LEASE


                                 BY AND BETWEEN


                           ARE-4757 NEXUS CENTRE, LLC

                                   as Landlord

                                       and

                           MATRIX PHARMACEUTICAL, INC.

                                    as Tenant


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                                      LEASE


         THIS  LEASE is made as of March 25,  1998  ("Effective  Date"),  by and
between  ARE-4757  NEXUS  CENTRE,  LLC, a  Delaware  limited  liability  company
("Landlord") and MATRIX PHARMACEUTICAL, INC., a Delaware corporation ("Tenant").

1.       Lease of Premises

         Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
upon the terms and  conditions  hereof,  those  certain  premises  (the "Demised
Premises")  located on the land legally described on Exhibit "A" attached hereto
(the "Land") and commonly known as the building located at the address set forth
below in  Section  2.1.1  (the  "Building").  The real  property  upon which the
Building  is  located  and  all  landscaping,   parking   facilities  and  other
improvements and  appurtenances  related thereto,  are hereinafter  collectively
referred to as the "Project",  the site plan and legal  description for which is
attached  hereto  as  Exhibit  "B".  All  portions  of the  Project  which  in a
multi-tenant  complex  would  be for the  non-exclusive  use of  tenants  of the
Building,  including, without limitation,  driveways,  sidewalks, parking areas,
landscaped areas, service corridors,  stairways, elevators, public restrooms and
Building lobbies, are hereinafter referred to as "Common Area".

2.       Basic Lease Provisions

         2.1. For convenience of the parties,  certain basic  provisions of this
Lease are set forth herein.  The  provisions set forth herein are subject to the
remaining  terms and conditions of this Lease and are to be interpreted in light
of such remaining terms and conditions.

                  2.1.1      Address of the Building:

                             4757 Nexus Centre Drive
                             San Diego, California

                  2.1.2      [Intentionally omitted.]

                  2.1.3      (a) Rentable Area of Demised  Premises:  67,050 sq.
                                 ft.

                             (b)  Rentable Area of Building:  67,050 sq. ft.

                  2.1.4      Initial Basic Annual Rent: $1,920,000

                  2.1.5      Initial Monthly Rental Installments of Basic Annual
                             Rent: $160,000

                  2.1.6      Tenant's Pro Rata Share: 100 % of the Building, and
                             100% of the Project

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<PAGE>

                  2.1.7      (a) Term  Commencement  Date: As defined in Section
                                 4.2 hereof.

                             (b) Term  Expiration  Date:  The  last  day  of the
                                 calendar   month   in  which   the   thirteenth
                                 anniversary  of  the  Term   Commencement  Date
                                 occurs,   subject  to   extension   or  earlier
                                 termination as provided herein.

                  2.1.8      Security  Deposit:  $2,580,000,  to be deposited in
                             accordance   with  and  subject  to  increase   and
                             decrease in accordance with Section 9 hereof.

                  2.1.9      Permitted Use: Scientific research laboratories and
                             related manufacturing, distribution and office uses
                             and incidental storage uses consistent with Section
                             10 hereof.

                  2.1.10     Address for Rent Payment:

                             135 North Los Robles Avenue, Suite 250
                             Pasadena, CA 91101
                             Attention:  Corporate Secretary

                             Address for Notices to Landlord:

                             135 North Los Robles Avenue, Suite 250
                             Pasadena, CA 91101
                             Attention: Corporate Secretary

                             With a copy to:

                             11440 West Bernardo Court, Suite 170
                             San Diego, CA 92127
                             Attention: Gary A. Kreitzer, Esq.

                  2.1.11     Address for Notices to Tenant:

                             34700 Campus Drive
                             Fremont, California 94555
                             Attention:  Mr. James R. Glynn

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3.       Term

         3.1. This Lease shall take effect upon the Effective  Date and,  except
as  specifically  otherwise  provide  within this Lease,  each of the provisions
hereof  shall be binding  upon and inure to the benefit of Landlord  and Tenant,
and  each of  their  respective  successors  and  permitted  assigns,  from  the
Effective Date.

         3.2.  The term of this Lease (the  "Term") will be that period from the
Term  Commencement  Date as  defined  in  Section  4.2  below  through  the Term
Expiration Date, as such may be terminated or extended as provided herein.

4.       Possession and Commencement Date

         4.1. Landlord shall tender possession of the Demised Premises to Tenant
on the Effective Date.

         4.2.     The "Term Commencement Date" shall be the Effective Date.

         4.3.     [Intentionally omitted.]

         4.4.  Access to and  non-exclusive  possession  of areas  necessary for
utilities,  services,  safety and  operation  of the Building and the Project is
reserved to Landlord.

5.       Rent

         5.1. Tenant agrees,  commencing on the Term  Commencement  Date, to pay
Landlord  as Basic  Annual Rent for the  Demised  Premises  the sum set forth in
Section  2.1.4  subject to the rental  increases  provided  in Section 6 hereof.
Basic Annual Rent shall be paid in the equal monthly  installments  set forth in
Section  2.1.5,  subject to the rental  increases  provided in Section 6 hereof,
each in advance  on the first day of each and every  calendar  month  during the
Term.

         5.2. In addition to Basic Annual Rent, Tenant agrees to pay to Landlord
as additional rent ("Additional  Rent") at times  hereinafter  specified in this
Lease (i) Tenant's pro rata share, as set forth in Section 2.1.6  ("Tenant's Pro
Rata Share") of  Operating  Expenses as provided in Section 7 and (ii) any other
amounts that Tenant  assumes or agrees to pay under the provisions of this Lease
that are owed to Landlord, including, without limitation, any and all other sums
that may  become due by reason of any  default of Tenant or failure on  Tenant's
part to comply with the  agreements,  terms,  covenants  and  conditions of this
Lease to be  performed  by Tenant,  after  notice and lapse of  applicable  cure
period.

         5.3.  Basic  Annual  Rent  and   Additional   Rent  shall  together  be
denominated  "Rent".  Rent  shall  be  paid  to  Landlord,   without  abatement,
deduction,  or offset,  in lawful money of the United States of America,  at the
office of Landlord as set forth in Section  2.1.10 or to such other

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<PAGE>

person or at such other place as Landlord may from time designate in writing. In
the event  the Term  commences  or ends on a day  other  than the first day of a
calendar month, then the Rent for such fraction of a month shall be prorated for
such  period  on the  basis of a thirty  (30) day month and shall be paid at the
then current rate for such fractional month.

6.       Rent Adjustments

         6.1. Basic Annual Rent shall be adjusted on the fifth (5th) anniversary
of the Term Commencement Date, and on such date every three (3) years thereafter
during the Term (each, a "Rent  Adjustment  Date") in proportion to increases in
the  Consumer  Price Index (as  hereinafter  defined)  as  provided  within this
Section 6. The each such  adjustment  shall become  effective  commencing on the
Rent Adjustment Date. Basic Annual Rent shall be adjusted upward as follows:

         6.2. The Basic Annual Rent shall be adjusted upward as follows:

                  6.2.1 For  purposes of each Rent  Adjustment  Date,  the "Base
Month" shall be that month which is three (3) months prior to the month in which
the previous Rent  Adjustment  Date occurred,  or, in the case of the first Rent
Adjustment  Date, the Term  Commencement  Date. The "Comparison  Month" shall be
that  month  which is three  (3)  months  prior to the  month in which  the Rent
Adjustment Date occurs.

                  6.2.2 As used in this  Section  6, the  term  "Consumer  Price
Index"  means the  Consumer  Price  Index (all  items) for all wage  earners and
clerical workers in the Los Angeles/Riverside  metropolitan area (1982-84 = 100)
as  published  by the  United  States  Department  of  Labor,  Bureau  of  Labor
Statistics.  If the  1982-84  base of the  Consumer  Price  Index  is  hereafter
changed, then the new base will be converted to the 1982-84 base and the base as
so converted  shall be used.  In the event that the Bureau ceases to publish the
Consumer Price Index at lease once every other month, then the successor or most
nearly comparable index thereto reasonably selected by Landlord shall be used.

                  6.2.3 In the  event  that the  Consumer  Price  Index  for the
Comparison  Month exceeds the Consumer Price Index for the Base Month, the Basic
Annual  Rent then  payable (as  increased  by  previous  adjustments  under this
Section 6) shall be  multiplied  by a fraction,  the  numerator  of which is the
Consumer Price Index figure for the  Comparison  Month,  and the  denominator of
which is the  Consumer  Price Index  figure for the Base  Month.  Such amount as
calculated  shall be the  Basic  Annual  Rent to be paid  until  the  next  Rent
Adjustment Date.

                  6.2.4 Notwithstanding the foregoing,  on every Rent Adjustment
Date Basic  Annual  Rent shall  increase  on  account of any such  adjustment  a
minimum of the  aggregate  of two percent (2%) of the Basic Annual Rent per year
for each year during the period since the previous  Rent  Adjustment  Date,  and
shall not  increase  more than the  aggregate  of four percent (4%) of the Basic
Annual Rent per year for each year  during the period  since the  previous  Rent

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<PAGE>

Adjustment Date.

7.       Operating Expenses

         7.1. As used herein, the term "Operating Expenses" shall include:

                  7.1.1 Government  impositions  including,  without limitation,
property  tax  costs  consisting  of  real  and  personal   property  taxes  and
assessments  (including amounts due under any improvement bond upon the Building
or the Project,  including the parcel or parcels of real property upon which the
Building  or the  Project are  located or  assessments  levied in lieu  thereof)
imposed by any governmental authority or agency; any tax on or measured by gross
rentals  received from the rental of space in the Building,  or tax based on the
square footage of the Demised  Premises,  the Building or the Project as well as
any parking charges,  utilities surcharges,  or any other costs levied, assessed
or  imposed  by,  or  at  the  direction  of,  or  resulting  from  statutes  or
regulations,  or  interpretations  thereof,  promulgated by any federal,  state,
regional,  municipal or local government authority in connection with the use or
occupancy  of the  Building  or the  parking  facilities  serving  the  Building
including  those  located  on any  adjacent  parcel  to the  extent  used  by or
benefitting the Demised Premises; any tax on this transaction or any document to
which  Tenant is a party  creating  or  transferring  an interest in the Demised
Premises;  any fee for a business license to operate an office building; and any
expenses,  including  the  reasonable  cost of attorneys or experts,  reasonably
incurred  by  Landlord  in  seeking  reduction  by the taxing  authority  of the
applicable  taxes,  less tax refunds  obtained as a result of an application for
review  thereof.  Operating  Expenses  shall  not  include  (i) any  net  income
franchise,  capital stock, estate or inheritance taxes, (ii) taxes which are the
personal  obligation  of Tenant or of another  tenant of the Project,  (iii) any
government  impositions arising from any legal parcel of the Project adjacent to
the Land whether or not owned by Landlord,  and any improvements thereto, to the
extent not used by or benefitting the Demised  Premises,  (iv) any environmental
assessment, charges or liens arising in connection with remediation of Hazardous
Materials from the Project which are caused by Landlord to be brought upon, kept
or used in or about the  Demised  Premises,  the  Building or the  Project,  (v)
reserves for future taxes and  assessments in excess of the installment of taxes
and assessments next coming due, or any documentary  transfer taxes arising from
a voluntary  transfer of the Project or any portion  thereof by  Landlord.  If a
reduction in real property  taxes or assessments is obtained for any year of the
Term during  which Tenant paid  Tenant's  Pro Rata Share of Operating  Expenses,
then  Operating  Expenses  for such year shall be  retroactively  adjusted,  and
Landlord  shall  provide  Tenant  with  a  credit  against   Tenant's  next  due
obligations  for Rent in the amount of such reduction (or, if none,  refund such
amount to Tenant within  ninety (90) days of such  reduction).  Landlord  hereby
agrees  to  contest  increases  in the tax rate and  assessed  valuation  of the
Project,  which  affect the  general  real  estate tax  component  of  Operating
Expenses or any other increase in taxes customarily  protested by prudent owners
of commercial office buildings in the City of San Diego in a manner  appropriate
for such an owner if requested by Tenant and provided that Tenant shall bear all
cost and expense in  connection  with such contest.  If, by applicable  law, any
taxes or assessments  may be paid in installments at the option of the taxpayer,
then  whether  or  not  

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Landlord elects to pay taxes and assessments in installments, Tenant's liability
for such taxes and  assessments  shall be computed as if such  election had been
made, and only the installments  thereof and any interest or fee payable thereon
which would have  become due during the Term shall be  included in Tenant's  Pro
Rata Share of Operating Expenses.

                  7.1.2 All other costs of any kind paid or incurred by Landlord
and  not  otherwise  paid  by  Tenant  in  connection  with  the  operation  and
maintenance  of the Building and the Project  including,  by way of examples and
not as a limitation  upon the generality of the foregoing,  costs of repairs and
replacements  to the  Building or the other  improvements  within the Project as
appropriate to maintain Building or the Project as required hereunder;  costs of
utilities  furnished  to  the  Common  Areas;  sewer  fees;  cable  T.V.;  trash
collection; cleaning, including windows; heating; ventilation; air-conditioning;
maintenance  of landscape and grounds;  maintenance of drives and parking areas;
security  services  and  devices;   building   supplies;   maintenance  for  and
replacement of equipment  utilized for operation and maintenance of the Project:
license,  permit and inspection  fees;  sales, use and excise taxes on goods and
services purchased by Landlord in connection with the operation,  maintenance or
repair of the Project and Building  systems and equipment;  telephone,  postage,
stationary   supplies  and  other  expenses  incurred  in  connection  with  the
operation,  maintenance, or repair of the Project;  accounting,  legal and other
professional fees and expenses incurred in connection with the Project; the cost
of furniture, draperies, carpeting, landscaping and other customary and ordinary
items of personal property provided by Landlord for use in Common Areas; capital
expenditures;  costs of complying  with any applicable  laws or hazardous  waste
remediation rules or regulations;  insurance  premiums,  including  premiums for
public liability,  property  casualty,  earthquake and environmental  coverages;
portions of insured losses paid by Landlord as part of the deductible portion of
such losses by reason of insurance  policy terms;  service  contracts;  costs of
services of independent contractors retained to do work of nature or type herein
referenced;  and costs of compensation  (including  employment  taxes and fringe
benefits) of all persons who perform regular and recurring duties connected with
the  day-to-day  operation and  maintenance of the Project,  its equipment,  the
adjacent walks,  landscaped areas,  drives, and parking areas below the level of
Project  manager,   including  without  limitation,   janitors,   floor  waxers,
window-washers,  watchmen,  gardeners,  sweepers,  and  handymen  and  costs  of
management  services in the amount of $2,000 per month during the Term. The cost
of any  capital  expenditures  by  Landlord  reimbursed  as  Operating  Expenses
pursuant to this Lease shall be amortized on a straight-line basis over a period
equal to the useful life of the item as  determined by reference to the vendor's
or manufacturer's  suggested useful life for such capital improvements or, where
such reference  does not exist,  by reference to generally  accepted  accounting
principals, consistently applied, but not more than seven years.

                  7.1.3 Notwithstanding the foregoing,  Operating Expenses shall
not include any leasing  commissions;  expenses  which relate to  preparation of
rental space for a tenant;  expenses of initial  development  and  construction,
including but not limited to, grading, paving,  landscaping,  and decorating (as
distinguished from maintenance  repair and replacement of the foregoing);  legal
expenses relating to other tenants;  costs of repair to the extent reimbursed by

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payment  received by  Landlord of  insurance  proceeds;  interest  upon loans to
Landlord or secured by  mortgages  or deeds of trust  covering  the Project or a
portion thereof (provided  interest upon a government  assessment or improvement
bond payable in installments is an Operating Expense under Section 7.1.1 above);
salaries of executive officers of Landlord; depreciation claimed by Landlord for
tax  purposes  (provided  this  exclusion of  "depreciation"  is not intended to
delete from Operating  Expenses actual costs of repairs and  replacements  which
are  provided  for in  Section  7.1.2  above);  and taxes of the types set forth
within the last sentence of Section 7.1.1 above.  Notwithstanding  any provision
of this Lease to the contrary,  the following shall not be included as Operating
Expenses: (i) any costs incurred solely due to Landlord's violation of any terms
or  conditions  of this  Lease and not  otherwise  caused or  contributed  to by
Tenant;  (ii) damage and repairs  necessitated solely by the gross negligence or
willful misconduct of Landlord or its agents, employees, contractors or invitees
and not  otherwise  caused  or  contributed  to by  Tenant;  (iii)  advertising,
promotional,  and marketing costs,  including leasing commissions and attorneys'
fees in connection with the negotiation and preparation of letters,  deal memos,
letters of intent,  leases or space planning costs with respect to tenants other
than  Tenant;  (iv)  costs,  including  permit,  license and  inspection  costs,
incurred with respect to the  development or construction of any other buildings
of the  Project  not for the  benefit of Tenant,  or the  installation  of other
tenants or other  occupants  in the  Project,  improvements  made to the demised
premises  of other  tenants or other  occupants  in the  Project or  incurred in
designing, constructing, renovating or otherwise improving, decorating, painting
or redecorating vacant space for tenants or other occupants of the Project other
than Tenant;  (v) any costs,  fines, or penalties  incurred due to violations by
Landlord of any governmental rule or authority, this Lease or any other lease in
the Project and not  otherwise  caused or  contributed  to by Tenant,  or due to
Landlord's  gross  negligence or willful  misconduct;  (vi)  Landlord's  general
corporate  overhead and  administrative  expenses (which shall be covered by the
costs of management services);  and (vii) reserves for Operating Expenses (other
than reasonable reserves for taxes,  assessments,  insurance and other recurring
charges which are payable less  frequently  than monthly for payments  which are
next  coming due,  which may be  collected  and held by  Landlord  only upon and
during the  continuance  of a Default).  Landlord  agrees to exercise  care that
there be no  duplication  of  submittals of items of expense for which Tenant is
obligated to pay Landlord under this Lease.

         7.2.  Tenant  shall pay to Landlord  on the first day of each  calendar
month of the Term, as Additional Rent,  Landlord's estimate of Tenant's Pro Rata
Share of Operating Expenses with respect to the Project for such month.

                  7.2.1  Within  ninety (90) days after the  conclusion  of each
calendar  year, (or such longer period as may be reasonably  required)  Landlord
shall  furnish to Tenant a  statement  showing in  reasonable  detail the actual
Operating  Expenses and  Tenant's  Pro Rata Share of Operating  Expenses for the
previous  calendar year. Any additional sum due from Tenant to Landlord shall be
immediately  due and payable.  If the amounts paid by Tenant pursuant to Section
7.2  exceeds  Tenant's  Pro Rata Share of  Operating  Expense  for the  previous
calendar  year,  Landlord  shall,  at Landlord's  option,  either (i) credit the
excess amount to the next succeeding  installments of estimated Additional Rent,
or (ii) pay the excess to Tenant within 

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thirty  (30) days after  delivery of such  statements;  provided,  however,  any
excess owing to Tenant after the  expiration of the term shall be paid to Tenant
within thirty (30) days after delivery of such statements.

                  7.2.2 Any amount due under Section 7.2 for any period which is
less than a full month shall be prorated  (based on a thirty (30) day month) for
such fractional month.

         7.3. Landlord's annual statement shall be final and binding upon Tenant
unless  Tenant,  within one hundred  twenty  (120) days after  Tenant's  receipt
thereof,  shall contest any item therein by giving  written  notice to Landlord,
specifying  each item  contested  and the reason  therefor.  If, during such one
hundred twenty (120) day period,  Tenant  reasonably and in good faith questions
or contests the  correctness of Landlord's  statement of Tenant's Pro Rata Share
of Operating  Expenses,  Landlord will provide  Tenant with access to Landlord's
books and records and such information as Landlord  reasonably  determines to be
responsive to Tenant' questions. In the event that after Tenant's review of such
information,  Landlord  and Tenant  cannot agree upon the amount of Tenant's Pro
Rata Share of  Operating  Expenses,  then Tenant shall have the right to have an
independent  public  accounting firm selected from among the ten (10) largest in
the United States hired by Tenant (at Tenant's  sole cost and expense  except as
hereinafter  provided)  and approved by Landlord  (which  approval  shall not be
unreasonably  withheld or delayed) audit and/or review such Landlord's books and
records for the year in question (the "Independent  Review"). The results of any
such  Independent  Review  shall be  binding  on  Landlord  and  Tenant.  If the
Independent  Review shows that  Tenant's  Pro Rata Share of  Operating  Expenses
actually paid for the calendar year in question  exceeded  Tenant's  obligations
for such calendar year,  Landlord  shall at Landlord's  option either (1) credit
the excess amount to the next succeeding  installments  of estimated  Additional
Rent or (2) pay the excess to Tenant within  thirty (30) days after  delivery of
such statement and if such Independent  Review determines that Tenant's Pro Rata
Share of  Operating  Expenses  actually  paid for such  year  exceeded  Tenant's
obligations  for such  calendar  year by the greater of 5% and $5,000,  Landlord
shall pay the reasonable  cost of such  Independent  Review.  If the Independent
Review  shows that  Tenant's  payments of Tenant's  Pro Rata Share of  Operating
Expenses  for such  calendar  year were less than  Tenant's  obligation  for the
calendar  year,  Tenant shall pay the  deficiency to the Landlord  within thirty
(30) days after delivery of such statement.

         7.4.   Tenant  shall  not  be   responsible   for  Operating   Expenses
attributable  to the  time  period  prior  to the Term  Commencement  Date.  The
responsibility of Tenant for Tenant's Pro Rata Share of Operating Expenses shall
continue to the latest of (i) the Term  Expiration  Date or (ii) the date Tenant
has fully  vacated the Demised  Premises  (including,  without  limitation,  the
removal of all items  required  hereby to be removed and the  completion  of all
procedures  necessary  to fully  release and  terminate  any permits or licenses
restricting  the  use of the  Demised  Premises  in any  manner),  or  (iii)  if
termination  of the Lease is due to the  default of  Tenant,  the date of rental
commencement of a replacement tenant.

         7.5.  Operating  Expenses  for  the  calendar  year in  which  Tenant's
obligation  to share  

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therein  commences  and in the calendar  year in which such  obligation  ceases,
shall be prorated on a basis reasonably determined by Landlord. Expenses such as
taxes,  assessments  and insurance  premiums  which are incurred for an extended
time period  shall be prorated  based upon time periods to which  applicable  so
that the amounts  attributed  to the  Demised  Premises  relate in a  reasonable
manner to the time period wherein Tenant has an obligation to share in Operating
Expenses.  In the event that any Operating Expenses are allocable to portions of
the  Project  other  than the  Demised  Premises  and the Land,  Landlord  shall
allocate such Operating  Expenses based upon the ratio of the maximum  buildable
area of the Land compared to the maximum  buildable area of all land  comprising
the Project.

         7.6.     [Intentionally omitted.]

         7.7.     [Intentionally omitted.].

8.       [Intentionally omitted.]

9.       Security Deposit

         9.1.  Tenant has  deposited  with Landlord the sum set forth in Section
2.1.8 (the  "Security  Deposit")  in cash or a Letter of Credit (as  hereinafter
defined) or any  combination  thereof,  which Security  Deposit shall be held by
Landlord  as  security  for  the  performance  by  Tenant  of all of the  terms,
covenants,  and  conditions  of this  Lease to be kept and  performed  by Tenant
during the Term (including, without limitation,  Tenant's obligations to repair,
maintain and improve the Demised  Premises).  If Tenant defaults with respect to
any  provision  of this Lease,  including,  but not  limited  to, any  provision
relating to the payment of Rent or the repair, maintenance or improvement of the
Demised  Premises,  Landlord  may (but shall not be required  to) use,  apply or
retain all or any part of the  Security  Deposit  for the payment of any Rent or
any other sum in default,  to repair,  maintain and improve the Demised Premises
or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, upon demand therefor,  restore the Security Deposit to
its original amount, and Tenant's failure to do so shall be a material breach of
this Lease.  Landlord shall keep the Security  Deposit separate from its general
fund, and Tenant shall be entitled to annual payments of interest on any portion
of the Security  Deposit held by Landlord as cash,  at such rate as Landlord may
receive thereon.

         9.2. In lieu of depositing cash as the Security  Deposit,  Tenant shall
have the right, but not the obligation, to deliver to Landlord an unconditional,
irrevocable standby letter of credit in the amount of $2,580,000 (the "Letter of
Credit"), which Letter of Credit shall (i) be in a form reasonably acceptable to
Landlord,  (ii) be issued by Imperial Bank, or such other financial  institution
selected  by Tenant and  reasonably  acceptable  to  Landlord,  (iii) be for the
benefit of  Landlord,  but shall be  assignable  by Landlord  to any  subsequent
purchaser or encumbrancer of the Building or the Project,  (iv) be automatically
renewable  from year to year  throughout the Term, (v) be payable by draft sight
in San Diego,  California,  upon  presentation of a  certification  


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signed by an officer of Landlord which states that a default under the Lease has
occurred and has not been cured within any applicable  cure period,  and (vi) be
payable in the event such  Letter of Credit is not renewed on or before the date
which is thirty (30) days prior to its expiration.

         9.3. In the event of  bankruptcy or other  debtor-creditor  proceedings
against Tenant,  the Security Deposit shall be deemed to be applied first to the
payment of Rent and other  charges due  Landlord  for all  periods  prior to the
filing of such proceedings.

         9.4. Landlord shall deliver the unapplied and unrefunded portion of the
Security Deposit to any purchaser of Landlord's interest in the Demised Premises
and thereupon  Landlord  shall be  discharged  from any further  liability  with
respect  to the  Security  Deposit.  This  provision  shall  also  apply  to any
subsequent transfers.

         9.5.  If Tenant  shall not then be in  default  under this  Lease,  the
Security  Deposit,  or any balance thereof,  shall be returned to Tenant (or, at
Landlord's  option, to the last assignee of Tenant's interest  hereunder) within
sixty (60) days after the expiration or earlier termination of this Lease.

         9.6.     [Intentionally omitted.]

         9.7.  Upon  delivery of written  evidence  reasonably  satisfactory  to
Landlord that Tenant has completed  strategic alliances or joint ventures with a
cumulative value in excess of $10,000,000,  as measured by initial and milestone
payments  received  by  Tenant  from  unaffiliated  joint  venture  or  alliance
partners,  and  provided  that no Default,  or event  which,  with the giving of
notice or the passage of time, or both, would constitute a Default, has occurred
and is  continuing,  the Security  Deposit  shall be  decreased  by  twenty-five
percent (25%) of the amount then held by Landlord (the "Reduction Amount"),  and
(i)  Landlord  shall  return to Tenant the  Reduction  Amount,  if the  Security
Deposit is held in cash,  within ten (10) days of  receipt by  Landlord  of such
written evidence,  or (ii) Landlord shall permit Tenant to deliver a replacement
letter of credit in the amount of the  Security  Deposit  then held by  Landlord
less the Reduction Amount,  which  replacement  letter of credit shall otherwise
comply with the terms of Section 9.2,  and  Landlord  shall return to Tenant the
Letter of Credit  upon  receipt  of the  replacement  letter,  at which time the
replacement letter of credit shall become the Letter of Credit.

         9.8. If,  subsequent to any reduction in the Security  Deposit pursuant
to Section 9.7,  Landlord receives written evidence  reasonably  satisfactory to
Landlord  that Tenant's net sales from  products for the  immediately  preceding
fiscal year (as  reported  in  Tenant's  most  recent  public  filings  with the
Securities and Exchange Commission) were no less than $10,000,000,  and provided
that no  Default,  or event  which,  with the giving of notice or the passage of
time, or both, would constitute a Default,  has occurred and is continuing,  the
Security  Deposit shall be decreased by twenty-five  percent (25%) of the amount
then held by Landlord  (the  "Additional  Reduction  Amount"),  and (i) Landlord
shall return to Tenant the Additional  Reduction Amount, if the Security Deposit
is held in cash,  within ten (10) days of receipt by  Landlord  of such  written

                                       10
<PAGE>

evidence,  or (ii) Landlord shall permit Tenant to deliver a replacement  letter
of credit in the amount of the Security  Deposit then held by Landlord  less the
Additional  Reduction Amount, which replacement letter of credit shall otherwise
comply with the terms of Section 9.2,  and  Landlord  shall return to Tenant the
letter of credit then held by Landlord upon receipt of the  replacement  letter,
at which  time the  replacement  letter of credit  shall  become  the  Letter of
Credit.

10.      Use

         10.1.  Tenant shall use the Demised  Premises for the purpose set forth
in Section 2.1.9 and shall not use the Demised Premises, or permit or suffer the
Demised  Premises to be used,  for any other  purpose  without the prior written
consent  of  Landlord  which may be  withheld  in  Landlord's  sole  discretion;
provided,  however,  that Landlord consents to the Antenna Lease (as hereinafter
defined) to the same extent as in effect as of the Effective Date.

         10.2.  Tenant shall not use or occupy the Demised Premises in violation
of any federal, state and local laws and regulations,  zoning ordinances,  or of
the  certificate of occupancy  issued for the Building,  and shall,  upon thirty
(30) days' written notice from Landlord,  or, if required by law or if resulting
in a threat to human health or safety,  then within five (5) days written notice
or as required by law,  discontinue  any use of the  Demised  Premises  which is
declared or claimed by any governmental  authority  having  jurisdiction to be a
violation  of law,  regulation  or zoning  ordinance or of said  certificate  of
occupancy,  subject to  Tenant's  right to  reasonably  contest  or appeal  such
governmental  action;  provided,  however,  that such  contest  rights shall not
suspend  Tenant's  obligation  to so comply during the pendency of any appeal or
contest.  Tenant shall comply with any direction of any  governmental  authority
having  jurisdiction  which  shall,  by reason of the nature of Tenant's  use or
occupancy of the Demised Premises,  impose any duty upon Tenant or Landlord with
respect  to the  Demised  Premises  or with  respect  to the  use or  occupation
thereof; provided, however (but without limiting Landlord's ability to determine
that the cost  thereof  constitutes  an  Operating  Expense for which  Tenant is
responsible  in  accordance  with the terms  hereof),  that Tenant shall have no
obligation to make any alterations,  replacements or improvements to the Demised
Premises,  Building or  Project,  including  without  limitation  structural  or
capital  improvements,  required to comply with such governmental action if such
alterations,  replacements  or  improvements  are not  required  as a result  of
Tenant's use or  occupancy of the Demised  Premises or as a result of the Tenant
Improvements  or any  other  Tenant  alterations  to  the  Demised  Premises  or
installation of Tenant's personal property in the Demised Premises. For example,
Tenant shall not be responsible for complying with seismic upgrade  requirements
imposed by governmental authority beyond Tenant's obligation to pay Tenant's Pro
Rata Share of Operating Expenses associated with such capital improvements.

         10.3.  Tenant  shall not do or permit to be done  anything  which  will
invalidate or permanently increase the cost of any fire, environmental, extended
coverage or any other  insurance  policy  covering  the Building and Project and
shall  comply  with all rules,  orders,  regulations,  and  requirements  of the
insurers  of the  Building  and Project and Tenant  shall  promptly  upon demand
reimburse  Landlord for any additional premium charged for such policy 

                                       11
<PAGE>

by reason of Tenant's  failure to comply  with the  provisions  of this  Section
10.3.

         10.4.     [Intentionally omitted.]

         10.5.  Tenant  shall  deliver  to  Landlord  copies of all new keys and
access  control  devices  promptly  following  installation.  Tenant must,  upon
termination  of this Lease return to Landlord all keys to offices and restrooms,
either  furnished to, or otherwise  procured by Tenant.  In the event any key so
furnished is lost,  Tenant shall pay to Landlord the cost of replacing  the same
or of changing the lock or locks opened by such lost key if Landlord  shall deem
it necessary to make such change.

         10.6. No awnings or other  projection  shall be attached to any outside
wall of the building.  Neither the interior nor exterior of any windows shall be
coated or otherwise  sunscreened without the express written consent of Landlord
(which shall not be unreasonably  withheld,  conditioned or delayed),  nor shall
any  bottles,  parcels,  or other  articles  be  placed on the  windowsills.  No
equipment,  furniture or other items of personal property shall be placed on any
exterior balcony without the express written consent of Landlord.

         10.7. No sign, advertisement,  or notice shall be exhibited, painted or
affixed by Tenant on any part of the Demised  Premises or the Building  which is
visible from the exterior of the Building  without the prior written  consent of
Landlord, which shall not be unreasonably withheld, conditioned or delayed.

         10.8.  Tenant  shall  cause any office  equipment  or  machinery  to be
installed  in  the  Demised  Premises  so as to  reasonably  prevent  sounds  or
vibrations  therefrom  from  extending into any other building of the Project or
any portion of the  Building  not leased to or occupied by Tenant.  Further,  no
equipment exceeding the recommended floor load capacity shall be placed upon the
second  floor  Demised  Premises  without  advance  notice  to and  approval  by
Landlord. Placement of such equipment, if approved by Landlord, shall be only at
a location designed to carry the weight of such equipment.

         10.9. Tenant shall not do or permit anything to be done in or about the
Demised Premises which shall in any way obstruct or interfere with the rights of
other tenants of the Project,  or injure or  unreasonably  annoy them, or use or
allow the Demised Premises to be used for immoral or unlawful purpose (provided,
however,  that any medical research activity permitted by the United States Food
and Drug Administration shall not be deemed to be an immoral purpose), nor shall
Tenant knowingly cause,  maintain or permit any nuisance or commit or permit any
act of waste in, on, or about the Demised Premises, Building or Project.

         10.10.  Notwithstanding  any other  provision  herein to the  contrary,
Tenant shall be responsible for all  liabilities,  costs and expense arising out
of or in  connection  with  the  compliance  of the  Demised  Premises  with the
Americans With  Disabilities  Act, 42 U.S.C.  ss. 12101, et seq.  (together with
regulations  promulgated  pursuant  thereto,  "ADA") and Tenant shall indemnify,
defend and hold harmless from and against any loss,  cost,  liability or expense

                                       12

<PAGE>

(including  reasonable  attorneys  fees and  disbursements)  arising  out of any
failure of the Demised Premises to comply with the ADA.

11.      Brokers

         11.1.  Tenant  represents and warrants that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this Lease
other than John Burnham & Company  ("Broker"),  as has been disclosed in writing
to Landlord and that Tenant knows of no other real estate broker or agent who is
or might be entitled to a commission in connection with this Lease.

         11.2.  Tenant  hereby  indemnifies  and  shall  defend,  hold  and save
Landlord  harmless  from and against any and all claims for any  commissions  or
fees in connection  with this Lease made by any broker or finder having  worked,
or claiming to have worked, on behalf Tenant, other than Broker. Landlord hereby
indemnifies and shall defend, hold and save Tenant harmless from and against any
and all claims for any commissions or fees in connection with this Lease made by
any broker or finder  having  worked,  or claiming to have worked,  on behalf of
Landlord, other than Broker.

         11.3.  Tenant  represents and warrants that no broker or agent has made
any  representation  or warranty  relied upon by Tenant in Tenant's  decision to
enter into this Lease other than as contained in this Lease.

         11.4. Tenant  acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of lease from  prospective
tenants and no authority is granted to any broker to furnish any  representation
(written or oral) or warranty from Landlord unless  expressly  contained  within
this Lease.  Landlord in executing  this Lease does so in reliance upon Tenant's
representations and warranties contained within Sections 11.1 and 11.3 hereof.

12.      Holding Over

         12.1.  If,  with  Landlord's  express  written  consent,  Tenant  holds
possession of all or any part of the Demised  Premises  after the  expiration or
earlier  termination  Term,  Tenant  shall  become a tenant from  month-to-month
(provided,  however, that if such holdover is with Landlord's consent and is for
less than 30 days,  Tenant's  obligation to pay Basic Annual Rent (or such other
amount as  Landlord  has  indicated)  shall be on a per diem basis  during  such
initial  30-day period) upon the Term  Expiration  Date, and in such case Tenant
shall  continue to pay monthly  installments  of Basic Annual Rent in the amount
payable  upon the Term  Expiration  Date,  or such other  amount as Landlord may
indicate,  in Landlord's sole and absolute discretion,  in such written consent,
and all other  provisions,  representations,  covenant and agreements  contained
herein,  other than with  respect to the Term and any  extensions  thereof,  but
specifically including,  without limitation, the adjustment of Basic Annual Rent
pursuant to Section 6 hereof, 

                                       13
<PAGE>

shall remain in full force and effect.

         12.2. Notwithstanding the foregoing, if Tenant remains in possession of
the Demised  Premises  after the  expiration or earlier  termination of the Term
without the express written consent of Landlord, Tenant shall become a tenant at
sufferance  upon the terms of this Lease except that the monthly rental shall be
equal to one hundred  twenty-five  percent  (125%) of the Basic  Annual Rent and
Additional  Rent in effect during the last thirty (30) days of the Term.  Tenant
shall be  responsible  for all damages  suffered by Landlord  resulting  from or
occasioned by Tenant's holding over.

         12.3.  Acceptance by Landlord of Rent after such  expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.

         12.4.  The  foregoing  provisions of this Section 12 are in addition to
and do not affect  Landlord's  right to re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.

13.      Taxes on Tenant's Property

         13.1. Tenant shall pay, prior to delinquency,  any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Demised Premises.

         13.2.  Subject to Tenant's  contest  rights as provided in Section 13.4
below,  if any such taxes on Tenant's  personal  property or trade  fixtures are
levied against Landlord or Landlord's  property or, if the assessed valuation of
the Building is increased by the inclusion  therein of a value  attributable  to
Tenant's  personal  property or trade fixtures,  and if Landlord,  after written
notice to  Tenant,  pays the taxes  based  upon such  increase  in the  assessed
valued,  then  Tenant  shall upon demand  repay to Landlord  the taxes so levied
against Landlord.

         13.3. If any  improvements  in or alterations to the Demised  Premises,
whether  owned by  Landlord  or Tenant and  whether  or not  affixed to the real
property so as to become a part  thereof,  are  assessed  for real  property tax
purposes  at a  valuation  higher  than  the  valuation  at  which  improvements
conforming to Landlord's  "Building Standard" in other spaces in the Project are
assessed,  then the real property taxes and assessments  levied against Landlord
or the Project by reason of such excess assessed valuation shall be deemed to be
taxes levied  against  personal  property of Tenant and shall be governed by the
provisions  of Section 13.2 above.  Any such excess  assessed  valuation  due to
improvements  in or  alterations to space in the Project leased by other tenants
of Landlord shall not be included in the Operating  Expenses  defined in Section
7.1, but shall be treated, as to such other tenants, as provided in this Section
13.3.

         13.4.  Tenant  shall have the right,  by  appropriate  proceedings,  to
protest or contest  with the  appropriate  governmental  agency any  assessment,
reassessment  or allocation  of Property  Taxes or other taxes payable by Tenant
hereunder,  in whole or in part;  provided that Tenant  

                                       14
<PAGE>


provides such financial  assurances as Landlord may reasonably  require in order
to bond over or provide  for such taxes and no jeopardy or threat to the Project
or any portion  thereof  exists as a result.  Tenant may act in its own name and
Landlord  shall,  at Tenant's  request and expense,  reasonably  cooperate  with
Tenant in connection  with such contest.  Tenant may utilize any legal procedure
for payment under protest,  if available,  and may sue to recover  overpayments.
Tenant  shall  indemnify,  hold  harmless  and defend  Landlord  and the Demised
Premises from any liens,  liabilities,  claims, losses, costs,  expenses,  fees,
judgments, actions, causes of action or damages (including,  without limitation,
reasonable  attorneys'  fees and  expenses)  arising  out of or  related  to any
contest of Property Taxes by Tenant and shall pay any Property Taxes  ultimately
determined  to be due,  together  with any interest or penalties  charged by the
taxing entity.

14.      Condition of Demised Premises

         14.1.  Tenant  acknowledges  that  neither  Landlord  nor any  agent of
Landlord has made any  representation  or warranty with respect to the condition
of the Demised  Premises or the  Building  or  Project,  or with  respect to the
suitability  for the conduct of Tenant's  business.  The taking of possession of
the Demised  Premises by Tenant shall,  except as otherwise agreed in writing by
Landlord  and  Tenant  conclusively  establish  that the  Demised  Premises  and
Building  were at such time in good,  sanitary and  satisfactory  condition  and
repair.  Tenant further  acknowledges  that, prior to the Effective Date, Tenant
has been in  possession of the Demised  Premises as owner,  that as owner Tenant
has developed an intimate familiarity with the Building and the Project and that
Tenant is accepting the Demised Premises "AS-IS."

15.      Common Areas and Parking Facilities

         15.1. Tenant shall have the  non-exclusive  right, in common with other
tenants of the  Building  or the  Project,  to use the Common  Areas  other than
parking  facilities  (provided,  however,  that with respect to the Common Areas
within the  Building  and so long as Tenant is the sole tenant of the  Building,
Tenant  shall  have the  exclusive  rights  thereto,  subject  to the  rights of
Landlord  under this  Lease),  subject to the rules and  regulations  adopted by
Landlord and attached hereto as Exhibit "C" together with such other  reasonable
and  nondiscriminatory  rules and  regulations  as are hereafter  promulgated by
Landlord in its discretion (the "Rules and Regulations").

         15.2.    [Intentionally omitted.]

         15.3.  Tenant  shall  have  the  exclusive  right  to use  the  parking
facilities  located  upon  the  Land,  subject  to the  Rules  and  Regulations;
provided,  however,  that  nothing in this Section 15.3 is intended to create an
affirmative duty on Landlord's part to monitor parking.

         15.4.  Landlord reserves the right to modify Common Areas including the
right to add or remove  exterior and interior  landscaping  (provided,  however,
that  Landlord  shall  have no right to modify the  portion  of the Common  Area
located within the Building unless a default by Tenant 

                                       15
<PAGE>

has occurred).

16.      Utilities and Services

         16.1.  Tenant shall pay for all water,  (including the cost to service,
repair and replace  reverse  osmosis,  deionized and other  treated  water) gas,
heat,  light,  power,  telephone  and other  utilities  supplied  to the Demised
Premises,  the Building and the Common Area, together with any fees,  surcharges
and taxes  thereon,  including,  without  limitation,  water in Common Areas for
drinking and lavatory purposes. If any such utility is not separately metered to
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges  jointly  metered  with other  premises as part of Tenant's Pro Rata
Share of Operating Expenses, or in the alternative, Landlord may, at its option,
monitor the usage of such utilities by Tenant and charge Tenant with the cost of
purchasing,  installing and monitoring such metering  equipment,  which shall be
paid by Tenant as Additional  Rent.  Tenant agrees to pay for its Pro Rata Share
of water consumed in Common Areas, as shown on said meter, as and when bills are
rendered,  and on default in making such payment,  Landlord may pay such charges
and  collect  the same from  Tenant.  Any such costs or  expenses  incurred,  or
payments made by Landlord for any of the reasons or purposes herein above stated
shall be deemed to be  Additional  Rent  payment  by Tenant and  collectible  by
Landlord as such.

         16.2.  Landlord  shall not be liable  for,  nor shall any  eviction  of
Tenant result from,  the failure to furnish any such utility or service  whether
or not such failure is caused by accident,  breakage, repairs, strikes, lockouts
or other labor  disturbances  or labor disputes of any  character,  governmental
regulation,  moratorium  or other  governmental  action,  inability  despite the
exercise of  reasonable  diligence  or by any other cause,  including  the gross
negligence  of  Landlord.  In the  event of such  failure,  Tenant  shall not be
entitled to any  abatement  or  reduction  of Rent  (except to the extent of any
rental  abatement  or  interruption  insurance  proceeds  actually  received  by
Landlord with respect to such period), nor be relieved from the operation of any
covenant or agreement of this Lease.

         16.3.  Tenant shall pay directly to the  applicable  utility or service
provider,  prior  to  delinquency,  for any  separately  metered  utilities  and
services  which may be  furnished to Tenant or the Demised  Premises  during the
Term.

         16.4.  Tenant shall not, without the prior written consent of Landlord,
use any device in the Demised Premises,  including, but without limitation, data
processing  machines,  which will in any way increase the amount of ventilation,
air exchange,  gas, steam,  electricity or water beyond the existing capacity of
the Building as  proportionately  allocated to the Demised  Premises  based upon
Tenant's Pro Rata Share.

         16.5.  If Tenant  shall  require  services  in  excess of that  usually
furnished or supplied for similar space in the Building,  by reason of equipment
operated  and/or  extended hours of business  operation,  Tenant may procure the
same all at Tenant's sole cost and expense.

                                       16
<PAGE>

         16.6.  Landlord  shall  provide  water to the  outdoor  portions of the
Common  Areas for  landscape  irrigation  purposes  only,  and Tenant  shall pay
Tenant's Pro Rata Share thereof as an Operating Expense.

         16.7.  Landlord  reserves  the right to stop  service of the  elevator,
plumbing, ventilation, air conditioning and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements,  in
the judgment of Landlord  desirable or necessary to be made, until said repairs,
alterations  or  improvements  shall have been  completed,  and  Landlord  shall
further  have no  responsibility  or  liability  for failure to supply  elevator
facilities,  plumbing, ventilation, air conditioning,  electric or other utility
service,  when prevented from doing so by strike or accident, or by laws, rules,
order,  ordinances,  directions,  regulations  or  requirements  of any federal,
state,  country or  municipal  authority or failure to deliver gas, oil or other
suitable fuel supply or inability by exercise of reasonable  diligence to obtain
gas, oil or other suitable fuel. It is expressly  understood and agreed that any
covenants  on  Landlord's  part to furnish  any  service  pursuant to any of the
terms,  covenants,  conditions,  provisions or  agreements of this Lease,  or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if  Landlord  is unable to furnish or perform  the same by virtue of a strike or
labor trouble or any other cause whatsoever.

17.      Alterations

         17.1. Tenant shall make no alterations, additions or improvements in or
to the Demised Premises without Landlord's prior written consent, which approval
shall not be unreasonably withheld,  conditioned or delayed (provided,  however,
that in the event any proposed  alteration,  addition or improvement affects (i)
any  structural  portions  of  the  Building  including  exterior  walls,  roof,
foundation and core of the Building,  (ii) the exterior of the Building or (iii)
any Building systems,  including elevator,  plumbing, air conditioning,  heating
electrical,  security,  life safety and power,  then  Landlord  may withhold its
consent with respect  thereto if Tenant does not provide  adequate  assurance to
Landlord of Tenant's ability to restore the Demised Premises to the condition in
which they existed prior to the  construction of such  alterations upon the Term
Expiration  Date),  and  then  only by  architects,  contractors,  suppliers  or
mechanics approved by Landlord in Landlord's sole discretion (provided, however,
that Tenant may make minor  alterations to the interior portions of the Building
which do not affect the  Building  systems,  which do not affect the  structural
portions of the  Building and which do not exceed  $100,000 in the  aggregate in
value  without  Landlord's  prior  consent but upon not less than 14 days' prior
notice to  Landlord).  In seeking  Landlord's  approval,  Tenant  shall  provide
Landlord,  at least fourteen (14) days in advance of any proposed  construction,
with  plans,  specifications,  bid  proposals,  work  contracts  and such  other
information  concerning  the  nature  and  cost  of  the  alterations  as may be
reasonably requested by Landlord.

         17.2.    [Intentionally omitted.]

                                       17
<PAGE>


         17.3.  Tenant agrees that there shall be no  construction of partitions
or other  obstructions  which might  interfere  with free  access to  mechanical
installation or service  facilities of the Building or interfere with the moving
of Landlord's equipment to or from the enclosures  containing said installations
or facilities.

         17.4.  Tenant agrees that any work by Tenant shall be  accomplished  in
such a manner as to permit any fire sprinkler system and fire water supply lines
to remain fully operable at all times.

         17.5. Tenant covenants and agrees that all work done by Tenant (whether
or not requiring  Landlord's  consent) shall be performed in compliance with all
laws, rules, orders, ordinances,  directions,  regulations,  and requirements of
all  governmental  agencies,  offices,  departments,  bureaus and boards  having
jurisdiction,  and in  full  compliance  with  the  rules,  orders,  directions,
regulations,  and requirements of any applicable fire rating bureau. Upon demand
by Landlord,  Tenant shall provide  Landlord with (i)  construction  agreements,
building plans,  lien releases and other similar  documentation  with respect to
any improvements or alterations  reasonably  requested by Landlord or Landlord's
lenders,  insurers or investors, and (ii) "as-built" plans showing any change in
the Demised Premises.

         17.6.  Before  commencing any work, Tenant shall give Landlord at least
fourteen (14) days prior  written  notice of the proposed  commencement  of such
work and  shall,  if  required  by  Landlord,  secure at  Tenant's  own cost and
expenses a completion  and lien indemnity  bond,  letter of credit or such other
security reasonably satisfactory to Landlord for said work.

         17.7. All alterations, attached equipment, decorations, fixtures, trade
fixtures,  additions and improvements,  subject to Section 17.9,  attached to or
built into the Demised Premises, made by either of Landlord or Tenant, including
(without  limiting the generality of the foregoing) all floor and wall covering,
built-in  cabinet  work and  paneling,  sinks  and  related  plumbing  fixtures,
exterior venting fume hoods and walk-in freezers and refrigerators, clean rooms,
climatized rooms,  ductwork,  conduits,  electrical  panels and circuits,  shall
become  the  property  of  Landlord  upon the Term  Expiration  Date or  earlier
termination of the term of this Lease,  and shall remain upon and be surrendered
with the Demised Premises as a part thereof;  provided,  however,  that Landlord
may at the time of Landlord's  consent to such alterations (or at any time if no
consent is  obtained  from  Landlord)  elect to cause  Tenant to remove any such
items  from  the  Demised  Premises  upon the Term  Expiration  Date or  earlier
termination of this Lease, and, if Landlord so elects,  Tenant shall remove such
alterations,   attached  equipment,   decorations,   fixtures,  trade  fixtures,
additions and improvements upon the Term Expiration Date or earlier  termination
of this Lease and restore any damage caused by or occasioned as a result of such
removal and further  provided that Tenant may remove the items listed on Exhibit
"D"  attached  hereto  so  long as  Tenant  restores  any  damage  caused  by or
occasioned as a result of such removal.

         17.8.  Tenant shall repair any damage to the Demised Premises caused by
Tenant's  removal of any  property  from the Demised  Premises.  During any such
restoration  period,  Tenant

                                       18
<PAGE>


shall pay Rent to Landlord as  provided  herein as if said space were  otherwise
occupied by Tenant.

         17.9.  Except as to those items listed on Exhibit "D"  attached  hereto
and  incorporated  herein,  all  business  and  trade  fixtures,  machinery  and
equipment,  built-in  furniture  and  cabinets,  together with all additions and
accessories  thereto,  installed in and upon the Demised  Premises  shall be and
remain the  property  of  Landlord  and shall not be moved by Tenant at any time
during the Term.  If Tenant  shall fail to remove  all of its  effects  from the
Demised Premises prior to expiration or earlier  termination of this Lease, then
Landlord may, at its option,  remove the same in any manner that Landlord  shall
choose,  and store said effects without  liability to Tenant for loss thereof or
damage  thereto,  and Tenant  agrees to pay  Landlord  upon demand any  expenses
incurred to such  removal and  storage or Landlord  may, at its option,  without
notice, sell said property or any of the same, at private sale and without legal
process,  for such price as Landlord  may obtain and apply the  proceeds of such
sale  against  any  amounts  due under this Lease from  Tenant to  Landlord  and
against any expenses incident to the removal,  storage and sale of said personal
property.

         17.10.  Notwithstanding  any other  provision of this Section 17 to the
contrary,  except with respect to the items list on Exhibit "D" attached hereto,
in no event may Tenant remove any  improvement  from the Demised  Premises as to
which Landlord  contributed  payment,  without Landlord's prior written consent,
which may be withheld in Landlord's sole discretion.

         17.11.  Tenant  shall pay to  Landlord  an amount  equal to ten percent
(10%) (not to exceed  $5,000) of the cost to Tenant of all  charges  incurred by
Tenant  of its  contractors  or  agents  in  connection  with  any  alterations,
additions  or  improvements  to the  Demised  Premises  for  projects  less than
$250,000,  and $10,000  plus all  reasonable  out-of-pocket  costs and  expenses
incurred by Landlord in  connection  therewith  for all  projects of $250,000 or
more, to cover Landlord's  overhead and expenses for plan review,  coordination,
scheduling and supervision thereof. Landlord shall use its good faith efforts to
review,  coordinate,  schedule and  supervise  any such project with  Landlord's
internal  personnel prior to incurring any material  out-of-pocket  cost related
thereto.  For  purposes of payment of such sum,  Tenant shall submit to Landlord
copies  of all  bills,  invoices,  and  statements  covering  the  costs of such
charges,  which will be accompanied by payment to Landlord of the percentage fee
set  forth  above.  Tenant  shall  reimburse  Landlord  for  any  extra  expense
reasonably  incurred  by Landlord by reason of faulty work done by Tenant or its
contractors, or by reason of inadequate cleanup.

18.      Repairs and Maintenance

         18.1. Landlord shall repair and maintain the structural portions of the
Demised  Premises  and the  exterior  portions of the Common  Areas,  including,
without  limitation,  structural  portions of the roof system (but not including
the roof membrane),  foundations,  exterior walls,  interior load bearing walls,
landscaping  and parking areas (and the full cost thereof shall be included as a
part of Operating Expenses),  unless such maintenance or repairs are 

                                       19
<PAGE>

required in whole or in part because of any act, neglect,  fault of or omissions
of any duty by Tenant,  its agents,  servants,  employees or invitees,  in which
case Tenant shall pay to Landlord the cost of such  maintenance and repairs.  If
Landlord fails to perform any of its repair and  maintenance  obligations  under
this Section 18.1, and such failure  materially  affects Tenant's ability to use
and occupy the Demised Premises for the purposes permitted herein,  Tenant shall
have the right,  but not the  obligation,  at Tenant's  sole cost and expense to
perform such repairs and/or  maintenance if such failure continues for more than
fifteen  (15) days after  written  notice  from  Tenant to  Landlord  and any of
Landlord's lenders; provided,  however, that if the nature of the repairs and/or
maintenance to be completed by Landlord is such that more than fifteen (15) days
are required to complete such repairs  and/or  maintenance,  Landlord shall have
such additional time as is reasonably  necessary to complete such repairs and/or
maintenance  so long as  Landlord  takes  appropriate  action to  commence  such
repairs  and/or  maintenance  within such fifteen (15) day period and thereafter
diligently pursues such repairs and/or maintenance to completion.

         18.2.  Except for  services of  Landlord,  if any,  required by Section
18.1,  Tenant shall at Tenant's sole cost and expense keep the Demised  Premises
and the Common Areas and every part thereof (including,  without limitation, the
roof membrane, the plumbing and the fire sprinkler,  heating,  ventilating,  air
conditioning,  elevator and  electrical  systems) in good  condition and repair,
damage  thereto from  ordinary wear and tear and casualty and  condemnation  not
caused  by Tenant  excepted.  Tenant  shall,  upon the Term  Expiration  Date or
earlier termination of this Lease, surrender the Demised Premises to Landlord in
as good as condition as when  received,  ordinary wear and tear and casualty and
condemnation not caused by Tenant excepted. Landlord shall have no obligation to
alter, remodel,  improve,  repair, decorate or paint the Demised Premises or any
part  thereof,  except as  specifically  set forth in Sections 22 and 23 of this
Lease.

         18.3.  Landlord shall not be liable for any failure to make any repairs
or to perform any  maintenance  which is an obligation  of Landlord  unless such
failure shall persist for an unreasonable  time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Tenant waives the
rights  under  Section 1941 and 1942 of the  California  Civil Code or under any
similar law,  statute or ordinance now or hereafter in effect to make repairs at
Landlord's expense.

         18.4.  Repairs under this Section 18 which are  obligations of Landlord
are subject to allocation among Tenant and other tenants as Operating Expenses.

         18.5.  This  Section 18 relates to repairs and  maintenance  arising in
ordinary  course of  operation  of the  Building,  the  Project  and any related
facilities. In the event of fire, earthquake,  flood, vandalism, war, or similar
cause of damage or destruction,  this Section 18 shall not be applicable and the
provisions of Section 22 shall apply and control.

19.      Liens

                                       20
<PAGE>

         19.1. Subject to the immediately succeeding sentence, Tenant shall keep
the Demised Premises, the Building, the Project and the real property upon which
the  Building and the Project are  situated  free from any liens  arising out of
work performed,  materials furnished or obligations  incurred by Tenant.  Tenant
further  covenants and agrees that any mechanic's lien filed against the Demised
Premises  or against the  Building or the Project for work  claimed to have been
done for,  or  materials  claimed  to have been  furnished  to  Tenant,  will be
discharged by Tenant, by bond or otherwise,  within ten (10) business days after
the filing thereof, at the sole cost and expense of Tenant, subject, however, to
Tenant's latest rights set forth in Section 19.4 below.

         19.2.  Should Tenant fail to discharge any lien of the nature described
in Section 19.1,  Landlord may at  Landlord's  election pay such claim or post a
bond or  otherwise  provide  security to eliminate  the lien as a claim  against
title and the cost thereof  shall be  immediately  due from Tenant as Additional
Rent.

         19.3.  In the event  Tenant shall lease or finance the  acquisition  of
equipment,  furnishings,  or  other  personal  property  of a  removable  nature
utilized by Tenant in the operation of Tenant's  business,  Tenant warrants that
any Uniform Commercial Code Financing Statement executed by Tenant will upon its
face or by exhibit thereto indicate that such Financing  Statement is applicable
only to  removable  personal  property  of Tenant  located  within  the  Demised
Premises.  In no event shall the address of the  Building  be  furnished  on the
statement  without  qualifying  language as to applicability of the lien only to
removable personal property. Should any holder of a Financing Statement executed
by Tenant  record or place of record a  Financing  Statement  which  appears  to
constitute a lien against any  interest of Landlord or against  equipment  which
may be located other than within the Demised  Premises,  Tenant shall within ten
(10) days after filing such Financing Statement (i) cause a copy of the Security
Agreement  or  other  documents  to which  Financing  Statement  pertains  to be
furnished to Landlord to facilitate  Landlord's being in a position to show such
lien is not applicable to Landlord's interest, and (ii) cause Tenant's lender to
amend any documents of record so as to clarify that such lien is not  applicable
to any interest of Landlord in the Building or the Project. If Tenant desires to
purchase  subject  to a  security  interest,  lease or obtain a loan  secured by
tenant's  personal  property and requests that Landlord execute a lien waiver or
consent to encumbrance in connection therewith,  Landlord agrees to execute such
lien waiver or consent to  encumbrance  in a form  reasonably  acceptable to the
Landlord,  the  delivery  of which  shall  not be  unreasonably  delayed  by the
Landlord.


         19.4.  Notwithstanding  anything to the contrary herein, Tenant may, in
good faith,  contest the validity of any lien of the nature described in Section
19.1, or any claim or demand  arising  therefrom,  and, as a condition  thereto,
Tenant shall, at its sole expense, indemnity,  defend, hold harmless and protect
itself,  Landlord  and the Demised  Premises  against the same and shall pay and
satisfy  any such  adverse  judgment  that may be  rendered  thereon  before the
enforcement thereof against the Landlord or the Demised Premises or the Project.
If Landlord shall in its discretion require,  Tenant shall furnish to Landlord a
letter of credit or surety bond in 

                                       21
<PAGE>

a form  reasonably  satisfactory  to Landlord  and in an amount equal to one and
one-half times the amount of such  contested lien claim or demand,  indemnifying
Landlord  against  liability for the same, as required by law for the holding of
the Demised Premises free from the effect of such lien or claim.

20.      Indemnification and Exculpation

         20.1. Tenant hereby  indemnifies and agrees to defend and save Landlord
harmless  from and against any and all  demands,  claims,  liabilities,  losses,
costs,  expenses,  actions,  causes of  action,  damages or  judgments,  and all
reasonable  expenses incurred in investigating or resisting the same (including,
without limitation, reasonable attorneys' fees, charges and disbursements),  for
injury or death to person or injury to  property  occurring  within or about the
Demised  Premises,   arising  directly  or  indirectly  out  of  Tenant's,  it's
employees, agents or guests use or occupancy of the Demised Premises or a breach
or default by Tenant in the  performance  of any of its  obligations  hereunder,
unless caused solely by the willful act or gross negligence of the Landlord.

         20.2.  Landlord  shall not be liable to Tenant and Tenant  assumes  all
risk of damage to personal  property or scientific  research,  including loss of
records  kept  within the  Demised  Premises if the cause of such damage is of a
nature which,  if Tenant had elected to maintain fire and theft  insurance  with
extended coverage and business records  endorsement  available on a commercially
reasonable  basis,  would  be a loss  subject  to  settlement  by the  insurance
carrier,  including,  but not  limited  to,  damage  or  losses  caused by fire,
electrical malfunctions, gas explosion, and water damage of any type, including,
but not limited to, broken water lines,  malfunction of fire  sprinkler  system,
roof  leakage  or  stoppages  of lines  unless and except if such loss is due to
willful  disregard  of  Landlord  after  written  notice by Tenant of need for a
repair which Landlord is responsible to make for an unreasonable period of time.
Tenant  further  waives any claim for  injury to  Tenant's  business  or loss of
income relating to any such damage or destruction of personal property including
any loss of records.

         20.3.  Landlord  shall not be liable to Tenant for any damages  arising
from any act,  omission  or neglect of any other  tenant in the  Building or the
Project or of any other third party provided that the foregoing shall not create
any liability of Tenant for any act,  omission or neglect of any other tenant in
the Building or Project (other than Tenant's  subtenants,  licensees,  invitees,
agents or contractors).

         20.4.  Security  devices and services,  if any, while intended to deter
crime may not in given instances  prevent theft or other criminal acts and it is
agreed  that  Landlord  shall not be liable  for  injuries  or losses  caused by
criminal acts of third parties and the risk that any security  device or service
may malfunction or otherwise be circumvented by a criminal is assumed by Tenant.
Tenant shall at Tenant's  cost obtain  insurance  coverage to the extent  Tenant
desires protection against such criminal acts.

                                       22
<PAGE>

21.      Insurance - Waiver of Subrogation

         21.1.  Landlord,  as part of Operating Expenses,  shall carry insurance
upon the Building, in an amount equal to full replacement cost (exclusive of the
costs of  excavation,  foundations,  and  footings,  and  without  reference  to
depreciation  taken by  Landlord  upon its books or tax  returns) or such lesser
coverage as Landlord may elect  provided  such  coverage is not less than ninety
percent  (90%) of such full  replacement  cost or the  amount of such  insurance
Landlord's mortgage lender requires Landlord to maintain,  providing  protection
against  any  peril  generally  included  within  the  classification  "Fire and
Extended   Coverage"  together  with  insurance  against  sprinkler  damage  (if
applicable), vandalism and malicious mischief. Landlord, subject to availability
thereof and, as part of Operating  Expenses,  shall  further  insure as Landlord
deems appropriate  coverage against flood,  environmental hazard and earthquake,
loss or failure of building  equipment,  rental loss during the period of repair
or rebuild  (for a period  not  exceeding  18  months),  workmen's  compensation
insurance  and  fidelity  bonds for  employees  employed  to  perform  services.
Notwithstanding  the foregoing,  Landlord may, but shall not be deemed  required
to,  provide  insurance  as to any  improvements  installed  by Tenant after the
Effective Date or which are in addition to the standard improvements customarily
furnished by Landlord  without  regard to whether or not such are made a part of
the Building.  The insurance maintained by Landlord on the Project shall include
reasonable  deductibles as are maintained by prudent owners of similar  projects
in the San Diego  metropolitan  area (which,  except with respect to  earthquake
coverages, shall not exceed 10% of the replacement value of the Building).

         21.2.  Landlord,  as part of Operating  Expenses,  shall  further carry
public and excess liability  insurance with a single loss limit of not less than
Five Million Dollars ($5,000,000) for death or bodily injury, or property damage
with respect to the Project.

         21.3.  Tenant at its own cost shall procure and continue in effect from
the Term Commencement Date and continuing  throughout the Term (and occupancy by
Tenant, if any, after the Term Expiration Date) comprehensive  public and excess
liability   insurance  with  limits  of  not  less  than  Five  Million  Dollars
($5,000,000)  per  occurrence  for death or bodily injury and not less than Five
Million  Dollars  ($5,000,000)  for property  damage with respect to the Demised
Property.

         21.4.  The aforesaid  insurance  required of Tenant shall name Landlord
and any mortgage  lender of Landlord who so requests as an  additional  insured.
Said  insurance  shall  be with  companies  having a  rating  of not  less  than
policyholder  rating of A and financial category rating of at least Class XII in
"Best's  Insurance  Guide."  Tenant shall obtain for Landlord from the insurance
companies or cause the insurance  companies to furnish  certificates of coverage
to  Landlord.  No such policy  shall be  cancellable  or subject to reduction of
coverage or other  modification  or  cancellation  except after thirty (30) days
prior written  notice to Landlord from the insurer.  All such policies  shall be
written  as  primary  policies  with  respect  to  the  Demised  Premises,   not
contributing  with and not in excess of the coverage  which  Landlord may carry.
Tenant's policy may be a "blanket policy" which  specifically  provides that the
amount of  

                                       23
<PAGE>

insurance shall not be prejudiced by other losses covered by the policy.  Tenant
shall,  at least  twenty  (20) days prior to the  expiration  of such  policies,
furnish Landlord with renewals or binders. Tenant agrees that if Tenant does not
take out and maintain  such  insurance,  Landlord may (but shall not be required
to), upon not less than five (5) days notice to Tenant,  procure said  insurance
on Tenant's behalf and at its cost to be paid as Additional Rent.

         21.5.  Tenant  assumes  the  risk of  damage  to any  fixtures,  goods,
inventory,  merchandise,  equipment,  and leasehold  improvements,  and Landlord
shall  not be  liable  for  injury to  Tenant's  business  or any loss of income
therefrom relative to such damage all as more particularly  heretofore set forth
within this Lease.  Tenant at Tenant's cost shall carry such insurance as Tenant
desires for Tenant's  protection with respect to personal  property of Tenant or
business interruption.

         21.6.  In  each  instance  where  insurance  is  to  name  Landlord  as
additional insured, Tenant shall upon written request of Landlord also designate
and furnish certificates so evidencing Landlord as additional insured to (i) any
lender of Landlord holding a security  interest in the Building or real property
upon which the  Building is situated,  and/or (ii) the landlord  under any lease
wherein  Landlord  is tenant of the real  property  whereupon  the  Building  is
located if the  interest of Landlord is or shall become that of a tenant under a
ground  lease  rather  than that of a fee  owner,  and/or  (iii) any  management
company retained by Landlord to manage the Building or the Project.

         21.7.  Landlord  and  Tenant  each  hereby  waive any and all rights of
recovery  against  the other or  against  the  officers,  directors,  employees,
agents,  and  representatives  of the  other,  on  account  of  loss  or  damage
occasioned to such waiving party or its property or the property of others under
its control to the extent that such loss or damage is insured  against under any
fire and extended  coverage  insurance  policy which either may have in force at
the time of such loss or damage.  Such waivers  shall  continue as long as their
respective  insurers  so permit  or such  waivers  are  generally  permitted  by
insurance  carriers in the California  market (provided that neither party shall
be required to pay any material amount to their respective  insurers in order to
maintain such  waivers).  Any  termination  of such a waiver shall be by written
notice of  circumstances  as  hereinafter  set forth.  Landlord  and Tenant upon
obtaining the policies of insurance required or permitted under this Lease shall
give notice to the  insurance  carrier or  carriers  that the  foregoing  mutual
waiver of subrogation is contained in this Lease.  If such policies shall not be
obtainable  with such waiver or shall be so  obtainable  only at a premium  over
that chargeable  without such waiver, the party seeking such policy shall notify
the other thereof,  and the latter shall have ten (10) days thereafter to either
(i) procure such insurance with companies  reasonably  satisfactory to the other
party or (ii) agree to pay such additional  premium. If neither (i) nor (ii) are
done,  this Section 21.7 shall have no effect  during such time as such policies
shall not be obtainable or the party in whose favor a waiver of  subrogation  is
desired  refuses to pay the  additional  premium.  If such policies shall at any
time be unobtainable,  but shall be subsequently obtainable, neither party shall
be subsequently liable for a failure to obtain such insurance until a reasonable
time after  notification  thereof by the other  party.  If the release 

                                       24
<PAGE>

of either Landlord or Tenant, as set forth in the first sentence of this Section
21.7 shall  contravene  any law with  respect  to  exculpatory  agreements,  the
liability  of the party in question  shall be deemed not  released  but shall be
secondary to the other's insurer.

         21.8.  Landlord  may require  insurance  policy  limits to be raised to
conform with any reasonable  requirements  of Landlord's  lender and/or to bring
coverage  limits  to levels  then  generally  being  required  by  institutional
landlords for comparable projects.

22.      Damage or Destruction

         22.1. In the event of a partial  destruction of the Building by fire or
other perils covered by extended coverage insurance,  not exceeding  twenty-five
percent (25%) of the full replacement cost thereof, and if the damage thereto is
such that the  Building  may be  repaired,  reconstructed  or restored  within a
period of six (6) months from the date of the  happening  of such  casualty  and
Landlord will receive  insurance  proceeds  sufficient to cover the cost of such
repairs (except for any deductible amount provided by Landlord's  policy,  which
deductible amount if paid by Landlord shall be an Operating  Expense),  Landlord
shall commence and proceed  diligently  with the work of repair,  reconstruction
and restoration and this Lease shall continue in full force and effect.

         22.2.  In the event of any damage to or  destruction  of the  Building,
other  than  as  provided  in  Section  22.1,  Landlord  may  elect  to  repair,
reconstruct and restore the Building, in which case this Lease shall continue in
full force and effect. If Landlord elects not to repair then the Term Expiration
Date shall be (and this Lease shall terminate as of) the date of destruction.

         22.3.  Landlord  shall give written notice to Tenant of its election to
repair or not to repair,  reconstruct  or restore the Building or Project within
the sixty (60) day period following the date of damage or destruction.

         22.4. Upon any termination of this Lease under any of the provisions of
this Section,  the parties shall be released thereby without further  obligation
to the other from the date possession of the Demised  Premises is surrendered to
the Landlord except for items which have theretofore occurred.

         22.5. In the event of repair,  reconstruction and restoration as herein
provided,  the rental  provided  to be paid  under  this  Lease  shall be abated
proportionately  based  on the  extent  to  which  Tenant's  use of the  Demised
Premises  is  impaired  during  the  period of such  repair,  reconstruction  or
restoration,  unless Landlord provides Tenant with other comparable space during
the period of repair,  which in Tenant's  reasonable opinion is suitable for the
temporary  conduct of Tenant's  business  and which shall be leased by Tenant on
terms substantially  similar to this Lease, but at monthly installments of Basic
Annual Rent  equitably  reduced to reflect the area and  permitted  uses of such
temporary premises.

                                       25
<PAGE>

         22.6.  Notwithstanding  anything  to the  contrary  contained  in  this
Section,  should  Landlord be delayed or prevented from completing the repair or
restoration  of the damage to the Demised  Premises after the occurrence of such
damage  or  destruction   by  reason  of  acts  of  God  or  war,   governmental
restrictions, inability to procure the necessary labor or materials, strikes, or
other  circumstances  beyond the control of  Landlord,  the time for Landlord to
commence or complete  repairs  shall be extended,  provided,  at the election of
Landlord,  Landlord  shall be relieved of its obligation to make such repairs or
restoration and Tenant shall be released from its obligation under this Lease as
of the end of eight (8) months from date of destruction,  if repairs required to
provide Tenant use of the Demised Premises are not then substantially complete.

         22.7.  If  Landlord is  obligated  to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repairs or restoration only
of those  portions of the Building and the Demised  Premises which were provided
at  Landlord's  expense;  the repair  and  restoration  of items not  provide at
Landlord's  expense  shall be the  obligation  of  Tenant.  In the event  Tenant
elected to upgrade certain  improvements  from the standard normally provided by
Landlord,  Landlord shall upon the need for  replacement due to an insured loss,
provide only the standard  Landlord  improvements  unless  Tenant shall elect to
again  upgrade  and pay any  additional  cost of such  upgrades,  except to such
extent as  insurance  proceeds  which,  if  received,  the excess  proceeds  are
adequate  to  provide  such  upgrades,   in  addition  to  providing  for  basic
reconstruction and standard improvements.

         22.8.  Notwithstanding  anything  to the  contrary  contained  in  this
Section,   Landlord  shall  not  have  any  obligation   whatsoever  to  repair,
reconstruct  or  restore  the  Demised  Premises  to the extent  that  insurance
proceeds are not  available  therefor  (except for the amount of the  deductible
carried by  Landlord  as  permitted  hereunder).  In  addition,  notwithstanding
anything to the contrary contained in this Section 22, if at any time during the
last twenty four (24) months of the term of this Lease there is damage for which
the cost to repair exceeds two months' installments of Basic Annual Rent, or the
repair,  reconstruction  or  restoration  of which is  reasonably  determined by
Landlord to exceed two (2) months from the date of damage or  destruction,  then
Landlord shall have no obligation whatsoever, to repair,  reconstruct or restore
the Demised  Premises and Landlord may terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written notice to
the Tenant of its  election  to do so within  thirty (30) days after the date of
occurrence of such damage; provided, however, that if Tenant at the time of such
election has an exercisable  option to extend this Lease so that the Lease after
exercise of such option  would have an  unexpired  term of not less seven years,
then Tenant may  preserve  this Lease,  notwithstanding  Landlord's  election to
terminate this Lease, by (a) exercising such option,  and (b) providing Landlord
with any shortage in insurance  proceeds (or adequate  assurance thereof) needed
to make the  repairs on or before the  earlier of (i) the date which is ten (10)
days after Tenant's receipt of Landlord's written notice purporting to terminate
this Lease, or (ii) the day prior to the date upon which such option expires. If
Tenant duly exercises such option during such period and provides  Landlord with
funds (or  adequate  assurance  thereof)  to cover  any  shortage  in  insurance
proceeds,  Landlord shall,  at Landlord's  expense repair such damage as soon as
reasonably  possible and this Lease shall continue in full force and effect.  If

                                       26
<PAGE>

Tenant fails to exercise such option and provide such funds or assurance  during
such  period,  then this Lease shall  terminate  as of the date set forth in the
first sentence of this Paragraph 22.8.

23.      Eminent Domain

         23.1.  In the  event the whole of the  Demised  Premises,  or such part
thereof or of the Project as shall substantially interfere with the Tenant's use
and occupancy thereof,  shall be taken for any public or quasi-public purpose by
any  lawful  power or  authority  by  exercise  of the  right of  appropriation,
condemnation  or eminent  domain,  or sold to  prevent  such  taking,  Tenant or
Landlord  may  terminate  this  Lease  effective  as of the date  possession  is
required to be surrendered to said authority.

         23.2. In the event of a partial taking of the Building,  the Project or
of drives,  walkways,  and parking areas serving the Building or the Project for
any public or quasi-public  purpose by any lawful power or authority by exercise
of right of appropriation,  condemnation,  or eminent domain, or sold to prevent
such  taking,  then  without  regard as to whether  any  portion of the  Demised
Premises  occupied by Tenant was so taken,  Landlord may elect to terminate this
Lease  as of such  taking  if such  taking  is,  in the  reasonable  opinion  of
Landlord,  of a material  nature such as to make it uneconomical to continue use
of the unappropriated  portion for purposes of office rentals,  laboratory space
or manufacturing facilities.

         23.3.  Tenant  shall be  entitled  to any award  which is  specifically
awarded as compensation for the taking of Tenant's  personal  property which was
installed  at Tenant's  expense,  for the value of Tenant's  good will,  for any
damage to Tenant's  business and for costs of Tenant  moving to a new  location.
Except as before set forth, any award for such taking shall belong to Landlord.

         23.4.  If upon any taking of the nature  described  in this  Section 23
this Lease continues in effect,  the Landlord shall promptly  proceed to restore
the  Demised  Premises,  Building  and the Project to  substantially  their same
condition  prior to such  partial  taking.  To the extent  such  restoration  is
feasible,  as determined by Landlord in its sole  discretion,  the Rent shall be
abated  proportionately  based  upon the  extent  to which  Tenant's  use of the
Demised  Premises  has  decreased on the basis of the  percentage  of the rental
value of the  Demised  Premises  after such  taking and the rental  value of the
Demised Premises prior to such taking.

24.      Defaults and Remedies

         24.1.  Late  payment by Tenant to  Landlord  of Rent and other sums due
will cause  Landlord to incur costs not  contemplated  by this Lease,  the exact
amount of which will be extremely difficult and impracticable to ascertain. Such
costs include,  but are not limited to,  processing  and accounting  charges and
late  charges  which may be imposed on Landlord by the terms of any  mortgage or
trust deed covering the Demised Premises.  Therefore, if any installment of Rent
due from Tenant is not received by Landlord  within ten (10) days after delivery
by Landlord of a notice of delinquency  to Tenant,  Tenant shall pay to Landlord
an  

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<PAGE>

additional  sum of three percent (3%) of the overdue Rent as a late charge.  The
parties agree that this late charge represents a fair and reasonable estimate of
the costs  that  Landlord  will incur by reason of late  payment  by Tenant.  In
addition to the late charge, Rent not paid when due shall bear interest from the
5th day after date due until paid at the lesser of (i) twelve  percent (12%) per
annum or (ii) the maximum  rate  permitted  by law (such rate being  referred to
herein as the "Default Rate").

         24.2.  No payment by Tenant or receipt by Landlord  of a lesser  amount
than the Rent  payment  herein  stipulated  shall be deemed to be other  than on
account of the Rent, nor shall any  endorsement or statement on any check or any
letter  accompanying  any check or  payment  as Rent be  deemed  an  accord  and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's  right to recover the balance of such Rent or pursue any other remedy
provided.  If at any time a dispute shall arise as to any amount or sum of money
to be paid by Tenant to  Landlord,  Tenant  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 Tenant to  institute  suit for
recovery of the payment paid under protest.

         24.3. If Tenant fails to pay any sum of money required to be paid by it
hereunder,  or shall fail to perform  any other act on its part to be  performed
hereunder,   Landlord  may,   without  waiving  or  releasing  Tenant  from  any
obligations  of Tenant,  but shall not be  obligated  to,  make such  payment or
perform  such act.  All sums so paid or  incurred  by  Landlord,  together  with
interest thereon,  from the date such sums were paid or incurred, at the Default
Rate shall be payable to Landlord on demand as Additional Rent.

         24.4. The  occurrence of any one or more of the following  events shall
constitute a "Default" hereunder by Tenant:

                  24.4.1   The abandonment of the Demised Premises by Tenant;

                  24.4.2  The  failure  by  Tenant to make any  payment  of Rent
within three days after written notice that the same is due (provided,  however,
the Landlord  shall have no obligation to give Tenant  written  notice more than
two times in any twelve month period);

                  24.4.3  The  failure  by  Tenant to  observe  or  perform  any
obligation or covenant  contained herein (other than described in Section 24.4.1
and 24.4.2) to be performed by Tenant which results in a threat to the health or
safety of any  tenants or  occupants  of the  Building  or  Project,  where such
failure  shall  continue for a period of three (3) business  days after  written
notice thereof from Landlord to Tenant.

                  24.4.4  The  failure  by  Tenant to  observe  or  perform  any
obligation or covenant contained herein (other than described in Section 24.4.1,
24.4.2 and 24.4.3) to be performed by Tenant,  where such failure shall continue
for a period of thirty (30) days after written  notice  thereof from Landlord to
Tenant.  Such  notice  shall be in lieu of, and not in  addition  to, any 

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<PAGE>

notice required under California Code or Civil Procedure Section 1161;  provided
that if the nature of Tenant's default is such that it reasonably  requires more
than thirty (30) days to cure,  then Tenant shall not be deemed to be in default
if Tenant  shall  commence  such cure  within  said  thirty  (30) day period and
thereafter  diligently prosecute the same to completion provided,  however, that
such cure is  completed  no later  than sixty (60) days from the date of written
notice;

                  24.4.5  Tenant makes a general  assignment  for the benefit of
creditors;

                  24.4.6 A receiver,  trustee or custodian  is appointed  to, or
does,  take  title,  possession  or control of all,  or  substantially  all,  of
Tenant's assets;

                  24.4.7 Tenant files a voluntary  petition under the Bankruptcy
Code (or any  similar  law) or an order for  relief is  entered  against  Tenant
pursuant to a voluntary or involuntary proceeding commenced under any chapter of
the Bankruptcy Code;

                  24.4.8 Any  involuntary  petition if filed  against the Tenant
under any chapter of the Bankruptcy Code and is not dismissed within ninety (90)
days; or

                  24.4.9 Tenant's  interest in this Lease is attached,  executed
upon,  or otherwise  judicially  seized and such action is not  released  within
ninety (90) days of the action.

                  24.4.10 Tenant  defaults  beyond any  applicable  grace period
under that  certain Loan and Security  Agreement of even date  herewith,  by and
between  Tenant,  as borrower,  and  Landlord,  as lender,  or any  documents or
instruments delivered in connection therewith.

Notices  given under this  Section  24.4 shall  specify the alleged  default and
shall demand that Tenant  perform the  provisions  of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Demised  Premises.  No such notice  shall be deemed a  forfeiture  or a
termination of this Lease unless Landlord elects otherwise in such notice.

         24.5.  During the  continuance of a Default by Tenant,  with or without
notice or demand and without  limiting  Landlord in the exercise of any right or
remedy which Landlord may have, Landlord shall be entitled to terminate Tenant's
right to possession of the Demised  Premises by any lawful means,  in which case
this Lease shall terminate and Tenant shall immediately  surrender possession of
the  Demised  Premises  to  Landlord.  In such  event,  Landlord  shall have the
immediate  right to  re-enter  and remove all  persons  and  property,  and such
property  may be removed and stored in a public  warehouse  or  elsewhere at the
cost of, and for the account of Tenant,  all without service of notice or resort
to legal process and without being deemed guilty of trespass, or becoming liable
for any loss or  damage  which may be  occasioned  thereby.  In the  event  that
Landlord shall elect to so terminate this Lease, then Landlord shall be entitled
to recover  from Tenant all  damages  incurred by Landlord by reason of Tenant's
default, including:

                                       29
<PAGE>

                  24.5.1 The worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus

                  24.5.2  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 that  portion of such rental loss which Tenant  proves could have
been reasonably avoided; plus

                  24.5.3  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 which  Tenant  proves  could  have been  reasonably
avoided; plus

                  24.5.4 Any other amount  necessary to compensate  Landlord for
all the  detriment  proximately  caused  by  Tenant's  failure  to  perform  its
obligation  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 restoring
the Demised  Premises to the condition  required  under the terms of this Lease;
plus

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

As used in Sections 24.5.1 and 24.5.2 above,  "worth at the time of award" shall
be computed by allowing  interest at the rate specified in Section 24.1. As used
in Section 24.5.3 above,  the "worth at the time of the award" shall be computed
by taking the present  value of such amount,  by using the discount  rate of the
Federal  Reserve  Bank of San  Francisco  at the time of the award  plus six (6)
percentage points.

         24.6. If Landlord does not elect to terminate this Lease as provided in
this  Section,  then  Landlord  may,  from time to time,  recover all Rent as it
becomes  due under this Lease.  At any time  thereafter,  Landlord  may elect to
terminate this Lease and to recover damage to which Landlord is entitled.

         24.7. In the event  Landlord  elects to terminate  this Lease and relet
the  Demised  Premises,  it may  execute  any new lease in its own name.  Tenant
hereunder  shall have no right or authority  whatsoever to collect any Rent from
such tenant. The proceeds of any such reletting shall be applied as follows:
 
                  First, to the payment of any indebtedness  other than Rent due
         hereunder  from  Tenant to  Landlord,  including,  but not  limited to,
         storage charges or brokerage  commissions owing from Tenant to Landlord
         as the result of such reletting;

                  Second,  to the payment of the costs and expenses of reletting
         the Demised Premises,  including alterations and repairs which Landlord
         deems  reasonably  necessary and advisable  and  reasonable  attorneys'
         fees, charges and disbursements incurred by

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<PAGE>

         Landlord in  connection  with the retaking of the Demised  Premises and
         such reletting;

                  Third, to the payment of Rent and other charges due and unpaid
         hereunder; and

                  Fourth,  to the  payment  of  future  Rent and  other  damages
         payable by Tenant under this Lease.

         24.8. All rights,  options,  and remedies of Landlord contained in this
Lease shall be construed and held to be nonexclusive  and  cumulative.  Landlord
shall  have the right to  pursue  any one or all of such  remedies  or any other
remedy or relief  which may be  provided  by law,  whether or not stated in this
Lease.  No waiver of any default of Tenant  hereunder  shall be implied from any
acceptance  by  Landlord  of any Rent or other  payments  due  hereunder  or any
omission  by  Landlord  to take any action on  account  of such  default if such
default  persists or is repeated,  and no express  waiver shall affect  defaults
other than as specified in said waiver.

         24.9.  Termination  of this Lease or Tenant's  right to  possession  by
Landlord  shall not relieve  Tenant  from any  liability  to Landlord  which has
theretofore accrued or shall arise based upon events which occurred prior to the
last to occur of (i) the Term  Expiration  Date or (ii) the date  possession  of
Demised Premises is surrendered.

         24.10.  Landlord  shall  not be in  default  unless  Landlord  fails to
perform  obligations  required of Landlord  within a reasonable  time, but in no
event  shall such  failure to  continue  be for more than thirty (30) days after
written notice by Tenant specifying  wherein Landlord has failed to perform such
obligation;  provided,  however,  that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if  Landlord  commences  performance  within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.

         24.11. In the event of any default on the part of Landlord, Tenant will
give notice by  registered  or certified  mail to any  beneficiary  of a deed of
trust or  mortgagee  or a mortgage  covering  the  Demised  Premises  and to any
landlord of any lease of any building in which Demised Premises is located whose
address  shall have been  furnished,  and Tenant  shall offer such  beneficiary,
mortgagee  and/or  landlord  a  reasonable  opportunity  to  cure  the  default,
including  the minimum  amount of time  necessary  to obtain  possession  of the
Building by power of sale or a judicial action if such should prove necessary to
effect a cure,  provided the Landlord  shall have furnished to Tenant in writing
the names and addresses of all such persons who are to receive such notices.

25.      Assignment or Subletting

         25.1.  Except  as  hereinafter  provided,   Tenant  shall  not,  either
voluntarily or by operation of law, directly or indirectly,  sell,  hypothecate,
assign, pledge, encumber or otherwise transfer this Lease, or sublet the Demised
Premises or any part  thereof,  or permit or suffer the Demised  

                                       31
<PAGE>

Premises  or any part  thereof to be used or  occupied  as work  space,  storage
space, mailing privileges,  concession or otherwise by anyone other than Tenant,
Tenant's  employees  or  consultants,  or employees  of Tenant's  joint  venture
partners,  without the prior written consent of Landlord in each instance, which
consent may be withheld  in  Landlord's  sole  discretion  (except as  otherwise
provided  herein).  Notwithstanding  anything to the contrary set forth  herein,
Landlord does hereby consent to the existing sublease of portions of the Demised
Premises pursuant to that certain Industrial  Multi-Tenant Lease between Tenant,
as "Landlord," and Advanced Tissue  Sciences,  Inc., as "Tenant," dated July 15,
1996,  and that  certain  Building  Lease  Agreement,  dated August 9, 1996 (the
"Antenna Lease"),  between Tenant, as "Lessor," and Cox California PCS, Inc., as
"Lessee," for rooftop communication facilities, which leases and the obligations
of lessor thereunder are being retained by Tenant.

         25.2. If Tenant is a corporation,  the shares of which are not actively
traded upon a stock exchange or in the  over-the-counter  market,  a transfer or
series of transfers whereby  twenty-five percent (25%) or more of the issued and
outstanding   shares  of  such  corporation  are,  or  the  voting  control  is,
transferred  (but excepting  transfers  upon deaths of individual  shareholders)
from a person or persons or entity or entities which were owners thereof at time
of  execution of this Lease to persons or entities who were not owners of shares
of the  corporation  at time of  execution  of this  Lease  shall be  deemed  an
assignment  of this Lease  requiring  the  consent of  Landlord  as  provided in
Section 25.1 above.

         25.3.  If Tenant  desires to assign this Lease to any entity into which
Tenant is merged,  with which  Tenant is  consolidated,  which  acquires  all or
substantially  all of the assets of Tenant,  or which is  controlled  by,  under
common  control  with or  controls  Tenant,  provided  that the  assignee  first
executes, acknowledge and delivers to Landlord an agreement whereby the assignee
agrees to be bound by all of the covenants and agreements in this Lease and that
the assignee  shall have a net worth  (determined  in accordance  with generally
accepted  accounting  principles  consistently  applied)  immediately after such
assignment which is at least equal to the net worth (as so determined) of Tenant
immediately prior to the assignment (or as of the date hereof, if greater), then
Landlord, upon receipt of proof of foregoing shall consent to such assignment.

         25.4. In the event Tenant desires to assign,  sublease,  hypothecate or
otherwise  transfer  this Lease or sublet the  Demised  Premises,  then at least
fifteen  (15) days,  but not more than ninety (90) days,  prior to the date when
Tenant  desires the  assignment  or sublease to be  effective  (the  "Assignment
Date"), Tenant shall give Landlord a notice (the "Assignment Notice") containing
information  (including  references)  concerning  the  character of the proposed
assignee  or  sublessee,  the  Assignment  Date,  any  ownership  or  commercial
relationship  between  Tenant and the proposed  assignee or  sublessee,  and the
consideration  and all other  material  terms  and  conditions  of the  proposed
assignment  or  sublease  along  with such other  information  as  Landlord  may
reasonably  require,  all in such detail as Landlord shall  reasonably  require.
Tenant shall also tender to Landlord,  reasonable attorneys fees and other costs
or overhead  expenses incurred by Landlord in reviewing Tenants request for such
assignment.

                                       32
<PAGE>

         25.5. Landlord in making its determination as to whether consent should
be given to a proposed  assignment or sublease,  may give  consideration  to the
financial strength of such assignee or subtenant  (notwithstanding  the assignor
or sublessor remaining liable for Tenant's performance), any change in use which
such  assignee  or  subtenant  proposes to make in use of Demised  Premises  and
desire of Landlord to exercise rights under Section 25.10 to obtain cancellation
of this Lease.  In no event  shall  Landlord  be deemed to be  unreasonable  for
declining to consent to transfer to an assignee or subtenant of poor reputation,
lacking financial qualifications, or seeking change in use.

         25.6.  As  conditions  precedent to Landlord  considering  a request by
Tenant to Tenant's  transfer of rights or  subletting  of the Demises  Premises,
Landlord may require any or all of the following:

                  25.6.1  Tenant  shall  remain  fully  liable  under this Lease
during the unexpired Term;

                  25.6.2 Tenant shall provide Landlord with evidence  reasonably
satisfactory to Landlord that the value of Landlord's  interest under this Lease
will not thereby be diminished or reduced. Such evidence shall include, but need
not be limited to,  evidence  respecting  the relevant  business  experience and
financial responsibility and status of the third party concerned;

                  25.6.3 Tenant shall reimburse  Landlord for Landlord's  actual
costs and expenses,  including, without limitation,  reasonable attorneys' fees,
charges and disbursements incurred in connection with the review, processing and
documentation of such request;

                  25.6.4  If  Tenant's  transfer  of rights  or  sharing  of the
Demised Premises  provides for the receipt by, on behalf or on account of Tenant
of any  consideration  of any  kind  whatsoever  (including,  but  not by way of
limitation,  a  premium  rental  for a  sublease  or  lump  sum  payment  for an
assignment)  in excess of the rental and other  charges due Landlord  under this
Lease,  Tenant  shall be entitled to retain such excess for Tenant's own account
and benefit;

                  25.6.5 Written  agreement from any applicable third party that
in the event  Landlord  gives such third party  notice that Tenant is in default
under this Lease, such third party shall thereafter make all payments  otherwise
due Tenant  directly to Landlord,  which  payments  will be received by Landlord
without any liability to Landlord  except to credit such payment against amounts
due under the Lease,  and any such third party shall agree to attorn to Landlord
or its  successors  and assigns  should this Lease be terminated for any reason;
provided,  however that in no event shall  Landlord or its successors or assigns
be obligated to accept such attornment;

                  25.6.6 Any such  transfer  and  consent  shall be  effected on
forms reasonably approved by Landlord as to form and substance;

                                       33
<PAGE>


                  25.6.7  Tenant  shall not then be in Default  hereunder in any
respect;

                  25.6.8 Such third party's proposed use of the Demised Premises
shall be substantially the same as Tenant's Permitted Use;

                  25.6.9  Landlord  shall not be bound by any  provision  of any
agreement pertaining to Tenant's transfer of rights or subletting of the Demised
Premises;

                  25.6.10  Any  agreement  pertaining  to  Tenant's  transfer of
rights or subletting of the Premises  shall be in a form  acceptable to Landlord
in Landlord's reasonable discretion and any such agreement shall not be modified
or  amended  without  Landlord's  prior  written  consent,  which  shall  not be
unreasonably withheld;

                  25.6.11 Tenant shall deliver to Landlord one original executed
copy of any and all  written  instruments  evidencing  or  relating  to Tenant's
transfer of rights or subletting of the Demised Premises; and

                  25.6.12  A  list  of  Hazardous  Materials,  certified  by the
proposed sublessee to be true and correct,  which the proposed sublessee intends
to use or store in the Demised Premises.  Additionally,  Tenant shall deliver to
Landlord,  on or before the date any proposed  sublessee  takes occupancy of the
Demised  Premises,  all of the items  relating to  Hazardous  Materials  of such
proposed sublessee.

         25.7. Any sale, assignment,  hypothecation or transfer of this Lease or
subletting of the Demised Premises that is not in compliance with the provisions
of this Section 25 shall be void and shall, at the option of Landlord, terminate
this Lease.

         25.8. The consent by Landlord to an assignment or subletting  shall not
relieve  Tenant or any  assignees  of this  Lease or  sublessee  of the  Demised
Premises  from  obtaining  the consent of Landlord to any further  assignment or
subletting  nor shall it release  Tenant or any  assignee or sublessee of Tenant
from full and primary liability under the Lease.

         25.9. Notwithstanding any subletting or assignment, Tenant shall remain
fully and primarily liable for the payment of all Rent and other sums due, or to
become  due  hereunder,  and  for  the  full  performance  of all  other  terms,
conditions,  and covenants to be kept and performed by Tenant. The acceptance of
Rent or any other sum due  hereunder,  or the  acceptance of  performance of any
other term,  covenant,  or  condition  thereof,  from any other person or entity
shall not be deemed to be a waiver of any of the  provisions  of this Lease or a
consent to any subletting, assignment or other transfer of the Demised Premises.

         25.10. If Tenant delivers to Landlord an Assignment Notice indicating a
desire to assign this Lease to an assignee other than as provided within Section
25.3,  then  Landlord  shall have the

                                       34
<PAGE>

option,  exercisable by giving notice to Tenant at any time within ten (10) days
after Landlord's receipt of the Assignment Notice, to terminate this Lease as of
the date specified in the Assignment  Notice as the Assignment Date. If Landlord
exercises  such  option,  then  Tenant  shall  have the right to  withdraw  such
Assignment Notice by delivery to Landlord written notice of such election within
five (5) days after  Landlord's  delivery of notice  electing  to exercise  such
option to  terminate.  In the event Tenant  withdraws the  Assignment  Notice as
herein above provided,  this Lease shall continue in full force and effect as if
such Assignment  Notice as herein above provided,  this Lease,  and the term and
estate herein granted,  shall terminate as of the Assignment Date. No failure of
Landlord to exercise any such option to terminate  this Lease shall be deemed to
be Landlord's consent to the proposed assignment.

         25.11. If Tenant shall sublet the Demised Premises or any part,  Tenant
hereby immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations  under this Lease,  all rent from any subletting of all or a part of
the Demised  Premises,  and  Landlord as assignee  and as  attorney-in-fact  for
Tenant,  or a receiver  for Tenant  appointed  on  Landlord's  application,  may
collect  such rent and apply it toward  Tenant's  obligations  under this Lease;
except that, except during the continuation of a Default by Tenant, Tenant shall
have the right to collect such rent.

26.      Attorneys' Fees

         If either party commences an action against the other party arising out
of or in connection with this Lease,  the prevailing  party shall be entitled to
have and recover  from the  non-prevailing  party  reasonable  attorneys'  fees,
charges and  disbursements  and costs of suit and such reasonable fees,  changes
disbursements  and  costs  may be  included  in and as part of the  judgment  or
declaration resulting from such action.

27.      Bankruptcy

         27.1. In the event a debtor, trustee, or debtor in possession under the
Bankruptcy  Code, or other person with similar  rights,  duties and powers under
any other law,  proposes  to cure any  default  under this Lease or to assume or
assign this Lease, and is obliged to provide adequate assurance to Landlord that
(i) a default will be cured,  (ii) Landlord will be compensated  for its damages
arising from any breach of this Lease,  or (iii) future  performance  under this
Lease will  occur,  then  adequate  assurance  shall  include  any or all of the
following, as designated by Landlord:

                  27.1.1 Those acts  specified in the  Bankruptcy  Code or other
law as included  within the meaning of  adequate  assurance,  even if this Lease
does not concern a shopping center or other facility described in such laws;

                  27.1.2 A prompt cash  payment to  compensate  Landlord for any
monetary  defaults  or actual  damages  arising  directly  from a breach of this
Lease;

                                       35
<PAGE>

                  27.1.3 A cash  deposit  in an  amount  at  least  equal to the
Security Deposit as referenced in 2.1.8 originally required at time of execution
of this Lease.

                  27.1.4  The  assumption  or  assignment  of  all  of  Tenant's
interest and obligations under this Lease.

28.      Estoppel Certificate

         Tenant  shall  within ten (10) days of written  notice  from  Landlord,
execute,  acknowledge  and deliver a statement in writing  substantially  in the
form attached to this Lease as Exhibit "E" with the blanks filled in, and on any
other  form  reasonably  requested  by  a  proposed  lender  or  purchaser,  (i)
certifying  that this Lease is  unmodified  and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this Lease
as so  modified  is in full force and  effect) and the dates to which the rental
and other charges are paid in advanced,  if any, (ii)  acknowledging  that there
are not, to  Tenant's  knowledge,  any uncured  defaults on the part of Landlord
hereunder,  or  specifying  such  defaults if any are claimed and (iii)  setting
forth  such  further  information  with  respect  to this  Lease or the  Demised
Premises as may be  reasonably  requested  thereon.  Any such  statement  may be
relied upon by any  prospective  purchaser or encumbrancer of all or any portion
of the real property of which the Demised Premises are a part.  Tenant's failure
or unreasonable refusal to deliver such statement within such time shall, at the
option of Landlord,  constitute a Default  under this Lease,  and, in any event,
shall be  conclusive  upon Tenant that the Lease is in full force and effect and
without modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution.

29.      [Intentionally Omitted.]

30.      Definition of Landlord; Limitation of Landlord's Liability

         30.1. The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned,  shall be limited to mean and
include only Landlord or the  successor-in-interest of Landlord under this Lease
at the  time in  question.  In the  event  of any  transfer,  assignment  or the
conveyance of Landlord's fee title or leasehold  interest,  the landlord  herein
named (and in case of any subsequent transfers or conveyances, the then grantor)
shall be  automatically  freed  and  relieved  from,  and after the date of such
transfer,  assignment or conveyance, of all liability for the performance of any
covenants or obligations  contained in this Lease  thereafter  accruing or to be
performed by Landlord and,  without  further  agreement,  the transferee of such
title or  leasehold  shall be deemed to have  assumed  and agreed to observe and
perform any and all  obligations of Landlord  hereunder  during its ownership or
ground lease of the Demised Premises.  Landlord may transfer its interest in the
Demised  Premises or this Lease  without the consent of Tenant and such transfer
or subsequent  transfer  shall not be deemed a violation on the part of Landlord
or the then grantor of any of the terms or conditions  of this 

                                       36
<PAGE>

Lease;  provided,  however that such  transferee  shall have delivered to Tenant
written confirmation of such transferee's  assumption of Landlord's  obligations
hereunder and receipt of the Security Deposit.

         30.2.  If Landlord is in default of this Lease,  and as a  consequence,
Tenant  recovers  a money  judgment  against  Landlord,  the  judgment  shall be
satisfied only out of the proceeds of sale received on execution of the judgment
and levy  against the right,  title and interest of Landlord in the Building and
Project,  and out of rent or other income from such real property  receivable by
Landlord  or out of the  consideration  received  by  Landlord  from  the  sale,
financing,  refinancing,  or other  disposition of all or any part of Landlord's
right, title, and interest in the Building and Project.

         30.3.  Landlord shall not be personally  liable for any deficiency.  If
Landlord is a partnership,  joint venture,  or limited  liability  company,  the
partners or members of such partnership or limited  liability  company shall not
be personally  liable and no partner or member of Landlord or limited  liability
company  shall be sued or named as a party in any suit or action or  service  of
process be made  against any partner of Landlord  except as may be  necessary to
secure  jurisdiction  of the  partnership  or joint  venture.  If  Landlord is a
corporation, the shareholders,  directors, officers, employees, and/or agents of
such corporation  shall not be personally  liable and no shareholder,  director,
officer,  employee or agent of Landlord shall be sued or named as a party in any
suit or action or service of process  made  against any  shareholder,  director,
officer,  employee  or agent of  Landlord.  No partner,  shareholder,  director,
employee, or agent of Landlord shall be required to answer or otherwise plead to
any service of process and no judgment will be taken or writ of execution levied
against any partner, shareholder, director, employee or agent of Landlord.

         30.4.  Each of the covenants and agreements of this Section 30 shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or by common law and shall survive the termination of this
Lease.


31.      Project Control by Landlord

         31.1. Landlord reserves full control over the Project to the extent not
inconsistent with Tenant's  enjoyment of the Demised Premises.  This reservation
includes  but is not  limited  to right  of  Landlord  to  expand  the  Project,
subdivide the Project,  the right to grant easements and licenses to others, the
right to enter the Building and the right to maintain or establish  ownership of
the  Building  separate  from fee  title to the land on which  the  Building  is
located;  provided,  however,  that any expansion or  subdivision of the Project
shall not permanently and unreasonably  interfere with Tenant's access to or use
of the Demised  Premises and will not directly result in an increase to Tenant's
Pro Rata Share of Operating Costs of more than 5% without Tenant's prior written
consent, which shall not be unreasonably withheld, conditioned or delayed.

                                       37
<PAGE>

         31.2.  Landlord  further reserves the right to combine the Project with
any  other  project  in the area of the  Project  and owned by  Landlord  or its
affiliates;  provided,  however,  that any  combination of the Project shall not
permanently  and  unreasonably  interfere with Tenant's  access to or use of the
Demised  Premises  and will not  directly  result in an increase to Tenant's Pro
Rata Share of Operating  Costs of more than 5% without  Tenant's  prior  written
consent, which shall not be unreasonably withheld, conditioned or delayed.

         31.3.  Tenant shall,  should Landlord so request and of Landlord's sole
cost and expense for the reasonable  fees and costs incurred by Tenant  pursuant
thereto,  promptly join with  Landlord in execution of such  documents as may be
reasonably appropriate to assist Landlord to implement any such action, provided
that Tenant need not execute any document which is of nature  wherein  liability
is created in Tenant or, if by reason of the terms of such document, Tenant will
be deprived of the quiet enjoyment and use of the Demised Premises as granted by
this Lease.

         31.4. Landlord may, at any and all reasonable times during non-business
hours (or during  business  hours if Tenant so  requests),  and upon  reasonable
advance notice which, with respect to entry to Tenant's manufacturing facilities
shall be not less than  twenty-four  hours  (provided that no time  restrictions
shall apply or advance  notice  need be given if an  emergency  necessitates  an
immediate  entry),  enter the  Demised  Premises  to (a) inspect the same and to
determine  whether Tenant is in compliance with its obligations  hereunder,  (b)
supply any  service  Landlord is  required  to provide  hereunder,  (c) show the
Demised Premises to prospective  lenders,  insurers,  investors,  purchasers or,
during   the  last   year  of  the   Term,   tenants,   (d)  post   notices   of
nonresponsibility, (e) access the telephone equipment, electrical substation and
fire risers, and (f) alter,  improve or repair any portion of the Building which
Landlord  is  obligated  or  entitled  to repair  or  maintain.  Tenant  and its
designees  shall have the right to accompany  Landlord  personnel in  connection
with any entry upon the Demised  Premises,  and  Landlord  shall comply with all
other  reasonable  rules which Tenant may have in  connection  with any required
access. In connection with any such alteration,  improvement or repair, Landlord
may erect in the Demised  Premises or  elsewhere  in the Building or the Project
scaffolding  and  other  structures  reasonably  required  for  the  work  to be
performed.  In no event shall  Tenant's Rent abate as a result of any such entry
or work; provided, however, that all such work shall be done in such a manner as
to cause as little interference to Tenant as reasonably possible. Landlord shall
at all times  retain a key with which to unlock all of the doors in the  Demised
Premises. If an emergency necessitates immediate access to the Demised Premises,
Landlord may use whatever  force is necessary to enter the Demised  Premises and
any such entry to the  Demised  Premises  shall not  constitute  a  forcible  or
unlawful  entry to the Demised  Premises,  an  unlawful  detainer of the Demised
Premises,  or an eviction of Tenant  from the Demised  Premises,  or any portion
thereof.

32.      Quiet Enjoyment

                                       38
<PAGE>

         So long as Tenant is not in default,  Landlord  covenants that Landlord
or anyone acting through or under Landlord will not disturb  Tenant's  occupancy
of the Demised Premises except as permitted by the provisions of this Lease.

33.      Quitclaim Deed

         Tenant  shall  execute and deliver to  Landlord  on the  expiration  or
termination  of this Lease,  immediately  on Landlord's  request,  in recordable
form,  a  quitclaim  deed to the Demised  Premises  or such other  documentation
reasonably requested by Landlord evidencing termination of this Lease, which may
be recorded by Landlord at its sole cost and expense.

34.      Rules and Regulations

         Tenant  shall  faithfully  observe  and  comply  (and  shall  cause its
subtenants,  guests, invitees,  licensees,  agents, employees and contractors to
comply) with the Rules and Regulations and all reasonable and  nondiscriminatory
modifications thereof and additions thereto from time to time put into effect by
Landlord.   Neither  Landlord  nor  Tenant  (except  with  respect  to  Tenant's
subtenants,  guests,  invitees,  licensees,  agents,  employees and contractors)
shall be responsible for the violation or non-performance by any other tenant or
any agent, employee or invitee of Landlord of any of said Rules and Regulations.

35.      Subordination and Attornment

         35.1.  This Lease shall be subject and  subordinate  to the lien of any
mortgage,  deed of trust,  or lease in which Landlord is tenant now or hereafter
in force  against  the  Project  or the  Building  and to all  advances  made or
hereafter  to be made upon the  security  thereof  without the  necessity of the
execution  and  delivery  of any  further  instruments  on the part of Tenant to
effectuate such  subordination  provided,  however,  that as a condition to such
subordination, the lender must agree not to disturb Tenant's right of possession
upon and following a foreclosure sale so long as Tenant attorns to the lender or
new purchaser and Tenant is not in Default hereunder.

         35.2.  Notwithstanding the foregoing,  Tenant shall execute and deliver
upon demand such further instrument or instruments evidencing such subordination
of this Lease to the lien of any such mortgage or mortgages or deeds of trust or
lease in which  Landlord  is tenant as may be  reasonably  required  by Landlord
provided,  however,  that as a condition to such subordination,  the lender must
agree  not to  disturb  Tenant's  right  of  possession  upon  and  following  a
foreclosure  sale so long as Tenant  attorns to the lender or new  purchaser and
Tenant is not in default hereunder. However, if any such mortgagee,  beneficiary
or landlord under lease wherein  Landlord is tenant so elects,  this Lease shall
be deemed  prior in lien to any such lease,  mortgage,  or deed of trust upon or
including  the Demised  Premises  regardless  of date and Tenant will  execute a
statement in writing to such effect at  Landlord's  request.  If Tenant fails or
unreasonably  refuses to execute any document  reasonably  required  from Tenant
under this 


                                       39
<PAGE>

Section  within ten (10) days after  written  request  therefor,  Tenant  hereby
constitutes and appoints Landlord or its special attorney-in-fact to execute and
deliver any such  document  or  documents  in the name of Tenant.  Such power is
coupled with an interest and is irrevocable.

         35.3. In the event any proceedings are brought for  foreclosure,  or in
the event of the  exercise  of the power of sale under any  mortgage  or deed of
trust made by the Landlord  covering the Demised  Premises,  the Tenant shall at
the  election  of the  purchaser  at  such  foreclosure  or sale  attorn  to the
purchaser upon any such  foreclosure or sale and recognize such purchaser as the
Landlord under this Lease, so long as, with respect to a new purchaser, such new
purchaser  assumes all of Landlord's  obligations  under this Lease arising from
and after the date of such transfer.

36.      Surrender

         36.1. No surrender of  possession  of any part of the Demised  Premises
shall release Tenant from any of its  obligations  hereunder  unless accepted by
Landlord.

         36.2.  The  voluntary or other  surrender of this Lease by Tenant shall
not work a  merger,  unless  Landlord  consents  and  shall,  at the  option  of
Landlord,   operate  as  an  assignment  to  it  of  any  or  all  subleases  or
subtenancies.

         36.3.  The  voluntary or other  surrender  of any ground or  underlying
lease that now exists or may hereafter be executed affecting the Building or the
Project, or a mutual  cancellation,  thereof, or of Landlord's interest therein,
shall not work a merger and shall,  at the option of the successor of Landlord's
interest in the Building or Project, operate as an assignment of this Lease.

         36.4. Upon the expiration or earlier  termination of this Lease, Tenant
shall surrender the Demised Premises to Landlord broom clean and free of debris;
with all of Tenant's  property and effects removed therefrom except as otherwise
provided under Section 17.7 of this Lease;  with all  alterations,  improvements
and  fixtures  required by Landlord to be removed  from the Demised  Premises as
provided under Section 17.7 of this Lease  actually  removed and all damage as a
result of or caused by such removal repaired; and with all licenses, permits and
similar items which restrict or affect the used of the Demised Premises released
and fully terminated.

37.      Waiver and Modification

         No provision of this Lease may be modified,  amended or added to except
by an  agreement  in writing.  The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of any
subsequent  breach of the same or any other term,  covenant or condition  herein
contained.

38.      Waiver of Jury Trial and Counterclaims

                                       40
<PAGE>

         THE PARTIES  HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY
ACTION,  PROCEEDING  OR  COUNTERCLAIM  BROUGHT BY EITHER OF THE  PARTIES  HERETO
AGAINST  THE  OTHER  ON ANY  MATTERS  WHATSOEVER  ARISING  OUT OF OR IN ANY  WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE
OR OCCUPANCY OF THE DEMISED PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE.

39.      [Intentionally omitted.]

40.      [Intentionally omitted.]

41.      Hazardous Materials

         41.1.  Prohibition/Compliance.  Tenant  shall not  cause or permit  any
Hazardous Materials (as hereinafter defined) to be brought upon, kept or used in
or about the Demised  Premises,  the  Building or the  Project in  violation  of
applicable law by Tenant,  its agents,  employees,  contractors or invitees.  If
Tenant  breaches the  obligation  stated in the  preceding  sentence,  or if the
presence  of  Hazardous  Materials  results  in  contamination  of  the  Demised
Premises, the Building, the Project or any adjacent property or if contamination
of the Demised Premises,  the Building,  the Project or any adjacent property by
Hazardous  Materials  otherwise  occurs  during  the  term of this  Lease or any
extension or renewal hereof or holding over hereunder, Tenant hereby indemnifies
and shall defend and hold Landlord, its officers,  directors,  employees, agents
and contractors harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including, without limitation,  diminution
in value of the Demised  Premises or any portion of the building or the Project,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Demised  Premises,  the Building or the Project,  damages arising
from any  adverse  impact on  marketing  of space in the Demised  Premises,  the
Building  or the  Project,  and sums paid in  settlement  of claims,  reasonable
attorneys'  fees,  consultant  fees and expert fees) which arise during or after
the  Lease  term as a result  of such  contamination.  This  indemnification  of
Landlord by Tenant includes,  without  limitation,  costs incurred in connection
with any investigation of site conditions or any cleanup, remedial,  removal, or
restoration work required by any federal,  state or local governmental agency or
political subdivision because of Hazardous Materials present in the air, soil or
ground  water  above on or under the  Demised  Premises.  Without  limiting  the
foregoing,  if the presence of any Hazardous  Materials on the Demised Premises,
the  Building,  the Project or any  adjacent  property,  caused or  permitted by
Tenant results in any contamination of the Demised Premises,  the Building,  the
Project or any adjacent property,  Tenant shall promptly take all actions at its
sole expense as are necessary to return the Demised Premises,  the Building, the
Project or any adjacent property, to the condition existing prior to the time of
such contamination, provided that Landlord's approval of such action shall first
be obtained,  which approval shall not  unreasonably be withheld so long as such
actions would not potentially have any material adverse  long-term or short-term
effect on the Demised Premises, the Building or the Project.

                                       41
<PAGE>

         41.2. Business. Landlord acknowledges that it is not the intent of this
Section 41 to prohibit  Tenant from  operating  its  business  as  described  in
Section 2.1.9 above.  Tenant may operate its business according to the custom of
the industry so long as the use or presence of  Hazardous  Materials is strictly
and properly monitored according to all applicable governmental requirements. As
a material  inducement to Landlord to allow Tenant to use Hazardous Materials in
connection with its business,  Tenant agrees to deliver to Landlord prior to the
Term Commencement Date a list identifying each type of Hazardous Materials to be
present on the  Demised  Premises  and  setting  forth any and all  governmental
approvals or permits  required in connection with the presence of such Hazardous
Materials on the Demised Premises  ("Hazardous  Materials  List").  Tenant shall
deliver to Landlord an updated Hazardous Materials List at least once a year and
shall also deliver an updated list before any new Hazardous Materials is brought
onto the Demised  Premises.  Tenant shall  deliver to Landlord  true and correct
copies of the following  documents (the  "Documents")  relating to the handling,
storage,  disposal  and  emission  of  Hazardous  Materials  prior  to the  Term
Commencement  Date, or if unavailable at that time,  concurrent with the receipt
from or submission to a governmental  agency:  permits;  approvals;  reports and
correspondence;  storage and management plans, notice of violations of any laws;
plans  relating to the  installation  of any storage tanks to be installed in or
under Building or the Project  (provided,  said installation of tanks shall only
be permitted after Landlord has given Tenant its written consent to do so, which
consent may be withheld in  Landlord's  sole and absolute  discretion);  and all
closure plans or any other documents required by any and all federal,  state and
local governmental  agencies and authorities for any storage tanks installed in,
on or under the  Building  or the  Project  for the  closure of any such  tanks.
Tenant is not required,  however, to provide Landlord with any portion(s) of the
Documents  containing  information  of a  proprietary  nature  which,  in and of
themselves,  do not contain a reference to any Hazardous  Materials or hazardous
activities.  It is not the  intent of this  Section  to  provide  Landlord  with
information  which  could  be  detrimental  to  Tenant's  business  should  such
information become possessed by Tenant's competitors.  At the written request of
Landlord,  Tenant agrees that it shall enter into a written agreement with other
tenant's at the Building  concerning  the  equitable  allocation of fire control
areas (as defined in the Uniform  Building  Code, and adopted by the City of San
Diego ("UBC"))  within the Building for the storage of Hazardous  Materials.  In
the event that Tenant's use of Hazardous Materials is such that it utilizes fire
control  areas in the  Building  in excess  of  Tenant's  Pro Rata  Share of the
Building as set forth in Section 2.1.6 above,  Tenant  agrees that it shall,  at
its own  expense,  and upon the  written  request  of  Landlord,  establish  and
maintain a separate area of the Demised  Premises or the Land  classified by the
UBC as an "H" occupancy area, for the use and storage of Hazardous Materials, or
take  such  other  action  so that its  share of the fire  control  areas of the
Building is not greater than Tenant's Pro Rata Share of the Building.

         41.3.  Termination of Lease.  Notwithstanding the provisions of Section
41.1 above,  if Tenant or the  proposed  assignee or  sublessee is subject to an
enforcement  order issued by any  governmental  authority in connection with the
continued use, disposal or storage of Hazardous  Materials in material violation
of any applicable  laws, (i) Landlord shall have the right, if Tenant 

                                       42

<PAGE>

has failed to comply with such  enforcement  order within thirty (30) days after
written  notice from  Landlord of such  non-compliance  (or, if such  failure to
comply  results in an imminent  threat to the health or safety of any tenants or
occupants  of the  Building or Project,  within  three (3)  business  days after
written notice from  Landlord),  to terminate this Lease in Landlord's  sole and
absolute  discretion (with respect to any such matter involving Tenant) and (ii)
it shall not be  unreasonable  for  Landlord  to  withhold  its  consent  to any
proposed  assignment or subletting  (with respect to any such matter involving a
proposed assignee or sublessee).

         41.4.  Testing.  At any  time,  and  from  time to time  (but  not more
frequently  than once in any calendar year unless Landlord  reasonably  believes
that a  hazardous  Materials  release  or  spill  has  occurred),  prior  to the
expiration or earlier  termination of the Term, Landlord shall have the right to
conduct appropriate tests of the Demised Premises,  the Building and the Project
to demonstrate  that  contamination  has occurred as a result of Tenant's use of
the Demised Premises.  Tenant shall be solely  responsible for and shall defend,
indemnify and hold the Landlord,  its agents and  contractors  harmless from and
against any and all claims,  costs and liabilities  including actual  attorneys'
fees,  charges  and  disbursements,  arising  out of or in  connection  with any
removal,  clean up,  restoration and materials  required hereunder to return the
Demised  Premises and any other property of whatever  nature to their  condition
existing prior to the time of any such  contamination.  Tenant shall pay for the
cost of the tests of the Demised Premises.

         41.5.  Underground Tanks. If underground or other storage tanks storing
Hazardous  Materials are located on the Demised Premises or are hereafter placed
on the Demised  Premises by any party,  Tenant shall monitor the storage  tanks,
maintain appropriate records, implement reporting procedures, properly close any
underground  storage  tanks,  and  take or cause to be  taken  all  other  steps
necessary  or  required  under the  California  Administrative  Code,  Title 23,
Chapter 3, Subchapter 16,  "Underground  Storage Tank Regulations," and Division
20, Chapter 6.7 of the California Health & Safety Code,  "Underground Storage of
Hazardous Substances," as they now exist or may hereafter be adopted or amended.

         41.6. Tenant's Obligations.  Tenant's obligations under this Section 41
shall survive the  expiration or earlier  termination  of the Lease.  During any
period of time  employed by Tenant or  Landlord  after the  termination  of this
Lease to complete  the removal from the Demised  Premises of any such  Hazardous
Materials and the release and termination of any licenses or permits restricting
the use of the Demised  Premises,  Tenant shall continue to pay the full Rent in
accordance with this Lease, which Rent shall be prorated daily.

         41.7.  Definition of "Hazardous  Materials."  As used herein,  the term
"Hazardous Materials" means any hazardous or toxic substance,  material or waste
which is or becomes regulated by any local governmental authority,  the State of
California or the United States government and includes, without limitation, any
material or substance  which is (i) defined as a "hazardous  waste, " "extremely
hazardous  waste" or "restricted  hazardous waste" under Section 25515 or 25117,
or listed pursuant to Section 25140,  of the California  Health and Safety Code,
Division  20,  Chapter 6.5  (Hazardous  Waste  Control  Law),  (ii) Defined as a
"hazardous
                                       43
<PAGE>

substance"  under  Section  25316 of the  California  Health  and  Safety  Code,
Division 2, Chapter 6.8  (Carpenter-Presly-Tanner  Hazardous  Substance  Account
Act),  (iii)  defined  as  a  "hazardous  material,"  "hazardous  substance"  or
"hazardous  waste" under Section 25501 of the California Health and Safety Code,
Division 20, Chapter 6.95 (Hazardous Substances),  (v) petroleum, (vi) asbestos,
(vii)  listed under  Article 9 and defined as  hazardous or extremely  hazardous
pursuant  to  Article  11 of Title  22 of the  California  Administrative  Code,
Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to
Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317),
(ix)  defined as a  "hazardous  waste"  pursuant to Section  1004 of the Federal
Resource  Conversation  and Recovery Act, 42 U.S.C.  Section 6901,  et. seq. (42
U.S.C.  Section  6903),  or (x) defined as a "hazardous  substance"  pursuant to
Section  101  of  the  Comprehensive  Environmental  Response  Compensation  and
Liability Act, 42 U.S.C. Section 9601 et. seq. (42 U.S.C. Section 9601).

42.      Option to Extend Term.

         Tenant  shall  have the option to extend the term of the Lease upon the
following terms and conditions:

         42.1.  Tenant  shall  have  five  (5)  consecutive  options  (each,  an
"Extension  Option")  to extend  the term of this  Lease for five (5) years each
(each,  an  "Extension  Term") on the same  terms and  conditions  as the Lease.
During any Extension Term, Basic Annual Rent shall be payable at the Market Rate
(as defined  below),  but in no event less than the Basic Annual Rent payable on
the date immediately preceding the commencement such Extension Term, as adjusted
pursuant  to  Section 6 hereof.  Basic  Annual  Rent  shall be  adjusted  on the
commencement of each Extension Term and on each one (1) year  anniversary of the
commencement such Extension Term in accordance with Section 6 above.

         42.2.  Extension Options are personal to Matrix  Pharmaceuticals,  Inc.
and its corporate successors and are not assignable separate and apart from this
Lease.

         42.3.  Extension  Options are  conditional  upon Tenant giving Landlord
written  notice of its election to exercise each  Extension  Option at least one
(1) year prior to the end of the  expiration of the initial term of the Lease or
the expiration of any Extension Term.

         42.4.  Notwithstanding  anything  set  forth  above  to  the  contrary,
Extension  Options shall not be in effect and Tenant may not exercise any of the
Extension Options:

                  42.4.1  during  any  period of time that  Tenant is in default
under any provision of this Lease; or

                  42.4.2 if Tenant has been in default  under any  provision  of
this  Lease  three (3) or more  times,  whether or not the  defaults  are cured,
during the twelve (12) month  period  immediately  prior to the date that Tenant
intends to exercise an Extension Option, whether or not 

                                       44
<PAGE>

the defaults are cured.

         42.5.  The  period of time  within  which any  Extension  Option may be
exercised shall not be extended or enlarged by reason of the Tenant's  inability
to exercise  the  Expansion  Option  because of the  provisions  of Section 42.4
above.

         42.6. The Extension  Option shall  terminate and be of no further force
or effect even after  Tenant's due and timely  exercise of an Extension  Option,
if,  after such  exercise,  but prior to the  commencement  date of an Extension
Term, (1) Tenant fails to timely cure any default by Tenant under this Lease; or
(2) Tenant has defaulted three (3) or more times during the period from the date
of the exercise of an Extension  Option to the date of the  commencement  of the
Extension Term, whether or not such defaults are cured.

         42.7.  As used herein,  "Market Rate" shall mean the price that a ready
and willing tenant would pay, at  commencement of the Extension term, as monthly
base rent to a ready and willing  landlord if such space were  offered for lease
on the open  market for a  reasonable  period of time and be the sum of the fair
market monthly rental rate per rentable  square foot  multiplied by the Rentable
Area of the Premises  determined as follows:  (a) as mutually agreed by Landlord
and Tenant within ten (10) days of  Landlord's  delivery to Tenant of Landlord's
opinion of the Market Rate for the first year of the Extension  term  ("Landlord
Rent Notice")(which shall be delivered to Tenant within ten (10) days of receipt
of Tenant's  written  Extension  Notice);  or (b) in the event that Landlord and
Tenant are unable to so agree  within such ten (10) day period,  the Market Rate
shall be determined  by  concurrent  appraisals  pursuant to  subparagraph  42.8
below.  The Market Rate shall be determined by  considering  (i) the highest and
best use of the  Premises,  (ii) the duration of the Extension  Term,  (iii) the
quality  and  prestige of the  Premises  (as then  improved  and  maintained  as
required by the terms and conditions of this Lease),  (iv) recent monthly rental
rates for  buildings of similar size and  location,  (v)  anticipated  CPI Index
changes from the date of the Market Rate determination to the date of the actual
Extension  term  commencement;  (vi) all other  relevant terms and conditions of
this Lease;  provided,  however,  that in no event shall the Market Rate be less
than the  Basic  Annual  Rent  payable  on the date  immediately  preceding  the
commencement such Extension Term, as adjusted pursuant to Section 6 hereof.

         42.8.  In the event that  Landlord  and Tenant are unable to agree upon
the Market rate within the required  ten (10) day period  described  above,  the
Market Rate shall be determined as follows:

                  42.8.1 If Tenant  rejects the Market Rate proposed by Landlord
in  Landlord's  Rent Notice,  Landlord and Tenant shall attempt to agree in good
faith upon a single  appraiser  not later than five (5) days after the  Landlord
receives  notice of  Tenant's  rejection  of  Landlord's  proposed  Market  Rate
("Tenant's  Rejection  Notice"),  which date of receipt shall be within ten (10)
days of Landlord's  delivery of Landlord's  Rent Notice.  If Landlord and Tenant
are  unable to agree  upon a single  appraiser  within  such time  period,  then
Landlord  and Tenant shall each  appoint one  appraiser  not later than ten (10)
days after Landlord's receipt of Tenant's Rejection Notice. 

                                       45
<PAGE>

Within five (5) days  thereafter,  the two appointed  appraisers shall appoint a
third appraiser. Landlord and Tenant shall instruct the appraiser(s) to complete
the  determination of the Market Rate not later than fifteen (15) days after all
appraisers have been appointed.

                  42.8.2  If either  Landlord  or Tenant  fails to  appoint  its
appraiser  within the prescribed  time period,  the single  appraiser  appointed
shall  determine  the  Market  Rate of the  Premises  for the first  year of the
Extension Term. If both parties fail to appoint appraisers within the prescribed
time  periods,  then the first  appraiser  thereafter  selected by a party shall
determine  the Market Rate of the Premises  for the first year of the  Extension
Term.

                  42.8.3 Landlord and Tenant shall each bear the cost of its own
appraiser  and the parties  shall share  equally the cost of the single or third
appraiser,  if  applicable.  All  appraisers so designated  herein shall have at
least five (5) years' experience in the appraisal of similar office buildings in
the San Diego area and shall be members of  professional  organizations  such as
MAI or equivalent.

                  42.8.4 If a single  appraiser is chosen,  then such  appraiser
shall determine the Market Rate of the Premises for the first year of the Option
Term.  Otherwise,  the  Market  Rate of the  Premises  for the first year of the
Option Term shall be the  arithmetic  average of (2) of the three (3) appraisals
which are closest in amount, and the third appraisal shall be disregarded.

43.      Right of First Offer to Purchase.

         Tenant  shall  have a right of first  offer (the  "Purchase  Right") to
purchase the Building upon the following terms and conditions:

         43.1. In the event that Landlord desires to sell the Building,  no less
than ten (10) days prior to actively  marketing  the  Building,  Landlord  shall
deliver to Tenant  written  notice (the "Sale  Notice") of Landlord's  intent to
sell the Building,  together with the terms and conditions  under which Landlord
is  prepared to sell the  Building.  Tenant  shall have ten (10) days  following
delivery  of the Sale  Notice to deliver to  Landlord  written  notification  of
Tenant's  exercise of the Purchase  Right upon the terms and  conditions  of the
Sale Notice.  In the event Tenant fails to timely deliver such notice,  or if on
the date  which is thirty  (30)  days  after the  delivery  of the Sale  Notice,
Landlord  and Tenant have failed to agree upon any of the terms of the  purchase
agreement  for the Building  after  negotiating  in good faith,  Tenant shall be
deemed to have  waived any right to  purchase  the  Building  and  Landlord  may
thereafter  sell the  Building  to any third party free of the  Purchase  Right;
provided,  however,  that in the event  Tenant does not  purchase  the  Building
following timely exercise of the Purchase Right due to a failure of Landlord and
Tenant to agree upon the terms of the  purchase  agreement,  any  purchaser  who
subsequently  acquires title to the Building shall acquire such title subject to
the Purchase Right and Tenant's rights in connection therewith.

         43.2.  In the event  that  Tenant  and  Landlord  enter into a purchase
agreement  following 

                                       46
<PAGE>

the timely exercise of the Purchase Right, the purchase and sale of the Building
shall close no sooner than the date which is nine (9) months,  and no later than
the date which is twelve (12) months,  following receipt by Landlord of Tenant's
election to exercise the Purchase Right.

         43.3.  Notwithstanding  the above,  the Purchase  Right shall not be in
effect and may not be exercised by Tenant  during any period of time that Tenant
is in  Default  under  any  provision  of the  Lease  (provided,  however,  that
notwithstanding  the  foregoing  Tenant may, as a condition  to  exercising  the
Purchase  Right,  cure any  Default  due to failure to any Rent or other sum due
Landlord).

         43.4.  The Purchase Right is personal to Matrix  Pharmaceuticals,  Inc.
and its corporate  successors and may not be transferred separate and apart from
this Lease or to any other person or entity (including,  without limitation, any
successor tenant).

         43.5. The Purchase Right shall  terminate and be of no further force or
effect upon the expiration or earlier termination of the Term.

         43.6. The Purchase Right shall  terminate and be of no further force or
effect even after Tenant's due and timely  exercise of the Purchase  Right,  if,
after such  exercise,  but prior to the closing of the  purchase and sale of the
Building,  (1) Tenant fails to timely cure any Default by Tenant under the Lease
(provided,  however,  that  notwithstanding  the  foregoing  Tenant  may,  as  a
condition  to the closing of the  purchase  and sale of the  Building,  cure any
Default due to failure to any Rent or other sum due Landlord); or (2) Tenant has
defaulted three (3) or more times, whether or not such Defaults are cured.

44.      Miscellaneous

         44.1. Terms and Headings.  Where applicable in this Lease, the singular
includes the plural and the masculine or neuter includes the masculine, feminine
and neuter.  The section headings of this Lease are not a part of this Lease and
shall have no effect upon the construction or interpretation of any part hereof.

         44.2.   Examination  of  Lease.   Submission  of  this  instrument  for
examination  or signature  by Tenant does not  constitute  a  reservation  of or
option  for  lease,  and it is not  effective  as a  lease  or  otherwise  until
execution by and delivery to both Landlord and Tenant.

         44.3.  Time.  Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is a factor.

         44.4.   Covenants  and   Conditions.   Each  provision  of  this  Lease
performable by Tenant shall be deemed both a covenant and a condition.

         44.5.  Consents.  Whenever  consent  or  approval  of  either  party is
required,  that party 

                                       47
<PAGE>

shall not  unreasonably  withhold  such  consent or  approval,  except as may be
expressly set forth to the contrary.

         44.6.  Entire  Agreement.  The terms of this Lease are  intended by the
parties as a final  expression of their  agreement  with respect to the terms as
are included  herein,  and may not be  contradicted  by evidence of any prior or
contemporaneous agreement. The Exhibits are incorporated into this Lease and the
Lease and the Exhibits constitute a single document.

         44.7. Severability.  Any provision of this Lease which shall provide to
be invalid, void, or illegal in no way affects, impairs or invalidates any other
provision  hereof,  and such  other  provisions  shall  remain in full force and
effect.

         44.8.  Recording.  Either  party may,  but shall not be  obligated  to,
record a short form  memorandum  hereof upon  reasonable  advance  notice to the
other party,  which shall be executed in  recordable  form and otherwise in form
satisfying to Landlord  within ten (10) business days after receipt of the other
party's  written  request  therefor.  Neither  parties  shall record this Lease.
Tenant shall be  responsible  for the cost of recording any Memorandum of Lease,
including  any  transfer  or  other  taxes  incurred  in  connection  with  said
recordation.

         44.9. Impartial  Construction.  The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.

         44.10.  Inurement.  Each of the  covenants,  conditions  and agreements
herein contained shall inure to the benefit of and shall apply to and be binding
upon  the  parties  hereto  and  their  respective  heirs,  legatees,  devisees,
executors,  administrators,  successors,  assigns, sublessees, or any person who
may come into  possession  of said  Demised  Premises or any part thereof in any
manner  whatsoever.  Nothing in this Section  43.10  contained  shall in any way
alter the provisions against assignment or subletting in this Lease provided.

         44.11. Notices. Any notice, consent,  demand, bill, statement, or other
communication required or permitted to be given hereunder must be in writing and
may be given by personal delivery,  reputable  overnight courier or by mail, and
if given by mail shall be deemed sufficiently given two (2) days after time when
deposited in United States Mail is sent by registered or certified  mail, and if
given by other means shall be deemed given when received, addressed to Tenant or
Landlord at the addresses shown in Sections 2.1.10 and 2.1.11 of the Basic Lease
Provisions.  Either  party may,  by notice to the other  given  pursuant to this
Section, specify additional or different addresses for notice purposes.

         44.12. Jurisdiction. This Lease has been negotiated and entered into in
the State of  California  and shall be governed  by,  construed  and enforced in
accordance  with the laws of the State of California,  applied to contracts made
in California to be wholly performed in California.

         44.13.  Authority.  That individual or those  individuals  signing this
Lease guarantee,  

                                       48
<PAGE>

warrant  and  represent  that said  individual  or  individuals  have the power,
authority  and legal  capacity  to sign this  Lease on behalf of and to bind all
entities,  corporations,  partnerships,  joint venturers or other  organizations
and/or entities on whose behalf said individual or individuals have signed.

         IN WITNESS  WHEREOF,  the parties hereto have executed this Lease as of
the date first above written.

                                    Landlord:

                                    ARE - 4757 NEXUS CENTRE, LLC,
                                    a Delaware limited liability company

                                    By:  Alexandria Real Estate Equities,  L.P.,
                                         a   Delaware    limited    partnership,
                                         managing member

                                         By: ARE-QRS     Corp.,    a    Maryland
                                             corporation, general partner


                                               By:  /s/ Joel S. Marcus
                                                    ----------------------------
                                                    Name: Joel S. Marcus
                                                          ----------------------
                                                    Its: Chief Executive Officer
                                                         -----------------------





                                     Tenant:

                                     MATRIX PHARMACEUTICAL, INC.,
                                     a Delaware corporation


                                     By: /s/ Ronald P. Lucas
                                         -----------------------------
                                     Name: Ronald P. Lucas
                                           ---------------------------
                                     Its: Vice President of Operations
                                          ----------------------------

                                       49

<PAGE>

                                    EXHIBITS

            EXHIBIT "A"       LAND
            
            EXHIBIT "B"       PROJECT
            
            EXHIBIT "C"       RULES AND REGULATIONS
            
            EXHIBIT "D"       TENANT'S PERSONAL PROPERTY
            
            EXHIBIT "E"       ESTOPPEL CERTIFICATE
            



                                       50
<PAGE>



                                   Exhibit "A"

                                      LAND

                  Parcel 1 of Parcel Map 17892, in the City of San Diego, County
of San Diego,  State of California,  according to Map filed in the Office of the
County Recorder of San Diego County on August 6, 1997.



                                       A-1

<PAGE>


                                   Exhibit "B"

                                     PROJECT


                  Parcels 1 and 2 of Parcel Map 17892, in the City of San Diego,
County of San Diego,  State of California,  according to Map filed in the Office
of the County Recorder of San Diego County on August 6, 1997.



                                      B-1

<PAGE>

                                   EXHIBIT "C"

                              RULES AND REGULATIONS


                                       -1-

         No  awnings  shall be  attached  to the  outside  walls of the  Demised
Premises or Building.

                                       -2-

         Tenant shall not install any  loudspeaker  or other devices on the roof
or  exterior  walls of the  Demised  Premises  or  Building.  Tenant  shall  not
interfere  with  radio or  television  broadcasting  or  reception  outside  the
Building from or in the Premises.

                                       -3-

         The sashes,  sash doors,  skylights,  windows and doors that reflect or
admit light and air into the halls,  passageways  or other public  places in the
Demised  Premises or Building shall not be covered or obstructed,  nor shall any
bottles,  parcels or other  articles be placed on the  windowsills.  Neither the
interior  nor  the  exterior  of  any  windows  shall  be  coated  or  otherwise
sunscreened without Landlord's prior written consent.

                                       -4-

         With the exception of signage existing on the Term  Commencement  Date,
no sign,  advertisement  or notice  shall be  exhibited,  painted  or affixed by
Tenant on any part of, so as to be seen from the outside of the Building without
Landlord's  prior  written  consent.  In the event of Tenant's  violation of the
foregoing, Landlord may remove the same without any liability and may charge the
expense incurred in such removal to Tenant.

                                       -5-

         Tenant  shall  store all of its trash and  garbage  within the  Demised
Premises or in other facilities provided by Landlord.  Tenant shall not place in
any trash box or  receptacle  any  material  which  cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal.

                                       -6-

         Tenant  assumes any and all  responsibility  for protecting the Demised
Premises or Building from theft,  robbery and pilferage,  which includes keeping
doors  locked and other  means of entry into the  Demised  Premises  or Building
closed.

                                       -7-

         Landlord  shall  have card key  access to the  Building  for  emergency
purposes. Tenant must, upon the termination of its tenancy, give to Landlord all
keys  pertaining to the Demised  Premises and the Building,  and in the event of
the  loss of any  keys so  furnished,  Tenant  shall  pay  Landlord  the cost of
replacing  same or of changing  the lock or locks  opened by such lost key(s) if
Landlord shall deem it necessary to make such change.

                                       -8-

         No windows or other air  conditioning or heating units or other similar
apparatus shall be installed or used by Tenant without  Landlord's prior written
consent.

                                       -9-

         The water and wash  closets and other  plumbing  fixtures  shall not be
used for any  purpose  other than those for which they were  constructed  and no
sweepings,  rubbish,  rags or other  substances  shall be  thrown  therein.  All
damages  resulting  from any misuse of the  fixtures by Tenant of its  servants,
employees, agents, visitors or licensees shall be borne by Tenant


                                       1
<PAGE>


                                      -10-

         Landlord  reserves  the right to  inspect  all safes or other  heavy or
bulky  equipment or articles,  the weight of which may exceed the floor load for
which the Building is designed, or such equipment or articles as may violate any
of the provisions of the Lease of which these Rules and  Regulations are a part.
Tenant  shall not use any  machinery  or other  bulky  articles  in the  Demised
Premises or Building,  which by its weight might injure the floor of the Demised
Premises or Building.

                                      -11-

         Neither  Tenant  nor  its  servants,  employees,  agents,  visitors  or
licensees shall at any time bring or keep upon the Demised  Premises or Building
any flammable, combustible or explosive fluid, chemical or substance, except for
a reasonable quantity of such material  reasonably  necessary for the conduct of
Tenant's trade or business.

                                      -12-

         Tenant shall not, without  Landlord's prior written consent,  occupy or
permit any  portion of the  Demised  Premises or Building to be occupied or used
for other than as provided under Section 2.1.9. The Demised Premises or Building
shall not be used for lodging or sleeping.

                                      -13-

         Tenant shall not make, or permit to be made, any unseemly or disturbing
noises, or disturb or interfere with neighboring  buildings or premises or those
having business with it by the use of any musical instrument, radio, phonographs
or  unusual  noise,  or in any  other  way.  Neither  Tenant  nor its  servants,
employees,  agents,  visitors or  licensees  shall throw  anything out of doors,
windows or skylights or down the passageways.

                                      -14-

         No birds or non-laboratory animals of any kind shall be brought into or
kept in or about the Demised Premises or Building except as required pursuant to
the  American  with  Disabilities  Act (ADA),  and no  cooking  shall be done or
permitted  by Tenant in its  Premises,  except  that  provided  for in  Tenant's
cafeteria (or similar facility), if any, for the preparation of coffee, tea, hot
chocolate,  pastries, sandwiches and similar microwaveable items for Tenant, its
employees  and  visitors.  Tenant  shall  nor  cause or permit  any  unusual  or
objectionable odors to emanate from the Building.

                                      -15-

         Except in Tenant's  lunch room,  no vending or coin  operated  machines
shall be placed within the Demised Premises or Building without Landlord's prior
written consent.


                                       2
<PAGE>


                                      -16-

         Landlord  shall have the right to prohibit  any  advertising  by Tenant
which, in Landlord's  opinion,  tends to impair the reputation of the Project or
its desirability as an office/laboratory  building, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.  Nothing in
this  provision,  however,  shall be construed to prevent Tenant from installing
reasonable  signage at the Building  identifying Tenant provided such signage is
located at a place and is of a size and is constructed of a material  acceptable
to Landlord.

                                      -17-

         Canvassing,  soliciting and peddling in the Building are prohibited and
Tenant shall cooperate to prevent same.

                                      -18-

         Landlord  reserves  the  right to  exclude  or expel  from the  Demised
Premises or Building any person who, in the judgment of Landlord, is intoxicated
or under the influence of liquor or drugs, or who shall in any manner do any act
in violation of the Rules and Regulations of the Building.

                                      -19-

         Landlord  and Tenant agree that there shall be no consent to any waiver
of any of these Rules or  Regulations  unless said waiver is done in writing and
acknowledged by Landlord and Tenant.

                                      -20-

         Landlord reserves the right at any time to change or rescind any one or
more of these Rules or Regulations, or to make such other and further reasonable
Rules and Regulations as in Landlord's reasonable judgment may from time to time
be necessary for the  management,  safety,  care and  cleanliness of the Demised
Premises or Building, and for the preservation of good order therein, as well as
for the  convenience  of other  occupants and tenants of the Building.  Landlord
shall not be  responsible  to  Tenant  herein  or to any  other  person  for the
non-observance of the Rules and Regulations by any other tenant or other person.
Tenant  shall be deemed to have read  these  Rules and  Regulations  and to have
agreed to abide by them as a condition to its occupancy of the Demised  Premises
and Building.

                                      -21-

         These  Rules  and  Regulations  are in  addition  to,  and shall not be
construed  to in any way  modify  or  amend,  in whole or in  part,  the  terms,
covenants, agreements and conditions of Tenant's lease of its Premises.

                                      -22-

         Tenant shall be responsible  for the observance of all of the foregoing
Rules  and  Regulations  by  Tenant's  employees,  agents,  clients,  customers,
invitees and guests.


                                       3
<PAGE>


                                  Exhibit "D"

                           EXCLUDED PERSONAL PROPERTY
                           --------------------------

                 4757 NEXUS CENTRE DRIVE, SAN DIEGO, CALIFORNIA

 ITEM                  DESCRIPTION                             QTY.    LOCATION

  1      All conference room furniture and chairs
  2      All lab stools and chairs
  3      All laboratory equipment and glassware
  4      All lunch room furniture and chairs
  5      All manufacturing process equipment
  6      All office cubicle furniture and chairs
  7      All patio furniture and chairs
  8      All plug-in refrigerators and freezers
  9      All stand-alone corrosive cabinets
 10      All stand-alone flammable cabinets
 11      Amsco single door autoclave                            1      117
 12      Baker Edgegard Hood                                    1      188
 13      Baker Edgegard Hood E6552                              1
 14      Baker Stenigard Hood                                   1      118
 15      Bike Lockers                                           1
 16      BioChem Garb Hood BC-6                                 1      147
 17      BloChem Garb Hood BC-8                                 1      147
 18      BioKlone 2 bio-contamination hood                      1      143
 19      Captair Labx Ductless Filtration Hood                  1      152
 20      Continental 2-door refrigerator                        1      143
 21      Continental 3-door refrigerator (MEIN 11537)           1      115
 22      Continental refrigerator w/wheels                      1      117
 23      Forklift-Komatsu                                       1
 24      Forma incubator, large, model 3919                     2      143
 25      Forma incubator, small, model 3546                     3      143
 28      Gallenkamp oven                                        1
 27      Gelman Filter Housing                                  3
 28      Hamilton SafeAir Hood                                  1      143
 29      Hazardous materials storage                            5      Outside
 30      Mobile laminar flow hood                               3


<PAGE>

                                  Exhibit "D"

                           EXCLUDED PERSONAL PROPERTY
                           --------------------------

                 4757 NEXUS CENTRE DRIVE, SAN DIEGO, CALIFORNIA

ITEM                  DESCRIPTION                              QTY.    LOCATION

 31      Portable particle counter- Met one                     1
 32      Refrigerator recovery unit (maint. tool)               1
 33      Remote particle counter - Met One                     12
 34      Scotsman Icemaker (E-144)                              1      117
 35      Signage for Reception Area
 38      Stainless steel racks
 37      Stainless steel trays                                  1
 38      Sterilizer, Kuhlman                                    1
 39      Storage Trailers                                       2      Outside
 40      Telephone System (Siemens)


<PAGE>
                                  Exhibit "E"

                              ESTOPPEL CERTIFICATE

         THIS TENANT ESTOPPEL CERTIFICATE ("Certificate"), dated as of ________,
19__, is executed by _____________ ("Tenant") in favor of Alexandria Real Estate
Equities,  Inc., a Maryland corporation,  together with its nominees,  designees
and assigns (collectively,  "Buyer"),  and in favor of _______________  together
with its nominees, designees and assigns (collectively, "Lender").

                                    RECITALS

         A. Buyer and _____________ ("Landlord"), have entered into that certain
Purchase  and  Sale  Agreement  and  Joint  Escrow  Instructions,  dated  as  of
_________,  19__  (the  "Purchase  Agreement"),  whereby  Buyer  has  agreed  to
purchase,  among other things, the improved real property located in the City of
_________, County of _________, State of __________, more particularly described
on Exhibit "A" attached to the Purchase Agreement (the "Property").

         B. Tenant and Landlord have entered into that certain Lease  Agreement,
dated  as  of  ___________   (together  with  all   amendments,   modifications,
supplements, guarantees and restatements thereof, the "Lease"), for a portion of
the Property.

         C.  Pursuant  to the Lease,  Tenant has agreed that upon the request of
Landlord,  Tenant would execute and deliver an estoppel  certificate  certifying
the status of the Lease.

         D. In connection  with the Purchase  Agreement,  Landlord has requested
that Tenant execute this Certificate with an understanding that Lender will rely
on the representations and agreements below in granting to Buyer a loan.

         NOW, THEREFORE, Tenant certifies, warrants, and represents to Buyer and
Lender as follows:

         Section 1. Lease.


<PAGE>

         Attached hereto as Exhibit "1" is a true,  correct and complete copy of
the Lease,  including  the  following  amendments,  modifications,  supplements,
guarantees  and  restatements  thereof,  which  together  represent  all  of the
amendments,  modifications,  supplements,  guarantees and restatements  thereof:
________________________________________________________________________________
_______________________________________________________________________________.
(If none, please state "None.")

        Section 2. Leased Premises.

         Pursuant  to the Lease,  Tenant  leases  those  certain  premises  (the
"Leased  Premises")  consisting  of  approximately   ________________   (______)
rentable square feet within the Property, as more particularly  described in the
Lease.  In  addition,  pursuant  to the  terms  of the  Lease,  Tenant  has  the
[non-exclusive]  right to use [_____ parking spaces/the parking area] located on
the Property during the term of the Lease.  [Cross-out the preceding sentence or
portions thereof if inapplicable.]

        Section 3. Full Force of Lease.

         The Lease has been duly  authorized,  executed and delivered by Tenant,
is in full force and effect has not been  terminated  and  constitutes a legally
valid instrument,  binding and enforceable against Tenant in accordance with its
terms,  subject  only to  applicable  limitations  imposed by laws  relating  to
bankruptcy and creditor's rights.

        Section 4. Complete Agreement.

         The Lease  constitutes  the  complete  agreement  between  Landlord and
Tenant for the Leased Premises and the Property, except as modified by the Lease
amendments noted above (if any), has not been modified, altered or amended.

        Section 5. Acceptance of Leased Premises.

         Tenant has accepted  possession  and is currently  occupying the Leased
Premises.

        Section 6. Lease Term.


                                       2
<PAGE>

        The  term  of  the  Lease  commenced  on  _______________  and  ends  on
_______________, subject to the following options to extend:____________________
____________________________________________________________________.
(If none, please state "None.")

        Section 7. Purchase Rights.

        Tenant has no option,  right of first refusal,  right of first offer, or
other right to acquire or purchase all or any portion of the Leased  Premises or
all or any portion of, or interest in, the Property, except as follows:_________
________________________________________________________________________________
______________________.
(If none, please state "None.")

        Section 8. Rights of Tenant.

        Except as expressly stated in this Certificate, Tenant:

        (a) has no right to renew or extend the term of the Lease;

        (b) has no  option  or other  right to  purchase  all or any part of the
Leased Premises or all or any part of the Property;

        (c) has no right, title, or interest in the Leased Premises,  other than
as Tenant under the Lease.

        Section 9. Rent.

        (a) The obligation to pay rent under the Lease commenced on ___________.
The rent  under the  Lease is  current,  and  Tenant  is not in  default  in the
performance of any of its obligations under the Lease.

         (b) Tenant is currently  paying base rent under the Lease in the amount
of _____________________  Dollars ($________) per month. Tenant has not received
and is not, presently,  entitled to any abatement, refunds, rebates, concessions
or forgiveness of rent or other  charges,  free rent,  partial rent, or credits,
offsets or reductions in rent, except as follows: ______________________________
________________________________________________________________________________
___________________________.


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<PAGE>

(If none, please state "None.")

        (c) Tenant's estimated share of operating expenses, common area charges,
insurance,  real  estate  taxes and  administrative  and  overhead  expenses  is
___________  percent  (_______%)  and is  currently  being  paid at the  rate of
_______________________ Dollars ($________) per month, payable to:______________
____________________________________________________________________.

        (d) There are no  existing  defenses or offsets  against  rent due or to
become due under the terms of the Lease,  and there  presently  is no default or
other  wrongful  act or  omission by Landlord  under the Lease or  otherwise  in
connection with Tenant's occupancy of the Leased Premises,  nor is there a state
of facts  which  with the  passage of time or the giving of notice or both could
ripen into a default on the part of Tenant,  or to the best knowledge of Tenant,
could  ripen into a default on the part of Landlord  under the Lease,  except as
follows: _______________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________.
(If none, please state "None.")

        Section 10. Security Deposit.

        The amount of Tenant's security deposit held by Landlord under the Lease
is ___________________ Dollars ($ ___________

        Section 11. Prepaid Rent.

         The amount of prepaid  rent,  separate  from the security  deposit,  is
___________________________  Dollars ($_______), covering the period from ______
to ______.

        Section 12. Insurance.

        All  insurance,  if any,  required to be  maintained by Tenant under the
Lease is presently in effect.

        Section 13. Pending Actions.


                                       4
<PAGE>

        There is not pending or, to the knowledge of Tenant,  threatened against
or contemplated by the Tenant, any petition in bankruptcy,  whether voluntary or
otherwise,  any assignment for the benefit of creditors, or any petition seeking
reorganization or arrangement under the federal  bankruptcy laws or those of any
state.

        Section 14. Tenant Improvements.

         As of the date of this Certificate,  to the best of Tenant's knowledge,
Landlord has  performed  all  obligations  required of Landlord  pursuant to the
Lease;  no offsets,  counterclaims,  or defenses of Tenant under the Lease exist
against Land- lord; and no events have occurred  that,  with the passage of time
or the giving of notice, would constitute a basis for offsets, counterclaims, or
defenses against Landlord, except as follows:___________________________________
________________________________________________________________________________
_________________________.
(If none, please state "None.")

        Section 15. Assignments by Landlord.

        Tenant has received no notice of any assignment, hypothecation or pledge
of the Lease or rentals under the Lease by Landlord.  Tenant hereby  consents to
an  assignment  of the lease and rents to be  executed  by  Landlord to Buyer or
Lender in connection  with the Loan and  acknowledges  that said assignment does
not violate the provisions of the Lease.  Tenant  acknowledges that the interest
of the Landlord  under the Lease is to be assigned to Buyer or Lender  solely is
security for the purposes specified in said assignment and Buyer or Lender shall
have no  duty,  liability  or  obligation  whatsoever  under  the  Lease  or any
extension  or renewal  thereof,  either by virtue of said  assignment  or by any
subsequent  receipt or  collection of rents  thereunder,  unless Buyer or Lender
shall specifically undertake such liability in writing.  Tenant agrees that upon
receipt of a written  notice from Buyer or Lender of a default by Landlord under
the Loan,  Tenant will thereafter pay rent to Buyer or Lender in accordance with
the terms of the Lease.

        Section 16. Assignments by Tenant.

        Tenant has not sublet or  assigned  the Leased  Premises or the Lease or
any portion  thereof to any sublessee or assignee.  No one except Tenant and its


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<PAGE>

employees will occupy the Leased Premises. The address for notices to be sent to
Tenant is as set forth in the Lease.

        Section 17. Environmental Matters.

        The  operation  and use of the  Leased  Premises  does not  involve  the
generation,  treatment, storage, disposal or release into the environment of any
hazardous  materials,  regulated materials and/or solid waste, except those used
in the  ordinary  course  of  operating  a  retail  store or  otherwise  used in
accordance with all applicable laws.

        Section 18. Succession of Interest.

        Tenant agrees that, in the event Buyer or Lender succeeds to interest of
Landlord under the Lease:

        (a) Buyer or Lender  shall not be liable for any act or  omission of any
prior landlord (including Landlord);

        (b) Buyer or Lender  shall not be liable for the return of any  security
deposit;

        (c) Buyer or Lender  shall not be bound by any rent or  additional  rent
which Tenant might have prepaid under the Lease for more than the current month;

        (d)  Buyer  or  Lender  shall  not  be  bound  by  any   amendments   or
modifications of the Lease made without prior consent of Buyer or Lender;

        (e) Buyer or Lender  shall not be  subject to any  offsets  or  defenses
which Tenant might have against any prior landlord (including Landlord); or

        (f) Buyer or Lender  shall not be liable  under the Lease to Tenant  for
the  performance  of  Landlord's  obligations  under the Lease  beyond  Buyer or
Lender's interest in the Property.

        Section 19. Notice of Default.

        Tenant  agrees to give  Buyer and Lender a copy of any notice of default
under the Lease served upon Landlord at the same time as such notice is given to


                                       6
<PAGE>

the Landlord.  Tenant  further  agrees that if Landlord  shall fail to cure such
default within the applicable grace period,  if any, provided in the Lease, then
Buyer or Lender  shall have an  additional  sixty (60) days within which to cure
such  default,  or if such  default  cannot be cured  within such sixty (60) day
period,  such sixty (60) day period shall be extended so long as Buyer or Lender
has  commenced and is  diligently  pursuing the remedies  necessary to cure such
default (including, but not limited to, commencement of foreclosure proceedings,
if  necessary  to effect  (such  cure),  in which  event the Lease  shall not be
terminated while such remedies are being pursued.

        Section 20. Notification by Tenant.

        From   the   date   of   this    Certificate   and   continuing    until
_____________, Tenant  agrees to immediately notify Buyer and Lender, in writing
by registered or certified  mail,  return  receipt  requested,  at the following
addresses,  on the  occurrence  of any event or the  discovery  of any fact that
would make any representation  contained in this Certificate  inaccurate: 


      If To Buyer:            Alexandria Real Estate Equities, Inc.
                              135 N. Los Robles Avenue, Suite 250
                              Pasadena, California 91101 
                              Attention: Corporate Secretary

     With A Copy To:          Skadden, Arps, Slate, Meagher & Flom
                              300 South Grand Avenue, Suite 3400
                              Los Angeles, California 90071
                              Attention: George M. Eshaghian

     If To Lender:



        Tenant makes this  Certificate with the knowledge that it will be relied
upon by Buyer and Lender in agreeing to purchase the Property.

        Tenant has executed this  Certificate as of the date first written above
by the person named below, who is duly authorized to do so.



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<PAGE>

                                        TENANT
                                        ________________________________________

                                        By:   __________________________

                                              Name:
                                              Its: