STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

                                      LOGO

1. Basic Provisions ("Basic Provisions").
   
     1.1 Parties:  This Lease  ("Lease"),  dated for  reference  purposes  only,
October 29, 1997, is made by and between SBR Development,  A California  General
Partnership  ("Lessor")  and Arterial  Vascular  Engineering,  Inc.  ("Lessee"),
(collectively the "Parties," or individually a "Party").

     1.2(a)  Premises:  That  cetain  portion  of the  Building,  including  all
improvements  therein or to be provided by Lessor under the terms of this Lease,
commonly  known by the street  address of 7975  Cameron  Center  Dr.,  Bldg 200,
located in the City of Windsor, County of Sonoma, State of California,  with zip
code  95492,  as  outlined  on  Exhibit  A  attached  hereto  ("Premises").  The
"Building"  is that certain  building  containing  the  Premises  and  generally
described as (describe briefly the nature of the Building):  Approximately 7,110
s.f.  warehouse  shell,  the Lessee will be responsible to construct and pay for
Lessee's tenant improvement work - See Addendum #1, Paragraph 55. In addition to
Lessee's rights to use and occupy the Premises as hereinafter specified,  Lessee
shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7
below) as  hereinafter  specified,  but  shall not have any  rights to the roof,
exterior walls or utility  raceways of the Building or to any other buildings in
the Industrial  Center. The Premises,  the Building,  the Common Areas, the land
upon which they are located,  along with all other  buildings  and  improvements
thereon, are herein collectively  referred to as the "Industrial Center".  (Also
see Paragraph 2.)

     1.2(b) Parking:  0 unreserved vehicle parking spaces  ("Unreserved  Parking
Spaces");  and 18 reserved vehicle parking spaces  ("Reserved  Parking Spaces").
(Also see Paragraph 2.6.) See Addendum No. __, Paragraph 53.

     1.3 Term: 5 years and 0 months  ("Original  Term")  commencing  February 1,
1998  ("Commencement  Date") and ending  January 31, 2003  ("Expiration  Date").
(Also see Paragraph 3.)

     1.4 Early  Possession:  See Addendum #1 Paragraph  58.  ("Early  Possession
Date"). (Also see Paragraphs 3.2 and 3.3.)

     1.5 Base Rent: $4,200 per month ("Base Rent"),  payable on the first day of
each month commencing February 1, 1998. (Also see Paragraph 4.)

     [ ] If this box is  checked,  this Lease  provides  for the Base Rent to be
adjusted per Addendum 60, attached hereto.

     1.6(a)  Base Rent Paid Upon  Execution:  $4,200 as Base Rent for the period
February 1, 1998.

     1.6(b)  Lessee's  Share of Common  Area  Operating  Expenses:  one  hundred
percent (100%) ("Lessee's Share") as determined by [ ] prorata square footage of
the  Premises  as compared to the total  square  footage of the  Building or [ ]
other criteria as described in Addendum __.

     1.7 Security Deposit: $4,000 ("Security Deposit"). (Also see Paragraph 5.)

     1.8 Permitted Use: General purpose  warehouse/manufacturing  with ancillary
office and lab functions ("Permitted Use"). (Also see Paragraph 6.)

     1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph 8.)

     1.10(a)  Real  Estate   Brokers.   The  following  real  estate   broker(s)
collectively,   the  "Brokers")  and  brokerage   relationships  exist  in  this
transaction and are consented to by the Parties (check applicable boxes):

     [ ] ___________________ represents Lessor exclusively ("Lessor's Broker");

     [ ] _________________ represents Lessee exclusively ("Lessee's Broker"); or

     [x] Keegan & Coppin Company, Inc.  represents both Lessor and Lessee ("Dual
Agency"). (Also see Paragraph 15.)

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

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

     1.12  Addenda  and  Exhibits.  Attached  hereto is an  Addendum  or Addenda
consisting  of  Paragraphs 49 through 60, and Exhibits A through E, all of which
constitute a part of this Lease. No Paragraph 49 or 63.

2. Premises, Parking and Common Areas.

     2.1 Letting.  Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor,  the Premises,  for the term, at the rental,  and upon all of the terms,
covenants and  conditions  set forth in this Lease.  Unless  otherwise  provided
herein,  any  statement of square  footage set forth in this Lease,  or that may
have been used in calculating rental and/or Common Area Operating  Expenses,  is
an approximation  which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph  1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.

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

     2.3 Compliance  with  Covenants,  Restrictions  and Building  Code.  Lessor
warrants that any  improvements  (other than those  constructed  by Lessee or at
Lessee's  direction)  on or in the  Premises  which  have  been  constructed  or
installed  by Lessor or with  Lessor's  consent or at Lessor's  direction  shall
comply with all applicable  covenants or  restrictions  of record and applicable
building codes,  regulations and ordinances in effect on the Commencement  Date.
Lessor  further  warrants to Lessee that  Lessor has no  knowledge  of any claim
having been made by any  governmental  agency that a violation or  violations of
applicable building codes,  regulations,  or ordinances exist with regard to the
Premises as of the  Commencement  Date. Said  warranties  shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee.  If the  Premises  do not comply  with said  warranties,  Lessor
shall,  except as otherwise  provided in this Lease,  promptly  after receipt of
written notice from Lessee given with six (6) months  following the Commencement
Date  and  setting  forth  with  specificity  the  nature  and  extent  of  such
non-compliance,  take such action, at Lessor's expense,  as may be reasonable or
appropriate  to rectify the  non-compliance.  Lessor makes no warranty  that the
Permitted Use in Paragraph 1.8 is permitted  for the Premises  under  Applicable
Laws (as defined in Paragraph 2.4).

     2.4  Acceptance of Premises.  Lessee hereby  acknowledges:  (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises  (including  but not limited to the  electrical  and fire sprinkler
systems,  security,  environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with  Disabilities Act and applicable  zoning,
municipal,  county,  state and federal laws,  ordinances and regulations and any
covenants or restrictions of record  (collectively,  "Applicable  Laws") and the
present and future  suitability  of the Premises for Lessee's  intended use; (b)
that Lessee has made such  investigation as it deems necessary with reference to
such  matters,   is  satisfied   with   reference   thereto,   and  assumes  all
responsibility  therefore  as the  same  relate  to  Lessee's  occupancy  of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said  matters  other than as set forth in this  Lease. 

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


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     2.6  Vehicle  Parking.  Lessee  shall  be  entitled  to use the  number  of
Unreserved  Parking Spaces and Reserved  Parking  Spaces  specified in Paragraph
1.2(b) on those  portions of the Common  Areas  designated  from time to time by
Lessor for parking.  Lessee shall not use more parking  spaces than said number.
Said  parking  spaces  shall be used for  parking  by  vehicles  no larger  than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles."  Vehicles  other than  Permitted  Size  Vehicles  shall be parked and
loaded or  unloaded  as  directed  by Lessor  in the Rules and  Regulations  (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)

         (a) Lessee shall not permit or allow any vehicles that belong to or are
controlled  by Lessee or Lessee's  employees,  suppliers,  shippers,  customers,
contractors  or invitees to be loaded,  unloaded,  or parked in areas other than
those designated by Lessor for such activities.

         (b) If  Lessee  permits  or  allows  any of the  prohibited  activities
described  in this  Paragraph  2.6,  then Lessor  shall have the right,  without
notice,  in  addition to such other  rights and  remedies  that it may have,  to
remove or tow away the  vehicle  involved  and charge the cost to Lessee,  which
cost shall be immediately payable upon demand by Lessor.

         (c) Lessor shall at the  Commencement  Date of this Lease,  provide the
parking facilities required by Applicable Law.

     2.7 Common  Areas--Definition.  The form  "Common  Areas" is defined as all
areas and facilities  outside the Premises and within the exterior boundary line
of the Industrial  Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general non-
exclusive use of Lessor,  Lessee and other Lessors of the Industrial Control and
their respective  employees,  suppliers,  shippers,  customers,  contractors and
invitees,  including  parking areas,  loading and unloading areas,  trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

     2.8 Common Areas--Lessee's  Rights. Lessor hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees,  during the term of this Lease, the non-exclusive right to use, in
common with others  entitled  to such use,  the Common  Areas as they exist from
time to time, subject to any rights,  powers, and privileges  reserved by Lessor
under the terms  hereof  or under  the  terms of any  rules and  regulations  or
restrictions  governing the use of the Industrial Center. Under no circumstances
shall the right herein  granted to use the Common Areas be deemed to include the
right to store any property,  temporarily or  permanently,  in the Common Areas.
Any such storage shall be permitted only by the prior written  consent of Lessor
or Lessor's  designated agent,  which consent may be revoked at any time. In the
event that any  unauthorized  storage  shall  occur then  Lessor  shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee,  which cost shall be
immediately payable upon demand by Lessor.

     2.9 Common Areas--Rules and Regulations.  Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish,  modify,  amend
and enforce  reasonable Rules and Regulations with respect thereto in accordance
with  Paragraph  40. Lessee agrees to abide by and conform to all such Rules and
Regulations,   and  to  cause  its  employees, suppliers,  shippers,  customers,
contractors  and  invitees  to  so  abide  and  conform.  Lessor  shall  not  be
responsible to Lessee for the non-compliance  with said rules and regulations by
other lessees of the Industrial Center.

     2.10 Common  Areas--Changes.  Lessor shall have the right, in Lessor's sole
discretion, from time to time:

         (a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress,  egress,  direction
of traffic, landscaped areas, walkways and utility raceways;

         (b) To  close  temporarily  any of the  Common  Areas  for  maintenance
purposes so long as reasonable access to the Premises remains available;

         (c) To designate  other land outside the  boundaries of the  Industrial
Center to be a part of the Common Areas;

         (d) To add additional buildings and improvements to the Common Areas;

         (e)  To use  the  Common  Areas  while  engaged  in  making  additional
improvements,  repairs or alterations to the Industrial  Center,  or any portion
thereof;

and

         (f) To do and perform  such other acts and make such other  changes in,
to or with respect to the Common Areas and  Industrial  Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.

3. Term.

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

     3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and if Lessee  totally or partially  occupies  the Premises  after the Early
Possession Date but prior to the  Commencement  Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy.  All other terms of
this  Lease,  however,  (including  but not  limited to the  obligations  to pay
Lessee's  Share of Common Area  Operating  Expenses  and to carry the  insurance
required by Paragraph 8) shall be in effect  during such period.  Any such early
possession  shall not affect nor advance  the  Expiration  Date of the  Original
Term.

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

4. Rent.

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

     4.2 Common Area Operating  Expenses.  Lessee shall pay to Lessor during the
term  hereof,  in addition to the Base Rent,  Lessee's  Share (as  specified  in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each  calendar  year of the term of this Lease,  in  accordance  with the
following provisions:

         (a) "Common Area Operating Expenses" are defined,  for purposes of this
Lease,  as all costs incurred by Lessor  relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:

               (i) The operation,  repair and maintenance,  in neat, clean, good
order and condition, of the following:

               (ii) The cost of water, gas, electricity and telephone to service
the Common Areas.

               (iii) Trash disposal.

               (iv) Omitted

               (v) Any increase  above the Base Real Property Taxes (as defined
in Paragraph 10.2(b)) for the Building and the Common Areas.

               (vi) Any "Insurance Cost Increase" (as defined in Paragraph 8.1).

               (vii) Omitted

               (viii)  Omitted

               (ix) Omitted

         (b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically  attributable  to the  Building  or to any  other  building  in the
Industrial Center or to the operation,  repair and maintenance thereof, shall be
allocated  entirely to the  Building  or to such other  building.  However,  any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable  to the  Building  or to any other  building  or to the  operation,
repair and maintenance  thereof,  shall be equitably  allocated by Lessor to all
buildings in the Industrial Center.

         (c) The  inclusion  of the  improvements,  facilities  and services set
forth in  Subparagraph  4.2(a) shall not be deemed to impose an obligation  upon
Lessor to either  have said  improvements  or  facilities  or to  provide  those
services  unless the  Industrial  Center  already has the same,  Lessor  already
provides the services,  or Lessor has agreed  elsewhere in this Lease to provide
the same or some of them.

         (d) Lessee's Share of Common Area  Operating  Expenses shall be payable
by Lessee within ten (10) days after a reasonably  detailed  statement of actual
expenses is  presented  to Lessee by Lessor.  At Lessor's  option,  however,  an
amount may be estimated by Lessor from time to time of Lessee's  Share of annual
Common  Area  Operating  Expenses  and the same  shall  be  payable  monthly  or
quarterly,  as Lessor shall designate,  during each 12 month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee  within  sixty (60) days after the  expiration  of each  calendar  year a
reasonably  detailed  statement showing Lessee's Share of the actual Common Area
Operating  Expenses  incurred  during the preceding  year. If Lessee's  payments
under this Paragraph  4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of each over-

                                      -2-

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payment against  Lessee's Share of Common Area Operating  Expenses next becoming
due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year
were less than Lessee's Share as indicated on said  statement,  Lessee shall pay
to Lessor the amount of the  deficiency  within ten (10) days after  delivery by
Lessor to Lessee of said statement.

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

6. Use.

     6.1 Permitted Use.

         (a) Lessee shall use and occupy the Premises only for the Permitted Use
set  forth in  Paragraph  1.8,  or any  other  legal  use  which  is  reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful,  creates  waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.

         (b) Lessor  hereby  agrees to not  unreasonably  withhold  or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants,  and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a  modification  of said  Permitted Use, so long as the same will not impair
the structural  integrity of the improvements on the Premises or in the Building
or the mechanical or electrical  systems therein,  does not conlict with uses by
other  lessees,  is not  significantly  more  burdensome  to the Premises or the
Building and the improvements  thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written  notification  of same,
which notice shall include an explanation of Lessor's  reasonable  objections to
the change in use.

     6.2 Hazardous Substances.

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

         (b) Duty to Inform Lessor.  If Lessee knows, or has reasonable cause to
believe,  that a Hazardous  Substance  has come to be located  in, on,  under or
about the Premises or the  Building,  other than as  previously  consented to by
Lessor,  Lessee shall immediately give Lessor written notice thereof,  and shall
make  available  a  copy  of  any  statement,   report,  notice,   registration,
application,  permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such Hazardous Substance
including  but not  limited  to all such  documents  as may be  involved  in any
Reportable  Use  involving  the  Premises.  Lessee shall not cause or permit any
Hazardous  Substance  to be  spilled  or  released  in,  on,  under or about the
Premises (including,  without limitation, through the plumbing or sanitary sewer
system).

         (c) Indemnification.  Lessee shall indemnify,  protect, defend and hold
Lessor,  its agents,  employees,  lenders  and ground  lessor,  if any,  and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens,  expenses,  penalties,  loss of permits and attorneys' and
consultants'  fees arising out of or involving any Hazardous  Substance  brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations  under this Paragraph  6.2(c) shall include,  but not be limited to,
the  effects  of  any  contamination  or  injury  to  person,  property  or  the
environment  created  or  suffered  by  Lessee,  and the  cost of  investigation
(including consultants' and attorneys' fees and testing), removal,  remediation,
restoration and/or abatement thereof, or of any contamination  therein involved,
and shall  survive the  expiration  or earlier  termination  of this  Lease.  No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall  release  Lessee  from its  obligations  under this Lease with  respect to
Hazardous Substances,  unless specifically so agreed by Lessor in writing at the
time of such agreement

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

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

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

     7.1 Lessee's Obligations.

         (a)  Subject to the  provisions  of  Paragraphs  2.2  (Condition),  2.3
(Compliance  with  Covenants,  Restrictions  and Building  Code),  7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's  sole cost and expense and at all times,  keep the  Premises  and every
part thereof in good order, condition and repair (whether or not such portion of
the  Premises  requiring  repair,  or the  means  of  repairing  the  same,  are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs  occurs as a result of Lessee's  use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning,  ventilating,  electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises,  fixtures,  interior walls,  interior  surfaces of exterior
walls,  ceilings,  floors,  windows,  doors,  plate glass,  and  skylights,  but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order,  condition and repair,
shall  exercise and perform good  maintenance  practices.  Lessee's  obligations
shall include restorations,  replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.

         (b) Lessee  shall,  at  Lessee's  sole cost and  expense,  procure  and
maintain a contract,  with copies  available to Lessor,  in  customary  form and
substance  for  and  with  a  contractor  specializing  and  experienced  in the
inspection,  maintenance  and  service  of the  heating,  air  conditioning  and
ventilating systems for the Premises.  

         (c)  If  Lessee  fails  to  perform  Lessee's  obligations  under  this
Paragraph  7.1,  Lessor may enter upon the  Premises  after ten (10) days' prior
written notice to Lessee  (except in the case of an emergency,  in which case no
notice shall be required),  perform such obligations on Lessee's behalf, and put
the Premises in good order,  condition and repair,  in accordance with Paragraph
13.2 below.

     7.2 Lessor's  Obligations.  Subject to the  provisions  of  Paragraphs  2.2
(Condition),  2.3 (Compliance  with Covenants,  Restrictions and Building Code),
4.2 (Common Area Operating  Expenses),  6 (Use), 7.1 (Lessee's  Obligations),  9
(Damage or Destruction) and 14 (Condemnation), Lessor, shall keep in good order,
condition and repair the foundations,  exterior walls,  structural  condition of
exterior  roof,  fire  sprinkler  and/or  standpipe  and hose (if located in the
Common Areas)

                                      -3-

<PAGE>

systems  and  equipment,  fire  hydrants,  parking  lots,  walkways,   parkways,
driveways,  landscaping,  fences,  signs and utility  systems serving the Common
Areas and all parts  thereof,  as well as providing the services for which there
is a Common Area Operating  Expense  pursuant to Paragraph 4.2. Lessor shall not
be obligated to paint the  exterior or interior  surfaces of exterior  walls nor
shall Lessor be obligated to maintain, repair or replace windows, doors or plate
glass of the Premises. Lessee expressly waives the benefit of any statute now or
hereafter  in effect  which  would  otherwise  afford  Lessee  the right to make
repairs at  Lessor's  expense or to  terminate  this Lease  because of  Lessor's
failure to keep the Building,  Industrial  Center or Common Areas in good order,
condtion and repair.

     7.3 Utility Installations, Trade Fixtures, Alterations.

         (a) Definitions;  Consent Required. The term "Utility Installations" is
used in  this  Lease  to  refer  to all  air  lines,  power  panels,  electrical
distribution,   security,  fire  protection  systems,   communications  systems,
lighting  fixtures,   heating,   ventilating  and  air  conditioning  equipment,
plumbing,  and fencing in, on or about the Premises.  The term "Trade  Fixtures"
shall mean Lessee's  machinery and equipment  which can be removed without doing
material  damage  to  the  Premises.  The  term  "Alterations"  shall  mean  any
modification  of the  improvements  on the Premises which are provided by Lessor
under  the  terms of this  Lease,  other  than  Utility  Installations  or Trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations  and/or Utility  Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a) except as set forth in this lease, Lessee
shall not make nor cause to be made any Alterations or Utility Installations in,
on, under or about the Premises without  Lessor's prior written consent.  Lessee
may, however,  make non-structural  Utility Installations to the interior of the
Premises (excluding the roof) without Lessor's consent but upon notice to Lessor
so long as they are not visible from the outside of the Premises, do not involve
puncturing,  relocating or removing the roof or any existing  walls, or changing
or  interfering  with the  fire  sprinkler  or fire  detection  systems  and the
cumulative  cost  thereof  during  the term of this Lease as  extended  does not
exceed $2,500.00.

         (b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in  written  form with  detailed  plans.  All  consents  given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent  specific consent,  shall
be deemed  conditioned  upon:  (i) Lessee's  acquiring  all  applicable  permits
required by  governmental  authorities;  (ii) the  furnishing  of copies of such
permits together with a copy of the plans and  specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the  compliance by Lessee with all  conditions of said permits in a prompt
and  expeditious  manner.  Any  Alterations or Utility  Installations  by Lessee
during the term of this Lease  shall be done in a good and  workmanlike  manner,
with good and  sufficient  materials,  and be in compliance  with all Applicable
Requirements.  Lessee shall promptly upon completion thereof furnish Lessor with
as built plans and specifications therefor.  Lessor may, (but without obligation
to do  so)  condition  its  consent  to  any  requested  Alteration  or  Utility
Installation that costs $2,500.00 or more upon Lessee's  providing Lessor with a
lien and  completion  bond in an  amount  equal to one and  one-half  times  the
estimated cost of such Alteration or Utility Installation.

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

     7.4 Ownership, Removal, Surrender, and Restoration.

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

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

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

8. Insurance; Indemnity.

     8.1 Payment of Premium Increases.

         (a) As used herein,  the term  "Insurance  Cost Increase" is defined as
any increase in the actual cost of the insurance  applicable to the Building and
required  to be carried by Lessor  pursuant  to  Paragraphs  8.2(b),  8.3(a) and
8.3(b), ("Required Insurance"),  over and above the Base Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises,  increased  valuation of the  Premises,  and/or a general
premium rate increase.  The term "Insurance  Cost Increase" shall not,  however,
include any premium increases  resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "Base  Premium." If a dollar amount has
not been  inserted in  Paragraph  1.9 and if the  Building  has been  previously
occupied  during  the  twelve  (12)  month  period  immediately   preceding  the
Commencement  Date, the "Base Premium" shall be the annual premium applicable to
such twelve (12) month  period.  If the Building was not fully  occupied  during
such twelve (12) month  period,  the "Base  Premium"  shall be the lowest annual
premium reasonably  obtainable for the Required Insurance as of the Commencement
Date,  assuming  the most  nominal use  possible of the  Building.  In no event,
however,  shall  Lessee be  responsible  for any  portion  of the  premium  cost
attributable to liability  insurance  coverage in excess of $1,000,000  procured
under Paragraph 8.2(b).

         (b) Lessee shall pay any Insurance Cost Increase to Lessor  pursuant to
Paragraph  4.2.  Premiums for policy periods  commencing  prior to, or extending
beyond,  the  term  of this  Lease  shall  be  prorated  to  coincide  with  the
corresponding Commencement Date or Expiration Date.

     8.2 Liability Insurance.

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

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

     8.3 Property Insurance-Building, Improvements and Rental Value.

         (a)  Building and  Improvements.  Lessor shall obtain and keep in force
during the term of this Lease a policy or policies  in the name of Lessor,  with
loss payable to Lessor and to any Lender(s),  insuring against loss or damage to
the Premises.  Such insurance  shall be for full  replacement  cost, as the same
shall exist from time to time, or the amount  required by any Lender(s),  but in
no event more than the commercially  reasonable and  available  insurable  value
thereof if, by reason of the unique nature or age of the improvements  involved,
such latter amount is less than full replacement cost. Lessee-Owned  Alterations
and Utility  Installations,  Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially  appropriate,  Lessor's policy or policies shall insure against all
risks of direct  physical  loss or damage  (except  the  perils of flood  and/or
earthquake  unless  required  by a Lender  or  included  in the  Base  Premium),
including  coverage for any additional  costs  resulting from debris removal and
reasonable  amounts of coverage  for the  enforcement  of any  ordinance  or law
regulating the  reconstruction  or replacement of any undamaged  sections of the
Building  required to be demolished or removed by reason of the  enforcement  of
any building,  zoning,  safety or land use laws as the result of a covered loss,
but not  including  plate glass  insurance.  Said policy or policies  shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property  insurance  coverage  amount by a factor of not less than the  adjusted
U.S.  Department of Labor Consumer  Price Index for All Urban  Consumers for the
city nearest to where the Premises are located.

         (b) Rental Value. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor  and any  Lender(s),  insuring  the loss of the full  rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled  rental  increases).  Said insurance may provide that in the event
the Lease is terminated  by reason of an insured  loss,  the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or  replacement  of the Premises,  to provide for one full year's loss of rental
revenues from the date of any such loss.  Said insurance shall contain an agreed
valuation  provision  in lieu of any  co-insurance  clause,  and the  amount  of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes,  insurance premium costs and other expenses,  if any,  otherwise
payable,  for the next 12-month  period.  Common Area  Operating  Expenses shall
include any deductible amount in the event of such loss.

         (c)  Adjacent  Premises.  Lessee  shall  pay  for any  increase  in the
premiums for the property insurance of the Building and for the Common Areas or

other buildings in the Industrial  Center if said increase is caused by Lessee's
negligent or wrongful acts, omissions, use or occupancy of the Premises.

                                      -4-

<PAGE>

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

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

     8.5 Insurance Policies.  Insurance required hereunder shall be in companies
duly licensed to transact  business in the state where the Premises are located,
and maintaining  during the policy term a "General  Policyholders  Rating" of at
least B+, V, or such other  rating as may be required by a Lender,  as set forth
in the most current issue of "Best's  Insurance  Guide."  Lessee shall not do or
permit  to be done  anything  which  shall  invalidate  the  insurance  policies
referred to in this  Paragraph  8. Lessee shall cause to be delivered to Lessor,
within  seven (7) days  after the  earlier of the Early  Possession  Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance  required under Paragraph  8.2(a) and 8.4. No such
policy shall be cancelable or subject to  modification  except after thirty (30)
days' prior  written  notice to Lessor.  Lessee  shall at least thirty (30) days
prior to the  expiration  of such  policies,  furnish  Lessor  with  evidence of
renewals or "insurance  binders" evidencing renewal thereof, or Lessor may order
such  insurance  and charge the cost  thereof to Lessee,  which  amount shall be
payable by Lessee to Lessor upon demand.

     8.6 Waiver of Subrogation.  Without affecting any other rights or remedies,
Lessee and Lessor  each hereby  release  and relieve the other,  and waive their
entire  right to recover  damages  (whether in contract or in tort)  against the
other,  for loss or damage to their  property  arising out of or incident to the
perils  required to be insured  against  under  Paragraph  8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of  insurance  carried  or  required,  or by any  deductibles  applicable
thereto.  Lessor and Lessee agree to have their respective  insurance  companies
issuing  property  damage  insurance  waive any right to  subrogation  that such
companies may have against Lessor or Lessee,  as the case may be, so long as the
insurance is not invalidated thereby.

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

     8.8  Exemption  of Lessor from  Liability.  Lessor  shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee,  Lessee's  employees,  contractors,  invitees,  customers,  or any other
person in or about the  Premises,  whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage,  obstruction  or  other  defects  of  pipes,  fire  sprinklers,  wires,
appliances,  plumbling, air conditioning or lighting fixtures, or from any other
cause,  whether said injury or damage results from  conditions  arising upon the
Premises or upon other  portions of the  Building  of which the  Premises  are a
part, from other sources or places,  and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial  Center except to the extent such liability arises
from Lessor's  negligence or willful  misconduct  and is not covered by Lessee's
insurance.

9. Damage or Destruction.

     9.1 Definitions.

         (a) "Premises  Partial  Damage" shall mean damage or destruction to the
Premises,  other than Lessee-Owned  Alterations and Utility  Installations,  the
repair cost of which damage or  destruction  is less than fifty percent (50%) of
the then  Replacement  Cost (as  defined in  Paragraph  9.1(d)) of the  Premises
(excluding   Lessee-Owned   Alterations  and  Utility  Installations  and  Trade
Fixtures) immediately prior to such damage or destructions.

         (b) "Premises  Total  Destruction"  shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises  (excluding  Lessee-Owned  Alterations and
Utility  Installations and Trade Fixtures)  immediately prior to such damage and
destruction.  In addition,  damage and  destruction to the Building,  other than
Lessee-Owned  Alterations  and Utility  Installations  and Trade Fixtures of any
lessees  of the  Building,  the cost of which  damage  or  destruction  is fifty
percent  (50%)  or more of the then  Replacement  Cost  (excluding  Lessee-Owned
Alterations and Utility  Installations  and Trade Fixtures of any lessees of the
Building)  of the  Building  shall,  at the  option of  Lessor,  be deemed to be
Premise Total Destruction.

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

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

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

     9.2 Premises Partial  Damage-Insured  Loss. If Premises Partial Damage that
is an Insured Loss occurs,  then Lessor shall, at Lessor's expense,  repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned  Alterations and Utility
Installations)  as soon as reasonably  possible and this Lease shall continue in
full force and  effect.  In the  event,  however,  that  there is a shortage  of
insurance  proceeds and such  shortage is due to the fact that, by reason of the
unique  nature  of the  improvements  in the  Premises,  full  replacement  cost
insurance coverage was not commercially  reasonable and available,  Lessor shall
have no  obligation  to pay for the shortage in  insurance  proceeds or to fully
restore the unique aspects of the Premises  unless Lessee  provides  Lessor with
the funds to cover same,  or adequate  assurance  thereof,  within ten (10) days
following  receipt of written notice of such shortage and request  therefor.  If
Lessor receives said funds or adequate  assurance  thereof  within said ten (10)
day period,  Lessor shall complete them as soon as reasonably  possible and this
Lease  shall  remain in full force and effect.  If Lessor does not receive  such
funds or assurance within said period,  Lessor may nevertheless elect by written
notice to Lessee within ten (10) days  thereafter to make such  restoration  and
repair  as is  commercially  reasonable  with  Lessor  paying  any  shortage  in
proceeds,  in which case this Lease shall  remain in full force and  effect.  If
Lessor does not receive such funds or assurance within such ten (10) day period,
and if Lessor  does not so elect to restore  and  repair,  then this Lease shall
terminate  sixty (60) days following the occurence of the damage or destruction.
Unless  otherwise   agreed,   Lessee  shall  in  no  event  have  any  right  to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction.  Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph  9.3 rather than  Paragraph  9.2,  notwithstanding  that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.

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

     9.4 Total  Destruction.  Notwithstanding  any other  provision  hereof,  if
Premises Total  Destruction  occurs  (including any destruction  required by any
authorized  public  authority),  this  Lease  shall  terminate  sixty  (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee.  In the event,  however,  that the damage or  destruction  was caused by
Lessee,  Lessor  shall have the right to recover  Lessor's  damages  from Lessee
except as released and waived in Paragraph 9.7.

     9.5 Damage Near End of Term.  If at any time during the last six (6) months
of the term of this Lease  there is damage for which the cost to repair  exceeds
one month's Base Rent,  whether or not an Insured Loss,  Lessor may, at Lessor's
option,  terminate  this Lease  effective  sixty (60) days following the date of
occurrence  of such  damage by  giving  written  notice  to  Lessee of  Lessor's
election to do so within  thirty (30) days after the date of  occurrence of such
damage.  Provided,  however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the  Premises,  then Lessee may  preserve  this
Lease by (a) exercising such option,  and (b) providing Lessor 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  Lessee's
receipt of Lessor's  written notice  purporting to terminate this Lease, or (ii)
the day  prior to the date upon  which  such  option  expires.  If  Lessee  duly
exercises  such option  during such  period and  provides  Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds,  Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect.  If Lessee fails to exercise
such option and provide  such funds or assurance  during such period,  then this
Lease  shall  terminate  as of the date set forth in the first  sentence of this
Paragraph 9.5.

9.6 Abatement of Rent; Lessee's Remedies.

     (a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition  for which Lessee is not legally  responsible,  the Base Rent,  Common
Area Operating  Expenses and other charges,  if any, payable by Lessee hereunder
for the period during which such damage or condition, its repair, remediation or
restoration  continues,  shall be abated in  proportion  to the  degree to which
Lessee's  use of the Premises is  impaired,  but not in excess of proceeds  from
insurance required to be carried under Paragraph 8.3(b). Except for abatement of
Base  Rent,  Common  Area  Operating  Expenses  and other  charges,  if any,  as
aforesaid,  all other  obligations  of Lessee  hereunder  shall be  performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.

                                      -5-
<PAGE>

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

     9.7 Hazaradous  Substance  Conditions.  If a Hazardous  Substance Condition
occurs,  unless  Lessee is legally  responsible  therefor  (in which case Lessee
shall make the  investigation  and  remediation  thereof  required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's  rights under  Paragraph  6.2(c) and  Paragraph  13),  Lessor may at
Lessor's option either (i)  investigate  and remediate such Hazardous  Substance
Condition,  if required,  as soon as reasonably possible at Lessor's expense, in
which event this Lease shall  continue in full force and effect,  or (ii) if the
estimated cost to investigate  and remediate such condition  exceeds twelve (12)
times the then monthly Base Rent or $100,000 whichever is greater,  give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the  occurrence  of such  Hazardous  Substance  Condition of Lessor's  desire to
terminate  this Lease as of the date sixty (60) days  following the date of such
notice. In the event Lessor elects to give such notice of Lessor's  intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written  notice to Lessor of Lessee's  commitment
to pay for  the  excess  costs  of (a)  investigation  and  remediation  of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount  equal to twelve  (12)  times the then  monthly  Base Rent or
$100,000,  whichever  is greater.  Lessee  shall  provide  Lessor with the funds
required of Lessee or  satisfactory  assurance  thereof  within thirty (30) days
following said commitment by Lessee.  In such event this Lease shall continue in
full force and effect,  and Lessor shall proceed to make such  investigation and
remediation  as soon  as  reasonably  possible  after  the  required  funds  are
available. If Lessee does not give such notice and provide the required funds or
assurance  thereof  within the time  period  specified  above,  this Lease shall
terminate as of the date specified in Lessor's notice of termination.

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

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

10. Real Property Taxes.

     10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in  Paragraph  10.2(a),  applicable  to the  Industrial  Center,  and  except as
otherwise  provided in Paragraph  10.3,  any  increases in such amounts over the
Base Real  Property  Taxes shall be included in the  calculation  of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2. *Any Real
Property  Tax  increase  attributable  to a sale of the  building  shall  not be
included in the calculation of Common Area Operating Expenses.

     10.2 Real Property Tax Definitions.

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

         (b) As used herein,  the term "Base Real  Property  Taxes" shall be the
amount of Real Property Taxes, which are assessed against the Premises, Building
or Common  Areas in the calendar  year during  which the Lease is  executed.  In
calculating  Real Property  Taxes for any calendar year, the Real Property Taxes
for any real  estate  tax year  shall be  included  in the  calculation  of Real
Property  Taxes for such  calendar year based upon the number of days which such
calendar year and tax year have in common.

     10.3  Additional  Improvements.  Common Area  Operating  Expenses shall not
include Real Property  Taxes  specified in the tax  assessor's  records and work
sheets as being caused by  additional  improvements  placed upon the  Industrial
Center by other lessees or by Lessor for the  exclusive  enjoyment of such other
lessees.  Notwithstanding  Paragraph 10.1 hereof,  Lessee shall, however, pay to
Lessor at the time Common Area  Operating  Expenses are payable under  Paragraph
4.2, the entirety of any increase in Real Property  Taxes if assessed  solely by
reason of Alterations,  Trade Fixtures or Utility  Installations placed upon the
Premises by Lessee or at Lessee's request.

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

     10.5 Lessee's  Property  Taxes.  Lessee shall pay prior to delinquency  all
taxes  assessed  against and levied upon  Lessee-Owned  Alterations  and Utility
Installations,  Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible,   Lessee  shall  cause  its   Lessee-Owned   Alterations  and  Utility
Installations,  Trade  Fixtures,  furnishings,  equipment and all other personal
property to be assessed and billed  separately from the real property of Lessor.
If any of Lessee's said property  shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes  attributable to Lessee's  property within ten
(10)  days  after  receipt  of a  written  statement  setting  forth  the  taxes
applicable to Lessee's property.

11. Utilities. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity,  telephone, security,
gas and cleaning of the Premises,  together with any taxes thereon.  If any such
utilities or services are not  separately  metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined  by Lessor of all such charges  jointly  metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).

12. Assignment and Subletting. See Addendum #1, Paragraph 61

     12.1 Lessor's Consent Required. 

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

         (b) Omitted

         (c) Omitted

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

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

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

         (a) Regardless of Lessor's consent,  any assignment or subletting shall
not (i) be effective without the express written  assumption by such assignee or
sublessee of the obligations of Lessee under this Lease,  (ii) release Lessee of
any obligations  hereunder,  nor (iii) alter the primary  liablity of Lessee for
the  payment  of Base  Rent and  other  sums  due  Lessor  hereunder  or for the
performance of any other obligations to be performed by Lessee under this Lease.

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

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


                                      -6-

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

     (e) Each request for consent to an  assignment  of  subletting  shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational  responsibility  and  appropriateness  of the proposed
assignee or  sublessee,  including  but not limited to the  intended  use and/or
required   modification  of  the  Premises,   if  any,  together  as  reasonable
consideration  for Lessor's  considering and processing the request for consent.
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested by Lessor.

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

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

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

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

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

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

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

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

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

13. Default; Breach; Remedies.

     13.1  Default;  Breach.  Lessor  and  Lessee agree that if an  attorney  is
consulted  by  Lessor  in  connection  with  a  Lessee  Default  or  Breach  (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurence for
legal services and costs in the  preparation and service of a notice of Default,
and that Lessor may include the cost of such  services  and costs in said notice
as rent due and payable to cure said  default.  A "Default" by Lessee is defined
as a failure by Lessee to  observe,  comply  with or  perform  any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
by  Lessee  is  defined  as the  occurence of any one or  more of the  following
Defaults,  and, where a grace period for cure after notice is specified  herein,
the  failure  by Lessee  to cure such  Default  prior to the  expiration  of the
applicable  grace period,  and shall  entitle  Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

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

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

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

         (d) A Default  by  Lessee as to the  terms,  covenants,  conditions  or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be  observed,  complied  with or  performed  by Lessee,  other than those
described  in  Subparagraphs  13.1(a),  (b) or (c),  above,  where such  Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee;  provided,  however,  that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably  required for its
cure,  then it shall not be  deemed  to be a Breach  of this  Lease by Lessee if
Lessee  commences  such cure within  said thirty (30) day period and  thereafter
diligently prosecutes such cure to completion.

         (e) The  occurence of any of the  following  events:  (i) the making by
Lessee of any general  arrangement  or assigment  for the benefit of  creditors;
(ii) Lessee's  becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor  statute  thereto  (unless,  in the case of a petition  filed  against
Lessee,  the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease,  where possession
is not restored to Lessee within (30) days, or (iv) the attachment, execution or
other judicial  seizure of  substantially  all of Lessee's assets located at the
Premises  or of  Lessee's  interest  in this  Lease,  where such  seizure is not
discharged  within thirty (30) days;  provided,  however,  in the event that any
provisions of this Subparagraph  13.1(e) is contrary to any applicable law, such
provisions shall be of no force or effect,  and shall not affect the validity of
the remaining provisions.

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

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

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

         (a)  Terminate  Lessee's  right to  possession  of the  Premises by any
lawful means,  in which case this Lease and the term hereof shall  terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the  award  of the  unpaid  rent  which  had  been  earned  at  the  time  of
termination;  (ii) the  worth at the time of award of the  amount  by which  the
unpaid  rent which would have been earned  after  termination  until the time of
award  exceeds the amount of such rental loss that the Lessee  proves could have
been reasonably  avoided;  (iii) the worth at the time of award of the amount by
which  the  unpaid  rent for the  balance  of the term  after  the time of award
exceeds  the  amount  of such  rental  loss  that  the  Lessee  proves  could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the  detriment  proximately  caused by the  Lessee's  failure to perform its
obligations  under this Lease or which in the ordinary course of things would be
likely to result therefrom,  including but not limited to the cost of recovering
possession  of  the  Premises,   expenses  of  reletting,   including  necessary
renovation and alteration of the Premises,  resonable  attorneys' fees, and that
portion of any leasing  commission  paid by Lessor in connection with this Lease
applicable to the unexpired  term of this Lease.  The worth at the time of award
of the  amount  referred  to in  provision  (iii) of the  immediately  preceding
sentence  shall be computed by  discounting  such amount at the discount rate of
the Federal  Reserve Bank of San Francisco or the Federal  Reserve Bank District
in which the Premises  are located at the time of awards plus one percent  (1%).
Efforts by Lessor to mitigate  damages  caused be Lessee's  Default or Breach of
this  Lease  shall  not waive  Lessor's  right to  recover  damages  under  this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such pro-


                                      -7-

<PAGE>

ceeding the unpaid rent and damages as are  recoverable  therein,  or Lessor may
reserve the right to recover all or any part thereof in a separate suit for such
rent and/or damages.  If a notice and grace period  required under  Subparagraph
13.1(b),  (c) or (d) was not previously  given, a notice to pay rent or quit, or
to  perform  or quit,  as the case may be,  given to Lessee  under  any  statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the  applicable  notice  for grace  period  purposes  required  by  Subparagraph
13.1(b),  (c) or (d).  In such  case,  the  applicable  grace  period  under the
unlawful  detainer  statue shall run  concurrently  after the one such statutory
notice,  and the failure of Lessee to cure the Default within the greater of the
two (2) such grace  periods  shall  constitute  both an unlawful  detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in this Lease
and/or by said statute.

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

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

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

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

     13.4 Late Charges.  Lessee hereby  acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder  will cause Lessor to incur costs
not  contemplated  by this Lease,  the exact  amount of which will be  extremely
difficult to ascertain.  Such costs include,  but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground  lease,  mortgage or deed of trust  covering  the  Premises.
Accordingly,  if any  installment of rent or other sum due from Lessee shall not
be  received  by Lessor or  Lessor's  designee  within  ten (10) days after such
amount shall be due, then, without any requirement for notices to Lessee, Lessee
shall pay to Lessor a late  charge  equal to six  percent  (6%) of such  overdue
amount.  The parties  hereby  agree that such late charge  represents a fair and
reasonable  estimate of the costs Lessor will incur by reason of late payment by
Lessee.  Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's  Default or Breach with respect to such overdue  amount,  nor
prevent  Lessor from  exercising  any of the other rights and  remedies  granted
hereunder. In the event that a late charge is payable hereunder,  whether or not
collected,   for  three  (3)   consecutive   installments  of  Base  Rent,  then
notwithstanding  Paragraph  4.1 or any  other  provision  of this  Lease  to the
contrary,  Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.

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

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

15. Brokers' Fees.

     15.1  Procuring  Cause.  The Broker(s)  named in Paragraph  1.10 is/are the
procuring cause of this Lease.

     15.2 Omitted.

     15.3 Omitted.

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

16. Tenancy and Financial Statements.

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

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

17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises. In the event of
a transfer  of  Lessor's  title or  interest  in the  Premises or in this Lease,
Lessor shall  deliver to the  transferee  or assignee (in cash or by credit) any
unused  Security  Deposit  held  by  Lessor  at the  time of  such  transfer  or
assignment.  Except  as  provided  in  Paragraph  15.3,  upon such  transfer  or
assignment and delivery of the Security Deposit, as aforesaid,  the prior Lessor
shall be  relieved  of all  liability  with  respect to the  obligations  and/or
covenants under this Lease thereafter to be performed by the Lessor.  Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.

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

19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder,
other than late charges,  not received by Lessor within ten (10) days  following
the date on which it was due, shall bear interest from the date due at the prime
rate  charged  by the  largest  state  chartered  bank in the state in which the
Premises are located plus four percent  (4%) per annum,  but not  exceeding  the
maximum rate allowed by law, in addition to the potential  late charge  provided
for in Paragraph 13.4.

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

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

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

                                      -8-
<PAGE>
23. Notices.

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

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

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

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

26.  No Right To  Holdover.  Lessee  has no right to  retain  possession  of the
Premises or any part thereof  beyond the  expiration or earlier  termination  of
this Lease.  In the event that Lessee holds over in violation of this  Paragraph
26 then the Base  Rent  payable  from and after  the time of the  expiration  or
earlier  termination  of this Lease shall be  increased  to two hundred  percent
(200%) of the Base Rent applicable during the month  immediately  preceding such
expiration or earlier  termination.  Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.

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

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

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

30. Subordination; Attornment; Non-Disturbance.

     30.1  Subordination.  This Lease and any  Option  granted  hereby  shall be
subject and subordinate to any ground lease,  mortgage,  deed of trust, or other
hypothecation  or security  device  (collectively,  "Security  Device"),  now or
hereafter  placed by Lessor upon the real  property of which the  Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications,  consolidations,  replacements  and  extensions  thereof.  Lessee
agrees that the Lenders  holding any such  Security  Device  shall have no duty,
liability or obligation to perform any of the  obligations  of Lessor under this
Lease,  but that in the  event of  Lessor's  default  with  respect  to any such
obligation,  Lessee  will  give any  Lender  whose  name and  address  have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to  Paragraph  13.5.  If any Lender  shall  elect to have this Lease  and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written  notice  thereof to Lessee,  this Lease and such Options shall be deemed
prior  to such  Security  Device,  notwithstanding  the  relative  dates  of the
documentation or recordation thereof.

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

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

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

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

32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time,  in the case of an  emergency,
and  otherwise  at  reasonable  times for the  purpose  of  showing  the same to
prospective  purchasers,  lenders,  or  lessees,  and making  such  alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may  reasonably  deem  necessary.  Lessor  may at any time place on or about the
Premises or Building  any  ordinary  "For Sale" signs and Lessor may at any time
during the last one hundred  eighty  (180) days of the term  hereof  place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability of Lessee.

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

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

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

36. Consents.

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

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

37. Guarantor.

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

                                      -9-
<PAGE>

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

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

39. Options.

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

     39.2 Options Personal to Original Lessee.  Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be  voluntarily or  involuntarily  assigned or exercised by any person or
entity other than said original  Lessee while the original Lessee is in full and
actual  possession  of the  Premises  and without the  intention  of  thereafter
assigning or subletting.  The Options,  if any, herein granted to Lessee are not
assignable,  either as a part of an  assignment  of this Lease or  separately or
apart  therefrom,  and no Option may be separated from this Lease in any manner,
by reservation or otherwise.

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

     39.4 Effect of Default on Options.

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

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

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

40.  Rules and  Regulations.  Lessee  agrees that it will abide by, and keep and
observe all reasonable  rules and regulations  ("Rules and  Regulations")  which
Lessor  may  make  from  time to time  for the  management,  safety,  care,  and
cleanliness  of the  grounds,  the parking  and  unloading  of vehicles  and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

Executed at:  Windsor, CA                Executed at:  Santa Rosa, CA
                                                                            
on:   Nov. 25, 1997                      on:  Dec. 1, 1997
                                                                            
                                                                            
By LESSOR:                               By LESSEE:                         
                                                                            
SBR, A California General Partnership    Arterial Vascular Engineering, Inc.
7700 Bell Road,                          3576 Unocal Place,
Suite A, Windsor                         Santa Rosa, CA
                                                                            
By: /s/ Randal P. Lewis                  By: /s/ Lawrence J. Fassler
                                                                            
Name Printed: Randal P. Lewis            Name Printed: Lawrence J. Fassler
                                                                            
Title: Managing General Part.            Title: General Counsel and Secretary
                                                                            
By: ______________________________       By: ______________________________ 
                                                                            
Name Printed: ____________________       Name Printed: ____________________ 
                                                                            
Title: ___________________________       Title: ___________________________ 
                                                                            
Address: _________________________       Address: _________________________ 
                                                                            
__________________________________       __________________________________ 
                                                                            
Telephone: (707) 838-6633                Telephone: 
                                                                            
Facsimile: (707) 838-7921                Facsimile: 
                                                                            
BROKER:                                  BROKER:                            
                                                                            
Executed at: _____________________       Executed at: _____________________ 
                                                                            
on: ______________________________       on: ______________________________ 
                                                                            
By: ______________________________       By: ______________________________ 
                                                                            
Name Printed: ____________________       Name Printed: ____________________ 
                                                                            
Title: ___________________________       Title: ___________________________ 
                                                                            
Address: _________________________       Address: _________________________ 
                                                                            
__________________________________       __________________________________ 
                                                                            
Telephone: (  ) __________________       Telephone: (  ) __________________ 
                                                                            
Facsimile: (  ) __________________       Facsimile: (  ) __________________ 
                                         


NOTE:  These forms are often modified to meet changing  requirements  of law and
needs of the  industry.  Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

<PAGE>

                 ADDENDUM TO STANDARD INDUSTRIAL MULTI-TENANT LEASE
                               Dated October 29, 1997
                                   By and Between
             SBR DEVELOPMENT, A CALIFORNIA GENERAL PARTNERSHIP (LESSOR)
                                        And
                   ARTERIAL VASCULAR ENGINEERING, INC., (LESSEE)
               PREMISES: 7975 Cameron Drive. Building 200, Windsor, CA
               ------------------------------------------------------
         
         
A.   "This Lease is contingent upon the following conditions:"
         
49.  Utilities  and Other  Services:

     Lessee  shall pay in addition to their rent their  prorata  share (100%) of
     the cost of the  utilities for the building.  All other  services,  such as
     security  patrols,  are at the  discretion  of the Lessor and Lessor is not
     obligated to provide such services.
         
     Refuse  service  shall be  contracted  and paid for directly by the Lessee.
     Disposal of Lessee's  trash is the  Lessee's  responsibility  and cannot be
     stacked or temporarily stored other than inside the Lessee's premises.
         
     If Lessee fails to dispose of wood pallets or shipping containers properly,
     Lessor may remove said items after three (3) days written notice to Lessee.
     Lessor may charge Lessee for the costs of such removal.
         
50.  Signage:

     Lessee will provide the street number on the glass  storefront  door of the
     Premises.
         
     Lessee will provide  lettering for Lessee's  business name on the directory
     sign (at Lessee's  option).  All  lettering  will be in white vinyl letters
     conforming to the style and sizing approved by Lessor.
         
     Lessor  may  place  such  signs  as  Lessor   deems   reasonable   for  the
     advertisement of space available for lease in the building. FOR LEASE signs
     to  include  canvas  or wood  banners  or  metal of real  estate  brokerage
     companies contracted by the Lessor.
         
     All other  signage will be provided by Lessee and Lessee agrees to abide by
     the sign program of the building.
         
51.  Financial Statements:

     Lessor has approved Lessee's financial statements.
         
52.  Permits:

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

     Lessee is entitled to the use of the parking  outlined on Exhibit A. Lessor
     is hereby  notified  that Lessee  intends to park a truck on Cameron  Drive
     adjacent to the  building  from time to time.  Lessee is aware that Cameron
     Drive is posted for no overnight parking.
         
54.  Lessor's Improvements:

     Lessor agrees to complete the following improvements at its sole cost prior
     to lease commencement. A. Link the subject building with building 100, 7975
     Cameron Center Drive via two underground conduits.  Each conduit shall have
     a 3 inch  diameter  and  shall  be  constructed  from  either  PVC or metal
     materials.  Provide access to the roof via an interior ladder to a lockable
     roof  hatch  (Lessee  agrees  to pay  the  cost  of  this  work  + 15%  for
     supervision which shall not exceed a total cost of $4,000.  This cost shall
     be  amortized  over the term of the lease at a cost of 8% interest and paid
     in addition to the rent).
         
<PAGE>

55.  Lessee  accepts the premises "as is" with the  exception of the Lessor work
     identified  in Paragraph  54.  Lessee shall be allowed to install  building
     improvements  which they deem necessary for the operation of their business
     such   as   building   insulation,    restrooms,   offices,   heating   and
     air-conditioning,  electrical  distribution,  etc., provided Lessee obtains
     the  Lessor's  approval  for all work  and any  necessary  use or  building
     permits.  Lessee will be responsible  for the  installation  and payment of
     said improvements and any possible damage it could cause to the building.

     Lessee  intends to use the  Building for air  conditioned  storage of their
     medical products.  Their required improvements include an office,  toilets,
     ceiling  and  wall  insulation,  HVAC  system,  lights,  pallet  racks  and
     electrical   distribution.   (see  Exhibit  F)  Lessor  approves  of  these
     improvements. Lessee reserves the right to remove the warehouse clean room,
     injection  moulding  and oven room HVAC  units and  warehouse  clean  room,
     injection moulding and oven room lights.

56.  Upon full  execution  of this lease,  payment of Prepaid  Rent and Security
     Deposit, and issuance of an insurance certificate,  Lessee shall be allowed
     access to the building to design and construct  interior  improvements  and
     store  materials  and  equipment  to be used in proposed  operation at this
     facility.  Lessee and Lessor  shall  coordinate  their  activities  so that
     Lessor can complete the shell building  without delay. If Lessee  completes
     their  improvement  work and occupies the building before February 1, 1998,
     then the commencement date shall be advanced to the date of occupancy.
         
57.  Hazardous Waste:

     "If  Lessee  uses,  stores,  or  becomes  aware of any  hazardous  waste or
     substances as listed by Proposition  65, he will advise Lessor within three
     (3) days of such  existence and either obtain  approval from Lessor and the
     appropriate  governing  agencies  within  thirty  (30) days from  notice or
     remove  and clean up said  hazardous  waste to  standards  required  by the
     Lessor and the appropriate  governing  agencies within sixty (60) days from
     notice."
         
     "If Lessee, his invitees,  employees, agents or associates cause or allow a
     spill, or contamination  of the premises,  common area, soil or surrounding
     area, then it will be the  responsibility of Lessee to clean up said hazard
     to the degree  required and within the time frame set by any public  entity
     which has  jurisdiction  and particularly in response to the Super Fund Act
     and Proposition 65."
         
58.  Area Measurement:

     Lessee has reviewed and approved the system of measurement, the useable and
     rental square footage of the subject  premises  within fifteen (15) days of
     acceptance hereof.
         
59.  Associations and Expenses:

     Lessee has reviewed and approved  CC&R's,  any common area  association and
     budget,  rules,  expenses,  and use conditions pertaining thereto within 30
     days of acceptance hereof.
         
     The herein  Addendum #1, upon its execution by both  parties,  its herewith
     made an integral part of the aforementioned Agreement.


     LESSEE                                       LESSOR
     Arterial Vascular Engineering, Inc.          SBR A Calif Gen. Part.
     By: /s/ Lawrence J. Fassler                  /s/ Randal P. Lewis
     Date: 12/1/97                                Date: 11/25/97



<PAGE>
                                 ADDENDUM TO
                           STANDARD INDUSTRIAL LEASE

DATED:  October 29, 1997

BY AND BETWEEN:    SBR, a California General Partnership (Lessor) and Arterial 
Vascular Engineering (Lessee)

ADDRESS:   7975   Cameron Center Drive, Building 200 Windsor, CA

60 RENT ESCALATIONS

(a)      On the  commencement  of the  second  year of the Lease and every  year
         thereafter, the monthly rent payable  under  Paragraph 4 and 1.5 of the
         attached lease shall be adjusted by the increase, if any, from the date
         this lease  commenced,  in the  Consumer  Price  Index of the Bureau of
         Labor  Statistics  of the  U.S.  Department  of  Labor  for  all  Urban
         Consumers,  San  Francisco-Oakland,  California (1982-1984 base period)
         "All Items", herein referred to as "C.P.I."

(b)      The monthly  rent  payable in  accordance  with  paragraph  (a) of this
         Addendum shall be calculated as follows: the rent payable for the first
         month of the term of this  lease,  as set forth in  Paragraph  4 of the
         attached  lease,  shall be multiplied  by a fraction,  the numerator of
         which  shall be the  C.P.I.  of the  calendar  month  during  which the
         adjustment is to take effect, and the denominator of which shall be the
         C.P.I.  for the  calendar  month  in  which  the  original  lease  term
         commences.  The sum so calculated shall constitute the new monthly rent
         hereunder, but in no event shall such new monthly rent be less than the
         rent  payable  for the month  immediately  preceding  the date for rent
         adjustment.

(c)      Pending receipt of the required C.P.I. and  determination of the actual
         adjustment,   Lessee  shall  pay  an  estimated   adjusted  rental,  as
         reasonably  determined  by Lessor by  reference  to the then  available
         C.P.I.  information.  Upon  notification of the actual adjustment after
         publication of the required C.P.I.  any  overpayment  shall be credited
         against the next installment of rent due, and any underpayment shall be
         immediately  due and  payable  by Lessee.  Lessor's  failure to request
         payment of an estimated or actual rent adjustment  shall not constitute
         a waiver of the  right to any  adjustment  provide  for in the lease or
         this addendum.

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



<PAGE>


                                   EXHIBIT A1

            ARCHITECTURAL MAP OF CAMERON CENTER / WINDSOR CALIFORNIA





<PAGE>

                                   EXHIBIT A2

                              [BLDG. C-FLOOR PLAN]

<PAGE>


                                   EXHIBIT B

                       STANDARD LEASE DISCLOSURE ADDENDUM

         
         
Notice to Owners,  Buyers and Tenants  Regarding  Hazardous Wastes or Substances
and Underground Storage Tanks
         
Comprehensive  federal and state laws and  regulations  have been enacted in the
last few years in an effort to develop controls over the use, storage, handling,
cleanup,  removal and disposal of hazardous wastes or substances.  Some of these
laws and  regulations,  such as, for example,  the  so-called  "Super Fund Act",
provide for broad liability  schemes  wherein an owner,  tenant or other user of
the property may be liable for cleanup  costs and damages  regardless  of fault.
Other laws and  regulations  set  standards  for the  handling  of  asbestos  or
establish  requirements for the use,  modification,  abandonment,  or closing of
underground storage tanks.
         
It is not  practical or possible to list all such laws and  regulations  in this
Notice.  Therefore,  lessors amid lessees are urged to consult  legal counsel to
determine their  respective  rights and  liabilities  with respect to the issues
described in this Notice as well as other  aspects of the proposed  transaction.
If various  materials  that have been or may be in the future  determined  to be
toxic,  hazardous or undesirable,  or are going to be used,  stored,  handled or
disposed of on the  property,  or if the  property  has or may have  underground
storage tanks for storage of such  hazardous  materials,  or that such materials
may be in the  equipment,  improvements  or soil, it is essential that legal and
technical advice be obtained to determine,  among other things, what permits and
approvals have been or may be required, if any, the estimated costs and expenses
associated with the use, storage, handling,  cleanup, removal or disposal of the
hazardous  wastes or substances and what  contractual  provisions and protection
are necessary or desirable. It may also be important to obtain expert assistance
for site investigations and building inspections.  The past uses of the property
may provide  valuable  information as to the  likelihood of hazardous  wastes or
substances, or underground storage tanks being on the property.
         
The term  "hazardous  wastes or  substances"  is used in this Notice in its very
broadest  sense and  includes,  but is not  limited to, all those  listed  under
Proposition 65,  petroleum base products,  paints and solvents,  lead,  cyanide,
DDT, printing inks, acids,  pesticides,  ammonium compounds,  asbestos, PCBs and
other chemical products.  Hazardous wastes or substances and underground storage
tanks may be present on all types of real property.  This Notice is,  therefore,
meant to apply to any transaction  involving any type of real property,  whether
improved or unimproved.
         
Although  Keegan & Coppin  Co.,  Inc.  or its  salespeople,  will  disclose  any
knowledge  it actually  possesses  with  respect to the  existence  of hazardous
wastes or  substances,  or underground  storage tanks on the property,  Keegan &
Coppin Co., Inc. has not made  investigations  or obtained reports regarding the
subject matter of this Notice,  except as may be described in a separate written
document,  studies or  investigation  by experts.  Therefore,  unless  there are
additional documents or studies attached to this notice, lease or contract, this
will serve as  notification  that Keegan & Coppin Co.,  Inc. or its  salespeople
make no  representation  regarding the existence or  non-existence  of hazardous
wastes or substances,  or underground storage tanks on the property.  You should
contact  a  professional,  such  as a  civil  enigineer,  geologist,  industrial
hygienist  or other  persons  with  experience  in these  matters  to advise you
concerning the property.
         
Americans with Disabilities Act (ADA)
         
On  July  26,  1991,  the  federal  legislation  known  as the  Amnenicans  with
Disabilities Act (ADA) was signed into law by President Bush. The purpose of the
ADA is to  integrate  persons  with  disabilities  into the  economic and social
mainstream of American life. Title III of the ADA applies to Lessors and Lessees
of "places of public  accommodation" and "commercial  facilities",  and requires
that places of public  accommodation  undertake "readily  achievable" removal of
communication and access barriers to the disabled. This requirement of Title III
of the ADA is effective January 26, 1992.
         
It is important that building owners identify and undertake "readily achievable"
removal of any such  barriers in the common areas,  sidewalks,  parking lots and
other areas of the building under their control.

The lessor and lessee is responsible for compliance with ADA relating to removal
of barriers within the workplace i.e.,  arrangement of interior  furnishings and
access  within the  premises,  and any  improvements  installed  by lessor  amid
lessee.
         
Keegan & Coppin  Company,  Inc.  recommends that both parties seek expert advice
regarding the implications of the Act as affects this agreement.
         
Alquist-Priolo:
         
"The property which is the subject of this contract may be situated in a Special
Study Zone as designated under the Alquist-Priolo  Geologic Hazard Act, Sections
2621-2625, inclusive, of the California Public Resources Code; and, as such, the
construction  or  development  on  this  property  of any  structure  for  human
occupancy  may be subject to the  findings  of a geologic  report  prepared by a
geologist registered in the State of California, unless such report is waived by
the City or  County  under  the terms of that  act.  No  representations  on the
subject  are made by the  lessor or agent,  and the lessee  should  make his own
inquiry or investigation."
         
Flood Hazard Area Disclosure:
         
The subject  property  may be situated in a "Special  Flood  Hazard Area" as set
forth on a Federal Emergency  Managemnt Agency (FEMA) "Flood Insurance Rate Map"
(FIRM) or "Flood  Hazard  Boundary  Map"  (FHBM).  The law provides  that,  as a
condition of obtaining financing on most structures located in a "Special Floods
Hazard  Area",  lender  requires  flood  insurance  where  the  property  or its
attachments  are  security  for a  loan.  Lessee  should  consult  with  experts
concerning the possible risk of flooding.
         
             Acknowledgment:

             Lessee: /s/ LF            Date:  12/1/97
                    ----------              ----------

             Lessor: /s/ RPL           Date:  11/25/97
                    ----------              ----------


<PAGE>



                                   EXHIBIT C


                            ARBITRATION OF DISPUTES
                                   FOR LEASE

PROPERTY ADDRESS:    7975 Cameron Center Drive Building 200, Windsor, CA
                 --------------------------------------------------------------

Any  dispute  or claim in law or  equity  arising  out of this  contract  or any
resulting  transaction  shall be  decided  by  neutral  binding  arbitration  in
accordance with the rules of the American  Arbitration  Association,  and not by
court  action  except as  provided  by  California  law for  judicial  review of
arbitration proceedings.  Judgment  upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction  thereof. The parties shall have
the  right to  discovery  in  accordance  with Code of Civil  Procedure  Section
1283.05.  The following matters are excluded from arbitration  hereunder:  (a) a
judicial or non-judicial  foreclosure or other action or proceeding to enforce a
deed of trust,  mortgage,  or real property  sales  contract as defined in Civil
Code  Section  2985,  (b)  an  unlawful  detainer  action,  (c)  the  filing  or
enforcement  of  a  mechanic's   lien,  (d)  any  matter  which  is  within  the
jurisdiction  of a probate court, or small claims court, or an action for bodily
injury or wrongful death, or for latent or patent defects to which Code of Civil
Procedure  Section  337.1 or Section  337.15  applies.  The filing of a judicial
action to enable  the  recording  of a notice of  pending  action,  for order of
attachment,  receivership,  injunction, or other provisional remedies, shall not
constitute a waiver of the right to arbitrate under this provision.

Any  dispute  or claim by or  against  broker(s)  and/or  associate  licensee(s)
participating in this transaction  shall be submitted to arbitration  consistent
with the provision  above only if the  broker(s)  and/or  associate  licensee(s)
making the claim or against  whom the claim is made shall have  agreed to submit
it to arbitration consistent with this provision.

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

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

(/s/LF)   (   )  Lessee agrees             (  )  (  ) Lessee does not agree
(/s/RL)   (   )  Lessor agrees             (  )  (  ) Lessor does not agree
(   )     (   )  Lessee's Broker agrees
(   )     (   )  Lessor's Broker agrees
<PAGE>

                                   EXHIBIT D

                  AGENT REPRESENTING BOTH LANDLORD AND TENANT


A real estate  agent  either  acting  directly or through one or more  associate
licenses,  can  legally  be the agent of both the  Landlord  and the Tenant in a
transaction,  but only with the  knowledge  and consent of both the Landlord and
the Tenant.

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

(a) A  fiduciary  duty of utmost  care,  integrity,  honest  and  loyalty in the
dealings with either Landlord or Tenant.

(b)  Other  duties to the  Landlord  and the  Tenant  as  stated  above in their
respective sections.

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

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

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

I/We acknowledge receipt of a copy of this disclosure.

/s/ Randal P. Lewis                          Date    11-25-97
------------------------------                    --------------------------
(Landlord)

/s/ Lawrence J. Fassler                      Date    12-1-97
------------------------------                    --------------------------
(Tenant)


             DECLARATION REGARDING REAL ESTATE AGENCY RELATIONSHIP

Keegan & Coppin Company, Inc., is the agent of (check one)

(Name of Listing Agent)

   The Landlord exclusively; or
--

 X Both the Tenant and Landlord
--

CONFIRMED AND ACKNOWLEDGED:

/s/  Randal P. Lewis                         Date    11-25-97
------------------------------                    --------------------------
(Tenant)

                                             Date
------------------------------                    --------------------------
(Landlord)

                                             By:
------------------------------                    --------------------------
(Agent)                                      

--------------------------------------------------------------------------------


Keegan & Coppin Company, Inc., is the agent (check one)

-- The Tenant exclusively; or

   The Landlord exclusively; or
--

 X Both the Tenant and Landlord
--


CONFIRMED AND ACKNOWLEDGED:

/s/ Randal P. Lewis                          Date   11-25-97
------------------------------                    --------------------------
(Tenant)

/s/ Lawrence J. Fassler                      Date   12-1-97
------------------------------                    --------------------------
(Landlord)

                                             By:
------------------------------                    --------------------------
(Agent)                                      
<PAGE>


                                   EXHIBIT E

                         PERMITTED HAZARDOUS MATERIALS

Lessee may, at any time and from time to time,  engage in a  Reportable  Use (as
defined in Section 6.2) with respect to any of the following substances:

                    Isopropanol
                    Nitric Acid
                    Sulfuric Acid
                    Phosphoric Acid
                    Synergy cleaner (citrus-based organic)
                    Oxalic acid
                    Cidex (gluteraldehyde)
                    Epoxy


Lessee   acknowledges   and  agrees  that  the  Sonoma   County   Department  of
Environmental  Health and the  Department of Emergency  Services  require that a
Hazardous  Material  Management  Plan  ("HMMP") be filed if the total  amount of
hazardous materials exceeds 25 gallons.  AVE covenants to Lessor to file an HMMP
with  the  aforementioned  agencies  if at any  time  the  amount  of  hazardous
materials stored on the property exceeds such amount.

<PAGE>
                                   EXHIBIT F

                          Proposal Lessee Improvements

                              [Floor Plan-Bldg.200]