electrical design, approved

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by Lessee, and then to be attached hereto as Exhibit D. Lessee and its
designated representatives, shall at all times during the construction of the
Lessee Interior Improvements for Phase I have access to the Premises to monitor
the progress of construction and Lessor's compliance with its obligation
hereunder; provided however, that such access shall not unreasonably interfere
with the activities of Lessor or its contractors. Lessee shall have a reasonable
right to approve the independent contractors Lessor engages to construct the
Lessee Interior Improvements. Lessee has employed an architect RMW, at Lessee
sole expense, to prepare the design development plans for the Lessee's Interior
Improvements. Lessee shall turn over these plans in CD form or electronic mail
to Lessor's architect, who will prepare the construction drawings.

     2.1.2  Budget: Before entering into any contract with a contractor
furnishing labor or materials in connection with the construction of the Lessee
Interior Improvements for Phase I where the payment due under such contract is
estimated by Lessor to be in excess of Fifty  Thousand Dollars ($50,000), Lessor
shall request bids from at least three (3) qualified contractors selected by
Lessor and approved by Lessee (which approval shall not be unreasonably
withheld) for bidding.  Lessor will accept the lowest bid.   Lessee shall have
the opportunity to review and approve the qualified bidders list prepared by
Lessor, which approval shall not be unreasonable withheld, and may select a
bidder of Lessee's choice for each bid, provided the bidder, meets the Lessor's
reasonable qualified bidder requirements.  Lessor shall make available to
Lessee all bids and supporting data (including schedules of values).

     2.1.3  Lessor's Allowance:  Lessor shall contribute up to Six Million Nine
Hundred and Twenty Thousand Dollars ($6,920,000) or Twenty Dollars ($20) per
square foot towards construction of the Lessee Interior Improvements for Phase I
(the "Phase I TI Allowance"), which is included in base rent.

     2.1.4  Cost Statement & Lessee's Contribution: Lessor will prepare for
Lessee's approval a cost statement which upon completion and approval shall be
attached as Exhibit E (the "Phase I Cost Statement"), showing the expected
construction cost of the Lessee Interior Improvements for Phase I.   Lessor may
include in the Phase I Cost Statement, a construction management fee, covering
its overhead and profit equal to six percent (6%) of all costs shown on the
Phase I Cost Statement including 3% for general conditions plus any additional
costs approved by Lessee.  No other general contractor's fees or costs shall be
charged to Lessee or against the Phase I TI Allowance in connection with the
Lessee Interior Improvements.  If Lessor's actual cost exceeds the Phase I Cost
Statement, Lessee may pay the excess or remove items until the total costs are
acceptable to Lessee.   Lessor and Lessee shall negotiate in good faith to
reduce the costs for construction of the Lessee Interior Improvements for Phase
I by modifying the plans or taking other appropriate actions. Lessee shall pay
its approved share of the cost for construction of the Lessee Interior
Improvements for Phase I within fifteen (15) days after Lessor has billed Lessee
and provided Lessee with evidence that the approved work being billed has been
installed.  All costs payable by Lessee for construction of the Lessee Interior
Improvements for Phase I shall be reasonably documented and subject to
verification by Lessee.

     2.1.5  Change Orders:  Change to the plans for the Lessee Interior
Improvements for Phase I or the Phase I Cost Statement after the final approval
by the parties must be approved in writing by Lessor and Lessee, which approval
shall not be unreasonably withheld.   In this regard, Lessor shall not be
required to approve any change which will: (i) increase its cost contribution
above the Phase I Cost Statement, (ii) structurally impair the Premises, or
(iii) materially and adversely effect the outside appearance of the subject
building.   Change orders shall be written and shall describe the nature of the
change and the reasonably determined increase or decrease in each item of the
Phase I Cost Statement (including the Lessor's management fee) occasioned by the
change.   If Lessee requests a change which will delay the Substantial
Completion of the Lessee Interior Improvements for Phase I beyond the Scheduled
Completion Date (defined below), the maximum amount of Lessee Delay, as defined
in Section 2.1.8 that can be attributed to the change shall also be specified in
the change order.

     2.1.6  Inability to Obtain Materials:  If Lessor notifies Lessee that any
fittings, finished or other materials specified by Lessee for the Lessee
Interior Improvements for Phase I are not: (i) regularly used, (ii) cannot be
obtained within

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sixty (60) days after placing an order therefore, and (iii) Lessor reasonably
determines that such extended delivery time will prohibit Lessor from
Substantially Completing the Lessee Interior Improvements for Phase I by the
Scheduled Completion Date, then Lessee shall within five days either (i) execute
a change order selecting an alternative reasonably approved by Lessor, or (ii)
agree that any delay in the Substantial Completion of the Lessee Interior
Improvements for Phase I as a consequence of the inability to obtain the item
will be a Lessee Delay.

     2.1.7  Time Periods For Approval:  Lessee shall approve or disapprove any
preliminary plans  on or before the fifth (5th) business day following
submission to Lessee of the plan.    Lessee shall approve or disapprove on or
before the tenth (10th) business day following submission to Lessee of any final
plans.  All change orders shall be approved or disapproved within three (3)
business days during construction.   If plans or change orders are disapproved,
Lessee shall state the reason for disapproval and Lessor and Lessee shall act in
good faith to resolve any issues.  Lessor shall approve or disapprove any design
development plans by architect RMW on or before the fifth (5th) business day
following submission to Lessor of the plans. If plans are disapproved, Lessor
shall state the reason for disapproval and Lessor and Lessee shall act in good
faith to resolve any issues.

     2.1.8  Completion of the Work & Delay:  Lessor shall use its best efforts
to cause the Commencement Date of the initial term to occur not later than
February 1, 2001.  If the Commencement Date has not occurred by February 28,
2001, Lessee shall receive one day of base rent abatement for each day after
February 28, 2001 until the Commencement Date.  If Lessee is entitled to base
rent abatement as provided in the preceding sentence, such abatement shall begin
on the Commencement Date.  Lessor and Lessee agree that having a Commencement
Date after February 28, 2001 will cause Lessee and Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain.  Accordingly, the parties hereby agree that Lessee's
right to the abatement of base rent specified herein  represents a fair and
reasonable settlement for both parties and neither party shall have further
liability to the other for any damages.  If the Commencement Date has not
occurred by March 31, 2001, Lessee may at its sole option, by written notice to
Lessor, have the right to terminate this Lease at any time after March 31, 2001
until the Commencement Date.  Notwithstanding anything to the contrary herein
(but subject to the last sentence of this section), all dates stated herein
shall be extended for the number of days  Lessor is unable to Substantially
Complete the Premises as a result of delays: (i) due to governmental actions
(other than governmental action of refusing to approve work which fails to
comply with the law or the building permit) which occurs after receipt of normal
building permits, (ii) due to acts of God, (iii) due to circumstances beyond
Lessor's control, (iv)  resulting from the City of San Jose failing to issue a
building permit within thirty (30) days after submittal of plans by Lessor, and
(v) due to Lessee Delays.  "Lessee Delays" means a delay in Substantial
Completion resulting from (a) Lessee's failure to meet Lessee's deadlines for
approval as shown on Exhibit F, (b) delays due to change orders, (c) delays due
to Lessee's failure to meet the deadlines for approving any plans or change
orders, and (d) delays because of the inability to obtain any product,
materials, design, color, fitting, or finish pursuant to this Section 2.1.6.
Notwithstanding the above, Lessor shall not be entitled to a delay exceeding 180
days as a result of (ii) or (iii) above.

     2.1.9  Standard of Performance:  Lessor shall be responsible for ensuring
that the Building Shell and the Lessee Interior Improvements for Phase I conform
to all applicable Laws and the approved plans for the Lessee Interior
Improvements for Phase I and are performed in a good and workmanlike manner.
Neither Lessee's approval of the plans for the Lessee Interior Improvements for
Phase I, the Phase I Cost Estimate,  nor Lessee's recommendation of any
contractor  for the work, shall relieve Lessor of its obligations under this
Lease nor make Lessee liable to Lessor or any contractor , or their
subcontractors with respect to the work.  Lessor shall  complete punchlist items
within 30 days after Commencement Date.

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     2.1.10  Installation of Lessee's improvements: Lessee shall be permitted
during the installation of Lessee Improvements by Lessor to inspect Lessor's
work and to install Lessee items such as telephone, security and moveable
partitions and other Lessee related work provided it does not materially
interfere with or delay Lessor's work or final approvals ("Lessee's Work").

     2.2  Building Shell for Phase II: The "Building Shell for Phase II", as
defined in the attached Exhibit B shall be constructed at Lessor's sole cost and
expense by independent contractors to be employed by and under the supervision
of Lessor in accordance with the site plan, elevations, plans, specifications,
and working drawings to be prepared by Lessor, which have been approved by
Lessee, and thereafter attached hereto as Exhibit C.1 (collectively the "Shell
Plans for Phase II").  Lessor shall be responsible for ensuring that Building
Shell for Phase II conform to the approved plans and all applicable statutes,
rules, regulations, ordinances, and City of San Jose Building Department
interpretations necessary for occupancy.

     2.2.1  Lessee Interior Improvements for Phase II: The "Lessee Interior
Improvements for Phase II" shall be defined as all items not part of the
Building Shell for Phase II and shall be constructed by independent contractors
to be employed by and under the supervision of Lessor, in accordance with
complete plans and specifications prepared by Lessor for submission to the City
of San Jose ("Lessee Improvement Plans for Phase II"), complete with all
mechanical and electrical design, approved by Lessee, and then to be attached
hereto as Exhibit D.1.  Lessee and its designated representatives, shall at all
times during the construction of the Lessee Interior Improvements for Phase II
have access to the Premises to monitor the progress of construction and Lessor's
compliance with its obligation hereunder; provided however, that such access
shall not unreasonably interfere with the activities of Lessor or its
contractors.    Lessee shall have a reasonable right to approve the independent
contractors Lessor engages to construct the Lessee Interior Improvements.
Lessee has employed an architect RMW, at Lessee sole expense, to prepare the
design development plans for the Lessee's Interior Improvements.  Lessee shall
turn over these plans in CD form or electronic mail to Lessor's architect, who
will prepare the construction drawings.

     2.2.2  Budget: Before entering into any contract with a contractor
furnishing labor or materials in connection with the construction of the Lessee
Interior Improvements for Phase II where the payment due under such contract is
estimated by Lessor to be in excess of Fifty Thousand Dollars ($50,000), Lessor
shall request bids from at least three (3) qualified contractors selected by
Lessor and approved by Lessee (which approval shall not be unreasonably
withheld) for bidding.  Lessor will accept the lowest bid.   Lessee shall have
the opportunity to review and approve the qualified bidders list prepared by
Lessor, which approval shall not be unreasonable withheld, and may select a
bidder of Lessee's choice for each bid, provided the bidder, meets the Lessor's
reasonable qualified bidder requirements.  Lessor shall make available to
Lessee all bids and supporting data (including schedules of values).

     2.2.3  Lessor's Allowance:  Lessor shall contribute up to One Million Nine
Hundred and Seventy Thousand Dollars ($1,970,000) or Twenty Dollars ($20) per
square foot towards construction of the Lessee Interior Improvements for Phase
II (the " Phase II TI Allowance"), which is included in base rent.

     2.2.4  Cost Statement & Lessee's Contribution: Lessor will prepare for
Lessee's approval a cost statement which upon completion and approval shall be
attached as Exhibit E.1 (the "Phase II Cost Statement"), showing the expected
construction cost of the Lessee Interior Improvements for Phase II.   Lessor may
include in the Phase II Cost Statement, a construction management fee, covering
its overhead and profit equal to six percent (6%) of all costs shown on the
Phase II Cost Statement including 3% for general conditions plus any additional
costs approved by Lessee.  No other general contractor's fees or costs shall be
charged to Lessee or against the Phase II TI Allowance in connection with the
Lessee Interior Improvements.  If Lessor's actual cost exceed the Phase II Cost
Statement, Lessee may pay the excess or remove items until the total costs are

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acceptable to Lessee.   Lessor and Lessee shall negotiate in good faith to
reduce the costs for construction of the Lessee Interior Improvements for Phase
II by modifying the plans or taking other appropriate actions. Lessee shall pay
its approved share of the cost for construction of the Lessee Interior
Improvements for Phase II within fifteen (15) days after Lessor has billed
Lessee and provided Lessee with evidence that the approved work being billed has
been installed.  All costs payable by Lessee for construction of the Lessee
Interior Improvements for Phase II shall be reasonably documented and subject to
verification by Lessee.

     2.2.5  Change Orders:  Change to the plans for the Lessee Interior
Improvements for Phase II or the Phase II Cost Statement after the final
approval by the parties must be approved in writing by Lessor and Lessee, which
approval shall not be unreasonably withheld.  In this regard, Lessor shall not
be required to approve any change which will: (i) increase its cost contribution
above the Phase II Cost Statement, (ii) structurally impair the Premises, or
(iii) materially and adversely effect the outside appearance of the subject
building.   Change orders shall be written and shall describe the nature of the
change and the reasonably determined increase or decrease in each item of the
Phase II Cost Statement (including the Lessor's management fee) occasioned by
the change.   If Lessee requests a change which will delay the Substantial
Completion of the Lessee Interior Improvements for Phase II beyond the Scheduled
Completion Date (defined below), the maximum amount of Lessee Delay, as defined
in Section 2.1.8 that can be attributed to the change shall also be specified in
the change order.

     2.2.6  Inability to Obtain Materials:  If Lessor notifies Lessee that any
fittings, finished or other materials specified by Lessee for the Lessee
Interior Improvements for Phase II are not: (i) regularly used, (ii) cannot be
obtained within sixty (60) days after placing an order therefore, and (iii)
Lessor reasonably determines that such extended delivery time will prohibit
Lessor from Substantially Completing the Lessee Interior Improvements for Phase
II by the Scheduled Completion Date, then Lessee shall within five days either
(i) execute a change order selecting an alternative reasonably approved by
Lessor, or (ii) agree that any delay in the Substantial Completion of the Lessee
Interior Improvements for Phase II as a consequence of the inability to obtain
the item will be a Lessee Delay.

     2.2.7  Time Periods For Approval:  Lessee shall approve or disapprove any
preliminary plans  on or before the fifth (5th) business day following
submission to Lessee of the plan.    Lessee shall approve or disapprove on or
before the tenth (10th) business day following submission to Lessee of any final
plans.  All change orders shall be approved or disapproved within three (3)
business days during construction.   If plans or change orders are disapproved,
Lessee shall state the reason for disapproval and Lessor and Lessee shall act in
good faith to resolve any issues.  Lessor shall approve or disapprove any design
development plans by architect RMW on or before the fifth (5th) business day
following submission to Lessor of the plans. If plans are disapproved, Lessor
shall state the reason for disapproval and Lessor and Lessee shall act in good
faith to resolve any issues.

     2.2.8  Completion of the Work & Delay:  Lessor shall use its best efforts
to cause the Commencement Date of the initial term to occur not later than
January 1, 2002.  If the Commencement Date has not occurred by February 1, 2002,
Lessee shall receive one day of base rent abatement for each day after February
1, 2002 until the Commencement Date.  If Lessee is entitled to base rent
abatement as provided in the preceding sentence, such abatement shall begin on
the Commencement Date.  Lessor and Lessee agree that having a Commencement Date
after February 1, 2002 will cause Lessee and Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain.  Accordingly, the parties hereby agree that Lessee's
right to the abatement of base rent specified herein  represents a fair and
reasonable settlement for both parties and neither party shall have further
liability to the other for any damages.  If the Commencement Date has not
occurred by February 1, 2002, Lessee may at its sole option, by written notice
to Lessor, have the right to terminate this Lease at any time

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after February 1, 2002 until the Commencement Date. Notwithstanding anything to
the contrary herein (but subject to the last sentence of this section), all
dates stated herein shall be extended for the number of days Lessor is unable to
Substantially Complete the Premises as a result of delays: (i) due to
governmental actions (other than governmental action of refusing to approve work
which fails to comply with the law or the building permit) which occurs after
receipt of normal building permits, (ii) due to acts of God, (iii) due to
circumstances beyond Lessor's control, (iv) resulting from the City of San Jose
failing to issue a building permit within thirty (30) days after submittal of
plans by Lessor, and (v) due to Lessee Delays. "Lessee Delays" means a delay in
Substantial Completion resulting from (a) Lessee's failure to meet Lessee's
deadlines for approval as shown on Exhibit F, (b) delays due to change orders,
(c) delays due to Lessee's failure to meet the deadlines for approving any plans
or change orders, and (d) delays because of the inability to obtain any product,
materials, design, color, fitting, or finish pursuant to this Section 2.2.6.
Notwithstanding the above, Lessor shall not be entitled to a delay exceeding 180
days as a result of (ii) or (iii) above.

     2.2.9  Standard of Performance:  Lessor shall be responsible for ensuring
that the Building Shell and the Lessee Interior Improvements for Phase II
conform to all applicable Laws and the approved plans for the Lessee Interior
Improvements for Phase II and are performed in a good and workmanlike manner.
Neither Lessee's approval of the plans for the Lessee Interior Improvements for
Phase II, the Phase II Cost Estimate, nor Lessee's recommendation of any
contractor for the work, shall relieve Lessor of its obligations under this
Lease nor make Lessee liable to Lessor or any contractor, or their
subcontractors with respect to the work.  Lessor shall  complete punchlist items
within 30 days after Commencement Date of Phase II.

     2.2.10  Installation of Lessee's improvements: Lessee shall be permitted
during the installation of Lessee Improvements by Lessor to inspect Lessor's
work and to install Lessee items such as telephone, security and moveable
partitions and other Lessee related work provided it does not materially
interfere with or delay Lessor's work or final approvals ("Lessee's Work").

     2.2.11  Adjustment of Initial Base Rent for Phase II: If the cost per
rentable square foot of constructing the building Shell for Phase II ("Phase II
Shell Cost") exceeds 104% of the cost per rentable square foot of constructing
the building Shell for Phase I ("Phase I Shell Cost"), the initial base monthly
rent for Phase II shall be adjusted as follows: (i) if the Phase II Shell Cost
is no more than 108% of the Phase I Shell Cost, the initial base monthly rent
shall increase by 1% for each percentage point by which the Phase II Shell Cost
exceeds 104% of the Phase I Shell Cost; and (ii) .if the Phase II Shell Cost is
greater than 108% of the Phase I Shell Cost, the initial base monthly rent shall
increase by the sum of 4% plus fifty basis points for each percentage point by
which the Phase II Shell Cost exceeds 108% of the Phase I Shell Cost.

     2.3  Acceptance Of Premises And Covenants To Surrender: Lessee accepts the
Premises in an "AS IS" condition and "AS IS" state of repair, subject to
Lessor's (a) representation that the Premises are in good order and repair, and
comply with all requirements for occupancy and comply with 2.1 for Phase I and
2.2 for Phase II as of the Commencement Date; and (b)warranty against defects in
materials or workmanship which shall continue as to all claims arising within
one year after the Commencement Date for each of Phase I and Phase II.  Lessee
shall have the benefit of any existing construction or equipment
warranties.Lessee agrees on the last day of the Lease Term, or on the sooner
termination of this Lease, to surrender the Premises to Lessor in Good Condition
and Repair.  "Good Condition and Repair"  shall generally mean that the Premises
are in the condition that one would expect the Premises to be in, if throughout
the Lease Term Lessee (i) uses and maintains the Premises in a commercially
reasonable manner and in an accordance with the requirements of this Lease and
(ii) makes all Required Replacements.  Lessee's duty to keep the Premises in
Good Condition and Repair is limited by sections 19 and 21 of this Lease.
"Required Replacements" are the replacements to worn-out equipment, fixtures,
and improvements that a

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commercially reasonable owner-user would make excluding HVAC replacements, roof
replacement, exterior painting and parking lot replacement. Notwithstanding the
above Good Condition and Repair shall not mean in a new condition. All of the
following shall be in Good Condition and Repair: (i) the interior walls and
floors of all offices and other interior areas, (ii) all suspended ceilings and
any carpeting shall be clean and in good condition, (iii) all glazing, windows,
doors and door closures, plate glass, and (iv) all electrical systems including
light fixtures and ballasts, plumbing, and temperature control systems. Lessee,
on or before the end of the Lease Term or sooner termination of this Lease,
shall remove all its personal property and trade fixtures from the Premises, and
all such property not so removed shall be deemed to be abandoned by Lessee.
Lessee shall reimburse Lessor for all disposition costs incurred by Lessor
relative to Lessee's abandoned property. If the Premises are not surrendered at
the end of the Lease Term or earlier termination of this Lease, Lessee shall
indemnify Lessor against loss or liability resulting from any delay caused by
Lessee in surrendering the Premises including, without limitation, any claims
made by any succeeding Lessee founded on such delay. Lessor will provide Lessee
notice in writing if Lessor has a new lease for Premises or portion thereof that
will result in damages or claims against Lessor.

3.   Uses Prohibited: Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other tenant of the project in which the
Premises are located or allow any sale by auction except auctions conducted over
the internet upon the Premises, or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, or place any loads upon
the floor, walls, or ceiling which may endanger the structure, or use any
machinery or apparatus which will in any manner vibrate or shake the Premises,
or place any harmful liquids in the drainage system of the building.  No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises outside of the building proper.  No materials, supplies, equipment,
finished products or semi-finished products, raw materials or articles of any
nature shall be stored upon or permitted to remain on any portion of the
Premises outside of the building structure, unless approved by the local, state
federal or other applicable governing authority.  Lessor consents to Lessee's
use of materials which are incidental to the normal, day-to-day operations of
any office user, such as copier fluids, cleaning materials, etc., but this does
not relieve Lessee of any of its obligations not to contaminate the Premises and
related real property or violate any Hazardous Materials Laws.  Upon prior
consent and approval by Lessor, which may not be unreasonably withheld, Lessee
may utilize Hazardous Materials directly required for Lessee's research and
development or light manufacturing and assembly activities subject to the
provisions of Section 33.

4.   Alterations And Additions: Lessee shall not make, or suffer to be made, any
alteration or addition to said Premises, or any part thereof, without the
express, advance written consent of Lessor; any addition or alteration to said
Premises, except movable furniture and trade fixtures, shall become at once a
part of the realty and belong to Lessor at the end of the Lease Term or earlier
termination of this Lease.  Alterations and additions which are not deemed as
trade fixtures shall include HVAC systems, lighting systems, electrical systems,
partitioning, carpeting, or any other installation which has become an integral
part of the Premises.  Lessee agrees that it will not proceed to make such
alterations or additions until all required government permits have been
obtained and after having obtained consent from Lessor to do so, until five (5)
days from the receipt of such consent, so that Lessor may post appropriate
notices to avoid any liability to contractors or material suppliers for payment
for Lessee's improvements.  Lessee shall at all times permit such notices to be
posted and to remain posted until the completion of work.  At the end of the
Lease Term or earlier termination of this Lease, Lessee shall remove and shall
be required to remove its special tenant improvements, all related equipment,
and any additions or alterations installed by Lessee at or during the Lease Term
and Lessee shall return the Premises to the condition that existed before the
installation of the tenant improvements.  Notwithstanding the above, Lessor
agrees to allow any reasonable alterations and improvements and will use its
best efforts to notify Lessee at the time of approval if such improvements or
alterations are to be removed at the end of the Lease Term  or earlier
termination of this Lease.

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5.   Maintenance Of Premises:

  (a) Lessee shall at its sole cost and expense keep, repair, and maintain the
  interior of the Premises in Good Condition and Repair, including, but not
  limited to, the interior walls and floors of all offices and other interior
  areas, doors and door closures, all lighting systems, temperature control
  systems (i.e. control thermostats and like in kind equipment), and plumbing
  systems, including any Required Replacements.  Lessee shall  provide interior
  and exterior window washing as needed.  Lessee's duty to keep the Premises in
  Good Condition and Repair is subject to sections 19 and 21 of this Lease.

  (b) Lessor shall, at Lessee's expense, keep, repair, and maintain in Good
  Condition and Repair including replacements (based on a pro-rata share of (i)
  costs based on square footage or (ii) costs directly related to Lessee's use
  of the Premises) the following, which shall be included in the monthly CAC:

     1. The exterior of the building, any appurtenances and every part thereof,
     including but not limited to, glazing, sidewalks, parking areas, electrical
     systems, and painting of exterior walls.  The parking lot to receive a
     finish coat every five to seven years.

     2. The HVAC by a service contract with a licensed air conditioning and
     heating contractor which contract shall provide for a minimum of quarterly
     maintenance of all air conditioning and heating equipment at the Premises
     including HVAC repairs or replacements which are either excluded from such
     service contract or any existing equipment warranties.

     3. The landscaping by a landscape contractor to water, maintain, trim and
     replace, when necessary, any shrubbery, irrigation parts, and landscaping
     at the Premises.

     4. The roof membrane by a service contract with a licensed reputable
     roofing contractor which contract shall provide for a minimum of semi-
     annual maintenance, cleaning of storm gutters, drains, removing of debris,
     and trimming overhanging trees, repair of the roof and application of a
     finish coat every five years to the building at the Premises.

     5. Exterior pest control.

     6. Fire monitoring services.

     7. Parking lot sweeping.

     8. Electrical Switchgear.

  (c) Lessee hereby waives any and all rights to make repairs at the expense of
  Lessor as provided in Section 1942 of the Civil Code of the State of
  California, and all rights provided for by Section 1941 of said Civil Code.

  (d) Lessor shall be responsible for the repair of any structural defects in
  the Premises including the roof structure (not membrane), exterior walls and
  foundation during the Lease Term.

6.   Insurance:

  A) Hazard Insurance: Lessee shall not use, or permit said Premises, or any
  part thereof, to be used, for any purpose other than that for which the
  Premises are hereby leased; and no use shall be made or permitted to be made
  of the Premises, nor acts done, which may cause a cancellation of any
  insurance policy covering the Premises, or any part thereof, nor shall Lessee
  sell or permit to be kept, used or sold, in or about said Premises, any
  article which may be prohibited by a special form property insurance policy.
  Lessee shall comply with any and all requirements, pertaining to said
  Premises, of any insurance organization or company, necessary for the
  maintenance of reasonable special form property insurance, covering the
  Premises.  Lessor shall, at Lessee's sole cost and expense, purchase and keep
  in force special form property insurance, covering loss or damage to the
  Premises in an amount equal to the full replacement cost of the Premises, as
  determined by Lessor, with proceeds payable to Lessor.  In the event of a loss
  per the insurance provisions of this paragraph, Lessee shall

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  be responsible for deductibles up to a maximum of $5,000 per occurrence.
  Lessee acknowledges that the insurance referenced in this paragraph does not
  include coverage for Lessee's personal property.

  B) Loss of Rents Insurance: Lessor shall, at Lessee's sole cost and
  expense, purchase and maintain in full force and effect, a policy of rental
  loss insurance, in an amount equal to the amount of Rent payable by Lessee
  commencing within sixty (60) days of the date of the loss or on the date of
  loss if reasonably available for the next ensuing one (1) year, as reasonably
  determined by Lessor with proceeds payable to Lessor ("Loss of Rents
  Insurance").

  C) Liability and Property Damage Insurance: Lessee, as a material part of
  the consideration to be rendered to Lessor, hereby waives all claims against
  Lessor and Lessor's Agents for damages to goods, wares and merchandise, and
  all other personal property in, upon, or about the Premises, and for injuries
  to persons in, upon, or about the Premises, from any cause arising at any
  time, and Lessee will hold Lessor and Lessor's Agents exempt and harmless from
  any damage or injury to any person, or to the goods, wares, and merchandise
  and all other personal property of any person, arising from the use or
  occupancy of the Premises by Lessee, or from the failure of Lessee to keep the
  Premises in Good Condition and Repair, as herein provided.  Lessee shall, at
  Lessee's sole cost and expense, purchase and keep in force a standard policy
  of commercial general liability insurance and property damage policy covering
  the Premises and all related areas insuring the Lessee  having a combined
  single limit for both bodily injury, death and property damage in an amount
  not less than five million dollars ($5,000,000.00) and Lessee's insurance
  shall be primary.  The limits of said insurance shall not, however, limit the
  liability of Lessee hereunder.  Lessee shall, at its sole cost and expense,
  comply with all of the insurance requirements of all local, municipal, state
  and federal authorities now in force, or which may hereafter be in force,
  pertaining to Lessee's use and occupancy of the said Premises.  Subject to
  Lessee's obligations under Section 9, Lessee's duty to comply with insurance
  requirements and laws shall not require Lessee to make structural
  modifications or additions to Premises unless these are required by virtue of
  Lessee's specialized use of the Premises or alterations made by Lessee after
  the Commencement Date.

  D) Personal Property Insurance: Lessee shall obtain, at Lessee's sole cost
  and expense, special form property insurance including coverage for direct
  physical loss special form, and a sprinkler leakage endorsement insuring the
  personal property of Lessee.  The proceeds from any personal property damage
  policy shall be payable to Lessee.  Lessee shall be permitted to self-insure
  for loss of personal property subject to having a shareholder's equity of
  $50,000,000 and provided Lessee indemnifies Lessor against all damage claims
  to Lessor's satisfaction.

All insurance policies required in 6 C) and 6 D) above shall: (i) provide for a
certificate of insurance evidencing the insurance required herein, being
deposited with Lessor ten (10) days prior to the Commencement Date, and upon
each renewal, such certificates shall be provided 15 days prior to the
expiration date of such coverage, (ii) be in a form reasonably satisfactory to
Lessor and shall provide the coverage required by Lessee in this Lease, (iii) be
carried with companies with a Best Rating of B+VII minimum, (iv) specifically
provide that such policies shall not be subject to cancellation, reduction of
coverage, or other change except after 30 days prior written notice to Lessor,
(v) name Lessor, Lessor's lender, and any other party with an insurable interest
in the Premises as designated by Lessor as additional insureds by endorsement to
policy, and (vi) shall be primary.

Lessee agrees to pay to Lessor, as additional Rent, on demand, the full cost of
the insurance policies referenced in 6 A) and 6 B)  above as evidenced by
insurance billings to Lessor which shall be included in the CAC.  If Lessee does
not occupy the entire project, the insurance premiums shall be allocated to the
portion of the project occupied by Lessee on a pro-rata square footage or other
equitable basis, as determined by Lessor.  It is agreed that Lessee's obligation
under this paragraph shall be prorated to the reflect the Commencement Date and
the end of the Lease Term.

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Lessor and Lessee hereby waive any rights each may have against the other
related to any loss or damage caused to Lessor or Lessee as the case may be, or
to the Premises or its contents, and which may arise from any risk covered by
fire and extended coverage insurance and those risks required to be covered
under Lessee's personal property insurance.  The parties shall provide that
their respective insurance policies insuring the property or the personal
property include a waiver of any right of subrogation which said insurance
company may have against Lessor or Lessee, as the case may be.

7.   Abandonment: Lessee shall not vacate or abandon the Premises at any time
during the Lease Term; and if Lessee shall abandon, vacate or surrender said
Premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee and left on the Premises shall be deemed to be
abandoned, at the option of Lessor.  Notwithstanding the above or any contrary
provision elsewhere in this Lease, the Premises shall not be considered vacated
or abandoned if Lessee maintains the Premises in Good Condition and Repair,
provides security and is not in default.

8.   Free From Liens: Lessee shall keep the subject Premises , free from any and
all liens including but not limited to liens arising out of any work performed,
materials furnished, or obligations incurred by Lessee.  Lessee shall have no
duty to keep Premises free of liens for work performed by Lessor at Lessor's
expense.  However, the Lessor shall allow Lessee to contest a lien claim, so
long as the claim is discharged prior to any foreclosure proceeding being
initiated against the property and provided Lessee provides Lessor a bond if the
lien exceeds $5,000.

9.   Compliance With Governmental Regulations: Lessee shall, at its sole cost
and expense, comply with all of the requirements of all local, municipal, state
and federal authorities now in force, or which may hereafter be in force,
pertaining to  the Premises, and shall faithfully observe in the use and
occupancy of the Premises all local and municipal ordinances and state and
federal statutes now in force or which may hereafter be in force.
Notwithstanding the above, Lessee shall not be obligated to pay for changes in
compliance with Governmental Regulations if the cost exceeds Twenty Five
Thousand Dollars ($25,000) and does not occur as a result of Lessee's
specialized use of the Premises or alterations made by Lessee but such cost
shall be amortized over their useful life (not to exceed 15 years) at Wells
Fargo Prime Rate plus 1.0 and added to monthly CAC during Lease Term.

10.  Intentionally Omitted.

11.  Advertisements And Signs: Lessee shall not place or permit to be placed,
in, upon or about the Premises any unusual or extraordinary signs, or any signs
not approved by the city, local, state, federal or other applicable governing
authority. Lessee shall not place, or permit to be placed upon the Premises, any
signs, advertisements or notices without the written consent of the Lessor, and
such consent shall not be unreasonably withheld.  A sign so placed on the
Premises shall be so placed upon the understanding and agreement that Lessee
will remove same at the end of the Lease Term or earlier termination of this
Lease and repair any damage or injury to the Premises caused thereby, and if not
so removed by Lessee, then Lessor may have the same removed at Lessee's expense.

12.  Utilities: Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities supplied to the Premises.  Any charges for sewer
usage, PG&E and telephone site service or related fees shall be the obligation
of Lessee and paid for by Lessee.  If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion of all charges which
are jointly metered, the determination to be made by Lessor acting reasonably
and on any equitable basis.  Lessor and Lessee agree that Lessor shall not be
liable to Lessee for any disruption in any of the utility services to the
Premises provided Lessor acts reasonably to avoid any such disruption, or if
such disruption is unavoidable, to minimize the effect thereof on Lessee's use
and enjoyment of the Premises, to extent that such disruption is within Lessor's
control.

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13.  Attorney's Fees: In case suit should be brought for the possession of the
Premises, for the recovery of any sum due hereunder, because of the breach of
any other covenant herein, or to enforce, protect, or establish any term,
conditions, or covenant of this Lease or the right of either party hereunder,
the losing party shall pay to the Prevailing Party reasonable attorney's fees
which shall be deemed to have accrued on the commencement of such action and
shall be enforceable whether or not such action is prosecuted to judgment.  The
term "Prevailing Party" shall mean the party that received substantially the
relief requested, whether by settlement, dismissal, summary judgment, judgment,
or otherwise.

14.  Default

     14.1  Lessee Default: The occurrence of any of the following shall
constitute a default and breach of this Lease by Lessee: a) Any failure by
Lessee to pay Rent or to make any other payment required to be made by Lessee
hereunder when due if not cured within ten (10) days after written notice
thereof by Lessor to Lessee; b) The abandonment or vacation of the Premises by
Lessee except as provided in Section 7; c) A failure by Lessee to observe and
perform any other provision of this Lease to be observed or performed by Lessee,
where such failure continues for thirty days after written notice thereof by
Lessor to Lessee; provided, however, that if the nature of such default is such
that the same cannot be reasonably cured within such thirty (30) day period,
Lessee shall not be deemed to be in default if Lessee shall, within such period,
commence such cure and thereafter diligently prosecute the same to completion;
d) The making by Lessee of any general assignment for the benefit of creditors;
the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt
or of a petition for reorganization or arrangement under any law relating to
bankruptcy; e) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets or Lessee's interest in this Lease, or the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease.

     14.2  Surrender Of Lease: In the event of any such default by Lessee, then
in addition to any other remedies available to Lessor at law or in equity,
Lessor shall have the immediate option to terminate this Lease before the end of
the Lease Term and all rights of Lessee hereunder, by giving written notice of
such intention to terminate.  In the event that Lessor terminates this Lease due
to a default of Lessee, then Lessor may recover from Lessee: a) the worth at the
time of award of any unpaid Rent which had been earned at the time of such
termination; plus b) the worth at the time of award of unpaid Rent which would
have been earned after termination until the time of award exceeding the amount
of such rental loss that the Lessee proves could have been reasonably avoided;
plus c) the worth at the time of award of the amount by which the unpaid Rent
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided; plus
d) any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee's failure to perform his obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and e) at Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
California law.  As used in (a) and (b) above, the "worth at the time of award"
is computed by allowing interest at the rate of Wells Fargo's prime rate plus
two percent (2%) per annum.  As used in (c) above, the "worth at the time of
award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

     14.3  Right of Entry and Removal: In the event of any such default by
Lessee, Lessor shall also have the right, with or without terminating this
Lease, to re-enter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Lessee.

     14.4  Abandonment: In the event of the vacation or abandonment, except as
provided in Section 7, of the Premises by Lessee or in the event that Lessor
shall elect to re-enter as provided in paragraph 14.3 above or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, and Lessor does not elect to terminate

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this Lease as provided in Section 14.2 above, then Lessor may from time to time,
without terminating this Lease, either recover all Rent as it becomes due or
relet the Premises or any part thereof for such term or terms and at such rental
rates and upon such other terms and conditions as Lessor, in its sole
discretion, may deem advisable with the right to make alterations and repairs to
the Premises. In the event that Lessor elects to relet the Premises, then Rent
received by Lessor from such reletting shall be applied; first, to the payment
of any indebtedness other than Rent due hereunder from Lessee to Lessor; second,
to the payment of any cost of such reletting; third, to the payment of the cost
of any alterations and repairs to the Premises; fourth, to the payment of Rent
due and unpaid hereunder; and the residue, if any, shall be held by Lessor and
applied to the payment of future Rent as the same may become due and payable
hereunder. Should that portion of such Rent received from such reletting during
any month, which is applied by the payment of Rent hereunder according to the
application procedure outlined above, be less than the Rent payable during that
month by Lessee hereunder, then Lessee shall pay such deficiency to Lessor
immediately upon demand therefore by Lessor. Such deficiency shall be calculated
and paid monthly. Lessee shall also pay to Lessor, as soon as ascertained, any
costs and expenses incurred by Lessor in such reletting or in making such
alterations and repairs not covered by the rentals received from such reletting.

     14.5 No Implied Termination: No re-entry or taking possession of the
Premises by Lessor pursuant to Section 14.3 or Section 14.4 of this Lease shall
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Lessee or unless the termination thereof is decreed
by a court of competent jurisdiction.  Notwithstanding any reletting without
termination by Lessor because of any default by Lessee, Lessor may at any time
after such reletting elect to terminate this Lease for any such default.

15.  Surrender Of Lease: The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or sub tenancies,
or may, at the option of Lessor, operate as an assignment to him of any or all
such subleases or sub tenancies.

16.  Taxes: Lessee shall pay and discharge punctually and when the same shall
become due and payable without penalty, all real estate taxes, personal property
taxes, taxes based on vehicles utilizing parking areas in the Premises, taxes
computed or based on rental income (other than federal, state and municipal net
income taxes), environmental surcharges, privilege taxes, excise taxes, business
and occupation taxes, school fees or surcharges, gross receipts taxes, sales
and/or use taxes, employee taxes, occupational license taxes, water and sewer
taxes, assessments (including, but not limited to, assessments for public
improvements or benefit), assessments for local improvement and maintenance
districts, and all other governmental impositions and charges of every kind and
nature whatsoever, regardless of whether now customary or within the
contemplation of the parties hereto and regardless of whether resulting from
increased rate and/or valuation, or whether extraordinary or ordinary, general
or special, unforeseen or foreseen, or similar or dissimilar to any of the
foregoing (all of the foregoing being hereinafter collectively called "Tax" or
"Taxes") which, at any time during the Lease Term, shall be applicable or
against the Premises, or shall become due and payable and a lien or charge upon
the Premises under or by virtue of any present or future laws, statutes,
ordinances, regulations, or other requirements of any governmental authority
whatsoever.  The term "Environmental Surcharge" shall include any and all
expenses, taxes, charges or penalties imposed by the Federal Department of
Energy, Federal Environmental Protection Agency, the Federal Clean Air Act, or
any regulations promulgated thereunder, or any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes, assessments or other types of surcharges as a means of controlling or
abating environmental pollution or the use of energy in regard to the use,
operation or occupancy of the Premises.  The term "Tax" shall include, without
limitation, all taxes, assessments, levies, fees, impositions or charges levied,
imposed, assessed, measured, or based in any manner whatsoever (i) in whole or
in part on the Rent payable by Lessee under this Lease, (ii) upon or with
respect to the use, possession, occupancy, leasing, operation or management of
the Premises, (iii) upon this transaction or any document to which Lessee is a
party creating or transferring an interest or an estate in the Premises, (iv)
upon Lessee's business operations conducted at the Premises, (v) upon, measured
by or reasonably attributable to the cost or

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<PAGE>

value of Lessee's equipment, furniture, fixtures and other personal property
located on the Premises or the cost or value of any leasehold improvements made
in or to the Premises by or for Lessee, regardless of whether title to such
improvements shall be in Lessor or Lessee, or (vi) in lieu of or equivalent to
any Tax set forth in this Section 16. In the event any such Taxes are payable by
Lessor and it shall not be lawful for Lessee to reimburse Lessor for such Taxes,
then the Rent payable thereunder shall be increased to net Lessor the same net
rent after imposition of any such Tax upon Lessor as would have been payable to
Lessor prior to the imposition of any such Tax. It is the intention of the
parties that Lessor shall be free from all such Taxes and all other governmental
impositions and charges of every kind and nature whatsoever. However, nothing
contained in this Section 16 shall require Lessee to pay any Federal or State
income, franchise, estate, inheritance, succession, transfer or excess profits
tax imposed upon Lessor. If any general or special assessment is levied and
assessed against the Premises, Lessor agrees to use its best reasonable efforts
to cause the assessment to become a lien on the Premises securing repayment of a
bond sold to finance the improvements to which the assessment relates which is
payable in installments of principal and interest over the maximum term allowed
by law. It is understood and agreed that Lessee's obligation under this
paragraph will be prorated to reflect the Commencement Date and the end of the
Lease Term. It is further understood that if Taxes cover the Premises and Lessee
does not occupy the entire Premises, the Taxes will be allocated to the portion
of the Premises occupied by Lessee based on a pro-rata square footage or other
equitable basis, as determined by Lessor. Lessee shall pay invoiced tax bills on
or before due date.

Subject to any limitations or restrictions imposed by any deeds of trust or
mortgages now or hereafter covering or affecting the Premises, Lessee shall have
the right to contest or review the amount or validity of any Tax by appropriate
legal proceedings but which is not to be deemed or construed in any way as
relieving, modifying or extending Lessee's covenant to pay such Tax at the time
and in the manner as provided in this Section 16.  However, as a condition of
Lessee's right to contest, if such contested Tax is not paid before such contest
and if the legal proceedings shall not operate to prevent or stay the collection
of the Tax so contested, Lessee shall, before instituting any such proceeding,
protect the Premises and the interest of Lessor and of the beneficiary of a deed
of trust or the mortgagee of a mortgage affecting the Premises against any lien
upon the Premises by a surety bond, issued by an insurance company acceptable to
Lessor and in an amount equal to one and one-half (1 1/2) times the amount
contested or, at Lessor's option, the amount of the contested Tax and the
interest and penalties in connection therewith.  Any contest as to the validity
or amount of any Tax, whether before or after payment, shall be made by Lessee
in Lessee's own name, or if required by law, in the name of Lessor or both
Lessor and Lessee.  Lessee shall defend, indemnify  and hold harmless Lessor
from and against any and all costs or expenses, including attorneys' fees, in
connection with any such proceedings brought by Lessee, whether in its own name
or not. Lessee shall be entitled to retain any refund of any such contested Tax
and penalties or interest thereon which have been paid by Lessee.  Nothing
contained herein shall be construed as affecting or limiting Lessor's right to
contest any Tax at Lessor's expense.

17.  Notices: Unless otherwise provided for in this Lease, any and all written
notices or other communication (the "Communication") to be given in connection
with this Lease shall be given in writing and shall be given by personal
delivery, facsimile transmission or by mailing by registered or certified mail
with postage thereon or recognized overnight courier, fully prepaid, in a sealed
envelope addressed to the intended recipient as follows:

<TABLE>
<S>                      <C>
(a)  to the Lessor at:   10050 Bandley Drive
                         Cupertino, California 95014
                         Attention: Carl E. Berg
                         Fax No: (408) 725-1626

(b)  Until Commencement Date for Phase I for Lessee:  166 Baypointe Parkway
                                                      San Jose, California  95134
                                                      Attention: Director, Real Estate & Facilities
</TABLE>

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<PAGE>

<TABLE>
<S>                      <C>
                                                      CC:  Chief Financial Officer
                                                      Fax No: 408.965.2859

(c)  After Commencement Date for Phase I for Lessee:  XXXXXXX Silver Creek Drive
                                                      San Jose, California
                                                      Attention: Director, Real Estate & Facilities
                                                      CC:  Chief Financial Officer
                                                      Fax No:
</TABLE>

or such other addresses, facsimile number or individual as may be designated by
a Communication given by a party to the other parties as aforesaid.  Any
Communication given by personal delivery shall be conclusively deemed to have
been given and received on a date it is so delivered at such address provided
that such date is a business day, otherwise on the first business day following
its receipt, and if given by registered or certified mail, on the day on which
delivery is made or refused or if given by recognized overnight courier, on the
first business day following deposit with such overnight courier and if given by
facsimile transmission, on the day on which it was transmitted provided such day
is a business day, failing which, on the next business day thereafter.

18.  Entry By Lessor: Lessee shall permit Lessor and its agents to enter into
and upon said Premises at all reasonable times using the minimum amount of
interference and inconvenience to Lessee and Lessee's business, subject to any
security regulations of Lessee, for the purpose of inspecting the same or for
the purpose of maintaining the building in which said Premises are situated, or
for the purpose of making repairs, alterations or additions to any other portion
of said building, including the erection and maintenance of such scaffolding,
canopies, fences and props as may be required, without any rebate of Rent and
without any liability to Lessee for any loss of occupation or quiet enjoyment of
the Premises; and shall permit Lessor and his agents, at any time within ninety
(90) days prior to the end of the Lease Term, to place upon said Premises any
usual or ordinary "For Sale" or "For Lease" signs and exhibit the Premises to
prospective tenants at reasonable hours.

19.  Destruction Of Premises:

19.1   Damage Subject to Restoration in One Year.  In the event one or more of
the buildings which are part of the Premises are damaged during the Lease Term
from any cause, Lessor shall forthwith repair the same, provided such repairs
can be made within one year after the date of the receipt of building permit
under the laws and regulations of State, Federal, County, or Municipal
authorities but subject to Section 19.3. Such damage shall in no way annul or
void this Lease, except that Lessee shall be entitled to a proportionate
reduction of Rent while such repairs are being made to the extent of payments
received by Lessor or any lender under Lessor's Loss of Rents Insurance
coverage.

19.2 Damage Not Subject to Restoration in One Year.  In the event one or more of
the buildings which are part of the Premises are damaged during the Lease Term
from any cause, but such repairs cannot be made within one year after the date
of the receipt of building permit under the laws and regulations of State,
Federal, County, or Municipal authorities but subject to Section 19.3, either
party may terminate this Lease, as to the damaged building or buildings by
notice to the other within 20 days after the date Lessor advises Lessee in
writing that repair will exceed one year.  However, if Lessor exercises such
termination right: (a) Lessee shall have the option to avoid such termination by
notifying Lessor within 10 days after receipt of such notice that Lessee will
commence paying Rent for such damaged building(s) prior to the completion of
repairs and at such time as Lessor's Loss of Rents Insurance coverage. with
respect to such building(s) has been depleted; and (b) if Landlord thereafter
elects to rebuild one or more of such buildings at a point in time where at
least 40% of the Lease Term is unexpired, Lessee shall

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have the right to reinstate this Lease as to the building or buildings Landlord
elects to rebuild. If this Lease is not terminated as provided in this Section
19.2, Lessor shall forthwith repair the damage to the buildings(s). Such damage
shall in no way annul or void this Lease, except that Lessee shall be entitled
to a proportionate reduction of Rent while such repairs are being made to the
extent of payments received by Lessor or any lender under Lessor's Loss of Rents
Insurance coverage.

19.3 Uninsured Damage.  Notwithstanding Sections 19.1 and 19.2 above, if the
reasonable cost of repairing damage to a building or buildings is not fully
covered by Lessor's insurance (with the exception of the deductible thereunder),
Lessor shall have the option of terminating this Lease as to the damaged
building or buildings by notice to Lessee within 60 days after the date of
damage.  If Lessor so elects to terminate this Lease as to the damaged
building(s), Lessee may avoid such termination by agreeing to pay all costs to
repair the damaged building(s) not covered by Lessor's insurance.

19.4 Destruction of Three or More Buildings.  If three or more of the buildings
within the Premises are damaged to a degree that repairs cannot be made within
one year after the date of the receipt of building permit under the laws and
regulations of State, Federal, County, or Municipal authorities, either party
may terminate this Lease as to the entire Premises (including any undamaged
building or buildings) by notice to the other within 30 days after the date of
damage.  However, if Lessor exercises such termination option, Lessee shall be
permitted to remain in possession of any undamaged building or buildings for up
to one year after Lessor's notice of termination, subject to all terms and
conditions of this Lease (except the Rent shall be proportionately reduced based
on the ratio that the rentable area of the undamaged building or buildings bears
to the total rentable area of the buildings within the Premises prior to such
damage.

19.5 Waiver of Civil Code Sections.  The provisions of Section 1932, Subdivision
2, and of Section 1933, Subdivision 4, of the Civil Code of the State of
California are waived by Lessee and Lessor.  The parties intend that the
provisions of this Lease, including this Section 19, shall govern their
respective rights and remedies in case of damage to the Premises.

20. Assignment And Subletting: Lessee shall not assign this Lease, or any
interest therein, and shall not sublet the said Premises or any part thereof, or
any right or privilege appurtenant thereto, or cause any other person or entity,
to occupy or use the Premises, or any portion thereof, without the advance
written consent of Lessor.    Notwithstanding the above, Lessee may, without the
consent of Lessor, assign this Lease or sublet all or any part of the Premises
to a bona fide subsidiary or affiliate of Lessee, an entity in which or with
which Lessee merges or an entity which acquires all or substantially all of the
assets of Lessee ("Excepted Party").   Any such assignment or subletting
requiring Lessor's consent made without Lessor's consent shall be void, and
shall, at the option of the Lessor, terminate this Lease.  This Lease shall not,
or shall any interest therein, be assignable, as to the interest of Lessee, by
operation of law, without the written consent of Lessor.  If Lessee desires to
assign its rights under this Lease or to sublet all or any part of the Premises
to a party other than an Excepted Party, Lessee shall first notify Lessor of the
proposed terms and conditions of such assignment or subletting.  Lessor shall
have the right of first refusal to enter into a direct Lessor-lessee
relationship with such party under such proposed terms and conditions, in which
event Lessee shall be relieved of its obligations hereunder to the extent of the
Lessor-lessee relationship entered into between Lessor and such third party;
provided, however, that notwithstanding the above, Lessee shall have the right
to sublease up to One Hundred and Fifty Thousand Square Feet (150,000 sq.ft.)
for a period up to five (5) years from the Commencement Date of Phase I (but no
renewals or extensions on such sublease shall be allowed by Lessor)and Lessor's
right of first refusal shall not apply as to any such sublease(s)  If Lessee
exercises its right of first refusal to enter into a direct Lessor-Lessee
relationship with a new lessee, then Lessee may recover from such rent an amount
equal to the unamortized value of its tenant improvements and Lessee shall
continue to own such improvements until end of the Lease Term at which time such
title to such improvements shall revert to Lessor.  Notwithstanding the
foregoing, Lessee may assign this Lease to an Excepted Party, provided there is
no substantial reduction in the net worth of the resulting guarantor.  Whether
or not Lessor's consent to a sublease or assignment is required, in the event of
any sublease or assignment, Lessee shall be and shall remain primarily liable
for the performance of all conditions, covenants, and obligations of Lessee
hereunder and, in the event of a default by an assignee or sublessee, Lessor may
proceed directly against the original Lessee hereunder and/or any other
predecessor of such assignee or sublessee without the necessity of

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<PAGE>

exhausting remedies against said assignee or sublessee. If Lessee merges or
sells substantially all of its assets and the net worth of the resulting entity
is substantially less than that of Lessee, such sale shall be a default under
this Lease unless approved by Lessor.

21.  Condemnation: If any part of the Premises shall be taken for any public or
quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall as to the part so taken, terminate as of
the date title vests in the condemnor or purchaser, and the Rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the Lease Term only that portion of Rent as the value of the part
remaining.  The rental adjustment resulting will be computed at the same Rental
rate for the remaining part not taken; however, Lessor shall have the option to
terminate this Lease as of the date when title to the part so taken vests in the
condemnor or purchaser.  If all of the Premises, or such part thereof be taken
so that there does not remain a portion susceptible for occupation hereunder,
this Lease shall thereupon terminate.  If a part or all of the Premises be
taken, all compensation awarded upon such taking shall be payable to the Lessor.
Lessee may file a separate claim and be entitled to any award granted to Lessee.

22.  Effects Of Conveyance: The term "Lessor" as used in this Lease, means only
the owner for the time being of the land and building constituting the Premises,
so that, in the event of any sale of said land or building, or in the event of a
Lease of said building, Lessor shall be and hereby is entirely freed and
relieved of all covenants and obligations of Lessor hereunder, and it shall be
deemed and construed, without further agreement between the parties and the
purchaser of any such sale, or the Lessor of the building, that the purchaser or
lessor of the building has assumed and agreed to carry out any and all covenants
and obligations of the Lessor hereunder.  If any security is given by Lessee to
secure the faithful performance of all or any of the covenants of this Lease on
the part of Lessee, Lessor may transfer and deliver the security, as such, to
the purchaser at any such sale of the building, and thereupon the Lessor shall
be discharged from any further liability.

23.  Subordination: This Lease, in the event Lessor notifies Lessee in writing,
shall be subordinate to any ground lease, deed of trust, or other hypothecation
for security now or hereafter placed upon the real property at which the
Premises are a part and to any and all advances made on the security thereof and
to renewals, modifications, replacements and extensions thereof. Lessee agrees
to promptly execute any documents which may be required to effectuate such
subordination provided Lessee receives a non-disturbance agreement on standard
commercial terms from Lender dated prior to lien. Notwithstanding such
subordination, if Lessee is not in default and so long as Lessee shall pay the
Rent and observe and perform all of the provisions and covenants required under
this Lease, Lessee's right to quiet possession of the Premises shall not be
disturbed or effected by any subordination.

24.  Waiver: The waiver by Lessor or Lessee of any breach of any term, covenant
or condition, herein contained shall not be construed to be a waiver of such
term, covenant or condition or any subsequent breach of the same or any other
term, covenant or condition therein contained.  The subsequent acceptance of
Rent hereunder by Lessor shall not be deemed to be a waiver of Lessee's breach
of any term, covenant, or condition of the Lease.

25.  Holding Over: Any holding over after the end of the Lease Term requires
Lessor's written approval prior to the end of the Lease Term, which,
notwithstanding any other provisions of this Lease, Lessor may withhold.  Such
holding over shall be construed to be a tenancy at sufferance from month to
month.  Lessee shall pay to Lessor monthly base rent equal to one and one-half
(1.5) times the monthly base rent installment due in the last month of the Lease
Term and all other additional rent and all other terms and conditions of the
Lease shall apply, so far as applicable.  Holding over by Lessee without written
approval of Lessor shall subject Lessee to the liabilities and obligations
provided for in this Lease and by law, including, but not limited to those in
Section 2.3 of this Lease.  Lessee shall indemnify and hold Lessor harmless
against any loss or liability resulting from

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any delay caused by Lessee in surrendering the Premises, including without
limitation, any claims made or penalties incurred by any succeeding lessee or by
Lessor; provided that Lessor gives Lessee notice as provided in Section 2.3 of
any leases which will result any such claims or penalties. No holding over shall
be deemed or construed to exercise any option to extend or renew this Lease in
lieu of full and timely exercise of any such option as required hereunder.

26.  Lessor's Liability: If Lessee should recover a money judgment against
Lessor arising in connection with this Lease, the judgment shall be satisfied
only out of the Lessor's interest in the Premises and neither Lessor or any of
its partners shall be liable personally for any deficiency.  If Lessor has
transferred its interest in the Premises, in enforcing any judgment for Lessor's
breach of the Lease, Lessee shall be entitled to reach the proceeds of any sale
or other disposition of the Premises.

27.  Estoppel Certificates: Lessee shall at any time during the Lease Term, upon
not less than ten (10) days prior written notice from Lessor, execute and
deliver to Lessor a statement in writing certifying that, this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification) and the dates to which the Rent and other charges have been
paid in advance, if any, and acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder or specifying
such defaults if they are claimed.  Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Lessee's failure to deliver such a statement within such time shall be
conclusive upon the Lessee that (a) this Lease is in full force and effect,
without modification except as may be represented by Lessor; (b) there are no
uncured defaults in Lessor's performance.

28.  Time: Time is of the essence of the Lease.

29.  Captions: The headings on titles to the paragraphs of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part thereof.  This instrument contains all of the
agreements and conditions made between the parties hereto and may not be
modified orally or in any other manner than by an agreement in writing signed by
all of the parties hereto or their respective successors in interest.

30.  Party Names: Landlord and Tenant may be used in various places in this
Lease as a substitute for Lessor and Lessee respectively.

31.  Earthquake Insurance: As a condition of Lessor agreeing to waive the
requirement for earthquake insurance, Lessee agrees that it will pay, as
additional Rent, which shall be included in the monthly CAC, an amount not to
exceed Ninety-Nine Thousand Dollars ($99,000) for Phase I and One Hundred
Seventy-Eight Thousand Dollars ($178,000) for Phase I and Phase II combined. per
year for earthquake insurance if Lessor desires to obtain some form of
earthquake insurance in the future, if and when available, on terms acceptable
to Lessor as determined in the sole and absolute discretion of Lessor.  Lessee's
responsibility for the deductible in case of loss covered under Lessor's
earthquake insurance policy should not exceed Three Hundred and Forty Six
Thousand Dollars ($346,000) for Phase I and Ninety Eight Thousand and Five
Hundred Dollars ($98,500) for Phase II.

32.  Habitual Default: Notwithstanding anything to the contrary contained in
Section 14 herein, Lessor and Lessee agree that if Lessee shall have defaulted
in the payment of Rent for two or more times during any twelve month period
during the Lease Term, and such defaults continue after written notice of
delinquency beyond the applicable cure period, then, at the option of  Lessor,
either (a) Lessee shall be required to increase the amount of the Security
Deposit to three month's Base Rent or (b) Lessor may require Lessee to commence
paying Base rent quarterly in advance.  If Lessor exercises its option under
clause (a) or (b) of the preceding sentence and Lessee thereafter makes all
payments of Rent without default for twelve (12) consecutive months, and there
exists no material non-monetary default by Lessee at such time, then (i) if
Lessor exercised the option under clause (a), the

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Security Deposit shall be reduced to the sum otherwise required under this Lease
but for Lessor's exercise of such option, and (ii) if Lessor exercised the
option under clause (b), Lessee may revert to paying the base Rent monthly in
advance.

33.  Hazardous Materials

     33.1 Definitions: As used in this Lease, the following terms shall have the
following meaning:

     a. The term "Hazardous Materials" shall mean (i) polychlorinated biphenyls;
     (ii) radioactive materials and (iii) any chemical, material or substance
     now or hereafter defined as or included in the definitions of "hazardous
     substance" "hazardous water", "hazardous material", "extremely hazardous
     waste", "restricted hazardous waste" under Section 25115, 25117 or 15122.7,
     or listed pursuant to Section 25140 of the California Health and Safety
     Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined
     as "hazardous substance" under Section 25316 of the California Health and
     Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous
     Substances Account Act), (iii) defined as "hazardous material", "hazardous
     substance", or "hazardous waste" under Section 25501 of the California
     Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials
     Release, Response, Plans and Inventory), (iv) defined as a "hazardous
     substance" under Section 25181 of the California Health and Safety Code,
     Division 20l, Chapter 6.7 (Underground Storage of Hazardous Substances),
     (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as
     "hazardous" or "extremely hazardous" pursuant to Article II of Title 22 of
     the California Administrative Code, Division 4, Chapter 20, (viii) defined
     as "hazardous substance" pursuant to Section 311 of the Federal Water
     Pollution Control Act, 33 U.S.C. 1251 et seq. or listed pursuant to Section
     1004 of the Federal Water Pollution Control Act (33 U.S.C. 1317), (ix)
     defined as a "hazardous waste", pursuant to Section 1004 of the Federal
     Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., (x) defined
     as "hazardous substance" pursuant to Section 101 of the Comprehensive
     Environmental Responsibility Compensations, and Liability Act, 42 U.S.C.
     9601 et seq., or (xi) regulated under the Toxic Substances Control Act, 156
     U.S.C. 2601 et seq.

     b. The term "Hazardous Materials Laws" shall mean any local, state and
     federal laws, rules, regulations, or ordinances relating to the use,
     generation, transportation, analysis, manufacture, installation, release,
     discharge, storage or disposal of Hazardous Material.

     c. The term "Lessor's Agents" shall mean Lessor's agents, representatives,
     employees, contractors, subcontractors, directors, officers and partners.

     d. The term "Lessee's Agents" shall mean Lessee's agents, representatives,
     employees, contractors, subcontractors, directors, officers, partners,
     invitees or any other person in or about the Premises other then Lessor or
     Lessor's Agents.

     33.2 Lessee's Right to Investigate: Lessee shall be entitled to cause such
inspection, soils and ground water tests, and other evaluations to be made of
the Premises as Lessee deems necessary regarding (i) the presence and use of
Hazardous Materials in or about the Premises, and (ii) the potential for
exposure to Lessee's employees and other persons to any Hazardous Materials used
and stored by previous occupants in or about the Premises.  Lessee shall provide
Lessor with copies of all inspections, tests and evaluations.  Lessee shall
indemnify, defend and hold Lessor harmless from any cost, claim or expense
arising from such entry by Lessee or from the performance of any such
investigation by such Lessee.

     33.3 Lessor's Representations: Lessor hereby represents and warrants to the
best of Lessor's knowledge that the Premises are, as of the date of this Lease,
in compliance with all Hazardous Material Laws.

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<PAGE>

     33.4 Lessee's Obligation to Indemnify: Lessee, at its sole cost and
expense, shall indemnify, defend, protect and hold Lessor and Lessor's Agents
harmless from and against any and all cost or expenses, including those
described under subparagraphs i, ii and iii herein below set forth, arising from
or caused in whole or in part, directly or indirectly by:

     a. Lessee's or Lessee's Agents' use, analysis, storage, transportation,
     disposal, release, threatened release, discharge or generation of Hazardous
     Material to, in, on, under, about or from the Premises; or

     b. Lessee's or Lessee's Agents failure to comply with Hazardous Material
     laws; or

     c. Any release of Hazardous Material to, in, on, under, about, from or onto
     the Premises caused by or occurring as a result of acts or omissions of
     Lessee or Lessee's Agents or occurring during the Lease Term, except ground
     water contamination from other parcels where the source is from off the
     Premises not arising from or caused by Lessee or Lessee's Agents.

The cost and expenses indemnified against include, but are not limited to the
following:

     i. Any and all claims, actions, suits, proceedings, losses, damages,
     liabilities, deficiencies, forfeitures, penalties, fines, punitive damages,
     cost or expenses;

     ii. Any claim, action, suit or proceeding for personal injury (including
     sickness, disease, or death), tangible or intangible property damage,
     compensation for lost wages, business income, profits or other economic
     loss, damage to the natural resources of the environment, nuisance,
     pollution, contamination, leaks, spills, release or other adverse effects
     on the environment;

     iii. The cost of any repair, clean-up, treatment or detoxification of the
     Premises necessary to bring the Premises into compliance with all Hazardous
     Material Laws, including the preparation and implementation of any closure,
     disposal, remedial action, or other actions with regard to the Premises,
     and expenses (including, without limitation, reasonable attorney's fees and
     consultants fees, investigation and laboratory fees, court cost and
     litigation expenses).

     33.5 Lessee's Obligation to Remediate Contamination: With respect to any
Hazardous Materials contamination of the Premises for which Lessee is
responsible under Section 33.4, Lessee shall, at its sole cost and expense,
promptly take any and all action necessary to remediate contamination  during
the Lease Term.

     33.6 Obligation to Notify: Lessor and Lessee shall each give written notice
to the other as soon as reasonably practical of (i) any communication received
from any governmental authority concerning Hazardous Material which related to
the Premises and (ii) any contamination of the Premises by Hazardous Materials
which constitutes a violation of any Hazardous Material Laws.

     33.7 Survival: The obligations of Lessee under this Section 33 shall
survive the Lease Term or earlier termination of this Lease.

     33.8 Certification and Closure: On or before the end of the Lease Term or
earlier termination of this Lease, Lessee shall deliver to Lessor a
certification executed by Lessee stating that, to the best of Lessee's
knowledge, there exists no violation of Hazardous Material Laws resulting from
Lessee's obligation in Paragraph 33.  If pursuant to local ordinance, state or
federal law, Lessee is required, at the expiration of the Lease Term, to submit
a closure plan for the Premises to a local, state or federal agency, then Lessee
shall comply at its sole cost and expense with the requirements of the closure
plan and furnish to Lessor a copy of such plan.

     33.9 Prior Hazardous Materials: Lessee shall have no obligation to clean up
or to hold Lessor harmless with respect to any Hazardous Material or wastes
discovered on the Premises, except as a result of Environmental Surcharges,
which were not introduced into, in, on, about, from or under the Premises during
the Lease Term or ground water contamination from other parcels where the source
is from off the Premises not arising from or caused by Lessee or Lessee's
Agents.

Page 22
<PAGE>

34.  Brokers: Lessor and Lessee represent that they have not utilized or
contacted a real estate broker or finder with respect to this Lease other than
CB Richard Ellis ("CB") and Lessee agrees to indemnify and hold Lessor harmless
against any claim, cost, liability or cause of action asserted by any broker or
finder claiming through Lessee other than CB.  Lessor shall at its sole cost and
expense pay an agreed upon brokerage commission to CB in connection with this
transaction.  Lessor represents and warrants that it has not utilized or
contacted a real estate broker or finder with respect to this Lease other than
CB and Lessor agrees to indemnify and hold Lessee harmless against any claim,
cost, liability or cause of action asserted by any broker or finder claiming
through Lessor.

35.  Option to Extend

A. Option: Lessor hereby grants to Lessee one (1) option to extend the Lease
Term, with the extended term to be for a period of five (5) years, on the
following terms and conditions:

     (i) Lessee shall give Lessor written notice of its exercise of its option
     to extend no earlier than twelve (12) , nor later than six (6) calendar
     months before the Lease Term would end but for said exercise.  If Lessee
     and Lessor have not agreed to rental terms in writing, Lessee may withdraw
     its notice of exercise of an extension option prior to six (6) months
     before the Lease Term would end but for said exercise.    Lessor shall
     provide Lessee with Lessor's proposed base monthly rent for the option
     period within twenty (20) days of Lessee's written request.  However, once
     Lessee delivers a notice of exercise of an option to extend the Lease Term
     it may not be withdrawn except as provided for herein and subject to the
     provisions of this Section 35, such notice shall operate to extend the
     Lease Term.   Upon any extension of the Lease Term pursuant to this Section
     35, the term "Lease Term" as used in this Lease shall thereafter include
     the then extended term.  Time is of the essence.

     (ii) Lessee may not extend the Lease Term pursuant to any option granted by
     this Section 35 if Lessee is in default as of the date of the exercise of
     its option.  If Lessee has committed a default by Lessee as defined in
     Section 14 or 32 that has not been cured or waived by Lessor in writing by
     the date that any extended term is to commence, then Lessor may elect not
     to allow the Lease Term to be extended, notwithstanding any notice given by
     Lessee of an exercise of this option to extend.

     (iii) All terms and conditions of this Lease shall apply during the
     extended term, except that the base rent and rental increases for each
     extended term shall be determined as provided in Section 35 (B) below

     (iv) The option rights of ONI Systems Corporation granted under this
     Section 35 are granted for ONI Systems Corporation's and Excepted Party's
     personal benefit and may not be assigned or transferred by ONI Systems
     Corporation or Excepted Party exercised if ONI Systems Corporation or
     Excepted Party is not occupying the Premises at the time of exercise

B. Extended Term Rent - Option Period: The monthly Rent for the Premises during
the extended term shall equal the fair market monthly Rent for the Premises as
of the commencement date of the extended term, but in no case, less than the
Rent during the last month of the prior Lease term.  Promptly upon Lessee's
exercise of the option to extend, Lessee and Lessor shall meet and attempt to
agree on the fair market monthly Rent for the Premises as of the commencement
date of the extended term.  In the event the parties fail to agree upon the
amount of the monthly Rent for the extended term prior to commencement thereof,
the monthly Rent for the extended term shall be determined by appraisal in the
manner hereafter set forth; provided, however, that in no event shall the
monthly Rent for the extended term be less than in the immediate preceding
period.  Annual base rent

Page 23
<PAGE>

increases during the extended term shall not be less than four percent (4%) per
year. In the event it becomes necessary under this paragraph to determine the
fair market monthly Rent of the Premises by appraisal, Lessor and Lessee each
shall appoint a real estate appraiser who shall be a member of the American
Institute of Real Estate Appraiser ("AIREA") and such appraisers shall each
determine the fair market monthly Rent for the Premises taking into account the
value of the Premises and the amenities provided by the outside areas, the
common areas, and the Building, and prevailing comparable Rentals in the area.
Such appraisers shall, within twenty (20) business days after their appointment,
complete their appraisals and submit their appraisal reports to Lessor and
Lessee. If the fair market monthly Rent of the Premises established in the two
(2) appraisals varies by five percent (5%) or less of the higher Rent, the
average of the two shall be controlling. If said fair market monthly Rent varies
by more than five percent (5%) of the higher Rental, said appraisers, within ten
(10) days after submission of the last appraisal, shall appoint a third
appraiser who shall be a member of the AIREA and who shall also be experienced
in the appraisal of Rent values and adjustment practices for commercial
properties in the vicinity of the Premises. Such third appraiser shall, within
twenty (20) business days after his appointment, determine by appraisal the fair
market monthly Rent of the Premises taking into account the same factors
referred to above, and submit his appraisal report to Lessor and Lessee. The
fair market monthly Rent determined by the third appraiser for the Premises
shall be controlling, unless it is less than that set forth in the lower
appraisal previously obtained, in which case the value set forth in said lower
appraisal shall be controlling, or unless it is greater than that set forth in
the higher appraisal previously obtained in which case the Rent set for in said
higher appraisal shall be controlling. If either Lessor or Lessee fails to
appoint an appraiser, or if an appraiser appointed by either of them fails,
after his appointment to submit his appraisal within the required period in
accordance with the foregoing, the appraisal submitted by the appraiser properly
appointed and timely submitting his appraisal shall be controlling. If the two
appraisers appointed by Lessor and Lessee are unable to agree upon a third
appraiser within the required period in accordance with the foregoing,
application shall be made within twenty (20) days thereafter by either Lessor or
Lessee to AIREA, which shall appoint a member of said institute willing to serve
as appraiser. The cost of all appraisals under this subparagraph shall be borne
equally be Lessor and Lessee.

     C.   Effect of Conditional Exercise:  As used in this section, "Rent Floor"
means the requirement under Section 35.B above that the  minimum rent for the
extended term be no less than the minimum rent in the immediate preceding
period.  Lessee may deliver to Lessor under Section 35.B a notice conditionally
exercising the option to extend, subject to Lessor's agreement to either waive
the Rent Floor or to reduce the floor below the amount specified under Section
35.B.  If Lessee timely delivers such a notice ("Conditional Exercise Notice"),
Lessor may notify Lessee within thirty (30) days after receipt thereof that
Lessor waives such Rent Floor or agrees to accept a reduced Rent Floor as set
forth in the Conditional Exercise Notice.  If Lessor timely gives the notice
described in the preceding sentence, Lessee's Conditional Exercise Notice shall
become an unconditional exercise of the option to extend, as the extended term
rent shall be established as provided in Section 35.B, except that there shall
be no Rent Floor or the Rent Floor shall reduced as provided in the Conditional
Exercise Notice.  If Lessor does not timely respond to Lessee's Conditional
Exercise Notice in the manner contemplated above, Lessee's Conditional Exercise
Notice shall be ineffective and Lessee's extension option shall lapse.  However,
in such case, Lessor shall not, prior to the expiration of the Lease term, enter
into any lease or option to lease of all or any part if the Premises with a
third party for less than the floor unless Lessor first delivers to Lessee a
notice ("Refusal Notice") setting forth all relevant terms and conditions of the
proposed lease or option to lease.  Lessee shall have five days after the
delivery of the Refusal Notice to notify Lessor that Lessee accepts such terms,
in which case Lessor and Lessee shall promptly execute a new lease, or an
amendment to this Lease, incorporating the terms set forth in the Refusal
Notice.  However, if Lessee does not so respond to the Refusal Notice, Lessor
shall be free to enter into a lease or option to lease with such third party on
terms no less favorable to Lessor than those set forth in the Refusal Notice.

36.  Approvals: Whenever in this Lease the Lessor's or Lessee's consent is
required, such consent shall not be unreasonably or arbitrarily withheld or
delayed.  In the event that the Lessor or Lessee does not respond to a request
for any consents which

Page 24
<PAGE>

may be required of it in this Lease within ten business days of the request of
such consent in writing by the Lessee or Lessor, such consent shall be deemed to
have been given by the Lessor or Lessee.

37.  Authority: Each party executing this Lease represents and warrants that he
or she is duly authorized to execute and deliver the Lease.  If executed on
behalf of a corporation, that the Lease is executed in accordance with the by-
laws of said corporation (or a partnership that the Lease is executed in
accordance with the partnership agreement of such partnership), that no other
party's approval or consent to such execution and delivery is required, and that
the Lease is binding upon said individual, corporation (or partnership) as the
case may be in accordance with its terms.

38.  Indemnification of Lessor: Except to the extent caused by the sole
negligence or willful misconduct of Lessor or Lessor's Agents, Lessee shall
defend, indemnify and hold Lessor harmless from and against any and all
obligations, losses, costs, expenses, claims, demands, attorney's fees,
investigation costs or liabilities on account of, or arising out of the use,
condition or occupancy of the Premises or any act or omission to act of Lessee
or Lessee's Agents or any occurrence in, upon, about or at the Premises,
including, without limitation, any of the foregoing provisions arising out of
the use, generation, manufacture, installation, release, discharge, storage, or
disposal of Hazardous Materials by Lessee or Lessee's Agents.  It is understood
that Lessee is and shall be in control and possession of the Premises and that
Lessor shall in no event be responsible or liable for any injury or damage or
injury to any person whatsoever, happening on, in, about, or in connection with
the Premises, or for any injury or damage to the Premises or any part thereof.
This Lease is entered into on the express condition that Lessor shall not be
liable for, or suffer loss by reason of injury to person or property, from
whatever cause, which in any way may be connected with the use, condition or
occupancy of the Premises or personal property located herein. The provisions of
this Lease permitting Lessor to enter and inspect the Premises are for the
purpose of enabling Lessor to become informed as to whether Lessee is complying
with the terms of this Lease and Lessor shall be under no duty to enter, inspect
or to perform any of Lessee's covenants set forth in this Lease.  Lessee shall
further indemnify, defend and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
to Lessee's part to be performed under the terms of this Lease.  The provisions
of Section 38 shall survive the Lease Term or earlier termination of this Lease
with respect to any damage, injury or death occurring during the Lease Term.

39.  Successors And Assigns: The covenants and conditions herein contained
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

40.  Miscellaneous Provisions: All rights and remedies hereunder are cumulative
and not alternative to the extent permitted by law and are in addition to all
other rights or remedies in law and in equity.

41.  Choice of Law:  This lease shall be construed and enforced in accordance
with the substantive laws of the State of California.  The language of all parts
of this lease shall in all cases be construed as a whole according to its fair
meaning and not strictly for or against either Lessor or Lessee.

42.  Right of First Offer to Lease: Prior to Lessor accepting any offer to lease
any Mission West buildings in the Silver Creek area of San Jose, or prior to
Lessor making any offer to lease any Mission West building in the Silver Creek
area of San Jose, Lessor shall give Lessee written notice of such offer and
Lessee shall have the opportunity to lease the subject building or the part
thereof offered for lease on the terms and conditions set forth in the notice of
offer.  Lessee shall have the option, which may be exercised by written notice
to Lessor at any time within fifteen (15) days from the receipt of the Lessor's
notice to agree to lease the portion of the subject building specified in the
notice to Lessee.  If Lessee fails to exercise its option within the 15-day
period, Lessor shall have 270 days thereafter to lease the subject building
specified in the notice, but in no case on terms more favorable than those
offered to Lessee.

Page 25
<PAGE>

If Lessor elects, within 270 days of Lessor's notice, to lease the subject
building to a third party on terms more favorable to the third party lessee than
the terms set forth in the above offer, then Lessor must re-offer the subject
building to Lessee on the same terms and conditions offered to the third party
lessee ("Lessor's Second Notice").  Lessee shall have five (5) business days
from Lessee's receipt of Lessor's Second Notice to elect to lease the subject
building.  If Lessee does not respond in writing accepting all terms and
conditions, Lessor shall thereafter be entitled to lease the subject building to
the third party on the terms and conditions set forth in Lessor's Second Notice
or on other terms and conditions at least as favorable to Lessor as said terms
and conditions in Lessor's Second Notice for a period of 270 days after which
Lessee's Right of First Offer to Lease shall again be in effect for the Premises
or the subject building.  This right of first offer is subject to any existing
rights of lessees.

43.  Right of First Offer to Purchase: Prior to Lessor accepting any offer to
sell Premises or any part thereof, Lessor shall give Lessee written notice of
such offer and Lessee shall have the opportunity to purchase the Premises or the
part thereof offered for sale on the terms and conditions set forth in the
notice of offer.  Lessee shall have the option, which may be exercised by
written notice to Lessor at any time within fifteen (15) days from the receipt
of the Lessor's notice to sell Premises or portion thereof specified in the
notice to Lessee.  If Lessee fails to exercise its option within the 15-day
period, Lessor shall have 270 days thereafter to sell the Premises or portion
thereof in the notice, but in no case on terms more favorable than those offered
to Lessee.

If Lessor elects, within 270 days of Lessor's notice, to sell the Premises or
portion thereof to a third party on terms more favorable to the third party
purchaser than the terms set forth in the above offer, then Lessor must re-offer
the Premises or portion thereof on the same terms and conditions offered to the
third party purchaser ("Lessor's Second Notice").  Lessee shall have five (5)
business days from Lessee's receipt of Lessor's Second Notice to elect to
purchase Premises or portion thereof.  If Lessee does not respond in writing
accepting all terms and conditions, Lessor shall thereafter be entitled to sell
the Premises or portion thereof to the third party on the terms and conditions
set forth in Lessor's Second Notice or on other terms and conditions at least as
favorable to Lessor as said terms and conditions in Lessor's Second Notice for a
period of 270 days. After 270 days Lessee's Right of First Offer to Purchase
shall again be in effect for the Premises or portion thereof.  Notwithstanding
the above, Lessee's Right of First Offer to Purchase herein shall be null and
void if the sale of Premises involves Lessor's entire portfolio or a portion
thereof exceeding 900,000 sq.ft..  Any sale as provided in this paragraph shall
void any future purchase rights under this Section 43.

44.  Entire Agreement:  This Lease is the entire agreement between the parties,
and there are no agreements or representations between the parties except as
expressed herein.  Except as otherwise provided for herein, no subsequent change
or addition to this Lease shall be binding unless in writing and signed by the
parties hereto.

In Witness Whereof, Lessor and Lessee have executed this Lease, the day and year
first above written.

<TABLE>
<S>                                                                     <C>
Lessor                                                                  Lessee
Mission West Properties, L.P.                                           ONI Systems Corporation
By: Mission West Properties, Inc., its general partner

By:                                                                     By:
    -------------------------------------------------------                 -------------------------------------------------------
Signature of authorized representative                                  signature of authorized representative

-----------------------------------------------------------             ------------------------------------------------------------
printed name                                                            printed name

</TABLE>

Page 26
<PAGE>

<TABLE>
<S>                                                                     <C>

-----------------------------------------------------------             ----------------------------------------------------------
Title                                                                   Title

-----------------------------------------------------------             ----------------------------------------------------------
Date                                                                    Date
</TABLE>

Page 27
<PAGE>

                                   Exhibit A

Site plan to be attached.

Page 28
<PAGE>

                                   Exhibit B

                                 BUILDING SHELL

Mission West Properties ("Building Shell") includes the following items in
customary quantities and quality.  All items not listed are part of Lessee
Interior Improvements.

Exterior walls
Foundations
Floors Slabs
Roof structures and membrane
Glazing
Exit doors
Truck doors
Landscaping
Parking and paving
Storm sewer line to building
Sanitary sewer line to building
Water line to building
Paint of exterior walls
Shell architecture and engineering (Mission West staff)
All permits for the above items

Page 29
<PAGE>

                                   Exhibit C

Building Shell plans to be attached.

Page 30
<PAGE>

                                   Exhibit D

Lessee Interior Improvement Plans to be attached.

Page 31
<PAGE>

                                   Exhibit F
                           Lessee Approval Deadlines

<TABLE>
<CAPTION>
                                                                                     Phase I   Phase II
                                                                                     --------  --------
<S>                                                                                  <C>       <C>
Lease signed                                                                         05/15/00  N/A

Approval of site plan                                                                Approved  Approved

Approval of building elevation                                                       Approved  Approved

Approval of restroom, stairs and underground plumbing                                06/15/00  05/15/02

Approval of preliminary floor plan, single line                                      07/01/00  06/01/02

Approval of final shell plans                                                        Approved  Approved

Approval of interior plans and specifications                                        07/15/00  06/15/02

Final selection of all material and interior finishes for construction such as
Carpet, ceramic tile, paint, and any other lessee selected materials and finishes    08/15/00  07/15/02
</TABLE>

Lessee shall not unreasonably withhold approval of final shell or interior plans
if they conform in general to the preliminary site plan, preliminary elevation,
and floor plans.

The Commencement Date shall be extended one day for each day Lessee does not
meet each deadline set forth on this Exhibit E and Lessee shall pay Rent for any
delays that effect the Substantial Completion Date which shall be considered a
Lessee Delay.

Page 32EXHIBIT 10.56

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                                                  EXECUTION COPY

                                LICENSE AGREEMENT

                            dated as of March 8, 1999

                                 by and between

                             TECHNICLONE CORPORATION

                                       and

                                   SCHERING AG

<PAGE>

<TABLE>

                                TABLE OF CONTENTS

<CAPTION>
                                                                                                               PAGE

<S>      <C>               <C>                                                                              <C>
Article I DEFINITIONS      .................................................................................... I-4

         Section 1.01      Definitions..........................................................................I-4

Article II LICENSES AND ASSIGNMENT............................................................................II-11

         Section 2.01      Exclusive Patent and Trademark License and Assignment to Schering..................II-11
         Section 2.02      Existing Licenses..................................................................II-12
         Section 2.03      VTA Technology.....................................................................II-12
         Section 2.04      Credit for Oncolym Payments........................................................II-13
         Section 2.05      Orphan Drug Act....................................................................II-13

Article III DEVELOPMENT    ..................................................................................III-14

         Section 3.01      JDC ............................................................................. III-14
         Section 3.02      Development.......................................................................III-15
         Section 3.03      Clinical Development Applications and Drug Approval Applications..................III-17
         Section 3.04      Costs of Development..............................................................III-18
         Section 3.05      Use of Funds......................................................................III-19
         Section 3.06      Right to Engage Third Parties.....................................................III-19
         Section 3.07      Schering Step-In Rights...........................................................III-20
         Section 3.08      Commercialization.................................................................III-20

Article IV PAYMENTS        .................................................................................. IV-20

         Section 4.01      Initial Payment....................................................................IV-20
         Section 4.02      Milestone Payments.................................................................IV-21
         Section 4.03      Additional Indications.............................................................IV-21

Article V COMMERCIALIZATION ...................................................................................V-22

         Section 5.01      Schering as Sole Marketing Party....................................................V-22
         Section 5.02      Commercialization Efforts...........................................................V-22
         Section 5.03      Competing Products..................................................................V-22
         Section 5.04      Techniclone Restrictions............................................................V-22

Article VI ROYALTIES       ...................................................................................VI-23

         Section 6.01      Royalties..........................................................................VI-23
         Section 6.02      Royalty Reports and Payments.......................................................VI-24
         Section 6.03      Payments; Interest.................................................................VI-24
         Section 6.04      Taxes .............................................................................VI-24
         Section 6.05      Payments to or Reports by Affiliates...............................................VI-24
         Section 6.06      Payment Currency...................................................................VI-24

                                       i.

<PAGE>

Article VII MANUFACTURE AND SUPPLY...........................................................................VII-25

         Section 7.01      Manufacture and Supply by Techniclone.............................................VII-25
         Section 7.02      Regulatory Approval for Manufacturing.............................................VII-25
         Section 7.03      Testing ..........................................................................VII-25
         Section 7.04      Specifications....................................................................VII-26
         Section 7.05      Quality Testing...................................................................VII-26
         Section 7.06      Stability; Recordkeeping; Inspection; etc.........................................VII-27
         Section 7.07      Forecasts and Orders..............................................................VII-27
         Section 7.08      Delivery and Shipment.............................................................VII-27
         Section 7.09      Warranties........................................................................VII-27
         Section 7.10      Acceptance and Pricing............................................................VII-27
         Section 7.11      Construction of Commercial Radiolabeling Sites....................................VII-28
         Section 7.12      Schering Option to Take Over Manufacturing........................................VII-29
         Section 7.13      Schering Manufacturing Step-In Rights.............................................VII-29

ARTICLE VIII CONFIDENTIALITY ...............................................................................VIII-30

         Section 8.01      Confidentiality; Exceptions......................................................VIII-30
         Section 8.02      Authorized Disclosure............................................................VIII-30
         Section 8.03      Survival........................................................................ VIII-31
         Section 8.04      Termination of Prior Agreement...................................................VIII-31
         Section 8.05      Publications.....................................................................VIII-31
         Section 8.06      Publicity Review.................................................................VIII-31

Article IX OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS...............................................IX-31

         Section 9.01      Ownership..........................................................................IX-31
         Section 9.02      Disclosure of Joint Inventions.....................................................IX-31
         Section 9.03      Patent Filings.....................................................................IX-31
         Section 9.04      Third Party Patent Rights..........................................................IX-32
         Section 9.05      Enforcement Rights.................................................................IX-32
         Section 9.06      Defense and Settlement of Third Party Claims.......................................IX-33
         Section 9.07      Patent Expenses....................................................................IX-33
         Section 9.08      Trademarks.........................................................................IX-33
         Section 9.09      Use of Names.......................................................................IX-33

Article X REPRESENTATIONS AND WARRANTIES.......................................................................X-33

         Section 10.01     Representations and Warranties......................................................X-33
         Section 10.02     Indemnification for Breaches of Representations and Warranties......................X-34
         Section 10.03     Performance by Affiliates...........................................................X-34

                                       ii.

<PAGE>

Article XI INFORMATION AND REPORTS............................................................................XI-35

         Section 11.01     Information and Reports During Development and Commercialization...................XI-35
         Section 11.02     Adverse Drug Experiences; Complaints...............................................XI-35
         Section 11.03     Records of Revenues and Expenses...................................................XI-35

Article XII TERM AND TERMINATION.............................................................................XII-36

         Section 12.01     Term .............................................................................XII-36
         Section 12.02     Termination at Will...............................................................XII-36
         Section 12.03     Surviving Rights..................................................................XII-41

Article XIII INDEMNIFICATION................................................................................XIII-41

         Section 13.01     Indemnification..................................................................XIII-41

Article XIV MISCELLANEOUS   .................................................................................XIV-43

         Section 14.01     Assignment........................................................................XIV-43
         Section 14.02     Retained Rights...................................................................XIV-43
         Section 14.03     Further Actions...................................................................XIV-43
         Section 14.04     No Trademark Rights...............................................................XIV-43
         Section 14.05     Notices ..........................................................................XIV-43
         Section 14.06     Waiver ...........................................................................XIV-44
         Section 14.07     Severability......................................................................XIV-44
         Section 14.08     Ambiguities.......................................................................XIV-44
         Section 14.09     Governing Law.....................................................................XIV-45
         Section 14.10     Headings .........................................................................XIV-45
         Section 14.11     Counterparts......................................................................XIV-45
         Section 14.12     Entire Agreement; Amendments......................................................XIV-45
         Section 14.13     Expenses .........................................................................XIV-45
         Section 14.14     Independent Contractors...........................................................XIV-45

EXHIBITS

EXHIBIT A-1       Techniclone Patents
EXHIBIT A-2       Third Party Agreements (Excluding Licenses)
EXHIBIT B         Development Plan and Budget
EXHIBIT C         Third Party Licenses
EXHIBIT D         VTA Term Sheet

</TABLE>

                                      iii.

<PAGE>

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                LICENSE AGREEMENT
                                -----------------

                  LICENSE AGREEMENT (the "AGREEMENT"), dated as of March 8, 1999
(the "EFFECTIVE DATE"), by and between TECHNICLONE CORPORATION, a Delaware
corporation having its principal place of business at 14282 Franklin Avenue,
Tustin, California 92680 (hereinafter referred to as "TECHNICLONE") and SCHERING
AG, a corporation organized and existing under the laws of Germany having its
principal place of business at 13342, Berlin, Germany (hereinafter referred to
as "SCHERING"). Techniclone and Schering are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS, Techniclone is developing through its research and
development activities a radiolabeled antibody for use in oncology products, and
has the right to grant rights and licenses and/or sublicenses under the
Techniclone Patents (hereinafter defined) and Techniclone Know-How (hereinafter
defined);

                  WHEREAS, Schering has expressed to Techniclone its interest in
obtaining from Techniclone certain rights and licenses to the Techniclone
Patents and Techniclone Know-How;

                  WHEREAS, Techniclone is willing to grant such rights and
licenses to Schering under the terms and conditions hereinafter set forth; and

                  WHEREAS, the Parties intend to record, characterize and report
their activities under this Agreement as separate activities of each of the
Parties;

                  NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants and agreements contained herein, the Parties hereto,
intending to be legally bound, do hereby agree as follows:

                                    Article I
                                   DEFINITIONS
                                   -----------

     Section 1.01 DEFINITIONS. The following terms, when capitalized, shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined) as used in this Agreement:

                  "AFFILIATE" means any person, corporation, partnership, firm,
joint venture or other entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
Techniclone or Schering, as the case may be. As used in this definition,
"control" means the possession of the power to direct or cause the direction of
the management and policies of an entity, whether through the ownership of the
outstanding voting securities or by contract or otherwise.

                                       4

<PAGE>

                  "ANTIBODY" shall mean an [...***...] produced by the cell line
designated [...***...] and specifically against normal human B-cells and derived
malignancies, as described in the patent listed in Exhibit A-1.

                  "AUDIT DISAGREEMENT" shall have the meaning set forth in
Section 11.03(b).

                  "BANKRUPTCY EVENT" shall have the meaning set forth in Section
12.02(c).

                  "CLINICAL DEVELOPMENT" shall refer to all activities relating
to planning and execution of clinical studies in humans directed toward
obtaining Regulatory Approval of a Product, but does not include any activities
falling within the definition of CMC/Manufacturing. Clinical Development
includes clinical studies and related regulatory affairs and outside counsel
regulatory legal services.

                  "CLINICAL DEVELOPMENT EXPENSES" means the expenses incurred by
a Party or for its account which are paid to a Third Party, and Internal Costs,
consistent with the Development Plan and Budget and are specifically
attributable to the Clinical Development of a Product (excluding royalties paid
to a Third Party). Clinical Development Expenses shall include, but are not
limited to, the direct costs of manufacturing and packaging Oncolym for use in
Clinical Development, the cost of clinical studies in humans on the
toxicological, pharmacokinetic, metabolic or clinical aspects of a Product by
individual investigators, of consultants necessary for the purpose of obtaining
and/or maintaining Regulatory Approval of the Product in the Territory,
including Third Party contractors, and costs (and related fees) for preparing,
submitting, reviewing or developing data or information relating to clinical
studies in humans for the purpose of submission to a governmental authority to
obtain and/or maintain Regulatory Approval of a Product in the Territory.
Clinical Development Expenses shall not include Existing Trial Expenses or
CMC/Manufacturing Expenses. Each Party shall incur only those Clinical
Development Expenses as are reasonably necessary to develop the Product for the
indications described in the Existing Trials and such other indications as are
agreed upon by the JDC.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       5

<PAGE>

                  "CMC/MANUFACTURING" means the development of one or more
processes for the manufacture and packaging of the Antibody and/or the Product
for Preclinical Development, Clinical Development and Commercialization, and
shall include, without limitation, formulation, production, fill/finish,
sourcing of components, raw materials and packaging supplies, development of
regulatory methods and controls, including assays, quality control and quality
assurance methodology and stability protocols, qualification of one or more
Antibody production facilities and one or more radiolabeling facilities.

                  "CMC/MANUFACTURING EXPENSES" means the expenses incurred by a
Party or for its account consistent with the Development Plan and Budget and
specifically attributable to the CMC/Manufacturing of the Antibody and/or the
Product. CMC/Manufacturing Expenses shall not include the direct costs of
manufacturing and packaging Oncolym for use in Clinical Development. Each Party
shall incur only those CMC /Manufacturing Expenses as are reasonably necessary
to develop the Product for the indications described in the Existing Trials and
such other indications as are agreed upon by the JDC.

                  "COMMERCIALIZATION" and "COMMERCIALIZE" shall refer to all
activities undertaken relating to the pre-marketing, marketing, distribution and
sale of the Product.

                  "COMPETING PRODUCT" means a radioactive monoclonal antibody
which recognizes any antigen on the surface of B-cells and is approved for use
in the treatment of intermediate- or high-grade Non-Hodgkins Lymphoma, or for
any other labeled indication for which the Product is approved.

                  "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 8.01.

                  "CONTROL" or "CONTROLLED" shall refer to possession of the
ability to grant a license or sublicense of patent rights, know-how, Information
or other intangible rights as provided for herein without violating the terms of
any agreement or other arrangement with any Third Party.

                  "DEVELOPMENT" and "DEVELOP" shall refer to all activities
relating to Existing Trials, Preclinical Development, Clinical Development and
CMC/Manufacturing.

                  "DEVELOPMENT EXPENSE" means Existing Trial Expenses,
Preclinical Development Expenses, Clinical Development Expenses and
CMC/Manufacturing Expenses.

                  "DEVELOPMENT PLAN AND BUDGET" shall have the meaning set forth
in Section 3.02(b).

                  "DRUG APPROVAL APPLICATION" means an application for
Regulatory Approval required to be approved before commercial sale or use of a
Product as a drug in a regulatory jurisdiction, including, for the purposes of
Regulatory Approval in the United States, a Biologic License Application and all
supplements filed pursuant to the requirements of the FDA (including all
documents, data and other information concerning a Product which are necessary
for, or included in, FDA approval to market the Product), and, for the purposes
of Regulatory Approval in Europe, applications for Regulatory Approval to EMEA.

                                       6

<PAGE>

                  "EFFECTIVE DATE" shall have the meaning set forth in the
Recitals to this Agreement.

                  "EMEA" means the European Medicines Evaluation Agency, or any
successor agency.

                  "EUROPE" means the countries which are members of the European
Union as such membership may change from time to time.

                  "EXISTING TRIALS" means the ongoing (as of the Effective Date)
Phase II study of Oncolym in intermediate and high-grade Non-Hodgkin's B-cell
lymphoma, protocol no. LYM 9702. If the Existing Trial is extended as a Phase
III clinical trial study, the Phase III extension shall not be considered an
Existing Trial.

                  "EXISTING TRIAL EXPENSES" means the expenses incurred by
Techniclone or for its account payable to Third Parties and specifically
attributable to Existing Trials. Existing Trial Expenses shall not include any
Internal Costs of Techniclone (including overhead, amortization of existing
capital assets and other administrative expenses) incurred in conducting the
Existing Trials not directly payable to a Third Party.

                  "FDA" means the United States Food and Drug Administration, or
any successor agency.

                  "FIELD" means all uses of products for the in vivo therapeutic
prevention, treatment, cure or mitigation of all human disease states,
conditions, disorders and indications.

                  "FIRST COMMERCIAL SALE" means the date Schering or an
Affiliate or a sublicensee of Schering first sells commercially, pursuant to a
Regulatory Approval, a Product in any country of the Territory, PROVIDED that
where such a first commercial sale has occurred in a country for which pricing
or reimbursement approval is necessary for widespread sale, then such sales
shall not be deemed a First Commercial Sale until such pricing or reimbursement
approval has been obtained.

                  "GCPs" means clinical practices in conformity with the current
Good Clinical Practices as established by the International Conference on
Harmonization, as such regulations may be amended from time to time and in
conformity with equivalent regulations in regulatory jurisdictions in the
Territory.

                  "GLPs" means laboratory practices in conformity with the FDA's
regulations governing current good laboratory practices set forth in 21 C.F.R.
Part 58 ET SEQ., as such regulations may be amended from time to time, and in
conformity with equivalent regulations in regulatory jurisdictions outside the
United States.

                  "GMPs" means manufacturing practices in conformity with the
FDA's regulations governing current good manufacturing practices set forth in 21
C.F.R. Part 210 ET SEQ., as such regulations may be amended from time to time,
and in conformity with equivalent regulations in regulatory jurisdictions
outside the United States.

                                       7

<PAGE>

                  "INFORMATION" means (i) techniques and data within the Field
relating to the Product, including, but not limited to, inventions, practices,
methods, knowledge, know-how, skill, trade secrets, experience, test data
including pharmacological, toxicological, preclinical and clinical test data,
regulatory submissions, adverse reactions, analytical and quality control data,
marketing, pricing, distribution, cost, sales and manufacturing data or
descriptions, and (ii) compounds, compositions of matter, assays and biological
materials within the Field relating to the Product.

                  "INITIAL DEVELOPMENT PLAN AND BUDGET" means the initial
Development Plan and Budget concerning the Development of Oncolym as set forth
in more detail on Exhibit B hereto.

                  "INTERNAL COSTS" means direct costs and charges, including
direct overhead charges, incurred by a Party, but shall only exclude costs and
charges related to unused manufacturing capacity, amortization of property,
plant or equipment, allocation of general corporate overhead and any employee
costs associated with equity incentive plans.

                  "JOINT DEVELOPMENT COMMITTEE" or "JDC" means the committee
established pursuant to Section 3.01 below.

                  "JOINT PATENTS" shall have the meaning set forth in Section
9.03(a).

                  "LOSSES" shall have the meaning set forth in Section 13.01(a).

                  "MANUFACTURING PARTY" means the Party who is from time to time
responsible for the (i) manufacturing and supply of the Antibody and/or the
Product for use during Development or (ii) commercial manufacture and supply of
the Antibody and/or the Product.

                  "MILESTONE PAYMENTS" shall have the meaning set forth in
Section 4.02.

                  "NET SALES" means the amount invoiced by, or on behalf of, a
Party, its Affiliates or its sublicensees from sales of the Product by or on
behalf of such Party to Third Parties in the Territory, less reasonable and
customary deductions applicable to the Product for (i) transportation charges
and charges such as insurance, relating to transportation paid by the selling
party; (ii) sales and excise taxes or customs duties paid by the selling party
and any other governmental charges imposed upon the sale of the Product and paid
by the selling party; (iii) distributors' fees, rebates or allowances actually
incurred; (iv) quantity discounts, cash discounts or chargebacks actually
incurred in the ordinary course of business in connection with the sale of the
Product; (v) allowances or credits to customers, not in excess of the selling
price of the Product, on account of governmental requirements, rejection,
outdating, recalls or return of the Product; (vi) costs of customer programs
such as cost effectiveness or patient or physician assistance programs designed
to aid in patient compliance to maintain medication schedules and which Schering
is reasonably required to carry out in order to effect a sale of the Product;
and (vii) a deduction for actual bad debts not to exceed 1%. Sales of the
Product between a Party and its Affiliates or sublicensees solely for research
or clinical testing purposes shall be excluded from the computation of Net
Sales. Net Sales of Schering will be accounted for in accordance with
International Accounting Standards, consistently applied. Net Sales of
Techniclone will be accounted for in accordance with Generally Accepted
Accounting Principles, consistently applied.

                                       8

<PAGE>

                  "NON-MANUFACTURING PARTY" shall be any Party that is not a
Manufacturing Party.

                  "PACKAGED PRODUCT" means the Product packaged and labeled in
compliance with the specifications and requirements of the Regulatory Approval
of the country of commercial distribution, in a fully equipped kit containing
imaging and/or treatment doses in the strengths and sizes ordered by the
Schering customer, in a form ready for delivery to Schering's customer by a
common carrier.

                  "PATENTS" means all existing United States patents and patent
applications and all United States patent applications hereafter filed,
including any continuation, continuation-in-part, division, provisional or any
substitute applications, any patent issued with respect to any such patent
applications, any reissue, re-examination, renewal or extension (including any
supplemental protection certificate) of any such patent, and any confirmation
patent or registration patent or patent of addition based on any such patent,
and all foreign counterparts of any of the foregoing and that are now owned or
Controlled or hereafter acquired or Controlled by a Party or its Affiliates.
"Patents" also includes a Supplementary Certificate of Protection of a member
state of the European Union and any other similar protective rights in any other
country.

                  "PATENT EXPENSES" means the fees, expenses and disbursements
and outside counsel fees, and payments to Third Party agents incurred in
connection with the preparation, filing, prosecution and maintenance of
Techniclone Patents covering the Product within the Field, including
Techniclone's costs of patent interference and opposition proceedings and
actions at law and equity for patent infringement and any sums paid to Third
Parties on account of judgments or settlements arising out of Third Party patent
claims (other than such judgments or settlements resulting in the payment of
royalties).

                  "PHASE II CLINICAL TRIAL" means any Phase II clinical trial as
described in 21 C.F.R. ss. 312.21 (b), other than the Existing Trials.

                  "PHASE III CLINICAL TRIAL" means any Phase III clinical trial
as described in 21 C.F.R. ss. 312.21(c).

                  "PRECLINICAL DEVELOPMENT" shall refer to all activities
relating to the planning and execution of non-human studies conducted in IN
VITRO or in relevant IN VIVO animal models directed toward obtaining Regulatory
Approval of a Product in each regulatory jurisdiction in the Territory. This
includes preclinical testing, pharmacokinetics, toxicology, documentary and
medical writing directly related to Preclinical Development activities, and
related regulatory affairs and outside counsel regulatory legal services.

                  "PRECLINICAL DEVELOPMENT EXPENSES" means the expenses incurred
by a Party or for its account which are paid to a Third Party, and Internal
Costs, consistent with the Development Plan and Budget and are specifically
attributable to the Preclinical Development of a Product (excluding royalties
paid to a Third Party). Preclinical Development Expenses shall include, but are
not limited to, the cost of non-human studies on the toxicological,
pharmacokinetic, metabolic or clinical aspects of a Product conducted internally
or by individual investigators, of consultants necessary for the purpose of
obtaining and/or maintaining Regulatory Approval of a Product in the Territory,
including Third Party contractors, and costs (and related fees) for preparing,
submitting, reviewing or developing data or information relating to non-human
studies for the purpose of submission to a governmental authority to obtain
and/or maintain Regulatory Approval of a Product in the Territory.

                                       9

<PAGE>

                  "PRODUCT" or "ONCOLYM" means the Antibody combined with
Iodine-131.

                  "REGULATORY APPROVAL" means any approvals, product and/or
establishment licenses, registrations or authorizations of any federal, state or
local regulatory agency, department, bureau or other governmental entity,
necessary for the manufacture, use, storage, importation, export, transport or
sale of Product in a regulatory jurisdiction.

                  "ROYALTY PERCENTAGE" shall have the meaning set forth in
Section 6.01.

                  "SAFETY" means adverse experiences which are significant,
unexpected (as defined in 21 C.F.R. ss. 314.80(a)), serious or life threatening
or have a toxicological effect on one or more body tissues.

                  "TECHNICLONE'S COST OF GOODS" shall mean (i) with regard to
Techniclone's Internal Costs and charges, the direct costs and charges,
including direct overhead charges, related to the manufacture, packaging and
shipment of the Antibody, Product or Packaged Product, and shall exclude costs
and charges related to or occasioned by unused manufacturing capacity; the
manufacture of other products at Techniclone's facilities; amortization of
property, plant or equipment not specifically related to manufacturing the
Antibody, Product or Packaged Product; allocation of general corporate overhead;
and any employee costs associated with equity incentive plans; and (ii) with
regard to Techniclone's external costs and charges, the commercially reasonable
invoiced costs and charges of suppliers of goods and services directly related
to the manufacture or packaging of Antibody, Product and Packaged Product.

                  "TECHNICLONE KNOW-HOW" means all Information, whether
currently existing or developed or obtained during the course of this Agreement,
and whether or not patentable or confidential that is now Controlled or
hereinafter becomes Controlled by Techniclone or its Affiliates and that relates
to the research, development, utilization, manufacture or use of the Product.
Notwithstanding anything herein to the contrary, Techniclone Know-How shall
exclude Techniclone Patents.

                  "TECHNICLONE PATENTS" means any Patents owned or Controlled by
Techniclone or its Affiliates covering the research, development, manufacture,
use, importation sale or offer for sale of a Product.

                  "TERRITORY" means all the countries, possessions, and
subdivisions of the world.

                  "THIRD PARTY" means any entity other than Techniclone or
Schering and their respective Affiliates and sublicensees.

                  "TOLERABILITY" means adverse drug experiences which are
unpleasant to such an extent that they can materially and adversely affect
market potential or market penetration of a Product, but which do not
necessarily require discontinuation of drug therapy.

                                       10

<PAGE>

                  "TREATMENT" means all Packaged Product required to provide one
imaging dose and two therapeutic doses for a patient of average body mass.

                  "VTA TECHNOLOGY" means Techniclone's vascular targeting agent
technology which is the subject of that certain Coagulation Patent License
Agreement between University of Texas System and Techniclone effective as of
October 8, 1998 and a related Patent License Agreement between University of
Texas System and Techniclone effective as of October 8, 1998.

                  "VALID CLAIM" means a claim of any issued, unexpired United
States or foreign patent which shall not have been withdrawn, canceled or
disclaimed, or held invalid or unenforceable by a court of competent
jurisdiction in an unappealed or unappealable decision.

                  "WRITTEN DISCLOSURE" shall have the meaning set forth in
Section 8.06.

                                   ARTICLE II
                             LICENSES AND ASSIGNMENT
                             -----------------------

    Section 2.01 Exclusive Patent and Trademark License and Assignment to
                 Schering.

                  (a) EXCLUSIVE PATENT AND TRADEMARK LICENSE TO SCHERING.
Techniclone grants to Schering a paid-up, exclusive (even as to Techniclone)
worldwide license, with a right to sublicense, under the Techniclone Patents,
the Techniclone Know-How and the Joint Patents to use, develop, manufacture,
have manufactured, market, sell, import for sale, and distribute the Antibody
and/or the Product in the Territory for all indications in the Field, subject to
the terms and conditions hereof and the terms and conditions of the Existing
Licenses described in Section 2.02 below. Notwithstanding the foregoing,
Techniclone shall retain the right to conduct Development and related activities
and to manufacture and have manufactured the Product to the extent specifically
provided for in this Agreement, subject to the terms and conditions hereof.

                  A list of the Techniclone Patents identified as of the
Effective Date is attached hereto as Exhibit A-1. Such list shall be modified
from time to time to reflect any changes to Techniclone Patents and to include
any Techniclone Patents acquired by or coming under the Control of Techniclone
during the course of this Agreement.

                  At Schering's election, to be exercised on a
country-by-country basis for all of the countries of the Territory in which
Techniclone has rights to the trademark "Oncolym," Techniclone shall, subject to
the terms and conditions hereof, (i) grant to Schering a paid-up exclusive (even
as to Techniclone) royalty free, perpetual license for the use of the trademark
"Oncolym" to be used in connection with the purposes of this Agreement, such
license to terminate on a country-by-country basis as of such time as Schering
shall obtain an exclusive trademark for the Product other than the trademark
"Oncolym" or (ii) assign such trademark to Schering.

                                       11

<PAGE>

                  (b) ASSIGNMENT. With the exception of the Existing Licenses
described in Section 2.02 below, Techniclone assigns to Schering all its right,
title and interest under all agreements (the "Third Party Agreements") with
Third Parties relating in any way to this Agreement and existing as of the date
hereof. Such agreements are listed on Exhibit A-2 hereto. Notwithstanding the
foregoing, Techniclone shall retain the right to conduct Development and related
activities and to manufacture and have manufactured the Product to the extent
specifically provided for in this Agreement. Techniclone agrees to use
commercially reasonable efforts to cause the applicable Third Parties to assign
the Third Party Agreements to Schering.

     Section 2.02 EXISTING LICENSES. The licenses granted under Section 2.01
include sublicenses of Third Party technology existing on the Effective Date and
licensed to Techniclone. A list of all such agreements as of the Effective Date
is attached hereto as Exhibit C, true, correct and complete copies of which have
been provided to Schering prior to the Effective Date. Any royalties payable to
Third Parties pertaining to technology discussed in the previous sentence shall
be paid by Techniclone, and, if not so paid, may be paid by Schering and offset
or deducted from royalty payments under Section 6.01. From time to time at
Schering's request, Techniclone will use its commercially reasonable efforts to
obtain a consent (a "CONSENT") from existing licensors and other contractual
counterparties with Techniclone. Such Consent shall contain the agreement of
such licensor or counterparty to (i) give reasonable written notice to Schering
prior to terminating the underlying license or contract, (ii) provide Schering a
reasonable period to cure any default under such license or contract, and (iii)
permit Schering or one or more of its Affiliates to assume Techniclone's
obligations thereunder as assignee of Techniclone's rights thereunder, in each
case at Schering's option.

     Section 2.03 VTA TECHNOLOGY. Techniclone has confirmed to Schering its
willingness to enter into a License and Development Agreement in respect of the
VTA Technology in accordance with the terms set out in Exhibit D (the "Proposed
Offer"). Techniclone hereby undertakes, at Schering's request, to enter into
good faith negotiations and to use all reasonable efforts to negotiate and
conclude a License and Development Agreement in respect of the VTA Technology in
accordance with such terms within thirty (30) days of the Effective Date. During
such thirty (30) day period, Techniclone will not license or dispose of any
rights to the VTA Technology to any Third Party, and will permit Schering to
conduct such reasonable due diligence as Schering believes to be appropriate. In
the event that during the thirty (30) day period Schering believes that
additional time is necessary to conclude a License and Development Agreement in
respect of the VTA Technology, then Schering shall so notify Techniclone
pursuant to Section 14.05, in which case the time period shall be extended by
thirty (30) days, and following Techniclone's receipt of the notice from
Schering, Schering and Techniclone shall be bound by the terms set out on
Exhibit D.

         If the thirty (30) day (or sixty (60) day if extended by Schering)
period expires without the Parties having concluded a License and Development
Agreement in respect of the VTA Technology, they shall observe the following
procedure:

                (i) Techniclone shall have the right to conclude a definitive
       agreement for the rights to the VTA Technology with a Third Party on
       terms on the whole materially more favorable to Techniclone than the
       Proposed Offer.

                                       12

<PAGE>

                (ii) In the event that within one (1) year of the Effective Date
       Techniclone desires to conclude a definitive agreement with a Third Party
       for the VTA Technology on terms equivalent to or materially less
       favorable to Techniclone than the Proposed Offer, then Techniclone shall
       submit such terms to Schering in writing pursuant to Section 14.05 (the
       "New Proposed Offer"). Techniclone need not disclose to Schering the
       identity of the Third Party. Schering shall then respond in writing to
       Techniclone within ten (10) days after receipt of such New Proposed Offer
       notice indicating whether Schering desires to commence negotiations with
       respect to same, and if Schering so indicates its desire to commence such
       negotiations, Schering shall have the right to cause Techniclone to enter
       into negotiations for thirty (30) days (or such longer period as the
       Parties may agree), and Techniclone's rights shall be determined
       accordingly.

                (iii) Provided Techniclone has complied with its obligations set
       forth in this Section 2.03, then following the first anniversary of the
       Effective Date Techniclone shall thereafter be relieved of its
       obligations set forth in this Section 2.03.

     Section 2.04 CREDIT FOR ONCOLYM PAYMENTS. In the event that Schering and
Techniclone conclude a definitive agreement concerning Techniclone's VTA
Technology pursuant to the first paragraph of Section 2.03 pursuant to
negotiations commenced prior to the expiration of the sixty day period referred
to therein, and the Development of Oncolym ceases pursuant to Article XII
without Oncolym being marketed in the United States or Europe, then Schering
shall be entitled to a credit under the definitive agreement concerning the VTA
Technology (i) for the initial payment of [...***...] paid by Schering to
Techniclone pursuant to Section 4.01 of this Agreement, and (ii) for any
Milestone Payments paid by Schering to Techniclone pursuant to Section 4.02 of
this Agreement.

     Section 2.05 ORPHAN DRUG ACT.

                  To the fullest extent permitted by law:

                  (a) Promptly following the Effective Date, Techniclone shall
transfer to Schering legal title to and possession of any and all Orphan Drug
Act petitions and other requests for designation by FDA of the Product as an
orphan drug, and/or any and all Orphan Drug Act designations by FDA of the
Product as an orphan drug. The Parties confirm that Schering will have the right
to claim and use any taxation credits, deductions or other benefits available as
a result of Orphan Drug Act designation by FDA of the Product, or a grant of
marketing exclusivity by FDA for the Product pursuant to the Orphan Drug Act.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       13

<PAGE>

                  (b) Techniclone agrees to cooperate with and assist Schering
to the extent reasonably requested by Schering in the preparation, amendment,
and/or prosecution of petitions or other requests for Orphan Drug Act
designation or Orphan Drug Act exclusivity for Product, and any other marketing
exclusivity available in the United States or any other country of the
Territory. Such assistance shall include without limitation participation by
Techniclone representatives in meetings with governmental authorities as
reasonably requested by Schering, and subject to the availability of Techniclone
personnel. Schering shall keep Techniclone apprised of its progress in obtaining
Orphan Drug Act exclusivity and any other marketing exclusivity that becomes
available in the United States and any other country of the Territory. Schering
shall be the legal and beneficial owner of Orphan Drug Act exclusivity or any
other marketing exclusivity obtained in regard to any Product in the United
States or any other country of the Territory.

                                   ARTICLE III
                                   DEVELOPMENT
                                   -----------

     Section 3.01 JDC

                  (a) FORMATION OF THE JDC. Within fifteen (15) days after the
Effective Date (or such later time as may be mutually agreed to by the Parties),
the Parties shall establish the JDC. The JDC shall consist of an equal number of
representatives of Techniclone and Schering to be agreed upon by the Parties
from time to time. Either Party may designate a substitute for a member unable
to be present at a meeting. One of the Schering members of the JDC, chosen at
the sole discretion of Schering, along with one of the Techniclone members of
the JDC, chosen at the sole discretion of Techniclone, shall serve as co-chairs
of the JDC. Regardless of the number of representatives from each Party on the
JDC, each Party shall have one vote on any issue. Meetings of the JDC shall be
held quarterly and may be called by either Party with not less than ten (10)
business days notice to the other unless such notice is waived, and all meetings
shall be held at the office of Schering's United States Affiliate in Richmond,
California, unless otherwise agreed in writing. The JDC may be convened, polled,
or consulted from time to time by means of telecommunication or correspondence.
Each Party will disclose to the other proposed agenda items reasonably in
advance of each meeting of the JDC. Each Party shall bear its own costs for
participation in the JDC.

                  (b) FUNCTIONS OF THE JDC. The JDC shall function as a forum
for the Parties to inform and consult with one another concerning progress of
and changes to Development and the Development Plan and Budget, meeting
Development goals, dealing with obstacles to successful Development, and the
status of obtaining Regulatory Approvals. The JDC shall have no role,
consultative or otherwise, with regard to Commercialization. The following
specific functions shall be delegated to the JDC.

                      (i) plan, coordinate and oversee the Development of the
                      Product in order to obtain Regulatory Approval in the
                      Territory (including establishing in writing the Approval
                      Criteria specified in Section 12.02(a)(iii));

                                       14

<PAGE>

                      (ii) assume responsibility for the Development Plan and
                      Budget as established in Section 3.02(b);

                      (iii) propose updates yearly to the Development Plan and
                      Budget, which plan and budget will specify a reasonable
                      level of detail by which Techniclone and Schering will
                      conduct Preclinical Development, Clinical Development and
                      CMC/Manufacturing;

                      (iv) propose any amendments of the Development Plan and
                      Budget which are not covered in the yearly updates;

                      (v) prepare detailed budgets consistent with the
                      Development Plan and Budget and allocate such budgets to
                      particular Development tasks; and

                      (vi) subject to Section 3.06, evaluate any proposal to
                      contract with any Third Party to perform any Development
                      activities.

                  (c) LIMITATION ON JDC AUTHORITY. Notwithstanding the creation
of the JDC, each Party to this Agreement shall retain the rights, powers and
discretion granted to it hereunder, and the JDC shall not be delegated or vested
with any such rights, powers or discretion unless such delegation or vesting is
expressly provided for herein or the Parties expressly so agree in writing. The
JDC shall not have the power to amend or modify this Agreement, which may be
amended or modified only as provided in Section 14.12.

                  (d) RESOLUTION OF DISPUTES. If the JDC cannot reach a
unanimous decision with respect to the Development matters delegated to it
within ten (10) days then the disputed matter shall be promptly referred to a
senior manager of each Party designated by such Party for resolutions. If the
senior managers are unable to resolve such matter within ten (10) days after one
Party notifies the other of its desire to have the matter referred to such
senior managers, the decision of Schering's senior manager shall control.
Schering's initial senior manager designee is the head of Strategic Unit
Therapeutics for Schering's U.S. Affiliate, and Techniclone's Chief Executive
Officer.

     Section 3.02 Development.

                  (a) Techniclone and Schering each agree to co-operate in the
Development of the Product and to use commercially reasonable efforts to develop
and bring the Product to market. Techniclone and Schering each agree to use
commercially reasonable efforts to execute and substantially perform the
obligations assumed by it under the Development Plan and Budget. All Clinical
Development, including all clinical trials other than the Existing Trials, shall
be conducted by Schering. The Existing Trials shall be conducted by Techniclone
under the supervision of Schering. Promptly following the Effective Date
Techniclone shall transfer legal title to all data from completed studies of the
Product to Schering. Promptly following the conclusion of any Existing Trials
Techniclone shall transfer legal title to all data from such Existing Trials to
Schering.

                                       15

<PAGE>

                  (b) The Development of the Product shall be governed by a
development plan and budget ("DEVELOPMENT PLAN AND BUDGET"), which shall provide
for Development of the Product in the Territory and, together with updates,
shall be updated, amended, supplemented and otherwise modified from time to time
by the JDC. The Parties have agreed upon and approved the Initial Development
Plan and Budget which is attached hereto as Exhibit B.

                  (c) With respect to the Development of additional indications
for the Product, the Development Plan and Budget for each such additional
indication shall be proposed by the JDC and agreed between the Parties, and each
subsequent Development Plan and Budget for each such additional indication shall
be proposed by the JDC and submitted to the Parties for review and approval.
Anything in the previous sentence notwithstanding, Schering shall have the right
at its sole discretion to veto or proceed with Development of the Product for
additional indications regardless of Techniclone's disagreement. Cost of
Development of the Product for additional indications will be borne exclusively
by Schering except in the circumstances described in Section 4.03.

                  (d) Each Development Plan and Budget shall provide a
reasonably detailed written time-line for each step to be achieved with respect
to the Development and Regulatory Approval of the Product, the estimated
Development Expenses of obtaining such Regulatory Approval and the description
of a final Product.

                  (e) Each Development Plan and Budget shall be updated annually
by the JDC, and submitted by October 1 of each calendar year to the Parties for
review and approval not later than sixty (60) days after such submission.

                                       16

<PAGE>

     Section 3.03 Clinical Development Applications and Drug Approval
                  Applications.

                  (a) CLINICAL STUDIES. Except in the case of Existing Trials
Schering shall be responsible for preparing, filing and prosecuting applications
for permission to conduct Clinical Development in such countries of the
Territory which require such applications to be filed and wherein Schering, in
good faith and in the exercise of reasonable business judgment, determines it is
commercially reasonable to do so. With respect to the United States and any
other country where Techniclone has such an application on file with appropriate
regulatory authorities, Techniclone shall transfer such application to Schering
promptly following the request of Schering PROVIDED that, from and after the
Effective Date, Schering shall have authority and control with respect to any
such applications (and prior to the transfer to Schering, all communications and
interactions with regulatory authorities by Techniclone with respect to such
applications shall be reviewed and approved in advance by Schering).

                  (b) DRUG APPROVAL APPLICATIONS. Techniclone will use its
reasonable best efforts to schedule as soon as is practical, a meeting with the
FDA (the "Conversion Meeting") for the purpose, INTER ALIA, of extending the
Existing Trial into a Phase III Clinical Trial. Schering shall be responsible
for preparing, filing, and prosecuting Drug Approval Applications and seeking
Regulatory Approvals for the Product in all countries in the Territory wherein
Schering, in good faith and in the exercise of reasonable business judgment,
determines it is commercially reasonable to do so, including preparing all
reports necessary as part of a Drug Approval Application. All such Drug Approval
Applications shall be filed in the name of Schering, and a copy of each such
Drug Approval Application shall be promptly provided to Techniclone. In
connection with all Drug Approval Applications being prosecuted by Schering
under this Section 3.03, Schering agrees to provide Techniclone with a copy
(which may be wholly or partly in electronic form) of all filings to regulatory
agencies that it makes hereunder within thirty (30) days after written request
by Techniclone, at no cost to Techniclone.

                  (c) COOPERATION. The Parties shall consult and cooperate
(including in the case of Techniclone providing such commercially reasonable
assistance as Schering shall reasonably request) in the preparation of each
regulatory submission and in obtaining and maintaining Regulatory Approvals
within the Territory, PROVIDED, HOWEVER, that except with regard to Existing
Trials, prior to and following approval of a Drug Approval Application, Schering
shall be solely responsible for interactions with regulatory authorities
throughout the Territory. Subject to the foregoing, Schering shall provide
Techniclone and Techniclone shall provide Schering (until transfer of
applications for permission to conduct Clinical Development, and thereafter
solely in regard to the Existing Trials) with reasonable advance notice of any
scheduled meeting with the FDA, EMEA or any other regulatory authority in a
major regulatory jurisdiction, relating to any Drug Approval Application, and
Techniclone or Schering, as applicable, shall have the right to participate in
any such meeting. In the event that any regulatory agency threatens or initiates
any action to remove a Product from the market in any country in the Territory,
Schering shall notify Techniclone of such communication within two business days
of receipt by Schering. As between Parties, Schering shall be the legal and
beneficial owner of all Drug Approval Applications and related approvals in the
Territory.

                                       17

<PAGE>

     Section 3.04 Costs of Development.

                  (a) GENERAL. All Development Expenses incurred throughout the
Territory pursuant to an approved Development Plan and Budget for the Product
shall be shared by the Parties in the Territory in the manner as set forth in
this Section 3.04. Each Party shall calculate and maintain records of
Development Expenses incurred by it in accordance with procedures to be agreed
upon between the Parties, which shall include an appropriate procedure for
classifying Development Expenses as Existing Trial Expenses, Preclinical
Development Expenses, Clinical Development Expenses and CMC/Manufacturing
Expenses. Accounting by Schering for Development Expenses shall be consistent
with International Accounting Standards, consistently applied. Accounting by
Techniclone for Development Expenses shall be consistent with Generally Accepted
Accounting Principles, consistently applied. Each Party shall report quarterly
to the other Party on its Development Expenses, with such reports to be
submitted within thirty (30) days after the end of each calendar quarter. At the
end of each calendar year the Parties shall assess the Development Expenses
incurred and documented by each Party. In the event that either Party disagrees
with the assessment, then the Chief Financial Officers of Techniclone and
Schering's U.S. Affiliate shall meet and attempt to resolve the disagreement. If
the Chief Financial Officers are unable to resolve the disagreement, then it
shall be resolved in the same manner as an Audit Disagreement pursuant to
Section 11.03(b). Each Party shall also have the right to audit the Development
Expenses reported by the other Party pursuant to Section 11.03.

                  (b) SHARING OF DEVELOPMENT EXPENSES.

                      (i) PRECLINICAL DEVELOPMENT EXPENSES. All Preclinical
                      Development Expenses incurred after the Effective Date up
                      to $500,000 shall be borne by Techniclone; Preclinical
                      Development Expenses incurred after the Effective Date in
                      excess of $500,000 shall be borne fifty percent (50%) by
                      Schering and fifty percent (50%) by Techniclone.

                      (ii) CLINICAL DEVELOPMENT EXPENSES. Schering shall be
                      responsible for eighty percent (80%) of all Clinical
                      Development Expenses incurred after the Effective Date for
                      Products in the Territory, and Techniclone shall be solely
                      responsible for the remaining twenty percent (20%) of such
                      Clinical Development Expenses.

                      (iii) EXISTING TRIAL EXPENSES. Existing Trial Expenses
                      incurred after the Effective Date shall be borne twenty
                      percent (20%) by Techniclone and eighty percent (80%) by
                      Schering. Each Party shall bear one hundred percent (100%)
                      of its Internal Costs relating to an Existing Trial.
                      Techniclone shall complete all Existing Trials and
                      promptly provide Schering with all data and results from
                      the Existing Trials.

                      If the FDA confirms that an Existing Trial may be extended
                      to constitute a Phase III Clinical Trial, all Clinical
                      Development Expenses incurred in respect of that Phase III
                      Clinical Trial after both of the following events have
                      occurred shall be shared between the Parties in accordance
                      with (ii) above: (A) the decision of the FDA is confirmed
                      in writing; and (B) the dosing of the first patient under
                      the amended protocol converting the trial to a Phase III
                      Clinical Trial.

                                       18

<PAGE>

                      (iv) CMC/MANUFACTURING EXPENSES. Techniclone shall be
                      responsible for all CMC/Manufacturing Expenses, except for
                      certain capital costs as described in Section 7.11.
                      Without limiting in any manner Techniclone's obligations
                      hereunder, if so requested by Techniclone, and subject to
                      availability of Schering personnel, Schering agrees to
                      provide reasonable advisory/consultancy input to
                      Techniclone with respect to CMC/Manufacturing at no cost
                      to Techniclone.

                  (c) PAYMENT. Each Party shall pay to the other Party its share
of Development Expenses within forty-five (45) days of its receipt of each
report referred to in Section 3.04(a) to the extent required pursuant to the
terms of Section 3.04(b).

     Section 3.05 USE OF FUNDS. As of the Effective Date, Techniclone intends to
utilize the initial payment specified in Section 4.01 and the Milestone Payments
payable pursuant to Section 4.02 for Development Expenses and to fulfill any
manufacturing obligations it may have hereunder.

     Section 3.06 Right to Engage Third Parties.

                  (a) Subject to the advance written approval of Schering,
Techniclone shall be entitled to contract with Third Parties to perform any
Development activities. Techniclone shall notify Schering in writing thirty (30)
days prior to entering into any contract with a Third Party to perform any
Development activities where such Third Party contract has not been unanimously
approved by the JDC. During the thirty (30) day period following such notice
from Techniclone, Schering shall have the right to (i) offer to perform itself
such Development activities or (ii) propose an alternative Third Party to
perform such Development activities. If Schering decides to offer to perform
itself such Development activities or to propose an alternative Third Party to
perform such Development activities, it shall notify Techniclone in writing
during such thirty (30) day period and shall include with such notice the terms
of its offer to perform such Development activities or the identification of
such alternative Third Party or the terms of the proposal for such alternative
Third Party to perform such Development activities, as the case may be.
Techniclone shall have no obligation to accept such offer or proposal, but shall
consider such offer or proposal in good faith and negotiate towards entering
into an agreement with Schering or the alternative Third Party proposed by
Schering if Schering's offer or proposal and the capabilities of Schering or
such alternative Third Party, as the case may be, are equivalent to those of the
Third Party proposed by Techniclone. All other things being equal, Schering or
its alternative Third Party shall be the preferred provider of such Development
activities, and Techniclone shall accept Schering's offer or proposal if it is
not materially more expensive or otherwise materially less beneficial than the
offer of the Third Party proposed by Techniclone.

                  (b) In the event that Schering shall not exercise its right
pursuant to Section 3.06(a) to offer to perform itself such Development
activities or to propose an alternative Third Party to perform such Development
activities, or if Techniclone shall have failed to accept any such offer or
proposal by Schering and such offer or proposal is not materially more expensive
or otherwise materially less beneficial than the offer of the Third Party
proposed by Techniclone, Techniclone shall not use any Third Party to perform
any Development without the prior written approval of Schering (which will not
be unreasonably withheld).

                                       19

<PAGE>

                  (c) Each contract related to the Development or
Commercialization of any Product entered into by Techniclone shall expressly
provide for the automatic assignment of such contract to Schering at Schering's
option upon written notice to such Third Party not more than one hundred eighty
(180) days following the termination of this Agreement for any reason, other
than a termination by Schering pursuant to Section 12.02(a).

     Section 3.07 SCHERING STEP-IN RIGHTS. Without prejudice to any other
remedies available to Schering under this Agreement or at law, if Techniclone
materially fails to carry out the reasonable Development tasks allocated to it
under this Agreement in accordance with the time lines and other conditions
allocated to it under the Development Plan and Budget and this Agreement
generally, Schering may, after forty-five (45) days prior written notice to
Techniclone, undertake that particular task ("Work") and complete it at its own
expense if Techniclone has not at such time begun to carry out such Work in a
manner reasonably likely to cure its default. Schering shall be entitled to
commercially reasonable cooperation and assistance from Techniclone to
accommodate its efforts, including assignment to Schering of sponsorship of
regulatory filings if necessary to permit the exercise by Schering of its rights
under this Section 3.07. All costs reasonably incurred by Schering in carrying
out such Work will be reimbursed by Techniclone on a quarterly basis pursuant to
the terms of Section 3.04(a) and (c) or may, at Schering's option, be set off
against any payments otherwise due to Techniclone under this Agreement.

     Section 3.08 COMMERCIALIZATION. Schering undertakes to use all reasonable
commercial diligence to enable the Product to be commercially distributed
following Regulatory Approval in the United States or Europe, as the case may
be. In the event that Schering fails to Commercialize the Product in the United
States or Europe, Techniclone's sole remedies are those provided for in Section
12.02 (d) below.

                                   ARTICLE IV
                                    PAYMENTS
                                    --------

     SECTION 4.01 INITIAL PAYMENT. Schering shall pay to Techniclone an amount
equal to [...***...] within three (3) business days of the execution of this
Agreement. This amount shall be noncreditable against any future obligations of
Schering under this Agreement.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       20

<PAGE>

     SECTION 4.02 MILESTONE PAYMENTS. Schering shall make the following payments
("MILESTONE PAYMENTS") to Techniclone within thirty (30) business days after the
first achievement of each of the following milestones. Each of these Milestone
Payments shall be paid only once regardless of the number of times the
milestones are achieved by the Product or the number of indications for which
the Product is developed or commercialized except as provided in Section 4.03
below.

<TABLE>

                                          MILESTONE                                                 PAYMENT
                                          ---------                                                 -------
<CAPTION>

<S>                                                                                                 <C>
(i)       Prior to the termination of this Agreement and upon the acceptance by the FDA for         $[...***...]
          filing of the first Drug Approval Application for Oncolym in the United States.

(ii)      Prior to the termination of this Agreement and upon Regulatory                            $[...***...]
          Approval of Oncolym in the United States; PROVIDED that Techniclone
          has made available to Schering reasonable quantities of Product that
          can be immediately commercially distributed in interstate commerce in
          the United States.

(iii)     Prior to the termination of this Agreement and upon Regulatory                            $[...***...]
          Approval of Oncolym in any country in Europe; PROVIDED that
          Techniclone has made available to Schering reasonable quantities of
          the Product that can be immediately commercially distributed in the
          applicable country of Europe.

(iv)      Prior to the termination of this Agreement and upon First Commercial Sale in any          $[...***...]
          country of Europe.

</TABLE>

     SECTION 4.03 ADDITIONAL INDICATIONS. In the event that Techniclone wishes
to develop the Product for indications other than those described in the
Existing Trials or agreed upon by the Parties in the JDC, and Schering does not
object to such development, Techniclone may carry out such development at its
own risk and expense. Prior to any proposal of the Product for any such
additional indications, the Parties agree to negotiate, in good faith (without
any obligation to conclude) an agreement regarding separate initial payments,
royalties and milestone payments for such additional indications, as have been
funded, or will be funded, by Techniclone pursuant to this Section 4.03. For the
avoidance of doubt, the Parties expressly agree that for any additional
indications, with respect to which any portion of the development is funded by
Schering, Techniclone shall not be entitled to any milestone or initial payments
(but only to the royalties specified in Article VI), nor shall there be any
requirement to so negotiate. Techniclone may not develop, commercialize, sell,
license or dispose of any right, title or interest in and to such additional
indications without Schering's written consent, which may be withheld by
Schering in its discretion.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       21

<PAGE>

                                   ARTICLE V
                                COMMERCIALIZATION
                                -----------------

     Section 5.01 SCHERING AS SOLE MARKETING PARTY. Schering shall have the
exclusive right to Commercialize the Product (either by itself or through its
Affiliates or sublicensees) in the Territory.

     Section 5.02 COMMERCIALIZATION EFFORTS. Schering agrees to use commercially
reasonable efforts with respect to the Commercialization of the Product
throughout the Territory as provided hereunder. Such commercially reasonable
efforts shall be consistent with the efforts used by Schering in preparing
commercialization plans and budgets and commercializing its own pharmaceutical
products. Without limiting the generality of the foregoing, Schering shall
determine the pricing and marketing strategy for the Product in its sole
discretion. Within 180 days after the execution hereof, Schering will present to
Techniclone a preliminary Commercialization plan outlining pre-launch
strategies, activities and plans related to the proposed Commercialization of
Oncolym, in the United States and Europe, together with projected five year
sales forecasts. Any such plans and forecasts provided to Techniclone by
Schering shall not be binding on Schering. Schering shall not be obligated to
Commercialize the Product in any country where Schering does not believe it
would be commercially reasonable to do so.

     Section 5.03 COMPETING PRODUCTS. On a country-by-country basis, in the
event that after the Regulatory Approval of the Product Schering desires to
continue the sale or commence the sale, as the case may be, of a Competing
Product then at Schering's option one of the following conditions shall apply:

                      (i) Schering shall return to Techniclone marketing rights
                      to the Product in the applicable country; or

                      (ii) Schering shall pay Techniclone a royalty of
                      [...***...] on Schering's Net Sales of the Competing
                      Product in the country in question for as long as Schering
                      continues to sell both the Product and the Competing
                      Product and to pay royalties on sales of the Product in
                      the country in question in accordance with the terms
                      hereof.

The foregoing conditions shall not be applicable to the sale by Schering of a
Competing Product if in the applicable country Schering has sublicensed
marketing rights to Oncolym to a party that is not an Affiliate of Schering; and
such sub-licensee is not selling a Competing Product. The restrictions set forth
in this Section 5.03 shall apply in Europe only to the extent permitted by the
Treaty of Rome.

     Section 5.04 TECHNICLONE RESTRICTIONS.

                  Outside of Europe Techniclone shall not make, use, sell or
permit, or cooperate with any Third Party in the manufacture use or sale of a
therapeutically capable radioisotope attached to any monoclonal antibody which
recognizes any antigen on the surface of B-cells. Within Europe, Techniclone's
reservation of diagnostic rights to the Antibody and/or the Product shall not
permit Techniclone to use, make or sell, or to permit or cooperate in the use,
manufacture or sale of the Antibody and/or the Product, in whole or in part, for
purposes falling within the Field.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       22

<PAGE>

                                   ARTICLE VI
                                    ROYALTIES
                                    ---------

     Section 6.01 ROYALTIES. GENERAL. In further consideration of the rights and
licenses granted to Schering under Article II of this Agreement, Schering shall
pay to Techniclone a royalty equal to [...***...] of Net Sales of the Product in
the Territory (the "ROYALTY PERCENTAGE").

                  (b) ROYALTY TERM. Except where expressly provided otherwise in
this Agreement, and subject to Section 6.01(c) below, all royalties to a Party
shall be paid, on a country-by-country basis, from the date of the First
Commercial Sale of the Product in a particular country until the later (the
"Royalty Expiration Date") of (i) [...***...] from the First Commercial Sale in
such country and (ii) the last to expire of any Techniclone Patent which
includes a Valid Claim in such country; PROVIDED, HOWEVER, that if the Product
is sold in any country in which Techniclone does not have a Valid Claim which
would prevent the sale of a generic form of such Product, the royalty obligation
set forth in Section 6.01(a) with respect to Net Sales attributable to the sale
of the Product in such country shall be reduced by [...***...] of the royalty
that would otherwise be payable with respect to Net Sales attributable to the
sale of the Product in such country, until Techniclone is granted a Valid Claim
in such country.

                  (c) GENERIC. The royalty reduction of [...***...] described in
Section 6.01(b) above shall only apply in any country of the Territory if a
generic form of the Product is actually sold in such country.

                  (d) DISCONTINUANCE. Subject to the provisions of Article XII,
Schering may discontinue Commercialization of the Product at any time, in any
country, and on a country-by-country basis.

                  (e) LICENSE FOLLOWING EXPIRATION. After the Royalty Expiration
Date, Schering shall thereafter have an exclusive (even as to Techniclone),
paid-up license to Techniclone Know-How to make, have made, use, sell, offer for
sale, have sold and import the Antibody and/or Product in that country,
PROVIDED, HOWEVER, that if Schering elects not to continue paying royalties as
provided herein in subsection (g) below at any time after the Royalty Expiration
Date, such license shall be non-exclusive.

                  (f) NON-EXTENSION OF EXISTING TRIALS. If the FDA does not
consent to an extension of the Existing Trials as a Phase III Clinical Trial by
[...***...], then the royalty specified in Section 6.01(a) shall be reduced by
[...***...] (e.g., from [...***...]).

                  (g) ROYALTY EXTENSION. Schering, at its sole discretion, may
elect to continue paying royalties under Section 6.01(a)-(f) after the Royalty
Expiration Date PROVIDED Schering gives Techniclone at least [...***...] months
notice prior to the then scheduled Royalty Expiration Date, and further PROVIDED
, that the applicable royalty will be [...***...] (subject to reduction under
subsections (b) and (f)). In the event that Schering thereafter elects to
terminate paying royalties to Techniclone, Schering shall provide [...***...]
months advance notice to Techniclone, in which case Techniclone shall have the
right to terminate its manufacturing obligations under Article VII on
[...***...] months advance notice to Schering. Notwithstanding anything to the
contrary contained herein, Techniclone shall not be obligated to continue to
perform its manufacturing obligations hereunder beyond the Royalty Expiration
Date PROVIDED that Techniclone uses its reasonable best efforts to have its
manufacturing contracts with Third Parties related to this Agreement (and its
rights and obligations thereunder) assigned and transferred to Schering or a
Third Party designated by Schering, in which case, the provisions of Section
7.12 hereof shall apply; and PROVIDED further, that, if Schering or its Third
Party designee does not duly assume such contracts (and the rights and
obligations thereunder) and Techniclone is not otherwise able to so assign and
transfer same to Schering or its Third Party designee, Techniclone shall have
the right to terminate its manufacturing obligations as of or at any time
following the Royalty Expiration Date on [...***...] months prior notice to
Schering.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       23

<PAGE>

     Section 6.02 ROYALTY REPORTS AND PAYMENTS. Schering shall make royalty
payments to Techniclone quarterly within sixty (60) days after the end of each
calendar quarter in which Net Sales occurred. A report summarizing the Net Sales
of the Products during the relevant quarter on a country-by-country basis shall
be delivered to Techniclone within sixty (60) days following the end of each
calendar quarter for which royalties are due.

     Section 6.03 PAYMENTS; INTEREST. Any payments due under this Agreement
shall be due on such date as specified in this Agreement and, in the event such
date is a day on which commercial banks are not authorized to conduct business
in either Tustin, California, New York, New York or Berlin, Germany, then the
next succeeding business day, and shall be made by wire transfer to a designated
bank account of the receiving Party.

                  Any failure by a Party to make a payment within five days
after the date when due shall obligate such Party to pay interest to the
receiving Party at a rate per annum equal to the prime rate as quoted in the
Eastern edition of the WALL STREET JOURNAL as of the date such payment is due
and, in the event such a rate is not quoted on such date then on the immediately
preceding date such rate is quoted, such interest due and payable upon tender of
the payment otherwise due and payable.

     Section 6.04 TAXES. The Party receiving royalties shall pay any and all
taxes levied on account of royalties it receives under this Agreement. If laws
or regulations require that taxes be withheld, the selling Party will (i) deduct
those taxes from the remittable royalty, (ii) timely pay the taxes to the proper
taxing authority, and (iii) send proof of payment to the other Party within
thirty (30) days of receipt of confirmation of payment from the relevant taxing
authority. The selling Party agrees to make all lawful and reasonable efforts to
minimize such taxes to the other Party.

     Section 6.05 PAYMENTS TO OR REPORTS BY AFFILIATES. Any payment required
under any provision of this Agreement to be made to either Party or any report
required to be made by any Party shall be made to or by an Affiliate of that
Party if designated by that Party as the appropriate recipient or reporting
entity without relieving such party from responsibility for such payment or
report.

     Section 6.06 PAYMENT CURRENCY. Payments by Schering under this Agreement
shall be paid to Techniclone in U.S. dollars by wire transfer of immediately
available funds to an account at a commercial bank designated by Techniclone
pursuant to this Article VI. Where payments are based on Net Sales in countries
other than the United States, the amount of such Net Sales expressed in the
currency of each country shall be converted first into Deutsche Marks, or if the
Deutsche Mark shall have been replaced by the Euro, into Euros, and then into
U.S. dollars at the average exchange rate (calculated at the average of the
"bid" and "asked" exchange rate) for the applicable quarter; PROVIDED, HOWEVER,
that the conversion of the currency in question into Deutsche Marks or Euros
prior to conversion into U.S. dollars shall be for calculation purposes only,
and no additional fee or commission will be incurred as a consequence of the
multiple currency conversions. In determining the average exchange rate for any
quarter, the standard shall be the exchange rate quoted by the Frankfurt Fixing
or any appropriate successor rate fixing procedure then in effect between
European First Class Banks for the applicable currency at 1:00 p.m. on the last
business day of the applicable quarter. If there is no Frankfurt Fixing or
appropriate successor rate fixing procedure in effect as of any date of
determination, the Parties shall agree on another reference rate.

                                       24

<PAGE>

                                  ARTICLE VII
                             MANUFACTURE AND SUPPLY
                             ----------------------

     Section 7.01 MANUFACTURE AND SUPPLY BY TECHNICLONE. Techniclone shall be
responsible for CMC/Manufacturing of Antibody, Product and Packaged Product
(including Techniclone's own manufacturing operations and those of its Third
Party contractors and suppliers), and for receipt and disposal of Antibody and
Product returned to Techniclone by Third Party contractors and suppliers, and
Product and Packaged Product returned by Schering customers. Subject to any
dispute resolution mechanisms specified herein and to the other provisions of
this Article VII, Techniclone shall have the final authority, so long as it is
the Manufacturing Party, with regard to CMC/Manufacturing. From the Effective
Date of this Agreement until the Parties otherwise agree, or as otherwise
provided herein, Techniclone will manufacture, or arrange for manufacture of
Antibody, Product and Packaged Product and supply Packaged Product to Schering
or Schering's designated distributor or distributors for use in connection with
Development and for the Commercialization of the Product in each applicable
country of the Territory under Article V hereof. Techniclone will not enter into
any Third Party contract relating to the manufacture of Antibody or Product or
Packaged Product without Schering's consent, which will not be unreasonably
withheld. Techniclone shall seek Schering's approval for all CMC/Manufacturing
plans, the implementation of such plans, and procedural changes to manufacturing
plans and processes, to the level of detail which Schering reasonably considers
to be necessary for Schering to fulfill its responsibilities and obligations as
holder of Regulatory Approvals throughout the Territory.

     Section 7.02 REGULATORY APPROVAL FOR MANUFACTURING. Schering shall be
responsible for preparing all filings to obtain, or causing a Third Party
manufacturer to make all necessary filings to obtain, Regulatory Approval for
the manufacture of the Antibody and the Product as part of the approval of a
Drug Approval Application for the Product. At the reasonable request of
Schering, Techniclone will provide draft submissions for filing to Schering and
will provide, or have provided to Schering, whatever other technical support and
expertise Schering reasonably deems necessary to effectively obtain Regulatory
Approval for the manufacture of the Antibody and the Product as part of the
approval of a Drug Approval Application for the Product. Schering shall have
authority and control with respect to all filings to obtain Regulatory Approval
for the manufacture of the Antibody and the Product, including Packaged Product.
Subject to the foregoing, Schering shall provide Techniclone and Techniclone
shall provide Schering with reasonable advance notice of any scheduled meeting
with the FDA, EMEA or any other regulatory authority in a major regulatory
jurisdiction, relating to any filing to obtain Regulatory Approval for the
Product, and Techniclone or Schering, as applicable, shall have the right to
participate in any such meeting. Once any filings are made in accordance with
this Section 7.02, Techniclone shall promptly notify Schering in writing, of any
proposed or required changes, to the process for the manufacture of Antibody,
Product or Packaged Product.

     Section 7.03 TESTING. Techniclone shall be responsible for all testing and
document generation (including without limitation all facilities information and
related documentation; chemistry, manufacturing, and control information;
regulatory methods and controls; and assays and reference standards) necessary
for and required by the FDA, EMEA or Koseisho for the manufacture of Antibody
and Product, including Packaged Product.

                                       25

<PAGE>

     Section 7.04 SPECIFICATIONS. Schering and Techniclone will jointly
establish release specifications and an expiration date for Antibody and
Product, including Packaged Product, to be manufactured by Techniclone and
Techniclone's Third Party contractors and suppliers, and commercialized by
Schering. Techniclone shall obtain the prior written approval of Schering to
specifications to be established by Techniclone relating to the process of
manufacture, labeling or packaging of Antibody and Product, including Packaged
Product, acceptance and release of raw materials, and facility and operational
specifications. Techniclone agrees that it will not make changes to any of the
specifications and procedures described in this Section without the prior
approval of Schering. The timelines for completing and implementing the
specifications described in this Section shall be established by the JDC.
Techniclone shall provide to Schering copies of all procedures relating to
manufacturing and packaging employed by Techniclone and its Third Party
contractors and suppliers.

     Section 7.05 QUALITY TESTING. Techniclone shall perform quality control
tests and assays on Antibody and Product, including Packaged Product,
manufactured and/or packaged by it and its Third Party manufacturers and
suppliers pursuant to Section 7.01 in accordance with the requirements of the
applicable Drug Approval Application. Techniclone shall provide Schering with a
copy of the batch record, a certificate of analysis and a certificate of
compliance for each batch of Antibody and Product, including Packaged Product,
manufactured by or on behalf of Techniclone, promptly following final quality
control release. The certificate of compliance shall certify that each batch was
reviewed and meets all regulatory requirements. The certificate of analysis
shall certify that each batch was tested and meets all specifications.

     Section 7.06 STABILITY; RECORDKEEPING; INSPECTION; ETC. Techniclone will
conduct a stability program for Antibody and Product, including Packaged
Product, to be produced pursuant to this Article VII (in compliance with
pharmaceutical industry standards and requirements of the FDA, EMEA and
Koseisho) and agreed upon between the Parties. Techniclone and its Third Party
contractors and suppliers will initiate and maintain all manufacturing-related
and packaging-related documents and records required by applicable law and
regulations. Techniclone will also: (a) furnish copies of such records to
Schering upon Schering's reasonable request; (b) conduct, at Schering's expense,
additional testing requested by any relevant regulatory authority in the
Territory and/or as may be reasonably requested by Schering (relating to
returned or suspect Products); (c) during and prior to the commencement of
manufacturing and/or packaging activities by Techniclone and its Third Party
contractors and suppliers, allow Schering or its agents to inspect, for quality
control purposes upon reasonable notice and during normal business hours, the
manufacturing, packaging and testing facilities, including the actual process of
manufacture, packaging and testing of Antibody and Product; (d) promptly inform
Schering of any inspection, seizure, or other actual or threatened legal or
regulatory action by any governmental authority relating to the process of
manufacture or packaging of any Antibody or Product, and promptly provide
Schering with any documentation relating thereto; (e) except for manufacturing
changes requiring the prior written approval of Schering pursuant to Section
7.02, provide reasonable advance notice to Schering and consult with Schering
prior to amending any governmental filing; and (f) comply in all material
respects with all laws relating to the generation, storage and disposal of waste
resulting from the manufacture and packaging of Antibody and Product.
Techniclone shall obtain the prior written approval of Schering with respect to
stability testing protocols, and process intermediates for Antibody and Product,
including Packaged Product. The Parties recognize that special stability studies
may be required by regulatory authorities to support transport of processes
intermediates such as Antibody between manufacturing sites, and final
distribution of Product with a stability period of brief duration.

                                       26

<PAGE>

     Section 7.07 FORECASTS AND ORDERS. As soon as is practicable following the
Effective Date, the Parties shall establish a system by which Schering shall
submit non-binding forecasts of its requirements of Packaged Products to
Techniclone. The system will provide reasonable notice to Techniclone of
Schering's anticipated requirements of Product. Unless technical or commercial
realities require otherwise, Schering will provide Techniclone with an initial
non-binding forecast for the eighteen month period commencing with the
anticipated initial Regulatory Approval in the Territory at least six months
before the commencement of such period. A new eighteen month forecast will be
submitted by Schering to Techniclone at the beginning of the next calendar
quarter and each calendar quarter thereafter. The system to be established by
the Parties shall provide for forecast amendments by Schering, and shall, to the
extent possible, minimize administrative burdens on Schering and Techniclone.
Firm purchase orders shall be placed by Schering's customers for Packaged
Product, and shall be placed with the distributor of the Packaged Product.

     Section 7.08 DELIVERY AND SHIPMENT. Techniclone shall deliver Packaged
Product F.O.B. the manufacturer's loading dock to the common carrier specified
by Schering. At the time of such delivery title to the Packaged Product shall
pass to the Schering customer to whom the delivered Packaged Product is to be
shipped, and risk of loss with respect to such Packaged Product shall pass to
Schering. Schering shall be responsible for the costs of shipping and insurance.
In the case of Packaged Product for export from the country of manufacture,
Techniclone will cooperate with Schering in providing documentation needed by
customs and other governmental authorities relating to import and export. The
Parties will provide alternatives as needed for special situations relating to
international supply.

     Section 7.09 WARRANTIES. Techniclone warrants that delivered Packaged
Product will comply with the specifications (established pursuant to Section
7.04) at the time of delivery and through the expiration date thereof, as well
as all other laws and manufacturing-related and packaging-related requirements
of applicable Regulatory Approvals (including without limitation, compliance
with applicable GMPs). Techniclone also warrants that its, and warrants that it
will use commercially reasonable best efforts to ensure that its Third Party
contractors', waste generation, storage, and disposal practices will comply with
all laws and regulations applicable at the time of manufacture or disposal.

     Section 7.10 ACCEPTANCE AND PRICING. Techniclone shall supply all of
Schering's requirements of Packaged Product at Techniclone's Cost of Goods plus
[...***...] (the "Price"), but in no event shall the Price exceed the following,
to be determined on a calendar year basis:

                      (i) if [...***...] Treatments or fewer are shipped in a
                      calendar year, then the Price shall not exceed
                      $[...***...] per Treatment;

                      (ii) if more than [...***...] Treatments but fewer than
                      [...***...] Treatments are shipped in a calendar year,
                      then the price shall not exceed $[...***...] per
                      Treatment; and

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       27

<PAGE>

                      (iii) if more than [...***...] Treatments are shipped in a
                      calendar year, then the Price shall not exceed
                      $[...***...] per Treatment.

                  Charges shall be based on the number of Treatments expected to
be sold during the calendar year in the Schering forecast for such calendar
year. If following the close of a calendar year, Techniclone determines that
actual Treatments shipped in such calendar year failed to achieve the threshold
required for the Price charged to Schering, then Techniclone will recalculate
the amount owed by Schering to Techniclone and invoice Schering for such amount.
If Schering agrees with the Techniclone calculation, then Schering shall pay the
Techniclone invoice promptly following receipt. If Schering disagrees with the
Techniclone calculation, then the disagreement shall be resolved as if it was an
Audit Disagreement pursuant to Section 11.03(b).

                  (b) In the event that Techniclone's Price is below the
applicable maximum set forth in Section 7.10(a)(i), (ii), or (iii), then
Schering, in addition to paying Techniclone the Price, shall pay Techniclone a
sum equal to [...***...] of the difference between the Price and the applicable
maximum set forth in Section 7.10(a).

                  (c) Schering shall make payments for Packaged Products shipped
to Schering's customers which comply with the Techniclone warranty set forth in
Section 7.09 within [...***...] days of receipt by Schering of Techniclone's
invoice. In the event that it is later determined that Packaged Product paid for
by Schering does not comply with the specifications and the Techniclone warranty
set forth in Section 7.09, Techniclone shall replace such Packaged Product free
of charge upon Schering's demonstration of such non-compliance to the reasonable
satisfaction of Techniclone.

     Section 7.11 CONSTRUCTION OF COMMERCIAL RADIOLABELING SITES.(a) If the
Parties agree that it is necessary or desirable to construct one or more
commercial radiolabeling sites for Oncolym, then Techniclone shall be
responsible for the construction of such site or sites, subject to prior review
and approval of plans and budgets by Schering. Schering shall be responsible,
upon payment of an equal amount by Techniclone, for (i) [...***...] of the total
capitalized cost up to $[...***...] (i.e., the Schering contribution will not
exceed [...***...]) of developing the first commercial radiolabeling site for
Oncolym in the United States, Canada, Japan or Europe and Techniclone shall be
responsible for the remaining [...***...] or more of such capitalized cost; and
(ii) [...***...] of the total capitalized cost up to $[...***...] (i.e., the
Schering contribution will not exceed $[...***...]) of developing the second
commercial radiolabeling site for Oncolym in the United States, Canada, Japan or
Europe and Techniclone shall be responsible for the remaining [...***...] or
more of such capitalized cost. Neither Party will unreasonably withhold its
agreement as set forth in the first sentence of this Section 7.11. Neither Party
will withhold its agreement as set forth in the first sentence of this Section
7.11 if an additional radiolabeling site is reasonably necessary for Schering to
distribute packaged Product in the United States, Canada, Japan or Europe.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       28

<PAGE>

                  (b) In the event that Schering determines in its sole
discretion that one or more commercial radiolabeling sites for Oncolym are
necessary or desirable, and Techniclone reasonably withholds its agreement
pursuant to Section 7.11 (a) (for example, because the radiolabeling site
proposed by Schering is not necessary for Schering to distribute Packaged
Product in the United States, Canada, Japan or Europe), then Schering shall have
the right to arrange for the construction or use of such site or sites at its
sole expense. Techniclone shall cooperate with Schering in the establishment of
such site or sites and, subject to the availability of Techniclone personnel,
shall provide such commercially reasonable assistance as Schering
shall request. In the event that Schering establishes one or more radiolabeling
sites pursuant to this Section 7.11(b), then at the request of Schering
Techniclone agrees to enter into a supply agreement with Schering for the supply
of Schering's requirements of Antibody at a price not to exceed Techniclone's
Cost of Goods plus [...***...].

     Section 7.12 SCHERING OPTION TO TAKE OVER MANUFACTURING. Notwithstanding
anything to the contrary herein, Schering may, at any time, by delivery of
written notice to Techniclone elect to become the Manufacturing Party hereunder
either in respect of Antibody or in respect of Product. Subject to the terms of
all relevant Third Party contracts related to manufacture of the Product, such
election shall become effective on the date specified in such notice, whereupon
Techniclone will be deemed to have transferred and assigned to Schering (and
will promptly transfer to Schering) all Information regarding Techniclone
Know-How and all Third Party contracts related to manufacture of the Product. In
the event that Schering shall so elect, it shall indemnify and hold Techniclone
harmless against any non-cancelable costs, expenses or fees payable to Third
Parties that Techniclone may become subject to as a result of such termination
of manufacturing obligations. In connection with any such election Schering
shall offer to purchase from Techniclone the property, plant and equipment
dedicated by Techniclone for the manufacture of Product, as the case may be, at
a purchase price equal to the book value of such property, plant and equipment.

     SECTION 7.13 SCHERING MANUFACTURING STEP-IN RIGHTS. Without prejudice to
any other remedies available to Schering under this Agreement or at law, if
Techniclone materially fails to carry out its responsibilities regarding
CMC/Manufacturing allocated to it under this Agreement, Schering may, after
forty-five (45) days prior written notice to Techniclone, undertake the
particular task and complete it at Schering's own expense if Techniclone has not
at such time begun to carry out such task in a manner reasonably likely to cure
its default. Schering shall be entitled to commercially reasonable cooperation
and assistance from Techniclone to accommodate its efforts. All costs reasonably
incurred by Schering in carrying out such tasks will be reimbursed by
Techniclone on a quarterly basis as invoiced by Schering or may, at Schering's
option, be set off against any payments otherwise due to Techniclone under this
Agreement.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       29

<PAGE>

                                  ARTICLE VIII
                                 CONFIDENTIALITY
                                 ---------------

     Section 8.01 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that the receiving Party shall keep confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in this
Agreement any Information and other information and materials furnished to it by
the other Party pursuant to this Agreement or any Information developed during
the course of the collaboration hereunder, or any provisions of this Agreement
that are the subject of an effective order of the Securities Exchange Commission
granting confidential treatment pursuant to the Securities Act of 1934, as
amended (collectively, "CONFIDENTIAL INFORMATION"), except to the extent that it
can be established by the receiving Party that such Confidential Information:

                  (a) was already known to the receiving Party, other than under
an obligation of confidentiality, at the time of disclosure by the other Party;

                  (b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;

                  (c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement;

                  (d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others; or

                  (e) was independently discovered and/or developed by the
receiving Party as documented in its corporate records.

     Section 8.02 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
filing or updating any Drug Approval Application, complying with applicable
governmental laws, rules and regulations or conducting pre-clinical or clinical
trials, PROVIDED, that if a Party is required by law or regulation to make any
such disclosures of the other Party's Confidential Information it will, except
where impracticable for necessary disclosures, for example in the event of
medical emergency, give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. In
addition, and with prior written notice to the other Party of each Third Party
with whom a confidential disclosure agreement is being entered into, each Party
shall be entitled to disclose, under a binder of confidentiality, Confidential
Information to any Third Party for the purpose of carrying out the purposes of
this Agreement. Nothing in this Article VIII shall restrict any Party from using
for any purpose any Confidential Information independently developed by it
during the course of the collaboration hereunder, or from using Confidential
Information that is specifically derived from pre-clinical or clinical trials to
carry out Regulatory Approval, marketing, sales or professional services support
functions as is customary in the pharmaceutical industry. Where materiality of
disclosure requires a press release or other disclosure pertaining to this
agreement by one Party, the disclosing Party shall give at least two (2)
business days' advance notice to the other Party.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       30

<PAGE>

     Section 8.03 SURVIVAL. This Article VIII shall survive the termination or
expiration of this Agreement for a period of [...***...] years.

     Section 8.04 TERMINATION OF PRIOR AGREEMENT. This Agreement supersedes the
Confidentiality Agreements between Techniclone and Berlex Laboratories, Inc.
dated as of October 23, 1997. All Information exchanged between the Parties
under those Agreements shall be deemed Confidential Information and shall be
subject to the terms of this Article VIII, and shall be included within the
definitions of Techniclone Know-How.

     Section 8.05 PUBLICATIONS. Schering shall determine the overall strategy
for publication in support of the Product in the Territory.

     Section 8.06 PUBLICITY REVIEW. Subject to the further provisions of this
Section and Section 11.04, no Party shall originate any written publicity, news
release, or other announcement or statement relating to this Agreement or to
performance hereunder or the existence of an arrangement between the Parties
(collectively, "WRITTEN DISCLOSURE"), without the prior prompt review and
written approval of the other, which approval shall not be unreasonably withheld
or delayed. Notwithstanding the foregoing provisions of this Section 8.06, any
Party may make any public Written Disclosure it believes in good faith based
upon the advice of counsel is required by applicable law or any listing or
trading agreement concerning its publicly traded securities, PROVIDED that prior
to making such Written Disclosure, the disclosing Party shall provide the other
Party with a copy of the materials proposed to be disclosed and provide the
receiving Party with an opportunity to promptly review the proposed Written
Disclosure.

                                   ARTICLE IX
              OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
              ----------------------------------------------------

     Section 9.01 OWNERSHIP. Each Party shall solely own, and it alone shall
have the right to apply for, Patents within and outside of the Territory for any
inventions made solely by that Party's employees or consultants in the course of
performing work under this Agreement. Inventions made jointly by employees or
consultants of Techniclone and Schering and any Patents resulting therefrom
shall be owned by Schering, subject to the licenses granted to Techniclone
pursuant to Article II.

     Section 9.02 DISCLOSURE OF JOINT INVENTIONS. Any such patent application
disclosing inventions made jointly by the Parties shall be provided by one Party
to the other reasonably in advance of the intended date for submission of such
application to a governmental patent authority.

     Section 9.03 PATENT FILINGS. Each Party, at its sole discretion, cost and
responsibility, shall prepare, file, prosecute and maintain Patents to cover
discoveries and inventions made solely by its own employees or consultants
relating to Antibody or Product and use commercially reasonable efforts to file
initially all such applications in the Territory or the appropriate forum under
the circumstances wherein such a Party determines it is commercially reasonable
to do so. Schering shall file, prosecute and maintain Patents to cover
inventions relating to the discovery, evaluation, manufacture, use or sale of
the Antibody or the Product that are made jointly by personnel of Techniclone
and Schering in the course of the collaboration (herein referred to as "JOINT
PATENTS"). The determination of the countries in the Territory in which to file
Joint Patents shall be made by Schering. Schering shall have the right to direct
and control all material actions relating to the prosecution or maintenance of
Joint Patents in the Territory, including interference proceedings,
reexaminations, reissue opposition and revocation proceedings.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       31

<PAGE>

                  (b) The Parties agree to use commercially reasonable efforts
to ensure that any Patent filed outside of the United States prior to a filing
in the United States will be in a form sufficient to establish the date of
original filing as a priority date for the purposes of a subsequent filing in
the United States. Schering shall bear all costs related to the filing of Joint
Patents. The Parties agree to use commercially reasonable efforts to ensure that
any Patent filed in the United States prior to filings outside of the United
States will be in a form sufficient to establish the date of original filing as
a priority date for the purpose of a subsequent filing in any contracting state
of the Paris Convention.

     Section 9.04 THIRD PARTY PATENT RIGHTS. Each Party agrees to bring to the
attention of the other Party any Third Party Patent it discovers, or has
discovered, and which relates to the subject matter of this Agreement.

     Section 9.05 ENFORCEMENT RIGHTS. NOTIFICATION OF INFRINGEMENT. If either
Party learns of any infringement or threatened infringement by a Third Party of
the Techniclone Patents, or Joint Patents, such Party shall promptly notify the
other Party and shall provide such other Party with all available evidence of
such infringement.

                  (b) ENFORCEMENT IN THE TERRITORY. Subject to the next
sentence, Techniclone shall be obligated, at its own expense, to defend
Techniclone Patents and Schering shall be obligated, at its own expense, to
defend Joint Patents in the Territory. Schering shall have the right, but not
the obligation, to institute, prosecute and control at its own expense any
action or proceeding with respect to infringement of any Techniclone Patents, or
Joint Patents covering the manufacture, use, importation, sale or offer for sale
of the Product being developed or marketed in the Territory, by counsel of its
own choice. Techniclone shall have the right, at its own expense, to be
represented in any action by counsel of its own choice. If Schering fails to
bring an action or proceeding or otherwise take appropriate action to abate such
infringement within a period of one hundred eighty (180) days of notice by
Techniclone to Schering requesting action, Techniclone will have the right to
bring and control any such action or proceeding relating to Techniclone Patents
by counsel of its own choice and Schering will have the right to be represented
in any such action by counsel of its own choice and at its own expense. If one
Party brings any such action or proceeding, the other Party agrees to be joined
as a party plaintiff if necessary to prosecute the action or proceeding and to
give the first Party commercially reasonable assistance and authority to file
and prosecute the suit. Any damages or other monetary awards recovered pursuant
to this Section 9.05(b) shall be allocated first to the costs and expenses of
the Party bringing suit, then to the costs and expenses, if any, of the other
Party. In the event that Schering brings such action, any amounts remaining
shall be distributed as follows: compensatory damages shall be treated as Net
Sales in the country and calendar quarter received and punitive and exemplary
damages shall be paid equally to Schering and Techniclone. In the event that
Techniclone brings such action, [...***...] of any amounts remaining shall be
payable to Techniclone and the remaining [...***...] payable to Schering.

                  (c) SETTLEMENT WITH A THIRD PARTY. The Party that controls the
prosecution of a given action shall also have the right to control settlement of
such action; PROVIDED, HOWEVER, that if one Party controls, no settlement shall
be entered into without the written consent of the other Party (which consent
shall not be unreasonably withheld) if such settlement would materially and
adversely affect the interests of such other Party.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       32

<PAGE>

     Section 9.06 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. If a Third Party
asserts that a patent, trademark or other intangible right owned by it is
infringed by any Product in the Territory, Techniclone will be solely
responsible for defending against any such assertions at its cost and expense
(subject to the provisions of Section 9.05(b)), but no settlement may be entered
into without the written consent of Schering, which shall not be unreasonably
withheld. The costs of any such settlement (including, without limitation,
damages, expense reimbursements, compliance, future royalties or other amounts)
shall be paid exclusively by Techniclone. If any Third Party is successful in
any such claim, and Schering is ordered to make any payments to such Third Party
in connection therewith, any such payments may be offset or deducted from the
payment obligations of Schering under the Agreement.

     Section 9.07 PATENT EXPENSES. All worldwide Patent Expenses with respect to
Techniclone's Patents shall be borne by Techniclone, subject to the terms of
this Agreement. All worldwide Patent expenses with respect to Joint Patents
shall be borne by Schering, subject to the terms of this Agreement.

     Section 9.08 TRADEMARKS. Schering shall be responsible for the selection,
registration and maintenance of all trademarks which it employs in connection
with the Product and shall own (or license in the case of "Oncolym") and control
such trademarks (and pay any costs in connection therewith). Techniclone
recognizes the exclusive ownership by Schering of any proprietary Schering name,
logotype or trademark furnished by Schering (including Schering's Affiliates)
for use in connection with the Product. Techniclone shall not, either while this
Agreement is in effect, or at any time thereafter, register, use or attempt to
obtain any right in or to any such name, logotype or trademark or in and to any
name, logotype or trademark confusingly similar thereto.

     Section 9.09 USE OF NAMES. Neither Party shall use the name of the other
Party in relation to this transaction in any public announcement, press release
or other public document without the written consent of such other Party, which
consent shall not be unreasonably withheld or delayed; PROVIDED, HOWEVER, that
either Party may use the name of the other Party in any document filed with any
regulatory agency or authority, including the FDA and the Securities and
Exchange Commission, in which case Schering shall be referred to as "Schering
AG, Germany". Techniclone agrees not to use the name "Schering" in relation to
this transaction in any press release, public announcement or other public
document without the approval of Schering, which approval shall not be
unreasonably withheld or delayed.

                                   ARTICLE X
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     Section 10.01 REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby
represents and warrants to the other Party as follows:

                      (i) The Agreement is a legal and valid obligation binding
                      upon such Party and enforceable in accordance with its
                      terms. The execution, delivery and performance of the
                      Agreement by such Party does not conflict with any
                      agreement, instrument or understanding, oral or written,
                      to which it is a party or by which it is bound, nor to
                      such Party's knowledge, violate any law or regulation of
                      any court, governmental body or administrative or other
                      agency having jurisdiction over it.

                                       33

<PAGE>

                      (ii) Techniclone has not granted (except with respect to
                      Existing Licenses referred to in Section 2.02 above), and
                      during the term of the Agreement neither Party will grant,
                      any right to any Third Party relating to the Techniclone
                      Patents, Techniclone Know-How and Joint Patents in the
                      Field which would conflict with the rights granted to
                      either Party hereunder.

                  (b) Techniclone hereby represents and warrants to Schering
that Techniclone:

                      (i) Has provided to Schering all information in its
                      possession or control or of which it is aware as of the
                      Effective Date, concerning efficacy, side effects, injury,
                      toxicity, or sensitivity, reaction and incidents or
                      severity thereof, associated with any clinical use,
                      studies, investigations, or tests with the Product (animal
                      or human), whether or not determined to be attributable to
                      the Product;

                      (ii) Has conducted or has caused its contractors or
                      consultants to conduct, and will in the future conduct,
                      the preclinical and clinical studies of the Product in
                      accordance with applicable United States law, known or
                      published standards of the FDA and EMEA, and the
                      scientific standards applicable to the conduct of studies
                      in the United States and the European Union;

                      (iii) Has employed and will in the future employ
                      individuals of appropriate education, knowledge, and
                      experience to conduct or oversee the conduct of
                      Techniclone's clinical and preclinical studies of the
                      Product;

                      (iv) Has not employed (and, to the best of its knowledge,
                      has not used a contractor or consultant that has employed)
                      and in the future will not employ (or, to the best of its
                      knowledge, use any contractor or consultant that employs)
                      any individual or entity debarred by the FDA (or subject
                      to a similar sanction of EMEA), or, to the best knowledge
                      of Techniclone, any individual who or entity which is the
                      subject of an FDA debarment investigation or proceeding
                      (or similar proceeding of EMEA), in the conduct of the
                      preclinical or clinical studies of the Product;

                      (v) In the course of Developing the Product, has not
                      conducted, and during the course of this Agreement it will
                      not conduct, any Development activities in violation of
                      applicable GCPs, GLPs or GMPs; PROVIDED, HOWEVER, that
                      with respect to periods prior to the Effective Date, this
                      representation is limited to Information included or to be
                      included in a Drug Approval Application or matters
                      relevant to Oncolym;

                                       34

<PAGE>

                      (vi) As of the Effective Date, except as it may have
                      previously disclosed to Schering in writing, has not
                      received any notices of infringement or any written
                      communications relating in any way to a possible
                      infringement with respect to Oncolym and any potential
                      Products, and that it is not aware that the manufacture,
                      use or sale of Oncolym or any potential Products infringes
                      any Third Party patent rights;

                      (vii) As of the Effective Date, is not aware of any prior
                      act or any fact which causes it to conclude that any
                      Techniclone Patent is invalid or unenforceable;

                      (viii) Has complied in all material respects with each
                      license listed on Exhibit C hereto, and during the term
                      hereof will comply in all material respects, and use all
                      reasonable efforts to keep in full force and effect, each
                      such license; neither this Agreement, nor any of the
                      transactions contemplated hereby will, with the giving of
                      notice or the lapse of time, or both, constitute a default
                      or breach of any such license; and

                      (ix) Techniclone has obtained all right, title and
                      interest in and to all rights to Oncolym and the
                      Techniclone Patents and Techniclone Know-How, free and
                      clear of any liens, encumbrances or rights to repurchase;
                      and

                      (x) During the term hereof, Techniclone will not grant a
                      lien on this Agreement or on any of Techniclone's rights
                      or obligations hereunder or on the Techniclone Patents or
                      Techniclone Know-How related to the Product.

     Section 10.02 INDEMNIFICATION FOR BREACHES OF REPRESENTATIONS AND
WARRANTIES. Each Party hereby agrees to save, defend and hold the other Party
and its directors, officers, agents and employees harmless from and against any
and all Losses resulting directly or indirectly from the breach of any
representation or warranty made by such Party hereunder. In the event that a
Party is seeking indemnification under this Section 10.02, it shall inform the
other Party of a claim as soon as reasonably practicable after it receives
notice of the claim, shall permit the indemnifying Party to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of the indemnifying Party) in the defense of the claim.

     Section 10.03 PERFORMANCE BY AFFILIATES. The Parties recognize that each
Party may perform some or all of its obligations under this Agreement through
Affiliates, PROVIDED, HOWEVER, that each Party shall remain responsible for and
be a guarantor of the performance by its Affiliates and shall cause its
Affiliates to comply with the provisions of this Agreement in connection with
such performance.

                                       34

<PAGE>

                                   ARTICLE XI
                             INFORMATION AND REPORTS
                             -----------------------

     Section 11.01 INFORMATION AND REPORTS DURING DEVELOPMENT AND
COMMERCIALIZATION. Schering and Techniclone will disclose and make available
(subject to any confidentiality agreements or requirements of law) to each other
without charge all preclinical, clinical, regulatory, and other Information,
including copies of all preclinical and clinical reports, known by Schering or
Techniclone directly concerning the Product within the Field at any time during
the term of this Agreement. Each Party shall own and maintain its own database
of clinical trial data accumulated from all clinical trials of the Product for
which it was responsible and of adverse drug event information for the Product.
At the option of the requesting Party, such data shall be provided in a computer
readable or other electronic format by the providing Party, to the extent
available, which shall also assist in the transfer and validation of such data
to the receiving Party. Without limitation of the foregoing, each Party shall
supply to the other the Information required by the other Party and requested by
it (either as a routine practice or as a specific request) for purposes of
compliance with regulatory requirements. With respect to information concerning
Commercialization, Schering agrees to keep Techniclone regularly informed on all
post marketing activities, but shall have no obligation, except as specifically
set forth in this Agreement, to share pricing, marketing or sales information
with Techniclone.

     Section 11.02 ADVERSE DRUG EXPERIENCES; COMPLAINTS. The Parties agree to
enter into a standard operating procedure by and between the Parties to govern
the exchange of Information relating to adverse drug experiences, Product
quality, and Product complaints.

     Section 11.03 RECORDS OF REVENUES AND EXPENSES. Each Party will maintain
complete and accurate records which are relevant to revenues, costs, expenses
and payments on a country-by-country basis in the Territory under this Agreement
and such records shall be open during reasonable business hours for a period of
two (2) years from creation of individual records for examination at the other
Party's expense and not more often than once each year by a certified public
accountant selected by the other Party, or the other Party's internal
accountants unless the first Party objects to the use of such internal
accountants, for the sole purpose of verifying for the inspecting Party the
correctness of calculations and classifications of such revenues, costs,
expenses or payments made under this Agreement. Each Party shall bear its own
costs related to such audit; PROVIDED that, for any underpayments greater than
five (5) percent by Schering, Schering shall pay Techniclone the amount of
underpayment, interest as provided for in Section 6.03 from the time the amount
was due and Techniclone's out-of-pocket expenses. For any underpayments less
than five (5) percent by Schering found under this Section, Schering shall pay
Techniclone the amount of underpayment. Any overpayments by Schering will be
refunded to Schering or credited to future royalties, at Schering's election.
Any records or accounting information received from the other Party shall be
Confidential Information for purposes of Article VIII. Results of any such audit
shall be provided to both Parties, subject to Article VIII.

                  (b) If there is a dispute between the Parties following any
audit performed pursuant to Section 11.03(a), either Party may refer the issue
(an "AUDIT DISAGREEMENT") to an independent certified public accountant for
resolution. In the event an Audit Disagreement is submitted for resolution by
either Party, the Parties shall comply with the following procedures:

                      (i) The Party submitting the Audit Disagreement for
                      resolution shall provide written notice to the other Party
                      that it is invoking the procedures of this Section
                      11.03(b).

                                       35

<PAGE>

                      (ii) Within thirty (30) business days of the giving of
                      such notice, the Parties shall jointly select a recognized
                      international accounting firm to act as an independent
                      expert to resolve such Audit Disagreement.

                      (iii) The Audit Disagreement submitted for resolution
                      shall be described by the Parties to the independent
                      expert, which description may be in written or oral form,
                      within ten (10) business days of the selection of such
                      independent expert.

                      (iv) The independent expert shall render a decision on the
                      matter as soon as practicable.

                      (v) The decision of the independent expert shall be final
                      and binding unless such Audit Disagreement involves
                      alleged fraud, breach of this Agreement or construction or
                      interpretation of any of the terms and conditions hereof.

                      (vi) All fees and expenses of the independent expert,
                      including any Third Party support staff or other costs
                      incurred with respect to carrying out the procedures
                      specified at the direction of the independent expert in
                      connection with such Audit Disagreement, shall be borne by
                      each Party in inverse proportion to the disputed amounts
                      awarded to the Party by the independent expert through
                      such decision (e.g. Techniclone disputes $100, the
                      independent expert awards Techniclone $50, then each Party
                      pays 1/2 of the independent expert's costs) in all other
                      cases.

                                  ARTICLE XII
                              TERM AND TERMINATION
                              --------------------

     Section 12.01 TERM. This Agreement shall commence as of the Effective Date
and, unless sooner terminated as provided herein shall continue in effect until
such time as (i) no royalties are payable under Article VI hereunder to
Techniclone; and (ii) Techniclone's manufacturing obligations described in
Article VII shall have terminated, provided that the license granted pursuant to
Section 6.01(e) shall survive such termination.

     Section 12.02 TERMINATION AT WILL.

                  (a) Notwithstanding any other term or provision hereof
expressly or impliedly to the contrary, Schering may terminate this Agreement in
its entirety or on a country-by-country basis, and be fully released of any
obligations hereunder (except as is expressly provided for herein) as follows:

                      (i) immediately at any time if Schering determines, in its
                      reasonable judgment, that there are issues of Safety or
                      Tolerability;

                                       36

<PAGE>

                      (ii) immediately if (A) the FDA requires that the Existing
                      Trials be repeated before a Phase III Clinical Trial can
                      begin; (B) the FDA requires that a new Phase II Clinical
                      Trial be conducted before a Phase III Clinical Trial can
                      begin; (C) the FDA has not allowed the commencement of a
                      Phase III Clinical Trial by [...***...]; (D) the FDA
                      Conversion Meeting does not occur by [...***...]; or (E)
                      Techniclone fails to deliver or it becomes reasonably
                      clear that Techniclone will fail to deliver in time
                      appropriate quantities of clinical supplies of Antibody,
                      Product and Packaged Product such that Clinical
                      Development is or will be delayed by a period of
                      [...***...] or more beyond the date anticipated in the
                      Development Plan.

                      (iii) upon ten days' written notice to Techniclone, if,
                      based upon data from, or the results of, the first Phase
                      III Clinical Trial of the Product, Schering determines,
                      using its reasonable judgment, that such results do not
                      support the submission of the Product for Regulatory
                      Approval based upon the criteria for Regulatory Approval
                      established at the Conversion Meeting or subsequently by
                      the FDA (the "Approval Criteria");

                      (iv) upon [...***...] written notice, given at any time
                      prior to the receipt of Regulatory Approval, if Schering
                      determines that for reasons of efficacy or risk/benefit
                      therapeutic ratio, that the Product, in Schering's
                      reasonable scientific or business discretion, is not
                      considered acceptable, applying the standard of medical
                      care and/or business judgment of major international
                      pharmaceutical companies engaged in the oncology business,
                      and taking into account the standard of medical care then
                      applicable at major international oncology treatment
                      centers;

                      (v) upon [...***...] written notice given at any time
                      prior to Regulatory Approval, for any reason;

                      (vi) at any time after Regulatory Approval, upon
                      [...***...] notice to Techniclone, for any reason; and

                      (vii) immediately if Techniclone has not concluded a
                      definitive agreement (in compliance with Section 7.01)
                      providing for a radiolabeling site for the production of
                      Product and Packaged Product [...***...].

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       37

<PAGE>

                  (b) TERMINATION FOR MATERIAL BREACH. Failure by Schering or
Techniclone to comply with any of the respective material (which, for the
purposes hereof, shall not include Section 3.05) obligations and conditions
contained in this Agreement shall entitle the other Party to give the Party in
default notice requiring it to cure such default. If such default is not cured
within ninety (90) days after receipt of such notice, the notifying Party shall
be entitled (without prejudice to any of its other rights conferred on it by
this Agreement) to terminate this Agreement or in the event of an uncured
material breach by Techniclone, effect the rights of Schering set forth in
Section 12.02(e) by giving a notice to take effect immediately. Notwithstanding
the foregoing, in the event of a non-monetary default, if the default is not
reasonably capable of being cured within the ninety (90) day cure period by the
defaulting Party and such defaulting Party is making a good faith effort to cure
such default, the notifying Party may not terminate this Agreement, provided,
however, that the notifying Party may terminate this Agreement if such default
is not cured within one hundred eighty (180) days of such original notice of
default. The right of either Party to terminate this Agreement as hereinabove
provided shall not be affected in any way by its waiver of, or failure to take
action with respect to any previous default.

                  (c) TERMINATION FOR INSOLVENCY. In the event that one of the
Parties hereto shall go into liquidation, a receiver or a trustee be appointed
for the property or estate of that Party and said receiver or trustee is not
removed within sixty (60) days, or the Party makes an assignment for the benefit
of creditors (collectively, a "BANKRUPTCY EVENT"), and whether any of the
aforesaid Bankruptcy Events be the outcome of the voluntary act of that Party,
or otherwise, the other Party shall be entitled to terminate this Agreement (or
in the event Techniclone suffers such a Bankruptcy Event, Schering may effect
its rights described in Section 12.02(e) forthwith by giving a written notice to
Techniclone). Each Party agrees (to the extent it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim to
take the benefit or advantage of, any stay or extension law or any other law
wherever enacted, now or at any time hereafter in force, which would prohibit
the termination of this Agreement or in any way modify the effects thereof as
provided herein; and each Party (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the other Party, but will suffer and permit the execution of every power as
though no such law had been enacted.

                  (d) EFFECT OF TERMINATION. (A) In the event that this
Agreement is terminated by Schering in one or more countries or in its entirety
in accordance with Section 12.02(a), or commercialization of the Product is
discontinued by Schering in one or more countries pursuant to Section 6.01(d),
or this Agreement is terminated by Techniclone pursuant to Section 12.02(b) in
one or more countries if Schering either fails to use commercially reasonable
efforts to enable the Product to obtain Regulatory Approval in those countries
where Schering is obligated to do so pursuant to Section 3.03(b), or fails to
Commercialize the Product in the countries where Schering is obligated to do so
pursuant to Section 5.02, and in the event that the Agreement is terminated by
either Party in its entirety in accordance with Sections 12.02(a),(b) or (c)
hereof, as applicable, subject to Section 12.02(e), Schering will with respect
to each country, as a whole, for which the termination applies:

                                       38

<PAGE>

                      (i) deliver to Techniclone the Techniclone Know-How and
                      assign to Techniclone its rights in said Techniclone
                      Know-How and Techniclone Patents if any, in either case
                      relating solely to the country that is the subject of the
                      termination;

                      (ii) not use the Techniclone Know-How as long as it has to
                      be kept confidential pursuant to Article VIII hereof in
                      such country;

                      (iii) not infringe any of the Techniclone Patents in such
                      country;

                      (iv) make all payments incurred under this Agreement with
                      respect to such country prior to the effective termination
                      date;

                      (v) transfer all regulatory filings and approvals related
                      to the Product in such country to Techniclone upon
                      Techniclone's written request for same;

                      (vi) transfer to Techniclone responsibility for and
                      control of ongoing work of Schering related to the
                      Product, Affiliates and Third Parties in an expeditious
                      and orderly manner with the costs for such work assumed by
                      Techniclone as of the date of notice;

                      (vii) reconvey to Techniclone all rights to the trademark
                      for "Oncolym" granted pursuant to Section 2.01; and

                      (viii) sell to Techniclone, at any time within ninety (90)
                      days of such termination, at Techniclone's election, all
                      or any portion of the inventory of the Product owned by
                      Schering or its Affiliates which are intended for sale in
                      such country at a price equal to Schering's or its
                      Affiliate's cost for such inventory; such election shall
                      be made by Techniclone in writing and within thirty (30)
                      days of such election, Schering shall ship at
                      Techniclone's cost and direction such inventory to
                      Techniclone. Techniclone shall pay for such inventory
                      within forty-five (45) days of receipt of such inventory.

         (B) If as a result of the operation of Section 12.02(d)(A) Techniclone
has the right to Commercialize the Product in one or more countries while
Schering is Commercializing the Product in the United States or Europe, then
upon written notice from Schering, Techniclone agrees to refrain from
Commercializing the Product in any country in which such Commercialization, in
the reasonable opinion of Schering, would have a material negative impact on
Schering's Commercialization in the United States or Europe.

                  (e) EFFECT OF TERMINATION BY SCHERING PURSUANT TO SECTIONS
12.02(b) AND (c). In the event of a Bankruptcy Event or a material default
described in Sections 12.02(b) and (c) by Techniclone (which default is not
cured as provided therein), Schering may elect in lieu of terminating this
Agreement to declare the license granted pursuant to this Agreement to be
irrevocable. From the date of receipt of notice of such election, Techniclone
shall have no further rights or obligations under this Agreement, except that
Techniclone may enforce any financial obligations of Schering, including those
arising under Section 3.04, Articles IV and VI herein before or after such
election, and Schering may enforce any manufacturing and supply obligations of
Techniclone, including those arising under Section 12.02(g); PROVIDED that if
such election occurs prior to the First Commercial Sale of the Product, any
additional Development Expenses and reasonable costs incurred by Schering to
Commercialize the Product as a result of such election shall be credited against
amounts payable by Schering to Techniclone.

                                       39

<PAGE>

                  (f) EFFECT OF TERMINATION BY SCHERING PURSUANT TO CERTAIN
SUBSECTIONS OF SECTION 12.02(a). If Schering terminates this Agreement pursuant
to:

                      A. Section 12.02(a)(i), (iii), or (iv), THEN Schering
                      shall reimburse Techniclone for [...***...] of the
                      non-cancellable Third Party Costs ("Non-cancellable
                      Costs") that Techniclone may incur after the effective
                      time of termination with respect only to clinical trials
                      underway at such effective time; PROVIDED, HOWEVER, that
                      Schering's [...***...] share of Non-cancellable Costs
                      shall not exceed $[...***...]; or

                      B. Section 12.02(a)(v), THEN Schering shall, if a Phase
                      III Clinical Trial is then underway for the Product, be
                      obligated to fund [...***...] of the costs of completing
                      all then ongoing Phase III Clinical Trials for the Product
                      ("Completion Costs"); PROVIDED, HOWEVER, that amounts
                      payable under this subsection (B) shall not exceed
                      $[...***...].

                  (g) OBLIGATIONS OF MANUFACTURING PARTY. In the event of
termination of this Agreement pursuant to this Section 12.02 where the Party
terminating this Agreement is the Manufacturing Party, the Manufacturing Party
shall continue to provide for manufacture of the Antibody, Product and/or
Packaged Product, as applicable, to the extent provided prior to notice of such
termination, from the effective date of such termination until such reasonable
time as the Non-Manufacturing Party is able to secure an equivalent alternative
commercial manufacturing source, as requested by the Non-Manufacturing Party.

                  (h) GENERAL. Except where expressly provided for otherwise in
this Agreement, termination of this Agreement shall not relieve the Parties
hereto of any liability, including any obligation to make payments hereunder,
which accrued hereunder prior to the effective date of such termination, nor
preclude any Party from pursuing all rights and remedies it may have hereunder
or at law or in equity with respect to any breach of this Agreement nor
prejudice any Party's right to obtain performance of any obligation.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       40

<PAGE>

                  (i) TECHNICLONE ROYALTY TO SCHERING. In the event that
Schering terminates this Agreement under Section 12.02(a)(ii), or terminates
this Agreement and pays Completion Costs to Techniclone under Section 12.02(f),
and, after such termination by Schering, either Techniclone or a Techniclone
Affiliate or a Techniclone licensee or distributor or an acquirer of all or
substantially all of the shares or assets of Techniclone markets the Product in
any country of the Territory, then: (i) Techniclone (in the case of marketing by
Techniclone or a Techniclone Affiliate, licensee, or distributor) or such
acquirer of the shares or assets of Techniclone shall pay Schering a royalty of
[...***...] percent of Techniclone's or such Affiliate's, licensee's,
distributor's or acquirer's Net Sales of the Product until Schering receives (A)
if Schering terminates pursuant to Section 12.02(a)(ii), an amount in cash equal
to $[...***...] or (B) if Schering terminates and pays Completion Costs to
Techniclone under Section 12.02(f), an amount in cash equal to one-half of the
amount of Completion Costs paid to Techniclone under Section 12.02(f); (ii) the
royalty payable by Techniclone or such acquirer to Schering shall be paid on the
terms (except for the royalty rate) set forth in Sections 6.02 through 6.06 for
the payment of the royalty from Schering to Techniclone; and (iii) Techniclone
shall contractually obligate any acquirer of all or substantially all of the
shares or assets of Techniclone to abide by the terms of this Agreement,
including without limitation this Section 12.02(i).

     Section 12.03 SURVIVING RIGHTS. The rights and obligations set forth in
this Agreement shall extend beyond the term or termination of the Agreement only
to the extent expressly provided for herein, or the extent that the survival of
such rights or obligations are necessary to permit their complete fulfillment or
discharge.

                                  ARTICLE XIII
                                 INDEMNIFICATION
                                 ---------------

     Section 13.01 INDEMNIFICATION. With respect to the Product (determined on a
country by country basis):

                  (a) Except as provided in Article 13.01(b) and in the
exception specified below, Schering hereby agrees to save, defend and hold
Techniclone and its directors, officers, agents and employees harmless from and
against any and all suits, claims, actions, demands, liabilities, expenses
and/or losses, including reasonable legal expenses and attorneys' fees
(collectively, "LOSSES"), resulting from the commercial sale of the Product
except to the extent such Losses result from the negligence or willful
misconduct of Techniclone or a breach by Techniclone of any warranty, covenant
or obligation under Article VII, in which case Techniclone hereby agrees to
save, defend and hold Schering and its directors, officers, agents and employees
harmless from any and all such Losses.

                  (b) Except as provided in Article 13.01(a), Schering and
Techniclone hereby agree to save, defend and hold the other Party and its
directors, officers, agents and employees harmless from and against any and all
Losses resulting directly from the Development of the Product to the extent such
Development was performed by such Party except to the extent such Losses result
from the negligence or willful misconduct of the other Party, in which case such
Party hereby agrees to save, defend and hold the other Party and its agents and
employees harmless from any and all such Losses.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       41

<PAGE>

                  (c) Each indemnified Party agrees to give the indemnifying
Party prompt written notice of any Loss or discovery of fact upon which such
indemnified Party intends to base a request for indemnification under Sections
13.01(a) or (b). Each Party shall furnish promptly to the other copies of all
papers and official documents received in respect of any Loss. With respect to
any Loss relating solely to the payment of money damages and which will not
result in the indemnified Party becoming subject to injunctive or other relief
or otherwise adversely affecting the business of the indemnified Party in any
manner, and as to which the indemnifying Party shall have acknowledged in
writing the obligation to indemnify the indemnified Party hereunder, the
indemnifying Party shall have the sole right to defend, settle or otherwise
dispose of such Loss, on such terms as the indemnifying Party, in its sole
discretion, shall deem appropriate. The indemnifying Party shall obtain the
written consent of the indemnified Party, which shall not be unreasonably
withheld or delayed, prior to ceasing to defend, settling or otherwise disposing
of any Loss if as a result thereof the indemnified Party would become subject to
injunctive or other equitable relief, or any remedy other than the payment of
money which is the responsibility of the indemnifying Party. The indemnifying
Party shall not be liable for any settlement or other disposition of a Loss by
the indemnified Party which is reached without the written consent of the
indemnifying Party. The reasonable costs and expenses, including reasonable fees
and disbursements of counsel incurred by any indemnified Party in connection
with any Loss, shall be reimbursed on a quarterly basis by the indemnifying
Party, without prejudice to the indemnifying Party's right to contest the
indemnified Party's right to indemnification and subject to refund in the event
the indemnifying Party is ultimately held not to be obligated to indemnify the
indemnified Party.

                                       42

<PAGE>

                                  ARTICLE XIV
                                  MISCELLANEOUS
                                  -------------

     Section 14.01 ASSIGNMENT. Schering may assign any of its rights or
obligations under this Agreement in any country to any of its Affiliates or to
any sublicensee as provided in Section 2.01; PROVIDED, HOWEVER, that such
assignment shall not relieve Schering of its responsibilities for performance of
its obligations under this Agreement.

                  (b) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties. Any assignment
not in accordance with this Agreement shall be void.

     Section 14.02 RETAINED RIGHTS. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development and to
market products using such Party's technology other than as herein expressly
provided.

     Section 14.03 FURTHER ACTIONS. Each Party agrees to execute, acknowledge
and deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

     Section 14.04 NO TRADEMARK RIGHTS. Except as otherwise provided herein, no
right, express or implied, is granted by the Agreement to use in any manner the
name "Schering," "Schering," or "Techniclone" or any other trade name or
trademark of the other Party or its Affiliates in connection with the
performance of the Agreement.

     Section 14.05 NOTICES. All notices hereunder shall be in writing and shall
be deemed given if delivered personally or two days after mailed by registered
or certified mail (return receipt requested), postage prepaid, or sent by
express courier service, to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice; PROVIDED that
notices of a change of address shall be effective only upon receipt thereof).

                  (a) If to Techniclone:

                           President
                           Techniclone Corporation
                           14282 Franklin Avenue
                           Tustin, CA  92680

                           With a copy to:

                           Rutan & Tucker, LLP
                           611 Anton Boulevard
                           Suite 1400
                           Costa Mesa, CA 92626
                           Attention:  Thomas J. Crane

                                       43

<PAGE>

                  (b)  If to Schering:

                           Schering Aktiengesellschaft
                           13342 Berlin
                           Germany
                           Attention: Head of Oncology SBU

                           With a copy to:

                           Schering Aktiengesellschaft
                           13342 Berlin
                           Germany
                           Attention: Legal Department

                           With a copy to:

                           Brobeck, Phleger & Harrison LLP
                           One Market
                           Spear Street Tower
                           San Francisco, CA 94105
                           Attention:  Michael J. Kennedy

     Section 14.06 WAIVER. Except as specifically provided for herein, the
waiver from time to time by either of the Parties of any of their rights or
their failure to exercise any remedy shall not operate or be construed as a
continuing waiver of same or any other of such Party's rights or remedies
provided in this Agreement.

     Section 14.07 SEVERABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstances shall, to any
extent or in any country, be held to be invalid or unenforceable, then (i) the
remainder of this Agreement, or the application of such term, covenant or
condition to Parties or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby and each other
term, covenant or condition of this Agreement shall be valid and be enforced to
the fullest extent permitted by law; and (ii) the Parties hereto covenant and
agree to renegotiate any such term, covenant or application thereof in good
faith in order to provide a reasonably acceptable alternative to the term,
covenant or condition of this Agreement or the application thereof that is
invalid or unenforceable, it being the intent of the Parties that the basic
purposes of this Agreement are to be effectuated.

     Section 14.08 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not
be construed against any Party, irrespective of which Party may be deemed to
have authored the ambiguous provision.

                                       44

<PAGE>

     Section 14.09 GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of New York as applied to contracts
entered into and performed entirely in New York by New York residents.

     Section 14.10 HEADINGS. The sections and paragraph headings contained
herein are for the purposes of convenience only and are not intended to define
or limit the contents of said sections or paragraphs.

     Section 14.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (and by facsimile), each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

     Section 14.12 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, including all
Exhibits attached hereto and thereto, and all documents delivered concurrently
herewith and therewith, set forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto and supersede and terminate all prior agreements and understandings
between the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties. This Agreement, including without limitation
the exhibits, schedules and attachments thereto, are intended to define the full
extent of the legally enforceable undertakings of the Parties hereto, and no
promise or representation, written or oral, which is not set forth explicitly
herein or therein is intended by either party to be legally binding. Both
Parties acknowledge that in deciding to enter into the Agreement and to
consummate the transaction contemplated hereby neither has relied upon any
statement or representations, written or oral, other than those explicitly set
forth herein.

     Section 14.13 EXPENSES. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, travel, lodging, meals and
entertainment incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.

     Section 14.14 INDEPENDENT CONTRACTORS. The status of the Parties under this
Agreement shall be that of independent contractors. Neither Party shall have the
right to enter into any agreements on behalf of the other Party, nor shall it
represent to any person that it has any such right or authority. Nothing in this
Agreement shall be construed as establishing a partnership or joint venture
relationship between the Parties. This Agreement is not intended to be a
partnership between Techniclone and Schering for federal, state or local income
tax purposes.

                                       45

<PAGE>

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

                                  TECHNICLONE CORPORATION

                                  By:    \S\ LARRY O. BYMASTER
                                     -------------------------------------------
                                  Name:  LARRY O. BYMASTER
                                  Title:  PRESIDENT & CHIEF EXECUTIVE  OFFICER

                                  SCHERING AG

                                  By:  \S\ G. STOCK
                                     -------------------------------------------
                                  Name:  PROF. G. STOCK
                                  Title:  MEMBER OF EXECUTIVE BOARD OF DIRECTORS

                                  By:   \S\ J. F. KAPP
                                     -------------------------------------------
                                  Name:  DR. J. F. KAPP
                                  Title:  HEAD OF STRATEGIC BUSINESS UNIT,
                                          THERAPEUTIC

                                       46

<PAGE>

                                   EXHIBIT A-1
                               TECHNICLONE PATENTS

1.       [...***...] issued [...***...]; [...***...], "[...***...]."

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                   EXHIBIT A-2

                  THIRD PARTY AGREEMENTS (EXCLUDING LICENSES)
                   ------------------------------------------

None.

                                       47

<PAGE>

                                    EXHIBIT B
                           DEVELOPMENT PLAN AND BUDGET

The following information reflect estimates only, which are not binding. The
following information is based upon current assumptions by Techniclone and is
subject to change by the Joint Development Committee (JDC) and if the
assumptions made in this document are not realized.

CLINICAL PLAN

Phase III Study Design:

The plan is for an open-label, non-randomized, multi-center, single 1311Lym-1
dose-level study in subjects with intermediate- or high-grade B-cell
Non-Hodgkin's lymphoma who have relapsed following [...***...] courses of
intensive multi-drug chemotherapy. Tumor tissue from the subjects must be
positive for Lym-1 by histology and/or localization of radioactivity with an
imaging study. Ninety subjects will be treated at up to 16 study sites. (A
subject is considered to be evaluable if he/she has received at least one course
of treatment and has had their indicator lesions measured on an x-ray CT scan
performed 4 weeks after this treatment). An imaging analysis will be performed
prior to initiation of therapy to quantitatively assess the uptake of the
radiolabeled Lym-1 antibody. All subjects who qualify for the treatment phase of
the protocol after imaging will receive therapeutic treatment with two (2) doses
of [...***...], unless: 1) the tumor progresses or 2) toxicity precludes
completion of dosing. Treatment doses will be administered at 6-week intervals
or when hematologic indices are acceptable per the protocol. The primary
endpoint in this trial will be the incidence of overall response (CR + PR), as
determined by an independent reviewer assessed across all measurable lesions. An
overall response rate of >35% will be considered evidence of efficacy. Duration
of response and survival will be the secondary endpoints.

The Parties envisage commencement of the Phase III Clinical Trial no later than
[...***...], by which date sufficient quantities of Antibody, Product and
Packaged Product of appropriate quality will be available to begin and proceed
with all reasonable diligence with and complete the Phase III Clinical Trial.

TOTAL CLINICAL TRIAL COSTS (ESTIMATED) - $[...***...]

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       48

<PAGE>

CMC MANUFACTURING

Techniclone plans to manufacture antibody at the Techniclone facility in Tustin
CA. Transition to a commercial contract facility (e.g. Schering, Lonza or
Covance) will commence at least [...***...] prior to exceeding maximum capacity
at the Techniclone facility (based upon Schering forecasts). The plan calls for
the commercial scale antibody to be available no later than [...***...] with the
following timetable/assumptions:

1. Process issues and yield optimization complete - [...***...]
2. Begin conformance lot runs - [...***...]
3. End conformance lot runs - [...***...]
4. Short term stability (last lot) - [...***...]
5. BLA submission - [...***...]

TOTAL CMC SCALEUP COSTS INCLUDING ADDITIONAL CAPITAL EQUIPMENT AND MANPOWER
(ESTIMATED) - $[...***...]

Techniclone's projections for product assume the in-house antibody production
will accommodate from [...***...] to [...***...] treatments per year depending
upon the final yield optimization. This projection does not include building
antibody inventory based on the known 2-year stability of the LYM-1 drug
substance.

RADIOLABELING

Techniclone plans on contracting with MDS Nordion (Ottawa) for manufacture and
distribution of the final Iodine-131 labeled drug product (Oncolym(R)).

The following milestones assume BLA submission in the United States in
[...***...].

1. Finalize commercial process including scale up - [...***...]
2. Finalize facility design at Nordion - [...***...]
3. Begin facility construction - [...***...]
4. Complete facility and commission - [...***...]

TOTAL RADIOLABELING SCALEUP COSTS (ESTIMATED) - $[...***...]

PRICING ESTIMATES

1.       Antibody manufacture will produce [...***...]/run in 300L reactor.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       49

<PAGE>

2.       Nordion will radiolabel [...***...] vials per batch run.

3.       The amount of unused radiolabeled vials per batch (scrap) will decrease
         as sales volume increases to the level necessary to utilize the batch
         yield.

4.       The radiolabeling facility has associated fixed costs; as volume
         increases the cost per batch is reduced thus lowering cost per dose.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       50

<PAGE>

                                    EXHIBIT C

                              THIRD PARTY LICENSES
                              --------------------

License Agreement dated June 12, 1985 by and between Northwestern University and
Techniclone ("[...***...]" (NU 8314-A) only).

Agreement dated October 28, 1992 by and among Techniclone, Cancer Biologics,
Inc. and American Cyanamid.

Termination and Transfer Agreement dated as of November 14, 1997 by and between
Techniclone and Alpha Therapeutic Corporation.

Option Agreement dated October 23, 1998 by and between Techniclone and
Biotechnology Development, Ltd., as amended.

Option Agreement dated February 29, 1996 by and between Techniclone and
Biotechnology Development Limited.

Distribution Agreement dated as of February 29, 1996 by and between
Biotechnology Development, Ltd. and Techniclone.

[...***...] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

                                       51

<PAGE>

                                                                     Page 1 of 3
                                    EXHIBIT D

                                 VTA TERM SHEET

1.         Techniclone will grant Schering exclusive worldwide rights to
           develop, manufacture, market and sell products for all human and
           animal diagnostic, therapeutic and preventative indications under all
           Techniclone patents, know-how and other technology relating to the
           VTA Technology. Techniclone will maintain (administratively and
           financially) all of its third party licenses to the VTA Technology
           licensed to Schering by Techniclone existing as of the execution of
           the VTA Agreement (defined below). If any additional third party
           licenses are needed to ensure that Techniclone has licenses to all
           necessary patents covering the VTA Technology, Techniclone shall be
           responsible (administratively and financially) for obtaining such
           third party licenses. Any additional third party licenses needed to
           manufacture or market any product developed by Schering from the VTA
           Technology licensed by Techniclone to Schering are the responsibility
           (administratively and financially) of Schering.

2.         Up front payment of $3 million ( any future credits under Section
           2.04 of Oncolym License Agreement will not be applicable to off-set
           this initial $3 million payment, Schering's equity investment or
           more than $1.5 million of the milestone in Point 5; the remaining
           credit can be taken against all other payments due from Schering to
           Techniclone under the VTA Agreement) upon execution of Development &
           License Agreement between Schering and Techniclone Corporation for
           Techniclone's Vascular Targeting Agents ("VTA Agreement").

3.         Schering makes an equity investment in Techniclone at execution of
           VTA Agreement of $6 million at 10% price premium to
           market (where "market" is equal to the average closing sales price of
           Techniclone stock during the ten (10) trading days preceding the
           execution of the VTA Agreement). Schering shall have the right to one
           board seat or, at Schering's option the right to appoint one board
           observer who will be allowed to attend board meetings and receive all
           information given to board members. In the event of a conflict of
           interest, the Schering board member/observer will not participate or
           be given sensitive information.

4.         Schering funds 100% of all research and development expenses
           associated with VTA up to filing of IND, including Dr. Phil Thorpe's
           continuing program at the University of Maine.

                                       52

<PAGE>

                                                                     Page 2 of 3

5.         $5 million milestone payment for first IND filed. If IND is not
           filed within 24 months after execution of agreement, and such
           failure to file is not due to circumstances beyond the control of
           Schering, then Techniclone has the option of having the rights revert
           back OR be paid $5 million by Schering.

6.         Schering funds 100% of all development, clinical expenses and
           intellectual property expenses including 100% of all
           CMC/manufacturing expenses for clinical study drug and
           commercialization.

7.         Milestone payments paid at proof of concept point as follows:

           a.         $2 million paid at commencement of Phase II (dosing of
                      first patient).
           b.         $10 million paid at commencement of Phase III (dosing of
                      first patient).

8.         One time $7 million milestone payment paid upon first BLA
           acceptance for filing in U.S., Europe or Japan.

9.         Milestone payments paid at market approval and first commercial sale
           ( but in no event more than six months following market approval) as
           follows:

           a.         $12 million for US.
           b.         $12 million for Europe.
           c.         $10 million for Japan

10.        Royalty rate of 12% on worldwide Schering net sales of all
           VTA products for as long as there is at least one valid and
           enforceable Techniclone patent claim covering the product, or
           10 years from first commercial sale, whichever is longer, to
           be determined on a country-by-country basis. After completion of the
           royalty term in each country, Schering shall have a fully paid up,
           perpetual royalty-free license to Techniclone know-how. If there is
           no patent coverage in a country and generic competition enters the
           market during the royalty term, then for the duration of the royalty
           term the royalty rate will be 6% in such country.

11.        Schering will be responsible for manufacturing or having manufactured
           Schering's requirements of clinical supplies and commercial Product
           at Schering's expense.

12.        Schering will be responsible for design of the clinical development
           plan and conducting all clinical studies needed for approval.

                                       53

<PAGE>

                                                                     Page 3 of 3

13.        Schering shall assemble, file and own all INDs and applications for
           regulatory approval. Schering will seek approval in the countries in
           which it believes it to be commercially reasonable to do so.

14.        Indications to be developed to be at the sole discretion of Schering.

15.        Termination rights of Schering.

           - At the end of any phase of clinical research prior to paying the
           milestone due at the beginning of the next phase;

           - Entire VTA Agreement or on a country -by-country basis at any time
           without cause on 90 days advance notice;

           - Effect of termination by Schering: license all VTA rights back to
           Techniclone, including transfer of all data specifically relating to
           the VTA Technology and generated by Schering in the course of its
           activities under the VTA Agreement up to date of termination;
           [...***...] royalty to Schering if returned product marketed by
           Techniclone or licensee until Schering milestone payments (excluding
           any equity investments) paid for the respective country recouped. In
           the case of Europe, milestone will be allocated as a fraction of a
           particular country population (i.e., Germany, France) to total Europe
           population.

16.        Termination rights of both parties: material breach (preceded by a
           cure period); insolvency of the other party.

17.        This term sheet is binding on Techniclone for thirty (30) days
           following execution of the Oncolym License Agreement.

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