AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
           STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--GROSS
                (Do not use this form for Multi-Tenant Property)

1. Basic Provisions ("Basic Provisions")

   1.1 Parties:  This Lease ("Lease"),  dated for reference purposes only, April
28,  1997,  is made by and  between  Bruce  S.  and  Sandra  G.  Rocco  Trustees
("Lessor") and Arterial Vascular Engineering, Inc. ("Lessee"),  collectively the
"Parties," or individually a "Party").

   1.2 Premises: That certain real property,  including all improvements therein
or to be provided by Lessor under the terms of this Lease, and commonly known by
the street address of 5355 Skylane Boulevard,  Santa Rosa, located in the County
of Sonoma, State of California, and generally described as (describe briefly the
nature of the property) approximately 15,017 s.f. of office and light industrial
space as per attached Exhibits A & B ("Premises").  (See Paragraph 2 for further
provisions.)

   1.3 Term: Three (3) years and (0) months  ("Original Term") commencing May 1,
1997 ("Commencement  Date") and ending April 30, 2000 ("Expiration  Date"). (See
Paragraph 3 for further provisions.)

   1.4 Early  Possession:  April  28,  1997.  ("Early  Possession  Date").  (See
Paragraphs 3.2 and 3.3 for further provisions.)

   1.5 Base Rent:  $12,013.60* per month ("Base Rent"), payable on the first day
of each month  commencing  Upon lease  execution.  (See  Paragraph 4 for further
provisions.) *see item #49 for rent schedule

[x] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.

   1.6 Base Rent Paid Upon Execution: $12,013.60 as Base Rent for the period May
1997.

   1.7 Security Deposit:  $12,764.45 ("Security Deposit").  (See Paragraph 5 for
further provisions.)

   1.8 Permitted Use: General office. (See Paragraph 6 for further provisions.)

   1.9 Insuring Party:  Lessee is the "Insuring Party." $__________ is the "Base
Premium." (See Paragraph 8 for further provisions.)

   1.10 Real Estate  Brokers:  The following real estate brokers  (collectively,
the "Brokers") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes): 
Keegan & Coppin Company, Inc. represents

[ ]  Lessor  exclusively  ("Lessor's  Broker");  [X] both Lessor and Lessee, and
______ represents

[ ]  Lessee exclusively  ("Lessee's  Broker");  [ ] both Lessee and Lessor. (See
Paragraph 15 for further provisions.)

   1.11  Guarantor.  The  obligations  of the Lessee  under this Lease are to be
guaranteed by N/A ("Guarantor"). (See Paragraph 37 for further provisions.)

   1.12  Addenda.  Attached  hereto is an  Addendum  or  Addenda  consisting  of
Paragraph 49 through 59 and Exhibits A-E all of which  constitute a part of this
Lease.

2. Premises.

   2.1 Letting.  Lessor hereby  leases to Lessee,  and Lessee hereby leases from
Lessor,  the Premises,  for the term, at the rental,  and upon all of the terms,
covenants and  conditions  set forth in this Lease.  Unless  otherwise  provided
herein,  any  statement of square  footage set forth in this Lease,  or that may
have been used in  calculating  rental,  is an  approximation  which  Lessor and
Lessee  agree is  reasonable  and the rental  based  thereon  is not  subject to
revision whether or not the actual square footage is more or less.

   2.2 Condition.  Lessor shall deliver the Premises to Lessee clean and free of
debris  on the  Commencement  Date and  warrants  to  Lessee  that the  existing
plumbing,  fire sprinkler  system,  lighting,  air  conditioning,  heating,  and
loading doors, if any, in the Premises,  other than those constructed by Lessee,
shall  be  in  good  operating   condition  on  the  Commencement   Date.  If  a
non-compliance  with said warranty exists as of the  Commencement  Date,  Lessor
shall,  except as otherwise  provided in this Lease,  promptly  after receipt of
written notice from Lessee setting forth with  specificity the nature and extent
of such  non-compliance,  rectify same at Lessor's  expense.  If Lessee does not
give Lessor written notice of a non-compliance  with this warranty within thirty
(30) days after the Commencement Date,  correction of that non-compliance  shall
be the obligation of Lessee at Lessee's sole cost and expense.

   2.3  Compliance  with  Covenants,  Restrictions  and  Building  Code.  Lessor
warrants  to  Lessee  that the  improvements  on the  Premises  comply  with all
applicable  covenants or restrictions  of record and applicable  building codes,
regulations  and ordinances in effect on the  Commencement  Date.  Said warranty
does not  apply  to the use to which  Lessee  will  put the  Premises  or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee.  If the  Premises  do not comply with said  warranty,  Lessor
shall,  except as otherwise  provided in this Lease,  promptly  after receipt of
written notice from Lessee setting forth with  specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date,  correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.

   2.4 Acceptance of Premises. Lessee hereby acknowledges:  (a) that it has been
advised by the Brokers to satisfy  itself with  respect to the  condition of the
Premises  (including  but not  limited  to the  electrical  and  fire  sprinkler
system's,  security,  environmental aspects,  compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's  intended  use, (b) that Lessee has made such  investigation  as it
deems  necessary with  reference to such matters and assumes all  responsibility
therefore as the same relate to Lessee's  occupancy of the Premises  and/or term
of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has made
any oral or  written  representations  or  warranties  with  respect to the said
matters other than as set forth in this Lease.

   2.5  Lessee  Prior  Owner/Occupant.  The  warranties  made by  Lessor in this
Paragraph 2 shall be of no force or effect if immediately  prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premise.  In such
event,   Lessee  shall,   at  Lessee's  sole  cost  and  expense,   correct  any
non-compliance of the Premises with said warranties.

3. Term.

   3.1 Term. The  Commencement  Date,  Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

   3.2 Early  Possession.  If Lessee totally or partially  occupies the Premises
prior to the Commencement  Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease, however,
shall be in effect  during  such  period.  Any such early  possession  shall not
affect nor advance the Expiration Date of the Original Term.

                                                              Initials /s/ JM
                                                                       /s/ BR SR

GROSS                                PAGE 1


<PAGE>

   3.3 Delay In Possession.  If for any reason Lessor cannot deliver  possession
of the Premises to Lessee as agreed herein by the Early  Possession Date, if one
is specified in Paragraph 1.4, or, if no Early Possession Date is specified,  by
the Commencement  Date,  Lessor shall not be subject to any liability  therefor,
nor shall such failure affect the validity of this Lease,  or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as  otherwise  provided  herein,  be obligated to pay rent or perform any
other  obligation of Lessee under the terms of this Lease until Lessor  delivers
possession  of the  Premises to Lessee.  If  possession  of the  Premises is not
delivered to Lessee within sixty (60) days after the Commencement  Date,  Lessee
may,  at its  option,  by  notice in  writing  to  Lessor  within  ten (10) days
thereafter,  cancel this Lease,  in which event the Parties  shall be discharged
from all obligations hereunder;  provided,  however, that if such written notice
by Lessee is not  received by Lessor  within said ten (10) day period,  Lessee's
right to cancel this Lease shall terminate and be of no further force or effect.
Except as may be otherwise  provided,  and  regardless of when the term actually
commences,  if  possession is not tendered to Lessee when required by this Lease
and Lessee does not terminate this Lease,  as aforesaid,  the period free of the
obligation to pay Base Rent, if any,  that Lessee would  otherwise  have enjoyed
shall run from the date of  delivery of  possession  and  continue  for a period
equal to what Lessee would  otherwise  have enjoyed under the terms hereof,  but
minus any days of delay caused by the acts, changes or omissions of Lessee.

4. Rent.

   4.1 Base  Rent.  Lessee  shall  cause  payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction,  on or before
the day on which it is due  under  the  terms of this  Lease.  Base Rent and all
other rent and charges for any period  during the term hereof  which is for less
than one (1) full calendar  month shall be prorated based upon the actual number
of days of the calendar month  involved.  Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other  addresses as Lessor may from time to time designate in writing to
Lessee.

5. Security Deposit.  Lessee shall deposit with Lessor upon execution hereof the
Security  Deposit set forth in Paragraph  1.7 as security for Lessee's  faithful
performance  of Lessee's  obligations  under this Lease.  If Lessee fails to pay
Base Rent or other rent or charges due  hereunder,  or otherwise  Defaults under
this Lease (as defined in Paragraph  13.1),  Lessor may use, apply or retain all
or any portion of said Security Deposit for the payment of any amount due Lessor
or to reimburse or compensate Lessor for any liability,  cost, expense,  loss or
damage  (including  attorneys'  fees) which Lessor may suffer or incur by reason
thereof.  If Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request  therefor deposit moneys
with  Lessor  sufficient  to restore  said  Security  Deposit to the full amount
required by this Lease. Any time the Base Rent increases during the term of this
Lease, Lessee shall; upon written request from Lessor, deposit additional moneys
with Lessor  sufficient to maintain the same ratio between the Security  Deposit
and the Base Rent as those amounts are specified in the Basic Provisions. Lessor
shall not be required to keep all or any part of the Security  Deposit  separate
from  its  general  accounts.   Lessor  shall,  at  the  expiration  or  earlier
termination of the term hereof and after Lessee has vacated the Premises, return
to Lessee (or, at Lessor's  option,  to the last  assignee,  if any, of Lessee's
interest  herein),  that portion of the Security  Deposit not used or applied by
Lessor.  Unless otherwise  expressly agreed in writing by Lessor, no part of the
Security  Deposit shall be  considered to be held in trust,  to bear interest or
other  increment for its use, or to be  prepayment  for any moneys to be paid by
Lessee under this Lease.

6. Use.

   6.1 Use.  Lessee shall use and occupy the Premises  only for the purposes set
forth in Paragraph 1.8, or any other use which is comparable thereto, and for no
other  purpose.  Lessee  shall not use or permit  the use of the  Premises  in a
manner  that  creates  waste  or a  nuisance,  or that  disturbs  owners  and/or
occupants of, or causes  damage to,  neighboring  premises or properties. Lessor
hereby agrees to not  unreasonably  withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees or subtenants, for a modification of
said permitted  purpose for which the premises may be used or occupied,  so long
as the same will not impair the structural  integrity of the improvements on the
Premises,  the mechanical or electrical  systems therein,  is not  significantly
more burdensome to the Premises and the improvements  thereon,  and is otherwise
permissible  pursuant to this  Paragraph  6. If Lessor  elects to withhold  such
consent, Lessor shall within five (5) business days give written notification of
same,  which  notice  shall  include  an  explanation  of  Lessor's   reasonable
objections to the change in use.

   6.2 Hazardous Substances.

       (a) Reportable Uses Require  Consent.  The term "Hazardous  Substance" as
used in this Lease  shall mean any  product,  substance,  chemical,  material or
waste whose  presence,  nature,  quantity  and/or  intensity of existence,  use,
manufacture,  disposal,  transportation,  spill,  release or  effect,  either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially  injurious to the public health,  safety or welfare, the
environment  or the Premises,  (ii)  regulated or monitored by any  governmental
authority,  or (iii) a basis for liability of Lessor to any governmental  agency
or third party  under any  applicable  statute or common law  theory.  Hazardous
Substance  shall  include,  but  not be  limited  to,  hydrocarbons,  petroleum,
gasoline,  crude oil or any products,  by-products or fractions thereof.  Lessee
shall not engage in any activity in, on or about the Premises which  constitutes
a Reportable Use (as hereinafter  defined) of Hazardous  Substances  without the
express  prior written  consent of Lessor and  compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3).  "Reportable  Use" shall mean (i) the  installation or use of any above or
below ground  storage  tank,  (ii) the  generation,  possession,  storage,  use,
transportation,  or  disposal of a Hazardous  Substance  that  requires a permit
from, or with respect to which a report,  notice,  registration or business plan
is required to be filed with, any governmental  authority.  Reportable Use shall
also include  Lessee's  being  responsible  for the presence in, on or about the
Premises of a  Hazardous  Substance  with  respect to which any  Applicable  Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring  properties.  Notwithstanding  the  foregoing,  Lessee may,  without
Lessor's  prior  consent,  but in compliance  with all  Applicable  Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's  business  permitted on the Premises,  so long as such
use is not a  Reportable  Use and does not expose the  Premises  or  neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor.  In addition,  Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous  Substance,
activity or storage tank by Lessee upon Lessee's  giving Lessor such  additional
assurances as Lessor, in its reasonable  discretion,  deems necessary to protect
itself,   the  public,   the  Premises  and  the  environment   against  damage,
contamination or injury and/or liability therefrom or therefor,  including,  but
not limited to, the  installation  (and removal on or before Lease expiration or
earlier  termination) of reasonably  necessary  protective  modifications to the
Premises  (such as concrete  encasements)  and/or the  deposit of an  additional
Security Deposit under Paragraph 5 hereof.

       (b) Duty to Inform Lessor.  If Lessee knows,  or has reasonable  cause to
believe, that a Hazardous Substance,  or a condition involving or resulting from
same, has come to be located in, on, under or about the Premises,  other than as
previously consented to by Lessor,  Lessee shall immediately give written notice
of such fact to Lessor.  Lessee shall also immediately give Lessor a copy of any
statement,  report, notice,  registration,  application,  permit, business plan,
license,   claim,   action  or  proceeding  given  to,  or  received  from,  any
governmental  authority or private party,  or persons  entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any  Hazardous  Substance  or  contamination  in,  on,  or about  the  Premises,
including  but not  limited  to all such  documents  as may be  involved  in any
Reportable Uses involving the Premises.

       (c)  Indemnification.  Lessee shall indemnify,  protect,  defend and hold
Lessor,  its agents,  employees,  lenders  and ground  lessor,  if any,  and the
Premises,  harmless  from and against any and all loss of rents and/or  damages,
liabilities,  judgments, costs, claims, liens, expenses,  penalties, permits and
attorney's  and  consultant's  fees  arising out of or involving  any  Hazardous
Substance  or storage  tank  brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be  limited  to,  the  effects  of any  contamination  or injury to  person,
property  or the  environment  created or  suffered  by Lessee,  and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation,  restoration  and/or  abatement  thereof,  or of any  contamination
therein  involved,  and shall survive the  expiration or earlier  termination of
this Lease. No termination,  cancellation or release  agreement  entered into by
Lessor and Lessee shall  release  Lessee from its  obligations  under this Lease
with respect to Hazardous  Substances or storage tanks,  unless  specifically so
agreed by Lessor in writing at the time of such agreement.

   6.3 Lessee's Compliance with Law. Except as otherwise provided in this Lease,
Lessee,  shall,  at Lessee's sole cost and expense,  fu11y,  diligently and in a
timely  manner,  comply  with all  "Applicable  Law," which term is used in this
Lease  to  include  all  laws,  rules,  regulations,   ordinances,   directives,
covenants,  easements and restrictions of record,  permits,  the requirements of
any   applicable   fire  insurance   underwriter  or  rating  bureau,   and  the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the  Premises  (including  but  not  limited  to  matters  pertaining  to (i)
industrial  hygiene,  (ii)  environmental  conditions on, in, under or about the
Premises,  including  soil  and  groundwater  conditions,  and  (iii)  the  use,
generation,  manufacture,   production,   installation,   maintenance,  removal,
transportation,  storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written  request,  provide Lessor
with copies of all documents  and  information,  including,  but not limited to,
permits,  registrations,  manifests,  applications,  reports  and  certificates,
evidencing  Lessee's compliance with any Applicable Law specified by Lessor, and
shall  immediately  upon  receipt,  notify Lessor in writing (with copies of any
documents  involved)  of any  threatened  or  actual  claim,  notice,  citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.

   6.4  Inspection;  Compliance.  Lessor and Lessor's  Lender(s)  (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an  emergency,  and otherwise at  reasonable  times,  for the purpose of
inspecting the condition of the Premises and for verifying  compliance by Lessee
with this Lease and all  Applicable  Laws (as defined in Paragraph  6.3), and to
employ  experts  and/or  consultants  in connection  therewith  and/or to advise
Lessor with  respect to Lessee's  activities,  including  but not limited to the
installation,  operation,  use,  monitoring,  maintenance,  or  removal  of  any
Hazardous  Substance  or  storage  tank on or from the  Premises.  The costs and
expenses of any such  inspections  shall be paid by the party  requesting  same,
unless a Default or Breach of this  Lease,  violation  of  Applicable  Law, or a
contamination,  caused or materially  contributed to by Lessee is found to exist
or  be  imminent,  or  unless  the  inspection  is  requested  or  ordered  by a
governmental  authority as the result of any such existing or imminent violation
or  contamination.  In any such case, Lessee shall upon request reimburse Lessor
or  Lessor's  Lender,  as the case may be,  for the costs and  expenses  of such
inspections.

7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations.

   7.1 Lessee's Obligations.

       (a) Subject to the provisions of Paragraphs 2.2 (Lessor's  warranty as to
condition), 2.3 (Lessor's warranty as to compliance with covenants, etc),

                                                            Initials /s/  JM
                                                                     /s/  BR SR
GROSS                                PAGE 2

<PAGE>

7.2  (Lessor's  obligations  to  repair),  9 (damage  and  destruction),  and 14
(condemnation),  Lessee  shall,  at  Lessee's  sole cost and  expense and at all
times,  keep the Premises and every part  thereof in good order,  condition  and
repair,  (whether or not such portion of the Premises  requiring  repair, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises),  including,
without  limiting the generality of the  foregoing,  all equipment or facilities
serving the Premises, such as plumbing, heating, air conditioning,  ventilating,
electrical,  lighting  facilities,  boilers,  fired or unfired pressure vessels,
fire sprinkler and/or  standpipe and hose or other automatic fire  extinguishing
system, including fire alarm and/or smoke detection systems and equipment,  fire
hydrants,  fixtures, walls (interior and exterior),  ceilings,  floors, windows,
doors, plate glass,  skylights,  landscaping,  driveways,  parking lots, fences,
retaining  walls,  signs,  sidewalks  and  parkways  located in, on,  about,  or
adjacent to the Premises, but excluding  foundations,  the exterior roof and the
structural  aspects  of the  Premises.  Lessee  shall not  cause or  permit  any
Hazardous  Substance  to be  spilled  or  released  in,  on,  under or about the
Premises  (including  through the plumbing or sanitary  sewer  system) and shall
promptly,  at Lessee's expense,  take all  investigatory  and/or remedial action
reasonably  recommended,  whether or not formally  ordered or required,  for the
cleanup  of any  contamination  of,  and for the  maintenance,  security  and/or
monitoring  of, the Premises,  the elements  surrounding  same,  or  neighboring
properties,  that  was  caused  or  materially  contributed  to  by  Lessee,  or
pertaining to or involving any Hazardous  Substance  and/or storage tank brought
onto the Premises by or for Lessee or under its control.  Lessee, in keeping the
Premises in good order,  condition and repair,  shall  exercise and perform good
maintenance   practices.   Lessee's  obligations  shall  include   restorations,
replacements   or  renewals  when   necessary  to  keep  the  Premises  and  all
improvements  thereon or a part  thereof in good order,  condition  and state of
repair.

       (b) Lessee shall, at Lessee's sole cost and expense, procure and maintain
contracts,  with copies to Lessor, in customary form and substance for, and with
contractors  specializing  and experienced  in, the inspection,  maintenance and
service of the following  equipment  and  improvements,  if any,  located on the
Premises: (i) heating, air conditioning and ventilation equipment,  (ii) boiler,
fired or unfired  pressure  vessels,  (iii) fire sprinkler  and/or standpipe and
hose or other automatic fire extinguishing systems,  including fire alarm and/or
smoke detection,  (iv) landscaping and irrigation systems, (v) roof covering and
drain maintenance and (vi) asphalt and parking lot maintenance.

   7.2 Lessor's Obligations. Upon receipt of written notice of the need for such
repairs and subject to Paragraph 13.5, Lessor shall, at Lessor's  expense,  keep
the  foundations,  exterior roof and structural  aspects of the Premises in good
order,  condition and repair,  Lessor shall not, however,  be obligated to paint
the exterior surface of the exterior walls or to maintain the windows,  doors or
plate glass or the interior surface of exterior walls.  Lessor shall not, in any
event,  have any  obligation to make any repairs until Lessor  receives  written
notice of the need for such repairs. It is the intention of the Parties that the
terms of this  Lease  govern the  respective  obligations  of the  Parties as to
maintenance  and repair of the Premises.  Lessee and Lessor  expressly waive the
benefit  of  any  statute  now or  hereafter  in  effect  to  the  extent  it is
inconsistent  with the terms of this Lease  with  respect  to, or which  affords
Lessee the right to make repairs at the expense of Lessor or to  terminate  this
Lease by reason of, any needed repairs.

   7.3 Utility Installations; Trade Fixtures; Alterations.

       (a) Definitions;  Consent Required.  The term "Utility  Installations" is
used in this Lease to refer to all carpeting, window coverings, air lines, power
panels,   electrical   distribution,    security,   fire   protection   systems,
communication  systems,  lighting  fixtures,  heating,   ventilating,   and  air
conditioning equipment,  plumbing, and fencing in, on or about the Premises. The
term "Trade  Fixtures"  shall mean Lessee's  machinery and equipment that can be
removed  without doing material damage to the Premises.  The term  "Alterations"
shall mean any  modification of the improvements on the Premises from that which
are  provided  by Lessor  under  the terms of this  Lease,  other  than  Utility
Installations or Trade Fixtures,  whether by addition or deletion. "Lessee Owned
Alterations  and/or Utility  Installations"  are defined as  Alterations  and/or
Utility Installations made by lessee that are not yet owned by Lessor as defined
in  Paragraph  7.4(a).   Lessee  shall  not  make  any  Alterations  or  Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent.  Lessee may, however, make non-structural  Utility Installations to the
interior of the Premises  (excluding the roof),  as long as they are not visible
from the outside, do not involve puncturing,  relocating or removing the roof or
any existing  walls,  and the  cumulative  cost thereof  during the term of this
Lease as extended does not exceed $25,000.

       (b) Consent.  Any Alterations or Utility  Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with  proposed  detailed  plans.  All  consents  given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed  conditioned upon: (i) Lessee's acquiring all applicable permits
required by  governmental  authorities,  (ii) the  furnishing  of copies of such
permits together with a copy of the plans and  specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon, and
(iii) the  compliance by Lessee with all  conditions of said permits in a prompt
and  expeditious  manner.  Any  Alterations or Utility  Installations  by Lessee
during the term of this Lease  shall be done in a good and  workmanlike  manner,
with good and sufficient  materials,  and in compliance with all Applicable Law.
Lessee shall promptly upon completion thereof furnish Lessor with as-built plans
and  specifications  therefor.  Lessor  may (but  without  obligation  to do so)
condition its consent to any requested  Alteration or Utility  Installation that
costs $10,000 or more upon Lessee's  providing Lessor with a lien and completion
bond in an amount equal to one and  one-half  times the  estimated  cost of such
Alteration or Utility  Installation  and/or upon Lessee's  posting an additional
Security Deposit with Lessor under Paragraph 36 hereof.

       (c) Indemnification.  Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the  Premises,  which claims are or may be secured by any  mechanics'  or
materialmen's  lien against the Premises or any interest  therein.  Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about  the  Premises,  and  Lessor  shall  have the right to post
notices of  non-responsibility  in or on the  Premises  as  provided  by law. If
Lessee  shall,  in good faith,  contest the validity of any such lien,  claim or
demand, then Lessee shall, at its sole expense defend and protect itself, Lessor
and the  Premises  against the same and shall pay and  satisfy any such  adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require,  Lessee shall furnish to Lessor
a surety  bond  satisfactory  to Lessor in an amount  equal to one and  one-half
times the amount of such  contested  lien claim or demand,  indemnifying  Lessor
against  liability  for the same,  as  required  by law for the  holding  of the
Premises  free from the effect of such lien or claim.  In  addition,  Lessor may
require Lessee to pay Lessor's  attorney's  fees and costs in  participating  in
such action if Lessor shall decide it is to its best interest to do so.

   7.4 Ownership; Removal; Surrender; and Restoration.

       (a)  Ownership.  Subject to Lessor's  right to require  their  removal or
become the owner  thereof as  hereinafter  provided in this  Paragraph  7.4, all
Alterations  and Utility  Additions  made to the Premises by Lessee shall be the
property of and owned by Lessee,  but considered a part of the Premises.  Lessor
may, at any time and at its  option,  elect in writing to Lessee to be the owner
of all or any  specified  part  of the  Lessee  Owned  Alterations  and  Utility
Installations.  Unless otherwise  instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility  Installations  shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.

       (b) Removal.  Unless otherwise agreed in writing, Lessor may require that
any or all Lessee Owned  Alterations or Utility  Installations be removed by the
expiration  or  earlier  termination  of  this  Lease,   notwithstanding   their
installation  may have been  consented  to by  Lessor.  Lessor may  require  the
removal  at any  time of all or any  part of any  Lessee  Owned  Alterations  or
Utility Installations made without the required consent of Lessor.

       (c) Surrender/Restoration. Lessee shall surrender the Premises by the end
of the last day of the Lease term or any earlier  termination  date, with all of
the  improvements,  parts and surfaces  thereof  clean and free of debris and in
good  operating  order,  condition  and state of repair,  ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that  would  have  been  prevented  by good  maintenance  practice  or by Lessee
performing all of its obligations  under this Lease.  Except as otherwise agreed
or specified in writing by Lessor, the Premises,  as surrendered,  shall include
the Utility Installations.  The obligation of Lessee shall include the repair of
any damage  occasioned by the  installation,  maintenance or removal of Lessee's
Trade  Fixtures,   furnishings,   equipment,   and  Alterations  and/or  Utility
Installations,  as well as the removal of any storage  tank  installed by or for
Lessee, and the removal,  replacement,  or remediation of any soil,  material or
ground water  contaminated by Lessee,  all as may then be required by Applicable
Law and/or good  service  practice.  Lessee's  Trade  Fixtures  shall remain the
property of Lessee and shall be removed by Lessee  subject to its  obligation to
repair and restore the Premises per this Lease.

8. See Addendum Section 57

                                                                 Initials /s/ JM
                                                                       /s/ BR SR
                                     PAGE 3

9. Damage or Destruction.

   9.1 Definitions.

       (a) "Premises  Partial  Damage" shall mean damage or  destruction  to the
improvements  on the Premises,  other than Lessee Owned  Alterations and Utility
Installations,  the repair cost of which damage or  destruction is less than 50%
of the then Replacement Cost of the Premises immediately prior to such damage or
destruction,  excluding from such  calculation  the value of the land and Lessee
Owned Alterations and Utility Installations.

       (b) "Premises Total  Destruction" shall mean damage or destruction to the
Premises,  other than Lessee Owned  Alterations  and Utility  Installations  the
repair  cost  of  which  damage  or  destruction  is 50%  or  more  of the  then
Replacement  Cost  of  the  Premises   immediately   prior  to  such  damage  or
destruction,  excluding from such  calculation  the value of the land and Lessee
Owned Alterations and Utility Installations.

       (c) "Insured Loss" shall mean damage or destruction  to  improvements  on
the Premises,  other than Lessee Owned  Alterations  and Utility  Installations,
which was caused by an event  required to be covered by the insurance  described
in Paragraph 8.3(a),  irrespective of any deductible  amounts or coverage limits
involved.

       (d)  "Replacement  Cost"  shall  mean the cost to repair or  rebuild  the
improvements  owned by Lessor at the time of the  occurrence to their  condition
existing  immediately prior thereto,  including  demolition,  debris removal and
upgrading required by the operation of applicable building codes,  ordinances or
laws, and without deduction for depreciation.

       (e)  "Hazardous   Substance  Condition"  shall  mean  the  occurrence  or
discovery of a condition  involving  the presence of, or a  contamination  by, a
Hazardous  Substance  as  defined  in  Paragraph  6.2(a)  in,  on,  or under the
Premises.

   9.2 Partial  Damage--Insured  Loss. If a Premises  Partial  Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense,  repair such damage
(but not  Lessee's  Trade  Fixtures  or Lessee  Owned  Alterations  and  Utility
Installations)  as soon as reasonably  possible and this Lease shall continue in
full force and effect.  Notwithstanding the foregoing, if the required insurance
was not in force or the  insurance  proceeds are not  sufficient  to effect such
repair, the Insuring Party shall promptly contribute the shortage in proceeds as
and when required to complete said repairs. In the event,  however, the shortage
in  proceeds  was due to the fact that,  by reason of the  unique  nature of the
improvements,  full  replacement  cost insurance  coverage was not  commercially
reasonable  and  available,  Lessor  shall  have  no  obligation  to pay for the
shortage in  insurance  proceeds or to fully  restore the unique  aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance  thereof,  within ten (10) days following receipt of written notice of
such shortage and request  therefor.  If Lessor  receives said funds or adequate
assurance  thereof within said ten (10) day period,  the party  responsible  for
making the repairs shall  complete them as soon as reasonably  possible and this
lease  shall  remain in full force and effect.  If Lessor does not receive  such
funds or assurance within said period,  Lessor may nevertheless elect by written
notice to Lessee within ten (10) days  thereafter to make such  restoration  and
repair  as is  commercially  reasonable  with  Lessor  paying  any  shortage  in
proceeds,  in which case this Lease shall remain in full force and effect. If in
such case Lessor does not so elect,  then this Lease shall  terminate sixty (60)
days following the  occurrence of the damage or  destruction.  Unless  otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor for
any funds contributed by Lessee to repair

                                                                 Initials /s/ JM
                                                                       /s/ BR SR

GROSS                                PAGE 4

<PAGE>

any  such  damage  or  destruction.  Premises  Partial  Damage  due to  flood or
earthquake  shall be  subject  to  Paragraph  9.3  rather  than  Paragraph  9.2,
notwithstanding that there may be some insurance coverage,  but the net proceeds
of any such insurance  shall be made available for the repairs if made by either
Party.

   9.3 Partial  Damage--Uninsured Loss. If a Premises Partial Damage that is not
an Insured  Loss occurs,  unless  caused by a negligent or willful act of Lessee
(in which event Lessee shall make the repairs at Lessee's expense and this Lease
shall  continue in full force and effect,  but subject to Lessor's  rights under
Paragraph 13), Lessor may at Lessor's option,  either: (i) repair such damage as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect,  or (ii) give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the  occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60) days
following  the giving of such notice.  In the event  Lessor  elects to give such
notice of Lessor's  intention  to  terminate  this Lease,  Lessee shall have the
right  within ten (10) days after the  receipt  of such  notice to give  written
notice to Lessor of  Lessee's  commitment  to pay for the repair of such  damage
totally at Lessee's expense and without  reimbursement from Lessor. Lessee shall
provide Lessor with the required funds or satisfactory  assurance thereof within
thirty (30) days following  Lessee's said  commitment.  In such event this Lease
shall  continue in full force and effect,  and Lessor shall proceed to make such
repairs as soon as reasonably possible and the required funds are available.  If
Lessee  does not give such notice and  provide  the funds or  assurance  thereof
within the times  specified  above,  this Lease shall  terminate  as of the date
specified in Lessor's notice of termination.

   9.4 Total  Destruction.  Notwithstanding  any other  provision  hereof,  if a
Premises Total  Destruction  occurs  (including any destruction  required by any
authorized  public  authority),  this  Lease  shall  terminate  sixty  (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee.  In the event,  however,  that the damage or  destruction  was caused by
Lessee,  Lessor  shall have the right to recover  Lessor's  damages  from Lessee
except as released and waived in Paragraph 8.6.

   9.5 Damage Near End of Term. If at any time during the last six (6) months of
the term of this Lease there is damage for which the cost to repair  exceeds one
(1) month's Base Rent,  whether or not an Insured Loss,  Lessor may, at Lessor's
option,  terminate  this Lease  effective  sixty (60) days following the date of
occurrence  of such  damage by  giving  written  notice  to  Lessee of  Lessor's
election to do so within  thirty (30) days after the date of  occurrence of such
damage.  Provided,  however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the  Premises,  then Lessee may  preserve  this
Lease by, within twenty (20) days  following  the  occurrence of the damage,  or
before the  expiration  of the time  provided in such  option for its  exercise,
whichever is earlier  ("Exercise  Period"),  (i) exercising such option and (ii)
providing Lessor with any shortage in insurance  proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said  Exercise  Period and  provides  Lessor with funds (or  adequate  assurance
thereof) to cover any shortage in insurance proceeds,  Lessor shall, at Lessor's
expense  repair such damage as soon as reasonably  possible and this Lease shall
continue in full force and effect.  If Lessee fails to exercise  such option and
provide such funds or assurance during said Exercise Period,  then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period  following  the  occurrence  of such damage by giving  written  notice to
Lessee of Lessor's  election to do so within ten (10) days after the  expiration
of the Exercise  Period,  notwithstanding  any term or provision in the grant of
option to the contrary.

   9.6 Abatement of Rent; Lessee's Remedies.

       (a)  In  the  event  of  damage   described  in  Paragraph  9.2  (Partial
Damage--Insured),  whether  or not  Lessor or Lessee  repairs  or  restores  the
Premises,  the Base Rent, Real Property  Taxes,  insurance  premiums,  and other
charges,  if any,  payable by Lessee  hereunder for the period during which such
damage,  its repair or the  restoration  continues (not to exceed the period for
which  rental value  insurance is required  under  Paragraph  8.3(b)),  shall be
abated in  proportion  to the degree to which  Lessee's  use of the  Premises is
impaired.  Except for  abatement of Base Rent,  Real Property  Taxes,  insurance
premiums,  and other  charges,  if any, as aforesaid,  all other  obligations of
Lessee  hereunder  shall be performed by Lessee,  and Lessee shall have no claim
against  Lessor  for any  damage  suffered  by  reason  of any  such  repair  or
restoration.

       (b) If Lessor shall be obligated to repair or restore the Premises  under
the provisions of this Paragraph 9 and shall not commence,  in a substantial and
meaningful  way, the repair or  restoration  of the Premises  within ninety (90)
days after such  obligation  shall accrue,  Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to
any Lenders of which Lessee has actual notice of Lessee's  election to terminate
this Lease on a date not less than sixty  (60) days following the giving of such
notice.  If Lessee  gives such notice to Lessor and such Lenders and such repair
or restoration  is not commenced  within thirty (30) days  after receipt of such
notice,  this Lease shall terminate as of the date specified in said notice.  If
Lessor or a Lender  commences the repair or restoration  of the Premises  within
thirty (30) days after receipt of such notice, this Lease shall continue in full
force and effect.  "Commence"  as used in this  Paragraph  shall mean either the
unconditional  authorization  of the  preparation of the required  plans, or the
beginning of the actual work on the Premises, whichever first occurs.

   9.7  Hazardous  Substance  Conditions.  If a  Hazardous  Substance  Condition
occurs,  unless  Lessee is legally  responsible  therefor  (in which case Lessee
shall make the investigation and remediation  thereof required by Applicable Law
and this Lease shall continue in full force and effect,  but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and  remediate  such  Hazardous  Substance  Condition,  if required,  as soon as
reasonably  possible  at  Lessor's  expense,  in which  event this  Lease  shall
continue in full force and effect,  or (ii) if the estimated cost to investigate
and remediate  such  condition  exceeds  twelve (12) times the then monthly Base
Rent or $100,000,  whichever is greater,  give written  notice to Lessee  within
thirty (30) days after receipt by Lessor of knowledge of the  occurrence of such
Hazardous  Substance  Condition of Lessor's desire to terminate this Lease as of
the date  sixty (60) days  following  the  giving of such  notice.  In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee  shall  have the right  within  ten (10) days  after the  receipt of such
notice to give written  notice to Lessor of Lessee's  commitment  to pay for the
investigation and remediation of such Hazardous  Substance  Condition totally at
Lessee's expense and without  reimbursement  from Lessor except to the extent of
an amount  equal to twelve (12) times the then  monthly  Base Rent or  $100,000,
whichever is greater.  Lessee shall  provide  Lessor with the funds  required of
Lessee or  satisfactory  assurance  thereof  within  thirty (30) days  following
Lessee's said commitment.  In such event this Lease shall continue in full force
and effect,  and Lessor shall proceed to make such investigation and remediation
as soon as reasonably  possible and the required funds are available.  If Lessee
does not give such notice and provide the required  funds or  assurance  thereof
within the times  specified  above,  this Lease shall  terminate  as of the date
specified in Lessor's notice of termination.  If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible,  there shall be abatement of
Lessee's  obligations  under  this  Lease  to the same  extent  as  provided  in
Paragraph 9.6(a) for a period of not to exceed twelve (12) months.

   9.8 Termination--Advance Payments. Upon termination of this Lease pursuant to
this Paragraph 9, an equitable  adjustment shall be made concerning advance Base
Rent and any other advance  payments made by Lessee to Lessor.  Lessor shall, in
addition, return to Lessee so much of Lessee's Security Deposit as has not been,
or is not then required to be, used by Lessor under the terms of this Lease.

   9.9 Waive  Statutes.  Lessor  and  Lessee  agree that the terms of this Lease
shall govern the effect of any damage to or  destruction  of the  Premises  with
respect to the  termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.

10.      Real Property Taxes. See Addendum Section 58

[SECTION 11 DELETED]
                                                                Initials /s/ JM
                                                                       /s/ BR SR

GROSS                                PAGE 5

<PAGE>
           
12. Assignment and Subletting.

   12.1 Lessor's Consent Required.

       (a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage  or  otherwise  transfer or encumber  (collectively,  "assignment")  or
sublet all or any part of  Lessee's  interest  in this Lease or in the  Premises
without  Lessor's prior written  consent given under and subject to the terms of
Paragraph 36.

       (b) A change in the  control of Lessee  shall  constitute  an  assignment
requiring Lessor's consent. The transfer,  on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall  constitute a change
in control for this purpose.

       (c) The involvement of Lessee or its assets in any transaction, or series
of transactions (by way of merger, sale,  acquisition,  financing,  refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation  of this Lease or Lessee's  assets  occurs,  which results or will
result in a reduction of the Net Worth of Lessee, as hereinafter  defined, by an
amount equal to or greater than  twenty-five percent (25%) of such  Net Worth of
Lessee as it was represented to Lessor at the time of the execution by Lessor of
this  Lease or at the time of the most  recent  assignment  to which  Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting  such reduction,  at whichever time said Net Worth of Lessee was or
is greater,  shall be  considered an assignment of this Lease by Lessee to which
Lessor may reasonably  withhold its consent.  "Net Worth of Lessee" for purposes
of this  Lease  shall be the net  worth of  Lessee  (excluding  any  guarantors)
established under generally accepted accounting principles consistently applied.

       (d) An  assignment  or  subletting  of  Lessee's  interest  in this Lease
without Lessor's  specific prior written consent shall, at Lessor's option, be a
Default  curable  after notice per  Paragraph  13.1(c),  or a noncurable  Breach
without the necessity of any notice and grace period.  If Lessor elects to treat
such  unconsented  to assignment or subletting as a noncurable  Breach,  Lesssor
shall have the right to either:  (i) terminate  this Lease,  or (ii) upon thirty
(30) days written notice ("Lessor's Notice"),  increase the monthly Base Rent to
fair market rental value or one hundred ten percent (110%) of the Base Rent then
in effect,  whichever is greater.  Pending  determination of the new fair market
rental  value,  if disputed by Lessee,  Lessee shall pay the amount set forth in
Lessor's Notice,  with any overpayment  credited against the next installment(s)
of Base Rent coming due, and any  underpayment  for the period  retroactively to
the effective date of the adjustment being due and payable  immediately upon the
determination  thereof.  Further,  in the event of such Breach and market  value
adjustment,  (i) the purchase  price of any option to purchase the Premises held
by Lessee shall be subject to similar  adjustment  to the then fair market value
(without  the  Lease  being  considered  an  encumbrance  or any  deduction  for
depreciation  or  obsolescence,  and considering the Premises at its highest and
best use and in good condition),  or one hundred ten percent (110%) of the price
previously in effect,  whichever is greater,  (ii) any index-oriented  rental or
price adjustment  formulas  contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index  applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the  remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect  immediately  prior to the market
value adjustment.

       (e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall
be limited to compensatory damages and injunctive relief.

12.2 Terms and Conditions Applicable to Assignment and Subletting.

       (a) Regardless of Lessor's  consent,  any assignment or subletting  shall
not: (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease,  (ii) release Lessee of
any obligations  hereunder,  or (iii) alter the primary  liability of Lessee for
the  payment  of Base  Rent and  other  sums  due  Lessor  hereunder  or for the
performance of any other obligations to be performed by Lessee under this Lease.

       (b) Lessor may accept any rent or  performance  of  Lessee's  obligations
from any  person  other  than  Lessee  pending  approval  or  disapproval  of an
assignment.  Neither a delay in the approval or disapproval  of such  assignment
nor the  acceptance  of any rent or  performance  shall  constitute  a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.

       (c) The  consent  of Lessor to any  assignment  or  subletting  shall not
constitute a consent to any subsequent  assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent  sublettings and assignments of the sublease or
any amendments or modifications  thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without  obtaining  their consent,  and such
action  shall not  relieve  such  persons  from  liability  under  this Lease or
sublease.

       (d) In the event of any Default or Breach of Lessee's  obligations  under
this Lease,  Lessor may proceed directly  against Lessee,  any Guarantors or any
one else responsible for the performance of the Lessee's  obligations under this
Lease,  including the  sublessee,  without first  exhausting  Lessor's  remedies
against  any other  person or entity  responsible  therefor  to  Lessor,  or any
security held by Lessor or Lessee.

       (e) Each request for consent to an assignment  or subletting  shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational  responsibility  and  appropriateness  of the proposed
assignee or  sublessee,  including  but not limited to the  intended  use and/or
required  modification of the Premises,  if any,  together with a non-refundable
deposit  of  $1,000 or ten  percent  (10%) of the  current  monthly  Base  Rent,
whichever is greater, as reasonable  consideration for Lessor's  considering and
processing  the request for consent.  Lessee agrees to provide  Lessor with such
other  or  additional  information  and/or  documentation  as may be  reasonably
requested by Lessor.

       (f) Any assignee of, or  sublessee  under, this Lease shall, by reason of
accepting  such  assignment or entering into such sublease,  be deemed,  for the
benefit of Lessor,  to have  assumed  and agreed to conform and comply with each
and every term,  covenant,  condition  and  obligation  herein to be observed or
performed by Lessee during the term of said  assignment or sublease,  other than
such  obligations  as are  contrary to or  inconsistent  with  provisions  of an
assignment or sublease to which Lessor has specifically consented in writing.

       (g) The occurrence of a transaction  described in Paragraph 12.1(c) shall
give  Lessor the right (but not the  obligation)  to require  that the  Security
Deposit be  increased  to an amount equal to six (6) times the then monthly Base
Rent, and Lessor may make the actual receipt by Lessor of the amount required to
establish  such  Security  Deposit  a  condition  to  Lessor's  consent  to such
transaction.

       (h) Lessor,  as a condition  to giving its consent to any  assignment  or
subletting,  may require  that the amount and  adjustment  structure of the rent
payable  under this Lease be  adjusted to what is then the market  value  and/or
adjustment  structure for property similar to the Premises as then  constituted.


       12.3  Additional  Terms and  Conditions  Applicable  to  Subletting.  The
following terms and conditions shall apply to any subletting by Lessee at all or
any part of the Premises  and shall be deemed  included in all  subleases  under
this Lease whether or not expressly incorporated therein:

       (a)  Lessee  hereby  assigns  and  transfers  to Lessor  all of  Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises  heretofore or hereafter made by Lessee,  and Lessor may collect
such rent and income  and apply  same  toward  Lessee's  obligations  under this
Lease;  provided,  however,  that until a Breach (as defined in Paragraph  13.1)
shall occur in the performance of Lessee's  obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive,  collect and enjoy the
rents accruing  under such sublease.  Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor,  nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's  obligations to such sublessee
under such sublease.  Lessee hereby irrevocably  authorizes and directs any such
sublessee,  upon receipt of a written  notice from Lessor  stating that a Breach
exists in the  performance of Lessee's  obligations  under this Lease, to pay to
Lessor the rents and other  charges  due and to become  due under the  sublease.
Sublessee  shall rely upon any such  statement and request from Lessor and shall
pay such rents and other  charges to Lessor  without any  obligation or right to
inquire as to whether such Breach exists and  notwithstanding any notice from or
claim from Lessee to the  contrary.  Lessee shall have no right or claim against
said sublessee,  or, until the Breach has been cured,  against  Lessor,  for any
such rents and other charges so paid by said sublessee to Lessor.

       (b) In the  event  of a  Breach  by  Lessee  in  the  performance  of its
obligations  under this Lease,  Lessor, at its option and without any obligation
to do so, may require any  sublessee to attorn to Lessor,  in which event Lessor
shall  undertake the  obligations of the sublessor  under such sublease from the
time of the  exercise  of  said  option  to the  expiration  of  such  sublease;
provided,  however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior Defaults
or Breaches of such sublessor under such sublease.

       (c) Any matter or thing  requiring the consent of the  sublessor  under a
sublease shall also require the consent of Lessor herein.

       (d) No sublessee  shall  further  assign or sublet all or any part of the
Premises without Lessor's prior written consent.

       (e)  Lessor  shall  deliver a copy of any  notice of Default or Breach by
Lessee to the sublessee,  who shall have the right to cure the Default of Lessee
within the grace period, if any,  specified in such notice.  The sublessee shall
have a right of  reimbursement  and offset from and against  Lessee for any such
Defaults cured by the sublessee.

13. Default; Breach; Remedies.

   13.1  Default;  Breach.  Lessor  and  Lessee  agree  that if an  attorney  is
consulted  by  Lessor  in  connection  with  a  Lessee  Default  or  Breach  (as
hereinafter  defined),  $350.00 is a reasonable  minimum sum per such occurrence
for legal  services  and costs in the  preparation  and  service  of a notice of
Default,

                                                                 Initials /s/ JM
                                                                       /s/ BR SR
GROSS                                PAGE 6

<PAGE>
and that Lessor may include the cost of such  services  and costs in said notice
as rent due and  payable  to cure said  Default.  A  "Default"  is  defined as a
failure  by the Lessee to  observe,  comply  with or  perform  any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
is defined as the occurrence of any one or more of the following Defaults,  and,
where a grace period for cure after notice is specified  herein,  the failure by
Lessee to cure such Default  prior to the  expiration  of the  applicable  grace
period, shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3: 

       (a) The vacating of the Premises  without the intention to reoccupy same,
or the abandonment of the Premises.

       (b) Except as expressly  otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent or any other monetary  payment  required
to be made by Lessee  hereunder,  whether to Lessor or to a third party,  as and
when due, the failure by Lessee to provide  Lessor with  reasonable  evidence of
insurance or surety bond required under this Lease,  or the failure of Lessee to
fulfill any  obligation  under this Lease which  endangers or threatens  life or
property,  where such failure continues for a period of three (3) days following
written notice thereof by or on behalf of Lessor to Lessee.

       (c) Except as expressly  otherwise provided in this Lease, the failure by
Lessee to provide  Lessor with  reasonable  written  evidence (in duly  executed
original  form,  if  applicable)  of (i)  compliance  with  applicable  law  per
Paragraph 6.3, (ii) the inspection,  maintenance and service contracts  required
under Paragraph  7.1(b),  (iii) the recission of an  unauthorized  assignment or
subletting per Paragraph 12.1(b),  (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or  non-subordination  of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required  under  Paragraphs  1.11 and 37,  (vii) the  execution  of any document
requested under Paragraph 42 (easements),  or (viii) any other  documentation or
information  which  Lessor may  reasonably  require of Lessee under the terms of
this  Lease,  where  any such  failure  continues  for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.

       (d) A  Default  by  Lessee  as to the  terms,  covenants,  conditions  or
provisions of this Lease,  or of the rules  adopted  under  Paragraph 40 hereof,
that are to be observed,  complied with or performed by Lessee, other than those
described in subparagraphs  (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee;  provided,  however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably  required for its cure, then
it  shall  not be  deemed  to be a Breach  of this  Lease by  Lessee  if  Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.

       (e) The  occurrence  of any of the  following  events:  (i) The making by
lessee of any general  arrangement  or assignment  for the benefit of creditors;
(ii)  Lessee's  becoming a "debtor"  as  defined  in 11 U.S.C.  sec.  101 or any
successor  statute  thereto  (unless,  in the case of a petition  filed  against
Lessee,  the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease,  where possession
is not  restored  to Lessee  within  thirty (30) days;  or (iv) the  attachment,
execution or other  judicial  seizure of  substantially  all of Lessee's  assets
located at the  Premises  or of  Lessee's  interest  in this  Lease,  where such
seizure is not discharged  within thirty (30) days;  provided,  however,  in the
event that any provision of this  subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect,  and not affect the validity
of the remaining provisions.

       (f) The discovery by Lessor that any financial  statement given to Lessor
by Lessee or any  Guarantor of Lessee's  obligations  hereunder  was  materially
false.

       (g) If the  performance  of  Lessee's  obligations  under  this  Lease is
guaranteed:  (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance  with the terms of
such  guaranty,  (iii) a  guarantor's  becoming  insolvent  or the  subject of a
bankruptcy filing,  (iv) a guarantor's  refusal to honor the guaranty,  or (v) a
guarantor's breach of its guaranty  obligation on an anticipatory  breach basis,
and Lessee's  failure,  within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event,  to provide  Lessor  with  written
alternative  assurance or security,  which,  when coupled with the then existing
resources  of Lessee,  equals or exceeds the  combined  financial  resources  of
Lessee and the guarantors that existed at the time of execution of this Lease.

   13.2 Remedies.  If Lessee fails to perform any affirmative duty or obligation
of Lessee under this Lease,  within ten (10) days after written notice to Lessee
(or in case of an  emergency,  without  notice),  Lessor may at its option  (but
without  obligation  to do so),  perform  such duty or  obligation  on  Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental  licenses,  permits or approvals.  The costs
and  expenses  of any such  performance  by Lessor  shall be due and  payable by
Lessee to Lessor upon invoice  therefor.  If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn,  Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's  check.  In the event of a Breach of this Lease by Lessee,  as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting  Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:

       (a) Terminate  Lessee's right to possession of the Premises by any lawful
means,  in which case this Lease and the term hereof shall  terminate and Lessee
shall immediately  surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover  from  Lessee:  (i) the worth at the time of
the award of the unpaid rent which had been  earned at the time of  termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned  after  termination  until the time of award  exceeds the
amount of such rental  loss that the Lessee  proves  could have been  reasonably
avoided;  (iii) the worth at the time of award of the amount by which the unpaid
rent for the  balance of the term after the time of award  exceeds the amount of
such rental loss that the Lessee  proves could be reasonably  avoided;  and (iv)
any  other  amount  necessary  to  compensate   Lessor  for  all  the  detriment
proximately caused by the Lessee's failure to perform its obligations under this
Lease or which in the  ordinary  course  of  things  would be  likely  to result
therefrom, including but not limited to the cost of recovering possession of the
Premises,  expenses of reletting,  including necessary renovation and alteration
of the Premises,  reasonable  attorneys'  fees,  and that portion of the leasing
commission  paid by Lessor  applicable to the unexpired term of this Lease.  The
worth at the time of award of the amount  referred to in provision  (iii) of the
prior sentence shall be 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%).  Efforts by Lessor to mitigate  damages caused by Lessee's Default
or Breach of this Lease shall not waive Lessor's right to recover  damages under
this Paragraph. If termination of this Lease is obtained through the provisional
remedy of  unlawful  detainer,  Lessor  shall  have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve  therein the right to recover all or any part thereof in a separate suit
for such rent  and/or  damages.  If a notice  and grace  period  required  under
subparagraphs  13.1 (b), (c) or (d) was not  previously  given,  a notice to pay
rent or quit,  or to perform or quit,  as the case may be, given to Lessee under
any statute  authorizing  the  forfeiture of leases for unlawful  detainer shall
also  constitute the  applicable  notice for grace period  purposes  required by
subparagraphs  13.1 (b), (c) or (d). In such case, the  applicable  grace period
under subparagraphs 13.1 (b), (c) or (d) and under the unlawful detainer statute
shall run concurrently  after the one such statutory notice,  and the failure of
Lessee to cure the  Default  within the  greater  of the two such grace  periods
shall constitute both an unlawful  detainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute.

       (b)  Continue the Lease and Lessee's  right to  possession  in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment  and recover  the rent as it becomes  due,  provided  Lessee has the
right  to  sublet  or  assign,  subject  only  to  reasonable  limitations.  See
Paragraphs 12 and 36 for the  limitations  on assignment  and  subletting  which
limitations  Lessee and Lessor  agree are  reasonable.  Acts of  maintenance  or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect  the  Lessor's  interest  under  the  Lease,   shall  not  constitute  a
termination of the Lessee's right to possession.

       (c) Pursue any other  remedy now or  hereafter  available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.

       (d) The expiration or termination of this Lease and/or the termination of
Lessee's right to possession  shall not relieve Lessee from liability  under any
indemnity  provisions of this Lease as to matters  occurring or accruing  during
the term  hereof  or by reason  of  Lessee's  occupancy  of the  Premises.  

   13.3  Inducement  Recapture In Event Of Breach.  Any  agreement by Lessor for
free or abated rent or other  charges  applicable  to the  Premises,  or for the
giving  or  paying  by  Lessor  to or for  Lessee  of any cash or  other  bonus,
inducement or consideration  for Lessee's entering into this Lease, all of which
concessions are  hereinafter  referred to as "Inducement  Provisions,"  shall be
deemed  conditioned  upon Lessee's full and faithful  performance  of all of the
terms,  covenants  and  conditions  of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended.  Upon the  occurrence
of a Breach of this Lease by Lessee,  as defined  in  Paragraph  13.1,  any such
inducement  Provision shall  automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus,  inducement or
consideration  theretofore  abated,  given  or  paid  by  Lessor  under  such an
Inducement  Provision  shall be immediately due and payable by Lessee to Lessor,
and   recoverable   by  Lessor  as   additional   rent  due  under  this  Lease,
notwithstanding  any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which  initiated  the operation of this
Paragraph  shall not be deemed a waiver  by  Lessor  of the  provisions  of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.

   13.4 Late Charges.  Lessee hereby acknowledges that late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor to incur costs not
contemplated  by this  Lease,  the  exact  amount  of  which  will be  extremely
difficult to ascertain.  Such costs include,  but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any  ground  lease,  mortgage  or trust  deed  covering  the  Premises.
Accordingly,  if any  installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's  designee  within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee,  Lessee
shall pay to Lessor a late  charge  equal to six  percent  (6%) of such  overdue
amount.  The parties  hereby  agree that such late charge  represents a fair and
reasonable  estimate of the costs Lessor will incur by reason of late payment by
Lessee.  Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's  Default or Breach with respect to such overdue  amount,  nor
prevent  Lessor from  exercising  any of the other rights and  remedies  granted
hereunder. In the event that a late charge is payable hereunder,  whether or not
collected,   for  three  (3)   consecutive   installments  of  Base  Rent,  then
notwithstanding  Paragraph  4.1 or any  other  provision  of this  Lease  to the
contrary,  Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.

   13.5  Breach by  Lessor.  Lessor  shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable  time to perform an obligation  required
to be performed by Lessor.  For  purposes of this  Paragraph  13.5, a reasonable
time shall in no event be less than  thirty  (30) days after  receipt by Lessor,
and by the holders of any ground lease,  mortgage or deed of trust  covering the
Premises whose name and address shall have been furnished  Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such  that more than  thirty  (30) days  after  such  notice  are  reasonably
required for its  performance,  then Lessor shall not be in breach of this Lease
if  performance  is commenced  within such thirty (30) day period and thereafter
diligently pursued to completion.


                                                            Initials /s/  JM
                                                                     /s/  BR SR
GROSS                                PAGE 7

<PAGE>

14.  Condemnation.  If the  Premises or any portion  thereof are taken under the
power of eminent  domain or sold under the threat of the  exercise of said power
(all of which are herein called  "condemnation"),  this Lease shall terminate as
to the part so taken as of the date  the  condemning  authority  takes  title or
possession,  whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises,  or more than  twenty-five  percent (25%) of the land area
not occupied by any building, is taken by condemnation,  Lessee may, at Lessee's
option,  to be exercised in writing within ten (10) days after Lessor shall have
given  Lessee  written  notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate  this  Lease  as of the  date  the  condemning  authority  takes  such
possession.  If Lessee  does not  terminate  this Lease in  accordance  with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises  remaining,  except that the Base Rent shall be reduced in the same
proportion as the rentable  floor area of the Premises  taken bears to the total
rentable  floor area of the building  located on the  Premises.  No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there  is no  building.  Any  award  for the  taking  of all or any  part of the
Premises  under the power of eminent  domain or any payment made under threat of
the exercise of such power shall be the  property of Lessor,  whether such award
shall be made as  compensation  for  diminution in value of the leasehold or for
the taking of the fee, or as severance damages;  provided,  however, that Lessee
shall be entitled to any compensation  separately awarded to Lessee for Lessee's
relocation  expenses and/or loss of Lessee's Trade  Fixtures.  In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation,  except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net  severance  damages  required to
complete such repair.

15. Broker's Fee.

   15.1 The Brokers  named in Paragraph  1.10 are the  procuring  causes of this
Lease.

   15.2 Upon  execution of this Lease by both Parties,  Lessor shall pay to said
Brokers  jointly,  or in such separate shares as they may mutually  designate in
writing,  a fee as set forth in a separate written  agreement between Lessor and
said  Brokers (or in the event there is no separate  written  agreement  between
Lessor and said Brokers,  the sum of $22,795.80) for brokerage services rendered
by said Brokers to Lessor in this transaction.

   15.3  Unless  Lessor and Brokers  have  otherwise  agreed in writing,  Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or any Option  subsequently  granted which is substantially  similar to an
Option granted to Lessee in this Lease,  or (b) if Lessee acquires any rights to
the Premises or other premises  described in this Lease which are  substantially
similar to what  Lessee  would have  acquired  had an Option  herein  granted to
Lessee been  exercised,  or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having  failed to exercise an Option,  or (d) if said Brokers are the  procuring
cause of any other lease or sale entered into between the Parties  pertaining to
the Premises  and/or any adjacent  property in which Lessor has an interest,  or
(e) if  Base  Rent  is  increased,  whether  by  agreement  or  operation  of an
escalation clause herein, then as to any of said transactions,  Lessor shall pay
said Brokers a fee in accordance  with the schedule of said Brokers in effect at
the time of the execution of this Lease.

   15.4 Any buyer or transferee of Lessor's interest in this Lease, whether such
transfer  is by  agreement  or by  operation  of law,  shall be  deemed  to have
assumed  Lessor's  obligation  under this  Paragraph  15. Each Broker shall be a
third party  beneficiary of the provisions of this Paragraph 15 to the extent of
its  interest in any  commission  arising  from this Lease and may enforce  that
right directly against Lessor and its successors.

   15.5  Lessee and Lessor each  represent  and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the Brokers,
if any named in Paragraph 1.10) in connection with the negotiation of this Lease
and/or the  consummation of the  transaction  contemplated  hereby,  and that no
broker or other person, firm or entity other than said named Brokers is entitled
to any commission or finder's fee in connection  with said  transaction.  Lessee
and Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless  from and against  liability for  compensation  or charges which may be
claimed by any such unnamed  broker,  finder or other similar party by reason of
any  dealings  or  actions  of the  indemnifying  Party,  including  any  costs,
expenses, attorneys' fees reasonably incurred with respect thereto.

   15.6   Lessor  and  Lessee   hereby   consent  to  and   approve  all  agency
relationships, including any dual agencies, indicated in Paragraph 1.10.

16. Tenancy Statement.

   16.1 Each  Party (as  "Responding  Party")  shall  within ten (10) days after
written  notice  from  the  other  Party  (the   "Requesting   Party")  execute,
acknowledge  and deliver to the Requesting  Party a statement in writing in form
similar to the then most  current  "Tenancy  Statement"  form  published  by the
American Industrial Real Estate Association,  plus such additional  information,
confirmation and/or statements as may be reasonably  requested by the Requesting
Party.

   16.2 If Lessor desires to finance,  refinance, or sell the Premises, any part
thereof,  or the  building  of which the  Premises  are a part,  Lessee  and all
Guarantors  of Lessee's  performance  hereunder  shall  deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such  Guarantors  as may be  reasonably  required by such  lender or  purchaser,
including but not limited to Lessee's  financial  statements  for the past three
(3) years.  All such financial  statements  shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.

17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises,  or, if this is
a  sublease,  of the  Lessee's  interest in the prior  lease.  In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease,  Lessor
shall  deliver to the  transferee  or assignee (in cash or by credit) any unused
Security  Deposit  held by Lessor at the time of such  transfer  of  assignment.
Except as  provided  in  Paragraph  15, upon such  transfer  or  assignment  and
delivery of the  Security  Deposit,  as  aforesaid,  the prior  Lessor  shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease  thereafter to be performed by the Lessor.  Subject to the foregoing,
the  obligations  and/or  covenants  in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.

18.  Severability.  The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder,
other  than late  charges,  not  received  by  Lessor  within  thirty  (30) days
following  the  date  on  which  it  was  due,  shall  bear  interest  from  the
thirty-first  (31st) day after it was due at the rate of 12% per annum,  but not
exceeding  the  maximum  rate  allowed by law,  in  addition  to the late charge
provided for in Paragraph 13.4.

20. Time of Essence.  Time is of the essence with respect to the  performance of
all obligations to be performed or observed by the Parties under this Lease.

21. Rent Defined.  All monetary  obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22. No Prior or Other  Agreements;  Broker  Disclaimer.  This Lease contains all
agreements  between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each  represents and warrants to the Brokers that it has made,
and is relying solely upon,  its own  investigation  as to the nature,  quality,
character and financial  responsibility  of the other Party to this Lease and as
to  the  nature,  quality  and  character  of  the  Premises.  Brokers  have  no
responsibility  with  respect  thereto or with  respect to any default or breach
hereof by either Party.

23. Notices.

   23.1 All notices  required or permitted by this Lease shall be in writing and
may be delivered  in person (by hand or by messenger or courier  service) or may
be sent by regular,  certified or registered mail or U.S. Postal Service Express
Mail, with postage prepaid,  or by facsimile  transmission,  and shall be deemed
sufficiently  given if served in a manner  specified in this  Paragraph  23. The
addresses  noted  adjacent  to a Party's  signature  on this Lease shall be that
Party's address for delivery or mailing of notice purposes.  Either Party may by
written  notice to the other  specify a different  address for notice  purposes,
except that upon Lessee's taking possession of the Premises,  the Premises shall
constitute  Lessee's address for the purpose of mailing or delivering notices to
Lessee.  A copy of all  notices  required  or  permitted  to be given to  Lessor
hereunder  shall be  concurrently  transmitted  to such party or parties at such
addresses as Lessor may from time to time hereafter  designate by written notice
to Lessee.

   23.2  Any  notice  sent by  registered  or  certified  mail,  return  receipt
requested,  shall be deemed  given on the date of delivery  shown on the receipt
card, or if no delivery date is shown, the postmark thereon.  If sent by regular
mail the notice shall be deemed given  forty-eight  (48) hours after the same is
addressed as required herein and mailed with postage prepaid.  Notices delivered
by United  States  Express Mail or overnight  courier that  guarantees  next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier.  If any notice is transmitted by
facsimile  transmission  or similar  means,  the same shall be deemed  served or
delivered upon telephone  confirmation of receipt of the  transmission  thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.


24. Waivers.  No waiver by Lessor of the Default or Breach of any term, covenant
or  condition  hereof by  Lessee,  shall be  deemed a waiver of any other  term,
covenant or condition hereof,  or of any subsequent  Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or  approval  of,  any act shall  not be  deemed to render  unnecessary  the
obtaining of Lessor's  consent to, or approval of, any subsequent or similar act
by Lessee,  or be construed as the basis of an estoppel to enforce the provision
or  provisions  of this Lease  requiring  such  consent.  Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting  rent,  the acceptance
of rent by Lessor  shall not be a waiver of any  preceding  Default or Breach by
Lessee of any  provision  hereof,  other  than the  failure of Lessee to pay the
particular rent so accepted.  Any payment given Lessor by Lessee may be accepted
by Lessor on  account  of moneys or  damages  due  Lessor,  notwithstanding  any
qualifying  statements  or conditions  made by Lessee in  connection  therewith,
which  such  statements  and/or  conditions  shall  be of  no  force  or  effect
whatsoever unless  specifically  agreed to in writing by Lessor at or before the
time of deposit of such payment.

25.  Recording.  Either  Lessor or Lessee  shall,  upon  request  of the  other,
execute,  acknowledge  and deliver to the other a short form  memorandum of this
Lease  for  recording  purposes.  The  Party  requesting  recordation  shall  be
responsible for payment of any fees or taxes applicable thereto.

                                                            Initials /s/  JM
                                                                     /s/  BR SR
GROSS                                PAGE 8

<PAGE>

26.  No Right To  Holdover.  Lessee  has no right to  retain  possession  of the
Premises or any part thereof  beyond the  expiration or earlier  termination  of
this Lease.

27.  Cumulative  Remedies.  No  remedy  or  election  hereunder  shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.  Covenants and  Conditions.  All  provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties,
their  personal  representatives,  successors and assigns and be governed by the
laws of the State in which the Premises are located.  Any litigation between the
Parties hereto  concerning  this Lease shall be initiated in the county in which
the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

   30.1 Subordination. This Lease and any Option granted hereby shall be subject
and  subordinate  to any  ground  lease,  mortgage,  deed  of  trust,  or  other
hypothecation  or security  device  (collectively,  "Security  Device"),  now or
hereafter  placed by Lessor upon the real  property of which the  Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications,  consolidations,  replacements  and  extensions  thereof.  Lessee
agrees that the Lenders  holding any such  Security  Device  shall have no duty,
liability or obligation to perform any of the  obligations  of Lessor under this
Lease,  but that in the  event of  Lessor's  default  with  respect  to any such
obligation,  Lessee  will  give any  Lender  whose  name and  address  have been
furnished  Lessee in writing for such  purpose  notice of  Lessor's  default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before  invoking any remedies Lessee may have by reason thereof.
If any Lender  shall elect to have this Lease and/or any Option  granted  hereby
superior  to the lien of its  Security  Device  and shall  give  written  notice
thereof to Lessee,  this Lease and such  Options  shall be deemed  prior to such
Security  Device,  notwithstanding  the relative dates of the  documentation  or
recordation thereof.

   30.2 Attornment. Subject to the non-disturbance provisions of Paragraph 30.3,
Lessee agrees to attorn to a Lender or any other party who acquires ownership of
the Premises by reason of a foreclosure  of a Security  Device,  and that in the
event of such  foreclosure,  such new owner shall not: (i) be liable for any act
or omission of any prior  lessor or with  respect to events  occurring  prior to
acquisition  of  ownership,  (ii) be subject to any  offsets or  defenses  which
Lessee might have against any prior  lessor,  or (iii) be bound by prepayment of
more than one (1) month's rent.

   30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor
after the execution of this Lease, Lessee's subordination of this Lease shall be
subject to receiving assurance (a  "non-disturbance  agreement") from the Lender
that  Lessee's  possession  and this Lease,  including any options to extend the
term hereof, will not be disturbed so long as Lessee is not in Breach hereof and
attorns to the record owner of the Premises.

   30.4  Self-Executing.  The agreements contained in this Paragraph 30 shall be
effective  without the execution of any further  documents;  provided,  however,
that,  upon written  request from Lessor or a Lender in connection  with a sale,
financing or refinancing  of the Premises,  Lessee and Lessor shall execute such
further writings as may be reasonably  required to separately  document any such
subordination or non-subordination,  attornment and/or non-disturbance agreement
as is provided for herein.

31.  Attorney's  Fees.  If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights  hereunder,  the Prevailing Party (as
hereafter defined) or Broker in any such proceeding,  action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in the
same  suit or  recovered  in a  separate  suit,  whether  or not such  action or
proceeding  is pursued to decision or  judgment.  The term,  "Prevailing  Party"
shall include,  without limitation,  a Party or Broker who substantially obtains
or  defeats  the  relief  sought,  as the case may be,  whether  by  compromise,
settlement,  judgment,  or the  abandonment  by the other Party or Broker of its
claim or defense.  The  attorney's fee award shall not be computed in accordance
with any  court  fee  schedule,  but  shall be such as to  fully  reimburse  all
attorney's  fees  reasonably  incurred.  Lessor shall be entitled to  attorney's
fees,  cost and expenses  incurred in the  preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.

32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time,  in the case of an  emergency,
and  otherwise  at  reasonable  times for the  purpose  of  showing  the same to
prospective  purchasers,  lenders,  or  lessees,  and making  such  alterations,
repairs,  improvements  or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the  Premises or building  any  ordinary  "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease"  signs.  All such
activities of Lessor shall be without abatement of rent or liability to Lessee.

33.  Auctions.  Lessee shall not  conduct,  nor permit to be  conducted,  either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained  Lessor's  prior  written  consent.  Notwithstanding  anything  to  the
contrary in this Lease,  Lessor  shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34. Signs. Lessee shall not place any sign upon the Premises, except that Lessee
may, with Lessor's  prior  written  consent,  install (but not on the roof) such
signs as are  reasonably  required  to  advertise  Lessee's  own  business.  The
installation  of any sign on the  Premises by or for Lessee  shall be subject to
the  provisions of Paragraph 7  (Maintenance,  Repairs,  Utility  Installations,
Trade  Fixtures and  Alterations).  Unless  otherwise  expressly  agreed herein,
Lessor reserves all rights to the use of the roof and the right to install,  and
all revenues from the installation  of, such advertising  signs on the Premises,
including  the  roof,  as do not  unreasonably  interfere  with the  conduct  of
Lessee's business.

35.  Termination;  Merger.  Unless  specifically  stated otherwise in writing by
Lessor,  the  voluntary or other  surrender of this Lease by Lessee,  the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee,  shall  automatically  terminate any sublease or lesser estate in the
Premises;  provided,  however, Lessor shall, in the event of any such surrender,
termination or  cancellation,  have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser  interest,  shall constitute  Lessor's  election to have such
event constitute the termination of such interest.

36. Consents.

       (a) Except for Paragraph 33 hereof  (Auctions)  or as otherwise  provided
herein,  wherever  in this Lease the consent of a Party is required to an act by
or for the other  Party,  such  consent  shall not be  unreasonably  withheld or
delayed.  Lessor's  actual  reasonable  costs and  expenses  (including  but not
limited to  architects',  attorneys',  engineers'  or other  consultants'  fees)
incurred in the  consideration  of, or response  to, a request by Lessee for any
Lessor  consent  pertaining  to this Lease or the  Premises,  including  but not
limited to consents to an  assignment,  a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and  supporting  documentation  therefor.  Subject to
Paragraph  12.2(e)  (applicable to assignment or  subletting),  Lessor may, as a
condition to considering any such request by Lessee, require that Lessee deposit
with Lessor an amount of money (in addition to the  Security  Deposit held under
Paragraph 5)  reasonably  calculated by Lessor to represent the cost Lessor will
incur in  considering  and responding to Lessee's  request.  Except as otherwise
provided, any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an  acknowledgement  that no Default
or Breach by Lessee of this Lease  exists,  nor shall  such  consent be deemed a
waiver of any then  existing  Default  or  Breach,  except  as may be  otherwise
specifically stated in writing by Lessor at the time of such consent.

       (b) All  conditions  to  Lessor's  consent  authorized  by this Lease are
acknowledged  by Lessee as being  reasonable.  The failure to specify herein any
particular  condition to Lessor's  consent shall not preclude the  imposition by
Lessor at the time of consent of such  further or other  conditions  as are then
reasonable  with reference to the  particular  matter for which consent is being
given.

37. Guarantor.

   37.1 If there are to be any Guarantors of this Lease per Paragraph  1.11, the
form of the guaranty to be executed by each such Guarantor  shall be in the form
most recently published by the American Industrial Real Estate Association,  and
each said Guarantor shall have the same  obligations as Lessee under this Lease,
including but not limited to the obligation to provide the Tenancy Statement and
information called for by Paragraph 16.

   37.2 It shall constitute a Default of the Lessee under this Lease if any such
Guarantor  fails or  refuses,  upon  reasonable  request by Lessor to give:  (a)
evidence  of the  due  execution  of the  guaranty  called  for by  this  Lease,
including  the  authority  of  the  Guarantor  (and  of  the  party  signing  on
Guarantor's  behalf) to obligate such Guarantor on said guaranty,  and including
in the case of a corporate  Guarantor,  a certified  copy of a resolution of its
board of directors  authorizing  the making of such  guaranty,  together  with a
certificate  of incumbency  showing the  signature of the persons  authorized to
sign on its behalf,  (b) current  financial  statements of Guarantor as may from
time to time be requested  by Lessor,  (c) a Tenancy  Statement,  or (d) written
confirmation that the guaranty is still in effect.

38.  Quiet  Possession.  Upon payment by Lessee of the rent for the Premises and
the  observance  and  performance  of  all  of  the  covenants,  conditions  and
provisions  on Lessee's  part to be  observed  and  performed  under this Lease,
Lessee  shall have quiet  possession  of the Premises for the entire term hereof
subject to all of the provisions of this Lease.

39. Options.

   39.1  Definition.  As used in this  Paragraph  39 the word  "Option"  has the
following  meaning:  (a) the right to extend  the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other  property of
Lessor;  (b) the right of first  refusal to lease the  Premises  or the right of
first offer to lease the  Premises or the right of first  refusal to lease other
property  of Lessor  or the  right of first  offer to lease  other  property  of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises,  or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.

   39.2 Options  Personal To Original  Lessee.  Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be  voluntarily or  involuntarily  assigned or exercised by any person or
entity other than said original Lessee while the original Lessee

                                                            Initials /s/  JM
                                                                     /s/  BR SR
GROSS                                PAGE 9

<PAGE>

is in full and actual  possession  of the Premises and without the  intention of
thereafter  assigning or  subletting.  The Options,  if any,  herein  granted to
Lessee are not  assignable,  either as a part of an  assignment of this Lease or
separately or apart therefrom, and no Option may be separated from this Lease in
any manner,  by reservation or otherwise.

39.3  Multiple  Options.  In the event that Lessee has any  Multiple  Options to
extend or renew this Lease, a later Option cannot be exercised  unless the prior
Options to extend or renew this Lease have been validly exercised.

39.4 Effect of Default on Options.

       (a) Lessee shall have no right to exercise an Option, notwithstanding any
provision  in the  grant of  Option  to the  contrary:  (i)  during  the  period
commencing  with the giving of any notice of Default  under  Paragraph  13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any  monetary  obligation  due Lessor from Lessee is unpaid  (without  regard to
whether notice  thereof is given Lessee),  or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of Default under Paragraph 13.1, whether or not the Defaults
are cured,  during  the  twelve  (12) month  period  immediately  preceding  the
exercise of the Option.

       (b) The period of time within which an Option may be exercised  shall not
be extended or  enlarged by reason of Lessee's  inability  to exercise an Option
because of the provisions of Paragraph 39.4(a).

       (c) All  rights  of  Lessee  under  the  provisions  of an  Option  shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely  exercise of the Option,  if, after such  exercise and during the term of
this Lease,  (i) Lessee fails to pay to Lessor a monetary  obligation  of Lessee
for a period of thirty (30) days after such obligation  becomes due (without any
necessity of Lessor to give notice  thereof to Lessee),  or (ii) Lessor gives to
Lessee  three (3) or more  notices of Default  under  Paragraph  13.1 during any
twelve (12) month  period,  whether or not the Defaults  are cured,  or (iii) if
Lessee commits a Breach of this Lease.

40.  Multiple  Buildings.  If the  Premises  are  part of a group  of  buildings
controlled by Lessor,  Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management,  safety,  care,  and  cleanliness  of the  grounds,  the parking and
unloading of vehicles  and the  preservation  of good order,  as well as for the
convenience  of other  occupants  or tenants of such other  buildings  and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.

41. Security  Measures.  Lessee hereby  acknowledges  that the rental payable to
Lessor  hereunder  does not include the cost of guard service or other  security
measures,  and that Lessor shall have no obligation  whatsoever to provide same.
Lessee assumes all  responsibility  for the protection of the Premises,  Lessee,
its agents and invitees and their property from the acts of third parties.

42.  Reservations.  Lessor  reserves to itself the right,  from time to time, to
grant,  without the consent or joinder of Lessee,  such  easements,  rights  and
dedications that Lessor deems necessary,  and to cause the recordation of parcel
maps and restrictions,  so long as such easements, rights, dedications, maps and
restrictions  do not  unreasonably  interfere  with the use of the  Premises  by
Lessee.  Lessee agrees to sign any documents  reasonably  requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.

43.  Performance  Under Protest.  If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment  "under  protest"  and such payment  shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to  institute  suit for recovery of such sum. If it shall be adjudged
that there was no legal  obligation on the part of said Party to pay such sum or
any part  thereof,  said Party shall be entitled to recover  such sum or so much
thereof  as it was not  legally  required  to pay under the  provisions  of this
Lease.

44.  Authority.  If either Party hereto is a corporation,  trust,  or general or
limited  partnership,  each  individual  executing  this Lease on behalf of such
entity  represents and warrants that he or she is duly authorized to execute and
deliver  this  Lease  on its  behalf.  If  Lessee  is a  corporation,  trust  or
partnership,  Lessee  shall,  within  thirty (30) days after  request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

45. Conflict.  Any conflict between the printed provisions of this Lease and the
typewritten or handwritten  provisions shall be controlled by the typewritten or
handwritten provisions.

46. Offer.  Preparation of this Lease by Lessor or Lessor's agent and submission
of same to Lessee shall not be deemed an offer to lease to Lessee. This Lease is
not intended to be binding until executed by all Parties hereto.

47.  Amendments.  This  Lease may be  modified  only in  writing,  signed by the
parties in interest  at the time of the  modification.  The parties  shall amend
this  Lease from time to time to reflect  any  adjustments  that are made to the
Base  Rent or  other  rent  payable  under  this  Lease.  As long as they do not
materially  change Lessee's  obligations  hereunder,  Lessee agrees to make such
reasonable  non-monetary  modifications  to  this  Lease  as may  be  reasonably
required  by an  institutional,  insurance  company,  or pension  plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.

48. Multiple  Parties.  Except as otherwise  expressly  provided herein, if more
than one  person or entity is named  herein  as  either  Lessor or  Lessee,  the
obligations   of  such   Multiple   Parties  shall  be  the  joint  and  several
responsibility of all persons or entities named herein as such Lessor or Lessee.

LESSOR AND LESSEE HAVE  CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION  CONTAINED  HEREIN,  AND BY THE  EXECUTION  OF THIS  LEASE  SHOW THEIR
INFORMED AND VOLUNTARY  CONSENT  THERETO.  THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND  EFFECTUATE  THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

     IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR  SUBMISSION
     TO  YOUR  ATTORNEY  FOR  HIS  APPROVAL.  FURTHER,  EXPERTS  SHOULD  BE
     CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE
     PRESENCE  OF  ASBESTOS,  STORAGE  TANKS OR  HAZARDOUS  SUBSTANCES.  NO
     REPRESENTATION OR  RECOMMENDATION  IS MADE BY THE AMERICAN  INDUSTRIAL
     REAL  ESTATE  ASSOCIATION  OR BY THE REAL  ESTATE  BROKER(S)  OR THEIR
     AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,  LEGAL EFFECT, OR TAX
     CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE
     PARTIES  SHALL RELY  SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO
     THE LEGAL AND TAX  CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY
     IS LOCATED IN A STATE  OTHER THAN  CALIFORNIA,  AN  ATTORNEY  FROM THE
     STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.

The parties hereto have executed this Lease at the place on the dates  specified
above to their respective signatures.

Executed at __________________________  Executed at Santa Rosa, CA
on ___________________________________  on April 30, 1997
by LESSOR:                              by LESSEE:                            
                                                                              
______________________________________  Arterial Vascular Engineering, Inc.
______________________________________  ______________________________________
By /s/ Bruce S. Rocco                                                         
   /s/ Sandra G. Rocco                  By /s/ John D. Miller
Name Printed: ________________________  Name Printed: John D. Miller
Title: _______________________________  Title: CFO
                                                                              
By ___________________________________  By ___________________________________
Name Printed: ________________________  Name Printed: ________________________
Title: _______________________________  Title: _______________________________
Address:______________________________  Address:______________________________
______________________________________  ______________________________________
Tel.No. (__)_______ Fax No. (__)______  Tel.No. (__)_______ Fax No. (__)______
                                        
GROSS                               PAGE 10

NOTICE: These forms are often modified to meet changing  requirements of law and
        industry needs.  Always write or call to make sure you are utilizing the
        most current form:  American  Industrial  Real Estate  Association,  700
        South Flower Street,  Suite 600, Los Angeles,  CA 90017. (213) 687-8777.
        Fax No. (213) 687-8616.

<PAGE>

                       STANDARD LEASE CONDITIONS ADDENDUM

                  To Lease dated April 28, 1997 by and between
                    Lessor Bruce S. and Sandra G. Rocco and
                   Lessee Arterial Vascular Engineering, Inc.

49.      Rent Schedule:
         May 1, 1997 to April 30, 1998 $12,013.60 per month
         May 1, 1998 to April 30, 1999 $12,764.45 per month
         May 1, 1999 to April 30, 2000 $13,515.30 per month

50.      Tenant Improvement Scope:

         Lessor  shall  provide  a tenant  improvement  allowance  not to exceed
         $15,000  for  re-carpeting  of the office  area  indicated  on attached
         Exhibit B. Lessor shall be responsible for having the carpet  delivered
         to the space,  ready for  installation  no later  than April 30,  1997.
         Lessor acknowledges that the Lessee has requested that the re-carpeting
         be completed no later than 5:00 p.m. Friday,  May 2 1997.  Lessor shall
         only be  responsible  for delivery of carpet to the space no later than
         April  30th.  Lessor  will pay for the  carpet  installation,  however,
         Lessor shall not be  responsible  for the time involved to complete the
         carpet  installation.  In the event that the carpet is not delivered on
         or before April 30th, Lessee may elect to eliminate the requirement for
         the  re-carpeting  and Lessee  shall then receive the month of May rent
         free. In this event the lease termination date shall be May 30, 2000.

         Lessee shall be  responsible  for any costs  involved in canceling  the
         order for the  carpet  and/or  returning  the  carpet to the  dealer or
         manufacturer.

         Lessee shall inspect said premises  within three (3) days of completion
         to ascertain that Tenant improvements have been installed in accordance
         with plans and  specifications.  Lessee shall provide a "punch list" of
         items not in accordance with plans and  specifications or not installed
         in a good  workmanlike  manner.  Lessor  shall have thirty (30) days to
         correct said punch list items.

         If Lessee  installs  any portion of the tenant  improvements,  it shall
         have  the  same  responsibility  as  indicated  above  for  Lessor  and
         additionally  Lessee shall remove all mechanic's  liens, to satisfy all
         claims and meet all contract  requirements with suppliers,  contractors
         and employees arising out said installation of improvements.  Lessee to
         have  workman  compensation  and  liability  insurance  with a  minimum
         $500,000  per  occurrence  for  said  installation  and to name  Lessor
         additional insured. Lessee shall indemnify and hold harmless Lessor for
         all claims of employees, invitees, materialmen, supplier arising out of
         said installation.

51.      Financial Information

         Lessor has reviewed and approved financial statements regarding Lessee.

         Lessor may deliver such financial information in Lessor's possession to
         lending  institutions,  mortgage  brokers,  investors in the Industrial
         Center or prospective purchasers.

52.      Permits

         Lessee will obtain a use permit and a  wastewater  discharge  permit if
         required from the appropriate  municipality  within thirty (30) days of
         acceptance  hereof.  Lessee shall use due  diligence  in pursuing  such
         permits and pay all costs  associated with them.  Lessee shall have the
         responsibility to maintain any use permits and to comply with all terms
         and  conditions of said use permits  during the term of this Lease.  If
         Lessee's  application for a use permit is denied,  Lessor or Lessee may
         declare  this lease void,  in which event all deposits and prepaid rent
         shall be returned to Lessee.

53.      Hazardous Waste

         "If Lessee uses,  stores,  or becomes aware of any  hazardous  waste or
         substances  as listed by  Proposition  65, he will advise Lessor within
         three (3) days of such existence and either obtain approval from Lessor
         and the  appropriate  governing  agencies  within thirty (30) days from
         notice  or  remove  and  clean up said  hazardous  waste  to  standards
         required by the Lessor and the  appropriate  governing  agencies within
         sixty (60) days from  notice."

         "If Lessee,  his invitees,  employees,  agents or  associates  cause or
         allow a spill, or contamination  of the premises,  common area, soil or
         surrounding area, then it will be the responsibility of Lessee to clean
         up said hazard to the degree  required and within the time frame set by
         any public entity which has  jurisdiction  and particularly in response
         to the Super Fund Act and Proposition 65."

54.      Area Measurement:

         Lessee has reviewed and approved the system of measurement, the useable
         and rentable square footage of the subject premises.
<PAGE>


55.     Associations and Expenses:

        Lessee has reviewed and approved CC&R's, any common area association and
        budget, rules, expenses, and use conditions pertaining thereto.

        Lessee to review and  approve  estimated  expenses  including  increases
        above  base,  maintenance,  repairs,  insurance,  utilities,  taxes  and
        assessments pertaining to Lessee's premises and in accordance with lease
        provisions within 30 days of acceptance hereof.

56.     Lessee  shall not  exceed  the  parking  allocation  designated  for the
        building,  Lessee shall park only in marked parking spaces and shall not
        over park as to block parked cars.

57.     See attached.

58.     See attached.

        Agreed by: Lessee: /s/ Arterial Vascular Engineering, Inc. Date: 4/30/97
                            ---------------------------------------      -------

        Agreed by: Lessor:  /s/ Bruce S. Rocco                     Date: 4/30/97
                            -----------------------------------          -------
                            /s/ Sandra G. Rocco
                            -----------------------------------
<PAGE>

                                   EXHIBIT A


                       DRAWING -- BUILDINGS A, B & C

                           MIDSTATE CONSTRUCTION

<PAGE>


                                 EXHIBIT B

                                  DRAWING

                          COMPOSITE PLAN/AS-BUILT

                    ARTERIAL VASCULAR ENGINEERING, INC.
                5355 Skylane Blvd., Santa Rosa, California

<PAGE>

                                   EXHIBIT C

                       STANDARD LEASE DISCLOSURE ADDENDUM

Notice to Owners,  Buyers and Tenants  Regarding  Hazardous Wastes or Substances
and Underground Storage Tanks

Comprehensive  federal and state laws and  regulations  have been enacted in the
last few years in an effort to develop controls over the use, storage, handling,
cleanup,  removal and disposal of hazardous wastes or substances.  Some of these
laws and  regulations,  such as, for example,  the  so-called  "Super Fund Act",
provide for broad liability  schemes  wherein an owner,  tenant or other user of
the property may be liable for cleanup  costs and damages  regardless  of fault.
Other laws and  regulations  set  standards  for the  handling  of  asbestos  or
establish  requirements for the use,  modification,  abandonment,  or closing of
underground storage tanks.

It is not  practical or possible to list all such laws and  regulations  in this
Notice.  Therefore,  lessors and lessees are urged to consult  legal  counsel to
determine their  respective  rights and  liabilities  with respect to the issues
described in this Notice as well as other  aspects of the proposed  transaction.
If various  materials  that have been or may be in the future  determined  to be
toxic,  hazardous or undesirable,  or are going to be used,  stored,  handled or
disposed of on the  property,  or if the  property  has or may have  underground
storage tanks for storage of such  hazardous  materials,  or that such materials
may be in the  equipment,  improvements  or soil, it is essential that legal and
technical advice be obtained to determine,  among other things, what permits and
approvals have been or may be required, if any, the estimated costs and expenses
associated with the use, storage, handling,  cleanup, removal or disposal of the
hazardous  wastes or substances and what  contractual  provisions and protection
are necessary or desirable. It may also be important to obtain expert assistance
for site investigations and building inspections.  The past uses of the property
may provide  valuable  information as to the  likelihood of hazardous  wastes or
substances, or underground storage tanks being on the property.

The term  "hazardous  wastes or  substances"  is used in this Notice in its very
broadest  sense and  includes,  but is not  limited to, all those  listed  under
Proposition 65,  petroleum base products,  paints and solvents,  lead,  cyanide,
DDT, printing inks, acids,  pesticides,  ammonium compounds,  asbestos, PCBs and
other chemical products.  Hazardous wastes or substances and underground storage
tanks may be present on all types of real property.  This Notice is,  therefore,
meant to apply to any transaction  involving any type of real property,  whether
improved or unimproved.

Although  Keegan & Coppin  Co.,  Inc.  or its  salespeople,  will  disclose  any
knowledge  it actually  possesses  with  respect to the  existence  of hazardous
wastes or  substances,  or underground  storage tanks on the property,  Keegan &
Coppin Co., Inc. has not made  investigations  or obtained reports regarding the
subject matter of this Notice,  except as may be described in a separate written
document,  studies or  investigation  by experts.  Therefore,  unless  there are
additional documents or studies attached to this notice, lease or contract, this
will serve as  notification  that Keegan & Coppin Co.,  Inc. or its  salespeople
make no  representation  regarding the existence or  non-existence  of hazardous
wastes or substances,  or underground storage tanks on the property.  You should
contact  a  professional,  such  as  a  civil  engineer,  geologist,  industrial
hygienist  or other  persons  with  experience  in these  matters  to advise you
concerning the property.

Americans with Disabilities Act (ADA)

On  July  26,  1991,  the  federal  legislation  known  as  the  Americans  with
Disabilities Act (ADA) was signed into law by President Bush. The purpose of the
ADA is to  integrate  persons  with  disabilities  into the  economic and social
mainstream of American life. Title III of the ADA applies to Lessors and Lessees
of "places of public  accommodation" and "commercial  facilities",  and requires
that places of public  accommodation  undertake "readily  achievable" removal of
communication and access barriers to the disabled. This requirement of Title III
of the ADA is effective January 26, 1992.

It is important that building owners identify and undertake "readily achievable"
removal of any such  barriers in the common areas,  sidewalks,  parking lots and
other areas of the building under their control.

The lessor and lessee is responsible for compliance with ADA relating to removal
of barriers within the workplace i.e.,  arrangement of interior  furnishings and
access within the premises, and any improvements installed by lessor and lessee.

Keegan & Coppin  Company,  Inc.  recommends that both parties seek expert advice
regarding the implications of the Act as it affects this agreement.

Alquist-Priolo:

"The property which is the subject of this contract may be situated in a Special
Study Zone as designated under the Alquist-Priolo  Geologic Hazard Act, Sections
2621-2625, inclusive, of the California Public Resources Code; and, as such, the
construction  or  development  on  this  property  of any  structure  for  human
occupancy  may be subject to the  findings  of a geologic  report  prepared by a
geologist registered in the State of California, unless such report is waived by
the City or  County  under  the terms of that  act.  No  representations  on the
subject  are made by the  lessor or agent,  and the lessee  should  make his own
inquiry or investigation".

Flood Hazard Area Disclosure:

The subject  property  may be situated in a "Special  Flood  Hazard Area" as set
forth on a Federal Emergency Management Agency (FEMA) "Flood Insurance Rate Map"
(FIRM) or "Flood  Hazard  Boundary  Map"  (FHBM).  The law provides  that,  as a
condition of obtaining financing on most structures located in a "Special Floods
Hazard  Area",  lender  requires  flood  insurance  where  the  property  or its
attachments  are  security  for a  loan.  Lessee  should  consult  with  experts
concerning the possible risk of flooding.

         Acknowledgment:

         Lessee:  /s/ Arterial Vascular Engineering, Inc.  Date:  4/30/97       
                  --------------------------------------          -------

         Lessor:  /s/  Bruce S. Rocco
                  /s/  Sandra G. Rocco                     Date:  4/30/97       
                  ----------------------------------              -------

<PAGE>


                                   EXHIBIT D

                          LEASING DISCLOSURE REGARDING
                         REAL ESTATE AGENCY RELATIONSHIP

When you enter into a  discussion  with a real  estate  agent  regarding  a real
estate  transaction,  you should from the outset  understand what type of agency
relationship  or  representation  you  wish  to  have  with  the  agent  in  the
transaction.
                                LANDLORD'S AGENT
A Landlord's agent under a listing agreement with the Landlord acts as the agent
for the  Landlord.  A  Landlord's  agent or a  subagent  of that  agent  has the
following affirmative obligations:
To the Landlord:
(a) A fiduciary duty of utmost care,  integrity,  honesty and loyalty in dealing
    with the Landlord. 
To the Tenant and the Landlord:
(a) Diligent exercise of reasonable skill and care in performance of the agent's
    duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose  all facts known to the agent  materially  affecting  the
    value or  desirability  of the property that are not known to, or within the
    diligent attention and observation of, the parties.


An agent is not obligated to reveal to either party any confidential information
obtained from the other party which does not involve the affirmative  duties set
forth above.
                                 TENANT'S AGENT
A Tenant's  agent can,  with a Tenant's  consent,  agree to act as agent for the
Tenant only. In these situations, the agent is not the Landlord's agent, even if
by agreement the agent may receive compensation for services rendered, either in
full or in part from the  Landlord.  An agent  acting  only for a Tenant has the
following affirmative obligations.
To the Tenant:
(a) A fiduciary duty of utmost care, integrity,  honesty and loyalty in dealings
    with the Tenant.
To the Tenant and the Landlord:
(a) Diligent exercise of reasonable skill and care in performance of the agent's
    duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose  all facts known to the agent  materially  affecting  the
    value or  desirability  of the property that are not known to, or within the
    diligent attention and observation of, the parties.

An agent is not obligated to reveal to either party any confidential information
obtained from the other party which does not involve the affirmative  duties set
forth above.
                  AGENT REPRESENTING BOTH LANDLORD AND TENANT
A real estate  agent,  either acting  directly or through one or more  associate
licensees,  can  legally be the agent of both the  Landlord  and the Tenant in a
transaction,  but only with the  knowledge  and consent of both the Landlord and
the Tenant.

In a dual agency situation,  the agent has the following affirmative obligations
to both the Landlord and the Tenant.

(a) A  fiduciary  duty of utmost  care,  integrity,  honest  and  loyalty in the
    dealings with either Landlord or Tenant.
(b) Other  duties  to the  Landlord  and the  Tenant  as  stated  above in their
    respective sections.

In representing both Landlord and Tenant, the agent may not, without the express
permission  of the  respective  party,  disclose  to the  other  party  that the
Landlord  will  accept a rent less than the listed  rent or that the Tenant will
pay a rent greater than the rent offered.

The above  duties of the agent in a real  estate  transaction  do not  relieve a
Landlord or Tenant from the  responsibility to protect their own interests.  You
should carefully read all agreements to assure that they adequately express your
understanding of the  transaction.  A real estate agent is a person qualified to
advise about real estate. If legal or tax advice is desired, consult a competent
professional.

You should read its contents each time it is presented to you,  considering  the
relationship between you and the real estate agent in your specific transaction.

                     SIGN BELOW TO AUTHORIZE TYPE OF AGENCY

Keegan & Coppin Company, Inc., is the agent of (check one).
(Name of Listing Agent)
___ The Landlord exclusively; or
_X_ Both the Tenant and Landlord

 CONFIRMED AND AUTHORIZED:

Landlord /s/ Bruce S. Rocco, Sandra Rocco                           Date 4-30-97
         --------------------------------                                -------

Agent Keegan & Coppin Company, Inc.     By                          Date 
      ----------------------------         ------------------------      -------

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

Keegan & Coppin Company, Inc., is the agent of (check one):
(Name of Tenant's agent)
___ The Tenant exclusively; or 
___ The Landlord exclusively; or
___ Both the Tenant and Landlord

CONFIRMED AND AUTHORIZED:

Tenant /s/ Arterial Vascular Engineering, Inc.                      Date 4/30/97
           ----------------------------------                            -------
Tenant                                                              Date        
           ----------------------------------                            -------

Agent      Keegan & Coppin Company, Inc.         By                 Date        
           ----------------------------------                            -------

<PAGE>


                                   EXHIBIT E
                                      
                                     [Logo]

                                     OCCOR
                                  INVESTMENTS

                                                                  Bruce S. Rocco
                                                                  April 28, 1997

INVENTORY OF ITEMS OWNED BY LESSOR
TO STAY IN BUILDING DURING TERM OF LEASE

Large Conference Room

          6 - section Cherry Conference Table
          1   Cherry Credenza -- Bought by AVE
          1   Projection Cabinet
         19   Adjustable Swivel Chairs to match table

Cafeteria

          2 Round Tables
          5 Wired plastic chairs

Small Conference Room

          1 Oak-finished Conference Table
         12 Oak chairs-Adjustable Swivel.
          1 Oak Wall Unit Projection Screen and Chalk Board

Offices

         10 Oak Desks
         10 Oak Credenzas
         10 Oak Book Shelves-mounted to credenzas.

          8 Fire Extinguishers

          3 Picnic Tables with Steel Frames

          6 Wall Mount Clocks




<PAGE>

                                     [Logo]

                               OPTION(S) TO EXTEND

                                   ADDENDUM TO
                                 STANDARD LEASE

                     Dated April 28, 1997

                     By and Between (Lessor) Bruce S. and Sandra G. Rocco

                                    (Lessee) Arterial Vascular Engineering, Inc.

                     Property Address: 5355 Skylane Blvd., Santa Rosa, CA

Paragraph 59

A.       OPTION(S) TO EXTEND:

         Lessor  hereby  grants  to Lessee the option to extend the term of this
Lease for an  additional  24 month  period(s)  commencing  when the  prior  term
expires upon each and all of the following terms and conditions:

(i) Lessee  gives to Lessor,  and Lessor  actually  receives  on a date which is
prior to the date that the option  period would  commence (if  exercised)  by at
least six (6) and not more than nine 9 months,  a written notice of the exercise
of the option(s) to extend this Lease for said additional term(s), time being of
essence.  If said notification of the exercise of said option(s) is (are) not so
given and received, the option(s) shall automatically expire; said option(s) may
(if more than one) only be exercised consecutively;

(ii) The provisions of paragraph 39, including the provision relating to default
of Lessee  set forth in  paragraph  39.4 of this  Lease are  conditions  of this
Option;

(iii) All of the terms and  conditions  of this Lease except where  specifically
modified by this option shall apply;

(iv) The monthly rent for each month of the option period shall be calculated as
follows, using the method(s) indicated below:

(Check Method(s) to be Used and Fill in Appropriately)

[x]           I. Cost of Living Adjustment(s) (COL)

             (a) On (Fill in COL Adjustment Date(s): May 1, 2000 and May 1, 2001
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified below, in
the  Consumer  Price  Index  of the  Bureau  of  Labor  Statistics  of the  U.S.
Department of Labor for (select one): [ ] CPI W (Urban Wage Earners and Clerical
Workers)  or [X] CPI U (All  Urban  Consumers),  for (Fill in Urban  Area):  San
Francisco-Oakland-San  Jose, All Items (1982-1984 = 100),  herein referred to as
"C.P.I."

             (b) The monthly rent payable in accordance  with paragraph Al(a) of
this  Addendum  shall be  calculated  as  follows:  the Base  Rent set  forth in
paragraph  1.5 of the  attached  Lease,  shall be  multiplied  by a fraction the
numerator  of which shall be the C.P.I.  of the  calendar  month 2 (two)  months
prior to the  month(s)  specified  in  paragraph  Al(a) above  during  which the
adjustment is to take effect,  and the  denominator of which shall be the C.P.I.
of the  calendar  month which is two (2) months prior to (select  one):  [X] the
first  month of the term of this  Lease as set  forth in  paragraph  1.3  ("Base
Month") or [ ] (Fill in Other "Base  Month"):  ____________________________. The
sum so calculated  shall  constitute the new monthly rent  hereunder,  but in no
event,  shall any such new  monthly  rent be less than the rent  payable for the
month immediately preceding the date for rent adjustment.

             (c) In the event the compilation  and/or  publication of the C.P.I.
shall be transferred to any other governmental department or bureau or agency or
shall be discontinued,  then the index most nearly the same as the C.P.I.  shall
be used to make such  calculation.  In the event that  Lessor and Lessee  cannot
agree on such alternative index, then the matter shall be submitted for decision
to the American  Arbitration  Association  in accordance  with the then rules of
said  association and the decision of the arbitrators  shall be binding upon the
parties.  The cost of said  Arbitrators  shall be paid  equally  by  Lessor  and
Lessee.

[ ]          II. Market Rental Value Adjustment(s) (MRV)

             (a) On (Fill in MRV Adjustment Date(s):____________________________
________________________________________________________________________________
 the monthly  rent payable  under  paragraph  1.5 ("Base  Rent") of the attached
 Lease  shall be  adjusted  to the  "Market  Rental  Value" of the  property  as
 follows:

                 1)  Four  months  prior  to  the  Market   Rental  Value  (MRV)
Adjustment Date(s) described above, Lessor and Lessee shall meet to establish an
agreed upon new MRV for the  specified  term.  If  agreement  cannot be reached,
then:

Initials: /s/ BR SR                                      Initials: /s/ JM

          _____________                                            _____________

                              OPTION(S) TO EXTEND
                                  Page 1 of 2

NOTICE:  These forms are often modified to meet changing requirements of law and
         industry needs. Always write or call to make sure you are utilizing the
         most current form:  American  Industrial Real Estate  Association.  345
         South  Figueroa  Street,  Suite  M-1,  Los  Angeles,  CA  90071.  (213)
         687-8777. Fax No. (213) 687-8616.

(c) 1991 American Industrial Real Estate Association.


<PAGE>


                 i) Lessor  and  Lessee  shall  immediately  appoint a  mutually
acceptable appraiser or broker to establish the new MRV within the next 30 days.
Any associated costs will be split equally between the parties, or
                 ii) Both Lessor and Lessee  shall each  immediately  select and
pay the  appraiser  or broker of their choice to establish a MRV within the next
30 days.  If, for any  reason,  either one of the  appraisals  is not  completed
within the next 30 days, as stipulated,  then the appraisal that is completed at
that  time  shall  automatically  become  the new MRV.  If both  appraisals  are
completed and the two  appraisers/brokers  cannot agree on a reasonable  average
MRV  then  they   shall   immediately   select  a  third   mutually   acceptable
appraiser/broker  to establish a third MRV within the next 30 days.  The average
of the two appraisals  closest in value shall then become the new MRV. The costs
of the third appraisal will be split equally between the parties.

                 2) In any  event,  the new MRV  shall not be less than the rent
payable for the month immediately preceding the date for rent adjustment.

             (b)  Upon the  establishment  of each New  Market  Rental  Value as
described in paragraph All:

                 1) the  monthly  rental  sum so  calculated  for  each  term as
specified in paragraph All(a) will become the new "Base Rent" for the purpose of
calculating  any further  Cost of Living  Adjustments  as specified in paragraph
Al(a) above and
                 2) the  first  month  of  each  Market  Rental  Value  term  as
specified in paragraph  All(a) shall become the new "Base Month" for the purpose
of calculating any further Cost of Living  Adjustments as specified in paragraph
Al(b).

[ ]        III.  Fixed Rental Adjustment(s) (FRA)

The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amounts on the dates set forth below:

           On (Fill in FRA Adjustment Date(s)):    The New Base Rental shall be:
           ____________________________________    $____________________________
           ____________________________________    $____________________________
           ____________________________________    $____________________________
           ____________________________________    $____________________________

B.         NOTICE: Unless specified  otherwise herein, notice of any escalations
other than Fixed Rental  Adjustments  shall be made as specified in paragraph 23
of the attached Lease.

C.         BROKER'S FEE:

           The Real Estate  Brokers  specified in paragraph 1.10 of the attached
           Lease shall be paid a  Brokerage  Fee for each  adjustment  specified
           above in accordance with paragraph 15 of the attached Lease.

Initials: /s/ BR SR                                      Initials: /s/ JM

          _____________                                            _____________
                              OPTION(S) TO EXTEND
                                  Page 2 of 2

NOTICE:  These forms are often modified to meet changing requirements of law and
         industry needs. Always write or call to make sure you are utilizing the
         most current form:  American  Industrial Real Estate  Association,  345
         South  Figueroa  Street,  Suite  M-1,  Los  Angeles,  CA  90071.  (213)
         687-8777. Fax No. (213) 687-8616.

(c) 1991 American Industrial Real Estate Association.