Document:

Exhibit 10.7

                               DATED 30 JUNE 1999

                             SUON CAMBRIDGE LIMITED

                                       to

                                 DIOMED LIMITED

                                   UNDERLEASE
                                       of
                        Plot 2000 Cambridge Research Park
                                    Cambridge

                                 Term: 25 years
                            Commences: 30 April 1999
                   Initial Rent: [Pounds sterling]302,375 p.a.

[logo IM)
                                                       IRWIN MITCHELL Solicitors
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                                TABLE OF CONTENTS

PARTICULARS ..................................................................1
OPERATIVE PROVISIONS: ........................................................3
  DEFINITIONS AND INTERPRETATION .............................................3
  PARTICULARS ................................................................5
  INTERPRETATION OF RESTRICTIONS AND LIABILITY ...............................5
  CLAUSES AND CLAUSE HEADINGS ................................................5
  SINGULAR AND PLURAL MEANINGS ...............................................6
  STATUTES AND STATUTORY INSTRUMENTS .........................................6
  GENDER .....................................................................6
  JOINT AND SEVERAL OBLIGATIONS ..............................................6

THE LETTING TERMS ............................................................6
TENANT'S COVENANTS ...........................................................7
  RENT .......................................................................7
  INTEREST ...................................................................7
  OUTGOINGS AND CONTRIBUTIONS ................................................7
  REPAIR .....................................................................8
  DECORATIONS ................................................................8
  LANDLORD'S RIGHT OF INSPECTION AND RIGHT OF REPAIR .........................8
  YIELD UP IN REPAIR AT THE END OF THE TERM ..................................9
  RELEVANT DEFECTS ..........................................................10
  ALTERATIONS ...............................................................10
  ALIENATION ................................................................11
  REGISTRATION OF DISPOSITIONS OF THIS LEASE ................................15
  ENFORCEMENT OF UNDERLEASES ................................................15
  USER ......................................................................16
  RESTRICTIONS AFFECTING USE OF THE PREMISES ................................16
  ADVERTISEMENTS AND SIGNS ..................................................17
  COMPLIANCE WITH STATUTES, ETC .............................................18
  PLANNING PERMISSIONS ......................................................19
  COMPLIANCE WITH TOWN PLANNING .............................................19
  CLAIMS MADE BY THIRD PARTIES ..............................................20
  EXPENSES OF THE LANDLORD ..................................................20
  OBSTRUCTION OF WINDOWS OR LIGHTS AND EASEMENTS ............................21
  CLEANING [AND INSURANCE] OF WINDOWS .......................................21
  VALUE ADDED TAX ...........................................................21
  NOTICES "TO LET" AND "FOR SALE" ...........................................21
  ENCUMBRANCES ..............................................................22
  SUPERIOR LEASE COVENANTS ..................................................22

PROVISOS ....................................................................22
  PROVISO FOR RE-ENTRY ......................................................22
  POWER FOR LANDLORD TO DEAL WITH ADJOINING PROPERTY ........................23
  EXEMPTION FROM LIABILITY IN RESPECT OF SERVICES ...........................24
  COMPENSATION FOR DISTURBANCE ..............................................24
  REMOVAL OF PROPERTY AFTER DETERMINATION OF TERM ...........................24
  NOTICES CONSENTS AND APPROVALS ............................................24
  SUPERIOR LANDLORD .........................................................25

LANDLORD'S COVENANTS ........................................................26
  QUIET ENJOYMENT ...........................................................26

OBLIGATIONS IN SCHEDULES TO THIS LEASE ......................................26

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OPTION TO DETERMINE .........................................................26

SCHEDULE 1 ..................................................................27
  PART 1: RIGHTS ENJOYED WITH DEMISE ........................................27
  PART 2: EXCEPTIONS AND RESERVATIONS .......................................27

SCHEDULE 2 ..................................................................29
  RENT REVIEWS ..............................................................29
  THE REVIEW DATES ..........................................................29
  UPWARD ONLY RENT REVIEWS ..................................................29
  THE MARKET RENT ...........................................................29
  MATTERS TO BE DISREGARDED   ...............................................30
  PROCEDURE FOR DETERMINATION OF MARKET RENT ................................31
  TIME LIMITS ...............................................................32
  RENTAL ADJUSTMENTS ........................................................32
  REVIEWED RENT RESERVED IN PHASES ..........................................32
  MEMORANDUM OF RENT REVIEW .................................................32

SCHEDULE 3 ..................................................................33
  INSURANCE PROVISIONS ......................................................33
  INSURED RISKS .............................................................33
  TENANT'S LIABILITY FOR INSURANCE PREMIUMS .................................33
  TENANT'S OBLIGATIONS IN RELATION TO INSURANCE COVER .......................34
  LANDLORD'S OBLIGATION TO INSURE AND REINSTATE .............................35
  LANDLORD'S [OBLIGATIONS AND] ENTITLEMENT IN RELATION TO INSURANCE .........36
  SUSPENSION OF RENT ........................................................36
  OPTIONS TO DETERMINE ......................................................37
  RETENTION OF INSURANCE PROCEEDS ...........................................37

SCHEDULE 4 ..................................................................38
  SECTION 1: SERVICE CHARGE PROVISIONS ......................................38
  TENANT'S LIABILITY TO PAY SERVICE CHARGE ..................................38
  DEFINITION OF "DUE PROPORTION\ ............................................38
  ADVANCE PAYMENTS ON PRELIMINARY BASIS .....................................38
  SERVICE CHARGE ACCOUNTS AND ADJUSTMENTS ...................................39
  EXCEPTIONAL EXPENDITURE ...................................................39
  ADVANCE PAYMENTS DEPOSIT ACCOUNT ..........................................40
  LANDLORD'S PROTECTION PROVISIONS ..........................................40
  VACANT PARTS OF THE BUILDING AND ACTIONS BY THE LANDLORD ..................41
  SERVICE CHARGE TO EXCLUDE TENANTS' LIABILITIES ............................41
  MANAGEMENT CHARGES ........................................................41
  THE LANDLORD'S OBLIGATION TO PROVIDE SERVICES .............................42

  SECTION 2: ESSENTIAL SERVICES AND HEADS OF CHARGE .........................43
  COMMON PARTS ..............................................................43
  REPAIRS AND STATUTORY REQUIREMENTS ........................................43
  FIRE FIGHTING EQUIPMENT, SECURITY AND PUBLIC ADDRESS ......................44
  INSURANCES ................................................................44
  GARDEN AREAS ..............................................................44
  SECTION 3: DISCRETIONARY SERVICES AND HEADS OF CHARGE .....................44
  LEGAL PROCEEDINGS .........................................................44
  EMPLOYEES .................................................................45
  SECURITY ..................................................................45
  FORM OF GUARANTEE ON ASSIGNMENT UNDER CLAUSE 3.10.4 .......................46
  GUARANTEE PROVISIONS ......................................................46
  GUARANTEE .................................................................46
  NO WAIVER OR RELEASE OF LIABILITY .........................................46
  GUARANTOR TO ACCEPT NEW LEASE UPON DISCLAIMER .............................47
  INDEMNITY FOLLOWING DISCLAIMER ............................................48
  SUBORDINATION OF RIGHTS OF THE GUARANTOR ..................................48
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                                   PARTICULARS

COLUMN 1                               COLUMN 2

THE LANDLORD                           SUON  CAMBRIDGE LIMITED whose
                                       registered office is at 22 Grosvenor
                                       Square, London WIX ODT

THE TENANT                             DIOMED LIMITED whose registered office is
                                       at The Jeffreys Building, Cowley Road,
                                       Cambridge CB4 4WS

THE PREMISES                           Plot 2000 Cambridge Research Park,
                                       Cambridge, shown edged in red on Plan 2

THE TERM                               The term of 25 years commencing on 30
                                       April 1999 (determinable in accordance
                                       with clause 7 of this Lease)

THE RENT                               The yearly rent of [Pounds
                                       sterling]302,375.00

THE RENT COMMENCEMENT DATE             30 January 2000

THE SERVICE CHARGE COMMENCEMENT DATE   30 April 1999

THE BANK                               Lloyds Bank Plc [Graphic Omitted}

THE PRESCRIBED RATE                    The base rate for the time being of the
                                       Bank plus 4%

THE EXTERNAL DECORATING YEARS          2002 and from then in every subsequent
                                       third year of the term

THE INTERNAL DECORATING YEARS          2004 and from then in every subsequent
                                       fifth year of the term

THE AUTHORISED USE                     Offices and Research and Development use
                                       within Use Class B1 of the Town & Country
                                       Planning (Use Classes) Order 1987 or such
                                       other use within that Use Class as the
                                       Landlord consents to, consent not to be
                                       unreasonably withheld

THE ENCUMBRANCES                       The matters contained or referred to in
                                       the registers of Title Number CB209861
                                       and in the Superior Lease, so far as they
                                       relate to and affect the Premises (other
                                       than the obligation to pay rent)

                               [Graphic Omitted]
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RENT REVIEW YEARS                       Each consecutive period of five years of
                                        the Term

THE NOTIONAL TERM                       A term of 10 years from the relevant
                                        review date

THE NET INTERNAL AREA                   the net internal area of the Premises
                                        measured in accordance with the
                                        Measuring Code and deemed for the
                                        purposes of this Lease to be 20,500
                                        square feet

THE SERVICE CHARGE DATES                1 January and 31 December in each year

                                       2
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DATE: 30 JUNE 1999

PARTIES:

(1) THE LANDLORD

and

(2) THE TENANT

OPERATIVE PROVISIONS:

1    DEFINITIONS AND INTERPRETATION

     1.1 DEFINITIONS:

     In this Lease where the context so allows:-

     "ACT" means the Landlord & Tenant (Covenants) Act 1995

     "RESEARCH PARK" means the Cambridge Research Park, shown for identification
     purposes edged in blue on Plan 1 of which the Premises form part and refers
     to each and every part of the Research Park and estate roads and any other
     areas the use and enjoyment of which is appurtenant to the Research Park
     whether or not within the boundaries of the Research Park and includes the
     Research Park as enlarged or reduced from time to time during the
     Perpetuity Period

     "COMMON PARTS" means those parts of the Research Park to be used in common
     by any of the Tenant, other tenants and occupiers of the Research Park, the
     Landlord, Superior Landlord and those properly authorised or permitted by
     them to do so, and "Common Parts" includes (but without limitation) the
     estate roads, any courtyards, external paviours, car parks, service areas
     and other such amenities, but excludes any such parts as may be within the
     Premises or let or capable or designed to be let to a tenant or occupier

     "CONDUCTING MEDIA" means any of the drains, sewers, conduits, flues,
     gutters, gullies, channels, ducts, shafts, watercourses, pipes, cables,
     wires and mains and includes pumping stations, sewerage treatment
     facilities, sub-stations, governor-stations and other similar facilities

                                       3
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                               [GRAPHIC OMITTED]
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     "ENCUMBRANCES" means the restrictions, stipulations, covenants, rights,
     reservations, provisions and other matters contained, imposed by or
     referred to in the documents (if any), brief particulars of which are set
     out in the Particulars

     "INSURED RISKS" has the meaning given to it in Schedule 3

     "INTEREST" means interest at the Prescribed Rate (as well after as before
     judgment), or such other comparable rate as the Landlord may reasonably
     designate if the Prescribed Rate ceases to be published, compounded at
     quarterly rests on 31 March, 30 June, 30 September and 31 December in each
     year

     "LANDLORD" includes all persons from time to time entitled to the immediate
     reversion to this Lease

     "LEASE" is a reference to this Underlease and includes any documents
     supplemental to this Lease

     ["MEASURING CODE" means the Code of Measuring Practice from time to time in
     force (Current edition: Fourth Edition RICS/ISVA 1993)]

     "OUTGOINGS" means in relation to and attributable to the Premises all
     non-domestic rates, water rates, water charges and all existing and future
     rates, taxes, charges, assessments, impositions and outgoings whatsoever
     (whether parliamentary municipal parochial or otherwise) which are now or
     may at any time be payable, charged or assessed on property or the owner or
     occupier of property, but 'taxes" in this context does not include value
     added tax, nor any taxes imposed on the Landlord in respect of the yearly
     rent reserved by this Lease or in respect of a disposal of the interest in
     immediate reversion to this Lease

     "PERIMETER LANDSCAPING" means the planting and landscaped areas on and
     within the boundaries of the Premises and shown for identification purposes
     on the Plan and edged in green and includes any additional or varied areas
     from time to time

     "PLAN 1 AND "PLAN 2" means the plans attached to this Lease and numbered
     "Plan 1" and "Plan 2" respectively.

     "PREMISES" refers to each and every part of the Premises, and includes
     improvements and additions made to, and fixtures fittings and appurtenances
     in, the Premises, but excludes the Conducting Media and machinery and plant
     within but not exclusively serving the Premises

     "SUPERIOR LANDLORD" means the holder of a reversion whether immediate or
     not to the lease under which the Landlord holds its interest in the
     Research Park

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     "SUPERIOR LEASE" means the lease under which the Landlord holds its
     interest in the Research Park dated 11 November 1997 made between
     Harmsworth Pension Fund Trustees Limited (1) and the Landlord (2)and also
     includes any leasehold reversion whether immediate or not to such lease

     "TENANT" includes the Tenant's successors in title and assigns in whom this
     Lease may for the time being be vested

     "TERM" means the term of years granted by this Lease

     "UNSECURED UNDERLETTING" means an underletting of the whole or part of the
     Premises in relation to which the underlessor and the underlessee have
     agreed to exclude the provisions of sections 24 to 28 of the Landlord and
     Tenant Act 1954 and their agreement to do so has been duly authorised
     beforehand by the Court.

     1.2  PARTICULARS

          The Particulars form part of this Lease and words and phrases set out
          in Column 1 of the Particulars have the meanings respectively
          attributed to them in Column 2 of the Particulars

     1.3  INTERPRETATION OF RESTRICTIONS AND LIABILITY

          1.3.1 Where the Tenant is placed under a restriction in this Lease,
                the restriction includes the obligation on the Tenant to use
                reasonable endeavours not to permit or allow the infringement of
                the restriction by any person.

          1.3.2 References to "liability" include, where the context allows,
                claims, demands, proceedings, damages, losses, costs and
                expenses.

     1.4  CLAUSES AND CLAUSE HEADINGS

          1.4.1  The clause and paragraph headings in this Lease are for ease of
                 reference only and are not to be taken into account in the
                 construction or interpretation of any covenant condition or
                 proviso to which they refer.

          1.4.2  Unless the context otherwise requires, references:

                 1.4.2.1  to numbered clauses and Schedules are references to
                          the relevant clause in or Schedule to this Lease; and

                 1.4.2.2  in any Schedule to a numbered paragraph are references
                          to the relevant paragraph in that Schedule.

                                       5
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     1.5  SINGULAR AND PLURAL MEANINGS

          Words in this Lease importing the singular meaning, where the context
          so allows, include the plural meaning and vice versa.

     1.6  STATUTES AND STATUTORY INSTRUMENTS

          References in this Lease to any statutes or statutory instruments
          include and refer to any statute or statutory instrument amending
          consolidating or replacing them respectively from time to time in
          force, and references to a statute include statutory instruments and
          regulations made pursuant to them.

     1.7  GENDER

          Words in this Lease importing any one gender include both other
          genders and may be used interchangeably, and words denoting natural
          persons where the context so allows include corporations and vice
          versa.

     1.8  JOINT AND SEVERAL OBLIGATIONS

          At any time that the party of the second part to this Lease is two or
          more persons the expression "the Tenant" includes the plural number
          and obligations in this Lease expressed or implied to be made with the
          Tenant or by the Tenant are to be treated as made with or by such
          individuals jointly and severally.

2    THE LETTING TERMS

     In consideration of the rent reserved by and the covenants in this Lease:

     2.1  the Landlord LETS to the Tenant:

          2.1.1 ALL the Premises;

          2.1.2 TOGETHER WITH the rights set out in Schedule 1 Part 1; and

          2.1.3 EXCEPT AND RESERVED to the Landlord the rights set out in
                Schedule 1 Part 2;

     2.2  for the TERM determinable as provided by this Lease subject to the
          Encumbrances; and

     2.3  the Tenant PAYING during the Term;

                                       6
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          2.3.1  the Rent (subject to revision under Schedule 2) by equal
                 quarterly payments in advance on the usual quarter days in
                 every year the first (or a proportionate part) of such payments
                 in respect of the period commencing on the Rent Commencement
                 Date and ending on the following quarter day to be made on the
                 Rent Commencement Date;

          2.3.2  as additional rent the monies payable by the Tenant under
                 Schedules 3 and 4 commencing on the Service Charge Commencement
                 Date; and

          2.3.3  as additional rent any value added tax chargeable on the rent
                 and additional rent reserved in Clauses 2.3.1 and 2.3.2.

3    TENANT'S COVENANTS

     THE TENANT COVENANTS with the Landlord during the Term and any extension by
     statute of the tenancy created by this Lease as follows:

     3.1  RENT

          3.1.1  To pay the yearly rent reserved by this Lease, free from any
                 deductions and rights of set-off save as permitted by law, at
                 the times and in the manner required in Clauses 2.3.1 and by
                 means of a standing order to the Tenant's bankers.

          3.1.2  To pay the additional rents reserved by this Lease at the times
                 and in the manner specified in relation to each of them.

     3.2  INTEREST

          3.2.1  To pay Interest on so much of the rents under this Lease as
                 remain unpaid 14 days after they have become due from the date
                 that they became due until the payment is made to the Landlord.

          3.2.2  To pay Interest under Clause 3.2.1 for any period during which
                 the Landlord properly and reasonably refuses to accept the
                 tender of payment because of an unremedied and material breach
                 of covenant of the Tenant.

     3.3  OUTGOINGS AND CONTRIBUTIONS

          3.3.1  To pay Outgoings.

          3.3.2  To pay for all gas and electricity consumed on the Premises,
                 all charges for meters, and all standing charges.

                                       7
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     3.4  REPAIR

          3.4.1  Well and substantially to repair, maintain and clean the
                 Premises and to keep the Premises in good and substantial
                 repair, maintained and in clean condition (except in respect of
                 damage by Insured Risks as allowed in Schedule 3).

          3.4.2  To replace any Landlord's fixtures and fittings in the Premises
                 which are beyond repair at any time during or at the
                 termination of the Term.

          3.4.3  To keep any part of the Premises which are not built upon
                 adequately surfaced in good condition and free from weeds and
                 all landscaped areas properly cultivated.

     3.5  DECORATIONS

          3.5.1  To decorate the inside of the Premises in the Internal
                 Decorating Years and in the last three months of the Term
                 (howsoever determined) with two coats of good quality paint or
                 good quality polish, and with paper for those parts normally
                 papered, or other suitable and appropriate materials of good
                 quality, in a workmanlike manner (such decorations in the last
                 three months of the Term to be executed in such colours
                 patterns and materials as the Landlord may reasonably approve
                 such approval not to be unreasonably withheld).

          3.5.2  to decorator otherwise treat in a manner appropriate to the
                 materials comprising the exterior of the Premises the exterior
                 of the Premises in the External Decorating Years and also in
                 the last three months of the Term (howsoever determined) with
                 three coats of good quality paint or good quality polish or
                 other suitable material of good quality in a proper and
                 workmanlike manner (such decorations in the last three months
                 of the Term to be executed in such colours patterns and
                 materials as the Landlord may reasonably approve such approval
                 not to be unreasonably withheld).

          3.5.3  not without the consent of the Landlord such approval not to be
                 unreasonably withheld to alter cover up or change any part of
                 the architectural decorations or the external colour of the
                 Premises

     3.6  LANDLORD'S RIGHT OF INSPECTION AND RIGHT OF REPAIR

          3.6.1  To permit the Landlord and its employees or agents at all
                 reasonable times on prior written notice and (if practicable)
                 outside usual business hours of

                                       8
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                 the Tenant at the Landlord's own cost to enter in order to
                 inspect and view the Premises and examine their condition and
                 also to take a schedule of fixtures in the Premises.

          3.6.2  If any breach of covenant, defects, disrepair, removal of
                 fixtures or unauthorised alterations or additions are found on
                 inspection for which the Tenant is liable, then, on written
                 notice from the Landlord, to execute to the reasonable
                 satisfaction of the Landlord or its Surveyor all repairs works
                 replacements or removals required within three months (or
                 sooner if necessary) after the receipt of the notice.

          3.6.3  If the Tenant fails to comply with a notice under clause 3.6.2,
                 the Landlord may itself or by its workpeople or agents enter
                 the Premises and execute the repairs works replacements or
                 removals.

          3.6.4  To pay to the Landlord on demand all expenses properly so
                 incurred under clause 3.6.3 (such expenses and any Interest on
                 them to be recoverable as if they were rent in arrear).

          3.6.5  To permit the Landlord and any valuer authorised by him to
                 enter the Premises at any reasonable time on prior written
                 notice and (if practicable) outside normal business hours of
                 the Tenant to inspect and value them for the purposes of
                 assessing the sum for which they should be insured.

     3.7  YIELD UP IN REPAIR AT THE END OF THE TERM

          At the termination of this Lease or at such later time as the Landlord
          recovers possession of the Premises from the Tenant:

          3.7.1  quietly to yield up the Premises (with all additions and
                 improvements to the Premises and all fixtures in the Premises,
                 other than tenant's fixtures which the Tenant may be entitled
                 to remove) repaired, maintained, cleaned, decorated and kept in
                 accordance with the Tenant's covenants in this Lease (except in
                 respect of damage by Insured Risks as allowed in Schedule 3);

          3.7.2  if so requested by the Landlord, to remove from the Premises
                 all the Tenant's belongings - that is to say trade fixtures and
                 fittings and all notices, notice boards and signs bearing the
                 name of or otherwise relating to the Tenant (including in this
                 context any persons deriving title to the Premises under the
                 Tenant) or its business; and

                                       9
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          3.7.3  to make good to the reasonable satisfaction of the Landlord all
                 damage to the Premises resulting from the removal of the
                 Tenant's belongings from the Premises.

     3.8  RELEVANT DEFECTS

          On becoming aware of any defects in the Research Park, which are
          "relevant defects" for the purposes of Section 4 of the Defective
          Premises Act 1972, to give notice of them to the Landlord.

     3.9  ALTERATIONS

          3.9.1  Not to make any alterations or additions to or affecting the
                 structure or exterior of the Premises, or the appearance of the
                 Premises as seen from the exterior.

          3.9.2  Not without the consent of the Landlord (consent not to be
                 unreasonably withheld) to make any other alterations or
                 additions to the Premises (but the erection, alteration or
                 removal by the Tenant of internal demountable partitioning, and
                 consequential adjustments of ducting, ceiling tiles, light
                 fittings and wiring, is authorised without such consent if the
                 plans of the partitions (or details of the alteration or
                 removal of partitioning) are immediately deposited with the
                 Landlord) without:-

                 3.9.2.1 obtaining and complying with all necessary consents of
                         any competent authority and paying all charges of any
                         such authority in respect of such consents;

                 3.9.2.2 making an application supported by drawings and where
                         appropriate a specification in duplicate prepared by an
                         architect or member of some other appropriate
                         profession (who shall supervise the work throughout to
                         completion);

                 3.9.2.3 paying the reasonable fees of the Landlord and its
                         professional advisers (but for the avoidance of doubt
                         not any superior landlord any mortgagee or their
                         respective professional advisers); and

                 3.9.2.4 entering into such covenants as the Landlord may
                         reasonably require as to the execution and
                         reinstatement of the alterations.

                                       10
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          3.9.3  Not without the Landlord's previous written consent which shall
                 not be unreasonably withheld to make any alterations or
                 additions in or to the electrical circuits or installations in
                 the Premises and not to use any lighting points therein
                 otherwise than for normal lighting purposes.

          3.9.4  Not to install or erect any exterior lighting, shade, canopy or
                 awning or other structure in front of or elsewhere outside the
                 Premises without prior written consent such consent not to be
                 unreasonably withheld.

          3.9.5  On the termination of this Lease, to the extent required by the
                 Landlord, to reinstate the Premises to the condition in which
                 they were in at the grant of this Lease, such reinstatement to
                 be carried out to the reasonable satisfaction of the Landlord
                 or the Landlord's Surveyor.

          3.9.6  If the Construction (Design and Management) Regulation 1994 (as
                 amended from time to time) apply to any alterations or
                 additions:

                 3.9.6.1 the Tenant will comply with the regulations in all
                         respects; and

                 3.9.6.2 before commencing any works the Tenant will make a
                         declaration to the Health and Safety Executive in the
                         prescribed form that the Tenant is the only client in
                         relation to these works and will immediately forward a
                         copy of the declaration to the Landlord; and

                 3.9.6.3 the Tenant will update the Health and Safety file kept
                         by the Landlord (which the Landlord shall deposit with
                         the Tenant for the purpose) in relation to the Premises
                         to reflect the works and will immediately return the
                         file to the Landlord.

     3.10 ALIENATION

          3.10.1 Not to assign or charge part only of the Premises.

          3.10.2 Not to assign the whole nor underlet the whole or any part of
                 the Premises without the consent of the Landlord (such consent
                 not to be unreasonably withheld or delayed but subject in the
                 case of an assignment to the provisions of clause 3.10.4);

          3.10.3 not otherwise than by assignment or underletting permitted
                 under this clause 3.10 to:

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                 3.10.3.1 part with or share possession or occupation of the
                          whole or any part of the Premises; or

                 3.10.3.2 grant to third parties any rights over the Premises.

          3.10.4 On application by the Tenant for consent to assign the Premises
                 under clause 3.10.2 the Landlord will be entitled:

                 3.10.4.1 to give consent subject to the condition that before
                          the Tenant assigns the Premises, it enters into an
                          agreement pursuant to Section 16 of the 1995 Act under
                          which it:

                          3.10.4.1.1 guarantees performance by the proposed
                                     assignee of all the covenants on the part
                                     of the Tenant contained in this Lease;

                          3.10.4.1.2 is liable to the Landlord as principal
                                     debtor and is not released, even if the
                                     Landlord gives the proposed assignee extra
                                     time to comply with any obligation or does
                                     not insist on its strict terms;

                          3.10.4.1.3 agrees that, if this Lease is disclaimed,
                                     to accept at the Landlord's request within
                                     3 months of the disclaimer the grant of
                                     (and if the Landlord does not so request,
                                     the Landlord will at the Tenant's request
                                     within the same period grant) a new lease
                                     of the Premises on the same terms and
                                     conditions of this Lease at the date of the
                                     disclaimer and for a term ending on the
                                     date the Term of this Lease would have
                                     ended but for the disclaimer;

                          and the form of such agreement will be as reasonably
                          determined by the Landlord;

                 3.10.4.2 to withhold consent to an assignment

                          3.10.4.2.1 where in the reasonable opinion of the
                                     Landlord it has not been satisfactorily
                                     demonstrated that the proposed assignee is
                                     of a financial standing as to be able to
                                     perform and observe and will be able and
                                     perform and observe the lessees' covenants
                                     and obligations under this Lease;

                                       12
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                          3.10.4.2.2 where the assignee is a member of a group
                                     of companies of which the Tenant is itself
                                     a member as defined in clause 3.10.9 below;

                 3.10.4.3 where it is reasonable in the circumstances to
                          require, as a condition of granting consent to assign,
                          that the proposed assignee provides the Landlord with

                          3.10.4.3.1 a guarantor or guarantors of financial
                                     standing acceptable to the Landlord who
                                     will covenant with the Landlord in the
                                     terms set out in schedule 5. In determining
                                     the acceptability of the guarantor or
                                     guarantors the Landlord will act
                                     reasonably; and/or

                          3.10.4.3.2 such reasonable rent deposit arrangements
                                     and/or the provision of such additional
                                     security for the performance by the
                                     assignee of its obligations under this
                                     Lease as reasonably required by the
                                     Landlord;

                 3.10.4.4 to require, as a condition of granting consent to
                          assign, that all rents and other sums which have
                          fallen or which fall due under this Lease prior to the
                          date of the assignment have been paid to the Landlord.

          3.10.5 On the grant of an underlease, to obtain covenants by deed from
                 the underlessee direct with the Landlord that the underlessee
                 will:

                 3.10.5.1 not assign, sub-underlet or charge part only of the
                          premises underlet;

                 3.10.5.2 not part with or share possession or occupation of the
                          whole or any part of the premises underlet nor grant
                          to third parties rights over them otherwise than by a
                          permitted assignment or sub-underletting;

                 3.10.5.3 not assign sub-underlet or charge the whole of the
                          premises sub-underlet without obtaining the previous
                          consent of the Landlord under this Lease (which the
                          Landlord shall covenant in the deed mentioned above
                          not unreasonably to withhold)

                                       13
<PAGE>

                          provided that no further sub-underletting by that
                          sub-underlessee shall be permitted.

          3.10.6 On the grant of any underlease:

                 3.10.6.1 to include provisions for the revision of the rent
                          reserved by the underlease in an upward only direction
                          to correspond in time and effect with the provisions
                          for the revision of rent in this Lease;

                 3.10.6.2 not to reserve or take a premium or fine;

                 3.10.6.3 to reserve a rent which is not less than the market
                          rent as at the time of the grant of the underlease
                          (assessed in accordance with the principles in
                          Schedule 2) or the proportionate part of the market
                          rent of the Premises where only part of the Premises
                          is underlet; and

                 3.10.6.4 to include such covenants of the underlessee as are
                          not inconsistent with or impair the due performance
                          and observance of the covenants of the Tenant in this
                          Lease.

          3.10.7 Not to underlet the Premises as to sub-divide them into more
                 than four units of occupation.

          3.10.8 Not to underlet part only of the Premises otherwise than by way
                 of Unsecured Underletting.

          3.10.9 The preceding provisions of this clause 3.10 do not apply to
                 any parting with possession or occupation or the sharing of
                 occupation or sub-division of the Premises to or with any
                 member of a group of companies of which the Tenant is itself a
                 member if:

                 3.10.9.1 the interest in the Premises so created is and remains
                          no more than a terminable bare licence or
                          tenancy-at-will; and

                 3.10.9.2 the possession, occupation or subdivision are
                          immediately determined if the Tenant and the relevant
                          member cease for any reason whatsoever to be members
                          of the same group of companies;

                 and for this purpose two companies are members of a group if,
                 and only if, one is a subsidiary of the other or both are
                 subsidiaries of a third company,

                                       14
<PAGE>

                 "subsidiary" having the meaning given to it by Section 736 of
                 the Companies Act 1985.

     3.11 REGISTRATION OF DISPOSITIONS OF THIS LEASE

          To produce to and leave with the Solicitors of the Landlord a
          certified copy of the document effecting the disposition within one
          month after any disposition of this Lease or the Premises (a
          "disposition" being an assignment, charge, transfer, underlease,
          assignment or surrender of any underlease, or on any transmission by
          death or otherwise documentary evidence of devolution affecting the
          Premises), and on each occasion to pay to the Solicitors such fee as
          they may reasonably require for the registration and also any
          registration fees payable to the Superior Landlord

     3.12 ENFORCEMENT OF UNDERLEASES

          3.12.1 Not without the consent of the Landlord such consent not to be
                 unreasonably withheld or delayed to vary the terms, or waive
                 the benefit, of any covenant of the underlessee or condition in
                 an underlease of the Premises in any material respect.

          3.12.2 Not without the consent of the Landlord such consent not to be
                 unreasonably withheld to accept a surrender of any underlease
                 of the Premises.

          3.12.3 If reasonably required by the Landlord diligently to enforce
                 the covenants of the underlessee and the conditions in any
                 underlease of the Premises and where it is otherwise likely to
                 affect the Landlord's reversionary interest to exercise by way
                 of enforcement the powers of re-entry in the underlease.

          3.12.4 Not without the consent of the Landlord to accept any sum or
                 payment in kind by way of commutation of the rent payable by an
                 underlessee of the Premises.

          3.12.5 Not to accept the payment of rent from an underlessee of the
                 Premises otherwise than by regular quarterly (or more frequent)
                 payments in advance.

          3.12.6 Duly and punctually to exercise all rights to revise the rent
                 reserved by an underlease of the Premises, and not to agree
                 with an underlessee a revised rent without the approval of the
                 Landlord (such approval not to be unreasonably withheld).

                                       15
<PAGE>

     3.13 USER

          3.13.1 Not to use the Premises otherwise than for the Authorised Use.

          3.13.2 Nothing in this Lease implies or is to be treated as a warranty
                 to the effect that the use of the Premises for those purposes
                 is in compliance with all town planning laws and regulations
                 now or from time to time in force.

     3.14 RESTRICTIONS AFFECTING USE OF THE PREMISES

          3.14.1  Not to erect or install in the Premises any engine, furnace,
                  plant or machinery which causes noise fumes or vibration which
                  can be heard smelled or felt outside the Premises.

          3.14.2  Not to store in the Premises any petrol or other specially
                  inflammable explosive or combustible substance.

          3.14.3  Not to use the Premises for any noxious, noisy or offensive
                  trade or business nor for any illegal or immoral act or
                  purpose.

          3.14.4  Not to hold any sales by auction on the Premises.

          3.14.5  Not to hold in or on the Premises any exhibition public
                  meeting or public entertainment.

          3.14.6  Not to permit any vocal or instrumental music in the Premises
                  so that it can be heard outside the Premises.

          3.14.7  Not to permit livestock of any kind to be kept on the
                  Premises.

          3.14.8  Not to do anything in the Premises which may be or grow to be
                  a nuisance, annoyance, disturbance, inconvenience or damage to
                  the Landlord or its other tenants of the Research Park or to
                  the owners tenants and occupiers of adjoining and neighbouring
                  properties.

          3.14.9  Not to load or use the floors, walls, ceilings, or structure
                  of the Premises so as to cause strain damage or interference
                  with the structural parts, loadbearing framework, roof,
                  foundations, joists and external walls of the Premises.

          3.14.10 Not to overload the electrical installation or Conducting
                  Media in the Premises.

                                       16
<PAGE>

          3.14.11 Not to do anything which may interfere with or which imposes
                  an additional loading on any ventilation, heating, air
                  conditioning or other plant or machinery serving the Premises.

          3.14.12 Not to use the Premises for the sale of alcoholic liquor for
                  consumption either on or off the Premises.

          3.14.13 Not to allow any person to sleep in the Premises nor to use
                  the Premises for residential purposes.

          3.14.14 Not to permit the drains to be obstructed by oil grease or
                  other deleterious matter, but to keep thoroughly cleaned the
                  Premises and the drains serving the Premises as often as may
                  be necessary.

          3.14.15 Not to use any portion of the access roads or any service area
                  for the parking of vehicles otherwise than during the course
                  of loading and unloading nor to carry out any repairs or
                  maintenance to vehicles on the access road or any service
                  area.

          3.14.16 To observe and perform or cause to be observed and performed
                  the rules and regulations from time to time made by the
                  Landlord for the orderly and proper use of the Common Parts
                  and the security of the Research Park provided that due notice
                  of the same has been provided to the Tenant and that the same
                  are in all the circumstances fair and reasonable and that the
                  same shall not require expenditure on the part of the Tenant.

     3.15 ADVERTISEMENTS AND SIGNS

          3.15.1  Not to place or display on the exterior of the Premises or on
                  the windows or inside the Premises so as to be visible from
                  the exterior of the Premises any name, writing, notice, sign,
                  illuminated sign, display of lights, placard, poster sticker
                  or advertisement other than:

                  3.15.1.1 a suitable sign of a size and kind first approved by
                           the Landlord or the Landlord's Surveyor showing the
                           Tenant's name and business;

                  3.15.1.2 the name of the Tenant signwritten on the entrance
                           doors of the Premises in a style and manner approved
                           by the Landlord or the Landlord's Surveyor.

                                       17
<PAGE>

                  3.15.1.3 a suitable sign of a size and kind first approved by
                           the Landlord or the Landlord's Surveyor (such
                           approval not to be unreasonably withheld) showing the
                           name which the Tenant may have given to the Premises,
                           and the Landlord shall not unreasonably object to any
                           application by the Tenant to the relevant authorities
                           to change the postal address of the Premises in order
                           to incorporate this name so long as the postal
                           address continues to incorporate the name "Cambridge
                           Research Park" or such other name given to the
                           Research Park during the Term.

                  3.15.1.4 If any name, writing, notice, sign, placard, poster,
                           sticker or advertisement is placed or displayed in
                           breach of these provisions, to permit the Landlord to
                           enter the Premises and remove such name, writing,
                           notice, sign, placard, poster, sticker or
                           advertisement, and to pay to the Landlord on demand
                           the expense of so doing.

          3.15.2  Not to leave the whole of the Premises continuously empty or
                  untended for more than two weeks without:-

                  3.15.2.1 notifying the Landlord in writing; and

                  3.15.2.2 providing such caretaking or security arrangements as
                           the Landlord shall reasonably require in order to
                           protect the Premises from vandalism theft damage or
                           unlawful occupation.

     3.16 COMPLIANCE WITH STATUTES, ETC

          3.16.1  Except where such liability may be expressly within the
                  Landlord's covenants in this Lease to comply in all respects
                  with the provisions of all statutes for the time being in
                  force and requirements of any competent authority relating to
                  the Premises or anything done in or on them by the Tenant.

          3.16.2  In particular but without affecting the general operation of
                  clause 3.19.1:

                  3.16.2.1 to execute all works and do all things on or in
                           respect of the Premises which are required under the
                           Offices Shops and Railway Premises Act 1963;

                                       18
<PAGE>

                  3.16.2.2 to comply with all requirements under any present or
                           future statute, order, by-law or regulation as to the
                           use or occupation of or otherwise concerning the
                           Premises;

                  3.16.2.3 to execute with all due diligence (commencing work
                           within two months or sooner if necessary and then
                           proceeding continuously) all works to the Premises
                           for which the Tenant is liable under this clause 3.16
                           and of which the Landlord has given notice to the
                           Tenant;

                  and, if the Tenant does not comply with clause 3.16.2.3, to
                  permit the Landlord to enter the Premises to carry out such
                  works, and to indemnify the Landlord on demand for the
                  expenses of so doing (including surveyors' and other
                  professional advisers' fees), such expenses and any Interest
                  on them to be recoverable as if they were rent in arrear.

     3.17 PLANNING PERMISSIONS

          3.17.1  Not without the consent of the Landlord such consent not to be
                  unreasonably withheld to make any application under the Town
                  and Country Planning Acts, as defined in the Town and Country
                  Planning Act 1990, to any local planning authority for
                  permission to develop, including change of use of, the
                  Premises.

          3.17.2  To indemnify the Landlord against expenses payable in respect
                  of such applications and to reimburse to the Landlord the
                  reasonable costs it may properly incur in connection with such
                  consent.

          3.17.3  Forthwith to give to the Landlord full particulars in writing
                  of the grant of planning permission.

          3.17.4  Not to implement any planning permission if the same
                  materially adversely affects the Landlord's reversion and the
                  Landlord makes reasonable objection to any of the conditions
                  subject to which it has been granted.

     3.18 COMPLIANCE WITH TOWN PLANNING

          3.18.1  To perform and observe the requirements of statutes and
                  regulations relating to town and country planning and
                  environmental protection applying to the Premises, and to
                  obtain any development or other consent permit or licence by
                  reason of the development or manner of use of or on the
                  Premises by the Tenant.

                                       19
<PAGE>

          3.18.2  To give full particulars to the Landlord of any notice, or
                  proposal for a notice, or order or proposal for an order, made
                  given or issued to the Tenant under any statute or regulation
                  relating to town and country planning, environmental
                  protection or otherwise within 10 working days after the
                  receipt of any such by the Tenant.

          3.18.3  Forthwith to take all reasonable and necessary steps to comply
                  with any such notice or order.

          3.18.4  At the request and cost of the Landlord, to make or join with
                  the Landlord in making such objections or representations
                  against or in respect of any proposal for such notice or order
                  as the Landlord may consider expedient.

     3.19 CLAIMS MADE BY THIRD PARTIES

          3.19.1  To keep the Landlord indemnified against liability in respect
                  of any accident, loss or damage to person or property in the
                  Premises resulting from the act or default of the Tenant.

          3.19.2  To keep the Landlord indemnified against liability of the
                  Landlord to third parties by reason of breach by the Tenant of
                  its obligations in this Lease.

     3.20 EXPENSES OF THE LANDLORD

          To pay to the Landlord on demand all expenses (including solicitors'
          costs, bailiffs' fees and surveyors' and architects' fees) properly
          (and in the case of 3.20.3, reasonably) incurred by the Landlord:

          3.20.1  incidental to or in proper contemplation of the preparation
                  and service of a schedule of dilapidations during or after the
                  termination of this Lease and/or a notice under section 146
                  and 147 of the Law of Property Act 1925, even if forfeiture is
                  avoided otherwise than by relief granted by the court;

          3.20.2  in the recovery or attempted recovery of arrears of rent or
                  additional rent due from the Tenant; and

          3.20.3  in connection with every application for any consent or
                  approval made under this Lease, whether or not consent or
                  approval is given save where the Landlord is declared by a
                  court unreasonably to have withheld or delayed consent.

                                       20
<PAGE>

     3.21 OBSTRUCTION OF WINDOWS OR LIGHTS AND EASEMENTS

          3.21.1  Not to stop up or obstruct any windows of the Premises.

          3.21.2  Not to permit any easement or similar right to be made or
                  acquired into against or on the Premises.

          3.21.3  Where any such easement or right is or is attempted to be
                  acquired, immediately to give notice of the circumstances to
                  the Landlord, and at the request and cost of the Landlord to
                  adopt such course as it may reasonably require for preventing
                  the acquisition of the easement or right to such easement.

     3.22 CLEANING OF WINDOWS

          3.22.1  To keep clean the glass in the windows of the Premises.

     3.23 VALUE ADDED TAX

          3.23.1  To pay value added tax on taxable supplies of goods and
                  services made by the Landlord in connection with this Lease,
                  the consideration for which is to be treated as exclusive of
                  value added tax chargeable on the payment.

          3.23.2  Where the Landlord is entitled under this Lease to recover
                  from the Tenant the costs of goods and services supplied to
                  the Landlord, but in respect of which the Landlord makes no
                  taxable supply to the Tenant, to indemnify the Landlord
                  against so much of the input tax on the cost for which the
                  Landlord is not entitled to credit allowance under section 26
                  of the Value Added Tax Act 1994.

     3.24 NOTICES "TO LET" AND "FOR SALE"

          3.24.1  To allow the Landlord or its agents to enter the Premises at
                  any time:

                  3.24.1.1 within six months next before the termination of this
                           Lease to fix on the Premises a notice board for
                           reletting the Premises; and

                  3.24.1.2 to fix on some part of the Premises a notice board
                           for sale of the interest of the Landlord.

          3.24.2  not to remove or obscure any such notice board.

                                       21
<PAGE>

          3.24.3  To permit all persons authorised by the Landlord or its agents
                  to view the Premises at reasonable hours without interruption
                  in connection with any such letting or sale.

     3.25 ENCUMBRANCES

          To observe and perform by way of indemnity only the obligations and
          restrictions comprising the Encumbrances so far as they relate to the
          Premises and are capable of being enforced, and to keep the Landlord
          indemnified against liability for breach of the obligations and
          restrictions.

     3.26 SUPERIOR LEASE COVENANTS

          3.26.1  Not to do any act, matter or thing which would constitute a
                  breach of the covenants of the tenant and the conditions in
                  the Superior Lease.

          3.26.2  The landlord acknowledges the right of the tenant to
                  production of the Superior lease (or a certified copy of the
                  Superior Lease).

4    PROVISOS

     THE PARTIES AGREE to the following provisos:

     4.1  PROVISO FOR RE-ENTRY

          4.1.1   The Landlord may terminate this Lease by re-entering the
                  Premises (or a part of them) itself or by an authorised agent
                  if:

                  4.1.1.1  any rent remains unpaid twenty one days after
                           becoming due for payment (whether or not formally
                           demanded); or

                  4.1.1.2  the Tenant fails in any material respect to perform
                           or observe any of its material covenants or the
                           conditions in this Lease; or

                  4.1.1.3  an event of insolvency occurs in relation to the
                           Tenant or one of the Tenants or any guarantor of the
                           Tenant or one of the Tenants.

          4.1.2   Re-entry in exercise of the rights in clause 4.1.1 does not
                  affect any other right or remedy of the Landlord for breach of
                  covenant or condition by the Tenant occurring before the
                  termination of this Lease.

                                       22
<PAGE>

          4.1.3   The expression "an event of insolvency" in clause 4.1.1
                  includes:

                  4.1.3.1  (in relation to a company or other corporation which
                           is the Tenant or one of the Tenants or a guarantor)
                           inability of the company to pay its debts, entry into
                           liquidation either compulsory or voluntary (except
                           for the purpose of amalgamation or reconstruction),
                           the passing of a resolution for a creditors winding
                           up, the making of a proposal to the company and its
                           creditors for a composition in satisfaction of its
                           debts or a scheme of arrangement of its affairs, the
                           application to the court for an administration order,
                           and the appointment of a receiver or administrative
                           receiver; and

                  4.1.3.2  (in relation to an individual who is the Tenant or a
                           guarantor) inability to pay or having no reasonable
                           prospect of being able to pay his debts, the
                           presentation of a bankruptcy petition, the making of
                           a proposal to his creditors for a composition in
                           satisfaction of his debts or a scheme of an
                           arrangement of his affairs, the application to the
                           court for an interim order, and the appointment of a
                           receiver or interim receiver; and

                  4.1.3.3  in relation to the various events of insolvency they
                           are, wherever appropriate, to be interpreted in
                           accordance and conjunction with the relevant
                           provisions of the Insolvency Act 1986.

     4.2  POWER FOR LANDLORD TO DEAL WITH ADJOINING PROPERTY

          4.2.1   The Landlord may deal as it thinks fit with other property
                  adjoining or nearby belonging to the Landlord, and may erect
                  or permit to be erected on such property any buildings
                  irrespective of whether they affect or diminish the light or
                  air which may now or at any time be enjoyed by the Tenant in
                  respect of the Premises

          4.2.2   The Landlord may at all times, without obtaining any consent
                  from or making any arrangement with the Tenant, alter
                  reconstruct or modify in any way whatsoever or change the use
                  of the Common Parts so long as proper means of access to and
                  egress from the Premises are afforded and essential services
                  are maintained at all times

                                       23
<PAGE>

     4.3  EXEMPTION FROM LIABILITY IN RESPECT OF SERVICES

          4.3.1   Subject as mentioned in 4.3.2 below, the Landlord is not to be
                  liable to the Tenant for any loss damage or inconvenience
                  which may be caused by reason of:

                  4.3.1.1  temporary interruption of services during periods of
                           inspection maintenance repair and renewal;

                  4.3.1.2  breakdown of or defect in any plant and machinery
                           services or Conducting Media in the Premises the
                           Research Park or neighbouring or adjoining property;
                           or

                  4.3.1.3  events beyond the reasonable control of the Landlord.

          4.3.2   The Landlord shall use its reasonable endeavours to avoid any
                  interruption to services, to minimise any unavoidable periods
                  of disruption and to procure the good working order of all
                  services and Conducting Media at the earliest reasonable
                  times.

     4.4  COMPENSATION FOR DISTURBANCE

          The Tenant is not entitled on quitting the Premises to claim from the
          Landlord any compensation unless and to the extent that any statutory
          right to compensation precludes the operation of this clause.

     4.5  REMOVAL OF PROPERTY AFTER DETERMINATION OF TERM

          If after the Tenant has vacated the Premises following the termination
          of this Lease any property of the Tenant remains in the Premises, and
          the Tenant fails to remove it within fourteen days after being
          requested in writing by the landlord to do so, the Landlord may as the
          agent of the Tenant sell such property and hold the proceeds of sale,
          after deducting the costs and expenses of removal storage and sale
          reasonably and properly incurred by it, to the order of the Tenant.

     4.6  NOTICES CONSENTS AND APPROVALS

          4.6.1   Any notice served under or in connection with this Lease is to
                  be in writing and be treated as properly served if compliance
                  is made with either the provisions of Section 196 of the Law
                  of Property Act 1925 (as amended by the Recorded Delivery
                  Service Act 1962) or Section 23 of the Landlord and Tenant
                  Act 1927.

                                       24
<PAGE>

          4.6.2   Any consent or approval under this Lease is required to be
                  obtained before the act or event to which it applies is
                  carried out or done and is to be treated as effective only if
                  the consent or approval is given in writing.

     4.7  SUPERIOR LANDLORD

          4.7.1   The rights reserved to the Landlord under this Lease are also
                  reserved to or exercisable by any Superior Landlord its
                  servants agents or workpeople to the extent as may be required
                  under the Superior Lease.

          4.7.2   Nothing in this Lease is to be construed as implying that the
                  Superior Lessor is under any obligation created by this Lease
                  not unreasonably to withhold its consent or approval in
                  respect of any application for a licence by the Tenant to the
                  Landlord.

          4.7.3   If the Tenant does or proposes to do any matter or thing for
                  which the consent of the Superior Landlord is required, the
                  Tenant shall bear and indemnify the Landlord against the
                  reasonable and proper legal and surveyors' costs and
                  disbursements of obtaining such consent.

          4.7.4   The Landlord may, notwithstanding any provision to the
                  contrary elsewhere in this Lease but provided the Landlord has
                  complied with its obligations to obtain the same contained in
                  Clause 5.1.3 withhold consent or approval in any matter where
                  the Superior Landlord's consent or approval is required and
                  has been unable to obtain it.

     4.8  CONDITIONS OF ENTRY

          Notwithstanding any other provision of this Lease any entry into or
          upon the Premises by the Landlord or any Superior Landlord or any
          person or persons on their behalf or with their authority shall only
          be effected subject to the following terms and conditions:

          4.8.1   such entry shall only be effected where the works or other
                  matters or things to be done may not reasonably be done
                  without such entry;

          4.8.2   such entry shall only be effected (if practicable) outside the
                  normal working hours of the Tenant and any permitted occupier
                  and at reasonable times and in a reasonable manner causing as
                  little damage to the Premises or disturbance or inconvenience
                  as reasonably possible in the circumstances;

          4.8.3   reasonable prior written notice shall be given save in cases
                  of emergency where as much notice as possible shall be given;

                                       25
<PAGE>

          4.8.4   the Landlord shall make good forthwith any damage caused to
                  the Premises and any fixtures, fittings and stock therein of
                  the Tenant or any permitted undertenant or occupier as a
                  result of such entry

5    LANDLORD'S COVENANTS

     THE LANDLORD COVENANTS with the Tenant as follows:

     5.1  QUIET ENJOYMENT

          The Tenant may lawfully and peaceably enjoy the Premises throughout
          the Term without interruption by the Landlord or by any person
          lawfully claiming through under or in trust for the Landlord.

     5.2  SUPERIOR LEASE OBLIGATIONS

          5.2.1   To pay the rent reserved by and observe and perform the
                  covenants of the tenant and the conditions contained in the
                  Superior Lease,

          5.2.2   To use all reasonable endeavours at its own cost to procure
                  that the Superior Landlord will throughout the Term perform
                  and observe the covenants on its part contained in the
                  Superior Lease.

          5.2.3   On the request and at the cost of the Tenant to use all
                  reasonable endeavours to obtain the Superior Landlord's
                  consent whenever the Tenant applies for any consent required
                  under this Underlease where the consent of the Superior
                  Landlord is needed howsoever required

6    OBLIGATIONS IN SCHEDULES TO THIS LEASE

     The Landlord and the Tenant mutually covenant to observe and perform their
     respective obligations and the conditions in the Schedules.

7    OPTION TO DETERMINE

     The Tenant is entitled to determine the Term on the expiration of the 15th
     or 20th year of the Term by serving on the Landlord not less than 12
     months' written notice of determination and following service of that
     notice the Term will on the expiration of the 15th or 20th year of the Term
     as the case may be immediately cease and determine, but without prejudice
     to any accrued rights of either party against the other under this Lease.

DELIVERED as a deed on the date at the head of this Lease

                                       26
<PAGE>

                                   SCHEDULE 1

                       PART 1: RIGHTS ENJOYED WITH DEMISE

The following rights for the Tenant and all persons expressly or by implication
authorised by the Tenant in common with all others having a like right:

1    The right at all times of free passage and running of water, soil,
     electricity, gas and any other services through the Conducting Media
     within, over or under any other part of the Research Park and Common Parts
     but with the right for the Landlord to alter, stop up or divert the
     Conducting Media subject to the Landlord leaving available for use at all
     times by the Tenant reasonable and adequate provision for those services no
     less convenient and of no less capacity than those existing prior to the
     stopping up or diverting.

2    The right of subjacent and lateral support and protection for the Premises
     as now enjoyed by and from the remainder of the Research Park.

3    The right of way at all times to pass and repass for the purpose of
     obtaining access to and egress from the Premises on foot and with vehicles
     (where appropriate) over:

     3.1  the estate roads within the Research Park; and

     3.2  that part of the service road within the adjacent Plot 2500 on the
          research Park as is shown coloured blue on Plan 2.

                       PART 2: EXCEPTIONS AND RESERVATIONS

EXERCISE OF THE FOLLOWING RIGHTS SHALL REMAIN SUBJECT AT ALL TIMES TO THE
PROVISIONS OF CLAUSE 4.8 (TO THE EXTENT RELEVANT)

1    The free and uninterrupted passage of water soil air gas electricity and
     telephone communications from and to any part of the Research Park or any
     adjoining or neighbouring property through the Conducting Media commonly
     used for those purposes which are now or may in the future but during the
     period of eighty years after the date of this Lease be in upon or under the
     Premises.

2    All rights of entry upon the Premises referred to in Clause 3.

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<PAGE>

3    The right to enter the areas of the Premises as are not built upon in order
     to maintain the Perimeter Landscaping in accordance with the requirements
     of Schedule 4.

4    The right to support and protection as now exists by the Premises for such
     other parts of the Research Park as require such support and protection.

5    The right to make connections with any or all of the Conducting Media to
     enter upon any parts of the Premises as do not have any buildings on them
     or any land and premises over which the Tenant is hereby granted any access
     rights at all reasonable times after giving reasonable prior notice (except
     in case of emergency) for the purpose of making connections with
     maintaining repairing cleansing and inspecting the Conducting Media making
     good any damage thereby occasioned to the Premises.

6    The right at any time to build on, alter, add or extend or re-develop any
     other part of the Research Park with all necessary statutory and other
     consents and measurements and without causing any material interference
     with the Tenant's use and enjoyment of the Premises and any Common Parts
     but notwithstanding any interference with the access of light or air to the
     Premises.

7    The right of way to pass and repass, on foot and with vehicles, at all
     times and for all purposes for the benefit of the adjacent plot 2500 on the
     Research Park over that part of the service road within the Premises as is
     shown coloured yellow on Plan 2

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<PAGE>

                                   SCHEDULE 2

                                  RENT REVIEWS

1    THE REVIEW DATES

     The yearly rent payable under this Lease is to be reviewed on the expiry of
     the Rent Review Years (referred to in this Schedule as "the review dates"
     and "the relevant review date" is to be construed accordingly) and with
     effect on and from each review date the reviewed rent (as agreed or
     determined in accordance with this Schedule) is to become payable as the
     yearly rent reserved by this Lease.

2    UPWARD ONLY RENT REVIEWS

     The reviewed rent is to be the greater of:

     2.1  the yearly rent reserved under this Lease immediately preceding the
          relevant review date; and

     2.2  the market rent of the Premises at the relevant review date.

3    THE MARKET RENT

     For the purposes of this Lease, the expression 'market rent' means the
     yearly rent at which the Premises might reasonably be expected to be let in
     the open market by a willing landlord to a willing tenant:

     3.1  with vacant possession;

     3.2  for the longer of the unexpired term of this Lease calculated from the
          Term commencement date and the Notional Term having a rent review, in
          the same terms as this Lease, at the expiry of each period of five
          years throughout the term;

     3.3  without the payment of a premium by the willing landlord or the
          tenant; and

     3.4  subject to the provisions of this Lease, other than the length of the
          term and the amount of rent, but including these provisions for rent
          review;

          but on the assumption, if not the fact, that at the relevant review
          date:

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<PAGE>

     3.5  the Premises have been fitted out ready for occupation and immediate
          use for the willing tenant's business so that the willing tenant would
          not require a rent or other allowance at the relevant review date for
          that purpose (but this assumption does not affect the operation of
          paragraph 4.3);

     3.6  in case the Premises have been destroyed or damaged they have been
          fully reinstated [in accordance with the original specification];

     3.7  the Premises are in a state of full repair and the covenants of the
          Tenant have been fully observed and performed;

     3.8  there is not in operation any statute order or instrument regulation
          or direction which has the effect of regulating or restricting the
          amount of rent of the Premises which might otherwise be payable;

     3.9  the Premises may be lawfully used throughout the Term for the
          Authorised Use and that no capital is required to be expended upon the
          Premises to enable them to be so used; and

     3.10 that any rent free period or concessionary rent or other inducement
          which may be offered in the case of a new letting in the open market
          at the relevant review date for the purpose only of fitting out shall
          have expired or been enjoyed before the relevant review date;

4    MATTERS TO BE DISREGARDED

     In agreeing or determining the market rent the effect upon it of the
     following matters are to be disregarded:

     4.1  the occupation of the Premises by the Tenant;

     4.2  any goodwill attached to the Premises by reason of the carrying on at
          the Premises of the business of the Tenant;

     4.3  any improvements to the Premises made by the Tenant before or after
          the commencement of this Lease with the consent of the Landlord where
          required other than those:

          4.3.1   made in pursuance of an obligation to the Landlord other than
                  an obligation to observe statute; or

          4.3.2   to the extent that the Landlord has made a financial
                  contribution; and

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<PAGE>

     4.4  any works carried out by the Tenant which has diminished the market
          rent;

     and in this paragraph 4 reference to 'the Tenant' includes
     predecessors-in-title to the Tenant, and sub-tenants of the Tenant or of
     the predecessors-in-title of the Tenant.

5    PROCEDURE FOR DETERMINATION OF MARKET RENT

     5.1  The Landlord and the Tenant are to endeavour to agree the market rent
          at any time not being earlier than twelve months before the relevant
          review date, but if they have not agreed the market rent three months
          before the relevant review date the amount of the market rent is to be
          determined by reference to determination of an independent expert.

     5.2  The expert is to be nominated by the Landlord and the Tenant jointly,
          but, if they cannot or do not do so, then he is to be nominated by the
          President for the time being of the Royal Institution of Chartered
          Surveyors on the application either of the Landlord or of the Tenant.

     5.3  The expert is to act as an expert and not as an arbitrator and is to
          be required to:

          5.3.1   give notice to the Landlord and the Tenant allowing each of
                  them an opportunity to submit to him within such reasonable
                  time as he may stipulate a proposal for the market rent
                  accompanied (if either of them so wish) by a statement of
                  reasons, and a professional rental valuation or report; and

          5.3.2   permit each of the Landlord and the Tenant to make submissions
                  in respect of the other's reasons valuation and report;

     but the expert is not to be bound by any such proposal or submission and
     may make his determination as he thinks fit.

     5.4  The expert nominated must be a chartered surveyor having not less than
          ten years' experience of leasehold valuation of property being put to
          the same or similar use as the Premises.

     5.5  If the expert refuses to act, becomes incapable of acting or dies, the
          Landlord or the Tenant may require the appointment of another expert
          as provided in paragraph 5.1.

     5.6  The fees and expenses of the expert, including the cost of his
          nomination, are to be borne in such manner and proportions as the
          expert may direct, but in the absence of

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<PAGE>

          any such direction, they are to be borne by the Landlord and the
          Tenant in equal shares.

     5.7  The determination of the expert is to be final and binding on the
          parties except on a matter of law

6    TIME LIMITS

     Time is not of the essence in agreeing or determining the reviewed rent or
     of appointing an arbitrator or expert.

7    RENTAL ADJUSTMENTS

     7.1  If the market rent has not been agreed or determined in accordance
          with the provisions of this Schedule before the relevant review date,
          then, until the market rent has been agreed or determined, the Tenant
          will continue to pay on account rent at the rate of yearly rent
          payable immediately before the relevant review date.

     7.2  The Tenant will pay to the Landlord within seven days after the time
          that the market rent has been agreed or determined all arrears of the
          reviewed rent which have accrued in the meantime, with interest equal
          to the base rate of the Bank on each of the instalments of the arrears
          from the time that it would have become due if the market rent had
          then been agreed or determined until payment becomes due from the
          Tenant to the Landlord under this paragraph 7.2.

8    REVIEWED RENT RESERVED IN PHASES

 The Landlord and the Tenant may, at any time before the market rent is
 determined by expert, settle the reviewed rent in more than one amount and
 agree to reserve the amounts increasing in phases until the next review date
 (if any).

9    MEMORANDUM OF RENT REVIEW

 The parties are to cause a memorandum of the reviewed rent duly signed by the
 Landlord and the Tenant to be endorsed on or securely annexed to this Lease and
 the counterpart of this Lease.

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<PAGE>

                                   SCHEDULE 3

                              INSURANCE PROVISIONS

1    INSURED RISKS

     1.1  "Insured Risks" means the risks and other contingencies against which
          the Premises and the Research Park are required to be, or which may
          from time to time be, insured under this Lease, but subject to any
          exclusions limitations and conditions in the policy of insurance.

     1.2  Insured Risks include, without limitation, fire, lightning, explosion,
          storm, tempest, flood, bursting and overflowing of water tanks
          apparatus or pipes, earthquake, aircraft (but not hostile aircraft)
          and other aerial devices dropped from aircraft, riot and civil
          commotion, malicious damage (including terrorist explosion) and such
          other risks as the Landlord may reasonably consider it prudent to
          insure.

     1.3  If a risk or contingency itemised, or otherwise included, as an
          Insured Risk, can no longer be insured or can only be insured at an
          uneconomic rate, the risk or contingency shall cease to be treated as
          an Insured Risk from the time that cover is withdrawn and the Landlord
          has notified the Tenant of its withdrawal.

2    TENANT'S LIABILITY FOR INSURANCE PREMIUMS

     2.1  The Tenant will pay to the Landlord on demand the due proportion of
          the insurance premiums incurred by the Landlord

     2.2  Insurance premiums are to include all monies expended, or required to
          be expended, by the Landlord in effecting and maintaining cover
          against:

          2.2.1   Insured Risks;

          2.2.2   three years' loss of rent insurance;

          2.2.3   such professional fees as may reasonably be expected to be
                  incurred in connection with rebuilding or reinstatement of the
                  Research Park;

          2.2.4   the costs of demolition, shoring up, and site clearance work

          2.2.5   third party and public liability risks; and

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<PAGE>

          2.2.6   value added tax liability on such items.

     2.3  The insurance cover may take into account cover for the effects of
          inflation and reasonable escalation of costs and fees, and the
          Landlord's fair and reasonable estimate of the market rent of the
          Premises as defined in Schedule 2 in the context of ensuing rent
          reviews and the termination of the Lease.

     2.4  The due proportion of the insurance premiums for which the Tenant is
          liable is to be such proportion of the premiums incurred with respect
          to the Research Park as may fairly be attributed to the Premises by
          the Landlord or the Landlord's surveyor, and the apportionment may as
          appropriate take into account:

          2.4.1   the net internal area (as defined in the Measuring Code) of
                  the Premises relative to the aggregate net internal areas in
                  the Research Park during the Term;

          2.4.2   the different uses to which the various parts of the Research
                  Park are put and the degree of special risk associated with
                  those uses;

          2.4.3   the cost of complying with requirements of the insurer;

          2.4.4   an increase in the insurance premiums or expense of renewal
                  resulting from any act or omission of the Tenant or any person
                  occupying or enjoying the use of the Premises through or under
                  the Tenant; and

          2.4.5   risks and contingencies that apply only to the Tenant; and

          2.4.6   such other matters as may properly affect the apportionment of
                  insurance premiums between the various tenants and occupiers
                  of the Research Park;

          and the apportionment may where appropriate attribute the whole of a
          premium, or an increase in premium, to the Tenant, and the decision of
          the Landlord or the Landlord's surveyor acting fairly in making
          apportionments is (except in the case of manifest error) to be
          conclusive.

     In this Schedule "due proportion" is to be interpreted accordingly.

3    TENANT'S OBLIGATIONS IN RELATION TO INSURANCE COVER

     3.1  The Tenant will not do anything which may render void or voidable the
          insurance of the Landlord on the whole or a part of the Research Park
          or which may cause insurance premiums to be increased.

                                       34
<PAGE>

     3.2  The Tenant will provide efficient fire extinguishers of a type
          approved by the Landlord such approval not to be unreasonably
          withheld, and will adopt such other precautions against Insured Risks
          as the Landlord's insurers may lawfully require.

     3.3  If the insurance of the Landlord is vitiated in whole or in part in
          consequence of an act or omission of the Tenant, persons occupying or
          enjoying the use of the Premises through or under the Tenant, or their
          respective employees workmen agents or visitors, the Tenant will pay
          to the Landlord on demand a sum equal to the amount of the insurance
          monies which have become irrecoverable in consequence of that act or
          omission.

     3.4  The Tenant may not insure the Premises for any of the Insured Risks in
          such a manner as would permit the insurer of the Landlord to average
          the proceeds of insurance or cancel insurance cover.

     3.5  The Tenant will notify the Landlord forthwith of the occurrence of
          damage to the Premises by any of the Insured Risks.

     3.6  If the Premises are damaged by Insured Risks, the Tenant will pay to
          the Landlord on demand the amount of any uninsured excess to which the
          insurance cover of the Landlord is subject.

     3.7  The obligations of the Tenant to repair and to yield up in repair the
          Premises are to remain operative to the extent that the insurance of
          the Landlord in respect of Insured Risks is vitiated or insurance
          monies are withheld by reason of an act or omission of the Tenant,
          persons occupying or enjoying the use of the Premises through or under
          the Tenant, or their respective employees workmen agents or visitors,
          but do not otherwise operate in respect of damage to the Premises by
          Insured Risks.

4    LANDLORD'S OBLIGATION TO INSURE AND REINSTATE

     4.1

          4.1.1   The Landlord will keep the Premises and the Research Park
                  insured with an insurer of repute against Insured Risks and
                  other items referred to in paragraph 2.2 for the full cost of
                  reinstatement, subject to such uninsured excess as the insurer
                  may reasonably apply.

          4.1.2   The Landlord's obligation to insure does not relate to any
                  fixtures and fittings installed by the Tenant and which may
                  become Landlord's fixtures and fittings until the Tenant has
                  notified the Landlord in writing of their reinstatement value.

                                       35
<PAGE>

     4.2  Following the occurrence of damage to or destruction of the Premises
          or any part or parts thereof or the access thereto or the services
          serving the Premises by an Insured Risk, the Landlord will diligently
          apply, or procure the application of, the proceeds of the insurance
          covering reinstatement and rebuilding costs for those purposes and
          will make up any shortfall to the same out of its own monies.

     4.3  The obligations of the Landlord in paragraph 4.2 do not apply:

          4.3.1   if the Landlord is unable, after using all reasonable
                  endeavours to do so (which the Landlord hereby covenants to
                  do), to obtain any requisite planning permission or other
                  consents for the reinstatement or rebuilding of the Premises
                  or of a building of similar size character and amenity; or

          4.3.2   if the Landlord's insurance is vitiated by reason of an act or
                  omission of the Tenant, persons occupying or enjoying the use
                  of the Premises through or under the Tenant or their
                  respective employees workmen agents or visitors.

5    LANDLORD'S OBLIGATIONS AND ENTITLEMENT IN RELATION TO INSURANCE

     5.1  The Landlord will use all reasonable endeavours to procure that its
          insurers waive entitlement to rights of subrogation against the
          Tenant, persons occupying or enjoying the use of the Premises through
          or under the Landlord, and their respective employees workmen agents
          or visitors.

     5.2  The Landlord will notify its insurers of the Tenant's interest in the
          Premises and, if practicable, have it noted on the policies of
          insurance.

     5.3  The Landlord will provide the Tenant with a copy of its insurance
          policies (or other evidence of the conditions of insurance) on the
          Research Park, and at the request of the Tenant with a receipt for the
          payment of the last premium or other evidence of renewal and
          up-to-date details of the amount of cover.

     5.4  The Landlord may retain for its exclusive benefit any discount on the
          insurance premiums or commission offered to it by its insurer.

6    SUSPENSION OF RENT

     6.1  Paragraph 6.2 applies if the Premises or any part or parts thereof or
          the access thereto or the services serving the Premises are at any
          time during the Term so damaged by an Insured Risk as to render the
          Premises unfit for occupation, use or enjoyment in accordance with
          this Lease, except in the circumstances referred to in paragraph
          4.3.2.

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<PAGE>

     6.2  All rents (except insurance rent) reserved by this Lease, or a fair
          proportion of them according to the nature and extent of the damage
          sustained, is to be suspended and cease to be payable until the
          Premises (excluding fitting out works and replacement of contents)
          have been reinstated and made accessible and fit for occupation, use
          and enjoyment or, if earlier, until the expiry of three years from the
          occurrence of the damage.

     6.3  A dispute as to the amount of the abatement of the rent or the
          duration of the period of abatement is to be submitted to a single
          arbitrator, by whose decision the parties are to be bound, who is to
          be appointed by the parties jointly if they can agree on one, but if
          they do not agree, then by the President for the time being of the
          Royal Institution of Chartered Surveyors at the request of either
          party, and the arbitration is to be conducted under the Arbitration
          Acts 1950-1979.

7    OPTIONS TO DETERMINE

     7.1  If the Premises is destroyed or damaged by an Insured Risk so as to
          make continued use and enjoyment of the Premises in accordance with
          this Lease impracticable, the Landlord may terminate this Lease by
          giving to the Tenant notice to that effect at any time within 12
          months after the occurrence of the damage

     7.2  If for any reason beyond the control of the Landlord it proves
          impossible to commence rebuilding or reinstatement of the Premises
          within two years of the occurrence of the damage by an Insured Risk,
          the Landlord may terminate this Lease by giving to the Tenant notice
          to that effect.

     7.3  If the rebuilding or reinstatement of the Premises has not been
          commenced eighteen months after the occurrence of the damage by an
          Insured Risk, the Tenant may give notice to the Landlord of intention
          to terminate this Lease, and if the rebuilding or reinstatement work
          has not commenced in earnest within three months of the giving of the
          notice, this Lease is to terminate at the expiry of the notice.

     7.4  The termination of this Lease under this paragraph 7 is not to affect
          any liability of either party which has accrued at any time before the
          time of termination.

8    RETENTION OF INSURANCE PROCEEDS

     On the termination of this Lease under paragraph 7, or if this Lease is
     terminated by the operation of the doctrine of frustration, the Landlord
     may retain for its exclusive benefit the proceeds of insurance.

                                       37
<PAGE>

                                   SCHEDULE 4

                      SECTION 1: SERVICE CHARGE PROVISIONS

1    TENANT'S LIABILITY TO PAY SERVICE charge

     The Tenant will pay to the Landlord by way of additional rent the due
     proportion (as defined below) of the total cost ("service charge") to the
     Landlord in any service charge period beginning or ending during the Term
     of providing the services specified in Sections 2 and 3 of this Schedule
     and defraying the costs and expenses relating and incidental to such
     services.

2    DEFINITION OF "DUE PROPORTION"

     2.1  In this Schedule the expression "due proportion" means in relation to
          the service charge the proportion which is attributable to the
          Premises.

     2.2  The due proportion is to be calculated primarily on a comparison at
          any relevant time of the net internal area (as defined in the
          Measuring Code) of the Premises with the aggregate net internal area
          of the buildings designed or intended for letting on the Research Park
          from time to time.

     2.3  If such comparison is inappropriate having regard to the nature of any
          expenditure incurred or the premises in or upon the Research Park
          benefited by the expenditure or otherwise, the Landlord is at liberty
          in its reasonable discretion and acting in accordance with the
          principles of good estate management to adopt such other method of
          calculation of the due proportion of such expenditure (or item of
          expenditure) to be attributed to the Premises as may be fair and
          reasonable in the circumstances (including if appropriate the
          attribution of the whole of such expenditure to the Premises).

3    ADVANCE PAYMENTS ON PRELIMINARY BASIS

     3.1  The due proportion of the service charge is to be discharged by means
          of advance payments to be made on the same days upon which rent is
          payable under this Lease and by such additional payments as may be
          required under paragraphs 4 and 5.

     3.2  The amount of each advance payment is to be such amount as the
          Landlord may reasonably determine as likely to be equal in the
          aggregate to the due proportion of

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<PAGE>

          the service charge for the relevant service charge period and which is
          notified to the Tenant at or before the time when the demand for an
          advance payment is made.

     3.3  For the purposes of this Schedule "service charge period" means the
          period of twelve months between the Service Charge Dates in each year
          (or such other period as the Landlord may from time to time
          determine).

     3.4  The service charge is to be treated as accruing on a day-to-day basis
          in order to ascertain yearly rates and for the purposes of
          apportionment in relation to periods other than of one year.

4    SERVICE CHARGE ACCOUNTS AND ADJUSTMENTS

     4.1  The Landlord will as soon as may be practicable after the end of each
          service charge period submit to the Tenant a statement duly certified
          (if so requested) by the Landlord's accountant or surveyor giving a
          proper summary of the service charge for the service charge period
          just ended.

     4.2  If the due proportion of the service charge as certified is more or
          less than the total of the advance payments (or the grossed-up
          equivalent of such payments if made for any period of less than the
          service charge period), then any sum due to or payable by the Landlord
          by way of adjustment in respect of the due proportion of the service
          charge is forthwith to be paid or allowed as the case may be (except
          in the last year of the Term, when any overpayment will be repaid to
          the Tenant).

     4.3  The provisions of this paragraph are to continue to apply
          notwithstanding the termination of this Lease in respect of any
          service charge period then current.

     4.4  The Tenant is entitled to:

          4.4.1   inspect the service charge records and vouchers of the
                  Landlord at such location as the Landlord may reasonably
                  appoint for the purpose during normal working hours on
                  weekdays; and

          4.4.2   at the Tenant's expense take copies of them.

5    EXCEPTIONAL EXPENDITURE

     5.1  If the Landlord is required during any service charge period to incur
          heavy or exceptional expenditure which forms part of the service
          charge, the Landlord is to be entitled to recover from the Tenant the
          due proportion of the service charge representing the whole of that
          expenditure on the quarter day next following.

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<PAGE>

     5.2  If funds collected by way of advance payments of service charge prove
          insufficient to meet an immediate liability, (and there is no reserve
          fund available, or which may be applied, to meet the liability, and
          the circumstances arose otherwise than as mentioned in paragraph 9.1)
          the Landlord is to be entitled to borrow monies for the purpose from
          reputable banks at commercially competitive rates of interest, and the
          interest payable on the borrowing shall be recoverable as an item of
          the service charge.

6    ADVANCE PAYMENTS DEPOSIT ACCOUNT

     6.1  This paragraph applies to such part of the monies ("relevant monies")
          paid by the Tenant and other tenants and occupiers of the Research
          Park by way of service charge as for the time being has not been
          disbursed in payment of the costs and expenses of providing services
          in and to the Research Park (and for the avoidance of doubt does not
          permit the creation of a sinking fund).

     6.2  The Landlord will keep the relevant monies in a separate trust account
          until and to the extent that they may be required for disbursement
          then or in the then immediate future in payment of the costs and
          expenses of providing services in and to the Research Park.

     6.3  Interest earned upon such account (less any tax payable) is to be
          credited to the account at regular rests in each year.

     6.4  Until actual disbursement the relevant monies are to be held by the
          Landlord for the benefit of the owners and occupiers of the Research
          Park as a class.

7    LANDLORD'S PROTECTION PROVISIONS

     The Tenant is not entitled to object to the service charge (or any item
     comprised in it) or otherwise on any of the following grounds:

     7.1  the inclusion in a subsequent service charge period of any item of
          expenditure or liability omitted from the service charge for the two
          preceding service charge periods;

     7.2  an item of service charge included at a proper and reasonable cost
          might have been provided or performed at a lower cost; or

     7.3  disagreement with any estimate of future expenditure for which the
          Landlord requires to make provision so long as the Landlord has acted
          reasonably and in good faith and in the absence of manifest error; or

                                       40
<PAGE>

     7.4  the manner in which the Landlord exercises its discretion in providing
          services under and in accordance with this Lease so long as the
          Landlord acts reasonably and in good faith and in accordance with the
          principles of good estate management; or

     7.5  the employment of managing agents to carry out and provide on the
          Landlord's behalf services under this Part of this Schedule.

8    VACANT PARTS OF THE RESEARCH PARK AND ACTIONS BY THE LANDLORD

     8.1  The due proportion of the service charge may not be increased or
          altered by reason only that at any relevant time any part of the
          Research Park may be vacant or undeveloped (which expression excludes
          landscaping and the costs of maintenance of it) be occupied by the
          Landlord or that any tenant or occupier of another part of the
          Research Park may default in payment of, or be required to pay less
          than, the due proportion of the service charge attributable to that
          part.

     8.2  If the Landlord recovers monies in exercise of its powers referred to
          in paragraph 18 representing expenditure which has been or which would
          otherwise fall to be included in the service charge, the Landlord will
          set off or credit such monies against the service charge accordingly.

9    SERVICE CHARGE TO EXCLUDE TENANTS' LIABILITIES

     There is to be excluded from the items comprising the service charge
     any liability or expense for which the Tenant or other tenants or occupiers
     of the Research Park may individually be responsible under the terms of the
     tenancy or other arrangement by which they use or occupy the Research Park.

10   MANAGEMENT CHARGES

     The Landlord is entitled to include in the service charge:

     10.1 a reasonable fee for the provision of services by the Landlord; or

     10.2 the proper and reasonable cost of employing managing agents for the
          carrying out and provision of services under this Schedule (subject to
          a maximum cost not exceeding 10% of the Tenant's due proportion of the
          service charge); and

     10.3 any proper and reasonable cost of the accountants or auditors for
          auditing the service charge or providing other proper services in
          connection with the service charge.

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<PAGE>

11   THE LANDLORD'S OBLIGATION TO PROVIDE SERVICES

     11.1 Subject to the following provisions of this paragraph, the Landlord
          will provide the services specified in Section 2 of this Schedule and
          may provide the services specified in Section 3 of this Schedule.

     11.2 Subject as mentioned in clause 4.3.1 the Landlord is not to be liable
          to the Tenant for failure to provide any services in Section 2 of this
          Schedule to the extent that the Landlord is prevented from doing so by
          Insured Risks and other such perils, accident, strikes, lockouts of
          workmen or other cause beyond the Landlord's control.

     11.3 The Landlord is not under any obligation to the Tenant to continue the
          provision of the services specified in Section 3 of this Schedule and
          may in its discretion vary, extend, alter or add to such services if
          the Landlord reasonably considers that by so doing the amenities in
          the Research Park may be improved and/or the management of the
          Research Park may be more efficiently conducted for the benefit of the
          occupiers of the Research Park as a whole.

12   FURTHER TENANT PROTECTION PROVISIONS

     Notwithstanding any other provision of this Lease there shall be excluded
     from the service charge and the Tenant shall not be liable for the
     following costs and expenses:-
-
     12.1 the initial capital cost of the Premises or the Research Park or any
          buildings, infrastructure, Conducting Media, Common Parts or other
          construction whatsoever including without limitation the Management
          Centre and computer equipment initially forming part of the Research
          Park and all expenditure relating to the same and the provision of all
          plant, machinery, fixtures and equipment, including leasing and hiring
          costs, incurred in connection with the initial construction of those
          items, but for the avoidance of doubt nothing in this paragraph 12
          shall prevent the inclusion in the service expenses and recovery
          through the service charge of any items of expenditure relating to the
          subsequent repair, maintenance and (where beyond economic repair or
          obsolete) renewal or replacement of any such items;

     12.2 the cost of reinstating or rebuilding the Premises pursuant to the
          Landlord's covenants in paragraph 4.2 of Schedule 3;

     12.3 any costs or fees incurred in relation to the grant, regrant or
          renewal of this Lease or any other lease of premises or buildings
          forming part of the Research Park except those to providers of
          facilities or services on the Research Park (including any

                                       42
<PAGE>

          Management Centre or similar premises) and any costs or fees incurred
          in relation to the review or collection of the rent or rents under any
          such leases;

     12.4 the costs incurred in relation to the marketing, maintenance, repair
          or decoration of any lettable areas which are from time to time unlet;

     12.5 all costs incurred in connection with the advertising or marketing of
          the Research Park.

     12.6 all Outgoings actually paid by the Tenant pursuant to this Lease.

                SECTION 2: ESSENTIAL SERVICES AND HEADS OF CHARGE

13   COMMON PARTS

     13.1 The cleaning lighting and maintenance of the Common Parts.

     13.2 The maintenance (but not initial provision) of ornamentation of the
          Common Parts.

     13.3 The payment of any Outgoings in respect of the Common Parts.

     13.4 Refuse disposal (if not undertaken by the local waste disposal
          authority).

     13.5 The repair, inspection, maintenance, cleaning and emptying of drains
          serving the Research Park and other Conducting Media.

14   REPAIRS AND STATUTORY REQUIREMENTS

     14.1 The repair, maintenance, cleaning and upkeep and (where beyond
          economic repair) renewal, replacement, rebuilding, of the Common
          Parts, the Conducting Media and other common service facilities and of
          plant, equipment and tools serving or used in the Research Park.

     14.2 Compliance with all statutes by-laws lawful and proper regulations and
          the lawful and proper requirements of all competent authorities and of
          the insurers in relation to the use occupation and enjoyment of the
          Research Park and the Common Parts and which shall for the time being
          be in force.

     14.3 The operation maintenance repair and (where beyond economic repair)
          replacement of any computer and other monitoring apparatus reasonably
          considered necessary for the efficient operation of all services.

                                       43
<PAGE>

15   SECURITY

     The operation, maintenance and (where beyond economic repair) replacement
     of any:

     15.1 security alarms, apparatus and systems in the Research Park; and

     15.2 closed circuit television cameras serving the Research Park.

16   INSURANCES

     16.1 Insurance of the Landlord against employers' liability risks in
          respect of the Research Park.

     16.2 Such insurances other than in respect of property risks as the
          Landlord may reasonably effect in respect of or incidental to the
          Research Park, its operation, and management.

     16.3 The proper cost of insurance re-valuations of the Premises and the
          Research Park carried out not more than once in any period of 2 years.

17   GARDEN AREAS

     Landscaping, planting and replanting and the maintenance and upkeep of the
     Common Parts and of garden or grassed and landscaped areas, including
     (without limitation) the Perimeter Landscaping.

              SECTION 3: DISCRETIONARY SERVICES AND HEADS OF CHARGE

18   LEGAL PROCEEDINGS

     18.1 Making representations which the Landlord in its reasonable discretion
          reasonably and properly considers should be made against, or otherwise
          contesting, the incidence of the provisions of any legislation, order,
          regulation, notice or statutory requirement relating to or affecting
          the whole or any part of the Research Park.

     18.2 The proper and reasonable costs of pursuing and enforcing any claim,
          and taking or defending any proceedings which the Landlord may in its
          reasonable discretion make, take or defend:

          18.2.1  against contractors, consultants, architects, consulting
                  engineers and surveyors employed or engaged in connection with
                  the construction and/or refurbishment and/or repair of the
                  Research Park and/or the Premises or

                                       44
<PAGE>

                  any other third party for the remedy of a defect, repairs in
                  or to the Research Park or otherwise for which they or any of
                  them may be liable; and

          18.2.2  which proceedings are for the purpose of establishing,
                  preserving or defending any rights, amenities or facilities
                  used or enjoyed by the Tenant together with all other tenants
                  and occupiers of the Research Park or any part of it or to
                  which they may be entitled.

19   EMPLOYEES

     19.1 Employment of a caretaker, gardener or other staff for the maintenance
          and upkeep of and the provision of services in the Research Park
          including (without limitation upon the general operation of this
          paragraph) National Insurance and pension contributions of such
          employees.

     19.2 The provision of uniforms overalls and protective clothing for such
          employees or other staff required in connection with their duties.

     19.3 The rental (but not purchase) of living accommodation for the
          caretaker in or nearby the Research Park and the payment of Outgoings
          in respect of such accommodation where it is required for the better
          performance of his duties.

     19.4 The maintenance and upkeep of a management centre equipped with
          computer and other monitoring equipment.

20   SECURITY

     20.1 Security arrangements for the safety of tenants and occupiers and
          users of the Research Park and their property in the Research Park.

     20.2 The engagement of security officers and services.

21   OTHER SERVICES

     21.1 Such other services which the Landlord reasonably considers
          appropriate so that the amenities in the Research Park may be improved
          and/or the management of the Research Park may be more efficiently
          conducted for the benefit of the Tenant and occupiers of the Research
          Park as a whole.

                                       45
<PAGE>

                                   SCHEDULE 5

               FORM OF GUARANTEE ON ASSIGNMENT UNDER CLAUSE 3.10.4

1    GUARANTEE PROVISIONS

     1.1  GUARANTEE

          The Guarantor guarantees to the Landlord as a primary obligation that
          the Assignee will pay the rents reserved by, and perform and observe
          all the Tenant's covenants in the Lease throughout the Term and any
          extension by statute of the tenancy created by the Lease

          1.1.1   whilst the Tenant remains the lessee of the Lease; and

          1.1.2   during any period following on assignment which is an excluded
                  assignment and until an assignment which is not an excluded
                  assignment (as that term is defined in the 1995 Act) entered
                  into by the Tenant; and

          1.1.3   whilst the Tenant remains liable under any authorised
                  guarantee agreement (as that term is defined in the 1995 Act)
                  entered into by the Tenant

          and the Guarantor will pay and make good to the Landlord on demand any
          losses, damages, costs and expenses suffered or incurred by the
          Landlord by reason of any failure of the Tenant to do so.

     1.2  NO WAIVER OR RELEASE OF LIABILITY

          The Guarantor is not to be released from liability under these
          provisions by reason of:

          1.2.1   any forbearance the granting of time or any other indulgence
                  on the part of the Landlord, including (but without affecting
                  the general operation of this paragraph 1.2) any granting or
                  extension of time under or varying the procedure set out in
                  Schedule 2, paragraph 5; or

          1.2.2   any variation of the Lease (including any consent given under
                  it), whether or not made with the consent of the Guarantor
                  except to the extent that the variation is a "relevant
                  variation" (as that term is defined in the 1995 Act) and the
                  guarantee of the Guarantor in paragraph 1.1 is to operate in
                  relation to the Lease as it may be varied from time to time;
                  or

                                       46
<PAGE>

          1.2.3   the transfer of the Landlord's reversion, or the assignment of
                  the Lease by the Tenant; or

          1.2.4   the release of one or more of the Guarantors (if more than
                  one) from liability under the Lease; or

          1.2.5   any other act, omission, matter or thing (except the 1995 Act)
                  by which (except for this provision) the Guarantor would be
                  relieved (wholly or partially) from liability under paragraph
                  1.1 (except a release by deed given by the Landlord).

     1.3  GUARANTOR TO ACCEPT NEW LEASE UPON DISCLAIMER

          1.3.1   If the Lease is determined by re-entry by the Landlord or is
                  effectively determined by disclaimer, the Guarantor shall, if
                  the Landlord by notice within six months after the date of
                  determination so requires, take from the Landlord a lease of
                  the Premises.

          1.3.2   The lease to be granted to the Guarantor under paragraph 1.3.1
                  is to be on the following terms:

                  1.3.2.1  the term is to commence on the date of termination of
                           the Lease and to be equal to the residue of the Term
                           which would have remained unexpired at that date if
                           the Lease had not then been terminated;

                  1.3.2.2  the yearly rent is to be the same as would have been
                           payable under the Lease if it had continued
                           undetermined and, if a rent review operative from a
                           review date before the grant of the lease had not
                           been completed, the Guarantor will complete the rent
                           review with the Landlord as if it had been the lessee
                           under the Lease in order to establish the commencing
                           yearly rent under the lease;

                  1.3.2.3  the lease is otherwise to be on the same terms and
                           conditions as would have applied under the Lease if
                           it had continued undetermined; and

                  1.3.2.4  the Guarantor is to succeed to the rights and assume
                           the liability of the Assignee under the Lease as if
                           the Lease had continued undetermined.

                                       47
<PAGE>

     1.4  INDEMNITY FOLLOWING DISCLAIMER

          If the Landlord does not require the Guarantor to take a new lease of
          the Premises under paragraph 1.3 the Guarantor will nevertheless
          within 7 days of written demand pay to the Landlord a sum equal to the
          rents and all other outgoings that would have been payable under the
          Lease but for its disclaimer for the period of six months from and
          including the date of the disclaimer or until the Landlord has relet
          the Premises (if earlier).

     1.5  SUBORDINATION OF RIGHTS OF THE GUARANTOR

          1.5.1   With respect to any sums paid by the Guarantor under this
                  paragraph 1 and to any other rights which may accrue to the
                  Guarantor in respect of any sums so paid or liabilities
                  incurred under this guarantee or in the observance,
                  performance or discharge of the obligations and covenants of
                  the Tenant in the Lease, the Guarantor is to rank and be
                  entitled to enforce its rights only after all obligations and
                  covenants under this guarantee have been fully observed and
                  performed, and if they have not the Guarantor may not:

                  1.5.1.1  seek to recover from the Tenant, or any third party
                           whether directly or by way of set-off lien
                           counterclaim or otherwise or accept any money or
                           other property or security or exercise any rights in
                           respect of any sum which may be or become due to the
                           Guarantor on account of the failure by the Tenant to
                           observe and perform or discharge such obligations or
                           covenants in the Lease;

                  1.5.1.2  claim, prove or accept any payment in composition by
                           way of winding-up, liquidation, bankruptcy or other
                           form of insolvency of the Tenant in competition with
                           the Landlord for any amount whatsoever owing to the
                           Guarantor by the Tenant; nor

                  1.5.1.3  exercise any right or remedy in respect of any amount
                           paid by the Guarantor under the Lease or any
                           liability incurred by the Guarantor in observing,
                           performing or discharging the obligations and
                           covenants of the Tenant.

          1.5.2   The Guarantor warrants that it has not taken, and undertakes
                  with the Landlord that it will not without the consent of the
                  Landlord:

                                       48
<PAGE>

                  1.5.2.1  take any security from the Tenant in respect of this
                           guarantee and, if any such security is so taken
                           notwithstanding, it is to be held on trust for the
                           Landlord as security for the respective liabilities
                           of the Guarantor and the Tenant; nor

                  1.5.2.2  be entitled to any right of proof in the bankruptcy,
                           liquidation or other form of insolvency of the Tenant
                           or exercise any other right of the guarantor
                           discharging his liability in respect of such
                           obligations and covenants.

     1.6  The Guarantor waives any right to participate in any review of the
          market rent under the Lease.

     1.7  To the extent that any provision or part of a provision of this
          paragraph 1 is found by the Court to be void or otherwise
          unenforceable then that provision or part of the provision shall be
          severable from the remainder of this paragraph 1, which will remain in
          full force and effect.

Executed as a Deed by SUON CAMBRIDGE
LIMITED acting by two Directors or a
Director and the Company Secretary

Director

Secretary

                                       49AXCAN DIOMED PDT LASER DEVELOPMENT AND SUPPLY AGREEMENT

                                TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION ...................................................  1
  1.1 Definitions ..........................................................  1
  1.2 Entire Agreement .....................................................  3
  1.3 Governing Law ........................................................  3

ARTICLE 2 DEVELOPMENT ......................................................  4
  2.1 Development Commitment ...............................................  4
  2.2 Development of the Laser .............................................  4

ARTICLE 3 PROMOTION OF PDT .................................................  4
  3.1 Cooperation ..........................................................  4
  3.2 CME participation ....................................................  4
  3.3 Joint efforts ........................................................  4

ARTICLE 4 MARKETING AND SALES OF LASERS ....................................  4
  4.1 Forecast .............................................................  4
  4.2 Reasonable Efforts to Market .........................................  4
  4.3 Commercial Obligations ...............................................  5
  4.4 Allocation of Manufacturing Resources ................................  5
  4.5 Notice of Delays .....................................................  5
  4.6 Sales to AXCAN .......................................................  5
  4.7 Reductions in Manufacturing Costs ....................................  6
  4.8 AXCAN's Exclusivity ..................................................  6
  4.9 DIOMED's Exclusivity .................................................  7

ARTICLE 5 LEGAL AND REGULATORY MATTERS; AUDIT ..............................  7
  5.1 Regulatory Approval ..................................................  7
  5.2 Compliance with Laws .................................................  7
  5.3 Audit of Facilities ..................................................  7
  5.4 Adverse Reports ......................................................  7
  5.5 Government Body and Other Inquiries ..................................  8
  5.6 Recalls ..............................................................  8
  5.7 Recall Procedure .....................................................  8
  5.8 Costs ................................................................  8

ARTICLE 6 INTELLECTUAL PROPERTY ............................................  8
  6.1 Title ................................................................  8
  6.2 Confidentiality ......................................................  9

ARTICLE 7 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION ..................  9
  7.1 DIOMED's Representations and Warranties ..............................  9
  7.2 No Other Warranties ..................................................  9
  7.3 NO CONSEQUENTIAL DAMAGES .............................................  9
  7.4 Indemnification ...................................................... 10
  7.5 Insurance ............................................................ 10

<PAGE>

ARTICLE 8 SECURITY OF SUPPLY ............................................... 10
  8.1 Security of Supply ................................................... 10
  8.2 Annual Financial Due Diligence ....................................... 10
  8.3 Plan for Resumption on Interruption of Supply ........................ 11
  8.4 Escrow of IP ......................................................... 11

ARTICLE 9 TERM ............................................................. 11
  9.1 Initial Term ......................................................... 11
  9.2 Renewal Terms ........................................................ 11

ARTICLE 10 TERMINATION ..................................................... 11
  10.1 Events of Termination ............................................... 11
  10.2 Consequences of Termination or Expiry in Any Event .................. 12
  10.3 Consequences of Termination for DIOMED's Default .................... 12
  10.4 Survival of Obligations ............................................. 13

ARTICLE 11 GENERAL PROVISIONS .............................................. 13
  11.1 Amendment ........................................................... 13
  11.2 Arbitration ......................................................... 13
  11.3 Assignment .......................................................... 14
  11.4 Counterparts; Facsimile ............................................. 14
  11.5 Enurement ........................................................... 14
  11.6 Force Majeure ....................................................... 14
  11.7 Independent Contractors ............................................. 14
  11.8 Media Announcements ................................................. 14
  11.9 Notice .............................................................. 15
  11.10 Severability ....................................................... 15
  11.11 Waiver ............................................................. 15
<PAGE>

           AXCAN QLT DIOMED PDT LASER DEVELOPMENT AND SUPPLY AGREEMENT

THIS AGREEMENT is entered into effective as of the 1st day of August, 2000 (the
"Effective Date") between DIOMED INC. ("DIOMED"), a Delaware corporation having
an office at 23 Main Street, Suite 240, Andover, MA 01810, USA and YELLOWGATE
LIMITED (SUCH NAME TO BE CHANGED TO ACAN PHARMA (IRELAND) LIMITED; HEREINAFTER
REFERRED TO AS"AXCAN"), a Quebec company having an office at 597 boul Laurier,
Mont-Saint-Hilaire, QC, J3H 6C4

WHEREAS

A.   QLT (as defined hereafter) and Diomed entered into a PDT Laser Development
     and Supply Agreement dated February 22, 2000 ("QLT AGREEMENT") for use with
     Photofrin;

B.   AXCAN is a leader in the field of gastroenterology and has purchased
     Photofrin(R) from QLT;

C.   DIOMED is a leader in the development of medical diode laser systems, and
     is developing a new compact laser to be used in combination with
     Photofrin(R);

D.   QLT and DIOMED have, subject to the conclusion of this Agreement, agreed to
     terminate the QLT Agreement;

E.   AXCAN and DIOMED have agreed to work together to continue the development
     of the Laser and to get the Laser approved for use with PHOTOFRIN, for the
     existing approved oncology indications transferred to AXCAN by QLT;

F.   QLT has licensed or sublicensed certain intellectual property related to
     fiber optic technology pertaining to or used in connection with the Laser
     and

G.   DIOMED and AXCAN wish to cooperate in the marketing of PDT with PHOTOFRIN
     and DIOMED's T2USA laser or its equivalent in the Agreed Territories;

NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained in this Agreement, the parties hereto agree as follows:

                            ARTICLE I INTERPRETATION

1.1  Definitions

The following capitalized terms shall have the following meanings in this
Agreement:

     1.1.1  "$" means United States Dollars.

     1.1.2  "Affiliate" means any corporation or business entity controlled by,
            controlling or under common control with a party, and "control" or
            "control interest" shall mean direct or indirect beneficial
            ownership of 50% or more of the voting stock of, or a 50% or greater
            interest in the income of, such corporation or other business
            entity, or such other relationship as, in fact constitutes actual
            control.

     1.1.3  "Agreed Territories" means worldwide excluding Japan.

     1.1.4  "AXCAN Indemnified Parties" has the meaning set out in Section 7.4.

     1.1.5  "AXCAN Pharmaceutical Partners" means pharmaceutical companies
            designated by AXCAN to DIOMED from time to time as such.
<PAGE>

     1.1.6  "Business Day" means a day that is not a Saturday or a Sunday or a
            statutory holiday in either Massachusetts or Quebec.

     1.1.7  "Clinical Trials" means any research or clinical trial, including
            trials pre- and post- regulatory approval, which include Phase IV
            trials, and any trial in which AXCAN and/or, AXCAN Pharmaceutical
            Partners provide AXCAN's Photosensitizers at no cost to the End
            User.

     1.1.8  "Confidential Information" has the meaning set out in Article 6.2.

     1.1.9  "End User" means any individual or institution which administers
            AXCAN's Photosensitizers to patients.

     1.1.10 "EPI" means Epitaxial Products International Limited, a company
            registered in England located at Pascal Close, Cypress Drive, St
            Mellons, Cardiff, CF3 OEG UK.

     1.1.11 "FDA" means the United States Food and Drug Administration and any
            successor thereto.

     1.1.12 "Fully Burdened Manufacturing Cost" means direct material costs,
            direct labor costs and reasonable manufacturing and administrative
            (but excluding marketing and sales) overhead costs, with such
            overhead costs determined in accordance with US Generally Accepted
            Accounting Principles ("USGAAP")

     1.1.13 "HPD" means HPD, a New Jersey corporation located at 1200A Airport
            Road, North Brunswick, NJ 08902, USA.

     1.1.14 "Intellectual Property" shall mean anything that is protected by any
            patents, trademarks, copyrights, trade secrets, know-how and all
            other intellectual and industrial property rights whatsoever and
            worldwide (whether registered or unregistered and including rights
            in any application for any of the foregoing)

     1.1.15 "Initial Term" has the meaning set out in Section 9.1.

     1.1.16 "Key Components" means EPI'S wafer and FWD's laser diode, which are
            elements of the Laser.

     1.1.17 "Laser" means the DIOMED T2USA laser and its DIOMED equivalent for
            sale in jurisdictions other than the United States incorporating the
            HPD 630nm diode that is compatible with PHOTOFRIN.

     1.1.18 "Manufacturing" means any and all activities to acquire the Key
            Components and manufacture Lasers.

     1.1.19 "OEM Transfer Price" means in respect of each Laser and subject to
            Article 4.7, DIOMED's Fully Burdened Manufacturing Cost of such
            Laser plus 100% of same.

     1.1.20 "PDT" means the field of photodynamic therapy, that is, the emerging
            medical field that uses light-activated drugs and light in the
            diagnosis, treatment and prevention of cancer and other diseases.

     1.1.21 "PHOTOFRIN" shall mean a specific PDT drug bearing that name and
            owned by QLT.

     1.1.22 "Photosensitizer" means any compounds whose cytotoxic mechanism
            requires activation by the direct application of light, made by or
            for AXCAN or a AXCAN Pharmaceutical Partner, or any licensee,
            sublicensee or distributor of either of them.

                                       2
<PAGE>

     1.1.23 "PMA" means a Premarket Approval Application under 21 C.F.R. 360(e)
            et seq. pursuant to the rules and policies of the FDA.

     1.1.24 "QLT" means collectively QLT Inc., a British Columbia company
            (formerly known as "QLT PhotoTherapeutics Inc.") having an office at
            520 West 6th Avenue, Vancouver, British Columbia, Canada, V5Z 4H5
            and QLT PhotoTherapeutics Inc., a Delaware Company.

     1.125  "QLT Agreement" has the meaning set out in preamble A of this
            Agreement.

     1.1.26 "Regulatory Authorities" means the FDA and the corresponding
            authorities in each applicable jurisdiction for which AXCAN informs
            DIOMED from time to time that the Lasers are to be marketed and sold
            in such jurisdiction, that have responsibility for any or all of the
            following:

            (a)  the issuance of marketing authorizations for medical devices
                 and/or drug device combinations; and

            (b)  the monitoring of quality systems compliance and/or
                 implementation and/or the ongoing surveillance of product
                 safety, efficacy, or adverse events.

     1.1.27 "Recall" means (i) any action by Diomed or Axcan or any of their
            Affiliates to recover title to or possession of Lasers or Photofrin
            products sold or shipped to third parties and (ii) also includes the
            failure by Diomed or Axcan to sell or ship Lasers or Photofrin
            products to third parties which would have been subject to recall if
            it had been sold or shipped provided that (iii), in the case of
            Photofrin, it does not include trade returns from third parties for
            past due dates, mishandling in the deliveries, etc.

     1.1.28 "Renewal Term" has the meaning set out in Section 9.2.

     1.1.29 "Seriously Disrupted" in a territory means that AXCAN's
            Pharmaceutical Partner for that territory has ceased to market
            actively PHOTOFRIN in that territory.

     1.1.30 "Term" means the Initial Term and any Renewal Terms as defined in
            Article 9.

     1.1.31 "Transfer Price" means the OEM Transfer Price plus an increase to
            cover any marketing costs incurred pursuant to Article 4.2.

1.2  ENTIRE AGREEMENT

This Agreement supersedes all previous representations, warranties, dealings,
agreements, understandings and expectations of the parties regarding the subject
matter hereof, and there are no other representations, warranties,
understandings, conditions, agreements, or expectations except as set out in
herein.

1.3  GOVERNING LAW

This Agreement shall be deemed to have been entered into and shall be construed
in accordance with the laws of the State of New York, provided that each party
hereto waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby.

                                       3
<PAGE>

                              ARTICLE 2 DEVELOPMENT

2.1  DEVELOPMENT COMMITMENT

In any future agreed development programs DIOMED will use reasonable efforts to
complete the programs in accordance with the jointly developed timelines.

2.2  DEVELOPMENT OF THE LASER

AXCAN wishes DIOMED to continue and DIOMED wishes to continue the development of
and to enable 630 nm laser diodes that can be used in, among other things, the
Laser. To do so, DIOMED will use commercially reasonable efforts to undertake,
and cause EPI and HPD to undertake, the development activities contemplated by
this development.

                           ARTICLE 3 PROMOTION OF PDT

3.1  COOPERATION

AXCAN and DIOMED agree to use economically reasonable efforts to cooperate in
order to promote PDT.

3.2  CME PARTICIPATION

AXCAN and DIOMED agree to provide joint support for the satellite symposium on
PDT held yearly during the International Course on Therapeutic Endoscopy in
Toronto and will examine participation in other CME events.

3.3  JOINT EFFORTS

AXCAN and DIOMED further agree to use economically reasonable efforts to promote
Photofrin-Laser combination therapy for G.I. indications pursuant to a marketing
plan to be jointly developed as set out in section 4.2 below.

                     ARTICLE 4 MARKETING AND SALES OF LASERS

4.1  FORECAST

AXCAN shall, with respect to all Lasers, maintain and provide to DIOMED an
annual non-binding forecast to be updated quarterly and a rolling six month
forecasted demand for Lasers from AXCAN's Pharmaceutical Partners and End Users,
such forecasts to be based on reasonable expectations of actual demand. Each
six-month forecast shall be delivered to DIOMED at the beginning of a calendar
quarter for the six-month period following the quarter in which the forecast is
given. The first ninety (90) days of each rolling six-month forecast shall be
binding on AXCAN and shall be non-binding thereafter. In the event that AXCAN
does not order the number of Lasers included in the second forty-five (45) days
of a ninety (90) day binding forecast, AXCAN agrees to pay DIOMED, within thirty
(30) days of receiving an invoice therefor, DIOMED's Fully Burdened
Manufacturing Cost for the Lasers scheduled for delivery in such second
forty-five (45) day period and diomed agrees to hold shipment of the Lasers
until such time as AXCAN notifies DIOMED to do so.

4.2  REASONABLE EFFORTS TO MARKET

AXCAN and DIOMED will cooperate in developing a marketing plan which will detail
each party's obligations.

                                       4
<PAGE>

Subject to the above DIOMED shall make commercially reasonable efforts to market
Lasers with AXCAN's support in the Agreed Territories unless either (i)
otherwise agreed in writing between DIOMED and AXCAN or (ii) the marketing of
PHOTOFRIN in an Agreed Territory is Seriously Disrupted.

4.3  COMMERCIAL OBLIGATIONS

DIOMED shall, with respect to all Lasers:

     4.3.1 Use commercially reasonable efforts to meet in a timely manner the
           reasonably forecasted demand and actual sales demand therefor from
           AXCAN, AXCAN's Pharmaceutical Partners, DIOMED distributors and End
           Users, such that DIOMED shall ship reasonably forecasted Lasers:

           (a)  on average on an annualized basis, within 90 days from receipt
                of an order, and

           (b)  95% of the time, on an annualized basis, within 120 days of
                receipt of any such order;

     4.3.2 accept all reasonable purchase orders for Lasers from AXCAN, AXCAN's
           Pharmaceutical Partners, DIOMED distributors and End Users and fill
           same within a reasonable time from the perspective of: (i) DIOMED,
           and (ii) such purchasers;

     4.3.3 sell Lasers to AXCAN and to AXCAN's Pharmaceutical Partners for use
           in any Clinical Trials at not more than the OEM Transfer Price of
           same.

4.4  ALLOCATION OF MANUFACTURING RESOURCES

Where DIOMED's inability to deliver Lasers is due to a shortage of production
capacity caused by the allocation of such capacity to DIOMED's other customers,
DIOMED shall allocate its production capacity among AXCAN, AXCAN's
Pharmaceutical Partners, DIOMED distributors and End Users for Lasers and
DIOMED's other customers on a reasonable pro rata basis based on AXCAN's and
such other customers' forecasted production requirements for the then current
six month period.

4.5  NOTICE OF DELAYS

Where possible, DIOMED shall provide to AXCAN prompt notice of any problems
which have the potential to adversely affect the Manufacturing of any Lasers
under this Agreement, or the timely delivery of same to AXCAN, AXCAN's
Pharmaceutical Partners, DIOMED distributors and End Users for Lasers. Without
limiting the generality of the foregoing, DIOMED shall provide to AXCAN at least
six months prior written notice of any scheduled shutdown at any of its
manufacturing facilities that may impact DIOMED's ability to Manufacture and
timely deliver Lasers to AXCAN, AXCAN Pharmaceutical Partners, DIOMED
distributors and End Users for Lasers under this Agreement.

4.6  SALES TO AXCAN

Excluding Lasers sold to AXCAN under Article 4.3.3, DIOMED will make commercial
sales of Lasers on the terms set out in this Agreement to AXCAN. The terms of
the sales to AXCAN shall be:

     4.6.1  AXCAN shall give DIOMED ninety (90) days notice of its desire to
            purchase Lasers at the Transfer Price and the jurisdictions in which
            AXCAN wishes to purchase the Lasers;

     4.6.2  DIOMED shall sell such Lasers to AXCAN at the Transfer Price;

     4.6.3  DIOMED shall give priority to AXCAN in the supply of such lasers;

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<PAGE>

     4.6.4  Any End User supplied with such Lasers directly or indirectly by
            AXCAN will be eligible for all DIOMED product guarantees and
            warranties as if said End User had been supplied directly by DIOMED
            on DIOMED's standard terns for same;

     4.6.5  In those countries in which AXCAN is selling Lasers, at AXCAN's
            request, DIOMED shall drop ship freight collect Lasers purchased by
            AXCAN to the location and party specified by AXCAN, provided that
            AXCAN will specify no more than one location in each country at any
            time; and

     4.6.6  Except as expressly set out herein, DIOMED shall not discriminate
            among AXCAN, AXCAN's Pharmaceutical Partners and End Users and other
            purchasers of Lasers respecting shipping times or availability of
            Lasers.

4.7  REDUCTIONS IN MANUFACTURING COSTS

DIOMED will notify AXCAN of any new technologies or new manufacturing methods
that could result or have resulted in reductions in the Fully Burdened
Manufacturing Cost. Any reductions in Fully Burdened Manufacturing Cost achieved
will be shared equally by the parties, and such sharing will be reflected in a
modification to the OEM Transfer Price.

4.8  AXCAN'S EXCLUSIVITY

In recognition of DIOMED's financial commitment to the development of the Laser,
AXCAN agrees to support, endorse and procure exclusively the Laser in the Agreed
Territories to the exclusion of other diode laser systems that incorporate a
630nm laser diode in the field of PDT for oncology using PHOTOFRIN, for a period
of five years following approval of the Laser from any regulatory authority in
any jurisdiction of the Agreed Territories. The foregoing is subject to:

     4.8.1  DIOMED not being in breach of this Agreement;

     4.8.2  DIOMED being able to submit the documentation required by a
            regulatory authority for the approval of the Laser within a
            timeframe to be jointly agreed on by AXCAN and DIOMED;

     4.8.3  approval of the Laser by the Regulatory Authority is not withheld in
            the applicable jurisdiction of the Agreed Territories due to:

            (a)  any failure of DIOMED to apply for and diligently pursue such
                 approval within a reasonable period of time; or

            (b)  any failure of or deficiencies in DIOMED's quality systems;

     4.8.4  approval by the applicable Regulatory Authority of the Laser occurs
            within 18 months of the date of application for same;

     4.8.5  approval by the applicable Regulatory Authority of the first
            generation T2USA laser (or equivalent in jurisdiction of the Agreed
            Territories other than the United States) (incorporating an SDL
            laser diode) is not significantly delayed by deficiencies in
            DIOMED's quality systems identified in the FDA audit dated March
            6/10 2000; and

     4.8.6  subject to Article 4.2 DIOMED can demonstrate that it is making
            reasonable efforts to market the Laser.

Further, DIOMED's period of exclusivity may be extended in a given Agreed
Territory if marketing of PHOTOFRIN in that Territory is Seriously Disrupted
during the initial three year period. Such period of extension shall equal the
period of the disruption.

                                       6
<PAGE>

If the sale of Laser is not authorized within the period set forth in
subsection 4.8.4 or such authorization is suspended in a jurisdiction of the
Agreed territories, AXCAN shall have the right to procure (and service) other
lasers in such jurisdiction until such time when the Lasers are authorized for
sale.

Notwithstanding the rest of this Article 4.8, AXCAN shall have no obligation to
oblige any commercial customer or investigator to use a Laser.

4.9  DIOMED'S EXCLUSIVITY

During the period of exclusivity set out in Article 4.8, DIOMED shall not
without AXCAN's prior approval:

     4.9.1  manufacture the Laser for any parties other than as provided for
            herein; or

     4.9.2  sell or otherwise dispose of any Laser except in accordance with the
            terms and conditions of this Agreement.

     4.9.3  replace the 630 nm diode with a diode that makes use of a different
            wavelength in any of the Lasers sold by DIOMED, AXCAN or AXCAN's
            Partners.

     4.9.4  exchange or replace the Laser with a laser equipped with a diode
            that makes use of a different wavelength.

     4.9.5  provided AXCAN makes an equity investment in DIOMED, manufacture or
            distribute Lasers for use as part of any PDT, PMA, MAA application
            for any gastrointestinal or hepatobiliary diagnostic, therapeutic or
            preventive indication except to AXCAN and DIOMED's current business
            partners (being Pharmacyclics, Dusa, QLT and Scotia) without the
            consent of AXCAN.

             ARTICLE 5 LEGAL AND REGULATORY MATTERS; AUDIT

5.1  REGULATORY APPROVALS

DIOMED confirms that it has obtained approval from the FDA. DIOMED and AXCAN
will reasonably cooperate to obtain, when required in a jurisdiction of the
Agreed Territories, the required approval from such other Regulatory Authority
for the Laser.

5.2  COMPLIANCE WITH LAWS

In carrying out its obligations under this Agreement, DIOMED shall at all times
comply with all applicable laws and obtain and maintain in effect all applicable
licenses and permits respecting such obligations, including, without
limitation, DIOMED shall produce the Laser in compliance with standards of the
FDA, Europe Union Medical Device Directive and any other applicable Regulatory
Authorities in the Agreed Territories.

5.3  AUDIT OF FACILITIES

DIOMED shall allow AXCAN to conduct QA audits of its manufacturing facility and
applicable documents whenever AXCAN believes them to be necessary and with 15
days advance written notice. Any audit under this Article shall be conducted
during regular business hours at a time and date mutually agreeable between the
parties but no later than three (3) business days following the fifteen-day (15)
period of the notice.

5.4  ADVERSE REPORTS

Each party shall promptly advise the other party and provide the other with a
notice of any reports of unexpected side effects, adverse reactions or injury
("Adverse Reports") which have been brought to such party's attention at any
place and which are alleged to have been caused by the Laser or Photofrin. Each
party shall forward serious

                                        7
<PAGE>

Adverse Reports and unexpected Adverse Reports without delay to the other party
as soon as such reports come its attention.

5.5  GOVERNMENT BODY AND OTHER INQUIRIES

Upon being contacted by any governmental body in the Agreed Territories in
connection with the Laser, Photofrin or any other matter which might reasonably
be expected to affect the rights or obligations of the other party under this
Agreement, the party so contacted shall immediately notify the other party. Each
party, as appropriate, shall respond to all inquiries regarding the Lasers from
governmental bodies throughout the Agreed Territories and the parties shall
provide one another with reasonable assistance in this regard.

5.6  RECALLS

In the event that an event, incident or circumstance has occurred which may
result in the need for a recall or other removal of one or more Lasers or
Photofrin product from the market, the parties shall consult with each other
with respect thereto as to the appropriate measures to be taken.

5.7  RECALL PROCEDURE

Prior to commencing any recall of Lasers, the parties shall review with one
another the manner in which the recall is to be carried out and any instructions
or suggestions of the applicable regulatory authorities. Diomed shall assume
control of any recall procedure concerning the Lasers and Axcan shall reasonably
assist (at Diomed's expenses) in any action taken pursuant to such recall. Axcan
shall assume control of any recall procedure concerning Photofrin and Diomed
shall reasonably assist (at Axcan's expense) in any action taken pursuant to
such recall.

5.8  COSTS

Diomed shall pay all costs incurred in connection with any recall of Lasers
throughout the Territory unless such recall is necessary due to a breach by
Axcan of its obligations hereunder. Axcan shall pay all costs incurred in
connection with any recall of Photofrin throughout the Territory unless such
recall is due to a breach by Diomed of its obligations hereunder.

                         ARTICLE 6 INTELLECTUAL PROPERTY

6.1  TITLE

Subject to the terms of this Agreement:

     6.1.1  Any inventions owned by DIOMED prior to the effective date of this
            Agreement or licensed or sublicensed from QLT since that date, or
            invented solely by DIOMED under this Agreement, and all the work
            product arising from any development carried out by DIOMED shall be
            solely owned by DIOMED.

     6.1.2  Any inventions owned by AXCAN prior to the effective date of this
            Agreement, or invented solely by AXCAN under this Agreement, and the
            work product arising from any development carried out by AXCAN shall
            be solely owned by AXCAN.

     6.1.3  Any inventions or work product arising from any development work
            made jointly by the parties hereunder shall be jointly owned by both
            parties, without any duty to account to each other and, unless
            agreed to otherwise by the parties in writing, each party shall be
            free to make use, sell, license or otherwise grant authorizations to
            this third parties concerning any such invention without the need to
            receive the prior approval or authorization of the other; the
            parties hereby definitively waive any right to request partition of
            such invention.

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<PAGE>

     6.1.4  Each party reserves all rights in its Intellectual Property that it
            does not expressly grant to the other party in this Agreement.

     6.1.5  Subject to the provisions of Subsection 6.1.3 above, the parties
            will mutually agree on the protection and enforcement of their
            jointly owned Intellectual Property.

     6.1.6  DIOMED, AXCAN shall promptly notify each other of any suspected
            infringement of the other's Intellectual Property rights.

6.2  CONFIDENTIALITY

DIOMED and AXCAN agree that all information relating to the technology arising
from the Development Program and the terms of this Agreement, disclosed by
either party in accordance with this Agreement shall be maintained by the
receiving party in secrecy, and each will use all reasonable diligence to
prevent disclosure, except to necessary personnel. DIOMED's and AXCAN's
obligations under this Article 6.2 shall be limited to a period of five years
from the date of expiry or earlier termination of this Agreement. The parties
shall not have any obligation of confidentiality with respect to any information
that is:

     6.2.1  in the public domain, other than by a breach of this Agreement on
            the part of the receiving party;

     6.2.2  rightfully received from a third party without any obligation of
            confidentiality;

     6.2.3  rightfully known to the receiving party without any limitations on
            use or disclosure prior to its receipt from the disclosing party as
            documented in written records;

     6.2.4  generally made available to third parties by the disclosing party
            without restriction on disclosure; or

     6.2.5  independently developed by the receiving party as documented in
            written records.

Any and all information received by either party from the other, upon request
shall be promptly returned, except that the receiving party may retain one copy
of such information in its confidential files, solely for record purposes.

            ARTICLE 7 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION

7.1  DIOMED'S REPRESENTATIONS AND WARRANTIES

DIOMED hereby represents and warrants to AXCAN as set out in Exhibit 7.1,
DIOMED's current applicable published warranty.

7.2  NO OTHER WARRANTIES

EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY MAKES TO THE OTHER PARTY ANY
WARRANTY OF ANY KIND EXPRESS OR IMPLIED, WITH RESPECT TO THIS AGREEMENT AND THE
PRODUCTS AND SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING, BUT NOT LIMITED
TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.

7.3  NO CONSEQUENTIAL DAMAGES

NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL
IN ANY CIRCUMSTANCES BE LIABLE TO THE OTHER OR ANY THIRD PARTY FOR SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY NATURE WHATSOEVER,

                                       9
<PAGE>

INCLUDING, BUT NOT LIMITED TO, COMMERCIAL LOSS FROM ANY CAUSE, BUSINESS
INTERRUPTION OF ANY NATURE OR LOSS OF PROFITS, EVEN IF THE PARTY THAT WOULD
OTHERWISE BE LIABLE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

7.4  INDEMNIFICATION

DIOMED shall indemnify, defend and hold harmless AXCAN and its officers,
directors, employees and agents (the "AXCAN Indemnified Parties") from and
against any and all liabilities, damages, costs and expenses, including
attorney's fees, which may be imposed upon, incurred by, or served against the
AXCAN Indemnified Parties by any third party:

     7.4.1  for the infringement of or by any product supplied by DIOMED against
            the patent, trademark, trade name, copyright or other intellectual
            property rights of such third party;

     7.4.2  challenging any right of ownership; or

     7.4.3  for product liability claims arising from any of the Lasers
            (including, but not limited to, claims arising out of or related to
            defects in material, workmanship or design or breach of warranty).

AXCAN shall notify DIOMED in writing within a reasonable time after it becomes
aware of any such allegation, claim, charge or legal proceeding and permit
DIOMED to handle defense and settlement of any such allegation, claim, charge or
legal proceeding.

7.5  INSURANCE

DIOMED shall maintain, at its own expense, adequate comprehensive general
liability insurance and adequate product liability insurance coveting the
manufacture, marketing, use and sale of the Lasers (excluding the manufacture,
marketing, use and sale of Photofrin(R)), with waivers of subrogation, covering
AXCAN, its employees and representatives and specifically naming AXCAN as
co-insured. Upon request, DIOMED shall provide a certificate covering any such
insurance to AXCAN.

AXCAN shall maintain, at its own expense, adequate comprehensive general
liability insurance and adequate product liability insurance covering the
manufacture, marketing, use and sale of Photofrin(R) (excluding the manufacture,
marketing, use and sale of the Lasers), with waivers of subrogation, covering
DIOMED, its employees and representatives and specifically naming DIOMED as
co-insured. Upon request, AXCAN shall provide a certificate covering any such
insurance to DIOMED.

                          ARTICLE 8 SECURITY OF SUPPLY

8.1  SECURITY OF SUPPLY

In the event that DIOMED:

     8.1.1  ceases or threatens to cease to do business or exploit the work
            product other than through termination under Article 9.2 or 10.1
            (where the defaulting party is AXCAN), or goes bankrupt, on written
            notice to DIOMED, AXCAN shall have the non-exclusive rights set out
            in Articles 10.2 and 10.3.

8.2  ANNUAL FINANCIAL DUE DILIGENCE

DIOMED shall inform AXCAN of any known material change in the situation of
DIOMED, HPD or EPI that might impact the security of supply of Lasers. On an
annual basis, and at AXCAN's request, DIOMED shall provide standard financial
information required to update AXCAN's financial due diligence records on
DIOMED.

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<PAGE>

8.3  PLAN FOR RESUMPTION ON INTERRUPTION OF SUPPLY

If for any reason, DIOMED fails to deliver Lasers for more than 30 days after
the delivery date for shipment, or if any event occurs which will interrupt the
supply of Lasers under this Agreement where such interruption will continue for
more than 30 days, DIOMED will provide a plan to AXCAN in which DIOMED details
how DIOMED will correct the interruption of supply and provide the timelines
required to achieve this. AXCAN may, at AXCAN's sole option, accept the plan,
regardless of whether or not AXCAN has exercised any other rights under this
Article or Article 10.

8.4  ESCROW OF IP

In furtherance of DIOMED's obligations under this Agreement, upon notice from
AXCAN from time to time, DIOMED shall place a copy of all of DIOMED's current
and future Intellectual Property necessary to exploit AXCAN's rights set out in
Article 10.3 in escrow. The escrow shall:

     8.4.1  be with an independent third party;

     8.4.2  be paid for by AXCAN;

     8.4.3  be terminable on expiry or other termination, provided that such
            termination did not give rise to the opportunity for AXCAN to
            exercise rights pursuant to the escrow contemplated hereby,

     8.4.4  provide for the release from escrow and delivery to AXCAN of such
            information upon the interruption of supply of Lasers as set out in
            Articles 8.1 and 10.1 of this Agreement on the terms set out herein;
            and

     8.4.5  be on commercially reasonable terms

If the parties cannot agree on the terms of the escrow, either party may submit
the matter to arbitration

                                 ARTICLE 9 TERM

9.1  INITIAL TERM

This Agreement shall commence on the Effective Date and shall remain in full
force and effect for a period of five years therefrom (the "Initial TERM"),
unless extended in accordance with Article 9.2, or earlier terminated in
accordance with the terms and conditions of this Agreement.

9.2  RENEWAL TERMS

This Agreement shall automatically renew for a period of two additional years (a
"Renewal Term") commencing on the expiration of the Initial Term or the
preceding Renewal Term, as the case may be, unless either party delivers written
notice to terminate to the other party a least three months prior to the
expiration of the initial Term or Renewal Term, as applicable. The parties may
renegotiate pricing and any other material terms and conditions of this
Agreement for any Renewal Term.

                             ARTICLE 10 TERMINATION

10.1 EVENTS OF TERMINATION

This Agreement may be terminated for cause including but not necessarily limited
to the following circumstances:

     10.1.1 by notice given by the non-defaulting party for the following and
            the defaulting party not remedying such failure within thirty days
            after receipt of written notice of such default:

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<PAGE>

            (a)  if a party fails to perform any material term or condition of
                 this Agreement or any other associated agreement in writing
                 between the parties;

            (b)  if either party fails to materially perform against agreed-to
                 Manufacturing schedules; or

     10.12  by notice of termination for the following reason given by the
            non-defaulting party, which notice will be effective upon receipt,
            upon the dissolution or insolvency of either party, or the
            appointment of a receiver or receiver-manager of any part of the
            property or business of either party, or the making of an
            assignment, proposal, or arrangement by either party for the benefit
            of creditors, or the filing of a petition in bankruptcy again to
            either party, or the commencement of any proceedings under any
            bankruptcy or insolvency laws in respect of either party, or if
            either party discontinues its business.

10.2 CONSEQUENCES OF TERMINATION OR EXPIRY IN ANY EVENT

Subject to Articles 10.3 and 10.4, on any expiration or earlier termination of
this Agreement through any means and for any reason, each party shall:

     10.2.1 promptly cease all use of the Confidential Information of the other
            party and ensure that its employees cease all use thereof; and

     10.2.2 upon written request of the other party:

            (a)  return to the other party all original copies of the
                 Confidential Information of the other party in its control or
                 possession, subject to the retention of one copy of materials
                 as necessary for compliance with the requirements of Regulatory
                 Authorities; and

            (b)  destroy any and all copies or other reproductions or extracts
                 of the Confidential Information of the other party and all
                 other documents, computer files, memoranda, notes or other
                 writings prepared based or such Confidential Information,
                 except where required by law, regulation or court order to be
                 maintained.

10.3 CONSEQUENCES OF TERMINATION FOR DIOMED'S DEFAULT

Solely in the event of termination due to the default of DIOMED or the
occurrence of any of the events set out in Article 8.1:

     10.3.1 DIOMED shall ensure that all Confidential Information, technology,
            know-how, and supplier and subcontractor lists and agreements
            (including licenses such as the QLT Agreement), relating to the
            Manufacturing by DIOMED, HPD or EPI of Key Components or the Laser
            are provided to AXCAN or its designee, all in a form and with
            content reasonably satisfactory to AXCAN as required to enable
            AXCAN'S reasonably competent staff to transfer the process of
            Manufacturing of Lasers (to the extent such process exists at the
            time of termination) to AXCAN or a third party as soon as reasonably
            possible, and AXCAN shall be granted a non-exclusive, worldwide
            license with a right to grant sublicenses, at a royalty rate of ten
            percent of the Fully Burdened Manufacturing Cost, to use DIOMED's
            Intellectual Property solely for the purpose of Manufacturing and
            selling Lasers;

     10.3.2 at the option of AXCAN, exercisable by written notice delivered by
            AXCAN to DIOMED, DIOMED, shall, notwithstanding such termination,
            continue to Manufacture Lasers for AXCAN's needs for a period not
            exceeding 24 months until AXCAN has established a replacement
            contractor for the Manufacturing of Lasers and replacement Laser
            inventory is available and approved for use by the applicable
            Regulatory Authorities. During such

                                       12
<PAGE>

            transition period, AXCAN shall pay for the products and services of
            DIOMED at a commercially reasonable rate. If the parties cannot
            agree on the commercially reasonable rate, either party may submit
            the matter to arbitration. AXCAN shall use its best commercial
            efforts to secure a new contractor for the Manufacturing of Lasers
            within a reasonable time;

     10.3.3 each party will co-operate reasonably and in good faith with the
            other so that the transition of the services rendered by DIOMED
            under this Agreement shall be timely and efficient and implemented
            in a manner so as not to unduly interfere with the orderly conduct
            of AXCAN's business or to DIOMED's other operations;

     10.3.4 DIOMED shall participate in technical review meetings with AXCAN to
            address any issues raised by AXCAN regarding the documentation and
            materials transferred hereunder and the transfer of Manufacturing or
            any element thereof to a third party; and

     10.3.5 DIOMED shall co-operate with AXCAN by providing to AXCAN, within 60
            days of the effective date of termination or the occurrence of any
            of the events set out in Article 8.1, at AXCAN's expense, copies or
            drafts, to the extent they exist, of:

            (a)  DIOMED's documentation in support of AXCAN's filing of its
                 marketing applications for the Lasers;

            (b)  DIOMED's Device History Records for the Lasers produced by
                 DIOMED under this Agreement;

            (c)  pertinent test reports and manufacturing instructions relating
                 to the Laser; and

            (d)  all other records maintained by DIOMED relating to the
                 Manufacturing of Laser under this Agreement.

10.4 SURVIVAL OF OBLIGATIONS

Notwithstanding expiration or earlier termination of this Agreement, the
provisions of Article 5, Article 6, Article 7, Article 10, Article 11 shall
survive the termination, expiration or cancellation of this Agreement and shall
be without prejudice to the rights and remedies of either party with respect to
the antecedent breach of any of the provisions of this Agreement.

                          ARTICLE 11 GENERAL PROVISIONS

11.1 AMENDMENT

Any modification or amendment to this Agreement shall be in writing, signed by
both parties.

11.2 ARBITRATION

Except for applications for injunctions required to protect Proprietary
Information, all disputes arising out of or in connection with this Agreement or
in respect of any defined legal relationship associated therewith or derived
therefrom shall be referred to and finally resolved by arbitration under the
rules of the American Arbitration Association, and in connection therewith:

     11.2.1 the appointing authority shall be the American Arbitration
            Association;

     11.2.2 the arbitration shall be conducted by a single arbitrator unless the
            parties agree otherwise;

     11.2.3 the case shall be administered by the American Arbitration
            Association; and

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<PAGE>

     11.2.14 the place of arbitration shall be New York, New York.

11.3 ASSIGNMENT

Except as expressly provided in this Agreement, neither party may assign,
transfer or sublicense in whole or in part any of its rights under this
Agreement without the written consent of the other party, which consent may not
be unreasonably withheld. Either party may assign, transfer or sublicense its
rights under this Agreement in whole or in part to any affiliate of the
assigning party without the consent of the other party. Either party may assign,
transfer or sublicense its rights under this Agreement without the consent of
the other party in whole or in part to any entity to whom the assigning party
has assigned the whole or any part of the business of the assigning party
related to this Agreement with the consent of the other party which shall not be
unreasonably withheld, provided that such third party has agreed with the party
not assigning to abide by and be bound by all the terms and conditions contained
in this Agreement. In all cases where an assignment of this Agreement is made to
a third party pursuant to the provisions of this paragraph, the assigning party
shall guarantee the fulfillment and execution of all obligations of the assignee
pursuant to this Agreement.

11.4 COUNTERPARTS; FACSIMILE

This Agreement may be executed in any number of counterparts with the same
effect as if all parties had all signed the same document. All counterparts
shall be construed together and shall constitute one and the same Agreement.
This Agreement may be executed by the parties and transmitted by facsimile
transmission and if so executed and transmitted this Agreement shall be for all
purposes as effective as if the parties had delivered an executed original
Agreement.

11.5 ENUREMENT

This Agreement shall enure to the benefit of and be binding upon the parties and
their respective heirs, executors, administrators, successors and permitted
assigns.

11.6 FORCE MAJEURE

Notwithstanding any other provisions of this Agreement, neither of the parties
hereto shall be liable in damages or have the right to terminate this Agreement
for any delay or default in performing hereunder if such delay or default is
caused by conditions beyond its control including, but not limited to acts of
God, governmental restrictions, wars, or insurrections, strikes, floods, work
stoppages; provided, however, that the party suffering such delay or default
shall notify the other party in writing of the reasons for the delay or default.
If such reasons for delay or default continuously exist for six months, this
Agreement may be terminated upon notice by either party.

11.7 INDEPENDENT CONTRACTORS

Except as otherwise expressly provided in this Agreement, the parties are
independent contractors, and neither party shall act as the legal agent of the
other or otherwise cause the other to incur liability in any manner whatsoever.

11.8 MEDIA ANNOUNCEMENTS

No party shall issue any press release, publish any circular or issue or release
any other public document or make any public statement, nor disclose to any
person whatsoever (other than those employees and professional advisors with a
need to know) any information, relating to or connected with or arising out of
this Agreement or the matters contained in it, without obtaining the prior
written approval of the other party to the contents and manner of the
publication of same. Notwithstanding the foregoing, either party may make any
release respecting this Agreement or the matters contemplated hereby when
required to do so by law or regulation.

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<PAGE>

11.9 NOTICE

Any notice or other communication required or permitted to be given to either
party hereto will be in writing and will be deemed to have been properly given
and to be effective on the date of delivery if delivered in person or by telex
or facsimile or 2 business days after mailing by expedited delivery or 5 days
after mailing by registered or certified mail, postage paid, to the other party
at address on the first page of this Agreement. Either party may change its
address or fax number for communications by a notice to the other party in
accordance with this Article is 11.9.

11.10 SEVERABILITY

If any provision of this Agreement is unenforceable for any reason whatsoever,
the unenforceability shall not affect the enforceability of the remaining
provisions of this Agreement and the unenforceable or invalid provision shall be
severable from the remainder of this Agreement.

11.11 WAIVER

A waiver of any breach of any provision of this Agreement shall not be construed
as a continuing waiver of other breaches of the same or other provisions of this
Agreement.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by their duly authorized representatives on the date(s) shown below.

DIOMED INC.                                     YELLOWGATE LIMITED
by its authorized signatory:                    by its authorized signatory:

/s/ Peter Klein                                 /s/ L.F. Gosselin
----------------------                          -----------------------
Name: Peter Klein                               Name: L.F. Gosselin
Title: CEO                                      Title: CEO

Date: August 1st, 2000                          Date: August 2nd, 2000

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<PAGE>

 EXHIBIT 7.1:     DIOMED'S WARRANTY

                          DIOMED MEDICAL LASER PRODUCTS
             MANUFACTURER'S 12 MONTH GUARANTEE & EXTENDED GUARANTEE
                                   (WORLDWIDE)

 Keep this document in a safe place for future reference

 UK                                                    USA
 Diomed Limited                                        Diomed Inc
 Cambridge Research Park                               23 Main Street, Suite 240
 Ely Road                                              Andover, MA 01810
 Cambridge CB5 9TE                                     USA
 United Kingdom
 Tel: +44 1223 729300                                  Tel: 978-475-7771
 Fax: +44 1223 729329                                  Fax: 978-475-8489
 Email: service@diomed-lasers.com                      Email: diomedinc@aol.com
 http://www.diomed-lasers.com
                                                       January 2000
                                                       LBL/0020 -

 Issue 1

 DIOMED Distributor

 DEFINITION OF TERMS

 Diomed           Diomed Limited or Diomed, Inc. as appropriate

 Distributor      A company that has a contractual agreement with Diomed to
                  distribute DIOMED Products

 Product          A new product manufactured by Diomed and sold by Diomed or its
                  Distributor which is covered by this Guarantee (see paragraph
                  headed Products covered).

 Registered User  An individual or organisation that intends to use a Product
                  and that has completed and returned a Guarantee Registration
                  form (supplied with every Product) to Diomed Limited,
                  Cambridge, UK

 TERMS OF MANUFACTURER'S 12 MONTH GUARANTEE

 This Guarantee shall apply between Diomed and the Registered User concerning
 the sale and supply of the following Products:

 o Products covered

 The Products listed below are guaranteed by Diomed to be free defects of
 materials and workmanship for a period of twelve (12) months from the date of
 installation at the Registered User's premises.

 o DIOMED Surgical diode lasers
 o DIOMED Aesthetic diode lasers
 o DIOMED Aesthetic Laser Scanning Handpieces
 o DIOMED PDT (photodynamic therapy) diode lasers

 The following items are excluded from this Guarantee:

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<PAGE>

 o Safety Eyewear
 o All optical fibres, handpieces (except Scanning Handpieces) and accessories
 o Maintenance Instruments
 o Footswitch and Electric Cables
 o All other accessories supplied by Diomed

 A repair or replacement of a Product, or part of it, will not extend the
 Guarantee period for that Product.

 o Circumstances rendering Guarantee invalid

 This Guarantee will become invalid in respect of any Product if:
 i. The Product has been damaged in any way (other than by Diomed or its
 Distributor)
 ii. The Product has been installed, stored, maintained, used or
 adjusted otherwise than in accordance with instructions provided by Diomed in
 the Product Operator's Manual
 iii. The Product has been repaired, serviced, replaced, worked on or altered by
 any person not authorised by Diomed
 iv. The Product has been used for a purpose which is not intended for it

 o CONDITIONS OF GUARANTEE

 Diomed will repair or replace a Product or part which Diomed's examination
 shows to have been defective.
 Diomed's decision as to whether a defect is covered by this Guarantee is final.
 Diomed's obligations under this Guarantee are limited to repair or replacement
 of the Product or part found to be defective and shall under no circumstances
 exceed the cost of the Product or part for which the claim under this
 Guarantee is made.
 This Guarantee contains all the warranties which Diomed gives in respect of all
 Products and all other conditions and warranties whether they are implied by
 statute or otherwise are expressly excluded by Diomed including without
 limitation any implied warranties of merchantability or fitness for purpose.
 In no event shall Diomed be liable to a Registered User for consequential
 damages, loss of profits, loss of use, or any indirect damages of any kind but
 Diomed  does not exclude its liability for death or personal injury caused by
 its negligence.
 This Guarantee shall be governed by the laws of England and Wales.

 o WHAT THE GUARANTEE COVERS IN THE EVENT OF A VALID CLAIM

 o   All parts and labour needed to repair or replace the Product at the
     premises of Diomed Limited, Cambridge, UK

 o   If the Product needs to be returned to Diomed, Cambridge for repair, the
     Registered User pays all shipping/transport & insurance costs relating to
     shipment of the Product from their premises to Diomed.

 o   Diomed will pay for all shipping/transport & insurance costs relating to
     the return of the repaired Product to the Registered User's premises.

 NOTE: Any Product returned for repair must be packaged securely and adequately
 to withstand international air transport handling. Diomed will not be liable
 for any damage caused during transit to Diomed as a result of poor or
 inadequate packaging or otherwise.

 TO REGISTER THE GUARANTEE

 Both the Guarantee Certificate and Guarantee Registration Form located at the
 back of the Product Operator's Manual must be fully completed by the
 Registered User and be countersigned / stamped by the local DIOMED Distributor.
 The Registration Form should be sent by fax or mail to Diomed Limited,
 Cambridge, UK, within 28 days of the installation of the product for our
 reference in the event of a Guarantee claim.

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<PAGE>

 NB: The Certificate and Registration form must clearly state the date of
 installation of the relevant Product.

 THE REGISTERED USER SHOULD KEEP THE GUARANTEE CERTIFICATE FOR FUTURE REFERENCE.
 ------------------------------------------------------------------------------

 WHAT TO DO IN THE EVENT OF A GUARANTEE CLAIM

 If the Product breaks down or fails during use and it is believed that this
 forms the basis for a claim under this Guarantee the procedure is as follows:
 EUROPE/ROW:
 Registered Users should contact their local DIOMED Distributor in the first
 instance, who will liase with the Diomed service department.
 USA:
 Registered Users should contact Diomed, Inc, Boston, MA
 NO LOCAL DISTRIBUTOR:
 i. In the unlikely event that there is no local Distributor, the Registered
 User should contact the Diomed service department, Cambridge, UK by:
 Fax:     +44 1223 729329
 Email: service@diomed-lasers.com
 ii. Once the extent of the problem has been assessed, the Diomed service
 department will identify the action to be taken.
 NB: Prior to returning any Product to Diomed, the Registered user should obtain
 authorisation from the Diomed service department when a 'Return Authorisation
 Number' will be provided.
 Diomed will make every reasonable effort to return the Product in the shortest
 possible time.

 WHAT HAPPENS WHEN THIS GUARANTEE EXPIRES?

 Diomed operates an Extended Guarantee Plan (available for a maximum of 4
 further years) that the Registered User can purchase either at the time of
 Product installation or alternatively before this Guarantee expires.
 The Extended Guarantee Plan can be purchased from the local DIOMED Distributor
 or directly from Diomed if there is no local Distributor. Diomed strongly
 recommends that Registered Users take out an Extended Guarantee to retain the
 same level of confidence, security and peace of mind as that offered by this
 Guarantee.
 Details about the Extended Guarantee Plan appear on the following pages.

 THE EXTENDED GUARANTEE PLAN

 The Extended Guarantee Plan covers the same Products as are covered by the
 initial Guarantee and can be purchased through local DIOMED Distributors, in
 the US through Diomed, Inc. or through Diomed Limited directly where there is
 no local Distributor.

 The Extended Guarantee will commence once the initial Guarantee of 12 months
 (see previous pages) has expired, and can be purchased for periods of:
 1 year
 2 years
 3 years
 4 years
 If the Extended Guarantee is taken out for a period of less than 4 years, it
 maybe renewed annually to a maximum of 4 years in total.
 A repair or replacement of a Product, or part, will not extend the Extended
 Guarantee period for that Product.

 TERMS OF THE EXTENDED GUARANTEE

 The Terms of the Extended Guarantee and the cover provided are identical to
 those of the initial Guarantee (see pages 3-4 of this document).

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<PAGE>

 HOW TO PURCHASE AN EXTENDED GUARANTEE?

 An Extended Guarantee may be purchased either:
 o  At the time of purchase/installation of a Product
 Diomed strongly recommends that a Registered User takes out an Extended
 Guarantee at the time of purchase of a Product. This will enable the Registered
 User to benefit from preferential pricing and to know that the Product will
 have the security of continuing Guarantee cover after the expiration of the
 initial Guarantee. To apply for an Extended Guarantee, simply complete the
 Extended Guarantee form at the back of this document and forward it with the
 relevant payment to the local DIOMED Distributor, Diomed, Inc., Boston MA or
 Diomed Limited, Cambridge as appropriate. An Extended Guarantee certificate
 will be issued by Diomed within 28 days of receipt of the form at Diomed's
 Cambridge premises.

 Or

 o When the initial Guarantee expires
 If the Registered User does not take out an Extended Guarantee when the Product
 is purchased, the local DIOMED Distributor or Diomed will contact the
 Registered User approximately 2 months before expiry of the initial Guarantee,
 to enquire whether the Registered User wishes to participate in the Extended
 Guarantee Plan.

 WHAT TO DO IN THE EVENT OF AN EXTENDED GUARANTEE CLAIM?

 The procedure is identical to that relating to the initial Guarantee as
 detailed on page 4 of this document.

 WHAT HAPPENS IF THE PRODUCT IS NOT REGISTERED IN THE EXTENDED GUARANTEE CLAIM?

 If the Product is not registered under the Extended Guarantee Plan, Diomed can
 still undertake repairs to the Product on the following terms:

 i. The Registered User will be liable for all charges incurred (ie. parts,
 labour, packing, shipping & insurance).
 ii. Diomed will provide an estimate for the cost of repair and will await
 written permission to proceed from the Registered User before commencing any
 repair work.

 EXTENDED GUARANTEE APPLICATION FORM

 Date of Application:
 Product Type:
 Product Serial Number:       Date Installed:
 Extended Guarantee Term required: (Tick as applicable)
 1 year  2 years  3 years 4 years
 Customer Name
 Institution:
 Address: Street:
 City: Zip/Post Code:
 Country
 Telephone:       Fax:
 Email:

 DIOMED Distributor Details:

 What happens now . . .

 o Return the completed form with the relevant payment by post or fax to your
 local DIOMED Distributor or Diomed, Inc.
 o The Distributor will forward this form to Diomed Limited, Cambridge.
 o You will be issued with an Extended Guarantee Certificate within 28 days of
 receipt of the form at Diomed premises.

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<PAGE>

 UK
 Diomed Limited, Cambridge Research Park, Ely Road, Cambridge, CB5 9TE,
 United Kingdom
 Tel: +44 1223 729300   Fax: +44 1223 729329    Email: service@diomed-lasers.com
 USA
 Diomed, Inc., 23 Main Street, Suite 240, Andover, MA 01810
 Tel: 978-475-7771    Fax: 978-475-8488       Email: diomedinc@diomed-lasers.com

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