<PAGE>

                                                                   EXHIBIT 10.11


                          MODIFIED NET SINGLE TENANT
                                LEASE AGREEMENT

                                  1.  PARTIES
                                      -------

     THIS LEASE, dated February 18, 1999, is entered into by and between DE ANZA
ENTERPRISES, LTD., Joint Venture of HOVER FAMILY TRUST 25%, SARAH T. BEHEL,
JULIA G. HOVER SMOOT, DAVID H. HOVER & TERESA KOROL each as to 6.25% and JOHNSON
FAMILY TRUST as to 50%, all as tenants in common, whose address is 101 CHURCH
STREET, #12, LOS GATOS, CALIFORNIA (hereinafter referred to as "Landlord") and
DURECT CORPORATION, a Delaware Corporation, whose address is 10240 Bubb Road,
Cupertino, CA  95014 (hereinafter referred to as "Tenant"), and shall be
effective on the date set forth below.

                                2.  DEFINITIONS
                                    -----------

As used in this Lease:

     A.    Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms, conditions and covenants hereinafter set forth, those
certain Premises (hereinafter referred to as the "Premises"), consisting of that
certain real property, as shown in the Official Records of Santa Clara County,
recorded at Book 245 Page(s) 55 Maps, on October 17, 1968, together with all
buildings and, improvements thereon and appurtenances thereto, consisting of one
(1) building on approximately 74,448 square feet and containing a total building
are of 30,149 square feet, commonly known as 10240 Bubb Road in the City of
Cupertino, California, all as more particularly shown on Exhibit "A" attached
hereto and made a part hereof.

     B.    There terms "Premises" shall mean all areas and facilities at the
same address including, without limitation, parking areas, access and perimeter
roads, sidewalks, landscaped area, trash disposal facilities, and similar area
facilities.

                                   3.  TERM
                                       ----

     A.    The term of this Lease shall be a period of Five (5) years and -0-
months, commencing on the Effective Date, as that term is defined in that
certain Termination Agreement Regarding Norian Master Lease and Durect Sublease
entered by and between Norian Corporation, Tenant and Landlord dated February
18, 1999, unless sooner terminated as provided herein, terminating on the end of
the sixtieth full calendar month after the Commencement Date.

     Tenant agrees that if Landlord, for any reasons whatsoever, is unable to
deliver possession of the Premises on the commencement date set out in the
foregoing Subparagraph A, Landlord shall not be liable to Tenant for any loss or
damage therefrom, nor shall this Lease be void or voidable; but in such event
the commencement, termination and all other dates of this Lease shall be
extended to conform to the time of Landlord's tender of possession of the
<PAGE>

Premises to Tenant, and Tenant shall not be obligated to pay rent or other sums
due Landlord until possession of the Premises is tendered to Tenant.

                             4.  RENT AND EXPENSES
                                 -----------------

     A.   Tenant shall pay in lawful money of the United States to Landlord for
each month of the term of this Lease, rent in the amount set forth below in
advance on the first day of each calendar month, except as otherwise provided
herein, without abatement, deduction, offset, prior notice or demand and also
increasing as scheduled.

               Month              Rate sq. ft.
               -----              ------------
               01-12              $2.10
               13-24              $2.17
               25-36              $2.19
               37-48              $2.21
               49-60              $2.23


     B.   Landlord hereby acknowledges receipt of Tenant's payment of Rent for
period first month of the Lease term in the amount of $63,312.90, Prorated Real
Property Taxes from February 1, 1999 to June 30, 1999 in the amount of $5,942.45
and Security Deposit of $75,000.00.

     C.   If the Commencement Date is not the first (1st) day of a month, or if
the termination date is not the last day of a month, a prorated monthly
installment based on a thirty (30) day month shall be paid at the then current
rate for the fractional month during which the leases commence or terminates.

                           5.  LATE PAYMENT CHARGES
                               --------------------

     Tenant acknowledges that late payment by Tenant to Landlord of rent and
other charges provided for under this Lease will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of such cost being extremely
difficult and impracticable to fix.  Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and notes secured by any encumbrance
covering the Premises or late charges and penalties by virtue of late payment of
taxes due on the Premises.  Therefore, if any installment of rent or any other
charge due from Tenant is not received by Landlord in five (5) days of the date
due, Tenant shall pay to Landlord an additional sum of $1,000.00 as a late
charge for every month that the rent or other charge remains unpaid.  The
parties agree that this late charge represents a fair and reasonable estimate of
the cost that Landlord will incur by reason of the late payment by Tenant.
Acceptance of any late charge shall not constitute a waiver of Tenant's default
with respect to the overdue amount, nor prevent Landlord from exercising any of
the rights and remedies available to Landlord.

                                      -2-
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                             6.  SECURITY DEPOSIT
                                 ----------------

     Tenant has deposited with Landlord the sum of SEVENTY FIVE THOUSAND AND
NO/100 DOLLARS ($75,000.00) as a security for the full and faithful performance
of ever portion of this Lease to be performed by Tenant.  If Tenant defaults
(beyond any applicable cure period) with respect to any provision of this Lease,
including but not limited to the provisions relating to the payment of rent and
other sums due or the repair of damage to the Premises caused by Tenant,
Landlord may use, apply, or retain all or any part of this security deposit for
the payment of any rent or any other sum in default, the repair of such damage
to the Premises or the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant's default or to compensate Landlord for
any other loss or damage which Landlord may suffer by reasons of Tenant's
default to the full extent permitted by law.  If any portion of said deposit is
so used or applied, Tenant shall within ten (10) days after written demand
therefor, deposit cash with Landlord in the amount sufficient to restore the
security deposit to its original amount, and Tenant's failure to do so shall be
a material breach of this Lease.  Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit.  If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant within thirty (30)
days of termination of the Lease term except for amounts that Landlord has
deducted therefrom that are needed by Landlord to cure defaults of Tenant under
this Lease or compensate Landlord for damages for which Tenant is liable
pursuant to this Lease.

                               7.  HOLDING OVER
                                   ------------

     If Tenant remains in possession of all or any part of the Premises after
the expiration of the term hereof, with or without the expressed or implied
consent of Landlord, such tenancy shall be month-to-month only and shall not
constitute a renewal or extension for any further term.  In such event, rent
shall be increased to any amount equal to one hundred twenty-five percent (125%)
of the rent paid during the last month of the Lease term, and any other sums due
hereunder shall be payable in the amount and at the time specified in this
Lease, and such month-to-month tenancy shall be subject to every other term,
condition, covenant and agreement contained herein.

                            8.  TENANT IMPROVEMENTS
                                -------------------

     None by Landlord.

                          9.  ACCEPTANCE OF PREMISES
                              ----------------------

     Except as provided below, by taking possession of the Premises, Tenant
accepts and acknowledges the Premises as being in good and sanitary order,
condition and repair and accepts them in their then-existing condition providing
the building and improvements shall comply with all applicable laws, codes, and
ordinances.  Notwithstanding the foregoing, however, Landlord hereby
acknowledges that Landlord shall be responsible for repairing the air
conditioning support structure on the roof of the Premises.  Landlord hereby
agrees to cooperate with Tenant in order to cause the air conditioning support
system on the roof to be properly repaired at the same time

                                      -3-
<PAGE>

as Tenant undertakes to replace the roof membrane. Should it be established by a
structural engineer prior to the replacement of the roof membrane that the roof
structure requires repair, Landlord hereby agrees to cooperate with Tenant in
order to cause repairs to the roof structure as may be required to be made at
the same time as Tenant undertakes to replace the roof membrane pursuant to
Section 17 of this Lease. Landlord shall be solely responsible for the costs of
upgrading the air conditioning support system and for the repairs necessary to
the roof structure and Tenant shall be solely responsible for the costs of
replacing the roof membrane.

     Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Landlord shall also be obligated to deliver the Premises in broom clean
condition, free of debris, with all building and other improvements in existence
as of the date of the execution of this Lease by Tenant except as related to the
laboratory construction commenced by Tenant as subtenant to Norian Corporation.
Tenant acknowledges that neither Landlord nor its agent(s) has made any
representation or warranty as to the suitability or fitness of the Premises for
the conduct of Tenant's business or for any other purpose, nor has Landlord
agreed to undertake any modification, alteration or improvement to the Premises
except as expressly provided in this Lease.  Except as provided above, the
taking of possession of the Premises by Tenant shall conclusively establish that
the Premises were at such time in satisfactory condition unless within thirty
(30) days after such date Tenant shall give Landlord written notice specifying
in reasonable detail the respects in which the Premises were not in satisfactory
condition.  Landlord also hereby assigns to Tenant all warranties with respect
to the Premises which would reduce Tenant's maintenance obligations hereunder
and shall cooperate with Tenant to enforce all such warranties.

                           10.  USE OF THE PREMISES
                                -------------------

     A.    Tenant shall use the Premises solely for office, R & D,
manufacturing, warehousing , the development of pharmaceuticals and drug
delivery systems and other legal purposes and shall not use the Premises for any
other purpose without obtaining the prior written consent of the Landlord which
consent shall not be unreasonably withheld.

     B.    Tenant shall not use the Premises or suffer or permit anything to be
done in or about the Premises which will in any way conflict with any law,
statute, zoning ordinance, regulation or requirement of duly constituted public
authorities now in force or which may hereafter be in force, or Board of Fire
Underwriters requirements or other similar body now or hereafter constituted
relating to or affecting the condition, use or occupancy of the Premises.
Tenant shall not commit any public or private nuisance or any other act or
things which might or would disturb the quiet enjoyment of any occupant of
nearby property.  Tenant shall not place loads upon the floors, walls, or
ceilings in excess of the maximum designed load or which endanger the structure,
place any harmful liquids in the drainage systems unless Tenant installs proper
neutralizers; dump or store waste materials or refuse or allow such to remain
in, or about any part of the Premises outside of the building proper and Tenant
shall not store or permit to be stored or otherwise place any materials of any
nature whatsoever outside the building proper.  Tenant may store materials
provided they are properly and attractively screened, in compliance with all
applicable city ordinances and approved, in writing, by Landlord.

                                      -4-
<PAGE>

                             11.  QUIET ENJOYMENT
                                  ---------------

     Landlord covenants that it has the right to make this Lease and that
Tenant, upon performing the terms, conditions, and covenants of this Lease,
shall have quiet and peaceful possession of the Premises and against any person
claiming the same by, through or under Landlord.

                 12.  ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
                      ----------------------------------------

     A.   Tenant shall not make or permit any alterations, additions or
improvements in, on or about the Premises, except for non-structural alterations
not exceeding Ten Thousand Dollars ($10,000.00) in cost, without the prior
written consent of Landlord which consent shall not be unreasonably withheld.
All alterations, additions or improvements shall be installed at Tenant's sole
expense in compliance with all applicable laws and by a licensed contractor
approved in writing by Landlord.  Any such alterations, additions or
improvements including but not limited to heating, lighting, electrical, air
conditioning, partitioning, drapery and carpentry installations made by Tenant
which become an integral part of the Premises or are affixed to the Premises so
that it cannot be removed without material damage to the Premises shall be and
become the property of Landlord upon installation and shall not be deemed trade
fixtures; provided, however, that Landlord may as a condition of its giving
consent require that Tenant, at Tenant's sole expense agree to remove nay or all
alterations, additions or improvements installed by Tenant and repair any damage
to the Premises caused by such removal and prior to the termination of the
Lease.

     B.   Tenant shall give Landlord at least (20) twenty days' prior written
notice of the date of commencement of any construction of alterations, additions
or improvements in, on or about the Premises and Landlord shall have the right
at any time to post notice of non-responsibility or similar notices on the
Premises in connection therewith.

     C.   Tenant shall submit drawings and specifications to Landlord for
Landlord's approval, and no work shall be commenced until Landlord has approved
such drawings and specifications and the contracts, contractors, performance and
payment bonds and the sureties thereon; provided however, that an such approvals
by Landlord shall not be unreasonably denied or delayed and no performance or
payment bonds shall be required on projects costing less than One Hundred
Thousand Dollars ($100,000.00).

                        13.  SURRENDER OF THE PREMISES
                             -------------------------

     On or before the expiration or earlier termination of the term of this
Lease, Tenant shall surrender the Premises to Landlord in their condition
existing as of the commencement of the term of this Lease, normal wear and tear
expected, acts of God, casualties, condemnation, Hazardous Materials, (other
than those released or emitted by Tenant in or about the Premises), and interior
improvements which Landlord states in writing may be surrendered at the
termination of the Lease, with all interior walls repainted or repaired, if
marked or damaged, all carpets shampooed and cleaned, all floors cleaned and
waxed, all to the reasonable satisfaction of Landlord.  Tenant shall remove all
of Tenant's personal property and trade fixtures from the

                                      -5-
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Premises, and all such property not so removed shall be deemed abandoned by
Tenant. If Landlord so elects, Tenant, prior to the termination hereof, shall
remove at its expense any and all fixtures and improvements installed by it
which would otherwise remain a part of the realty and restore the Premises to
their condition as of the commencement of this Lease. If Tenant fails to remove
any trade fixtures, equipment, or improvements, the removal of which is required
by Landlord, and such failure continues after the termination of the Lease,
Landlord may retain such property and all rights of Tenant with respect to it
shall cease, or Landlord may place such property in public storage for Tenant's
account. Tenant shall be liable to Landlord for the costs of removal of any such
trade fixtures, improvements or equipment of or installed by Tenant, the
transportation and storage costs of same, the cost of returning the Premises to
their condition as of the commencement of the term of this Lease, together with
interest at fifteen (15%) per annum, but in no event to exceed the maximum rate
allowed by law on all such expenses from the date of expenditure by Landlord. If
the Premises are not so surrendered at the termination of this Lease, Tenant
shall indemnify Landlord against all loss or liability resulting from delay by
Tenant in so surrendering the Premises, including, without limitation, any clams
made by any succeeding tenants, attorneys' fees and other costs incurred.

                          14.  WAIVER OF SUBROGATION
                               ---------------------

     Notwithstanding anything to the contrary contained in this lease, Landlord
and Tenant each hereby waive any and all rights of recovery against the other or
against the officers, employees, agents and representatives of the other on
account of loss or damage occasioned to such waiving party for its property or
the property of others under its control to the extent that such loss or damage
is insured against under any property insurance policies which either may have
in force at the time of the loss or damage.  Tenant and Landlord shall, upon
obtaining policies of property insurance required hereunder give notice to the
insurance carrier that the foregoing mutual waiver or subrogation is containing
in this lease and Tenant and Landlord shall cause each insurance policy obtained
by them to provide that the insurance company waives all right of recovery by
way of subrogation against either Landlord or Tenant in connection with any
damage covered by such policy.

                           15.  REAL PROPERTY TAXES
                                -------------------

     A.   As used in this Lease, the term "Real Property Tax" shall include any
form of assessment, license fee, rent tax, levy, penalty or tax (other than net
income or franchise taxes) imposed by any authority having the direct or
indirect power to tax including without limitation any city, county, state or
federal government or any improvement or other district or division thereof,
whether such tax is (i) determined by the area of the Premises or any part
thereof or the rent and other sums payable hereunder by Tenant, including
without limitation, any gross income or excise tax levied by any of the
foregoing authorities with respect to receipt of such rent or other sums, or
(ii) upon or with respect to any legal or equitable interest of Landlord in the
Premises or any part thereof, or (iii) upon this transaction or any document to
which Tenant is a part creating or transferring any interest in the Premises, or
(iv) taxes of every kind and nature levied or assessed in lieu of, in
substitution for, or in addition to, existing or additional taxes on the
Premises whether or not now customary or within the contemplation of the
parties.

                                      -6-
<PAGE>

     B.   On or before April 1 and December 1 of each calendar year during the
term of this lease, Tenant shall pay to Landlord, all Real Property Taxes as set
forth on the county tax assessor's tax statement for the Premises.  Landlord
shall give Tenant at last fifteen (15) days prior written notice of the amount
so due.  Upon Landlord's receipt of said tax payment, Landlord shall pay said
taxes, and in the event that Tenant shall fail to pay said taxes on or before
April 10 and December 10, respectively, Tenant shall pay to Landlord any penalty
incurred by said delinquency.  Tenant shall pay any Real Property Tax not
included within the county tax assessor's tax statement within ten (10) days
after being billed for the same by Landlord.  In the event this Lease or any
extension thereof shall expire on a date earlier than the end of a fiscal tax
year, Landlord shall prepare a statement setting forth the Real Property Taxes
to the date of such expiration and the parties shall adjust the Tenant's
obligation to pay the Real Property Taxes to the date of the expiration of
termination of this Lease.

     C.   Anything to the contrary notwithstanding contained herein, Tenant
shall pay any increases in Real Property taxes resulting from any and all
improvements of any kind whatsoever placed in, on or about the Premises for the
benefit of, at the request of, or by Tenant.

     Tenant's liability to pay any Real Property Tax increase pursuant to this
Paragraph 15 shall be pro-rated on the basis of 365-day year to account for any
fractional portion of a fiscal tax year included at the commencement or
expiration of the term of the Lease.  With respect to any assessment which may
be levied against or upon the Premises, or which under the laws then in force
may be evidenced by improvements or other bonds or may be paid in annual
installments, only the amount of such annual installment (with appropriate
proration for any partial year) and interest due thereon shall be included
within the computation of the annual taxes and assessments levied against the
Premises.

     D.   Tenant shall pay prior to delinquency all taxes assessed against and
 levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenants contained in, on or about the Premises or elsewhere.  When
possible Tenant shall cause said trade fixtures, furnishings, equipment and all
other personal property to the assessed and billed separately from the real or
personal property of Landlord.

     E.   Failure of Tenant to pay any of the charges required to be paid under
this Paragraph 15 shall constitute a default under the terms hereof the like
manner as failure to pay rental when due.

     F.   Notwithstanding anything to the contrary contained herein, Tenant
shall not be required to pay any portion of any tax or assessment expense or any
increase therein (i) levied on Landlord's rental income, unless such tax or
assessment expense is imposed in lieu of real property taxes; (ii) in excess of
the amount which would be payable if such tax or assessment expense were paid in
installments over the longest possible term; (iii) imposed on land and
improvements other than the Premises; (iv) attributable to Landlord's net
inheritance, gift, transfer, estate or state taxes, or any penalties resulting
from Landlord's failure to pay any taxes or assessments in a timely fashion; or
(v) resulting from a change of ownership or transfer of any or all of the
Premises.  Additionally, Tenant shall have the right, by appropriate
proceedings, to

                                      -7-
<PAGE>

protest or contest any assessment, reassessment or allocation of property taxes
or any change therein or any application of any Law to the Premises or Tenant's
use thereof. Landlord shall notify Tenant in writing of any change in property
taxes within sufficient time to allow Tenant to review and, if it so desires, to
contest or protest such change. In the contest or proceedings, Tenant may act in
its own name and/or the name of Landlord and Landlord will, at Tenant's request
and expense, cooperate with Tenant in any way Tenant may reasonably require in
connection with such contest. If Tenant does not pay the property taxes when due
which are the subject of such protest or contest, Tenant shall post a bond in
lieu thereof in an amount reasonably determined by Landlord but not less than
one hundred twenty-five percent (125%) of the amount demanded by the taxing
authorities which holds Landlord and the Premises harmless from any damage
arising out of the contest and ensuring the payment of any judgment that may be
rendered. With respect to any contest of property taxes or law, Tenant shall
hold Landlord and the Premises harmless from any damage arising out of such
protest or contest and shall pay any judgment that may be rendered for which
Tenant would otherwise be liable under the lease without such contest or
protest. Any contest conducted by Tenant under the paragraph shall be at
Tenant's expense and if interest or late charges become payable as a result of
such contest or protest, Tenant shall pay the same. Tenant shall receive the
benefit of all refunds of property taxes received with respect to the Lease
term.

                          16.  UTILITIES AND SERVICES
                               ----------------------

     Tenant shall be responsible for and shall pay promptly, as the same become
due and payable, all charges for water, sewer rental, gas, electricity,
telephone, refuse pickup, janitorial services and all other utilities, materials
and services furnished directly to or used by Tenant in, on or about the
Premises during the term of the Lease, together with any taxes thereon.
Landlord shall not be liable in damages or otherwise for any failure or
interruption of any utility services or other services furnished to the
Premises, except that resulting from the negligence or willful misconduct of
Landlord and its agents, employees or contractors, and no such failure or
interruption shall entitle Tenant to terminate this Lease or withhold rent or
other sums hereunder.

                           17.  BUILDING MAINTENANCE
                                --------------------

     Landlord shall keep in good order, condition and repair the structural
parts of the building which structural parts include only the foundation,
exterior walls (excluding the interior of all walls and the exterior and
interior of all windows, doors, plate glass, showcases and interior ceiling),
roof structure not the membrane and subflooring of the Premises, except for any
damage thereto caused by negligent of Tenant or of Tenant's agents, employees or
invitees, or by reason of the failure of Tenant to perform or comply with any
terms, conditions or covenants in this Lease, or caused by alterations,
additions or improvements made by Tenant or Tenant's agents, employees or
contractors.  It is an express condition precedent to all obligations of
Landlord to repair and maintain that Tenant shall have notified Landlord in
writing of the need for such repair of maintenance.

                                      -8-
<PAGE>

                18.  TENANTS' OBLIGATION TO REPAIR AND MAINTAIN
                     ------------------------------------------

     A.   Tenant shall at all times clean, keep and maintain in good order,
condition and repair the Premises and every part thereof, including without
limitation all plumbing and sewage facilities within the Premises, fixtures,
interior walls, floors, ceilings, windows, roofing membrane, doors, entrances,
plate glass, showcases, skylights, all electrical facilities and equipment,
including without limitation lighting fixtures, lamps, fans and any exhaust
equipment and systems, and automatic fire extinguisher equipment within the
Premises, electrical motors and all other appliances and equipment of every kind
and nature located in, upon or about the Premises, except as otherwise provided
hereunder.  All glass, both interior and exterior is at the sole risk of Tenant,
and any broken glass shall promptly be replaced by Tenant at Tenant's expense
with glass of the same kind, size and quality.  Tenant shall obtain heating,
ventilating and air conditioning systems preventive maintenance contract with
quarterly service, which shall be subject to the reasonable approval of Landlord
and paid for by Tenant, which shall provide for and include without limitation
replacement of filters, oiling and lubricating of machinery, parts replacements,
adjustment of drive belts, or changes and other preventive maintenance;
provided, however, that the Tenant shall have the benefit of all warranties
available to landlord regarding the equipment in said systems.  Tenant agrees to
assign to Landlord any warranties obtained by Tenant for the roof membrane upon
the termination of the Lease.  Tenant waives the provisions of Section 1941 and
1942 of the California Civil Code and any similar or successor law regarding
Tenant's right to make repairs and deduct the expenses of such repairs from the
rent due under this Lease.

     B.   Unless the same is caused by the negligence or willful misconduct of
Landlord or any of its agents, employees or contractors, Landlord shall not be
liable to Tenant or to any other person for any damage occasioned by a failure
in any utility system or by the bursting or leaking of any vessel or pipe in or
about the Premises, or for any damage occasioned by water coming into the
Premises or arising from the acts of neglect of occupants of adjacent property,
or the public.

     C.   Notwithstanding anything to the contrary contained in this lease, in
the event of the failure of the HVAC equipment and it is not reasonably
economical to repair the same, then Landlord shall replace the failed equipment
as follows:  (i) the replacement shall be made with improvements, materials
and/or equipment which are of a type and quality equal to or better than the
items that are being replaced, and (ii) such replacements shall be made at its
sole expense, but the cost thereof shall be amortized and Tenant shall pay
additional rent on account of such amortization in accordance with the following
procedures:  the cost of such replacement shall be amortized on a straight line
basis for ten (10) years with interest on the unamortized balance at either (a)
if Landlord borrows the needed funds, the then prevailing market rate Landlord
would pay if it borrowed funds to perform such replacement work from a
Institutional Lender (as defined below), or (v) if Landlord does not borrow such
funds, the annual rate of ten percent (10%) or the maximum rate allowed by Law,
whichever is less.  Landlord shall inform Tenant of the monthly amortized
payment required to amortize such cost and shall also provide Tenant with the
information upon which such determination is made.  As additional rent, Tenant
shall pay an amount equal to such monthly amortization payment for each month
after such

                                      -9-
<PAGE>

replacement is completed until the first to occur of (i) the expiration of the
term of the Lease, or (ii) the end of the term over which such costs were
amortized. The amount of such additional rent that Tenant is to pay shall be due
at the same time rent is due.

     D.   Tenant shall at all times clean, keep and maintain in good order,
condition and repair, the parking and landscaping areas associated with the
Premises including without limitation, fences, landscape irrigation systems
parking lot and striping.

                                 19.  FIXTURES
                                      --------

     Tenant shall, at its own expense, provide, install and maintain in good
condition all trade fixtures and equipment required in the conduct of its
business in the Premises.  All fixtures and improvements other than Tenant's
trade fixtures and equipment which are installed or constructed upon or attached
to the Premises by either Landlord or Tenant shall become a part of the reality
and belong to Landlord.  If Tenant is not then in default, Tenant may, at the
termination of this Leases or at any other time, remove from the Premises all
trade fixtures, equipment  and other personal property not permanently affixed
to the Premises.  Upon such removal, Tenant shall restore the Premises to its
original condition at the time of occupancy, normal wear and tear expected.

                                  20.  LIENS
                                       -----

     Tenant hereby indemnifies and agrees to hold Landlord free and harmless
from all liens, claims and demands arising out of any work performed or
materials supplied in, on or about the Premises by or on behalf of Tenant, its
agents, employees or contractors.  Tenant shall cause any such lien imposed to
be released of record by payment or posting of proper bond within twenty (20)
days after imposition of the lien or upon written request by Landlord.

                  21.  LANDLORD'S RIGHT TO ENTER THE PREMISES
                       --------------------------------------

     Tenant shall permit Landlord and its agents to enter the Premises at all
reasonable times upon not less than twenty-four (24) hours prior written notice,
(except in case of emergency), to inspect the same, to post notices of non
responsibility and similar notices and "For Sale" signs, to submit the Premises
to prospective purchasers, to make necessary alterations, additions,
improvements, or repairs to discharge alterations, additions, improvements or
repairs, to discharge Tenant's obligation hereunder when Tenant has failed to do
so within a reasonable time after written notice from Landlord, and at any
reasonable time within one hundred and eight (180) days prior to the expiration
of this Lease or any extension thereof, to place upon the Leased Premises
ordinary "For Lease" signs and to submit the Premises to prospective Tenants.
The above rights are subject to reasonable security regulations of Tenant.  Any
such entry by Landlord and Landlord's agents shall not repair Tenant's
operations more than reasonably necessary.

                                      -10-
<PAGE>

                                  22.  SIGNS
                                       -----

     Landlord shall provide a sign location on the Premises which may be used by
Tenant ("Designated Location").  In addition, Landlord hereby agrees to allow
Tenant to install one or more additional signs on or about the Premises at
locations other than the Designated Location ("Addition Signs") so long as such
signs comply with all applicable laws including all applicable zoning laws and
Tenant agrees to remove any such Additional Signs on termination of the Lease.
The costs of installing and maintaining the signs shall be Tenant's obligation.

                                23.  INSURANCE
                                     ---------

     A.   Tenant hereby agrees to indemnify and hold harmless Landlord, its
subsidiaries, directors, officers, agents, and employees from and against any
and all damage, loss, liability or expense including, but not limited to,
attorneys' fees and legal costs suffered by same directly or by reason of any
claim, suit or judgment brought by or in favor of any person or persons for
damage, loss or expense due to, but not limited to, bodily injury, including
death resulting anytime therefrom, and property damage sustained by such person
or persons which arises out of, is occasioned by or in any way attributable to
the use or occupancy of the demised Premises and adjacent areas by the Tenant,
the acts or omissions of the Tenant, its agents, employees or any contractors
brought onto said Premises by the Tenant, except to the extent caused by the
negligence or willful misconduct of Landlord or its agents, employees or
contractors.  Tenant agrees that the obligations assumed herein shall survive
this Lease.

     B.   Tenant hereby agrees to maintain in full force and effect at all
times during the term of this lease, at its own expense, for the protection of
Tenant and Landlord, as their interest may appear, policies of insurance issued
by a responsible carrier or carriers acceptable to Landlord which afford the
following coverages:

          1.   Employers' Liability__Not less than $1,000,000

          2.   Commercial General
               Liability Insurance, Including Blanket Contractual Liability,
               Broad Form Property Damage,
               Personal Injury,
               Completed Operations Products Liability,
               Fire Damage and
               Legal LiabilityNot less than $2,000,000

          3.   "All Risk" Property, Fire, Extended Coverage, and Special
               Extended Insurance including without limitation, vandalism,
               malicious mischief, inflation endorsement, sprinkler leakage
               endorsement on the Premises, including without limitation, the
               Improvements and all equipment, trade fixtures, inventory,
               fixtures and personal property located on or installed in the
               Premises.  Such insurance shall be in the full amount of the
               replacement cost of the aggregate of the foregoing as the same
               may from time to time increase as a result of inflation or
               otherwise.

                                      -11-
<PAGE>

          4.   Rent Insurance covering those risks referred to in B(3) in an
               amount equal to all rents (and any sums payable under the lease)
               for a period of at least twelve (12) months commencing  with the
               date of loss.

          5.   Boiler and Machinery Insurance including, but not limited to,
               steam pipes, return pipes, condensation return pipes and other
               pressure vessels and HVAC, in an amount satisfactory to Landlord.

          6.   Earthquake insurance with deductibles approved by Landlord not
               less than $200,000.

     C.   Tenant may, with the written consent of Landlord, elect to have
reasonable deductibles in connection with Items B(3), B(4) and B(5).  Landlord
shall have no obligation to pay for repairs within the deductible amount except
as provided in B(6).

     D.   Tenant shall deliver to Landlord at least thirty (30) days prior to
the time such insurance is first required to be carried by Tenant, and
thereafter at least thirty (30) days prior to expiration of such policy,
Certificates of Insurance of copies of the policy evidencing the above coverage
with limits not less than those specified above.  Such Certificates, with the
exception of Workers Compensation, shall name Landlord, as described herein and
its agents and employees as additional insured.  Further, all Certificates shall
expressly provide that no less than thirty (30) days prior written notice shall
be given Landlord in the event of a material alteration or to or cancellation of
the coverages evidenced by such Certificates.

     E.   Upon demand, Tenant shall provide Landlord, at Tenant's expense, with
such increased amount of existing insurance, and such other insurance with
respect to increase in risk due to any change in use of the Premises by Tenant
hereafter, as Landlord may reasonably require to afford Landlord adequate
protection for said risks.

     F.   If, on account of the failure of Tenant to comply with the foregoing
provisions, Landlord is adjudge a co-insurer by its insurance carrier, then any
loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant
and shall be immediately paid by Tenant upon receipt of a bill thereof and
evidence of such loss.

     G.   Landlord makes no representation that the limits of liability
specified to be carried by Tenant under the terms of this Lease are adequate to
protect Tenant against Tenant's undertaking under this Article, and in the event
Tenant believes that any such insurance coverage called for under this Lease is
insufficient Tenant shall provide, at its own expense, such additional increase
as Tenant deems adequate.

     H.   All such insurance shall be in a form reasonably satisfactory to
Landlord and shall be carried with companies that have a general policy holder's
rating not less than "A" and a financial rating of not less than Class "X" in
the most current edition of Best's Insurance Reports, shall provide that such
policies shall not be subject to cancellation or change except after at least
thirty (30) days' prior written notice to Landlord, and the policy or policies,
or duly executed certificates for them, together with satisfactory evidence of
payment of the premium

                                      -12-
<PAGE>

thereon shall be deposited with Landlord prior to the time Tenant enters into
possession of the Premises, and upon renewal of such policies, not less than
thirty (30) days prior to the expiration of the term of such coverage. If Tenant
fails to procure and maintain the insurance required hereunder, Landlord may,
but shall not be required to, order such insurance and Tenant shall pay the cost
and expense of same upon demand, plus interest at fifteen percent (15%) per
annum, but in no event to exceed maximum rate allowed by law.

                          24.  DAMAGE OR DESTRUCTION
                               ---------------------

     A.   If the Premises are damaged or destroyed, Landlord shall repair the
Premises to their prior condition unless it has the option to terminate this
Lease as provided herein and it elects to so terminate.  Landlord shall have the
option to terminate this Lease in the event any of the following occur:

          1.   The building(s) which is located on the Premises is destroyed or
          damaged by fire or other casualty required to be insured against by
          Tenant pursuant to Paragraph 23(B)(1), then in force to the extent of
          fifty percent (50%) or more of the replacement cost thereof.
          Notwithstanding the foregoing, however, in the event Landlord elects
          to terminate the Lease due to the fact that the Premises is destroyed
          to the extent of 50% or more of the replacement costs thereof, Tenant
          shall have the election to cause this Lease to continue in full force
          and effect by agreeing to pay for all of the costs necessary to repair
          or replace the Premises to the extent such costs exceed the insurance
          proceeds.  Tenant shall make such election within thirty (30) days
          following Landlord's election to terminate this Lease.  In the event
          Tenant makes the election to pay such additional expenses in order to
          avoid the termination of this Lease, the parties shall cooperate and
          work together in good faith in order to enable the Premises to be
          rebuilt as quickly as reasonably possible following any such damage
          and destruction.  Tenant also agrees to pay Landlord's reasonable
          costs and expenses associated with assisting Tenant in reconstruction.

          2.   The building(s) which is located on the Premises is damaged or
          destroyed by an uninsured casualty and the cost to repair such damage
          will exceed 5% of the replacement cost of the building; provided,
          however, that in the event Landlord elects to terminate the Lease as a
          result of any such uninsured casualty, Tenant shall have the election
          to cause this Lease to continue in full force and effect by agreeing
          to pay for all of the costs necessary to repair or replace the
          Premises to the extent there are no insurance proceeds available.
          Durect shall make such election within thirty (30) days following
          Landlord's election to terminate this Lease.  In the event Tenant
          makes the election to pay such additional expenses in order to avoid
          the termination of this Lease, the parties shall cooperate and work
          together in good faith in order to enable the Premises to be rebuilt
          as quickly as reasonably possible following any such damage and
          destruction. Tenant also agrees to pay Landlord's reasonable costs and
          expenses associated with assisting Tenant in reconstruction.

                                      -13-
<PAGE>

          3.   If one of the above events occurs, Landlord may terminate this
          Lease by giving Tenant written notice of its election to terminate
          within thirty (30) days after such damage or destruction, in which
          event this Lease shall terminate as of the date Tenant receives such
          notice unless Tenant has elected to pay for all costs necessary to
          replace the Premises to the extent such costs exceed the insurance
          proceeds as provided above.  If any of the above events occurs and
          Landlord elects not to terminate the Lease, Landlord and Tenant shall
          work together in good faith so as to commence the repair or
          replacement of the Premises and all of Tenant's fixtures and other
          property and improvements within ninety (90) days following the date
          of such damage and destruction in accordance with the terms hereof,
          and shall thereafter cooperate with each other in good faith in order
          to prosecute the same diligently to completion in which event this
          Lease will continue in full force and effect.  Landlord shall not be
          responsible for any costs in replacement or repair of Tenant's trade
          fixtures and other property and improvements.  Notwithstanding the
          foregoing or anything to the contrary contained in this Lease, if the
          Premises are condemned or damaged by any peril and the Landlord does
          not elect to terminate the Lease or is not entitled to terminate the
          Lease pursuant to its terms, then Tenant shall have the option to
          terminate the Lease if the Premises are condemned or damaged by any
          peril and the Landlord does not elect to terminate the Lease or is not
          entitled to terminate the Lease pursuant to its terms, then Tenant
          shall have the option to terminate the Lease if the Premises cannot be
          or are not in fact, fully restored by Landlord to their prior
          condition within two hundred seventy days (270) days after the
          condemnation or damage.

     All insurance proceeds for the Premises that shall be payable under all
risk, property fire and extended coverage and extended insurance provided for in
paragraph 23 shall be payable to Landlord and Tenant, as their interests shall
appear, and the parties hereby agree to cooperate in good faith with each other
to cause such insurance proceeds to be used to repair the Premises and all of
Tenant's fixtures and other property.  In the event the Lease is terminated as a
result of any damage or destruction, such insurance proceeds shall be payable to
the parties as their interests may appear.  Landlord shall not be liable to
tenant for any shortfall in insurance proceeds.

     B.   In the event of any damage or destruction to the Premises which does
not result in a termination of this Lease, and if rent loss proceeds are not
available, the rent and other sums payable hereunder shall be temporarily abated
proportionately with the degree to which Tenant's use of the Premises is
impaired by such damage or destruction commencing from the date of such damage
or destruction and continuing during the period required by Landlord to complete
its repair and restoration of the Premises.  Provided Landlord complies with its
obligations under this Section 24, Tenant shall not be entitled to any
compensation of damages from Landlord for loss of the use of the Premises,
damage to Tenant's personal property or any inconvenience occasioned by such
damage, repair or restoration.  Tenant hereby waives the provisions of Section
1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil
Code, and the provisions of any similar law hereinafter enacted.

                                      -14-
<PAGE>

                               25.  CONDEMNATION
                                    ------------

     A.   If title to all of the Premises or so much thereof be taken for any
public or quasi-public use under any statute or by right of eminent domain, or
by private purchase in lieu thereof, so that a reasonable amount of
reconstruction of the Premises will not result in the Premises being reasonably
suitable for Tenant's continued occupancy for the uses and purposes permitted by
this Lease, this Lease shall terminate as of the date that possession of the
Premises or part thereof be taken.

     B.   If any part of the Premises shall be so taken and the remaining part
thereof (after reconstruction of the then existing building in which the
Premises are located) is reasonably suitable for Tenant's continued occupancy
for the purposes and uses permitted by this Lease, this Lease shall, as to the
part taken, terminate as of the date that possession of such part of the
Premises be so taken and the rental and other sums payable hereunder shall be
reduced in the same proportion that the floor areas of the portion of the
Premises so taken (less any addition thereto by reason of any reconstruction)
bears to the original floor area of the Premises, and Landlord shall, at is own
cost and expense, make all necessary repairs or alterations to the building in
which the Premises are located so as to make the portion of the building not
taken a complete architectural unit and the remaining Premises a complete unit.
A proportionate part of the rental and other sums payable hereunder shall be
temporarily abated during such restoration to the extent there is a substantial
interference with Tenant's business.  Each party thereto waives the provisions
of Section 1265.130, California Code of Civil Procedure allowing either party to
petition the Superior Court to terminate this Lease in the event of a partial
taking of the Premises.

     C.   No award for any partial or entire taking shall be apportioned, and
Tenant hereby assigns to Landlord its interest in any award which may be made in
such taking or condemnation, together with any and all rights of Tenant now or
hereafter arising in or to the same or part thereof; provided, however, that
nothing contained herein shall be deemed to give Landlord any interest in or
require Tenant to assign Landlord any award made to Tenant for the taking of
personal property belonging to Tenant, for the interruption of Tenant's business
for its moving cost, or for the loss of good will.  No temporary taking of the
Premises, defined as a taking for less than 180 days, shall terminate this Lease
or give Tenant any right to any abatement of rent hereunder.  Any award made to
Tenant by reason of such temporary taking shall belong entirely to Tenant and
Landlord shall  not be entitled to share instruments that may be required to
effectuate the provisions of this paragraph.

                         26.  ASSIGNMENT AS SUBLETTING
                              ------------------------

     A.   Landlord's Consent.  Tenant shall not transfer, sublet, assign or
          ------------------
enter into any license or concession agreement, mortgage or hypothecate this
Lease or Tenant's interest in this Lease or in or to any portion of the Premises
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed.  Any attempt or purported sublet without
Landlord's prior written consent shall be void and confer no rights upon any
third person and, at Landlord's election shall allow Landlord to terminate this
Lease.

                                      -15-
<PAGE>

     B.   Sublease Form.  Each sublet to which Landlord has consented shall be
          -------------
by an instrument in writing in a form reasonably satisfactory to Landlord, and
shall be executed by all parties to the transaction.  Each subtenant shall agree
in writing, for the benefit of Landlord to assume, to be bound by, and to
perform the terms, conditions and covenants of this Lease to be performed by
Tenant.  Notwithstanding anything contained herein, Tenant shall not be released
from personal liability for the performance of each term, condition and covenant
of this Lease unless Landlord specifically consents to such release in writing.

     C.   No Waiver.  Consent by Landlord to one such subletting shall not be
          ---------
deemed a consent to any subsequent subletting.

     D.   Information To Be Furnished.  If Tenant desires at any time to sublet
          ---------------------------
the premises, it shall first notify Landlord of its desire to do so and shall
submit in writing to Landlord (i) the name of the proposed subtenant; (ii) the
nature of the proposed subtenant's business to be carried on in the Premises,
(iii) the terms and provisions of the proposed sublease and a copy of the
proposed sublease form; (iv) such financial information, including financial
statements, as Landlord may reasonably request concerning the proposed
subtenant.

     E.   Consent and Excess Rent.  If Landlord consents to the sublet, Tenant
          -----------------------
may thereafter enter into a valid sublease of the Premises or portion thereof,
upon the terms and conditions set forth in the information furnished by Tenant
to Landlord pursuant to Subparagraph D above, subject, however, at Landlord's
election, to the following conditions:

     Any excess of the monies paid to Tenant under the sublease ("Excess Rent")
over the rental required to be paid by Tenant hereunder shall be paid to
Landlord and Tenant, in equal shares after deducting reasonably direct sublease
expenses.  Any such Excess Rent to be paid to Landlord pursuant hereto shall be
payable to Landlord as and with the monthly rent payable to Landlord hereunder
pursuant to the terms of Article 4 above.

     F.   Subrental.  The term "Excess Rent" as used herein shall include any
          ---------
consideration of any kind received, or to be received, by Tenant from the
subtenant as a result of the sublet, including, but not limited to, key money,
bonus money, and payments (in excess of book value thereof) for Tenant's assets,
fixtures, inventory, accounts, good will, equipment, furniture, general
intangibles, and any capital stock or other equity ownership on Tenant.

     G.   Proration.  If less than the whole of the Premises is sublet, the
          ---------
prorata share of the rental attributable to such partial area of the Premises
shall be determined by Landlord by dividing the monthly rental payable to Tenant
hereunder by the total square footage of the Premises and multiplying the
resulting quotient (the per square foot rent) by the number of feet of the
Premises which are being sublet.

     H.   Extended Counterpart.  No sublease shall be valid nor shall any
          --------------------
subtenant take possession of the Premises until an executed counterpart of the
sublease has been delivered to Landlord.

                                      -16-
<PAGE>

     I.   Permitted Transfers.  Notwithstanding anything to the contrary
          -------------------
contained in this Section 26, Tenant may, without Landlord's prior written
consent and without being subject to any of the provisions of this Section 26
including, without limitation, Landlord's right to participate in subrental
proceeds, sublet the Premises or assign this Lease to (i) a subsidiary,
affiliate, division or corporation controlling, controlled by or under common
control with Tenant; (ii) a successor corporation related to Tenant by merger,
consolidation, non-bankruptcy reorganization, or government action or (iii) a
purchaser of substantially all of Tenant's assets.  For the purpose of this
Lease, the sale or transfer of Tenant's capital stock, including without
limitation, a transfer in connection with the merger, consolidation or non-
bankruptcy reorganization of Tenant and any sale of such stock through any
public exchange or any public or private offering, shall not be deemed an
assignment, subletting, or any other transfer of the Lease or the Premises.  It
shall be a condition for the operation of this clause that the proposed
transferee shall provide Landlord with an assumption of this Lease Agreement in
a form reasonably approved by Landlord which agreement shall continue all
Tenant's duties hereunder.

     J.   Landlord Cooperation. Landlord hereby acknowledges that Tenant intends
          --------------------
to enter into one or more subleases of all or a portion of the Premises and
Landlord hereby agrees to cooperate in good faith with Tenant and Tenant's
subtenants in connection with any tenant improvements which any such subtenants
propose to make to the Premises so long as subtenants agree and conform to the
requirements of Article 13 "Surrender of the Premises" of this Lease.
Additionally, Landlord shall cooperate with and allow any and all such
subtenants to install any signs on or about the Premises which are otherwise
agreed to by Tenant and which comply with all applicable laws including zoning
laws.

                                 27.  DEFAULT
                                      -------

     A.   Upon an "Event of Default" (as defined herein), Landlord shall have
the following remedies, in addition to all other rights and remedies provided by
law or otherwise provided in this Lease, to which Landlord may resort
cumulatively or in the alternative:

          1.   Landlord can continue this Lease in full force and effect, and
the Lease will continue in effect as long as Landlord does not terminate
Tenant's right to possession, and Landlord shall have the right to collect rent
when due.  During the period Tenant is in default, Landlord can enter the
Premises and rent them, or any part of them, to third parties for Tenant's
account.  Tenant shall be liable immediately to Landlord to all costs Landlord
incurs in reletting the Premises, including, without limitation, broker's
commissions, expenses of remodeling the Premises required by the reletting and
like cost.  Such reletting cannot be for a period shorter or longer than the
remaining term of this lease.  Tenant shall pay to Landlord the rent and other
sums due under this Lease on the dates the rent is due, less the rent and other
sums Landlord receives from any reletting.  No act by Landlord allowed by this
paragraph shall terminate this Lease unless Landlord notifies Tenant in writing
that Landlord elects to terminate this Lease.

          2.   Landlord can terminate Tenant's right to possession of the
Premises at any time.  No act by Landlord other than giving written notice to
Tenant shall terminate this Lease.  Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Landlord's

                                      -17-
<PAGE>

interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord has the right to remove all personal
property of Tenant and store same at Tenant's cost and to recover from Tenant as
damages:

          a.   The worth at the time of award of unpaid rent and other sums due
and payable which had been earned at the time of termination; plus

          b.   The worth at the time of award of the amount by which the unpaid
rent and other sums due and payable which would have been payable after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus

          c.   The worth at the time of award of the amount by which the unpaid
rent and other sums due and payable for the balance of the term after the time
of award exceeds the amount of such rental loss the Tenant proves could be
reasonably avoided; plus

          d.   Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform Tenant's obligation
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including but not limited to any cost of expenses incurred by
Landlord (i) in retaking possession of the Premises, including reasonable
attorneys' fees and costs therefore, (ii) maintaining or preserving the Premises
after such a new tenant, including repairs or alterations to the Premises for
such reletting, (iii) leasing commissions, or (iv) any other cost necessary or
appropriate to relet the Premises.

          The "worth at the time of award" of the amounts referred to in
Subparagraphs 2a and 2b of this Paragraph is computed by allowing interest at
the rate of fifteen percent (15%) per annum, but in no event to exceed the
maximum rate allowed by law, on the unpaid rent and other sums due and payable
from the termination date through the date of award, The "worth at the time of
award" of the amount referred to in Subparagraph 2c of this Paragraph is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

     B.   At the option of Landlord, a breach of this Lease shall exist if any
of the following events (severally "Event of Default" and collectively "Events
of Default") shall occur:

          1.   Tenant shall have failed to pay rent, real property insurance,
building maintenance expenses, real estate taxes or any other sum required to be
aid hereunder when due and such failure shall not have been cured within ten
(10) days after Tenant's receipt of written notice of delinquency; provided,
however, that Landlord shall not be required to provide two (2) such notices for
a similar default in any twelve (12) month period of the lease.  Tenant may cure
said default at any time prior to a termination of this Lease by Landlord or a
re-entry by Landlord by paying all rents and other expenses or charges then due.

          2.   Tenant shall have failed to perform any term, covenant or
condition of this Lease, except those requiring the payment of money, and Tenant
shall have failed to cure such breach within thirty (30) days after written
notice from Landlord if such breach could reasonably

                                      -18-
<PAGE>

be cured within said 30-day period. In the event any such breach could not
reasonably be cured within said 30-day period, then Tenant shall not be in
default under the terms of this Lease unless Tenant fails to commence to cure
such breach within such 30-day period or fails to diligently prosecute such cure
thereafter until completion, or

          3.   Tenant shall have assigned its assets for the benefit of its
creditors, or

          4.   The sequestration or attachment of or execution on any
substantial part of the property of Tenant or on any property essential to the
conduct of Tenant's business shall have occurred, and Tenant shall have failed
to obtain a return or release of such property within thirty (30) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier; or

          5.   Tenant shall have abandoned or vacated the Premises without
paying rent.

          6.   A court shall have made or entered any decree or order which is
not rescinded within sixty (60) days of its issuance and Tenant is not otherwise
in default:

          a. other than under the bankruptcy laws of the United States or

          b. appointing a receiver, trust or assignee of Tenant in bankruptcy or
insolvency or for its property; or

          c. directing the winding up or liquidation of Tenant and such decree
or order shall have continued for a period of thirty (30) days.

     C.   The waiver by either party 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 or any subsequent breach of the same or any other term,
covenant or condition herein contained.  The subsequent acceptance of rent
hereunder by Landlord 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 or other sum accepted, regardless
of Landlord's knowledge of such preceding breach at the time of acceptance of
such payment.  No covenant, term or condition of this Lease shall be deemed to
have been waived by Landlord or Tenant unless such waiver be in writing signed
by such party.

                              28.  SUBORDINATION
                                   -------------

     This Lease is subject and subordinate to all mortgages and deeds of trust
which now affect the Premises and to all renewals, modifications,
consolidations, replacements, and extension thereof and Landlord shall have the
right to cause this Lease to be and become and remain subject and subordinate to
mortgages or deeds of trust which may hereafter be executed covering the
Premises or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof, provided only that any such subordination to any existing or future

                                      -19-
<PAGE>

mortgage or deed of trust shall at all times be expressly subject to the
condition that the holder of any such mortgage or deed of trust agree that in
the event of the foreclosure of any such mortgage or deed of trust, Tenant's
leasehold interest in the Premises shall not be disturbed so long as Tenant is
not in default beyond any applicable cure period.  Additionally, the holder of
any such mortgage or deed of trust shall agree to enter into a new lease with
Tenant upon the same terms and conditions as this Lease with respect to the
Premises in the event such holder acquires title to the Premises.  Within ten
(10) days after Landlord's written request therefor, Tenant shall execute any
and all documents reasonably required by Landlord or the Holder (or Holders) of
the mortgage or deed of trust required to effectuate such subordination
attornment and non-disturbance agreement to make this Lease prior to any lien of
any mortgage, or deed of trust, as the case may be, so long as such documents
provide that the holder or holders of such mortgage or deed of trust will not
disturb Tenant's leasehold interest in the Premises following foreclosure so
long as Tenant is not in default beyond any applicable cure period.
Notwithstanding anything to the contrary set forth in this paragraph, Tenant
hereby attorns and agrees to attorn to any person, firm or corporation
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, powers or remedies under such
mortgage or deeds of trust as if such person, firm or corporation had been named
as Landlord herein, it being intended hereby that Tenant's right to quiet
possession of the Premises shall not be disturbed if Tenant is not in default
and so long as Tenant shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated, pursuant to
its terms.  If acceptable to Landlord's lender and in an acceptable form, this
Lease may be prior to the mortgage.

     Landlord shall, within thirty (30) days of the execution of this Lease by
the parties, provide a written acknowledgement to Tenant from the holder or
holders of any mortgage or deed of trust encumbering the Premises which (i)
provides that this Lease shall not be terminated so long as Tenant is not in
default under any applicable cure period under this Lease and (ii) recognizes
all of Tenant's rights hereunder.

                                 29.  NOTICES
                                      -------

     Any notice or demand required or desired to be given under this Lease,
except inspection requests, shall be in writing and shall be personally served
or in lieu of personal service may e given by mail in which latter event such
notice shall be deemed to have been given when three (3) business days have
elapsed from the time when such notice was deposited in the United States mail,
certified and postage prepaid, addressed to the party to be served.  At the date
of execution of this Lease, the addresses of Landlord and Tenant are as first
above set forth; provided that from and after the date the term of this Lease
commences the address of Tenant shall be the address of the Premises.  Either
party may change its address by giving notice of same in accordance with this
paragraph.

                             30.  ATTORNEY'S FEES
                                  ---------------

     In the event either party shall bring any action or legal proceeding for
damages for an alleged breach of any provision of this Lease, to recover rent,
or other sums due, to terminate the

                                      -20-
<PAGE>

tenancy of the Premises or to enforce, protect or establish any term, condition
or covenant of this Lese or right of either party, the prevailing party shall be
entitled to recover as a part of such action or proceedings, or in a separate
action brought for that purpose, reasonable attorneys' fees and court costs as
may be fixed by the court or jury.

                          31.  ESTOPPEL CERTIFICATES
                               ---------------------

     Tenant shall within fifteen (15) days following request by Landlord:

     A.   Execute and deliver to Landlord any document, including estoppel
certificates as prepared by Landlord (i) certifying that this Lease is
unmodified and in full force and effect or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or if there
are uncured defaults on the part of Landlord, stating the nature of such uncured
defaults, and (iii) evidencing the status of the Lease as may be reasonably
required either by a lender making a loan to Landlord to be secured by deed of
trust or mortgage covering the Premises or a purchaser of the Premises from
Landlord; and

     B.   In connection with any refinancing or sale of the Premises by
Landlord, to deliver to Landlord the current financial statements of Tenant with
an opinion of a certified public accountant, if available, including a balance
sheet and profit and loss statement for the most recent prior year, all prepared
in accordance with generally accepted accounting principles consistently
applied.  Tenant's failure to deliver an estoppel certificate within fifteen
(15) days after the delivery of Landlord's request therefor shall be conclusive
upon Tenant (i) that his Lease is in full force and effect, without modification
except as may be represented by Landlord, (ii) that there are now no uncured
defaults in Landlord's performance, and (iii) that no rent has been paid in
advance.

                   32.  TRANSFER OF THE PROPERTY BY LANDLORD
                        ------------------------------------

     In the event of any conveyance of the Premises and assignment by Landlord
of this Lease, Landlord shall be and is hereby entirely freed and relieved of
all liability under any and all of its covenants and obligations contained in or
derived from this Lease first arising and occurring after the consummation of
such conveyance assignment so long as Landlord's successor agrees and covenants
to assume all of Landlord's obligations under this Lease occurring after the
consummation of such conveyance assignment.

                                 33.  GENERAL
                                      -------

     A.   The captions used in this Lease are for the purpose of convenience
only and shall not be constructed to limit or extend the meaning of any part of
this Lease.

     B.   Any executed copy of this Lease Agreement shall be deemed an original
for all purposes.

                                      -21-
<PAGE>

     C.   Time is of the essence for the performance of each term, condition and
covenant of this Agreement.

     D.   In case any one or more of the provisions contained herein, except for
the payment of rent, shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein. This Lease shall be construed and enforced in accordance with
the laws of the State of California.

     E.   The language in all parts of this Lease shall in all cases be
construed as a whole according to its fair meaning and not strictly for or
against either Landlord or Tenant. When the content of this Lease requires the
neuter gender, it includes the masculine, the feminine, a partnership or
cooperation or joint venture, and the singular includes the plural.

     F.   The covenants and agreements contained in this Lease shall be binding
on the parties hereto and on their respective successors and assigns (to the
extent this Lease is assignable).

     G.   The waiver of Landlord of any breach of any term, condition or
covenant of this Lease shall not be deemed to be a waiver of such provision or
any subsequent breach of the same or nay other term, condition or covenant of
this Lease.

              34.  LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
                   ----------------------------------------------

     If Tenant shall at any time be in default (beyond any applicable cure
period) of its obligations to make any payment or perform any other act on its
part to be made or performed under this Lease, Landlord may, but shall not be
obligated to and without waiving or releasing Tenant from any obligation of
Tenant under this Lease, make such payment or perform such other act to the
extent Landlord may deem desirable, and in connection therewith, pay expenses
and employ counsel.  All sums so paid by Landlord and all penalties, interest
and costs in connection therewith shall be due and payable by Tenant on the next
day after any such payment by Landlord, together with interest thereon at the
rate of fifteen percent (15%) per annum, but in no event to exceed the maximum
rate allowed by law, from such date to the date of payment thereof by Tenant to
Landlord plus collection costs and attorneys' fees.  Landlord shall have the
same rights and remedies for the non-payment thereof as in the case of default
in the payment of rent.

                             35.  RENEWAL OPTIONS
                                  ---------------

     A.   At the expiration of the original five (5) year term hereof, and if
Tenant is not in default of any of the terms and conditions of this Lease,
Tenant shall have an option to extend this Lease for one additional term of five
(5) years (herein referred to as the "First Renewal Term").  The option to
extend the Lease for the First Renewal Term shall be exercised by giving
Landlord written notice of Tenant's intention to do so at least one hundred
eighty (180) days prior to the expiration of the present term.  Such First
Renewal Term shall be upon all the terms

                                      -22-
<PAGE>

and conditions hereof, except that the monthly rental for the new term shall be
ninety-five percent (95%) of the then current fair market rental value of the
Premises. In determining the then fair market rental value, the value of any
tenant improvements in the Premises which were paid for by Tenant or any
subtenant shall not be taken into account except for those improvements which
Landlord has agreed to in writing need not be removed by Tenant upon the
termination of this Lease. The parties acknowledge that the value of the
laboratory improvements which construction was commenced by Tenant as subtenant
to Norian Corporation prior to the Commencement Date shall not be taken into
account when determining the fair market rental value of the Premises for the
First Renewal Term.

     At the expiration of the First Renewal Term and if Tenant is not in default
of any of the terms and conditions of this Lease, Tenant shall have a second
option to extend this Lease for one additional term of five (5) years (herein
the "Second Renewal Term").  This option to extend the term of this Lease for
the Second Renewal Term shall be exercised by giving Landlord written notice of
Tenant's election to do so at least one hundred eighty (180) days prior to the
expiration of the First Renewal Term.  Such Second Renewal Term shall be upon
all the terms and conditions hereof except that the monthly rental for the
Second Renewal Term shall be an amount equal to ninety-five percent (95%) of the
then current fair market rental value of the Premises.  In determining the then
fair market rental value, the value of any tenant improvements in the Premises
which were paid for by Tenant or any subtenant shall not be taken into account
except for those improvements which Landlord has agreed to in writing need not
be removed by Tenant upon the termination of this Lease.  The parties
acknowledge that the value of the laboratory improvements which construction was
commenced by Tenant as subtenant to Norian Corporation prior to the Commencement
Date shall not be taken into account when determining the fair market rental
value of the Premises for the Second Renewal Term.

     B.   In the event Landlord and Tenant cannot agree upon the sum which is
ninety-five percent 95% of the then current fair market rental value of the
Premises within fifteen (15) days after the expiration of the first five (5)
year term or the First Renewal Term, the parties shall have the fair market
rental value of the Premises determined by the appraisal procedure set forth
below.

     Each party shall, within, appoint one (1) representative who shall be an
MAI real estate appraiser with at least five (5) years full-time commercial
appraisal experience in Santa Clara County to act as an appraiser.  The two (2)
appraisers within thirty (30) days from the expiration of the fifteen (15) day
period shall submit their determination in writing signed by both appraisers to
each party.

     If the two (2) appraisers cannot agree upon the fair market rental value of
the Premises within said thirty (30) days, they shall appoint a third appraiser
who is similarly qualified.  If the two (2) appraisers cannot agree on a third
appraiser within fifteen (15) days from the date they were to have submitted
their appraisal to Landlord and Tenant, either of the parties to this Lease, by
giving five (5) days notice to the other party, can apply to the presiding judge
of the Santa Clara County Superior Court for the selection of a third appraiser
who meets the qualifications stated above.

                                      -23-
<PAGE>

     Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the fair market value of the Premises.  If
a majority of the appraisers are unable to set the fair market rental value
within the stipulated time, three (3) appraisals shall be added together and
their total divided by three; the resulting quotient shall be the fair market
rental value.

     If, however, the low appraisal and/or the high appraisal are more than ten
percent (10%) lower and/or higher than the middle appraisal, the low and/or high
appraisal shall be disregarded.  If only one (1) appraisal is disregarded, the
remaining two 92) appraisals shall be added together and their total divided by
two (2); the resulting quotient shall be the fair market rental value of the
Premises.  If both the low appraisal and the high appraisal are disregarded as
stated in this paragraph, the middle appraisal shall be the fair market rental
value of the Premises.

     In appraising the Premises as provided for in this paragraph, the
appraisers shall take into consideration the fair market rental value of the
space which is comparable in quality and nature to the Premises; provided,
however, in determining the fair market rental value, the value of any tenant
improvements in the Premises which were paid for by Tenant or any subtenant
shall not be taken into account except for those improvements which Landlord has
agreed to in writing need not be removed by Tenant upon the termination of this
Lease.  The parties acknowledge that the value of the laboratory improvements
which construction was commenced by Tenant as subtenant to Norian Corporation
prior to the Commencement Date shall not be taken into account when determining
the fair market rental value of the Premises for either the First Renewal Term
or the Second Renewal Term.  If feasible, comparable space within the adjacent
business park shall be the basis of the appraisers' determination of fair market
rental value of the Premises.  In no event shall the new fair market rental
value be less than the rent last payable under the terms of the Lease.

     If Tenant objects to the fair market rental that is finally determined
pursuant to the appraisal process set forth above, Tenant shall have the right
to elect not to extend the term of the lease so long as such determination is
made in writing to Landlord within fifteen (15) days from the date of the final
determination of the renewal term rent.  If Tenant fails to so notify Landlord
of its election to terminate the Lease, it shall be deemed that the Lease shall
continue in effect and the rent payable shall be the final determination on the
appraisers.

     Landlord and Tenant shall each pay for the cost of the appraiser appointed
by them and they shall each pay one-half of the cost of the third appraiser in
the event it is necessary to appoint a third appraiser.

     In the event Landlord or Tenant fails to appoint an appraiser within the
time specified, the determination of the appointed appraiser shall be final and
binding on both parties.

     In the event the third appraiser fails to present a fair market rent within
the thirty (30) day period, then by mutual consent of Landlord and Tenant (1)
the time period shall be extended or (2) if Landlord or Tenant do not wish to
extend the period, a new third appraiser shall be selected by Landlord's and
Tenant's appraisers and a new thirty (30) day period shall begin.

                                      -24-
<PAGE>

                             36.  ENTIRE AGREEMENT
                                  ----------------

     This Lease and the Exhibits and Addenda, if any, attached hereto is the
entire Agreement between the Parties, and there are no agreements or
representations between the Parties except as expressed herein.  Except as
otherwise provided herein, no subsequent changes or additions to this Lease
shall be binding unless in writing and signed by the Parrots hereto.

                                 37.  OFFSETS
                                      -------

     No claim the Tenant may have against the Landlord for any reason shall be
offset against the Rents due from Tenant to Landlord.

               38.  COMPLIANCE WITH THE AMERICANS DISABILITY ACT
                    --------------------------------------------

     Tenant, at its sole cost and expense, shall be responsible for full
compliance with the Americans with Disabilities Act of 1990, as amended,
including, without limitation, Title III thereof and the regulations promulgated
thereunder (collectively ADA), with regard to the leased premises and Tenant's
business conducted therein.  Notwithstanding anything to the contrary contained
herein, Tenant shall not be required to construct or pay the cost of complying
with any Laws, including, without limitation, the ADA, requiring the
construction of structural or other improvements to the Premises unless such
compliance is necessitated by new legislation becoming effective during the
Lease term or because of Tenant's particular use of the Premises or any
improvements to the Premises made by Tenant.

                  39.  TENANT'S ENVIRONMENTAL RESPONSIBILITY
                       -------------------------------------

     Tenant shall not permit or conduct any activity on the Premises which would
violate or cause Landlord to be in violation of applicable laws, statutes,
ordinances, rules, regulations, policies, orders and determinations of any
governmental authority pertaining to health or the environmental (collectively
the "Applicable Law"), including, but not limited to, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Resource Conversion and recovery Act of 1967, as amended, and State Laws, as
amended, nor which would cause the presence of any substance or the existence of
any condition, or the threatened release of any substance in, on, or under the
surface of the Premises, or occurrence of any event in which any substance has
been disposed of or released on, in or from the Premises in any manner not
permitted under Applicable Law such that Applicable Law would require (i) a
report or other notice of such condition or event to any federal, state or local
governmental agency or (ii) remodel, treatment, or other procedures or remedial
action with respect to such condition or event in order to bring the Premises
into compliance with all Applicable Law or (iii) contribution by any current or
former owner or operator of the Premises toward removal, treatment or other
procedures or remedial action required by or that may be brought under
Applicable Law with respect to the Premises or any other site or location
affected by such condition or event.

     To the best knowledge of Landlord, (i) no Hazardous Material is present on
the Premises or the soil, surface water or ground water thereof, and no action,
proceeding or claim is pending

                                      -25-
<PAGE>

or threatened regarding the Premises concerning any Hazardous Material or
pursuant to any Applicable Law. Under no circumstance shall Tenant be liable for
any losses, costs, claims, liabilities and damages (including attorneys' and
consultants' fees) of every type and nature, directly or indirectly arising out
of or in connection with any Hazardous material present at any time on or about
the Premises, or the soil, air improvements, ground water or surface water
thereof, or the violation of any law, orders or regulations, relating to any
such Hazardous Material except to the extent that any of the foregoing actually
results from the release or emission of Hazardous Material on or about the
Premises during the Lease term by Tenant or its agents or employees in violation
of Applicable Laws. As used herein, "Hazardous Material" shall mean any material
which is now or hereafter regulated by any governmental authority or which poses
a hazard to the environment or human life. Tenant acknowledges receipt of
Earthmetrics (1990) report showing presence of underground storage tank, but
shall not be responsible for such removal if compelled by government action.

                   40.  WASTE COVENANT/EASEMENTS PROHIBITED
                        -----------------------------------

     Tenant agrees not to commit  nor suffer any waste to the leased premises.
Tenant will not use or permit the use of the leased premises in any manner which
would result, or would with the passage of time result in the creation of any
easement or prescriptive right.

    41.  MAINTENANCE OF CORPORATE EXISTENCE & ASSETS; MERGER CONSOLIDATION
         -----------------------------------------------------------------

     Tenant covenants that it will maintain its corporate existence and that it
will not during the term hereof sell, transfer or assign all or substantially
all of its assets, or merge into or consolidate with any other corporation
unless the surviving corporation shall have a new worth at lest equal to the net
worth of Tenant immediately prior to such merger or consolidation and unless
such surviving corporation shall execute and deliver to Landlord and to any
mortgagees of the leased premises written assumption of the obligations of
Tenant under this Lease.

                           42.  MEMORANDUM OF LEASE
                                -------------------

     At Tenant's request, Landlord shall execute in recordable form, a "
Memorandum of Lease" referencing the Lease and setting forth the true and legal
description and assessor's parcel number of the Premises in a form reasonably
acceptable to Tenant, and which Memorandum of Lease shall be recorded in the
Official Records of Santa Clara County, California.

                                43.  AUTHORITY
                                     ---------

     Each of the parties executing this Lease hereby represent that (i) they
have the authority to do so and (ii) all requisite approvals from any other
parties, if necessary, have been obtained.

                              44.  REPRESENTATION
                                   --------------

     Landlord hereby represents to Tenant that Landlord owns the Premises free
and clear of all exceptions to title other than those exceptions to title set
forth in that Preliminary Report No.

                                      -26-
<PAGE>

69720012 issued by Commonwealth Land Title Insurance Company attached hereto as
Exhibit B.

     Landlord further represents to Tenant that to the best of Landlord's
knowledge, no claims, lawsuits or other actions have been filed or made against
Landlord with regard to its ownership and operation of the Premises except
Superior Court action #CV 762983 entitled De Anza et al. v. Johnson Family Trust
et al.  Landlord hereby agrees to indemnify, defend (with counsel reasonably
acceptable to Tenant), protect and hold harmless Tenant and its officers,
employees, agents and assigns from and against all claims, demands, losses,
costs (including attorney's fees and costs) or liabilities arising from or
relating to the foregoing civil action.

     Landlord has not received any notice from any city, county or other public
agency that the Premises or any portion thereof may be the subject of any taking
or condemnation action.

                                      -27-
<PAGE>

                                SIGNATURE PAGE

     In witness whereof, the undersigned have executed this document of 29 pages
this ___ day of February, 1999.

DURECT CORPORATION                        DE ANZA ENTERPRISES, LTD.

By: /s/ Thomas A. Schreck                 By: /s/ Wade H. Hover
   -----------------------                    --------------------------
   Chief Financial Officer                    Wade H. Hover, Manager

                                          By: /s/ Joseph C. Johnson
                                             ---------------------------
                                              Joseph C. Johnson

                                      -28-
<PAGE>

                                  EXHIBIT "A"
                                  -----------

                                      -29-
<PAGE>

                                  EXHIBIT "B"
                                  -----------

                                      -30-