Exhibit 10(r)


                         AGREEMENT OF PURCHASE AND SALE
                         ------------------------------


                            SUMMARY OF CERTAIN TERMS
                            ------------------------


EFFECTIVE DATE:                       July 25, 2005

SELLER:                               REGAN   HOLDING    CORP.,   a   California
                                      corporation

SELLER'S ADDRESS:                     2090 Marina Ave.
                                      Petaluma, California 94954
                                      Attn:  Mr. Michael Cairns
                                      Telephone:        (______) _____-________
                                      Facsimile:        (______) _____-________

BUYER:                                BASIN  STREET  PROPERTIES,   a  California
                                      corporation

BUYER'S ADDRESS:                      c/o Basin Street Properties
                                      1318 Redwood Way
                                      Suite 140
                                      Petaluma, CA 94954
                                      Attn:  Mr. Scott Stranzl
                                      Telephone:        (707) 795-4477
                                      Facsimile:        (707) 795-2683

REAL PROPERTY:                        That  certain   improved   real   property
                                      commonly known as 2084  Lakeville  Blvd. -
                                      2090 Marina Ave. in Petaluma,  California.
                                      The  land  portion  is  more  particularly
                                      described in Exhibit A, attached hereto.

PURCHASE PRICE:                       Thirteen  Million   One-Hundred   Thousand
                                      Dollars ($13,100,000).

DEPOSIT:                              Fifty Thousand Dollars ($50,000).

DUE DILIGENCE PERIOD:                 The  period  commencing  on the  Effective
                                      Date and ending at 6:00 p.m.  Pacific Time
                                      on the thirtieth  (30th) day after date on
                                      which Seller has delivered to Buyer all of
                                      the Due  Diligence  Documents as described
                                      in Exhibit D, attached hereto.

FINANCING CONTINGENCY PERIOD:         The  period  commencing  on the  Effective
                                      Date and ending at 6:00 p.m.  Pacific Time
                                      on the  forty-fifth  (45th)  day after the
                                      Effective Date.

                                       i

<PAGE>

SELLER'S REPRESENTATIVE:              Mr. Michael Cairns

BUYER'S REPRESENTATIVE:               Mr. Scott Stranzl

TITLE COMPANY:                        Old Republic Title Insurance Company
                                      516 Petaluma Boulevard North, Suite C
                                      Petaluma, CA  94952
                                      Attn:  Ms. Julie James
                                      Telephone:        (707) 763-9941
                                      Facsimile:        (707) 762-0473

ESCROW HOLDER:                        Old Republic Title Company
                                      6 Petaluma Blvd. North
                                      Suite A-2
                                      Petaluma, CA 94952
                                      Attn:  Ms. Julie James
                                      Telephone:        (707) 763-9941
                                      Facsimile:        (707) 762-0473

SCHEDULED CLOSING DATE:               The   fifteenth   (15th)   day  after  the
                                      expiration  of the  Financing  Contingency
                                      Period.

SELLER'S BROKER:                      None.

BUYER'S BROKER:                       None.

CLOSING COST
ALLOCATIONS:

- BUYER:                              TITLE INSURANCE                     100%

                                      ESCROW FEES                          50%

                                      RECORDING FEES (DEED)               100%

                                      ALTA SURVEY                         100%

- SELLER:                             COUNTY TRANSFER TAXES               100%

                                      CITY TRANSFER TAXES                 100%

                                      ESCROW FEES                          50%



                                       ii

<PAGE>

                                TABLE OF CONTENTS

                                                                           Page
1.       Purchase and Sale of Property........................................1
         1.1.     Real Property...............................................1
         1.2.     Personal Property...........................................1
         1.3.     Intangible Property.........................................1
2.       Purchase Price.......................................................2
3.       Deposit..............................................................2
4.       Payment of Purchase Price............................................2
5.       Remedies; Liquidated Damages.........................................2
         5.1.     Remedies....................................................2
         5.2.     LIQUIDATED DAMAGES..........................................2
6.       Due Diligence........................................................3
         6.1.     Seller's Studies............................................3
         6.2.     Survey......................................................3
         6.3.     Right of Entry..............................................3
         6.4.     Designation of Representatives..............................3
         6.5.     Disapproval of Seller's Studies or Buyer's Inspections......4
         6.6.     Title Review................................................4
         6.7.     Modification of Title Report................................4
         6.8.     Service Contracts...........................................5
         6.9.     Natural Hazard Disclosure Statement.........................5
7.       Sale / Leaseback.....................................................5
8.       Operation of Property................................................5
9.       Grant Deed...........................................................6
10.      Conditions Precedent.................................................6
         10.1.    Seller......................................................6
         10.2.    Buyer.......................................................7
         10.3.    Failure of Conditions Precedent.............................8
11.      Escrow...............................................................8
         11.1.    Time........................................................8
         11.2.    Documents...................................................8
         11.3.    Procedure...................................................9
         11.4.    Possession..................................................9
         11.5.    Deliveries Outside Escrow...................................9
         11.6.    Escrow Instructions........................................10
         11.7.    Closing Costs and Prorations...............................10
         11.8.    Failure to Furnish Non-Foreign Person Certificate..........11
12.      Brokerage Commission................................................12
13.      Condemnation/Casualty...............................................12
         13.1.    Right to Terminate.........................................12
         13.2.    Election to Terminate......................................12
         13.3.    No Election to Terminate...................................12
14.      Representations and Warranties......................................12
         14.1.    Buyer......................................................12

                                      iii

<PAGE>

         14.2.    Seller.....................................................13
         14.3.    Indemnity..................................................15
         14.4.    No Warranties..............................................15
15.      Miscellaneous.......................................................16
         15.1.    Successors and Assigns.....................................16
         15.2.    Entire Agreement...........................................16
         15.3.    Attorneys' Fees............................................16
         15.4.    Governing Law..............................................16
         15.5.    Further Assurances.........................................16
         15.6.    Severability...............................................16
         15.7.    Notices....................................................16
         15.8.    Counterparts...............................................17
         15.9.    Time.......................................................17
         15.10.   Nonwaiver..................................................17
         15.11.   Survival...................................................17
         15.12.   Captions...................................................17
         15.13.   Exhibits...................................................17
         15.14.   Construction...............................................17
         15.15.   Business Day...............................................17
16.      Deferred Exchange...................................................17


EXHIBITS:         A   -  Real Property
                  B   -  List of Service Contracts
                  C   -  Due Diligence Documents
                  D   -  Lease
                  E   -  Grant Deed
                  F   -  Bill of Sale and Assignment
                  G   -  Non-Foreign Person Certificate
                  H   -  Seller's Date Down Certificate
                  I   -  Buyer's Date Down Certificate
                  J   -  NHDS


                                       iv

<PAGE>

                         AGREEMENT OF PURCHASE AND SALE
                         ------------------------------


     THIS AGREEMENT OF PURCHASE AND SALE (this  "Agreement")  is entered into as
of July 25, 2005 (the  "Effective  Date"),  by and among REGAN HOLDING  CORP., a
California  corporation  ("Seller"),  and BASIN STREET PROPERTIES,  a California
corporation ("Buyer").

     THIS  AGREEMENT  IS  ENTERED  INTO on the  basis  of the  following  facts,
intentions and understandings of the parties:

     A. Seller is the owner of that certain real property (the "Real Property"),
located in Petaluma,  California,  commonly known as 2084 Lakeville Blvd. - 2090
Marina Ave. and more particularly described in Exhibit A, attached hereto.

     B. Seller desires to sell the Property (as  hereinafter  defined) to Buyer,
and Buyer desires to purchase the Property from Seller,  in accordance  with the
terms of this Agreement.

     C.  Concurrently  with Seller's  sale to Buyer of the Property,  Seller and
Buyer are entering  into a lease for a portion of the space in the building (the
"Building") located on the Real Property, pursuant to which Buyer shall lease to
Seller  approximately  71,612 rentable square feet of space in the Building,  as
more particularly provided herein.

     NOW  THEREFORE,  for  valuable  consideration,  the receipt and adequacy of
which are hereby acknowledged, Seller and Buyer hereby agree as follows:

     1.  Purchase  and Sale of Property.  Seller shall sell to Buyer,  and Buyer
shall purchase from Seller, on the terms,  covenants and conditions set forth in
this Agreement, the following described property (collectively, the "Property"):

          1.1. Real  Property.  The Real  Property,  together with all minerals,
     oil, gas and other hydrocarbon substances thereon and all easements, access
     rights, air, water and riparian rights,  development  rights,  solar rights
     and all tenements, privileges and appurtenances pertaining thereto;

          1.2. Personal Property. All fixtures,  equipment,  machinery, building
     materials and other  personal  property owned by Seller and attached to the
     Real Property and all equipment,  machinery, building materials, furniture,
     furnishings  and other  personal  property owned by Seller and described in
     Exhibit 2 of the Bill or Sale and Assignment (attached hereto as Exhibit F)
     (collectively, the "Personal Property"); and

          1.3. Intangible Property.  Seller's interest in any and all intangible
     personal  property  arising out of or in  connection  with the ownership or
     operation of the Real Property,  including (i) the right to use the current
     names of the Real Property,  (ii) all licenses,  permits,  certificates  of
     occupancy  and  franchises  issued  to Seller  by  federal,  state or local
     municipal  authorities  relating  to the  use,  maintenance,  occupancy  or


                                       1.
<PAGE>

     operation of the Real Property, (iii) all warranties given by third parties
     with  respect  to the  Real  Property,  and (iv)  all  service,  equipment,
     maintenance,  construction  and employment  agreements  (collectively,  the
     "Service  Contracts")  entered  into by  Seller  with  respect  to the Real
     Property and listed on Exhibit B,  attached  hereto,  which Buyer elects to
     have  assigned  to  it  pursuant  to  the   provisions  of  this  Agreement
     (collectively, the "Intangible Property").

     2.  Purchase  Price.  Buyer  shall pay to Seller  the  purchase  price (the
"Purchase Price") in the amount of Thirteen Million One-Hundred Thousand Dollars
($13,100,000)  for the Property.  The Purchase Price shall be paid in the manner
described in Section 4.

     3.  Deposit.  Within  two (2)  business  days after the  execution  of this
Agreement, Buyer and Seller shall open an escrow account (the "Escrow") with Old
Republic Title Company  ("Escrow  Holder"),  and Buyer shall deposit with Escrow
Holder by cashier's check or immediately available federal wire transfer cash in
the amount of Fifty Thousand Dollars  ($50,000) (the  "Deposit").  Escrow Holder
shall  place  the  Deposit  in an  interest-bearing  account  at an  institution
acceptable to Buyer,  to be held as a deposit on account of the Purchase  Price.
(The Deposit and all interest earned thereon shall  hereinafter  collectively be
referred to as the "Earnest Money  Deposit.") Upon Close of Escrow,  the Earnest
Money Deposit shall be applied against the Purchase Price.

     4. Payment of Purchase  Price.  On or before  Close of Escrow,  Buyer shall
deposit with Escrow  Holder by  immediately  available  federal wire transfer or
cashier's  check an  additional  amount  equal  to the  difference  between  the
Purchase  Price  and the  Earnest  Money  Deposit,  plus or  minus  the  closing
adjustments and prorations described in Section 11.7.

     5. Remedies; Liquidated Damages.

          5.1.  Remedies.  If the transfer of the Property  from Seller to Buyer
     does not close as a result of a default  by Seller  under  this  Agreement,
     Buyer shall be entitled to pursue any and all remedies  available at law to
     Buyer, including an action for specific performance.

          5.2.  LIQUIDATED  DAMAGES. IF THE TRANSFER OF THE PROPERTY FROM SELLER
     TO BUYER IS NOT CONSUMMATED DUE TO A DEFAULT BY BUYER UNDER THIS AGREEMENT,
     SELLER  SHALL  HAVE THE  RIGHT  TO  TERMINATE  THIS  AGREEMENT  IN  WRITING
     IMMEDIATELY  AND  WITHOUT  FURTHER  OBLIGATION  TO BUYER.  SELLER  SHALL BE
     ENTITLED TO RETAIN ANY PORTION OF THE EARNEST  MONEY  DEPOSIT  THEN HELD BY
     ESCROW  HOLDER AS  LIQUIDATED  DAMAGES AND AS  SELLER'S  SOLE  REMEDY.  THE
     PARTIES AGREE THAT SELLER'S  ACTUAL DAMAGES AS A RESULT OF BUYER'S  DEFAULT
     UNDER THIS AGREEMENT WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THE
     EARNEST MONEY DEPOSIT IS THE BEST ESTIMATE OF THE AMOUNT OF DAMAGES  SELLER
     WOULD  SUFFER  AS A  RESULT  OF SUCH  DEFAULT.  SELLER  HEREBY  WAIVES  THE
     PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. THE PARTIES WITNESS THEIR
     AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION BY INITIALING THIS SECTION:

                         Seller: (_____) Buyer: (_____)

                                       2.
<PAGE>

     6. Due Diligence.

          6.1.  Seller's  Studies.  Seller  either has or will  provide to Buyer
     within  two (2)  business  days  after  the  Effective  Date  copies of the
     documents  and  materials  (the "Due  Diligence  Documents")  described  in
     Exhibit C, attached  hereto and a list of the Due Diligence  Documents.  In
     addition, Seller shall make available at Seller's office for Buyer's review
     all studies,  reports,  maps,  surveys and other documents  relating to the
     Property in Seller's possession or control (together with the Due Diligence
     Documents hereinafter referred to as the "Due Diligence Materials").

          6.2. Survey.  During the Due Diligence Period,  Buyer, at Buyer's sole
     cost and  expense,  shall the right to have an ALTA survey  (the  "Survey")
     prepared of the Real Property.

          6.3.  Right of  Entry.  During  the  period  (the  "Contract  Period")
     commencing  on the  Effective  Date and  ending on the  earlier of Close of
     Escrow or termination of this Agreement, Buyer and Buyer's representatives,
     agents,  consultants and contractors shall have the right to enter the Real
     Property to conduct  investigations  of the  Property  and the physical and
     economic  conditions  thereof,  including the conduct of such  engineering,
     economic  feasibility  and soil tests as Buyer may desire  (each,  a "Buyer
     Inspection"), pursuant to the following terms and conditions:

               6.3.1. Buyer's Expense. Each Buyer Inspection shall be at Buyer's
          sole cost and expense.

               6.3.2.   No   Interference.   Any   entry   by   Buyer   or   its
          representatives,   agents,   consultants  or  contractors   shall  not
          interfere with Seller's use of the Real Property.

               6.3.3.  Restoration.  Buyer,  at Buyer's  sole cost and  expense,
          shall restore the Real Property to its condition existing  immediately
          prior to Buyer's  Inspections if, for any reason,  the Property is not
          transferred by Seller to Buyer. The restoration  obligation  contained
          in this Section 6.3.3 shall survive the termination of this Agreement.

               6.3.4. Indemnity. Buyer shall indemnify, defend and hold harmless
          Seller  for,  from and against  any and all  claims,  damages,  costs,
          liabilities  and losses  (including  mechanics'  liens)  and  expenses
          (including,  without limitation,  reasonable  attorneys' fees) arising
          out of any entry by Buyer or its agents, representatives,  consultants
          or  contractors  on  the  Real  Property.  The  indemnity  obligations
          contained in this Section  6.3.4 shall  survive Close of Escrow or any
          termination of this Agreement.

          6.4.  Designation  of  Representatives.  Seller  and Buyer  each shall
     designate  one  (1)  representative  to act  for  them  in  scheduling  and
     arranging   visits  to  and   inspections  of  the  Real  Property  and  in
     coordinating  the delivery of and/or access to the Due Diligence  Materials
     pursuant  to  Section  6.1  above.  Buyer's   Representative  and  Seller's
     Representative  are identified in the Summary of Certain Terms.  Each party
     shall have the right to change its respective  representative  by notice to
     the other party given in accordance with Section 15.7.

                                       3.
<PAGE>

          6.5. Disapproval of Seller's Studies or Buyer's Inspections.

               6.5.1.  Termination  Notice.  Buyer shall have the right,  at any
          time during the period (the "Due Diligence Period")  commencing on the
          Effective  Date and ending at 6:00 p.m.  Pacific Time on the thirtieth
          (30th) day after date on which  Seller has  delivered  to Buyer all of
          the Due Diligence  Documents,  to disapprove of the results of Buyer's
          review of the Due Diligence Materials, Buyer's Inspections of the Real
          Property or any aspect of this  transaction,  by  notifying  Seller in
          writing (a  "Termination  Notice").  If Buyer fails to provide  Seller
          with a Termination Notice prior to the expiration of the Due Diligence
          Period,  then Buyer  shall be deemed to have  approved  the results of
          Buyer's review of the Due Diligence Materials and Buyer's Inspections.

               6.5.2.   Result  of  Termination  Notice.  If  Buyer  delivers  a
          Termination Notice to Seller during the Due Diligence Period, then (i)
          this Agreement, and all of the obligations,  rights and liabilities of
          Buyer and Seller to each other hereunder,  shall  terminate,  and (ii)
          Seller shall  immediately  direct  Escrow Holder to return the Earnest
          Money Deposit to Buyer.

          6.6.  Title  Review.  Buyer shall notify Seller in writing (the "Title
     Objection  Notice") prior to the expiration of the Due Diligence  Period if
     Buyer  objects to the  condition  of title as shown on a title  report (the
     "Title  Report")  for  the  Real  Property  issued  by Old  Republic  Title
     Insurance Company ("Title Company") or any items shown on the Survey. Buyer
     shall be deemed to have  approved  the  condition  of title as shown on the
     Title  Report and the Survey if Buyer  fails to deliver to Seller the Title
     Objection  Notice prior to the expiration of the Due Diligence  Period.  If
     Buyer timely  delivers to Seller the Title Objection  Notice,  Seller shall
     notify  Buyer in writing  within  three (3)  business  days after  Seller's
     receipt of the Title  Objection  Notice of Seller's  election to either (i)
     cure or satisfy  all or some of the  objection(s)  (the  "Objections")  set
     forth in the Title Objection  Notice and/or (ii) not to cure or satisfy any
     of the  Objections.  Seller  shall  have  until  Close of Escrow to cure or
     satisfy any  Objections  that Seller elects to cure or satisfy and Seller's
     failure to do so by Close of Escrow  shall  constitute  a default by Seller
     under this  Agreement.  If Seller  fails to notify  Buyer in writing of its
     election within the three (3) business day period referenced above,  Seller
     shall  be  deemed  to  have  elected  not to  cure  or  satisfy  all of the
     Objections. If Seller notifies Buyer in writing of its election not to cure
     or satisfy any of the  Objections  or is deemed to have elected not to cure
     or satisfy any of the  Objections,  then Buyer shall either:  (A) waive the
     Objections and proceed with Close of Escrow pursuant to all of the terms of
     this  Agreement with no reduction in the Purchase  Price,  or (B) terminate
     this  Agreement by written  notice to Seller.  Buyer shall notify Seller in
     writing of its  election  either to terminate  this  Agreement or waive the
     Objections  pursuant to the  foregoing  sentence  within three (3) business
     days after  Buyer's  receipt of Seller's  response  to the Title  Objection
     Notice.  If Buyer  fails to notify  Seller in  writing of its  election  to
     either  terminate this  Agreement or waive the  Objections  within the time
     period  provided  above,  Buyer  shall be  deemed to have  terminated  this
     Agreement.  If Buyer  terminates  this Agreement  pursuant to this Section,
     Seller shall  immediately  direct Escrow Holder to return the Earnest Money
     Deposit to Buyer.

          6.7.  Modification  of Title  Report.  In the event that Title Company
     issues any  modification  or supplement to the Title Report between the end
     of the Due  Diligence  Period and Close of Escrow that is not the result of
     activities of Buyer or any of Buyer's agents, representatives,  consultants
     or  contractors,  and,  if, in  Buyer's  reasonable  judgment,  the  change
     materially and adversely affects the Real Property or Buyer's projected use

                                       4.
<PAGE>

     thereof,  Buyer  shall have three (3)  business  days after  receipt of the
     modification  or supplement to the Title Report in which to object  thereto
     by written  notice to  Seller.  If Buyer  objects to such a change,  Seller
     shall have three (3) days after the date Seller receives Buyer's  objection
     notice (and, if necessary,  Close of Escrow shall be extended by the number
     of days  necessary  to give Seller this full three (3) day period) in which
     to notify  Buyer in  writing  of its  election  either to  satisfy  or cure
     Buyer's objection or not to satisfy or cure Buyer's objection. Seller shall
     have until  Close of Escrow to cure or satisfy any  objections  that Seller
     elects to cure or satisfy and Seller's  failure to do so by Close of Escrow
     shall constitute a default by Seller under this Agreement.  Seller shall be
     deemed to have elected not to cure or satisfy all of Buyer's  objections if
     Seller fails to notify  Buyer in writing of its  election  within the three
     (3) day period referenced above. If Seller notifies Buyer in writing of its
     election  not to satisfy the  objection or Seller is deemed to have elected
     not to cure or satisfy  Buyer's  objection,  then Buyer shall  either:  (A)
     waive the objection and proceed with Close of Escrow pursuant to all of the
     terms of this  Agreement  with no reduction in the Purchase  Price,  or (B)
     terminate  this  Agreement.  Buyer  shall  notify  Seller in writing of its
     election  either to terminate this Agreement or waive its objection  within
     three (3)  business  days after the earlier of Buyer's  receipt of Seller's
     written notice election not to cure Buyer's  objection or the expiration of
     the three (3) day period  within  which Seller was required to notify Buyer
     of its  election.  If Buyer  terminates  this  Agreement  pursuant  to this
     Section,  (i)  this  Agreement,  and  all of the  obligations,  rights  and
     liabilities of Buyer and Seller to each other  hereunder  shall  terminate;
     and (ii)  Seller  shall  immediately  direct  Escrow  Holder to return  the
     Earnest Money Deposit to Buyer.

          6.8. Service Contracts.  Buyer shall notify Seller in writing prior to
     the end of the Due Diligence Period as to which (if any) Service  Contracts
     Buyer shall  assume at Close of Escrow.  Seller shall  terminate  all other
     Service Contracts by Close of Escrow.

          6.9.  Natural Hazard  Disclosure  Statement.  Seller shall execute and
     deliver to Buyer  within ten (10) days after the  Effective  Date a Natural
     Hazard Disclosure  Statement (the "NHDS"),  as and to the extent prescribed
     by California law, in substantially  the form of Exhibit J, attached hereto
     and made a part hereof.

     7. Sale / Leaseback.  At Close of Escrow,  and  concurrently  with Seller's
sale to Buyer of the  Property,  Buyer and Seller  shall enter into that certain
NNN Lease (the  "Lease")  pursuant to which  Buyer  shall  lease to Seller,  and
Seller  shall lease from Buyer,  approximately  71,612  rentable  square feet of
space in the Building  (hereinafter  referred to as the "Leased Premises").  The
Lease shall be for a term of ten (10) years (plus any partial  calendar month at
the end of the  term of the  Lease)  with an  initial  base  rent of  $1.30  per
rentable  square foot and three percent (3%) annual  increases.  The form of the
Lease is attached hereto as Exhibit D.

     8.  Operation of Property.  Seller hereby  covenants with Buyer that during
the Contract Period:

               8.1.1. Leases,  Contracts.  Seller shall not enter into, amend or
          terminate  any  lease,  service  contract  or any other  agreement  or
          contract affecting or relating to the Property that will survive Close
          of Escrow  without the prior written  consent of Buyer,  which consent
          shall not be unreasonably withheld;

                                       5.
<PAGE>
               8.1.2.  Insurance.  All insurance coverage carried by Seller with
          respect to the Property and in effect as of the  Effective  Date shall
          remain continuously in full force and effect;

               8.1.3.  Maintenance.   Seller  shall  continue  to  maintain  the
          Property  in  substantially   the  same  manner  in  which  Seller  is
          maintaining the Property as of the Effective Date;

               8.1.4.  Personal  Property.  Seller shall not remove any Personal
          Property  from  the  Real  Property  unless  it  is  replaced  with  a
          comparable  item of equal  quality and quantity as existed at the time
          of such  removal  and shall  maintain  the  Personal  Property in good
          condition and repair;

               8.1.5.  Liens.  Seller  shall not transfer any of the Property or
          create or, except as existing on the date hereof,  permit or suffer to
          exist on any of the Property  any  easements,  liens,  deeds of trust,
          mortgages,  security  interests,  encumbrances or other interests that
          would affect the  Property or any part thereof or Seller's  ability to
          comply with the terms of this Agreement; and

               8.1.6.  Withdrawal.  Seller shall  withdraw the Property from the
          market and not enter into any  agreement  to sell the  Property to any
          other party or otherwise  negotiate with any other party  concerning a
          sale of the Property.

     9. Grant Deed. Seller shall convey to Buyer all of its interest in the Real
Property by a grant deed (the "Deed") in the form of Exhibit E, attached hereto.

     10. Conditions Precedent. In addition to the documents and funds which must
be placed into  Escrow  prior to Close of Escrow as stated in Section 11 of this
Agreement, the following are conditions precedent to Close of Escrow:

          10.1.  Seller.  The  following  are  conditions  precedent to Seller's
     obligation to proceed with Close of Escrow:

               10.1.1.  No  Proceedings.  No suit,  action  or other  proceeding
          (instituted  by any party other than  Seller)  shall be pending  which
          seeks,  nor shall there exist any  judgment the effect of which is, to
          restrain the purchase and sale of the Property;

               10.1.2.  Buyer's   Representations  True  and  Correct.   Buyer's
          representations  and  warranties  set forth  herein  shall be true and
          correct in all material respects on Close of Escrow;

               10.1.3.  Performance of Covenants. Buyer shall have performed all
          of Buyer's  covenants and agreements  contained in this Agreement that
          are  required to be performed by Buyer prior to or on Close of Escrow;
          and

                                       6.
<PAGE>

               10.1.4. Authority.  Buyer shall have provided to Seller and Title
          Company  prior to Close of Escrow  evidence of authority  for Buyer to
          enter into this Agreement and purchase the Property from Seller.

          10.2.  Buyer.  The following are  conditions  precedent to the Buyer's
     obligation to proceed with Close of Escrow:

               10.2.1.  Satisfaction With Due Diligence.  Buyer's inspection and
          approval  during  the  Due  Diligence  Period  of  the  Due  Diligence
          Materials,  the Service Contracts,  the Survey and all other physical,
          environmental,  legal and any other  matters  relating to the Property
          that Buyer may elect to investigate;

               10.2.2.  Title.  Buyer's inspection and approval of all title and
          survey  matters  relating  to the  Property  within  the time  periods
          provided in Sections 6.6 and 6.7;

               10.2.3. Financing. Buyer's receipt prior to the expiration of the
          Financing  Contingency  Period of (i) a  financing  commitment  from a
          lender  acceptable  to  Buyer to  facilitate  the  acquisition  of the
          Property  on terms and  conditions  satisfactory  to Buyer and (ii) an
          appraisal  from a qualified  MAI  appraiser  indicating a value of the
          Property of not less than $13,000,000;

               10.2.4.  Owner's Title Policy.  Buyer's receipt prior to Close of
          Escrow of an irrevocable written commitment of Title Company to issue,
          upon the payment of its regularly  scheduled premium,  an ALTA Owner's
          Policy (1992 Form) of title  insurance,  with  extended  coverage (the
          "Owner's  Title  Policy")  dated  as of  the  date  and  time  of  the
          recordation of the Deed, in the amount of the Purchase Price, insuring
          Buyer that fee simple  title to the Real  Property is vested in Buyer,
          subject only to (i) a lien for real property taxes and assessments not
          then  delinquent;  (ii) matters of title  respecting the Real Property
          approved or deemed approved by Buyer during the Due Diligence  Period;
          and  (iii)  matters  affecting  the  condition  of  title  to the Real
          Property  created  by or with  the  written  consent  of  Buyer or its
          agents, representatives, consultants or contractors;

               10.2.5. No Proceedings. As of Close of Escrow, no suit, action or
          other  proceeding  (instituted by any party other than Buyer) shall be
          pending which seeks,  nor shall there exist any judgment the effect of
          which is, to restrain the purchase and sale of the Property;

               10.2.6. Seller's Representations True and Correct. As of Close of
          Escrow,  Seller's  representations  and  warranties  set forth in this
          Agreement shall be true and correct in all material respects;

               10.2.7.  Performance  and Covenants.  Seller shall have performed
          all of the covenants and agreements  herein that Seller is required to
          perform on or before Close of Escrow; and

               10.2.8. Authority.  Seller shall have provided to Buyer and Title
          Company at Close of Escrow with  evidence of  authority  to enter into
          this Agreement and transfer the Property to Buyer.

                                       7.
<PAGE>

          10.3. Failure of Conditions  Precedent.  If any of Buyer's or Seller's
     conditions precedent have not been satisfied or waived by the time provided
     therein,  then this Agreement  shall  terminate.  Upon  termination of this
     Agreement  pursuant to the  foregoing  sentence,  Seller  shall  direct the
     Escrow  Holder to return the Earnest  Money  Deposit to Buyer.  If Close of
     Escrow  fails to occur  due to a default  under  this  Agreement  by either
     Seller or Buyer, the parties'  respective remedies shall be as described in
     Section 5 hereof.

     11. Escrow.

          11.1.  Time.  Close of Escrow shall occur when all documents and funds
     specified in this Section 11 have been deposited  into Escrow.  The failure
     of Seller or Buyer to be in a position by the  Scheduled  Closing  Date (as
     defined  in the  Summary  of Certain  Terms) to  fulfill  their  respective
     obligations  with respect to Close of Escrow and thus enable Title  Company
     to cause  Close of  Escrow to occur on the  Scheduled  Closing  Date  shall
     constitute a default by the party so failing.

          11.2.  Documents.  On or before the business day immediately preceding
     the Scheduled Closing Date, the parties shall deposit into Escrow the funds
     and documents described below.

               11.2.1. Seller. Seller shall deposit the following:

                    a. Deed. A duly executed and acknowledged Deed, conveying to
               Buyer all of its interest in the Real Property;

                    b. Lease. Two (2) duly executed counterparts of the Lease;

                    c.  Bill of Sale  and  Assignment.  Two  (2)  duly  executed
               counterparts of a Bill of Sale and Assignment (the  "Assignment")
               in the form of Exhibit F, attached hereto,  transferring to Buyer
               all of Seller's  interest in the Personal Property and Intangible
               Property;

                    d.   Non-Foreign   Person   Certificate.   A  duly  executed
               non-foreign   person   certificate   (the   "Non-Foreign   Person
               Certificate")  under Section 1445 of the Internal Revenue Code in
               the form of Exhibit G, attached hereto;

                    e.  Form  593-W.  A  duly  executed  Withholding   Exemption
               Certificate  and Waiver of  Request  for  Non-Individual  Sellers
               (Form 593-W) (the "Form 593-W");

                    f.  Seller's  Date Down  Certificates.  A Seller's Date Down
               Certificate  ("Seller's  Date Down  Certificate")  in the form of
               Exhibit H, attached hereto; and

                    g.  Additional  Documents.  Such  additional  documents  and
               funds,   including  without   limitation,   escrow   instructions
               consistent  with the terms and conditions of this  Agreement,  as
               may be reasonably  required of Seller to close the transaction in
               accordance with this Agreement.

                                       8.
<PAGE>

               11.2.2. Buyer. Buyer shall deposit the following:

                    a. Purchase  Price.  The Purchase  Price,  plus or minus the
               closing adjustments and prorations due hereunder;

                    b. Lease. Two (2) duly executed counterparts of the Lease;

                    c.  Bill of Sale  and  Assignment.  Two  (2)  duly  executed
               original counterparts of the Assignment;

                    d. Buyer's Date Down  Certificate.  A duly executed  Buyer's
               Date Down  Certificate in the form of Exhibit I, attached hereto;
               and

                    e.  Additional  Documents.  Such  additional  documents  and
               funds,   including  without   limitation,   escrow   instructions
               consistent  with the terms and conditions of this  Agreement,  as
               may be reasonably  required of Buyer to close the  transaction in
               accordance with this Agreement.

          11.3. Procedure. Escrow Holder shall close the Escrow as follows:

               11.3.1.  Record Deed.  Record the Deed in the Official Records of
          Sonoma  County,  California  and deliver  conformed  copies thereof to
          Buyer and Seller;

               11.3.2. Purchase Price. Deliver to Seller by wire transfer to the
          account  designated by Seller in writing,  the Purchase  Price,  minus
          prorations and closing costs;

               11.3.3.  Additional  Deliveries to Seller.  Deliver to Seller one
          (1) fully executed  original of the Lease,  the Assignment and Buyer's
          Date Down Certificate; and

               11.3.4.  Additional Deliveries to Buyer. Deliver to Buyer (i) one
          (1) fully executed original of the Lease, the Non-Foreign Certificate,
          the Assignment, the Form 593-W and Seller's Date Down Certificate, and
          (ii) the Owner's Title Policy.

          11.4.  Possession.  Seller shall deliver possession of the Property to
     Buyer at Close of  Escrow  free and  clear of all  tenants  and  occupants,
     except that Seller shall continue to occupy the Leased Premises pursuant to
     the terms of the Lease.

          11.5.  Deliveries Outside Escrow.  Upon Close of Escrow,  Seller shall
     deliver (or shall have previously delivered) to Buyer, the following items:

               11.5.1. Keys; Security Systems.  Keys to all buildings located on
          the Real Property and access codes to any security systems  comprising
          part of the Property.

               11.5.2. Approvals.  Originals or, to the extent originals are not
          available,  copies of all governmental licenses, permits and approvals
          relating to the occupancy or use of the Property;

                                       9.
<PAGE>

               11.5.3. Project Agreements and Project Documents.  Originals,  or
          to the extent originals are not available,  copies of all construction
          drawings   and   specifications   (including,    without   limitation,
          structural,  electrical,  HVAC,  mechanical  and  plumbing  plans  and
          specifications)  and any addenda  thereto,  and all other  blueprints,
          architectural  documents,  operating  manuals and  similar  documents,
          landscaping plans, development plans and shop drawings relating to the
          Improvements.

               11.5.4. Warranties. Originals or, to the extent originals are not
          available,  copies of all existing  warranties  given by third parties
          with respect to the Property.

          11.6.  Escrow  Instructions.  This  Agreement  shall  serve as  escrow
     instructions  and an executed copy of this Agreement  shall be deposited by
     Seller and Buyer with Escrow  Holder  following  the execution and delivery
     hereof.  The parties agree to execute for the benefit of Escrow Holder such
     additional  escrow  instructions as required,  provided that the additional
     escrow  instructions  do not change the terms of this  Agreement but merely
     offer protection to Escrow Holder. Seller and Buyer hereby designate Escrow
     Holder as the "Reporting  Person" for the  transaction  pursuant to Section
     6045(e) of the Internal Revenue Code.

          11.7. Closing Costs and Prorations.

               11.7.1. Closing Costs

                    a.  Buyer's  Share of  Closing  Costs.  Buyer  shall pay the
               following  portions of the closing costs (the "Closing Costs") in
               connection with transfer of the Property: (A) the title insurance
               premiums  for the  Owner's  Title  Policy  and  any  endorsements
               requested by Buyer;  (B) fifty  percent (50%) of all Escrow fees;
               and (C) all recording  fees incurred in connection  with the Deed
               or any financing by Buyer.

                    b.  Seller's  Share of Closing  Costs.  Seller shall pay the
               following  portions of the Closing Costs: (A) all City and County
               documentary transfer taxes; (B) fifty percent (50%) of all Escrow
               fees; and (C) all recording fees not the  responsibility of Buyer
               pursuant to Section 11.7.1.a above.

                    c. No Close of  Escrow.  If Close of  Escrow  does not occur
               because of a failure of either Seller or Buyer to comply with its
               obligations   under  this   Agreement,   the  costs  incurred  in
               connection  with the  Escrow,  including  the  cost of the  Title
               Report and any cancellation fees or other costs of Title Company,
               shall be paid by the  defaulting  party.  If Close of Escrow does
               not occur because of any other reason,  including any termination
               of this  Agreement by Buyer pursuant to Sections 6.5, 6.6 or 6.7,
               such costs shall be paid by Buyer.

               11.7.2.  Real Estate Taxes. All real and personal  property taxes
          attributable  to the Real Property  shall be prorated as of 11:59 p.m.
          Pacific  Time on the day  immediately  prior to Close of  Escrow  (the
          "Proration  Date") based on a 365-day  year and the assessed  value of
          the  Property in effect on the  Proration  Date.  Seller  shall pay or
          credit Buyer for all such taxes  attributable  to periods  through and

                                      10.
<PAGE>

          including the Proration  Date. If at any time after the Proration Date
          additional  or  supplemental  taxes  are  assessed  against  the  Real
          Property by reason of any event occurring prior to or on the Proration
          Date,  or  there  is any  rebate  of such  taxes  (with  Seller  being
          responsible for the supplemental or additional  taxes  attributable to
          the period prior to and including  the Proration  Date and Buyer being
          responsible for the supplemental or additional  taxes  attributable to
          the period after the Proration Date),  Buyer and Seller shall promptly
          re-prorate such taxes, and any amounts due from one party to the other
          shall be paid in cash at that time.

               11.7.3.  Utilities.  Except  for  utility  service  accounts  for
          electricity  and natural gas which shall remain in the name of Seller,
          Buyer shall arrange with all utility  services and  companies  serving
          the Real Property to have accounts started in the name of Buyer or its
          property  manager  beginning as of the Closing Date.  Buyer and Seller
          shall  cooperate  to have the  utility  services  and  companies  make
          utility  readings (with respect to those accounts that will be started
          in Buyer's name) as of the Proration Date. If readings cannot be made,
          utility charges shall be prorated as of 11:59 p.m. Pacific Time on the
          Proration  Date based on estimates  from the latest  bills  available;
          provided,  in any event,  Seller shall pay,  through and including the
          Proration Date, all utility charges attributable to the Real Property.

               11.7.4. Insurance. Seller shall not assign to Buyer any insurance
          policies in connection with the Property.

               11.7.5.  Calculations for Closing. Seller and Buyer shall provide
          Escrow  Holder with a preliminary  calculation  of prorations no later
          than  three  (3)  days  prior  to  the  Proration  Date  and  a  final
          calculation no later than one (1) day prior to the Proration Date. The
          final  calculation  shall be  executed by each party and may be relied
          upon by Escrow  Holder  in  completing  the  closing  adjustments  and
          prorations.  In the event  incomplete  information  is  available,  or
          estimates  have  been  utilized  to  calculate  prorations  as of  the
          Proration  Date,  any  prorations  relating  thereto  shall be further
          adjusted and completed  outside of Escrow within sixty (60) days after
          the Proration Date or as soon as possible  after complete  information
          becomes  available  to Buyer and Seller.  Any  adjustments  to initial
          estimated  prorations  that are required  upon review of such complete
          information shall be made by Buyer and Seller,  with due diligence and
          cooperation,  by prompt cash payment to the party entitled to a credit
          as a  result  of  such  adjustments.  Any  errors  or  adjustments  in
          calculations  of the  foregoing  adjustments  shall  be  corrected  or
          adjusted as soon as practicable after Close of Escrow.

               11.7.6.  Additional Costs.  Buyer and Seller each shall pay their
          own legal,  lending and other fees and expenses incurred in connection
          with the  negotiation,  documentation  and closing of the contemplated
          transactions.

               11.8.  Failure  to Furnish  Non-Foreign  Person  Certificate.  If
          Seller  shall  fail to deposit  into  Escrow  the  Non-Foreign  Person
          Certificate  as  required by this  Agreement,  Buyer may at its option
          either  (i) delay  Close of  Escrow  until  such  time as  Seller  has
          complied with the  conditions set forth herein,  and such  adjournment
          shall not place Buyer in default of its obligations hereunder, or (ii)
          withhold  from the Purchase  Price and remit to the  Internal  Revenue

                                      11.
<PAGE>

          Service,  a sum equal to ten percent  (10%) of the gross selling price
          of the  Property or such other sum as shall be required in  accordance
          with the  withholding  obligations  imposed  upon  Buyer  pursuant  to
          Section 1445 of the Code.  Such  withholding  shall not place Buyer in
          default  under this  Agreement,  and Seller  shall not be  entitled to
          claim that such withholding  shall excuse Seller's  performance  under
          this Agreement.

     12.  Brokerage  Commission.  Each party to this  Agreement  warrants to the
other  that no person  or entity  can  properly  claim a right to a real  estate
commission,  finder's  fee or  other  real  estate  brokerage-type  compensation
(collectively,  "Real  Estate  Compensation")  based upon the acts of that party
with  respect to the  transaction  contemplated  by this  Agreement.  Each party
hereby  agrees  to  indemnify  and  defend  the  other  (by  counsel  reasonably
acceptable  to the party  seeking  indemnification)  against  and hold the other
harmless  from and  against  any and all loss,  damage,  liability  or  expense,
including costs and reasonable  attorneys'  fees,  resulting from any claims for
Real Estate Compensation by any person or entity based upon such acts.

     13. Condemnation/Casualty.

          13.1.  Right to  Terminate.  If  before  Close of  Escrow,  all or any
     portion of the Property is damaged or destroyed by fire or other  casualty,
     or is taken by condemnation or eminent domain (or an action of condemnation
     or eminent  domain has been  commenced  or  threatened  against  all or any
     portion of the Property),  Seller shall promptly notify Buyer of such fact,
     and Buyer shall have the option to terminate  this Agreement upon notice to
     Seller on or before the Closing Date.

          13.2.  Election  to  Terminate.   Upon  Buyer's  termination  of  this
     Agreement  pursuant to this Section 13, Seller shall  immediately  instruct
     Escrow Holder to return Earnest Money Deposit to Buyer. Upon termination of
     this  Agreement,  neither Buyer nor Seller shall have any further rights or
     obligations under this Agreement.

          13.3. No Election to Terminate.  If Buyer does not exercise the option
     to terminate this Agreement,  neither Buyer nor Seller shall have the right
     to terminate this  Agreement.  However,  Buyer shall be entitled to receive
     and keep at Close of  Escrow  all  insurance  proceeds,  in the  event of a
     casualty,  and all rights to receive future awards, in the case of a taking
     by condemnation  or eminent domain with respect to the Property,  and Close
     of Escrow shall be  consummated  pursuant to the terms  hereof  without any
     reduction in the Purchase  Price.  Until the Close of Escrow or the earlier
     termination  of this Agreement by Buyer,  all such  insurance  proceeds and
     awards shall be deposited with Title Company into Escrow,  for disbursement
     in accordance with the foregoing provisions.

     14. Representations and Warranties.

          14.1. Buyer. Buyer represents and warrants to Seller the following:

               14.1.1.  Authority.  To the best of Buyer's knowledge,  Buyer has
          the  full  power  to  execute  and  deliver  and  fully   perform  its
          obligations  under this  Agreement;  and this Agreement  constitutes a
          valid  and  legally  binding  obligation  of  Buyer,   enforceable  in
          accordance with its terms.

               14.1.2. No Violation.  To the best of Buyer's knowledge,  neither
          this Agreement nor anything provided to be done hereunder  violates or
          shall violate any contract,  agreement or instrument to which Buyer is

                                      12.
<PAGE>

          a party,  the  effect  of which  shall  be to  prohibit  or to seek or
          purport to prohibit Buyer from fulfilling its  obligations  under this
          Agreement.

               14.1.3. No Assignment.  To the best of Buyer's  knowledge,  Buyer
          has not made (i) a general  assignment  for the benefit of  creditors;
          (ii) filed any voluntary petition in bankruptcy or suffered the filing
          of an involuntary  petition by Buyer's  creditors;  (iii) suffered the
          appointment of a receiver to take  possession of all or  substantially
          all of Buyer's assets;  (iv) suffered the attachment or other judicial
          seizure of all, or substantially  all, of Buyer's assets; (v) admitted
          in writing its  inability to pay its debts as they become due; or (vi)
          made an offer of settlement, extension or composition to its creditors
          generally.

          14.2. Seller. Seller represents and warrants to Buyer the following:

               14.2.1. Authority. To the best of Seller's knowledge,  Seller has
          the  full  power  to  execute  and  deliver  and  fully   perform  its
          obligations  under this  Agreement;  and this Agreement  constitutes a
          valid  and  legally  binding  obligation  of  Seller,  enforceable  in
          accordance with its terms.

               14.2.2. No Violation. To the best of Seller's knowledge,  neither
          this Agreement nor anything provided to be done hereunder  violates or
          shall violate any contract, agreement or instrument to which Seller is
          a party,  the  effect  of which  shall  be to  prohibit  or to seek or
          purport to prohibit Seller from fulfilling its obligations  under this
          Agreement.

               14.2.3. No Assignment. To the best of Seller's knowledge,  Seller
          has not (i) made a general  assignment  for the benefit of  creditors;
          (ii) filed any voluntary petition in bankruptcy or suffered the filing
          of an  involuntary  petition  by its  creditors;  (iii)  suffered  the
          appointment of a receiver to take  possession of all or  substantially
          all of its assets;  (iv)  suffered the  attachment  or other  judicial
          seizure of all, or substantially  all, of its assets;  (v) admitted in
          writing its  inability to pay its debts as they come due; or (vi) made
          an offer of  settlement,  extension or  composition  to its  creditors
          generally.

               14.2.4. No Litigation. To the best of Seller's knowledge,  Seller
          has not  received  any  actual  notice of any  pending  or  threatened
          litigation which would materially and adversely affect the Property.

               14.2.5. Notice of Violations.  To the best of Seller's knowledge,
          except as disclosed  in the Due  Diligence  Documents,  Seller has not
          received any written notice from any governmental authority and Seller
          is not  aware  of  any  violation  of any  law,  regulation  or  code,
          including any building  code,  with respect to the Property  which has
          not been cured.

               14.2.6.  No  Eminent  Domain  Action.  To the  best  of  Seller's
          knowledge,  Seller  has not  received  any  written  notice  from  any
          governmental  authority and Seller is not aware of any eminent  domain
          proceedings  for  the  condemnation  of the  Real  Property  that  are
          threatened or currently pending.

               14.2.7. Service Contracts. To the best of Seller's knowledge, the
          documents  constituting  the Service  Contracts which are delivered or
          made available to Buyer pursuant to Section 6.1 are true,  correct and
          complete  copies of the Service  Contracts  and there is no default or
          alleged  default by Seller or the vendor  under the Service  Contracts
          that has not been cured.

                                      13.
<PAGE>

               14.2.8. No Leases. To the best of Seller's knowledge,  Seller has
          not entered into or assumed any lease relating to the Property that is
          in  effect  as of the  Effective  Date or will be in  effect as of the
          Close of Escrow except for the Lease.

               14.2.9.   Licenses,   Permits,  Etc.  To  the  best  of  Seller's
          knowledge, (i) Seller has obtained all approvals, easements and rights
          of way  which are  required  by any and all  governmental  authorities
          having  jurisdiction  over the Property or by private  parties for the
          normal use,  occupancy  and  operation  of the  Property and to ensure
          continued free and  unrestricted  vehicular and pedestrian  ingress to
          and egress  from the  Property,  (ii) all such  approvals  are in full
          force and effect and there are no facts or  circumstances  which might
          result in  revocation  of or  failure  to renew  the  same,  (iii) the
          Improvements  comply with all applicable laws,  statutes,  ordinances,
          rules   and    regulations   of   any   and   all    governmental   or
          quasi-governmental  agencies having or claiming  jurisdiction over the
          Property  or the use of all or any part  thereof and (iv) there are no
          violations thereof.

               14.2.10.  Due  Diligence  Materials.  To  the  best  of  Seller's
          knowledge,  all Due Diligence  Materials and other  information  which
          Seller has provided to Buyer concerning the Property are true, correct
          and complete.

               14.2.11.   Outstanding   Contracts.   To  the  best  of  Seller's
          knowledge,  as of the  Closing  Date,  there  will  be no  outstanding
          contracts  made by Seller for any  improvements  to the Property which
          have not been fully paid for,  and Seller will  discharge  and satisfy
          all of its  obligations and  liabilities  under the Service  Contracts
          before the Closing  Date,  except to the extent  expressly  assumed in
          writing by Buyer.

               14.2.12.  Property. To the best of Seller's knowledge,  except as
          disclosed by the public records of the county recorder's office of the
          county in which the Real  Property  is  located,  Seller  has good and
          marketable  fee simple  title to the  Property,  free and clear of any
          lien, charge or other encumbrance created or imposed during the period
          that Seller has owned the Property and any prior  period.  To the best
          of Seller's knowledge, no one has any option or right of first refusal
          to purchase the Property.

               14.2.13. Hazardous Materials.

                    (i) The term "Hazardous Materials" shall mean any substance:
               (i) the presence of which requires  investigation  or remediation
               under any federal, state or local statute, regulation, ordinance,
               order,  action,  policy or common  law;  (ii) which is or becomes
               defined as a "hazardous waste," "hazardous  substance," pollutant
               or  contaminant  under  any  federal,  state  or  local  statute,
               regulation, ordinance, rule, directive or order or any amendments
               thereto  (hereinafter   referred  to  as  "Environmental   Laws")
               including,  without limitation,  the Comprehensive  Environmental
               Response,  Compensation and Liability Act (42 U.S.C. Section 9601
               et seq.)  and/or the Resource  Conservation  and Recovery Act (41

                                      14.
<PAGE>

               U.S.C.  Section 6901 et seq.);  (iii) which is toxic,  explosive,
               corrosive,  flammable,  infectious,  radioactive,   carcinogenic,
               mutagenic or otherwise  hazardous and is or becomes  regulated by
               any  governmental  authority,  agency,  department,   commission,
               board,  agency or instrumentality of the United States, the State
               of California or any political  subdivision  thereof;  (iv) which
               contains gasoline,  diesel fuel or other petroleum  hydrocarbons;
               (v) which contains polychlorinated  biphenyls (PCBs), asbestos or
               urea formaldehyde foam insulation; or (vi) radon gas.

                    (ii) To the best of Seller's knowledge,  the Property is not
               in violation of any Environmental Laws.

                    (iii) Except as disclosed in the Due Diligence Documents, to
               the best of Seller's knowledge,  there has been no use, presence,
               disposal, storage, generation or release (as those terms are used
               in the Environmental Laws, and hereinafter  collectively referred
               to as  "Use")  of  Hazardous  Materials  on,  from or  under  the
               Property  during the period that Seller has owned the Property or
               any prior period.

                    (iv)  To the  best of  Seller's  knowledge,  no  enforcement
               action or  litigation  has been  brought  or  threatened  against
               Seller or the  Property  during the period  that Seller has owned
               the Property or any prior period, nor any settlements  reached by
               Seller or any prior owner of or other party  having any  interest
               in the Property,  with any party or parties,  alleging Use of any
               Hazardous Materials on, from or under the Property.

                    (v)  To  the  best  of  Seller's  knowledge,  there  are  no
               underground storage tanks on the Property.

                    (vi) The scope of the  representations  and  warranties  set
               forth in Sections 14.2.13(i), (ii), (iii), (iv) and (v) shall not
               diminish in any respect  any  liability  of Seller to Buyer which
               would otherwise exist under the Environmental Laws.

               14.2.14. Subsequent Changes. Seller will promptly notify Buyer in
          writing of any event or  occurrence  which would cause any of Seller's
          above representations and warranties to cease to be true or correct in
          any respect.

          14.3.  Indemnity.  Seller shall  indemnify,  defend and hold  harmless
     Buyer from and against any and all damages, liabilities, costs and expenses
     (including,  without  limitation,  reasonable  attorneys' fees) directly or
     indirectly  arising  from any (i)  misrepresentation  of  Seller  contained
     herein, (ii) breach of any warranty or covenant of Seller contained herein,
     or (iii) personal injury,  property damage,  contractual or other claims in
     connection with the Property to the extent such claims are  attributable to
     the period on or before Close of Escrow.

          14.4. No Warranties.  Except for those  representations and warranties
     expressly set forth in Section 14.2, the parties understand and acknowledge
     that no person  acting on behalf of Seller is  authorized  to make,  and by
     execution  hereof  Buyer   acknowledges   that  no  person  has  made,  any
     representation  or warranty  regarding  the  Property,  or the  transaction
     contemplated  herein,  or  regarding  the  zoning,  construction,  physical
     condition  or  other  status  of  the  Real  Property.  No  representation,
     warranty,  agreement,  statement,  guaranty or promise, if any, made by any
     person acting on behalf of Seller which is not contained in this  Agreement
     shall be valid or binding on Seller.

                                      15.
<PAGE>

     15. Miscellaneous.

          15.1. Successors and Assigns. This Agreement shall be binding upon the
     heirs, executors,  administrator,  and successors and assigns of Seller and
     Buyer.  Notwithstanding  the  forgoing,  except in order to  effectuate  an
     Exchange,  Seller may not assign  its  rights  and  obligations  under this
     Agreement  without the prior written consent of Buyer (which consent may be
     withheld in each party's sole  discretion).  No  assignment by Seller shall
     result in Seller being released from any obligations  under this Agreement.
     Any assignment in violation of this Section shall be void.

          15.2. Entire Agreement.  This Agreement contains all of the covenants,
     conditions and agreements between the parties and shall supersede all prior
     correspondence, agreements and understandings, both oral and written.

          15.3. Attorneys' Fees. Should either party employ attorneys to enforce
     any of the  provisions of this  Agreement or to protect its interest in any
     manner arising under this  Agreement,  or to recover  damages for breach of
     this Agreement,  or to enforce any judgment  relating to this Agreement and
     the transaction contemplated hereby, the prevailing party shall be entitled
     to reasonable attorneys' fees and court costs.

          15.4. Governing Law. This Agreement shall be governed by and construed
     in accordance with the laws of the State of California.

          15.5.  Further  Assurances.  Seller and Buyer shall promptly  perform,
     execute and deliver or cause to be performed,  executed and/or delivered at
     or after Close of Escrow any and all acts, deeds and assurances,  including
     the  delivery  of any  documents,  as  either  party or Escrow  Holder  may
     reasonably  require in order to carry out the  intent  and  purpose of this
     Agreement.

          15.6.  Severability.  In case  any  one (1) or more of the  provisions
     contained in this  Agreement for any reason is held to be invalid,  illegal
     or   unenforceable  in  any  respect,   such   invalidity,   illegality  or
     unenforceability  shall not affect  any other  provision  hereof,  and this
     Agreement shall be construed as if such invalid,  illegal or  unenforceable
     provision had never been contained herein.

          15.7. Notices.

               15.7.1.  Means/Receipt.   All  notices  or  other  communications
          required or  permitted  hereunder  shall be in  writing,  and shall be
          personally  delivered or sent by registered or certified mail, postage
          prepaid, return receipt requested,  national overnight courier service
          (next  business  day  delivery)  or  facsimile,  and  shall be  deemed
          received upon the earlier of (i) if personally delivered,  the date of
          delivery to the address of the person to receive such notice,  (ii) if
          mailed, three (3) business days after the posting by the United States
          Post Office, (iii) if sent by national overnight courier service (next
          business day  delivery),  one (1) business day after  delivery to such
          courier  service,  or (iv) if  given  by  facsimile,  upon  electronic
          evidence of receipt.

               15.7.2.  Addresses.  Any notice to Seller shall be sent to Seller
          at  Seller's  Address,  as stated on page (i) of this  Agreement.  Any
          notice to Buyer shall be sent to Buyer at Buyer's  Address,  as stated
          on page (i) of this Agreement.

                                      16.
<PAGE>

          15.8. Counterparts.  This Agreement may be executed in one (1) or more
     counterparts, and all the counterparts shall constitute but one (1) and the
     same agreement,  notwithstanding  that all parties hereto are not signatory
     to the same or original counterpart.

          15.9.  Time.  Time is of the essence of every  provision  contained in
     this Agreement.

          15.10.   Nonwaiver.   Unless  otherwise  expressly  provided  in  this
     Agreement,  no waiver by Seller or Buyer of any  provision  hereof shall be
     deemed to have been made unless  expressed  in writing and signed by Seller
     or Buyer,  as the case may be. No delay or omission in the  exercise of any
     right or remedy  accruing to Seller or Buyer,  as the case may be, upon any
     breach  under  this  Agreement  shall  impair  such  right or  remedy or be
     construed  as a  waiver  of  any  such  breach  theretofore  or  thereafter
     occurring.  The  waiver  by  Seller  or Buyer of any  breach  of any  term,
     covenant or condition  herein  stated shall not be deemed to be a waiver of
     any other term, covenant or condition.

          15.11.   Survival.   Each  of  the   terms,   covenants,   conditions,
     representations  and warranties  contained in this Agreement  shall survive
     the  delivery  of the Deed to Buyer and shall not be deemed to have  merged
     into the Deed.

          15.12.  Captions.   Section  titles  or  captions  contained  in  this
     Agreement are inserted as a matter of convenience and for reference, and in
     no way define, limit, extent or describe the scope of this Agreement.

          15.13.  Exhibits.  All exhibits  attached hereto shall be incorporated
     herein by reference as if set out herein in full.

          15.14.  Construction.  The parties acknowledge that each party and its
     counsel have  reviewed and revised this  Agreement and that the normal rule
     of  construction  to the effect  that any  ambiguities  are to be  resolved
     against the drafting party shall not be employed in the  interpretation  of
     this Agreement or any amendment or exhibits hereto.

          15.15.  Business Day. As used herein,  the term  "business  day" shall
     mean any day other  than a  Saturday,  Sunday or day on which  banks in the
     State of California are authorized to be closed for business.

     16. Deferred Exchange.  Either party may consummate the purchase or sale of
the Property as part of a so-called like kind exchange (the "Exchange") pursuant
to Section 1031 of the Internal Revenue Code of 1986, as amended,  provided that
(i) Close of Escrow shall not be delayed or affected by reason of the  Exchange,
nor shall the  consummation  or  accomplishment  of the  Exchange be a condition
precedent or  condition  subsequent  to either  party's  obligations  under this
Agreement;  (ii) the party electing to consummate this transaction as part of an
Exchange (the "Electing  Party") shall effect the Exchange through an assignment
of  this  Agreement,  or  its  rights  under  this  Agreement,  to  a  qualified
intermediary;  (iii) the other party (the "Accommodator")  shall not be required
to take an assignment of the purchase agreement for the relinquished property or

                                      17.
<PAGE>

be  required  to acquire  or hold title to any real  property  for  purposes  of
consummating the Exchange;  and (iv) the Electing Party shall pay any additional
costs that would not otherwise  have been incurred by the  Accommodator  had the
Electing  Party not  consummated  this  transaction  through the  Exchange.  The
Accommodator  shall  not by  this  Agreement  or  acquiescence  to the  Exchange
proposed by the Electing Party have its rights under this Agreement  affected or
diminished in any manner or be responsible  for compliance  with or be deemed to
have  warranted to the Electing  Party that the Exchange in fact  complies  with
Section 1031 of the Internal Revenue Code of 1986, as amended.

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement in one
or more  counterparts,  on the date set forth  above,  effective  as of the date
first above written.

"Seller"                                      "Buyer"

REGAN HOLDING CORP., a                        BASIN STREET PROPERTIES, a
California corporation                        California corporation

By:      /s/ R. Preston Pitts                 By:    /s/ Matthew T. White
      --------------------------------               ------------------------
Name:    R. Preston Pitts                     Name:  Matthew T. White
      --------------------------------               ------------------------
Its:     President                            Its:   President
      --------------------------------               ------------------------



                                      18.
<PAGE>


                                    EXHIBIT D
                                    ---------


                                      LEASE





                                       1

<PAGE>


                    2084 LAKEVILLE BLVD. AND 2090 MARINA AVE
                                    NET LEASE

                             BASIC LEASE INFORMATION

<TABLE>
<CAPTION>

<S>                                                       <C>
DATE:                                                     November 18, 2005

LANDLORD:                                                 LAKEVILLE & MARINA, LLC, a California limited liability
                                                          company, FLORENE MAY HECK, LLC, a Delaware limited
                                                          liability company, THOMAS FLORIAN FRAZER, LLC, a Delaware
                                                          limited liability company, AMERIVINE, INC., a California
                                                          corporation, and WHEELER PROPERTIES, LLC, a California
                                                          limited liability company

LANDLORD'S ADDRESS:                                       c/o Basin Street Properties
                                                          201 First Street, Suite 100
                                                          Petaluma, CA 94952
                                                          Attn:  Ms. Betsy Ross
                                                          Phone:   (707) 795-4477
                                                          Fax:     (707) 795-6283

TENANT:                                                   REGAN HOLDING CORP., a California corporation

TENANT'S ADDRESS:                                         2090 Marina Ave.
                                                          Petaluma, California 94954
                                                          Attn:  Michael Cairns
                                                          Phone:  (707) 765-5867

PREMISES:                                                 Approximately seventy-one thousand six hundred twelve
                                                          (71,612) rentable and usable square feet of space in the
                                                          Building, as more particularly shown on Exhibit A-1
                                                          attached hereto.

REDUCED SPACE:                                            Approximately twenty thousand (20,000) rentable square
                                                          feet of space in the Building, as more particularly shown
                                                          on Exhibit A-1 attached hereto.

BUILDING:                                                 That certain office building located within the Project,
                                                          commonly known as 2084-2090 Marina Avenue and consisting
                                                          of approximately seventy-one thousand six hundred twelve
                                                          (71,612) rentable square feet of space.

LOT:                                                      APN 005-050-036 and 005-060-066

TERM:                                                     Ten (10) Lease Years

     a.  Commencement Date                                See Section 3.1

     b.  Estimated Commencement Date                      See Section 3.1

BASE RENT:

     a.  Initial Monthly Base Rent                        Eighty-Nine Thousand Five Hundred Fifteen Dollars
                                                          ($89,515.00)

     b.  Advanced Base Rent
         (Paid Upon Lease Execution)                      Nine Hundred Seventy-Nine Thousand Six Hundred Fifty-Two
                                                          and 16/100 Dollars ($979,652.16).  See Addendum
</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>

<S>                                                       <C>
     c.  Adjustment Date of Monthly
         Base Rent                                        See Addendum

TAXES AND OPERATING EXPENSES:

         Initial Monthly Allocation of Taxes
and Operating Expenses:                                   $0.27 per rentable square foot

TENANT'S PERCENTAGE SHARE:                                One hundred percent (100%) (i.e., the rentable square
                                                          footage of the Premises/the rentable square footage of the
                                                          Building)

SECURITY DEPOSIT:                                         One Million Dollars ($1,000,000)

PERMITTED USE:                                            For use as office space and for no other use or purpose.

PARKING SPACES:                                           Tenant shall have the right to use on a non-exclusive
                                                          basis a number of parking spaces in the parking areas
                                                          shown on Exhibit A-2 equal to the ratio of five (5) spaces
                                                          per 1,000 rentable square feet of the Premises.

REAL ESTATE BROKERS:

     a.  Landlord's Broker:                               Basin Street Properties

     b.  Tenant's Broker:                                 None

GUARANTOR:                                                N/A

EXHIBITS AND ADDENDUM

     Exhibit A-1:     Diagram of Premises
     Exhibit A-2:     Diagram of Project
     Exhibit B:       Work Letter Agreement
     Exhibit C:       Commencement Date
                      Memorandum
     Exhibit D:       Rules and Regulations
     Exhibit E:       Tenant's Financial
                      Statement
</TABLE>

                                       ii

<PAGE>

                    2084 LAKEVILLE BLVD. AND 2090 MARINA AVE
                                    NET LEASE


     THIS 2084  LAKEVILLE  BLVD.  AND 2090 MARINA AVE NET LEASE  (this  "Lease")
dated as of  November  18,  2005,  is entered  into by and  between  LAKEVILLE &
MARINA,  LLC, a California limited liability  company,  FLORENE MAY HECK, LLC, a
Delaware  limited  liability  company,  THOMAS FLORIAN  FRAZER,  LLC, a Delaware
limited  liability  company,  AMERIVINE,  INC.,  a California  corporation,  and
WHEELER PROPERTIES,  LLC, a California limited liability company  (collectively,
"Landlord"), and REGAN HOLDING CORP., a California corporation ("Tenant").

     THIS LEASE IS ENTERED INTO on the basis of the following facts,  intentions
and understandings of the parties:

     A. Basin Street Properties  ("Basin Street") and Tenant previously  entered
into that certain  Agreement of Purchase and Sale dated as of July 25, 2005,  as
subsequently  amended (as amended,  the "Purchase  Agreement").  Pursuant to the
Purchase Agreement,  Tenant, as the owner of fee title to the Project, agreed to
sell to Basin  Street,  as buyer,  all of its right,  title and  interest in the
Project. Basin Street subsequently assigned to Landlord all of its rights, title
and interest in and obligations  under the Purchase  Agreement  pursuant to that
certain Assignment and Assumption Agreement dated as of November 15, 2005.

     B. As a condition to Landlord  purchasing  the Project from Tenant,  Tenant
agreed to lease from  Landlord  the  Premises in  accordance  with the terms and
conditions  set forth herein.  The date on which Tenant  conveys its interest in
the Project to Landlord (as evidenced by the  recordation of a grant deed in the
Official Records of Sonoma County pursuant to which Tenant grants and conveys to
Landlord all of its interest in the Project) is  hereinafter  referred to as the
"Closing Date".

     C. Landlord and Tenant now desire to enter into this Lease on the terms and
conditions set forth below.

     NOW  THEREFORE,  for  valuable  consideration,  the receipt and adequacy of
which are hereby acknowledged, Seller and Buyer hereby agree as follows:

     1.  Definitions.  The  following  terms shall have the  meanings  set forth
below:

          1.1. Building. The term "Building" shall have the meaning set forth in
     the Basic Lease Information.

          1.2.  Building  Common Areas.  The term "Building  Common Areas" shall
     mean the areas and facilities  within the Building  provided and designated
     by Landlord for the general use, convenience or benefit of Tenant and other
     tenants and occupants of the Building (e.g., common stairwells,  stairways,
     hallways, shafts, elevators, restrooms, janitorial telephone and electrical
     closets,  pipes, ducts, conduits,  wires and appurtenant fixtures servicing
     the Building).

          1.3.  Commencement Date. The term  "Commencement  Date" shall have the
     meaning set forth in Section 3.1.

          1.4.  Common  Areas.  The term "Common  Areas" shall mean the Building
     Common Areas and the Project Common Areas.

          1.5.  Lot.  The term "Lot" shall mean  parcels  described in the Basic
     Lease Information.

          1.6. Premises. The term "Premises" shall have the meaning set forth in
     the Basic Lease Information.

          1.7. Project. The term "Project" shall mean the Building and the Lot.

          1.8.  Project Common Areas. The term "Project Common Areas" shall mean
     the areas and  facilities  within the Project  provided and  designated  by
     Landlord  for the general use,  convenience  or benefit of Tenant and other
     tenants and  occupants  of the Project  (e.g.,  walkways,  traffic  aisles,
     accessways, utilities and communications conduits and facilities).
<PAGE>

          1.9.  Rentable Area. The term "Rentable  Area" shall mean the rentable
     area of the Premises and the Building as reasonably determined by Landlord.
     The parties agree that for all purposes under this Lease, the Rentable Area
     of the  Premises  and the  Building  shall be  deemed  to be the  number of
     rentable square feet identified in the Basic Lease Information.

          1.10. Tenant's Percentage Share. The term "Tenant's  Percentage Share"
     shall mean the percentage specified in the Basic Lease Information.  If the
     Rentable  Area of the  Premises  or the  Rentable  Area of the  Building is
     changed,  then Tenant's  Percentage Share shall be adjusted to a percentage
     equal to the Rentable Area of the Premises  divided by the Rentable Area of
     the Building.

          1.11.  Term.  The term "Term"  shall have the meaning set forth in the
     Basic Lease Information.

     2. Premises.

          2.1.  Demise.  Landlord  hereby  leases to Tenant,  and Tenant  hereby
     leases from Landlord, for the Term, at the rent and upon the conditions set
     forth below,  the  Premises,  together  with the right in common to use the
     Common Areas.

          2.2.  Condition  Upon  Delivery.   Tenant   acknowledges  that  Tenant
     currently  occupies the Premises  and,  subject to  Landlord's  obligations
     under  Section  9.2,  Tenant  accepts the  Premises in its existing "as is"
     condition,  with all faults and defects and without any  representation  or
     warranty of any kind, express or implied.

          2.3. Reserved Rights.  Landlord reserves the right to do the following
     from time to time:

               (a)  Changes.  To install,  use,  maintain,  repair,  replace and
          relocate pipes, ducts, shafts, conduits, wires, appurtenant meters and
          mechanical,   electrical  and  plumbing   equipment  and   appurtenant
          facilities for service to other parts of the Building or Project above
          the ceiling surfaces, below the floor surfaces and within the walls of
          the  Premises and in the central core areas of the Building and in the
          Building Common Areas, and to install, use, maintain,  repair, replace
          and relocate any pipes, ducts, shafts,  conduits,  wires,  appurtenant
          meters  and   mechanical,   electrical  and  plumbing   equipment  and
          appurtenant  facilities  servicing  the  Premises,  which are  located
          either in the Premises or elsewhere outside of the Premises;

               (b) Boundary Changes.  To change the boundary lines of the Lot or
          the Project;

               (c)  Facility  Changes.  To alter or relocate the Common Areas or
          any facility within the Project;

               (d) Parking.  To designate  and/or  redesignate  specific parking
          spaces on the Lot or in the Project for the exclusive or non-exclusive
          use of specific tenants on the Lot or in the Project;

               (e) Services. To install, use, maintain, repair, replace, restore
          or  relocate  public or  private  facilities  for  communications  and
          utilities on or under the Building and/or Project; and

               (f) Other. To perform such other acts and make such other changes
          in, to or with respect to the Common Areas, Building and/or Project as
          Landlord may reasonably deem appropriate.

          2.4. Work Letter Agreement. Landlord and Tenant shall each perform the
     work  required  to be  performed  by it as  described  in the  Work  Letter
     Agreement  attached  hereto as Exhibit B.  Landlord  and Tenant  shall each
     perform such work in  accordance  with the terms and  conditions  contained
     therein.

     3. Term.

          3.1.  Commencement  Date.  The Term  shall be for the  period  of time
     specified  in the Basic  Lease  Information  unless  sooner  terminated  as
     hereinafter  provided.  The Term shall  commence  on the  Closing  Date (as
     defined  in  Recital  B) and shall  continue  thereafter  in full force and
     effect  for the  period  specified  as the  Term or  until  this  Lease  is
     terminated as otherwise  provided  herein.  For purposes of this Lease, the
     first "Lease  Year" shall mean the period  commencing  on the  Commencement
<PAGE>

     Date  and  ending  twelve  (12)  months  thereafter,  except  that  if  the
     Commencement  Date is other  than the first day of a  calendar  month,  the
     first "Lease  Year" shall mean the period  commencing  on the  Commencement
     Date and ending on the last day of the twelfth  (12th) full calendar  month
     after the Commencement Date. Thereafter, the term "Lease Year" shall mean a
     period equal to twelve (12) full calendar months.

          3.2.  Commencement Date Memorandum.  Following the Commencement  Date,
     Landlord may prepare and deliver to Tenant a commencement  date  memorandum
     (the  "Commencement  Date  Memorandum")  in the form of Exhibit C, attached
     hereto,  subject to such  changes in the form as may be  required to insure
     the accuracy  thereof.  The Commencement  Date Memorandum shall certify the
     dates  upon  which the Term  commences  and  expires.  Tenant's  failure to
     execute and deliver to Landlord the  Commencement  Date  Memorandum  within
     five (5) days after Tenant's  receipt of the  Commencement  Date Memorandum
     shall  be  conclusive  upon  Tenant  as to the  matters  set  forth  in the
     Commencement Date Memorandum.

     4. Rent.

          4.1. Base Rent. For purposes of this Lease, the term "Rent" shall mean
     the Base Rent,  Advanced Base Rent,  all  additional  rent,  and all of the
     other monetary  obligations  of Tenant under this Lease.  Upon execution of
     this Lease,  Tenant shall pay to Landlord the Advanced  Base Rent set forth
     in the Basic Lease Information.  Tenant shall pay to Landlord the Base Rent
     specified  in the Basic Lease  Information,  in  advance,  on or before the
     first  day of each  and  every  successive  calendar  month  following  the
     Commencement  Date. If the Term  commences on other than the first day of a
     calendar  month,  the first  payment  of Base Rent  shall be  appropriately
     prorated  on the  basis  of the  number  of days in  such  calendar  month.
     Tenant's  payment  of any  Advanced  Base Rent  shall be  credited  against
     Tenant's obligation to pay Base Rent beginning as of the Commencement Date.
     If the Term  expires on other than the last day of a  calendar  month,  the
     last  payment of Base Rent  shall be  appropriately  prorated  based on the
     number of days in such calendar month.

          4.2.  Adjustments  to Base Rent.  The Base Rent shall be  adjusted  as
     provided in the Addendum attached hereto.

          4.3.  Additional  Rent.  Tenant  shall pay, as  additional  rent,  all
     amounts of money that  Tenant is  required  to pay to  Landlord  under this
     Lease  in  addition  to  monthly  Base  Rent  whether  or not  the  same is
     designated  "additional  rent." Tenant shall pay to Landlord all additional
     rent upon  Landlord's  written  request or  otherwise  as  provided in this
     Lease.

          4.4. Late Payment.  Tenant  acknowledges  that late payment of Rent to
     Landlord will cause Landlord to incur costs not contemplated by this Lease,
     the exact amount of which is extremely  difficult to ascertain.  Such costs
     include,  but are not limited to,  processing and accounting  charges,  and
     late  charges  which may be imposed on  Landlord  by the terms of any trust
     deed covering the Premises.  Accordingly, if any installment of Rent or any
     other sums due from Tenant  shall not be  received by Landlord  within five
     (5) business days after such payment is due, Tenant shall pay to Landlord a
     late charge in an amount equal to five percent (5%) of such overdue amount.
     The parties  agree that such late charge  represents a fair and  reasonable
     estimate  of the costs  Landlord  will  incur by reason of late  payment by
     Tenant.  Acceptance of such late charge by Landlord  shall not constitute a
     waiver of Tenant's default with respect to such overdue amount, nor prevent
     Landlord  from  exercising  any of the other  rights and  remedies  granted
     hereunder.

          4.5. Interest.  In addition to the imposition of a late payment charge
     pursuant  to Section  4.4 above,  any Rent that is not paid within five (5)
     business  days after such payment is due shall bear  interest from the date
     due until paid at the rate that is the lesser of twelve  percent  (12%) per
     annum (the "Interest  Rate") or the maximum rate permitted by law.  Payment
     of interest shall not excuse or cure any default hereunder by Tenant.

          4.6. Payment. All payments due from Tenant to Landlord hereunder shall
     be made to Landlord  without  deduction  or offset,  in lawful money of the
     United States of America at Landlord's address for notices hereunder, or to
     such other  person or at such other place as Landlord may from time to time
     designate in writing to Tenant.

<PAGE>

     5. Taxes.

          5.1. Tenants Obligations.  Tenant shall pay to Landlord, as additional
     rent,  Tenant's  Percentage  Share of Taxes  during  each  year of the Term
     (prorated for any partial calendar year during the Term).

          5.2.  Definition of Taxes.  The term "Taxes" shall include all transit
     charges,  housing fund  assessments,  real estate taxes and all other taxes
     relating  to the  Premises,  Building  and Lot of  every  kind  and  nature
     whatsoever,  including any supplemental  real estate taxes  attributable to
     any period  during the Term;  all taxes which may be levied in lieu of real
     estate  taxes;  and  all  assessments,   assessment  bonds,  levies,  fees,
     penalties  (if a result of  Tenant's  delinquency)  and other  governmental
     charges  (including,  but not limited to, charges for parking,  traffic and
     any storm  drainage/flood  control  facilities,  studies and  improvements,
     water and sewer service studies and improvements, and fire services studies
     and  improvements);  and all amounts  necessary  to be expended  because of
     governmental orders, whether general or special, ordinary or extraordinary,
     unforeseen  as  well  as  foreseen,  of any  kind  and  nature  for  public
     improvements,  services, benefits or any other purpose, which are assessed,
     based upon the use or occupancy of the  Premises,  Building  and/or Lot, or
     levied,  confirmed,  imposed or become a lien upon the  Premises,  Building
     and/or Lot, or become payable  during the Term, and which are  attributable
     to any period within the Term.

          5.3. Limitation.  Nothing contained in this Lease shall require Tenant
     to pay (i) any franchise,  estate, inheritance,  succession or transfer tax
     of Landlord, (ii) any income, profits or revenue tax or charge upon the net
     income of Landlord  from all  sources,  (iii) any  penalties  imposed on or
     incurred  by Landlord  as a result of  Landlord's  failure to pay any taxes
     prior to delinquency  or (iv) any Taxes relating to the  development of the
     Lot after the date of this Lease;  provided,  however,  that if at any time
     during the Term under the laws of the United States Government or the State
     of California,  or any political  subdivision  thereof,  a tax or excise on
     rent, or any other tax however described, is levied or assessed by any such
     political body against Landlord on account of Rent, or any portion thereof,
     one hundred  percent  (100%) of any said tax or excise shall be included in
     the  definition  of Taxes and Tenant shall pay its  proportionate  share as
     additional rent.

          5.4.  Installment  Election.  In the case of any  Taxes  which  may be
     evidenced by  improvement  or other bonds or which may be paid in annual or
     other periodic installments, Landlord shall elect to cause such bonds to be
     issued  or such  assessment  to be paid in  installments  over the  maximum
     period permitted by law.

          5.5. Estimate of Tenant's Share of Taxes. Prior to the commencement of
     each  calendar  year during the Term,  or as soon  thereafter as reasonably
     practicable, Landlord shall notify Tenant in writing of Landlord's estimate
     of the amount of Taxes  which  will be  payable  by Tenant for the  ensuing
     calendar  year. On or before the first day of each month during the ensuing
     calendar year, Tenant shall pay to Landlord in advance,  together with Base
     Rent, one-twelfth (1/12th) of the estimated amount;  provided,  however, if
     Landlord  fails to notify Tenant of the estimated  amount of Tenant's share
     of Taxes for the  ensuing  calendar  year  prior to the end of the  current
     calendar year, Tenant shall be required to continue to pay to Landlord each
     month in  advance  Tenant's  estimated  share of Taxes on the  basis of the
     amount  due for the  immediately  prior  month  until ten (10)  days  after
     Landlord notifies Tenant of the estimated amount of Tenant's share of Taxes
     for the ensuing  calendar  year. If at any time it appears to Landlord that
     Tenant's  share of Taxes  payable for the current  calendar  year will vary
     from Landlord's estimate,  Landlord may give notice to Tenant of Landlord's
     revised  estimate for the year, and  subsequent  payments by Tenant for the
     year shall be based on the revised estimate.

          5.6. Annual Adjustment. Within one hundred twenty (120) days after the
     close of each  calendar  year  during  the Term,  or as soon  after the one
     hundred twenty (120) day period as reasonably  practicable,  Landlord shall
     deliver to Tenant a statement of the  adjustment to the Taxes for the prior
     calendar  year.  If, on the basis of the  statement,  Tenant owes an amount
     that is less  than the  estimated  payments  for the  prior  calendar  year
     previously  made by  Tenant,  Landlord  shall  apply the excess to the next
     payment of Taxes due.  If, on the basis of the  statement,  Tenant  owes an
     amount  that is more than the  amount  of the  estimated  payments  made by
     Tenant for the prior  calendar  year,  Tenant shall pay the  deficiency  to
<PAGE>
     Landlord within thirty (30) days after delivery of the statement.  The year
     end statement shall be binding upon Tenant unless Tenant notifies  Landlord
     in writing of any objection  thereto within thirty (30) days after Tenant's
     receipt of the year end  statement.  In addition,  if, after the end of any
     calendar year or any annual  adjustment of Taxes for a calendar  year,  any
     Taxes are assessed or levied against the Premises, Building or Lot that are
     attributable  to any period  within the Term (e.g.,  supplemental  taxes or
     escaped  taxes),  Landlord  shall  notify  Tenant  of  its  share  of  such
     additional  Taxes and Tenant  shall pay such amount to Landlord  within ten
     (10) days after Landlord's written request therefor.

          5.7.  Personal  Property Taxes.  Tenant shall pay or cause to be paid,
     not less than ten (10)  days  prior to  delinquency,  any and all taxes and
     assessments  levied upon all of Tenant's trade  fixtures,  inventories  and
     other personal property in, on or about the Premises. When possible, Tenant
     shall cause Tenant's personal property to be assessed and billed separately
     from the real or personal  property of  Landlord.  On request by  Landlord,
     Tenant shall  furnish  Landlord  with  satisfactory  evidence of payment of
     Tenant's  business  personal  property  taxes  and  deliver  copies of such
     business personal property tax bills to Landlord.

          5.8. Taxes on Tenant Improvements. Notwithstanding any other provision
     hereof,  Tenant  shall pay to Landlord  the full amount of any  increase in
     Taxes during the Term  resulting  from any and all  alterations  and tenant
     improvements of any kind  whatsoever  placed in, on or about or made to the
     Premises,  Building or Project for the benefit of, at the request of, or by
     Tenant.

     6. Operating Expenses.

          6.1. Obligation to Pay Operating Expenses

.. Tenant  shall pay to Landlord  as  Additional  Rent  during the Term  Tenant's
Percentage  Share  of all  Operating  Expenses  attributable  to the  ownership,
operation, repair and/or maintenance of the Building and the Project.

          6.2. Definition of Operating Expenses

.. The term  "Operating  Expenses"  shall include all expenses and costs of every
kind and nature which Landlord  shall pay or become  obligated to pay because of
or in connection with the ownership, operation, repair and/or maintenance of the
Building,  Common  Areas  and/or  Project,  the  surrounding  property,  and the
supporting  facilities,  including,  without  limitation:  (A) all  maintenance,
janitorial  and  security  costs;  (B) costs  for all  materials,  supplies  and
equipment;  (C) all  costs  of  water,  heat,  gas  power,  electricity,  refuse
collection, parking lot sweeping,  landscaping, and other utilities and services
relating or  allocated  to the  Building or the Common  Areas;  (D) all property
management expenses, including, without limitation, all property management fees
and all  expense  and  cost  reimbursements;  (E) all  costs of  alterations  or
improvements  to the  Building or Common Areas made to achieve  compliance  with
federal, state and local law including,  without limitation,  the Americans with
Disabilities  Act (42  U.S.C.  Section  12101 et seq.),  or to reduce  Operating
Expenses or improve the operating efficiency of the Building or the Project, all
of which costs will be amortized over the reasonable  life of such alteration or
improvement as reasonably determined by Landlord,  together with interest at the
rate  paid  by  Landlord  on  funds  borrowed  for the  purpose  of  making  the
alterations  or  improvements  (not to exceed 8% per annum);  (F)  premiums  for
insurance  maintained by Landlord  pursuant to this Lease or with respect to the
Building or the Project; (G) costs for repairs,  replacements,  uninsured damage
or insurance  deductibles and general maintenance of the Building,  Common Areas
and Project, but excluding any repairs or replacements paid for out of insurance
proceeds or by other parties;  (H) all costs incurred by Landlord for making any
capital repairs or  replacements to the Building or the Common Areas,  including
repairs to or replacement  of the roof  membrane,  which costs will be amortized
over  the  reasonable  life of such  improvement,  repair  or  modification,  as
reasonably  determined by Landlord,  together with interest upon the unamortized
balance  at the rate paid by  Landlord  on funds  borrowed  for the  purpose  of
constructing  the  improvements  or making the  improvements  or repairs (not to
exceed 8% per annum);  (I) all costs of  maintaining  machinery,  equipment  and
directional  signage or other markers;  (J) all rent or other consideration paid
by Landlord  under any parking lease or agreement with respect to parking spaces
that are  included in the Common  Areas or  available  for use by tenants in the
Building;  and (K) the share  allocable to the Building of dues and  assessments
payable under any reciprocal  easement or common area maintenance  agreements or
declarations  or by  any  owners  associations  affecting  the  Building  or the
Project.

     Notwithstanding  the  forgoing,  the term  "Operating  Expenses"  shall not
include  (i) costs  incurred  by  Landlord in  repairing  and/or  replacing  the
structural  portions of the roof,  the exterior  walls,  the  foundation and any
other  structural  components of the Building and (ii) the cost of  constructing
any new buildings, improvements or structures on the Lot.
<PAGE>

          6.3. Less Than Full Occupancy. If the Building or the Project are less
     than  ninety-five  percent  (95%)  occupied  during  any year of the  Term,
     Operating  Expenses for each such  calendar year shall be adjusted to equal
     Landlord's  reasonable estimate of Operating Expenses as though ninety-five
     percent (95%) of the total rentable area of the Building and/or the Project
     as applicable had been occupied.

          6.4.  Estimates  of Operating  Expenses.  Tenant shall pay to Landlord
     each  month at the same time and in the same  manner as  monthly  Base Rent
     one-twelfth  (1/12th) of  Landlord's  estimate  of the amount of  Operating
     Expenses  payable by Tenant for the  then-current  calendar year. If at any
     time it appears to  Landlord  that  Tenant's  share of  Operating  Expenses
     payable for the current  calendar year will vary from Landlord's  estimate,
     Landlord may give notice to Tenant of Landlord's  revised  estimate for the
     calendar  year,  and  subsequent  payments by Tenant for the calendar  year
     shall be based on the revised  estimate.  Within one hundred  twenty  (120)
     days after the close of each  calendar  year, or as soon after such 120-day
     period as  practicable,  Landlord  shall  deliver to Tenant a statement  in
     reasonable  detail of the actual  amount of Operating  Expenses  payable by
     Tenant for such calendar year. Landlord's failure to provide such statement
     to Tenant within the 120-day period shall not act as a waiver and shall not
     excuse Tenant or Landlord  from making the  adjustments  to reflect  actual
     costs as provided herein.  If on the basis of such statement Tenant owes an
     amount that is less than the  estimated  payments  for such  calendar  year
     previously  made by Tenant,  Landlord  shall credit such excess against the
     next payment of Operating  Expenses due. If on the basis of such  statement
     Tenant owes an amount  that is more than the  estimated  payments  for such
     calendar year previously made by Tenant, Tenant shall pay the deficiency to
     Landlord  within  fifteen  (15) days after  delivery of the  statement.  In
     addition,  if, after the end of any calendar year or any annual  adjustment
     of Operating Expenses for a calendar year,  Operating Expenses are incurred
     or billed to Landlord that are  attributable  to any period within the Term
     (e.g., sewer district flow fees), Landlord shall notify Tenant of its share
     of such additional  Operating  Expenses and Tenant shall pay such amount to
     Landlord within ten (10) days after  Landlord's  written request  therefor.
     The  obligations of Landlord and Tenant under this Section 6.4 with respect
     to the reconciliation between the estimated and actual amounts of Operating
     Expenses  payable by Tenant for the last year of the Term shall survive the
     termination of this Lease.

          6.5.  Payment at End of Term. Any amount payable by Tenant which would
     not otherwise be due until after the  termination of this Lease,  shall, if
     the exact amount is uncertain  at the time that this Lease  terminates,  be
     paid by  Tenant  to  Landlord  upon  such  termination  in an  amount to be
     estimated by Landlord  with an  adjustment to be made once the exact amount
     is known.

     7. Permitted Use.

          7.1. Use and  Compliance  with Laws.  The  Premises  shall be used and
     occupied  by Tenant  solely  for the  Permitted  Use set forth in the Basic
     Lease Information.  Tenant shall, at Tenant's expense, comply promptly with
     all  applicable  federal,  state and local laws,  regulations,  ordinances,
     rules,  orders,  and requirements in effect during the Term relating to the
     condition, use or occupancy of the Premises. Tenant shall not use or permit
     the use of the  Premises in any manner that will tend to create  waste or a
     nuisance,  or that  unreasonably  disturbs other tenants of the Building or
     Project, nor shall Tenant place or maintain any signs,  antennas,  awnings,
     lighting or plumbing fixtures, loudspeakers, exterior decoration or similar
     devises on the  Building or the Project or visible from the exterior of the
     Premises without  Landlord's  prior written  consent,  which consent may be
     withheld in Landlord's sole discretion. Tenant shall not use any corridors,
     sidewalks,  stairs,  elevators  or other areas  outside of the Premises for
     storage or any purpose other than access to the Premises.  Tenant shall not
     use,  keep or permit to be used or kept on the Premises any foul or noxious
     gas or substance,  nor shall Tenant do or permit to be done anything in and
     about  the  Premises,   either  in  connection  with  activities  hereunder
     expressly permitted or otherwise, which would cause an increase in premiums
     for or a cancellation of any policy of insurance (including fire insurance)
     maintained by Landlord in connection with the Premises, Building or Project
     or  which  would  violate  the  terms  of  any  covenants,   conditions  or
     restrictions,  the design  guidelines,  the sign  guidelines  affecting the
     Building or the land on which it is  located,  or the Rules (as the term is
     defined under Section 7.4.2 below).
<PAGE>

          7.2.  Signs.  Tenant shall not attach or install any sign to or on any
     part of the outside of the Premises, the Building or the Project, or in the
     halls,  lobbies,   windows  or  elevator  banks  of  the  Building  without
     Landlord's  prior  written  consent,  which  consent  may  be  withheld  in
     Landlord's  sole  discretion.  Any signage  approved  by Landlord  shall be
     subject to prior approval of and conformance  with the  requirements of the
     design review  committee of the Project and the design review agency of the
     applicable city and/or county, and shall be installed at Tenant's sole cost
     and expense.  Tenant, at its sole cost and expense,  shall (i) maintain all
     permitted  signage in good  condition  and  repair,  and (ii)  remove  such
     signage upon  expiration or earlier  termination  of this Lease and restore
     the Building and the Project to their condition existing  immediately prior
     to the placement or erection of said sign or signs in such a condition that
     no  discoloration  or other  evidence  of the  prior  sign  appears  on the
     Building where the sign  previously was affixed.  If Tenant fails to do so,
     Landlord may  maintain,  repair  and/or remove such signage and restore the
     Building and or Project to its original  condition without notice to Tenant
     and at  Tenant's  expense,  the cost of which shall be payable by Tenant as
     additional rent.

          7.3.  Suitability.  Tenant  acknowledges that neither Landlord nor any
     agent of Landlord has made any  representation  or warranty with respect to
     the  Premises,  Building or with respect to the  suitability  or fitness of
     either for the conduct of Tenant's business or for any other purpose.

          7.4. Use of Common Areas.

               7.4.1.  Right to Use Common Areas.  Landlord gives Tenant and its
          authorized employees, agents, customers,  representatives and invitees
          the  nonexclusive  right to use the Common  Areas with  others who are
          entitled to use the Common Areas,  subject to Landlord's rights as set
          forth in this Section 7.4.

               7.4.2.  Rules. All Common Areas shall be subject to the exclusive
          control and  management of Landlord and Landlord  shall have the right
          to  establish,   modify,   amend  and  enforce  reasonable  rules  and
          regulations  with  respect to the Common  Areas.  Tenant  acknowledges
          receipt of a copy of the current rules and  regulations  (the "Rules")
          attached  hereto as Exhibit D, and agrees that they may,  from time to
          time, be modified or amended by Landlord in a commercially  reasonable
          manner. Tenant agrees to abide by and conform with the Rules; to cause
          its concessionaires and its and their employees and agents to abide by
          the  Rules;  and to use its  best  efforts  to  cause  its  customers,
          invitees and licensees to abide by the Rules.

               7.4.3.  Use.  Landlord shall have the right to close  temporarily
          any portion of the Common Areas for the purpose of discouraging use by
          parties who are not tenants or customers  of tenants;  to use portions
          of the Common Areas while engaged in making additional improvements or
          repairs or  alterations  to the  Building  or the  Project;  to use or
          permit  the use of the  Common  Areas by others to whom  Landlord  may
          grant or have granted such rights; and to do and perform such acts in,
          to,  and  with  respect  to,  the  Common  Areas as in the use of good
          business  judgment  Landlord shall determine to be appropriate for the
          Project.

               7.4.4.  Change in Common Areas.  Landlord shall have the right to
          increase or reduce the Common  Areas,  provided the Project  meets the
          parking requirement under Section 7.6 below.

               7.4.5. Recycling.  Tenant shall cooperate with Landlord and other
          tenants in the Project in  recycling  waste  paper,  cardboard or such
          other materials  identified under any trash recycling program that may
          be established in order to reduce trash collection costs.

          7.5. Environmental Matters.

               7.5.1.  Hazardous  Materials.  The term "Hazardous  Materials" as
          used herein means any petroleum  products,  asbestos,  polychlorinated
          biphenyls, P.C.B.'s, or chemicals,  compounds,  materials, mixtures or
          substances  that  are  now or  hereafter  defined  or  listed  in,  or
          otherwise classified as a "hazardous substance", "hazardous material",
          "hazardous waste",  "extremely  hazardous waste",  "infectious waste",
          "toxic substance", "toxic pollutant" or any other formulation intended
          to  define,  list or  classify  substances  by reason  of  deleterious
          properties   such   as    ignitability,    corrosivity,    reactivity,
          carcinogenicity  or toxicity  pursuant to any federal,  state or local
          environmental law, regulation,  ordinance, resolution, order or decree
          relating to industrial hygiene,  environmental  protection or the use,
          analysis,  generation,  manufacture,  storage,  release,  disposal  or
          transportation of the same ("Hazardous Materials Laws").
<PAGE>
               7.5.2.  Tenant's  Covenants.  Except for ordinary office supplies
          and janitorial  cleaning  materials which in common business  practice
          are  customarily  and lawfully  used,  stored and disposed of in small
          quantities, Tenant shall not use, manufacture, store, release, dispose
          or  transport  any  Hazardous  Materials  in,  on,  under or about the
          Premises,  the Building or the Project  without  giving prior  written
          notice to Landlord and obtaining  Landlord's  prior  written  consent,
          which  consent  Landlord may withhold in its sole  discretion.  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  approvals  required in connection  with
          Tenant's  generation,  use,  storage,  disposal and  transportation of
          Hazardous  Materials.  Except as discharged into the sanitary sewer in
          strict  accordance  and  conformity  with  all  applicable   Hazardous
          Materials  Laws,  Tenant shall cause any and all  Hazardous  Materials
          removed from the Premises to be removed and transported solely by duly
          licensed  haulers to duly licensed  facilities  for final  disposal of
          such  materials  and wastes.  Tenant shall not maintain or install in,
          on, under or about the Premises, the Building or the Project any above
          or below ground storage tanks,  clarifiers or sumps, nor any wells for
          the monitoring of ground water, soils or subsoils.

               7.5.3.  Notice.  Tenant  shall  immediately  notify  Landlord  in
          writing   of:  (a)  any   enforcement,   cleanup,   removal  or  other
          governmental or regulatory action instituted,  completed or threatened
          pursuant  to any  Hazardous  Materials  Law;  (b)  any  claim  made or
          threatened  by any  person or entity  against  Tenant or the  Premises
          relating to damage, contribution,  cost, recovery,  compensation, loss
          or injury  resulting  from or  claimed  to result  from any  Hazardous
          Materials;  and (c) any  reports,  information,  inquiries  or demands
          made,  ordered,  or received by or on behalf of Tenant which arise out
          of or in connection  with the existence or potential  existence of any
          Hazardous Materials in, on, under or about the Premises,  the Building
          or  the  Project,  including,   without  limitation,  any  complaints,
          notices,  warnings,  asserted  violations,  or  mandatory or voluntary
          informational  filings  with any  governmental  agency  in  connection
          therewith, and immediately supply Landlord with copies thereof.

               7.5.4.  Indemnity.  Tenant  shall  indemnify,  defend (by counsel
          reasonably   acceptable  to  Landlord),   protect  and  hold  harmless
          Landlord,  and  each  of  Landlord's  officers,  directors,  partners,
          employees,  affiliates,  joint venturers,  members,  trustees, owners,
          shareholders, principals, agents, representatives, lenders, successors
          and  assigns,  from  and  against  any  and all  claims,  liabilities,
          damages,   fines,   penalties,   forfeitures,   losses,   cleanup  and
          remediation costs or expenses (including  attorneys' fees) 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 (i) the
          use, analysis, generation, manufacture, storage, release, disposal, or
          transportation  of Hazardous  Materials by Tenant and Tenant's agents,
          employees, contractors, licensees or invitees to, in, on, under, about
          or from the  Premises,  the Building or the Project,  or (ii) Tenant's
          failure  to  comply  with  any  Hazardous   Materials  Law.   Tenant's
          obligations hereunder shall include,  without limitation,  and whether
          foreseeable or  unforeseeable,  all costs of any required or necessary
          repair,  cleanup,  detoxification or  decontamination of the Premises,
          the Building, or the Project and the preparation and implementation of
          any closure,  remedial  action or other  required  plans in connection
          therewith,  and shall survive the expiration or earlier termination of
          this Lease.

               7.5.5.  Landlord's Rights. Landlord shall have the right to enter
          the  Premises  at all  times  upon  reasonable  prior  notice  for the
          purposes of  ascertaining  compliance  by Tenant  with all  applicable
          Hazardous Materials Laws; provided,  however,  that in the instance of
          an  emergency no notice  shall be  required.  Landlord  shall have the
          option to declare a default of this Lease for the release or discharge
          of  Hazardous  Materials  by Tenant  or  Tenant's  employees,  agents,
          contractors,  or  invitees  on the  Premises,  Building  or Project in
          violation  of  law  or in  deviation  from  prescribed  procedures  in
          Tenant's  use or storage of  Hazardous  Materials.  If Tenant fails to
          comply with any of the  provisions  under this Section  7.5,  Landlord
          shall have the right (but not the  obligation)  to remove or otherwise
          cleanup any Hazardous Materials from the Premises, the Building or the
          Project.   In  such  case,  the  costs  of  any  Hazardous   Materials
          investigation,   removal   or  other   cleanup   (including,   without
          limitation, transportation,  storage, disposal and attorneys' fees and
          costs)  will be due  under  this  Lease,  whether  or not a court  has
          ordered  the  cleanup,  and will  become due and  payable on demand by
          Landlord.

               7.6. Parking.  Landlord grants to Tenant and Tenant's  customers,
          suppliers,  employees and invitees during the Term the right to use in
          the  parking  area  designated  on  Exhibit  A-2 the number of parking
          spaces stated in the Basic Lease Information on a non-exclusive  basis
          for the use of motor vehicles,  subject to rights reserved to Landlord
          as specified in this Section 7.6. Landlord reserves the right to grant
          similar  nonexclusive rights to other tenants; to promulgate rules and
          regulations relating to the use of the including parking area; to make
          changes in the parking layout from time to time; and to do and perform
          any other  acts in and to these  areas and  improvements  as  Landlord
          determines  to be  advisable.  Tenant  agrees  not to  overburden  the
          parking  facilities  and to abide by and  conform  with the  rules and
          regulations  and to cause  its  employees  and  agents to abide by and
<PAGE>
          conform  to the rules and  regulations.  Upon  request,  Tenant  shall
          provide  Landlord with license plate numbers of all vehicles driven by
          its employees and to cause  Tenant's  employees to park only in spaces
          specifically  designated for tenant  parking.  Landlord shall have the
          unqualified right to rearrange or reduce the number of parking spaces;
          provided, however, the ratio of the number of parking spaces available
          to  Tenant  will be no less than five (5)  spaces  per 1,000  rentable
          square feet of the Premises.

     8. Services.

          8.1.  Utilities and Services.  Landlord shall (i) furnish the Premises
     with electricity for lighting fixtures and office machines, water, heat and
     air  conditioning  and (ii)  provide  daily  janitorial  service  on normal
     business  days.  Landlord  shall have the right,  at Tenant's sole cost and
     expense,  to install  separate  metering for  electricity  and water to the
     Premises. In addition, Tenant shall reimburse Landlord within ten (10) days
     after  Landlord's  written  request for the cost of providing  heat and air
     conditioning  to the Premises in excess of that  required for normal office
     use or during  other than usual  business  hours and the cost of  providing
     power to the Premises for other than normal desk-top office equipment.

          8.2. No Liability.  Landlord  shall not be in default  hereunder or be
     liable for any  damages or  personal  injuries  to any person  directly  or
     indirectly  resulting from, nor shall there be any Rent abatement by reason
     of, any interruption or curtailment whatsoever in utility services.

     9. Maintenance and Repairs.

          9.1.  Tenant's  Repairs and  Maintenance.  Tenant  shall,  at Tenant's
     expense,  maintain  the  Premises  in good  order,  condition  and  repair,
     including without limitation,  (i) all interior surfaces,  ceilings, walls,
     door frames, window frames, floors,  carpets,  draperies,  window coverings
     and  fixtures,   (ii)  all  windows,  doors,  locks  and  closing  devices,
     entrances,  plate glass,  and signs,  (iii) all plumbing and sewage  pipes,
     fixtures and fittings, (iv) all phone lines, electrical wiring,  equipment,
     switches,  outlets and light bulbs, (v) any fire detection,  fire sprinkler
     or  extinguisher  equipment,   (vi)  all  of  Tenant's  personal  property,
     improvements  and  alterations,  and (vii) all other  fixtures  and special
     items  installed  by or for the  benefit  of, or at the  expense of Tenant.
     Tenant,  at its expense,  shall  maintain in good  operating  condition and
     repair, all heating,  ventilating, and air conditioning equipment installed
     in the Premises and, at Landlord's election,  all heating,  ventilating and
     air conditioning  equipment  exclusively serving the Premises. If requested
     by Landlord,  Tenant shall keep in force a preventive  maintenance contract
     with a qualified  maintenance  company  acceptable to Landlord covering all
     heating,  ventilating  and air  conditioning  equipment and shall  annually
     provide Landlord with a copy of this contract.  Tenant shall not enter onto
     the roof area of the Building,  except for the purpose of  maintaining  the
     heating,  ventilating,  and air conditioning equipment to the extent Tenant
     is required to do so under the terms of this Lease. Tenant shall repair any
     damage to the roof area caused by its entry.

          9.2.  Landlord's Repairs and Maintenance.  Landlord shall keep in good
     condition and repair the  foundation,  roof  structure,  exterior walls and
     other  structural  parts of the  Building,  and all other  portions  of the
     Building not the  obligation of Tenant or any other tenant in the Building.
     Tenant expressly  waives the benefits of any statute,  including Civil Code
     Sections 1941 and 1942, which would afford Tenant the right to make repairs
     at Landlord's  expense or to terminate this Lease due to Landlord's failure
     to keep the Building in good order,  condition and repair.  Landlord  shall
     have no liability to Tenant for any damage,  inconvenience  or interference
     with the use of the Premises by Tenant as the result of Landlord performing
     any such maintenance and repair work.

          9.3.  Failure  to Repair or  Maintain.  In the event  Tenant  fails to
     perform Tenant's  obligations under this Section 9, Landlord may, but shall
     not be required  to, give Tenant  notice to do such acts as are  reasonably
     required to so maintain the Premises. If Tenant shall fail to commence such
     work and diligently  prosecute it to  completion,  then Landlord shall have
     the right (but not the obligation) to do such acts and expend such funds at
     the expense of Tenant as are reasonably  required to perform such work. Any
     amounts so  expended  by Landlord  will be  additional  rent due under this
     Lease,  and such amounts will become due and payable on demand by Landlord.
     Landlord   shall  have  no  liability  to  Tenant  for  any  such  damages,
<PAGE>
     inconvenience  or interference  with the use of the Premises by Tenant as a
     result of  performing  such work;  provided,  however,  Landlord  shall use
     commercially  reasonable  efforts to perform any work in the  Premises in a
     manner that does not  interfere  with  Tenant's  use of or operation of its
     business in the Premises.

          9.4. Surrender of Premises. Upon the expiration or earlier termination
     of this Lease,  Tenant  shall  surrender  the  Premises to Landlord in good
     condition and repair,  ordinary wear and tear excepted.  The term "ordinary
     wear and tear" as used  herein  shall  mean wear and tear  which  manifests
     itself  solely  through  normal  intensity  of  use  and  passage  of  time
     consistent with the employment of commercially  prudent measures to protect
     finishes and components  from damage and excessive wear, the application of
     regular and appropriate  preventative maintenance practices and procedures,
     routine  cleaning and  servicing,  waxing,  polishing,  adjusting,  repair,
     refurbishment  and  replacement at a standard of appearance and utility and
     as often as  appropriate  for Class A  corporate  and  professional  office
     occupancies  in the Petaluma  office  market.  The term  "ordinary wear and
     tear" would thus encompass the natural fading of painted  surfaces,  fabric
     and materials over time, and carpet wear caused by normal foot traffic.  To
     the  extent  that  such wear and tear  exceeds  the  normal  Class A office
     occupancy standards of the Petaluma office market, such would be considered
     items  of  deferred   maintenance   indicative  of  a  degradation  of  the
     improvements.  The term  "ordinary  wear and tear"  shall not  include  any
     damage  or  deterioration  that  could  have  been  prevented  by  Tenant's
     employment  of ordinary  prudence,  care and diligence in the occupancy and
     use of the Premises and the  performance  of all of its  obligations  under
     this Lease. Items not considered reasonable wear and tear hereunder include
     the  following  for which Tenant shall bear the  obligation  for repair and
     restoration (except to the extent caused by the gross negligence or willful
     misconduct of Landlord or its employees or agents) (i) excessively  soiled,
     stained, worn or marked surfaces or finishes; (ii) damage,  including holes
     in building surfaces (e.g.,  cabinets,  doors, walls,  ceilings and floors)
     caused  by  the   installation  or  removal  of  Tenant's  trade  fixtures,
     furnishings,  decorations,  equipment,  alterations, utility installations,
     security systems,  communications  systems (including  cabling,  wiring and
     conduits),  displays and signs; and (iii) damage to any component, fixture,
     hardware,  system or component  part thereof  within the Premises,  and any
     such damage to the  Building  or  Project,  caused by Tenant or its agents,
     contractors  or  employees,  and  not  fully  recovered  by  Landlord  from
     insurance proceeds.  Tenant, at its sole cost and expense, agrees to repair
     any damages to the Premises  caused by or in connection with the removal of
     any  articles of personal  property,  business  or trade  fixtures,  signs,
     machinery,  equipment,  cabinetwork,   furniture,  moveable  partitions  or
     permanent improvements or additions,  including without limitation thereto,
     repairing  the floor and patching and painting the walls where  required by
     Landlord to  Landlord's  reasonable  satisfaction.  Tenant shall  indemnify
     Landlord against any loss or liability resulting from delay by Tenant in so
     surrendering the Premises, including without limitation, any claims made by
     any succeeding tenant resulting from such delay.

     10. Alterations.

          10.1.  Consent  Required.  Tenant  shall  not  make  any  alterations,
     improvements  or  additions  (each,  an  "Alteration")  in, on or about the
     Premises without Landlord's prior written consent,  which consent shall not
     be unreasonably  withheld.  Notwithstanding the foregoing,  Tenant may make
     Alterations   without  Landlord's  prior  written  consent  where  (i)  the
     reasonably  estimated  cost of the Alteration and together with the cost of
     any other  Alteration  made during the  immediately  preceding  twelve (12)
     months does not exceed $25,000,  and (ii) such Alterations do not affect or
     involve the structural integrity,  roof membrane,  exterior areas, building
     systems or  water-tight  nature of the  Premises,  Building or Project.  In
     requesting Landlord's consent,  Tenant shall, at Tenant's sole cost, submit
     to Landlord complete drawings and specifications  describing the Alteration
     and the identity of the proposed contractor.

          10.2. Conditions.

               10.2.1.   Notice.   Before   commencing   any  work  relating  to
          Alterations,  Tenant  shall notify  Landlord of the  expected  date of
          commencement  thereof and of the  anticipated  cost thereof.  Landlord
          shall  then  have the  right at any time and from time to time to post
          and maintain on the Premises such notices as Landlord reasonably deems
          necessary to protect the Premises and Landlord from  mechanics'  liens
          or any other liens.

               10.2.2.  Liens. Tenant shall pay when due all claims for labor or
          materials  furnished to Tenant for use in the  Premises.  Tenant shall
          not  permit  any  mechanics'  liens or any  other  liens to be  levied
          against the Premises for any labor or materials furnished to Tenant in
          connection  with work performed on the Premises by or at the direction
<PAGE>
          of Tenant.  Tenant shall indemnify,  hold harmless and defend Landlord
          (by counsel  reasonably  satisfactory  to Landlord) from any liens and
          encumbrances  arising out of any work performed or materials furnished
          by or at the direction of Tenant.  In the event that Tenant shall not,
          within five (5) days following the imposition of any such lien,  cause
          such lien to be  released  of record by payment or posting of a proper
          bond,  Landlord shall have, in addition to all other remedies provided
          herein by law, the right, but not the obligation, to cause the same to
          be released by such means as it shall deem proper,  including  payment
          of the claim giving rise to such lien.  All such sums paid by Landlord
          and all expenses  incurred by it in  connection  therewith,  including
          attorneys'  fees and costs,  shall be payable to Landlord by Tenant on
          demand with interest at the Interest Rate.

               10.2.3.  Compliance  with Laws.  All  Alterations in or about the
          Premises  performed  by or on  behalf  of  Tenant  shall  be done in a
          first-class,  workmanlike  manner,  shall not unreasonably  lessen the
          value  of  leasehold  improvements  in  the  Premises,  and  shall  be
          completed  in  compliance  with  all  applicable   laws,   ordinances,
          regulations   and  orders  of  any   governmental   authority   having
          jurisdiction thereover, as well as the requirements of insurers of the
          Premises and the Building.

               10.2.4.  Labor Disputes.  Upon Landlord's  request,  Tenant shall
          remove any  contractor,  subcontractor  or material  supplier from the
          Premises  and the  Building  if the work or presence of such person or
          entity  results in labor  disputes in or about the Building or Project
          or damage to the Premises, Building or Project.

               10.2.5.  Americans with Disabilities Act. Landlord, at Landlord's
          sole discretion, may refuse to grant Tenant permission for Alterations
          that require,  because of application  of Americans with  Disabilities
          Act or other laws, substantial  improvements or alterations to be made
          to the Common Areas.

               10.2.6.  End of Term.  Landlord,  by written notice,  may require
          that Tenant, at Tenant's  expense,  remove any Alterations prior to or
          upon the  expiration of this Lease,  and restore the Premises to their
          condition prior to such  Alterations.  Unless Landlord  requires their
          removal, as provided above, all Alterations made to the Premises shall
          become the  property  of Landlord  and remain upon and be  surrendered
          with  the  Premises  upon  the  expiration  of this  Lease;  provided,
          however, that Tenant's machinery, equipment, and trade fixtures, other
          than any which may be affixed to the  Premises  so that they cannot be
          removed  without  material  damage to the  Premises,  shall remain the
          property  of  Tenant  and may be  removed  by  Tenant  subject  to the
          provisions of Section 9.4 above.

     11. Insurance and Indemnity.

          11.1. Insurance.  Tenant shall obtain and maintain during the Term the
     following insurance:

               11.1.1.   Commercial  General  Liability  Insurance.   Commercial
          general liability insurance (occurrence form) having a combined single
          limit  of not less  than  $2,000,000  per  occurrence  and  $2,000,000
          aggregate per location,  if Tenant has multiple  locations,  providing
          coverage  for,  among other  things,  blanket  contractual  liability,
          premises,  product/completed  operations and personal  injury coverage
          (in a form,  with a deductible  amount,  and with carriers  reasonably
          acceptable to Landlord).

               11.1.2. Automobile Liability Insurance.  Comprehensive automobile
          liability  insurance  having a combined  single limit of not less than
          One Million Dollars  ($1,000,000) per occurrence,  and insuring Tenant
          against liability for claims arising out of ownership,  maintenance or
          use of any owned, hired, borrowed or non-owned automobiles;

               11.1.3. Workers' Compensation and Employer's Liability Insurance.
          Workers'  compensation  insurance  having  limits  not less than those
          required by state  statute and federal  statute,  if  applicable,  and
          covering  all  persons  employed  by  Tenant  in  the  conduct  of its
          operations on the Premises  (including the all states endorsement and,
          if applicable,  the volunteers endorsement),  together with employer's
          liability  insurance  coverage  in the amount of at least Two  Million
          Dollars ($2,000,000);

               11.1.4. Property Insurance. "Special Form" property insurance (or
          its equivalent if "Special Form" property insurance is not available),
          including  vandalism  and  malicious  mischief,  boiler and  machinery
          comprehensive  form, if  applicable,  and  endorsement  for earthquake
<PAGE>
          sprinkler damage, each covering damage to or loss of Tenant's personal
          property, fixtures and equipment, including electronic data processing
          equipment  ("EDP  Equipment"),   media  and  extra  expense,  and  all
          alterations,  additions and improvements  made by or at the request of
          Tenant to the Premises other than those tenant  improvements  owned by
          Landlord (and coverage for the full  replacement  cost  thereof).  EDP
          Equipment, media and extra expense shall be covered for perils insured
          against in the  so-called  "EDP  Form".  If the  property  of Tenant's
          invitees is to be kept in the Premises,  warehouser's  legal liability
          or bailee  customers  insurance for the full  replacement cost of such
          property;

               11.1.5. Business Income/Extra Expense Insurance.  Business income
          with extra expense insurance (form CP 0030 or equivalent) in an amount
          not less than the  annual  Base Rent and  Additional  Rent  payable by
          Tenant  hereunder for the then current  calendar year,  with a minimum
          fifty percent (50%)  coinsurance  percentage,  the agreed value option
          and building  ordinance (Form CP 1531 or  equivalent).  Any boiler and
          machinery  policies or endorsements  obtained shall also include these
          same provisions and coverages; and

               11.1.6.   Additional  Insurance.  Any  such  other  insurance  as
          Landlord or Landlord's lender may reasonably require.

          11.2.  General.  The  insurance  carrier  shall  be  authorized  to do
     business in the State of  California,  with a  policyholders  and financial
     rating of at least A:IX Class status as rated in the most recent edition of
     Best's Key-Rating guide.  Tenant's  commercial general liability  insurance
     policy  shall be  endorsed  to provide  that (i) it may not be  canceled or
     altered  in such a manner as to  adversely  affect  the  coverage  afforded
     thereby  without thirty (30) days' prior written  notice to Landlord,  (ii)
     Landlord is designated as an additional  insured,  and (iii) such insurance
     is primary with respect to Landlord and that any other insurance maintained
     by Landlord is excess and noncontributing  with such insurance.  If, in the
     opinion of Landlord's lender or in the commercially  reasonable  opinion of
     Landlord's  insurance  adviser,  the  specified  amounts of coverage are no
     longer  adequate,  such  coverage  shall,  within thirty (30) days' written
     notice to Tenant, be appropriately increased.  Prior to the commencement of
     the Term,  Tenant shall deliver to Landlord a duplicate of such policy or a
     certificate  thereof to Landlord for retention by it with endorsements.  At
     least  thirty  (30)  days  prior to the  expiration  of such  policy or any
     renewal  or  modification  thereof,  Tenant  shall  deliver  to  Landlord a
     replacement  or  renewal  binder,   followed  by  a  duplicate   policy  or
     certificate within a reasonable time thereafter.  If Tenant fails to obtain
     such  insurance  or to  furnish  Landlord  any  such  duplicate  policy  or
     certificate  as herein  required,  Landlord may, at its  election,  without
     notice to Tenant and without any  obligation to do so, procure and maintain
     such coverage and Tenant shall  reimburse  Landlord on demand as additional
     rent for any premium so paid by Landlord.

          11.3. Waiver of Claims.  Landlord waives all claims against Tenant and
     Tenant's   officers,    directors,    partners,   employees,   agents   and
     representatives  for loss or damage to the extent  that such loss or damage
     is  insured  against  under  any  valid and  collectable  insurance  policy
     insuring Landlord or would have been insured against but for any deductible
     amount under any such policy. Tenant waives all claims against Landlord and
     Landlord's officers,  directors,  partners,  employees,  affiliates,  joint
     venturers,  members, trustees, owners,  shareholders,  principals,  agents,
     representatives,  successors and assigns,  for loss or damage to the extent
     such loss or  damage is  insured  against  under any valid and  collectable
     insurance  policy  insuring  Tenant or required to be  maintained by Tenant
     under this Lease, or would have been insured against but for any deductible
     amount under any such policy.  The insuring party shall, upon obtaining the
     policies  of  insurance  required  under  this  Lease,  give  notice to the
     insurance   carrier  or  carriers  that  the  foregoing  mutual  waiver  of
     subrogation is contained in this Lease.  Tenant agrees that in the event of
     a sale, assignment or transfer of the Premises by Landlord,  this waiver of
     subrogation shall continue in favor of the original Landlord.

          11.4. Landlord's  Insurance.  During the Term, Landlord shall keep the
     Building insured against loss or damage by fire, with extended coverage and
     vandalism,  malicious  mischief  and  special  extended  perils  (all risk)
     endorsements  or their  equivalents,  in amounts  not less than one hundred
     percent  (100%) of the  replacement  cost of the  Building  and  structures
     insured. Landlord may maintain rent insurance, for the benefit of Landlord,
     equal  to at  least  one  year's  Base  Rent  hereunder.  If this  Lease is
     terminated  as a result of  damage by fire,  casualty  or  earthquake,  all
     insurance  proceeds  shall be paid to and retained by Landlord,  subject to
     the rights of any authorized encumbrancer of Landlord.
<PAGE>

          11.5.  Earthquake and Flood.  Tenant  acknowledges  that Landlord does
     not,  at the time of the  signing of this Lease,  insure the  Building  for
     earthquake or flood  damage.  If at any time Landlord is required to obtain
     earthquake  insurance by its lender or a prospective lender (as a condition
     of the prospective  lender making a loan to Landlord),  then (i) so long as
     Landlord  deems  the  insurance  premiums  to be  commercially  reasonable,
     Landlord may insure the Building fully or partially for  earthquake  and/or
     flood  damage and (ii)  Landlord  shall  include  as part of the  Operating
     Expenses only the amount by which the premium for  earthquake  and/or flood
     insurance  increases  following the first year in which Landlord is insured
     for earthquake and/or flood damage.

          11.6.  Indemnity.  Tenant waives all claims  against  Landlord for any
     injury to  Tenant's  business or loss of income  there from,  damage to any
     property or injury to or death of any person in, on, or about the Premises,
     the Building,  or any other portion of the Project  arising at any time and
     from  any  cause,  unless  caused  by  the  active  negligence  or  willful
     misconduct  of Landlord or its agents,  employees  or  contractors.  Tenant
     shall indemnify,  defend (by counsel  reasonably  satisfactory to Landlord)
     and hold harmless Landlord, and Landlord's officers,  directors,  partners,
     employees,   affiliates,   joint  venturers,   members,  trustees,  owners,
     shareholders, principals, agents, representatives,  successors and assigns,
     from and against all claims,  costs,  damages,  actions,  indebtedness  and
     liabilities (except such as may arise from the active negligence or willful
     misconduct  of Landlord,  and  Landlord's  officers,  directors,  partners,
     employees,   affiliates,   joint  venturers,   members,  trustees,  owners,
     shareholders, principals, agents, representatives,  successors and assigns)
     arising by reason of any death,  bodily injury,  personal injury,  property
     damage or any other injury or damage in  connection  with (i) any condition
     or occurrence in or about or resulting  from any condition or occurrence in
     or about the  Premises  during  the Term,  or (ii) any act or  omission  of
     Tenant,   or  Tenant's  agents,   representatives,   officers,   directors,
     shareholders,  partners,  employees,  successors  and assigns,  wherever it
     occurs.  The  foregoing  indemnity   obligation  of  Tenant  shall  include
     reasonable  attorneys'  fees, and all other  reasonable  costs and expenses
     incurred by Landlord  from the first  notice that any claim or demand is to
     be made. The provisions of this Section 11.6 shall survive the  termination
     or  expiration of this Lease with respect to any damage,  injury,  or death
     occurring prior to such expiration or termination.

     12. Damage or Destruction.

          12.1. Landlord's  Obligation to Rebuild.  Subject to the provisions of
     Sections 12.2,  12.3 and 12.4 below,  if, during the Term, the Premises are
     totally or partially  destroyed from any insured casualty,  Landlord shall,
     within  ninety  (90) days after the  destruction,  commence  to restore the
     Premises to  substantially  the same  condition as they were in immediately
     before the  destruction  and prosecute the same  diligently to  completion.
     Such  destruction  shall not terminate  this Lease.  Landlord's  obligation
     shall not include repair or replacement of Tenant's alterations or Tenant's
     equipment,  furnishings,  fixtures and personal  property.  If the existing
     laws do not permit the  Premises to be restored to  substantially  the same
     condition as they were in immediately before  destruction,  and Landlord is
     unable  to get a  variance  to such  laws to  permit  the  commencement  of
     restoration of the Premises within the 90-day period, then either party may
     terminate  this Lease by giving  written  notice to the other party  within
     thirty (30) days after expiration of the 90-day period.

          12.2. Right to Terminate.

               12.2.1.  Landlord's  Right to Terminate.  Landlord shall have the
          option to  terminate  this Lease if the  Premises  or the  Building is
          destroyed or damaged by fire or other casualty,  regardless of whether
          the  casualty  is  insured  against  under  this  Lease,  if  Landlord
          reasonably  determines  that  (i)  there  are  insufficient  insurance
          proceeds  made  available  to  Landlord to pay all of the costs of the
          repair  or  restoration  or (ii)  the  repair  or  restoration  of the
          Premises or the Building cannot be completed within one hundred eighty
          (180)  days  after the date of the  casualty.  If  Landlord  elects to
          exercise the right to terminate  this Lease as a result of a casualty,
          Landlord  shall  exercise the right by giving Tenant written notice of
          its election to terminate this Lease within forty-five (45) days after
          the date of the  casualty,  in which event this Lease shall  terminate
          fifteen  (15) days after the date of the notice.  If neither  Landlord
          nor Tenant exercise its right to terminate this Lease,  Landlord shall
          promptly  commence  the  process  of  obtaining  all of the  necessary
          permits and approvals for the repair or restoration of the Premises or
          the  Building as soon as  practicable  and  thereafter  prosecute  the
          repair or  restoration  of the Premises or the Building  diligently to
          completion and this Lease shall continue in full force and effect.
<PAGE>

               12.2.2. Tenant's Right to Terminate. Tenant shall have the option
          to  terminate  this Lease if the Premises or the Building is destroyed
          or  damaged  by fire or other  casualty,  regardless  of  whether  the
          casualty  is  insured  against  under  this  Lease,  if the  repair or
          restoration of the Premises or the Building cannot be completed within
          one hundred eighty (180) days after the date of the casualty. Landlord
          shall notify Tenant in writing  ("Landlord's  Repair Estimate") within
          thirty (30) days after the date of the casualty of Landlord's estimate
          of the  period  required  to repair or  restore  the  Premises  or the
          Building,  as applicable.  If Landlord reasonably  determines that the
          repair  or  restoration  of the  Premises  or the  Building  cannot be
          completed  within one hundred  eighty (180) days after the date of the
          casualty and Tenant  elects to exercise  its right to  terminate  this
          Lease pursuant to this Section 12.2.2, Tenant shall exercise the right
          by giving  Landlord  written  notice of its election to terminate this
          Lease  within  fifteen (15) days after the date of  Landlord's  Repair
          Estimate,  in which event this Lease shall terminate fifteen (15) days
          after the date of Tenant's termination notice. If neither Landlord nor
          Tenant  exercise its right to  terminate  this Lease,  Landlord  shall
          promptly  commence  the  process  of  obtaining  all of the  necessary
          permits and approvals for the repair or restoration of the Premises or
          the  Building as soon as  practicable  and  thereafter  prosecute  the
          repair or  restoration  of the Premises or the Building  diligently to
          completion and this Lease shall continue in full force and effect.

          12.3.  Last  Year of  Term.  In  addition  to each  party's  right  to
     terminate this Lease under Section 12.2, Landlord and Tenant shall have the
     right to terminate  this Lease upon thirty (30) days' prior written  notice
     to other party if the  Premises or Building is  substantially  destroyed or
     damaged  during the last twelve (12) months of the Term. The party electing
     to  terminate  this Lease  shall  notify the other  party in writing of its
     election to terminate this Lease under this Section 12.3, if at all, within
     forty-five  (45)  days  after  Landlord  determines  that the  Premises  or
     Building  has been  substantially  destroyed.  If neither  party  elects to
     terminate  this Lease,  the repair of the  Premises  or  Building  shall be
     governed by Sections 12.1, 12.2 and 12.4.

          12.4.  Uninsured  Casualty.  If the  Premises  are  damaged  from  any
     uninsured  casualty to any extent  whatsoever,  Landlord may within  ninety
     (90) days  following  the date of such damage:  (i) commence to restore the
     Premises to  substantially  the same  condition as they were in immediately
     before the destruction and prosecute the same diligently to completion,  in
     which  event this Lease shall  continue  in full force and effect;  or (ii)
     within the 90-day period Landlord may elect not to so restore the Premises,
     in which event this Lease shall cease and terminate.  In either such event,
     Landlord  shall give  Tenant  written  notice of its  intention  within the
     90-day period.

          12.5.  Abatement of Rent. In the event of destruction or damage to the
     Premises which materially  interferes with Tenant's use of the Premises, if
     this Lease is not terminated as above provided, there shall be an abatement
     or  reduction  of Base Rent  between the date of  destruction  and the date
     Landlord substantially completes its reconstruction obligations, based upon
     the extent to which the destruction materially interferes with Tenant's use
     of the  Premises.  All other  obligations  of Tenant under this Lease shall
     remain in full force and effect.  Except for abatement of Base Rent, Tenant
     shall have no claim against Landlord for any loss suffered by Tenant due to
     damage or destruction  of the Premises or any work of repair  undertaken as
     herein provided.

          12.6. Waiver. The provisions of California Civil Code Sections 1932(2)
     and 1933(4),  and any successor statutes,  are inapplicable with respect to
     any  destruction  of the  Premises,  such sections  providing  that a lease
     terminates  upon the destruction of the Premises  unless  otherwise  agreed
     between the parties to the contrary.

     13. Eminent Domain.

          13.1. Condemnation.  If all or any part of the Premises shall be taken
     as a result of the exercise of the power of eminent  domain or sold in lieu
     of condemnation ("Condemned"), this Lease shall terminate as to the part so
     taken as of the date of title vesting in such proceeding.  In the case of a
     partial  condemnation  of greater than twenty percent (20%) of the rentable
     area of the  Premises,  either  Landlord or Tenant  shall have the right to
     terminate  this Lease as to the  balance of the  Premises  by notice to the
     other  within  thirty  (30) days  after the date of title  vesting  in such
     proceeding.  In the event of a partial  condemnation  of the Premises which
     does not result in a  termination  of this  Lease,  the  monthly  Base Rent
     thereafter  to be paid shall be  equitably  reduced  on a  rentable  square
     footage  basis.  If  the  continued   occupancy  of  Tenant  is  materially
     interfered with for any time during the partial taking, notwithstanding the
     partial  taking does not terminate  this Lease as to the part not so taken,
     the Base Rent shall  proportionately abate so long as Tenant is not able to
     continuously occupy the part remaining and not so taken.
<PAGE>
          13.2.  Award.  If the  Premises  are  wholly or  partially  Condemned,
     Landlord shall be entitled to the entire award paid in connection with such
     condemnation, and Tenant waives any right or claim to any part thereof from
     Landlord or the condemning authority.  Tenant shall have the right to claim
     and recover from the  condemning  authority,  but not from  Landlord,  such
     compensation  as may be  separately  awarded  or  recoverable  by Tenant in
     Tenant's own right on account of any and all costs which Tenant might incur
     in moving Tenant's merchandise, furniture, fixtures, leasehold improvements
     and equipment to a new location.

     14. Assignment and Subletting.

          14.1. Assignment and Subletting; Prohibition. Tenant shall not assign,
     mortgage,  pledge or  otherwise  transfer  this Lease,  in whole or in part
     (each  hereinafter  referred to as an  "assignment"),  nor sublet or permit
     occupancy by any party other than Tenant of all or any part of the Premises
     (each hereinafter  referred to as a "sublet" or "subletting"),  without the
     prior written consent of Landlord in each instance, which consent shall not
     be  unreasonably  withheld.  No  assignment  or  subletting by Tenant shall
     relieve  Tenant of any  obligation  under this  Lease,  including  Tenant's
     obligation to pay Base Rent and additional  rent  hereunder.  Any purported
     assignment or subletting  contrary to the  provisions of this Lease without
     Landlord's  prior written consent shall be void. The consent by Landlord to
     any assignment or subletting shall not constitute a waiver of the necessity
     for  obtaining   Landlord's   consent  to  any  subsequent   assignment  or
     subletting.   Landlord  may  consent  to  any   subsequent   assignment  or
     subletting,  or any  amendment  to or  modification  of this Lease with the
     assignees of Tenant,  without  notifying Tenant or any successor of Tenant,
     and without  obtaining its or their consent thereto,  and such action shall
     not relieve  Tenant or any successor of Tenant of any liability  under this
     Lease. As additional rent  hereunder,  Tenant shall reimburse  Landlord for
     all  reasonable  legal fees and other  expenses  incurred  by  Landlord  in
     connection  with any  request by Tenant for  consent  to an  assignment  or
     subletting, not to exceed in the aggregate $1,500.

          14.2.  Information  to be Furnished.  If Tenant desires at any time to
     assign its  interest  in this Lease or sublet the  Premises,  Tenant  shall
     first notify Landlord of its desire to do so and shall submit in writing to
     Landlord:  (i) the name of the  proposed  assignee or  subtenant;  (ii) the
     nature of the proposed  assignee's or subtenant's  business to be conducted
     in the Premises;  (iii) the terms and provisions of the proposed assignment
     or  sublease,  including  the  date  upon  which  the  assignment  shall be
     effective or the commencement date of the sublease (hereinafter referred to
     as the  "Transfer  Effective  Date")  and a copy  of the  proposed  form of
     assignment  or sublease;  and (iv) such  financial  information,  including
     financial  statements,  and other  information  as Landlord may  reasonably
     request concerning the proposed assignee or subtenant.

          14.3.  Landlord's  Election.  Except as  provided  in  Section  14.10,
     Landlord  may, by written  notice to Tenant at any time within  thirty (30)
     days after Landlord's receipt of the information specified in Section 14.2,
     (i) consent to the proposed  assignment or  subletting  by Tenant,  or (ii)
     withhold its consent to the proposed assignment or subletting by Tenant.

          14.4. Termination. [Intentionally deleted.]

          14.5. Withholding Consent.  Without limiting other situations in which
     it may be  reasonable  for Landlord to withhold its consent to any proposed
     assignment  or  sublease,  Landlord  and  Tenant  agree  that it  shall  be
     reasonable  for  Landlord to withhold its consent in any one (1) or more of
     the  following  situations:  (1) in  Landlord's  reasonable  judgment,  the
     proposed  subtenant or assignee or the  proposed use of the Premises  would
     detract from the status of the Building as a first-class  office  building,
     generate vehicle or foot traffic,  parking or occupancy density  materially
     in excess of the amount customary for the Building or the Project or result
     in a materially greater use of the elevator, janitorial,  security or other
     Building  services  (e.g.,  HVAC,  trash disposal and sanitary sewer flows)
     than is customary for the Project;  (2) in Landlord's  reasonable judgment,
     the  creditworthiness  of the proposed  subtenant or assignee does not meet
     the credit standards  applied by Landlord in considering  other tenants for
<PAGE>
     the lease of space in the Project on comparable terms, or Tenant has failed
     to provide  Landlord with reasonable proof of the  creditworthiness  of the
     proposed subtenant or assignee;  (3) in Landlord's reasonable judgment, the
     business history, experience or reputation in the community of the proposed
     subtenant or assignee  does not meet the  standards  applied by Landlord in
     considering  other tenants for  occupancy in the Project;  (4) the proposed
     assignee or subtenant is a governmental entity, agency or department or the
     United States Post Office;  or (5) the proposed  subtenant or assignee is a
     then existing or  prospective  tenant of the Project.  If Landlord fails to
     elect any of the alternatives  within the thirty (30) day period referenced
     in Section  14.3,  it shall be deemed that Landlord has refused its consent
     to the proposed assignment or sublease.

          14.6. Bonus Rental. If, in connection with any assignment or sublease,
     Tenant receives rent or other  consideration,  either initially or over the
     term of the  assignment  or  sublease,  in  excess of the Rent  called  for
     hereunder,  or in case of the  sublease  of a portion of the  Premises,  in
     excess of such Rent fairly  allocable to such portion,  Tenant shall pay to
     Landlord,  as additional rent hereunder,  fifty percent (50%) of the excess
     of each such  payment  of Rent or other  consideration  received  by Tenant
     promptly after Tenant's receipt of such Rent or other consideration. To the
     extent  that a  subtenant  or  assignee  pays the  leasing  commissions  or
     brokerage fees incurred in connection with the assignment or sublease,  the
     cost of  partitioning  the Premises for  multiple  occupancy,  or any other
     costs or expenses normally paid by a landlord in connection with a lease of
     commercial  office  property  located  in  Petaluma,  or a  sublandlord  in
     connection  with a sublease of office space in Petaluma,  or the  subtenant
     purchases goods or services from sublandlord or an affiliate of sublandlord
     for an  amount  in  excess  of the fair  market  value  for  such  goods or
     services,  such costs  incurred or amounts  expended  shall be deemed to be
     "other  consideration"  for  purposes  of  calculating  excess  Rent due to
     Landlord hereunder.

          14.7. Scope. The prohibition against assigning or subletting contained
     in this Section 14 shall be construed to include a prohibition  against any
     assignment or subletting by operation of law. If this Lease is assigned, or
     if the underlying  beneficial interest of Tenant is transferred,  or if the
     Premises or any part  thereof is sublet or  occupied by anybody  other than
     Tenant, Landlord may collect rent from the assignee,  subtenant or occupant
     and apply the net amount collected to the Rent due herein and apportion any
     excess rent so collected in accordance  with the terms of Section 14.6, but
     no such assignment,  subletting,  occupancy or collection shall be deemed a
     waiver  of the  provisions  regarding  assignment  and  subletting,  or the
     acceptance of the assignee,  subtenant or occupant as tenant,  or a release
     of Tenant from the further  performance  by Tenant of covenants on the part
     of Tenant herein  contained.  No assignment or subletting  shall affect the
     continuing primary liability of Tenant (which, following assignment,  shall
     be joint and several with the  assignee),  and Tenant shall not be released
     from performing any of the terms, covenants and conditions of this Lease.

          14.8. Executed Counterparts. No sublease or assignment shall be valid,
     nor shall any subtenant or assignee take possession of the Premises,  until
     a fully  executed  counterpart  of the  sublease  or  assignment  has  been
     delivered to Landlord and Landlord,  Tenant and the applicable  assignee or
     subtenant  have entered into a consent to  assignment or sublease in a form
     acceptable to Landlord.

          14.9.  Transfer of a Majority  Interest.  If Tenant is a  non-publicly
     traded corporation,  the transfer (as a consequence of a single transaction
     or any number of separate  transactions)  of fifty percent (50%) or more or
     of a  controlling  interest  or the  beneficial  ownership  interest of the
     voting stock of Tenant  issued and  outstanding  as of the  Effective  Date
     shall constitute an assignment hereunder for which Landlord's prior written
     consent is required. If Tenant is a partnership, limited liability company,
     trust or an  unincorporated  association,  the transfer of a controlling or
     majority  interest  therein shall  constitute  an assignment  hereunder for
     which Landlord's prior written consent is required.

          14.10.  Permitted  Transfers.  Notwithstanding  anything stated to the
     contrary herein, the following transfers shall not constitute an assignment
     of this Lease, may be made by Tenant without Landlord's consent,  and shall
     not be subject to Sections 14.3,  14.4, 14.5 and 14.6 of this Lease and the
     requirement in Section 14.8 that Tenant obtain  Landlord's  consent:  (i) a
     sale  of  stock  of  the  Tenant  in a  public  offering  or in  any  stock
     transaction conducted through a national stock exchange or over the counter
     transaction;   or  any  private   placement  or   offering;   (ii)  merger,
     consolidation or reorganization or related or unrelated corporations; (iii)
     any  assignment  of this  Lease  or  sublet  of all or any  portion  of the
     Premises to (A) any entity that that  directly or indirectly  controls,  is
     controlled by, or under common control with Tenant,  where  "control" means
     the power to direct the  management of such entity  through  voting rights,
     ownership or contractual obligations,  or (B) an entity at least a majority
     of whose economic interest is owned by Tenant;  (iv) an intra-family  stock
     assignment or any stock assignment to a trust for estate planning  purposes
     or  upon  the  death  of  a  shareholder;  and  (v)  the  sale  of  all  or
     substantially  all of the stock or assets of Tenant in a  transaction  or a
     sequence of related transactions.
<PAGE>

     15. Default by Tenant.

          15.1. Events of Default. The occurrence of any of the following events
     shall  constitute  an event of  default  on the part of Tenant  under  this
     Lease:

               15.1.1.  Payment. A failure by Tenant to pay Rent within five (5)
          days after written notice that such payment is due;

               15.1.2.  Bankruptcy.  The bankruptcy or insolvency of Tenant, any
          transfer by Tenant to defraud creditors,  any assignment by Tenant for
          the benefit of creditors,  or the  commencement  of any proceedings of
          any kind by or  against  Tenant  under any  provision  of the  Federal
          Bankruptcy   Act  or  under  any  other   insolvency,   bankruptcy  or
          reorganization  act  unless,  in the  event any such  proceedings  are
          involuntary, Tenant is discharged from the same within sixty (60) days
          thereafter;  the  appointment of a receiver for a substantial  part of
          the  assets of  Tenant;  or the levy upon this  Lease or any estate of
          Tenant hereunder by any attachment or execution;

               15.1.3.  Abandonment or Vacation.  The abandonment or vacation of
          the Premises;

               15.1.4.  Performance of Lease Terms.  Tenant's failure to perform
          any of the terms, covenants, agreements or conditions of this Lease to
          be observed or  performed  by Tenant  (excluding  any event of default
          under Section 15.1.1  above),  which default has not been cured within
          thirty (30) days after written  notice  thereof by Landlord to Tenant;
          provided,  however, that if the nature of the default is such that the
          same cannot reasonably be cured within the 30-day period, Tenant shall
          not be deemed to be in  default if within  such  period  Tenant  shall
          commence  such cure and  thereafter  diligently  prosecute the same to
          completion; and

               15.1.5.  Failure to Comply.  Tenant's  failure to comply with the
          provisions contained in Sections 18 and 19.

An event of default  shall  constitute a default by Tenant under this Lease.  In
addition,  any notice required to be given by Landlord under this Lease shall be
in lieu of, and not in addition to, any notice  required  under  Section 1161 of
the California Civil Code of Procedure.  Tenant shall pay to Landlord the amount
of Two Hundred  Fifty  Dollars  ($250.00)  for each  notice of default  given to
Tenant  under this  Lease,  which  amount is the amount the  parties  reasonably
estimate will compensate Landlord for the cost of giving such notice of default.

          15.2.  Remedies.  In the event of any  default  or  breach by  Tenant,
     Landlord  may at any time  thereafter,  without  limiting  Landlord  in the
     exercise of any right or remedy at law or in equity which Landlord may have
     by reason of such default or breach:

               15.2.1. Continue Lease. Pursue the remedy described in California
          Civil Code Section 1951.4 whereby  Landlord may continue this Lease in
          full force and effect after  Tenant's  breach and recover the Rent and
          any other  monetary  charges as they become due,  without  terminating
          Tenant's  right to  sublet  or  assign  this  Lease,  subject  only to
          reasonable limitations as herein provided. During the period Tenant is
          in default,  Landlord shall have the right to do all acts necessary to
          preserve and maintain the Premises as Landlord  deems  reasonable  and
          necessary,  including  removal of all  persons and  property  from the
          Premises,  and Landlord can enter the Premises and relet them,  or any
          part of them, to third parties for Tenant's  account.  Tenant shall be
          liable  immediately  to  Landlord  for all  costs  Landlord  incurs in
          reletting  the  Premises,  including,  without  limitation,   brokers'
          commissions,  expenses  of  remodeling  the  Premises  required by the
          reletting,  and like costs.  Reletting can be for a period  shorter or
          longer than the remaining Term.

               15.2.2.  Perform.  Pay or perform such  obligation due (but shall
          not be  obligated  to do so),  if Tenant  fails to pay or perform  any
          obligations  when due under this Lease within the time  permitted  for
          their  payment or  performance.  In such case,  the costs  incurred by
          Landlord in connection  with the  performance  of any such  obligation
          will be  Additional  Rent due under this Lease and will become due and
          payable on demand by Landlord.
<PAGE>

               15.2.3. Terminate. Terminate Tenant's rights to possession by any
          lawful  means,  in which case this Lease  shall  terminate  and Tenant
          shall immediately surrender possession of the Premises to Landlord. In
          such event  Landlord  shall be  entitled  to recover  from  Tenant all
          damages incurred by Landlord by reason of Tenant's default, including,
          without limitation,  the following: (A) the worth at the time of award
          of any  unpaid  Rent  which  had  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 which would have been earned  after  termination
          until the time of award  exceeds  the amount of such Rent loss that is
          proved could have been reasonably  avoided;  plus (C) the worth at the
          time of award of the amount by which the unpaid  Rent for the  balance
          of the Term  after the time of award  exceeds  the amount of such Rent
          loss that is proved could be  reasonably  avoided;  plus (D) any other
          amount  necessary  to  compensate   Landlord  for  all  the  detriment
          proximately  caused by  Tenant's  failure to perform  its  obligations
          under this Lease or which in the  ordinary  course of events  would be
          likely to result  therefrom;  plus (E) at  Landlord's  election,  such
          other  amounts in  addition to or in lieu of the  foregoing  as may be
          permitted  from time to time by  applicable  State law.  In  addition,
          Landlord  shall be  entitled to recover  from  Tenant the  unamortized
          portion  of any  tenant  improvement  allowance,  free  rent or  other
          allowance provided by Landlord to Tenant and any brokerage  commission
          or finders fee paid or incurred  by Landlord in  connection  with this
          Lease  (amortized  with  interest at the  Interest  Rate on a straight
          line-basis  over  the  original  term of this  Lease.)  Upon  any such
          termination  of Tenant's  possessory  interest in and to the Premises,
          Tenant (and at Landlord's sole election, Tenant's sublessees) shall no
          longer have any interest in the Premises,  and Landlord shall have the
          right to make any reasonable repairs,  alterations or modifications to
          the Premises which Landlord in its sole  discretion  deems  reasonable
          and  necessary.  The  "worth  at the  time of  award"  of the  amounts
          referred to in subparagraphs (A) and (B) above is computed by allowing
          interest at the maximum  rate an  individual  is  permitted  by law to
          charge.  The worth at the time of award of the amount  referred  to in
          subparagraph  (C) above is computed by discounting  such amount at the
          discount rate of the Federal Reserve Bank of San Francisco at the time
          of award plus one percent (1%).

               15.2.4.  Additional Remedies. Pursue any other legal or equitable
          remedy  available to Landlord.  Unpaid  installments of Rent and other
          unpaid  monetary  obligations  of Tenant under the terms of this Lease
          shall bear interest from the date due at the rate of ten percent (10%)
          per annum.

          15.3. Waiver of Right of Redemption. In the event Tenant is evicted or
     Landlord  takes  possession  of the  Premises  by reason of any  default by
     Tenant  hereunder,  Tenant  hereby waives any right of redemption or relief
     from forfeiture as provided by law.

          15.4.  Continue.  Even  though  Tenant  has  breached  this  Lease and
     abandoned the Premises,  this Lease shall continue in effect for so long as
     Landlord does not terminate Tenant's right to possession,  and Landlord may
     enforce all its rights and remedies  under this Lease,  including the right
     to recover Rent as it becomes due under this Lease.  Acts of maintenance or
     preservation,  efforts  to relet  the  Premises,  or the  appointment  of a
     receiver upon initiative of Landlord to protect  Landlord's  interest under
     this  Lease,  shall not  constitute  a  termination  of  Tenant's  right to
     possession.

          15.5.  Tenant's  Exercise  Rights.  In the event  Tenant is in default
     under any provision of this Lease then, at Landlord's  sole  election:  (i)
     Tenant shall not have the right to exercise any available right,  option or
     election under this Lease ("Tenant's  Exercise Rights"),  (ii) Tenant shall
     not have the right to consummate any  transaction or event triggered by the
     exercise of any of Tenant's  Exercise Rights,  and (iii) Landlord shall not
     be obligated to give Tenant any required notices or information relating to
     the exercise of any of Tenant's Exercise Rights hereunder.

     16. Default by Landlord.  Landlord shall not be in default under this Lease
unless  Landlord,  or the holder of any mortgage,  deed of trust or ground lease
covering the Premises,  fails to perform obligations required of Landlord within
a  reasonable  time,  but in no event later than thirty (30) days after  written
notice by Tenant to Landlord certified mail, postage prepaid,  and to the holder
of any first mortgage, deed of trust or ground lease covering the Premises whose
name and address  shall have been  furnished  to Tenant in  writing,  specifying
wherein Landlord has failed to perform such obligations; provided, however, that
if the nature of  Landlord's  obligation is such that more than thirty (30) days
are required for performance,  then Landlord shall not be in default if Landlord
or the  holder of any such  mortgage,  deed of trust or ground  lease  commences
performance within such 30-day period and thereafter  diligently  prosecutes the
same to completion. In no event shall Tenant be entitled to terminate this Lease
by reason of Landlord's  default,  and Tenant's  remedies shall be limited to an
action for monetary damages at law.
<PAGE>
     17. Security Deposit.  On execution of this Lease,  Tenant shall deliver to
Landlord cash in the amount specified as the Security Deposit in the Basic Lease
Information.  The Security Deposit shall be held by Landlord as security for the
performance by Tenant of all of the provisions of this Lease. If Tenant fails to
pay Rent or other charges due hereunder,  or otherwise  defaults with respect to
any  provision  of this  Lease,  Landlord  may use,  apply or retain  all or any
portion of the  Security  Deposit for the payment of any Rent or other charge in
default,  or the payment of any other sum to which Landlord may become obligated
by reason of Tenant's default,  or to compensate Landlord for any loss or damage
which  Landlord  may suffer  thereby.  If Landlord so uses or applies all or any
portion of the Security Deposit, then within ten (10) days after demand therefor
Tenant shall deposit cash with  Landlord in an amount  sufficient to restore the
deposit to the full amount  thereof,  and  Tenant's  failure to do so shall be a
material  breach  of this  Lease.  Landlord  shall not be  required  to keep the
Security Deposit separate from its general  accounts.  If Tenant performs all of
Tenant's obligations hereunder,  the Security Deposit, or so much thereof as has
not  theretofore  been applied by Landlord,  shall be returned to Tenant without
payment of interest for its use (or, at Landlord's  option to the last assignee,
if any,  of  Tenant's  interest  hereunder)  within  thirty  (30) days after the
expiration or earlier  termination  of this Lease,  and after Tenant has vacated
the Premises.  No trust  relationship  is created  herein  between  Landlord and
Tenant with respect to the Security Deposit.

     18. Estoppel Certificate.

          18.1.  Obligation  to Execute  Estoppel.  Tenant shall within ten (10)
     days after  notice  from  Landlord,  execute,  acknowledge  and  deliver to
     Landlord a statement  certifying  (i) that this Lease is unmodified  and in
     full  force  and  effect  (or,  if  modified,  stating  the  nature of such
     modification  and certifying  that this Lease,  as so modified,  is in full
     force and effect),  (ii) the amount of the Rent and the  Security  Deposit,
     (iii) the date to which the Rent has been  paid,  (iv)  acknowledging  that
     there are not, to Tenant's  knowledge,  any uncured defaults on the part of
     Landlord hereunder,  or specifying such defaults,  if any are claimed,  and
     (v) such other matters as may reasonably be requested by Landlord. Any such
     statement may be  conclusively  relied upon by Landlord and any prospective
     purchaser or encumbrancer of the Building.

          18.2.  Failure to Execute  Estoppel.  Tenant's failure to deliver such
     statement  within such time shall be  conclusive  upon Tenant that (i) this
     Lease is in full force and effect,  without  modification  except as may be
     represented by Landlord,  (ii) there are no uncured  defaults in Landlord's
     performance, and (iii) not more than one month's Base Rent has been paid in
     advance.

          18.3.  Financial  Statements.  If Landlord  desires to sell all or any
     portion of its  interest  in the  Building  or the Project or to finance or
     refinance the Building or the Project, Tenant agrees to deliver to Landlord
     and any  lender  or  prospective  purchaser  designated  by  Landlord  such
     financial statements of Tenant as may be reasonably required by Landlord or
     such lender or prospective  purchaser.  All such financial statements shall
     be received by Landlord in  confidence  and shall be used for the  purposes
     herein  set forth.  In  addition,  within  ten (10) days  after  Landlord's
     written  request,  Tenant shall  deliver to Landlord  Tenant's most current
     quarterly and annual  financial  statements  audited by Tenant's  certified
     public  accountant.  If audited  financial  statements  are not  available,
     Tenant shall deliver to Landlord Tenant's financial statements certified to
     be true and correct by Tenant's chief  financial  officer.  Tenant's annual
     financial  statements shall not be dated more than twelve (12) months prior
     to the date of Landlord's request.

     19.  Subordination.  This  Lease,  at  Landlord's  sole  option,  shall  be
subordinate  to any  ground  lease,  mortgage,  deed  of  trust,  or  any  other
hypothecation  for security now or hereafter placed upon the Building and to any
and  all  advances   made  on  the  security   thereof  and  to  all   renewals,
modifications,   consolidations,   replacements,   refinancings  and  extensions
thereof. Notwithstanding such subordination,  Tenant's right to quiet possession
of the  Premises  shall not be disturbed if Tenant is not in default and so long
as Tenant  shall pay the Rent and observe and perform all of the  provisions  of
this Lease, unless this Lease is otherwise  terminated pursuant to its terms. If
any mortgagee,  trustee or ground lessor shall elect to have this Lease prior to
the lien of its mortgage,  deed of trust or ground lease,  and shall give notice
thereof to Tenant,  this Lease shall be deemed prior to such  mortgage,  deed of
trust,  or ground  lease,  whether this Lease is dated prior to or subsequent to
the  date of said  mortgage,  deed of  trust  or  ground  lease  or the  date of
recording  thereof.  If any  mortgage  or deed of trust to which  this  Lease is
<PAGE>

subordinate  is  foreclosed  or a deed in lieu of  foreclosure  is  given to the
mortgagee  or  beneficiary,   Tenant  shall  attorn  to  the  purchaser  at  the
foreclosure sale or to the grantee under the deed in lieu of foreclosure; if any
ground  lease to which this Lease is  subordinate  is  terminated,  Tenant shall
attorn to the ground lessor.  Tenant agrees to execute any documents required to
effectuate  such  subordination  or to make this Lease  prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, or to evidence such
attornment.  Any  such  document  of  attornment  shall  also  provide  that the
successor shall not disturb Tenant in its use of the Premises in accordance with
this Lease.

     20.  Attorneys' Fees. If Landlord uses the services of an attorney in order
to  secure  Tenant's  compliance  with the  terms of this  Lease,  Tenant  shall
reimburse  Landlord upon demand for any and all reasonable  attorneys'  fees and
expenses  incurred by  Landlord,  whether or not formal  legal  proceedings  are
instituted  by Landlord.  In any action or proceeding  which  Landlord or Tenant
brings  against  the  other  party in order to  enforce  its  respective  rights
hereunder  or by reason of the other  party  failing  to comply  with all of its
obligations hereunder, whether for declaratory or other relief, the unsuccessful
party therein agrees to pay all costs incurred by the prevailing  party therein,
including  reasonable  attorneys' fees, to be fixed by the court, and said costs
and attorneys' fees shall be made a part of the judgment in said action. A party
shall be deemed to have prevailed in any action (without limiting the definition
of prevailing  party) if such action is dismissed  upon the payment by the other
party of the amounts  allegedly due or the performance of obligations which were
allegedly  not  performed,  or if such party  obtains  substantially  the relief
sought  by such  party in the  action,  regardless  or  whether  such  action is
prosecuted to judgment.

     21. Notices. All notices, consents,  demands, and other communications from
one party to the other  given  pursuant  to the terms of this Lease  shall be in
writing  and  shall be  personally  delivered,  delivered  by  courier  service,
delivered  by  national  overnight  delivery  service  (e.g.,  Federal  Express,
Airborne Express and UPS), sent via facsimile  (confirmation  receipt required),
or  deposited  in the United  States  mail,  certified  or  registered,  postage
prepaid,  and  addressed as follows:  To Tenant at the address  specified in the
Basic Lease  Information  or to such other place as Tenant may from time to time
designate in a notice to Landlord;  to Landlord at the address  specified in the
Basic Lease  Information,  or to such other  place and to such other  parties as
Landlord  may from time to time  designate  in a notice to Tenant.  All  notices
shall be effective upon delivery or refusal of delivery.

     22. General Provisions.

          22.1. Applicable Law. This Lease shall be governed by and construed in
     accordance   with  the   internal   laws  of  the   State  of   California,
     notwithstanding  any choice of law  statutes,  regulations,  provisions  or
     requirements to the contrary.

          22.2. Severability.  The invalidity of any provision of this Lease, as
     determined by a court of competent jurisdiction, shall in no way affect the
     validity of any other provision hereof.

          22.3.  Waiver. No waiver of any provision hereof by either party shall
     be deemed by the other party to be a waiver of any other  provision,  or of
     any subsequent breach of the same provision. Landlord's or Tenant's consent
     to, or approval of, any act shall not be deemed to render  unnecessary  the
     obtaining  of  Landlord's  or  Tenant's  consent  to, or  approval  of, any
     subsequent act by the other party.

          22.4.  Holdover.  Should Tenant, or any of its successors in interest,
     hold over in the Premises, or any part thereof, after the expiration of the
     Term  unless  otherwise  agreed to in  writing,  such  holding  over  shall
     constitute  and be  construed  as tenancy from  month-to-month  only,  at a
     monthly  rent equal to one hundred  fifty  percent  (150%) of the Base Rent
     owed during the final year of the Term, as the same may have been extended,
     together with the  Additional  Rent due under this Lease.  The inclusion of
     the preceding sentence shall not be construed as Landlord's  permission for
     Tenant to hold over. In addition,  Tenant shall indemnify,  protect, defend
     and hold harmless Landlord for all losses, expenses and damages,  including
     any  consequential  damages  incurred  by  Landlord,  as a result of Tenant
     failing to  surrender  the  Premises to Landlord and vacate the Premises by
     the end of the Term.

                                      23.
<PAGE>

          22.5. Successors and Assigns.  Subject to the provisions of this Lease
     restricting  assignment or subletting by Tenant,  this Lease shall bind the
     parties, their personal representatives, successors and assigns.

          22.6.  Entry.  Upon  reasonable  prior notice to Tenant  (which notice
     shall  not  be  required  in  the  event  of an  emergency),  Landlord  and
     Landlord's  representatives  and  agents  shall have the right to enter the
     Premises  during  regular  business hours for the purpose of inspecting the
     same,  showing  the same to  prospective  purchasers  (during the last nine
     months of the Term only) or lenders, and making such alterations,  repairs,
     improvements,  or  additions  to the  Premises,  the Building or the Common
     Areas as Landlord may deem necessary or desirable. Landlord may at any time
     during the last nine (9) months of the Term place on or about the  Premises
     any ordinary  "For Lease" sign.  Landlord may at any time place on or about
     the Premises any ordinary "For Sale" sign.

          22.7.  Subleases.  The  voluntary or other  surrender of this Lease by
     Tenant, the mutual cancellation thereof or the termination of this Lease by
     Landlord as a result of Tenant's  default shall, at the option of Landlord,
     terminate  all or any  existing  subtenancies  or  may,  at the  option  of
     Landlord,  operate  as an  assignment  to  Landlord  of any or all of  such
     subtenancies.

          22.8.  Limitation  of  Liability.  In the event that  Landlord  or any
     successor  owner of the  Building  sells or  conveys  the  Building,  then,
     provided that the assignee of Landlord's  interest under this Lease assumes
     in writing all of the obligations of Landlord including, without limitation
     the obligation to return the Security  Deposit in accordance with the terms
     of this Lease, all liabilities and obligations of Landlord or the successor
     owner  under  this  Lease  accruing  after  the  sale or  conveyance  shall
     terminate  and become  binding on the new owner,  and Tenant shall  release
     Landlord  from  all  liability   under  this  Lease   (including,   without
     limitation, the Security Deposit), except for acts or omissions of Landlord
     occurring prior to such sale or conveyance.  Tenant  expressly  agrees that
     (i) the obligations of Landlord shall not constitute  personal  obligations
     of  the  officers,  directors,   partners,  employees,   affiliates,  joint
     venturers,  members, trustees, owners,  shareholders,  or other principals,
     agents or  representatives  of Landlord  ("Member of  Landlord"),  and (ii)
     Tenant shall have recourse  only to Landlord's  interest in the Building of
     which the Premises are a part for the  satisfaction of such obligations and
     not against the other assets of Landlord.  In this  regard,  Tenant  agrees
     that in the event of any  actual or alleged  failure,  breach or default by
     Landlord  of its  obligations  under  this  Lease,  that (i) no  Member  of
     Landlord shall be sued or named as a party in any suit or action (except as
     may be necessary to secure jurisdiction of Landlord), (ii) no judgment will
     be taken against any Member of Landlord, and any judgment taken against any
     Member  of  Landlord  may be  vacated  and set  aside at any  time  without
     hearing,  (iii) no writ of execution will ever be levied against the assets
     of any  Member  of  Landlord,  and (iv)  these  agreements  by  Tenant  are
     enforceable both by Landlord and by any Member of Landlord.

          22.9. Authority. If Tenant is a corporation, limited liability company
     or partnership,  each  individual  executing this Lease on behalf of Tenant
     represents  and warrants that he is duly  authorized to execute and deliver
     this  Lease  on  behalf  of the  corporation,  company  or  partnership  in
     accordance with, where applicable,  a duly adopted  resolution of the board
     of  directors  of the  corporation,  the vote of the members of the limited
     liability  company or the vote of the partners within the partnership,  and
     that this Lease is binding upon the corporation,  company or partnership in
     accordance  with its  respective  articles  of  incorporation  and  bylaws,
     operating agreement or partnership agreement.

          22.10.  Time. Time is expressly  declared to be of the essence of this
     Lease  and of each and  every  covenant,  term,  condition,  and  provision
     hereof.

          22.11.  Joint and Several  Liability.  If there is more than one party
     comprising  Tenant,  the  obligations  imposed on Tenant shall be joint and
     several.

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

          22.13. Definitions. As used in this Lease and whenever required by the
     context thereof,  each number, both singular and plural,  shall include all
     numbers and in each gender shall include all genders.  Landlord and Tenant,
     as used in this Lease or in any other  instrument  referred to in or made a
     part of this  Lease,  shall  likewise  include  both the  singular  and the
<PAGE>

     plural, a corporation,  limited liability company, partnership,  individual
     or person  acting in any  fiduciary  capacity as  executor,  administrator,
     trustee or in any other representative capacity.

          22.14.  Exhibits.  The Basic Lease  Information,  Exhibits and Addenda
     attached to this Lease and incorporated herein by reference thereto.

          22.15.  Force  Majeure.   Any  delay  in  construction,   repairs,  or
     rebuilding  any building,  improvement or other  structure  herein shall be
     excused  and the time  limit  extended  to the  extent  that  the  delay is
     occasioned by reason of acts of God, labor troubles, laws or regulations of
     general  applicability,  acts of Tenant or  Tenant  Delays  (as the term is
     defined in the Work  Letter  Agreement),  or other  occurrences  beyond the
     reasonable  control of  Landlord.  Accordingly,  Landlord's  obligation  to
     perform  shall be  excused  for the  period of the delay and the period for
     performance  shall be  extended  for a period  equal to the  period of such
     delay.

          22.16.  Brokers'  Fees.  Each  party  represents  that  it has not had
     dealings with any real estate broker,  finder or other person, with respect
     to this Lease in any manner,  except the brokerage firm(s) specified in the
     Basic Lease  Information.  Each party shall hold  harmless  the other party
     from all damages  resulting from any claim that may be asserted against the
     other  party by any  broker,  finder,  or other  person with whom the other
     party has or purportedly  has dealt.  Landlord shall pay any commissions or
     fees that are  payable to the  brokers or  finders  specified  in the Basic
     Lease  Information,  with  respect  to this  Lease in  accordance  with the
     provisions of a separate commission contract.

          22.17. Relocation. [Intentionally deleted.]

          22.18.  Entire Agreement.  This Lease,  including  attached  Exhibits,
     Addendum,  and  Basic  Lease  Information,   contains  all  agreements  and
     understandings  of the parties and supersedes and cancels any and all prior
     or contemporaneous written or oral agreements, instruments, understandings,
     and  communications  of the  parties  with  respect to the  subject  matter
     herein. This Lease,  including the attached Exhibits,  Addendum,  and Basic
     Lease Information,  may be modified only in a writing signed by each of the
     parties.  The Exhibits,  Addendum and Basic Lease  Information  attached to
     this Lease are incorporated herein by reference.

          22.19.  Addendum.  The Addendum attached hereto is incorporated herein
     by reference.
<PAGE>

     IN WITNESS WHEREOF,  the parties have executed this Lease on the date first
mentioned above.

"Tenant"

REGAN HOLDING CORP.,
a California corporation

By:      /s/ John W. Abbott
   ----------------------------------
     Name:  John W. Abbott
           --------------------------
     Its:  Chief Information Officer
           --------------------------

By:
   ----------------------------------
     Name:
           --------------------------
     Its:
           --------------------------


"Landlord"
<TABLE>
<CAPTION>
<S>                                                <C>
LAKEVILLE & MARINA, LLC,                           FLORENE MAY HECK, LLC,
a California limited liability company             a Delaware limited liability company

By:    G&W Ventures, LLC,                          By:   /s/ William A. Robotham
       a California limited liability company,           ------------------------------------
       Managing Member                                   William A. Robotham, as Trustee of the Florene
         By:  /s/ Matthew T. White                       May Heck 1986 Trust Dated May 22, 1986
              ---------------------------
              Matthew T. White
              Managing Member

AMERIVINE, INC.,                                   THOMAS FLORIAN FRAZER, LLC,
a California corporation                           a Delaware limited liability company

By:      /s/ David F. Coleman                      By:   /s/ Thomas Florian Frazer
         --------------------                            -------------------------
         David F. Coleman                                Thomas Florian Frazer
         President                                       Sole Member

WHEELER PROPERTIES, LLC
a California limited liability company


By:      /s/ William W. Wheeler
         ----------------------
         William W. Wheeler
         Managing Member
         By Matthew T. White
         As attorney
</TABLE>

<PAGE>

                                    ADDENDUM



1. Base Rent. The Base Rent during the Term shall be as follows:


--------------------------- -----------------------------------------------
     Lease Year             Monthly NNN Base Rent Per Rentable Square Foot
--------------------------- -----------------------------------------------
   1st Lease Year                               $1.25
--------------------------- -----------------------------------------------

     Commencing  on the first day of the second  (2nd)  Lease  Year,  and on the
first day of each Lease Year  thereafter  during the Term, the monthly Base Rent
then in effect shall be increased by three percent (3%).

2. Signs.

     Tenant  shall  remove  Tenant's  existing  signage on the  exterior  of the
Building fronting Lakeville Highway within thirty (30) days after written notice
from  Landlord and repair any damage to the  Building  resulting  from  Tenant's
signage or the removal of Tenant's signage (with Landlord's  reimbursing  Tenant
for up to fifty percent of the cost of repairing any damage).  Landlord,  at its
election, may add additional tenants' names to the existing monument sign on the
Lot;  provided,  however,  Tenant's  name shall be the top name on the  monument
sign.

3. Reduction of Premises.

     3.1. Space Reduction Effective Date. Effective as of the earlier of (i) the
last day of the  eighteenth  (18th) full calendar  month of the Term or (ii) the
thirtieth  (30th) day after  Landlord  delivers  to Tenant  written  notice (the
"Premises  Reduction  Notice") of its election to recapture the Reduction  Space
(defined  herein),  the Premises shall be reduced in size to exclude therefrom a
portion of the Premises as  determined  by Landlord  consisting of not less than
twenty thousand  (20,000) rentable square feet of contiguous space (the "Minimum
Reduction  Space"),  nor more than thirty-six  thousand (36,000) rentable square
feet of  contiguous  space;  provided,  however,  that Tenant shall at all times
retain the use of the computer room, docking supply areas, loading area and mail
room. The Minimum  Reduction Space and other  potential  Reduction Space is more
particularly  shown on Exhibit A-1, attached hereto. The portion of the Premises
that Landlord recaptures  pursuant to this paragraph is hereinafter  referred to
as the  "Reduction  Space".  During the first  eighteen (18) months of the Term,
Landlord  shall use  commercially  reasonable  efforts  to market for lease to a
third  party the  Minimum  Reduction  Space.  The date on which the  Premises is
reduced in size  pursuant to this  paragraph is  hereinafter  referred to as the
"Space Reduction  Effective  Date". The portion of the Premises  remaining after
Landlord  recaptures  the  Reduction  Space is  hereinafter  referred  to as the
"Reduced Premises".  Tenant shall vacate and surrender to Landlord possession of
the Reduction Space on the Space Reduction Effective Date in accordance with all
of the terms of the Lease regarding Tenant's obligation to surrender  possession
of the  Premises  upon the  expiration  of the Term.  Effective  as of the Space
Reduction  Effective  Date, the term "Premises" as used in the Lease shall refer
only to the Reduced Premises.

     3.2.  Tenant's  Percentage  Share.  Effective  as of  the  Space  Reduction
Effective Date,  "Tenant's Percentage Share" shall be recalculated in accordance
with Section 1.10 of the Lease (i.e.,  the Rentable Area of the Premises divided
by the Rentable  Area of the  Building.  If the Rentable Area of the Premises or
the Rentable Area of the Building is later  changed,  then  Tenant's  Percentage
Share shall be further adjusted in accordance with Section 1.10 of the Lease.

     3.3. Base Rent.  Effective as of the Space  Reduction  Effective  Date, the
Base Rent  shall be  calculated  based on the  rentable  square  footage  of the
Reduced Premises.

     3.4.  Parking Spaces.  Effective as of the Space Reduction  Effective Date,
the  number of parking  spaces in the  parking  areas on the Lot that  Tenant is
entitled to use on a non-exclusive basis shall be reduced in accordance with the
formula contained in the Basic Lease Information.
<PAGE>

4. Security Deposit.

     4.1 Letter of Credit.  Subject to the terms and conditions set forth below,
Tenant  shall have the right to  substitute  an  irrevocable  standby  letter of
credit  (the  "Letter  of  Credit")  for the cash  Security  Deposit  previously
delivered to Landlord.  The Letter of Credit shall name Landlord as beneficiary,
be in an amount equal to the  Security  Deposit,  be issued by a major  national
bank located in San  Francisco or a regional  bank located in the San  Francisco
Bay Area ("Bank") reasonably satisfactory to Landlord and be upon such terms and
conditions as Landlord may reasonably require.  The Letter of Credit shall allow
draws by Landlord upon sight draft accompanied by a statement from Landlord that
it is entitled to draw upon the Letter of Credit and shall  contain  terms which
allow  Landlord to make partial and multiple  draws up to the face amount of the
Letter of Credit.  If Tenant has not  delivered to Landlord at least thirty (30)
days prior to the  expiration  of the original  Letter of Credit (or any renewal
letter of credit) a renewal or extension thereof,  Landlord shall have the right
to draw down the entire  amount of the  original  Letter of Credit  (or  renewal
thereof) and hold the proceeds thereof as the Security Deposit.

     4.2 Reduction of Security Deposit.

          a.  First Four  Calendar  Quarters  of  Profitability.  Upon  Tenant's
     written  request  to  Landlord,  and  provided  that  Tenant is not then in
     default  under this Lease,  the Security  Deposit shall be reduced to Seven
     Hundred  Eighty  Thousand  Dollars  ($780,000) at such time as Tenant shows
     four (4) consecutive  calendar  quarters of "profits" during the Term (with
     "profits" defined as Tenant's gross income for a calendar quarter exceeding
     Tenant's actual and imputed  expenses for that particular  calendar quarter
     as  evidenced  on  Tenant's  balance  sheet and profit and loss  statements
     certified as correct by an officer of Tenant).

          c.  Second Four  Calendar  Quarters of  Profitability.  Upon  Tenant's
     written  request  to  Landlord,  and  provided  that  Tenant is not then in
     default under this Lease,  the Security Deposit shall be reduced further to
     Five Hundred  Thirty  Thousand  Dollars  ($530,000)  at such time as Tenant
     shows four (4) additional consecutive calendar quarters of "profits" during
     the Term (with  "profits"  defined as Tenant's  gross income for a calendar
     quarter exceeding  Tenant's actual and imputed expenses for that particular
     calendar quarter as evidenced on Tenant's balance sheet and profit and loss
     statements  certified  as correct by an officer of Tenant) in  addition  to
     those referenced in Paragraph 4.2.a above.

          c.  Third Four  Calendar  Quarters  of  Profitability.  Upon  Tenant's
     written  request  to  Landlord,  and  provided  that  Tenant is not then in
     default under this Lease,  the Security Deposit shall be reduced further to
     Three  Hundred  Seventy-Five  Thousand  Dollars  ($375,000) at such time as
     Tenant shows four (4) additional consecutive calendar quarters of "profits"
     during the Term (with  "profits"  defined as  Tenant's  gross  income for a
     calendar  quarter  exceeding  Tenant's actual and imputed expenses for that
     particular  calendar  quarter as  evidenced on Tenant's  balance  sheet and
     profit and loss statements certified as correct by an officer of Tenant) in
     addition to those referenced in Paragraphs 4.2.a and 4.2.b above.

          d.  Fourth Four  Calendar  Quarters of  Profitability.  Upon  Tenant's
     written  request  to  Landlord,  and  provided  that  Tenant is not then in
     default under this Lease,  the Security Deposit shall be reduced further to
     Three Hundred Thousand Dollars ($300,000) at such time as Tenant shows four
     (4) additional  consecutive  calendar quarters of "profits" during the Term
     (with  "profits"  defined as Tenant's  gross income for a calendar  quarter
     exceeding Tenant's actual and imputed expenses for that particular calendar
     quarter  as  evidenced  on  Tenant's  balance  sheet  and  profit  and loss
     statements  certified  as correct by an officer of Tenant) in  addition  to
     those referenced in Paragraphs 4.2.a, 4.2.b and 4.2.c above.

          e.  Purchase of  Operational  Software.  For  purposes of  determining
     whether Tenant is profitable  during any calendar  quarter pursuant to this
     Paragraph  4.2, the parties shall not take into account a one-time  expense
     by Tenant for a software operating system.

     4.3 Interest.  Notwithstanding  anything to the contrary  contained in this
Lease,  Landlord  shall deposit the cash Security  Deposit  received from Tenant
into an  interest-bearing  business  savings account and, upon Tenant's  written
request  (not more than once  every  calendar  quarter),  Landlord  shall pay to
Tenant the interest earned on the cash Security Deposit.

5. Right of First Offer.  If any space in the  Building  becomes  available  for
lease during the Term (hereinafter referred to as the "Available Space") or will
become  available  for Lease  within the next thirty (30) days,  Landlord  shall
notify  Tenant in writing  (the  "Notice of  Available  Space") of the terms and
conditions  upon which Landlord would  consider  leasing the Available  Space to
Tenant.  Landlord  shall  state in the  Notice  of  Available  Space  all of the
material terms and conditions upon which it would consider leasing the Available
Space to Tenant  including,  without  limitation,  the  length of the term,  the
amount of the rent and the amount of the tenant improvement  allowance (if any).
<PAGE>
Tenant shall have fifteen (15) days from after Tenant's receipt of the Notice of
Available  Space to notify  Landlord  in  writing of its  election  to lease the
Available  Space upon all of the terms and conditions set forth in the Notice of
Available  Space. If Tenant timely notifies  Landlord in writing of its election
to lease the Available Space,  then,  within ten (10) days thereafter,  Landlord
and  Tenant  shall  enter  into a new  lease  for the  Available  Space  or,  at
Landlord's  sole  election,  amend this Lease to include the Available  Space as
part of the  Premises.  If Tenant  fails to notify  Landlord  in  writing of its
election  to lease the  Available  Space  within  the  fifteen  (15) day  period
referenced  above or for any reason  Landlord  and  Tenant  fail to enter into a
lease for the Available Space or amendment to this Lease, as applicable,  within
the ten (10) period referenced above,  Tenant shall be deemed to have waived its
right to lease the Available  Space  pursuant to this provision and Landlord may
lease the space to any other party.

6. Advance Rent. Concurrently with the execution of this Lease, Tenant shall pay
to Landlord  advance  rent (the  "Advance  Rent") in the amount of Nine  Hundred
Seventy-Nine  Thousand Six Hundred  Fifty-Two and 16/100 Dollars  ($979,652.16).
Landlord  shall apply the Advance Rent  against  Tenant's  obligation  to pay to
Landlord  the Base Rent and  additional  rent due during the first nine (9) full
calendar  months of the Term.  Landlord  shall  deposit the  Advance  Rent in an
interest-bearing  business  savings  account.  Upon Tenant's  written  notice to
Landlord  (not more than once every  calendar  quarter),  Landlord  shall pay to
Tenant the interest earned on the Advance Rent.