EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT  AGREEMENT (the "Agreement") is made and entered into as of
the 2nd day of January, 1998, by and between Price Enterprises, Inc., a Maryland
corporation ("Employer"), and Gary W. Nielson ("Executive").

                                    RECITALS

     A. Employer  desires to employ  Executive as Executive  Vice  President and
Chief Financial Officer of Employer.

     B. Executive  desires to accept such position upon the terms and subject to
the conditions herein provided.

                              TERMS AND CONDITIONS

     NOW,  THEREFORE,  in  consideration  of the  foregoing  premises and mutual
covenants and conditions  hereinafter set forth, and for other good and valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereto agree as follows:

                                    ARTICLE I

                              EMPLOYMENT AND DUTIES

     1.1 Position and Duties.  Executive shall serve as Executive Vice President
and Chief  Financial  Officer of Employer.  Executive shall have such duties and
authority as are customary for, and commensurate  with, such position,  and such
other  related  duties and  authority  as may from time to time be  delegated or
assigned  to him by the Chief  Executive  Officer or the Board of  Directors  of
Employer.  Executive shall  discharge his duties in a diligent and  professional
manner.

     1.2 Outside Business Activities Precluded. During his employment, Executive
shall devote his full energies,  interest,  abilities and productive time to the
performance of this Agreement.  Executive  shall not,  without the prior written
consent of Employer,  perform other  services of any kind or engage in any other
business activity,  with or without compensation,  that would interfere with the
performance of his duties under this Agreement. Executive shall


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<PAGE>

not,  without the prior  written  consent of  Employer,  engage in any  activity
adverse to Employer's interests.

     1.3 Place of  Employment.  Unless the parties  agree  otherwise in writing,
during the  Employment  Term (as defined in Section 3.1 below)  Executive  shall
perform  the  services  he is  required  to  perform  under  this  Agreement  at
Employer's offices located in San Diego,  California;  provided,  however,  that
Employer may from time to time require Executive to travel  temporarily to other
locations on Employer's business.

                                   ARTICLE II

                                  COMPENSATION

     2.1 Salary. For Executive's services hereunder,  Employer shall pay as base
salary to  Executive  the amount of One Hundred  Seventy-Five  Thousand  Dollars
($175,000) per annum during the Employment Term. Said salary shall be payable in
equal   installments  in  conformity  with  Employer's  normal  payroll  period.
Executive's  salary shall be reviewed by Employer's Board of Directors from time
to time at its discretion, and Executive shall receive such salary increases, if
any, as Employer's Board of Directors, in its sole discretion, shall determine.

     2.2 Bonus.  In  addition  to the  salary  set forth in  Section  2.1 above,
commencing  with the Effective  Date and during the Employment  Term,  Executive
shall participate in Employer's bonus plan for executive  management  personnel.
All decisions  regarding said bonus plan shall be made in the sole discretion of
Employer's Board of Directors, or the Compensation Committee thereof.

     2.3 Other  Benefits.  Executive  shall be  entitled to  participate  in and
receive benefits under Employer's  standard company benefits practices and plans
for officers of Employer, as they may exist from time to time, including medical
insurance,  long-term disability,  life insurance, profit sharing and retirement
plan, and Employer's other plans,  subject to and on a basis consistent with the
terms,  conditions  and  overall  administration  of such  practices  and



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<PAGE>

plans.  Executive  shall be  entitled to three (3) weeks of paid  vacation  each
year,  which will accrue and be paid out in conformity  with  Employer's  normal
vacation  pay  practices.  Employer  may  in  its  sole  discretion  grant  such
additional  compensation  or benefits to Executive from time to time as Employer
deems proper and desirable.

     2.4 Expenses. During the term of his employment hereunder,  Executive shall
be entitled to receive prompt reimbursement for all reasonable  business-related
expenses  incurred by him, in accordance  with the policies and procedures  from
time to time adopted by Employer,  provided that Executive properly accounts for
such business expenses in accordance with Employer policy.

     2.5 Stock Option  Plan.  Employer  has adopted The Price  Enterprises  1995
Combined Stock Grant and Stock Option Plan (the "Stock Plan").  On the Effective
Date,  Executive will receive options to purchase fifty thousand (50,000) shares
of  Employer's  common  stock,  exercisable  at a price equal to the fair market
value of the common stock on the Effective  Date,  with such options  vesting at
twenty  percent  (20%) per year over a period of five (5) years and expiring six
(6) years from the Effective  Date.  Such options shall be granted in accordance
with and subject to all other terms,  conditions and  restrictions  set forth in
the 1995  Combined  Stock  Grant and Stock  Option  Plan  attached  as Exhibit A
hereto.

     2.6  Deductions  and  Withholdings.  All  amounts  payable or which  become
payable under any provision of this Agreement shall be subject to any deductions
authorized by Executive and any deductions and withholdings required by law.

                                   ARTICLE III

                               TERM OF EMPLOYMENT

     3.1 Term. The term of Executive's  employment  hereunder  shall commence on
February 2, 1998 (the  "Effective  Date") and shall  continue  until February 1,
2000,  unless  sooner  terminated  or  extended  as  hereinafter  provided  (the
"Employment Term").



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<PAGE>

     3.2  Extension  of Term.  The  Employment  Term may be  extended by written
amendment to this Agreement signed by both parties.

     3.3 Early Termination by Executive.  Executive may terminate his employment
at any time by giving  Employer  written notice of his  resignation  ninety (90)
days in advance;  provided,  however,  that the Board of Directors may determine
upon receipt of such notice that the effective date of such resignation shall be
immediate or some time prior to the expiration of the ninety-day  notice period.
Executive's  employment  shall  terminate  as  of  the  effective  date  of  his
resignation as determined by the Board of Directors.

     3.4 Termination for Cause.  Prior to the expiration of the Employment Term,
Executive's  employment may be terminated for Cause by the Board of Directors of
Employer,  immediately  upon  delivery of notice  thereof.  For these  purposes,
termination  for  "Cause"  shall mean  termination  because of  Executive's  (a)
repeated and  habitual  failure to perform the  material  duties or  obligations
hereunder;  (b) engaging in any act that has a direct,  substantial  and adverse
effect on Employer's interests; (c) personal dishonesty,  willful misconduct, or
breach of fiduciary duty involving personal profit;  (d) intentional  failure to
perform his lawfully stated material duties;  (e) willful  violation of any law,
rule or regulation which materially  adversely  affects his ability to discharge
his duties or has a direct,  substantial adverse effect on Employer's interests;
(f)  any  material  breach  of  this  contract  by  Executive;  or  (g)  conduct
authorizing termination under Cal. Labor Code ss. 2924.

     3.5  Termination  Due  to  Death  or  Disability.   Executive's  employment
hereunder  shall  terminate  immediately  upon his  death.  In the event that by
reason of injury, illness or other physical or mental impairment Executive shall
be: (a) completely unable to perform his services  hereunder for more than three
(3)  consecutive  months,  or (b) unable to perform his services  hereunder  for
fifty  percent  (50%) or more of the  normal  working  days  throughout  six (6)
consecutive months, then Employer may terminate Executive's employment hereunder
immediately upon delivery of notice thereof. Executive's beneficiaries,  estate,
heirs,



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<PAGE>

representatives,  or assigns, as appropriate, shall be entitled to the proceeds,
if any, due under any Employer-paid life insurance policy held by Executive,  as
determined  by and in accordance  with the terms of any such policy,  as well as
any vested benefits and accrued vacation benefits.

                                   ARTICLE IV

                    BENEFITS AFTER TERMINATION OF EMPLOYMENT

     4.1  Benefits  Upon  Termination.   Upon  termination  of  the  Executive's
employment  under  Section 3.3 (Early  Termination  by  Executive),  Section 3.4
(Termination for Cause) or Section 3.5 (Termination Due to Death or Disability),
all salary and benefits of Executive  hereunder  shall cease  immediately.  Upon
termination  of  Executive's  employment  by Employer  for any reason other than
those set forth in Section 3.4 or Section  3.5,  Executive  shall be entitled to
the  continuation of Executive's base salary for the remainder of the Employment
Term, payable in equal installments in conformity with Employer's normal payroll
period.  In no event will the  severance  be less than One Hundred  Seventy-Five
Thousand  Dollars  ($175,000)  without  regard  to the  remaining  period of the
employment  term.  During  the period of this  severance  pay,  Executive  shall
cooperate  with Employer in providing for the orderly  transition of Executive's
duties and  responsibilities  to other individuals,  as reasonably  requested by
Employer.

     4.2 Rights Against Employer. The benefits payable under this Article IV are
exclusive,  and no amount  shall  become  payable to any person  (including  the
Executive)  by reason of  termination  of  employment  for any  reason,  with or
without  Cause,  except as provided in this  Article IV.  Employer  shall not be
obligated to segregate  any of its assets or procure any  investment in order to
fund the benefits payable under this Article IV.



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<PAGE>

                                    ARTICLE V

                            CONFIDENTIAL INFORMATION

     5.1  Executive  acknowledges  that  Employer  holds  as  confidential,  and
Executive may have access to during the Employment Term, certain information and
knowledge  respecting the intimate and  confidential  affairs of Employer in the
various  phases of its business,  including,  but not limited to, trade secrets,
data  and  know-how,  improvements,  inventions,  techniques,  marketing  plans,
strategies,  forecasts,  pricing  information,  and customer  lists.  During his
employment  by  Employer  and  thereafter,   Executive  shall  not  directly  or
indirectly  disclose such information to any person or use any such information,
except as required in the course of his employment  during the Employment  Term.
All  records,  files,  keys,  documents,  and the like  relating  to  Employer's
business, which Executive shall prepare, copy or use, or come into contact with,
shall  be and  remain  Employer's  sole  property,  shall  not be  removed  from
Employer's  premises  without  its  written  consent,  and shall be  returned to
Employer upon the termination of the Executive's employment.

                                   ARTICLE VI

                               GENERAL PROVISIONS

     6.1 Entire Agreement.  This Agreement contains the entire understanding and
sole and entire agreement between the parties with respect to the subject matter
hereof,   and  supersedes  any  and  all  prior  agreements,   negotiations  and
discussions  between the  parties  hereto  with  respect to the  subject  matter
covered   hereby.   Each   party  to  this   Agreement   acknowledges   that  no
representations,  inducements,  promises or agreements,  oral or otherwise, have
been made by any party,  or anyone acting on behalf of any party,  which are not
embodied herein, and that no other agreement, statement or promise not contained
in this Agreement shall be valid or binding.  This Agreement may not be modified
or amended by oral agreement,  but rather only by an agreement in writing signed
by Employer and by Executive which specifically states the intent of the parties
to amend this Agreement.



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<PAGE>

     6.2 Assignment and Binding Effect. Neither this Agreement nor the rights or
obligations hereunder shall be assignable by the Executive.  Employer may assign
this  Agreement  to any  successor  or  affiliate  of  Employer,  and upon  such
assignment  any such  successor or  affiliate  shall be deemed  substituted  for
Employer upon the terms and subject to the  conditions  hereof.  In the event of
any  merger  of  Employer  or the  transfer  of all  (or  substantially  all) of
Employer's  assets,  the provisions of this Agreement shall be binding upon, and
inure to the benefit of, the surviving business entity or the business entity to
which such assets shall be transferred.

     6.3  Arbitration.  The  parties  hereto  agree  that  any and all  disputes
(contract,  tort,  or  statutory,  whether  under  federal,  state or local law)
between  Executive  and  Employer  (including  Employer's  employees,  officers,
directors,  stockholders,  members, managers and representatives) arising out of
Executive's  employment with Employer,  the termination of that  employment,  or
this  Agreement,  shall be  submitted  to final and  binding  arbitration.  Such
arbitration  shall take place in the County of San Diego,  and may be  compelled
and  enforced  according  to the  California  Arbitration  Act  (Code  of  Civil
Procedure  ss.ss.  1280 et seq.).  Unless the parties  mutually agree otherwise,
such arbitration shall be conducted before the American Arbitration Association,
according  to its  Commercial  Arbitration  Rules.  Judgment  on the  award  the
arbitrator  renders  may be entered in any court  having  jurisdiction  over the
parties.  Arbitration  shall be  initiated  in  accordance  with the  Commercial
Arbitration Rules of the American Arbitration Association.

     6.4 No  Waiver.  No waiver  of any term,  provision  or  condition  of this
Agreement,  whether by conduct or otherwise,  in any one or more instances shall
be deemed or be  construed as a further or  continuing  waiver of any such term,
provision or condition, or as a waiver of any other term, provision or condition
of this Agreement.

     6.5  Governing  Law;  Rules  of  Construction.   This  Agreement  has  been
negotiated and executed in, and shall be governed by and construed in accordance
with the laws of, the



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<PAGE>

State of  California.  Captions of the  several  Articles  and  Sections of this
Agreement are for  convenience of reference only, and shall not be considered or
referred  to in  resolving  questions  of  interpretation  with  respect to this
Agreement.

     6.6 Notices. Any notice, request, demand or other communication required or
permitted  hereunder shall be deemed to be properly given when personally served
in writing,  or when  deposited  in the United  States mail,  postage  pre-paid,
addressed  to Employer or Executive  at his last known  address.  Each party may
change its address by written notice in accordance with this Section.

     Address for Employer:

                     Price Enterprises, Inc.
                     4649 Morena Boulevard
                     San Diego, CA.  92117

     Address for Executive:

                     Gary W. Nielson
                     1986 Port Ramsgate Place
                     Newport Beach, CA 92660

     6.7  Severability.  The provisions of this Agreement are severable.  If any
provision  of  this  Agreement   shall  be  held  to  be  invalid  or  otherwise
unenforceable,  in  whole  or in  part,  the  remainder  of  the  provisions  or
enforceable  parts hereof shall not be affected thereby and shall be enforced to
the fullest extent permitted by law.

     6.8 Attorneys' Fees. In the event of any arbitration or litigation  brought
to enforce or interpret any part of this Agreement,  the prevailing  party shall
be  entitled  to  recover  reasonable  attorneys'  fees,  as well  as all  other
litigation costs and expenses as an element of damages.

     6.9  Indemnification.  Employer  agrees to the maximum intent  permitted by
law, and its bylaws, to indemnify Employee against expenses,  judgments,  fines,
settlements  and other amounts  actually and reasonably  incurred,  all of which
Employer shall advance to Executive on a current basis,  in connection  with any
action, suit or proceeding which arises by reason of


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<PAGE>

the fact that  Executive was  performing  duties within this scope and course of
his employment as an officer or Employee of Employer.

     IN WITNESS  WHEREOF,  this Agreement has been executed and delivered by the
parties hereto as of the date first above written.


EMPLOYER                                         EXECUTIVE


PRICE ENTERPRISES, INC.                          Name: /s/ Gary W. Nielson
                                                       -------------------------
By: /s/Jack McGrory
   -------------------------------
Name: Jack McGrory
Title: CEO



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