Document:

LEASE AMENDMENT, SETTLEMENT AGREEMENT AND MUTUAL RELEASE
            --------------------------------------------------------

     1. PARTIES:  This Lease Amendment,  Settlement Agreement and Mutual Release
(hereinafter,  the  "Agreement")  is made  and  entered  into  this  26th day of
October,  2000 (hereinafter,  the "Effective Date"), by and between  ISCO-IRVINE
NORTH,  LTD.,  a  California  limited  partnership  ("ISCO"),  and ROBERT  COHEN
(collectively,  ISCO and Cohen are referred to  hereinafter  as  "Plaintiff"  or
"Lessor"),  and GISH BIOMEDICAL,  INC., a California corporation ("Defendant" or
"Lessee").

     2. RECITALS: This Agreement is made with reference to the following facts:

        a) Certain  disputes  and  controversies have arisen between the parties
           hereto.

        b) Such disputes and controversies include,  but are not limited to, the
claims,  demands,  and cause or causes of action set forth by the parties and/or
related  persons and entities  hereto in that certain action filed in the Orange
County  Superior  Court  entitled  ISCO-Irvine  North,  Ltd.,  et al.,  v.  Gish
Biomedical, Inc., et al. (hereinafter,  the "Unlawful Detainer Action"), bearing
Case No. 00CC06504.

     3. SETTLEMENT  TERMS: The parties each desire and intend to fully,  finally
and forever  resolve all past and present  disputes among them arising out of or
relating  to the  Unlawful  Detainer  Action.  In  consideration  of the  terms,
covenants,  promises,  representations and conditions  contained herein, and for
other good and valuable consideration,  the receipt, sufficiency and adequacy of
which the parties  hereby  acknowledge,  the parties  hereto,  and each of them,
hereby represent, warrant and covenant and agree as follows:

        a) Amendment of Lease.Concurrently with the execution of this Agreement,
that certain lease dated as of July 8, 1992, as amended,  by and between ISCO as
Lessor and Defendant as Lessee, a true copy of which is attached as Exhibit A to
this Agreement (hereinafter the "Lease") for the property located at 2681 Kelvin
Avenue,  Irvine,  California  (hereinafter the "Premises" or "Leased  Premises")
shall be deemed amended as follows,  which  amendments (and the other provisions
of  this  Agreement  and  the  Exhibits  hereto)  shall  control  over  anything
inconsistent  in the  Lease.  Lessee  shall  continue  to timely  pay and timely
perform all of its obligations  under the Lease (as amended  hereby).  Except as
otherwise  provided herein, the provisions of the Lease shall otherwise continue
to apply and remain in full force and effect.

           (i) New Tenant. Lessee acknowledges that Lessor shall have the right,
but not the obligation,  to (and that Lessor has or may hereafter)  enter into a
separate  lease of the Premises with SBC SERVICES,  INC. a Delaware  corporation
("SBC")  and/or such other persons or entities as Lessor may  determine  (singly
and/or  collectively,  SBC and/or such other persons or entities are referred to
hereafter as "New  Tenant") on such terms as Lessor shall  determine in Lessor's
sole and absolute discretion, whereby New Tenant and/or New Tenant's affiliates,
subtenants, employees, agents, contractors, customers, invitees, and others will
be entitled to the use and occupancy of the Premises (on a phased-in basis, with
New Tenant and/or Lessor taking back or taking over the portions of the Premises
to be surrendered by Lessee in accordance  with the scheduled  phased  surrender
indicated  below).  Lessee  shall at all  times  cooperate  with and  shall  not
directly or indirectly interfere or permit others to interfere with New Tenant

<PAGE>

in  connection  with  New  Tenant's   ownership,   taking  over,   constructing,
demolishing,  improving,  modifying, using, occupying and operating the Premises
and/or  any  personal   property,   fixtures,   installations,   utilities,   or
improvements  made  or  to be  made  thereat  and  that  Lessor  shall  have  no
obligation,  responsibility  or  liability  to Lessee or any of  Lessee's  past,
current and future agents,  representatives,  principals,  officers,  directors,
employees,  attorneys, tenants, customers, invitees, subtenants,  contractors or
direct and indirect subsidiaries,  owners, lenders and affiliates  (hereinafter,
"Related Persons") in connection with any claims, demands,  damages, loss, cost,
liability,  expense or  disputes  which may arise as a result of any  actions or
omissions  of Lessee,  New  Tenant or any of their  respective  Related  Persons
relating  to  the  use,  occupancy,  construction,   demolition,   modification,
improvement,  ownership  or  operation  by any of them of the Premises or of any
personal property, fixtures, installations, utilities or improvements made or to
be made thereat. Further, Lessee for itself and on behalf of its Related Persons
agrees to fully indemnify,  defend and hold harmless Lessor and Lessor's Related
Persons  (other than New Tenant and its  subtenants)  from all claims,  demands,
damages,  loss, cost,  liability,  expense (including,  without limitation,  the
value of lost or reduced profits, revenues and rents, penalties for non-delivery
of leased space and/or loss of the value of any New Tenant lease which may occur
as a result of any lease termination resulting from a breach, Breach, default or
Default of the Lease or this  Agreement by Lessee,  whether  resulting from late
surrender    of    space   or    otherwise)    and    disputes    (collectively,
"Losses/Liabilities")  which  may  exist or arise  as a  result  of any  breach,
Breach, default,  Default or misrepresentation or any other failure to fully and
timely  pay or  perform by Lessee  under the Lease (as  amended  hereby) or this
Agreement on or after the date hereof  and/or as a result of any claim or demand
by any person or entity who occupied or occupies the Premises under any sublease
from Lessee or otherwise with Lessee's  permission  during the Term of the Lease
(other than Lessor,  St. John Knits,  Respiratory  Support  Products Inc.,  Sims
Portex, Inc. and New Tenant).  Without limitation of the foregoing,  in no event
shall any actions or omissions of any New Tenant or any Related  Person to a New
Tenant of any  kind,  method,  manner,  character,  timing or nature  whatsoever
(whether or not such  activities  constitute any breach or default by New Tenant
of New  Tenant's  lease or any  other  obligation  it may have to any  person or
entities  whatsoever)  constitute or result in any excuse,  condition,  delay or
defense to/of Lessee's full and timely payment and performance of all provisions
of the Lease (as amended  hereby) and this Agreement in strict  accordance  with
their terms, including, without limitation, the timely surrender and vacation of
the  Premises  by Lessee as  specified  herein;  and Lessee  hereby  represents,
warrants,  covenants and agrees for itself and on behalf of its Related  Persons
that in no event shall  Lessee or any Related  Person to Lessee sue or otherwise
attempt to hold  Lessor or any Related  Person to Lessor  (other than New Tenant
and its  subtenants)  directly  or  indirectly  responsible  or  liable  for any
Losses/Liabilities  incurred  by  Lessee  or any  Related  Person to Lessee as a
result of any such actions or omissions of any New Tenant or any Related  Person
to a New Tenant ("New  Tenant's  Activities").  Further,  Lessee agrees to fully
indemnify,  defend and hold harmless Lessor and Lessor's  Related Persons (other
than New Tenant and its  subtentants)  on demand  from and  against  claims,  by
Lessee or Lessee's  Related  Persons  against  Lessor  and/or  Lessor's  Related
Persons arising from New Tenant's Activities. In particular, without limitation,
Lessee acknowledges that New Tenant may make tenant improvements at the Premises
as described on Exhibit B. However, the described tenant improvements shall not

<PAGE>

constitute  any  limitation on other  activities or  improvements  by New Tenant
which may occur.  Nothing in this  Agreement,  the Lease or  elsewhere  shall be
interpreted  to permit  Lessee to assign or sublet (or to permit Lessee to allow
or  permit  any  licensees,  subtenants,  assignees,  co-occupants  or others to
acquire, sublease, occupy or use) the Lease or the Premises in whole or part (or
to permit the continuation of any of same) and Lessee hereby covenants,  agrees,
represents and warrants that no subtenants, licensees, occupants or assignees or
others  with any  right to use or occupy  any part of the Lease or the  Premises
exist or shall  hereafter  exist and any  rights  whatsoever  which  might  have
otherwise existed to engage in or permit any of the same are hereby  irrevocably
waived and released by Lessee.

           (ii) Term. The Term of the Lease shall end January 10, 2001 and there
shall be no options to extend or renew the Lease.

           (iii) Phased-Surrender of Premises. Lessee shall (and shall cause any
and all other  persons and  entities  other than Lessor or New Tenant to) timely
surrender  and vacate and remove all  personal  property  from the  Premises  in
"as-is" broom-clean condition (and in particular, if Lessee so timely surrenders
and vacates the  Premises,  Lessee shall be permitted to surrender  the Premises
"as-is"  in broom  clean  condition  and  shall  not be  required  to paint  the
building,  demolish its clean rooms or replace the roof or parking lot or remove
or replace any Trade Fixtures, Utility Installations or Lessee Owned Alterations
pursuant to Section 7.4 of the Lease) in phases as follows  (including  interior
areas of the building, exterior land areas, mezzanine area and parking areas):

       Phase                              Building Sq. Ft.       Surrender Date
       -----                              ----------------       --------------
<TABLE>

       <S>                                <C>                  <C>

        I (in its entirety)                   + 35,700         One business day after
                                              -                execution hereof

        II (in its entirety)                  +  6,889         October 31, 2000
                                              -
        III (in its entirety)                 + 86,300         January 10, 2001
                                              -
        IV (in its entirety)                  +  8,111         January 10, 2001
                                              -
        V (in its entirety)                   + 13,000         January 10, 2001
</TABLE>

                                              -

The  particular  space  constituting  each of the  foregoing  phases and certain
provisions for the  modification,  methodology of use and surrender  thereof are
described  and  diagrammed  on Exhibit C hereto.  Lessee  agrees to abide by and
comply with Exhibit C.  Notwithstanding  anything to the contrary herein, in the
Lease or elsewhere,  (i) Lessee shall have no right at any time to use or occupy
the roof or any portion thereof (and Lessee shall not interfere with Lessor's or
New  Tenant's  use or occupancy  thereof)  and (ii)  without  limitation  of the
foregoing phased surrender schedule, Lessee agrees that any part of the Premises
which has not been  surrendered  and vacated prior to January 10, 2001 as and in
the condition  required  hereby shall be so surrendered and vacated on that date
by Lessee  and all other  persons  and  entities  in  Lessee's  portions  of the
Premises.

           (iv) Rent. Base Rent shall be reduced pro rata (commensurate with the
reduction  of the  estimated  building  square  footage as  indicated in Section

<PAGE>

3.a)(iii)  above  as of  each  applicable  surrender  date)  if and as  actually
surrendered  in accordance  with this  Agreement.  No other  charges,  expenses,
pass-throughs,  taxes.,  etc.,  shall be reduced  except to the extent that such
items  (including  electricity)  are properly  attributable to phases which have
been surrendered and vacated by Lessee for periods  following such surrender and
vacation  (e.g.,  once a phase has been  surrendered  and vacated in  accordance
herewith, property taxes, landscaping and exterior maintenance measured on a pro
rata  square  footage  basis  shall no longer be charged to Lessee to the extent
attributable  to periods  after such  surrender and vacation and Lessor will not
charge Lessee for electricity  which is determined to have been actually used by
New Tenant).

           (v) Security Deposit. There will be no refund of the Security Deposit
to Lessee.

        b) Payment to Lessee.  Subject to Lessor's right to reduce or offset any
ofthe following payment(s) to Lessee (which reduction and offset right is hereby
expressly  acknowledged by Lessee and reserved by Lessor) to appropriately  take
into account any Losses/Liabilities suffered or incurred by Lessor, in the event
that Lessee does not fully and timely  perform  and comply in all  respects  and
particulars (or if a  representation  or warranty of Lessee is incorrect or if a
breach, Breach, default, Default or any other failure to fully and timely pay or
perform by Lessee  occurs,  exists or arises (or any event or condition  occurs,
exists or arises  which with  notice,  passage  of time,  action,  election,  or
otherwise would constitute any breach,  Breach,  default or Default or any other
failure to fully and timely pay or perform by Lessee)) with respect to the Lease
(as hereby amended) and/or this Agreement:

           (i) After  Lessee  actually  surrenders  and  vacates  the  following
respective  phases of the Premises in  accordance  with this  Agreement,  Lessor
shall make payments in the following respective amounts:

                (1) Two Hundred Thousand Dollars  ($200,000) after surrender of'
Phase  I in its  entirety  (but  such  payment  shall  not be due  earlier  than
September 30, 2000);

                (2) Two Hundred Thousand  Dollars  ($200,000) after surrender of
Phase II in its entirety (but such payment shall not be due earlier than October
31, 2000); and

                (3) One Million One Hundred Fifty Thousand Dollars  ($1,150,000)
after  surrender  of the  entire  Premises  (but such  payment  shall not be due
earlier than January 10, 2001).

           (ii) Lessor shall have the right to  reasonably  verify,  by physical
inspection  and  otherwise,  that  such  surrender  is  actually  proceeding  as
specified (including the right to conduct a reasonable  walk-through  inspection
guided  by a  knowledgeable  representative  of  Lessee  of both the space to be
surrendered  hereunder  and  Lessee's  replacement  space  under its new lease).
Provided  Lessee so delivers and complies with Section  3.a)(iii) above for each
of Phases I and II in accordance herewith, the respective payments under (1) and
(2)  immediately  above  shall be due and  payable by wire  transfer  within one
business  day after the  actual  timely  surrender  and  vacation  of the entire
relevant  phase in each case (but not earlier  than the date  provided  for such
surrender in this Agreement for the surrender of such phases).  Provided  Lessee
so delivers and complies with Section 3.a)(iii) for each of Phases III, IV and V

<PAGE>

in accordance  herewith  (not later than five (5) days after the surrender  date
therefor),  payment  under (3)  immediately  above  shall be due and  payable at
Lessor's  election  either  (i)  through  an escrow to be  conducted  at a title
company,  bank or similar commercial escrow holder's escrow department,  or (ii)
by a bank letter of credit. To provide for payment under (3) immediately  above,
on or before  January 14, 2001,  Lessor shall either (i) deliver the said letter
of credit (if  applicable)  to Lessee or (ii)  deposit  into the said escrow (if
applicable) the funds required under (3) immediately  above.  Whether the escrow
or the letter of credit is used, in either case the payment to Lessee shall only
be  required to be made within one  business  day after  delivery of a notarized
certificate executed by Lessee and New Tenant certifying that full surrender and
vacation of each of Phases III,  IV and V has  occurred in their  entirety on or
before  January 15,  2001(i.e.,  within five (5) days after the  surrender  date
therefor). This paragraph (ii) shall not override any offset or reduction rights
of Lessor which may be applicable under this Agreement.  Further, this paragraph
(ii) shall not apply in the event that the surrender or vacation of any Phase is
not fully and timely made (or in the case of Phases  III, IV and V so  certified
to have been so made on or before  January  15,  2001) in  accordance  with this
Agreement or in the event that stipulated judgment for possession is obtained by
Lessor pursuant to this Agreement.

           (iii) The  aforementioned  payments  shall  constitute  a return  and
reimbursement  of a portion  of the rents  previously  paid by Lessee  under the
Lease which is being paid in full  satisfaction  of any and all claims of damage
resulting from any of Lessor's and/or its Related Persons' actions or omissions.

           (iv) In addition to any and all other rights and remedies as may ever
be available to Lessor,  SBC and/or others,  whether under this  Agreement,  the
Lease,applicable  law,  principles of equity or otherwise,  and  notwithstanding
anything to the contrary herein or elsewhere,if Lessee does not fully and timely
surrender  and vacate and cause the  surrender  and  vacation of the Premises as
required hereby strictly in accordance with the terms hereof,  time being of the
essence in this regard,  the  aggregate  amount of the  aforementioned  payments
shall  be  reduced  by an  aggregate  amount  equal  to the sum of any Per  Diem
Reductions  (as  described  below) for each day (or  portion  thereof)  that any
portion of any Phase of the Premises is surrendered or vacated later than 5 p.m.
on the fifth (5th) day after the  applicable  surrender date (or, in the case of
Phase I and Phase II only,  on the  fifteenth  (15th)  day after the  applicable
surrender date)for that Phase. The "Per Diem Reductions" shall be Eight Thousand
Nine  Hundred  Twenty-five  Dollars  ($8,925)  per day for Phase I, One Thousand
Seven  Hundred  Twenty-two  Dollars  ($1,722)  per day for Phase II;  Twenty-one
Thousand Five Hundred  Seventy-five Dollars ($21,575) per day for Phase III; Two
Thousand  Twenty-eight Dollars ($2,028) per day for Phase IV; and Three Thousand
Two Hundred Fifty Dollars ($3,250) per day for Phase V. Any reductions resulting
under this sub-paragraph  shall be applied to the first payments next coming due
under subparagraph(s) (1), (2) and (3) above, and if at any time said reductions
exceeds the aggregate  amounts  remaining  unpaid (after taking into account any
offsets permitted under this Agreement) under said subparagraphs (1), (2) and/or
(3) above,  then the amount of said excess shall be immediately  due and payable
by Lessee  as  additional  Base Rent  under the  Lease.  Without  limitation  of
Lessor's other rights and remedies, the aforementioned  reductions and/or excess
payments  shall be in  addition  to any other  Base  Rent  and/or  other  rents,
charges,  expenses,  pass-throughs,  late  charges,  taxes,  interest  and other
amounts  which  may be  applicable  as a  result  of any late  surrender  of the
Premises under the Lease.

<PAGE>

        c) Lessee's New Lease.  Lessee  concurrently  herewith is  delivering to
Lessor an  unexecuted  copy of a new lease by Lessee and a third party  landlord
for separate space  (consisting of at least 50,000  rentable  square feet) other
than the Premises to which Lessee will relocate its business, including, without
limitation, provisions for the delivery of the new space and timely construction
of improvements needed for Lessee to move in and conduct its business at the new
premises on or before  January 10,  2001.  Lessee's  prompt  entry into said new
lease is a material  inducement  to Lessor's  agreeing  to make the  payments to
Lessee  provided for herein.  Lessee shall  deliver to Lessor a copy of said new
lease fully  executed by Lessee and the new  landlord  within three (3) business
days after the execution of this Agreement.  Notwithstanding Section 3.b) above,
no payment of any amounts in Section 3.b) shall be due prior to actual  delivery
of a  copy  of  the  fully  executed  new  lease  as  just  mentioned.  Further,
notwithstanding  Section 3.b) above:  (i) if the fully  executed copy of the new
lease is not delivered  within ten (10) days after  execution of this Agreement,
no payment under Section 3.b)(i)(1) shall ever be made or required;  and (ii) in
addition,  if the  fully  executed  copy of the new  lease is not  delivered  by
November 10, 2000,  no payment under  Section  3.b)(i)(2)  shall ever be made or
required;  and (iii) in addition, if the fully executed copy of the new lease is
not  delivered by January 10, 2001,  then no payment  under  Section  3.b)(i)(3)
shall ever be made or required.

        d) Stipulated Judgment and Notice of Settlement.  Concurrently herewith,
Lessee and its counsel  shall  execute and  deliver a  stipulation  for entry of
judgment  (which shall  constitute a part of this  Agreement for all  purposes),
with an order pursuant thereto awarding  immediate  possession to Lessor,  to be
issuable immediately upon Lessor's ex parte application and declaration so as to
allow Lessor to  immediately  physically  evict Lessee and any other  persons or
entities in possession (other than New Tenant) from the entire Premises,  all in
form attached as Exhibit E. Lessor agrees not to file the Stipulation/Order with
the Court unless and until a "Trigger Event" as described  therein occurs (at or
after  which  time  Lessor  may  file  the  Stipulation/Order   with  the  Court
unilaterally  at any  time in its sole and  absolute  discretion).  Concurrently
herewith,  Lessee and its counsel  shall also execute and deliver a Joint Notice
of  Settlement  in form  attached as Exhibit F, which  Lessor  shall cause to be
promptly counter-executed and filed with the Court.

        e) Tenant  Estoppels.  On or within one business day before  January 10,
2001 (or such later date as Lessee  actually  fully  surrenders  and vacates the
Premises),  inclusive, Lessee shall cause to be executed and delivered to Lessor
an estoppel  certificate  in the form attached as Exhibit D certifying as of the
date so  delivered  that no Breach,  Default ,  misrepresentations,  breach,  or
default by Lessee (or to Lessee's knowledge after due inquiry, by Lessor) exists
under  the  Lease or this  Agreement  (or  alternatively,  if any of the same do
exist, the certificate shall specify the same).

        f) No  Limitation  of  Remedies.  Lessor and Lessee  each shall have all
rights and remedies for any Breach,  breach,  Default or default under the Lease
(as amended hereby) and/or this Agreement  (including,  without limitation,  any
other  rights to collect or to increase  rents,  costs,  interest,  taxes,  late
charges,  inducement recapture,  attorneys fees and/or other sums, any rights to
evict Lessee and/or any rights to reduce or offset payments to Lessee) which may
be provided by the Lease,  applicable  law,  principles of equity,  agreement or
otherwise  and  in  particular,   without  limitation,   the  provisions  herein
acknowledging  offset rights and/or providing for a stipulated judgment or other
specified  rights  or  remedies  shall not be  construed  as any  limitation  on
Lessor's or Lessee's other rights or remedies in such circumstances  (except the
limitations on Lessee's rights to oppose as specified in the Stipulation/Order).

<PAGE>

     It is  acknowledged  that the fact that  Lessee  may  actually  be  evicted
pursuant to the above-referenced  stipulated judgment shall not in and of itself
result in a  forfeiture  of any claim for payment of the amounts in Section 3.b)
above nor of any other claim which may exist in Lessee's  favor  against  Lessor
(or in Lessor's  favor  against  Lessee);  provided,  however,  any claims by or
amounts  owed to  Lessee  shall  still be  subject  to any  applicable  Lessor's
reduction and/or offset rights,  Per Diem Reductions,  damages and costs,  along
with a further  reduction and/or offset of any such claims or payments to Lessee
in order to give  credit to Lessor for all Rents or other  amounts  foregone  by
Lessor or unpaid by Lessee as a result of early  termination  of the Lease,  the
said eviction or otherwise  (including,  without  limitation,  dollar for dollar
credit to Lessor for Rents for all phases that would have been due if Lessee had
remained in  possession in  compliance  herewith in  accordance  with the phased
surrender schedule herein). Further, any such claims by Lessee shall and must be
asserted and determined  separately from any hearing on any ex parte application
by Lessor  pursuant to the stipulation for entry of judgment herein and the fact
that any such  claims by Lessee may exist or the fact that any  payments  may be
owed or alleged to be owed to Lessee shall in no event constitute any excuse for
late surrender of space or late payment of Rents,  nor constitute any defense to
any ex parte  application by Lessor under the  stipulation for entry of judgment
herein.

     4. DISMISSAL OF THE UNLAWFUL DETAINER ACTION: Provided that Defendant fully
complies with this  Agreement,  within ten (10) business days after the full and
timely  surrender  and vacation of the entire  Premises in  accordance  herewith
occurs,  Plaintiff shall cause to be executed and filed in the Unlawful Detainer
Action,  a form Request for  Dismissal  with  prejudice  of the entire  Unlawful
Detainer  Action.  As a condition  precedent to Plaintiff's  obligations in this
Section,  Defendant  shall also cause to be dismissed with prejudice any and all
counter-claims/cross-actions  against Lessor and its Related Persons in form and
content  reasonably  acceptable to Lessor. The parties shall each bear their own
costs and  attorneys'  fees with respect to the Unlawful  Detainer  Action.  The
parties and their attorneys shall, in all respects,  cooperate to effectuate the
dismissal of the  Unlawful  Detainer  Action,  as needed,  including  taking off
calendar any and all pending motions.

     5. MUTUAL GENERAL RELEASE:

        a) Subject to Section 5.d) below, Defendant, for itself and on behalf of
its  past,   present   and  future   direct   and   indirect   owners,   agents,
representatives,   principals,  officers,  directors,  employees  and  attorneys
(collectively,  with  Defendant,  "Defendant  Entities") does hereby release and
forever discharge Plaintiff Entities (as defined below) from any and all claims,
demands, causes of action and liabilities of any kind or description, whether in
law or in equity,  in tort or in  contract,  or  otherwise,  and whether  fixed,
contingent, inchoate, or otherwise, which any of them have, had, may have or may
have had, if known,  suspected,  claimed or alleged,  in whole or in part, on or
before the Effective Date of this Agreement  heretofore or hereafter arising out
of,  connected  with,  incidental  to or in any way related to either the Leased
Premises or the Unlawful  Detainer  Action and  including any claims that any of
the parties hereto could have or should have asserted in said actions or similar
actions and including any claims for  interference  with contract,  interference
with prospective business advantage, abuse of process, malicious prosecution and
similar claims related to said actions (hereinafter, collectively the "Claims").
Any and all such  Claims,  of  whatever  kind,  are hereby  finally  and forever
compromised, settled, and/or discharged.

<PAGE>

        b) Subject to Section 5.d) below, Plaintiff, for itself and on behalf of
its  past,   present   and  future   direct   and   indirect   owners,   agents,
representatives,   principals,  officers,  directors,  employees  and  attorneys
(hereinafter  "Plaintiff  Entities"),  does hereby release and forever discharge
Defendant Entities (as defined above) from any and all claims,  demands,  causes
of action  and  liabilities  of any kind or  description,  whether  in law or in
equity,  in  tort or in  contract,  or  otherwise,  whether  fixed,  contingent,
inchoate, or otherwise,  which any of them have, had, may have, or may have had,
if known,  suspected,  claimed or alleged, in whole or in part, on or before the
Effective  Date  of this  Agreement  heretofore  or  hereafter  arising  out of,
connected  with,  incidental  to or in any way  related  to  either  the  Leased
Premises or the Unlawful  Detainer Action,  including any claims that any of the
parties  hereto  could have or should have  asserted in said  actions or similar
actions and including any claims for  interference  with contract,  interference
with prospective business advantage, abuse of process, malicious prosecution and
similar claims related to said actions (hereinafter, collectively the "Claims").
Any and all such  Claims,  of  whatever  kind,  are hereby  finally  and forever
compromised, settled, and/or discharged.

        c) Each party to this Agreement  specifically  waives the benefit of the
provisions of Section 1542 of the Civil Code of the State of  California,  which
reads 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 the

                                    debtor."

     Each party,  having  been so apprised as to the nature and legal  effect of
Section 1542 of the California  Civil code, does elect to waive the provision of
that  Section  and the  provision  of all  comparable,  equivalent,  or  similar
statutes  and  principles  of common law of  California,  or any other  state or
county or  subdivision  thereof.  Each party  acknowledges  and agrees that this
Agreement will be delivered in the State of California,  and that this waiver is
an essential,  integral, and material term of this Agreement,  without which the
consideration  recited and stated  herein would not have been made and delivered
to one by or on behalf of the other.

       d) Further, notwithstanding anything to the contrary herein or elsewhere,
(i) any Breach, breach, Default, default,  misrepresentation or other failure to
fully and timely  perform (or any condition or event occurs or exists which with
notice, passage of time, action, election or otherwise would constitute any such
Breach, breach,  Default,  default or other failure to fully and timely perform)
by Lessee  or Lessor  under  the  Lease or this  Agreement  and (ii) any  Claims
against the parties by governmental  agencies for  environmental  clean-up under
applicable  hazardous  materials laws, which (in the case of any of (i) or (ii))
are not  actually  known by  Lessor  on or  before  the  Effective  Date of this
Agreement, and (iii) any obligations under the Lease (as amended hereby) or this
Agreement  relating to periods after the Effective Date are (in the case of (i),
(i) and (iii)) all  explicitly  excluded from and shall not be deemed covered by
the releases hereinabove.

<PAGE>

        e) The provisions of this Agreement shall not amend, modify, supplement,
extend, delay, renew, terminate,  waive, release or otherwise limit or prejudice
Plaintiff's and Defendant's  rights under the Lease,  except as specifically set
forth herein,  and the Lease and its terms and provisions shall otherwise remain
in full force and effect.

       f) Plaintiff and Defendant warrant that no other person or entity has any
interest in the Claims set forth herein, and that they have not sold,  assigned,
transferred,  conveyed or  otherwise  disposed  of any of the Claims  covered by
Plaintiff's and Defendant's release.

     6.  REPRESENTATIONS  AND WARRANTIES:  Each of the parties to this Agreement
represents  and  warrants  to, and agrees  with,  each other  party  hereto,  as
follows:

        a) Consents.  Plaintiff  and  Defendant  have  obtained all consents and
permissions  related to the transactions  herein contemplated and required under
any covenant, agreement, encumbrance, law or regulation.

        b) Due Authorization, Execution and Organization. This Agreement and all
agreements,  instruments  and  documents  herein  provided  to  be  executed  by
Plaintiff and/or  Defendant will be duly  authorized,  executed and delivered by
and are and will be binding upon  Plaintiff  and the  Defendant.  Plaintiff  and
Defendant  have the capacity  and  authority  to enter into this  Agreement  and
consummate the transactions  herein provided and nothing  prohibits or restricts
the right or ability of Plaintiff and Defendant to carry out the terms hereof.

       c) Advice of Counsel. Plaintiff and Defendant have had the opportunity to
be fully advised by counsel as to the full contents, meaning and significance of
this Agreement,  and understand its terms and  conditions.  They understand that
this is a full and final  compromise,  release and  settlement  of all claims as
stated.

        d) Successors and Assigns.  The terms,  releases,  covenants,  promises,
conditions and representations contained in this Agreement shall inure to and be
binding upon the successors and assigns of Plaintiff and Defendant,  and each of
them; provided, however, Defendant shall have no right to assign or delegate the
Lease,  this Agreement or any of its rights or obligations under any of the same
(nor may Lessor limit or avoid its obligations under this Agreement by assigning
or delegating the Lease or this Agreement to others).

       e) Entire Agreement. Except as to the representations and warranties made
in this  Agreement,  no  party  (nor any  agent,  employee,  representative,  or
attorney of or for any party) has made any  statement or  representation  to any
other party regarding any fact relied upon in entering into this Agreement,  and
no party has relied upon any statement,  representation  or promise of any other
party (or any agent, employee,  representative, or attorney of or for any party)
in executing this Agreement or in making the settlement provided for herein.

        f)  Severability.  If any  provision  of this  Agreement  shall  be held
prohibited by or  invalidated  under  applicable  law, such  provision  shall be
ineffective  only to the  extent  of such  prohibition  or  invalidity,  without
invalidating or rendering  ineffective  the remainder of such provision,  or any
other provision of this Agreement.

<PAGE>

       g) No Admission. This Agreement is entered into solely for the purpose of
compromise,   and  may  not  be  construed  as  an  admission  of  liability  or
responsibility  on the part of the parties to this dispute,  at any time for any
purpose whatsoever.

        h)  Construction  of the  Agreement.  Each party has  cooperated  in the
drafting and  preparation of this Agreement.  Hence,  in any  construction to be
made of this Agreement, the same shall not be construed against any party.

        i) Attorneys' Fees. If there be any suit, arbitration,  legal proceeding
or other actions brought for the enforcement of this Agreement, or because of an
alleged dispute,  breach, default or misrepresentation in connection with any of
the  provisions of this  Agreement,  the  prevailing  party shall be entitled to
recover  its  reasonable  attorneys'  fees  and  other  costs  incurred  in such
proceeding  or  action,  in  addition  to any  other  relief  to which it may be
entitled  or which  may be  granted  to it by the  court or  other  judicial  or
quasi-judicial body.

        j) Governing Law. This  Agreement  shall be deemed to have been executed
and delivered within the State of California,  and the rights and obligations of
the parties  hereto shall be  construed  and enforced in  accordance  with,  and
governed by, the laws of the State of California.

        k)  Execution  in  Counterparts.  This  Agreement  may  be  executed  in
counterparts,  by fax or otherwise, and when each party has signed and delivered
at least one such counterpart, each counterpart shall be deemed an original, and
when taken  together  with  other  signed  counterparts,  shall  constitute  one
Agreement, which shall be binding upon and effective as to all parties.

       l) Modification and Waiver. This Agreement can only be modified or waived
by a written  agreement  executed  by all the parties  hereto.  No breach of any
provision  herein can be waived except in writing,  and waiver of any one breach
shall not be deemed to  constitute  a waiver of any other  breach of the same or
other provisions hereto.

        m)  Reporting/Enforcement.  To the  extent  that this  Agreement  or the
provisions or effects of this Agreement are required to be disclosed or reported
to comply with applicable law or orders,  including for tax reporting  purposes,
such  disclosure is hereby  expressly  permitted by each of the parties and such
reporting  shall  be  fully   consistent   with  the  amounts,   treatments  and
characterization of the same by the terms hereof.

        n) Authority to Sign/Perform.  Each party hereto represents and warrants
that its attorneys are  authorized and directed to perform the acts necessary to
effect this  settlement.  Any person  signing  this  Agreement  on behalf of any
entity  represents  and warrants  that he or she is authorized by that entity to
sign this Agreement on its behalf.

        o) Fees/Costs. Each party hereto agrees that it will not seek to recover
any costs of suit,  attorneys' fees, or other expenses  incurred with respect to
the Unlawful  Detainer  Action from any other party hereto;  provided,  however,
this shall not  preclude  recovery  of costs of suit,  attorneys'  fees or other
expenses incurred under Section 6.i) above and/or in the event that Lessor seeks
entry of judgment  pursuant to the stipulation for entry of judgment attached to
this Agreement.

<PAGE>

                                   Plaintiff:

DATED:  October 26, 2000             ISCO-IRVINE NORTH, LTD., a California
                                     Limited Partnership

                                     By: /s/ Robert Cohen

                                         ----------------------------------
                                     Name: Robert Cohen

                                           --------------------------------
                                     Its: General Partner

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

DATED:  October 26, 2000             /s/ Robert Cohen
                                     --------------------------------------
                                     ROBERT COHEN

                                   Defendant:

DATED:  October 26, 2000             GISH BIOMEDICAL, INC., a California
                                   Corporation

                                     By: /s/ Kelly D. Scott
                                         ----------------------------------
                                     Name: Kelly D. Scott
                                           --------------------------------
                                     Its: President and Chief Executive Officer

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

<PAGE>

                                    EXHIBIT A

                                      LEASE

   Copy of the lease dated as of July 8, 1992,  as amended by and  between  ISCO
 and the Company. See Exhibit 10.11 to the Company's Report on Form 10-KSB for

                         the year ended June 30, 1993.

<PAGE>

                                    EXHIBIT B

                             PLANNED NEW TENANT WORK

     New Tenant's improvements may include all improvements for an internet data
center, including, without limitation, the matters mentioned in Exhibit C hereto
and the following:  painting,  parking lot repairs,  landscaping upgrades,  roof
replacement,  seismic upgrades, ADA upgrades, new entrance, electrical upgrades,
modifications of existing office area,  demolition of warehouse  mezzanine,  new
floors and walls, drop ceilings, new cooling units, fire protection system, HVAC
and air monitoring systems,  generators, fuel storage tanks,  telecommunications
switching  equipment and rooftop  equipment,  office finishes,  screen walls and
sound attenuators.

<PAGE>

                                    EXHIBIT C

                        DESCRIPTION OF PHASES OF PREMISES

<PAGE>

                                    EXHIBIT D

                               ESTOPPEL AGREEMENT

TO:      ISCO-Irvine North, Ltd. and Robert Cohen (collectively, "Lessor")

     For good consideration had and received, the undersigned,  GISH BIOMEDICAL,
INC., a California corporation ("Lessee") hereby represents, warrants, certifies
and agrees that:

     1. Lessee is the lessee under that certain  lease dated as of July 8, 1992,
as amended,  (hereinafter  the "Lease") for the property  located at 2681 Kelvin
Avenue,  Irvine,  California  (hereinafter  the  "Premises")  referenced in that
certain Lease Amendment,  Settlement Agreement and Mutual Release between Lessor
and Lessee dated October __, 2000 (the "Settlement Agreement"),  which Lease (as
amended  by  the  Settlement  Agreement)  evidences  the  entire  agreement  and
understanding with respect to Lessee's occupancy and use of the Premises.

     2. The term of the Lease will  expire on January 10, 2001 and Lessee has no
right to use or occupy the  Premises  after such date and Lessee has no options,
rights of first  refusal  or other  rights to extend the term of the Lease or to
lease  any part of the  Premises.  Lessee  also has no  right  to  purchase  the
Premises.

     3. No Breach, Default,  misrepresentation,  breach or default or failure to
perform has occurred  under the Lease or  Settlement  Agreement by Lessee (or to
Lessee's  knowledge  after due inquiry,  by Lessor)  except as follows (if none,
then specify  "none" and initial;  otherwise  state the facts  constituting  the
Breach, etc., in detail):

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

     4. The person executing this Estoppel personally  represents that he/she is
authorized to execute this Estoppel on behalf of Lessee.

     5. The  statements  in this  Estoppel  may be relied  upon by  Lessor,  its
affiliates,  and their  successors  and  assigns,  and any  lender  which now or
hereafter  holds a lien on the Premises,  and any such lender's  successors  and
assigns.  Any  capitalized  terms used herein  which are not  expressly  defined
herein  shall  have the same  meaning  as used in the  Lease  and/or  Settlement
Agreement.

Dated this _____ day of January, 2001.

                                LESSEE

                                GISH BIOMEDICAL, INC., a California corporation

                                By:_________________________
                                Name:_______________________
                                Title:________________________

<PAGE>

                                    EXHIBIT E

                        STIPULATION FOR ENTRY OF JUDGMENT

                                  AND JUDGMENT

AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
PETER J. MORT (Bar No. 102480)
ANNE K. EDWARDS (Bar No. 110424)
JAMES M. GILBERT (BAR NO. 150406)
2029 Century Park East, Suite 2600
Los Angeles, California 90067
Telephone:        (310) 229-1000
Facsimile:        (310) 229-1001

Attorneys for Plaintiffs

ISCO-IRVINE NORTH, LTD., a California
limited partnership and ROBERT COHEN, an
individual

                    SUPERIOR COURT OF THE STATE OF CALIFORNIA

                            FOR THE COUNTY OF ORANGE

ISCO-IRVINE NORTH, LTD., a California Limited        )  Case No. 00CC06504
Partnership, and ROBERT COHEN, an individual,        )
                                                     )  STIPULATION FOR ENTRY OF
                                                     )  JUDGMENT
         Plaintiffs,                                 )
                                                     )
         vs.                                         )
GISH BIOMEDICAL, INC., a California Corporation;     )
CALIFORNIA MEDICAL LABORATORIES, INC., a California  )
corporation; SIMS PORTEX, INC., a Delaware           )
corporation; RESPIRATORY SUPPORT PRODUCTS, INC., a   )
California corporation; DAVENPORT INDUSTRIES; and    )
DOES 1 through 25, inclusive,                        )
                                                     )
         Defendants.                                 )
 .                                                    )
                                                     )
                                                     )
                                                     )
------------------------------------------------------

     1.  PARTIES:  This  Stipulation  for Entry of  Judgment  (hereinafter,  the
"Stipulation") is made and entered into by and between  ISCO-IRVINE NORTH, LTD.,
a  California  limited  liability   partnership   ("ISCO"),   and  ROBERT  COHEN
(collectively,  ISCO and Cohen are referred to  hereinafter  as  "Plaintiff"  or
"Lessor"),  and GISH BIOMEDICAL,  INC., a California corporation ("Defendant" or
"Lessee").

     2.  RECITALS:  This  Stipulation  is made with  reference to the  following
facts:

         a) Certain disputes  and  controversies have arisen between the parties
hereto.

<PAGE>

         b) Such disputes and controversies include, but are not limited to, the
claims,  demands,  and cause or causes of action set forth by the parties and/or
related  persons and  entities  hereto in the within  action filed in the Orange
County  Superior  Court  entitled  ISCO  Irvine  North,  Ltd.,  et al.,  v. Gish
Biomedical, Inc., et al. (hereinafter,  the "Unlawful Detainer Action"), bearing
Case No. 00CC06504,  and concerning the possession of the real property commonly
known and located at 2681 Kelvin Avenue, Irvine, California 92714 ("Premises").

         c) In order to resolve the Unlawful Detainer Action, the Parties,  upon
advice of counsel, have entered into a Lease Amendment, Settlement Agreement and
Mutual Release  ("Settlement  Agreement")  relating to the Lease of the Premises
described  therein  ("Lease").  In the event of any "Trigger  Event" defined and
described in paragraph "3" below,  this Stipulation  shall govern the rights and
obligations of the Parties concerning the immediate  possession of the Premises.
In  consideration  of  the  terms,  covenants,  promises,   representations  and
conditions contained herein, and for other good and valuable consideration,  the
receipt,  sufficiency and adequacy of which the parties hereby acknowledge,  the
Parties hereto, and each of them, hereby represent and agree as follows:

     3.  STIPULATION  FOR ENTRY OF JUDGMENT:  The Parties hereby  incorporate by
reference  the  Settlement  Agreement as though fully set forth  herein.  In the
event  that  any one or  more  of the  following  events  occurs  (collectively,
"Trigger Events"):  (A) Defendant fails or refuses to fully and timely surrender
and vacate all or any portion of the Premises  when and as required by Section 3
a)(iii) or 3 a)(iv) of the Settlement  Agreement (any such failure or refusal is
referred to as a "Late  Surrender")  or (B) Defendant  fails or refuses to fully
and timely pay all or any portion of the Base Rent and/or  other Rent or charges
when due under the Lease (any such  failure or refusal is referred to as a "Late
Rent  Payment"),  IT IS  HEREBY  STIPULATED  by and  between  the  Parties  that
Plaintiff  shall  have the  right  to  immediately  apply  to the  Court in this
Unlawful Detainer Action, on an ex parte basis upon 24-hour notice to Defendant,
for entry of  judgment  in favor of  Plaintiff  and  against  Defendant  and all
parties in possession (other than any New Tenant as specified by Plaintiff),  in
the form attached hereto as Exhibit "A" and for the immediate issuance of a writ
of  possession  for the  Premises,  and that  such  judgment  and writ  shall be
thereupon  immediately  awarded  provided  that  such ex  parte  application  is
accompanied by a declaration  stating that a Trigger Event has occurred (subject
only  to  Defendant's  limited  right  to  oppose  Plaintiff's   application  if
Plaintiff's  application is based on certain (but not all) Trigger  Events,  but
only to the extent expressly  allowed by paragraph "6" below,  which opposition,
if  applicable,  may be  considered  by the  Court  solely  for the  purpose  of
determining  whether the alleged Trigger Event in fact occurred,  in which case,
unless the Court  actually  determines  that no  Trigger  Event  occurred,  then
Plaintiff  and  Defendant  hereby agree that the said judgment and writ shall be
immediately  awarded  to  Plaintiff   notwithstanding  any  such  opposition  by
Defendant).  Plaintiff's  application  for  entry  of  judgment  may be  made by
declaration.

<PAGE>

     4. CURE PERIODS FOR LATE  SURRENDER OF  PARTICULAR  PHASES OR FOR LATE RENT
PAYMENT.  If, and only if, the Trigger Event  specified in  Plaintiff's ex parte
application  is NOT a Late  Surrender  with  respect to Phase III or Phase IV or
Phase V of the Premises (as  described  and referred to in Section  3.a)(iii) of
the Settlement  Agreement),  then Plaintiff's ex parte application hereunder may
be made only  after  three (3)  calendar  days have  passed  (after the date any
Plaintiff  has given  written  notice  to  Defendant  that a  Trigger  Event has
occurred)   without  Defendant  having  fully  cured  such  failure  or  refusal
constituting  the  applicable   Trigger  Event  (by  Defendant  actually  having
surrendered  and vacated the relevant  portion(s) of the Premises as so required
in the case of a Late Surrender of Phase I or Phase II, or by Defendant actually
having  fully paid all such  amounts as so  required  in the case of a Late Rent
Payment).  If the Trigger Event specified in Plaintiff's ex parte application IS
a Late  Surrender  with  respect  to  Phase  III or  Phase  IV or Phase V of the
Premises (as  described and referred to in Section  3.a)(iii) of the  Settlement
Agreement) (i.e., if full surrender and vacation has not occurred by January 10,
2001),  then Plaintiff's ex parte  application  hereunder may be made only after
January  15,  2001  (without  any notice  being  required  that a Trigger  Event
occurred and without any further cure period).

     5. ADVICE OF COUNSEL.  Plaintiff and Defendant have had the  opportunity to
be fully advised by counsel as to the full contents, meaning and significance of
this Stipulation, and understand its terms and conditions.

<PAGE>

     6. LIMITATION ON DEFENDANT'S RIGHT TO OPPOSE.  Notwithstanding  anything to
the contrary herein or elsewhere,  including,  without limitation, any document,
rule,  statute,  law or otherwise,  Defendant shall have no right  whatsoever to
oppose or contest any ex parte application of Plaintiff brought hereunder or the
issuance of judgment in accordance herewith except as follows:  If, and only if,
the Trigger Event  specified in Plaintiff's  ex parte  application is NOT a Late
Surrender  with  respect to Phase III or Phase IV or Phase V of the Premises (as
described  and referred to in Section  3.a)(iii) of the  Settlement  Agreement),
then (without any delay of the hearing)  Defendant may introduce evidence at the
hearing showing that the alleged  Trigger Event in fact did not occur.  However,
no other issue, matter, excuse, claim, offset, defense, allegation or opposition
whatsoever  shall be permitted at the hearing nor  constitute  any defense to or
impairment of Plaintiff's right to immediate  issuance of the attached judgment.
Further, even this limited right to oppose shall be inapplicable to any ex parte
application by Plaintiff if the Trigger Event alleged therein is with respect to
any Late  Surrender  of Phase  III or Phase IV or Phase V of the  Premises.  For
purposes  of  clarification,  the  limitations  in  this  paragraph  "6" are not
intended to apply and shall not apply to Defendant's  (or  Plaintiff's)  express
right to  oppose  the  matters  specified  in parts  "(3)"  and/or  "(4)" of the
attached  form of  judgment  (which  matters  shall  only  be  raised  or  heard
separately from the said hearing on Plaintiff's  application  brought  hereunder
and only at a later date than the said hearing).

     7. NO INJUNCTION.  Defendant waives its right to bring any action to enjoin
Plaintiff's enforcement of a judgment entered pursuant to paragraph 3 above.

     8.  EXECUTION  IN  COUNTERPARTS.   This  Stipulation  may  be  executed  in
counterparts,  by fax or otherwise, and when each party has signed and delivered
at least one such counterpart, each counterpart shall be deemed an original, and
when taken  together  with  other  signed  counterparts,  shall  constitute  one
Stipulation, which shall be binding upon and effective as to all parties.

<PAGE>

     9. MODIFICATION AND WAIVER. This Stipulation can only be modified or waived
by a  written  agreement  executed  by the  Parties  hereto.  No  breach  of any
provision  herein can be waived except in writing,  and waiver of any one breach
shall not be deemed to  constitute  a waiver of any other  breach of the same or
other provisions hereto.

     10.  AUTHORITY TO  SIGN/PERFORM.  Any person  signing this  Stipulation  on
behalf of any entity  represents  and warrants  that he or she is  authorized by
that entity to sign this Stipulation on its behalf.

                                   Plaintiff:

DATED:  October 26, 2000             ISCO-IRVINE NORTH, LTD.,  a California
                                     Limited Partnership

                                     By: /s/ Robert Cohen

                                         ----------------------------------
                                     Name: Robert Cohen

                                           --------------------------------
                                     Its: General Partner

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

DATED:  October 26, 2000             /s/ Robert Cohen
                                     --------------------------------------
                                     ROBERT COHEN

                                   Defendant:

DATED:  October 26, 2000             GISH BIOMEDICAL, INC.,  a California
                                   Corporation

                                     By: /s/ Kelly D. Scott
                                         ---------------------------------
                                     Name: Kelly D. Scott
                                           -------------------------------
                                     Its: President and Chief Financial Officer

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

DATED:  October 26, 2000             AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.

                                     By /s/ Tony Salandra

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

                                     Attorneys for Plaintiffs

DATED:  October 26, 2000             STRADLING YOCCA CARLSON & RAUTH

                                     By /s/ Randall J. Sherman
                                        ---------------------------------------
                                        Attorneys for Defendants

<PAGE>

                                    EXHIBIT A

                    Form of Judgment Pursuant to Stipulation

AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
PETER J. mORT (Bar No. 102480)
ANNE K. EDWARDS (Bar No. 110424)
JAMES M. GILBERT (Bar no. 150406)
2029 Century Park East, Suite 2600
Los Angeles, California 90067
Telephone:        (310) 229-1000
Facsimile:        (310) 229-1001

Attorneys for Plaintiffs

ISCO-IRVINE NORTH, LTD., a California limited
partnership and ROBERT COHEN, an individual

                    Superior COURT OF THE STATE OF CALIFORNIA

                            FOR THE COUNTY OF ORANGE

ISCO-IRVINE NORTH, LTD., a California Limited        )  Case No. 00CC06504
Partnership, and ROBERT COHEN, an individual,        )
                                                     )  JUDGMENT   PURSUANT   TO
                                                     )  STIPULATION
         Plaintiffs,                                 )
                                                     )
         vs.                                         )
GISH BIOMEDICAL, INC., a California Corporation;     )
CALIFORNIA MEDICAL LABORATORIES, INC., a California  )
corporation; SIMS PORTEX, INC., a Delaware           )
corporation; RESPIRATORY SUPPORT PRODUCTS, INC., a   )
California corporation; DAVENPORT INDUSTRIES; and    )
DOES 1 through 25, inclusive,                        )
                                                     )
         Defendants.                                 )
                                                     )
                                                     )
                                                     )
------------------------------------------------------

     In the  above-entitled  action,  Plaintiffs  ISCO-Irvine  North,  Ltd., and
Robert Cohen and defendant Gish Biomedical Inc., having stipulated through their
respective counsel,  that judgment be entered in favor of Plaintiffs and against
Defendant,  and  Plaintiffs  having  served  a  prejudgment  claim  of  right of
possession on all unnamed occupants pursuant to Code of Civ. Pro. $415.46,

<PAGE>

     IT IS HEREBY  ADJUDGED,  ORDERED  AND DECREED  that  judgment is entered as
follows:

     (1)  Plaintiffs  shall have and recover from Defendant and all occupants in
possession,  the possession of the entire premises commonly known and located at
2681 Kelvin Avenue, Irvine, California ("Premises");

     (2) The  Clerk of this  Court  is  directed  to issue a Writ of  Possession
directing  the  Sheriff's  Office to take all legal  steps  necessary  to remove
Defendant and all other  occupants in possession  from the Premises  (subject to
Plaintiff's  right to specify  any other new  tenant  which may be  entitled  to
remain in the Premises);

     (3)  Plaintiffs  may apply to the Court at a later date for an award of its
attorneys'  fees and costs and amend this  judgment  accordingly,  and Defendant
shall be entitled to oppose any such application.

     (4)  Nothing  in this  judgment  shall  preclude  or  limit  Plaintiffs  or
Defendant from also applying to the Court at a later date whether in this action
or by separate action for any unpaid rent,  interest,  and/or other damages, and
the other party shall be entitled to oppose any such application.

     IT IS FURTHER ORDERED AND DECLARED that the lease dated as of July 8, 1992,
as amended by and between  Plaintiffs as Lessor and  Defendant as Lessee,  under
which the  Premises  was held by Defendant  is  forfeited  and  terminated  (but
without  limitation  of any of  Plaintiffs'  rights and  remedies  and/or any of
Defendant's  obligations  pursuant to the  provisions of the Lease (as amended),
this order and/or applicable law, which are applicable following the termination
of the Lease following the Defendant's failure to perform thereunder).

    Date: ___________                           ______________________________
                                                Judge of the Superior Court

<PAGE>

                                    EXHIBIT F

                           JOINT NOTICE OF SETTLEMENT

AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
PETER J. MORT (Bar No. 102480)
ANNE K. EDWARDS (Bar No. 110424)
2029 Century Park East, Suite 2600
Los Angeles, California 90067
Telephone:        (310) 229-1000
Facsimile:        (310) 229-1001

Attorneys for Plaintiffs

ISCO-IRVINE NORTH, LTD., a California
limited partnership and ROBERT COHEN, an
individual

                    SUPERIOR COURT OF THE STATE OF CALIFORNIA

                            FOR THE COUNTY OF ORANGE

ISCO-IRVINE NORTH, LTD., a California Limited        )Case No. 00CC06504
Partnership, and ROBERT COHEN, an individual,        )
                                                     )
         Plaintiffs,                                 )
                                                     )
         vs.                                         )JOINT NOTICE OF SETTLEMENT
GISH BIOMEDICAL, INC., a California Corporation;     )
CALIFORNIA MEDICAL LABORATORIES, INC., a California  )
corporation; SIMS PORTEX, INC., a Delaware           )
corporation; RESPIRATORY SUPPORT PRODUCTS, INC., a   )
California corporation; DAVENPORT INDUSTRIES; and    )
DOES 1 through 25, inclusive,                        )
                                                     )
         Defendants.                                 )
 .                                                    )
                                                     )
                                                     )
                                                     )
------------------------------------------------------

                  TO THE HONORABLE ORANGE COUNTY SUPERIOR COURT

COMMISSIONER, LATIMER F. GOULD:

     Plaintiffs  ISCO-Irvine North, Ltd. a California limited  partnership,  and
Robert Cohen (collectively,  "Plaintiff") and Defendant Gish Biomedical, Inc., a
California  corporation  ("Gish"),  hereby file this Joint Notice of  Settlement
("Joint Notice") based on the following facts:

<PAGE>

     1.  Plaintiff  and Gish have  entered  into a Lease  Amendment,  Settlement
Agreement and Mutual Release (the "Settlement Agreement"), effective on or about
the  date  hereof,  and  a  Stipulation  for  Entry  of  Judgment   ("Stipulated
Judgment").

     2.  Under the terms of the  Settlement  Agreement,  certain  covenants  and
conditions  must be performed by the  Plaintiff  and Gish through and  including
January 15, 2001.

     3. In the event  Gish  defaults  under the  Settlement  Agreement  and such
default constitutes a "Trigger Event" as defined therein,  Plaintiff is entitled
to move this Court, ex parte,  for entry of judgment  pursuant to the Stipulated
Judgment, for immediate possession of the subject premises.

     4.  Under the  Settlement  Agreement,  this case will be  concluded  at the
latest by February 10, 2001 by either (a)  Plaintiff  filing a Request for Entry
of Dismissal with Prejudice as of the entire action,  or (b) Plaintiff filing an
ex parte  application  for  entry of  judgment  against  Gish,  pursuant  to the
Stipulated Judgment,  and a Request for Entry of Dismissal with Prejudice of the
entire action as to all of the remaining defendants.

     5. By this Joint Notice,  Plaintiff and Gish hereby  request that the Court
move this case off the unlawful detainer priority docket to a "nonactive" status
for the monitoring of the parties' performance under the Settlement Agreement.

Dated:  October 26, 2000             AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.

                                     By /s/ Tony Salandra

                                        -------------------------------------
                                        Attorneys for Plaintiffs

Dated: October 26, 2000              STRADLING YOCCA CARLSON & RAUTH

                                     By /s/ Randall J. Sherman
                                        --------------------------------------
                                        Attorneys for DefendantsSTANDARD FORM

                         SINGLE TENANT INDUSTRIAL LEASE

                                      (NET)

         LANDLORD:         ERIC AND SHIRLEY PEPYS

         TENANT:           GISH BIOMEDICAL, INC.

         PROJECT:          22942 ARROYO VISTA

         CITY, STATE:      RANCHO SANTA MARGARITA, CALIFORNIA

         DATE:             OCTOBER 26, 2000

<PAGE>

                                TABLE OF CONTENTS

1.       BASIC LEASE TERMS....................................................1

2.       PREMISES.............................................................2

3.       LEASE TERM...........................................................2

4.       POSSESSION...........................................................2

5.       RENT.................................................................3

6.       PREPAID RENT.........................................................4

7.       SECURITY DEPOSIT.....................................................4

8.       USE OF PREMISES AND PROJECT FACILITIES...............................6

9.       SURRENDER OF PREMISES; HOLDING OVER..................................7

10.      SIGNAGE..............................................................8

11.      TAXES................................................................8

12.      UTILITIES............................................................9

13.      MAINTENANCE..........................................................9

14.      ALTERATIONS.........................................................11

15.      RELEASE AND INDEMNITY...............................................11

16.      INSURANCE...........................................................12

17.      DESTRUCTION.........................................................13

18.      CONDEMNATION........................................................14

19.      ASSIGNMENT OR SUBLEASE..............................................15

20.      DEFAULT.............................................................16

21.      LANDLORD'S REMEDIES.................................................17

22.      DEFAULT BY LANDLORD.................................................18

23.      ENTRY OF PREMISES AND PERFORMANCE BY TENANT.........................18

24.      SUBORDINATION.......................................................19

25.      NOTICE..............................................................19

26.      WAIVER..............................................................20

27.      LIMITATION OF LIABILITY.............................................20

28.      FORCE MAJEURE.......................................................20

29.      PROFESSIONAL FEES...................................................20

30.      EXAMINATION OF LEASE................................................21

31.      ESTOPPEL CERTIFICATE................................................21

32.      RULES AND REGULATIONS...............................................21

<PAGE>

33.      LIENS...............................................................21

34.      MISCELLANEOUS PROVISIONS............................................22

35.      LEASE EXECUTION.....................................................23

EXHIBITS

EXHIBIT A                  DEPICTION OF PREMISES
EXHIBIT B                  DESCRIPTION OF PREMISES
EXHIBIT C                  WORK LETTER AGREEMENT
EXHIBIT D                  NOTICE OF LEASE TERM DATES
EXHIBIT E                  TENANT ESTOPPEL CERTIFICATE
EXHIBIT F                  RULES AND REGULATIONS
EXHIBIT G                  PROJECT SIGNAGE CRITERIA
EXHIBIT H                  HAZARDOUS MATERIALS ADDENDUM
EXHIBIT I                  HAZARDOUS MATERIALS QUESTIONNAIRE

RIDERS

------

RIDER 1                    OPTION TO EXTEND

<PAGE>

                            STANDARD INDUSTRIAL LEASE

                                      (NET)

1.       BASIC LEASE TERMS.
            (a) DATE OF LEASE EXECUTION:            26 October 2000
            (b) TENANT:          Gish Biomedical, Inc., a California corporation

                  Address (Premises):22942 Arroyo Vista, Rancho Santa Margarita
                                   California

                  Address for Notices:22942 Arroyo Vista, Rancho Santa Margarita
                                    CA 92688

            (c) LANDLORD:        Eric and Shirley Pepys.

                  Address for Rent:         Eric and Shirley Pepys
                                            526 South Bayfront
                                            Newport Beach, CA 92662

                  Address for Notices:      Eric and Shirley Pepys
                                            526 South Bayfront
                                            Newport Beach, CA 92662

            (d) TENANT'S PERMITTED USE OF PREMISES: General office,  warehousing
                and laboratory facilities consistent with biomedical industry

            (e) PREMISES:   Those Certain Premises Defined in Paragraph 2 Below.

            (f) PREMISES AREA:    Approximately 51,913 Rentable Square Feet

            (g) TERM AND COMMENCEMENT:

                Term:   10 Years and 4 Months (124 Months)

                Commencement Date (for Possession): The earlier of the following
                two dates:

                (a) The  date  of  final execution of this Lease by Landlord and
                    delivery to Tenant; or

                (b) October 13, 2000

                 Base Rent Commencement Date: The  earlier  of the following two
                 dates:

                (a) The date  which is four (4)  months  after the date of final
                execution of this Lease by Landlord and delivery to Tenant; or

                (b) February 13, 2001

                Option to Extend Term: One  option  to  extend the Term for five
                years (see Rider 1)

                (h) MONTHLY BASIC RENT: Thirty  Three  Thousand,  Seven  Hundred
                Forty Three and 45/100 Dollars ($33,743.45)

                (i) ANNUAL BASIC RENT: Four Hundred Four  Thousand, Nine Hundred
                Twenty-One and 40/100 Dollars ($404,921.40)

                (j) RENT ADJUSTMENT:

                    Cost  of   Living.   The  cost  of  living   provisions   of
                    Subparagraph  5(c) apply  using the  Consumer  Price Index -
                    Urban  Wage  Earners  and  Clerical  Workers  (Los  Angeles-
                    Anaheim-Riverside),  all items,  Base  1982-1984  ("Index"),
                    (1967=100),  assuming a minimum of three  percent (3%) and a
                    maximum  of five  percent  (5%) per  annum,  cumulative  and
                    compounding.

                (k) PREPAID RENT  (for First Month of Term Commencement): Thirty
                Three  Thousand,  Seven  Hundred  Forty Three and 45/100 Dollars
                ($33,743.45)

<PAGE>

                (l) SECURITY  DEPOSIT:  Three   Hundred   Thousand   and  00/100
                Dollars ($300,000.00) in the form of a Letter of Credit pursuant
                to Pagaraph 7.

                (m) BROKER(S):  Cushman  &   Wakefield   of   California,  Inc.,
                              representing Landlord

                                Cushman  &  Wakefield  of  California,  Inc. and
                                Colliers     Seeley     International,     Inc.,
                                co-representing Tenant

                (n) GUARANTOR(S):     N/A

                (o) TENANT IMPROVEMENTS: All work performed by Tenant to prepare
                the  Premises  for  occupancy  pursuant to the terms of the Work
                Letter Agreement attached hereto as Exhibit-C.

                (p) TENANT IMPROVEMENT  ALLOWANCE:  Landlord  grants to Tenant a
                Tenant  Improvement  Allowance pursuant to the terms of the Work
                Letter Agreement attached hereto as Exhibit-C.

                (q) ADDITIONAL SECTIONS:  None.

                (r) RIDERS:  Riders numbered 1 through 1 are attached hereto and
                made a part hereof.

                (s) EXHIBITS: Exhibits lettered A through I, are attached hereto
                and made a part hereof.

     This Paragraph 1 represents a summary of the basic terms of this Lease.  In
the event of any  inconsistency  between the terms contained in this Paragraph 1
and any  specific  provision  of this  Lease,  the  terms of the  more  specific
provision shall prevail.

2. PREMISES
   --------
     (a)  Landlord  hereby  leases to  Tenant  and  Tenant  hereby  leases  from
Landlord,  the Premises  referenced in Paragraph 1 and outlined on the Depiction
of  Premises  attached  hereto  as  Exhibit-A  and  incorporated  herein by this
reference. The Premises consist of that certain building which is located at the
address  designated  in  Subparagraph  1(b) (the  "Building")  and the parcel or
parcels of real  property  described  on the  Description  of Premises  attached
hereto as Exhibit-B and  incorporated  herein by this reference which is for the
exclusive  use of Tenant.  The  Premises  are  improved or to be  improved  with
certain tenant  improvements (the "Tenant  Improvements")  described in the Work
Letter  Agreement,  a  copy  of  which  is  attached  hereto  as  Exhibit-C  and
incorporated herein by this reference,  said Premises being agreed, for purposes
of this Lease,  to have an area of  approximately  the number of Rentable Square
Feet designated in Subparagraph 1(f). (b) The parties agree that the letting and
hiring  of the  Premises  is  upon  and  subject  to the  terms,  covenants  and
conditions  herein set forth and  Tenant  covenants  as a  material  part of the
consideration  for this Lease to keep and  perform  each and all of said  terms,
covenants  and  conditions by it to be kept and performed and that this Lease is
made upon the condition of such performance.

3. LEASE  TERM
   ----------

     The Term of this Lease shall be for the period  designated in  Subparagraph
1(g)  commencing  on the  Commencement  Date,  and ending on the last day of the
Term,  unless  the term  hereby  demised  shall be sooner  terminated  as herein
provided ("Term"). Notwithstanding the foregoing, if the Commencement Date falls
on any day other  than the first day of a  calendar  month then the Term of this
Lease shall be measured  from the first day of the month  following the month in
which the Commencement Date occurs.  Landlord and Tenant shall execute Exhibit D
to confirm the Commencement Date and other matters.

4. POSSESSION
   ----------

     (a) Delivery of Possession.  Landlord  agrees to deliver  possession of the
Premises to Tenant upon the date  immediately  following date of final execution
of this Lease by Landlord and delivery to Tenant. Notwithstanding the foregoing,
Landlord shall not be obligated to deliver  possession of the Premises to Tenant
until Landlord has received from Tenant all of the  following:  (i) the Security
Deposit and the first monthly  installment  of Annual Basic Rent;  (ii) executed
copies of policies  of  insurance  or  certificates  thereof as  required  under
Paragraph  16 of this  Lease;  (iii)  copies  of all  governmental  permits  and
authorizations  required in connection  with Tenant's  operation of its business
upon the  Premises;  and (iv) an executed  original of the  Hazardous  Materials
Questionnaire in the form attached hereto as Exhibit I.

<PAGE>

     (b) Late  Delivery.  Tenant  agrees  that if  Landlord is unable to deliver
possession  of the  Premises  to  Tenant  on or prior to the  Commencement  Date
specified in Subparagraph  1(g),  this Lease shall not be void or voidable,  nor
shall Landlord be liable to Tenant for any loss or damage  resulting  therefrom,
nor shall the  Expiration  Date of the Term be in any way extended,  unless such
late delivery shall be due solely to the gross negligence or willful  misconduct
of Landlord,  in which event, as Tenant's sole remedy, the Commencement Date and
the  Expiration  Date of the  Term  shall be  extended  one (1) day for each day
Landlord delays in delivering possession of the Premises to Tenant due solely to
Landlord's gross negligence or willful misconduct.  Notwithstanding  anything to
the contrary in this Paragraph 4(b), Tenant may terminate this Lease if Landlord
fails to deliver  possession of the Premises  pursuant to Paragraph  4(a) within
fifteen (15) days of the Commencement Date (for Possession)

     (c) Condition of Premises. Tenant has inspected the Premises and prepared a
punch-list of items (the  "Punch-List",  attached  hereto as Exhibit C-5) on the
Premises that need additional work.  Landlord shall cause all items set forth in
the  Punch-List  to be  repaired  or  corrected  within  thirty (30) days of the
Commencement Date (for Possession) or as soon as reasonably  practicable.  Other
than  the  items  specified  in the  Punch-List,  by  taking  possession  of the
Premises,  Tenant will be deemed to have  accepted the Premises and the Building
in  their  condition  on  the  date  of  delivery  of  possession  and  to  have
acknowledged that Landlord has installed the Tenant  Improvements as required by
the Work Letter Agreement and that there are no additional items needing work or
repair.  Landlord  shall  cause  all items  set  forth in the  Punch-List  to be
repaired or corrected  within thirty (30) days following the  preparation of the
Punch-List or as soon as reasonably  practicable  after the  preparation  of the
Punch-List.  Tenant acknowledges that neither Landlord nor any agent of Landlord
has made any  representation  or warranty  with  respect to the Premises and the
Building or any portions  thereof or with respect to the suitability of same for
the  conduct of  Tenant's  business.  Without  limiting  the  foregoing,  if the
Building is newly constructed or recently  renovated,  Tenant's execution of the
Notice attached hereto as Exhibit D shall  constitute a specific  acknowledgment
and  acceptance of the various  start-up  inconveniences  that may be associated
with the use of the Premises such as certain construction  obstacles,  including
scaffolding,  uneven air  conditioning  services  and other  typical  conditions
incident to recently constructed or renovated buildings.

5. RENT

   ----
     (a) Basic Rent.  Effective as of the Base Rent  Commencement  Date,  Tenant
agrees to pay  Landlord as Annual  Basic Rent for the  Premises the Annual Basic
Rent  designated in  Subparagraph  1(h)  (adjusted as  hereinafter  provided) in
twelve (12) equal monthly  installments as designated in Subparagraph 1(j), each
in advance of the first day of each and every  calendar  month  during the Term,
except that one month's rent shall be paid upon the execution of this Lease.  If
the Term of this Lease commences on a day other than the first day of a calendar
month or ends on a day other  than the last day of a  calendar  month,  then the
rent for such  periods  shall be prorated in the  proportion  that the number of
days this Lease is in effect during such periods bears to thirty (30),  and such
rent shall be paid at the commencement of such period. In addition to the Annual
Basic Rent,  Tenant  agrees to pay  additional  rent as provided in Paragraph 11
(Taxes), Paragraph 13 (Maintenance),  Paragraph 16 (Insurance),  effective as of
the Commencement Date (for Possession), and the amount of all rental adjustments
as and when  hereinafter  provided in this  Lease.  The Annual  Basic Rent,  any
additional rent payable pursuant to the provisions of this Lease, and any rental
adjustments  shall be paid to Landlord,  without any prior demand therefor,  and
without any deduction or offset  whatsoever in lawful money of the United States
of America,  which shall be legal tender at the time of payment,  at the address
of Landlord  designated in Subparagraph  1(c) or to such other person or at such
other place as Landlord may from time to time designate in writing. Further, all
charges to be paid by Tenant hereunder,  including, without limitation, payments
for real property  taxes,  insurance,  repairs,  and parking,  if any,  shall be
considered  additional rent for the purposes of this Lease,  and the word "rent"
in this Lease shall include such additional rent unless the context specifically
or clearly  implies that only the Annual Basic Rent is referenced.  Annual Basic
Rent shall be adjusted as provided in Subparagraph 1(j).

<PAGE>

     (b) Late  Payment.  Tenant  acknowledges  that  late  payment  by Tenant to
Landlord  of any rent or other sums due under this Lease will cause  Landlord to
incur costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impracticable to ascertain.  Such costs include, without
limitation,  processing  and  accounting  charges and late  charges  that may be
imposed  on  Landlord  by the terms of any  encumbrance  or note  secured by the
Premises.  Therefore,  if any  installment  of Annual Basic Rent is not received
within five (5) days of the date such  installment is due (pursuant to Paragraph
5 (a)) or any rent or other sum due from Tenant is not received  within five (5)
days of written notice from Landlord, Tenant shall pay to Landlord an additional
sum equal to 10% of such  overdue  payment for each month such  payment  remains
overdue.  Landlord and Tenant  hereby  agree that such late charge  represents a
fair and reasonable  estimate of the costs that Landlord will incur by reason of
any such late payment.  Additionally,  all such delinquent  rents or other sums,
shall bear interest at the lesser of 12% per annum or the maximum legal interest
rate. Any payments of any kind returned for  insufficient  funds will be subject
to an additional handling charge of $25.00.

     (c) Cost of Living Rent Adjustment. If Subparagraph 1(j)1 is marked, Annual
Basic Rent,  including  all prior  adjustments,  shall be  increased  (but never
decreased) annually effective each anniversary of the Commencement Date for Rent
or each  anniversary  of the first day of the month  immediately  following  the
month in which the Commencement  Date for Rent occurs if the  Commencement  Date
for Rent occurs other than on the first day of a month  ("Adjustment  Date"), in
accordance  with the  percentage  increase,  if any, in the Index  described  in
Subparagraph 1(j)1 as published by the United States Department of Labor, Bureau
of Labor Statistics  ("Bureau").  The Index most recently published prior to the
Adjustment  Date  shall be  compared  with the Index  for the same  month of the
preceding  year and the Annual Basic Rent shall be increased in accordance  with
the  percentage  increase,  if any,  between  such  Indices.  Should  the Bureau
discontinue the  publication of the Index, or publish the same less  frequently,
or alter the same in some other manner, Landlord, in its discretion, shall adopt
a substitute index or procedure which reasonably  reflects and monitors consumer
prices. The foregoing  notwithstanding,  the Annual Basic Rent increase shall be
increased  at a minimum  of three  percent  (3%) with a maximum of five (5%) per
annum, cumulative and compounding.

6. PREPAID RENT
   ------------

     Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent
set  forth  in  Subparagraph  1(k),  and if  Tenant  is not  in  default  of any
provisions of this Lease, such Prepaid Rent shall be applied toward the rent due
for the first month of the Term,  measured from the Base Rent Commencement Date.
Landlord's  obligations  with  respect to the Prepaid Rent are those of a debtor
and not of a trustee,  and Landlord can  commingle  the Prepaid  Rent.  Landlord
shall not be required to pay Tenant interest on the Prepaid Rent. Landlord shall
be entitled to immediately endorse and cash Tenant's Prepaid Rent; however, such
endorsement  and cashing  shall not  constitute  Landlord's  acceptance  of this
Lease.  In the event Landlord does not accept this Lease,  Landlord shall return
said  Prepaid  Rent.  If  Landlord  sells the  Premises  and  deposits  with the
Purchaser  the  Prepaid  Rent,  Landlord  shall be  discharged  from any further
liability with respect to the Prepaid Rent.

7. SECURITY DEPOSIT
   ----------------

     (a) Upon execution of this Lease, Tenant shall deposit the Security Deposit
set forth in Subparagraph 1(l) with Landlord, as security for the performance by
Tenant of the  provisions  of this  Lease.  If Tenant is in default  (beyond all
applicable  cure  periods),  regardless  of whether  such default is monetary or
non-monetary,  Landlord may use the Security  Deposit or any portion  thereof to
cure the default or to compensate Landlord for any damages sustained by Landlord
resulting from Tenant's  default.  Upon demand,  Tenant shall immediately pay to
Landlord a sum equal to the portion of the Security  Deposit expended or applied
by Landlord to maintain the Security Deposit in the amount  initially  deposited
with  Landlord.  If Tenant is not in default at the expiration or termination of
this Lease,  Landlord shall return the entire Security Deposit to Tenant, net of
any portion  thereof  used by  Landlord  to cure a default by Tenant  under this
Lease or  compensate  Landlord for any damages  sustained by Landlord  resulting
from such  default,  to  Tenant.  Landlord's  obligations  with  respect  to the
Security  Deposit are those of a debtor and not of a trustee,  and  Landlord can
commingle the Security Deposit with Landlord's general funds. Landlord shall not
be required to pay Tenant  interest on the Security  Deposit.  Landlord shall be
entitled to immediately  endorse and cash Tenant's  Security  Deposit;  however,
such endorsement and cashing shall not constitute  Landlord's acceptance of this
Lease.  In the event Landlord does not accept this Lease,  Landlord shall return
said  Security  Deposit.  If Landlord  sells the Premises and deposits  with the
purchaser the Security  Deposit,  Landlord shall be discharged  from any further
liability with respect to the Security Deposit.

<PAGE>

     (b) Paragraph 7(a) notwithstanding,  Tenant shall post the Security Deposit
set forth in  Subparagraph  1(l) with Landlord by the delivery to Landlord of an
irrevocable standby letter of credit ("Letter of Credit") in compliance with all
provisions of this Paragraph  7(b). The Letter of Credit shall reflect  Landlord
as beneficiary and shall be in the principal amount of the Security Deposit. The
Letter of Credit  shall be capable of being drawn upon at a location in Southern
California  reasonably acceptable to Landlord. In all cases, the identity of the
issuer of the Letter of Credit  shall be subject to the  reasonable  approval of
Landlord.  The form of the  Letter of Credit  shall be subject to the review and
reasonable approval of Landlord, and the Letter of Credit shall contain language
allowing  Landlord  to draw upon the Letter of Credit upon  presentation  to the
issuer of Landlord's  written  statement  that Landlord is entitled to the funds
represented by such Letter of Credit in accordance with the terms of this Lease.
Approval by Tenant  prior to any drawing  upon the Letter of Credit shall not be
required.  The Letter of Credit  shall be for an original  term of not less than
one (1) year and shall  permit,  if  appropriate  based  upon the  length of the
remaining Term of the Lease and (if  appropriate)  the remaining  portion of the
Option Term,  Landlord to draw in full upon the Letter of Credit  unless  Tenant
furnishes to Landlord,  at least thirty (30) days prior to the expiration of the
Letter of Credit, either an extension of the Letter of Credit from the issuer or
a substitute Letter of Credit consistent with the requirements of this Paragraph
7(b), in either case so that Landlord has in its  possession at all times during
the Term and (if  appropriate)  during  the  Option  Term and for a period of at
least two (2) weeks  after  Landlord  recovers  and  accepts  possession  of the
Premises a valid Letter of Credit capable of being drawn upon in compliance with
this Paragraph 7(b).

     Landlord and Tenant agree that  Landlord may draw upon the Letter of Credit
without  notice to Tenant  upon the  occurrence  or  nonoccurrence  of any event
entitling  Landlord  under  this  Lease to apply  any  portion  of the  Security
Deposit.  Landlord  shall  return the Letter of Credit to Tenant at such time as
Landlord is obligated to return the Security  Deposit to Tenant  pursuant to the
terms of this  Lease.  Should the terms of this Lease  require  an  increase  or
replacement  of the dollar amount of the Security  Deposit,  Tenant shall timely
furnish to Landlord  either an amendment to the Letter of Credit  increasing its
principal  amount  consistent  with the  requirements  of this  Lease or provide
Landlord with a substitute  Letter of Credit in such increased  principal amount
and otherwise consistent with this Paragraph 7(b). In the event partial drawings
are not  permitted  upon the Letter of Credit and there occurs or does not occur
an event so that  Landlord  under this Lease is entitled to draw upon the Letter
of Credit, Landlord may draw upon the full amount of the Letter of Credit, apply
a portion of the funds so  obtained by  Landlord  as  authorized  by this Lease,
retain the  balance of the  Security  Deposit  pursuant to this Lease and Tenant
shall  thereafter  post additional cash funds with Landlord in the amount of the
balance of the  Security  Deposit,  unless  Landlord,  in its sole and  absolute
discretion,  permits Tenant to post a substitute  Letter of Credit  representing
the  Security  Deposit.  In the  event  of a sale or  other  disposition  of the
Premises,  Landlord may require that Tenant  furnish to Landlord's  transferee a
substitute  or  amended  Letter  of  Credit,   naming  such  transferee  as  the
beneficiary and otherwise in compliance with this Paragraph 7(b).

     Should the Letter of Credit be revoked,  should the creditworthiness of the
issuer  of the  Letter of  Credit  become  impaired  (in  Landlord's  reasonable
judgment),  should Tenant be assessed on two (2)  occasions  within any eighteen
(18)  month  period or three (3)  occasions  within any  twenty-four  (24) month
period any late  charges  pursuant to  Paragraph 5 of this Lease  and/or  should
circumstances arise that create the reasonable likelihood that Landlord would be
unable to draw upon the Letter of Credit,  Landlord  may  require  that  Tenant,
within  fifteen (15) days of Landlord's  notice,  post with Landlord in cash the
full amount of the Security  Deposit then required by this Lease without  regard
to this  Paragraph  7(b).  In such event,  Landlord  shall  return any Letter of
Credit  then in its  possession  to Tenant.  The  intent of the  parties by this
Paragraph  7(b) is that  Landlord  shall have and retain at all times during the
Term and (if  appropriate)  during the Option Term,  and for a period of two (2)
weeks after  Landlord  recovers  possession of the  Premises,  a valid Letter of
Credit capable of being drawn upon by Landlord in compliance with this Paragraph
7(b)  for the  purpose  of  immediately  obtaining  funds in the  amount  of the
Security  Deposit,  so that Landlord is in substantially the same position as if
Landlord had in its possession a cash payment by Tenant of the Security  Deposit
in accordance with this Lease.

<PAGE>

     The right as set forth in this Paragraph 7(b) to post a Letter of Credit in
satisfaction of Tenant's obligations  regarding the Security Deposit is personal
to the  original  Tenant  executing  this Lease and may not be  exercised by any
assignee  or  subtenant  of  Tenant,  even  if  Landlord  has  consented  to the
assignment or subletting.

     (c) Reduction in Security  Deposit.  Provided that Tenant is not in default
(beyond all applicable cure periods), the Security Deposit shall be decreased by
the amounts set forth in this Subparagraph 7(c).

          (i)  Effective  as of the  first  (1st)  anniversary  of the Base Rent
Commencement  Date,  the Letter of Credit shall be reduced by an amount equal to
One Hundred Five  Thousand  and 00/100  Dollars  ($105,000.00)  and the Security
Deposit  shall then be One  Hundred  Ninety  Five  Thousand  and 00/100  Dollars
($195,000.00).

          (ii)  Effective  as of the second (2nd)  anniversary  of the Base Rent
Commencement  Date,  the Letter of Credit shall be reduced by an amount equal to
One Hundred Five  Thousand  and 00/100  Dollars  ($105,000.00)  and the Security
Deposit shall then be Ninety Thousand and 00/100 Dollars ($90,000.00).

8. USE OF PREMISES AND PROJECT FACILITIES
   --------------------------------------

     (a) Tenant's Use of the Premises. Tenant shall use the Premises for the use
or uses set forth in  Subparagraph  1(d) above,  and shall not use or permit the
Premises to be used for any other purpose  without the prior written  consent of
Landlord,  which  consent  Landlord  may  withhold  in  its  sole  and  absolute
discretion. Landlord makes no representations or warranties that said use of the
Premises  is  permitted  by  any  duly   constituted   public  authority  having
jurisdiction over the Premises or the conduct of Tenant's business.

     (b)  Compliance.  At Tenant's sole cost and expense,  Tenant shall procure,
maintain and hold available for Landlord's inspection, all governmental licenses
and permits  required for Tenant's use of the Premises and the proper and lawful
conduct of Tenant's  business from the Premises.  Tenant shall, at its sole cost
and expense, observe and comply with the Certificate of Occupancy issued for the
Building, that certain Declaration of Covenants Conditions, and Restrictions for
Rancho Santa  Margarita  Business  Park dated as of July 1, 1986,  and all laws,
statutes, zoning restrictions,  ordinances,  rules, regulations and requirements
of any duly constituted  public authority having  jurisdiction over the Premises
now  or  hereafter  in  force  relating  to or  affecting  the  use,  occupancy,
alteration or improvement of the Premises  including,  without  limitation,  the
provisions  of Title III of the  Americans  with  Disabilities  Act of 1990,  as
amended.  Tenant shall not use or occupy the Premises in violation of any of the
foregoing. Tenant shall, upon written notice from Landlord,  discontinue any use
of the Premises which is declared by any authority having  jurisdiction over the
Premises,  governmental  or  otherwise,  to be a  violation  of law  or of  said
Certificate  of  Occupancy.   Tenant  shall  comply  with  all  rules,   orders,
regulations  and  requirements  of the Board of Fire  Underwriters  or any other
insurance  authority  having  jurisdiction  over the  Premises or any present or
future insurer  relating to the Premises.  Tenant shall  promptly,  upon demand,
reimburse Landlord for any additional premium charged for any existing insurance
policy or endorsement  required by reason of Tenant's failure to comply with the
provisions of this Paragraph 8. Tenant shall not use or allow the Premises to be
used for any unlawful  purpose,  nor shall Tenant cause,  maintain or permit any
nuisance in, on or about the Premises.  Tenant shall comply with all restrictive
covenants and obligations  created by private contracts which affect the use and
operation  of  the  Premises,  including,  without  limitation,  the  Rules  and
Regulations referred to in Paragraph 32 and attached hereto as Exhibit F. Tenant
shall not commit or suffer to be committed any waste in or upon the Premises and
shall keep the Premises in first-class  repair and  appearance.  Tenant shall be
responsible  for all  structural  engineering  required to determine  structural
load, as well as the expense thereof.

     (c)  Hazardous  Materials.  Tenant shall not cause or permit any  Hazardous
Materials  to be  brought  upon,  stored,  used,  generated,  released  into the
environment  or disposed of in, on, under or about the  Premises by Tenant,  its
agents, employees, contractors or invitees, without the prior written consent of
Landlord,  which  consent  Landlord  may  withhold  in  its  sole  and  absolute
discretion. Landlord, in its sole and absolute discretion, may consent to

<PAGE>

Tenant's generation, storage or use of Hazardous Materials on or in the Premises
provided  Tenant  demonstrates to Landlord,  in its sole and absolute  judgment,
that such  Hazardous  Materials (in incidental  quantities)  are necessary to or
required as part of Tenant's business and will be generated,  used, kept, stored
and/or  disposed of in a manner that complies with all laws  regulating any such
Hazardous Materials and with good business  practices,  and provided that Tenant
first obtains the written consent of Landlord,  and provided further that Tenant
indemnifies  Landlord from any and all liability  with respect to such Hazardous
Materials as more  particularly  described below.  Upon the expiration or sooner
termination of this Lease, Tenant covenants to remove from the Premises,  at its
sole cost and expense, any and all Hazardous Materials,  including any equipment
or systems containing Hazardous Materials, which are brought upon, stored, used,
generated or released into the  environment  by Tenant,  its agents,  employees,
contractors or invitees.  To the fullest extent  permitted by law, Tenant hereby
indemnifies  Landlord  and agrees to hold  Landlord  and the  Premises  free and
harmless  from and against any and all claims,  judgments,  damages,  penalties,
fines, costs, liabilities and losses (including, without limitation,  diminution
in the value of the  Premises,  damages  for the loss or  restriction  of use of
rentable  or usable  space or of any amenity of the  Premises,  and sums paid in
settlement of claims,  attorneys'  fees,  consultant fees and expert fees) which
arise during or after the Lease Term directly or indirectly from the presence of
Hazardous Materials on, in or about the Premises which is caused or permitted by
Tenant, its agents, employees,  contractors or invitees. This indemnification by
Tenant of Landlord includes,  without limitation,  any and all costs incurred in
connection with any  investigation of site conditions or any cleanup,  remedial,
removal or restoration work required by any federal, state or local governmental
agency or  political  subdivision  because  of the  presence  of such  Hazardous
Materials in, on or about the Premises,  or the soil or ground water on or under
the Premises or any portion  thereof.  Tenant shall promptly  notify Landlord of
any release of Hazardous  Materials  in, on or about the  Premises  which Tenant
becomes aware of during the Term of this Lease,  whether caused by Tenant or any
other persons or entities. As used in this Lease, the term "Hazardous Materials"
shall mean and include any hazardous or toxic  materials,  substances or wastes,
including  (A) those  materials  identified  in Section  66680 through 66685 and
Sections 66693 through 66740 of Title 22 of the California  Administrative Code,
Division  4,  Chapter  30, as  amended  from time to time,  (B) those  materials
defined in Section  2550(j) of the  California  Health and Safety Code,  (C) any
materials,  substances  or  wastes  which are  toxic,  ignitable,  corrosive  or
reactive and which are regulated by any local governmental authority, any agency
of the State of California or any agency of the United  States  Government,  (D)
asbestos, (E) petroleum and petroleum-based products, (F) urea formaldehyde foam
insulation,  (G)  polychlorinated  biphenyls  ("PCBs"),  and (H) freon and other
chlorofluorocarbons.

     (d) Unless caused by Tenant,  Tenant shall not have any  responsibility  or
liability for (i) existing  violation of any applicable law relating to any part
of the Project (it being understood that the term "Project" includes, but is not
limited to, the Premises,  the Building and the land  underlying  the Building),
including  without  limitation  the Premises as improved by Landlord,  as of the
date Tenant takes  possession  of the Premises,  including,  but not limited to,
violations of any building codes,  Laws and the Americans with  Disabilities Act
of 1990, 42 U.S.C.  12101 et seq. and 47 U.S.C. 225 et seq. as amended from time
to  time,  and  any  similar  or  successor   federal,   state,  or  local  laws
(collectively  the "ADA") (all of the  foregoing  laws are  included in the term
"applicable  laws"),  or (ii) any hazardous  substances or materials present in,
on,  under  or  about  any  part of the  Project  as of the  date  Tenant  takes
possession of the Premises or that we were or are brought into, onto,  about, or
under any part of the Project  after the date  Tenant  takes  possession  of the
Premises,  except for hazardous  materials brought onto the Project by Tenant or
Tenant's agents, employees or contractors.

     (e)  Survival.  The  provisions  of  this  Paragraph  8 shall  survive  any
termination of this Lease.

9. SURRENDER OF PREMISES; HOLDING OVER
   -----------------------------------

     Upon the  expiration of the Term of this Lease,  Tenant shall  surrender to
Landlord  the  Premises  and all Tenant  Improvements  and  alterations  in good
condition,  except for  ordinary  wear and tear and  alterations  Tenant has the
right or is  obligated to remove  under the  provisions  of Paragraph 14 herein.
Subject to Paragraph 14, Tenant shall remove all personal  property,  including,
without limitation, all wallpaper, paneling and other decorative improvements or
fixtures and shall perform all restoration  made necessary by the removal of any
alterations  or Tenant's  personal  property  before the expiration of the Term,
including, for example,  restoring all wall surfaces to their condition prior to
the  commencement  of this Lease.  Landlord may elect to retain or dispose of in
any manner  Tenant's  personal  property not removed from the Premises by Tenant
prior to the expiration of the Term.  Tenant waives all claims against  Landlord
for any damage to Tenant  resulting from Landlord's  retention or disposition of
Tenant's  personal  property.  Tenant shall be liable to Landlord for Landlord's
costs for storage, removal or disposal of Tenant's personal property.

<PAGE>

     If Tenant, with Landlord's  consent,  remains in possession of the Premises
after  expiration  or  termination  of the Term, or after the date in any notice
given by Landlord to Tenant  terminating  this Lease,  such possession by Tenant
shall be deemed to be a  month-to-month  tenancy  terminable  on written  thirty
(30)-day  notice at any time,  by either  party.  All  provisions of this Lease,
except  those  pertaining  to Term and rent,  shall apply to the  month-to-month
tenancy.  Tenant  shall pay monthly  rent in an amount  equal to 150% of Monthly
Basic  Rent,   subject  to  increases  as  provided  in  Subparagraph  5(c),  if
applicable,  for the last full calendar  month during the regular Term plus 100%
of  additional   rent  as  provided  in  Paragraph  11  (Taxes),   Paragraph  13
(Maintenance),  Paragraph  16  (Insurance),  subject  to  increase  as  provided
therein.  If  Tenant  fails  to  surrender  the  Premises  after  expiration  or
termination  of the Term,  Tenant  shall  indemnify,  defend  and hold  harmless
Landlord  from all rental loss only,  including,  reasonable  attorney  fees and
costs,  but shall not be liable  for any loss or  liability  resulting  from any
claim against  Landlord made by any  succeeding  tenant  founded on or resulting
from  Tenant's  failure  to  surrender  and  losses  to  Landlord  due  to  lost
opportunities  to lease any  portion  of the  Premises  to  succeeding  tenants,
together with, in each case, actual attorneys' fees and costs.

10. SIGNAGE
    -------

     Landlord  shall  designate  the location at or adjacent to the Premises for
two or more Tenant identification sign(s), which location shall include building
top and monument  signage along Arroyo Vista . Tenant shall install and maintain
Tenant's  identification sign(s) in such designated locations in accordance with
this  Paragraph  11 and  Exhibit  G.  Tenant  shall  have no right to install or
maintain Tenant  identification  signs in any other location in, on or about the
Premises  and shall not  display  or erect any other  signs,  displays  or other
advertising  materials  that are visible from the exterior of the Building.  The
size,  design,  color and other physical  aspects of permitted  sign(s) shall be
subject  to:  (i)  Landlord's  written  approval  prior to  installation,  which
approval  may  be  withheld  in  Landlord's  discretion,   (ii)  any  covenants,
conditions or restrictions  encumbering  the Premises,  and (iii) any applicable
municipal  or  governmental  permits  and  approvals.  The cost of the  sign(s),
including  the  installation,  maintenance  and  removal  thereof,  shall  be at
Tenant's  sole cost and  expense.  If Tenant  fails to install or  maintain  its
sign(s),  or if Tenant fails to remove same upon  termination  of this Lease and
repair  any  damage  caused  by such  removal,  including,  without  limitation,
repainting  the  Building  (if  required by  Landlord,  in  Landlord's  sole but
reasonable  judgment),  Landlord  may do so at Tenant's  expense.  Tenant  shall
reimburse   Landlord  for  all  costs   incurred  by  Landlord  to  effect  such
installation,  maintenance or removal,  which amount shall be deemed  additional
rent, and shall include,  without  limitation,  all sums disbursed,  incurred or
deposited  by  Landlord,   including  Landlord's  costs,   expenses  and  actual
attorneys'  fees with  interest  thereon  at the  lesser of 12% per annum or the
maximum legal  interest rate from the date of Landlord's  demand until  payment.
Any sign rights  granted to Tenant  under this Lease are  personal to Tenant and
may not be  assigned,  transferred  or  otherwise  conveyed  to any  assignee or
subtenant of Tenant  without  Landlord's  prior written  consent,  which consent
Landlord may withhold in its sole and absolute discretion.

11. TAXES, ASSOCIATION FEES
    -----------------------

     (a) Personal Property Taxes. Tenant shall pay before delinquency all taxes,
assessments,  license fees and public charges  levied,  assessed or imposed upon
its  business  operations  as  well  as  upon  all  trade  fixtures,   leasehold
improvements, merchandise and other personal property in or about the Premises.

     (b) Real Property  Taxes.  Tenant shall pay, as additional  rent,  all Real
Property Taxes, including all taxes, assessments (general and special) and other
impositions or charges which may be taxed, charged,  levied, assessed or imposed
with respect to any calendar year or part thereof  included within the Term upon
all or any portion of or in relation to the Premises or any portion thereof, any
leasehold estate in the Premises or measured by rent from the Premises,

<PAGE>

including  any  increase  caused by the  transfer,  sale or  encumbrance  of the
Premises or any portion  thereof.  Notwithstanding  anything to the  contrary in
this  Paragraph 11 (b),  and  provided  Tenant has timely paid its share of Real
Property  Taxes as provided for in this  Paragraph 11 (b), Real  Property  Taxes
shall not include tax penalties and interest  incurred as a result of Landlord's
negligence, inability, unwillingness, or failure to make payments when due "Real
Property Taxes" shall also include any form of assessment, levy, penalty, charge
or tax (other than estate,  inheritance,  net income or franchise taxes) imposed
by any authority having a direct or indirect power to tax or charge,  including,
without limitation, any city, county, state, federal or any improvement or other
district, whether such tax is: (1) determined by the area of the Premises or the
rent or other sums  payable  under this Lease;  (2) upon or with  respect to any
legal or equitable interest of Landlord in the Premises or any part thereof; (3)
upon this  transaction  or any  document to which  Tenant is a party  creating a
transfer  in  any  interest  in the  Premises;  (4) in  lieu  of or as a  direct
substitute in whole or in part of or in addition to any real  property  taxes on
the Premises;  (5) based on any parking spaces or parking facilities provided in
the Premises;  or (6) in consideration for services,  such as police protection,
fire protection,  street,  sidewalk and roadway  maintenance,  refuse removal or
other services that may be provided by any  governmental  or  quasi-governmental
agency from time to time which were  formerly  provided  without  charge or with
less charge to property  owners or  occupants.  Tenant  shall pay Real  Property
Taxes on the date any  taxes or  installments  of taxes are due and  payable  as
determined by the taxing  authority,  evidenced by the tax bill.  Landlord shall
determine and notify  Tenant of the amount of Real Property  Taxes not less than
thirty (30) days in advance of the date such tax or  installment of taxes is due
and payable.  In the event Landlord  fails to deliver such timely  determination
and notice to Tenant,  then Tenant  shall have thirty (30) days from  receipt of
such notice to remit payment of Real Property  Taxes to Landlord.  The foregoing
notwithstanding,  upon notice from  Landlord,  Tenant  shall pay, as  additional
rent, Real Property Taxes to Landlord in advance monthly  installments  equal to
one twelfth (1/12) of Landlord's  reasonable estimate of the Real Property Taxes
payable under this Lease,  together with monthly installments of Basic Rent, and
Landlord shall hold such payments in a non-interest  bearing  account.  Landlord
shall  determine and notify Tenant of any deficiency in the impound  account and
Tenant shall pay any  deficiency  of funds in the impound  account not less than
thirty (30) days in advance of the date such tax or  installment of taxes is due
and  payable.  In the event  Landlord  fails to deliver  such timely  deficiency
determination and notice to Tenant, then Tenant shall have thirty (30) days from
receipt of such  notice to remit  payment of such  deficiency  to  Landlord.  If
Landlord  determines  that  Tenant's  impound  account  has accrued an amount in
excess of the Real  Property  Taxes due and  payable,  then such excess shall be
credited to Tenant within said notice from Landlord.

     (c)  Maintenance  Association.  Tenant shall pay, as additional  rent,  all
assessments,  fees and dues  chargeable  to the Premises by,  through or for the
Santa Margarita Maintenance Association.

12. UTILITIES
    ---------

     Tenant shall pay directly to the utility companies providing such services,
the cost of all water, gas, heat, light, power, sewer, electricity, telephone or
other service  metered,  chargeable or provided to the Premises.  Landlord shall
not be liable in damages or  otherwise  for any failure or  interruption  of any
utility  or  other  service  furnished  to the  Premises.  No  such  failure  or
interruption  shall entitle  Tenant to terminate this Lease or abate rent in any
manner.

13. MAINTENANCE
    -----------

     (a) Performed by Tenant.  Except as provided  below,  Tenant shall maintain
and  repair the  Premises  in good  condition,  including,  without  limitation,
maintaining and repairing all walls; floors;  ceilings;  telephone equipment and
wiring;  doors;  exterior  and  interior  windows and fixtures as well as damage
caused  by  Tenant,  its  agents,  contractors,   employees  or  invitees.  Upon
expiration or termination of this Lease,  Tenant shall surrender the Premises to
Landlord  in the same  condition  as  existed at the  commencement  of the Term,
except for  reasonable  wear and tear or damage caused by fire or other casualty
for which  Landlord has  received all funds  necessary  for  restoration  of the
Premises from  insurance  proceeds.  If Tenant refuses or neglects to repair and
maintain the Premises as required  hereunder and to the reasonable  satisfaction
of Landlord,  Landlord may at any time  following ten (10) days from the date on
which  Landlord  shall make a written demand on Tenant to effect such repair and
maintenance,  enter upon the Premises and make such repairs  and/or  maintenance
without liability to Tenant for any loss or damage which might occur to Tenant's
merchandise,  fixtures  or other  property  or to  Tenant's  business  by reason
thereof, and upon completion thereof,  Tenant shall pay to Landlord,  Landlord's
costs for making such  repairs  plus twenty  percent  (20%) for  overhead,  upon
presentation of a bill therefor.  Said bill shall include interest at the lesser
of 12% per annum or the maximum legal  interest rate on said costs from the date
of completion of the maintenance  and repairs by Landlord.  Tenant shall, at its
own expense, provide, install and maintain in good condition all of its Personal
Property required in the conduct of its business on the Premises.

<PAGE>

     (b)  Performed  by  Landlord.   Subject  to   reimbursement  by  Tenant  as
hereinafter  provided,  Landlord  shall  be  responsible  to  maintain,  in good
condition,  the structural  parts of the Premises,  which shall include only the
foundations,  bearing and exterior walls (including painting),  subflooring; the
roof system and  skylights;  the  unexposed  electrical,  plumbing  and sewerage
systems,  including  without  limitation,  those  portions of the systems  lying
outside  the  Premises;  the paved and  hardscaped  parking and  driveway  areas
(including resurfacing and restriping); window frames, gutters and downspouts on
the Building; the heating, ventilating and air conditioning system servicing the
Premises;  the outside areas of the Premises and every part thereof,  including,
without  limitation,  the soil,  landscaping  (including  replacement  thereof),
sprinkler system, walkways, parking areas (including periodic sweeping),  signs,
site lighting and pest control.  Landlord shall not be liable for any failure to
make any such repairs or any  maintenance  unless such failure shall persist for
an  unreasonable  time  after  written  notice  of the need of such  repairs  or
maintenance is given to Landlord by Tenant.

     (c)  Reimbursement  by Tenant.  Prior to the  commencement of each calendar
year,  Landlord  shall give Tenant a written  estimate of the expenses  Landlord
anticipates  will be incurred for the ensuing  calendar year with respect to the
maintenance  and repair to be  performed  by Landlord as herein  described  (the
"Maintenance  Expenses").  Tenant shall pay, as additional  rent, such estimated
expenses in equal monthly  installments in advance on or before the first day of
each month  concurrent  with its payment of Basic Rent.  Within ninety (90) days
after the end of each calendar  year,  Landlord shall furnish Tenant a statement
showing in  reasonable  detail the actual  expenses  incurred  for the period in
question and the parties shall within thirty (30) days  thereafter  make payment
or allowance as necessary to adjust  Tenant's  estimated  payments to the actual
expenses as shown by applicable  periodic statements  submitted by Landlord.  If
Landlord  shall  determine  at any time that the  estimate of  expenses  for the
current calendar year is or will become inadequate to meet all such expenses for
any reason,  Landlord shall immediately determine the appropriate amount of such
inadequacy  and issue a supplemental  estimate as to such  expenses,  and Tenant
shall  pay  any  increase  in  the  estimated  expenses  as  reflected  by  such
supplemental  estimate.  Tenant's  failure to timely  pay any of the  charges in
connection with the performance of its maintenance and repair  obligations to be
paid under this  Paragraph  13 shall  constitute a material  default  under this
Lease.

     Landlord  shall keep or cause to be kept  separate  and  complete  books of
account covering costs and expenses  incurred in connection with its maintenance
and repair of the Building  and outside  areas,  which costs and expenses  shall
include,  without  limitation,   the  actual  costs  and  expenses  incurred  in
connection  with labor and material  utilized in performance of the  maintenance
and repair obligations hereinafter described, public liability,  property damage
and other forms of  insurance  which  Landlord  may or is required to  maintain,
reasonable  reserves for  replacements  and/or  repairs of  improvements  to the
outside areas, equipment and supplies,  employment of such personnel as Landlord
may deem reasonably necessary,  payment or provision for unemployment insurance,
worker's  compensation  insurance  and other  employee  costs,  depreciation  of
machinery and equipment used in connection  with the  maintenance of the outside
areas,  the cost of  bookkeeping  and accounting  services,  a management fee to
cover Landlord's management,  overhead and administrative expenses,  assessments
which  may  be  levied  against  the  Premises  under  any  recorded  covenants,
conditions and restrictions,  and any other items reasonable necessary from time
to time to properly  repair,  replace  and  maintain  the outside  areas and any
interest paid in connection therewith. Landlord may elect to delegate its duties
hereunder  to a  professional  property  manager  in which  event  all costs and
expenses  of such  property  management  shall be  included  as  expenses  to be
reimbursed by Tenant hereunder.

     All costs and expenses  incurred,  by either Tenant directly or by Landlord
that are reimbursed by Tenant  pursuant to the terms of this Lease,  for capital
expenses  whose  useful life will exceed the then  remaining  term of this Lease
shall be defined as "Capital  Expenses".  Tenant and  Landlord  shall share such
Capital  Expenses such that Tenant shall only pay or reimburse  Landlord for the
portion of such Capital  Expenses  calculated by multiplying the Capital Expense
by a fraction the  numerator of which is the  remaining  term of the Lease as of
the date of the Capital  Expense and the denominator of which is the useful life
of the item as of the date of the Capital Expense. If Tenant has a valid option

<PAGE>

to extend the term of the Lease which  option has not been  exercised  as of the
date of the Capital Expense, the remaining term of the Lease for Capital Expense
sharing  shall not  include  the  extension  period.  Upon  exercise  of a valid
extension option, Tenant's share of the Capital Expense shall be recalculated to
account for the extension period and,  accordingly,  any additional share of the
Capital Expense due from Tenant (after accounting for previous payment therefore
by Tenant) shall become immediately due and payable with interest accrued at the
rate of twelve  percent (12%) per annum from the date of the Capital  Expense to
the  date of  Landlord's  statement.  Tenant  shall be  allowed  to pay any such
additional  share of Capital  Expense (i) within  thirty (30) days of receipt of
Landlord's statement  determining such additional share or (ii) in equal monthly
installments with principal and interest at the rate of twelve percent (12%) per
annum fully  amortized  over the lesser of the extension term or that portion of
the remaining life which falls within the extension term.

     Except as provided in Paragraph  17 hereof,  there shall be no abatement of
rent and no  liability  of Landlord  by reason of any injury to or  interference
with Tenant's  business  arising from the making of any repairs,  alterations or
improvements  in or to any portion of the  Building or the  Premises or in or to
fixtures,  appurtenances and equipment therein.  Tenant waives the right to make
repairs at  Landlord's  expense under  Sections 1941 and 1942 of the  California
Civil Code or any similar law, statute or ordinance now or hereafter in effect.

14. ALTERATIONS
    -----------

     Tenant  shall  not make any  alterations  to the  Premises,  including  any
changes to the existing  landscaping,  without Landlord's prior written consent.
If Landlord gives its consent to such alterations,  Landlord may post notices in
accordance with the laws of the state in which the Premises are located.  Tenant
may, upon expiration or earlier termination of this Lease, remove all furniture,
fixtures,  equipment and other  personal  property  installed in the Premises by
Tenant  (regardless of the method of  attachment);  including but not limited to
lab benches,  shelves,  storage racks,  portable clean rooms, modular furniture,
signage and laboratory equipment. Any other alterations made shall remain on and
be  surrendered  with the  Premises  upon  expiration  of the Term,  except that
Landlord may, within sixty (60) days before or thirty (30) days after expiration
of the Term, elect to require Tenant to remove any alterations  which Tenant may
have made to the  Premises.  Landlord  agrees that in no event  shall  Tenant be
obligated  to  remove  the  Tenant  Improvements  or  any  of  the  alterations,
improvements  or additions  being made to the  Premises by Tenant in  connection
with Tenant's initial occupancy of the Premises, if any (collectively, `Tenant's
Initial  Alterations')  upon  expiration or earlier  termination  of this Lease,
except as provided for within the Work Letter  attached  hereto as Exhibit C. If
Landlord so elects,  Tenant shall, at its own cost,  restore the Premises to the
condition  designated  by Landlord in its  election,  before the last day of the
Term or within thirty (30) days after notice of its election is given, whichever
is later.

     Should Landlord consent in writing to Tenant's  alteration of the Premises,
Tenant  shall   contract  with  a  contractor   approved  by  Landlord  for  the
construction  of such  alterations,  shall secure all  appropriate  governmental
approvals and permits, and shall complete such alterations with due diligence in
compliance with plans and specifications approved by Landlord, and in compliance
with all applicable laws,  statutes and regulations.  Tenant shall pay all costs
for such  construction  and  shall  keep  the  Premises  free  and  clear of all
mechanics' liens which may result from construction by Tenant.

15. RELEASE AND INDEMNITY
    ---------------------

     As material  consideration  to Landlord,  Tenant agrees that Landlord,  its
agents, successors-in-interest with respect to the Premises and their directors,
officers, partners, employees,  shareholders, agents and representatives and the
directors,   officers,   partners,   employees,    shareholders,    agents   and
representatives  of the  partners or members of Landlord  shall not be liable to
Tenant, its agents,  employees,  invitees,  licensees and other persons claiming
under Tenant for:  (i) any damage to any property  entrusted to employees of the
Premises,  (ii) loss or  damage to any  property  by theft or  otherwise,  (iii)
consequential  damages arising out of any loss of the use of the Premises or any
equipment  or  facilities  therein,  or (iv) any  injury  or damage to person or
property  resulting  from  fire,   explosion,   falling  plaster,   steam,  gas,
electricity,  water or rain which may leak from any part of the Premises or from
pipes, appliances or plumbing work therein or from the roof, street, sub-surface
or from  any  other  place  or  resulting  from  dampness  or any  other  causes
whatsoever,  except to the  extent  caused by the gross  negligence  or  willful
misconduct  of  Landlord  or  its  officers,   directors,   employees,   agents,
contractors and representatives.  Landlord or its agents shall not be liable for
interference with light or other incorporeal  hereditaments,  nor shall Landlord
be liable  for any latent  defects in the  Premises.  Tenant  shall give  prompt
notice to Landlord in case of fire or  accidents  in the Premises and of defects
therein or in the fixtures or equipment located therein.

<PAGE>

     To the fullest extent permitted by law, Tenant agrees to indemnify,  defend
(with counsel satisfactory to Landlord) and hold harmless Landlord,  its agents,
successors-in-interest  with  respect  to  the  Premises  and  their  directors,
officers, partners, employees,  shareholders, agents and representatives and the
directors,   officers,   partners,   employees,    shareholders,    agents   and
representatives  of the  partners  or members of  Landlord  from (i) all claims,
actions  liabilities,  and proceedings arising from Tenant's use of the Premises
or the  conduct  of its  business  or from any  activity,  work or  thing  done,
permitted or suffered by Tenant, its agents, contractors, employees or invitees,
in or about the  Premises  and any breach or default in the  performance  of any
obligation  to be performed by Tenant under the terms of this Lease,  or arising
from  any  act,  neglect,  fault  or  omission  of  Tenant,  or of  its  agents,
contractors,  employee or invitees, and (ii) any and all costs, attorneys' fees,
expenses and  liabilities  incurred  with  respect to any such claims,  actions,
liabilities, or proceedings, except to the extent caused by the gross negligence
of Landlord or its  officers,  directors,  employees,  agents,  contractors  and
representatives,  and in the event any actions or  proceedings  shall be brought
against  Landlord by reason of such claims,  Tenant,  upon notice from Landlord,
shall  defend the same at  Tenant's  expense by counsel  approved  in writing by
Landlord.  Tenant  hereby  assumes  all risk of damage to  property or injury to
person in,  upon or about the  Premises  from any cause  whatsoever  except that
which is caused by the gross negligence or willful  misconduct of Landlord,  its
agents or employees,  and Tenant hereby waives all its claims in respect thereof
against Landlord.

     As used herein,  the term "liabilities"  shall include all suits,  actions,
claims and  demands and all  expenses  (including  attorneys'  fees and costs of
defense)  incurred in or about any such  liability  and any action or proceeding
brought thereon.  If any claim shall be made or any action or proceeding brought
against  Landlord on the basis of any liability  described in this Paragraph 15,
Tenant shall, upon notice from Landlord,  defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord. It is understood that payment shall
not be a condition precedent to recovery upon the foregoing indemnity.

16. INSURANCE
    ---------

     Tenant,  at its  cost,  shall  pay for and keep in full  force  and  effect
throughout the Term of this Lease:

     (a) COMMERCIAL GENERAL LIABILITY insurance with respect to the Premises and
the  operations  by or on  behalf  of  Tenant  in,  on or  about  the  Premises,
including,   but  not  limited  to,  personal  injury,   product  liability  (if
applicable), blanket contractual, owner's protective, broad form property damage
liability,  liquor liability (if applicable) and owned and non-owned  automobile
liability in an amount not less than  $2,000,000 per  occurrence.  The insurance
policy or policies shall contain the following  provisions:  (1) severability of
interest,  (2) cross-liability,  (3) an endorsement naming Landlord,  Landlord's
Mortgagees  and Ground  Lessors (as defined in Paragraph  37(m)) if any, and any
other parties-in-interest  designated by Landlord as additional insureds, (4) an
endorsement  stating  "such  insurance  as is  afforded  by this  policy for the
benefit  of  Landlord  and any other  additional  insured  shall be  primary  as
respects any liability or claims arising out of the occupancy of the Premises by
the Tenant, or Tenant's operations and any insurance carried by Landlord, or any
other  additional  insured  shall  be  non-contributory,"  (5) with  respect  to
improvements or alterations permitted under this Lease, contingent liability and
builder's risk insurance, (6) an endorsement allocating to the Premises the full
amount of liability  limits required by this Lease,  and (7) coverage must be on
an "occurrence basis." "Claims-Made" forms are not acceptable.

     (b)  WORKERS  COMPENSATION  COVERAGE  as  required  by law,  together  with
Employers Liability coverage with a limit of not less than $1,000,000.

     (c) TENANT'S PROPERTY INSURANCE:  Tenant shall at all times during the Term
hereof and at its cost and  expense,  maintain in effect  policies of  insurance
covering (1) all Tenant  Improvements on the Premises  installed by Tenant,  (2)
all personal  property of Tenant located in or at the Premises,  including,  but
not limited to, fixtures, furnishings, equipment and furniture, in an amount not
less than their full replacement value, and (3) loss of income or business

<PAGE>

interruption  insurance.  These  policies shall provide  protection  against any
peril included within the classification "All Risk," including,  but not limited
to, insurance against sprinkler leakage,  vandalism and malicious mischief.  The
proceeds  of such  insurance  shall be used to  repair  or  replace  the  Tenant
Improvements  and  personal  property so  insured.  Tenant  shall,  at its cost,
maintain rental  abatement  insurance  assuring that the rent payable  hereunder
will be paid to  Landlord  for a period of not less than  twelve  (12) months if
rent is to abate  under any  provision  of this Lease or  applicable  law.  Such
coverage   shall  include  a  sixty  (60)-day   extended   period  of  indemnity
endorsement.

     All  policies of insurance  required  hereunder  shall  include a clause or
endorsement  denying  the insurer  any rights of  subrogation  against the other
party to the extent rights have been waived by the insured before the occurrence
of injury or loss, if same are obtainable without  unreasonable  cost.  Landlord
and Tenant  each  hereby  waives any rights of  recovery  against  the other for
injury or loss to such  waiving  party or to its  property  or the  property  of
others  under its  control,  arising from any cause  insured  against  under any
policy of  insurance  required  to be carried by such  waiving  party under this
Lease. The foregoing waiver shall be effective  whether or not the waiving party
shall  actually  obtain and maintain the  insurance  which such waiving party is
obligated to obtain and maintain under this Lease.

     All insurance required to be provided by Tenant under this Lease: (a) shall
be issued by insurance companies authorized to do business in the state in which
the Premises are located and holding a General Policyholders Rating of "A" and a
Financial  Rate of "X" or  better,  as set forth in the most  recent  edition of
Best's  Insurance  Reports;  and (b) shall contain an  endorsement  requiring at
least thirty (30) days prior written notice to Landlord and  Landlord's  lender,
before cancellation or change in coverage, scope or amount of any policy. Tenant
shall  deliver a  certificate  or copy of such policy  together with evidence of
payment of all current premiums to Landlord within thirty (30) days of execution
of this  Lease and  within  fifteen  (15)  days of  expiration  of each  policy.
Tenant's  failure to provide  evidence  of such  coverage  to  Landlord  may, in
Landlord's sole discretion, constitute a default under this Lease.

     Subject to being  reimbursed by Tenant,  Landlord shall insure the Building
(excluding  all property  which Tenant is obligated to insure) by obtaining  and
maintaining  property  insurance  for any and all  reasonable  risks  (including
earthquake and flood  insurance)  and public  liability  insurance,  all in such
amounts and with such  deductibles  as Landlord  considers  appropriate.  Tenant
shall pay, as additional rent, the cost of any insurance  maintained by Landlord
hereunder and any other insurance  Landlord may elect to obtain for the Premises
from time to time during the Term  (including,  without  limitation,  earthquake
and/or flood insurance).  Tenant shall pay the cost of insurance policy premiums
on the date any  premiums  or  installments  of  premiums  are due and  payable.
Landlord shall  determine and notify Tenant of the amount of insurance  premiums
not less  than  fifteen  (15)  days in  advance  of the  date  such  premium  or
installment  of  premiums is due and  payable.  In the event  Landlord  fails to
deliver such timely  determination and notice to Tenant,  then Tenant shall have
fifteen  (15) days from  receipt of such  notice to remit  payment of  insurance
premiums to Landlord. The foregoing notwithstanding,  upon notice from Landlord,
Tenant shall pay, as additional rent,  insurance premiums to Landlord in advance
monthly  installments  equal to one  twelfth  (1/12)  of  Landlord's  reasonable
estimate of the  insurance  premiums  payable  under this Lease,  together  with
monthly  installments  of Basic Rent, and Landlord shall hold such payments in a
non-interest bearing account. Upon determination of the actual insurance premium
due and payable, Landlord shall determine and notify Tenant of any deficiency in
the impound  account and Tenant shall pay any deficiency of funds in the impound
account not less than  fifteen  (15) days in advance of the date such  insurance
premium or  installment  of premiums is due and payable.  In the event  Landlord
fails to deliver such timely deficiency determination and notice to Tenant, then
Tenant shall have fifteen (15) days from receipt of such notice to remit payment
of such deficiency to Landlord.  If Landlord  determines  that Tenant's  impound
account  has  accrued  an amount in excess  of the  insurance  premiums  due and
payable,  then such excess  shall be credited to Tenant  within said notice from
Landlord.

     Notwithstanding  any  contribution  by  Tenant  to the  cost  of  insurance
premiums as provided herein, Tenant acknowledges that it has no right to receive
any proceeds from any insurance policies carried by Landlord.

<PAGE>

17. DESTRUCTION
    -----------

     If during the Term of this Lease,  any portion of the  Premises,  access to
the  Premises or any part of the  Building  which is essential to the use of the
Premises  is  damaged  or  destroyed  and such  damage or  destruction  can,  in
Landlord's  reasonable  estimation,  be repaired  within 180 days following such
damage or destruction,  and Landlord receives insurance  proceeds  sufficient to
restore  such  damage  this  Lease  shall  remain in full  force and  effect and
Landlord shall promptly commence to repair and restore the damage or destruction
to  substantially  the same  condition as existed prior to such damage and shall
complete such repair and  restoration  with due diligence in compliance with all
then existing  laws.  If (1) such damage or  destruction  cannot,  in Landlord's
reasonable  estimate,  be  repaired  within 180 days  following  such  damage or
destruction;  or (2) more than forty percent (40%) of the Building is damaged or
destroyed;  or (3) any Mortgagee of the Building will not allow the  application
of  insurance  proceeds  for  repair  and  restoration;  or (4)  the  damage  or
destruction is not covered in full by Landlord's Insurance required by Paragraph
16, subject to the deductible or (5) the damage or destruction occurs within the
last twelve (12) months of the term of this Lease or any extension hereof,  then
Landlord may, in its sole discretion, terminate this Lease by delivery of notice
to Tenant within 30 days of the date Landlord learns of the damage.

     In the event of repair,  reconstruction  and  restoration  by  Landlord  as
herein   provided,   the  rent   payable   under  this  Lease  shall  be  abated
proportionately  to the extent to which there is substantial  interference  with
Tenant's use of the Premises during the period of such repair, reconstruction or
restoration; provided that there shall be no abatement of rent if such damage is
the result of Tenant's negligence or intentional wrongdoing. Tenant shall not be
entitled to any  compensation or damages for loss in the use of the whole or any
part  of  the  Premises,   damage  to  Tenant's  personal  Property  and/or  any
inconvenience or annoyance occasioned by such damage, repair,  reconstruction or
restoration.

     If  Landlord  is  obligated  to or elects to  repair or  restore  as herein
provided,  Landlord  shall be  obligated to make repair or  restoration  only to
those portions of the Building and the Premises which were  originally  provided
at Landlord's  expense,  and the repair and restoration of items not provided at
Landlord's  expense  shall  be  the  obligation  of  Tenant.  Tenant  agrees  to
coordinate the  restoration  and repair of those items it is required to restore
or repair with Landlord's  repair and restoration  work and in accordance with a
work schedule prepared by Landlord, or Landlord's contractor.  Further, Tenant's
work shall be performed in accordance  with the terms,  standards and conditions
contained in Paragraph 14 above.

     The  provisions  of California  Civil Code Section 1932,  Subsection 2, and
Section 133,  Subsection  4, and any other  similarly  enacted  statute or court
decision relating to the abatement or termination of a lease upon destruction of
the leased  premises,  are hereby waived by Tenant;  and the  provisions of this
Paragraph 17 shall govern in case of such destruction.

18. CONDEMNATION
    ------------

     (a) Definitions.  The following definitions shall apply: (1) "Condemnation"
and "Taking" means (a) the exercise of any governmental power of eminent domain,
whether by legal  proceedings  or otherwise by Condemnor  and (b) the  voluntary
sale  or  transfer  by  Landlord  to  any  Condemnor   either  under  threat  of
Condemnation or while legal  proceedings for  condemnation  are proceeding;  (2)
"Date of Taking" means the date the Condemnor has the right to possession of the
property being condemned;  (3) "Award" means all compensation,  sums or anything
of value awarded, paid or received on a total or partial  Condemnation;  and (4)
"Condemnor" means any public or quasi-public  authority,  or private corporation
or individual, having a power of condemnation.

     (b)  Obligations to be Governed by Lease.  If during the Term of this Lease
there  is any  Taking  of all or any  part  of  the  Premises,  the  rights  and
obligations of the parties shall be determined pursuant to this Lease.

     (c) Total or Partial Taking. If the Premises are taken in their entirety by
Condemnation,  this Lease shall terminate on the date of Taking.  If any portion
of the  Premises is taken by  Condemnation,  this Lease shall  remain in effect,
except that Tenant may elect to terminate this Lease if the remaining portion of
the Premises is rendered unsuitable for Tenant's continued use of the Premises.

<PAGE>

If Tenant  elects to  terminate  this Lease,  Tenant must  exercise its right to
terminate by giving notice to Landlord within 30 days after receipt of notice of
the Taking from Landlord. If Tenant elects to terminate this Lease, Tenant shall
also notify Landlord of the date of termination, which date shall not be earlier
than 30 days nor later than 90 days after  Tenant has  notified  Landlord of its
election to  terminate;  except that this Lease shall  terminate  on the date of
Taking if the date of Taking falls on a date before the date of  termination  as
designated  by Tenant.  If any portion of the Premises is taken by  Condemnation
and this Lease remains in full force and effect,  on the date of taking the rent
shall be reduced by an amount in the same ratio as the total  number of rentable
square feet in the portion of the  Premises  taken bears to the total  number of
rentable square feet in the Premises  immediately  before the Date of Taking. In
the case where a portion of the Premises is taken and the Lease  remains in full
force  and  effect,  Landlord  shall,  at its own  cost  and  expense,  make all
alterations or repairs to the Building so as to make the portion of the Building
not taken a complete  architectural  unit. Such work shall not, however,  exceed
the scope of work done by  Landlord in  originally  constructing  the  Premises.
Monthly Basic Rent due and payable hereunder shall be temporarily  abated during
such  restoration  period  in  proportion  to  the  extent  to  which  there  is
substantial interference with Tenant's use of Premises, as reasonably determined
by Landlord or Landlord's architect.  Each party hereby waives the provisions of
Section  1265.130 of the California  Code of Civil  Procedure and any present or
future law allowing  either  party to petition  the Superior  Court to terminate
this Lease in the event of a partial taking of the Building or Premises.

     If the  Premises  are totally or partially  taken by  Condemnation,  Tenant
shall have the right to assert a claim against the  Condemnor  for  compensation
because  of  such  taking,  including  a  claim  for the  amount  calculated  by
multiplying the percentage of the Premises taken by the  unamortized  portion of
Tenant's  contribution to improvements to the Premises (such portion of Tenant's
contribution  will be  amortized  over a fifteen  (15) year period on a straight
line basis)  ("Tenant's  Claim").  Additionally,  Tenant  reserves  the right to
assert a claim against the Condemnor for  compensation  due to the taking of any
clean  room  located on the  Premises  and  tenant's  loss of  goodwill  and for
relocation  benefits  associated  with such taking  Tenant  shall not  otherwise
assert any claim against Landlord for any  compensation  because of such Taking,
and  Landlord  shall be  entitled  to receive  the  entire  amount of its award,
excluding  the portion,  if any,  attributable  to Tenant's  Claim,  without any
deduction for any estate or interest of Tenant.

19. ASSIGNMENT OR SUBLEASE
    ----------------------

     Tenant  shall not  assign or  encumber  its  interest  in this Lease or the
Premises or sublease  all or any part of the  Premises or allow any other person
or entity (except Tenant's authorized representatives,  employees,  invitees, or
guests) to occupy or use all or any part of the Premises without first obtaining
Landlord's consent which Landlord shall not unreasonably  withhold.  In addition
to any other  reasonable  grounds upon which  Landlord may withhold its consent,
Landlord shall be deemed  reasonable in withholding its consent if it determines
in its sole  discretion  that:  (i) the  financial  net  worth  of the  proposed
assignee or  sublessee is not equal to or greater than  Tenant's  financial  net
worth as of the date of this Lease as  increased by the increase in the Consumer
Price  Index,  if  any,  between  the  date of this  Lease  and the  date of the
assignment  or  sublease;  (ii) the intended use of the Premises by the proposed
assignee or sublessee  will require more than  insignificant  alteration  of the
Premises;  (iii) the intended  uses of the Premises by the proposed  assignee or
sublessee  will  constitute a violation of this Lease or any  governmental  law,
rule,  ordinance  or  regulation  governing  the  Premises or would  involve the
storage, use or keeping of Hazardous Materials in, on or about the Premises;  or
if (iv) the proposed  rent for the  proposed  assignee or sublessee is less than
the rent then in effect  under  the  Lease;  or (vi) the  proposed  assignee  or
sublessee is a tenant of Landlord or has  negotiated  to be a tenant of Landlord
any time in the six (6) months just  preceding  Tenant's  request for Landlord's
consent.  Any assignment,  encumbrance or sublease  without  Landlord's  written
consent  shall be  voidable  and at  Landlord's  election,  shall  constitute  a
default.  Landlord's waiver or consent to any assignment or subletting shall not
relieve Tenant or any assignee or sublessee from any obligation under this Lease
whether or not accrued.

     If Tenant is a partnership, a withdrawal or change, voluntary,  involuntary
or by operation of law of any partner,  or the  dissolution of the  partnership,
shall be  deemed  a  voluntary  assignment.  If  Tenant  is a  corporation,  any
dissolution, merger, consolidation or other reorganization of Tenant, or sale or
other transfer of a controlling percentage of the capital stock of Tenant, or

<PAGE>

the sale of at least 10% of the value of the assets of Tenant  shall be deemed a
voluntary assignment. The phrase "controlling percentage" means ownership of and
right to vote stock  possessing at least 10% of the total combined  voting power
of all classes of Tenant's capital stock issued, outstanding and entitle to vote
for election of directors.  The preceding two sentences of this paragraph  shall
not  apply  to  corporations  the  stock of which  is  traded  through  a public
exchange. If Landlord shall consent to any assignment or sublease of this Lease,
fifty  percent (50%) of all sums and other  consideration  payable to or for the
benefit of the Tenant from its  assignees  or  subtenants  in excess of the rent
payable  by Tenant to  Landlord  under this  Lease  (excluding  any sums paid to
Tenant from the assignee or sublessee for Tenants business assets not related to
Tenant's  leasehold  interest),  less Tenant's cost of assigning or  subleasing,
including,  but not  limited to,  broker  fees,  attorney  fees and the costs of
preparing the Premises for a new tenant and other reasonable tenant  concessions
which are ordinarily  considered within the local commercial real estate market,
shall be paid to Landlord, as and when such sums are due and payable.

     If Tenant requests Landlord's consent to an assignment or sublease,  Tenant
shall  submit to  Landlord,  in writing,  the name of the  proposed  assignee or
subtenant and the nature and character of the business of the proposed  assignee
or  subtenant,  the term,  use,  rental  rate and all other  material  terms and
conditions  of  the  proposed   assignment  or  sublease,   including,   without
limitation,  evidence  satisfactory  to Landlord  that the proposed  assignee or
subtenant  satisfies the financial  criteria set forth in the first paragraph of
this Paragraph 19, sixty (60) days prior to the proposed  effective date of such
assignment or sublease. Tenant shall also submit to Landlord a processing fee of
Five Hundred  Dollars  ($500.00) as a condition to Landlord  reviewing  Tenant's
proposed assignment and subletting materials.  Landlord shall within thirty (30)
days after Landlord's receipt of such written request and information either (i)
consent to or refuse to consent to such  assignment  or sublease in writing (but
no such  consent  to an  assignment  or  sublease  shall  relieve  Tenant or any
guarantor of Tenant's obligations under this Lease of any liability  hereunder),
(ii) in the event of a proposed  assignment of this Lease or a proposed sublease
of the entire  Premises for the entire  remaining Term of this Lease,  terminate
this Lease  effective the first to occur of ninety (90) days  following  written
notice of such termination or the date that the proposed  assignment or proposed
sublease would have come into effect.  If Landlord  should fail to notify Tenant
in writing of its decision within such thirty (30) day period after the later of
the date Landlord is notified in writing of the proposed  assignment or sublease
or the date  Landlord  has  received all  required  information  concerning  the
proposed assignee or subtenant and the proposed assignment or sublease, Landlord
shall be deemed to have refused to consent to such  assignment or sublease,  and
to have  elected  to keep this  Lease in full  force  and  effect.  If  Landlord
consents to any such assignment or sublease,  the assignment  shall be on a form
approved by Landlord,  and Tenant shall pay Landlord any  reasonable  attorneys'
fees and costs  incurred  in  connection  with the  preparation,  review  and/or
approval of such documentation.

     Notwithstanding  anything  contained  herein to the  contrary,  Tenant may,
without obtaining Landlord's consent,  without constituting a default under this
Lease,  and without  triggering any recapture or termination  rights in favor of
Landlord,  assign this Lease or sublet all or any portion of the Premises to (i)
any parent, subsidiary, or affiliate entity of Tenant, (ii) any person or entity
that acquires all or substantially  all of Tenant's assets,  or (iii) any entity
with which Tenant merges or consolidates  with,  regardless of whether Tenant is
the surviving entity, provided, however that (i) at least twenty (20) days prior
to such  assignment,  Tenant  delivers to Landlord the financial  statements and
other  financial  and  background  information  of Tenant  and the  assignee  as
reasonably  required by Landlord,  (ii) the net worth of Tenant or any successor
or  surviving  entity  shall be not less  than the net worth of Tenant as of the
date of  execution  of this Lease as  increased  by the increase in the Consumer
Price  Index,  if  any,  between  the  date of this  Lease  and the  date of the
assignment  or  sublease  and (iii)  with  respect  to an  assignment,  any such
successor or surviving  entity assumes in full all of the  obligations of Tenant
under this  Lease and (iv) the use of the  Premises  under  this  Lease  remains
unchanged ("Permitted Transfer"). In addition, an assignment or sublet shall not
include, and Landlord's consent shall not be required for any transfer of stock,
membership  interest or other  ownership  interest in Tenant,  including but not
limited to (i) any initial or subsequent  public offering by Tenant,  or (ii) if
Tenant is a public  company,  any sale or transfer of Tenant's stock or the sale
or transfer of Tenant's stock to take Tenant private.

20. DEFAULT
    -------

     The  occurrence  of any of the  following  shall  constitute  a default  by
Tenant:  (a) A failure  to pay rent or any other  charge  when due,  where  such
failure  continues for a period of five (5) days after receipt of written notice
from Landlord; (b) Abandonment of the Premises (failure to occupy and operate

<PAGE>

the Premises  for ten  consecutive  days without  paying rent shall be deemed an
abandonment); (c) The making by Tenant of any general assignment for the benefit
of  creditors;  the filing by or against  Tenant of a  petition  to have  Tenant
adjudged a bankrupt or a petition for  reorganization  or arrangement  under any
law relating to  bankruptcy  (unless,  in the case of a petition  filed  against
Tenant,  the same is dismissed  within thirty (30) days;  the  appointment  of a
trustee or receiver to take possession of  substantially  all of Tenant's assets
located  at  the  Premises  or  of  Tenant's  interest  in  this  Lease,  or  of
substantially  all of  Tenant's  assets  located at the  Premises or of Tenant's
interest in this  Lease,  where  possession  is not  restored to Tenant,  within
thirty  (30)  days;  the  attachment,  execution  or other  judicial  seizure of
substantially  all of  Tenant's  assets  located at the  Premises or of Tenant's
interest in this Lease where such seizure is not discharged within (30) days; or
if this Lease shall,  by operation  of law or  otherwise,  pass to any person or
persons  other than Tenant  except as provided in Paragraph  19 herein;  (d) The
failure  of Tenant to timely  comply  with the  provisions  of  Paragraph  24 or
Paragraph 31 of this Lease regarding,  respectively,  Subordination and Estoppel
Certificates,  where such failure  continues for a period of ten (10) days after
receipt of written notice from Landlord; or (e) The failure of Tenant to perform
any other provision of this Lease,  where such failure continues for a period of
ten (10) days after receipt of written notice from Landlord.

21. LANDLORD'S REMEDIES
    -------------------

     Landlord  shall have the remedies  described in this Paragraph 21 if Tenant
is in default.  These  remedies are not  exclusive;  they are  cumulative and in
addition to any remedies now or later allowed by law.

     (a)  Maintain  this Lease in full force and effect and recover the rent and
other monetary charges as they become due, without terminating Tenant's right to
possession  irrespective of whether Tenant shall have abandoned the Premises. If
Landlord  elects not to terminate  this Lease,  Landlord shall have the right to
attempt to relet the Premises at such rent and upon  conditions,  and for such a
term,  and to do all acts  necessary  to maintain or preserve the  Premises,  as
Landlord deems reasonable and necessary, without being deemed to have elected to
terminate this Lease,  including  re-entering the Premises to make repairs or to
maintain or modify the Premises,  and removing all persons and property from the
Premises;  such  property  may be removed  and stored in a public  warehouse  or
elsewhere at the cost of and for the account of Tenant.  Reletting  may be for a
period shorter or longer than the remaining Term of this Lease,  and for more or
less  rent,  but  Landlord  shall  have no  obligation  to  relet  at less  than
prevailing market rental rates. If reletting occurs,  this Lease shall terminate
automatically   when  the  new  tenant  takes   possession   of  the   Premises.
Notwithstanding  that Landlord fails to elect to terminate the Lease  initially,
Landlord at any time  thereafter  may elect to terminate  the Lease by virtue of
any previous  uncured default by Tenant.  In the event of any such  termination,
Landlord  shall be  entitled  to recover  from  Tenant all  damages  incurred by
Landlord  by  reason of  Tenant's  default,  as well as all costs of  reletting,
including, without limitation,  commissions, attorneys' fees, and restoration or
remodeling costs.

     (b) Terminate  Tenant's  right to possession by any lawful means,  in which
case  this  Lease  shall  terminate  and  Tenant  shall  immediately   surrender
possession of the Premises to Landlord. In such event Landlord shall be entitled
to recover  from Tenant all  damages  incurred by Landlord by reason of Tenant's
default including,  without limitation thereto, the following: (i) the worth, at
the time of award,  of any unpaid rent which had been earned at the time of such
termination;  plus (ii) the worth,  at the time of award, of the amount by which
the unpaid rent which would have been earned after termination until the time of
award  exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus (iii) the worth, at the time of award, of the amount by
which  the  unpaid  rent for the  balance  of the Term  after  the time of award
exceeds  the  amount of such  rental  loss that  Tenant  proves  could have been
reasonably  avoided;  plus (iv) any other amount, and court costs,  necessary to
compensate Landlord for all the detriment proximately caused by Tenant's default
or which in the ordinary  course of things  would be likely to result  therefrom
(including,  without limiting the generality of the foregoing, the amount of any
commissions  and/or  finder's  fee for a  replacement  tenant,  maintaining  the
Premises after such default, and preparing the Premises for reletting); plus (v)
at  Landlord's  election,  such other  amounts in  addition to or in lieu of the
foregoing as may be permitted  from time to time by  applicable  law. As used in
(i) and (ii) above, the "worth at the time of the award" is computed by allowing
interest at the lesser of 12% per annum or the maximum legal  interest  rate. As
used in (iii)  above,  the  "worth  at the time of the  award"  is  computed  by
discounting  such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one percent (1%).

<PAGE>

     (c) Collect  sublease  rents (or appoint a receiver to collect  such rents)
and otherwise  perform  Tenant's  obligations at the Premises,  it being agreed,
however, that neither the filing of a petition for the appointment of a receiver
for Tenant nor the appointment  itself shall  constitute an election by Landlord
to terminate this Lease.

     (d) Proceed to cure the default at Tenant's  sole cost and  expense.  If at
any time  Landlord  pays any sum or  incurs  any  expense  as a result  of or in
connection with curing any default of Tenant, the amount thereof shall be deemed
additional  rent hereunder and shall be immediately due and payable by Tenant to
Landlord upon demand.

     (e) Intentionally omitted.

     The remedies of Landlord,  as hereinabove  provided,  are cumulative and in
addition to and not  exclusive of any other  remedy of Landlord  herein given or
which  may be  permitted  by law.  The  remedies  of  Landlord,  as  hereinabove
provided,  are subject to the other provisions herein. Nothing contained in this
Paragraph 21 shall constitute a waiver of Landlord's right to recover damages by
reason of  Landlord's  efforts to  mitigate  the damage to it caused by Tenant's
default; nor shall anything herein adversely affect Landlord's right, as in this
Lease elsewhere  provided,  to  indemnification  against liability for injury or
damage to persons or property occurring prior to the termination of this Lease.

22. DEFAULT BY LANDLORD
    -------------------

     Landlord shall not be in default hereunder unless Landlord fails to perform
the obligations  required of Landlord within a reasonable  time, but in no event
later than forty five (45) days after  written  notice by Tenant to Landlord and
to any  Mortgagee or Ground  Lessor (as defined in  Paragraph  34(m)) in writing
specifying  wherein  Landlord has failed to perform such  obligation;  provided,
however,  that if the  nature of  Landlord's  obligation  is such that more than
forty five (45) days is required for performance,  then Landlord shall not be in
default if Landlord commences performance within such forty five (45) day period
and thereafter diligently  prosecutes the same to completion.  In no event shall
Tenant have the right to terminate this Lease as a result of Landlord's default;
Tenant's  remedies  shall be limited to any other remedy  available at law or in
equity.  Nothing  herein  contained  shall be interpreted to mean that Tenant is
excused from paying rent due hereunder as a result of any default by Landlord.

     Notwithstanding  any provision of the Lease to the  contrary,  (i) Tenant's
remedies shall include any legal or relief other than the right to terminate the
Lease, and (ii) if Landlord should fail, within a reasonable time (not to exceed
thirty (30) days) after  written  notice from  Tenant,  to perform (or  commence
performance  and  diligently  pursue   completion)  of  any  act  of  Landlord's
maintenance,  repair,  replacement or other  obligations set forth in the Lease,
then  Tenant  shall  have the right,  but not the  obligation,  to perform  such
obligations and to deduct the reasonable cost thereof from Annual Basic Rent.

23. ENTRY OF PREMISES AND PERFORMANCE BY TENANT
    -------------------------------------------

     Landlord and its authorized  representatives  shall have the right to enter
the Premises upon at least one (1) business  day's notice and  accompanied  by a
Tenant escort, except in cases of emergency,  at all reasonable times for any of
the  following  purposes:  (a) To  determine  whether the  Premises  are in good
condition and whether Tenant is complying with its obligations under this Lease;
(b) To do any necessary  maintenance and to make any restoration to the Premises
or the Building that  Landlord has the right or  obligation  to perform;  (c) To
post "for sale"  signs at any time  during the Term,  to post "for rent" or "for
lease"  signs  during the last 90 days of the Term,  or during any period  while
Tenant is in default; (d) To show the Premises to prospective  brokers,  agents,
buyers,  tenants or persons  interested  in an exchange,  at any time during the
Term; (e) To repair,  maintain or improve the Premises and to erect  scaffolding
and protective barricades around and about the Premises but not so as to prevent
entry to the Premises and to do any other act or thing  necessary for the safety
or  preservation  of the  Premises;  or (f) To  discharge  Tenant's  obligations
hereunder  when Tenant has failed to do so in accordance  with the terms of this
Lease.  Landlord  shall  not be  liable  in any  manner  for any  inconvenience,
disturbance,  loss  of  business,  nuisance  or  other  damage  arising  of  out
Landlord's  entry onto the  Premises as provided in this  Paragraph  23.  Tenant
shall not be entitled to an abatement or reduction of rent if Landlord exercises
any rights reserved in this Paragraph 23. Landlord shall  reasonably  attempt to
conduct his activities on the Premises as provided  herein in a manner that will
cause the lease  inconvenience,  annoyance or disturbance to Tenant. For each of
these purposes,  Landlord shall at all times have and retain a key with which to
unlock all the doors in, upon and about the Premises,  excluding Tenant's vaults
and safes.  Tenant shall not alter any lock or install a new or additional  lock
or bolt on any  door of the  Premises  without  the  prior  written  consent  of
Landlord.  If Landlord gives its consent,  Tenant shall furnish  Landlord with a
key for any such lock.

<PAGE>

     All  covenants  and  agreements  to be performed by Tenant under any of the
terms of this  Lease  shall be  performed  by Tenant at  Tenant's  sole cost and
expense  without any  abatement of rent.  If Tenant shall fail to pay any sum of
money to any third party which  Tenant is  obligated  to pay under this Lease or
shall fail to perform any other act on its part to be performed  hereunder,  and
such failure shall  continue for ten (10) days after notice  thereof by Landlord
(or such other period as specifically  provided  herein),  Landlord may, without
waiving or releasing  Tenant from any  obligations  of Tenant,  but shall not be
obligated  to,  make any such  payment or perform any such other act on Tenant's
part to be made or performed in this Lease; provided,  however, all sums so paid
by Landlord and all necessary incidental costs together with interest thereon at
the lesser of 12% or the maximum  rate an  individual  is permitted to charge by
law, from the date of such payment by Landlord,  shall be payable to Landlord on
demand.  Tenant  covenants  to pay any such sums,  and  Landlord  shall have (in
addition  to all other  rights or  remedies  of  Landlord)  the same  rights and
remedies  in the  event of the  nonpayment  thereof  by Tenant as in the case of
default  by  Tenant in the  payment  of rent.  Further,  following  each  second
consecutive late payment of rent, Landlord shall have the option to require that
Tenant increase the amount of the Security Deposit required under Paragraph 7 by
one hundred percent (100%),  which additional Security Deposit shall be retained
by Landlord  and may be applied by Landlord in the manner  provided in Paragraph
7.

24. SUBORDINATION
    -------------

     Without the necessity of any  additional  document being executed by Tenant
for the purpose of effecting a subordination,  and unless  otherwise  elected by
Landlord or any Mortgagee  with a lien on the Premises or any Ground Lessor with
respect to the Premises (or any part  thereof),  this Lease shall be subject and
subordinate at all times to (a) all ground leases or underlying leases which may
now exist or  hereafter be executed  affecting  the  Premises,  or the land upon
which the  Premises is  situated,  or both,  and (b) the lien of any mortgage or
deed of trust  which may now exist or  hereafter  be  executed in any amount for
which the Premises,  ground leases or underlying leases, or Landlord's  interest
or estate in any of said items is  specified as  security.  Notwithstanding  the
foregoing, Tenant acknowledges that Landlord shall have the right to subordinate
or cause to be  subordinated  this Lease to any such ground leases or underlying
leases or any such liens. In the event that any ground lease or underlying lease
terminates  for any reason or any mortgage or Deed of Trust is  foreclosed  or a
conveyance  in lieu  of  foreclosure  is made  for  any  reason,  Tenant  shall,
notwithstanding  any  subordination,  attorn  to and  become  the  tenant of the
successor in interest to Landlord,  at the option to such successor in interest.
Tenant covenants and agrees to execute and deliver,  upon demand by Landlord and
in the form  requested  by Landlord  any  additional  documents  evidencing  the
priority or subordination of this Lease with respect to any such ground lease or
underlying  leases or the lien of any such  mortgage  or Deed of  Trust.  Tenant
hereby irrevocably  appoints Landlord as  attorney-in-fact of Tenant to execute,
deliver and record any such document in the name and on behalf of Tenant. Tenant
shall  pay upon  demand  Landlord's  reasonable  attorneys'  fees  and  costs in
connection with any negotiation or modification of Landlord's  lender's standard
subordination agreement form.

     Landlord  shall,  within  thirty  (30) days  after the date of this  Lease,
provide Tenant with a non-disturbance agreement in form and substance reasonably
satisfactory to Tenant pursuant to which Landlord's  lenders with respect to the
Building  and  ground  lessors,  if any,  each  agree  that  Tenant's  rights to
possession  of the  Premises  pursuant  to the terms of the  Lease  shall not be
disturbed,  so long as Tenant is not in  default  of its  obligations  under the
Lease beyond any applicable notice and cure periods. Notwithstanding anything to
the contrary in this Lease,  any  subordination of the Lease by Tenant to ground
lessors or lienholders with respect to the Building is expressly  conditioned on
Tenant's receipt of such non-disturbance agreement.

<PAGE>

25. NOTICE
    ------

     Any notice, demand, request,  consent, approval or communication desired by
either party or required to be given,  shall be in writing and served personally
or sent prepaid by commercial overnight courier or prepaid certified first class
mail (return receipt requested), addressed as set forth in Subparagraph 1(b) and
1(c).  Either party may change its address by  notification  to the other party.
Notice shall be deemed to be communicated 72 hours from the time of mailing,  or
at the time of service as provided in this Paragraph 25.

26. WAIVER
    ------

     No delay or  omission  in the  exercise  of any right or remedy by Landlord
shall impair such right or remedy or be construed as a waiver. No act or conduct
of  Landlord,  including,  without  limitation,  acceptance  of the  keys to the
Premises, shall constitute acceptance of the surrender of the Premises by Tenant
before the  expiration of the Term.  Only written notice from Landlord to Tenant
shall  constitute  acceptance  of the  surrender of the Premises and  accomplish
termination  of this  Lease.  Landlord's  consent to or  approval  of any act by
Tenant requiring  Landlord's consent or approval shall not be deemed to waive or
render  unnecessary  Landlord's  consent to or approval of any subsequent act by
Tenant.  Any waiver by Landlord of any default  must be in writing and shall not
be a waiver of any other default  concerning the same or any other  provision of
this Lease.

27. LIMITATION OF LIABILITY
    -----------------------

     In  consideration  of the  benefits  accruing  hereunder,  Tenant  and  all
successors  and assigns of Tenant  covenant and agree that,  in the event of any
actual or alleged  failure,  breach or default  hereunder by  Landlord:  (a) The
obligations  under  this Lease do not  constitute  personal  obligations  of the
individual partners, directors, officers, members or shareholders of Landlord or
the partners or the constituent  members of Landlord,  and Tenant shall not seek
recourse  against  any  such  parties  or  any  of  their  personal  assets  for
satisfaction  of any  liability in respect to this Lease;  (b) The  liability of
Landlord  shall be limited  solely to, and Tenant's  sole and  exclusive  remedy
shall be against,  Landlord's  interest in the  Building  and no other assets of
Landlord; (c) No partner or member 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 or limited  liability  company);  (d) No service of process shall be
made  against any partner or member of Landlord  (except as may be  necessary to
secure  jurisdiction of the partnership or limited  liability  company);  (e) No
partner or member of Landlord shall be required to answer or otherwise  plead to
any service of  process;  (f) No  judgment  may be taken  against any partner or
member of  Landlord;  (g) No writ of execution  will ever be levied  against the
assets of any partner or member of Landlord;  (h) These covenants and agreements
are  enforceable  both by Landlord and also by any  director,  officer,  member,
shareholder  or partner of Landlord.  Tenant  agrees that each of the  foregoing
provisions  shall be  applicable to any covenant or agreement  either  expressly
contained in this Lease or imposed by statute or at common law.

28. FORCE MAJEURE
    -------------

     Landlord shall have no liability whatsoever to Tenant on account of (a) the
inability or delay of Landlord in fulfilling any of Landlord's obligations under
his Lease by reason of strike,  other labor  trouble,  governmental  controls in
connection  with a national or other  public  emergency,  or  shortages of fuel,
supplies or labor  resulting  therefrom or any other cause,  whether  similar or
dissimilar  to the  above,  beyond  Landlord's  reasonable  control;  or (b) any
failure or defect in the supply,  quantity or character of  electricity or water
furnished to the Premises, by reason of any requirement,  act or omission of the
public utility or others  furnishing the Premises with  electricity or water, or
for any reason,  whether similar or dissimilar to the above,  beyond  Landlord's
reasonable  control. If this Lease specifies a time period for performance of an
obligation of Landlord,  that time period shall be extended by the period of any
delay in  Landlord's  performance  caused by any of the events of force  majeure
described above.

29. PROFESSIONAL FEES
    -----------------

     (a)  If  Landlord  should  engage  any  professional   including,   without
limitation,  attorneys,  appraisers,   accountants  or  environmental  or  other
consultants for the purpose of bringing suit for possession of the Premises, for
the  recovery of any sum due under this  Lease,  or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or

<PAGE>

in the event of any other  litigation  between the parties  with respect to this
Lease,  then all reasonable costs and expenses  including,  without  limitation,
actual professional fees such as appraisers',  accountants', attorneys and other
consultants'  fee, 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.  If Landlord
employs a collection agency to recover delinquent charges,  Tenant agrees to pay
all  collection  agency fees  charged to  Landlord  in  addition  to rent,  late
charges, interest and other sums payable under this Lease.

     (b) If Landlord is 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,  without
limitation,  its actual professional fees such as appraisers',  accountants' and
attorneys' fees.

30. EXAMINATION OF LEASE
    --------------------

     Submission of this  instrument for examination or signature by Tenant shall
not  create a  binding  agreement  between  Landlord  and  Tenant  nor  shall it
constitute  a  reservation  or option  to lease on the part of  Tenant  and this
instrument  shall  not  be  effective  as a  lease  and  shall  not  create  any
obligations  on the part of Landlord or Tenant until this Lease has been validly
executed first by Tenant and second by Landlord, and delivered to Tenant.

31. ESTOPPEL CERTIFICATE
    --------------------

     (a) Within ten (10) days  following any written  request which Landlord may
make from time to time, Tenant shall execute and deliver to Landlord a statement
("Estoppel Certificate"), in a form substantially similar to the form of Exhibit
E attached  hereto or in such other form as  Landlord's  lender or purchaser may
require,  certifying:  (i) the date of commencement of this Lease; (ii) the fact
that this Lease is  unmodified  and in full force and effect  (or, if there have
been modifications,  stating the nature and date of such  modifications),  (iii)
the date to which the rent and other  sums  payable  under  this Lease have been
paid;  (iv) that  there  are no  current  defaults  under  this  Lease by either
Landlord or Tenant except as specified in Tenant's statement; and (v) such other
matters  requested by Landlord.  Landlord and Tenant  intend that any  statement
delivered  pursuant to this  Paragraph  31 may be relied upon by any  Mortgagee,
beneficiary,  purchaser or prospective purchaser of the Premises or any interest
therein.

     (b) Tenant's  failure to deliver such  statement  within such time shall be
conclusive upon Tenant (i) that this Lease is in full force and effect,  without
modification  except as may be represented  by Landlord,  (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one (1)
month's  rent has  been  paid in  advance.  Tenant's  failure  to  deliver  said
statement to Landlord within ten (10) days of receipt shall constitute a default
under this Lease and Landlord shall have the remedies provided in Paragraph 21.

32. RULES AND REGULATIONS
    ---------------------

     Tenant   shall   faithfully   observe   and  comply  with  the  "Rules  and
Regulations",  a copy of which is attached  hereto and marked Exhibit F, and all
reasonable and  nondiscriminatory  modifications  thereof and additions  thereto
from time to time put into effect by Landlord.

33. LIENS

    -----

     Tenant shall,  within ten (10) days after receiving notice of the filing of
any  mechanic's  lien for material or work claimed to have been furnished to the
Premises on Tenant's behalf or at Tenant's request, discharge the lien or post a
bond equal to the amount of the disputed claim with a bonding company reasonably
satisfactory to Landlord.  If Tenant posts a bond, it shall contest the validity
of the lien with all due  diligence.  Tenant  shall  indemnify,  defend and hold
Landlord harmless from any and all losses and costs incurred by Landlord as a

<PAGE>

result of any such liens  attributable  to Tenant.  If Tenant does not discharge
any lien or post a bond for such lien within such ten (10) day period,  Landlord
may discharge such lien at Tenant's expense and Tenant shall promptly  reimburse
Landlord for all costs incurred by Landlord in discharging  such lien including,
without limitation,  attorney's fees and costs and interest on all sums expended
at the lesser of 12% per annum or the maximum legal interest rate.  Tenant shall
provide  Landlord  with  not  less  than ten (10)  days  written  notice  of its
intention to have work  performed  at or materials  furnished to the Premises so
that Landlord may post appropriate notices of  non-responsibility.  Tenant shall
pay upon demand  Landlord's  reasonable  attorneys' fees and costs in connection
with any  request  by  Tenant  for any  subordination  or  clarification  of any
Landlord lien right arising under this Lease or at law.

34. MISCELLANEOUS PROVISIONS
    ------------------------

     (a) Time of  Essence.  Time is of the  essence  of each  provision  of this
Lease.

     (b) Successors.  This Lease shall be binding on and inure to the benefit of
the parties and their successors, except as provided in Paragraph 19 herein.

     (c) Landlord's  Consent.  Any consent required by Landlord under this Lease
must be granted in  writing  and may be  withheld  by  Landlord  in its sole and
absolute discretion, unless otherwise expressly provided herein.

     (d)  Commissions.  Each party  represents that it has not had dealings with
any real estate broker, finder or other person with respect to this Lease in any
manner,  except for the broker  identified in  Subparagraph  1(m). If Tenant has
dealt with any other  person or real estate  broker  with  respect to leasing or
renting the Premises,  Tenant shall be solely responsible for the payment of any
fees due said person or firm and Tenant  shall hold  Landlord  free and harmless
and indemnify and defend Landlord from any  liabilities,  damages or claims with
respect thereto, including attorney's fees and costs.

     (e) Landlord's Successors. In the event of a sale or conveyance by Landlord
of the Premises,  the same shall operate to release  Landlord from any liability
under this Lease,  and in such event  Landlord's  successor in interest shall be
solely responsible for all obligations of Landlord under this Lease.

     (f)  Prior  Agreement  or  Amendments.  This  Lease  contains  all  of  the
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease,  and no prior agreement or  understanding  pertaining to any such
matter shall be effective  for any purpose.  No  provisions of this Lease may be
amended  except by an agreement in writing signed by the parties hereto or their
respective successors-in-interest.

     (g)  Recording.  Tenant  shall  not  record  this  Lease  nor a short  form
memorandum thereof without the consent of Landlord.  Landlord may record a short
form memorandum of this Lease and Tenant shall execute and acknowledge such form
if requested to do so by Landlord.

     (h)  Severability.  Any  provision  of this Lease  which  shall prove to be
invalid,  void or illegal shall in no way affect, impair or invalidate any other
provision  hereof,  and all other  provisions of this Lease shall remain in full
force and effect.

     (i) No Partnership or Joint Venture.  Nothing in this Lease shall be deemed
to  constitute  Landlord  and Tenant as partners or joint  venturers.  It is the
express intent of the parties hereto that their relationship with regard to this
Lease and the Premises be and remain that of lessor and lessee.

     (j)  Interpretation.  When  required  by the  context  of this  Lease,  the
singular shall include the plural,  and the masculine shall include the feminine
and/or neuter. "Party" shall mean Landlord or Tenant.

     (k) No Light,  Air or View  Easement.  Any diminution or blocking of light,
air or view by any  structure  which may be  erected  on lands  adjacent  to the
Building shall in no way affect this Lease or impose any liability on Landlord.

     (l) Governing  Law. This Lease shall be governed by and construed  pursuant
to the laws of the State of California.

<PAGE>

     (m)  Mortgagee  Protection.  In the  event  of any  default  on the part of
Landlord,  Tenant will give simultaneous  notice consistent with Paragraph 25 to
any beneficiary of a deed of trust,  Mortgagee, or Ground Lessor of the Premises
("Mortgagee"  or Ground  Lessor"),  and shall  offer  such  Mortgagee  or Ground
Lessor, a reasonable  opportunity to cure the default,  including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, or in the
event of a Ground Lessor,  by appropriate  judicial action, if such should prove
necessary to effect a cure.

     (n) Certain Representations and Warranties of Landlord. Landlord represents
and  warrants  that,  as of the date of this  Lease,  (i)  there  are no  liens,
encumbrances,  leases, mortgages, deeds or trust or other matters encumbering or
affecting  Landlord's  right,  title or interest in or to the Premises that will
materially and adversely affect Tenant's quiet use and enjoyment of the Premises
for  which a  non-disturbance  agreement  acceptable  to  Tenant  has  not  been
obtained,  (ii) to Landlord's knowledge,  the surface and structural elements of
the roof,  bearing  walls,  and  foundation of the Building are free of material
defects  and the roof  system  does not suffer  deferred  maintenance,  (iii) to
Landlord's  knowledge,  the Premises,  all improvements thereto and all building
systems  therein are in good  condition and repair,  and in compliance  with all
applicable  laws,  (iv)  except in  compliance  with  applicable  laws,  neither
Landlord,  nor to Landlord's  knowledge,  any prior owner,  operator,  tenant or
occupant of any part of the Project or any nearby property has generated,  used,
treated, spilled, stored, transferred, disposed, released or caused a threatened
release  in, at,  under,  into,  from,  to or on any part of the  Project or any
nearby property of any hazardous  substances or materials,  and (v) Landlord has
not received any notice or claim to the effect that either  Landlord or any part
of  the  Project  or  nearby  property  is or may be  liable  to any  government
authority or private party as a result of the release or  threatened  release of
any hazardous  substances or  materials.  If Tenant shall give Landlord  written
notice of any noncompliance  contained within this Subparagraph 34(n), which non
compliance is not a result of Tenant's  particular  use of or improvement to the
Premises  requiring  application of laws which would not otherwise be applicable
to the Premises  absent such use or improvement,  Landlord shall,  within thirty
(30) days of receipt of such  notice,  take all  necessary  actions and make all
necessary  repairs,  replacements,  and  alterations  to make the Premises,  all
improvements  thereto and all building  systems  therein in  compliance,  all at
Landlord's sole cost and expense and without Landlord passing through such costs
and expenses to Tenant.  If Landlord does not take the corrective  action within
thirty (30) days of  Landlord's  receipt of Tenant's  notice,  then Tenant shall
have the right to take the corrective  actions and to deduct the reasonable cost
of said actions from Basic Annual Rent.

35. LEASE EXECUTION
    ---------------

     (a) Tenant's  Authority.  If Tenant executes this Lease as a partnership or
corporation, then Tenant and the persons and/or entities executing this Lease on
behalf of Tenant represent and warrant that: (a) Tenant is a duly authorized and
existing partnership or corporation,  as the case may be, and is qualified to do
business in the state in which the Building is located;  (b) such persons and/or
entities  executing  this Lease are duly  authorized to execute and deliver this
Lease on Tenant's behalf in accordance with the Tenant's  partnership  agreement
(if Tenant is a partnership),  or a duly adopted resolution of Tenant's board of
directors and the Tenant's  by-laws (if Tenant is a  corporation);  and (c) this
Lease is binding upon Tenant in accordance with its terms.

     (b) Joint and Several Liability. If more than one person or entity executes
this Lease as Tenant:  (a) each of them is and shall be  jointly  and  severally
liable for the covenants, conditions, provisions and agreements of this Lease to
be kept,  observed and performed by Tenant;  and (b) the act or signature of, or
notice  from or to, any one or more of them with  respect to this Lease shall be
binding  upon each and all of the persons and entities  executing  this Lease as
Tenant with the same force and effect as if each and all of them had so acted or
signed, or given or received such notice.

<PAGE>

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

"TENANT"                          Gish Biomedical, Inc.,
                                  a California corporation

                                  By: /s/ Kelly D. Scott
                                      --------------------------------
                                  Name: Kelly D. Scott
                                        ------------------------------
                                  Title: President and Chief Executive Officer

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

                                  By: /s/ Les Taeger

                                      ------------------------------------
                                Name: Les Taeger

                                        ----------------------------------
                                  Title: Chief Financial Officer

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

"LANDLORD"                        Eric and Shirley Pepys,

                                  By: /s/ Eric Pepys

                                      -------------------------------------
                                      Eric Pepys

                                  By: /s/ Shirley Pepys

                                      -------------------------------------
                                      Shirley Pepys

<PAGE>

                                    EXHIBIT A

                              DEPICTION OF PREMISES

                    DRAWING OF BUILDING LAYOUT AND PROPERTY.

<PAGE>

                                    EXHIBIT B

                             DESCRIPTION OF PREMISES

    Assessors Parcel Map for the property: 805-063-01 22942 ARROYO VISTA RANCHO
                            SANTA MARGARITA CA 92688

<PAGE>

                                    EXHIBIT C

                              WORK LETTER AGREEMENT

                    TENANT CONDUCTING OWN TENANT IMPROVEMENTS

THIS WORK LETTER  AGREEMENT is entered into as dated 29 September  2000,  by and
between  Eric  and  Shirley  Pepys,  Landlord,  and  Gish  Biomedical,  Inc.,  a
California corporation, Tenant.

                                    RECITALS:

A.  Concurrently with the execution of this Work Letter Agreement,  Landlord and
    Tenant have entered into a lease (the  "Lease")  covering  certain  premises
    (the  "Premises") more  particularly  described in Exhibit A attached to the
    Lease.

B.  Tenant desires to improve the Premises on its own behalf without the benefit
    of  Landlord's  design and construction resources.

C.  In  order to  induce  Tenant  to  enter  into the  Lease  (which  is  hereby
    incorporated by reference to the extent  applicable) and in consideration of
    the mutual covenants hereinafter contained, Landlord and Tenant hereby agree
    as follows:

1.  Minimum  Standards   for  Tenant's  Design and Construction  Resources.  The
    following minimum standards shall apply:

         (i) Only licensed  architects  and  engineers  shall be used to perform
designwork. Prior to commencement of any designwork, Tenant shall furnish a list
of all architects and engineers who will perform designwork for the improvements
to be installed under the terms and provisions of this Work Letter Agreement.

         (ii)  Only a  licensed  General  Contractor  may  be  used  to  perform
construction  work.  Prior to contracting  with the General  Contractor,  Tenant
shall  furnish  Landlord  with a list of  Contractors  (general  contractor  and
sub-contractors)  who will perform work on the Premises.  The list shall include
the Contractor license number,  City Business License Number,  business address,
phone number and name of the representative of Contractor.

         (iii) (iii) The General Contractor and all Sub-contractors must conform
to all  laws  and  regulations  of all  State,  County  , City or  other  lawful
governing  authority'  having  jurisdiction  over the  Premises  or the  General
Contractor.

         (iv)Prior to the commencement of any construction work on the Premises,
Landlord must receive (a) certificates of insurance endorsed to include Landlord
as  "additional  named  insured"  as  applicable  on  insurance  policies  to be
maintained  by Tenant  as set forth  within  the Lease and (b)  certificates  of
insurance  for the  workman's  compensation  and  liability  insurance  policies
maintained  by  the  General   Contractor,   endorsed  to  include  Landlord  as
"additional  named  insured"  on all  liability  insurance  policies  and  which
evidence the following minimum protection:

             WORKER'S COMPENSATION     Statutory

             EMPLOYERS LIABILITY       $1,000,000 (minimum)

             PUBLIC LIABILITY          $1,000,000/$5,000,000 Bodily Injury
                                       $1,000,000 Property Damage or
                                       $5,000,000 Combined Single Limit

         (v) When  proceeding  with Tenant  Improvements,  Tenant and Contractor
shall  fulfill any and all further  obligations  contained  in the Lease and its
Exhibits.

2.  Completion  Schedule.  Within ten (10) days after the execution of the Lease
    and this Work  Letter  Agreement,  Tenant  shall  deliver  to  Landlord  for
    Landlord's  review and approval,  a schedule (the "Work  Schedule")  setting
    forth a timetable for the planning and completion of the installation of the
    Tenant  Improvements  (as defined in Paragraph 3 below) to be constructed in
    the Premises, and the estimated Commencement Date for the Term of the Lease.
    The Work  Schedule  shall set forth each of the various  items of work to be
    done by or approval to be given by Landlord  and Tenant in  connection  with
    the  completion  of the  Tenant  Improvements.  The Work  Schedule  shall be
    submitted to Landlord for its approval  and,  upon approval by both Landlord
    and Tenant, the approved Work Schedule shall become the basis for completing
    the Tenant Improvements.

<PAGE>

3.  Tenant Improvements. Reference herein to "Tenant Improvements" shall include
    all work to be done in the Premises pursuant to the Tenant Improvement Plans
    (defined in Paragraph 4 below), including, but not limited to, partitioning,
    doors,  ceilings,  floor coverings,  wall finishes (including paint and wall
    covering),  electrical (including lighting, switching,  telephones, outlets,
    etc.), plumbing, heating, ventilating and air conditioning, fire protection,
    cabinets and other millwork and sitework.

4.  Tenant Improvement  Plans.  Immediately after the execution of the Lease and
    this Work Letter Agreement,  Tenant's  architect shall prepare final working
    drawings and specifications for the Tenant Improvements.  Such final working
    drawings  and   specifications   are  referred  to  herein  as  the  "Tenant
    Improvement  Plans." The Tenant  Improvement  Plans must be consistent  with
    Landlord's  standard  specifications for tenant improvements for the Project
    (the "Project  Standards"),  as the same may be changed from time to time by
    Landlord.

5.  Non-Standard  Tenant  Improvements.  Landlord shall permit Tenant to deviate
    from  the  Project  Standards  for the  Tenant  Improvements  (the  "Project
    Non-Standards"),  provided that (a) the deviations  shall not be of a lesser
    quality than the Project  Standards;  (b)the total lighting for the Premises
    shall not exceed 1.65 watts per Rentable Square Foot of the Premises;(c) the
    deviations  conform to  applicable  governmental  regulations  and necessary
    governmental  permits and approvals have been secured; (d) the deviations do
    not require  building  service beyond the levels normally  provided to other
    tenants  in the  Project;  and  (e)  Landlord  has  determined  in its  sole
    discretion  that  the  deviations  are of a  nature  and  quality  that  are
    consistent with the overall objectives of Landlord for the Project.

    Any non-standard Tenant Improvements made shall remain on and be surrendered
    with the Premises  upon  expiration  of the Term,  except that Landlord may,
    upon  consenting  to any such  non-standard  Tenant  Improvements,  elect to
    require Tenant to remove any non-standard Tenant Improvements which may have
    been made to the  Premises.If  Landlord  so elects,  at its own cost  Tenant
    shall  restore the Premises to the  condition  designated by Landlord in its
    election,  before the last day of the term or within 30 days after notice of
    its election is given, whichever is later.

6.  Final Pricing and Drawing Schedule.  After the preparation of the space plan
    and after Landlord's  written approval thereof,  in accordance with the Work
    Schedule, Tenant shall cause its architect to prepare and submit to Landlord
    the Tenant Improvement Plans. The Tenant Improvement Plans shall be approved
    by  Landlord  and  Tenant in  accordance  with the Work  Schedule  and shall
    thereafter  be submitted to the  appropriate  governmental  body by Tenant's
    architect for plan checking and the issuance of a building  permit.  Tenant,
    with  Landlord's  cooperation,   shall  cause  to  be  made  to  the  Tenant
    Improvement  Plans any  changes  necessary  to obtain the  building  permit.
    Concurrent  with the plan  checking,  Tenant  shall  have  prepared  a final
    pricing for  Landlord's  approval,  in  accordance  with the Work  Schedule,
    taking  into  account  any  modifications  which may be  required to reflect
    changes in the Tenant  Improvement  Plans  required by the City or County in
    which  the  Premises  are  located.  After  final  approval  of  the  Tenant
    Improvement  Plans no further  changes may be made thereto without the prior
    written  approval  from  both  Landlord  and  Tenant,  and then  only  after
    agreement by Tenant to pay any excess costs resulting from the design and/or
    construction  of such  changes.  Tenant  hereby  acknowledges  that any such
    changes shall be subject to the terms of Paragraph 9 below.

7.  Construction of Tenant Improvements. After the Tenant Improvement Plans have
    been  prepared  and  approved,  the final  pricing has been  approved  and a
    building permit for the Tenant  Improvements  has been issued,  Tenant shall
    cause its contractor to begin  installation  of the Tenant  Improvements  in
    accordance  with the Tenant  Improvement  Plans.  Tenant shall supervise the
    completion  of such work and  shall use  reasonable  commercial  efforts  to
    secure  substantial  completion  of the  work in  accordance  with  the Work
    Schedule.  The cost of such work shall be paid as  provided  in  Paragraph 8
    below.

8.  Payment  for the Tenant  Improvements.  Landlord  hereby  grants to Tenant a
    "Tenant  Improvement  Allowance"  of One Hundred  Fifty Five,  Seven Hundred
    Thirty-nine and 00/100 Dollars ($155,739.00), subject to Tenant's compliance
    with the provisions of this Work Letter  Agreement and provided in the event
    (a)  Tenant has not  provided  Landlord  with a copy of a  contract  binding
    Tenant for the completion of such Tenant  Improvements  within twelve months
    from the Commencement Date of the Lease or (b) Tenant shall not fully expend
    or submit for  reimbursement  from the Tenant  Improvement  Allowance within
    eighteen months from the Commencement  Date of the Lease,  Tenant shall have
    no further right to seek or obtain reimbursement from Landlord, and Landlord
    shall have no further  obligation  or liability to reimburse  Tenant for any
    amounts  expensed  by  Tenant  for  the  Tenant  Improvements.   The  Tenant
    Improvement Allowance shall only be used for:

<PAGE>

     (a)  Payment  of the  cost of  preparing  the  space  plan  and the  Tenant
Improvement  Plans,  including  mechanical,   electrical,  plumbing,  structural
drawings and of all other aspects  necessary to complete the Tenant  Improvement
Plans.  The Tenant  Improvement  Allowance  will not be used for the  payment of
extraordinary  design work not included within the scope of Landlord's  Project.
Standards or for  payments to any other  consultants,  designers  or  architects
other than Landlord's architect and/or space planner.

         (i) The payment of plan  check,  permit and  license  fees  relating to
construction of the Tenant Improvements.

         (ii) Construction  of  the  Tenant  Improvements,   including,  without
limitation, the following:

              (aa) Installation within the Premises of all partitioning,  doors,
floor  coverings,  ceilings,  wall coverings and painting,  millwork and similar
items;

              (bb) All electrical wiring,lighting fixtures,outlets and switches,
and other electrical work to be installed within the Premises;

              (cc) The furnishing and  installation  of all duct work,  terminal
boxes,  diffusers and  accessories  required for the  completion of the heating,
ventilation and air conditioning systems within the Premises, including the cost
of meter and key control for after- hour air conditioning;

              (dd) Any additional Tenant requirements including, but not limited
to, odor control,  special heating,  ventilation and air conditioning,  noise or
vibration control or other special systems;

              (ee) All fire and life safety control  systems such as fire walls,
sprinklers,  halon,  fire  alarms,  including  piping,  wiring and  accessories,
installed within the Premises;

              (ff) All plumbing, fixtures, pipes and accessories to be installed
within the Premises;

              (gg) Testing and inspection costs; and

              (hh)  Contractor's  fees,  including  but not  limited to any fees
based on general conditions.

         (iii) All other costs expended by Landlord in the  construction  of the
Tenant Improvements, including those costs incurred by Landlord for construction
of elements of the Tenant  Improvements in the Premises,  which construction was
performed  by Landlord  prior to the  execution  of this Lease by  Landlord  and
Tenant and which  construction  is for the benefit of tenants and is customarily
performed by Landlord  prior to the execution of leases for space in the Project
for reasons of economics  (examples of such construction would include,  but not
be limited to, the extension of mechanical  [including heating,  ventilating and
air  conditioning  systems] and electrical  distribution  systems outside of the
core of the Building, wall construction,  column enclosures and painting outside
of the core of the Building, ceiling hanger wires and window treatment).

         (iv) The cost of sitework or other improvements approved by Landlord as
equivalent  to  Landlord's  Project  Standards  and  included  within the Tenant
Improvement Plans.

     (b) The cost of each item  referenced  in  Paragraph  8(a)  above  shall be
charged against the Tenant Improvement Allowance.  In the event that the cost of
installing the Tenant  Improvements,  as established by Tenant, shall exceed the
Tenant Improvement Allowance, or if any of the Tenant Improvements are not to be
paid out of the Tenant Allowance as provided in Paragraph 8(a) above, the excess
shall be paid by Tenant prior toprior to disbursement of the Tenant  Improvement
Allowance.

     (c) In the  event  that,  after  the  Tenant  Improvement  Plans  have been
prepared and a price therefor  established  by Tenant,  Tenant shall require any
changes or substitutions to the Tenant Improvement Plans, Tenant shall provide a
revised final pricing schedule to Landlord.

     (d) Tenant  shall submit its  application  for  disbursement  of the Tenant
Improvement Allowance upon completion of the Tenant Improvements,  together with
an  unconditional  release of lien for each  consultant and  subconsultant  with
statutory  rights to lien,  and all  contractors,  subcontractors  and  material
suppliers  providing  materials and/or labor to complete the Tenant Improvements
("Completed Application for Payment").

<PAGE>

     (e) All bills and releases will be audited by Landlord  prior to release of
the Tenant Improvement Allowance.

     (f) Landlord  shall remit the Tenant  Improvement  to Tenant  within thirty
days of  receipt of  Tenant's  Completed  Application  for  Payment.  Any unused
portion  of the  Tenant  Improvement  Allowance  upon  completion  of the Tenant
Improvements  shall not be  refunded  to Tenant  and shall not be  available  to
Tenant as a credit against any obligations of Tenant under the Lease.

Completion and Rental  Commencement  Date. The  commencement  of the Term of the
Lease and  Tenant's  obligation  for the  payment of rent under the Lease  shall
commence  as of the  date  referred  to in  Subparagraph  1(i)  of the  Lease10.
Certificate of Occupancy.  Upon  completion of the Tenant  Improvements  and the
issuance by the City or other  relevant  government  agency of a Certificate  of
Occupancy or other comparable certificate authorizing occupancy of the Premises,
Tenant  will  promptly  provide  Landlord  with a copy  of  the  Certificate  of
Occupancy  or other such  certificate,  the  stamped set of plans and a recorded
"Notice of  Completion".  The  certificate  of  Occupancy  must be  approved  by
Landlord before Tenant can move in.

9.  Force  Majeure.  Landlord  shall have no liability  whatsoever  to Tenant on
    account of the  inability or delay of Landlord to fulfill any of  Landlord's
    obligations under this Work Letter Agreement by reason of strike,other labor
    trouble,inclement weather,acts of God,governmental restrictions, controls or
    inaction, or shortages of fuel, supplies or labor resulting therefrom or any
    other cause,  whether similar or dissimilar to the above,  beyond Landlord's
    reasonable  control.  If this Work Letter Agreement  specifies a time period
    for  performance  of an  obligation  of Landlord,  that time period shall be
    extended by the period of any delay in Landlord's  performance caused by any
    of the events of force majeure described above.

IN WITNESS WHEREOF,  this Work Letter Agreement is executed as of the date first
written above.

"TENANT"                         Gish Biomedical, Inc.,
                                 a California corporation

                                 By: /s/ Kelly D. Scott
                                     -----------------------------------
                                 Name: Kelly D. Scott
                                       ---------------------------------
                                 Title: President and Chief Executive Officer

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

                               By: /s/ Les Taeger

                                     --------------------------------------
                                Name: Les Taeger

                                       ------------------------------------
                                 Title: Chief Financial Officer

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

"LANDLORD"                       Eric and Shirley Pepys,

                               By: /s/ Eric Pepys

                                     --------------------------------------
                                   Eric Pepys

                                 By: /s/ Shirley Pepys

                                     ---------------------------------------
                                     Shirley Pepys

<PAGE>

                                   PUNCH-LIST

                          (TO BE COMPLETED BY LANDLORD)

1.  Perform  miscellaneous  concrete  epoxy  repair  and  touch-painting  on the
    exterior column at front entrance

2.  All lobby, office and warehouse lights to be in working order

3.  Structural  engineering inspection and report on hairline cracks in concrete
    tilt-up panels

4.  Perform one-time pest control service for ant control

5.  All restroom fixtures to be in good working order

6.  Inspect  irrigation  and  drainage  along south perimeter of building (check
    for over watering of planter areas)

<PAGE>

                                    EXHIBIT D

                                    ---------

                           NOTICE OF LEASE TERM DATES

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

Re:  Lease  dated  29  September  2000,  by and between Eric and Shirley  Pepys,
("Landlord") and Gish Biomedical,  Inc., a California corporation"),  concerning
the Premises located at 22942 Arroyo Vista, Rancho Santa Margarita, California

Gentlemen:

In  accordance  with the  subject  Lease,  we wish to advise  and/or  confirm as
follows:

1.  That the  Premises  have  been  accepted  herewith  by the  Tenant  as being
    substantially  complete in accordance  with the subject Lease and that there
    is no deficiency in construction.

2.  That the Tenant has possession of the subject Premises and acknowledges that
    under the  provisions  of the  subject  Lease  the Term of the  Lease  shall
    commence as of 13th of October 2000 for a term of 124 months, ending on 12th
    of February 2011.

3.  That  in  accordance  with  the  subject Lease,  rent commences to accrue on
    13th of February 2001.

4.  If the Commencement Date of the subject Lease is other than the first day of
    the  month,  the first  billing  will  contain a pro rata  adjustment.  Each
    billing  thereafter shall be for the full amount of the monthly  installment
    as provided for in said Lease.

5.  Rent is due and  payable in advance on the first day of each and every month
    during the term of said Lease.  Tenant's  rent checks should be made payable
    to Eric and Shirley Pepys at 526 South Bayfront, Newport Beach, CA.

                                  AGREED AND ACCEPTED

"TENANT"                          Gish Biomedical, Inc.,
                                  a California corporation

                                  By: /s/ Kelly D.Scott
                                  Name: Kelly D. Scott

                                       ------------------------------
                                  Title: President and Chief Executive Officer

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

                                  By: /s/ Les Taeger

                                      ----------------------------------
                                Name: Les Taeger

                                        --------------------------------
                                  Title: Chief Financial Officer

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

"LANDLORD"                        Eric and Shirley Pepys,

                                  By: /s/ Eric Pepys

                                      ------------------------------------
                                      Eric Pepys

                                  By: /s/ Shirley Pepys

                                      ------------------------------------
                                      Shirley Pepys

<PAGE>

                                    EXHIBIT E

                                  Not Executed.

                           TENANT ESTOPPEL CERTIFICATE

The undersigned,  Eric and Shirley Pepys,  ("Landlord"),  with a mailing address
c/o  ________________  and  Gish  Biomedical,  Inc.,  a  California  corporation
("Tenant"),  hereby  certify to  ___________________,  a  _________________,  as
follows:

1.  Attached  hereto is a true,  correct and complete copy of that certain lease
    dated  _____,  between  Landlord  and Tenant (the  "Lease"),  which  demises
    premises located ________________________ (the "Premises").

    The Lease is now in full force and effect and has not been amended, modified
    or supplemented, except as set forth in Paragraph 4 below.

2.  The Term of the Lease commenced on ________________________, 19__.

3.  The Term of the Lease shall expire on ____________________, 19__.

4.  The Lease has: (initial one)

    (_________) not  been amended, modified, supplemented,  extended, renewed or
    assigned.

    (_________)  been  amended,  modified,  supplemented,  extended,  renewed or
    assigned by the following described agreements, copies of which are attached
    hereto:

    --------------------------------------------------------------------------.

5.  Tenant has accepted and is now in possession of the Premises.

6.  Tenant  and  Landlord  acknowledge  that  the  Lease  will  be  assigned  to
    _______________ _____________ and that no modification, adjustment, revision
    or cancellation of the Lease or amendments thereto shall be effective unless
    written consent of ____________ is obtained,  and that until further notice,
    payments under the Lease may continue as heretofore.

7.  The amount of fixed monthly rent is $_____________.

8.  The  amount  of  security  deposits  (if  any) is  $_____________.  No other
    security deposits have been made.

9.  Tenant is paying the full lease rental which has been paid in full as of the
    date hereof.  No rent or other  charges  under the Lease have been paid more
    than thirty (30) days in advance of its due date.

10. All  work  required  to  be  performed  by Landlord under the Lease has been
    completed.

11. There are no defaults on the part of the Landlord or Tenant under the Lease.

12. Tenant  has  no  defense  as  to  its obligations under the Lease and claims
    no set-off or counterclaim against Landlord.

13. Tenant  has no right to any  concession  (rental  or  otherwise)  or similar
    compensation  in  connection  with  renting the space it occupies  except as
    provided in the Lease.

14. Tenant has no right or option to purchase the Premises, Building or Project,
    to relocate within the Building or Project or to terminate the Lease.

15. All provisions of the Lease and the amendments thereto  (if any) referred to
    above are hereby ratified.

The foregoing  certification is made with the knowledge that  __________________
is about to fund a loan to Landlord or ________________ is about to purchase the
Project (or part thereof) from  Landlord and that  _________________  is relying
upon the  representations  herein made in funding such loan or in purchasing the
Project (or part thereof).

<PAGE>

IN WITNESS  THEREOF,  this  certificate  has been  executed and delivered by the
authorized officers of the undersigned as of ______________, 19__.

                                      Gish Biomedical, Inc.,
                                      a California corporation

                                       By: ___________________________________
                                       Name: _________________________________
                                       Title: ________________________________

                                       By: ___________________________________
                                       Name: _________________________________
                                       Title: ________________________________

                                   SAMPLE ONLY

                               (Not For Execution)

<PAGE>

                                    EXHIBIT F

                              RULES AND REGULATIONS

1.  Except  as  specifically  provided  in the  Lease to which  these  Rules and
    Regulations are attached, no sign, placard, picture, advertisement,  name or
    notice  shall be installed or displayed on any part of the outside or inside
    of the  Building  of the  Project  without  the  prior  written  consent  of
    landlord,  which  consent  Landlord  may  withhold in its sole and  absolute
    discretion. Landlord shall have the right to remove, at Tenant's expense and
    without  notice,  any sign installed or displayed in violation of this rule.
    All approved signs or lettering on doors and walls shall be printed, painted
    , affixed or  inscribed  at the  expense of Tenant by a person  approved  by
    Landlord.

2.  If Landlord objects in writing to any curtains,  blinds,  shades, screens or
    hanging  plants or other similar  objects  attached to or used in connection
    with any window or door of the Premises, or placed on any windowsill,  which
    is visible  from the  exterior of the  Premises,  Tenant  shall  immediately
    discontinue  such use. Tenant shall not place anything against or near glass
    partitions or doors or windows which may appear  unsightly  from outside the
    Premises.

3.  Tenant shall not obstruct any sidewalks,  halls, passages, exits, entrances,
    stairways,  elevators  or  escalators  (if any) of the  Project.  The halls,
    passages,  exists,  entrances,  shopping  malls,  elevators,  escalators and
    stairways  are not open to the  general  public,  but are open,  subject  to
    reasonable regulations, to Tenant's business invitees. Landlord shall in all
    cases retain the right to control and prevent  access thereto of all persons
    whose  presence  in the  judgment of Landlord  would be  prejudicial  to the
    safety,  character,  reputation and interest of the Project and its tenants;
    provided that nothing  herein  contained  shall be construed to prevent such
    access to persons with whom any tenant normally deals in the ordinary course
    of its  business,  unless  such  persons  are engaged in illegal or unlawful
    activities. No tenant and no employee or invitee of any tenant shall go upon
    the roof(s) of the Project.

4.  The  directory of the Building or Project will be provided  exclusively  for
    the display of the name and location of tenants  only and Landlord  reserves
    the right to exclude any other names therefrom.

5.  All cleaning and janitorial  services for the Project and the Premises shall
    be  provided  exclusively  through  Landlord,  and except  with the  written
    consent of  Landlord,  no person or persons  other  than those  approved  by
    Landlord  shall be employed by Tenant or  permitted to enter the Project for
    the purpose of cleaning  the same.  Tenant  shall not cause any  unnecessary
    labor or  carelessness  or indifferent to the good order and  cleanliness of
    the Premises.

6.  Landlord  will furnish  Tenant,  free of charge,  with two keys to each door
    lock  in the  Premises.  Landlord  may  make a  reasonable  charge  for  any
    additional  keys.  Tenant shall not make or have made  additional  keys, and
    Tenant shall not after existing locks or install any new additional locks or
    bolts on any door of the  Premises.  Tenant,  upon  the  termination  of its
    tenancy,  shall  deliver to  Landlord  the keys to all doors which have been
    furnished  to Tenant,  and in the event of any loss of any keys so furnished
    shall pay Landlord therefor.

7.  If  Tenant  requires  telegraphic,  telephonic,  burglar  alarm  or  similar
    services, it shall first obtain, and comply with Landlord's  instructions in
    their installation.

8.  Freight  elevator(s),  if any,  shall be available for use by all tenants in
    the Building,  subject to such  reasonable  scheduling  as landlord,  in its
    discretion,  shall deem  appropriate.  No equipment,  materials,  furniture,
    packages,  supplies,  merchandise  or other property will be received in the
    Building or carried in the elevators  except  between such hours and in such
    elevators as may be  designated  by landlord.  Tenant's  initial move in and
    subsequent  deliveries of bulky items, such as furniture,  safes and similar
    items shall, unless otherwise agreed in writing by Landlord,  be made during
    the hours of 6:00 p.m. to 6:00 a.m.  or on  Saturday  or Sunday.  Deliveries
    during normal  office hours shall be limited to normal  office  supplies and
    other small items.No deliveries shall be made which impede or interfere with
    other tenants or the operation of the Building.

<PAGE>

9.  Tenant shall not place a load upon any floor the Premises  which exceeds the
    load per square  foot which  such floor was  designed  to carry and which is
    allowed by law. Landlord shall have the right to prescribe the weight,  size
    and  position  of all  equipment,  materials,  furniture  or other  property
    brought into the Building.  Heavy objects shall, if considered  necessary by
    Landlord,  stand on such platforms as determined by Landlord to be necessary
    to properly  distribute  the weight,  which  platforms  shall be provided at
    Tenant's expense.  Business machines and mechanical  equipment  belonging to
    Tenant,  which  cause  noise or  vibration  that may be  transmitted  to the
    structure of the building or to any space  therein to such a degree as to be
    objectionable to Landlord or to any tenants in the Building, shall be placed
    and maintained by Tenant, at Tenant's expense,  on vibration  eliminators or
    other  devises  sufficient  to  eliminate  noise or  vibration.  The persons
    employed to move such equipment in or out of the Building must be acceptable
    to Landlord. Landlord will not be responsible for loss of, or damage to, any
    such equipment or other property from any cause,  and all damage done to the
    Building  by maintain or moving such  equipment  orother  property  shall be
    repairs at the expense of Tenant.

10. Tenant  shall not use or keep in the  Premises  any  kerosene,  gasoline  or
    inflammable  or  combustible  fluid or  material  other than  those  limited
    quantifies  necessary for the operation or maintenance of office  equipment.
    Tenant  shall  not use or  permit  to be used in the  Premises  any  foul or
    noxious gas or substance,  or permit or allow the Premises to be occupied or
    used in a manner offense or  objectionable to Landlord or other occupants of
    the Building by reason of noise, odors or vibrations, nor shall Tenant bring
    into or keep in or about the Premises any birds or animals.

11. Tenant  shall  not  use  any  method  of heating or air  conditioning  other
    than that supplied by Landlord.

12. Tenant shall not waste electricity,  water or air conditioning and agrees to
    cooperate fully with Landlord to assure the most effective  operation of the
    Building's  heating and air conditioning and to comply with any governmental
    energy-saving  rules, laws or regulations of which Tenant has actual notice,
    and shall  refrain from  attempting  to adjust  controls.  Tenant shall keep
    corridor doors closed,  and shall close window  coverings at the end of each
    business day.

13. Landlord  reserves  the  right,   exercisable  without  notice  and  without
    liability to Tenant, to change the name and street address of the Building.

14. Landlord  reserves the right to exclude from the Building  between the hours
    of 6 p.m.  and 7 a.m.  the  following  day,  or such  other  hours as may be
    established  from  time  to time  by  Landlord,  and on  Sundays  and  legal
    holidays,  any person  unless that person is known to the person or employee
    in charge of the  Building or has a pass or is properly  identified.  Tenant
    shall be responsible for all persons for whom it request passes and shall be
    liable  to  Landlord  for all acts of such  persons.  Landlord  shall not be
    liable for damage for any error with regard to the admission to or exclusion
    from the  Building of any  person.  Landlord  reserves  the right to prevent
    access to the Building in case of invasion,  mob, riot, public excitement or
    other commotion by closing the doors or by other appropriate action.

15. Tenant shall close and lock the doors of its Premises and entirely  shut off
    all water  faucets or other water  apparatus,  and  electricity,  gas or air
    outlets before Tenant and its employees leave the Premises.  Tenant shall be
    responsible  for any  damage  or  injuries  sustained  by other  tenants  or
    occupants of the Building or by Landlord for noncompliance with this rule.

16. Tenant shall not obtain for use on the Premises ice,  drinking  water,  food
    beverage,   towel  or  other  similar   services  or  accept   barbering  or
    bootblacking service upon the Premises,  except at such hours and under such
    regulations as may be fixed by Landlord.

<PAGE>

17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
    be used for any purpose other than that for which they were  constructed and
    no foreign  substance of any kind whatsoever  shall be thrown  therein.  The
    expense of any breakage,  stoppage or damage resulting from the violation of
    this rule shall e borne by the tenant  who,or  whose  employees or invitees,
    shall have caused it.

18. Tenant  shall  not  sell,  or  permit  the  sale at  retail  of  newspapers,
    magazines, periodicals, theater tickets or any other goods or merchandise to
    the  general  public  in or on the  Premises.  Tenant  shall  not  make  any
    room-to-room  solicitation  of business  from other  tenants in the Project.
    Tenant shall not use the  Premises  for any business or activity  other than
    that specifically provided for in this Lease.

19. Tenant shall not install any radio or  television  antenna,  loudspeaker  or
    other  devices on the roof(s)or  exterior  walls of the Building or Project.
    Tenant  shall  not  interfere  with  radio  or  television  broadcasting  or
    reception from or in the Project or elsewhere.  Notwithstanding  anything to
    the contrary in this  Paragraph  19,  Tenant  shall have the right,  for its
    personal use and not for the use or enjoyment of any third party, to install
    and use a microwave dish,  antenna, or other  telecommunications  equipment,
    which shall not be unsightly and shall be subject to  Landlord's  reasonable
    approval and all applicable laws and regulations.

20. Tenant  shall not mark,  drive  nails,  screw or drill into the  partitions,
    woodwork  or  plaster or in any deface  the  Premises  or any part  thereof,
    except  in  accordance  with  the  provisions  of the  Lease  pertaining  to
    alterations.  Landlord reserves the right to direct electricians as to where
    and how telephone and telegraph  wires are to be introduced to the Premises.
    Tenant  shall not cut or bore  holes for wires.  Tenant  shall not affix any
    floor  covering  to the  floor of the  Premises.  In any  manner  except  as
    approved  by  Landlord.  Tenant  shall  repair  any  damage  resulting  from
    noncompliance with this rule.

21. Tenant  shall not  install,  maintain  or  operate  on the  exterior  of the
    Premises any vending machines without the written consent of Landlord.

22. Canvassing,  soliciting and  distribution  of handbills or any other written
    material,  and  peddling  in the Project are  prohibited,  and Tenant  shall
    cooperate to prevent such activities.

23. Landlord  reserves the right to exclude or expel from the Project any person
    who, in Landlord's judgment, is intoxicated or under the influence of liquor
    or drugs or who is in violation of any of the Rules and  Regulations  of the
    Building.

24. Tenant shall store all its trash and garbage within its Premises or in other
    facilities provided by Landlord.  Tenant shall not place in any trash box or
    receptacle  any  material  which  cannot be disposed of in the  ordinary and
    customary  manner of trash and  garbage  disposal.  All  garbage  and refuse
    disposal  shall be made in accordance  with  directions  issued from time to
    time by Landlord.

25. The Premises shall not be used for the storage of merchandise  held for sale
    to the general public,  or for loading or for manufacturing of any kind, nor
    shall  the  Premises  be used for any  improper,  immoral  or  objectionable
    purpose.  No cooking  shall be done or  permitted  on the  Premises  without
    Landlord's  consent,  except the use by Tenant of  Underwriters'  laboratory
    approved  equipment  for brewing  coffee,  tea,  hot  chocolate  and similar
    beverages shall be permitted,  and the use of a microwave oven,  toaster and
    toaster  oven for  employees  use  shall be  permitted,  provided  that such
    equipment  and use is in  accordance  with all  applicable  federal,  state,
    county and city laws, codes, ordinances, rules and regulations.

26. Tenant  shall not use in any space or in the public halls of the Project any
    hand truck except those  equipped  with rubber tires and side guards or such
    other material-handling  equipment as Landlord may approve. Tenant shall not
    bring any other vehicles of any kind into the Building or Project.

<PAGE>

27. Without the written  consent to  Landlord,  Tenant shall not use the name of
    the Building or Project in  connection  with or in promoting or  advertising
    the business of Tenant except as Tenant's address.

28. Tenant  shall  comply  with  all  safety,  fire  protection  and  evacuation
    procedures  and  regulations  established  by Landlord  or any  governmental
    agency.

29. Tenant assumes any and all  responsibility  for protecting its Premises from
    theft, robbery and pilferage,  which includes keeping doors locked and other
    means of entry to the Premises closed.

30. To the extent Landlord  reasonably deems it necessary to exercise  exclusive
    control over any portions of the Common Areas for the mutual  benefit of the
    tenants in the  Project,  Landlord  may do so subject to  non-discriminatory
    additional Rules and Regulations.

31. Tenant's requirements will be attended to only upon appropriate  application
    to the Project management office by an authorized  individual.  Employees of
    Landlord shall not perform any work or do anything  outside of their regular
    duties unless under special  instructions from Landlord,  and no employee of
    Landlord will admit any person  (Tenant or otherwise) to any office  without
    specific instructions from Landlord.

32. Landlord  may waive any one or more of these Rules and  Regulations  for the
    benefit of Tenant or other tenant,  but no such waiver by Landlord  shall be
    construed  as a waiver of such Rules and  Regulations  against any or all of
    the tenants of the Project.

33. These Rules and  Regulations  are in addition to, and shall not be construed
    to in any way  modify or amend,  in whole or in part,  the terms  covenants,
    agreements and conditions of the Lease.

34. Landlord  reserves  the right to make such  other and  reasonable  Rules and
    Regulations  as, in its  judgment,  may from  time to time to be needed  for
    safety and  security,  for care and  cleanliness  of the Project and for the
    preservation of good order therein. Tenant agrees to abide by all such Rules
    and Regulations herein above stated and any additional rules and regulations
    which are adopted.

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

<PAGE>

                                    EXHIBIT G

                            PROJECT SIGNAGE CRITERIA

                                To be determined.

                            Exhibit G was left blank.

<PAGE>

                                    EXHIBIT H

                          HAZARDOUS MATERIALS ADDENDUM

This  Exhibit H is  hereby  attached  to and made a part of the  Lease  dated 29
September  2000, by and between Eric and Shirley  Pepys,  ("Landlord")  and Gish
Biomedical, Inc., a California corporation"), concerning the Premises located at
22942 Arroyo Vista, Rancho Santa Margarita, California.

1.  Tenant  shall  promptly  notify  Landlord  of,  and shall  promptly  provide
    Landlord  with true,  correct,  complete  and legible  copies of, all of the
    following environmental items relating to the Premises which may be filed or
    prepared by or on behalf of, or delivered to or served upon, Tenant: reports
    filed pursuant to any self-reporting requirements, reports filed pursuant to
    any  applicable  laws or  this  Lease,  all  permit  applications,  permits,
    monitoring  reports,  workplace  exposure and community exposure warnings or
    notices and all other reports,  disclosures,  plans or documents (even those
    which may be characterized as  confidential)  relating to water  discharges,
    air pollution,  waste generation or disposal,  underground  storage tanks or
    Hazardous Materials.

2.  In addition to Tenant's routine reporting obligations described in Paragraph
    1 above,  Tenant  shall  promptly  notify  Landlord  of, and shall  promptly
    provide Landlord with true, correct,  complete and legible copies of, all of
    the  following  environmental  items  relating to the Premises  which may be
    filed or  prepared  by or on behalf  of,  or  delivered  to or served  upon,
    Tenant: all orders,  reports,  notices,  listings and  correspondence  (even
    those which may be considered  confidential)  of or concerning  the release,
    investigation of, compliance, clean up, remedial and corrective actions, and
    abatement of Hazardous  Materials  whether or not required by any applicable
    laws,  including,  but not  limited to,  reports and notices  required by or
    given pursuant to any applicable  laws,  and all  complaints,  pleadings and
    other legal documents filed against Tenant related to Tenant's use, handling
    storage or disposal of Hazardous Materials. In the event of a release of any
    Hazardous  Materials  in, on or about the  Premises or the  Project,  Tenant
    shall   promptly   provide   Landlord   with   copies  of  all  reports  and
    correspondence  with or from all governmental  agencies,  authorities or any
    other persons relating to such release.

3.  Prior to the  execution of this Lease,  Tenant shall  complete,  execute and
    deliver to  Landlord a Hazardous  Materials  Questionnaire  (the  "Hazardous
    Materials Questionnaire") in the form of Exhibit I, and Tenant shall certify
    to  Landlord  all   information   contained  in  the   Hazardous   Materials
    Questionnaire  as true and  correct to the best of  Tenant's  knowledge  and
    belief.  The completed  Hazardous  Materials  Questionnaire  shall be deemed
    incorporated  into  this  Lease  for all  purposes,  and  Landlord  shall be
    entitled  to  rely  fully  on the  information  contained  therein.  On each
    anniversary of the Commencement Date (each such date is hereinafter referred
    to as a "Disclosure  Date"),  until and including the first  Disclosure Date
    occurring after the expiration or sooner  termination of this Lease,  Tenant
    shall disclose to Landlord in writing the names and amounts of all Hazardous
    Materials, or any combination thereof, which were stored,  generated or used
    or  disposed of on, in,  under or about the  Premises  for the  twelve-month
    period prior to and after each  Disclosure  Date, or which Tenant intends to
    store,  generate,  use or dispose  of on,  under or about the  Premises.  At
    Landlord's option,  Tenant's  disclosure  obligations under this Paragraph 3
    shall  include a  requirement  that  Tenant  update,  execute and deliver to
    Landlord the Hazardous Materials Questionnaire,  as the same may be modified
    by Landlord from time to time.

4.  Landlord and Landlord's  agents and employees shall have the right,  but not
    the obligation, to inspect, investigate, sample and/or monitor the Premises,
    including any soil,  water,  groundwater  or other  sampling,  and any other
    testing,  digging,  drilling or analyses,  at any time to determine  whether
    Tenant is  complying  with the terms of this  Exhibit  H, and in  connection
    therewith,  Tenant shall  provide  Landlord with full access to all relevant
    facilities,  records and personnel.  If Tenant is not in compliance with any
    of the  provisions  of this Exhibit H,  Landlord and  Landlord's  agents and
    employees shall have the right, but not the obligation,  without  limitation
    upon any of  Landlord's  other  rights and  remedies  under this  Lease,  to
    immediately  enter upon the Premises and to discharge  Tenant's  obligations
    under  this  Exhibit  H  at  Tenant's  expense,  notwithstanding  any  other
    provision of this Lease.  Landlord and Landlord's agents and employees shall
    endeavor to minimize  interference  with Tenant's  business but shall not be
    liable for any such interference.  All sums reasonably disbursed,  deposited
    or incurred by Landlord in connection therewith,  including, but not limited
    to, all costs, expenses and actual attorneys' fees, shall be due and payable
    by Tenant to Landlord, as an item of additional rent, on demand by Landlord,
    together with interest thereon at the maximum interest rate permitted by law
    from the date of such demand until paid by Tenant.

<PAGE>

5.  Landlord,  at Tenant's sole cost and expense,  shall have the right, but not
    the obligation,  to join and participate in any legal proceedings or actions
    initiated in connection  with any claims or causes of action  arising out of
    the storage,  generation,  use or disposal by Tenant, its agents, employees,
    contractors or invitees, of Hazardous Materials in, on, under, from or about
    the Premises or any other portion of the sublessees Project. If the presence
    of any Hazardous  Materials in, on, under or about the Premises or any other
    portion of the Project caused or permitted by Tenant, its agents, employees,
    contractors,  sublessees  or invitees,  results in (i) injury to any person,
    (ii) injury to or any  contamination  of the  Premises or (iii) injury to or
    contamination of any real or personal property wherever situated, Tenant, at
    its sole cost and  expense,  shall  promptly  take all actions  necessary to
    return the Premises or such other  portion of the Project,  to the condition
    existing  prior  to the  introduction  of such  Hazardous  Materials  to the
    Premises  and  to  remedy  or  repair  any  such  injury  or  contamination.
    Notwithstanding  the foregoing,  Tenant shall not, without  Landlord's prior
    written consent, take any remedial action in response to the presence of any
    Hazardous Materials in, on, under or about the Premises or any other portion
    of the Project,  or enter into any settlement  agreement,  consent decree or
    other compromise with any governmental  agency with respect to any Hazardous
    Materials claims; provided,  however, Landlord's prior written consent shall
    not be necessary in the event that the presence of Hazardous  Materials  in,
    on,  under or about the  Premises  or any other  portion of the  Project (i)
    poses an immediate threat to the health, safety or welfare of any individual
    or (ii) is of such a nature that an immediate remedial response is necessary
    and it is not  possible  to obtain  Landlord's  consent  before  taking such
    action.

6.  Promptly upon the  expiration or sooner  termination  of this Lease,  Tenant
    shall  represent  to Landlord in writing that (i) Tenant has made a diligent
    effort to determine  whether any  Hazardous  Material s are in, on, under or
    about  the  Premises  or any  other  portion  of the  Project,  and  (ii) no
    Hazardous  Materials  exist in, on, under or about the Premises or any other
    portion of the Project other than as specifically  identified to Landlord by
    Tenant in writing. To ensure performance of Tenant's  obligations under this
    Paragraph 7, Landlord may, at any time within one (1) year of the expiration
    of the Term,  or upon the  occurrence  of an Event of Default,  by notice to
    Tenant,  require that Tenant promptly  commence and diligently  prosecute to
    completion an environmental  evaluation of the Premises or any other portion
    of the Project.  In connection  therewith,  Landlord may require Tenant,  at
    Tenant's sole cost and expense,  to immediately  hire an outside  consultant
    satisfactory  to Landlord to perform a complete  environmental  audit of the
    Premises or any other  portion of the  Project,  an  executed  copy of which
    shall be  delivered  to Landlord  within  thirty (30) days after  landlord's
    request  therefor.  If  Tenant  or the  environmental  audit  discloses  the
    existence of Hazardous  Materials in, on, under or about the Premises or any
    other  portion  of  the  Project,   Tenant  shall,  at  Landlord's  request,
    immediately  prepare  and submit to Landlord  within  thirty (30) days after
    such  request  a  comprehensive   plan,  subject  to  Landlord's   approval,
    specifying  the actions to be taken by Tenant to return the  Premises or any
    other  portion  of  the  Project  to the  condition  existing  prior  to the
    introduction of such Hazardous Materials.  Upon Landlord's approval, of such
    clean up plan,  Tenant  shall,  at Tenant's  sole cost and expense,  without
    limitation  on any  rights  and  remedies  of  Landlord  under  this  Lease,
    immediately  implement such plan and proceed to clean up Hazardous Materials
    in accordance with all applicable laws and as required by such plan and this
    Lease.

7.  The  provisions  of  this  Exhibit H  shall survive any  termination of this
    Lease.

              /s/ EP  /s/ SP                         /s/ KDS
          ------------------------                   ----------------------
           Landlord's Initials                          Tenant's Initials

<PAGE>

                                    EXHIBIT I

                        HAZARDOUS MATERIALS QUESTIONNAIRE

This  questionnaire is designed to solicit  information  regarding your proposed
use of hazardous or toxic  materials.  Please  complete  the  questionnaire  and
return it to SARES  REGIS  Group for  evaluation.  If your use of  materials  or
generation of wastes is considered to be significant, further information may be
requested regarding your plans for hazardous and toxic materials management.

Your cooperation in this matter is appreciated. If you have any questions do not
hesitate to call us for assistance.

I.       PROPOSED LESSEE OR TENANT

                                     D.B.A.:

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Name (Corporation, Individual, Corporate or Individual D.B.A., or Public Agency)
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Standard Industrial Classification Code (SIC)
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Street Address

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City, State, Zip Code
Contact Person & Title:
Telephone Number:  (___) _________          Facsimile Number:  (___) __________

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Street Address

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City, State, Zip Code

III.     DESCRIPTION OF PROPOSED FACILITY USE

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Does the  operation of your  business  involve the use,  generation,  treatment,
storage,  transfer or disposal of hazardous  wastes or  materials?  Yes _____ No
_____.  If yes,  or if your SIC code  number  is  between  2000 to 4000,  please
complete Section IV.

IV.      PERMIT DISCLOSURE

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If your answer is yes to any of the above questions  please complete  Sections V
and VI.

<TABLE>

<S>                                        <C>                                            <C>

                                                                                               Quantity On A

     Material                                   Storage Method                                 Monthly Basis

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

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

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

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

</TABLE>

Attach additional sheets if necessary.

Is any  facility  modification  required or planned to  mitigate  the release of
toxic or hazardous substance or wastes into the environment?  Yes ____ No _____.
If yes, please describe the proposed facility modifications:

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VI.      HAZARDOUS WASTE DISCLOSURE

Will any  hazardous  waste,  including  recyclable  waste,  be  generated by the
operation of your business?

Yes _____ No _____.  If yes,  please  list the  hazardous  waste  which  will be
generated at the facility,  its hazard class and  volume/frequency of generation
on a monthly basis.

<TABLE>

<S>                                              <C>                                            <C>

       Waste Name                                     Hazard Class                                  Volume/Month

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

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

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

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

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

</TABLE>

<PAGE>

Attach additional sheets if necessary.

       Waste Name                                    Storage Method

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

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

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

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

If yes, please also describe the method(s) of disposal for each waste.  Indicate
where disposal will take place and method of transportation to be used:

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Is any treatment or processing of hazardous wastes to be conducted  onsite?  Yes
____ No ____. If yes, please describe proposed treatment/processing methods:

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Which agencies are  responsible  for monitoring and evaluating  compliance  with
respect to the storage and disposal of hazardous  materials or wastes at or from
the Premises?

(Please list all agencies)

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Have there been any agency enforcement actions regarding the company facilities,
or  any  existing  company  facilities,  or any  past,  pending  or  outstanding
administrative  orders or consent decrees?  Yes ____ No ____. If yes, have there
been any continuing  compliance  obligations imposed on your company as a result
of decrees or orders? Yes ____ No ____. If yes, please describe:

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Has the company  been the  recipient  of requests  for  information,  notice and
demand  letters,  cleanup and  abatement  orders,  or cease and desist orders or
other administrative inquiries? Yes _____ No _____. If yes, please describe:

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Are there any pending citizen  lawsuits,  or have any notices of violations been
provided to the company or any existing facilities pursuant to the citizens suit
provisions of any statute? Yes _____ No _____. If yes, please describe:

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<PAGE>

Have  there  been  any   previous   lawsuits   against  the  company   regarding
environmental concerns?

Yes _____ No _____. If yes, please describe how these lawsuits were resolved?

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Has an environmental audit ever been conducted at any of your company's existing
facilities? Yes _____ No _____. If yes, please describe:

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Does your company carry environmental impairment insurance? Yes _____ No ___. If
yes,  what is the name of the  carrier  and what are the  effective  periods and
monetary limits of such coverage?

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This Hazardous  Materials  Questionnaire is certified as being true and accurate
and has been completed by the party whose  signature  appears below on behalf of
Tenant as of the date set forth below.

Dated: ____________              Signature:  _________________________________
                                 Print Name: _________________________________
                                 Title:  _____________________________________

<PAGE>

                                     Rider 1

                                OPTION TO EXTEND

1. Option Right.  Landlord hereby grants to the Tenant  originally  named in the
Summary  (the  "Original  Tenant") one (1) option to extend the Lease Term for a
period of five (5) years (the "Option Term"),  which option shall be exercisable
only by written  notice  delivered  by Tenant to  Landlord  as  provided  below,
provided  that,  as of the date of  delivery  of such  notice,  Tenant is not in
default  under this Lease and Tenant has not  previously  been in default  under
this Lease more than once.  Upon the proper  exercise  of such option to extend,
and provided  that,  as of the end of the initial  Lease Term,  Tenant is not in
default  under this Lease and Tenant has not  previously  been in default  under
this Lease more than once, the Lease Term, as it applies to the Premises,  shall
be extended for a period of five (5) years.  The rights  contained in this Rider
Paragraph 1 shall be personal to the  Original  Tenant and may only be exercised
by the Original Tenant (and not any assignee,  sublessee or other  transferee of
the Original  Tenant's  interest in this Lease) if the Original  Tenant occupies
the entire Premises.

2. Option Rent.  The rent payable by Tenant  during the Option Term (the "Option
Rent")  shall be equal to ninety  percent  (90%) of the annual  rental  rate per
rentable square foot (and the additional rent and considering any "base year" or
"expense  stop"  applicable  thereto) at which,  as of the  commencement  of the
Option Term, tenants are leasing non-sublease,  non-encumbered, non-equity space
comparable in size, location and quality to the Premises, for a term of five (5)
years,  which  comparable  space is located  in the local  market,  taking  into
consideration the following concessions:  (a) rental abatement  concessions,  if
any, being granted such tenants in connection  with such comparable  space;  and
(b) tenant  improvements  or  allowances  provided  or to be  provided  for such
comparable space, taking into account,  and deducting the value of, the existing
improvements in the Premises,  such value to be based upon the age,  quality and
layout of the  improvements  and the extent to which the same can be utilized by
Tenant based upon the fact that the precise tenant improvements  existing in the
Premises are specifically suitable to Tenant ("Market Rent").

If  Landlord  and  Tenant  are unable to agree on Market  Rent for  purposes  of
determining  the Option Rent within four (4) months prior to the  expiration  of
the initial  Lease Term,  then  Landlord and Tenant shall  attempt to agree on a
single  real  estate  appraiser  with at least  five  (5)  years  experience  in
appraising  industrial or research and development buildings in the county where
the Premises are located (a  "Qualified  Appraiser").  If the parties agree on a
single  Qualified  Appraiser  within  fifteen  (15) days,  then each party shall
submit to such Qualified Appraiser its opinion of the Market Rent as of the date
of  the  exercise  of the  Option.  The  sole  responsibility  of the  Qualified
Appraiser will be to determine  which of the Market Rents  submitted by Landlord
and Tenant most  accurately  reflects the Market Rent for the Premises as of the
date of the exercise of the Option. The Qualified  Appraiser shall select either
Landlord's  or Tenant's  Market Rent.  The  Qualified  Appraiser has no right to
propose a middle ground or any modification of the determination  made by either
party. The Qualified  Appraiser's choice will be submitted to the parties within
twenty (20) days after his or her engagement.  Such determination will bind both
Landlord  and Tenant.  If the parties are unable to agree on a single  Qualified
Appraiser  within  such  fifteen  (15) day  period,  each party  will  appoint a
Qualified  Appraiser on the sixteenth  (16th day).  Each party will pay the fees
and expenses of the  Qualified  Appraiser it selected to select the  determining
Qualified Appraiser.  Each such Qualified Appraiser shall then designate a third
Qualified  Appraiser,  who shall make the determination as described above. Each
party will pay one-half the cost of the determining Qualified Appraiser.

3. Exercise of Option.  The option  contained in this Rider Paragraph 3 shall be
exercised by Tenant, if at all, only in the following  manner:  (i) Tenant shall
deliver  written  notice to Landlord  not less than six (6) months  prior to the
expiration  of the initial  Lease Term,  stating  that Tenant is  interested  in
exercising its option;  (ii) Landlord,  after receipt of Tenant's notice,  shall
deliver  notice  (the  "Option  Rent  Notice")  to Tenant not less than five (5)
months prior to the  expiration  of the initial  Lease Term,  setting  forth the
Option Rent;  and (iii) if Tenant wishes to exercise such option,  Tenant shall,
on or before the  earlier of (A) the date  occurring  four  months  prior to the
expiration of the initial  Lease Term,  and (B) the date  occurring  thirty (30)
days after  Tenant's  receipt of the Option Rent Notice,  exercise the option by
delivering written notice thereof to Landlord.

<PAGE>

"TENANT"                           Gish Biomedical, Inc.,
                                   a California corporation

                                   By: /s/ Kelly D. Scott
                                       -----------------------------------
                                   Name: Kelly D. Scott
                                         ---------------------------------
                                   Title: President and Chief Executive Officer

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

                                   By: /s/ Les Taeger

                                       ------------------------------------
                                   Name: Les Taeger

                                         ----------------------------------
                                   Title: Chief Financial Officer

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

"LANDLORD"                         Eric and Shirley Pepys,

                                   By: /s/ Eric Pepys

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

                                   By:  /s/ Shriley Pepys

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

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