EXHIBIT 10.8

                         TRIPLE NET REAL PROPERTY LEASE
                             (Multi-Tenant Building)



     THIS TRIPLE NET REAL  PROPERTY  LEASE (this  "Lease"),  dated for reference
purposes  only as of February 16, 1998,  is made and entered into by and between
BATH STREET PARTNERS,  a California  limited  partnership (the "Landlord"),  and
AVTEL  COMMUNICATIONS,   INC.,  a  Delaware  corporation  (the  "Tenant"),  who,
intending to be legally bound, agree as follows:

1.   LEASED PREMISES

     Landlord leases to Tenant,  and Tenant leases from Landlord,  those certain
premises  identified  as the entire first floor of the  building  located at 505
Bath Street, Santa Barbara, California (the "Building"), as depicted on the Plot
Plan  attached  as  Exhibit  A (the  "Premises"),  together  with  all  fixtures
presently  located  in the  Premises,  upon the terms and  conditions  set forth
below.  Landlord and Tenant  acknowledge and agree that the Premises  consist of
6,978 square feet. The Premises do not include  approximately  1,317 square feet
on the first floor of the Building  comprised  of the stair and elevator  wells,
pump rooms, back reception area, the electric room, and the mail room.

     1.1  Acceptance  of  Condition.  Landlord  shall  remove  all of the  prior
tenant's  furnishings prior to the Commencement  Date. The Premises are accepted
"AS IS" by Tenant,  after  Tenant's  inspection,  in the condition in which they
exist as of the execution of this Lease.  Tenant  acknowledges that there are no
warranties, express or implied, made by Landlord with regard to the Premises.

     1.2 Parking.  Tenant shall have the nonexclusive  right, in common with the
other tenants of the Building,  to use parking spaces used by all tenants of the
Building.  Prior to the  Commencement  Date,  Landlord  shall cause all existing
reserved spaces for the Building to be relocated or eliminated.

     1.3 Phone Room.  Landlord  shall have  reasonable  access to the main phone
room in the  Premises  with 24  hours'  prior  notice  except in the event of an
emergency.  Tenant may relocate the other tenant's phone and computer  equipment
from this room at Tenant's  expense and with  Landlord's  prior  approval of the
relocation site.

     1.4  New  Address.   Tenant  shall,   within  ninety  (90)  days  from  the
Commencement  Date,  take such  actions as may be necessary to obtain a separate
street address for the Premises.  From and after the date that a separate street
address is obtained for the Premises,  the Premises  shall be deemed to refer to
such new street address.

2.   TERM

     2.1 Initial Term. The term of this Lease (the "Term") shall commence thirty
(30)  days  from  the  execution  of this  Lease by  Landlord  and  Tenant  (the
"Commencement  Date").  The Term shall expire upon the passage of five (5) years
from that date, unless sooner terminated as provided in this Lease.

     2.2 Options to Extend.  Landlord hereby grants to Tenant,  on the terms and
conditions set forth below, one (1) conditional  option (the "Option") to extend
the term of this Lease for an additional  period of five (5) years (the "Renewal
Term").  The  Renewal  Term shall be subject  to all of the  provisions  of this
Lease.  Landlord has no duty whatsoever to advise or remind Tenant of its rights
hereunder. The right of Tenant to exercise the Renewal Term to extend the




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term of the Lease is subject to the satisfaction of the following conditions
precedent:

          2.2.1 The Lease  shall be in effect at the time  notice of exercise is
given and on the last day of the expiring term of the Lease;

          2.2.2  Landlord  shall not,  in good  faith,  have at any time  served
Tenant  with a  three-day  notice to pay rent or quit under  California  Code of
Civil Procedure Section 1161 during the preceding term of the Lease;

          2.2.3      Tenant shall not be in default at the time notice of
exercise is given or on the last day of the then-expiring term of the Lease; and

          2.2.4  Tenant  shall  have  given  notice of  exercise  of its  Option
pursuant to this  Section 2.2 not less than one hundred  eighty  days,  nor more
than two hundred ten days, prior to the expiration of the then-expiring  term of
this Lease.

3.    RENT

     Commencing thirty days from the Commencement  Date (the "Rent  Commencement
Date"),  Tenant  shall pay to Landlord  the  minimum  monthly  rent  provided in
Section 3.1, all Operating Costs provided in Section 3.2, and any other payments
required under the terms of this Lease,  without set-off or reduction.  All such
sums owing under this Lease shall be  considered  additional  rent  ("Rent") and
shall be payable at Landlord's  office  identified on the signature page of this
Lease. Minimum monthly rent and all additional Rent shall be payable in advance,
commencing on the Rent  Commencement  Date,  and  continuing on the first day of
each  month  thereafter  during the term of this  Lease,  without  reduction  or
set-off (except as otherwise  expressly provided in Section 3.5). Upon execution
of this Lease,  Tenant shall prepay the first month's  minimum monthly rent that
would  otherwise  be  due  on  the  Rent  Commencement  Date.  Should  the  Rent
Commencement  Date be a date other than the first day of a month,  then the rent
due on the  Rent  Commencement  Date  shall  be  prorated,  on  the  basis  of a
thirty-day  month,  for the number of days  between the Rent  Commencement  Date
(including  the  Commencement  Date)  and the end of the month in which the Rent
Commencement Date occurs.

     3.1  Minimum Monthly Rent.

          3.1.1 The minimum monthly rent payable from the Rent Commencement Date
through the  expiration of the first twelve (12) months of the Term shall be One
Dollar and Seventy  Cents  ($1.70) per square  foot,  or Eleven  Thousand  Eight
Hundred Sixty-Two Dollars and Sixty Cents ($11,862.60).

          3.1.2 The minimum  monthly rent shall be adjusted upon the  expiration
of the first year of the Term and each year thereafter.  Commencing on the first
day of the thirteenth  month of the Term (the  "Adjustment  Date"),  the parties
shall ascertain from the official  Consumer's Price Index for Urban Wage Earners
and Clerical Workers,  All Items, for the Los Angeles,  Anaheim-Riverside  area,
1982-1984=100  Base,  as published  by the United  States  Department  of Labor,
Bureau of Labor  Statistics  (the  "Index")  the Index figure for the month four
months  preceding  the  Commencement  Date  (the  "Base  Index"),  and  for  the
corresponding month prior to the Adjustment Date (the "Adjustment  Index").  The
minimum  monthly rent payable from each Adjustment Date until the next date upon
which  minimum  monthly  rent is  adjusted  as  provided  in this Lease shall be
determined  by  multiplying  the  minimum  monthly  rent  payable  at  the  Rent
Commencement Date by a fraction,  the numerator of which shall be the Adjustment
Index, and the denominator of which shall be the Base Index. Notwithstanding the
preceding,  in no event will the adjusted  minimum monthly rent be less than two
percent  (2%)  more  than  the  minimum  monthly  rent in  effect  prior  to the
Adjustment  Date, nor more than five percent (5%) more than the minimum  monthly
rent in effect prior to the Adjustment Date.





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               A. If the Index is no longer  published on the  Adjustment  Date,
then appropriate  reference  figures for the Base Index and the Adjustment Index
shall be derived from any successor or comparable  index mutually  agreed by the
parties  to be  authoritative.  If the  parties  are  unable to agree,  then the
substituted  index shall be selected  by the  then-presiding  judge of the Santa
Barbara County, California Superior Court upon the application of either party.

               B. The parties  acknowledge  that the Adjustment Index may not be
available on the  Adjustment  Date. In such event,  the minimum  monthly rent in
effect  immediately  prior to the Adjustment Date shall continue in effect until
the  appropriate  Index  figure  is  available.  At that  time,  an  appropriate
adjustment  shall be made  (retroactive to the Adjustment Date) between Landlord
and Tenant  with  respect to the minimum  monthly  rent  payable by Tenant.  Any
amounts  then  determined  to be owing by  Tenant to  Landlord  shall be paid by
Tenant within ten (10) days following  Landlord's  delivery to Tenant of written
notice of the  appropriate  adjustment.  No delay by Landlord in the delivery of
any such notice  shall  constitute  a waiver by Landlord of the right to receive
any rent owing.

          3.1.3 The minimum  monthly rent  payable  during the first year of the
Renewal Term shall be the greater of (a) the Fair Market  Rental of the Premises
upon the  commencement of any such Renewal Term, or (b) the minimum monthly rent
in effect  immediately  prior to the  expiration  of the  immediately  preceding
Initial Term. Such Fair Market Rental shall be determined in accordance with the
provisions of this Section 3.1.3.

               A. The following definitions shall apply for the purposes of this
Section 3.1.3:

                    (1) "Fair Market  Rental" means the price at which a willing
landlord and a willing  tenant would rent the  Premises,  or similar first class
premises having  comparable  visibility,  parking,  access and location that the
Premises have,  neither being under abnormal  pressure to rent. For the purposes
of determining such Fair Market Rental, it shall be assumed that the Tenant will
not require that any tenant  improvements  be made to the Premises in connection
with its  occupancy.  The Fair  Market  Rental  shall be  determined  by  giving
appropriate  consideration to rental rates per rentable square foot, the type of
escalation  clauses contained in leases for comparable  premises,  the length of
the Renewal Term,  the fact that this Lease is a Triple Net Lease,  the location
of the Premises being leased and other generally applicable terms and conditions
of leases for comparable premises.

                    (2)  "Qualified  Appraiser"  shall  mean a  State  certified
general real estate appraiser  qualified for commercial lease rental  appraisals
of the type of property and the  improvements  then comprising the Premises with
at least five years' full-time  commercial appraisal experience in Santa Barbara
County.

               B.  Commencing  six months prior to the expiration of the Initial
Term, if Tenant has properly exercised its Option for the Renewal Term, Landlord
and Tenant shall  attempt to agree upon the Fair Market  Rental for the Premises
within  fifteen  days.  If  Landlord  and  Tenant are able to agree on such Fair
Market  Rental,  the amount so agreed upon shall  become the Fair Market  Rental
upon the commencement of the Renewal Term.

               C. If  Landlord  and Tenant  fail to agree  upon the Fair  Market
Rental within the  fifteen-day  period set forth in  Subsection  B, above,  then
within ten days following the  expiration of such  fifteen-day  period  Landlord
shall appoint a Qualified  Appraiser,  at its sole cost and expense, to appraise
the Fair  Market  Rental  of the  Premises  within  thirty  days  following  the
appointment of the appraiser. Following such determination,  Landlord shall give
notice to Tenant of the appraised Fair Market Rental of the Premises.  If Tenant
does not dispute such appraised Fair Market Rental, it shall be the Fair Market




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Rental  upon the  commencement  of the Renewal  Term.  If Tenant  disputes  such
appraised Fair Market Rental,  then within ten days after the delivery of notice
of such Fair  Market  Rental  delivered  by  Landlord,  Tenant  shall  appoint a
Qualified  Appraiser,  at its sole cost and expense, to appraise the Fair Market
Rental of the Premises  within  thirty days  following  the  appointment  of the
second  appraiser.  Within  ten days  following  the  completion  of the  second
appraisal,  the two appraisers so appointed  shall endeavor to agree upon a Fair
Market Rental for the Premises.

               D. If such two appraisers are able to agree as to the Fair Market
Rental of the  Premises  within  ten days after the  second  appraisal  has been
completed,  then the  appraisers  shall so inform  Landlord  and Tenant of their
decision,  and such agreed upon Fair Market  Rental shall become the Fair Market
Rental upon the  commencement of the Renewal Term. If such appraisers are unable
to agree on the Fair Market Rental for the Premises  within such ten-day period,
then the  appraisers  shall,  within five days of the expiration of such ten-day
period,  designate  a third  Qualified  Appraiser  and give  written  notice  to
Landlord  and  Tenant of their  inability  to agree and the Fair  Market  Rental
proposed by each  appraiser.  Such notice shall also specify the third Qualified
Appraiser  designated  by such two  appraisers.  Either  Landlord  or Tenant may
appoint such designated third Qualified Appraiser to assist in the determination
of Fair Market Rental by delivering written notice of such election to the other
within five days of the  expiration of such ten-day  period without an agreement
as to the  Fair  Market  Rental  by the  two  Qualified  Appraisers.  If a third
Qualified Appraiser is appointed, then the fees and costs of the third appraiser
shall be borne equally by Landlord and Tenant.

               E. Upon appointment of the third Qualified  Appraiser,  the three
appraisers shall meet and attempt to reach agreement upon the Fair Market Rental
for the Premises for the Renewal Term within the ten-day  period  following  the
appointment of the third Qualified Appraiser.  If the three Qualified Appraisers
are able to reach  unanimous  agreement  regarding the Fair Market  Rental,  the
agreed  upon Fair Market  Rental  shall  become the Fair Market  Rental upon the
commencement of the Renewal Term. If the three  Qualified  Appraisers are unable
to agree upon the Fair Market Rental,  then the Third Qualified  Appraiser shall
appraise the Fair Market Rental of the Premises within thirty days following the
expiration  of such  ten-day  period.  On or  prior  to the  expiration  of such
thirty-day period, the three Qualified Appraisers shall give Landlord and Tenant
written notice of their inability to agree and the Fair Market Rentals  proposed
by each appraiser.  If the highest appraised Fair Market Rental is more than one
hundred five percent (105%) of the middle appraised Fair Market Rental, then the
highest  appraised  Fair  Market  Rental  shall be  disregarded.  If the  lowest
appraised  Fair  Market  Rental is less than  ninety-five  percent  (95%) of the
middle  appraised  Fair Market  Rental,  then the lowest  appraised  Fair Market
Rental shall be disregarded.  If there is then only one remaining appraised Fair
Market Rental,  it shall be the Fair Market Rental upon the  commencement of the
Renewal  Term. If there is then more than one  remaining  appraised  Fair Market
Rental,  the remaining  appraised  Fair Market Rentals shall be averaged and the
average of such  appraised  Fair Market  Rentals shall be the Fair Market Rental
upon the commencement of the Renewal Term.

               F. If the appraisal  proceedings provided for in this Section are
not complete prior to the  commencement  of the Renewal Term,  then Tenant shall
pay the minimum  monthly rent in effect  immediately  prior to such Renewal Term
until the appraisal  proceedings  have been completed and a new minimum  monthly
rent is determined.  Once the new minimum  monthly rent has been  determined,  a
retroactive  adjustment  to  such  rent  shall  be  made,  effective  as of  the
commencement  date of the Renewal Term.  Within ten days after the date on which
the new  minimum  monthly  rent has been  determined,  (1) Tenant  shall pay any
deficiency  owing to  Landlord,  and (2)  Landlord and Tenant shall enter into a
written  agreement  setting forth the minimum monthly rent upon the commencement
of the Renewal Term.





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               G. Following the  establishment  of the minimum monthly rent upon
the  commencement  of the  Renewal  Term,  such  minimum  monthly  rent shall be
adjusted as provided herein. The adjustment shall be made in accordance with the
provisions  of  Section  3.1.2,  with  the  following  modifications:   (1)  all
references  to the "Initial  Term" shall be deemed to refer to the Renewal Term;
(2) the term  "Commencement  Date"  shall  refer to the first day of the Renewal
Term; and (3) the term "Rent  Commencement Date" shall be deemed to refer to the
first day of such Renewal Term.

     3.2  Common Area Expenses; Operating Costs.

          3.2.1 In addition to any other  payments due under this Lease,  Tenant
shall pay to Landlord,  as additional rent, Tenant's monthly proportionate share
of Landlord's  estimated total Operating Costs.  Such payments shall commence on
the Rent Commencement Date and continue  thereafter through the end of the Term.
For the purposes of this Lease, the term "Operating  Costs" shall mean all costs
and expenses  whatsoever  incurred or accrued by Landlord in connection with the
ownership,  operation,  maintenance, repair and improvement of the Premises, the
common  areas,  the  Building  and the land upon which the  Building is situated
(collectively,  the "Property"),  except as otherwise  specifically  provided in
this  Lease.  Tenant's  proportionate  share of the total  Operating  Costs (the
"Tenant's  Proportionate  Share") shall be forty-three  percent (43%).  Landlord
estimates that Tenant's Proportionate Share of the Operating Costs will be $0.50
per square foot per month. In no event shall Tenant's Proportionate Share of the
Operating  Costs for the  calendar  year 1998  exceed  $0.60 per square foot per
month.  After the  calendar  year 1998,  the  foregoing  limitation  of Tenant's
Proportionate Share of the Operating Costs shall not apply.

               A.  Operating  Costs for any  portion  of  Landlord's  accounting
period not included within the Term, or occurring prior to the Rent Commencement
Date, shall be prorated on the basis of a 360-day year.

               B.  The  accounting  period  for  determining   Landlord's  total
Operating  Costs shall be the calendar  year,  except that the first  accounting
period  shall  commence on the Rent  Commencement  Date and the last  accounting
period shall end on the date the Term expires or Lease otherwise terminates.

          3.2.2 Tenant shall pay Tenant's Proportionate Share of Operating Costs
as additional rent owing in the manner provided in this Section 3.2.2.

               A. Landlord may furnish to Tenant,  on the Rent Commencement Date
and at the commencement of each accounting  period, an estimate of the Operating
Costs reasonably  anticipated by Landlord for the ensuing  accounting  period or
the  remainder  of such  accounting  period,  and Tenant's  Proportionate  Share
thereof,  calculated on a monthly basis. If Tenant's  Proportionate Share of the
actual Operating Costs for the preceding accounting period exceeds the estimated
payments made by Tenant, then Tenant shall pay any deficiency to Landlord within
ten (10) days  after  Tenant's  receipt  of  Landlord's  statement.  Should  the
estimated payments made by Tenant during the preceding  accounting period exceed
Tenant's  Proportionate  Share of the  Operating  Costs,  Landlord  shall credit
Tenant the excess  through  reductions  to the  subsequent  accounting  period's
payments of Tenant's Proportionate Share of Operating Costs due from Tenant.

               B.   Alternatively,   Landlord   may  bill  Tenant  for  Tenant's
Proportionate Share of the actual Operating Costs incurred by Landlord. Any such
bill shall be made in arrears for Operating  Costs incurred during the preceding
month,  and shall be due and payable within ten (10) days following  delivery of
such bill.  The expiration of the Term shall not affect  Tenant's  obligation to
pay its Proportionate  Share of Operating Costs accrued during the last month of
the Term.





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          3.2.3  As used  herein,  the term  "Operating  Costs"  shall  include,
without limitation,  all amounts paid or incurred by Landlord for: real property
taxes and assessments, as provided in Section 4, and other taxes and assessments
of any nature levied and assessed against Landlord on account of, and/or against
the, Property;  repair,  remodeling,  renovation,  replacement,  improvement and
operation of the Property, including, without limitation,  wiring, machinery and
equipment,  plumbing,  sewers,  the roof, load bearing  exterior walls,  joists,
supports,   subflooring,   gutters,   downspouts,   heating,   ventilating   and
air-conditioning,  glass and doors, and reasonable  reserves pertaining thereto;
Landlord's  reasonable  costs of supervision and  administration,  including the
costs of any property manager engaged by Landlord; attorneys' fees and costs not
relating  to  a  particular  tenant  or  lease;  maintenance  of  the  Property,
including,  without  limitation,  costs of resurfacing and repainting,  costs of
security,  cleaning, sweeping, and other services, supplies, policing, purchase,
construction,  location, and maintenance of refuse receptacles,  maintaining and
operating the heating,  ventilating,  and air-conditioning equipment and related
distribution  facilities and controls  providing  climatic control of the common
areas, the Building and the Premises,  planting and  relandscaping,  maintaining
directional  signs and other  markers  and  lighting;  premiums  and  deductible
amounts payable on insurance  purchased by Landlord as provided herein;  and all
costs of  utilities  used in  connection  with the  maintenance,  operation  and
management  of the  Property  that are not  separately  metered  and  billed  to
particular tenants.


          3.2.4  Landlord shall keep at its principal  place of business,  full,
accurate and separate books of account showing  Landlord's  Operating Costs. The
statements of Landlord to Tenant shall  accurately  reflect the total  Operating
Costs shown on such books of account.  These books of account  shall be retained
by  Landlord  for at least six (6)  months  after  the close of each  accounting
period.  Tenant  shall  have the right at  reasonable  times  during the Term to
inspect these books of account.

          3.2.5  Notwithstanding  the foregoing,  Landlord reserves the right to
bill Tenant  promptly  for any  surcharge  or penalty  incurred by Landlord as a
result of  utilities  in the  Premises or the Building in which the Premises are
located. If such surcharge or penalty pertains to the Premises, Tenant shall pay
all of such penalty or surcharge.  If such  surcharge or penalty  relates to the
Building or common  area,  Tenant shall pay its pro rata  portion.  Such payment
shall be payable in full prior to the  expiration  of thirty  (30) days from the
date  Landlord  delivers  such a  statement  of the amount of the  surcharge  to
Tenant.

     3.3 Late  Payment  Charges.  If Tenant  fails to make any  payment  of rent
within five (5) days of the date when such payment  first becomes due, or if any
check  tendered to  Landlord by Tenant is returned to Landlord by Tenant's  bank
for insufficient  funds, then Tenant shall pay to Landlord,  in addition to such
payment,  a late charge in the amount of five  percent (5%) of the rent or other
payment due. The parties agree this late payment charge is a reasonable estimate
of  the  amount  necessary  to  reimburse   damages  and  additional  costs  not
contemplated  by  this  Lease  that  Landlord  will  incur  as a  result  of the
delinquent  payment or  returned  check,  including  processing  and  accounting
charges and late  charges  that may be imposed on  Landlord by its lender.  Upon
notice of  nonpayment  given by Landlord to Tenant,  the entire amount then due,
including such late charge,  shall  thereafter bear interest at the highest rate
permitted  by law on the  due  date  for  such  payment,  until  paid  in  full.
Landlord's  acceptance  of any payment shall not  constitute  waiver of any late
charges or interest which may be due.

     3.4 Security Deposit. On execution of this Lease, Tenant shall deposit with
Landlord  Eleven  Thousand  Eight  Hundred  Sixty-Two  Dollars  and Sixty  Cents
($11,862.60), as a security deposit (the "Security Deposit") for the performance
by Tenant of the provisions of this Lease. If Tenant is in default, Landlord may
use the  Security  Deposit,  or any  portion  of it, to cure the  default  or to
compensate Landlord for all damage sustained by Landlord resulting from Tenant's




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default. Tenant shall immediately on demand pay to Landlord any amounts required
to maintain the  Security  Deposit in the amount  required to be deposited  with
Landlord.  Upon the adjustment of any minimum  monthly rent owing,  Tenant shall
deposit with Landlord such sum as necessary to maintain the Security  Deposit in
the same  proportion  to the  minimum  monthly  rent then owing as the  original
Security   Deposit  bore  to  the  initial  minimum  monthly  rent.   Landlord's
obligations with respect to the Security Deposit are those of a debtor and not a
trustee.  Landlord may maintain  the  Security  Deposit  separate and apart from
Landlord's  general funds or may commingle the Security  Deposit with Landlord's
general and other funds.  Landlord shall not be required to pay Tenant  interest
on the Security  Deposit.  In the event of bankruptcy  or other  debtor-creditor
proceedings  against  Tenant,  the Security  Deposit shall be offset against any
unpaid rent. If Tenant is not in default at the  termination of this Lease,  and
after Tenant has vacated the Premises,  then Landlord  shall return the Security
Deposit,  less any  damages,  to Tenant (or at  Landlord's  option,  to the last
assignee, if any, of Tenant's interest).

     3.5 Temporary Rent Abatement. Provided that Tenant is not in default of its
obligations under this Lease, minimum monthly rent shall abate for the first six
(6) months for which rent is payable in the amount of Four  Thousand Six Hundred
Fifty-Two  Dollars  ($4,652) per month, for total rent abatement of Twenty-Seven
Thousand Nine Hundred Twelve Dollars ($27,912) (i.e.,  6,978 square feet x $4.00
per square foot).

4.   PROPERTY TAXES AND ASSESSMENTS

     4.1 Personal Property Taxes.  Tenant shall pay before delinquency all taxes
assessed against any personal property of Tenant installed or located in or upon
the Premises and that are  attributable  to any period included within the Term,
whether or not such taxes are actually payable during the Term.

     4.2 Real Property  Taxes.  In addition to all other rent payable by Tenant,
Tenant agrees to pay as additional  rent  Tenant's  Proportionate  Share of real
property taxes levied and assessed against the Property.  Such payments shall be
made as a part of Tenant's payments of Tenant's Proportionate Share of Operating
Costs,  as provided above.  Real property taxes for any fractional  portion of a
fiscal  year  included  in the Term shall be  prorated on the basis of a 360-day
year.

     4.3 Taxes Defined;  Special  Assessments.  The term "real property taxes"as
used in this Section shall include, without limitation,  all taxes, assessments,
improvement bonds, levies and other governmental  charges,  general and special,
ordinary  and  extraordinary,  of any  kind and  nature  whatsoever,  levied  or
assessed against the Property,  or against Landlord as a result of its ownership
thereof,  including but not limited to,  assessments for public  improvements or
benefits that are levied or assessed  against the  Property,  and any changes in
taxes resulting from a change in ownership or other reassessment,  but excluding
franchise,  estate, inheritance,  succession,  capital levy, transfer, income or
excess profits tax imposed upon Landlord.  If at any time during the Term, under
the laws of  California,  or any  political  subdivision  thereof  in which  the
Premises are situated, a tax or excise on rents or other tax, however described,
is levied or assessed against Landlord on account of the rent expressly reserved
hereunder,  in  addition  to or as a  substitute  in whole or in part for  taxes
assessed or imposed by California or such  political  subdivision on land and/or
buildings,  such tax or excise shall be included  within the definition of "real
property taxes",  but only to the extent of the amount thereof which is lawfully
assessed or imposed as a direct result of Landlord's ownership of leases related
to the Property,  or of the rental  accruing under such leases.  With respect to
any  assessment  which may be levied  against or upon the  Property,  and which,
under the laws then in force, may be evidenced by improvement or other bonds, or
may be paid in installments,  Tenant shall be required to pay each year only the
amount of such  installments  as  Landlord  is  required to pay during such year
(with appropriate proration for any partial year) and shall have no




<PAGE>



obligation to continue such payments after the expiration of the Term.

5.   UTILITIES

     Tenant  shall pay when due all utility  charges when  separately  billed to
Tenant because of separate  installation or connection of service by Tenant. Any
utility, including,  without limitation,  refuse disposal, for which no separate
installation or connection can be made for Tenant,  shall be paid as prorated in
Landlord's  discretion among Tenants of the Building based on either  percentage
of leased space or estimated usage, as reasonably determined by Landlord. Tenant
shall  comply  with all  applicable  laws and  regulations  and rules  regarding
utilities.  The suspension or interruption  in utility  services to the Property
for reasons beyond Landlord's  ability to control shall not constitute a default
by Landlord or entitle Tenant to any reduction or abatement of rent.

6.   LANDLORD'S MANAGEMENT OF THE BUILDING

     6.1 Management of the Building.  Landlord shall have the right, at its sole
cost and expense, which will be reimbursed by Tenant as an Operating Cost:

          6.1.1 To close the common areas when and to the extent  necessary  for
maintenance  or  renovation  purposes  or to  prevent a  dedication  of any part
thereof or the accrual of any rights therein in favor of the public or any third
person;

          6.1.2  To  make  changes  to  the  common  areas,  including,  without
limitation, changes in the location or nature of entrances and exits;

          6.1.3  To  remodel  or  renovate  the  Property   and,  in  connection
therewith, to install pipes, supports,  utilities,  conduits,  ducts and similar
fixtures  beneath or through the  Premises,  provided  that such  remodeling  or
renovation does not substantially change the size,  dimension,  configuration or
nature of the Premises or unreasonably interfere with Tenant's use thereof; and

          6.1.4 To change the plan of the Building to the extent  necessary  for
its expansion,  or the remodeling or renovation  thereof, so long as the changes
do not substantially interfere with ingress to and egress from the Premises.

     6.2  Other  Tenants.  Landlord  reserves  the right to  effect  such  other
tenancies  in the Building as  Landlord,  in the  exercise of its sole  business
judgment, determines will best promote Landlord's interests. Tenant acknowledges
that Tenant does not rely on the fact, and Landlord does not represent, that any
specific  tenant,  or number or type of tenants,  shall  occupy any space in the
Building.

     6.3 Rules and  Regulations.  Landlord  shall have the  right,  from time to
time, to  promulgate,  amend and enforce  against all occupants of the Building,
reasonable  rules and  regulations  for the safety,  care and cleanliness of the
Building,  or for the preservation of good order. All such rules and regulations
shall apply without discrimination to all occupants and tenants in the Building.
Tenant agrees to conform to and abide by such rules and regulations. A violation
of any of them shall constitute a default by Tenant under this Lease.

     6.4 Tenant's Use of Premises. Tenant agrees that the Premises shall be used
and occupied only for general  office use, and for no other  purpose  whatsoever
without Landlord's prior written consent.  No exclusive rights regarding use are
granted.  Tenant  shall  neither  engage in nor  permit  others to engage in any
activity or conduct  that will cause the  cancellation  of or an increase in the
premium for any fire or other insurance maintained by Landlord.


     6.5  Compliance with Law.  Tenant shall, at Tenant's sole cost and




<PAGE>



expense,  comply  promptly  and  at  all  times  with  all  laws,  requirements,
ordinances,  statutes,  and  regulations  of all  municipal,  state  or  federal
authorities,  or any  board of fire  insurance  underwriters,  or other  similar
bodies,  now in force,  or which may  hereafter be in force,  pertaining  to the
Building  and  the  Premises  and  the  occupancy  thereof,  including,  without
limitation, any law that requires alteration,  maintenance or improvement of the
Premises as the result of Tenant's use.

     6.6 Waste,  Nuisance.  Tenant shall not commit,  or suffer to be committed,
any waste of the  Premises,  or any  nuisance,  annoyance or other  unreasonable
annoyance  which  may  disturb  the quiet  enjoyment  of other  portions  of the
Building or the common areas by the owners or occupants.

7.   CARE AND MAINTENANCE

     7.1  Landlord's  Maintenance.  Except as otherwise  provided in this Lease,
Landlord  agrees to maintain  in good  condition  and repair (1) the  structural
components  of the  Building,  which  structural  components  are limited to the
foundation and the exterior walls;  (2) the common areas and the exterior of the
Building;  and  (3)  any  heating,  ventilating  and  air  conditioning  systems
furnished  by Landlord to the common areas or to the  Building.  All such costs,
whether  related to repairs,  replacements or  improvements,  shall be Operating
Costs.

     7.2  Tenant's Maintenance.  Except as otherwise provided in this Lease,
Tenant, at its own cost and expense, agrees:

          7.2.1 To  maintain  throughout  the Term in good and  sanitary  order,
condition  and  repair,  all  portions  of  the  Premises,   including,  without
limitation,  (1) the  interior  of the  Premises,  including  flooring,  exposed
plumbing and wiring, paint and finish; (2) any windows, lights or skylights; (3)
any  storefront  or portion of the  Premises  fronting on any common area or the
exterior of the  Building;  (4) any heating,  ventilating  and air  conditioning
which serves only the Premises; and (5) any personal property of Tenant situated
in or upon the Premises;

          7.2.2 To  notify  Landlord  promptly  of any  damage  to the  Premises
resulting from or attributable to the acts or omissions of Tenant,  its invitees
or its authorized representatives, or any other party and thereafter to promptly
repair all such damage; and

          7.2.3 To keep the front of the Premises  adjacent to any property line
or common area,  any area adjacent  thereto,  and the refuse area used by Tenant
clean and neat at all times,  and to remove  immediately  therefrom  any litter,
debris or other unsightly or offensive matter placed or deposited thereon by
Tenant's agents or customers.

8.   IMPROVEMENT TO LEASED PREMISES

     Any  improvements  to the Premises shall be  constructed by Tenant,  or its
designated agent, at Tenant's sole cost and expense.  Tenant shall pay, prior to
delinquency, absolutely all costs for such improvements.

     8.1 Conditions to Commencement of Construction.  Before construction of the
improvements  is commenced on the  Premises,  and before any building  materials
have been  delivered  thereto  by or  pursuant  to the  authority  or request of
Tenant, Tenant shall comply with the following conditions,  or obtain Landlord's
prior written waiver thereof:

          8.1.1  Tenant  shall  prepare and deliver to Landlord  for  approval a
complete  set of all  preliminary  and  final  plans  and  specifications  to be
utilized by Tenant for the purpose of constructing the new improvements.  Tenant
must obtain the written approval of Landlord to the final plans and




<PAGE>



specifications  prior to the commencement of any construction  work. Tenant will
reimburse Landlord for Landlord's  architect's or contractor's charges to review
these plans.  Landlord shall not unreasonably withhold approval of the plans and
specifications. No review, inspection or approval by Landlord, or its architect,
shall relieve Tenant of any liability or create any obligation or responsibility
for Landlord.

          8.1.2 Tenant shall give  Landlord at least  fifteen (15) days' written
notice prior to (a) the commencement of construction of any tenant improvements,
or (b) the delivery of any building  materials to the site.  Landlord,  or, upon
request,  Tenant,  as the  agent of  Landlord,  shall  post on and  affix to the
Premises a "Notice of Non-Responsibility" in the name and on behalf of Landlord,
as provided in Sections 3094 and 3129 of the  California  Civil Code,  and shall
cause such Notice to be recorded promptly following posting in the Santa Barbara
County Recorder's Office.

          8.1.3 Tenant shall purchase and maintain in effect,  until a Notice of
Completion is filed and  recorded,  insurance  coverage for all-risk  "Builders'
Risk"  or  "Course  of  Construction"   insurance  and  "Worker's  Compensation"
insurance  covering all persons  employed in connection with the construction of
the  improvements  and with  respect to whom claims  could be  asserted  against
Landlord,  the  Building  or the  Premises.  Tenant  shall  furnish to  Landlord
certificates  of  such  insurance,  and  evidence  of the  payment  of  premiums
therefor,  and for any other insurance  required by the provisions of this Lease
to be furnished by Tenant.

          8.1.4  Tenant  shall pay,  when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Tenant.  Landlord reserves
the right to require Tenant to deliver to Landlord payment and performance bonds
in an amount equal to one hundred fifty percent  (150%) of the estimated cost of
the work undertaken by Tenant pursuant  hereto.  Tenant promptly shall cause the
elimination and removal of any mechanic's,  materialmen's or other liens arising
out of any improvements performed, materials furnished or obliga-

tions  incurred  by or on  behalf  of  Tenant  in  connection  with  any  tenant
improvements in accordance with Section 9.2.

     8.2 Construction of Improvements. Tenant warrants and covenants to Landlord
that:

          8.2.1 The  improvements  shall be of good quality and the  development
and  construction  work shall be  performed  in a good and  workmanlike  manner,
consistent with and comparable to standards of practice in the area in which the
Building is located for similar space of first-class construction;

          8.2.2  Tenant  shall  secure or cause to be secured  all  permits  and
licenses   necessary  for  the  proper   construction   and  completion  of  the
improvements,  and shall assume full responsibility for the compliance of Tenant
and the improvements with all governmental laws, codes, ordinances,  regulations
and standards applicable thereto; and

          8.2.3 The  improvements  shall be constructed  in accordance  with the
plans and specifications. All such improvements shall be completed by Tenant and
a certificate  of occupancy  for the Premises  shall be obtained by Tenant on or
before the  Commencement  Date.  Tenant  shall give  notice to  Landlord  of the
imminent  completion  of the  improvements  not less than ten (10) days prior to
their expected completion. Promptly upon completion of the improvements,  Tenant
shall  cause a "Notice  of  Completion"  as  described  in  Section  3093 of the
California  Civil Code, to be filed and recorded in the manner  provided by such
Section.

     8.3 Cooperation by Landlord.  Landlord agrees,  upon the request of Tenant,
to join with Tenant to execute and deliver such documents and instruments




<PAGE>



as may be  necessary  or proper  for  applying  for or  obtaining  any  permits,
licenses,  approvals  or  records  as may be  necessary  or  appropriate  to the
construction of the improvements  and operation of the Premises.  Landlord shall
incur no expense  and no  liability  as a result of such  cooperation.  Landlord
shall  have the right to approve  any  conditions  imposed  by any  governmental
agency in connection  with  obtaining any such  permits,  or other  documents or
approvals,  which may  impact the  Premises  separate  and apart  from  Tenant's
occupancy thereof, which approval shall not be withheld unreasonably.

     8.4 Ownership of  Improvements.  All of Tenant's  improvements  constructed
hereunder, and all subsequent additions and alterations thereto and replacements
thereof,  shall be deemed  affixed to,  become and remain a part of the Premises
and shall not be removed,  encumbered,  transferred or materially altered except
as provided by this Lease.  Upon the  expiration of the Term, or upon the sooner
termination of this Lease, all of the improvements  other than Tenant's personal
property,  removable trade fixtures and equipment,  shall become the property of
Landlord without further obligation to Tenant.

9.   ALTERATIONS; LIENS

     9.1  Changes  by  Tenant.  Following  the  completion  of the  improvements
contemplated by Section 8, if any, any alterations,  additions,  improvements or
changes,  including any  remodeling or  redecorating,  that Tenant may desire to
make  in,  to or upon the  Premises,  shall be made at  Tenant's  sole  cost and
expense.  Prior to undertaking any such  alterations,  Tenant shall first submit
the plans and  specifications  therefor  to  Landlord  and obtain the consent of
Landlord thereto in writing. The parties' rights and obligations with respect to
such alterations, additions, improvements or changes shall be identical to those
rights and remedies  concerning  Tenant's  construction of improvements,  as set
forth in Section 8. Should Landlord so elect, any such  alterations,  additions,
improvements or changes shall become a part of the Premises at the expiration or
sooner  termination of the Lease,  and shall be surrendered to Landlord upon the
expiration of the Term or the sooner  termination of this Lease.  Alternatively,
at any time  prior to the ten (10)  days  following  the  expiration  or  sooner
termination  of this Lease,  Landlord  may elect to have Tenant  remove any such
alterations,  additions or  improvements.  In such case,  Tenant shall so remove
such items within ten (10) days following  Tenant's receipt of Landlord's notice
of  election,  and shall  restore the  Premises to the  condition  in which they
existed prior to the  completion of the work that Landlord  specifies  should be
removed.

     9.2  Mechanic's  Liens.  Tenant  agrees  to  keep  the  Premises,  and  any
improvements  thereon, at all times free of mechanic's liens and other liens for
labor,  services,  supplies,  equipment or material  purchased by or directly or
indirectly furnished to Tenant. Tenant, however, shall have the right to contest
the  validity  or  amount of any such  lien as filed  upon  posting a bond in an
amount equal to one hundred fifty percent (150%) of the dollar amount sufficient
to discharge the lien. Upon the final determination of any such contest,  Tenant
shall  immediately  pay and discharge any judgment  rendered,  together with all
costs and charges  incidental  thereto,  and shall cause the lien  thereof to be
released  from the  Premises.  If Tenant  fails,  within  thirty (30) days after
notice of the filing of any such lien, to discharge or cause the release of such
liens or  charges or to contest  the same and post bond as above  provided  for,
then Landlord,  at Landlord's option, may satisfy such liens by payment. In such
event, the amount of such payment, together with interest thereon at the maximum
rate permitted by law, from the time the payment is so made until repayment the-

reof,  shall be payable by Tenant at the time  installment  of rent shall be due
and payable. Tenant shall reimburse Landlord,  within ten days following written
demand, for all costs and expenses,  including,  without limitation,  attorneys'
fees, incurred by Landlord in connection with addressing any mechanic's liens or
similar claims related to Tenant's occupancy of the Premises.





<PAGE>



10.  TENANT'S PERSONAL PROPERTY

     10.1  Installation  of  Property.  Landlord  shall have no  interest in any
removable equipment, furniture or trade fixtures owned by Tenant or installed in
or upon the Premises solely at the cost and expense of Tenant. Prior to creating
or permitting the creation of any lien or security or  reversionary  interest in
any removable  personal  property to be placed in or upon the  Premises,  Tenant
shall obtain the written agreement of the party holding such lien or interest to
make such repairs  required by the removal of such  property as may be necessary
to restore the Premises to good condition and repair,  excepting only reasonable
wear and  tear,  in the event  such  property  is  thereafter  removed  from the
Premises by such party, or by any agent or  representative  thereof or purchaser
therefrom, without any cost or expense to Landlord.

     10.2 Removal of Personal Property. Tenant shall have the right to remove at
its own cost and  expense  upon  the  expiration  of this  Lease  all  removable
equipment,  furniture or trade  fixtures owned by or installed at the expense of
Tenant on the Premises  during the Term.  All such  personal  property  shall be
removed prior to the close of business on the last day of the Term. Tenant shall
make such  repairs  required  by the  removal  of such  property  and any damage
resulting  therefrom  as may be  necessary  to  restore  the  Premises  to  good
condition and repair, excepting only reasonable wear and tear. Any such property
not so  removed  shall be  deemed to have been  abandoned  or, at the  option of
Landlord, shall be removed and placed in storage for the account and at the cost
and expense of Tenant.

11.  WAIVER AND INDEMNITY

     This Lease is made upon the express  condition  that Landlord is to be free
from all  liability and claims for damages by reason of any injury to any person
and  damage  to any  property  (including  Tenant's),  resulting  from any cause
whatsoever  while in, upon,  about, or in any way connected with the Premises or
the  Building in which the  Premises is  located,  during the Term.  In no event
shall  Landlord  be liable for events  that  occur in the common  areas,  or for
damage  or injury  caused  by fire,  utility  outage  or  interruption,  pipe or
sprinkler leakage, or similar causes.  Tenant waives all claims against Landlord
for, and agrees to defend with counsel acceptable to Landlord,  and to indemnify
and hold  Landlord  harmless  from,  any  loss or  liability,  and all  costs or
expenses,  including  attorneys'  fees and  costs of  defense,  arising  from or
attributable  to any such injury or damage from any cause at any time related in
any way to the Premises  during the term hereof,  other than those caused by the
gross negligence or willful misconduct of Landlord,  to the extent of such gross
negligence or willful misconduct.  This Section 11 shall survive the termination
of the Lease.

12.  INSURANCE, PUBLIC LIABILITY AND PROPERTY DAMAGE

     12.1 Insurance Coverage.  Tenant agrees to maintain in force throughout the
Term,  at  Tenant's  sole  cost and  expense,  comprehensive  general  liability
insurance with a broad form general liability  endorsement  insuring against any
liability to the public for any claim for damages due to death, bodily injury or
property  damage related to the use of or resulting from any accident  occurring
in or about the Premises, with single limit coverage of not less than $1,000,000
for any loss and $3,000,000 for any policy period.

          12.1.1 Such policy shall insure the  contingent  liability of Landlord
and the  performance  by Tenant of its indemnity  obligations  under this Lease.
Landlord shall be named as an additional insured in such policy, and such policy
shall contain a cross-liability endorsement.

          12.1.2 Tenant further agrees that the amount of the insurance coverage
shall be  reviewed  every  three (3) years,  at least sixty (60) days before the
expiration of a three-year period. If the parties are unable to agree upon




<PAGE>



the amount of such  coverage,  Tenant shall be required to maintain for the next
three-year  period (or prior to the  expiration of the Term,  whichever is less)
the  amount of  coverage  recommended  in  writing  by an  insurer  selected  by
Landlord.

     12.2 Tenant's Property  Insurance.  Tenant, at its own cost, shall maintain
on all of its personal  property and removable  fixtures and equipment  situated
in, on or about the Premises,  a policy of standard  fire and extended  coverage
insurance,  with vandalism and malicious  mischief  endorsements  (and sprinkler
leakage and  earthquake  sprinkler  leakage  endorsements,  if the  Building has
sprinklers),  to the  extent of at least  one  hundred  percent  (100%) of their
actual replacement cost. The proceeds of any such policy that become payable due
to damage,  loss or destruction of such property shall be used by Tenant for the
repair or replacement of such property.

     12.3      Miscellaneous Insurance Provisions.

          12.3.1 Each policy of insurance required of Tenant by this Lease shall
be a primary policy,  issued by an insurance company reasonably  satisfactory to
Landlord,  and shall contain an endorsement  requiring thirty (30) days' written
notice from the insurer to Landlord before cancellation or change in the nature,
scope or amount of coverage. Each policy of insurance maintained by Tenant shall
be primary and  noncontributing  with any policy  maintained  by Landlord.  Each
policy, or a certificate of the policy, together with evidence of the payment of
premiums,  shall be deposited with Landlord at the  commencement  of the Term of
this Lease and prior to any expiration of any such policy.

          12.3.2  Landlord  and  Tenant  each  release  the  other,   and  their
respective agents and representatives,  from any claims for damage to any person
or to the Premises and to the fixtures and personal  property  situated therein,
resulting from or attributable to any risk insured under any insurance  policies
carried by the parties and in force at the time of the damage.  Each party shall
cause any insurer providing  insurance to it pursuant to this Lease to waive all
rights or recovery by way of  subrogation  against either party by virtue of the
payment of any loss under such insurance. Such waiver shall be effective as long
as such insurance is required under the provisions of this Lease.

     12.4 Casualty  Insurance;  Damage or  Destruction.  Landlord  shall, at all
times during the Term, keep the Building and  improvements in which the Premises
are situated  insured against loss or damage by fire and the perils covered by a
combined  single limit bodily  injury and broad form property  damage  insurance
policy,  extended  coverage,  or an "all risk" insurance,  with inflation guard,
vandalism and malicious mischief  endorsements,  zoning ordinance coverage,  and
any other endorsements selected by Landlord.  Landlord,  at its discretion,  may
purchase (a) an earthquake policy of insurance and zoning ordinance coverage, in
any amount  sufficient  to prevent  either  Landlord or Tenant  from  becoming a
co-insured under the provisions of the policies, (b) a policy of rental value or
rent  continuation  insurance  for a  period  of one  year,  and (c)  any  other
insurance  that may be  required  from  time to time by  Landlord's  lender.  In
addition,  Landlord  may  purchase  any  other  insurance  which it, in its sole
discretion, deems necessary or desirable. All such insurance shall be payable to
Landlord and the holder of any  encumbrances  on the Property as their interests
may  appear.  All of the costs  and  expenses  and  deductible  amounts  of such
insurance shall be an Operating Cost.

     12.5      Insurable Casualty Loss.

          12.5.1  Except  as  provided  in  Section  12.5.2,  in the  event  the
Premises,  or the  Building in which the Premises  are  situated,  is damaged or
destroyed  as the  result of any risk  required  to be  insured  against by this
Section 12, then Landlord shall  forthwith  restore the Premises or the Building
to substantially the same condition as existed  immediately prior to such damage
or destruction. Any insurance proceeds remaining after the completion of such




<PAGE>



work shall belong to Landlord.  Except as otherwise  provided in Section 12.5.2,
below,  any amount by which the cost of such  repair and the  deductible  amount
required  by such  insurance  policies  exceeds  the  amount  of such  insurance
proceeds shall be deemed an Operating Cost pursuant to Section 3.2.

          12.5.2  If at any time  during  the Term,  the  Premises  are  totally
destroyed,   or  are  sufficiently  damaged  to  render  them  unusable  without
substantial repair or  reconstruction,  due to a casualty required to be insured
against as provided herein,  or should then applicable laws or zoning ordinances
preclude  the  restoration  or repair of the  Premises,  or should  the costs of
restoration  exceed five percent (5%) of the amount of the  insurance  proceeds,
then  Landlord  shall have the option,  exercisable  by giving at least ten (10)
days' prior written  notice to Tenant within one hundred twenty (120) days after
the occurrence of any such casualty, to terminate this Lease.

     12.6      Uninsured Casualty Loss.

          12.6.1 If,  during the Term,  the Premises or the Building are damaged
or partially  destroyed  from a risk not required to be insured  against by this
Section 12,  Landlord  shall  restore the  Premises  to  substantially  the same
condition as existed immediately prior to such damage or destruction.

          12.6.2  If the  costs of  repair  or  restoration  necessitated  by an
uninsured  casualty loss exceed five percent (5%) of the then replacement  value
of the Premises,  then Landlord shall have the option,  exercisable by giving at
least ten (10) days' prior written  notice to Tenant  within one hundred  twenty
(120) days after the occurrence of any such casualty, to terminate this Lease.

     12.7 Termination;  Abatement of Rent. This Lease shall not be terminated by
any damage to or destruction of the Premises or other  improvements of which the
Premises are a part, unless notice of termination is given by Landlord to Tenant
as provided by this Section 12. Tenant waives the provisions of Section  1932(2)
and  1933(4) of the  California  Civil Code with  respect to any such  damage or
destruction.

          12.7.1  Should the Premises be damaged or destroyed at any time during
the Term,  there shall be an abatement or reduction of the minimum monthly rent,
between the date of destruction and the date of completion of restoration, based
on the  extent to which the  destruction  interferes  with  Tenant's  use of the
Premises.

          12.7.2 Should it be determined by Landlord that  then-applicable  laws
or zoning  ordinances  would  preclude the  restoration  or  replacement  of the
Premises in a manner that will result in the approximate  functional  equivalent
of the  Premises,  then  Landlord  shall have the right to terminate  this Lease
within  ninety  (90)  days of such  determination  by giving  written  notice of
termination to Tenant.

     12.8 Notice; Tenant's Right to Terminate.  Notwithstanding any provision of
this Lease to the contrary, if Landlord determines in good faith that the repair
and restoration of the Premises to be made by Landlord  pursuant to this Section
12  reasonably  cannot  be  made  within  eighteen  (18)  months  following  the
occurrence  of  any  casualty,  Landlord  shall  give  written  notice  of  such
determination  to Tenant within ninety (90) days following the occurrence of the
casualty.  Tenant may  terminate  this Lease  only by  written  notice  given to
Landlord within thirty (30) days after receipt by Tenant of Landlord's notice of
such determination.

13.  CONDEMNATION

     13.1      Entire Premises.  Should title or possession of the whole of the




<PAGE>



Premises or the Building be taken by duly constituted  authority in condemnation
proceedings  under the  exercise  of the right of  eminent  domain,  or should a
partial taking render the remaining portion of the Premises wholly  unacceptable
for  occupation,  then this Lease shall  terminate  upon the vesting of title or
taking of possession.

     13.2      Partial Taking.

          13.2.1 Landlord shall have the right to terminate this Lease upon such
thirty  (30)  days'  notice if title to a portion  of the  Premises  is taken in
connection with, or by deed in lieu of, any condemnation  proceedings  under the
exercise of the right of eminent  domain,  and is such as to prevent Tenant from
using the Premises,  or the remaining portion,  in substantially the same manner
as they were used prior to such  taking.  If Landlord  does not  terminate  this
Lease as provided herein, then this Lease shall remain in full force and effect.
In such event, Landlord shall promptly make any necessary repairs or restoration
at the cost and expense of Landlord. The minimum monthly rent from and after the
date of the taking shall be reduced in the proportion that the value of the area
of the portion of the  Premises  taken bears to the total value of the  Premises
immediately prior to the date of such taking or conveyance.

          13.2.2 Each party  waives the  provisions  of Code of Civil  Procedure
Section  1265.130  allowing  either  party to  petition  the  Superior  Court to
terminate  this  Lease in the event of a partial  taking  of the  Premises.  Any
dispute  between the parties  concerning the extent to which a partial taking by
eminent domain  interferes  with the use and occupancy of the Premises by Tenant
shall be settled by  arbitration  in the city in which the Premises are located,
in accordance  with the rules of the American  Arbitration  Association  then in
effect.

     13.3  Conveyance  Under Threat of  Condemnation.  Any sale or conveyance by
Landlord  to any person or entity  having the power of  eminent  domain,  either
under threat of  condemnation  or while  condemnation  proceedings  are pending,
shall be deemed to be a taking by eminent domain under this Section 13.

     13.4  Awards and  Damages.  All  payments  made on account of any taking by
eminent  domain shall be made to Landlord,  except that Tenant shall be entitled
to any payment or award made for or attributable  to the reasonable  removal and
relocation costs of any removable  property that Tenant has the right to remove,
or for loss and  damage  to any  such  property  that  Tenant  elects  or is not
required to remove.

14.  ASSIGNING, MORTGAGING, SUBLETTING OR CHANGE IN OWNERSHIP

     14.1  Limitation.  Tenant shall not  transfer,  assign,  sublet,  mortgage,
hypothecate, share rights in this Lease or Tenant's interest in the Premises, or
permit  any  other  person  or  entity  to use  the  Premises  (collectively,  a
"Transfer"),  without  first  procuring the written  consent of Landlord,  which
consent  shall not be  unreasonably  withheld.  Any attempted  Transfer  without
Landlord's written consent shall be void and shall constitute a material default
under this Lease. Tenant agrees to reimburse Landlord for Landlord's  attorneys'
fees (if any)  incurred in connection  with any requested  Transfer by Tenant of
Tenant's rights hereunder.

     14.2 Deemed Transfer. If Tenant is a nonpublicly traded corporation,  or an
unincorporated  association or  partnership,  any direct or indirect  cumulative
transfer,  assignment  or  hypothecation  of  any  stock  or  interest  in  such
corporation,  association  or  partnership  in the aggregate in excess of thirty
percent  (30%)  of the  beneficial  ownership  thereof  (or,  in the  case  of a
partnership, of the beneficial ownership thereof or of the general partner




<PAGE>



interest  thereof) shall be deemed a Transfer  within the meaning and provisions
of this Section 14 and subject to its provisions.

     14.3  Standard  for Consent.  If Tenant  desires at any time to assign this
Lease or to sublease the Premises, or any portion thereof, it shall first notify
Landlord of its desire to do so and shall submit in writing to Landlord: (a) the
name of the proposed  subtenant or assignee and the proposed  guarantors of such
subtenant's  or  assignee's   obligations;   (b)  the  nature  of  the  proposed
subtenant's  or assignee's  business to be carried on in the  Premises;  (c) the
terms and  provisions  of the  proposed  sale,  transfer or sublease of Tenant's
business and leasehold interest, including the price, rent and terms of payment;
and  (d)  any  other  information  required  by  Landlord.  Landlord  shall  not
unreasonably withhold its consent provided:  (i) the use of the Premises remains
the same as provided  in this Lease  (unless  Landlord,  for  reasonable  cause,
decides  that  the use  and/or  the  location  of the use is  incompatible  with
Landlord's  present or future  plans for  operation of the  Property);  (ii) the
proposed subtenant or assignee and their respective guarantors  demonstrate that
it is  financially  responsible  by  submission  to Landlord of such  reasonable
information  as Landlord  may  request  concerning  the  proposed  subtenant  or
assignee,  including,  but not  limited  to, a  balance  sheet  of the  proposed
subtenant  or assignee  as of a date within  ninety (90) days of the request for
Landlord's consent,  and statements of income or profit and loss of the proposed
subtenant  or assignee  and  guarantor  for the two-year  period  preceding  the
request  for  Landlord's  consent;  (iii) the  proposed  subtenant  or  assignee
demonstrates  a record of  successful  experience  in operating the same type of
business by submission to Landlord of such  reasonable  information  as Landlord
may request  concerning the proposed subtenant or assignee,  including,  but not
limited  to,  a  written  statement  in  reasonable  detail  as to the  business
experience  of the  proposed  subtenant  or  assignee  during the five (5) years
preceding the request for Landlord's consent; and (iv) the proposed subtenant or
assignee  has a  reputation  for  honesty  and is of good  moral  character.  No
subletting  or  assignment,  even with the consent of  Landlord,  shall  relieve
Tenant  of its  obligation  to pay the  rent  and to  perform  all of the  other
obligations to be performed by Tenant hereunder.

     14.4 Conditions.  Each Transfer to which there has been consent shall be by
an instrument in writing,  in a form  satisfactory to Landlord.  Such instrument
shall be  executed  by the  transferor,  assignor,  sublessor,  hypothecator  or
mortgagor and the transferee,  assignee, sublessee, mortgagee or other person or
entity, as the case may be. Each transferee,  assignee, sublessee,  mortgagee or
other  person or entity  shall  agree in writing  for the benefit of Landlord to
assume,  to be bound by, and to perform the terms,  covenants and  conditions of
this Lease to be performed by Tenant,  including the payment of all amounts due,
or to become due,  under this Lease.  In addition,  as  conditions  precedent to
Landlord's  consent to any  Transfer of this Lease,  Landlord may require any or
all of the following:

          14.4.1  Tenant  shall  provide   Landlord  with  evidence   reasonably
satisfactory to Landlord that the value of Landlord's  interest under this Lease
will not thereby be diminished or reduced, which evidence shall include, but not
need be limited to,  evidence  respecting the relevant  business  experience and
financial responsibility and status of the third party concerned;

          14.4.2 If the  Transfer  provides for the receipt by, on behalf of, or
on account of Tenant of any consideration or any kind whatsoever (including, but
not by way of limitation,  a premium rental for the sublease or lump sum payment
for an assignment)  in excess of the rent due Landlord under this Lease,  Tenant
shall pay seventy-five  percent (75%) of such excess,  less Tenant's  reasonable
costs (not to exceed  twenty five  percent  (25%) of such  excess) to  Landlord,
which  payment(s) to Landlord shall be made upon receipt of any such  payment(s)
by Tenant;





<PAGE>



          14.4.3    Tenant shall not be then in default hereunder in any
respect;

          14.4.4  Tenant  shall  deliver to Landlord  one  executed  copy of all
written instruments  evidencing or relating to Tenant's assignment,  transfer or
sharing of the Premises; and

          14.4.5 Tenant shall provide a written  agreement  from any third party
concerned  that, in the event Landlord gives such third party notice that Tenant
is in default  under this Lease,  such third party shall  thereinafter  make all
payments  otherwise due Tenant  directly to Landlord.  Any such payments will be
received by Landlord without the imposition of any liability on Landlord, except
to credit such payments  against those due under the Lease. Any such third party
shall agree to attorn to Landlord,  or its successors  and assigns,  should this
Lease be terminated for any reason;  provided,  however,  that in no event shall
Landlord, or its successors or assigns, be obligated to accept such attorn-

ment.

     14.5      Limitation on Consent.

          14.5.1 Tenant agrees and acknowledges that the conditions permitted to
be imposed  upon  Landlord's  grant of its  consent  hereunder  are  reasonable.
Landlord's  imposition of such conditions shall under no circumstances impair or
limit Landlord's  rights and remedies under California Civil Code Section 1951.4
or any successor statute.

          14.5.2  Landlord's  consent to Tenant's  Transfer on any one  occasion
shall apply only to the specific  transaction thereby  authorized.  Such consent
shall not be construed as a waiver of the duty of Tenant, or any transferee,  to
obtain Landlord's consent to any other or subsequent  Transfer,  or as modifying
or limiting  Landlord's  rights hereunder in any way.  Landlord's  acceptance of
rent, or any other payment directly from any third party, shall not be construed
as a waiver of any of Landlord's rights or as Landlord's agreement to accept the
attornment of any third party,  in the event of a termination of this Lease.  In
no event shall Landlord's enforcement of any provision of this Lease against any
third party be deemed a waiver of  Landlord's  right to enforce any provision of
this Lease against Tenant or any other person.

     14.6 Applicability to Successors.  If Landlord gives consent to a Transfer,
such third party in respect of which such consent was given may in turn apply to
Landlord for its consent to subsequent  Transfers.  In such case, the provisions
of this  Section  14  shall  apply  as fully as  possible  to such  third  party
(including  this  Section 14.5 in the case of more remote  transfers).  Any such
transfer  shall be subject to all the terms and  conditions  of this Lease,  and
each such successive  transfer shall be made only upon like conditions.  Tenant,
and each successor to Tenant's  interest in the Premises,  shall agree to remain
fully responsible to Landlord for the performance of all of Tenant's obligations
under this Lease.

15.  DEFAULT BY TENANT; LANDLORD'S REMEDIES

     15.1      Events of Default.  Each of the following shall constitute a
material
default and breach by Tenant under this Lease:

          15.1.1 If Tenant is at any time in default of its  obligations  to pay
any rent or other  charges,  and such default  continues  for more than five (5)
days after the date upon which the obligation to pay is due;

          15.1.2 If Tenant is in default in the prompt and full  performance  of
any other of its  obligations  under this Lease and such default  continues more
than thirty (30) days after Landlord's delivery of written notice




<PAGE>



specifying the particulars of such default,  unless such default cannot be cured
within  thirty (30) days, in which case Tenant shall be in default if Tenant (a)
does not commence the cure of such default within such  thirty-day  period,  and
(b) actually cures such default within sixty (60) days of Landlord's delivery of
written notice of such default;

          15.1.3 If Tenant  vacates or abandons the Premises or otherwise  fails
to occupy and operate the Premises in accordance with the terms of this Lease;

          15.1.4  If  Tenant  or any  guarantor  of this  Lease  makes a general
assignment or general arrangement for the benefit of creditors; or if a petition
for adjudication of bankruptcy or for  reorganization  or rearrangement is filed
by or against  Tenant or any guarantor  and is not dismissed  within thirty (30)
days;  or  if  a  trustee  or  receiver  is  appointed  to  take  possession  of
substantially  all of  Tenant's  assets  located at the  Premises or of Tenant's
interest in this Lease and  possession  is not  restored to Tenant  within sixty
(60) days; or if substantially all of Tenant's assets located at the Premises or
Tenant's  interest in this Lease is subjected to attachment,  execution or other
judicial  seizure which is not discharged  within sixty (60) days. If a court of
competent jurisdiction determines that any of the acts described in this Section
15.1.4 is not a default  under  this Lease and a trustee  is  appointed  to take
possession of Tenant's  assets or if Tenant  remains a debtor in possession  and
such trustee or Tenant transfers  Tenant's interest in this Lease, then Landlord
shall receive, as additional rent, the excess, if any, of the rent (or any other
consideration) paid in connection with such assignment or sublease over the rent
payable by Tenant hereunder; or

          15.1.5 If any guarantor of the Lease revokes or otherwise  terminates,
or purports to revoke or otherwise terminate, any guaranty of all or any portion
of Tenant's obligations under the Lease.

     15.2 Remedies Upon Breach of Lease. On the occurrence of any breach of this
Lease by Tenant, Landlord may, at any time thereafter, with or without notice or
demand and without limiting Landlord in the exercise of any right or
remedy which Landlord may have:

          15.2.1  Terminate  Tenant's  right to  possession  of the Premises and
re-enter  the  Premises  by  any  lawful  means.  In  such  case,  Tenant  shall
immediately  surrender  possession  of the  Premises  to  Landlord.  If Landlord
reenters the Premises under the  provisions of this Section,  Landlord shall not
be deemed to have  terminated  this Lease, or the liability of Tenant to pay any
rent or other charges that are due or thereafter accruing, or Tenant's liability
for damages under any of the provisions of this Lease.  In the event of any such
entry or taking  possession of the Premises,  Landlord shall have the right, but
not the obligation,  to remove from the Premises any personal  property  located
therein and to place it in storage at a public warehouse at Tenant's expense and
risk;

          15.2.2 Maintain Tenant's right to possession of the Premises, in which
case this Lease shall continue in effect whether or not Tenant has abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due,  and Landlord  shall have the right to occupy or relet the whole
or any part of the Premises for the account of Tenant; or

          15.2.3 Pursue any other remedy now or hereafter  available to Landlord
under the laws or judicial decisions of the State of California.

     15.3      Termination.  Notwithstanding any other term or provision hereof
to
the contrary, this Lease shall terminate on the occurrence of any act which




<PAGE>



affirms Landlord's intention to terminate this Lease as provided in this Section
15.3,  including the filing of an unlawful detainer action against Tenant.  Acts
of  maintenance  or  preservation,   efforts  to  relet  the  Premises,  or  the
appointment  of a receiver at the  initiative of Landlord shall not constitute a
termination of Tenant's right to possession unless written notice of termination
is given. On any such termination,  Landlord's damages for default shall include
all costs and fees, including  reasonable  attorneys' fees, incurred by Landlord
in connection with filing,  commencing,  pursuing or defending any action in any
bankruptcy court or other court with respect to the Lease, obtaining relief from
any stay in  bankruptcy  restraining  any action to evict Tenant or pursuing any
action with respect to Landlord's right to possession of the Premises.  All such
damages  suffered  (apart  from  minimum  monthly  rent and other  rent  payable
hereunder)  shall  constitute  pecuniary  damages  which must be  reimbursed  to
Landlord  prior to  assumption of the Lease by Tenant or any successor to Tenant
in any bankruptcy or other proceeding.

     15.4 Cumulative  Rights.  The rights and remedies given to Landlord in this
Section  shall be in addition and  supplemental  to all other rights or remedies
which  Landlord  may  have  under  the laws in force  when the  default  occurs.
Landlord's exercise of any right or remedy shall not prevent it from exercising
any other right or remedy.

     15.5      Landlord's Damages.

          15.5.1 If Landlord  elects to terminate this Lease and Tenant's rights
to possession of the Premises in accordance  with the  provisions of this Lease,
Landlord may recover from Tenant as damages all of the following:

               A.   The worth at the time of award of any unpaid rent and
other charges which has been earned at the time of such termination; plus

               B. The  worth at the time of  award of the  amount  by which  the
unpaid rent and other  charges  which would have been earned  after  termination
until the time of award  exceeds the amount of such  rental  loss Tenant  proves
Landlord could have reasonably avoided; plus

               C. The  worth at the time of  award of the  amount  by which  the
unpaid rent and all other  charges  which Tenant would have paid for the balance
of the term of the Lease  after  the time of award  exceeds  the  amount of such
rental loss that Tenant proves Landlord could have reasonably avoided; plus

               D. Any other amount  necessary to compensate  Landlord for all of
the detriment  proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the  ordinary  course of things  would be likely to
result therefrom,  including, without limitation, any costs or expenses incurred
by Landlord in (a)  maintaining  or preserving  the Premises after such default,
(b) recovering possession of the Premises,  including reasonable attorneys' fees
therefor;  (c)  expenses of reletting  the  Premises to a new tenant,  including
necessary renovations or alterations of the Premises, reasonable attorneys' fees
incurred, and leasing commission incurred; plus

               E. Such other  amounts in addition to or in lieu of the foregoing
as may be permitted from time to time by the laws of the State of California.

          15.5.2 As used in  Subsections A and B, above,  the "worth at the time
of award" is computed by allowing  interest on unpaid amounts at the rate of ten
percent (10%) per annum. As used in Subsection C, above,  the "worth at the time
of award" is computed by  discounting  such amount at the  discount  rate of the
Federal  Reserve Bank  located  nearest to the Building in effect at the time of
award, plus one percent (1%).





<PAGE>



          15.5.3 For  purposes of this  Section 15, all rent other than  minimum
monthly  rent  shall,  for  purposes  of  calculating  any  amount due under the
provisions  of  Subsection  C,  above,  be  computed on the basis of the average
monthly  amount of rent,  other than  minimum  monthly  rent,  payable by Tenant
during the  immediately  preceding  thirty-six-month  period,  except that if it
becomes necessary to compute such rental before such thirty-six-month period has
expired,  then such rent shall be computed  on the basis of the average  monthly
amount of rent payable during such shorter period.

     15.6 No  Waiver.  The  waiver by  Landlord  of any  breach by Tenant of any
provision,  covenant or condition contained in this Lease shall not be deemed to
be a waiver of such provision,  covenant or condition,  of any subsequent breach
thereof, or of any other provision, covenant or condition of this Lease.

          15.6.1 The  subsequent  acceptance of rent hereunder by Landlord shall
not be deemed to be a waiver of any preceding breach by Tenant of any provision,
covenant or  condition of this Lease or of any right of Landlord to a forfeiture
of the Lease by reason of such breach,  regardless  of  Landlord's  knowledge of
such  preceding  breach at the time of  acceptance  of such rent.  No provision,
covenant  or  condition  of this  Lease  shall be deemed to have been  waived by
Landlord unless such waiver is in writing and signed by Landlord.

          15.6.2 Landlord is entitled to accept, receive and cash or deposit any
payment  made by Tenant for any  reason or purpose or in any amount  whatsoever,
and apply the same at Landlord's option to any obligation of Tenant and the same
shall not constitute  payment of any amount owed,  except that to which Landlord
has applied the same.  No  endorsement  or  statement  on any check or letter of
Tenant shall be deemed an accord and  satisfaction  or otherwise  recognized for
any purpose  whatsoever.  The  acceptance  of any such check or payment shall be
without  prejudice  to  Landlord's  right to recover any and all amounts owed by
Tenant hereunder and Landlord's right to pursue any other available remedy.

     15.7 Power of Receiver.  Upon a default by Tenant,  Landlord shall have the
right to obtain the appointment of a receiver to take possession of the Premises
and/or to collect the rents or profits.  Tenant irrevocably agrees that any such
receiver  may, if  necessary  or  convenient  in order to collect such rents and
profits,  conduct the business  then being  carried on by Tenant on the Premises
and that the receiver may take possession of any personal property  belonging to
Tenant  and  used in the  conduct  of  such  business,  and may use the  same in
conducting such business on the Premises without compensation to Tenant for such
use. Neither the application for nor the appointment of such a receiver shall be
construed as an election on  Landlord's  part to  terminate  this Lease unless a
written notice of such intention is given by Landlord.

     15.8 Landlord's Right to Cure Defaults.  Landlord, at any time after Tenant
commits a default in the performance of any of Tenant's  obligations  under this
Lease,  shall be entitled (but is not  obligated)  to cure such  default,  or to
cause such default to be cured,  at the sole cost and expense of Tenant.  If, by
reason of any default by Tenant, Landlord incurs any expense or pays any sum, or
performs  any act  requiring  Landlord  to incur any  expense or to pay any sum,
including  reasonable fees and expenses paid or incurred by Landlord in order to
prepare and post or deliver any notice  permitted or required by the  provisions
of this Lease, or otherwise permitted or contemplated by law, then the amount so
paid or incurred by Landlord shall be immediately due and payable to Landlord by
Tenant as additional Rent. Tenant hereby authorizes Landlord to deduct such sums
from any Security  Deposit held by  Landlord.  If there is no Security  Deposit,
such sums shall be paid by Tenant immediately upon demand by Landlord, and shall
bear interest at the rate of ten percent (10%) per annum, or such greater sum as
may be permitted by law from the date of such demand until paid in full.

     15.9      Assumption of Lease.  If Tenant becomes a Debtor under Chapter 7




<PAGE>



of
the Bankruptcy Code ("Code"),  or a petition for reorganization or adjustment of
debts is filed  concerning  Tenant  under  Chapters  11 or 13 of the Code,  or a
proceeding is filed under Chapter 7 and is  transferred  to Chapters 11 or 13 of
the Code, the Trustee or Tenant, as Debtor and as Debtor-In-Possession,  may not
elect to assume this Lease unless,  at the time of such assumption,  the Trustee
or Tenant has:

          15.9.1 Cured or provided  Landlord  "Adequate  Assurance"  (as defined
below) that: (a) within ten days from the date of such assumption the Trustee or
Tenant will cure all monetary defaults under this Lease and compensate  Landlord
for any actual  pecuniary loss resulting from any existing  default,  including,
without  limitation,  Landlord's  reasonable costs,  expenses,  late charges and
accrued  interest as set forth in this Lease,  and attorneys' fees incurred as a
result  of the  default;  (b)  within  thirty  (30)  days  from the date of such
assumption,  the Trustee or Tenant will cure all nonmonetary defaults under this
Lease;  and (c) the assumption  will be subject to all of the provisions of this
Lease.

          15.9.2 For  purposes of Sections  15.9 and 15.10,  Landlord and Tenant
acknowledge  that,  in the context of a bankruptcy  proceeding  of Tenant,  at a
minimum, "Adequate Assurance" shall mean: (a) the Trustee or Tenant has and will
continue to have sufficient unencumbered assets after the payment of all secured
obligations and  administrative  expenses to assure Landlord that the Trustee or
Tenant will have  sufficient  funds to fulfill the  obligations  of Tenant under
this Lease, and to keep the Premises properly staffed with sufficient  employees
to conduct a fully-operational,  actively promoted business in the Premises; (b)
the Bankruptcy  Court shall have entered an order  segregating  sufficient  cash
payable to Landlord and/or the Trustee, or Tenant shall have granted a valid and
perfected  first lien and  security  interest  and/or  mortgage  in  property of
Trustee  or Tenant  acceptable  as to value and kind to  Landlord,  to secure to
Landlord the  obligation  of the Trustee or Tenant to cure the  monetary  and/or
nonmonetary  defaults  under this Lease within the time periods set forth above;
and (c) the Trustee or Tenant at the very least shall deposit a sum equal to one
month's minimum  monthly rent to be held by Landlord  (without any allowance for
interest thereon) to secure Tenant's future performance under the Lease.

     15.10  Assignment of Lease.  If the Trustee or Tenant has assumed the Lease
pursuant  to the  provisions  of  Sections  15.9 and 15.10,  for the  purpose of
assigning  Tenant's  interest  hereunder  to any other  person or  entity,  such
interest may be assigned only after the Trustee, Tenant or the proposed assignee
has complied with all of the provisions, covenants and conditions of Section 14.
Landlord and Tenant  acknowledge that such provisions,  covenants and conditions
are commercially reasonable in the context of a bankruptcy proceeding of Tenant.
Any person or entity to which this Lease is assigned  pursuant to the provisions
of the Code shall be deemed  without  further act or deed to have assumed all of
the  obligations  arising  under  this  Lease  on and  after  the  date  of such
assignment. Any such assignee shall upon request execute and deliver to Landlord
an instrument confirming such assignment.

     15.11  Adequate  Protection.  Upon the filing of a  petition  by or against
Tenant under the Code,  Tenant, as Debtor and as  Debtor-in-Possession,  and any
Trustee who may be appointed agree to adequately protect Landlord as follows:

          15.11.1  To perform  each and every  obligation  of Tenant  under this
Lease  until such time as this Lease is either  rejected  or assumed by order of
the Bankruptcy Court;

          15.11.2 To pay all  monetary  obligations  required  under this Lease,
including,  without  limitation,  the payment of minimum  monthly rent, and such
other additional rent charges payable hereunder which are considered  reasonable
compensation for the use and occupancy of the Premises;





<PAGE>



          15.11.3 To provide  Landlord a minimum  thirty days'  written  notice,
unless  a  shorter  period  is  agreed  to in  writing  by the  parties,  of any
proceeding relating to any assumption of this Lease or any intent to abandon the
Premises, which abandonment shall be deemed a rejection of this Lease; and

          15.11.4 To perform to the benefit of Landlord otherwise required under
the Code.

          The  failure  of Tenant to comply  with the above  shall  result in an
automatic rejection of this Lease.

     15.12 Cumulative Rights.  The rights,  remedies and liabilities of Landlord
and Tenant set forth in Sections  15.9,  15.10 and 15.11 shall be in addition to
those which may now or  hereafter  be accorded,  or imposed  upon,  Landlord and
Tenant by the Code.

16.  DEFAULTS BY LANDLORD

     If Landlord fails to perform any covenant, condition or agreement contained
in this Lease  within  thirty  (30) days after  receipt of written  notice  from
Tenant  specifying  such failure (or if such failure cannot  reasonably be cured
within  thirty  (30) days,  if  Landlord  does not  commence to cure the failure
within that thirty-day period),  then such failure shall constitute a default by
Landlord.  In such  case,  Landlord  shall be liable to Tenant  for any  damages
sustained by Tenant as a result of Landlord's default.

     16.1  Liability  Limitation.  Tenant and Landlord  expressly  agree that if
Tenant obtains a money judgment against  Landlord  resulting from any default or
other claim arising under this Lease,  that judgment shall be satisfied only out
of the rents, issues,  profits, and other income,  including insurance proceeds,
if any, actually received on account of Landlord's right,  title and interest in
the Property.  No other real,  personal or mixed property of Landlord (or of any
of the partners  which comprise  Landlord,  or of partners or principals of such
partners  comprising  Landlord,  if any,  or of the  officers,  shareholders  or
directors,  if any, of any such entity) wherever  situated,  shall be subject to
levy,  attachment or execution,  or otherwise used to satisfy any such judgment.
Tenant hereby  waives any right to satisfy a judgment  against  Landlord  except
from the rents, issues, profits and other income,  including insurance proceeds,
if any, actually received on account of Landlord's right,  title and interest in
the Property.

     16.2 Cure. If, after notice to Landlord of default,  Landlord fails to cure
the default as provided  below,  then subject to the  provisions  of this Lease,
Tenant shall have the right to cure that default at Landlord's  expense. In such
case,  Landlord  shall pay the reasonable  cost of such cure promptly  following
receipt of a bill from Tenant itemizing the cost of such cure.  Tenant shall not
have the right to terminate this Lease or to withhold, reduce or offset any cost
of such cure  against any  payments of rent or other  charges due and payable to
Landlord  under this Lease,  except as otherwise  specifically  provided in this
Lease.

     16.3  Waiver of Code  Provisions.  Tenant  hereby  agrees  that  Civil Code
Sections 1932(2),  1933(4),  1941 and 1942 shall not be applicable to this Lease
and  Tenant  hereby  waives  any right it may have  under any of such Civil Code
Sections.

17.  ENVIRONMENTAL MATTERS

     Landlord  does not have actual  knowledge of the presence of any  Hazardous
Substances, as defined below, on the Property not in conformance with applicable
law. Tenant has had sufficient opportunity to satisfy itself of the condition of
the Premises prior to the execution hereof.




<PAGE>



     17.1 Compliance.  Tenant shall at all times and in all respects comply with
all federal,  state and local laws,  ordinances and  regulations  (collectively,
"Hazardous  Substances  Laws")  relating to  industrial  hygiene,  environmental
protection or the use, analysis, generation,  manufacture,  storage, disposal or
transportation  of any  oil,  hydrocarbons,  flammables,  explosives,  asbestos,
radioactive  materials or wastes or other  hazardous,  toxic,  contaminating  or
polluting materials,  substances or wastes, including,  without limitation,  any
hazardous  substances  which  are  the  subject  of  any  laws,   ordinances  or
regulations  intend to protect  the  environment  or health,  safety and welfare
(collectively, the "Hazardous Substances").

     17.2  Licenses  and Permits.  Tenant  shall,  at its own expense,  procure,
maintain  in effect,  and comply  with all  conditions  of any and all  permits,
licenses and other  governmental and regulatory  approval  required for Tenant's
use of the Premises,  including, without limitation,  discharge of appropriately
treated materials or wastes which may be discharged into or through any sanitary
sewer  serving  the  Premises.  Tenant  shall,  in all  respects,  deal with the
Hazardous Substances in conformity with the Hazardous Substances Laws.

     17.3 Indemnification. Tenant shall indemnify, defend, by counsel reasonably
acceptable  to  Landlord,  protect,  and hold  Landlord  and each of  Landlord's
partners,  employees,  agents,  attorneys,  successors  and  assigns,  free  and
harmless  from  and  against  any  and  all  claims,   liabilities,   penalties,
forfeitures, losses or expenses (including attorneys' fees), damages or death of
or injury to any person or damage to any  property  whatsoever,  arising from or
caused in whole or in part,  directly  or  indirectly,  by  Tenant's  failure to
comply with any  Hazardous  Substances  Law, or other  environmental,  health or
safety law,  regulation  or  ordinance.  Tenant's  obligations  hereunder  shall
include, without limitation, and whether foreseeable or unforeseeable, all costs
of any kind whatsoever related in any way to the repair, clean-up or remediation
of the Premises, and the preparation and implementation of any closure, remedial
action or other required plans. Tenant's obligations hereunder shall survive the
expiration or earlier  termination  of the Term.  For purposes of this indemnity
provision, any acts or omission of Tenant, or by employees,  agents,  assignees,
contractors or  subcontractors  of Tenant,  or others acting for or on behalf of
Tenant  (whether or not they are  negligent,  intentional,  willful or unlawful)
shall be strictly attributable to Tenant.

18.  SUBORDINATION OF LEASE

     18.1  Subordination  Agreement.  Tenant agrees to execute,  acknowledge and
deliver to Landlord within ten days following  Landlord's written request,  such
documents and instruments that may be necessary to subordinate this Lease to (a)
any  mortgages or trust deeds that now exist or may hereafter be placed upon the
Premises by Landlord, (b) to any and all advances made or to be made thereunder,
(c) to the interest on all  obligations  secured  thereby,  (d) to all renewals,
modifications,  consolidations, replacements and extensions thereof, and (e) any
easements,  covenants,  conditions or restrictions executed by Landlord provided
that they do not materially interfere with Tenant's use, enjoyment and occupancy
of the  Premises.  In each case the mortgagee or  beneficiary  named in any such
mortgage or trust deed shall agree in writing that,  as long as Tenant  performs
its obligations under this Lease, no foreclosure or deed in lieu of foreclosure,
or sale under the encumbrance or other procedures to enforce the rights incident
thereto, shall affect Tenant's rights under this Lease.

     18.2      Attornment.  Tenant shall attorn to any purchaser at any
foreclosure
sale or to any grantee or transferee designated in any deed given in lieu of
foreclosure.

     18.3      Estoppel Certificate.  Within ten (10) days after receipt of a
written request therefor, Tenant shall deliver in recordable form a written




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statement  certifying (if such is the case) that this Lease is in full force and
effect  and that there are no  defenses  or offsets  thereto,  or stating  those
claimed to exist and such other  information as Landlord may reasonably  request
be included in such statement. The failure of Tenant to deliver such certificate
within such time period shall  constitute  conclusive  affirmation by Tenant for
the benefit of Landlord, its lender, mortgagee or assignee, and their respective
successors in interest,  that this Lease is in full force and effect and has not
been modified  except as may be represented  by Landlord in its written  request
for such statement.

19.  LANDLORD'S ENTRY ON PREMISES

     19.1 Right of Entry. Landlord and its authorized representatives shall have
the right without  liability and without abatement of rent to enter the Premises
at all reasonable times for, without limitation, any of the following purposes:

          19.1.1 To determine  whether the  Premises  and/or the Building are in
good condition,  and whether Tenant is complying with its obligations under this
Lease;

          19.1.2  To do  any  necessary  maintenance,  repairs,  restoration  or
remodeling  to the Premises  and/or the Building  that Landlord has the right or
obligation to perform;

          19.1.3 To serve,  post, or keep posted any notices required or allowed
under the provisions of this Lease,  including "for rent" or "for lease" notices
during the last six months of this Lease,  or during any period  while Tenant is
in default,  and any notices  provided by law for the  protection  of Landlord's
interest in the Premises;

          19.1.4 To shore the  foundations,  footings and walls of the Building,
and to  erect  scaffolding  and  protective  barricades  around  and  about  the
Building,  but not so as to prevent entry to the  Premises,  and to do any other
act or thing  necessary  for the safety or  preservation  of the Premises or the
Building; and

          19.1.5  To show  the  Premises  and/or  the  Building  to  prospective
purchasers,  lenders, tenants, brokers and others for business purposes, and for
such other purposes as Landlord may deem appropriate.

     19.2 Exercise of Right.  Landlord  shall  exercise its rights of entry in a
manner that will not interfere  unreasonably  with Tenant's use and occupancy of
the Premises;  provided that Landlord's  entry and activities do not result from
Tenant's  default.  Landlord  shall not be liable  in any other  manner  for any
inconvenience,  disturbance, loss of business, nuisance, or other damage arising
out of  Landlord's  entry on the  Premises as  provided  herein,  except  damage
resulting from the acts or omissions of Landlord or its authorized represent-

atives.

20.  SALE OR TRANSFER OF PREMISES

     If Landlord  sells or  transfers  all or any portion of the  Premises,  the
Building,  or the  improvements  and land of which the Premises and the Building
are a part,  then  Landlord  shall be  released  from any  liability  thereafter
accruing  under this Lease upon (a) the  consummation  of such sale or transfer,
and (b) Landlord  accounting to any such transferee for any Security Deposit and
prepaid rent of Tenant.

21.  SURRENDER ON TERMINATION; HOLDING OVER





<PAGE>



     21.1 Surrender.  On the last day of the Term, or upon sooner termination of
this Lease,  Tenant  shall  surrender  to Landlord the Premises and all Tenant's
improvements  and alterations  (except for  improvements  and  alterations  that
Tenant has the right or is  obligated  to remove  under the  provisions  of this
Lease),  broom  clean,  maintained  and  repaired in  accordance  with the terms
hereof,  and  otherwise  in the same  condition  as when  received,  except  for
reasonable  wear and tear. Any damage to or  deterioration  of the Premises will
not be deemed  reasonable wear and tear if the same could have been prevented by
good  maintenance  practices  of Tenant.  Tenant  shall  also  remove all of its
personal property on or prior to such last day. Tenant shall promptly repair any
physical damage to the Premises arising as a result of Tenant's  vacation of the
Premises.  Landlord  may  elect  to  retain  or  dispose  of in any  manner  any
improvements or alterations or Tenant's  personal  property that Tenant does not
remove from the Premises on expiration or  termination of the Term as allowed or
required  by this Lease by giving at least ten days'  written  notice to Tenant.
Title to any such improvements or alterations or Tenant's personal property that
Landlord  elects to retain or dispose of on  expiration  of the  ten-day  period
shall vest in Landlord. Tenant waives all claims against Landlord for any damage
to  Tenant  resulting  from  Landlord's  retention  or  disposition  of any such
alterations or Tenant's personal property.

     21.2  Holding  Over.  If  Tenant,  with  Landlord's  consent,   remains  in
possession of the Premises after expiration or termination of the Term, or after
the date in any notice given by Landlord to Tenant  terminating this Lease, such
possession by Tenant shall be deemed to be a month-to-month  tenancy  terminable
on thirty  (30) days'  notice  given at any time by either  party.  The  minimum
monthly rent for any such tenancy  shall be equal to double the aggregate of the
monthly minimum rent in effect on the date of such expiration. Such minimum rent
shall be subject to  adjustment  as provided in this Lease.  Such tenancy  shall
otherwise be subject to all of the terms and  conditions  of this Lease,  except
those  pertaining  to Term and  Option(s)  to extend,  if any.  Any holding over
without Landlord's consent shall not give Tenant tenure.

22.  GENERAL PROVISIONS

     22.1  Notices.  Any and all notices by Landlord to Tenant,  or by Tenant to
Landlord,  shall be in writing and  delivered  personally  or by U.S.  certified
mail,  return  receipt  requested,  addressed  to the  parties at the  addresses
specified on the  signature  page of this Lease.  Either party may, at any time,
change the address by written notice to the other party in accordance  with this
Section.  If notice is mailed, it shall be deemed received on the third business
day following the date on which it is mailed.

     22.2 Binding  Effect;  Complete  Agreement.  Landlord and Tenant agree that
each of the provisions, conditions and obligations of this Lease shall extend to
and bind, or inure to the benefit of (as the case may require),  the  respective
parties hereto,  and each and every one of their  respective  heirs,  executors,
administrators,  representatives,  successors and assigns.  This Lease,  and the
exhibits hereto, constitute the entire agreement between the parties and may not
be altered,  amended,  modified or extended,  except by an instrument in writing
signed by all  parties.  The  parties  respectively  acknowledge  and agree that
neither has made any  representations  or  warranties to the other not expressly
set forth in this Lease.  This Lease  supersedes  any  proposals  regarding  the
leasing of the Premises,  whether  written or oral.  Any such  proposals will be
terminated,  and of no force or effect,  effective  upon the  execution  of this
Lease.

     22.3  Attorneys'  Fees.  If any legal action is instituted by either of the
parties  hereto to enforce or  construe  any of the  provisions,  conditions  or
covenants of this Lease, or the validity  thereof,  the party  prevailing in any
such action  shall be  entitled to recover  from the other party all court costs
and




<PAGE>



reasonable  attorneys'  fees to be set by the  court,  and the  costs  and  fees
incurred in enforcing any judgment entered.  Attorneys' fees and costs, whenever
mentioned  in  this  Lease,   shall  include  those  incurred  with  respect  to
arbitration proceedings, if any.

     22.4 Partial Invalidity.  If any term or provision, in whole or in part, of
this Lease or the application  thereof to any person or  circumstance  shall, to
any  extent,   be  invalid,   unenforceable,   or  inapplicable  in  the  stated
circumstances or for stated purposes, in any jurisdiction, then the remainder of
this  Lease,  or the  application  of  such  term or  provision  to  persons  or
circumstances  other than those to which it is held  invalid,  unenforceable  or
inapplicable, shall not be affected. Each term and provision of this Lease shall
be valid and be enforceable to the fullest extent permitted by law.

     22.5  Recordation;  Quitclaim.  Neither party shall record this Lease. Upon
the request of Landlord, in Landlord's sole discretion, Tenant shall execute and
acknowledge  in recordable  form a Memorandum  of Lease in content  agreeable to
Landlord. The reasonable costs and expenses, including attorneys' fees, incurred
by Landlord in preparing,  filing and recording the Memorandum of Lease shall be
borne by Landlord.  Concurrently  with the execution of any Memorandum of Lease,
Tenant shall execute and deliver to Landlord for filing and recording,  upon the
expiration or termination of this Lease, a quitclaim deed designating  Landlord,
its successors and assigns, as the transferee of the Premises.

     22.6 Broker.  Landlord shall pay a leasing  commission to Leider Commercial
Real Estate and Blair Hayes  Commercial Real Estate in accordance with the terms
of a separate  listing  agreement  between  Landlord and Leider  Commercial Real
Estate.  Tenant  represents and warrants to Landlord that Tenant has not engaged
any broker or finder  other than Blair  Hayes  Commercial  Real Estate and shall
indemnify,  defend,  and hold Landlord free and harmless from any and all claims
arising from this transaction brought by any other finder or broker.

     22.7  Consent  of Party.  If this  Lease  requires  the  consent of a party
hereto, such consent shall not be unreasonably withheld or delayed.

     22.8  Corporate  Authority.  If Tenant is a  corporation,  each  individual
executing this Lease on behalf of such corporation  represents and warrants that
he or she is duly authorized to execute and deliver this Lease on behalf of such
corporation,  in  accordance  with a duly  adopted  resolution  of the  Board of
Directors, or in accordance with the Bylaws of such corporation; that this Lease
is binding upon such corporation in accordance with its terms;  that Tenant is a
duly  qualified  corporation  and all steps  have been  taken  prior to the date
hereof to qualify  Tenant to do business in the State in which the  Premises are
situated,  if Tenant is a foreign corporation;  that all franchise and corporate
taxes have been paid to date; and that all future forms, reports, fees and other
documents necessary to comply with applicable laws will be filed when due.

     22.9 Time.  Time is of the  essence of this Lease and each and every  term,
covenant and condition.

     22.10 Signs.  Tenant shall install signs, at Tenant's sole expense,  on the
Premises in accordance  with the City of Santa  Barbara sign  ordinance and with
Landlord's  prior approval.  Tenant shall have the exclusive right to signage to
the  main  entrance  to  the  Building,  with  the  exception  of  the  existing
wall-mounted  tenant directory sign. The monument sign will be converted back to
building identification signage.

     22.11 Financial Statements. Tenant shall deliver to Landlord copies of such
financial  statements as are submitted to the Securities and Exchange Commission
with  Tenant's  Form 10-Q and 10-K within ten (10)  business  days of the filing
thereof.




<PAGE>




     22.12  Confidentiality  of Lease.  Tenant  acknowledges and agrees that the
terms of this Lease are confidential and constitute  proprietary  information of
Landlord.  Disclosure of the terms hereof could adversely  affect the ability of
Landlord to  negotiate  other  leases with  respect to the  Building  and impair
Landlord's  relationship with other tenants of the Building.  Tenant agrees that
it, its  partners,  officers,  directors,  employees  and  attorneys,  shall not
disclose the terms and  conditions of this Lease to any other person without the
prior  written  consent of Landlord.  A breach of this  covenant by Tenant shall
constitute  a material  default  under this Lease that,  by its  nature,  is not
susceptible to cure by Tenant. It is understood and agreed that damages,  alone,
would be an  inadequate  remedy  for the  breach of this  provision  by  Tenant.
Landlord  therefore  shall  have  the  right  to  specific  performance  of this
provision and to injunctive relief to prevent its breach or continued breach, as
well as all other remedies available at law or in equity.

     22.13 Security  Measures.  Tenant hereby  acknowledges  that Landlord shall
have no  obligation  whatsoever  to  provide  guard  service  or other  security
measures for the benefit of the  Premises or the  Building.  Tenant  assumes all
responsibility  for the  protection  of Tenant  and its  agents,  employees  and
invitees,  and the property of Tenant,  and its agents,  employees and invitees,
from acts of third parties.  Nothing herein contained shall prevent Landlord, at
Landlord's sole option,  from providing security  protection for the Building or
any part  thereof,  in which  event the cost  thereof  shall be  included  as an
Operating Cost.

     22.14     Construction of Lease.  The language in all parts of this Lease
shall
in all cases be construed as a whole according to its fair meaning and not
strictly for nor against Landlord or Tenant.

     22.15 Negation of Joint Venture. Nothing in this Lease shall cause Landlord
in any way to be construed as an employer,  employee,  fiduciary,  a partner,  a
joint venturer,  or otherwise associated in any way with Tenant in the operation
of  the  Premises.  Nothing  contained  herein  shall  subject  Landlord  to any
obligation,  loss,  charge or expense  connected  with or arising from  Tenant's
operation in or use of the Premises.

     22.16  Triple Net Lease.  The  parties  agree that the  general  intent and
purpose of this Lease is that this Lease shall be an  absolute  triple net lease
with respect to Landlord.  Tenant shall pay its pro rata share of all  Operating
Costs for the Premises,  the common areas of the Building,  the Building and the
land on which it is situated.  Landlord and Tenant intend that the rental return
to Landlord shall not be reduced, offset or diminished directly or indirectly by
any cost,  charge or expense due from Tenant and others in  connection  with the
Premises,  Building or land upon which the Building is situated,  nor subject to
suspension  or  termination  for any reason.  Landlord and Tenant agree that all
provisions of this Lease shall be  interpreted in a manner  consistent  with and
subordinate to such general intent and purpose. Tenant further acknowledges that
all tenants of the Building may not be subject to triple net leases.

     22.17 Liquidated  Damages.  BY INITIALING IN THE SPACES PROVIDED BELOW, THE
PARTIES AGREE THAT A LATE OPENING OF THE PREMISES,  LATE OR INSUFFICIENT PAYMENT
OF RENT OR OTHER CHARGES PAYABLE HEREUNDER, OR TENANT'S HOLDING OVER, WILL CAUSE
LANDLORD TO INCUR COSTS NOT CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF SUCH
COSTS BEING  EXTREMELY  DIFFICULT AND  IMPRACTICABLE  TO  ASCERTAIN.  SUCH COSTS
INCLUDE ADMINISTRATIVE  EXPENSES AND LOST GOOD WILL TO THE BUILDING.  THEREFORE,
THIS LEASE PROVIDES FOR CERTAIN LATE CHARGES AND OTHER LIQUIDATED DAMAGES.  SUCH
LATE CHARGES AND DAMAGES  REPRESENT FAIR AND  REASONABLE  ESTIMATES OF THE COSTS
AND/OR DAMAGES THAT LANDLORD WILL INCUR UNDER THE  CIRCUMSTANCES.  ACCEPTANCE OF
ANY SUCH LATE CHARGE OR DAMAGES  SHALL  CONSTITUTE  NEITHER A WAIVER OF TENANT'S
DEFAULT NOR AN ELECTION OF REMEDY.




<PAGE>




          LANDLORD                      TENANT









            (Signatures appear on the following page.)





<PAGE>




     IN WITNESS WHEREOF,  the parties have executed this Lease on this 16 day of
February, 1998, at the location of the Premises.

                              "LANDLORD":

                              BATH STREET PARTNERS,
                              a California limited partnership


                              By  /s/ ALEX N. PANANIDES
                                  ---------------------
                                Alex N. Pananides,
                                General Partner


                              Address:

                              3740 State Street
                              Santa Barbara, California 93105


                              "TENANT":

                              AVTEL COMMUNICATIONS, INC., a
                              Delaware corporation


                              By /s/ ANTHONY E. PAPA
                                 -------------------
                                 Anthony E. Papa, Chief Executive Officer

                              By /s/ JAMES P. PISANI
                                 -------------------
                                 James P. Pisani, Chief Operating Officer


                              Address:

                              Prior to the Commencement Date:
                              AvTel Communications, Inc.
                              130 Cremona Drive, Suite C
                              Santa Barbara, California 93117

                              After the Commencement Date:
                              AvTel Communications, Inc.
                              505 Bath Street*
                              Santa Barbara, California 93101

                              *subject to the provisions of
                               Section 1.4




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