Document:

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                                                                    EXHIBIT 10.7
                                                   [With Acceleration Provisions
                                                         Upon Change of Control]

                          ALGORX PHARMACEUTICALS, INC.

                    EARLY EXERCISE STOCK PURCHASE AGREEMENT

      This EARLY EXERCISE STOCK PURCHASE AGREEMENT (the "Agreement") is made as
of the____day of_____________, 200___, by and between ALGORX PHARMACEUTICALS,
INC., a Delaware corporation (the "Company"), and ____________________________
("Purchaser").

      WHEREAS, the Company has previously granted to the Purchaser options (the
"Options") to purchase Common Stock of the Company;

      WHEREAS, the Stock Option Grant Notice (the "Grant Notice") and the Stock
Option Agreement related to such Options permit the early exercise of the
Options;

      WHEREAS, the Purchaser has elected to early exercise of all or a part of
such Options for a specified number of shares of Common Stock (the "Stock") set
forth on the signature page hereto, on the terms and conditions hereinafter set
forth;

      NOW, THEREFORE, IT IS AGREED between the parties as follows:

      1. VOTING OF STOCK. Purchaser hereby agrees that at every meeting of the
stockholders of the Company, and at every adjournment thereof, and on every
action or approval by written consent of the stockholders of the Company, the
Purchaser will vote its Stock on the same proportionate basis as the votes
actually made on account of all other shares of capital stock of the Company
voted.

      2. REPURCHASE OPTION.

            (a) In the event Purchaser's relationship with the Company (or a
parent or subsidiary of the Company) terminates for any reason (including death
or disability), or for no reason, with or without cause, such that after such
termination Purchaser is no longer an employee of, or consultant to, the Company
(and regardless of whether or not Purchaser is then serving as a director of the
Company), then the Company shall have an irrevocable option (the "Repurchase
Option"), for a period of ninety (90) days after said termination, or such
longer period as may be agreed to by the Company and the Purchaser, to
repurchase from Purchaser or Purchaser's personal representative, as the case
may be, at the original exercise price per share paid by Purchaser for such
Stock ("Option Price"), up to but not exceeding the number of shares of Stock
that have not vested in accordance with the provisions of Sections 2(b) below as
of such termination date.

            (b) One hundred percent (100%) of the Stock shall initially be
subject to the Repurchase Option. Subject to the provisions of Section 5 hereof,
on the date one (1) year from the Vesting Commencement Date (as set forth on the
Grant Notice) (the "Vesting Anniversary Date") twenty-five percent (25%) of the
Stock subject to the Repurchase Option shall vest and be released from the
Repurchase Option. Thereafter,

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1/48th of the Stock shall vest and be released from the Repurchase Option on a
monthly basis measured from the Vesting Anniversary Date, until all the Stock is
released from the Repurchase Option (provided in each case that Purchaser
remains an employee of, or a consultant to, the Company (or a parent or
subsidiary of the Company) as of the date of such release).

      3. EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be exercised
by written notice signed by an officer of the Company or by any assignee or
assignees of the Company and delivered or mailed as provided in Section 16(a).
Such notice shall identify the number of shares of Stock to be purchased and
shall notify Purchaser of the time, place and date for settlement of such
purchase, which shall be scheduled by the Company within the term of the
Repurchase Option set forth in Section 2(a) above. The Company shall be entitled
to pay for any shares of Stock purchased pursuant to its Repurchase Option at
the Company's option in cash or by offset against any indebtedness owing to the
Company by Purchaser (including without limitation any Note given in payment for
the Stock), or by a combination of both. Upon delivery of such notice and
payment of the purchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Stock being repurchased and
all rights and interest therein or related thereto, and the Company shall have
the right to transfer to its own name the Stock being repurchased by the
Company, without further action by Purchaser.

      4. ADJUSTMENTS TO STOCK. If, from time to time, during the term of the
Repurchase Option there is any change affecting the Company's outstanding Common
Stock as a class that is effected without the receipt of consideration by the
Company (through merger, consolidation, reorganization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, change in corporation structure or other
transaction not involving the receipt of consideration by the Company), then any
and all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of Purchaser's ownership of Stock shall be
immediately subject to the Repurchase Option and be included in the word "Stock"
for all purposes of the Repurchase Option with the same force and effect as the
shares of the Stock presently subject to the Repurchase Option, but only to the
extent the Stock is, at the time, covered by such Repurchase Option. While the
total Option Price shall remain the same after each such event, the Option Price
per share of Stock upon exercise of the Repurchase Option shall be appropriately
adjusted.

      5. CORPORATE TRANSACTION. In the event of (a) a sale of substantially all
of the assets of the Company; (b) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation in which
shareholders immediately before the merger or consolidation have, immediately
after the merger or consolidation, greater stock voting power); or (c) a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise (other than a reverse merger in which shareholders
immediately before the merger have, immediately after the merger, greater stock
voting power); or (d) any transaction or series of related transactions in which
in excess of fifty percent (50%) of the Company's voting power is transferred,
other than the sale by the Company of stock in transactions the primary purpose
of

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which is to raise capital for the Company's operations and activities, then the
Repurchase Option shall immediately terminate and all unvested Stock shall
immediately vest.

      6. TERMINATION OF REPURCHASE OPTION. Sections 2, 3 and 4 of this Agreement
shall terminate upon the exercise in full or expiration of the Repurchase
Option, whichever occurs first.

      7. ESCROW OF UNVESTED STOCK. As Security for Purchaser's faithful
performance of the terms of this Agreement and to insure the availability for
delivery of Purchaser's Stock upon exercise of the Repurchase Option herein
provided for, Purchaser agrees, at the closing hereunder, to deliver to and
deposit with the Secretary of the Company or the Secretary's designee ("Escrow
Agent"), as escrow agent in this transaction, three (3) stock assignments duly
endorsed (with date and number of shares blank) in the form attached hereto as
Exhibit A, together with a certificate or certificates evidencing all of the
Stock subject to the Repurchase Option; said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Company and Purchaser set forth in Exhibit B attached hereto
and incorporated by this reference, which instructions shall also be delivered
to the Escrow Agent at the closing hereunder. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that Escrow Agent shall not be liable
to any party hereof (or to any other party). Escrow Agent may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as Escrow Agent for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as Escrow Agent pursuant to the terms of this Agreement.
Purchaser agrees that if the Secretary of the Company resigns as Secretary, the
successor Secretary shall serve as Escrow Agent pursuant to the terms of this
Agreement.

      8. RIGHTS OF PURCHASER. Subject to the provisions of Sections 1, 9, 12 and
14 herein, Purchaser shall exercise all rights and privileges of a shareholder
of the Company with respect to the Stock deposited in escrow. Purchaser shall be
deemed to be the holder for purposes of receiving any dividends that may be paid
with respect to such shares of Stock, even if some or all of such shares of
Stock have not yet vested and been released from the Repurchase Option.

      9. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
hypothecate, donate, encumber or otherwise dispose of any interest in the Stock
while the Stock is subject to the Repurchase Option. After any Stock has been
released from the Repurchase Option, Purchaser shall not assign, hypothecate,
donate, encumber or otherwise dispose of any interest in the Stock except in
compliance with the provisions herein and applicable securities laws.
Furthermore, the Stock shall be subject to any right of first refusal in favor
of the Company or its assignees that may be contained in the Company's Bylaws.

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      10. RESTRICTIVE LEGENDS. All certificates representing the Stock shall
have endorsed thereon legends in substantially the following forms (in addition
to any other legend which may be required by other agreements between the
parties hereto):

            (a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER,
OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY
SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT
OF THE COMPANY."

            (b) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."

            (c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS ASSIGNEE(S) AS
PROVIDED IN THE BYLAWS OF THE COMPANY."

            (d) Any legend required by appropriate blue sky officials.

      11. INVESTMENT REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser represents to the Company the following:

            (a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock. Purchaser is
purchasing the Stock for investment for Purchaser's own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Act.

            (b) Purchaser understands that the Stock has not been registered
under the Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.

            (c) Purchaser further acknowledges and understands that the Stock
must be held indefinitely unless the Stock is subsequently registered under the
Act or an exemption from such registration is available. Purchaser further
acknowledges and understands that the Company is under no obligation to register
the Stock. Purchaser understands that the certificate evidencing the Stock will
be imprinted with a legend which prohibits the transfer of the Stock unless the
Stock is registered or such registration is not required in the opinion of
counsel for the Company.

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            (d) Purchaser is familiar with the provisions of Rules 144, under
the Act, as in effect from time to time, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions.

      The Stock may be resold by Purchaser in certain limited circumstances
subject to the provisions of Rule 144, which requires, among other things: (i)
the availability of certain public information about the Company and (ii) the
resale occurring following the required holding period under Rule 144 after the
Purchaser has purchased, and made full payment of (within the meaning of Rule
144), the securities to be sold.

            (e) Purchaser further understands that at the time Purchaser wishes
to sell the Stock there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, Purchaser would be precluded from selling the Stock under Rule 144
even if the minimum holding period requirement had been satisfied.

            (f) Purchaser further warrants and represents that Purchaser has
either (i) preexisting personal or business relationships, with the Company or
any of its officers, directors or controlling persons, or (ii) the capacity to
protect his own interests in connection with the purchase of the Stock by virtue
of the business or financial expertise of himself or of professional advisors to
Purchaser who are unaffiliated with and who are not compensated by the Company
or any of its affiliates, directly or indirectly.

      12. MARKET STAND-OFF AGREEMENT. Purchaser shall not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any Common Stock or other securities of the Company held by Purchaser, including
the Stock (the "Restricted Securities"), for a period of time specified by the
managing underwriter (not to exceed one hundred eighty (180) days) following the
effective date of a registration statement of the Company filed under the Act.
Purchaser agrees to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the managing underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto, provided that all similarly situated officers are similarly bound. In
order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to Purchaser's Restricted Securities until the end of
such period. The underwriters of the Company's stock are intended third party
beneficiaries of this Section 12 and shall have the right, power and authority
to enforce the provisions hereof as though they were a party hereto.

      13. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" includes the right of the Company to buy back the Stock
pursuant to the Repurchase Option set forth in Section 2(a) above. Purchaser
understands that Purchaser may elect to be taxed at the time the Stock is

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purchased, rather than when and as the Repurchase Option expires, by filing an
election under Section 83(b) (an "83(b) Election") of the Code with the Internal
Revenue Service within thirty (30) days from the date of purchase. Even if the
fair market value of the Stock at the time of the execution of this Agreement
equals the amount paid for the Stock, the 83(b) Election must be made to avoid
income under Section 83(a) in the future. Purchaser understands that failure to
file such an 83(b) Election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such 83(b) Election is required to be filed with his or her federal
income tax return for the calendar year in which the date of this Agreement
falls. Purchaser acknowledges that the foregoing is only a summary of the effect
of United States federal income taxation with respect to purchase of the Stock
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death. Purchaser assumes all responsibility for filing an 83(b)
Election and paying all taxes resulting from such election or the lapse of the
restrictions on the Stock.

      14. REFUSAL TO TRANSFER. The Company shall not be required (a) to transfer
on its books any shares of Stock of the Company which shall have been
transferred in violation of any of the provisions set forth in this Agreement or
(b) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.

      15. NO EMPLOYMENT RIGHTS. This Agreement is not an employment contract and
nothing in this Agreement shall affect in any manner whatsoever the right or
power of the Company (or a parent or subsidiary of the Company) to terminate
Purchaser's employment for any reason at any' time, with or without cause and
with or without notice.

      16. MISCELLANEOUS.

            (a) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
sent by telegram or fax or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to the
other party hereto at his address hereinafter shown below its signature or at
such other address as such party may designate by advance written notice to the
other party hereto.

            (b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors, and assigns. The Repurchase Option of the Company
hereunder shall be assignable by the Company at any time or from time to time,
in whole or in part.

            (c) ATTORNEYS' FEES; SPECIFIC PERFORMANCE. Purchaser shall reimburse
the Company for all costs incurred by the Company in enforcing the performance
of, or protecting its rights under, any part of this Agreement, including
reasonable costs of investigation and attorneys' fees. It is the intention of
the parties that the Company, upon

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exercise of the Repurchase Option and payment of the Option Price, pursuant to
the terms of this Agreement, shall be entitled to receive the Stock, in specie,
in order to have such Stock available for future issuance without dilution of
the holdings of other shareholders. Furthermore, it is expressly agreed between
the parties that money damages are inadequate to compensate the Company for the
Stock and that the Company shall, upon proper exercise of the Repurchase Option,
be entitled to specific enforcement of its rights to purchase and receive said
Stock.

            (d) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to, and
does hereby, submit to the jurisdiction and venue of, the appropriate state or
federal court for the district encompassing the Company's principal place of
business.

            (e) FURTHER EXECUTION. The parties agree to take all such further
action (s) as may reasonably be necessary to carry out and consummate this
Agreement as soon as practicable, and to take whatever steps may be necessary to
obtain any governmental approval in connection with or otherwise qualify the
issuance of the securities that are the subject of this Agreement.

            (f) INDEPENDENT COUNSEL. Purchaser acknowledges that this Agreement
has been prepared on behalf of the Company by Heller Ehrman White & McAuliffe
LLP, counsel to the Company and that Heller Ehrman White & McAuliffe LLP does
not represent, and is not acting on behalf of, Purchaser. Purchaser has been
provided with an opportunity to consult with Purchaser's own counsel with
respect to this Agreement.

            (g) ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes and merges all prior agreements or understandings, whether
written or oral. This Agreement may not be amended, modified or revoked, in
whole or in part, except by an agreement in writing signed by each of the
parties hereto.

            (h) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.

            (i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

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      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

                                    ALGORX PHARMACEUTICALS, INC.

                                    By:________________________________________

                                    Title:_____________________________________

                                    Address: 101 Interchange Plaza
                                             Suite 102
                                             Cranberry, New Jersey 08512

PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
2 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT
THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING
IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH RESPECT TO
CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.

                                    PURCHASER:

                                    ___________________________________________
                                    ___________________________________________

                                    Address: __________________________________
                                    ___________________________________________
                                    ___________________________________________

                                    NUMBER OF SHARES OF STOCK
                                    SUBJECT TO THE EARLY EXERCISE
                                    ___________________________________________

<PAGE>

                                    EXHIBIT A

                   STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE

      FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto ALGORX PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), pursuant to the Repurchase Option under that certain Early
Exercise Stock Purchase Agreement, dated ______________ ____ , 200_, by and
between the undersigned and the Company (the "Agreement") ____________________
shares of Common Stock of the Company standing in the undersigned's name on the
books of the Company represented by Certificate No.______________________ and
does hereby irrevocably constitute and appoint the Company's Secretary attorney
to transfer said stock on the books of the Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain subject to the
Company's Repurchase Option under the Agreement.

Dated: _____________________

                                    ___________________________________________
                                    (Signature)

                                    ___________________________________________
                                    (Print Name)

[INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this Assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.]

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                                   EXHIBIT B

                           JOINT ESCROW INSTRUCTIONS

Escrow Agent
Stephen M. Davis, Esq.
Corporate Secretary
c/o Heller Ehrman White & McAuliffe LLP
120 West 45th Street
New York, NY 10036-4041

Ladies and Gentlemen:

      As Escrow Agent for both ALGORX PHARMACEUTICALS, INC., a Delaware
corporation ("Corporation") and ________________________________ ("Purchaser"),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Early Exercise Stock Purchase Agreement
("Agreement") to which a copy of these Joint Escrow Instructions is attached as
Exhibit B, in accordance with the following instructions:

      1. In the event Corporation or an assignee shall elect to exercise the
Repurchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing
thereunder at the principal office of the Corporation. Purchaser and the
Corporation hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.

      2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver the same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) for the number of shares of
stock being purchased pursuant to the exercise of the Repurchase Option.

      3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and complete any transaction herein contemplated,
including but not limited to any appropriate filing with state or government
officials or bank officials. Subject to the provisions of this paragraph 3,
Purchaser shall exercise all rights and privileges of a shareholder of the
Corporation while the stock is held by you.

      4. This escrow shall terminate upon the exercise in full or expiration of
the Repurchase Option, whichever occurs first.

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      5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Corporation that any property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Corporation.

      6. Except as otherwise provided in these Joint Escrow Instructions, your
duties hereunder may be altered, amended, modified or revoked only by a writing
signed by all of the parties hereto.

      7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.

      8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.

      9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

      10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

      11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Corporation or if you shall resign by written
notice to each party. In the event of any such termination, the Secretary of the
Corporation shall automatically become the successor Escrow Agent unless the
Corporation shall appoint another officer or assistant officer of the
Corporation as successor Escrow Agent, and Purchaser hereby confirms the
appointment of such successor as his attorney-in-fact and agent to the full
extent of your appointment.

      12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

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      13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

      14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery, including delivery
by express courier, or five (5) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties entitled to such notice at the following addresses,
or at such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto.

      CORPORATION                   AlgoRx Pharmaceuticals, Inc.
                                    101 Interchange Plaza
                                    Suite 102
                                    Cranberry, NJ 08512

      PURCHASER:                    ____________________________
                                    ____________________________
                                    ____________________________

      ESCROW AGENT:                 Stephen M. Davis, Esq.
                                    Corporate Secretary
                                    c/o Heller Ehrman White & McAuliffe LLP
                                    120 West 45th Street
                                    New York, NY 10036-4041

      15. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.

      16. You shall be entitled to employ such legal counsel and other experts
(including, without limitation, the firm of Heller Ehrman White & McAuliffe LLP)
as you may deem necessary properly to advise you in connection with your
obligations hereunder. You may rely upon the advice of such counsel, and you may
pay such counsel reasonable compensation therefor. The Corporation shall be
responsible for all fees generated by such legal counsel in connection with your
obligations hereunder.

      17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. It is
understood and agreed that references to "you" and "your" herein refer to the
original Escrow Agents. It is understood and agreed that the Corporation may at
any time or from time to time assign its rights under the Agreement and these
Joint Escrow Instructions.

                                        3
<PAGE>

      18. This Agreement shall be governed by and interpreted and determined in
accordance with the laws of the State of Delaware, as such laws are applied by
State courts to contracts made and to be performed entirely in Delaware by
residents of that state.

                                    Very truly yours,

                                    ALGORX PHARMACEUTICALS, INC.

                                    By ________________________________________
                                       Name
                                       Title:

                                    PURCHASER

                                    By ________________________________________
                                       Name
                                       Title:

ESCROW AGENT:

Stephen M. Davis, Esq.
Heller Ehrman White & McAuliffe LLP

                                        4
<PAGE>

                                                      [For California Residents]

                                SPOUSAL CONSENT

      I am married to __________________________________ the Purchaser pursuant
to the attached Early Exercise Stock Purchase Agreement. I acknowledge that I
have read the foregoing Early Exercise Stock Purchase Agreement and that I know
its contents. I am aware that by its provisions my spouse agrees to sell all his
Shares of the Company, including my community property interest in them, if any,
on the occurrence of certain events and that I must agree to sell Shares
transferred to me in certain circumstances. I hereby consent to such sale,
approve of the provisions of the Agreement, and agree that those Shares and my
interest in them are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement on those Shares
or my interest in them.

Dated: _______________________

                                    ___________________________________________
                                    (SIGNATURE OF SPOUSE)

                                       1<PAGE>

                                                                    EXHIBIT 10.8

                                                            BLDG: Ardenwood II-3
                                                            OWNER: 500
                                                            PROP: 123
                                                            UNIT: 1
                                                            TENANT: 12301

                                LEASE AGREEMENT

      THIS LEASE, made this 27th day of August, 1997 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee , UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S
TRUST) as amended and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST ) as amended,
hereinafter called Landlord, and POWDERJECT TECHNOLOGIES, INC., a Delaware
corporation, hereinafter called Tenant.

                                   WITNESSETH:

      Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain Premises (the "Premises") outlined in red Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:

A portion of that certain 51,433+or- square foot, one-story building located at
6503 Dumbarton Circle, Fremont, California 94555, consisting of approximately
24,800+or- square feet of space. Said Premises is more particularly shown within
the area outlined in Red on Exhibit A attached hereto. The entire parcel, of
which the Premises is a part, is shown within the area outlined in Green on
Exhibit A attached. The interior of the Premises leased hereunder shall be
constructed by Landlord as set forth in the related Construction Agreement of
even date herewith. The improved interior configuration is shown in Red on
Exhibit B to be attached hereto.

      The word "Premises" as used throughout this lease is hereby defined to
include the nonexclusive use of landscaped areas, sidewalks and driveways in
front of or adjacent to the Premises, and the nonexclusive use of the area
directly underneath or over such sidewalks and driveways. The gross leasable
area of the Premises shall be measured from outside of exterior walls to outside
of exterior walls, and shall include any atriums, covered entrances or agresses
and covered building loading areas.

      Said letting and hiring is Upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.

1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of general
office, light manufacturing, research and development, and storage and other
uses necessary for Tenant to conduct Tenant's business, provided that such uses
shall be in accordance with all applicable governmental laws and ordinances, and
for no other purpose. Tenant shall not do or permit to be done in or about the
Premises nor bring or keep or permit to be brought or kept in or about the
Premises anything which is prohibited by or will in any way increase the
existing rate of(or otherwise affect) fire or any insurance covering the
Premises or any part thereof, or any of its contents, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring Premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
walls, or calling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building in which the Premises are a part,except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door partition or wall which may appear unsightly from
outside the Premises. No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord. Tenant Shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law. Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises (a copy of said CC&R's have been provided by
Landlord to Tenant). The provisions of this paragraph are for the benefit of
Landlord only and shall not be construed to be for the benefit of any tenant or
occupant of the Premises.

2. TERM *

      A. The term of this Lease  shall be for a period of SEVEN (7) years
(unless sooner terminated as hereinafter provided) and, subject to Paragraphs 2B
and 3, shall commence on the 1st day of December, 1997 and end on the 30th day
of November, 2004.

      B. Possession of the Premises shall be deemed tendered and the term of
the Lease shall commence when the first of the following occurs:

            (a) One day after a Certificate at Occupancy is granted by the
proper governmental agency, or, if the governmental agency having jurisdiction
over the area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed; or

            (b) Upon the occupancy of the Premises by any of Tenant's operating
personnel;or

            (c) When the Tenant Improvements have been substantially completed
for Tenants's use and occupancy, in accordance and compliance with Exhibit B of
this Lease Agreement; or

            (d) As otherwise agreed in writing.

* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting partial
month will be pro-rated (for the number of days in the partial month) at the
Basic Rent rate scheduled for the projected commencement date as shown in
Paragraph 39.

                                  Page 1 of 8
<PAGE>

3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession
of said premises to tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease, and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 28, above. The above is, however, subject
to the provision that the period of delay of delivery of the Premises shall not
exceed 120 days from the commencement date herein (except those delays caused by
Acts of God, strikes, war, utilities, governmental bodies, weather, unavailable
materials, and delays beyond Landlord's control shall be excluded in calculating
such period) in which instance Tenant, at its option, may by written notice to
Landlord, terminate this Lease.

4. RENT

      A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord
may designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of THREE
MILLION NINE HUNDRED FIFTY EIGHT THOUSAND EIGHTY AND NO/100 Dollars ($
3,958,080.00) in lawful money of the United States of America, payable as
follows:

                    See Paragraph 39 for Basic Rent Schedule

      B. Time for Payment. Full monthly rent is due in advance on the first day
of each calendar month. In the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from such
date of commencement to the first day of the next succeeding calendar month that
proportion of the monthly rent hereunder which the number of days between such
date of commencement and the first day of the next succeeding calendar month
bears to thirty (30). In the event that the term of this Lease for any reason
ends on a date other than the last day of a calendar month, on the first day of
the last calendar month of the term hereof Tenant shall pay to Landlord as rent
for the period from said first day of said last calendar month to and including
the last day of the term hereof of that proportion of the monthly rent hereunder
which the number of days between said first day of said last calendar month and
the last day of the term hereof bears to thirty (30).

      C. Late Charge. Notwithstanding any other provision of this Lease, if
Tenant is in default in the payment of rental as set forth in this Paragraph 4
when due, or any part thereof, Tenant agrees to pay Landlord, In addition to the
delinquent rental due, a late charge for each rental payment in default ten (10)
days. Said late change shall equal ten percent(10%) of each rental payment so in
default.

      D. Additional Rent. Beginning with the commencement date of the term of
this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:

            (a) All Taxes relating to the Premises as set forth in Paragraph 9,
and

            (b) All Insurance premiums relating to the Premises, as set forth in
Paragraph 12, and

            (c) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys's fees and legal expenses, that may accrue
thereto in the event of Tenant's failure to pay such amounts, and all damages,
reasonable costs and expenses which Landlord may incur by reason of default of
Tenant or failure on Tenant's part to comply with the terms of this Lease. In
the event of nonpayment by Tenant of Additional Rent, Landlord shall have all
the rights and remedies with respect thereto as Landlord has for nonpayment of
rent. and (d) all prorated costs and expenses related to the Ardenwood Property
Owners' Association as set forth in Paragraph 52.

      The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent(i) within five days for taxes and insurance and within thirty days for all
other Additional Rent items after presentation of invoice from Landlord or
Landlord's agent setting forth such Additional Rent and/or (ii) at the option of
Landlord, Tenant shall pay to Landlord monthly, in advance, Tenants prorata
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent Items, which estimated amount shall
be reconciled within 120 days of at the end of each calendar year or more
frequently if Landlord elects to do so at Landlord's sole and absolute
discretion as compared to Landlord's actual expenditure for said Additional Rent
items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
crediting to Tenant (providing Tenant as not in default in the performance of
any of the terms, covenants and conditions of this Lease) any amount of
estimated payments made by Tenant in excess of Landlord's actual expenditures
for said Additional Rent items.

      The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this Lease, and
if the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year. In which the term hereof expire or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.

      E. Fixed Management Fee. Beginning with the Commencement Date of the Term
of this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and
Additional Rent, a fixed monthly management fee ("Management Fee") equal to 3%
of the Basic Rent due for each month during the Lease Term.

      F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder
and all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San Francisco, CA
94160 or to such other person or to such other place as Landlord may from time
to time designate in writing.

      G. Security Deposit. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of ONE HUNDRED ONE THOUSAND SIX
HUNDRED EIGHTY AND NO/100 Dollars ($ 101,680.00). Said sum shall be held by
Landlord as a Security Deposit for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, but not limited to, the provisions relating to the
payment of rent and any of the monetary sums due herewith, Landlord may (but
shall not be required to) use, apply or retain all or any part of this Security
Deposit for the payment of any other amount which Landlord may spend by reason
of Tenant's default or to compensate Landlord for

                                   page 2 of 8
<PAGE>

any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said Deposit is so used or applied, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in the amount sufficient to restore the Security Deposit to its original amount.
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant
fully and faithfully performs every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant (or
at Landlord's option, to the last assignee of Tenant's interest hereunder) at
the expiration of the Lease term and after Tenant has vacated the Premises. In
the event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return of such Deposit or the
accounting therefor.

5.    ACCEPTANCE AND SURRENDER OF PREMISES By entry hereunder, Tenant accepts
the Premises as being in good and sanitary order, condition and repair and
accepts the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; all broken, marred or
nonconforming accoustical ceiling tiles replaced; all windows washed; the
airconditioning and heating systems serviced by a reputable and licensed service
firm and in good operating condition and repair; the plumbing and electrical
systems and lighting in good order and repair, including replacement of any
burned out or broken light bulbs or ballasts; the lawn and shrubs in good
condition including the replacement of any dead or damaged plantings; the
sidewalk, driveways and [ILLEGIBLE] areas in good order, condition and repair;
together with all alterations, addition, and improvements which may have been
made in, to, or on the Premises (except moveable trade fixtures installed at the
expense of Tenant) except that Tenant shall ascertain from Landlord within
thirty (30) days before the end of the term of this Lease whether Landlord
desires to have the Premises or any part or parts thereof restored to their
condition and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such part
or parts thereof before the end of this Lease at Tenant's sole cost and expense.
Tenant, on or before the end of the term or sooner termination of this lease,
shall remove all of Tenant's personal property and trade fixtures from the
Premises, and all property not so removed on or before the end of the term or
sooner termination of this Lease shall be deemed abandoned by Tenant and title
to same shall thereupon pass to Landlord without compensation to Tenant.
Landlord may, upon termination of this Lease, remove all moveable furniture and
equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage
caused by such removal at Tenant's sole cost. If the Premises be not surrendered
at the end of the term or sooner termination of this Lease, Tenant shall
indemnify landlord against loss or liability resulting from the delay by Tenant
in so surrendering the Premises including, without limitation, any claims made
by any succeeding tenant founded on such delay. Nothing contained herein shall
be construed as an extension of the term hereof or as a consent of Landlord to
any holding over by Tenant. The voluntary or other surrender of this Lease or
the Premises by Tenant or a mutual cancellation of this Lease shall not work as
a merger and, at the option of Landlord, shall either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
all or any such subleases or subtenancies.

6.    ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant (such consent not to be
unreasonably withhold), but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixture, shall
at once become a part of the premises and belong to the Landlord. Landlord
reserves the right to approve all contractors and mechanics proposed by Tenant
to make such alterations and additions. Tenant shall retain title to all
moveable furniture and trade fixtures placed in the Premises. All heating,
lighting, electrical, airconditioning, floor to ceiling partitioning, drapery,
carpeting, and floor installations made by Tenant, together with all property
that has become an integral part of the Premises, shall not be deemed trade
fixtures. Tenant agrees that it will not proceed to make such alteration, or
additions, without having obtained consent from Landlord to do so, and until
five (5) days from the receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work. Tenant
shall, if required by Landlord, secure at Tenant's own costs and expense, a
completion and lien indemnity bond, satisfactory to Landlord, for such work.
Tenant further covenants and agrees that any mechanic's lien filed against the
Premises for work claimed to have been done for, or materials claimed to have
been furnished to Tenant, will be discharged by Tenant, by bond or otherwise,
within ten (10) days after the filing thereof, at the cost and expense of
Tenant. Any exceptions to the foregoing must be made in writing and executed by
both Landlord and Tenant.

7.    TENANT MAINTENANCE. Tenant shall, at its sole cost and expense, keep and
maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, and in good and sanitary condition. Tenant's
maintenance and repair responsibilities herein referred to include, but are not
limited to, [ILLEGIBLE] plumbing systems within the non-common areas of the
Premises (such as water and drain lines, sinks), electrical systems within the
non-common areas of the Premises (such as outlets, lighting fixtures, lamps,
bulbs, tubes, [illegible]), heating and air conditioning controls within the
non-common areas of the premises(such as mixing boxes, thermostats, time clocks,
supply and returns grills), all interior improvements within the premises
including but not limited to; wall coverings, window coverings, acoustical
ceilings, vinyl tile, carpeting, partitioning, doors (both interior and
exterior, including closing mechanisms, latches, locks), and all other interior
improvements of any nature whatsoever. Tenant agrees to provide carpet shields
under all rolling chairs or to otherwise be responsible for wear and tear of the
carpet caused by such rolling chairs if such wear and tear exceeds that caused
by normal foot traffic in surrounding areas. Areas of excessive wear shall be
replaced at Tenant's sole expense upon Lease termination.

8.    UTILITIES See Paragraph 43.

9.    TAXES

      A. As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay to Landlord, or if Landlord so directs, directly to the Tax
Collector, all Real Property Taxes relating to the Premises. In the event the
Premises leased hereunder consist of only a portion of the entire tax parcel,
Tenant shall pay to Landlord Tenant's proportionate share of such real estate
taxes allocated to the leased Premises by square footage or other reasonable
basis as calculated and determined by Landlord. If the tax billing pertains 100%
to the leased Premises, and Landlord chooses to have Tenant pay said real estate
taxes directly to the Tax Collector, then in such event it shall be the
responsibility to the Tenant to obtain the tax and assessment bills and pay,
prior to delinquency, the applicable real property taxes and assessments
pertaining to the leased Premises, and failure to receive a bill for taxes
and/or assessments shall not provide a basis for cancellation nonresponsibility
for payment of penalties for nonpayment or late payment by Tenant. The term
"Real Property Taxes", as used herein, shall mean (i) all taxes, assessments,
levies and other charges of any kind of nature whatsoever, general and special,
foreseen and unforeseen (including all installments of principal and interest
required to pay and general or special assessments for of public improvements
and any increases resulting from reassessments caused by any change in ownership
of the Premises) now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed against, or with
respect to the value, occupancy or use of, all or any portion of the Premises
(as now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein; any improvements located
within the Premises (regardless of ownership); the fixtures, equipment and other
property of Landlord, real or personal, that are an integral part of and located
in the Premises; or parking areas, public utilities or energy within the
Premises; (ii) all charges, levies or fees imposed by reason of environmental
regulation or other governmental control of the Premises; and (iii) all costs
and fees including

                                  Page 3 of 8
<PAGE>

reasonable attorneys' fees) incurred by Landlord in reasonably contesting any
Real Property Tax and in negotiating with public authorities as to any Real
Property Tax. If at any time during the term of this Lease the taxation or
assessment of the Premises prevailing as of the commencement date of this Lease
shall be altered so that in lieu of or in addition to any Real Property Tax
described above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new tax or
charge, or any other cause) an alternate or additional tax or charge(i) on the
value, use or occupancy of the Premises or Landlord's Interest therein or (ii)
on or measured by the gross receipts, income or rentals from the Premises, on
Landlord's business of leasing the Premises, or computed in any manner with
respect to the operation of the Premises, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources.

      B. Taxes on Tenant's Property Tenant shall be liable for and shall pay ten
days before delinquency, taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall upon demand, as the case may be, repay to
Landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with
Landlord's full cooperation, to bring suit in any court of competent
jurisdiction to recover the amount of such taxes so paid under protest, and any
amount so recovered shall belong to Tenant commercial general liability
insurance with (combined single limit coverage of not less than Two Million
Dollars ($2,000,000), per occurrence.

10. LIABILITY INSURANCE Tenant, at Tenant's expense, agrees to keep in force
during the term of this Lease a policy [ILLEGIBLE] insurance for bodily injury
and property damage occurring in, on or about the Premises, including parking
and landscaped areas,in the amount of $2,000,000 combined single limit. Such
insurance shall be primary and noncontributory as respects any insurance carried
by Landlord. The policy or policies effecting such insurance shall name Landlord
as additional insureds, and shall insure any liability of Landlord, contingent
or otherwise, as respects acts or omissions of Tenant, its agents, employees or
invitees or otherwise by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company admitted to transact business in the State of California; and shall
provide that the insurance effected thereby shall not be canceled, except upon
thirty (30) days' prior written notice to Landlord. A certificate of Insurance
of said policy shall be delivered to Landlord. If, during the term of this
Lease, in the considered opinion of Landlord's Lender, insurance advisor, or
counsel, the amount of insurance described in this Paragraph 10 is not adequate,
Tenant agrees to increase said coverage to such reasonable amount as Landlord's
Lender, insurance advisor, or counsel shall deem adequate.

11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
damage insurance in "all risk" form with a sprinkler leakage endorsement
insuring the personal property, inventory, trade fixtures, and leasehold
improvements within the leased Premises for the full replacement value thereof.
The proceeds from any of such policies shall be used for the repair or
replacement of such items so insured.

      Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.

12. PROPERTY INSURANCE Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (allocated to the leased Premises by square footage or other
equitable basis as calculated and determined by Landlord) of the deductibles on
insurance claims and the cost of, policy or policies of insurance covering loss
or damage to the Premises (excluding routine maintenance and repairs and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake insurance,
if available, plus a policy of rental income insurance in the amount of one
hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as
Additional Rent. If such insurance cost is increased due to Tenant's use of the
Premises, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for the Premises.

      Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing party, from any liability for loss
or damage caused by fire or any of the extended coverage casualties included in
the releasing party's insurance policies, irrespective of the cause of such fire
or casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the insured
party affected shall promptly notify the other party thereof.

13. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person
or damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however, the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord its agents, servants, employees,
invitees, or contractors. Tenant shall hold Landlord harmless from and defend
Landlord against any and all expenses, including reasonable attorneys' fees, in
connection therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about the Premises, or
any part thereof, from any cause whatsoever.

14. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters of other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of
the provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The Judgement of court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
sole cost and expense, comply with any all requirements pertaining to said
Premises, of any insurance organization or company, necessary for the
maintenance of reasonable fire and public liability insurance covering
requirements pertaining to said Premises, of any insurance organization or
company, necessary for the maintenance of reasonable fire and public liability
insurance covering the Premises.

15. LIENS Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished or obligation incurred by Tenant. In the
event that Tenant shall not, within ten (10) days following the imposition of
such lien, cause the same to be released of record, Landlord shall have, in
addition to all other remedies provided herein and by law, the right, but no
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord for such purpose, and all expenses incurred by it in connection
therewith, shall be payable to Landlord by Tenant on demand with interest at the
prime rate of interest as quoted by the Bank of America.

16. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest therein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. As a condition for
grating this consent to any assignment, transfer, or subletting, Landlord shall
require that Tenant agrees to pay to Landlord, as Additional Rent, fifty percent
(50%) of all [ILLEGIBLE] additional consideration due Tenant from its assignees,
transferees, or subtenants in excess of the Rent payable by Tenant to Landlord
hereunder for the assigned, transferred and/or subleased space; provided,
however, that before sharing such excess rent, Tenant shall first be entitled to
recover from such excess rent the amount of any reasonable leasing commissions
paid by Tenant to third parties not affiliated with Tenant. Tenant shall, by
thirty (30) days written notice, advise Landlord of its intent to assign or
transfer Tenant's interest in the Lease or sublet the Premises or any portion
thereof for any part of the term hereof. Within thirty (30) days after receipt
of said written notice. Landlord may, in its sole discretion, elect to terminate
this Lease as to the portion of the Premises described in Tenant's notice on the
date specified in Tenant's notice by giving written notice of such election to
terminate. If no such notice to terminate is given to Tenant within said thirty
(30) day period, Tenant may proceed to locate an acceptable sublessee, assignee,
or other transferee for presentment to Landlord for Landlord's approval, all in
accordance with the terms, covenants, and conditions of this paragraph 16. If
Tenant intends to sublet the entire Premises and Landlord elects to terminate
this Lease, this Lease shall be terminated on the date specified in Tenant's
notice. If, however, this Lease shall terminate pursuant to the foregoing with
respect to less than all the Premises, the rent, as defined and reserved
hereinabove shall be adjusted on a pro rata basis to the number of square feet
retained by Tenant, and this Lease as so amended shall continue in full force
and effect. In the event Tenant is allowed to assign, transfer of sublet the
whole or any part of the Premises with the prior written
<PAGE>

consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premises without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer, hypothecation,
subletting occupation or use by any other person shall not release Tenant from
any of Tenant's obligations hereunder or be deemed to be a consent to any
subsequent similar or dissimilar assignment, transfer, hypothecation, subletting
occupation or use by any other person. Any such assignment, transfer,
hypothecation, subletting, occupation or use without such consent shall be void
and shall constitute a breach of this Lease by Tenant and shall, at the option
of Landlord exercised by written notice to Tenant, terminate this Lease. The
leasehold estate under this Lease shall not, nor shall any interest therein, be
assignable for any purpose by operation of law without the written consent of
Landlord. As a the condition to its consent, Landlord shall require Tenant to
pay all expenses in connection with the assignment and Landlord shall require
Tenant's assignee or transfers (or other assignees or transferees) to assume in
writing all the obligation under this Lease and for Tenant to remain liable to
Landlord under this Lease.

Notwithstanding-the above, -in no event will Landlord consent to a sub-sublease.
See Paragraph 46.

17. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust; upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lendor's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease.

18. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times after
at least 24 hours notice (except in emergencies) have, the right to enter the
Premises to inspect them; to perform any services to be provided by Landlord
hereunder; to make repairs or provide any services to a contiguous tenant(s); to
submit the Premises to prospective purchasers, mortgagers or tenants; to post
notices to nonresponsibility; and to alter, improve or repair the Premises or
other parts of the building, all without abstement of rent, and may erect
scaffolding and other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed; provided
however that the business of Tenant shall be interfered with to the least extent
that is reasonably practical. Any entry to the Premises by Landlord for the
purposes provided for herein shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or detainer of the Premises or an
eviction, actual or constructive, of Tenant from the Premises or any portion
thereof.

19. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganisation action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action.

     Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under the said Lease to the reasonable satisfaction of
Landlord. Adequate assurance of future performance, as used herein, includes but
shall not be limited to (I)assurance of source and payment of rent ,and other
consideration due under this Lease; (II) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, locations uses or exclusivity provision, in any agreement relating to
the above described Premises.

     Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained in this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency or reorganization proceedings.

     The failure to perform or honor any covenant, condition or representation
made under this Lease shall constitute a default hereunder by Tenant upon
expiration of the appropriate grace period hereinafter provided. Tenant shall
have a period of five (5) days from the date of written notice from Landlord
within which to cure any default in the payment of rental or adjustment thereto.
Tenant shall have a period of thirty (30) days from the date of written notice
from Landlord within which to cure any other default under this Lease Upon an
uncured default of this Lease by Tenant. Landlord shall have the following
rights and remedies in addition to any other rights or remedies available to
Landlord at law or in equity:

           (a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but not limited to, recovery of 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 rental loss for the same period
that Tenant proves could be reasonably avoided, as computed pursuant to
subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraph
(2) and (3) of Section 1951.2 of the California Civil Code of the amount of
rental loss that could be reasonably avoided shall be made in the following
manner: Landlord and Tenant shall each select a licensed real estate broker in
the business of renting property of the same type and use as the Premises and
the same geographic vicinity. Such two real estate brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the rental loss that could be reasonably
avoided from the balance of the term of this Lease after the time of award. The
decision of the majority of said licensed real estate brokers shall be final and
binding upon the parties hereto.

           (b) The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, include the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.

           (c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.

           (d) To the extent permitted by Law. The right and power, to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord may from time to time sublet the Premises or
any part thereof for such term or terms (which may extend beyond the term of
this Lease) and at such rent and such other terms as Landlord in its reasonable
sole discretion may deem advisable, with the right to make alterations and
repairs to the Premises. Upon each subletting. (i) Tenant shall be immediately
liable to pay Landlord, in addition to indebtedness other than rent due
hereunder, the resonable cost of such subletting, including, but not limited to,
reasonable attorneys' fees, and any real estate commissions actually paid, and
the cost of such reasonable alterations and repairs incurred by Landlord and the
amount, if any, by which the rent hereunder for the period of such subletting
(to the extent such period does not exceed the term hereof) exceeds the amount
to be paid as rent for the Premises for such period or (ii) at the option of
Landlord, rents received from such subletting shall be applied first to payment
of indebtedness other than rent due hereunder from Tenant to Landlord; second,
to the payment of any costs of such subletting and of such alterations and
repairs; third to payment of rent due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of future rent as the same
becomes due hereunder. If Tenant has been creditted with any rent to be received
by such subletting under option (i) and such rent shall not be promptly paid to
Landlord by the subtenant(s), or if such rentals from such subletting under
option (ii) during any month be less than that to be paid during that month by
Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No taking possession of the
premises by Landlord, shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention be given to Tenant.
Notwithstanding any such subletting without termination, Landlord may at any
time hereafter elect to terminate this Lease for such previous breach.

           (e) The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises and to apply any
rental collected from the Premises and to exercises all other rights and
remedies granted to Landlord pursuant to Subparagraph above. See Paragraph 47

20 ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease and if Tenant shall abandon, vacate or surrender
said Premises or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned at the option of Landlord, except such property as may be
mortgaged to Landlord. See Paragraph 48

21. DESTRUCTION In the event the Premises are destroyed in whole or in part from
any cause, except for routine maintenance and repairs and Incidental.

                                   Page 5 of 8

<PAGE>

damage and destruction caused from vandalism and accidents for which Tenant is
responsible under Paragraph 7, Landlord may, at its option:

      (a)   Rebuild or restore the Premises to their condition prior to the
            damage or destruction, or

      (b)   Terminate this lease. (providing that the Premises is damaged to the
            extent of 33 1/3% of the replacement cost)

      If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense except for any deductible, which is the responsibility of Tenant,
promptly to rebuild or restore the Premises to their condition prior to the
damage or destruction. Tenant shall be entitled to a reduction in rent, which
such repair is being made in the proportion, that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises. If
Landlord initially estimates that the rebuilding or restoration will exceed 180
days or if Landlord does not complete the rebuilding or restoration within one
hundred eighty (180) days following the date of destruction (such period of time
to be extended for delays caused by the fault or neglect of Tenant or because of
Acts of God, acts of public agencies, labor disputes, strikes, fires, freight
embargos, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), than Tenant shall have the right to terminate this Lease by giving
fifteen(15)days prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvement's, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.

      Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.

      In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33 1/3 % of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not. Notwithstanding anything to the contrary herein, Landlord may
terminate this Lease in the event of an uninsured event or if insurance proceeds
are insufficient to cover one hundred percent of the rebuilding costs net of the
deductible.

22.   EMINENT DOMAIN If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business.
Tenant's personal property, moving cost or loss of goodwill, shall be and remain
the property of Tenant.

      If any action or proceeding is commenced for such taking of the Premises
or any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, then Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, or taking conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such notice is given or the date on which title to the Premises shall vest
in the condemnor.

      In the event of such a partial taking or conveyance of the Premises, if
the portion of the Premises taken or conveyed is so substantial that the Tenant
can no longer reasonably conduct its business, Tenant shall have the privilege
of terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month such notice is given, upon payment by Tenant of
the rent from the date of such taking or conveyance to the date of termination.

      If a portion of the Premises be taken by condemnation or conveyance in
lieu thereof and neither Landlord nor Tenant shall terminate this Lease as
provided herein, this Lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed, and the rent herein shall be
apportioned as of the date of such taking or conveyance so that thereafter the
rent to be paid by Tenant shall be in the ratio that the area of the portion of
the Premises not so taken or conveyed bears to the total area of the Premises
prior to such taking.

23.   SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any further
liability upon any of the terms, covenants or conditions (express or implied)
herein contained in favor of Tenant, and in such event, insofar as such transfer
is concerned, Tenant agrees to look solely to the responsibility of the
successor in interest of such transferor in and to the Premises and this Lease.
This Lease shall not be affected by any such sale or conveyance, and Tenant
agrees to attorny to the successor in interest of such transferor.

24.   ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale. Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the Lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.

25.   HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred fifty (150%) percent of the monthly Basic Rent
required during the last month of the Lease term.

26    CERTIFICATE OF ESTOPPEL. Tenant shall at any time upon not less than ten
(10) days prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults, if any, are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be conclusive
upon Tenant that this Lease is in full force and effect, without modification
except as may be represented by Landlord; that there are no uncured defaults in
Landlord's performance, and that not more than one month's rent has been paid in
advance.

27.   CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with Tenant.

28.   RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at  Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder or shall fail to perform any other term or covenant hereunder on
its part to be performed, and such failure shall continue for thirty (30) days
after written notice thereof by Landlord, Landlord, without waiving or releasing
Tenant from any obligation of Tenant hereunder, may, but shall not be obliged
to, make any such payment or perform any such other term or covenant on Tenant's
part to be performed. All sums so paid by Landlord and all necessary costs of
such performance by Landlord together with interest thereon at the rate of the
prime rate of interest per annum as quoted by the Bank of America from the date
of such payment on performance by Landlord, shall be paid (and Tenant covenants
to make such payment) to Landlord on demand by Landlord, and Landlord shall have
(in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of nonpayment by Tenant as in the case of failure by
Tenant in the payment of rent hereunder.

29.   ATTORNEYS' FEES

      A. In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees,

                                   Page 6 of 8
<PAGE>

incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.

      B. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord Its costs and expenses incurred in such suit, including a
reasonable attorney's fee.

30. WAIVER The waiver by either party of the other party's failure to perform or
observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party falling to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.

31. NOTICES All notices, demands, requests, advices or designations which may be
or are required to be given by either party to the other hereunder shall be in
writing. All notices, demands, requests, advices or designations by Landlord to
Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises of if sent by United Stated certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices, demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
Blvd., Suite 101, Santa Clara, CA 95054

Each notice, request, demand, advice or designation referred to in this
paragraph shall be deemed received on the date of the personal service on
mailing thereof in the manner herein provided, as the case may be.

32. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.

33. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations: provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.

34. CORPORATE AUTHORITY If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.

36. LIMITATION OF LIABILITY In consideration of the benefits accruing hereunder.
Tenant and all successors and assigns covenant and agree that, in the event of
any actual or alleged failure, breach or default hereunder by Landlord:

            (a) the sole and exclusive remedy shall be against Landlord's
interest in the Premises leased herein;

            (b) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);

            (c) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);

            (d) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;

            (e) no judgment will be taken against any partner of Landlord;

            (f) any judgment taken against any partner of Landlord may be
vacated and set aside at any time without hearing;

            (g) no writ of execution will ever by levied against the assets of
any partner of Landlord;

            (h) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.

      Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.

37. SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects or the appearance of the Premises to the condition prior to the
placement of said sign.

      All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord.

      Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall which may appear unsightly from
outside the Premises.

38. MISCELLANEOUS AND GENERAL PROVISIONS

      A. Use of Building Name. Tenant shall not, without the written consent of
Landlord, use the name of the building for any purpose other than as the address
of the business conducted by Tenant in the Premises.

                                    page 7 of 8
<PAGE>

      B. Choice of law; Severability. This Lease shall in all respects be
governed by and construed in accordance with the laws of the State of
California. If any provision of this Lease shall be invalid, unenforceable or
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.

      C. Definition of Terms. The term "Premises" includes the space leased
hereby and any improvements now or hereafter installed therein or attached
thereto. The term "Landlord" or any pronoun used in place thereof includes the
plural as well as the singular and the successors and assigns of Landlord. The
term "Tenant" or any pronoun used in place thereof includes the plural as well
as the singular and individuals, firms, associations, partnerships and
corporations, and their and each of their respective heirs, executors,
administrators, successors and permitted assigns, according to the context
hereof, and the provisions of this Lease shall inure to the benefit of and bind
such heirs, executors, administrators, successors and permitted assigns.

      The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than one Tenant the
obligations of Tenant hereunder are joint and several. The paragraph headings of
this Lease are for convenience of reference only and shall have no effect upon
the construction or interpretation of any provision hereof.

      D. Time of Essence. Time is of the essence of this Lease and of each and
all of its provisions.

      E. Quitclaim. At the expiration or earlier termination of this Lease,
Tenant shall execute, acknowledge and deliver to Landlord, within ten(10) days
after written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in the
State of California, to remove the cloud or encumbrance created by this Lease
from the real property of which Tenant's Premises are a part.

      F. Incorporation of Prior Agreements; Amendments. This instrument along
with any exhibits and attachments hereto constitues the entire agreement
between Landlord and Tenant relative to the Premises and this agreement and the
exhibits and attachments may be altered, amended or revoked only by an
instrument in writing signed by both Landlord and Tenant. Landlord and Tenant
agree hereby that all prior or contemporaneous oral agreements between and among
themselves and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this agreement.

      G. Recording. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the consent of the other.

      H. Amendments for Financing. Tenant further agrees to execute any
amendments required by a lender to enable Landlord to obtain financing, so long
as Tenant's rights hereunder are not substantially affected.

      I. Additional Paragraphs. Paragraphs 39 through 56 are added hereto and
are included as a part of this lease.

      J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.

      K. Diminution of Light, Air or View. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect his
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.

      IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year last written below.

LANDLORD:                                      TENANT:

JOHN ARRILLAGA SURVIVOR'S TRUST                POWDERJECT TECHNOLOGIES, INC.
                                               a Delaware corporation

By /s/ John Arrillaga                          By /s/ Gordon Saul
   -------------------------------------          ------------------------------
   John Arrillaga, Trustee

Date: 9/16/97                                  Title Vice President Business
                                                     -----------------------
                                               Development
                                               -----------
RICHARD T. PEERY SEPARATE PROPERTY TRUST       Type or Print Name Gordon M. Saul
                                                                  --------------
By /s/ Richard T. Peery                        Date: Sept 15 1997
   -------------------------------------             ------------
   Richard T. Peery, Trustee

Date: 10/2/97

                                  page 8 of 8
<PAGE>

Paragraphs 39 through 56 to Lease Agreement dated August 27, 1997, By and
Between the John Arrillaga Survivor's Trust and the Richard T. Peery Separate
Property Trust, as Landlord, and POWDERJECT TECHNOLOGIES, INC., a Delaware
corporation, as Tenant for 24,800+/- Square Feet of Space Located at 6503
Dumbarton Circle, Fremont, California.

39.   BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate
sum of THREE MILLION NINE HUNDRED FIFTY EIGHT THOUSAND EIGHTY AND NO/100 DOLLARS
($3,958,080.00), shall be payable as follows:

      On December 1, 1997, the sum of FORTY THREE THOUSAND FOUR HUNDRED AND
NO/100 DOLLARS ($43,400.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including November 1, 1998.

      On December 1, 1998, the sum of FORTY FOUR THOUSAND SIX HUNDRED FORTY AND
NO/100 DOLLARS ($44,640.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including November 1, 1999.

      On December 1, 1999, the sum of FORTY FIVE THOUSAND EIGHT HUNDRED EIGHTY
AND NO/100 DOLLARS ($45,880.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including November 1, 2000.

      On December 1, 2000, the sum of FORTY SEVEN THOUSAND ONE HUNDRED TWENTY
AND NO/100 DOLLARS ($47,120.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including November 1, 2001.

      On December 1, 2001, the sum of FORTY EIGHT THOUSAND THREE HUNDRED SIXTY
AND NO/100 DOLLARS ($48,360.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including November 1, 2002.

      On December 1, 2002, the sum of FORTY NINE THOUSAND SIX HUNDRED AND NO/100
DOLLARS ($49,600.00) shall be due, and a like sum due on the first day of each
month thereafter, through and including November 1, 2003.

      On December 1, 2003, the sum of FIFTY THOUSAND EIGHT HUNDRED FORTY AND
NO/100 DOLLARS ($50,840.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including November 1, 2004; or until the
entire aggregate sum of THREE MILLION NINE HUNDRED FIFTY EIGHT THOUSAND EIGHTY
AND NO/100 DOLLARS ($3,958,080.00) has been paid.

40.   "AS-IS" BASIS: Subject only to the Construction Agreement of even date
herewith and to Landlord making the improvements shown on Exhibit B to be
attached hereto, it is hereby agreed that the Premises leased hereunder is
leased strictly on an "as-is" basis and in its present condition, and in the
configuration as shown on Exhibit B to be attached hereto, and by reference made
a part hereof. Except as noted within said Construction Agreement, it is
specifically agreed between the parties that after Landlord makes the interior
improvements as shown on Exhibit B, Landlord shall not be required to make, nor
be responsible for any cost, in connection with any repair, restoration, and/or
improvement to the Premises in order for this Lease to commence, or thereafter,
throughout the Term of this Lease. Notwithstanding anything to the contrary
within this Lease, Landlord makes no warranty or representation of any kind or
nature whatsoever as to the condition or repair of the Premises, nor as to the
use or occupancy which may be made thereof.

41.   RULES AND REGULATIONS AND COMMON AREA: Subject to the terms and conditions
of this Lease and such Rules and Regulations as Landlord may from time to time
prescribe, Tenant and Tenant's employees, invitees and customers shall, in
common with other occupants of the Parcel/Building in which the premises are
located, and their respective employees, invitees and customers, and others
entitled to the use thereof, have the non-exclusive right to use the access
roads, parking areas, and facilities provided and designated by Landlord for the
general use and convenience of the occupants of the Parcel/Building in which the
Premises are located, which areas and facilities are referred to herein as
"Common Area". This right shall terminate-upon the termination of this Lease.
Landlord reserves the right from time to time to make changes the shape, size,
location, amount and extent of Common Area. Landlord further reserves the right
to promulgate such reasonable rules and regulations relating to the use of the
Common Area, and any

                                     Page 9

<PAGE>

part or parts thereof, as Landlord may deem appropriate for the best interests
of the occupants of the Parcel/Building. Such Rules and Regulations may be
amended by Landlord from time to time, with or without advance notice, and all
amendments shall be effective upon delivery of a copy to Tenant. Landlord shall
not be responsible to Tenant for the non-performance by any other tenant or
occupant of the Parcel/Building of any of said Rules and Regulations.

Landlord shall operate, manage and maintain the Common Area. The manner in which
the Common Area shall be maintained and the expenditures for such maintenance
shall be at the discretion of Landlord.

42.   EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF
THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional Rent
and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord
Tenant's proportionate share (calculated on a square footage or other equitable
basis as calculated by landlord) of all expenses of operation, management,
maintenance and repair of the Common Areas of the Parcel including, but not
limited to, license, permit, and inspection fees; security; utility charges
associated with exterior landscaping and lighting (including water and sewer
charges); all charges incurred in the maintenance and replacement of landscaped
areas, lakes, parking lots and paved areas (including repairs, replacement,
resealing and restriping), sidewalks, driveways, maintenance, repair and
replacement of all fixtures and electrical, mechanical and plumbing systems;
supplies, materials, equipment and tools; the cost of capital expenditures which
have the effect of reducing operating expenses, provided, however, that in the
event Landlord makes such capital improvements, Landlord may amortize its
investment in said improvements (together with interest at the rate of fifteen
(15%) percent per annum on the unamortized balance) as an operating expense in
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.

As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant
shall pay its proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the cost of operation (including
common utilities), management, maintenance, and repair of the building
(including structural and common areas such as lobbies, restrooms, janitor's
closets, hallways, elevators, mechanical and telephone rooms, stairwells,
entrances, spaces above the ceilings and janitorization of said common areas) in
which the Premises are located. The maintenance items herein referred to
include, but are not limited to, all windows, window frames, plate glass,
glazing, truck doors, main plumbing systems of the building (such as water drain
lines, sinks, toilets, faucets, drains, showers and water fountains), main
electrical systems (such as panels and conduits), heating and air-conditioning
systems (such as compressors, fans, air handlers, ducts, boilers, heaters),
structural elements and exterior surfaces of the building; store fronts, roof,
downspouts, building common area interiors (such as wall coverings, window
coverings, floor coverings and partitioning), ceilings, building exterior doors,
skylights (if any), automatic fire extinguishing systems, and elevators (if
any); license, permit and inspection fees; security, supplies, materials,
equipment and tools; the cost of capital expenditures which have the effect of
reducing operating expenses, provided, however, that in the event Landlord makes
such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum on the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a rate
greater than the anticipated savings in the operating expenses. Tenant hereby
waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and
Sections 1941 and 1942 of the California Civil Code and under any similar law,
statute or ordinance now or hereafter in effect.

"Additional Rent" as used herein shall not include Landlord's debt repayments;
interest on charges, expenses directly or indirectly incurred by Landlord for
the benefit of any other tenant; cost for the installation of partitioning or
any other tenant improvements; cost of attracting tenants; depreciation;
interest; or executive salaries.

43.   UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional
Rent and in accordance with Paragraph 4D of this Lease Tenant shall pay its
proportionate share (calculated on a square footage or other equitable basis as
calculated by Landlord) of the cost of all utility charges such as water, gas,
electricity, (telephone, telex and other electronic communications service, if
applicable) sewer service, waste pick-up and any other utilities, materials or
services furnished directly to the building in which the Premises are located,
including, without limitation, any temporary or permanent utility surcharge or
Other exactions

                                    Page 10

<PAGE>

whether or not hereinafter imposed.

Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.

Provided that Tenant is not in default in the performance or observance of any
of the terms, covenants or conditions of this Lease to be performed or observed
by it, Landlord shall furnish to the Premises between the hours of 8:00 am and
6:00 pm, Mondays through Fridays (holidays excepted) and subject to the rules
and regulations of the Common Area hereinbefore referred to, reasonable
quantities of water, gas and electricity suitable for the intended use of the
Premises and heat and air-conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises for such purposes. Tenant agrees
that at all times it will cooperate fully with Landlord and abide by all
regulations and requirements that Landlord may prescribe for the proper
functioning and protection of the building heating, ventilating and
air-conditioning systems. Whenever heat generating machines, equipment, or any
other devices (including exhaust fans) are used in the Premises by Tenant which
affect the temperature or otherwise maintained by the air-conditioning system,
Landlord shall have the right to install supplementary air-conditioning units in
the Premises and the cost thereof, including the cost of installation and the
cost of operation and maintenance thereof, shall be paid by Tenant to Landlord
upon demand by Landlord. Tenant will not, without the written consent of
Landlord, use any apparatus or device in the Premises (including, without
limitation), electronic data processing machines or machines using current in
excess of 110 Volts which will in any way increase the amount of electricity,
gas, water or air-conditioning usually furnished or supplied to premises being
used as general office space, or connect with electric current (except through
existing electrical outlets in the Premises), or with gas or water pipes any
apparatus or device for the purposes of using electric current, gas, or water.
If Tenant shall require water, gas, or electric current in excess of that
usually furnished or supplied to premises being used as general office space,
Tenant shall first obtain the written consent of Landlord, which consent shall
not be unreasonably withheld and Landlord may cause an electric current, gas or
water meter to be installed in the Premises in order to measure the amount of
electric current, gas or water consumed for any such excess use. The cost of any
such meter and of the installation, maintenance and repair thereof, all charges
for such excess water, gas and electric current consumed (as shown by such
meters and at the rates then charged by the furnishing public utility); and any
additional expense incurred by Landlord in keeping account of electric current,
gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay
Landlord therefor promptly upon demand by Landlord.

44.   PARKING: Tenant shall have the right to the nonexclusive use of ninety-six
(96) parking spaces in the common parking area of the building. Tenant agrees
that Tenant, Tenant's employees, agents, representatives, and/or invitees shall
not use parking spaces in excess of said ninety six parking spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking area of the building in the event of a dispute among the tenants
occupying the building referred to herein, in which event Tenant agrees that
Tenant, Tenant's employees, agents, representatives and/or invitees shall not
use any parking spaces other than those parking spaces specifically designated
by Landlord for Tenant's use. Said parking spaces, if specifically designated by
Landlord to Tenant, may be relocated by Landlord at any time, and from time to
time. Landlord reserves the right, at Landlord's sole discretion, to rescind any
specific designation of parking spaces, thereby returning Tenant's parking
spaces to the common parking area. Landlord shall give Tenant written notice of
any change in Tenant's parking spaces. Tenant shall not, at any time, park, or
permit to be parked, any trucks or vehicles adjacent to the loading area so as
to interfere in any way with the use of such areas, nor shall Tenant, at any
time, park or permit the parking of Tenant's trucks and other vehicles or the
trucks and vehicles of Tenant's suppliers or others, in any portion of the
common areas not designated by Landlord for such use by Tenant. Tenant shall not
park nor permit to be parked, any inoperative vehicles or equipment on any
portion of the common parking area or other common areas of the building. Tenant
agrees to assume responsibility for compliance by its employees with the parking
provision contained herein. If Tenant or its employees park in other than
designated parking areas, then Landlord may charge Tenant, as an additional
charge, and Tenant agrees to pay Ten Dollars ($10,00) per day for each day or
partial day each such vehicle is parking in any area other than that designated
Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow away from
the building any vehicle belonging to Tenant or Tenant's employees parked in
violation of these provisions, or to attach

                                     Page 11

<PAGE>

violation stickers or notices to such vehicles. Tenant shall use the parking
area for vehicle parking only and shall not use the parking areas for storage.

45.   ASSESSMENT CREDITS: The demised property herein may be subject to a
special assessment levied by the City of Fremont as part of an Improvement
District. As a part of said special assessment proceedings (if any), additional
bonds were or may be sold and assessments were or may be levied to provide for
construction contingencies and reserve funds. Interest shall be earned on such
funds created for contingencies and on reserve funds which will be credited for
the benefit of said assessment district. To the extent surpluses are created in
said district through unused contingency funds, interest earnings or reserve
funds, such surpluses shall be deemed the property of Landlord. Notwithstanding
that such surpluses may be credited on assessments otherwise due against the
Leased Premises, Tenant shall pay to Landlord, as additional rent if, and at the
time of any such credit of surpluses, an amount equal to all such surpluses so
credited. For example: if (i) the property is subject to an annual assessment of
$1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's
assessment which reduces the assessment amount shown on the property tax bill
from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord,
pay to Landlord said $200.00 credit as Additional Rent.

46.   ASSIGNMENT AND SUBLETTING (CONTINUED):

      A.    Tenant has advised Landlord that Tenant intends to sublease
approximately 10,000+/- square feet of the Premises during the initial Lease
Term and Landlord has agreed to issue a consent to said sublease subject to
Tenant submitting to Landlord a copy of said sublease (prior to said sublease
commencing), and Landlord, Tenant and the subtenant thereafter executing
Landlord's standard Consent to Sublease agreement prior to said sublease
commencing.

      B.    Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consented to by Landlord, pursuant to the
requirements of this Lease) shall contain the following language:

                  "If Landlord and Tenant jointly and voluntarily elect, for any
      reason whatsoever, to terminate the Master Lease prior to the scheduled
      Master Lease termination date, then this Sublease (if then still in
      effect) shall terminate concurrently with the termination of the Master
      Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary
      termination of the Master Lease by Landlord and Tenant and the resulting
      termination of this Sublease shall not give Subtenant any right or power
      to make any legal or equitable claim against Landlord, including without
      limitation any claim for interference with contract or interference with
      prospective economic advantage, and (2) Subtenant hereby waives any and
      all rights it may have under law or at equity against Landlord to
      challenge such an early termination of the Sublease, and unconditionally
      releases and relieves Landlord, and its officers, directors, employees and
      agents, from any and all claims, demands, and/or causes of action
      whatsoever (collectively, "Claims"), whether such matters are known or
      unknown, latent or apparent, suspected or unsuspected, foreseeable or
      unforeseeable, which Subtenant may have arising out of or in connection
      with any such early termination of this Sublease. Subtenant knowingly and
      intentionally waives any and all protection which is or may be given by
      Section 1542 of the California Civil Code which provides as follows: "A
      general release does not extend to claims which the creditor does not know
      or suspect to exist in his favor at the time of executing the release,
      which if known by him must have materially affected his settlement with
      debtor.

                  The term of this Sublease is therefore subject to early
      termination. Subtenant's initials here below evidence (a) Subtenant's
      consideration of and agreement to this early termination provision, (b)
      Subtenant's acknowledgment that, in determining the net benefits to be
      derived by Subtenant under the terms of this Sublease, Subtenant has
      anticipated the potential for early termination, and (c) Subtenant's
      agreement to the general waiver and release of Claims above.

          Initial: _________                        Initials: ______
                   Subtenant                                  Tenant

                                     Page 12

<PAGE>

47.   BANKRUPTCY AND DEFAULT: Paragraph 19 is modified to provide that with
respect to non-monetary defaults not involving Tenant's failure to pay Basic
Rent or Additional Rent, Tenant shall not be in default of any non-monetary
obligation if (i) more than thirty (30) days is required to cure such
non-monetary default, and (ii) Tenant commences cure of such default as soon as
reasonably practicable after receiving written notice of such default from
Landlord and thereafter continuously and with due diligence prosecutes such cure
to completion.

48.   ABANDONMENT: Paragraph 20 is modified to provide that Tenant shall not be
in default under the Lease if it leaves all or any part of Premises vacant so
long as (i) Tenant is performing all of its other obligations under the Lease
including the obligation to pay Basic Rent and Additional Rent (ii) Tenant
provides on-site security during normal business hours for those parts of the
Premises left vacant, (iii) such vacancy does not materially and adversely
affect the validity or coverage of any policy of insurance carried by Landlord
with respect to the Premises, and (iv) the utilities and heating and ventilation
system are operated and maintained to the extent necessary to prevent damage to
the Premises or its systems.

49.   HAZARDOUS MATERIALS; Landlord and Tenant agree as follows with respect to
the existence or use of "Hazardous Materials" (as defined herein) on, in, under
or about the Premises and real property located beneath said Premises and the
common areas of the Parcel, which includes the entire parcel of land on which
the Premises are located as shown in Green on Exhibit A attached hereto
(hereinafter collectively referred to as the "Property"):

      A.    As used herein, the term "Hazardous Materials" shall mean any
material, waste, chemical, mixture or byproduct which is or hereafter is
defined, listed or designated under Environmental Laws (defined below) as a
pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or
material, or any other unwholesome, hazardous, toxic, biohazardous, or
radioactive material, waste, chemical, mixture or byproduct, or which is listed,
regulated or restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement, or approval, or any determination,
judgment, directive, or order of any executive or judicial authority at any
level of Federal, State of California or local government (whether now existing
or subsequently adopted or promulgated) relating to pollution or the protection
of the environment, ecology, natural resources, or public health and safety.

      B.    Tenant shall obtain Landlord's written consent, which may be
withheld in Landlord's discretion, prior to the occurrence of any Tenant's
Hazardous Materials Activities (defined below); provided, however, that
Landlord's consent shall not be required for normal use in compliance with
applicable Environmental Laws of customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such as mild
cleaners, lubricants and copier toner. As used herein, the term "Tenant's
Hazardous Materials Activities" shall mean any and all use, handling,
generation, storage, disposal, treatment, transportation, release, discharge, or
emission of any Hazardous Materials on, in, beneath, to, from, at or about the
Property, in connection with Tenant's use of the Property, or by Tenant or by
any of Tenant's agents, employees, contractors, vendors, invitees, visitors or
its future subtenants or assignees. Tenant agrees that any and all Tenant's
Hazardous Materials Activities shall be conducted in strict, full compliance
with applicable Environmental Laws at Tenant's expense, and shall not result in
any contamination of the Property or the environment. Tenant agrees to provide
Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials
Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense: (i) to
install such Hazardous Materials monitoring, storage and containment devices as
Landlord reasonably deems necessary (Landlord shall have no obligation to
evaluate the need for any such installation or to require any such
installation); (ii) provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary date of
the Commencement Date of the Lease ) ("Anniversary Date"); and (iii) on each
Anniversary Date, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether Tenant is in compliance with all applicable

                                     Page 13

<PAGE>

Environmental Laws with respect to Tenant's Hazardous Materials Activities.
Tenant, at its expense, shall submit to Landlord a report from such
environmental consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense, shall
promptly undertake and complete any and all steps necessary, and in full
compliance with applicable Environmental Laws, to fully correct any and all
problems or deficiencies identified by the environmental consultant, and
promptly provide Landlord with documentation of all such corrections.

      C.    Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written concurrence that
closure has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
such closure activities.

      D.    If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and extent of such contamination. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not limited to
reasonable attorneys' fees Landlord incurs with respect to such investigation,
that discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or drilling
to identify the presence of any Hazardous Materials at the Property, without
Landlord's prior written consent which may be withheld in Landlord's discretion.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
sampling, testing or drilling performed pursuant to the preceding sentence.

      E.    Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 49 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities,
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.

As evidenced by their initials set forth immediately below, Tenant acknowledges
that Landlord has provided Tenant with copies of the environmental reports
listed on Exhibit C ("Reports"), and Tenant acknowledges that Tenant and
Tenant's experts (if any) have had ample opportunity to review such reports and
that Tenant has satisfied itself as to the environmental conditions of the
Property and the suitability of such conditions for Tenant's intended use of the
Property. To the best of Landlord's knowledge as of the date of this Lease,
except as noted in said Reports, no additional on site Hazardous Materials
contamination exist on the Property; however, Landlord shall have no obligation
to further investigate.

        Initial: _______                            Initial: ________
                 Tenant                                      Landlord

                                     Page 14

<PAGE>

It is agreed that the Tenant's responsibilities related to Hazardous Materials
will survive the expiration or termination of this Lease and that Landlord may
obtain specific performance of Tenant's responsibilities under this Paragraph
49.

50.   CONSENT: Whenever the consent of one party to the other is required
hereunder, such consent shall not be unreasonably withheld.

51.   AUTHORITY TO EXECUTE. The parties executing this Lease Agreement hereby
warrant and represent that they are properly authorized to execute this Lease
Agreement and bind the parties on behalf of whom they execute this Lease
Agreement and to all of the terms, covenants and conditions of this Lease
Agreement as they relate to the respective parties hereto.

52.   ASSOCIATION DUES: The Premises leased hereunder is part of the Ardenwood
Property Owner's Association (the "Association"), and is subject to Association
Dues to fund the cost of the Association's obligations and expenses as
authorized under said Agreement. As of the date of this Lease, Tenant's current
prorata share of the Association Dues is currently estimated at $1,022.60 per
year and is subject to adjustment as provided for by said Association. Said
Association Dues are payable by Tenant to Landlord as Additional Rent on a
monthly basis throughout the Term of this Lease. Tenant understands that it will
not be a direct member of the Association.

53.   TAXES CONTINUED: Notwithstanding anything within Paragraph 9, in the event
prior to the Commencement Date there is an interim or supplemental reassessment
of the Premises based upon the added value of the Improvements, then when Tenant
accepts occupancy of the Premises Tenant shall pay any interim or supplemental
taxes (but no penalties or interest in connection therewith) that have been
levied against the Premises and are attributable to the added value of the
Improvements (as defined in the Construction Letter of even date herewith)
during the period prior to Tenant's occupancy of the Premises. As of the Lease
Commencement Date, Tenant shall be responsible for paying one hundred percent
(100%) of the Real Property Taxes as provided for in Paragraph 9.

54.   SUBDIVISION: Landlord and Tenant agree that the Premises and the Parcel
outlined in Green on Exhibit A attached hereto are subject to change and/or
modification once the parcel lot lines are adjusted and said revised parcel
dimensions are recorded. The parties agree that Exhibit A shall be replaced with
a revised and corrected Exhibit A-1. indicating any revisions to the site plan,
including specific parking stall locations and/or lot line adjustments.

55.   ADDRESS FOR LEASED PREMISES: It is understood that (i) the current address
for the building in which the Premises are located is 6503 Dumbarton Circle,
Fremont, California, and that (ii) the address for the Premises will be assigned
by the City of Fremont (the "City") upon issuance of a building permit for the
Interior Improvements as defined herein. In the event the address assigned to
the Premises is changed by the City, said Lease shall thereafter be amended to
reflect the assigned address for the Premises leased hereunder.

56.   LANDLORD'S RIGHT TO TERMINATE: It is understood that the Premises to be
leased by Tenant are to be constructed by Landlord, and that Landlord is
required to obtain the necessary building permits before construction of said
Premises can commence. Therefore, it is agreed that in the event Landlord cannot
obtain all the necessary building permits for said Premises within 120 days from
the date this executed Lease is received by Landlord, that Landlord can
terminate this Lease Agreement without any liability to Tenant, of any type
whatsoever, and that this Lease Agreement will be null and void as of the date
of said cancellation. Landlord agrees to use its best efforts to obtain the
required permits within the aforementioned 120-day period.

                                     Page 15
<PAGE>

[PEERY/ARRILLAGA LOGO]

February 9, 1998

MR. GORDON SAUL
POWDERJECT TECHNOLOGIES, INC.
6503 Dumbarton Circle
Fremont, CA 94555

RE: COMMENCEMENT OF LEASE

Gentlemen:

This letter will confirm our agreement relative to the Commencement Date of the
Lease Agreement dated August 27, 1997 by and between the John Arrillaga
Survivor's Trust and the Richard T. Peery Separate Property Trust, as Landlord,
and PowderJect Technologies, Inc., a Delaware corporation, as Tenant, for
approximately 24,800+/- square feet of space located at 6503 Dumbarton Circle,
Fremont, California.

Notwithstanding anything to the contrary contained in said Lease Agreement, it
is agreed that said Lease shall commence effective February 1, 1998 and
terminate seven (7) years later on January 31, 2005. Because of the change in
Commencement Date, your Basic Monthly Rent Schedule as shown in Paragraph 43 of
the Lease shall be changed as follows:

<TABLE>
<CAPTION>
                                                                    No. of      Rent Due
     Period        Sqauare Feet         Rate PSF     Rent per Mo.    Mos.      for Period
-----------------  ------------         --------     ------------   ------   -------------
<S>                <C>                  <C>         <C>             <C>      <C>
02/01/98-01/31/99     24,800              1.750     $    43,400.00    12     $  520,800.00
02/01/99-01/31/00     24,800              1.800     $    44,640.00    12     $  535,680.00
02/01/00-01/31/01     24,800              1.850     $    45,880.00    12     $  550,560.00
02/01/01-01/31/02     24,800              1.900     $    47,120.00    12     $  565,440.00
02/01/02-01/31/03     24,800              1.950     $    48,360.00    12     $  580,320.00
02/01/03-01/31/04     24,800              2.000     $    49,600.00    12     $  595,200.00
02/01/04-01/31/05     24,800              2.050     $    50,840.00    12     $  610,080.00
                                                                             -------------
                                                                      84     $3,958,080.00 Aggregate
                                                                             =============
</TABLE>

2560 Mission College Blvd - Suite 101 - Santa Clara. California - 95054-1291 -
(408) 980-0130 - FAX (408) 988 4893

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