<PAGE>

[LOGO]



                                 PROMISSORY NOTE

<TABLE>
<CAPTION>
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  Principal    Loan Date    Maturity   Loan No  Call  Collateral    Account    Officer  Initials
<S>            <C>         <C>         <C>      <C>   <C>         <C>          <C>      <C>
$8,000,000.00  05-13-1998  06-12-2002                             00700005958    345
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</TABLE>
References in the shaded area are for Lender's use only and do not limit the 
applicability of this document to any particular loan or item.
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<TABLE>
<S>         <C>                     <C>      <C>
Borrower:   MEGABIOS CORP.          Lender:  Imperial Bank
            863-A Millen Road                Emerging Growth Industries Group
            Burlingame, CA 94010                - Menio Park
                                             226 Airport Parkway
                                             San Jose, CA 95110-1024
</TABLE>
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Principal Amount: $8,000,000.00          Initial Rate: 9.000%      Date of Note:
                                                                   May 13, 1998

PROMISE TO PAY. MEGABIOS CORP. ("Borrower") promises to pay to Imperial Bank 
("Lender"), of order, in lawful money of the United States of America, the 
principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much 
as may be outstanding, together with interest on the unpaid outstanding 
principal balance of each advance. Interest shall be calculated from the date 
of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in accordance with the following payment 
schedule:

     Disbursements under the Note shall be available through December 31, 
     1998 ("Draw Period"). During the draw period, interest only shall be due 
     monthly beginning June 12, 1998. On June 30, 1998 and December 31, 1998 
     the outstanding balance of the disbursements at the end of each period 
     shall be payable monthly in 42 equal payments of principal plus accrued 
     interest beginning July 12, 1998 and January 12, 1999, respectively. All 
     principal and accrued but unpaid interest shall in any event be due and 
     payable on or before June 12, 2002.

The annual interest rate for this Note is computed on a 365/360 basis; that 
is, by applying the ratio of the annual interest rate over a year of 360 
days, multiplied by the outstanding principal balance, multiplied by the 
actual number of days the principal balance is outstanding. Borrower will pay 
Lender at Lender's address shown above or at such other place as Lender may 
designate in writing. Unless otherwise agreed or required by applicable law, 
payments will be applied first to any unpaid collection costs and any late 
charges, then to any unpaid interest, and any remaining amount to principal.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change 
from time to time based on changes in an index which is the Imperial Bank 
Prime Rate (The "Index"). The Prime Rate is the rate announced by Lender as 
its Prime Rate of interest from time to time. Lender will tell Borrower the 
current index rate upon Borrower's request. Borrower understands that Lender 
may make loans based on other rates as well. The interest rate change will 
not occur more often than each day. The index currently is 8.500%. The 
interest rate to be applied to the unpaid principal balance of this Note will 
be at a rate of 0.500 percentage points over the index, resulting in an 
initial rate of 9.000%. NOTICE: Under no circumstances will the interest rate 
on this Note be more than the maximum rate allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full 
prepayment of this Note, Borrower understands that Lender is entitled to a 
minimum interest charge of $250.00. Other than Borrower's obligation to pay 
any minimum interest charge. Borrower may pay without penalty all or a 
portion of the amount owed earlier than it is due. Early payments will not, 
unless agreed to by Lender in writing, relieve Borrower of Borrower's 
obligation to continue to make payments of accrued unpaid interest. Rather, 
they will reduce the principal balance due.

LATE CHARGE. If a payment is 10 days or more late. Borrower will be charged 
5.000% of the unpaid portion of the regularly scheduled payment.

DEFAULT. Borrower will be in default if any of the following happens: (a) 
Borrower fails to make any payment when due. (b) Borrower breaks any promise 
Borrower has made to Lender, or Borrower fails to comply with or to perform 
when due any other term, obligation, covenant, or condition contained in this 
Note or any agreement related to this Note, or in any other agreement or loan 
Borrower has with Lender. (c) Any representation or statement made or 
furnished to Lender by Borrower or on Borrower's behalf is false or 
misleading in any material respect either now or at the time made or 
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any 
part of Borrower's property. Borrower makes an assignment for the benefit of 
creditors, or any proceeding is commenced either by Borrower or against 
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to 
take any of Borrower's property on or in which Lender has a lien or security 
interest. This includes a garnishment of any of Borrower's accounts with 
Lender. (f) Any guarantor dies or any of the other events described in this 
default section occurs with respect to any guarantor of this Note. (g) A 
material adverse change occurs in Borrower's financial condition, or Lender 
believes the prospect of payment or performance of the indebtedness is 
impaired. (h) Lender in good faith deems itself insecure.

If any default, other than a default in payment, is curable and if Borrower 
has not been given a notice of a breach of the same provision of this Note 
within the preceding twelve (12) months, it may be cured (and no event of 
default will have occurred) if Borrower, after receiving written notice from 
Lender demanding cure of such default: (a) cures the default within ten (10) 
days; or (b) if the cure requires more than ten (10) days, immediately 
initiates steps which Lender deems in Lender's sole discretion to be 
sufficient to cure the default and thereafter continues and completes all 
reasonable and necessary steps sufficient to produce compliance as soon as 
reasonably practical.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal 
balance on this Note and all accrued unpaid interest immediately due, without 
notice, and then Borrower will pay that amount. Upon Borrower's failure to 
pay all amounts declared due pursuant to this section, including failure to 
pay upon final maturity, Lender, at its option, may also, if permitted under 
applicable law, do one or both of the following: (a) increase the variable 
interest rate on this Note to 5.500 percentage points over the Index, and (b) 
add any unpaid accrued interest to principal and such sum will bear interest 
therefrom until paid at the rate provided in this Note (including any 
increased rate). Lender may hire or pay someone else to help collect this 
Note if Borrower does not pay. Borrower also will pay Lender that amount. 
This includes, subject to any limits under applicable law, Lender's 
attorneys' fees and Lender's legal expenses whether or not there is a 
lawsuit, including attorneys' fees and legal expenses for bankruptcy 
proceedings (including efforts to modify or vacate any automatic stay or 
injunction), appeals, and any anticipated post-judgment collection services. 
Borrower also will pay any court costs, in addition to all other sums 
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY 
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES 
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SANTA 
CLARA COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE 
RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY 
EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE /S/[ILLEGIBLE]) 
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF 
THE STATE OF CALIFORNIA.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower 
makes a payment on Borrower's loan and the check or preauthorized charge with 
which Borrower pays is later dishonored.

RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security 
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to 
Lender all Borrower's right, title and interest in and to, Borrower's 
accounts with Lender (whether checking, savings, or some other account), 
including without limitation all accounts held jointly with someone else and 
all accounts Borrower may open in the future, excluding however all IRA and 
Keogh accounts, and all trust accounts for which the grant of a security 
interest would be prohibited by law. Borrower authorizes Lender, to the 
extent permitted by applicable law, to charge or setoff all sums owing on 
this Note against any and all such accounts.

LINE OF CREDIT. This Note evidences a straight line of credit. Once the total 
amount of principal has been advanced, Borrower is not entitled to further 
loan advances. Advances under this Note may be requested orally by Borrower 
or by an authorized person. All oral requests shall be confirmed in writing 
on the day of the request. All communications, instructions, or directions by 
telephone or otherwise to Lender are to be directed to Lender's office shown 
above. The following party or parties are authorized to request advances 
under the line of credit until Lender receives from Borrower at Lender's 
address shown above written notice of revocation of their authority: BENJAMIN 
F. MCGRAW, III, PRESIDENT/CEO. Borrower agrees to be liable for all sums 
either: (a) advanced in accordance with the instructions of an authorized 
person or (b) credited to any of Borrower's accounts with Lender. The unpaid 
principal balance owing on this Note at any time may be evidenced by 
endorsements on this Note or by Lender's internet records, including daily 
computer print-outs. Lender will have no obligation to advance funds under 
this Note if: (a) Borrower or any guarantor is in default under the terms of 
this Note or any agreement that Borrower or any guarantor has with Lender, 
including any agreement made in connection with the signing of this Note; (b) 
Borrower or any guarantor ceases doing business or is insolvent; (c) any 
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such 
guarantor's guarantee of this Note or any other loan with Lender; (d) 
Borrower has applied funds provided pursuant to this Note for purposes other 
than those authorized by Lender; or (e) Lender in good faith deems itself 
insecure under this Note or any other agreement between Lender and Borrower.

CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions 
of the Credit Terms and Conditions dated May 13, 1998 and all amendments 
thereto and replacements therefor.

   
<PAGE>
                               PROMISSORY NOTE                           Page 2
                                 (Continued)
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REFERENCE PROVISION.  1.   Other than (i) non-judicial foreclosure and all 
matters in connection therewith regarding security interests in real or 
personal property; or (ii) the appointment of a receiver, or the exercise of 
other provisional remedies (any and all of which may be initiated pursuant to 
applicable law), each controversy, dispute or claim between the parties 
arising out of or relating to this document ("Agreement"), which controversy, 
dispute or claim is not settled in writing within thirty (30) days after the 
"Claim Date" (defined as the date on which a party subject to the Agreement 
gives written notice to all other parties that a controversy, dispute or 
claim exists), will be settled by a reference proceeding in California in 
accordance with the provisions of Section 638 et seq. of the California Code 
of Civil Procedure, or their successor section ("CCP"), which shall 
constitute the exclusive remedy for the settlement of any controversy, 
dispute or claim concerning this Agreement, including whether such 
controversy, dispute or claim is subject to the reference proceeding and 
except as set forth above, the parties waive their rights to initiate any 
legal proceedings against each other in any court or jurisdiction other than 
the Superior Court in the County where the Real Property, if any, is located 
or Los Angeles County if none (the "Court"). The referee shall be a retired 
Judge of the Court selected by mutual agreement of the parties, and if they 
cannot so agree within forty-five (45) days after the Claim Date, the referee 
shall be promptly selected by the Presiding Judge of the Court (or his 
representative). The referee shall be appointed to sit as a temporary judge, 
with all of the powers for a temporary judge, as authorized by law, and upon 
selection should take and subscribe to the oath of office as provided for in 
Rule 244 of the California Rules of Court (or any subsequently enacted Rule). 
Each party shall have one peremptory challenge pursuant to CCP 170.6. The 
referee shall (a) be requested to set the matter for hearing within sixty 
(60) days after the Claim Date and (b) try any and all issues of law or fact 
and report a statement of decision upon them, if possible, within ninety (90) 
days of the Claim Date. Any decision rendered by the referee will be final, 
binding and conclusive and judgment shall be entered pursuant to CCP 644 in 
any court in the State of California having jurisdiction. Any party may apply 
for a reference proceeding at any time after thirty (30) days following 
notice to any other party of the nature of the controversy, dispute or 
claim, by filing a petition for a hearing and/or trial. All discovery 
permitted by this Agreement shall be completed no later than fifteen (15) 
days before the first hearing date established by the referee. The referee 
may extend such period in the event of a party's refusal to provide requested 
discovery for any reason whatsoever, including, without limitation, legal 
objections raised to such discovery or unavailability of a witness due to 
absence or illness. No party shall be entitled to "priority" in conducting 
discovery. Depositions may be taken by either party upon seven (7) days 
written notice, and request for production or inspection of documents shall 
be responded to within ten (10) days after service. All disputes relating to 
discovery which cannot be resolved by the parties shall be submitted to the 
referee whose decision shall be final and binding upon the parties. Pending 
appointment of the referee as provided herein, the Superior Court is 
empowered to issue temporary and/or provisional remedies, as appropriate.

2.   Except as expressly set forth in this Agreement, the referee shall 
determine the manner in which the reference proceeding is conducted including 
the time and place of all hearings, the order of presentation of evidence, 
and all other questions that arise with respect to the course of the 
reference proceeding. All proceedings and hearings conducted before the 
referee, except for trial, shall be conducted without a court reporter, 
except that when any party so requests, a court reporter will be used at any 
hearing conducted before the referee. The party making such a request 
shall have the obligation to arrange for and pay for the court reporter. The 
costs of the court reporter at the trial shall be borne equally by the 
parties.

3.   The referee shall be required to determine all issues in accordance with 
existing case law and the statutory laws of the State of California. The 
rules of evidence applicable to proceedings at law in the State of California 
will be applicable to the reference proceeding. The referee shall be 
empowered to enter equitable as well as legal relief, to provide all 
temporary and/or provisional remedies and to enter equitable orders that will 
be binding upon the parties. The referee shall issue a single judgment at the 
close of the reference proceeding which shall dispose of all of the claims of 
the parties that are the subject of the reference. The parties hereto 
expressly reserve the right to contest or appeal from the final judgment or 
any appealable order or appealable judgment entered by the referee. The 
parties hereto expressly reserve the right to findings of fact, conclusions 
of law, a written statement of decision, and the right to move for a new 
trial or a different judgment, which new trial, if granted, is also to be a 
reference proceedings under this provision.

4.   In the event that the enabling legislation which provides for 
appointment of a referee is repealed (and no successor statute is enacted), 
any dispute between the parties that would otherwise be determined by the 
reference procedure herein described will be resolved and determined by 
arbitration. The arbitration will be conducted by a retired judge of the 
Court, in accordance with the California Arbitration Act, 1280 through 1294.2 
of the CCP as amended from time to time. The limitations with respect to 
discovery as set forth hereinabove shall apply to any such arbitration 
proceeding.

ADDENDUM TO PROMISSORY NOTE. The attached Addendum dated May 13, 1998 is 
hereby incorporated and made a part hereof.

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or 
remedies under this Note without losing them. Borrower and any other person 
who signs, guarantees or endorses this Note, to the extent allowed by law, 
waive any applicable statute of limitations, presentment, demand for payment, 
protest and notice of dishonor. Upon any change in the terms of this Note, 
and unless otherwise expressly stated in writing, no party who signs this 
Note, whether as maker, guarantor, accommodation maker or endorser, shall be 
released from liability. All such parties agree that Lender may renew or 
extend (repeatedly and for any length of time) this loan, or release any 
party or guarantor or collateral; or impair, fail to realize upon or perfect 
Lender's security interest in the collateral; and take any other action 
deemed necessary by Lender without the consent of or notice to anyone. All 
such parties also agree that Lender may modify this loan without the consent 
of or notice to anyone other than the party with whom the modification is 
made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS 
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER 
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY 
OF THE NOTE.

BORROWER:

MERGABIOS CORP.

By:  /s/ Benjamin F. McGraw
   -----------------------------------------
     Benjamin F. McGraw, III, President/CEO

-------------------------------------------------------------------------------
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Variable Rate. Line of Credit.           LASER PRO, Reg. U.S. Pal. & T.M. Off.,
                                      Ver. 3.24b (c) 1998 CFi PRoServices, Inc.
                                         All rights reserved. CA-O20E3.24F3.24a
                                                                    MEGABIOS.LN
<PAGE>

               AMENDED ADDENDUM TO CREDIT TERMS AND CONDITIONS
                             DATED MAY 13, 1998
                               MEGABIOS CORP.

This Amended Addendum ("Addendum") is made and entered into as of May 13, 
1998, between MEGABIOS CORP. ("Borrower") and IMPERIAL BANK ("Bank"). This 
Addendum amends and supplements the Credit Terms and Conditions dated May 19, 
1995 ("Agreement"). In the event of any inconsistency between the terms 
herein and the terms of the Agreement, the terms herein shall in all cases 
govern and control. All capitalized terms herein, unless otherwise defined 
herein, shall have the meaning set forth in the Agreement. The Addendum dated 
May 19, 1995 to the Agreement is hereby amended in full to read as follows:

COMMITMENTS

     1.  An $8,000,000 Credit Facility for the purchase of capital equipment, 
         tenant improvements, and general corporate purposes.

     2.  Existing $249,999 Term Loan.

TERMS

     1.  Draws under the Credit Facility shall be available through 12/31/98, 
         with borrowed amounts converted semi-annually to a 42-month term 
         payout of equal principal amortization plus accrued interest.

     2.  Term Loan to be repaid in six equal monthly payments of principal 
         plus accrued interest.

COLLATERAL

     Bank to have a perfected first priority security interest in all 
     corporate assets, excluding leased or financed equipment and patents, 
     copyrights, trademarks, trade secrets, or other intellectual property. 
     The existing Deed of Trust dated 8/15/95 shall be used to secure only 
     the existing $249,999 Term Loan.

BORROWING FORMULA

     1.  100% against invoice price of equipment purchases, less tax, 
         freight, and installation. 100% against invoice price of tenant 
         improvements up to $1,250,000, excluding miscellaneous soft costs. 
         Additionally, up to $4,000,000 of non-invoice supported advances 
         shall be allowed.

     2.  Unavailable for additional borrowings.

PRICING

     1.  Interest Rate:   Prime + 0.5%
         Facility Fee:    $10,000.

     2.  Interest Rate:   Prime + 2.0%
         Facility Fee:    None.


<PAGE>

COVENANTS

A.   Measured on a monthly basis unless stated otherwise:

     1)  Minimum unrestricted cash and short-term investments not less than 
         the greater of (a) the last two quarters of Net Cash Burn(1) as 
         adjusted on a two quarter rolling average, or (b) 90% of the total 
         principal drawn through 12/31/98.

     2)  Minimum Tangible Net Worth of 90% of the total principal drawn 
         through 12/31/98.

         (1)  Net Cash Burn shall be defined as the change in cash, 
              short-term investments, and marketable securities for the 
              fiscal quarter then ended less the net new equity received by 
              Borrower for the fiscal quarter then ended. In the event the 
              unrestricted cash plus short-term investments balance drops 
              below the greater of (i) 150% of the total principal drawn 
              through 12/31/98 or (ii) the last four quarters of Net Cash 
              Burn, the Net Cash Burn covenant shall be monitored and 
              adjusted on a monthly basis.

B.   Borrower to provide to Bank:

     1)  Unqualified audited financial statements within 90 days after each 
         fiscal year end.

     2)  Company prepared quarterly financial statements within 45 days of 
         each fiscal quarter. In the event the unrestricted cash plus 
         short-term investments balance drops below the greater of (i) 150% of 
         the total principal drawn through 12/31/98 or (ii) the last four 
         quarters of Net Cash Burn, financial statements to be provided 
         30 days of each month end.

     3)  Compliance Certificate within 30 days of each month end.

     4)  Budgets, sales projections, operating plan, or other financial 
         exhibits which Bank may reasonably request.


C.   Other Covenants:

     1)  Borrower's primary deposit and operating accounts to be maintained 
         at Bank.

     2)  Borrower shall not without Bank's prior approval:

         a.  Enter into any mergers or acquisitions or major debt 
             agreements, except for (i) equipment leases; (ii) contingent 
             obligations of Borrower consisting of guarantees (and other 
             credit support) of the obligations of vendors and suppliers of 
             Borrower in respect of transactions entered into in the ordinary 
             course of business; (iii) indebtedness with respect to capital 
             lease obligations (including leases of real property); (iv) 
             prepaid royalties and deferred revenue in connection with 
             prepaid support services; (v) extensions, renewals, refundings, 
             refinancings, modifications, amendments and restatements of any 
             of the items of permitted indebtedness (i) through (iv) above, 
             provided that the principal amount thereof is not increased or 
             the terms thereof are not modified to impose more burdensome 
             terms upon Borrower.

         b.  Pay cash dividends or repurchase stock; provided that Borrower 
             may redeem or repurchase its securities in connection with any 
             agreement between Borrower and any officer, director or employee 
             of Borrower.

         c.  Loan money to others; provided, however, this Section C(2)(c) 
             shall not prohibit:

             (i)    extensions of credit in the nature of accounts receivable 
                    or notes receivable arising from the sale or lease of 
                    goods or services in the ordinary course of business.

             (ii)   investments consisting of the endorsement of negotiable 
                    instruments for deposit or collection or similar 
                    transactions in the ordinary course of business;

             (iii)  investments (including debt obligations) received in 
                    connection with the bankruptcy or reorganization or 
                    customers or suppliers and in settlement of delinquent 
                    obligations of, and other disputes with, customers or 
                    suppliers arising in the ordinary course of business;

<PAGE>

             (iv)   investments consisting of (a) compensation of employees, 
                    officers and directors of Borrower so long as the Board 
                    of Directors of Borrower determines that such 
                    compensation is in the best interests of Borrower, (b) 
                    travel advances, employee relocation loans and other 
                    employee loans and advances in the ordinary course of 
                    business, (c) loans to employees, officers or directors 
                    relating to the purchase of equity securities of 
                    Borrower, and (d) other loans to officers and employees 
                    approved by the Board of Directors.

             Provided that immediately before and after giving effect thereto 
             (i) no event of default has occurred and is continuing or will 
             exist or result therefrom and (ii) unrestricted cash balances 
             exceed $15,000,000, Bank's prior approval shall not be required 
             for actions contained in this Section C(2).

     3)  Without Bank's prior written approval, Borrower shall not:

         a.  Hypothecate existing assets, except for the following Permitted 
             Liens:

             (i)    liens for taxes not delinquent;

             (ii)   liens in Bank's favor;

             (iii)  liens existing as of the closing date;

             (iv)   liens securing capital lease obligations on assets 
                    subject to such capital leases;

             (v)    liens on equipment leased by Borrower pursuant to an 
                    operating lease (including sale-leaseback transactions) 
                    in the ordinary course of business (including proceeds 
                    thereof and accessions thereto) incurred solely for the 
                    purpose of financing the lease of such equipment 
                    (including liens arising from UCC financing agreements 
                    regarding leases permitted by this Addendum;

             (vi)   liens arising from judgments, decrees or attachments to 
                    the extent and only so long as such judgment, decree or 
                    attachment has not caused or resulted in an Event of 
                    Default;

             (vii)  easements, reservations, rights-of-way, restrictions, 
                    minor defects or irregularities in title and other 
                    similar liens affecting real property not interfering in 
                    any material respect with the ordinary conduct of 
                    business of Borrower;

             (viii) liens in favor of customs and revenue authorities arising 
                    as a matter of law to secure payment of customs duties in 
                    connection with the importation of goods;

             (ix)   liens arising solely by virtue of any statutory or common 
                    law provision relating to banker's liens, rights of 
                    setoff or similar rights and remedies as to deposit 
                    accounts or other funds maintained with a creditor 
                    deposit accounts or other funds maintained with a 
                    creditor depository institution;

             (x)    liens, not otherwise permitted, which liens do not in the 
                    aggregate exceed $150,000 at any time;

             (xi)   liens securing permitted indebtedness; and

             (xii)  liens incurred in connection with the extension, renewal, 
                    or refinancing of the indebtedness secured by liens of 
                    the type described in clauses (i) through (xi) above; 
                    provided, however, that any extension, renewal or 
                    replacement liens shall be limited to property encumbered 
                    by the existing lien and the principal amount of the 
                    indebtedness being extended, renewed or refinanced does 
                    not increase.

         b.  Guarantee loans of others.

     4)  Borrower shall notify Bank in writing of any legal action commenced 
         against it which may result in damages over $100,000 as not covered 
         by Borrower's general liability insurance. Borrower shall provide 
         Bank with such notice immediately upon Borrower's receipt of notice 
         of such legal action.

     5)  Borrower shall provide Bank proof of insurance on all tangible 
         corporate assets and a Lender's Loss Payable Clause with Bank as loss 
         payee as its interests appear.


<PAGE>

GOVERNING LAW; JUDICIAL REFERENCE

     1.  GOVERNING LAW.  This Agreement shall be deemed to have been made in 
the State of California and the validity, construction, interpretation, and 
enforcement hereof, and the rights of the parties hereto, shall be determined 
under, governed by, and construed in accordance with the internal laws of the 
State of California, without regard to principles of conflicts of law.

     2.  JUDICIAL REFERENCE.

         a)  Other than (i) nonjudicial foreclosure and all matters in 
connection therewith regarding security interests in real or personal 
property; or (ii) the appointment of a receiver, or the exercise of other 
provisional remedies (any and all of which may be initiated pursuant to 
applicable law), each controversy, dispute or claim between the parties 
arising out of or relating to this Agreement, the General Security Agreement, 
any note executed by Borrower in connection with this transaction and any 
other document executed by Borrower in connection with any loans by Bank to 
Borrower ("Loan Documents"), which controversy, dispute or claim is not 
settled in writing within thirty (30) days after the "CLAIM DATE" (defined as 
the date on which a party subject to any Loan Document gives written notice 
to all other parties that a controversy, dispute or claim exists), will be 
settled by a reference proceeding in California in accordance with the 
provisions of Section 638 ET SEQ. of the California Code of Civil Procedure, 
or their successor section ("CCP"), which shall constitute the exclusive 
remedy for the settlement of any controversy, dispute or claim concerning any 
Loan Document, including whether such controversy, dispute or claim is 
subject to the reference proceeding and except as set forth above, the 
parties waive their rights to initiate any legal proceedings against each 
other in any court or jurisdiction other than the Superior Court in the 
County where the Real Property, if any, is located or Los Angeles County if 
none (the "COURT"). The referee shall be a retired Judge of the Court 
selected by mutual agreement of the parties, and if they cannot so agree 
within forty-five (45) days after the Claim Date, the referee shall be 
promptly selected by the Presiding Judge of the Court (or his 
representative). The referee shall be appointed to sit as a temporary judge, 
with all of the powers for a temporary judge, as authorized by law, and upon 
selection should take and subscribe to the oath of office as provided for in 
Rule 244 of the California Rules of Court (or any subsequently enacted Rule). 
Each party shall have one peremptory challenge pursuant to CPP Section 170.6. 
The referee shall (a) be requested to set the matter for hearing within sixty 
(60) days after the claim date and (b) try any and all issues of law or fact 
and report a statement of decision upon them, if possible, within ninety (90) 
days of the Claim Date. Any decision rendered by the referee will be final, 
binding and conclusive and judgment shall be entered pursuant to CCP Section 
644 in any court in the State of California having jurisdiction. Any party 
may apply for a reference proceeding at any time after thirty (30) days 
following notice to any other party of the nature of the controversy, dispute 
or claim, by filing a petition for a hearing and/or trial. All discovery 
permitted by this Agreement shall be completed no later than fifteen (15) 
days before the first hearing date established by the referee. The referee 
may extend such period in the event of a party's refusal to provide requested 
discovery for any reason whatsoever, including, without limitation, legal 
objections raised to such discovery or unavailability of a witness due to 
absence or illness. No party shall be entitled to "priority" in conducting 
discovery. Depositions may be taken by either party upon seven (7) days 
written notice, and request for production or inspection of documents shall 
be responded to within ten (10) days after service. All disputes relating to 
discovery which cannot be resolved by the parties shall be submitted to the 
referee whose decision shall be final and binding upon the parties. Pending 
appointment of the referee as provided herein, the Superior Court is 
empowered to issue temporary and/or provisional remedies, as appropriate.

         b)  Except as expressly set forth in this Agreement, the referee 
shall determine the manner in which the reference proceeding is conducted 
including the time and place of all hearings, the order of presentation of 
evidence, and all other questions that arise with respect to the course of 
the reference proceeding. All proceedings and hearings conducted before the 
referee, except for trial, shall be conducted without a court reporter except 
that when any party so requests, a court reporter will be used at

<PAGE>

any hearing conducted before the referee. The party making such a request 
shall have the obligation to arrange for and pay for the court reporter. The 
costs of the court reporter at the trial shall be borne equally by the parties.

     c)   The referee shall be required to determine all issues in accordance 
with existing case law and the statutory laws of the State of California. The 
rules of evidence applicable to proceedings at law in the State of California 
will be applicable to the reference proceeding. The referee shall be empowered 
to enter equitable as well as legal relief, to provide all temporary and/or 
provisional remedies and to enter equitable orders that will be binding upon 
the parties. The referee shall issue a single judgment at the close of the 
reference proceeding which shall dispose of all of the claims of the parties 
that are the subject of the reference. The parties hereto expressly reserve 
the right to contest or appeal from the final judgment or any appealable 
order or appealable judgment entered by the referee. The parties hereto 
expressly reserve the right to findings of fact, conclusions of laws, a 
written statement of decision, and the right to move for a new trial or a 
different judgment, which new trial, if granted, is also to be a reference 
proceeding under this provision.

     d)   In the event that the enabling legislation which provides for 
appointment of a referee is repealed (and no successor statute is enacted), 
any dispute between the parties that would otherwise be determined by the 
reference procedure herein described will be resolved and determined by 
arbitration. The arbitration will be conducted by a retired judge of the 
Court, in accordance with the California Arbitration Act, Section 1280 
through Section 1294.2 of the CCP as amended from time to time. The 
limitations with respect to discovery as set forth hereinabove shall apply to 
any such arbitration proceeding.

MEGABIOS CORP.

By: /s/ Benjamin F. McGraw
    -----------------------------------
        Benjamin F. McGraw, III

Title: Chairman, President & CEO
       --------------------------------

By: -----------------------------------

Title: --------------------------------


IMPERIAL BANK

By: /s/ David Sousa
    -----------------------------------

Title:  AVP
       --------------------------------

<PAGE>

                  Amendment to Credit Terms and Conditions

This Amendment ("Amendment") dated as of May 13, 1998 amends that certain 
Credit Terms and Conditions dated June 2, 1995 ("Credit Terms and 
Conditions") with attached addendum dated May 19, 1995 (herein referred to as 
"Addendum" and together with the Credit Terms and Conditions the 
"Agreement"), by and between Imperial Bank ("Bank") and Megabios Corp. 
("Borrower") as follows:

1.   The last paragraph of the Credit Terms and Conditions is hereby amended 
     in full to read as follows:

     "See Addendum, as may be amended or replaced from time to time, attached 
     hereto and incorporated herein by this reference for additional terms. 
     In the event of a conflict between this Agreement and the Addendum, the 
     terms in the Addendum prevail."

2.   Except as provided above, the Agreement remains unchanged.

3.   This Amendment is effective as of May 13, 1998, and the parties hereby 
     confirm that the Agreement as amended is in full force and effect.


MEGABOIS CORP.

By: /s/ Benjamin F. McGraw
    -----------------------------------

Name: Benjamin F. McGraw, III
      ---------------------------------

Title: Chairman, President & CEO
       --------------------------------


IMPERIAL BANK

By: /s/ David Sousa
    -----------------------------------

Name: David Sousa
      ---------------------------------

Title:  AVP
       --------------------------------

<PAGE>

                       ADDENDUM TO PROMISSORY NOTE

     This Addendum dated May 13, 1998 ("Addendum") is made and entered into 
by and between Imperial Bank ("Bank") and Megabios Corp. ("Borrower"). This 
Addendum amends and supplements that certain Promissory Note date May 13, 
1998 ("Note") between Bank and Borrower. In the event of any inconsistency 
between the terms herein and the terms of the Note, the terms herein shall in 
all cases govern and control. All capitalized terms herein, unless otherwise 
defined herein, shall have the meaning set forth in the Note.

1.   The section of the Note entitled "DEFAULT" is hereby amended in full to 
     read as follows:

     "Borrower will be in default if any of the following happens: (a) 
     Borrower fails to make any payment within five days when due. (b) 
     Borrower fails to comply with or to perform when due any other term, 
     obligation, covenant, or condition contained in this Note or any 
     agreement related to this Note or in any other agreement or loan 
     Borrower has with Lender which is not cured within 30 days. (c) Any 
     representation or statement made or furnished to Lender by Borrower is 
     false or misleading in any material respect either now or at the time 
     made or furnished. (d) Borrower becomes insolvent, a receiver is 
     appointed for any part of Borrower's property, Borrower makes an 
     assignment for the benefit of creditors, or any proceeding is commenced 
     either by Borrower or against Borrower which is not cured or dismissed 
     within 30 days under any bankruptcy or insolvency laws. (e) Any creditor 
     tries to take any of Borrower's property on or in which Lender has a 
     lien or security interest. This includes a garnishment of any of 
     Borrower's accounts with Lender. (f) Any guarantor does or any of the 
     other events described in this default section occurs with respect to  
     any guarantor of this Note. (g) A material adverse change occurs in 
     Borrower's financial condition."

2.   The sentence following the "*" in the section of the Note entitled 
     "LENDERS RIGHTS" is hereby amended to read as follows:

     "This includes, subject to any limits under applicable law, Lender's 
     reasonable attorneys' fees and Lender's reasonable legal expenses 
     whether or not there is a lawsuit, including reasonable attorney's fees 
     and reasonable legal expenses for  bankruptcy proceedings (including 
     efforts to modify or vacate any automatic stay or injunction), appeals, 
     and any anticipated post-judgment collection services."

3.   The section of the Note entitled "LINE OF CREDIT" is hereby amended in 
     full to read as follows:

     "This Note evidences a straight line of credit. Once the total amount of 
     principal has been advanced, Borrower is not entitled to further loan 
     advances. Advances under this Note may be requested orally by Borrower 
     or by an authorized person. All oral


<PAGE>

     requests shall be confirmed in writing on the day of the request. All 
     communications, instructions, or directions by telephone or otherwise 
     to Lender are to be directed to Lender's office shown above. The 
     following party or parties are authorized to request advances under the 
     line of credit until Lender receives from Borrower at Lender's address 
     shown written notice of revocation of their authority: BENJAMIN F. 
     MCGRAW, III, PRESIDENT/CEO. Borrower agrees to be liable for all sums 
     either: (a) advanced in accordance with the instructions of an 
     authorized person or (b) credited to any Borrower's accounts with Lender 
     in accordance with the instructions of an authorized person. The unpaid 
     principal balance owing on this Note at any time may be evidenced by 
     endorsements on this Note or by Lender's internal records, including 
     daily computer print-outs. Lender will have no obligation to advance 
     funds under this Note if: (a) Borrower or any guarantor is in default 
     under the terms of this Note or any agreement that Borrower or any 
     guarantor has with Lender and such default is continuing and has not 
     been cured within the stated cure periods, including any agreement made 
     in connection with the signing of this Note; (b) Borrower or any 
     guarantor ceases doing business or is insolvent; (c) any guarantor 
     seeks, claims or otherwise attempts to limit, modify or revoke such 
     guarantor's guarantee of this Note or any other loan with Lender; or (d) 
     Borrower has applied funds provided pursuant to this Note for purposes 
     other than those authorized by Lender."

4.   Except as provided above, the Note remains unchanged.

5.   This Amendment is effective as of May 13, 1998 and the parties hereby 
     confirm that the Note as amended is in full force and effect.


Megabios Corp.

By: /s/ Benjamin F. McGraw, III
    ----------------------------------

Title: Chairman, President & CEO
       -------------------------------


Imperial Bank

By: /s/ David Sousa
    ----------------------------------

Title: AVP
       -------------------------------