<PAGE>   1
                                                                    EXHIBIT 10.5

          POINT RICHMOND R & D II, AN LLC. TRIPLE NET LABORATORY LEASE


This Lease is made and entered into as of May 23, 1997, between Point Richmond
R & D II, an LLC, a California Limited Liability Corporation ("Landlord"), and
Sangamo BioSciences, Inc. a Delaware Corporation ("Tenant").
     1.   DEFINITIONS.   Words not defined in this paragraph or elsewhere in
this Lease have their customary meanings. 1) The "Initial Term" is five years;
2) "Commencement Date" is September 16, 1997, the first day of the Initial
Term; 3) "Base Monthly Rent" means, subject to adjustment, $1.75 per month per
square foot, Triple Net, payable in advance, without deduction, offset, prior
notice or demand, on the first day of each Month of the Term; 4) "Premises"
means the part of the Building leased to Tenant for exclusive use, consisting
of approximately 9,770 square feet, commonly known as Point Richmond R & D
Center II, Building A, 501 Canal Blvd., Richmond, California as delineated on
Exhibit A); 5) "Building" means the structure in which the Premises are
located; 6) "Property" includes the Building and land on which it stands; 7)
"Agents" includes employees, agents, guest and invitees and, when applied to
Tenant, subtenants and assignees; 8) "Day" and "Month" mean calendar day/month;
9) "Lease Year" means consecutive 12-month periods starting on the Commencement
Date; 10) "Common Area" means parts of the building not for exclusive use by
tenants including halls, lobby, elevators, rest rooms, roof, exterior walls
and structural components; 11) "Tax" means any form of assessment, license,
fee, tax, levy, or tax imposed by any authority having direct or indirect
taxing powers; 12) "Alteration" includes additions, deletions, modifications
and changes including utility installations such as ducting, power panels,
fluorescent fixtures, base heaters, conduit and wiring; 13) "Operating
Expenses" are all expenses for maintenance, servicing, management and repair of
the Property and the Premises inclusive of Taxes and insurance premiums; 14)
"Base Year" is the calendar year in which Tenant executes this Lease; 15)
Tenant's "Pro Rata Share" is the total cost of an item multiplied by 11.9%
[Landlord may, however, adjust Tenant's Pro Rata Share of specific Operating
Expenses if Landlord reasonably determines that Tenant's usage warrants such
adjustment]; 16) The "floor area of the Premises" is measured from the exterior
surface of exterior walls and from the center of walls separating the Premises
from adjacent premises or common areas; 17) The "floor area of the
Building" is measured from the exterior surface of exterior walls including
common and core areas; 18) "consent" and "approval" require reasonable and
prompt conduct by the consenting/approving party; 19) "Regulation" includes all
laws, statutes, regulations and requirements adopted by duly constituted public
authorities now in force or hereafter adopted; 20) "Condemnation" includes
taking by exercise of governmental power or the sale or transfer to any
condemnor under threat of or during the dependency of proceedings for
condemnation.
     2.   PREMISES. Landlord hereby leases to Tenant and Tenant shall have
exclusive use of the Premises for the Initial Term.
     3.   DELAY IN POSSESSION. If Landlord cannot deliver possession of the
Premises to Tenant on the Commencement Date, such failure shall not affect the
validity of this Lease, extend its Term, or render Landlord liable for any
resulting damage, but Tenant shall not be obligated to pay rent until Landlord
tenders possession. If Landlord cannot deliver possession within 90 days of the
Commencement Date, Tenant may terminate this Lease on written notice to
Landlord. In such event, Tenant shall have no further recourse against Landlord
respecting the Lease.
          3.1  Option to Extend Term. Tenant is hereby granted on option to
extend this Lease for an additional five year period (the "Option Term")
pursuant to the provisions of this Lease and exercisable by written notice (the
"Option Notice") delivered to Landlord at least 180 Days before expiration of
the Initial Term. References to "Term" in this Lease include the Initial Term
and exercised Option Term. At Landlord's option, Tenant's default at the time it
delivers the Option Notice precludes the effectiveness of the notice and
commencement of the Option Term.
     4.   RENT. Tenant shall pay all rent due Landlord in United States dollars
at the address set forth below or such other place as Landlord designates in
writing. If Alterations increase the floor area of the Premises, Base Monthly
Rent will increase proportionately. If the obligation to pay rent commences
other than on the first day of a Month, the first payment shall also include
rent from the date the obligation commences to the first day of the following
month calculated per diem.


<PAGE>   2
          4.1. BASE MONTHLY RENT ADJUSTMENT. THE BASE MONTHLY RENT WILL
INCREASE ACCORDING TO THE FOLLOWING SCHEDULE:

     BEGINNING AT MONTH 31:                   $1.85/SQ.FT./MONTH, TRIPLE NET

          4.2. OPTION TERM RENT ADJUSTMENT. The Base Monthly Rent for the
OPTION TERM WILL BE SET TO 95% OF THE FAIR MARKET VALUE ("FMV") for similar
laboratory space in the Berkeley Emeryville area, but in no condition will the
Option Term Rent be less than $1.85/sq.ft./month.

          4.3. ADDITIONAL RENT. For each year during the Term, Tenant shall pay
to Landlord, in addition to the Base Monthly Rent and all other payments due
under this Lease, an amount equal to Tenant's Pro Rata Share of the actual
Operating Expenses for that year. These expenses will be reasonably estimated
by the Landlord and paid by the Tenant to the Landlord on a monthly basis. Not
less than once each year Landlord will reconcile the actual expenses as
compared to the estimated collections. If Tenant has paid on an estimated
basis, an amount less than the actual expenses, Tenant shall pay the difference
between the estimated payments, and the actual expenditures within 30 days of
receipt of a written reconciliation and bill. If the Tenant has paid in an
estimated basis an amount more than the actual expenses, Tenant shall receive a
rental credit upon receipt of a written reconciliation.

               4.3.1. CALCULATION OF OPERATING EXPENSES. Operating Expenses
shall be determined as the actual Operating Expenses incurred for the Property
during the Year. Prior to the Commencement Date, Landlord shall prepare
referenced as an addendum to Lease and deliver to Tenant a schedule of the
Year's Operating Expenses, approximately $.25 per square foot per month. The
said schedule will fix the amount of the Current Year Operating Expenses for
all purposes under the provisions of this Lease. Should Tenant question the
said schedule, Landlord shall provide Tenant with verification of the amounts
set forth in the schedule. Tenant shall have the right to review, access and
audit operating expenses. In the event landlord, for any reason, neglects or
fails to timely provide the required schedule of Years Operating Expenses to
Tenant, such failure shall not be deemed a default under or breach of this
Lease by Landlord for any purpose, neither shall it be deemed a waiver of any
rights of Landlord to collect Tenant's Pro Rata Share of Operating Expenses,
neither shall such failure by Landlord excuse Tenant from performance of any of
Tenant's obligations under the provisions of this Lease. Landlord shall be
required to deliver the required schedule of actual Years Operating Expenses to
Tenant no less than 60 days prior to the date on which Tenant's payment is due
to Landlord for Tenant's Pro Rata Share of Operating Expenses.

               4.3.2. SECURITY DEPOSIT. Concurrent with its execution of this
Lease, Tenant shall give Landlord as a security deposit the sum of $10,000.00
(THE "DEPOSIT"). Landlord shall hold the Deposit as security for Tenant's
faithful performance of all its obligations under this Lease and may, at its
option, apply the Deposit to remedy defaults in the payment of any charge
hereunder, to repair damages to the Property caused by Tenant, or to clean the
Premises at the end of this Lease. If any portion of the Deposit is so applied,
Tenant shall, within 10 Days after written demand therefor, deliver to Landlord
funds sufficient to restore the Deposit to its original amount. Landlord shall
not be required to keep the Deposit separate from its general funds. Tenant
shall earn no interest on the Deposit. If Tenant fully performs under this
Lease, Landlord shall return any unused portion of the Deposit to the last
holder of Tenant's interest in this Lease upon Tenant's surrender of the
Premises. On any transfer of Landlord's interest in the Lease, the Deposit will
be transferred to Landlord's successor, and Landlord released from liability
for the Deposit.

          4.4. LATE CHARGES. Late payment of any sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, including, without
limit, accounting charges and late charges which may be imposed on Landlord by
the terms of loans secured by the Property. If Tenant fails to deliver to
Landlord any monies due hereunder within 10 Days of the due date, Tenant shall
pay to Landlord a late charge of 10% of the overdue amount which is agreed to
be a reasonable estimate of the costs Landlord will incur by reason of the late
payment, the exact amount of which will be difficult



                                       2
<PAGE>   3

Landlord will incur by reason of the late payment, the exact amount of which
will be difficult to determine. Acceptance of a late charge shall not
constitute a waiver of the default or preclude Landlord's exercise of other
rights and remedies.

      5.    TAXES. Landlord shall pay all Taxes assessed against Landlord's
interest in the Property. Tenant shall pay all Taxes assessed on Tenant's
fixtures, improvements, furnishings, merchandise, equipment and personal
property in and on the Premises and if Tenant fails to timely pay Taxes,
Landlord may (but is not obligated to) pay the same at any time thereafter
after notice to tenant. On demand, Tenant shall repay Landlord amounts so paid
with interest at prime rate plus 2%.

      If Tenant desires to contest the validity or amount of any Tax applicable
to the Premises, Tenant shall be entitled to do so and to defer payment of such
Tax until final determination of such contest upon giving Landlord written
notice thereof prior to commencing such contest and protecting Landlord on
demand by obtaining a surety bond in the amount of 150% of the total amount of
Taxes in dispute. The surety bond shall hold Landlord harmless from any damages
or costs incurred in connection with the contest. Landlord shall, at Tenant's
request, cooperate in all reasonable ways requested by Tenant in connection
with the contest of Taxes, provided that Tenant pays all reasonable costs
incurred by Landlord resulting from such cooperation.

      6.    INSURANCE.

            6.1.  LANDLORD'S INSURANCE. Landlord shall insure the Property for
100% of its replacement value against loss or damage by those risks normally
included by the insurance industry in the term "All Risk"; any recovery from
such insurance  shall belong to Landlord including all of the Premises
improvements, exclusive of furnishings, merchandise, equipment and personal
property. Landlord shall maintain comprehensive general liability insurance
insuring Landlord (and others named by Landlord, but not Tenant) against
liability for bodily injury, death and property damage on or about the
Property, with combined single limit coverage of at least $2 million.

            6.2.  TENANT'S INSURANCE. Tenant, at its sole expense, shall
maintain: a) All Risk coverage insurance on all fixtures, improvements,
furnishings, merchandise, equipment and personal property in the Premises; and
b) for the benefit of Tenant, commercial general liability and property damage
insurance against claims for bodily injury, death or property damage occurring
in or about, and/or arising from Tenant's use of, the Premises, with combined
single limit coverage of at least $2,000,000. Such insurance coverage shall not
limit Tenant's liability. Tenant shall furnish to Landlord prior to the
Commencement Date, and at least 30 Days prior to the expiration date of any
policy, certificates indicating that the insurance required of Tenant is in
full force and effect, that Landlord has been named as an additional insured on
the liability policy, and that no such policy will be canceled unless 30 Days'
prior written notice has been given to Landlord. Each liability policy shall
include a broad form liability endorsement and provide that Landlord as an
additional insured may recover for any loss it suffers by reason of
acts/omissions of Tenant and its Agents. Except as Landlord may approve in
writing before issuance of such policy, all policies which Tenant shall obtain
hereunder shall be issued by companies with "AAA" rating by either Moody's
Rating Service or Standard & Poor's Rating Service and general policy rating of
at least A in Best Insurance Guide's then most current issue. Policies obtained
by Tenant pursuant to this Lease shall be subject to Landlord's approval.

            6.3.  WAIVER OF SUBROGATION. Notwithstanding anything to the
contrary herein, the parties hereby release each other and their respective
officers, agents, employees and servants, from all claims for damages, loss,
expense or injury to the Premises, and/or to the furnishings and fixtures and
equipment or inventory or other property of either Landlord or Tenant in, about
or upon the Premises, which is caused by or results from perils, events or
happenings which are covered by insurance in force at the time of any such loss
or by insurance required to be carried hereunder; provided, however, that such
waiver shall be effective only to the extent permitted by the said insurance
and to the extent such insurance coverage is not prejudiced thereby. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation in connection with
any damage covered by such policy.

            6.4.  LANDLORD INDEMNIFICATION. Tenant will indemnify and save
Landlord harmless from and against any and all claims, actions, damages,
liability and expense relating to loss of life, personal injury and/or property
damage arising from or out of any occurrence in, upon or at the Premises, or
the occupancy or Tenant's use of the Property,


                                       3
<PAGE>   4
occasioned wholly or in part by any acts or omissions of Tenant and its Agents.
If Landlord becomes a party to such litigation commenced by or against Tenant,
Tenant shall defend and hold Landlord harmless from all claims, liabilities,
costs and expenses, and shall pay all costs, expenses and reasonable legal fees
incurred by Landlord in connection with such litigation. If Tenant is made a
party to litigation commenced by or against Landlord solely as a result of
Landlord's acts or omissions, Landlord shall defend Tenant and indemnify Tenant
against the costs of such litigation. As used herein, "litigation" includes
arbitration. The provisions of this paragraph shall be deemed to apply only to
those circumstances where there is a portion of a loss or claim not covered by
existing insurance and then only to the extent that such loss or claim is not
covered by insurance. This paragraph shall not preclude application of
comparative negligence if the parties or their agents are both at fault.

          6.5  TENANT INDEMNIFICATION. Landlord will indemnify and save Tenant
harmless from and against any and all claims, actions, damages, liability and
expense relating to loss of life, personal injury and/or property damage arising
from or out of any occurrence in, upon or at the Premises, or the occupancy or
Landlord's use of the Property, occasioned wholly or in part by any acts or
omissions of Landlord and its Agents. If Tenant becomes a party to such
litigation commenced by or against Landlord, Landlord shall defend and hold
Tenant harmless from all claims, liabilities, costs and expenses, and shall pay
all costs, expenses and reasonable legal fees incurred by Tenant in connection
with such litigation. If Landlord is made a party to litigation commenced by or
against Tenant solely as a result of Tenant's acts or omissions, Tenant shall
defend Landlord and indemnify Landlord against the costs of such litigation. As
used herein, "litigation" includes arbitration. The provisions of this paragraph
shall be deemed to apply only to those circumstances where there is a portion of
a loss or claim not covered by existing insurance and then only to the extent
that such loss or claim is not covered by insurance. This paragraph shall not
preclude application of comparative negligence if the parties or their agents
are both at fault.

          6.6  WORKER'S INSURANCE. Landlord and Tenant shall keep in force for
the Term and pay for worker's compensation and other insurance to comply with
all applicable Regulations.

     7.   MAINTENANCE.

          7.1  PREMISES. During the Term, Landlord shall maintain the Premises
(including all interior walls, doors, doorways, lighting fixtures, plumbing
fixtures, and all windows) in good order, condition and repair. Tenant waives
the provisions of any law permitting Tenant to make repairs at Landlord's
expense, including, without limitation, California Civil Code Sections
1941-1946. Tenant will supply its own janitorial services to the Premises.

          7.2  COMMON AREAS. Landlord shall maintain the Common Area in good
order and condition and in compliance with all Regulations; however, damage
caused by the acts/omissions of Tenant and its Agents shall be repaired at
Tenant's expense. Landlord shall maintain all improvements and appurtenances and
systems upon the Property in good order and repair. Tenant shall notify Landlord
in writing of required repairs to the Property; Landlord shall make necessary
repairs in a reasonable time. Maintenance and repairs shall be completed in a
good and workmanlike manner using such methods as Landlord deems appropriate in
its sole reasonable discretion. Landlord shall make commercially reasonable
efforts to perform maintenance and repairs with minimum interference with
Tenant's business operations.

          7.3  ALTERATIONS. Tenant shall make no Alteration to the Property
without Landlord's prior written consent. Landlord may impose such conditions
upon approval of an Alternation as Landlord may deem reasonably appropriate.
Every Alteration shall be done under supervision of a licensed contractor and in
accordance with plans and specifications furnished to and approved by Landlord
prior to commencement of work. If an Alteration increases the floor area of the
Premises, the Base Monthly Rent and Tenant's Pro Rata Share shall be increased
in proportion to the resulting increase in the floor area of the Premises.
Tenant shall give Landlord 7 Days advance written notice prior to starting
construction of each Alteration. Each Alteration shall remain in place and
become the property of Landlord, unless, at the time of consent, Landlord
required removal of the Alteration on Termination, in which case, Tenant shall
remove such Alteration(s) and restore the Premises to their pre-Alteration
condition at Termination.

          7.4  SYSTEMS. The heating/air-conditioning ("HVAC"), plumbing and
electrical systems (collectively "SYSTEMS") shall not be used for any purpose
other than that

                                       4
<PAGE>   5
for which they were constructed. Tenant shall pay for repairs resulting from the
willful misconduct of Tenant and its Agents.

           7.5  LIENS. Tenant shall keep the Property free from liens arising
out of work performed, materials furnished or obligations incurred by Tenant.
Tenant shall indemnify Landlord from all costs, liens and encumbrances from work
performed or materials furnished by or at Tenant's direction. If Tenant fails to
obtain removal of such lien within 30 Days following its imposition, Landlord
shall have the right, but not the obligation after notice to Tenant, to obtain
such release by such means as it may deem proper, including payment of the claim
giving rise to such lien. On demand, Tenant shall reimburse Landlord for all
such sums paid and expenses incurred by Landlord in connection therewith
(including attorneys' fees and costs) together with interest at Prime Rate plus
2% from the date Landlord makes such payment until the date of reimbursement.

     8.   MANAGEMENT. The Wareham Property Group, Inc., an affiliate of
Landlord, or another affiliated or unaffiliated third party, will manage the
Property for a fee.

     9.   UTILITIES AND SERVICES.

           9.1. PREMISES. Landlord will make available to the Premises HVAC and
utilities for healing and lighting use at all times. Tenant will pay all utility
costs directly.

           9.2. COMMON AREAS. Landlord shall arrange for Common Area utilities,
landscaping, janitorial and, if Landlord deems if appropriate, security
services. Tenant will pay its pro rata share above Base Year costs as part of
Operating Expenses, see 4.3.1.

           9.3. LIMITATION OF LIABILITY. Landlord shall not be in default under
the provisions of this Lease or be liable for any damages directly or indirectly
resulting from the following conditions: (1) the temporary interruption of use
of any equipment in connection with the furnishing of any of the services
described in paragraphs 9.1 and 9.2 of this lease for not more than 24 hours;
(2) failure to furnish or delay in furnishing any services referred to in
paragraphs 9.1 and 9.2 of this lease where failure or delay is caused by
accident or any condition or event beyond Landlord's reasonable control; (3) the
limitation, curtailment or rationing of, or restrictions on, use of water,
electricity, gas or any other form of energy serving the premises mandated by a
governmental authority. Landlord shall not be liable under any circumstances for
a loss of or injury to property or business, however occurring, through or in
connection with or incidental to failure to furnish any such services.
Notwithstanding the foregoing provisions of this paragraph, in the event that
utility service to the premises is unavailable for a period exceeding 5
consecutive days, then from and after the 6th consecutive day without utility
service and until utility service is restarted, Tenant shall be entitled to an
abatement of rent unless the disruption of the utility service results in whole,
or in part, from the acts and/or omissions of Tenant (inclusive of Tenant's
agents, servants, employes, operatives and/or contractors) in which case there
shall be no abatement of rent.

           10.  USE OF PREMISES. This Lease is subject to all Regulations
governing use of the Property. Tenant has not entered into this Lease relying on
any representation by Landlord or its Agents as to suitability of the Premises
for the conduct of Tenant's business. Tenant has made its own analysis of
suitability of the Premises for its intended use. Tenant shall: 1) use the
Premises for only laboratory and office research and development; 2) pay
Landlord the full amount of any increased insurance premium resulting solely
from Tenant's use of the Premises; 3) at its sole expense, promptly comply with
all Regulations and the requirements of any board of fire underwriters or other
similar body now or hereafter constituted relating to or affecting Tenant's
particular use of the Premises. Tenant shall not 1) sell or permit to be kept,
used or sold in or about the Premises any articles prohibited by a standard form
policy of fire insurance; 2) do not permit anything to be done in or about the
Property which will obstruct or interfere with rights of other occupants of the
Property or injure or unreasonably annoy them; 3) maintain or permit any
nuisance in or about the Property; 4) commit or suffer to be committed any waste
in or upon the Property; 5) conduct or allow any auction or similar sale upon
the Property; 6) do or permit anything to be done in or about the Property which
will violate any Regulation [the final, unappealable judgment of any court of
competent jurisdiction or Tenant's admission in any action (whether or not
Landlord is a party) that Tenant has violated a Regulation shall be conclusive
of that fact between Landlord and Tenant or 7) do or permit anything to be done
which will increase existing insurance premiums for the Property or cause
cancellation of any policy covering any of the Property; provided, however, that
none of the foregoing shall restrict Tenant's ability to conduct its business as
is customary for a biotechnology company conducting research and development.
However, Tenant shall not be required to comply with or cause

                                       5
<PAGE>   6
the Premises to comply with any Regulations requiring the construction of
improvements in the Premises unless the compliance with any of the foregoing is
necessitated solely due to Tenant's particular use of the Premises.
     11.     DEFAULTS AND REMEDIES.
             11.1     DEFAULT OF TENANT.   The occurrence of any one or more
of the following events shall constitute a default and breach of this Lease by
Tenant: (a) Tenant's failure to pay any rent or charges required to be paid by
Tenant under this Lease within 5 days or Landlord's delivery of written notice
to Tenant that said amounts are past due; (b); (c) Tenant's failure to promptly
and fully perform any other covenant, condition or agreement contained in this
Lease where such failure continues for 30 days after written notice from
Landlord to Tenant of such default; (d) the levy of a writ of attachment or
execution on this Lease; (e) the making by Tenant of a general assignment for
the benefit of its creditors or of an arrangement, composition, extension or
adjustment with its creditors; (f) the filing by or against Tenant of a
petition for relief or other proceeding under federal bankruptcy laws or state
or other insolvency laws, which petition in not removed or which action is not
dismissed within 90 days of its filing, or the assumption by any court or
administrative agency, or by a receiver, trustee or custodian appointed by
either, of jurisdiction, custody or control of the premises or of Tenant or any
substantial part of its assets or property; or (g) if the interest of Tenant
under this Lease is held by a partnership or by more than one person or entity,
the occurrence of any act or event described in parts (e) or (f) above in
respect of any partner of the partnership. Except as otherwise specified by
this paragraph, in the event a nonmonetary default occurs which cannot
reasonably be cured within the time period specified above and Tenant commences
corrective action within said time period, Tenant shall not be subject to
penalty under this Lease so long as Tenant prosecutes such corrective action
diligently and continuously to completion.
              11.2.     REMEDIES OF LANDLORD.   In the event of Tenant's
default hereunder, then in addition to any other rights or remedies Landlord
may have under this Lease or under law, Landlord may elect either of the
remedies set forth in Paragraphs 11.2.1 and 11.2.2. Notwithstanding any other
provision of this Lease, the Lessor has the remedy described in California
Civil Code Section 1951.4 (Lessor (Landlord) may continue lease in effect after
Lessee's (Tenant's) breach and abandonment and recover rent as it becomes due,
if Lessee (Tenant) has the right to sublet or assign, subject only to
reasonable limitations).
     11.2.1.   To immediately terminate this Lease and Tenant's right to
possession of the premises by giving written notice to Tenant and to recover
from Tenant an award of damages equal to the sum of (i) the worth at the time
of award of the unpaid rental which had been earned at the time of termination,
(ii) the worth at the time of award of the amount by which the unpaid rental
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that could have been reasonably avoided, (iii)
the worth at the time of award of the amount by which the unpaid rental for the
balance of the term after the time of award exceeds the amount of such rental
loss that could be reasonable avoided, (iv) any other amount necessary to
compensate Landlord for all out of pocket costs incurred due to Tenant's, and
(v) all such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time under applicable law; or
     11.2.2.     To have this Lease continue in effect for so long as Landlord
does not terminate this Lease and Tenant's right to possession of the premises,
in which event Landlord shall have the right to enforce all of the rights and
remedies provided by this Lease and by law, including the right to recover the
rental and other charges payable by Tenant under this Lease as they become due.
     For purposes of this paragraph 11, the worth at the time of award of the
amounts referred to in parts 11.2.1(i), and 11.2.2(ii) shall be computed by
allowing interest at prime rate plus 2%, and the worth at time of award of the
amount referred to in part 11.2.2(iii) shall be computed by discounting such
amount at the rate specified in California Civil Code Section 1951.2(b) or any
successor statute. In such computations, the rent due hereunder shall include
monthly rent plus the aggregate amount of all other rentals, charges and other
amounts payable by Tenant hereunder.
     11.3     DEFAULT BY LANDLORD.   Landlord will be in default if Landlord
fails to perform any obligation required of Landlord (other than a delay in
delivery of possession as provided for in paragraph 3.2 above) within 30 days
after written notice by Tenant, specifying wherein Landlord has failed to
perform such obligation; provided that if the nature of Landlord's obligation is
such that more than 30 days are required for performance, then Landlord shall


                                       6
<PAGE>   7
not be in default if Landlord commences performance within 30 day period and
thereafter diligently prosecutes the same to completion. Except as expressly
set forth in this Lease, Tenant shall not have any right whatsoever to
terminate this Lease or to withhold, reduce or offset any amount against any
payments of rents or charges due and payable under this Lease.

        12.     TERMINATION. Upon expiration of the Term or early termination
of this Lease (collectively "Termination"), Tenant shall deliver up and
surrender to Landlord possession of the Premises in as good order and condition
as when Tenant took possession excepting only ordinary wear and tear. Tenant's
obligation with respect to the surrender of the Premises shall be fulfilled if
Tenant surrenders possession of the Premises in the condition existing at the
Commencement Date (including the improvements described on Exhibit B, ordinary
wear and tear, casualties, condemnation, Hazardous Materials (other than those
released or emitted by Tenant in or about the Premises), and alterations,
excepted. Upon Termination, Landlord may reenter the Premises and remove all
persons and property therefrom. If Tenant fails to remove anything that is
required or entitled to remove from the Premises on Termination, Landlord may
remove the same and store or dispose of such item(s) in accordance with CC
31980. Tenant shall pay to Landlord on demand all expenses incurred in such
removal and storage and in cleaning the Premises. If the Premises are not
surrendered at the end of the Term, Tenant shall indemnify Landlord against all
losses resulting from Tenant's delay in surrendering the Premises. If Tenant
remains in possession of the Premises after the expiration of the Term and if
Landlord and Tenant have not executed an express written agreement as to such
holding over, then such occupancy shall be a tenancy from month to month at a
Base Monthly Rent fixed at 125% of the Base Monthly Rent in effect immediately
prior to such expiration, such payments to be made as herein provided. In the
event of such holding over, all terms of this Lease including the obligation
for payment of all charges owing hereunder shall remain in force and effect on
said month to month basis. The voluntary or other surrender of this Lease by
Tenant, if accepted by Landlord, or a mutual cancellation thereof, shall not
work a merger, but shall, at the Landlord's option, terminate or operate as an
assignment to Landlord of any or all subleases or subtenancies.

        13.     CONDEMNATION OF PREMISES.

                13.1.   TOTAL CONDEMNATION. If the entire Premises are taken by
Condemnation during the Term, this Lease shall terminate on the date of
transfer of possession and Tenant shall have no claim against Landlord for the
value of the unexpired Term.

                13.2.   PARTIAL CONDEMNATION. If any portion of the Premises is
taken by Condemnation during the Term, this Lease shall remain in full force
and effect; except that if a partial taking leaves the Premises unsuitable for
occupation, Tenant may terminate this Lease effective on the date transfer of
possession is required unless Landlord makes other comparable arrangements for
Tenant's space. Landlord and Tenant shall each have the right to terminate this
Lease effective on the date transfer of possession is required in the event of
Condemnation of more than 25% of the floor area of the Premises. The parties
may exercise their respective rights to terminate this Lease by serving written
notice to the other within 30 Days of their receipt of notice of condemnation,
except that Tenant's notice shall be ineffective if Landlord serves notice upon
Tenant of Landlord's election to provide alternate space equivalent to that
condemned within 10 Days of Tenant's delivery of notice to Landlord pursuant to
this paragraph. Tenant shall have the right of approval of replacement space.
All rent and other obligations of Tenant under this Lease shall be paid to the
date of Termination; Tenant shall have no claim against Landlord for any
unexpired portion of the Term. If this Lease is not canceled after a partial
taking, Base Monthly Rent and Tenant's Pro Rata Share shall be adjusted to
reflect the net change in the floor area of the Premises. Tenant waives
California Code of Civil Procedure Section 1265.130.

        13.3.   AWARD TO TENANT. In the event of Condemnation, Tenant may claim
from the condemnor such compensation as Tenant may separately recover for
moving costs, loss of business, fixtures or equipment belonging to Tenant.
Tenant shall have no other right to recover from Landlord or the condemnor for
any additional claims arising out of such taking.

        14.     LANDLORD'S ENTRY. Landlord and its Agents may enter the
Premises at all reasonable times and use reasonable efforts not to interfere
with Tenant's business to: inspect the Premises; make repairs or Alterations;
post "To Lease" signs during the last 120 Days of the Term; show the Premises
during the last 120 days of the Term; and/or to post

                                       7
<PAGE>   8
notices of nonresponsibility. Landlord shall have such right of entry without
any rebate of rent to Tenant for any loss of occupancy or quiet enjoyment of the
Premises. Landlord shall provide 24 hours' notice of intended entry except under
circumstances Landlord reasonably deems an emergency.

        15. LIMITATION OF LIABILITY AND INDEMNITY: This paragraph 15, inclusive
of all subparagraphs, supersedes each and every other provision of this Lease.

            15.1. Limitation of Landlord's Liability. Tenant will not hold
Landlord liable for amounts exceeding insurance coverage maintained by Landlord
under this Lease ("Existing Coverage") respecting any injury or damage,
proximate or remote, occurring through or caused by any repairs or Alterations
to the Property, unless such injury or damage arises form Landlord's negligence,
willful misconduct, or breach of this Lease ("Landlord's Acts"). Landlord shall
not be liable in excess of Existing Coverage for any injury or damage occasioned
by defective electric wiring, or the breaking, bursting, stoppage or leaking of
any part of the plumbing, air-conditioning, heating, fire control sprinkler
systems or gas, sewer or steam pipes, unless such loss arises from Landlord's
Acts.

            15.2.   Limitation on Enforcement of Remedies. Notwithstanding any
other provision of this Lease, Tenant and its Agents shall, under all
circumstances, be absolutely limited to Landlord's interest in the Property for
satisfaction of Tenant and its Agents' remedies, or for the collection of a
judgment (or other judicial process or arbitration award) requiring Landlord to
pay money, as the result of any and all judgments, awards and/or orders against
Landlord relating to or arising out of Tenant and its Agents' occupancy and use
of the Property and/or in the event of any default by Landlord hereunder, and no
other property of Landlord or its partners or principals, disclosed or
undisclosed, shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant and its Agents' remedies with respect to this
Lease, the relationship of Landlord and Tenant hereunder, or the use and
occupancy of the Property and the Premises by Tenant and its Agents. Tenant, on
behalf of Tenant and its Agents, waives all right to collect or enforce any and
all orders, awards and/or judgments against Landlord in excess of limitations
imposed by this paragraph. Tenant shall require that each subtenant and each
assignee of Tenant agree to be bound by the waiver set forth in this paragraph.
Landlord's maximum exposure as set forth in this paragraph is cumulative and in
the aggregate (as to all judgments, awards and orders against Landlord arising
in connection with this Lease, the relationship of Landlord and Tenant, or the
use and occupancy of the Property by Tenant and its Agents). Limits imposed by
this paragraph include Landlord's duties of indemnity (express and/or implied).
"Landlord" includes all persons and entitles who now or hereafter own an
interest in Landlord.

        16.     ASSIGNMENT AND SUBLETTING. Tenant shall not directly or
indirectly assign this Lease in whole or in part, or sublet any part or all of
the Premises, or license the use of all or any part of the Premises, or business
conducted thereon, or encumber or hypothecate this Lease, without first
obtaining Landlord's written consent. The transfer of shares of stock,
partnership interests or other ownership interests in Tenant resulting in a
change in the effective control of Tenant, or any merger, consolidation or other
reorganization of Tenant is not an indirect assignment of Tenant's interest in
this Lease. Tenant's request for consent to any assignment, sublease or other
transfer shall be in writing and shall include the following: (a) the name and
legal composition of the proposed transferee: (b) the nature of the proposed
transferee's business to be carried on in the Premises; (c) an outline of the
business terms and provisions of the proposed assignment or sublease; and (d)
such financial and other reasonable information as Landlord may reasonably
request concerning the proposed transferee or concerning the proposed assignment
or sublease. Any assignment, subletting, licensing, encumbering or hypothecating
of this Lease without Landlord's prior written consent shall constitute a
default. Landlord's consent to any assignment or sublease shall not constitute a
waiver of the need for such consent to any subsequent assignment or sublease.
Tenant may, without Landlord's prior written consent sublet the Premises or
assign the Lease to (i) a subsidiary, affiliate, division or corporation
controlling, controlled by or under common control with Tenant; (ii) a successor
corporation related to Tenant by merger, consolidation, nonbankruptcy
reorganization, or government action; or (iii) a purchaser of substantially all
of Tenant's assets located in the Premises. A sale or transfer of Tenant's
capital stock shall not be deemed an assignment, subletting or any other
transfer of the Lease or the


                                       8
<PAGE>   9
Premises.

      Notwithstanding any assignment or subletting with Landlord's consent.
Tenant shall remain fully liable on this Lease. Without limiting other reasons
or circumstances, Landlord and Tenant agree that it is reasonable for Landlord
to withhold consent if, in Landlord's reasonable judgment: (i) for a full
assignment and transfer the financial strength of the proposed assignee is not
commensurate with the obligations of the Lease; (ii) the proposed use would be
incompatible with the use of the rest of the Property; or (iii) the proposed
use would generate traffic and/or wear and tear materially in excess of
Tenant's use. If Landlord consents to a sublease or assignment, Tenant shall
pay Landlord's reasonable attorneys' fees incurred in connection with such
consent. Tenant shall pay to Landlord 50% of all Excess Rent received by Tenant
directly or indirectly in respect of an assignment of this Lease or sublease of
the Premises. "Excess Rent" means, in the case of an assignment, all
consideration and, in the case of a sublease, all consideration in excess of
the rents and charges reserved under this Lease. However, Tenant shall not be
regulated to pay Landlord any Excess Rent until Tenant has deducted therefrom
the costs to Tenant to effectuate the assignment or sublease, including
attorney's fees, leasing commissions and remodeling costs.

      17.   DAMAGE OR DESTRUCTION. Each party may terminate this Lease if the
Premises or the Building are damaged to an extent exceeding 50% of the then
replacement cost of the Premises (in the event of damage limited to the
Premises) or 33% of the Building (in the event of damage not limited to the
Premises). Landlord may also terminate this Lease if the Premises or the
Building are damaged by an uninsured peril to an extent exceeding 33% of the
then replacement cost of the Premises (in the event of damage limited to the
Premises) or 25% of the Building (in the event of damages not limited to the
Premises). If a party elects Termination under this section, the terminating
party shall deliver written notice to the non-terminating party within 30 Days
of the occurrence of the damage. Tenant shall have 30 Days to vacate the
Premises unless they are unsafe for occupancy, in which case, Tenant shall
immediately vacate. TENANT WAIVES SECTION 1932(2), and SECTION 1933(4) OF THE
CALIFORNIA CIVIL CODE. If this Lease is terminated pursuant to this paragraph,
Landlord shall, within 90 Days of the occurrence of the damage, proceed to and
diligently prosecute the repair of the Building, on the same plan as existed
immediately before the occurrence. Tenant shall be liable for repair and
replacement of all fixtures, leasehold improvements, furnishings, merchandise,
equipment and Tenant's personal property not covered by insurance. If Tenant is
able to continue to conduct its business during the making of repairs, the Base
Monthly Rent will be reduced in the proportion that the unusable part of the
Premises bears to the whole during the repair period.

      18.   HAZARDOUS MATERIALS.

            18.1  TENANT'S WARRANTIES. Tenant's obligations are:

                  18.1.1. RESTRICTIONS ON HAZARDOUS MATERIALS. Hazardous
Material (as defined below) shall not be brought upon, manufactured, generated,
disposed of, handled, used, kept or stored (collectively "Handled" or
"Handling") in, on, about or under the Property by Tenant and its Agents
without Landlord's prior written consent.

                  18.1.2. APPLICABLE REGULATIONS. If Hazardous Material is
Handled, in, on, about or under the Property by Tenant and its Agents, Tenant
shall bear all responsibility for ensuring that such material shall be handled
in compliance with all Environmental, Health and Safety Requirements regulating
such Hazardous Material. Tenant shall procure, maintain in effect and comply
with all conditions and requirements of any and all permits, licenses and other
governmental and regulatory approvals or authorizations required by
Environmental, Health or Safety Requirements relating to the Handling of
Hazardous Material by Tenant. Tenant shall give Landlord copies of all such
permits, licenses, or other regulatory approvals within 5 Days of receipt.

                  18.1.3. RESTORATION. If, as a result of handling of Hazardous
Materials by Tenant and its Agents, Hazardous Material in, on, about or under
the Property or any adjoining property results in contamination of the Property
or other property, Tenant, at its sole expense, shall promptly take all actions
as are necessary to return the Property and/or the other affected property to
the condition existing prior to such contamination ("Restoration"). Tenant
shall not, however, undertake Restoration without first providing Landlord with
written notice thereof and obtaining Landlord's approval. Tenant shall effect
Restoration in compliance with all Environmental, Health and Safety
Requirements. Tenant shall not enter into any settlement agreement, consent
decree or compromise respecting



                                       9
<PAGE>   10

any claims relating to Hazardous Material connected with the Property without
first notifying Landlord of its intention to do so and affording Landlord ample
opportunity to appear, intervene or appropriately assert and protect Landlord's
interests.

                  18.1.4.     REMOVAL. On Termination, Tenant shall remove from
the Property all Hazardous Materials in, on, or about or under the Property
Handled by Tenant and its Agents and all receptacles and containers to be
Handled, transported and disposed of pursuant to all applicable Environmental,
Health and Safety Requirements. Hazardous Materials, receptacles and containers
shall be removed by duly licensed haulers, transported to and disposed of at
duly licensed facilities for the disposal of such Hazardous Materials,
receptacles or containers. Tenant shall deliver to Landlord copies of all
documentation relating to Handling of Hazardous Materials, receptacles or
containers therefor, reflecting legal and proper Handling. Tenant shall, at its
sole expense, repair all damage to the Property resulting from its removal of
Hazardous Materials, receptacles and containers. Tenant shall continue to pay
rent until completion of such removal and repairs.

                  18.1.5.     TENANT'S WRITTEN CONFIRMATION. Tenant shall
execute such documents as Landlord may reasonably request as to Tenant's
knowledge of the presence of Hazardous Materials in, on, about or under the
Property. On each anniversary of the Commencement Date, Tenant shall, upon
request, give Landlord a letter stating the during the preceding year Tenant
compiled with this Section 18 or, if Tenant has not so compiled, stating the
details of noncompliance.

                  18.1.6.     TENANT'S DUTY TO NOTIFY LANDLORD. Tenant shall
notify Landlord in writing immediately upon receiving written notice of: (1)
enforcement, cleanup, remediation or other action threatened, instituted or
completed by any governmental or regulatory agency or private person with
respect to the Property or any adjoining property relating to Hazardous
Materials; (2) any claim threatened or made by any person against Tenant,
Landlord, the Property or any adjoining landowner, tenant or property for
personal injury, compensation or any other matter relating to Hazardous
Materials; and (3) any reports made by or to any governmental or regulatory
agency with respect to the Property or any adjoining property relating to
Hazardous Materials, including without limitation, any complaints, notices or
asserted violations in connection therewith. Tenant shall supply to Landlord as
promptly as possible, and in any event within 5 Days after Tenant first receives
or sends the same, copies of all claims, reports, complaints, notices, warnings,
asserted violations or other documents relating in any way to the foregoing.

            18.2.   LANDLORD'S RIGHTS. Landlord and its Agents shall have the
right to communicate, verbally or in writing, with any regulatory agency or any
environmental consultant on any matter respecting the Property relating to
Hazardous Materials. Landlord shall be entitled to copies of all notices,
reports or other documents issued by or to any such regulatory agency or
consultant respecting the Property relating to Hazardous Materials.

            18.3. TENANT'S DUTY TO INDEMNIFY. If the Handling by Tenant and its
Agents of Hazardous Materials results in contamination of the Property, or if
any lender or governmental agency requires an investigation to determine whether
there is a contamination of the Property or any adjoining property as a result
of the Handling of Hazardous Materials by Tenant and its Agents, and it is
determined that such handling resulted in contamination of the property, then
Tenant shall indemnify, defend and hold Landlord and its Agents and all of
Landlord's partners or other affiliates, together with all their directors,
officers, shareholders, employees, agents, contractors and attorneys, harmless
from and defend them against any and all claims, damages, penalties, fines,
costs, liabilities and losses (including, without limitation, sums paid in
settlement of claims, attorneys' fees, consultants' fees and experts' fees)
which arise during or after the Term as a result of such contamination. This
indemnification includes, without limitation, costs incurred in connection with
removal or restoration work required by any regulatory agency and/or private
persons because of the presence of Hazardous Materials in the soil or
groundwater in, on, about or under the Property or any adjoining property as a
result of the handling of Hazardous Materials, resulting in contamination of
the property, by Tenant and its Agents and legal fees and expenses incurred by
Landlord relating to such claims, demands, investigations and responses.

            18.4. RIGHT OF ENTRY. If contamination of the Property by Hazardous
Materials occurs or if any lender or regulatory agency requires an
investigation to determine if there is contamination of the Property or any
adjoining property, then Landlord and its Agents shall have the right, at any
reasonable time and from time to time, to enter the


                                       10
<PAGE>   11
Premises to perform any required or reasonably necessary monitoring, testing or
other analyses, and to review applicable documents, notices, or other materials.
If such contamination resulted from the handling of Hazardous Materials by
Tenant and its Agents, Tenant shall pay, on delivery of Landlord's invoice, all
costs and expenses reasonably incurred by Landlord in connection with such
investigation, monitoring, and testing.

          18.5  DEFINITIONS. The following terms shall have the following
meanings:

                18.5.1.   "HAZARDOUS MATERIAL" shall mean, without limitation,
(1) petroleum or petroleum products; (2) hydrocarbon substances of any kind; (3)
asbestos in any form; (4) formaldehyde; (5) radioactive substances; (6)
industrial solvents; (7) flammables; (8) explosives; (9) leakage from
underground storage tanks; (10) substances defined as "hazardous substances,"
"hazardous materials," or "toxic substances" in (A) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 or as otherwise
amended, 42 U.S.C. Sections 9601, et seq., (B) the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and any amendments thereto,
or (C) the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et
seq. and any amendments thereto; (11) those substances defined as "hazardous
wastes," "extremely hazardous wastes" or "restricted hazardous wastes" in
Sections 25115, 25117, and 25122.7 or listed pursuant to Section 25140 of the
California Health & Safety Code and any amendments thereto; (12) those
substances defined as "hazardous substances" in Section 25316 of the California
Health & Safety Code and any amendments thereto; (13) those substances defined
as "hazardous materials," "hazardous wastes" or "hazardous substances" in
Sections 25501 and 25501.1 of the California Health & Safety Code and any
amendments thereto; (14) those substances defined as "hazardous substances"
under Section 25281 of the California Health & Safety Code and any amendments
thereto; (15) those substances causing "pollution" or "contamination" or
constituting "hazardous substances" within the meaning of (A) the Clean Water
Act, 33 U.S.C. Section 1251 et seq., and any amendments thereto, (B) the
Porter-Cologne Water Quality Control Act, Section 13050 of the California Water
Code and any amendments thereto, and (C) the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; (16) such chemicals as are identified on the list
published from time to time as provided in Chapter 6.6 of the California Health
and Safety Code, as amended as causing cancer or reproductive toxicity; (17)
polychlorinated biphenyls (PCBs) set forth in the Federal Toxic Substance
Control Act, as amended, 15 U.S.C. Section 2601 et seq.; (18) "toxic air
contaminant" as defined in California health and Safety Code Section 39655; and
(19) the wastes, substances, materials, contaminants and pollutants identified
pursuant to or set forth in the regulations adopted or judicial or
administrative, decisions or decrees promulgated pursuant to any of the
foregoing laws. The foregoing list of definitions, rules, regulations and laws
applicable to the subject matter of this paragraph as they may be amended or
changed from time to time.

                18.5.2 "ENVIRONMENTAL HEALTH AND SAFETY REQUIREMENTS" means any
law, statute, ordinance, rule, regulation, order, judgment or decree
promulgated by any governmental agency, court, judicial or quasi-judicial body
or legislative or quasi-legislative body which relates to matters of the
environment, health, industrial hygiene or safety.

          18.6  ALLOCATION OF RESPONSIBILITIES. ALL LIABILITY ARISING FROM THE
TRANSPORTATION OR HANDLING OF HAZARDOUS MATERIALS IN, ON, UNDER, AND/OR ABOUT
THE PROPERTY OR ADJOINING PROPERTY BY TENANT AND ITS AGENTS SHALL, AT ALL TIMES,
REMAIN TENANT'S SOLE RESPONSIBILITY, EVEN IF THE HAZARDOUS MATERIALS ORIGINATE
FROM THE PROPERTY. NO ACT BY LANDLORD OR ITS AGENTS SHALL CONSTITUTE LANDLORD'S
ASSUMPTION OF ANY OBLIGATIONS, DUTIES, LIABILITIES OR RESPONSIBILITIES
PERTAINING TO TENANTS'S COMPLIANCE WITH ANY ENVIRONMENTAL, HEALTH OR SAFETY
REQUIREMENTS. NOTWITHSTANDING TERMINATION OF THIS LEASE, TENANT SHALL RETAIN ALL
LIABILITY AND RESPONSIBILITY FOR COMPLIANCE WITH REGULATIONS AND ENVIRONMENTAL,
HEALTH OR SAFETY REQUIREMENTS CONCERNING TENANT AND ITS AGENTS' HANDLING OF
HAZARDOUS MATERIALS. TENANT SHALL INDEMNIFY AND HOLD LANDLORD AND ITS AGENTS
HARMLESS FROM ALL COSTS AND EXPENSES ASSOCIATED WITH SUCH COMPLIANCE.

          18.7 INSPECTIONS. Tenant will cooperated with the completion of
inspections of the Property as required by applicable law and regulation. Tenant
shall provide to Landlord a copy of the reports for each such inspection within
15 days of Tenant's receipt of such reports.

                                       11
<PAGE>   12
          18.8. COOPERATION. Tenant will not interfere with Landlord's acts
pursuant to the above-referenced Regulations. Tenant will comply with
reasonable procedures promulgated by Landlord pursuant to such laws and
regulations. Landlord shall have no duty to establish any procedures or to
supervise in any way Tenant's activities on the Property.

          18.9. SURVIVAL. The covenants, agreements and indemnities set
forth in this Section 18 shall survive Termination and shall not be affected by
any investigation, or information obtained as a result of any investigation, by
or on behalf of Landlord or any prospective Tenant.

          18.10. STORAGE TANKS. Tenant shall not install any storage tanks
on the Property without Landlord's prior written consent.

          18.11. LANDLORD'S OBLIGATIONS. Landlord's obligations are:

                 18.11.1. COMPLIANCE WITH REGULATIONS. If Landlord and its
Agents Handle Hazardous Materials in, on, about or under the Property, such
material shall be Handled in compliance with all Environmental, Health and
Safety Requirements.

                 18.11.2. RESTORATION. If, as a result of Landlord's bringing
Hazardous Material upon the Property, or otherwise any contamination of the
Property or the surrounding environment occurs, Landlord shall promptly take
all necessary actions to  return the Property and/or the surrounding
environment to the condition existing prior to such contamination.

                 18.11.3. DUTY TO NOTIFY TENANT. Landlord shall notify Tenant in
writing upon learning of: (1) enforcement, cleanup, remediation or other action
threatened, instituted or completed by any regulatory agency or private person
with respect to the Property relating to Hazardous Materials; (2) any claim
threatened or made against Landlord respecting the Tenant or the Property for
personal injury, compensation or any other matter relating to Hazardous
Materials; and (3) reports made by or to any regulatory agency respecting the
Property, complaints, notices or asserted violations in connection therewith.
Landlord shall supply to Tenant copies of claims, notices, warnings, or other
documents relating to the foregoing.

                18.11.4. INDEMNITY OF TENANT. To the best knowledge of
Landlord, (i) no underground storage tanks are present on the Property, (ii) no
Hazardous Material is present at the Property in violation of any Regulations
and (iii) no action, proceeding or claim is pending or threatened regarding the
Property concerning any Hazardous Materials or pursuant to any environmental
law. If Hazardous Materials on the Property, resulting from Landlord's acts,
contaminate the Property, or if the Property is contaminated on the
Commencement Date, Landlord shall indemnify and hold Tenant and its Agents
harmless from any and all claims, damages, penalties, fines, costs, liabilities
and losses, damages, attorneys' fees, consultants' fees and experts' fees
resulting from such contamination.

     19.  MISCELLANEOUS PROVISIONS.

          19.1. WAIVER. No waiver of any breach of this Lease shall be
construed as a waiver of any other breach. Landlord's acceptance of rent after
Tenant's breach shall not be a waiver of any preceding breach of this Lease by
Tenant, even if known by Landlord at the time.

          19.2. NOTICES. Notices, requests, demands and other communications
shall be in writing and personally delivered or sent by certified mail, return
receipt requested, postage prepaid, properly addressed to the other party at
the address set forth by its signature below, or at such other address as may
be designated in writing by one party to the other. Notice shall be effective
on personal delivery or on the date indicated on the post office's certified
mail receipt of delivery.

          19.3. CONSTRUCTION. This Lease shall be construed pursuant to
California law. The invalidity of any provision of this Lease shall not affect
the remainder. All terms of this Lease shall be construed to mean either the
singular or the plural, masculine, feminine or neuter, as the situation may
demand. Headings are descriptive only and not determinative of meaning. Time is
of the essence in performance of all obligations. This Lease constitutes the
entire agreement between the parties respecting the subject matters it
addresses. This Lease supersedes all prior oral and written agreements
respecting the hiring of the Premises. Provisions of this Lease may be waived,
amended or repealed only by all parties' written consent. This Lease binds and
inures to the benefit of the parties' heirs, personal representatives,
successors and assigns.

          19.4. MEMORANDUM. If Landlord or Tenant requests a memorandum of
Lease, the parties shall execute, acknowledge and record a document
identifying: the

                                       12





<PAGE>   13
shall be recorded.

            19.5 AUTHORITY. Each individual executing this Lease for a
corporation warrants that he is duly authorized to execute and deliver the Lease
for the corporation and that the Lease binds the corporation in accordance with
its terms. Each individual executing this Lease on behalf of a partnership
warrants that he is duly authorized to execute and deliver this Lease for the
partnership and that this Lease binds the partnership in accordance with its
terms.

            19.6 LITIGATION. All actions and arbitrations arising out of or in
connection with this Lease shall be venued in Alameda County, California. If an
action or arbitration proceeding is commenced by reason of the breach of this
Lease or arising out of this Lease, the prevailing party shall recover costs of
suit and attorneys' fees, whether or not the matter proceeds to judgment.

            19.7 SUBORDINATION OF LEASEHOLD. Tenant agrees that this Lease is
and shall be, at all times, subject and subordinate to the lien of any mortgage
or other encumbrances which Landlord may create against the premises, including
all renewals, replacements and extensions thereof. Tenant agrees to execute any
and all instruments in writing which may be required by Landlord to subordinate
Tenant's rights to the lien of such mortgage. Tenants's obligation to
subordinate its leasehold to a lender shall, at all times, be conditioned upon
the lender giving to Tenant a nondisturbance agreement providing that the lender
will not terminate Tenant's occupancy in the event of a foreclosure as long as
Tenant is not in default under the provisions of this Lease. If required by
Tenant, Landlord will make best efforts to obtain from any lender or ground
lessors of the Property a written agreement in form reasonably satisfactory to
Tenant providing for recognition of Tenant's interest under the Lease in the
event of a foreclosure of the lender's security interest or termination of the
ground lease.

            19.8 ESTOPPEL. Within 15 Days of Landlord's request, Tenant shall
complete, execute and deliver to Landlord a certification: (a) that this Lease
is unmodified and in full force and effect (or if modified, stating the nature
of such modification and certifying that this Lease as so modified is in full
force and effect); (b) of the date to which the rent and other charges are paid;
(c) that Tenant knows of no uncured defaults on the part of Landlord hereunder,
or specifying such defaults, if any are claimed; and (d) of the date of
commencement and expiration of the Term. Tenant's failure to timely deliver the
document constitutes a certification that Landlord is not in default under the
Lease and the terms of the Lease are in force without modification. Prospective
purchasers, lenders or lender's assignees may rely upon such certification.

            19.9 ATTORNMENT. In the event of a sale of the Property of the
completion of foreclosure against the Property, Tenant shall attorn to the
Landlord's successor in interest.

            19.10 LENDER'S REQUESTS. Tenant shall consent to Lease amendments
requested by any lender against the Property, provided that such amendments do
not materially affect Tenant's obligations. Tenant shall timely supply financial
information reasonably requested by such lender.

            19.11 REASONABLE EXPENDITURES. Any expenditure by a party permitted
or required under the Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.

            19.12 TENANT IMPROVEMENTS. Tenant and Landlord will design space
plans and working drawings for the Tenant Improvements together. The completed
and approved Tenant Improvement drawings along with specifications will become
Exhibit B. Special equipment and tenant interior specifications must be
forwarded to Landlord not later than June 1, 1997.

            19.12.1 Time is of the essence in this effort. Tenant shall
cooperate with Landlord to ensure that Working Drawings are complete and
approved by the Parties not later than June 23, 1997. Landlord will build out
the space in a first class workmanlike manner and deliver the Premises to the
Tenant by the Commencement Date. Landlord acknowledges that the creation of
Working Drawings and construction specifications will be completed after
execution of this lease. Landlord agrees that provided the Working Drawings and
specifications are reasonably consistent with the space plan and general notes
currently listed as Exhibit B that



                                       13
<PAGE>   14
LANDLORD WILL APPROVE AND BUILD THESE IMPROVEMENTS AS THEN SPECIFIED. TENANT
WILL CONTRIBUTE $97,770 TOWARDS THIS TENANT IMPROVEMENT BUILD OUT.

      19.12.2. IN ADDITION, TENANT WILL CONTRIBUTE TO PT. RICHMOND R & D
ASSOCIATES II, AN LLC (LANDLORD) AN ADDITIONAL $48,850 OF STOCK WARRANTS TO BE
DELIVERED UPON TENANT OCCUPANCY. EXCEPT FOR CHANGE ORDERS REQUESTED BY AND
APPROVED BY THE TENANT, THE CASH CONTRIBUTIONS AND STOCK WARRANTS WILL BE THE
ONLY PORTION OF THE TENANT IMPROVEMENTS BUILD OUT THAT IS THE RESPONSIBILITY OF
THE TENANT.

      19.12.3. RIGHT OF FIRST REFUSAL. TENANT SHALL HAVE A CONTINUOUS RIGHT OF
FIRST REFUSAL FOR 5000 SQUARE FEET OF ADJACENT, CONTIGUOUS SPACE IN BUILDING A.
HOWEVER, UPON NOTIFICATION BY LANDLORD IN WRITING, TENANT MUST EXERCISE OPTION
TO COMMIT TO THIS SPACE WITHIN 24 HOURS UNDER THE SAME TERMS AND CONDITIONS
BEING OFFERED TO THE THIRD PARTY.

      19.13. SUBMISSION. Submission of this document to Tenant does not create a
reservation for a lease or any rights respecting the Premises prior to
Landlord's execution.

      19.14. ARBITRATION OF DISPUTES. ANY CONTROVERSY OR CLAIM BETWEEN THE
PARTIES ARISING OUT OF THIS LEASE SHALL BE SUBMITTED TO BINDING ARBITRATION
UNDER THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION. CALIFORNIA CODE OF
CIVIL PROCEDURE SECTION 1283.05 SHALL APPLY TO THE ARBITRATION. ANY COURT OF
COMPETENT JURISDICTION MAY ENTER JUDGMENT UPON THE ARBITRATION AWARD.

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISIONS
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR
JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING
OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO
NEUTRAL ARBITRATION.


           /S/ Pt. Richmond R&D Associates II           /S/ EOL
           ----------------------------------           ------------------------
           Initial                                      Initial

      19.16. BROKERAGE. LANDLORD HAS RETAINED THE SERVICES OF C.B. COMMERCIAL AS
THE BROKER FOR THIS PROJECT. ANY AND ALL COSTS ASSOCIATED WITH THIS RELATIONSHIP
ARE THE SOLE RESPONSIBILITY OF THE LANDLORD. TENANT WARRANTS THAT IT HAS
INVOLVED NO BROKERS WITH RESPECT TO THIS TRANSACTION OTHER THAN C.B. COMMERCIAL.

      19.17. COOPERATION. Tenant will not interfere with Landlord's actions
pursuant to any Regulation affecting the Property. Tenant will comply with all
reasonable procedures promulgated by Landlord relating to the matters covered by
such Regulations. Landlord has on duty to establish procedures or regulations or
to supervise Tenant's activities for any purpose including, without limitation,
the Handling of Hazardous Materials.

      19.18. PARKING. Tenant shall have the use of 35 UNRESERVED, OFF-STREET
parking places.

                                       14
<PAGE>   15
                LANDLORD:                               TENANT:

By /s/ Point Richmond R&D Associates    By /s/ EDWARD LANPHIER
       Associates II, LLC                  -------------------------------------
   ----------------------------------      Authorized Signature
   Authorized Signature
                                           -------------------------------------
                                           Edward Lanphier
                                           President and
                                           Chief Executive Officer


  Address for Notices and Rent:            Address for Notices:
  1120 Nye Street, Suite 400
  San Rafael, CA 94901

  Date 5-22-97                             Date 5/23/97
       ----------------                         ---------------


                                       15
<PAGE>   16
                                   EXHIBIT A


       [DIAGRAM OF SANGAMO BIOSCIENCES, INC. TECH CENTER TWO, BUILDING A]
<PAGE>   17
SANGAMO
---------------------------------------------------


TECH CENTER TWO
---------------------------------------------------
BUILDING A
POINT RICHMOND


WAREHAM DEVELOPMENT
---------------------------------------------------
1120 NYE STREET
SUITE 400
SAN RAFAEL, CA

FeeMunsonEbert
---------------------------------------------------
Architecture
Interior Design

500 Montgomery Street
San Francisco
California 94111
415 434-0320

25 APRIL 1997 REV

GENERAL NOTES
---------------------------------------------------

FLOOR FINISHES
---------------------------------------------------

FRONT OFFICE AREA -- CARPET
LAB AREA -- SHEET VINYL
RECEIVING -- EXPOSED CONCRETE
(toilets, shower and dark room is also sheet vinyl)


CEILINGS
---------------------------------------------------
FRONT OFFICE AREA -- 2 x 4 T-BAR W/ACOUSTICAL TILE
LAB AREA -- 2 X 4 T-BAR W/VINYL SURFACED TILE

IN LABS
---------------------------------------------------

A. AIR OUTLETS 12 TOTAL
B. NH GAS 12 TOTAL
C. VACUUM 12 TOTAL
D. ALLOW $15,000 FOR DI water
   SYSTEM AND PIPING
E. PROVIDE (1) EMERGENCY SHOWER IN EA. LAB
   AND IN TISSUE CULTURE

F. PROVIDE RACEWAY WITH POWER AND DATA
   OUTLETS 12" O.C. + (2) TURRETS (20 A/110 V)
   AT EA. ISLAND BENCH
   (Convenience outlets at each island and at cabinets)
G. Provide electrical for lab equipment
   per drawing.
H. Sink and hot and cold water in dark room.
I. Provide telephone and data outlets as
   required.
J. Blinds for windows.
K. Convenience outlets in offices, mail/copy
   room and computer room.


HVAC
---------------------------------------------------

LABS 1, 2, 3 -- STANDARD LAB AC 1 TO 2 ZONES TOTAL
NO SPECIAL FILTRATION, 15 AIR CHANGES PER HOUR,
RECIRCULATE AIR
LAB 4 AND TISSUE CULTURE AND GLASS PREP. -- PREFILTER AND BAG FILTER
ONCE THROUGH AIR WITH 100% EXHAUST.
1 ZONE TOTAL, 20 AIR CHANGES PER HOUR
FRONT OFFICE AREA & DARK ROOM -- SEPARATE STANDARD HVAC FOR
OFFICE AREA. ZONES TO BE DETERMINED BY EXPOSURE
EXHAUST FANS IN CONF, TOILETS, BREAK/KITCHEN AND MAIL/COPY

PROVIDE (1) 4 X 8 SKYLIGHT OVER BREAK/KITCHEN


RENTABLE AREA
---------------------------------------------------

9770 SF +/-

<PAGE>   18
By Facsimile and Certified Mail

June 15, 1999

Mr Peter Bluford
Vice President, Corporate Development
Sangamo Biosciences Inc
501 Canal Boulevard
Suite A
Richmond, CA 94804

Dear Peter:

Re: RIGHT OF FIRST REFUSAL ON ADJACENT SPACE AT 501 CANAL BOULEVARD

Pursuant to our letter to Dr Ed Lanphier dated June 10, 1999 and our telephone
conversation today, this letter is confirmation that Sangamo Biosciences Inc.
is exercising its first right of refusal on the approximately 4,840 usable
square feet immediately adjacent to the existing suite. The agreed terms are as
follows:

1    The Term will be five years, commencing on September 1, 1999 and
     terminating on August 31, 2004.

2    The base monthly rent will be $1.45 NNN per rentable square foot for the
     first 30 months of the Term and $1.525 NNN per rentable square foot
     effective the beginning of the 31st month. The rentable square footage will
     be 5,009 square feet based on a load factor of 3.5%.

3    Landlord will grant a Tenant Improvement Allowance of $32 per usable square
     foot towards the design, permitting, construction and project management of
     the approximately 4,840 usable square feet.

4    Sangamo Biosciences Inc has requested that Landlord consider amortization
     of costs in excess of the Tenant Improvement Allowance. Landlord has agreed
     to meet to explore the possibility of a full or partial amortization.
<PAGE>   19
                                      -2-


5     The Triple Net Laboratory Lease entered into as of May 23, 1997 between
      Point Richmond R&D Associates II, LLC and Sangamo Biosciences Inc.
      concerning 9,770 rentable square feet in 501 Canal Boulevard will be
      amended as follows:

      a)     The Initial Term will be extended such that the termination date
             will be August 31, 2004

      b)     The base monthly rent on the 9,770 rentable square feet will
             increase to $1.85 NNN per rentable square feet effective the
             beginning of the 31st month of that lease (pursuant to paragraph
             4.1 of the lease) and will remain at this rate through August 31,
             2004

6     Sangamo Biosciences Inc will be granted a first right of refusal on the
      approximately 7,000 rental square feet within 501 Canal Boulevard
      currently being built out for Pixar Animation Studios. The space is
      scheduled to become available in August 2002. The first right of refusal
      would be based on an initial base monthly rental of $1.50 NNN with other
      terms to be finalized.

Peter, please confirm by your signature below your agreement with the content of
this letter. By signing, you are also confirming that you have been authorized
to do so by Dr Ed Lanphier, President and CEO of Sangamo Biosciences Inc.



Sincerely

/s/ CHRIS BARLOW
-----------------------------------------
CHRIS BARLOW
for POINT RICHMOND R&D ASSOCIATES II, LLC

cc     Rich Robbins; Lease File


Contents of Letter Agreed:

/s/ PETER BLUFORD
-----------------------------------------
Peter Bluford
Vice President, Corporate Development
for Sangamo Biosciences, Inc.