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                                                                    Exhibit 10.7








                        SINGLE TENANT ABSOLUTE NET LEASE





                            Dated: December 20, 1999



                                     Between



                           10165 MCKELLAR COURT, L.P.,
                        A CALIFORNIA LIMITED PARTNERSHIP

                                   (LANDLORD)



                                       and



                               QUIDEL CORPORATION,
                             A DELAWARE CORPORATION


                                    (TENANT)







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                               SINGLE TENANT LEASE



         This SINGLE TENANT ABSOLUTE NET LEASE ("LEASE") is made as of December
20, 1999 ("EFFECTIVE DATE"), between 10165 McKELLAR COURT, L.P., a California
limited partnership ("LANDLORD"), and QUIDEL CORPORATION, a Delaware corporation
("TENANT"), who agree as follows:

                                    RECITALS:

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

         A. Landlord is the owner of the real property commonly known as 10165
McKellar Court, San Diego, California, and more particularly described on
Exhibit "A" attached hereto ("LAND"), upon which Land is a building of
approximately 72,863 square feet ("BUILDING"). The Land and the Building may
hereafter be referred to collectively as the "PREMISES."

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

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

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

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

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

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

                  1.5 "LEASE COMMENCEMENT DATE" shall be the Effective Date.


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

                  1.7 "LENDER" shall mean any lender whose loan is secured by a
deed of trust on any part of the Premises.

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

                  1.9 "SECURITY DEPOSIT" shall be $100,000.00.

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

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

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

         2.       FUNDAMENTAL LEASE PROVISIONS.

                  Initial Lease Term:   15 years from Lease Commencement Date

                  Monthly Rent:         Initially $121,462.62, subject to annual
                                        adjustments pursuant to Paragraph 5

                  Security Deposit:     $100,000.00


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                   Address for Notices:

                         To Landlord:       10165 McKELLAR COURT, L.P.
                                            c/o Bernardo Property Advisors, Inc.
                                            11440 W. Bernardo Court, Suite 208
                                            San Diego, California  92127

                         With a copy to:    David J. Dorne, Esq.
                                            SELTZER CAPLAN WILKINS &
                                            McMAHON 750 B Street, Suite 2100
                                            San Diego, California 92101

                         To Tenant:         QUIDEL CORPORATION
                                            10165 McKellar Court
                                            San Diego, California  92121
                                            Attention:  Charles J. Cashion

                         With a copy to:    Teresa Farrell, Esq.
                                            GIBSON DUNN & CRUTCHER
                                            Jamboree Plaza, 4 Park
                                            Plaza Irvine, California
                                            92614-2127

         In the event of any conflict between any Fundamental Lease Provision
and the balance of this Lease, the latter shall control.

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

         4.       TERM.

                  4.1 LEASE TERM. The initial Lease Term shall begin as of the
Lease Commencement Date and shall continue until fifteen (15) years after the
Lease Commencement Date unless sooner terminated or renewed as provided in this
Lease. Provided that no Default has occurred and is continuing at the time
Tenant elects to extend the Lease Term, Tenant, at its sole option, may extend
the Lease Term for two (2) additional periods of five (5) years each
(individually, an "EXTENSION PERIOD"), subject to all the provisions of this
Lease. All references in this Lease to "LEASE TERM" shall be considered to
include both the initial term of this Lease and any properly executed Extension
Period, and all references to termination or to the end of the Lease Term shall
be considered to mean the termination or end of the initial term of this Lease
or any exercised Extension Period, as the case may be.

                  4.2 PROCEDURE TO EXTEND TERM. Tenant may exercise its option
with respect to the Extension Period by complying with the following procedure:
At least one year before the last day of the Lease Term (the "EXERCISE PERIOD"),
Tenant shall deliver


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written notice to Landlord setting forth Tenant's irrevocable election to
exercise the option to extend. Extension Periods are not assignable separate and
apart from this Lease.

                  4.3 TENANT'S DEFAULT. Notwithstanding the foregoing, if a
Default has occurred and is continuing at the time Tenant elects to extend the
Lease Term, Tenant shall have no right to extend the Lease Term as herein
provided, and Landlord shall be free to lease the Premises to any other party or
parties. Furthermore, nothing in this Paragraph 4.3 shall increase or extend the
Exercise Period.

         5.       RENT; SECURITY DEPOSIT.

                  5.1      MONTHLY RENT.

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

                           5.1.2 Upon the Lease Commencement Date, Tenant shall
pay to Landlord the Rent due and payable for the first full calendar month of
the Lease Term. If the Lease Commencement Date is not on the first day of a
calendar month, Tenant shall pay to Landlord the prorated Rent for the first
partial month of the Lease Term.

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

                           5.1.4 The initial Monthly Rent shall be $121,462.62.
Effective each year during the Lease Term (including any Extension Period) on
the anniversary of the first day of the calendar month following the month in
which the Lease Commencement Date occurs (the "ADJUSTMENT DATE"), Monthly Rent
shall be increased by two percent (2%) of its then current amount.

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


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costs and expenses relating to the Premises, except as otherwise expressly
provided under this Lease.

                  5.3 LATE PAYMENT. If Tenant shall fail to pay, when the same
is due and payable (after giving effect to any applicable notice and cure
period), any Rent, such unpaid amounts shall bear interest at the Default Rate
from the date due to the date of payment. Tenant further acknowledges that late
payment of Monthly Rent will cause Landlord to incur certain costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impractical to determine with certainty. For this reason, in
addition to interest, if Tenant shall fail to pay (which for purposes of this
paragraph, "pay" shall mean actual receipt of the payment by Landlord) any
installment of Monthly Rent by the tenth day of the calendar month for which
such installment is due, a late charge equal to six percent (6%) of the overdue
installment of Monthly Rent automatically shall be due without further notice,
and shall be in addition to all other sums due. The Parties agree that this
additional late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant.

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

                  5.5 PAYMENT OF SECURITY DEPOSIT. Concurrently with the
execution of this Lease, Tenant shall deliver to Landlord the Security Deposit.
This amount shall be deposited by Landlord into a segregated, interest-bearing
bank account (with interest accruing for the benefit of Tenant) in a federally
insured bank or savings institution, and shall be held for the faithful
performance of all of the provisions and conditions of this Lease to be kept and
performed by Tenant hereunder.

                  5.6 USE OF SECURITY DEPOSIT. During the continuance of a
Default hereunder, Landlord may use or retain all or any part of the Security
Deposit for the payment of any Monthly Rent or any other sum in default, or for
the payment of any amount which Landlord may spend or become obligated to spend
by reason of Tenant's Default. Landlord also may apply the Security Deposit
toward costs incurred to repair damages to the Premises or to clean the Premises
upon termination of this Lease. If any portion of the Security Deposit is so
applied or used prior to termination of this Lease, Tenant shall, within five
(5) days after written notice thereof, deposit an additional amount with
Landlord sufficient to restore the Security Deposit to the amount set forth
above, and Tenant's failure to do so shall constitute a breach of this Lease. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by Tenant, the Security Deposit (including interest thereon), or the
balance thereof, shall be returned to Tenant (or, at Landlord's option to the
last assignee of Tenant's interest hereunder) at the expiration of the Lease,
subject to the provisions of Paragraph 27.


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         6.       USE.

                  6.1 POSSESSION AND USE. Landlord shall deliver possession of
the Premises to Tenant as of the Lease Commencement Date. During the Lease Term,
the Premises and every part thereof shall be kept by the Tenant in a clean and
wholesome condition, free of any noises or activities which constitute any
nuisance. Tenant shall comply with all Applicable Law in all respects and at all
times during the Lease Term.

                  6.2 PERMITTED USE. Tenant shall use the Premises for the
purposes of biological, chemical and medical research and development use and
related manufacturing, warehouse and distribution use and administrative office
use (and only for such purposes) (the "PERMITTED USE"). Tenant shall keep the
Premises in a neat, clean and orderly condition.

         7.       TAXES ON PREMISES.

                  7.1 PAYMENT OF REAL PROPERTY TAXES. Commencing with the Lease
Commencement Date and continuing for each calendar year, or tax year at
Landlord's option (such "tax year" being a period of twelve (12) consecutive
calendar months for which the applicable taxing authority levies or assesses
Taxes), for the balance of the Lease Term, Tenant shall pay to Landlord the
amount of all Taxes levied and assessed for any such year upon the Premises.
Such sum for any partial year of the Lease Term shall be prorated on the basis
of the number of days of such partial year. Payment shall be made in the
following manner: Tenant shall pay to Landlord the amount of all Taxes levied
and assessed upon the Premises including improvements and the underlying realty
for any calendar year, or at Landlord's option any tax year, within thirty (30)
days after Landlord gives notice to Tenant of the amount of such Taxes payable
by Tenant (or not less than 20 days prior to delinquency, whichever is later).
Landlord also shall provide Tenant with a copy of the applicable Tax bill or Tax
statement from the taxing authority. Notwithstanding the foregoing, if
applicable law allows such Taxes to be paid in installments, then Tenant may
make such payments to Landlord in installments, provided that each such
installment shall be payable to Landlord not less than fifteen (15) days prior
to the date upon which payment of the applicable installment to the taxing
authority becomes delinquent. In addition to any other amounts due from Tenant
to Landlord, if Tenant fails to pay the Taxes to Landlord as herein required,
Tenant shall pay to Landlord the amount of any interest, penalties or late
charges imposed for late payment. Notwithstanding anything to the contrary
herein except Paragraph 7.4, so long as Tenant is not in Default hereunder,
Tenant shall pay all Taxes directly to the appropriate taxing authority under
the same manner and subject to the provisions set forth in this Paragraph 7.1
(as if the governmental authority were "Landlord"). Tenant shall provide to
Landlord verification (reasonably acceptable to Landlord) of said payment within
five (5) days of payment.

                           7.1.1 If the Premises are separately assessed, Tenant
shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of Taxes, any special assessment, or the
validity of any Taxes or of any change in assessment or tax rate; provided,
however, that prior to any such challenge


<PAGE>


Tenant must either (a) pay the taxes alleged to be due in their entirety and
seek a refund from the appropriate authority, or (b) post bond in an amount
sufficient to insure full payment of the Taxes. In any event, upon a final
determination with respect to such contest or protest, Tenant shall promptly pay
all sums found to be due with respect thereto. In any such protest or contest,
Tenant may act in its own name, and at the request of Tenant, Landlord shall
cooperate with Tenant in any way Tenant may reasonably require in connection
with such contest or protest, including signing such documents as Tenant
reasonably shall request, provided that such cooperation shall be at no expense
to Landlord and shall not require Landlord to attend any appeal or other
hearing. Any such contest or protest shall be at Tenant's sole expense, and if
any penalties, interest or late charges become payable with respect to the Taxes
as a result of such contest or protest, Tenant shall pay the same.

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

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

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

                  7.4 TAX AND INSURANCE ESCROWS. To the extent Landlord is
required by Lender, Tenant shall timely pay all tax and insurance impound
payments due on the Premises.

         8.       CONDITION OF PREMISES.

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

                  8.2 NO WARRANTIES. Landlord has not made and makes no
representations or warranties to Tenant of any kind regarding the Premises,
including, without limitation, any representation or warranty regarding the
physical condition of the


<PAGE>


Premises, its suitability for Tenant's intended use, or the availability of
utilities or sewer to the Premises.

         9.       ALTERATIONS AND IMPROVEMENTS.

                  9.1 CONSTRUCTION REQUIREMENTS. Any alterations or improvements
to the Premises of any kind by Tenant, the cost of which exceeds $150,000 or
which materially alters, affects, or modifies Building systems (including,
without limitation, mechanical, electrical, plumbing, or HVAC systems),
structural components, or the exterior of the Building shall be subject to
satisfaction of each of the following conditions:

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

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

                           9.1.3 INSURANCE. Tenant shall deliver to Landlord
certificates of insurance evidencing that Tenant or the general contractor has
obtained builder's all-risk risk insurance in an amount not less than
$3,000,000. Tenant also shall deliver to Landlord evidence of worker's
compensation insurance coverage for all persons employed in connection with the
construction and with respect to whom death or personal injury claims could be
asserted against Landlord or the Premises. Tenant also shall deliver to Landlord
evidence that Tenant has paid or caused to be paid all premiums for the
insurance described in this paragraph. Tenant shall maintain or cause to be paid
all premiums required to maintain and keep in force all insurance described in
this paragraph at all times during which the construction is in progress.

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

                           9.1.5 NOTICE OF CONSTRUCTION; MECHANICS' LIENS.
Landlord and its representatives shall have the right to go upon and inspect the
Premises at all reasonable times upon reasonable prior notice and shall have the
right to post and keep posted thereon notices of nonresponsibility, or such
other notices which Landlord may


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deem to be proper for the protection of Landlord's interest in the Premises;
provided, however, that such rights shall not unreasonably interfere with
Tenant's use or possession of the Premises. Before the commencement of any work
which might result in any lien, Tenant shall give to Landlord written notice of
its intention to do so in sufficient time to enable the posting of such notices.
Subject to Tenant's right to contest any Claim or lien, Tenant shall keep the
Premises and the Building free and clear of any and all liens and encumbrances
which may arise at any time in connection with the improvement of the Premises
by Tenant or its agents and contractors. Subject to Tenant's right to contest
any Claim or lien, Tenant shall pay and discharge all expenses incurred by
Tenant for the services of mechanics and for the cost of goods and materials
supplied by materialmen, and Tenant shall indemnify and hold harmless Landlord
and the Premises from and against any Claims by such mechanics or materialmen
for labor or services performed or goods supplied at the request of Tenant.
Furthermore, subject to Tenant's right to contest any Claim or lien, Tenant
shall, at its cost and expense, remove all such mechanics liens by bond or
otherwise within twenty (20) working days after the filing thereof. If Tenant
desires to contest any Claim or lien, it shall be entitled to do so on the
condition that Tenant first shall either (1) furnish Landlord a bond of a
responsible corporate surety approved by Landlord in such amount as is
sufficient to cause discharge of the lien of record, and conditioned on the
discharge of the lien, or (2) furnish Landlord with other assurances
satisfactory to Landlord that Landlord will be protected from the effect of such
Claim or lien. If a final judgment establishing the validity or existence of a
lien for any amount is entered, Tenant shall pay and satisfy the same at once.
If Tenant shall not have paid, as and when required by this Paragraph 9.1.5, any
charge for which a mechanic's lien claim and suit to foreclose the lien have
been filed, or if Tenant shall not have given Landlord security to protect the
Premises and Landlord against such Claim or lien as required by this Paragraph
9.1.5, Landlord, upon five (5) days' notice to Tenant, may (but shall not be
required to) pay said lien or Claim including any costs, in which event the
amount so paid, together with reasonable attorneys' fees incurred in connection
therewith, shall be immediately due and owing from Tenant to Landlord. Tenant
shall pay the same to Landlord together with interest on the full amount thereof
at the Default Rate from the date of Landlord's payment until paid. If any
Claims or liens are filed against the Premises or, if any action affecting title
to the Premises is commenced, the party receiving notice of such lien or action
shall forthwith give the other party written notice thereof.

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

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


<PAGE>


                           9.1.8 OWNERSHIP OF IMPROVEMENTS. All improvements and
fixtures (excluding Tenant's trade fixtures and the items listed on EXHIBIT "D"
attached hereto) existing on the Premises as of the Effective Date, including
(without limiting the generality of the foregoing) all wallcover, carpeting,
flooring, built-in cabinet work, paneling and the like, all electrical,
mechanical, and plumbing equipment and related ducts, shafts, and conduits, all
exterior venting fume hoods, walk-in freezers and refrigerators, clean-rooms,
climatized rooms, and electrical panels shall be the property of Landlord and
shall remain upon, and be surrendered with the Premises, as a part thereof, at
the end of the Lease Term. In the event that Tenant desires to make any
alterations, additions or improvements upon the Premises during the Lease Term,
Tenant shall submit to Landlord proposed final plans therefor, together with a
request (the "Identification Notice") that Landlord identify to Tenant in
writing which of the proposed alterations, additions or improvements Landlord
elects to remain property of Tenant to be removed by Tenant at the end of the
Lease Term (each a "Tenant-Owned Alteration"). If Landlord fails to respond in
writing to the Identification Notice (or fails to designate in writing a
proposed alteration, addition or improvement as a Tenant-Owned Alteration)
within fifteen (15) days after Landlord's receipt of the Identification Notice,
then Landlord shall be deemed to have elected to have any proposed alteration,
addition or improvement not expressly designated as a Tenant-Owned Alteration
within such fifteen (15) day period become property of Landlord (each a
"Landlord-Owned Alteration"). If Tenant thereafter elects to make such proposed
alterations, additions or improvements, then (a) all Landlord-Owned Alterations
shall become property of Landlord and shall remain upon, and be surrendered
with, the Premises, as a part thereof, at the end of the Lease Term, and (b) all
Tenant-Owned Alterations shall remain the property of Tenant and shall be
removed by Tenant at or prior to the end of the Lease Term. Tenant shall repair
all damage resulting from its removal of Tenant-Owned Alterations, and restore
the affected area to the condition existing prior to installation of
Tenant-Owned Alterations. Nothing in the foregoing shall be construed to imply
that Tenant's Equipment or other property of Tenant may become the property of
Landlord. All articles of personal property, business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the term of
this Lease, provided that removal of the same shall not materially affect or
damage the Building's electrical, mechanical, or plumbing systems. Any items of
Tenant's improvements which are paid for by Landlord shall belong to Landlord
and shall not be regarded as paid for by Tenant. If Tenant shall fail to remove
all of its effects from the Premises upon termination of this Lease for any
cause whatsoever, Landlord, at its option, upon written notification to Tenant,
may remove the same in any manner that Landlord shall choose and store said
effects without liability to Tenant for loss thereof. In such event, Tenant
agrees to pay Landlord upon demand any and all expenses reasonably incurred in
such removal, including court costs and reasonable attorneys' fees and storage
charges on such effects, for any length of time that the same shall be in
Landlord's possession. If Tenant shall fail to remove all of its effects from
the Premises upon termination of this Lease, Landlord, at its option, without
notice, may sell said effects, or any of the same, at private sale and without
legal process, for such price as Landlord may obtain and apply the proceeds of
such sale upon the amounts


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due under this Lease from Tenant to Landlord and upon the expense incident to
the removal and sale of said effects.

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

         10.      UTILITIES AND SERVICES.

                  10.1. TENANT'S RESPONSIBILITY. Tenant shall be responsible for
bringing all utility and other services to the Premises, at Tenant's sole cost
and expense. All such utility services shall be separately metered, and Tenant
shall pay all costs therefor, including, without limitation, connection charges
and billing deposits. Tenant shall pay (directly to the provider and prior to
delinquency) for all water, gas, electricity, sewer, telephone, cable television
and other utilities which may be furnished to the Premises during the term of
this Lease.

                  10.2 LANDLORD NOT RESPONSIBLE. Landlord shall not be liable in
damages or otherwise for any failure or interruption of any utility service or
other services being furnished the Premises, and no such failure or interruption
shall entitle Tenant to terminate this Lease, abate Rent, or be relieved from
any obligation or the operation of any covenant or agreement under this Lease.

         11.      MAINTENANCE AND REPAIRS.

                  11.1     MAINTENANCE AND REPAIR OF THE PREMISES.

                           11.1.1 Tenant, at its sole cost and expense, shall
maintain and keep the Premises, all improvements thereon, and all appurtenances
thereto, including but not limited to sidewalks, parking areas, curbs, roads,
driveways, lighting standards, landscaping, sewers, water, gas and electrical
distribution systems and facilities, drainage facilities, and all signs, both
illuminated and non-illuminated that are now or hereafter on the Premises, in
good condition and in a manner consistent with the Permitted Use. Tenant shall
make all repairs, replacements and improvements including, without limitation,
all structural, roof, HVAC, plumbing, and electrical repairs, replacements and
improvements required and shall keep the same free and clear from all rubbish
and debris. All repairs made by Tenant shall be at least equal in quality to the
original work, shall be made only by a licensed, bonded contractor approved in
advance by Landlord; provided, however, that such contractor need not be bonded
or approved by Landlord if the non-structural alterations, repairs, additions or
improvements to be performed do not exceed Twenty-Five thousand Dollars
($25,000) in value. Landlord may impose reasonable restrictions and requirements
with respect to such repairs. Tenant shall not take or omit to take any action,
the taking or omission of which shall cause waste,


<PAGE>


damage or injury to the Premises. Tenant shall indemnify, defend (by legal
counsel acceptable to Landlord) and hold harmless Landlord from and against any
and all Claims arising out of the failure of Tenant or Tenant's Agents to
perform the covenants contained in this paragraph. "Tenant's Agents" shall be
defined to include Tenant's officers, employees, agents, contractors, invitees,
customers and subcontractors.

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

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

                           11.1.4 Tenant hereby waives any applicable law,
statute, or ordinance relating to a landlord's duty to maintain the Premises in
a tenantable condition, and all other rights of Tenant under any law, statute or
ordinance now or hereafter in effect authorizing Tenant to make repairs at
Landlord's expense.

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

                  11.2 LANDLORD'S RIGHT TO MAINTAIN. During the Lease Term,
Landlord shall not be required to maintain or make any repairs or replacements
of any nature or description whatsoever to the Premises. Tenant hereby expressly
waives the right to make repairs at the expense of Landlord as provided for in
any statute or law in effect at the time of execution of this Lease, or in any
other statute or law which hereafter may be enacted. Notwithstanding the
foregoing, if Tenant shall fail, after reasonable notice, to maintain or to
commence and thereafter to proceed with diligence to make any repair required of
it pursuant to the terms of this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such Default, may so maintain or
make such repair and may charge Tenant for the cost thereof. Any expense
reasonably incurred by Landlord in connection with the making of such repairs
may be billed by Landlord to Tenant monthly, or immediately, at Landlord's
option, and shall be due and payable within ten (10) days after such billing, or
at Landlord's option, may be deducted from the security deposit.

                  11.3 LANDLORD'S RIGHT OF ENTRY FOR REPAIRS. Landlord and
Landlord's agents shall have the right to enter upon the Premises, or any part
thereof, for the purpose


<PAGE>


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

                  11.4 RESERVE ACCOUNT. Tenant shall comply with all
requirements of Lender regarding maintenance of a reserve account, to provide
for future replacements to improvements and fixtures within the Premises (the
"RESERVE ACCOUNT"). The Reserve Account shall remain the property of Tenant, but
disbursements from the Reserve Account shall be made only by joint check
executed by Landlord and Tenant upon the mutual consent of Landlord and Tenant,
which consent shall not be unreasonably withheld. Landlord shall, within ten
(10) days after receipt of a written request, either sign any such check or
convey in writing to Tenant any objections to signing the check, and shall
thereafter diligently work with Tenant to resolve any differences with regard to
the disbursement. Notwithstanding the foregoing, if Tenant, pursuant to the
Lease, is required to make certain repairs, improvements, or replacements to the
Premises but fails to do so within the time allowed hereunder (subject to any
applicable cure period), then Landlord, as provided under the Lease, may make
such repairs, improvements, or replacements, and may disburse funds from the
Reserve Account, without Tenant's consent or signature on the disbursement
check(s), to pay for the cost of the repairs, improvements, or replacements. Any
amount in the Reserve Account remaining at the expiration of the Lease shall
remain the property of Tenant.

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

         13.      FIXTURES AND PERSONAL PROPERTY.

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


<PAGE>


by Tenant. All built-ins and fixtures installed in or attached to the Premises
by Tenant must be new or like new when so installed or attached.

                  13.2 TRADE FIXTURES AND PERSONAL PROPERTY. Any trade fixtures,
equipment, stock, inventory, machines (other than HVAC or other built-in
machines or machinery, as provided in Paragraph 9.1.8), signs and other personal
property of Tenant not permanently affixed to the Premises ("Tenant's
Equipment") shall remain the property of Tenant. Landlord agrees that Tenant
shall have the right, at any time, and from time to time, to remove any and all
of Tenant's Equipment which it may have stored or installed in the Premises.
Tenant, at its sole cost and expense, immediately shall repair any damage
occasioned to the Premises by reason of the removal of Tenant's Equipment and,
upon the last day of the Lease Term or upon earlier termination of this Lease,
shall leave the Premises in a neat and clean condition, free of debris, and in
as good a condition as that existing on Lease Commencement Date, reasonable wear
and tear excepted, with all HVAC and other Building systems in good and operable
condition.

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

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

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

         15.      INDEMNITY - WAIVER OF SUBROGATION.

                  15.1 INDEMNIFICATION. Tenant shall indemnify, defend, and hold
Landlord and its agents, employees, directors, officers, managers, members,
partners, affiliates, independent contractors, and property managers
(collectively, "LANDLORD'S AGENTS" or "AGENTS") harmless from and against any
and all claims, demands, liability, loss or damage, whether for injury to or
death of persons or damage to real or personal property, arising out of or in
connection with the Premises, Tenant's use of the Premises, any activity, work,
or other thing done, permitted, or suffered by Tenant in or about the Building,
or arising from any reason or cause whatsoever in connection with the use or


<PAGE>


occupancy of the Premises by any party during the term of this Lease. This
indemnification by Tenant shall include indemnity for the acts or omissions of
Landlord and Landlord's Agents to the fullest extent allowed by law. Tenant
shall further indemnify, defend, and hold Landlord and Landlord's Agents
harmless against and from any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part to be performed under the
terms of this Lease or arising from any act or negligence of Tenant or any
officer, agent, employee, guest, or invitee of Tenant, and from and against all
costs, attorney's fees, expenses, and liabilities incurred as a result of any
such claim or any action or proceeding brought thereon. In any case, action, or
proceeding brought against Landlord or Landlord's Agents by reason of any such
claim, Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense by counsel reasonably satisfactory to Landlord. Tenant, as a material
part of the consideration to Landlord, hereby assumes all risk of damage to
property or injury to persons in, upon, or about the Premises from any cause
arising prior to the later of the termination of this Lease or the date Tenant
is no longer in possession of the Premises (except for such damage or injury
caused by Landlord's or its Agents' willful misconduct or gross negligence), and
Tenant hereby waives all claims in respect thereof against Landlord and
Landlord's Agents. Tenant's obligation to indemnify under this paragraph shall
include attorney's fees, investigation costs, and other reasonable costs,
expenses, and liabilities incurred by Landlord and Landlord's Agents. If the
ability of Tenant to use the Premises or the Building is interrupted for any
reason, Landlord and Landlord's Agents shall not be liable to Tenant for any
loss or damages occasioned by such loss of use, except to the extent such loss
or damages is caused by Landlord's or its Agents' willful misconduct or gross
negligence.

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

                  15.3 WAIVER OF SUBROGATION. Landlord and Tenant hereby waive
any rights each may have against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be, their respective property
or the Premises, caused by or resulting from risks insured against under any
policies carried by the parties; provided, however, that this paragraph shall be
inapplicable if it would have the effect, but only to the extent that it would
have the effect, of invalidating any insurance coverage of Landlord or Tenant.
To the extent available, the parties shall cause each insurance policy obtained
by it hereunder to provide a waiver of subrogation. Tenant's insurer shall


<PAGE>


either waive subrogation rights against Landlord or, if Tenant's insurance
company does not waive the right of subrogation against Landlord and its
insurance company, Tenant shall (a) maintain during the Lease Term fire and
commercial liability coverage with respect to the Premises, and (b) pay to
Landlord upon demand Landlord's cost incurred in securing fire and commercial
liability insurance protecting Landlord upon the destruction of Tenant's
property.

         16.      INSURANCE.

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

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

                  16.3     OTHER INSURANCE.


<PAGE>


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

                           (a) Such further insurance against such other hazards
and risks and in such amounts as the holder of any first mortgage or first deed
of trust lien may require under to the terms of such superior liens, to the
extent such insurance is commercially attainable;

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

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

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

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

                           (f) Other insurance required by Landlord, including,
without limitation, earthquake and environmental remediation, in types and
amounts consistent with commercially reasonable practice.

                  16.4 INSURERS; PRIMARY INSURANCE. All policies of insurance
provided for herein shall be on an occurrence and claims made basis and shall be
issued by insurance companies with a general policy holder's rating of not less
than A- and a financial rating of not less than Class V as rated in the most
current available "Best's" Insurance Reports. Such insurance companies shall be
qualified to do business in the State of California. All such policies shall be
issued in the names of Landlord, Tenant, and Lender (or its successors and
assigns), and shall be for the mutual and joint benefit and protection of
Landlord, Tenant and Landlord's first mortgagee or beneficiary. All public
liability and property damage policies shall contain a provision that Landlord,
although named as an insured, nevertheless shall be entitled to recovery under
said policies for any loss occasioned to it, its servants, agents and employees
by reason of the negligence of Tenant. As often as any such policy shall expire
or terminate, renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent. All policies of insurance must contain
a provision that the company writing said policy will give to Landlord thirty
(30) days notice in writing in advance of any cancellation or lapse or the
effective date of any reduction in the amounts of insurance. All public


<PAGE>


liability, property damage and other casualty policies shall be written as
primary policies, not contributing with and not in excess of coverage which
Landlord may carry. Tenant shall, upon request from Landlord from time to time,
immediately deliver to Landlord copies of all insurance policies (including the
declarations pages) in effect with respect to Tenant's business and the
Premises.

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

                  16.6 DEDUCTIBLES. The deductible amounts, if any, with respect
to all insurance which Tenant is required to maintain hereunder shall not exceed
$25,000 per claim or occurrence. The amount of the deductibles, if any, within
this limitation shall be a business decision by Tenant; under no circumstances
shall Landlord be required to reimburse Tenant for the amount of any deductible
incurred by Tenant in connection with any insured event, except to the extent
the event resulting in the claim was caused or contributed to by Landlord's or
Landlord's Agents' gross negligence or willful misconduct.

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

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

                  16.9 ADJUSTMENT IN THE EVENT OF LOSS. Except as otherwise
provided herein, all insurance proceeds payable with respect to any damage or
destruction to the Premises (but not with respect to Tenant's personal property,
it being understood that insurance proceeds allocable to Tenant's personal
property shall be payable directly to Tenant) shall be payable to Landlord and
Tenant, jointly, to be held in an interest bearing account. If Tenant undertakes
to repair said damage in accordance with Paragraph 17 below, the proceeds shall
be made available to Tenant and used to fund the reconstruction. In all other
events, the proceeds shall be the sole property of Landlord


<PAGE>


except otherwise expressly provided herein. Tenant shall be entitled to
compromise, adjust or settle, with Landlord's approval, any and all claims with
respect to the Premises. Each party agrees to execute and deliver to the other
party such releases, endorsements and other instruments as the other party
reasonably may require in order to compromise, adjust or settle any insurance
claim which such other party shall be entitled to compromise, adjust or settle
pursuant to this paragraph and to enable the other party or its designee to
collect such insurance proceeds as are payable in respect of such claim.

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

         17.      DAMAGE OR DESTRUCTION.

                  17.1     TENANT'S DUTY TO REBUILD.

                           17.1.1 If the Premises are damaged or destroyed
during the Lease Term, within a period of ninety (90) days thereafter, Tenant
shall commence repair, reconstruction and restoration of the Premises and
prosecute the same diligently to completion at Tenant's sole cost and expense
whether or not the insurance proceeds shall be sufficient for the purpose, but
subject to Landlord making available to Tenant any insurance proceeds for such
repair, reconstruction or restoration paid out to Landlord by the insurer. This
Lease shall continue in full force and effect, and Tenant's duty to rebuild
shall exist without regard to whether the damage or destruction is covered by
insurance.

                           17.1.2 Notwithstanding Paragraph 17.1.1 hereof, in
the event of a total destruction of the Premises during the last two (2) years
of the Lease Term, or the last year with respect to any Extension Period, as the
case may be, Landlord and Tenant each shall have the option to terminate this
Lease upon giving written notice to the other of exercise thereof within thirty
(30) days after such destruction, in which case this Lease shall cease and
terminate as of the date of destruction, and provided that, in the event of such
termination by either Landlord or Tenant, Tenant shall pay to Landlord the fair
market value of the Premises less the fair market value of the Land (to the
extent such amount exceeds Landlord's insurance proceeds received from the
destruction). For purposes of this Paragraph 17.1.2, "total destruction" shall
be deemed a damage or destruction to an extent that the cost of repair is at
least fifty percent (50%) of the then full replacement cost of the Premises as
of the date of destruction.

                  17.2 RECONSTRUCTION. In the event of any reconstruction of the
Premises pursuant to this Paragraph 17, the construction by Tenant shall be
subject to, and conducted in accordance with, the provisions of Paragraph 9
above.

                  17.3 TERMINATION. In the event of termination pursuant to this
  Paragraph 17, all right to compromise, adjust or settle any insurance claim
  shall be in Landlord, and all proceeds from Tenant's insurance shall be
  disbursed and paid to, and


<PAGE>


be the property of, Landlord, except to the extent such proceeds are allocable
to the equipment, fixtures or other personal property of Tenant.

                  17.4 NO ABATEMENT. In the event of repair, reconstruction or
restoration as herein provided, the Monthly Rent which Tenant is required to pay
to Landlord under this Lease shall not be abated. Tenant shall continue the
operation of its business on the Premises during any such period to the extent
reasonably practicable from the stand-point of prudent business management, and
obligation hereunder to pay Additional Rent shall remain in full force and
effect. Except as otherwise provided herein, Tenant shall not be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Premises, Tenant's personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.
Tenant hereby waives any statutory or common law rights of termination or
abatement of rent which may arise by reason of any partial or total destruction
of the Premises.

         18.      ASSIGNMENT AND SUBLETTING.

                  18.1 NO ASSIGNMENT. Tenant shall neither voluntarily nor by
operation of law assign, sell, encumber, pledge or otherwise transfer all or any
part of Tenant's leasehold estate hereunder, or permit any other person
(excepting Tenant's agents and employees) to occupy the Premises or any portion
thereof, without Landlord's prior written consent, which consent shall be solely
within Landlord's absolute discretion. Consent by Landlord to one or more
assignments of this Lease or to one or more sublettings of the Premises shall
not constitute a waiver of Landlord's right to require consent to any subsequent
assignment, subletting or other transfer. If Tenant is a corporation,
unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of twenty-five percent (25%) of all
outstanding stock or interests, or liquidation thereof, shall be deemed an
assignment within the meaning and provisions of this paragraph. The foregoing
sentence shall not apply to any corporation or partnership which is a reporting
company under the Securities Exchange Act of 1934 (the "1934 Act"). The sale of
all or substantially all of the assets of Tenant shall be deemed an assignment
within the meanings and provisions of this paragraph. The foregoing sentence
shall not apply to a sale to an entity with a net worth, as designated in its
most recent financial statement (no older than 3 months), equal to or greater
than Tenant's net worth on the Effective Date. Tenant shall reimburse Landlord
for all of Landlord's reasonable costs and attorneys' fees incurred in
conjunction with the processing and documentation of any required consent to
assignment, subletting, transfer, change of ownership or hypothecation of this
Lease or Tenant's interest in and to the Premises. Notwithstanding the
foregoing, Tenant shall have the right, without the consent of Landlord, to
assign its rights and obligations pursuant to this Lease to its parent,
subsidiary or affiliate, provided that Tenant remains obligated under the Lease.
For purposes of this Paragraph, the term "subsidiary" shall mean and refer to
any subsidiary of Tenant in which Tenant owns eighty percent (80%) or more of
the voting stock of such subsidiary. For purposes of this Paragraph, the term
"affiliate" shall mean and refer to any entity in which Tenant or parent of
Tenant owns eighty percent (80%) or more of the voting stock or ownership
interest of such entity.


<PAGE>


                  18.2 CONSENT REQUIRED. Landlord's consent may be based upon a
determination that the same type, class, nature and quality of business,
services, management and financial soundness of ownership shall exist after the
proposed assignment or subletting and, provided further, that each and every
covenant, condition and obligation imposed upon Tenant by this Lease and each
and every right, remedy and benefit afforded Landlord by this Lease and the
underlying purpose of this Lease is not thereby impaired or diminished. The
determination by Landlord as to whether consent will be granted in any specific
instance may be based on, without limitation, the following factors, which shall
be solely in Landlord's discretion: (a) whether the transferee's use of the
Premises will be compatible with the provisions of this Lease; (b) the financial
capacity of the transferee; (c) the business reputation of the transferee; (d)
the quality and type of the business operations of the transferee; and (e) the
business experience of the proposed transferee. This list of factors is not
intended to be exclusive, and Landlord may rely on such other basis for judgment
as may apply from time to time.

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

                  18.4 ADVERTISING. In no event shall Tenant display on or about
the Premises any signs for the purpose of advertising the Premises for
assignment, subletting or other transfer of rights.

                  18.5 WRITING REQUIRED. Each permitted assignment or sublease
shall be consummated by an instrument in writing executed by the transferor and
transferee in form satisfactory to Landlord. Each assignee and subtenant shall
agree in writing for the benefit of the Landlord herein to assume all
obligations of Tenant hereunder, including the payment of all amounts due or to
become due under this Lease directly to the


<PAGE>


Landlord. One executed copy of such written instrument shall be delivered to the
Landlord.

                  18.6 TRANSFER PREMIUMS. If Tenant assigns or sublets its
rights under this Lease, Tenant shall pay to Landlord as Additional Rent, after
Tenant has recovered any relevant leasing commissions, costs of tenant
improvements and other expenses of the assignment or sublease, one-half (1/2) of
all such excess consideration due and payable to Tenant from said assignment or
sublease to the extent said consideration exceeds the Rent or a pro rata portion
of the Rent, in the event only a portion of the Premises is sublet.

         19. NO ENCUMBRANCE. Without Landlord's prior written consent, Tenant
shall not mortgage, encumber or hypothecate its interest in this Lease, the
Premises or the Building, and any attempt by Tenant to do so shall be a default
hereunder, and at Landlord's option, shall terminate this Lease.

         20.      HAZARDOUS MATERIALS.

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

                  20.2 TESTING. At reasonable times and upon reasonable prior
notice, prior to the expiration or earlier termination of the Lease Term,
Landlord shall have the right to conduct (a) not more frequently than annually,
a hazardous waste investigation of the Premises and (b) if Landlord has
reasonable cause to believe that any contamination exists on, in, under, or
around the Building or the Premises, such other tests of the Premises and the
Building as Landlord may deem necessary or desirable to demonstrate whether
contamination has occurred as a result of Tenant's use of the Premises. Tenant
shall be solely responsible for and shall defend, indemnify and hold the
Landlord, its Agents and contractors harmless from and against any and all
Claims, arising out of or in connection with any removal, clean up, restoration
and materials required hereunder to return the Premises and any other property
of whatever nature to their condition existing prior to the time of any such
contamination, except for Claims caused by Landlord's or


<PAGE>


its Agents' gross negligence or willful misconduct. Tenant shall pay for the
cost of the annual investigation and other tests of the Premises.

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

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

                  20.5 TENANT INDEMNIFICATION. Tenant shall indemnify, defend
and hold harmless Landlord and Landlord's Agents from and against (i) Claims in
connection with or arising out of any release, spill or discharge of Hazardous
Materials due to, contributed to or caused by the activities of Tenant, Tenant's
Agents, third parties who have trespassed on the Premises during the Lease Term
or parties in contractual relationship with Tenant or any of them (but excluding
any Claims arising out of the migration of Hazardous Materials from adjacent
properties to the Premises for which Hazardous Materials or migration Tenant is
not responsible); and (ii) all Claims arising out of Tenant's failure to provide
all information, make all submissions and take all steps required by any
Authority, under any federal, state or local laws pertaining to or governing
Hazardous Materials laws or any other environmental law. Tenant's obligations
and liabilities under this paragraph shall survive the expiration or earlier
termination of this Lease. Without limiting the foregoing, if the release,
spill, leakage, or discharge of any Hazardous Materials on or in the Premises or
the Building or any adjacent property, caused or permitted by Tenant results in
any contamination of the


<PAGE>


Premises or the Building or any adjacent property, Tenant shall promptly take
all actions at its sole expense as are necessary to return the Premises or the
Building or any adjacent property, to the condition existing prior to the time
of such contamination, provided that Landlord's approval of such action shall
first be obtained, which approval shall not unreasonably be withheld, delayed or
conditioned so long as such actions would not potentially have any material
adverse long-term or short-term effect on the Premises or the Building.
Notwithstanding the foregoing, the indemnification herein shall not apply to the
initial introduction of Hazardous Materials on or to the Premises by anyone
other than the Tenant from and after the date that Tenant is neither the
"Tenant" hereunder nor in possession of the Premises ("Tenant Relinquishment
Date"); provided, however, that the Tenant shall bear the burden of proof that
the initial introduction of such Hazardous Materials (i) occurred subsequent to
the Tenant Relinquishment Date, (ii) did not occur as a result of any act or
inaction of the Tenant, and (iii) did not occur as a result of a continuing
migration or release of any Hazardous Materials initially introduced, stored, or
manufactured on the Premises prior to the Tenant Relinquishment Date.

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

         21.      CONDEMNATION.

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

                  21.2 RENT REDUCTION; TENANT'S OBLIGATION TO REPAIR. If this
Lease is not terminated by Landlord or Tenant, it shall remain in full force and
effect as to the portion of the Premises remaining; provided, however, that the
Monthly Rent shall be reduced by the proportion that the floor area of the
Building taken bears to the original floor area of the Building. In such event
Tenant, at Tenant's sole cost and expense, but subject to the availability of
condemnation proceeds therefor, shall restore the Premises


<PAGE>


to a complete unit of like quality and character, except as to size, as existed
prior to the date on which the condemning authority took possession.

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

         22.      DEFAULT PROVISIONS.

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

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

                           22.1.2 The abandonment or vacation of the Premises by
Tenant for a period in excess of sixty (60) days during any single twelve (12)
month period;

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

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

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

                           22.1.6 Any act of bankruptcy caused, suffered or
permitted by Tenant or, if Tenant is a partnership, any general partner of
Tenant. For purposes of this Lease, an "act of bankruptcy" shall include the
following: (i) any general assignment or general arrangement for the benefit of
creditors; (ii) the filing of any petition by or against Tenant to have Tenant
adjudged a bankrupt, or a petition for reorganization or arrangement under any
law relating to bankruptcy, unless such petition is filed against


<PAGE>


Tenant and the same is dismissed within ninety (90) days; (iii) the appointment
of a trustee or receiver to take possession of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease; or (iv)
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease.

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

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

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


<PAGE>


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

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

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

                           (c) The worth at the time of award of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Tenant proves could be
reasonably avoided. "Worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank
situated nearest the Premises at the time of award plus one percent (1%).

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

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

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

                           22.2.5 Landlord, where permitted by applicable law,
may seek to restrain any breach or threatened breach of any of Tenant's
obligations hereunder and/or may exercise any and all rights and remedies of a
secured party under applicable law with


<PAGE>


respect to any property in which Landlord is granted a security interest under
this Lease or otherwise.

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

                  22.4 DETERMINING RENT ON DEFAULT; WAIVER; SECURITY INTEREST.

                           22.4.1 For all purposes of this Paragraph 22, Rent,
except Monthly Rent, shall be computed on the basis of the amount thereof
accruing during the highest twelve (12) month period in the immediately
preceding sixty (60) month period, except that if it becomes necessary to
compute such Rent before a sixty (60) month period has occurred, then Rent shall
be computed on the basis of the amount accruing during such shorter period.

                           22.4.2 The waiver by Landlord of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition on any subsequent breach by Tenant. The
acceptance of Rent hereunder by Landlord after any such breach shall not be
deemed to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
rental so accepted, regardless of Landlord's knowledge of such preceding breach
at the time of acceptance of such Rent. No covenant, term or condition of this
Lease or breach thereof by Tenant shall be deemed to have been waived by
Landlord unless such waiver is in a writing executed by Landlord.

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

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

                  22.7 TENANT'S RIGHT TO PERFORM. If, after such notice to
Landlord and Assignee, if any, Landlord and Assignee shall fail to cure such
default as provided herein, Tenant shall have the right, but not the obligation,
to cure any such default at Landlord's


<PAGE>


sole cost and expense including in such expenditure all costs and attorneys'
fees incurred to cure such default or breach of Lease. Tenant shall have no
right to terminate this Lease for any such default by Landlord unless otherwise
specifically provided in this Lease.

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

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

         24. SUBORDINATION-ATTORNMENT.

                  24.1 TENANT TO GIVE EVIDENCE OF SUBORDINATION. Upon written
request of Landlord, or any mortgagee or deed of trust beneficiary, Tenant in
writing shall subordinate its rights hereunder to the lien of any mortgage or
deed of trust now or hereafter in force against the land and buildings comprised
of the Premises of which the Premises are a part, and upon any building
hereafter placed upon the Premises, and to all advances made or hereafter to be
made upon the security thereof; provided that Tenant obtains a non-disturbance
agreement acceptable to Tenant from any such mortgagee or deed of trust
beneficiary. Said subordination shall be in the form of the document


<PAGE>


attached hereto as EXHIBIT "B," or a reasonable equivalent requested by Landlord
and satisfactory to Tenant.

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

                  24.3 EXECUTION OF DOCUMENTS BY TENANT. Tenant, upon request of
any party in interest, shall duly execute in recordable form such instruments
and certificates as are necessary to carry out the intent of this Paragraph 24.

         25. QUIET POSSESSION. Subject to the provisions and matters referred to
in Paragraph 14 of this Lease, Tenant, upon paying the Rent and performing the
covenants and conditions of this Lease, may quietly have, hold and enjoy the
Premises during the Lease Term.

         26.      MISCELLANEOUS.

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

                  26.2 OBLIGATIONS OF SUCCESSORS. Each of the provisions hereof
are to be construed as covenants and agreements as though the words importing
such covenants and agreements were used in each separate paragraph hereof, and
all of the provisions hereof shall bind and inure to the benefit of the parties
hereto, and their respective heirs, legal representatives, successors and
assigns (subject to any restrictions on assignment).

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

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


<PAGE>


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

                  26.6 HOLDING OVER. If Tenant remains in possession of the
Premises (a) after the expiration of the Lease Term without executing a new
lease, or (b) after Landlord has declared a forfeiture by reason of a Default by
Tenant, then such holding over shall be construed as a tenancy at sufferance
from month-to-month, subject to all the conditions, provisions and obligations
of this Lease insofar as they are applicable to a month-to-month tenancy, except
that the Monthly Rent shall be one hundred fifty percent (150%) of the Monthly
Rent last paid, payable monthly in advance. Not-withstanding the foregoing, if
Tenant fails to vacate the Premises and fulfill all of its obligations hereunder
at the end of the Lease Term, Tenant also shall be liable for all damages
incurred by Landlord by reason of the latter's inability to deliver possession
of the Premises or any portion thereof to any other person.

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

                  26.8 NON-MERGER. There shall be no merger of this Lease, or of
the leasehold estate created hereby, with the fee estate in and to the Premises
by reason of the fact that this Lease, or the leasehold estate created hereby,
or any interest in either thereof, may be held directly or indirectly by or for
the account of any person who shall own the fee estate in and to the Premises,
or any portion thereof, and no such merger shall occur unless and until all
persons at the time having any interest in the fee estate and all persons having
any interest in this Lease or the leasehold estate, shall join in a written
instrument effecting such merger.
                  26.9 RECORDATION OF LEASE. Neither Landlord nor Tenant shall
record this Lease or any other document relating to this Lease without the prior
written consent of the other party.

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



<PAGE>


the manner herein provided for giving notice. Unless and until such written
notice is received, the last address and addressee as stated by written notice,
or provided herein if no written notice of change has been sent or received,
shall be deemed to continue in effect for all purposes hereunder.

                  26.11 ATTORNEYS' FEES. If any action or proceeding (judicial
or nonjudicial) is commenced to enforce or interpret this Lease, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs,
together with all other costs and fees incurred by it in attempting to enforce
the other party's obligations and/or to protect its rights under this Lease,
whether or not such action or proceeding proceeds to judgment.

                  26.12 NO OTHER AGREEMENTS. This Lease and the letter agreement
of even date herewith from Landlord to Tenant ("Side-Letter") regarding, among
other things, property management fees and the Security Deposit represents the
entire agreement between the parties hereto and supersedes any and all previous
written or oral agreements or discussions between said parties and any other
person or legal entity concerning the transactions contemplated herein. There
are no representations, warranties or agreements except as specifically set
forth in this Lease or the Side-Letter or to be set forth in the instruments or
other documents delivered or to be delivered hereunder.

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

                  26.14 NO THIRD-PARTY BENEFIT. The parties acknowledge and
agree that the provisions of this Lease are for the sole benefit of Landlord and
Tenant, and not for the benefit, directly or indirectly, of any other person or
entity, except as otherwise expressly provided herein.

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

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

                  26.17 GOVERNING LAW/JURISDICTION. This Lease shall, in all
respects, be interpreted, enforced and governed by and under the laws of the
State of California.

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

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


<PAGE>


                  26.20    ENTRY BY LESSOR.

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

                           26.20.2 SALE OR LEASE OF PREMISES. Landlord may at
any time place on or about the Premises any ordinary "For Sale" signs, and at
any time within one (l) year prior to the expiration of this Lease, place on or
about the Premises any usual or ordinary "For Lease" signs. Landlord may enter
the Premises at reasonable times upon reasonable prior notice during the Lease
Term to show the Premises to prospective tenants, lenders, investors, or
purchasers. In exercising its rights under this Paragraph 26.20.2, Landlord
shall not unreasonably interfere with Tenant's use or occupancy of the Premises.

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

                  26.21 ESTOPPEL CERTIFICATES. Tenant shall at any time during
the Lease Term, within ten (10) days after written request from Landlord,
execute and deliver to Landlord a statement in writing in the form of the
document attached hereto as EXHIBIT "C," or any reasonable equivalent requested
by Landlord, certifying that this Lease is unmodified and in full force and
effect or, if modified, stating the nature of such modification. Tenant's
statement shall include such other details as may be reasonably requested by
Landlord. Any such statement may be relied upon conclusively by any existing or
prospective purchaser or lender. Tenant's failure to deliver such statements
within such time shall be conclusive upon Tenant that this Lease is in full
force and effect, except to the extent any modification has been represented in
writing by Landlord to such prospective purchaser or lender, that there are no
uncured defaults in Landlord's performance, and that not more than one month's
rent has been paid in advance.

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

                  26.23 CONSENT OF LANDLORD AND TENANT. Whenever Landlord or
Tenant is required to give its consent or approval to any action on the part of
the other, such


<PAGE>


consent or approval shall not be unreasonably withheld, conditioned or delayed,
unless otherwise expressly provided. In the event of failure to give any such
consent, the other party hereto shall be entitled to specific performance at law
and shall have such other remedies as are reserved to it under this Lease;
provided, however that in no event shall Landlord or Tenant be responsible in
monetary damages for such failure to give consent unless said consent is
withheld maliciously or in bad faith.

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

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

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

                  26.27 ABSOLUTE NET LEASE. This Lease shall be deemed and
construed to be an "absolute net lease" and, except as herein expressly
provided, the Landlord shall receive all payment required to be made by Tenant,
free from all charges, assessments, impositions, expenses, deductions of any and
every kind or nature whatsoever. Landlord shall not be required to furnish any
services or facilities or to make any repairs, replacements, or alterations of
any kind in or on the Premises, except as otherwise specifically required
herein. Tenant shall receive all invoices and bills relative to the Premises
and, except as otherwise provided herein, shall pay for all expenses directly to
the person or company submitting a bill without first having to forward payment
for the expenses to Landlord. Tenant shall at Tenant's sole cost and expense be
responsible for the management of the Premises, shall maintain the landscaping,
parking lot and shall make all additional repairs and alterations as required to
maintain the property in good condition.

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

                  26.29 WAIVER OF JURY TRIAL AND COUNTERCLAIMS. THE PARTIES
HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE


<PAGE>


PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT,
TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE.

         27.      END OF TERM.

                  27.1      SURRENDER OF PREMISES.

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

                           27.1.2 Notwithstanding the exercise by either party
of any option contained herein to terminate this Lease, any unsatisfied
obligations of Tenant accruing on or prior to the Surrender Date and the
indemnification provisions of Tenant contained in Paragraphs 15.1 and 20 shall
survive the Surrender Date (except that the obligations with respect to
Paragraph 15.1, only, shall terminate eighteen (18) months after the Surrender
Date), unless excused as of the Surrender Date by the provisions elsewhere
contained in this Lease.

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

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


<PAGE>


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


         28. ACKNOWLEDGEMENT OF RESPONSIBILITY. Tenant acknowledges and agrees
that Tenant, as the legal owner of the Property immediately prior to the
execution of this Lease, is solely responsible for the payment of all Taxes,
utility charges, maintenance costs, and any other operating expense due and
payable and pertaining to the Premises as of the Effective Date (the "Prior
Expenses"). Tenant shall indemnify and hold harmless Landlord from and against
all Claims arising out of or related to the Prior Expenses.

         29. MANAGEMENT FEE. If and when required by Landlord, Tenant shall pay
to Landlord, as Additional Rent, a monthly fee to cover costs of property
management services in an amount not to exceed three percent (3%) of the Monthly
Rent due from Tenant, whether or not Landlord incurs fees payable to any third
party to provide such services and without regard to the actual costs incurred
by Landlord for such services.

TENANT:                                     LANDLORD:

QUIDEL CORPORATION,                         10165 McKELLAR COURT, L.P.,
a Delaware corporation                      a California limited partnership

By:  /s/ Andre de Bruin                     By:  SCIMED PROP II, LLC
    ------------------------------------    a California limited liability
     President or Vice President            company, General Partner


By:  /s/ Charles J. Cashion                 By: /s/ Alan D.gold
    ------------------------------------       ---------------------------------
      Secretary, Assistant Secretary,                 Alan D. Gold, Member
      Treasurer, or Assistant Treasurer