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                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

             STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET

(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,
September  18,  1998,  is made by and between W.H.  POMERADO,  LLC, a California
limited  liability   company   ("Lessor"),   and  AETRIUM,   INC.,  a  Minnesota
corporation,  San Diego  Division  ("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 13000 Gregg Street,  Poway,  CA 92064 located in
the  County  of San  Diego,  State of  California  and  generally  described  as
(describe briefly the nature of the property) Lot 89, an approximately 45,000 sf
concrete  tilt-up  manufacturing,  distribution,  office building with expansion
capability of 15,000 sf ("Premises"). (See Paragraph 2 for further provisions.)

     1.3.  Term:  10  years  and  3  months  ("Original  Term")  commencing  See
AddendumP.  3  ("Commencement  Date") and ending 123 months  later  ("Expiration
Date"). (See Paragraph 3 for further provisions.)

     1.4. Early Possession:  N/A ("Early Possession Date").  (See Paragraphs 3.2
and 3.3 for further provisions.)

     1.5. Base Rent:  $35,082.00 per month ("Base  Rent"),  payable on the first
day of each month  commencing  Commencement  Date.  (See Paragraph 4 for further
provisions.) |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:  $ See AddendumP.  14 as Base Rent for
the period.

     1.7. Security Deposit: $70,164.00 See Add'nP. 14 ("Security Deposit"). (See
Paragraph 5 for further provisions.)

     1.8.  Permitted  Use:   Office/warehouse/distribution   use  or  any  other
permitted use under  applicable  zoning or applicable  law. (See Paragraph 6 for
further provisions.)

     1.9. Insuring Party: Lessor is the "Insuring Party" unless otherwise stated
herein. (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):

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                  CB Richard Ellis represents

|X|      Lessor exclusively ("Lessor's Broker"); | | both Lessor and Lessee, and
         Colliers Iliff Thorn represents

|X|      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
Paragraphs 1 through 19 and  Exhibits "1" through "6" 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"  -  words  not  readable  due  to  hole  punched  in  page]  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.

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     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
systems,  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
therefor as the same relate to Lessee's  occupancy  of the  Premises  and/or the
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 Premises. 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,
(including  but not limited to the  obligations  to pay Real Property  Taxes and
insurance  premiums and to maintain the Premises) shall be in effect during such
period.  Any such early  possession  shall not affect nor advance the Expiration
Date of the Original Term.

     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  ["d________s"  - word(s) not readable due to hole punched in page]
possession  of the  Premises to Lessee.  If  possession  of the  Premises is not
delivered to Lessee within sixty (60) days alter 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. See
Addendum P. 3.3

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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 and 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"
- word not readable due to hole punched in page] 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 a written  notification of same,  which notice shall
include an explanation of Lessor's reasonable objections to the change in use.

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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.

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     (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" - word not readable due to hole punched in page] 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,  fully,  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 the
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" -
word not  readable  due to hole  punched in page]  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" - words not  readable
due to hole  punched  in page] 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.

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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.), 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 ["structural and" - appear to be struck through]  non-structural (whether
or not such portion of the Premises requiring repairs, 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" - word
not  readable  due to hole  punched  in page]  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),  foundations," - appear to be struck through]
ceilings,  roofs, floors,  windows,  doors, plate glass,  skylights landscaping,
driveways,  parking  lots,  fences,  ["retaining  walls,"  - appear to be struck
through] signs, sidewalks and parkways located in, on, about, or adjacent to 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.  If Lessee  occupies the Premises for ["seven (7)" - struck
through,  replaced by "eight (8)"] years or more,  Lessor may require  Lessee to
repaint the exterior of the  buildings on the Premises as  reasonably  required,
but not more frequently than once every ["seven (7)" - struck through,  replaced
by "eight (8)"] years.

     (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 (v) root covering and drain
maintenance and (vi) asphalt and parking lot maintenance, See Addendum P. 8.

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     7.2.  Lessor's  Obligations.  Except for the  warranties  and agreements of
Lessor  contained in Paragraphs  2.2 (relating to condition of the Premises) 2.3
(relating to compliance  with  covenants,  restrictions  and building  code),  9
(relating to  destruction of the Premises) and 14 (relating to  condemnation  of
the  Premises),  it is  intended  by the  Parties  hereto  that  Lessor  have no
obligation,  in any manner  whatsoever,  to repair and  maintain  the  Premises,
improvements  located thereon,  or the equipment therein,  whether structural or
non-structural,  all of which  obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. 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. See Addendum P. 20

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"  - word not  readable  due to hole  punched  in  page]  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.

                                       8
<PAGE>

     (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
the" - words not readable due to hole punched in page]  improvements,  parts and
surfaces thereof clean and free of debris and in good operating order, condition
and state of repair,  ordinary  wear and ["tear" - word not readable due to hole
punched in page] accepted. "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.

                                       9
<PAGE>

8.       Insurance; Indemnity.

     8.1.  Payment for Insurance.  Regardless of whether the Lessor or Lessee is
the Insuring  Party,  Lessee  shall pay for all  insurance  required  under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000  per  occurrence.  Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to  correspond  to the  Lease  term.  Payment  shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.

8.2.     Liability Insurance.

     (a) Carried by Lessee.  Lessee  shall  obtain and keep in force  during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee and Lessor (as an additional  insured)  against claims for bodily injury,
personal injury and property damage based upon,  involving or arising out of the
ownership,  use,  occupancy  or  maintenance  of  the  Premises  and  all  areas
appurtenant  thereto.  Such insurance shall be on an occurrence  basis providing
single limit coverage in an amount not less than  $1,000,000 per occurrence with
an "Additional  Insured-Managers or Lessors of Premises" Endorsement and contain
the "Amendment of the Pollution  Exclusion" for damage caused by heat,  smoke or
fumes  from a hostile  fire.  The policy  shall not  contain  any  intra-insured
exclusions  as between  insured  persons  or  organizations,  but shall  include
coverage for  liability  assumed  under this Lease ["as an" - words not readable
due to hole punched in page] "insured  contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance required by
this Lease or ["as carried" - words not readable due to hole punched in page] by
Lessee shall not,  however,  limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not  contributory  with any similar  insurance  carried by Lessor,  whose
insurance shall be considered excess insurance only.

     (b) Carried by Lessor.  In the event Lessor is the Insuring  Party,  Lessor
shall also maintain liability insurance described in Paragraph 8.2(a), above, in
addition  to, and not in lieu of, the  insurance  required to be  maintained  by
Lessee. Lessee shall not be named as an additional insured therein.

8.3.     Property Insurance-Building, Improvements and Rental Value.

     (a) Building and Improvements.  The Insuring Party shall obtain and keep in
force  during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and to the holders of any mortgages,  deeds of trust
or ground  leases on the Premises  ("Lender(s)"),  insuring  loss ["or damage" -
words not readable due to hole punched in page] to the  Premises.  The amount of
such insurance shall be equal to the full replacement  cost of the Premises,  as
the same shall exist from time to time, or the amount  required by Lenders,  but
in no event more than the commercially  reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements  involved,
such latter amount is less than full replacement cost. If Lessor is the Insuring
Party,  however,  Lessee Owned  Alterations and Utility  Installations  shall be
insured by Lessee under Paragraph 8.4 rather than by Lessor.  If the coverage is
available and  commercially  appropriate,  such policy or policies  shall insure
against all risks of direct  physical loss or damage (except the perils of flood
and/or  earthquake  unless  required by a Lender),  including  coverage  for any
additional  costs  resulting  from  debris  removal  and  reasonable  amounts of
coverage  for  the   enforcement   of  any  ordinance  or  law   regulating  the
reconstruction or replacement of any undamaged sections of the Premises required
to be  demolished  or  removed  by reason of the  enforcement  of any  building,
zoning,  safety or land use laws as the result of a covered cause of loss.  Said
policy or policies shall also contain an agreed  valuation  provision in lieu of
any coinsurance  clause,  waiver of subrogation,  and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S.  Department of Labor Consumer Price Index for
All Urban  Consumers for the city nearest to where the Premises are located.  If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed  $1,000 per  occurrence,  and Lessee shall be liable for such  deductible
amount in the event of an Insured Loss, as defined in Paragraph 9.1(c).

                                       10
<PAGE>

     (b) Rental Value. The Insuring Party shall, in addition, obtain and keep in
force  during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and Lender(s),  insuring the loss of the full rental
and other charges  payable by Lessee to Lessor under this Lease for one (1) year
(including  all real estate taxes,  insurance  costs,  and any scheduled  rental
increases).  Said  insurance  shall  provide  that in the  event  the  Lease  is
terminated  by reason of an  insured  loss,  the  period of  indemnity  for such
coverage  shall be  extended  beyond  the date of the  completion  of repairs or
replacement  of the  Premises,  to provide  for one full  year's  loss of rental
revenues from the date of any such loss.  Said insurance shall contain an agreed
valuation  provision  in lieu of any  coinsurance  clause,  and  the  amount  of
coverage  shall be adjusted  annually to reflect the  projected  rental  income,
property taxes,  insurance premium costs and other expenses,  if any,  otherwise
payable by Lessee,  for the next,  twelve  (12) month  period.  Lessee  shall be
liable for any deductible amount in the event of such loss.

     (c) Adjacent Premises. If the Premises are part of a larger building, or if
the Premises are part of a group of buildings owned by Lessor which are adjacent
to the  Premises,  the Lessee shall pay for any increase in the premiums for the
property  insurance of such  building or buildings if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.

     (d) Tenant's Improvements.  If the Lessor is the Insuring Party, the Lessor
shall  not  be  required  to  insure  Lessee  Owned   Alterations   and  Utility
Installations  unless the item in  question  has become the  property  of Lessor
under the terms of this  Lease.  If Lessee is the  Insuring  Party,  the  policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.

                                      11
<PAGE>

     8.4. Lessee's Property Insurance.  Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's  option,
by endorsement to a policy already carried,  maintain  insurance coverage on all
of  Lessee's   personal   property,   Lessee  Owned   Alterations   and  Utility
Installations  in, on, or about the Premises similar in coverage to that carried
by the  Insuring  Party  under  Paragraph  8.3.  Such  insurance  shall  be full
replacement  cost  coverage  with  a  deductible  of not to  exceed  $1,000  per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal  property or the restoration of Lessee Owned Alterations
and Utility  Installations.  Lessee shall be the Insuring  Party with respect to
the  insurance  required by this  Paragraph  8.4 and shall  provide  Lessor with
written evidence that such insurance is in force.

     8.5. Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are ["held" -
word not  readable  due to hole  punched in page],  and  maintaining  during the
policy  term a "General  Policyholders  Rating" of at least B+, V, or such other
rating as may be  required  by a Lender  having a lien on the  Premises,  as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything  which shall  invalidate  the  insurance  policies
referred to in this Paragraph 8. If Lessee is the Insuring  Party,  Lessee shall
cause to be delivered to Lessor  certified  copies of policies of such insurance
or certificates  evidencing the existence and amounts of such insurance with the
insureds  and loss  payable  clauses as required  by this Lease.  No such policy
shall be  cancellable or subject to  modification  except after thirty (30) days
prior written notice to Lessor.  Lessee shall at least thirty (30) days prior to
the  expiration of such  policies,  furnish  Lessor with evidence of renewals or
"insurance  binders"  evidencing  renewal  thereof,  or Lessor  may  order  such
insurance  and charge the cost thereof to Lessee,  which amount shall be payable
by Lessee to Lessor upon demand. If the Insuring Party shall fail to procure and
maintain the insurance  required to be carried by the Insuring  Party under this
Paragraph  8, the other  Party may,  but shall not be required  to,  procure and
maintain the same, but at Lessee's expense.

     8.6. Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor  ("Waiving  Party") each hereby release and relieve the other,
and waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss of or damage to the Waiving Party's property arising
out of or incident to the perils  required to be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall
not be  limited  by the  amount of  insurance  carried  or  required,  or by any
deductibles applicable thereto.

     8.7.  Indemnity.  Except for Lessor's  negligence  and/or breach of express
warranties,  Lessee  shall  indemnify,  protect,  defend and hold  harmless  the
Premises,  Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders,  from and  against any and all claims,  loss of rents  and/or  damages,
costs, liens, judgments,  penalties,  permits, attorney's and consultant's fees,
expenses and/or liabilities  arising out of, involving,  or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business,  any act,
omission or neglect of Lessee, Its agents,  contractors,  employees or Invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any  obligation  on  Lessee's  part to be  performed  under this  Lease.  The
foregoing  shall  include,  but not be limited to, the defense or pursuit of any
claim or any action or proceeding  Involved therein,  and whether or not (in the
case of claims made against Lessor)  litigated  and/or reduced to judgment,  and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably  satisfactory to
Lessor and Lessor shall  cooperate with Lessee in such defense.  Lessor need not
have first paid any such claim in order to be so Indemnified.

                                       12
<PAGE>

     8.8.  Exemption  of Lessor from  Liability.  Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee,  Lessee's  employees,  contractors,  Invitees,  customers,  or any ether
person in or about the  Premises,  whether such damage or Injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage,  obstruction  or  other  defects  of  pipes,  fire  sprinklers,  wires,
appliances,  plumbing,  air conditioning or lighting fixtures, or from any other
cause,  whether the said injury or damage results from  conditions  arising upon
the Premises or upon other  portions of the building of which the Premises are a
part,  or from other sources or places,  and  regardless of whether the cause of
such damage or injury or the means of repairing  the same is  accessible or not.
Lessor  shall not be liable for any damages  arising  from any act or neglect of
any other tenant of Lessor.  Notwithstanding  Lessor's  negligence  or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom,

9.       Damage or Destruction.

     9.1. Definitions.

          (a) "Promises  Partial Damage" shall mean damage or destruction to the
improvements on the Premises,  other than Lessee Owned Alterations ["and" - word
not readable due to hole punched in page] 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.

                                       13
<PAGE>

          (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;  provided,  however,  that  Lessee  shall,  at  Lessor's
election,  make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make the insurance
proceeds   available  to  Lessee  on  a  reasonable   basis  for  that  purpose.
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 (except as to the deductible
which is Lessee's responsibility) 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" - word not
entirely  readable due to hole punched in page] cost insurance  coverage was not
commercially  reasonable and  available,  Lessor shall have no obligation to pay
for the shortage in insurance  ["proceeds"  - word not entirely  readable due to
hole  punched in page] 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  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" - word not readable due to hole punched in page] (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" - word not readable
due to hole punched in page] 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.

                                       14
<PAGE>

     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 ho 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 ton (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.

                                       15
<PAGE>

          (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 ["and  meaningful"  - words not  entirely  readable due to hole
punched in page] 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" - words not entirely  readable due to hole punched in page]
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) limes 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 lull 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.

                                       16
<PAGE>

     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.

     10.1.

          (a) Payment of Taxes.  Lessee shall pay the Real  Property  Taxes,  as
defined in Paragraph  10.2,  applicable to the Premises  during the term of this
Lease.  Subject to Paragraph  10.1(b),  all such payments shall be made at least
ten (10)  days  prior to the  delinquency  date of the  applicable  installment.
Lessee shall promptly furnish Lessor with satisfactory  evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably  prorated to cover ["only the" -
words not  readable  due to hole  punched in page] period of time within the tax
fiscal year this Lease is in effect,  and Lessor shall reimburse  Lessee for any
overpayment  after such proration.  If ["Lessee" - word not readable due to hole
punched in page]  shall fail to pay any Real  Property  Taxes  required  by this
Lease to be paid by Lessee,  Lessor  shall  have the right to pay the same,  and
Lessee shall reimburse Lessor therefor upon demand. See Addendum P. 8

          (b) Advance  Payment.  In order to insure  payment when due and before
delinquency  of any or all Real  Property  Taxes,  Lessor  reserves the right at
Lessor's  option,  to estimate the current Real Property Taxes applicable to the
Premises,  and to require such current  year's Real Property Taxes to be paid in
advance  to Lessor by  Lessee,  either:  (i) in a lump sum  amount  equal to the
installment  due, at least twenty (20) days prior to the applicable  delinquency
date,  or (ii) monthly in advance  with the payment of the Base Rent.  If Lessor
elects to require payment monthly in advance,  the monthly payment shall be that
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax  installment  would become  delinquent  (and without
interest  thereon),  would provide a fund large enough to fully discharge before
delinquency  the  estimated  installment  of taxes to be paid.  When the  actual
amount of the  applicable  tax bill is known,  the amount of such equal  monthly
advance  payment shall be adjusted as required to provide the fund needed to pay
the applicable taxes before delinquency. If the amounts paid to Lessor by Lessee
under the  provisions  of this  Paragraph  are  insufficient  to  discharge  the
obligations  of Lessee to pay such Real  Property  Taxes as the same become due,
Lessee shall pay to Lessor,  upon Lessor's  demand,  such additional sums as are
necessary  to pay  such  obligations.  All  moneys  paid to  Lessor  under  this
Paragraph  may be  intermingled  with other  moneys of Lessor and shall not bear
interest.  In  the  event  of a  Breach  by  Lessee  in the  performance  of the
obligations of Lessee under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may,  subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional Security
Deposit under Paragraph 5.

                                       17
<PAGE>

     10.2.  Definition of "Real Property Taxes." As used herein,  the term "Real
Property  Taxes"  shall  include  any  form of real  estate  tax or  assessment,
general,  special,  ordinary or extraordinary,  and any license fee,  commercial
rental tax,  improvement  bond or bonds,  levy or tax (other  than  inheritance,
personal  income or estate  taxes)  imposed upon the  Premises by any  authority
having the direct or indirect power to tax, including any city, state or federal
government,  or any school,  agricultural,  sanitary,  fire, street, drainage or
other  improvement  district  thereof,  levied  against  any legal or  equitable
interest or Lessor in the Premises or in the real property of which the Premises
are a part,  Lessor's right to rent or other income  therefrom,  and/or Lessor's
business of leasing the  Premises.  The term "Real  Property  Taxes"  shall also
include any tax,  fee,  levy,  assessment  or charge,  or any increase  therein,
["imposed"  - word not readable due to hole punched in page] by reason of events
occurring,  or changes in applicable law taking effect,  during the term of this
Lease, including but not limited to a change in the ownership of the Premises or
in the improvements  thereon,  the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.

     10.3.  Joint  Assessment.  If the  Premises  are not  separately  assessed,
Lessee's  liability shall be an equitable  proportion of the Real Property Taxes
for all of the land and  improvements  included within the tax parcel  assessed,
such  proportion  to be  determined  by Lessor  from the  respective  valuations
assigned  in the  assessor's  work  sheets or such other  information  as may be
reasonably available.  Lessor's reasonable determination thereof, in good faith,
shall be conclusive.

     10.4.  Personal  Property Taxes.  Lessee shall pay prior to delinquency all
taxes  assessed  against  and levied  upon  Lessee  Owned  Alterations,  Utility
Installations,  Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere.  When possible, Lessee ["shall
use" - words  not  readable  due to hole  punched  in page]  shall use its Trade
Fixtures, furnishings,  equipment and all other personal properly to be assessed
and billed separately from the real property of Lessor. If ["all of" - words not
readable due to hole punched in page]  Lessee's said personal  property shall be
assessed  with  Lessor's  real  property.  Lessee  shall  pay  Lessor  the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's  property or, at Lessor's option,
as provided in Paragraph 10.1(b).

11.  Utilities.  Lessee  shall  pay for all  water,  gas,  heat,  light,  power,
telephone,  trash  disposal and other  utilities  and  services  supplied to the
premises,  together  with  any  taxes  thereon.  If any  such  services  are not
separately metered to lessee,  lessee shall pay a reasonable  proportion,  to be
determined by lessor, of all charges jointly metered with other premises.

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.

                                       18
<PAGE>

          (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,  ["which consent has not been
unreasonably  withheld," - inserted]  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,  Lessor 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" - words not readable due to hole punched in page]
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" - word
not readable due to hole punched in page].

          (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.

                                       19
<PAGE>

          (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,"  - struck  through]  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.

                                       20
<PAGE>

          (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.
[This entire Section 12.2(h) struck through]

     12.3.  Additional  Terms  and  Conditions  Applicable  to  Subletting.  The
following terms and conditions shall apply to any subletting by Lessee of all or
["any part" - words not  readable  due to hole  punched in page] 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" - word not readable due to hole punched in page] 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" - word not  readable  due to
hole punched in page]Defaults cured by the sublessee.

                                       21
<PAGE>

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, 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"  - word  not  readable  due to hole  punched  in page] 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.

                                       22
<PAGE>

          (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.  ss. 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" - word not entirely readable due to hole punched in page] 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  defamer  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.

                                       23
<PAGE>

          (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" - word not  readable  due to hole punched in page] 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.

                                       24
<PAGE>

     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'  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"  - word not readable due to hole punched in page] 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.

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" - word not
entirely  readable due to hole punched in page] 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  ["re_______" - word not readable
due to hole punched in page] 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.

                                       25
<PAGE>

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  $_____________)  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.

                                       26
<PAGE>

     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. [Entire
Section 15 struck through.]

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  or
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.

                                       27
<PAGE>

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" - word not  readable  due to hole  punched  in page] be sent by  regular,
certified or  registered  mail or U.S.  Postal  Service  Express  Mail,  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"  struck  through and
replaced by "a party"] hereunder shall be concurrently transmitted to such party
or parties at such  addresses as ["Lessor"  struck through and replaced by "such
party"] may from time to time hereafter designate by written notice to ["Lessee"
struck  through and replaced by "the other party or parties  hereunder".]  ["See
Add'm P. 21" inserted]

     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.

                                       28
<PAGE>

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.

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"
- words not readable due to hole punched in page] 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" - word not  readable due to
hole punched in page] 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.

                                       29
<PAGE>

     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 fees 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,  costs 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.

                                       30
<PAGE>

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"
- word not  readable due to hole  punched in page] and  otherwise at  reasonable
times for the purpose of showing the same to prospective purchasers, lenders, or
lessees,  and making such ["alterations" - word not readable due to hole punched
in page], 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." - struck through]

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.

                                       31
<PAGE>

          (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"  - words not  readable  due to hole  punched in page]  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" - word not readable
due to hole punched in page] 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" - words not readable due to hole punched in
page] 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" -
word not readable due to hole punched in page] 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.

                                       32
<PAGE>

     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 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"  - word not  readable due to hole punched in page] 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
tar 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.

                                       33
<PAGE>

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,  ["together  with  interest at the rate  provided  under  Paragraph 19" -
inserted].

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" - word not entirely readable due to hole punched in page]
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.

                                       34
<PAGE>

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.

                                       35
<PAGE>



<TABLE>
<S>                                              <C>
Executed at El Cajon, California                 Executed at St. Paul, Minnesota
on ___________________________________           _______________________________
by LESSOR:                                       by LESSEE:
   W.H. Pomerado LLC                                Aetrium Incorporated
   By Its Manager:  Hamann Properties, Inc.

By:___________________________________           By:____________________________

Name Printed:  Gregg Hamann                         Name Printed:  Douglas Hemer
Title:  Secretary                                   Title:  Group Vice President

By:___________________________________           By:____________________________
Name Printed:_________________________           Name Printed:__________________
Address:  475 W. Bradley Ave.                    Address:  2350 Helen Street
          El Cajon, CA  92020                              St. Paul, MN  55109
Tel #:  619-440-7424  Fax #:  619-440-8914                 Tel. # 651-704-1810 Fax # 651-704-0339
                                                           San Diego:  619-623-5656

Net
</TABLE>

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.


                                       36
<PAGE>

                                ADDENDUM TO LEASE

     This Addendum to Lease  ("Addendum")  is made by and between W.H.  POMERADO
LLC,  a  California   limited   liability   company   ("LESSOR"),   and  AETRIUM
INCORPORATED., a Minnesota corporation ("LESSEE"), and is intended to supplement
that certain  Standard  Industrial/Commercial  Single-Tenant  Lease-Net  between
LESSOR and LESSEE dated  September 17, 1998  ("Lease") to which this Addendum is
annexed. If there is any inconsistency  between this Addendum and the Lease, the
terms of this Addendum shall  supersede and control.  LESSOR and LESSEE agree as
follows:

     1. Premises and Building Shell  Description.  The Premises shall be located
on the real property  legally  depicted in EXHIBIT "1" annexed to this Addendum.
The Building Shell, as defined in section 4 of this Addendum,  shall be designed
and  constructed in accordance  with the general design  elements shown on those
certain "Site Plan", "Floor Plan" and "Elevation drawings prepared by Kenneth D.
Smith & Associates,  Inc., which LESSEE hereby approves ("Approved Drawings"); a
copy of the Approved  Drawings is attached as EXHIBIT "2" to this Addendum.  The
components  of  the  Building  Shell  construction  shall  also  conform  to the
specifications  attached  as EXHIBIT  "3" to this  Addendum  ("Specifications").
Following  the  execution  of this  Lease,  LESSOR  shall  cause final plans and
specifications  ("Working  Drawings")  for the Building Shell to be prepared and
submitted  to LESSEE for its approval in  accordance  with the  requirements  of
subsection  1.2  of  this  Addendum  and  not  later  than  November  15,  1998.
Notwithstanding  any other provisions in this Lease, LESSOR shall be entitled to
make  modifications  to the  Building  Shell  design  and/or  Specifications  as
provided in subsection 1.2 of this Addendum.

          1.1  Planned  Size  and  Final  Measurement.  It is  planned  that the
Building Shell (as defined  below) will contain  approximately  45,000  rentable
square  feet on the  ground  level  of the  Building  Shell  and the  structural
elements for an  approximately  15,000  rentable  square foot mezzanine level as
more  particularly  described in section 4 of this Addendum.  All square footage
measurements  shall be from the roof "drip line" and shall  otherwise be made in
accordance with the BOMA standards for industrial/commercial projects. Following
Substantial  Completion  (as  defined  below)  of the  Building  Shell per field
measurement, LESSOR will, in good faith, certify the actual rentable square feet
of the  Building  Shell to  establish  the exact  rentable  square  feet for all
purposes of the Lease.

          1.2 Modifications. LESSEE agrees that LESSOR may make modifications to
the Building  Shell design on account of government or lender  requirements  and
otherwise  as  reasonably  determined  by LESSOR;  provided,  however,  any such
modifications  shall not: (a)  increase or decrease the rentable  square feet of
the Building by more than 2%; (b) materially relocate the Premises from the area
shown in the Approved Drawings;  (c) materially change the  Specifications;  (d)
reduce the number of planned parking spaces or significantly  change ingress and
egress to the  Building or (e)  materially  increase  the cost or  decrease  the
utilization of Tenant Improvements.

     2.  Rent.  "Rent"  for the  Premises  shall be the sum of (a) the Base Rent
described in subsection 2.1 of this Addendum,  subject to adjustment as provided
in  subsections  1.1 and 2.2 of this  Addendum,  (b)  the  amount  of  Operating
Expenses  payable by LESSEE as provided in section 8 of this  Addendum,  and (c)
any other amounts  becoming payable by LESSEE under the Lease. The Rent shall be
payable on the first day of each month.

          2.1 Base Rent. The monthly Base Rent set forth in Paragraph 1.5 of the
Lease  for the  first  Lease  Year  (as  defined  below)  of the  Original  Term
represents  the full Base Rent  payable  beginning  upon the  Commencement  Date
consisting  of (a) an amount  determined by  multiplying  the amount of $.52 per
rentable  square foot by the estimated  total 45,000 rentable square feet of the
Premises ("SF Rate Rent), and (b) adding to such amount,  the sum of $11,682 per
month for the Allowance  Amortization  Charge as determined under subsection 2.3
of this Addendum.  Such Base Rent shall be subject to adjustment as follows: (i)
if there is a  variance  in the  rentable  square  footage  of the  Premises  as
actually  constructed,  the Base Rent for the first Lease Year shall be adjusted
based on the actual  rentable square feet within the Premises  multiplied  times
$.52 per  rentable  square  foot;  and/or  (ii) if the full amount of the Tenant
Improvement Allowance is not disbursed,  then the Base Rent shall be adjusted to
reflect a lower Allowance Amortization Charge as calculated under subsection 2.3
of this Addendum.

<PAGE>

          2.2  Increase in SF Rate Rent.  The SF Rate Rent shall be increased at
the  beginning of the second Lease Year and at the  beginning of each Lease Year
thereafter  until the sixth Lease Year, in an amount equal to three percent (3%)
of the amount of the scheduled SF Rate Rent for the immediately  preceding Lease
Year.  At the  beginning  of the sixth Lease Year and at the  beginning  of each
Lease Year thereafter, the SF Rate Rent shall be increased in an amount equal to
three and one-half  percent  (3.5%) of the amount of the  scheduled SF Base Rent
for the immediately preceding Lease Year.

          2.3 Tenant Improvement  Allowance  Amortization.  As more particularly
provided in section 4 of this Addendum, LESSOR will provide a Tenant Improvement
Allowance in the amount of up to $900,000.00 to pay for Tenant Improvement Costs
(as  defined  below)  for Tenant  Improvements  requested  by  LESSEE.  The term
"Allowance  Amortization Charge" means an amount to be included in the Base Rent
calculated as follows:  (a) from and after the Commencement Date,  determine the
aggregate  amount of the Allowance  expended by LESSOR for Tenant  Improvements;
(b) amortize  eighty percent (80%) of the amount of the Allowance  actually used
based on an economic  return  equivalent  to eleven  percent  (11%) per annum to
derive a monthly payment sufficient to pay in full an amount equal to 80% of the
Allowance  and such  economic  return over a period of time equal to one hundred
and twenty (120) months and the remaining  twenty percent (20%) of the amount of
the  Allowance  actually used based on an economic  return  equivalent to eleven
percent (11%) per annum to derive a monthly payment sufficient to pay in full an
amount equal to 20% of the Allowance  and such economic  return over a period of
time equal to three hundred months;  and (c) the resulting monthly payment shall
equal  the  Allowance  Amortization  Charge.  If the  amount  of  the  Allowance
Amortization  Charge is determined after the  Commencement  Date on account of a
delay in finalizing the Tenant  Improvement  Costs, then LESSEE shall pay LESSOR
the amount accruable from the  Commencement  Date to the end of the then current
month,  adjusted  for any Free Rent  within  fifteen  (15) days  after  LESSOR's
billing for such accrued amounts, and shall thereafter pay the monthly Allowance
Amortization Charge with each payment of Base Rent.

          2.4 Free Rent.  Provided  LESSEE is not in default  under the terms of
the Lease,  LESSOR  hereby  agrees to give LESSEE the first three  months of the
term free of Base Rent.  LESSEE shall still be  obligated  to pay the  Operating
Expenses as provided  in section 8 of this  Addendum  during such free Base Rent
period.

     3.  Effective   Date/Term/Commencement   Date.  Notwithstanding  any  other
provision of the Lease,  this Lease shall be effective  upon execution by LESSOR
and LESSEE  ("Effective  Date") and shall  constitute a legally binding contract
for  LESSOR  to  deliver  possession  of the  Premises  in  accordance  with the
requirements  of this  Lease and for  LESSEE to  accept  possession  and pay the
rentals beginning on the Commencement Date.  Notwithstanding  that the Effective
Date of this Lease is the date of execution of this Lease,  LESSEE's  obligation
to commencement  payment of the Rent payable under this Lease shall not commence
until the occurrence of the Commencement Date.

          3.1 Commencement  Date. Except as otherwise provided in subsection 4.5
of this Addendum,  the  Commencement  Date of the Lease shall be the date of the
Substantial  Completion  (as defined below) of the Building Shell and the Tenant
Improvements; provided, however, the Commencement Date shall not be earlier than
July 31,  1999 nor later  than  November  30,  1999,  except  (a) with  LESSEE's
consent,  in its sole  discretion,  (b) on account of delays caused by LESSEE as
described in subsection 4.5 of this Addendum, or (c) for delays not the fault of
the  LESSOR  or  LESSOR's  contractor  caused  by  fire,   earthquake  or  other
unavoidable   casualties  or  inclement   weather   conditions   not  reasonably
anticipatable,  extraordinary  governmental  action  other than usual permit and
inspection  procedures,  delays  encountered in processing  building permits and
other governmental  approvals or inspections,  delays encountered as a result of
the  discovery of any unknown or concealed  conditions  affecting  the Premises,
delays caused by general area wide labor or material shortages or labor disputes
(such as strikes or  lock-outs),  or any other causes not the fault of LESSOR or
LESSOR's  Contractor,  subcontractors,  agents or employees.  If the Substantial
Completion  is not  achieved  by  December  31,  1990 except for delays per this
section then LESSEE may elect to be released from all LEASE  obligations  and be
refunded the deposit.

          3.2 Lease Term/"Lease Year" Defined.  Unless otherwise  provided,  the
initial Term of the Lease ("Original  Term") shall be a period of ten (10) years
and three (3) months beginning on the Commencement Date;  provided,  however, if
the  Commencement  Date occurs other than on the first day of a calendar  month,
the  Original  Term shall be deemed  extended  for a period of time equal to the
number of days between the Commencement Date and the beginning of the first full
calendar month following the Commencement Date. The term "Lease Year" means each
consecutive  period of twelve (12) months  during the Lease Term,  provided that
(a) if the "Commencement  Date" is other than the first day of a calendar month,
then the first  Lease  Year  shall be a period of twelve  (12)  months  plus the
period  between  the  Commencement  Date and the  first  day of the  first  full
calendar  month  thereafter;  and (b) the last  Lease  Year shall be a period of
three (3) months.

                                       2
<PAGE>

          3.3 LESSOR's Delay. In the event that the Commencement Date is delayed
beyond  twelve (12) months from the execution of this Lease solely on account of
the  Default  of LESSOR or on  account of the fault of  LESSOR's  Contractor  in
failing to timely cause Substantial  Completion of the Building Shell and Tenant
Improvements,  LESSEE shall be entitled to a "Delay Credit" in the amount of the
lesser of (a)  $30,000.00  per  month,  or any part  thereof,  or (b) the amount
actually paid to LESSEE's  existing  landlord in excess of the scheduled monthly
rent in effect at the end of the term of LESSEE's  existing  lease on account of
LESSEE's continued  possession of its existing premises.  Any Delay Credit shall
be applied to the Base Rent  becoming due on the fourth month of the first Lease
Year and each  month  thereafter,  until  fully  applied.  Except for such Delay
Credit,  LESSOR shall not otherwise  have any liability to LESSEE  whatsoever on
account of a delay in the Commencement Date caused by LESSOR or its Contractor.

     4. Building Shell and Tenant  Improvements.  LESSOR, at its expense,  shall
cause the  construction of the Building Shell. The phrase "Building Shell" means
the  improvements  to be  constructed  as shown in the  Approved  Drawings,  the
Specifications and the Approved Working Drawings, including (a) roofing, fascia,
exterior walls, doors and windows, (b) footings and concrete floors, (c) "shell"
fire sprinkler system in accordance with minimum code requirements, (d) conduits
and pipes for telephone,  electricity, water, fire sprinklers and sewage brought
to "stub out"  termination  points in or above a perimeter wall of the Building,
(e) a main electrical  termination panel for the Building, (f) paving and finish
of parking areas,  entrance areas and walkways,  (g) landscaping as shown on the
Approved  Drawings and as otherwise  reasonably  determined by LESSOR,  (h) site
improvements consisting of street, gutters,  sidewalks,  curbs, storm drains and
erosion control  (construction  period and permanent) as required to comply with
governmental requirements,  and (i) structural elements,  consisting of footings
and exterior wall  reinforcement only for a future mezzanine level consisting of
approximately 15,000 rentable square feet ("Mezzanine Area").

          4.1  Tenant  Improvements  Description.  The costs of  completing  the
initial Tenant  Improvements will be shared by LESSOR and LESSEE as described in
subsection 4.4 of this  Addendum.  The phrase  "Tenant  Improvements"  means all
interior improvements which are not a part of the Building Shell,  including (a)
partitions,   walls,  and  doors,  (b)  all  surface  finishes,  including  wall
coverings,  paint, floor coverings,  suspended ceilings and other similar items,
(c) duct work, heat pumps, vents, diffusers,  terminal boxes and accessories for
completion  of heating,  ventilation  and air  conditioning  systems  within the
Premises,  (d) electrical  distribution  systems (including  panels,  subpanels,
wires and outlets),  lighting fixtures,  outlets,  switches and other electrical
work  to be  installed  in  the  Premises,  (e)  plumbing  lines,  fixtures  and
accessories, (f) all fire and life safety control systems such as fire walls and
fire alarms  (including  piping,  wiring and  accessories)  to be located in the
Premises,  and fire sprinklers and lines attributable to the Tenant Improvements
and/or  LESSEE's  fixture,  furnishing  or  equipment,  beyond that  included in
Exhibit 3, 5.3, (g) entrance door signage and directory listings,  as authorized
by LESSOR,  (h)  improvements  required  for  compliance  with Title 24, and (i)
flooring,  suspended ceilings, air conditioning and heating, walls and stairways
for a portion of the Mezzanine  Area, if elected by LESSEE;  provided,  however,
LESSEE's trade fixtures,  equipment and personal property  (including  telephone
systems,  chairs,  tables,  furniture  and  other  equipment  used  in  LESSEE's
business) shall not be considered a part of the Tenant Improvements.

          4.2 Design of Tenant Improvements.  LESSEE shall furnish to LESSOR for
its  approval,  a space plan showing the  configuration  of the Improved  Office
Space no later than  November 1, 1998,  which shall be the  Approved  Space Plan
following LESSOR's  approval.  LESSEE shall furnish to LESSOR, a complete set of
plans  and  specifications  detailing  all  Tenant  Improvements  no later  than
February 1, 1999 ("Tenant  Improvement  Plans").  Unless  otherwise  approved by
LESSOR,  the Tenant  Improvement  Plans will be prepared by the  Architect,  who
shall also obtain permits for the plans. If LESSEE delays in providing the Space
Plan  or  the  Tenant  Improvement  Plans,  such  delay  shall  not  change  the
Commencement Date of the Lease,  which shall be the date the Premises would have
been available for  occupancy,  but for any such delay.  The Tenant  Improvement
Plans  shall  be  subject  to  LESSOR's  prior  approval,   which  will  not  be
unreasonably withheld;  provided,  however, LESSOR shall have the absolute right
of disapproval,  in its sole discretion,  of any Tenant  Improvements  which (a)
alter or otherwise  affect any structural  component of the Building  and(b) are
visible from the exterior of the  Premises.  LESSOR shall have fifteen (15) days
after receipt of the Tenant  Improvement Plans in which to approve or disapprove
the  Tenant  Improvement  Plans.  If  LESSOR  does  not  disapprove  the  Tenant
Improvement Plans within such fifteen (15) day period, LESSOR shall be deemed to
have approved the Tenant Improvement Plans. If LESSOR reasonably disapproves the
Tenant  Improvement  Plans,  LESSEE,  at its expense,  shall  promptly cause the
Tenant  Improvement Plans to be revised and resubmitted to LESSOR for its review
and  approval  within  fifteen  (15) days from notice of  LESSOR's  disapproval.
Following  LESSOR's  approval,  LESSOR will have the Architect submit the Tenant
Improvement  Plans  ("Approved  Tenant  Improvement  Plans") for government plan
checking and a building  permit,  if required,  provided,  LESSOR shall have the
right to approve any  changes  required by such  governmental  authorities.  The
final  Tenant  Improvement  Plans  shall be subject to any  changes  required by
governmental authorities.

                                       3
<PAGE>

               4.2.1 "Improved  Space" Defined.  The term "Improved Space" means
portions of the rentable area of the Building  Shell other than those to be used
for shipping,  which are improved with suspended ceilings,  air conditioning and
heating  systems,  finished  flooring and walls other than the  perimeter  walls
forming the Building Shell.

          4.3  Approved  Contractor.  Hamann  Construction,  a licensed  general
contractor,  will be the general  contractor  for  construction  of the Building
Shell and the  Tenant  Improvements.  LESSOR and LESSEE  hereby  approve  Hamann
Construction acting as the general contractor ("Contractor").

               4.3.1 LESSEE's  Subcontractors' Bids. LESSEE shall have the right
to approve,  which approval shall not be unreasonably  withheld, the subcontract
proposals  ("Bids")  for the  Major  Trades  (as  defined  below)  required  for
construction of the Tenant Improvements. No later than thirty (30) days prior to
the  commencement of  construction,  LESSOR shall cause Contractor to deliver to
LESSEE  Bids  for  each  Major  Trade  from  no less  than  three  (3)  licensed
subcontractors  together  with a  written  notice  specifying  the  Bids,  which
Contractor recommends for acceptance.  LESSEE shall have the right to reasonably
disapprove of the Bids selected by Contractor by giving LESSOR written notice of
any  objection  that  LESSEE may have to one or more of the Bids within ten (10)
days from  LESSEE's  receipt  of the Bids from  Contractor;  provided,  however,
LESSEE  shall not have the right to  disapprove  all Bids within a Major  Trade.
LESSEE's  notice  of  disapproval  shall  explain  in  detail  the basis for the
disapproval  of any Bid  recommended by  Contractor.  Contractor  shall have the
right to utilize any  subcontractors  submitting  Bids for which LESSEE does not
timely give notice of its disapproval. The term "Major Trades" means portions of
the  construction  work  consisting of the supply or installation of electrical,
heating and air conditioning, fire sprinkler system, framing, drywall, plumbing,
painting, floor coverings, suspended ceilings, glass, doors and ceramic tile.

          4.4  Payment  of  Tenant   Improvement   Costs.   The  phrase  "Tenant
Improvement   Costs"  means  all  direct  and  indirect   costs  of  furnishing,
constructing  and  installing the Tenant  Improvements,  including (a) any costs
incurred by LESSOR for design and/or architectural  services of the Architect in
preparing the Tenant  Improvement  Plans, (b) government permit costs applicable
to  the  Tenant   Improvements,   (c)   amounts   payable  to   Contractor   for
overhead/profit, job site supervision, cleanup, trash and janitorial services as
shown in the Cost Breakdown Tenant Improvement which is annexed to this Addendum
as  EXHIBIT  "4",  except  that the 12%  overhead  and  profit  fee  payable  to
Contractor  shall  not  apply  to the  costs  of (i) the  design  of the  Tenant
Improvements,  or (ii) the building  permit(s)  for  construction  of the Tenant
Improvements,  or (iii) "hard costs" exceeding the Tenant Improvement  Allowance
but not exceeding  $1,100,000 (d) the actual "hard costs" of construction of the
Tenant Improvements and (e) financing costs attributable to financing to pay the
LESSOR's  Allowance,  including,  construction  period interest from the initial
loan funding  until the  Commencement  Date,  loan points,  fees and other costs
customarily  incurred in  connection  with such  financing;  provided,  however,
financing  costs incurred after the  Commencement  Date shall not be included in
determining the Tenant Improvement Costs.

               4.4.1  Estimate  for  Tenant  Improvement  Costs.  Prior  to  the
commencement  of  construction,  LESSOR shall cause  Contractor  to make a final
selection  of the Bids for each  Major  Trade and  LESSOR  shall  provide  final
estimates of all other Tenant  Improvement Costs ("Estimated  Tenant Improvement
Costs").  LESSOR shall provide LESSEE  written  notice of such Estimated  Tenant
Improvement  Costs,  which notice will include  copies of the Bids for the Major
Trades.

                                       4
<PAGE>

               4.4.2  LESSOR's  Allowance.  LESSOR  agrees to pay a  maximum  of
$900,000.00 for the Tenant Improvement Costs ("Allowance").  The Allowance shall
be  applied  solely  to pay the cost of the  Tenant  Improvements,  and under no
circumstances  shall  LESSEE be entitled to any payment on account of any unused
portion of the Allowance  following  completion of the Tenant  Improvements  and
payment of the Tenant  Improvement  Costs. The amount of the Allowance  actually
expended  for  payment of Tenant  Improvement  Costs shall be the amount used to
determine the amount of the Allowance  Amortization  Charge under subsection 2.3
above.   LESSOR  shall  pay  its  share  of  the  Tenant  Improvement  Costs  as
construction  progresses  in the same  manner that LESSEE is required to pay its
Initial Contribution under subsection 4.4.3 of this Addendum.

               4.4.3 LESSEE's Payment/Initial Contribution.  Except for LESSOR's
Allowance, LESSEE shall be responsible for the payment of all Tenant Improvement
Costs. The amount of LESSEE's initial  contribution  will be determined based on
the  Estimated  Tenant  Improvement  Costs,  and LESSEE shall pay to LESSOR,  as
provided in this subsection,  an amount equal to the difference between LESSOR's
Allowance and the Estimated Tenant  Improvement Costs ("Initial  Contribution").
LESSEE  shall  pay  such  Initial  Contribution  in  installments,  based on the
percentage of completion of the Tenant Improvements, as reasonably determined by
LESSOR,  and each installment will be due and payable within 10 days of LESSOR's
delivery  of  an  invoice  to  LESSEE.   Such  payments  shall  be  paid  to  an
institutional  fund  control  established  by LESSOR  for  payment of the Tenant
Improvement  Costs.  The  amount  of each  installment  payment  of the  Initial
Contribution  shall be calculated by multiplying the amount of LESSEE's  Initial
Contribution  by the  percentage  of progress as  determined  by LESSOR and then
multiplying that product by ninety percent (90%).

               4.4.4  Final   Reconciliation.   Following   completion   of  the
construction  of the Tenant  Improvements,  LESSOR  shall to deliver to LESSEE a
final accounting of the Tenant  Improvement Costs. If additional amounts are due
from LESSEE on account of differences between the LESSEE's payments on Estimated
Tenant  Improvement Costs and the actual costs incurred,  LESSEE shall reimburse
LESSOR in the amount of such difference following completion of the construction
of the  Tenant  Improvements  and  within  fifteen  (15) days from  receipt of a
written notice and accounting from LESSOR's accounting. If such final accounting
shows  that the  actual  Tenant  Improvement  Costs are less  than the  LESSEE's
payment on Estimated Tenant  Improvement Costs, then LESSEE shall be entitled to
a credit in the  amount of any  excess  paid by LESSEE,  which  credit  shall be
applied to the next payment of Base Rent then becoming due.

               4.4.5 Costs  Attributable to Changes.  LESSEE will be responsible
for payment of any excess Tenant Improvement Costs resulting from any changes to
the Work  requested  by  LESSEE  or  necessitated  by  government  requirements,
following  LESSOR's approval of the Tenant  Improvement  Plans. Any such changes
shall result in the recalculation of the Estimated Tenant  Improvement Costs and
LESSEE's required payments under Section 4.4.3 of this Addendum.

               4.4.6   Inspection  of  Records.   LESSEE,   or  its   designated
representative,  shall have the right  during the course of  performance  of the
construction of the Building Shell and the Tenant Improvements and in connection
with the final  reconciliation  of the Tenant  Improvement  Costs as provided in
subsection  4.4.4 of this  Addendum to a reasonable  review of books and records
maintained  by LESSOR  and  Contractor  relating  to such  costs.  Such right of
inspection is exercisable on reasonable  written notice to LESSOR and during the
regular business hours of LESSOR or Contractor, whichever is applicable.

          4.5   Completion   and   Acceptance  of  Building   Shell  and  Tenant
Improvements.  The  Commencement  Date  of  the  Lease  shall  not  occur  until
Substantial Completion (as defined in subsection 4.5.2 of this Addendum), except
if  Substantial  Completion is delayed on account of LESSEE's  failure to timely
submit the Tenant Improvement Plans (or any revisions thereto), LESSEE's request
for special materials,  finishes or installations (i.e.  materials which are not
readily  available or  customarily  and  ordinarily  used in similarly  situated
construction  work) not shown in the Tenant  Improvement  Plans as  approved  by
LESSOR,  changes to the approved Tenant  Improvement  Plans requested by LESSEE,
LESSEE's  failure  to  timely  pay  amounts  required  to be paid by  LESSEE  in
connection  with such  construction  or other delays  caused by LESSEE.  If such
delays are encountered, the Commencement Date of this Lease shall occur prior to
Substantial Completion of the Tenant Improvements and as of the date such Tenant
Improvements  would have been  substantially  completed  but for such  delays by
LESSEE.  LESSEE  and  LESSOR  shall  conduct a  walk-through  inspection  of the
Premises and prepare and sign a punch-list of all items needing  additional work
by LESSOR,  and LESSEE shall  thereafter  have an additional  sixty (60) days in
which to identify to LESSOR any construction  deficiencies or defects which were
not readily  observable at the time of the preparation of the first  punch-list,
whereupon  any  items  so  identified  in no  more  than  three  (3)  additional
punch-lists and agreed to by LESSOR following  consultation with LESSEE, will be
added to the final  punch-list.  The  punch-lists to be prepared by LESSEE shall
not include any damage to the Premises caused by LESSEE's move-in,  which damage
shall be repaired or  corrected by LESSEE,  at its  expense.  If LESSEE fails to
submit  the  final  punch-list  to  LESSOR  within  the  sixty  (60) day  period
immediately  following the Commencement  Date, it shall be deemed that there are
no items needing additional work or repair.  LESSOR's  contractor shall complete
all reasonable  punch-list  items within thirty (30) days after the walk-through
inspection  and  within  thirty  (30) days  following  LESSOR's  receipt  of any
additional  punch-lists,  or as soon as practicable  thereafter.  Upon LESSOR or
LESSOR's contractor's  indication to LESSEE of the completion of such punch-list
items,  LESSEE  shall  acknowledge  the  completion  of such items in writing to
LESSOR.  If LESSEE fails either to so  acknowledge  the completion of such items
within seven (7) days of such stated  completion or within such seven day period
to specify in writing to LESSOR in reasonable  detail any such previously listed
punch-list  items  that  remain  uncompleted,  all such  items  shall be  deemed
approved by LESSEE.

                                       5
<PAGE>

               4.5.1 Construction/Substantial Completion. Promptly following the
approval of the Tenant  Improvement  Plans and conditioned  upon LESSEE's timely
payment of the LESSEE's Initial  Contribution,  LESSOR shall cause Contractor to
cause the  Substantial  Completion of the Tenant  Improvements in no event later
than the date  determined  in  subsection  3.1 of this  Addendum.  Following the
Substantial Completion,  LESSOR shall cause Contractor to correct all immaterial
defects and  deficiencies  to fully complete the Tenant  Improvements as soon as
reasonably possible.

               4.5.2  "Substantial  Completion"  Defined.  The term "Substantial
Completion"  means the date upon which  LESSOR  satisfies  all of the  following
requirements:  (a) the  construction  of the  Building  Shell  is  substantially
completed in accordance with the Approved Working Drawings,  as modified only by
any changes requested by LESSEE or as otherwise permitted by this Lease, subject
only to minor corrective work which does not affect or limit LESSEE's use of the
Premises;  (b) the  construction  of the Tenant  Improvements  is  substantially
completed in accordance  with the Tenant  Improvement  Plans as modified only by
any changes requested by LESSEE or as otherwise permitted by this Lease, subject
only to minor corrective work which does not affect or limit LESSEE's use of the
Premises;  (c) LESSOR has procured a certificate of occupancy (whether temporary
or permanent) or other applicable permit permitting  LESSEE's  immediate use and
occupancy  of the  Premises;  and (d) LESSOR  has given  LESSEE  written  notice
stating that such Substantial  Completion has occurred and that the Premises are
available  for  LESSEE's   immediate   possession  and  occupancy   ("Notice  of
Possession").

               4.5.3 LESSOR's Enforcement of Contractor's Warranties. LESSOR has
obtained from Contractor the following warranties ("Contractor's Warranties"):

          "CONTRACTOR  unconditionally  warrants  all  materials  and  equipment
     furnished under this Contract will be new, unless  otherwise  specified and
     approved in advance by LESSEE,  and that all Work will be of good  quality,
     free from material faults and defects and in conformance  with the Contract
     Documents.  CONTRACTOR,  at its  expense,  shall repair or replace any Work
     requiring  replacement or repair within one (1) year from completion of the
     Project,  except with respect to the roof membrane only,  which  CONTRACTOR
     will repair or replace  within two (2) years as  required to prevent  water
     penetration.  In the event  CONTRACTOR fails to timely perform its warranty
     obligation,   OWNER  shall  have  the  right  to  cause  such   repairs  or
     replacements  and CONTRACTOR  shall be liable for the  reasonable  costs of
     such  repairs  or  replacements.  In the event of any  action to  enforce a
     warranty  claim,  the  prevailing  party  shall be  entitled to recover its
     reasonable attorney's fees and costs."

                                       6
<PAGE>

Notwithstanding  the limitation on LESSOR's  warranty under Paragraph 2.2 of the
Lease or the time for  enforcement  of LESSOR's  warranty  has  expired,  to the
extent LESSOR has any claim under the Contractor's  Warranties on account of any
defect or  deficiency  in the  construction  of the  Premises,  upon the written
request of LESSEE,  LESSOR  shall take such  commercially  reasonable  action as
necessary to enforce any such  warranties or claims for the benefit of LESSEE to
the extent LESSEE incurs or will incur any out-of-pocket  expense or cost in the
performance of its obligations under this Lease for the repair or maintenance of
the Premises on account of any items covered by the Contractor's Warranties as a
result of any such defects or deficiencies,  provided that LESSOR shall first be
entitled  to  recover  its  Legal  Expenses  (as  defined  below)  prior  to any
reimbursement to LESSEE of any such out-of-pocket expenses;  provided,  however,
if LESSOR determines, based on its good faith belief, that pursuit of such claim
against Contractor would not be commercially reasonable,  then LESSOR shall have
the right to satisfy its  obligations  under this section by assigning to LESSEE
the  right  to  enforce  any such  Contractor's  Warranties,  provided  any such
assignment shall be effective only to the extent LESSEE incurs or will incur any
out-of-pocket  expense or cost in the performance of its obligations  under this
Lease for the  repair or  maintenance  of the  Premises  on account of any items
covered  by the  Contractor's  Warranties  as a result  of any such  defects  or
deficiencies,  and LESSOR shall be entitled to receive any excess recovery after
deduction of LESSEE's Legal Expenses. The term "Legal Expenses" means reasonable
attorneys'  fees and  costs  (including  any  expert  witness  fees),  including
attorneys'  fees and costs in connection  with the  enforcement  of any award or
judgment or any  appellate  proceedings,  which Legal  Expenses  are incurred by
LESSOR in the event LESSOR  elects to enforce  warranties or claims in any legal
proceedings  against  Contractor,  or  incurred by LESSEE,  in the event  LESSOR
assigns  the right to LESSEE  to  enforce  such  warranties  or claims  directly
against Contractor.

               4.5.4   Exclusion   From   Common   Area   Operating    Expenses.
Notwithstanding any other provision,  any costs of repairs or replacement of any
patent  or  latent  defect  or  deficiency  identified  during  the  period  the
applicable  Contractor's  Warranties  remain in effect  shall not be included in
calculating Common Area Operating Expenses.

     5. LESSOR's Contingencies. LESSOR's obligations under the Lease are subject
to satisfaction of the following  contingencies  within one month following full
execution of the Lease: (a) LESSOR procures a commitment for a construction loan
and permanent loan on terms and conditions  reasonably acceptable to LESSOR; (b)
LESSOR  reasonably  determines  that the total  cost of all  governmental  fees,
exactions and charges for development of the Building Shell and the Allowance of
LESSOR shall not exceed  $50,000;  and (c) LESSOR  approves the  disclosures  in
LESSEE's  Hazardous  Materials  Questionnaire  described  in  section 11 of this
Addendum.  LESSOR  agrees to use its  reasonable,  best  efforts to satisfy  the
contingencies  described  in  preceding  clauses  (a) and (b)  within  one month
following  full  execution of the Lease,  and LESSOR shall have thirty (30) days
following the receipt of the Hazardous  Materials  Questionnaire  to give LESSEE
notice of its approval or disapproval  under  preceding  clause (c). LESSOR will
promptly give LESSEE notice as and when each contingency is satisfied. If LESSOR
does not give notice to LESSEE that all contingencies have been satisfied within
one month  following full  execution of the Lease,  then either LESSOR or LESSEE
shall have the right to  terminate  the Lease by giving the other notice of such
decision.  If the Lease is so  terminated,  LESSOR  shall  return  the  Security
Deposit to LESSEE and neither party will have any further  obligations under the
Lease, except that the obligation of LESSEE to provide indemnification to LESSOR
as provided in section 6 of this Addendum shall survive such termination.

     6. Access to Premises/Indemnification. LESSEE and its agents, employees and
design  consultants  shall be entitled to reasonable  access to the property for
the purpose of carrying out the preparation of the Tenant  Improvement Plans and
inspecting the progress of the  construction of the Building Shell or the Tenant
Improvements.  LESSEE's  entitlement to access shall be conditioned  upon LESSEE
giving LESSOR prior written  notice of the date and time for such access,  which
shall not be less than three (3) business days prior to the desired access date.
LESSEE  agrees  that it will  pay for the  cost or  expense  of any  repairs  or
replacements,  including  damage  to  landscaping,  roads,  irrigation  systems,
utilities and other improvements, resulting from LESSEE's exercise of the access
rights  provided in this section,  and LESSEE shall  indemnify,  defend and hold
harmless  LESSOR and  Contractor  from and against any loss,  liability,  claim,
expense  (including  reasonable  attorneys'  fees and  court  costs)  or  damage
resulting  from  LESSEE's  exercise of such access  rights,  including,  without
limitation,  any  claims  arising  from the  activities  of LESSEE or its agent,
employees or design consultants.  LESSOR may require,  upon reasonable notice to
LESSEE,  that LESSEE provide  evidence of adequate general  liability  insurance
coverage  from an insurer  acceptable to LESSOR and name LESSOR as an additional
insured under LESSEE's policy as a condition to LESSEE's exercise of such access
rights.  LESSEE agrees not to interfere with the progress of the construction on
the property or otherwise  interfere with any other  activities of LESSOR or its
agents or contractors while present on the property.

                                       7
<PAGE>

          6.1  LESSEE's  Fixturization.  No later than thirty (30) days prior to
the expected date of Substantial Completion of the Building, LESSOR shall permit
LESSEE to enter upon the  Premises  for the  purposes  of  permitting  LESSEE to
commence  installation of LESSEE's machinery and trade fixtures  ("Fixturization
Period").  LESSEE  agrees  to carry  out such  work in such  manner  as will not
interfere  with the  Contractor's  work.  LESSOR  shall not be  responsible  for
securing the Premises or liable for any loss or damage to any such  machinery or
trade  fixtures  installed by LESSEE prior to the delivery of  possession of the
Premises.  LESSEE shall not be responsible for payment of any of the Rent during
the  Fixturization  Period,  provided LESSEE shall be responsible for compliance
with all other terms and  conditions of the Lease,  including the  provisions in
Paragraph 8.2 (a) of the Lease requiring LESSEE to maintain certain insurance.

     7. No Restriction on LESSOR'S  Remedies.  In the event that LESSEE Defaults
under the Lease by failing or refusing to take  possession  of the  Premises and
commence  paying the rent,  nothing in the Lease is  intended to nor shall it be
applied to restrict  any rights or  remedies  that LESSOR may have on account of
such Default,  including,  without limitation,  LESSOR's  entitlement to recover
consequential  and  incidental  damages  from LESSEE on account of such  breach.
LESSEE  acknowledges  that it is aware that,  based upon LESSEE's  inducement in
entering  into this Lease,  LESSOR is entering  into a contract to purchase  the
land on which the Building is to be  constructed  and is  purchasing  such land,
LESSOR is procuring financing in connection with such acquisition and to pay for
the costs of  construction  of the Building Shell and the  Allowance,  LESSOR is
otherwise making a substantial  investment of its own funds and creditworthiness
to acquire the land and develop the Building,  and, in the event of such Default
by LESSEE,  LESSOR will suffer  substantial  damages and losses,  including lost
profits  and the  economic  value of the loss of use of its  invested  funds and
credits in the real  estate  development  project  which is the  subject of this
Lease.

     8. LESSEE's Payment of Operating Expenses. Subject to subsection 8.1 below,
beginning  on the  Commencement  Date,  in addition to payment of the Base Rent,
LESSEE shall be responsible for payment of all "Operating  Expenses" (as defined
below). The term "Operating  Expenses" means the following expenses and costs of
the ownership and operation of the Premises: (a) amounts payable for maintenance
contracts required to be procured pursuant to Paragraph 7.1(b) of the Lease (but
not the cost of  repairs  or  replacements  payable by  LESSEE),  (b)  insurance
required to be maintained by LESSOR or LESSEE under the Lease  (exclusive of the
insurance  maintained  by LESSEE  under  Paragraph  8.4 of the Lease),  (c) Real
Property  Taxes,  (d) a  reasonable  reserve  for  replacement  of the  roof and
heating/air  conditioning  units,  (e)  assessments  and  dues  payable  to  any
association  or other  governing  body  established  pursuant to any  covenants,
conditions or  restrictions  affecting the Premises as of the date of the Lease,
(f) payment of Mello Roos Bond  installments,  (g) a fire  sprinkler  monitoring
contract  if  payable  separate  from the fire  sprinkler  maintenance  contract
described in Paragraph 7.1(b) of the Lease, (h) the Administrative Fee described
in  subsection  8.2 of this  Addendum,  and (i) the  reasonable  amount of other
ordinary and necessary  expenses and costs of operation of the  Premises,  which
are  customarily  incurred in the  operation of similarly  situated  real estate
projects;  provided, however, the term "Operating Expenses" does not include (i)
the costs of repairs or  maintenance  required to be  performed by LESSEE to the
extent  such  costs  exceed  the  amount of any  reserves  accumulated  from the
Operating Expense  collections for the particular repair or maintenance item, or
(ii) any other  items of expense or cost which the terms of the Lease  expressly
require be paid or incurred by LESSEE,  including  all utility and trash charges
payable by LESSEE under  Paragraph 11 of the Lease.  Interest at the Wells Fargo
savings account rate on any unused portion of the above reserves shall accrue to
the reserve account and not to the LESSOR.

          8.1  Method  of  Payment.  LESSEE  shall  pay to  LESSOR  monthly,  as
additional  rent,  an amount  equal to 1/12 of the  projected  annual  Operating
Expenses.  Such amount shall be due and payable concurrently with the payment of
the applicable Base Rent. Prior to the beginning of each Lease Year, LESSOR will
provide  LESSEE an  annual  estimated  Operating  Budget  ("Estimated  Operating
Budget") for each calendar year or partial year.  Subject to LESSEE's payment to
LESSOR of the Operating Expenses as provided in this Addendum, LESSOR shall make
prompt  payment  of the  Operating  Expenses.  Any  excess or  deficit  from the
estimates shown in the Estimated  Operating Budget will be credited or billed to
LESSEE within sixty (60) days following the end of the applicable calendar year,
and LESSOR shall  concurrently  furnish LESSEE with a detailed statement showing
the actual  Operating  Expenses  incurred  for such year.  Any  deficit  will be
payable as additional  rent within ten (10) days of receipt of a final Operating
Budget setting forth the actual  expenditures  for the  applicable  year and the
deficit.  Any excess  shall be credited  against the next  payments of Operating
Expenses due from LESSEE. A copy of the Estimated Operating Budget for the first
calendar  year is attached  to the Lease as EXHIBIT  "5",  provided  that LESSEE
acknowledges  that such budget  represents  only LESSOR's good faith estimate of
the such expenses and that actual expenses may vary. LESSEE further acknowledges
that the amounts  and/or  categories of expense will likely vary in future years
as the Premises ages. Promptly following LESSEE's request,  LESSOR shall furnish
LESSEE with such  additional  information as LESSEE may reasonably  request with
respect to such Operating Expenses.

                                       8
<PAGE>

          8.2 LESSOR'S Administrative Services. LESSOR agrees to provide certain
administrative  services  to  assist  LESSEE  in  the  performance  of  LESSEE's
obligations  under  Paragraphs 7, 8.2, 8.3 and 10 of the Lease in  consideration
for LESSEE's monthly payment of an administrative fee to LESSOR two percent (2%)
of the SF Rate Rent per month  ("Administrative  Fee"). Such  Administrative Fee
shall be payable as a part of the Operating Expenses payable by LESSEE. LESSOR's
administrative services shall consist of the following: LESSOR shall procure, on
behalf of LESSEE,  maintenance contracts required to be procured by LESSEE under
Paragraph  7.1(b) of the Lease,  and shall  otherwise  procure bids and contract
proposals  from  contractors  when  necessary  for LESSEE's  performance  of its
general  maintenance and repair obligations under Paragraph 7.1(a) of the Lease.
Except  with the  prior  written  consent  of  LESSEE,  major  items of  expense
exceeding  $10,000.00 shall be competitively bid and LESSOR shall not submit any
contracts or proposals for any of such services to be performed by LESSOR or any
affiliate  of LESSOR,  except to the extent such  affiliation  is  disclosed  to
LESSEE and such contract is competitively priced. LESSOR shall not be liable for
any acts or  omissions  of any such  contractors,  nor for  LESSEE's  default in
failing  to perform  any  obligation  under the  Lease,  except to the extent of
LESSOR's failure to pay any Operating Expense from funds previously  provided by
LESSEE for the payment of such Operating Expense.

     9.  Additional  Insurance  Provisions.  In addition to the  insurance to be
maintained  by LESSEE  pursuant to Paragraph  8.2(a) of the Lease,  LESSOR shall
have the right, but not the obligation,  to maintain,  at LESSOR's sole cost and
expense,  any additional  general  liability  insurance that LESSOR may elect to
procure  for the sole and  exclusive  benefit  of  LESSOR.  LESSEE  shall not be
obligated  to  reimburse  LESSOR for the cost of any such  additional  liability
insurance and LESSEE shall not be named as an insured under any such  additional
insurance  nor shall the  existence  of such  additional  insurance  effect  any
obligations or liabilities of LESSEE under the Lease.

     10.  Option to Extend.  Subject to the  provisions  of  Paragraph 39 of the
Lease,  LESSEE shall have the option to extend the Lease Term for one additional
term of five (5) years, which option is exercisable only by LESSEE giving LESSOR
written  notice of the election to exercise  such option no earlier than fifteen
(15)  months  and no later than nine (9) months  before  the  expiration  of the
Original  Term.  If LESSEE  fails for any  reason to timely  give such  Election
Notice,  such option rights shall  automatically  terminate and be of no further
force or effect and LESSEE shall not have any other right to extend the Original
Term.  LESSEE may withdraw a notice to elect to excercise  the option up to nine
months before the end of the term of the Lease.

          10.1 Remaining Lease Terms  Remaining Lease Terms.  Except as provided
in this subsection and in subsection 10.2 of this Addendum,  if LESSEE elects to
extend the Original Term, all other terms and conditions of the Lease, including
annual  Base Rent  Adjustments  of 3.5%,  shall  remain in  effect  during  such
extended  term.  LESSEE  shall have no  further  right to extend the term of the
Lease;  and the Base Rent applicable  during the option term shall be determined
in accordance with subsection 10.2 of this Addendum.

          10.2  Adjustment to Base Rent.  The Base Rent for the first Lease Year
of the  extension  period shall be an amount equal to the "fair rental value" of
the Premises as determined in the following manner:

          (a) Within thirty (30) days from LESSEE's Election Notice,  LESSOR and
     LESSEE shall meet in an effort to negotiate, in good faith, the fair rental
     value of the  Premises for the first year of the option  period.  If LESSOR
     and LESSEE have not agreed upon such fair rental  value of the  Premises at
     least  ninety (90) days prior to the  beginning  of the  applicable  option
     period,  the fair rental value shall be determined by appraisal,  by one or
     more appraisers  ("Appraiser(s)").  The Appraisers shall have at least five
     (5)  years  experience  in  the  appraisal  of  commercial/industrial  real
     property in the area in which the  Premises is located and shall be members
     of professional organizations such as M.A.I. or equivalent.

          (b) If LESSOR and  LESSEE  are not able to agree upon the fair  rental
     value of the Premises  within the prescribed  time period,  then LESSOR and
     LESSEE  shall  attempt to agree in good faith upon a single  Appraiser  not
     later than  seventy-five (75) days prior to the beginning of the applicable
     option  period.  If LESSOR  and  LESSEE  are  unable to agree upon a single
     Appraiser  within  such time  period,  then  LESSOR and  LESSEE  shall each
     appoint  one  Appraiser  not later than  sixty-five  (65) days prior to the
     beginning of the applicable option period. Within ten (10) days thereafter,
     the two (2) appointed Appraisers shall appoint a third Appraiser. If either
     LESSOR or LESSEE fails to appoint its Appraiser  within the prescribed time
     period,  the single  Appraiser  appointed shall  determined the fair rental
     value of the Premises.  If both parties fail to appoint  Appraisers  within
     the prescribed time periods,  then the first Appraiser  thereafter selected
     by a party shall  determine  the fair rental  value of the  Premises.  Each
     party shall bear the cost of its own  Appraiser and the parties shall share
     equally the cost of the single or third Appraiser, if applicable.

                                       9
<PAGE>

          (c) For the purposes of such  appraisal,  the term "fair rental value"
     shall mean the price that a ready and willing  tenant  would pay, as of the
     beginning of the applicable  option period, as monthly Base Rent to a ready
     and  willing  landlord  of  property  comparable  to the  Premises  if such
     property were exposed for lease on the open market for a reasonable  period
     of time and taking into account all of the purposes for which such property
     may be used. If a single  Appraiser is chosen,  then such  Appraiser  shall
     determine the fair rental value of the Premises. Otherwise, the fair rental
     value of the Premises shall be the arithmetic average of the two (2) of the
     three (3) appraisals  which are closest in amount,  and the third appraisal
     shall be disregarded.  LESSOR and LESSEE shall instruct the Appraiser(s) to
     complete the  determination  of the fair rental value not later than thirty
     (30) days prior to the beginning of the applicable  option  period.  If the
     fair rental value is not  determined  prior to the  beginning of the option
     period,  then  LESSEE  shall  continue  to  pay to  LESSOR  the  Base  Rent
     applicable to the Premises  immediately prior to such extension,  until the
     fair rental value is determined. When the fair rental value of the Premises
     is determined,  LESSOR shall deliver  notice thereof to LESSEE,  and if the
     fair rental value is higher,  LESSEE  shall pay to LESSOR,  within ten (10)
     days after  receipt of such notice,  the  difference  between the Base Rent
     actually  paid  by  LESSEE  to  LESSOR  and the new  Base  Rent  determined
     hereunder.

          (d)  Notwithstanding  any other  provision of this Lease,  in no event
     shall the Base Rent for the first Lease Year of the extension  term be less
     than the Base Rent in effect for the last Lease Year of the  Original  Term
     ("Prior  Base Rent").  If the fair rental value of the Premises  determined
     under this section is less than the Prior Base Rent, then the Base Rent for
     the first Lease Year of the extension term shall equal the Prior Base Rent.

          (e) The  Base  Rent  determined  for the  first  Lease  Year  shall be
     adjusted at the  beginning of the second Lease Year and at the beginning of
     each Lease Year  thereafter  during the extension term. The Base Rent shall
     be increased in an amount equal to three and one-half percent (3.5%) of the
     amount of the scheduled Base Rent for the immediately preceding Lease Year.

          (f) In the event the  foregoing  extension is  exercised,  LESSEE will
     receive  a Tenant  Improvement  retrofit  allowance  equal  to two  dollars
     ($2.00) per square  foot of the  Premises,  which will be credited  against
     Base Rent due under the extension term in the first month after evidence of
     money spent on the building is presented to LESSOR, until credited in full.

     11.  Hazardous   Materials   Questionnaire.   Without   limiting   LESSEE's
obligations  under  Paragraph  6.2  of  the  Lease  regarding   compliance  with
Applicable Laws concerning Hazardous  Substances,  LESSEE shall, within ten (10)
days from the  execution,  complete and deliver to LESSOR for its approval under
section 5 of this Addendum and, following such approval,  filing with applicable
government  authorities,  a Hazardous Materials Questionnaire in the form as set
forth in EXHIBIT "6" annexed to this Addendum.

     12. Additional  Provisions Regarding Tenancy Statement.  In addition to the
information  required under  Paragraph 16 of the Lease,  LESSOR may also require
that LESSEE certify to the absence of any violations of any Hazardous  Substance
Laws and  require  that  LESSEE  provide  and  certify to an  updated  Hazardous
Materials Questionnaire.

                                       10
<PAGE>

     13. Corporate Resolution.  Within ten (10) days of Lease execution,  LESSEE
shall provide LESSOR with a certified copy of a Corporate Resolution authorizing
the person(s) designated below to execute this Lease on the behalf of LESSEE and
thereupon become a binding contractual obligation of LESSEE.

     14.  Security  Deposit.  If  LESSEE  is not in  default  on or  before  the
Commencement Date of the Lease, then 1/2 of the security deposit under Paragraph
1.7 of the Lease will be applied to the Base Rent becoming due during the fourth
month of the first Lease Year.

     15. Rent  Adjustment  Upon  Assignment or Sublease.  The provisions of this
section  shall only apply  during the  Original  Term of the Lease and shall not
apply during the option period  Provided that LESSEE is not in Default under the
Lease, if LESSEE subleases or assigns the Premises,  LESSEE shall pay to LESSOR,
as additional  rental due under this Lease,  at LESSOR's  option,  the following
amounts:  (a) in the case of an assignment,  LESSOR shall be entitled to receive
an amount equal to fifty percent  (50%) of the total value of the  consideration
received by LESSEE on account of such  assignment,  less an amount  equal to any
real estate  commissions  payable by LESSEE on account of the assignment of this
Lease  amortized  over  the  duration  of the  Lease  following  the  applicable
assignment,  and the  additional  amount  payable to LESSOR shall be paid within
five (5) days from the date(s) as and when LESSEE  receives such  consideration;
and (b) in the case of a sublease(s),  an amount equal to fifty percent (50%) of
the Excess Rental  payable by any subtenant on account of such sublease less the
costs of any real  estate  commissions  payable  by  LESSEE  amortized  over the
duration  of the  sublease.  The term  "Excess  Rental"  means the rent or other
consideration  received by LESSEE from the  subtenant in excess of the amount of
Base Rent, additional rent and other charges payable by LESSEE under this Lease.
In no event shall this provision be construed or applied to reduce the Base Rent
or other  charges  payable by LESSEE  under this  Lease,  nor  modify,  waive or
otherwise affect LESSOR's entitlement to increase the rentals payable under this
Lease  pursuant to Paragraph  12.1(d) of the Lease in the event of an assignment
or  subletting  without the consent of LESSOR.  For purposes of this  Paragraph,
LESSEE will not be deemed to be in Default if all conditions of Default  noticed
by LESSOR to LESSEE in  connection  with  LESSEE's  request  for  consent to the
applicable  assignment or subletting are cured within the grace periods  allowed
therefor under Paregraph 13.1 of the Lease.

     16. Limited Right to Holdover.  Notwithstanding  Paragraph 26 of the Lease,
Lessee shall have the right to retain  possession  of the Premises for a maximum
six months after upon the expiration  (but not the earlier  termination) of this
Lease or any renewal or extension term,  LESSEE shall have the right to holdover
and retain  possession  of the Premises  for a maximum  period of six (6) months
subject to  LESSEE's  compliance  with each of the  following  requirements  and
conditions:  (a) At least one hundred  twenty (120) days prior to the expiration
of the then-current  term, LESSEE shall give written notice ("Holdover  Notice")
to LESSOR of its  election to  holdover,  which notice shall state the period of
the  holdover,  which  shall not be less than three (3) months nor more than six
(6) months ("Holdover Period");  (b) LESSEE shall not be in Default or Breach of
the Lease either at the time of the giving of the Holdover Notice or at the time
of the  commencement of the Holdover  Period;  (c) LESSEE shall pay as Base Rent
(i) for the first three months of the Holdover  Period,  an amount equal to 125%
of the Base Rent in effect  for the month  immediately  preceding  the  Holdover
Period, and (ii) for the second three months, if applicable,  an amount equal to
150% of the  Base  Rent  in  effect  for the  month  immediately  preceding  the
beginning of the Holdover  Period;  and (d) LESSEE shall continue to comply with
all of the other terms,  covenants and  conditions of this Lease,  including the
payment of any other rent,  charges or fees  payable  during the Lease term.  If
LESSEE complies with each of the above-described  conditions,  LESSEE's holdover
shall be deemed to be with the consent of LESSOR and the provisions of Paragraph
26 of the Lease shall not apply.  Upon  expiration of the Holdover Period stated
in the Holdover Notice, LESSEE shall have no further right to holdover or retain
possession of the Premises.  If LESSEE does not timely give a Holdover Notice or
LESSEE otherwise fails to comply with each of the  above-described  requirements
and conditions,  LESSEE shall have no right to retain possession of the Premises
or any part thereof beyond the  expiration of this Lease,  and the provisions of
Paragraph 26 of the Lease shall apply.

     17. Additional Provisions Regarding Alteration Removal. Notwithstanding any
contrary  provision  in  Paragraph  7.4(b) of the Lease,  LESSEE may  request in
writing, at the time of submitting any Alterations or Utility  Installations for
LESSOR's  consent,  that LESSOR  agree not to require the removal of any of such
LESSEE's  Alterations or Utility  Installations upon expiration of the Lease. If
LESSEE makes such request, LESSOR shall notify LESSEE at the time of giving such
consent  whether or not  LESSOR  will  require  the  removal of any of  LESSEE's
Alterations or Utility  Installations,  and LESSOR's failure to so notify LESSEE
shall  constitute  a waiver of LESSOR's  right to require  LESSEE to remove such
Alterations or Utility  Installations  upon  expiration of the Lease.  If LESSOR
gives such notice  that it will  require  such  removal,  then  LESSEE  shall be
obligated to remove such Alterations or Utility Installations upon expiration of
the Lease.

                                       11
<PAGE>

     18. Additional  Provisions  Regarding Hazardous  Materials.  Subject to the
limitations described in this section,  LESSOR shall indemnify,  defend and hold
harmless LESSEE from and against any action,  demand or claim (including a claim
for reasonable attorneys' fees and court costs) constituting a Third Party Claim
(as  defined   below)  which  is  based  solely  on  any   Hazardous   Substance
contamination  in, under or about the  Premises  (including  groundwater)  which
existed as of the Commencement Date of the Lease ("Preexisting  Contamination"),
but only to the extent LESSEE  incurs a loss,  liability,  claim and/or  expense
exceeding the sum of $5,000.00.  The phrase "Third Party Claim" means a lawsuit,
administrative  action  or other  proceeding  commenced  and  maintained  by any
governmental  agency or by any owner or occupant of adjacent land other than the
Premises o cause the remediation of any Preexisting Contamination.  LESSEE shall
promptly give LESSOR notice of any such Third Party Claim.  LESSOR's  obligation
of  indemnification  includes the  obligation  to defend the Third Party Claims,
after LESSEE has first paid losses, liabilities, costs and/or expenses in excess
of  $5,000.00  on account of such Third Party  Claim.  LESSEE  shall  reasonably
cooperate,  without  expense to LESSOR,  with LESSOR in such  defense.  LESSOR's
indemnification  obligation  under this  section does not (a) increase or expand
any  obligation  of  LESSOR  under  Paragraph  9.7 of the  Lease  to  cause  the
remediation  of  any  such  Preexisting  Contamination,  (b)  modify,  waive  or
otherwise  change  any of  LESSOR's  rights  under  Paragraph  9.7 of the Lease,
including the right to terminate the Lease,  or (c) otherwise  subject LESSOR to
any liability for losses of or damages to LESSEE  resulting  from the disruption
of LESSEE's  business  operation on the Premises on account of such  Preexisting
Contamination  and/or from any order or judgment resulting from such Third Party
Claim limiting or restricting the use or occupancy of the Premises, provided the
preceding provision does not affect LESSEE's entitlement to abatement of rent in
accordance with Paragraph 9.7 of the Lease.

     19. No Binding Offer. LESSOR'S SUBMISSION OF THIS DOCUMENT FOR EXAMINATION,
NEGOTIATION  AND/OR  SIGNATURE BY LESSEE DOES NOT  CONSTITUTE AN OFFER TO LEASE,
NOR A RESERVATION OF, NOR AN OPTION FOR THE LEASE OF THE PREMISES.  THE DOCUMENT
SHALL NOT BE  BINDING  AND IN EFFECT  AGAINST  EITHER  PARTY  UNTIL AT LEAST ONE
COUNTERPART OF THIS LEASE IS FULLY EXECUTED AND DELIVERED BY LESSOR AND LESSEE.

     20. LESSOR's  Maintenance  Obligations.  Notwithstanding  the provisions of
Subparagraphs 7.1 and 7.2 of the Lease, LESSOR, not LESSEE, shall be responsible
for the maintenance and repair of certain LESSOR  Maintained  Improvements.  The
phrase "LESSOR  Maintained  Improvements",  refers only to and is limited to the
structural  elements of the Building Shell,  being the structural portion of the
exterior  Building Shell walls,  foundations  and  structural  roof (but not the
non-structural  roof membrane,  roof drainage  system,  gutters and  downspouts,
which shall be maintained by LESSEE).

          20.1 Limitations on LESSOR's  Responsibility.  LESSOR's obligation for
repair and  maintenance  of the  LESSOR  Maintained  Improvements  is limited to
maintaining  the LESSOR  Maintained  Improvements  in an operable  condition and
sound structural condition, and LESSEE, not LESSOR, shall be responsible for any
painting or other  resurfacing of the exterior  surfaces of exterior or interior
walls or LESSOR  Maintained  Improvements in order to maintain such improvements
in a neat and  attractive  appearance.  LESSOR  shall not be in  default  of its
repair and  maintenance  obligation if LESSOR  performs the required  repairs or
maintenance within thirty (30) days after written notice from LESSEE of the need
for such repairs or maintenance. If, due to the nature of a particular repair or
maintenance  obligation,  more than thirty (30) days is  reasonably  required to
complete such repairs or maintenance,  LESSOR shall not be in default so long as
LESSOR  commences  work  within  such  thirty  (30) day  period  and  diligently
prosecutes the work to completion. Except as expressly provided in this section,
no  abatement  of rent and no liability of LESSOR shall result for any injury to
or interference with LESSEE's business from the making of or failure to make any
repairs or replacements,  and LESSEE waives and releases its rights,  if any, to
make repair at LESSOR's expense, under California Civil Code Sections 1941-42 or
any similar law, statute or ordinance in effect now or in the future;  provided,
however,  nothing in the preceding provisions shall limit LESSOR's liability for
the  costs   and   expenses   of  such   maintenance   or  repair   obligations.
Notwithstanding the foregoing,  if any such repair and or maintenance obligation
of LESSOR  constitutes an emergency  situation  involving  significant  property
damage or personal injury, LESSOR shall make such repair as soon as commercially
reasonable following notice from LESSEE. If LESSOR cannot perform such repair or
maintenance  obligation in time to mitigate any such significant property damage
or personal injury,  LESSEE shall have the right to perform such maintenance and
repair and LESSOR shall reimburse LESSEE for the reasonable,  out-of-pocket cost
thereof  within  thirty  (30) days from the receipt of an invoice  from  LESSEE,
which invoice shall include backup information  substantiating the expenses.  In
the case of such emergency situations, the notice given to LESSOR may be made by
telephonic  communication  so long as LESSEE  continues with its best efforts to
contact a responsible employee or agent of LESSOR or LESSOR's designated manager
until  successful and LESSEE  simultaneously  sends a facsimile  transmission to
LESSOR  notifying  LESSOR of the emergency.  If LESSEE's  ability to conduct its
business  from the  Premises  is  materially  impaired  as a result of  LESSOR's
default in failing to timely perform its maintenance and repair obligations, the
Base Rent shall be abated in the same  manner and to the same extent as provided
in  Paragraph  9.6 of the Lease  with  respect to damage or  destruction  of the
Premises until LESSOR has cured any such default.

                                       12
<PAGE>

          20.2   Exclusions.   The   provisions   of  Paragraph  9  (damage  and
destruction) and Paragraph 14  (condemnation)  of the Lease shall control in the
event of any damage, destruction or condemnation of any of the LESSOR Maintained
Improvements.  In addition,  LESSOR shall have no  responsibility to maintain or
repair such LESSOR Maintained Improvements in the following circumstances:

          (a) repairs or replacements  are  necessitated by LESSEE's  failure to
     promptly   perform  its  repair  and   maintenance   obligations  of  other
     improvements;

          (b) repairs or  replacements  are  necessitated  by any intentional or
     negligent act or omission of LESSEE, its employees,  agents or contractors,
     including misuse or abuse of the LESSOR Maintained Improvements;

          (c) to the extent that LESSEE makes any  modification or alteration of
     any of the LESSOR Maintained  Improvements,  with or without the consent of
     LESSOR,  including,  without  limitation,   penetrations  of  the  roof  or
     structural  elements,  and  LESSEE  shall be  deemed to have  assumed  full
     responsibility  for the  repair  and  maintenance  of any  improvements  so
     modified, altered or added;

          (d) repairs or replacements  are  necessitated by LESSEE exceeding the
     designed load bearing capacities of the walls, foundations, roof structure,
     floor slab or other structural elements;

          (e) repairs or  replacements  of the Building Shell plumbing and sewer
     lines resulting from normal blockages and not from any defect or deficiency
     in such improvements; or

          (f) repairs or  replacement to the Building  Shell  electrical  system
     resulting  from any  unusual or  intensive  power  demand  requirements  of
     LESSEE,  or on  account  of any  power  fluctuation  or  other  malfunction
     attributable  to equipment or other  electrical  system  improvements to be
     maintained by LESSEE.

     21. Additional Notice Procedures.  In the event that any notice is given by
personal  delivery,  messenger or courier service,  the date of delivery of such
notice  shall be the date such notice is actually  delivered  to the  recipient.
Notwithstanding  any  contrary  provision  in  Paragraph  23 of the  Lease,  the
addresses of LESSOR and LESSEE for notice, unless otherwise changed by a written
notice, shall be as follows:

         If to LESSOR:           Hamann Consolidated, Inc.
                                 Attn: Jeffrey C. Hamann, Pres.
                                 475 W. Bradley Avenue
                                 El Cajon, CA  92020
                                 Fax No. (619) 440-8914

         If to LESSEE:           Aetrium Incorporated
                                 Attn:  Brent Conyers
                                 10790 Roselle Street
                                 San Diego, CA 92121
                                 Fax No. (619) 623-5699

                                       13
<PAGE>

        With a Copy to:          Aetrium Incorporated
                                 Attn: Chief Executive Officer
                                 2350 Helen Street
                                 North St. Paul, MN  55109
                                 Fax No. (612) 770-7975

     IN WITNESS WHEREOF,  LESSOR and LESSEE have executed this Addendum to Lease
to be effective as of the date set forth herein.

                                       "LESSOR"
                                       W.H. POMERADO LLC,
                                       a California limited liability company

                                       By:      Hamann Properties, Inc.,
                                                a California corporation,
                                                Its Manager


                                                By:  ___________________________
                                                     Gregg Hamann, Secretary


                                       "LESSEE"

                                       AETRIUM INCORPORATED
                                       a Minnesota corporation

                                       By:  __________________________________
                                            Douglas Hemer, Group Vice President


                                       14
<PAGE>

                                    EXHIBITS

Exhibit "1"                Legal Description
Exhibit "2"                Building Plans
                  2.1      Site Plan
                  2.2      Floor Plan
                  2.3      Building Elevation
                  2.4      Rendering
Exhibit "3"                Building Shell Specifications
Exhibit "4"                Blank Tenant Improvement Specifications
Exhibit "5"                1998 Estimated Common Area Operating Expenses Budget
Exhibit "6"                Hazardous Materials Questionnaire


                                       15
<PAGE>

                                   EXHIBIT "1"
                                Legal Description

     Lot 89 of City of Poway  Tract  No.  85-04,  Unit II, in the City of Poway,
State of California,  according to map thereof No. 12572,  filed inthe office of
the County  Recorder of San Diego County,  February 28, 1990, as Instrument  No.
90-107515.



                                       16
<PAGE>

                                   EXHIBIT "3"
                          BUILDING SHELL SPECIFICATIONS
                Concrete Tilt-up Shell Building for Aetrium, Inc.
                               September 19 , 1998

1    DESIGN, ENGINEERING, AND PERMITS:

     .1   Drawings to be drawn,  engineered  and  permitted by Kenneth D. Smith,
          Architect. All architectural drawings,  structural engineering,  shell
          plumbing   drawings,   shell   electrical   drawings,   shell   energy
          calculations,   landscaping   drawings,   and  civil  engineering  are
          included.  Where the  plans  differ  from  these  specifications,  the
          specifications shall control.

     .2   Any  and  all  additional  space  planning,  interior  design,  energy
          calculations,mechanical, electrical, or plumbing drawings required for
          the tenant  improvements  will be the  responsibility  of the  tenant.
          Tenant  shall  be  responsible  for  all  warehouse   racking  design,
          permitting and installation.

     .3   Tenant shall be responsible for all Construction Costs associated with
          the Tenant Improvements subject to the Tenant Improvement Allowance as
          specified  in  Paragraph  4.1  of the  Addendum  to  the  Lease  dated
          September 17, 1998 .

     .4   All  shell  building  permits,   third  party   inspections,   special
          inspections  required  by the City  and all  utility  fees  (including
          SDG&E) are included.  There will be additional  permit and  inspection
          fees  required  for  the  tenant   improvements   which  will  be  the
          responsibility of the Tenant.

     .5   The  following  Shell  Building  plans  are  hereby  approved  will be
          initialed  and attached to the Lease:  1) Site Plan 2) Floor Plan,  3)
          Elevations and 4) Rendering.

     .6   The  Shell   Architect  will  be  responsible  for  all  external  ADA
          compliance, PID approvals and POA approvals.

2    SITE WORK:

     .1   Necessary construction staking and site survey is included.

     .2   Grading  and  required  soils  reporting  and  testing  are  included.
          Buildings  to be  designed  in  conformance  with the  existing  soils
          reports.  Shell  Contractor  shall be responsible  for site grading to
          balance.

     .3   We include all necessary  shell  building  utility lines to and on the
          site including primary and secondary  electrical,  telephone conduits,
          fire hydrants and water mains per code  requirements,  fire  services,
          and storm  drains.  We include a gas service to the building  provided
          that tenant  elects to install gas  appliances,  sufficient  to induce
          SDG&E to engineer  and install  requested  service type at the time of
          initial construction. Cable TV service is not included.

     .4   One drive Aprons to be provided as shown on Site Plan.

     .5   Dock area to be drained to the site storm drainage.

     .6   Landscaping to include soils amendments, plant materials and automatic
          sprinkler systems to City standards and of equal quality to Lot 73B.

     .7   We include building numbers and all other  code-required  signage such
          as handicap signs but exclude Tenant name/logo signage or lettering.

     .8   One (1) trash  enclosure  sufficient to accommodate one three yard bin
          and two (2) trash enclosures  sufficient to accommodate two three yard
          bins will be provided.

     .9   Protective 4" concrete filled,  steel bollards will be installed where
          required by the City or the Utility companies.

     .10  The Lot will not be fenced.

                                       1
<PAGE>

     .11  One 10' x 10' compressor  enclosure  will be supplied  adjacent to the
          building with two concrete  sides,  metsl roof and a chain link fence(
          or equivalent to be determined) and gate on the front.

     .12  One  approximately  12' x 12' x 12" concrete  pad for a nitrogen  tank
          will be supplied at a location to be specified by LESSEE.

     .13  One Patio/ lunch area as generally  depicted on the site plan (EXHIBIT
          2.1)with concrete paving and screen walls.


3    CONCRETE WORK:

     .1   The concrete  slabs will be minimum 5 1/2" thick,  4,000 psi concrete,
          reinforced  with  #3's at 18" on  center.  Concrete  footings  will be
          engineered  and  constructed  per  industry  standards.  All  concrete
          sealers,  sealing of slab joints and smooth  dowels at control  joints
          are excluded.

     .2   We exclude  visqueen  or other  waterproofing  in the slab  areas.  If
          Lessee   desires  to  install  vapor   sensitive   floorings  such  as
          vinyl-reinforced   tiles,   sheet  vinyl  or  epoxy   coatings,   then
          waterproofing, alternative concrete mixes, and/or vapor testing should
          be  considered.  We do not  recommend  the  storage  of boxes or other
          non-porous materials directly on the concrete slab.

     .3   Concrete walls will be engineered and constructed with thicknesses and
          concrete strengths per the industry standards.  (i.e.:  minimum 6 1/2"
          wall  thickness  and  minimum  strengths  of 3,000  psi).  We  exclude
          texture.

     .4   All  parking  and  drive  areas  to  be  non-reinforced,   2,500  psi,
          broom-finished  concrete on native,  5 1/2" thick in car parking areas
          and 7" thick in truck traffic areas.

     .5   On site sidewalks to be 3 1/2" thick.

     .6   Onsite  curbs  to be 6" x 6"  extruded  in areas  of low  traffic  and
          monolithic in areas subject to truck traffic.

     .7   French drains and waterproofing at below grade walls are excluded.

4    ROOF:

     .1   Roof to be  panelized  roof  structure,  24' clear with 8" round metal
          interior  posts.  Warehouse  areas to be designed  for 11 psf with 2x4
          subpurlins and area over mezznanine to be disigned for 13 psf with 2x6
          subpurlins. Additionally, roof will support 500 lbs of extra equipment
          at any purlin.

     .2   Roofing to be a four-ply built up roof with a two-year guarantee.

     .3   We  include  35  non-ventilated,  curb-mounted,  4'  x  8'  Bristolite
          fiberglass skylights,  framing for 35 additional skylights, and 70 14"
          rotary  vents.   Location  of  skylights  and  rotary  vents  will  be
          coordinated with the Space Planner and the Shell Architect .

     .4   It has been our intention to provide parapets on all sides high enough
          to hide standard mechanical equipment (30"); however,  additional roof
          screening if required by the City would be a tenant improvement item.

     .5   Roof drains to be ABS plastic and interior mounted.

     .6   Contractor    will   coordinate    location   and    installation   of
          Tenant-provided   factory   curbs  and  roof  jacks  for  HVAC  units.
          Contractor to include  rough framing  supports for the HVAC as part of
          the Shell.  The goal is to avoid any penetrations of the roof membrane
          during Tenant Improvement Construction.

                                       2
<PAGE>

5    MECHANICAL:

     .1   ABS plastic  underground  plumbing to the  building  is  included.  We
          include one backflow prevention device, 1 1/2" domestic water service,
          at least one hose bib per  building  face and  appropriate  water line
          grounds  for  the  electrical  system.  Provided  that  locations  are
          supplied in a timely  manner so that they can be installed  before the
          slab is poured,  we include  plumbing  stub-ins  for up to 30 plumbing
          fixtures.  Permit fees,  gas piping,  top out and finish  plumbing for
          said fixtures are excluded.

     .2   Air conditioning and condensate (except for any code-required  exhaust
          of the electrical room) will be a part of the tenant improvement work.

     .3   Shell  building Fire  Sprinklers are included to a density of .45/3000
          with plugs for future tenant improvements (locations to be coordinated
          with the space  planner  prior to City  plan  check  submittal  of the
          Tenant  Improvements  drawings).  We  include  fire  service  and fire
          service  fees,  but exclude  in-rack  sprinklers,  knox boxes or other
          special locking  mechanisms,  fire  extinguishers,  supervisory  alarm
          panels and tenant improvement drops.

6    ELECTRICAL:

     .1   Contractor  to provide  required  switch gear,  main  disconnect,  and
          transformer  to supply 3,000 amps of 480/277 3 phase,  4 wire power to
          the building..

     .2   Primary  phone  service for both  buildings  will be terminated in the
          computer/phone  rooms.  Locations will be  coordinated  with the Space
          Planner.

     .3   We exclude all power distribution and lighting.

     .4   The  exterior  of  the   building   will  be  lit  with  14  90  watt,
          high-pressure sodium wallpacks mounted on the building.

     .5   All other electrical will be part of the tenant improvements.


7    EXTERIOR FINISH:

     .1   The  exterior  of  building  will be painted  with two coats of Frazee
          paint.

     .2   Soffit areas will be finished with exterior  gypsum  ceiling board and
          skim coat. We exclude Frye molding.

     .3   Exterior  doors  to be 3' x 7' 1 3/4",  18  gauge,  metal  doors  with
          Schlage "L" series, lever-handled, mortise locks with tamper-resistant
          butts  and  weather-stripping  if  necessary.  We  include  three  (3)
          personnel doors at the concrete  perimeter  walls,  two glass doors at
          the cafeteria and glass double doors at the front entry.

     .4   Overhead doors to be 26 gauge Porvene Roll-ups or equal as follows: 1)
          Two 9' x 10' Dock High Doors and 2) Two (2) 12' x 14' Grade Doors.

     .5   We include 2,500 square feet blue-reflective,  medium-performance, LOF
          or equal  glass,  with  Kynar  finished  aluminum  frames.  We exclude
          operable windows.

8    INTERIOR FINISH:

     .1   All  office  and  interior   improvements   are  part  of  the  tenant
          improvement work.

     .2   We exclude all  appliances,  equipment,  equipment  installation,  and
          associated electrical.

     .3   We exclude draperies, blinds and other window treatments.

     .4   We exclude all insulation.

                                       3
<PAGE>

     .5   Our price includes structural  provisions for an approximately  15,000
          square foot 125 psf future mezzanine including increased exterior wall
          reinforcement and footings only.



                                       4
<PAGE>

Triple Net Calculations for Pomerado Business Park, Lot 89             3/21/2000
AETRIUM

Leased SF                        45,000
Total Bldg. SF                   45,000
Percentage of Project           100.00%

<TABLE>
<S>                                    <C>              <C>              <C>             <C>
                                                         Annually          Monthly        Monthly
Description                                Annual       /sf of bldg      /sf of bldg        NNN

Bonds                                   $38,072.23        $0.8460         $0.0705         $3,172.69
LMD                                      $2,760.62        $0.0613         $0.0051           $230.05
Property Taxes                          $22,384.89        $0.4974         $0.0415         $1,865.41
Owners Association                       $1,612.19        $0.0358         $0.0030           $134.35
Administrative Fee                       $5,292.00        $0.1176         $0.0098           $441.00
Insurance                                $2,160.00        $0.0480         $0.0040           $180.00
Utilities:
  Electricity                           BY TENANT         $0.0000         $0.0000             $0.00
  Telephone                                $162.00        $0.0036         $0.0003            $13.50
  Alarm - FIRE ONLY                        $450.00        $0.0100         $0.0008            $37.50
  Landscape Water                            $0.00        $0.0000         $0.0000             $0.00
Security                                BY TENANT         $0.0000         $0.0000             $0.00
HVAC Maint.                              $4,050.00        $0.0900         $0.0075           $337.50
Elevator Maint. & Reserve                  N/A            $0.0000         $0.0000             $0.00
Landscape                                $3,375.00        $0.0750         $0.0063           $281.25
Roof Maint. & Reserve                    $3,375.00        $0.0750         $0.0063           $281.25
Painting Reserve                           $891.00        $0.0198         $0.0017            $74.25
Paving Maint. & Reserve                  $2,250.00        $0.0500         $0.0042           $187.50

TOTAL                                   $86,834.93        $1.9297         $0.1608         $7.236.24

Per month for AETRIUM                    $7,236.24        $0.1608
</TABLE>

<PAGE>

Assumptions

Saleable Acreage                           3.999
Net Acreage                                3.276
Bonds                                $11,621.56   Annually
Landscape Maint. District               $842.68   Annually
Prop Taxes                                 1.12% of Appraised Value  $1,998,651
Owners Association                      $492.12   Annually
Monthly Rental rate                       $0.49
Monthly NNN Rent                     $22,050.00
Management Fee Percentage                  2.00%
Management Fee                            $0.1176 Annually/sf
Insurance                                 $0.0480 Annually/sf
Utilities:
   Electricity                       BY TENANT    Annually/sf
   Telephone                              $0.0036 Annually/sf
   Alarm                                  $0.0100 Annually/sf
   Landscape Water                        $0.0720 Annually/sf
Security                             BY TENANT    Annually/sf
HVAC Maint.                               $0.0900 Annually/sf
Elevator Maint. & Reserve                 $0.0234 Annually/sf
Landscape                                 $0.0750 Annually/sf
Roof Maint. & Reserve                     $0.0750 Annually/sf
Painting Reserve                          $0.0198 Annually/sf
Paving Maint. & Reserve                   $0.0500 Annually/sf


          [Remaining Exhibits intentionally omitted]