SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                            FORM 10-K

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934

            For the Fiscal Year Ended March 31, 1999
                   Commission File No. 0-7955

                       Mentor Corporation
                        201 Mentor Drive
                 Santa Barbara, California 93111
                    Telephone:  805/879-6000

 A Minnesota Corporation          I.R.S. Employer Identification
                         No. 41-0950791

   Securities registered pursuant to Section 12(b) of the Act:
                              NONE

   Securities registered pursuant to Section 12(g) of the Act:

            Common Shares, par value $.10  per share

     Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes x   No

     Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in a definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K

     The aggregate market value of the voting stock of the
Company held by non-affiliates of the Registrant as based upon
the closing National Market System sale price on June 28, 1999
was $408,229,000.

Number of Shares of Common Stock outstanding on June 28, 1999:
24,421,000.

               DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement for its 1999
Annual Meeting of Shareholders are incorporated by reference in
Part III in this Report on Form 10-K.

                             PART I

ITEM 1.   BUSINESS.

          This Annual Report on Form 10-K filed on behalf of
Mentor Corporation ("Mentor" or the "Company") contains various
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events.
Statements containing expressions such as "believes",
anticipates" or "expects" used in this Annual Report and such
other documents incorporated herein by reference are intended to
identify forward-looking statements.  These include statements
about the Company's strategies and expectations about new and
existing products, technologies and opportunities, market and
industry segment growth and demand and acceptance of new and
existing products.  These also include statements regarding the
regulatory and legal environment in which the Company operates
and its assessment of risks associated therewith.  All forward-
looking statements involve risks and uncertainties.  Although the
Company believes its expectations are based upon reasonable
assumptions within the bounds of its knowledge of its business
and operations, there can be no assurances that actual results
will not materially differ from expected results.  The Company
cautions that these and similar statements included in this
Annual Report are further qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements.  Such factors include, without
limitation, the following:  increased competition, changes in
product demand, changes in market acceptance, new product
development, obtaining FDA approval of new and existing products,
changes in government regulation, supply of raw materials,
changes in reimbursement practices, adverse results of litigation
and other risks identified in this Annual Report or in other
documents filed by the Company with the Securities and Exchange
Commission.  Specific attention should be directed to the
sections entitled "Government Regulation" and "Product
Liability".  Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on
which they are made.  The Company assumes no obligation to
publicly release any revisions to such forward-looking statements
to reflect changes in events or circumstances after such dates.

General

          In May 1999, the Company announced that its Board of
Directors had decided to divest the ophthalmology business, which
accounted for approximately 16% of sales in fiscal 1999.  The
Company subsequently announced that it has entered into an
agreement to sell the assets of the intraocular lens business.
The remaining parts of the ophthalmic business are currently
being actively marketed.  As a result of this decision, the
Company now accounts for the ophthalmic business as a
"Discontinued Operation" under Generally Accepted Accounting
Principles (GAAP).  Accordingly, all sales and expenses and other
financial information of the ophthalmic business are reported, on
a net basis, as a single line on the financials.  Numbers in this
Form 10-K have been restated to exclude the results of the
ophthalmic business as appropriate.

          The Company develops, manufactures, and markets a broad
range of products for the medical specialties of plastic,
reconstructive and general surgery, and urology.  Plastic and
general surgery products include surgically implantable
prostheses for cosmetic and reconstructive surgery, principally
breast implants and tissue expanders, and capital equipment and
disposable products used in soft tissue aspiration.  Urologic
products include disposable and surgical products for the
management of urinary incontinence, surgically implantable
prostheses, principally penile implants for the treatment of
chronic male sexual impotence, and brachytherapy seeds for the
treatment of prostate cancer.

     Corporate Organization

          Two years ago, the Company was operated through wholly
owned subsidiaries which were organized around its existing
primary product groups: plastic surgery (through Mentor H/S,
Inc.), urology (through Mentor Urology, Inc.) and ophthalmology
(through Mentor Ophthalmics, formerly known as Mentor O&O, Inc.).

          During fiscal 1998, the Company reorganized along
functional lines, rather than product groups, enabling the
Company to present a unified, single company image to its
customers, as well as to facilitate the sharing of technology and
manufacturing expertise among its various locations. As a result,
in August 1997, the Company formed Mentor Medical Inc. as a
wholly owned subsidiary and transferred to it all the sales and
marketing functions, and related assets, from each of its product
subsidiaries.  Mentor H/S, Mentor Urology and Mentor Ophthalmics
retained all of the assets related to the Texas, Minneapolis and
Norwell, Massachusetts manufacturing facilities, respectively.
These assets consisted primarily of leasehold improvements and
manufacturing and research and development equipment.  Mentor H/S
was subsequently renamed Mentor Texas, Inc.  Mentor Urology was
changed to Mentor Minnesota, Inc.

     International Expansion

          During the 1990's, the Company expanded its
international presence through the establishment of direct sales
offices in Canada, Europe, and the Pacific Rim.  All of the
offices are wholly owned subsidiaries of Mentor Corporation.  In
fiscal 1991, the Company established its first four sales
offices:  Mentor Medical Systems Canada, Mentor Medical Systems
UK, Ltd., Mentor Deutschland, GmbH, and Mentor Medical Systems,
Pty, Ltd. (Australia).  In fiscal 1996, the Company established
Mentor France S.A. and Mentor Benelux B.V.  In fiscal 1997, the
Company opened two additional sales office subsidiaries:  Mentor
Medical Systems Iberica S.L. and Havas Medical B.V.  In late
fiscal 1998, the Company established a sales office in Japan:
Mentor Japan K.K.

          In 1993, the Company established Mentor Medical
Systems, B.V. in Leiden, the Netherlands, to further its
expansion into the international marketplace.  This is the
Company's manufacturing and research and development facility
outside of the United States.

          In fiscal 1999, sales from the direct international
offices accounted for 14% of total sales.

Principal Products and Markets

          The Company strives to utilize its product design and
marketing capabilities, and its close working relationships with
health care professionals, to introduce products which provide
improved results for patients compared to existing treatment
methods and which can potentially reduce the overall cost of the
treatment. Following is a description of the Company's principal
product lines and the markets for them.

     Plastic and General Surgery Products

          The Company produces an extensive line of implants for
cosmetic and reconstructive surgery, including a line of breast
implants and skin and tissue expanders.

          Mammary prostheses may be implanted to achieve breast
reconstruction following total or partial removal (mastectomy) or
to enhance breast size and shape in cosmetic surgery.  Breast
reconstruction is possible for most patients undergoing a
mastectomy, either at the time of the original surgery or at a
later date.

          The Company produces a broad line of mammary
prostheses, including saline-filled implants and silicone gel-
filled implants.  Mammary prostheses comprise approximately 90%
of total plastic surgery product sales.  Saline-filled breast
implants accounted for approximately 80% of mammary prostheses
sold in fiscal 1999.

          By offering a combination of different types of
implants in a variety of different shapes and sizes and surfaces,
the physician is able to select the product most appropriate for
the patient.

          The Company offers a patented line of skin and tissue
expanders.  Tissue expansion is a technique for growing
additional tissue for reconstruction and skin graft procedures.
Some of the major applications of tissue expansion developed to
date include post-mastectomy reconstruction, and the elimination
of disfigurements such as burns, massive scars and facial
deformities.

          In April 1997, the Company began marketing a line of
facial implants.  These products are supplied by Implantech, a
private manufacturer of facial implants.

          In September 1997, the Company began marketing the
Contour Genesis, following FDA approval in July 1997.  The
Contour Genesis is an ultrasound assisted product used for the
liquification and aspiration of soft tissues in general surgery
and plastic and reconstructive surgery applications.  While
initial sales of the Contour Genesis have been encouraging, the
Company believes that a greater potential for the product exists
in the area of liposuction.  Liposuction, or the removal of body
fat, is one of the most popular cosmetic procedures performed
today.  Current liposuction uses a metal cannula to sheer the
fat.  This requires the physician to exert a large amount of
force to facilitate the procedure.  In ultrasonic assisted
liposuction, a generator sends ultrasonic waves through a probe
that is inserted under the skin.  The ultrasonic energy
emulsifies the fat, which can then be easily aspirated away.

          The Company is currently conducting human clinical
trials using the Contour Genesis in order to expand the labeling
of the product to include ultrasonic assisted liposuction.  The
Company expects to submit an application for approval to the FDA
by the end of the current fiscal year.  Like any clinical
research, the outcomes of the trials are not predictable.  There
can be no guarantee that data from this study will support an
approvable application.  There can be no assurance as to when, if
ever, final approval will be given.

          During fiscal 1999, the Company entered into a
marketing alliance and equity investment in Byron Medical, Inc.,
a privately held company that provides a variety of products for
the surgical specialties of liposuction and body contouring.
Under the agreement, the Company will promote and sell Byron's
products.

     Disposable Urology Products

          The National Institute of Health estimates that, due to
a variety of causes, ten million men, women and children in the
United States suffer from urinary incontinence or retention --
the inability to control the flow of urine.  The Company markets
a broad range of incontinence products, including disposable
products that help people manage their incontinence, and surgical
products which aid in curing the problem.

          In the disposable products area, the Company produces
several types of catheters, including intermittent self-
catheters, used by women, men and children to manage retentive
incontinence, and male external catheters, including both latex
and silicone models.  These products are used in homes, hospitals
and extended care facilities.

          During the year, the Company enhanced its position in
this market via the acquisition of Sierra Laboratories, Inc., a
privately held manufacturer of specialized urologic products.
These products include male external catheters and drainage bags.

          The Company also markets a variety of other disposable
products used in the management of urinary incontinence.  These
include leg bags and urine collection systems, organic odor
eliminators, and moisturizing skin creams and ointments.

     Surgical Urology Products

          The Company's Surgical Urology products fall into three
general categories of products: impotence treatment, incontinence
treatment, and cancer diagnosis and treatment products.

          Impotence Products.  The Company's impotence products
include primarily a line of penile implants for the treatment of
male sexual impotence.  Penile prostheses, which accounted for
over 90 % of the Company's impotence sales in fiscal 1999, are
implanted in men who cannot achieve a natural erection of
sufficient rigidity for sexual intercourse.  In order to respond
to various physician and patient preferences, the Company
manufactures several types of penile prostheses, including two
versions of hydraulic inflatable devices and two versions of a
malleable prosthesis.

          For the past several years, alternative treatment
methods for male impotence have become increasingly popular.
These include injection drug therapy and vacuum erection devices.
These modes of treatment have been used extensively as a first
line of treatment due to their lower cost and less invasive
nature.  The Company had marketed a vacuum erection device since
fiscal 1991.  Due to its small sales base, this product was
discontinued in fiscal 1999.

          In April 1998, Pfizer Inc., a major pharmaceutical
company, received FDA approval for the first oral drug treatment
for impotence.  Its product, Viagra, received an enormous amount
of media attention, due to its ease of use and purported
efficacy.  While the Company believes that the heightened
interest in treating impotence may be beneficial to the Company
in the long run, there was a near term negative impact on penile
implant sales as men who might be interested in an implant tried
Viagra instead.  The Company continues to believe that this
interest in treating impotence bodes well for the long-term
prospects of penile implant sales, as Viagra will not work on all
patients.  Sales of penile implants in the second half of fiscal
1999 increased 17% over the first half of the year.  While the
Company hopes this upward trend will continue, we may continue to
see weakness in sales in the near term.

          The Company expects that alternative treatment methods
to permanent implants will remain an integral part of the
marketplace in the future.

          Incontinence Products.   The Company believes that many
people, if given the choice, would rather cure than manage their
incontinence problem.  The Company has focused considerable
attention in developing products for this market.  For several
years the Company has been pursuing regulatory approval on a new
product, Urethrin, which is an injectable implant for the
treatment of incontinence.  The FDA is currently requiring the
Company to submit additional clinical data before it can make a
decision on the marketing of Urethrin.  The Company is in the
process of compiling data for submission to the FDA.  There can
be no guarantee that data from this study will support an
approvable application.  In addition, there can be no assurance
as to when, if ever, final approval will be given for sales in
the United States.  The Company has limited sales of Urethrin in
the international market.

          Bladder neck suspensions and the pubovaginal sling are
increasingly popular surgical procedures for women suffering from
stress incontinence.  In a suspension procedure, the bladder neck
and proximal urethra are lifted and suspended by a pair of
sutures attached to an anchor in the pubic bone.  In April 1997,
the Company began marketing the Cinch bone anchor system, used to
anchor the sutures.  In a pubovaginal sling procedure, a piece of
material is placed underneath the urethra and suspended from the
pubic bone, in a hammock-like fashion.  This prevents the bladder
neck from descending during coughing or other stressful exertion.
In May 1998, the Company began marketing the Suspend for use in
sling procedures.  This product is made from Tutoplast-processed
human fascia lata.  The Tutoplast process inactivates pathogens
such as HIV and Hepatitis B and C, while preserving the collagen
matrix of the fascia, providing superior tensile strength
characteristics.

          Cancer Products.  In June 1997, the Company announced
two strategic alliances to launch its efforts in the treatment of
urologic cancers.  The first alliance is with North American
Scientific, Inc. ("NASI") which produces brachytherapy seeds for
the treatment of prostate cancer.  The conventional treatment for
prostate cancer has been the radical prostatectomy.  This is an
invasive surgical procedure that involves the complete removal of
the prostate.  It involves a 2-3 day hospital stay.  Due to the
damage done to the urinary sphincter and penile nerves during
surgery, impotence and incontinence are common side effects of
the procedure.

          Brachytherapy treatment is a much less invasive
procedure in which radioactive seeds, approximately the size of a
grain of rice, are implanted directly into the prostate.  Fifty
to one hundred seeds are used in each procedure.  Because the
radiation exposure is limited to a small area, general radiation
side effects are unusual with brachytherapy, and complication
rates are lower than with a radical prostatectomy.  The procedure
can often be performed in an outpatient setting, thus reducing
the cost of the overall procedure.

          NASI manufactures and ships the IoGold brachytherapy
seed, while the Company does all of the sales and marketing.
Sales of this product began in January 1998.

          The second alliance is with Intracel Corporation in
which Mentor will be the exclusive worldwide marketing partner
for two of Intracel's bladder cancer products.  PerImmune
Holdings, Inc. originally developed the products.  PerImmune
merged with Intracel in 1997.  The first product is a bladder
cancer test, the Accu-Dx.  The product is a simple urine test
that can be performed in the doctor's office.  It is intended to
be used in conjunction with cystoscopy to aid in the management
of bladder cancer patients.  The FDA approved this product in
April 1997, and Mentor began sales in February 1998.  During the
first quarter of fiscal 1999, the manufacturer voluntarily
recalled this product because of shelf life issues. The Company
expects to re-introduce this product in fiscal 2001.  In addition
to the test, Intracel is developing a potential bladder cancer
treatment.  This product, BCI-Immune Activator, appears to
demonstrate enhanced anti-tumor activity in the bladder.  It has
completed Phase I and II clinical trials, and began Phase III
clinicals during fiscal 1999.  Like any clinical research, the
outcomes of the trials are not predictable.  There can be no
guarantee that data from this study will support an approvable
application.  There can be no assurance as to when, or if, the
FDA will approve this product.

          Summary of Sales by Principal Product Lines.  The
following table shows the net sales attributable to each of the
Company's principal product lines and the percentage
contributions of such sales to total net sales for the periods
indicated.

                                 Year Ended March 31,
                          1999            1998           1997
                                (Dollars in thousands)
                     Amount      %    Amount    %     Amount    %
Plastic & General
  Surgery Products  $122,066    60%  $112,449   62%  $106,970   64%
Surgical Urology
  Products            37,307    18%    28,413   16%    25,500   15%
Disposable Urology
  Products            43,410    22%    39,405   22%    34,324   21%
                    $202,783   100%  $180,267  100%  $166,794  100%

Marketing

          The Company employs specialized domestic sales forces
for its cosmetic surgery, urologic implants and disposable
urology product lines.  Each group provides product orientation
and support and related service to physicians, nurses and other
health care professionals.  This also allows the Company to
maintain active and continuous communication with leading health
care professionals in order to identify emerging growth markets
and opportunities for improved products and product extensions.

          The Company also markets certain products, particularly
its disposable incontinence products, through an extensive
domestic network of independent hospital supply dealers and
health care distributors, and increasingly through retail
pharmacies.

          The Company promotes its products through journal
advertising, direct mail programs, and participation in, and
sponsorship of, medical conferences and seminars.  The Company
also participates in support organizations that provide
counseling and education for persons suffering from specific
maladies, and provides patient education materials for some of
its products to physicians for use with their patients.

          The Company exports most of its products, principally
to Canada and Western Europe.  Products are sold to both
independent distributors as well as through the Company's own
foreign direct international sales offices.  For the years ended
March 31, 1999, 1998 and 1997, export sales to independent
distributors were $17,600,000, $16,173,000, and $14,996,000,
respectively.  In addition, $27,450,000, $25,731,000 and
$19,809,000 in sales respectively, were from the Company's direct
international offices.

          The Company's domestic sales and foreign sales are
approximately equal in profitability.  Other than sales through
the Company's international sales offices, export sales have been
made in United States dollars and currency fluctuations have not
significantly affected operating earnings.  The Company does not
hedge any of its foreign currency transactions.

          The Company has eight international sales offices in
Canada, the United Kingdom, Germany, France, Benelux, Australia,
Spain and Japan.  The Japan office was established late in fiscal
1998.  These offices warehouse product and sell through a direct
sales force in each country.  The offices currently sell
primarily cosmetic and reconstructive surgery implants and
disposable urology products.  Sales are made in the local
currency of the host country.  The Company feels that a local
presence in key countries will help the Company to capitalize on
the growing international market for medical products.

          In general, the Company maintains sufficient
inventories of finished goods both domestically and
internationally to support immediate shipment of products upon
receipt of a customer's order.  From time to time, however, a
back-order situation may develop due to increased demand for a
product or special circumstances, such as regulatory restrictions
or physical damage to the plant.  See "Government Regulation".

          During the fiscal year ended March 31, 1999, no
customer accounted for more than 10% of the Company's revenues.

Competition

          The Company believes it is one of the leading suppliers
in the United States of penile implants and cosmetic and
reconstructive surgery products and of disposable catheter
products, based upon independent research studies of market
share.

          The Company currently competes with only one other
company in the inflatable penile market, American Medical
Systems, Inc.  Several implants compete with the Company's
malleable penile implants.  The primary competitive factors are
product performance and reliability, ease of implantation and
customer service.  The Company believes that, by providing
several types of implants that stress high performance and
reliability, it can successfully respond to various physician and
patient preferences.

          The Company competes primarily with one other company
in the domestic breast implant market, McGhan Medical
Corporation, a subsidiary of INAMED, Inc.  The primary
competitive factors currently are range of style and sizes,
product performance and quality, proprietary design, customer
service and in certain instances, price.

          By careful design and active marketing of catheters and
other disposable incontinence products, the Company has been able
to compete successfully against larger companies.  The Company,
C.R. Bard, Inc., Hollister, Inc., Sherwood Medical, Baxter
Travenol, Inc., and Coloplast, Inc. are the dominant competitors
in the market.  As with many of the Company's other product
lines, the Company competes primarily on the basis of design and
performance, and by providing product orientation, support and
related service to health care professionals and consumers.

          While the Company believes it competes successfully in
its markets, many of its competitors have substantially greater
financial, technological and marketing resources.

Government Regulation

          General

          As a manufacturer of medical devices, the Company's
manufacturing processes and facilities are subject to continuing
review by the FDA and various state agencies to insure compliance
with current good manufacturing practices and other regulatory
requirements.  These agencies inspect the Company and its
facilities from time to time to determine whether the Company is
in compliance with various regulations relating to manufacturing
practices, process validation, testing, quality control and
product labeling.  These regulations depend heavily on
administrative interpretation by the various agencies, and can be
influenced by adverse publicity and political pressure.  There
can be no assurance that future interpretations made by the FDA
or other regulatory bodies will not adversely affect the Company.
A determination that the Company is in violation of such
regulations could lead to imposition of various penalties,
including the issuance of warning letters, injunctive relief
(whether by adverse court ruling or by consent), product recalls
or product seizures.

          Medical Device Amendments of 1976

          Under the "Medical Device Amendments of 1976" (the
"Medical Device Act"), the FDA has the authority to adopt
regulations that:  (i) set standards for medical devices; (ii)
require proof of safety and effectiveness prior to marketing
devices which the FDA believes require pre-market clearance;
(iii) require test data approval prior to clinical evaluation of
human use; (iv) permit detailed inspections of device
manufacturing facilities; (v) establish "good manufacturing
practices" ("GMP") that must be followed in device manufacture;
(vi) require reporting of product defects to the FDA; and (vii)
prohibit device exports that do not comply with the Medical
Device Act unless they comply with established foreign
regulations, do not conflict with foreign laws, and the FDA and
the health agency of the importing country determine export is
not contrary to public health.  All of the Company's products are
"medical devices intended for human use" within the meaning of
the Medical Device Act and are, therefore, subject to FDA
regulation.

          The Medical Device Act establishes complex procedures
for compliance based upon FDA regulations that designate devices
as Class I (general controls, such as compliance with labeling
and record-keeping requirements), Class II (performance standards
in addition to general controls) or Class III (pre-market
approval application ("PMAA") before commercial marketing).
Class III devices are the most extensively regulated.   Class III
devices require each manufacturer to submit to the FDA a PMAA
that includes information on the safety and effectiveness of the
device.  The majority of the Company's plastic surgery and
urology implants, are in Class III, while most of its disposable
incontinence products are in Class I.

          In 1991, the Company submitted PMAAs for its silicone
gel-filled mammary prostheses to the FDA, pursuant to FDA
regulations issued at that time.  In 1992, the FDA's outside
advisory panel on plastic surgery products indicated that
although there was insufficient data to establish with reasonable
certainty that silicone gel implants were safe and effective,
there was a public health need for these types of implants.  The
FDA adopted the recommendations of the panel.

          The FDA denied the pending applications for the use of
silicone gel-filled breast implants for augmentation, but
provided for the continued availability of the implants for
reconstruction purposes on the basis of a public health need.  In
order to obtain silicone gel-filled implants for use in
reconstruction, women were required to enroll, beginning in 1993,
in a clinical study for future follow-up.  Patients were required
to sign an informed consent form and physicians had to certify
that saline implants were not a satisfactory alternative.  The
Company continues to ship these products under the terms of this
clinical study.

          In 1993, the FDA published proposed guidelines for
PMAA's on the Company's hydraulic inflatable penile prostheses
and saline-filled breast implants.  For saline implants, the FDA
published a schedule that permits the data required for the PMAA
to be submitted in phases, beginning with preclinical data due in
1995 and ending with final submission of prospective clinical
data in 1998.  The FDA has extended final submissions until 1999.
The Company has submitted all required data to date (primarily
laboratory tests and manufacturing data) and intends to submit
the remaining data for its PMAA's in a timely fashion, which it
expects will be by the end of the calendar year.

          For its penile implants, the FDA has requested that the
data for the PMAA be submitted in four modules during calendar
1999.  The Company has submitted the first two modules, covering
manufacturing, and chemical and biological testing.  The Company
expects to submit the remaining two modules, which include
clinical studies and mechanical testing as required by the FDA.

          FDA approval for either of these products, however,
cannot be assured.  Should the Company's PMAAs be denied, it
would have a material adverse effect on the Company's operations
and financial position.

          To comply with the Medical Device Act, the Company has
incurred, and will continue to incur, substantial costs relating
to laboratory and clinical testing of new products and the
preparation and filing of documents in the formats required by
the FDA.  The process of obtaining marketing clearance from the
FDA for new products and existing products can be time-consuming
and expensive, and there is no assurance that such clearances
will be granted.  The Company also may encounter delays in
bringing new products to market as a result of being required by
the FDA to conduct and document additional investigations of
product safety and effectiveness, which may adversely affect the
Company's ability to commercialize additional products or
additional applications for existing products.

          Additional Regulations

          As a manufacturer of medical devices, the Company's
manufacturing processes and facilities are subject to regulations
and review by the FDA and other regulatory agencies.  The
Company's domestic facilities must comply with the FDA's Quality
System Regulation requirements (regulations adopted by the FDA in
October 1996 which replaced the requirements previously known as
Good Manufacturing Practices).  Also, for products sold
internationally, the Company has obtained a CE mark for its
products by demonstrating compliance with the ISO 9001 and
EN46001 international quality system standards. Medical device
laws and regulations similar to those described above are also in
effect in some of the other countries to which the Company
exports its products.  These range from comprehensive device
approval requirements for some or all of the Company's medical
device products to requests for product data or certifications.

          Texas Facility Review

          In June 1995, Mentor H/S's Texas facility was audited
by the FDA. As a result of that audit, Mentor H/S received an
FD483, "list of observations".  These observations dealt
primarily with validation of manufacturing processes and follow-
up on product complaint evaluations.  Mentor H/S responded to the
FD483 in August 1995.  In February 1996, the FDA issued Mentor
H/S a warning letter, concluding that they had not satisfactorily
addressed the inadequacies noted in the FD483. Specifically, the
FDA disagreed with the method by which the Company had performed
its initial validations of the Texas facility.  To address the
warning letter, in 1996 the Company hired an outside expert
consultant to conduct a comprehensive GMP audit, and initiated or
completed all corrections called for in the consultant's report.
For those items which could not be corrected in a timely manner,
primarily the re-validation of the manufacturing process, a time
frame for completion was submitted to the FDA.

          In August 1997, the FDA returned to the Texas facility
to perform a comprehensive GMP audit, which included reviewing
the Company's progress in completing the remaining items
contained in the 1996 warning letter.  While the Company had
completed most of these items, the re-validation effort had not
been completed within the time frame outlined in the 1996 report.
In December 1997, the Company developed a new timeline for
completion of these items.  In May 1998, the Company entered into
a voluntary consent decree with the FDA, under which the Company
agreed, among other things, to complete the re-validations in the
agreed upon timeframe.

          The consent decree required the Company to hire outside
expert consultants to assist in strengthening the Company's
compliance program and related processes.  In July, 1998 the
consultant conducted a comprehensive GMP audit of the Texas
facility and submitted a detailed written report to Mentor
management and the FDA on its findings.  In that report, the
consultant stated that, except for the outstanding re-
validations, there were no significant areas of GMP non-
compliance.

          The Company and FDA agreed to time frames under which
the Company was to complete its re-validations of its
manufacturing processes; specifically by November 2, 1998 for
saline-filled devices and by December 31, 1998 for gel-filled
devices.  The Company completed its validations of both devices
in those timeframes.  The outside expert consultant reviewed the
validations and reported to management and to the FDA that all
validation projects had been completed in accordance with
established milestones and within the timeframes established by
the consent decree.

          Additionally, under the terms of the consent decree, an
expert consultant is required to conduct an inspection and to
issue a report annually.  The first annual inspection and report
has been completed and filed with the FDA.  The consultant
conducted a comprehensive inspection according to the QSR/GMP
medical device regulations.  In his report, the consultant
stated, "Mentor is in substantial compliance with the current
Good Manufacturing Practices."

          The Company believes that it will meet the remaining
requirements of the consent decree, although there can be no
assurance that it can do so.  In addition, although the expert
consultants have expressed their opinion as to the satisfactory
completion of certain consent decree requirements, FDA
inspectors, during some future audit, may disagree with the
conclusions of these experts.  Should the Company fail to comply
with the conditions of the consent decree, under its terms the
FDA is allowed to order the Company to stop manufacturing or
distributing the breast implants, order a recall or take other
corrective actions.  The Company may also be subject to penalties
of $10,000 per day until compliance is achieved.

          If the Company maintains continuous compliance with the
terms of the consent decree for a period of 5 years after the
completion of the re-validations, the Company can petition the
courts to remove the consent decree without opposition from the
government.

          Environmental Regulation

          In certain states, primarily Texas, the Company is also
subject to regulation by the local Air Pollution Control District
and the United States Environmental Protection Agency as a result
of some of the chemicals used in its manufacturing process.

Health Care Cost Containment

          The cost of a significant portion of medical care in
the United States is funded by government and private insurance
programs, such as Medicare and corporate health insurance plans.
Accordingly, third parties, rather than patients, frequently pay
all or a substantial portion of the costs of goods and services
delivered by health care providers.  Except for breast and facial
implants used in cosmetic surgery and augmentation, the Company's
medical products are generally eligible for coverage under many
of these third-party reimbursement programs.  The Company
believes that eligibility for third-party reimbursement can be an
important factor in the success of medical products, particularly
in situations where there are competing products or treatments
that are also eligible for such reimbursement.  Therefore, the
Company attempts when feasible to obtain eligibility of its
products for such reimbursement.

          Reimbursement plans, whether through government funded
Medicare or private third party insurers, are developing
increasingly sophisticated methods of controlling health care
costs through prospective reimbursement programs, capitation
programs, group buying, redesign of benefits, requirement of a
second opinion prior to major surgery, careful review of bills,
encouragement of healthier lifestyles and exploration of more
cost-effective methods of delivering health care.

          These types of programs can potentially limit the
amount which health care providers may be willing to pay for
medical products.  In the past, the Company has encountered
instances in which reimbursement for some of its products,
particularly its hydraulic inflatable penile prostheses, was
denied.  In the majority of cases, the Company has successfully
obtained reinstatement of reimbursement for these products.
Denial of reimbursement and/or limitations on the amount third
party payors are willing to pay will, most likely, have a
detrimental effect on sales of the affected products.

Product Development

          At March 31, 1999, the Company employed 87 people
engaged in full-time research and development.  The Company is
working to develop new or improved products in many of its
principal product lines, including breast implants and general
surgery.  In addition, the Company has committed $1 million per
year for three years to help fund the Phase III clinical trials
for the BCI-Immune Activator bladder cancer treatment.  Intracel
is conducting the trials.  These payments began in January 1998.
The Company is obligated to pay Intracel an additional $3 million
based on the achievement of certain milestones.  The first $1
million milestone payment was paid in fiscal 1999.  The second
payment of $1 million is not expected until fiscal 2001.

          The Company believes its future growth will continue to
depend in part upon the introduction of new products that provide
superior benefits, command premium prices and have significant
growth potential.  The Company works closely with health care
professionals to ascertain their needs and concerns and those of
their patients.

          During fiscal 1999, 1998 and 1997, the Company spent a
total of $14,820,000, $15,179,000 and $13,861,000 respectively,
for research and development.

Patents and Licenses

          It is the Company's policy to actively seek patent
protection for its products when appropriate.  The Company's
patents include patents relating to its penile prostheses, tissue
expanders, combination breast implant and tissue expander,
ultrasonic assisted soft tissue aspiration and disposable
catheters.

          All of the patents relating to products, which produce
significant revenues, have at least two years remaining until
expiration.  While the Company believes its patents are valuable,
it has been the Company's experience that the knowledge,
experience and creativity of its product development and
marketing staffs, and trade secret information with respect to
manufacturing processes, materials and product design, have also
been important in maintaining proprietary product lines.  As a
condition of employment, the Company requires each of its
employees to execute an agreement relating to confidential
information and patent rights.

Product Liability and Warranties

          The Company attempts to conduct its product
development, manufacturing, marketing and service and support
activities with careful regard for the consequences to patients.
The Company occasionally receives communications from surgeons or
patients with respect to various products claiming the products
are defective and have resulted in injury to the patient.  It is
the Company's policy to replace any products claimed to have
malfunctioned within a reasonable time after sale.  In the case
of the Company's inflatable penile prostheses, the Company will
replace a unit after implantation upon request of the surgeon for
any reason.

          In fiscal 1999, the Company implemented a limited
warranty program to cover its breast implants.  The program
provides a no charge replacement product, under certain
circumstances, for the life of the patient.  For five years
following implantation, the Company will provide up to
$1,200 in financial assistance to defray operating room
costs not covered by insurance.  The Company provides a
limited warranty on certain of its capital equipment
products, such as the Contour Genesis, against defects in
workmanship and material.  Estimated warranty costs are
provided at the time of sale and periodically adjusted to
reflect actual experience.

Raw Material Supply

          The Company obtains certain raw materials and
components for a number of its products from single suppliers.
In most cases the Company's sources of supply could be replaced
if necessary without undue disruption, but it is possible that
the process of qualifying new materials and/or vendors for
certain raw materials and components could cause a material
interruption in manufacturing or sales.  No material
interruptions occurred during the last fiscal year.

          In the mid 90's, certain suppliers of raw materials,
such as Dow Corning, DuPont and others, announced that they would
no longer supply implant or medical grade materials for products
in several markets related to reproduction, contraception,
obstetrics or cosmetic surgery, due to what they perceived as a
product liability risk in excess of the potential economic
benefits of providing these materials.  Certain of the Company's
products, principally breast implants and penile implants,
incorporated materials supplied by these companies.  Under
guidelines established by the FDA, the Company successfully
replaced these materials with those being offered by other
companies willing to supply device manufacturers.  The price the
Company pays for many of these replacement materials is
substantially higher than with its previous vendors.  These
sources of supply are relatively new, and there can be no
assurance that they will be able to supply the Company in the
quantities needed, or that regulatory or other delays will not
cause a disruption in sales of affected products.  The Company
believes its supply of raw materials is adequate for the current
fiscal year.

Employees

          As of March 31, 1999, the Company employed 1,581 people
of whom 1,074 were in manufacturing, 357 in sales and marketing,
87 in research and development and 63 in finance and
administration.  Included in this amount are 360 employees
exclusively engaged in the ophthalmology business.  None of the
Company's employees are represented by a union.  There has never
been a work stoppage due to labor difficulties, and the Company
considers its relations with its employees to be satisfactory.

Discontinued Operations (Ophthalmology Products)

          As discussed earlier, the Company is in the process of
divesting the ophthalmology business.  The Company has entered
into an agreement to sell the assets of its intraocular lens
business, which represents approximately half of the Company's
ophthalmic assets.  The Company is actively marketing the
remaining portions of the business. The Company would expect to
complete the divestiture during fiscal 2000.

          Ophthalmic products include intraocular lenses, used
for replacement of a lens following cataract surgery, surgical
equipment, primarily coagulators used to control bleeding during
ophthalmic and other microsurgery, and diagnostic equipment, used
to evaluate disorders of the eye.

          Net sales of ophthalmology products were $37,893,000,
$35,029,000 and $36,574,000 in fiscal 1999, 1998 and 1997,
respectively.

          The Company's primary focus in ophthalmology has been
on cataract and glaucoma surgery.  Cataract surgery, which
involves the removal of a calcified lens in the eye and the
implantation of an intraocular lens ("IOL"), is the most common
surgical procedure performed in both the United States and the
world.

          The Company has produced a wide range of products
related to cataract surgery, including diagnostic ultrasound
equipment, disposable products used during the surgery,
phacoemulsification to remove the cataract and IOLs.

          In November 1996, the Company introduced its next
generation diagnostic ultrasound device, the Advent A/B.  The
Advent aids in the diagnosis of the cataract and other disorders
of the eye, and helps determine the prescription strength of the
IOL to implant.

          Disposable ophthalmic products include coagulators to
control bleeding during surgery.  This is accomplished by
equipment that generates radio frequency energy and a hand-held
instrument that delivers it to the surgical site.  The Company
also markets lint free surgical wipes and sponges, diamond blades
and knives, and titanium instruments such as forceps and needle
holders.

          In February 1997, the Company began marketing the
Mentor SIStem phacoemulsifier, a totally redesigned and upgraded
version of the Company's first phacoemulsifier.  This product
incorporates many advanced features, including a unique fluidics
system for enhanced hydrodynamic control and a closed aspiration
system for instant vacuum control.

          In October 1994, the Company acquired the IOL product
line of Optical Radiation Corporation, a subsidiary of Benson
Eyecare.  The Company markets two types of IOLs:  a fixed, hard
plastic lens, and proprietary foldable lens, the MemoryLensr.
The MemoryLens has been available internationally since early
1996.  Sale in the United States was approved by the FDA in
December 1997.  The market for IOL's has been shifting rapidly
from fixed lenses to foldable ones, which can be implanted
through a smaller incision.  The MemoryLens is the first and only
lens to be pre-rolled at the factory, thereby facilitating the
surgical procedure.

          The Company also markets tonometry products, which
measures the intraocular pressure of the eye, which aids in the
diagnosis of glaucoma.

          The Company uses primarily independent sales
representatives in the United States to market its ophthalmic
products. In this market, companies compete primarily on the
basis of product quality and technology, service, reliability and
price.  By offering unique, proprietary products and a broad
range of niche products, the Company believes that it will be
able to compete against larger companies.  Various competitors
include Allergan, Inc., Alcon Laboratories Inc., a subsidiary of
Nestle S.A., Bausch & Lomb, Inc., Pharmacia, Upjohn, Inc. and
Staar Surgical Company.


ITEM 2.   PROPERTIES.

          The Company owns manufacturing, warehouse and office
buildings in Minneapolis, Minnesota (161,965 square feet).  The
Company leases additional office manufacturing and warehouse
facilities in Santa Barbara, California (78,000 square feet),
Mounds View, Minnesota (20,000), Irving, Texas (139,109 square
feet), Norwell, Massachusetts (57,000 square feet), Cidra, Puerto
Rico (47,000 square feet) and Leiden, the Netherlands (15,000
square feet).  Under the terms of the proposed sale of the
intraocular lens product line, the acquirer will assume the
obligations under the Cidra Puerto Rico lease.  The Company's
international sales offices lease office and warehouse space
ranging from 1,000 to 5,500 square feet.  All leases have terms
ranging from one to fifteen years, renewable on terms the Company
considers favorable.

          The Company believes its facilities are generally
suitable and adequate to accommodate its current operations, and
suitable facilities are readily available to accommodate any
future expansion as necessary.


ITEM 3.   LEGAL PROCEEDINGS.

          Claims related to product liability are a regular and
ongoing aspect of the medical device industry.  At any one time,
the Company is subject to claims asserted against it and is
involved in products liability litigation.  These actions can be
brought by an individual, or by a group of patients purported to
be a class action.  The Company has carried product liability
insurance on all its products, including breast implants,
subsequent to May 1991 and prior to September 1985.  This
insurance is subject to certain self-insured retentions and
limits of the policy.  From September 1985 through April 1991,
the Company was self insured for the majority of its surgical
implant products, but had product liability insurance on the rest
of its products.  From June 1992 on, the Company's insurance has
excluded silicone gel-filled breast implants.

          In addition, in the ordinary course of its business the
Company experiences various types of claims that sometimes result
in litigation or other legal proceedings.  The Company does not
anticipate that any of these proceedings will have any material
adverse effect on the Company.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT.

          The executive officers of the Company as well as the
ages as of June 28, 1999, are listed below, followed by brief
accounts of their business experience and certain other
information.

Name                   Age  Position

Christopher J. Conway  60   Chairman of the Board, Chief
                            Executive Officer and Director

Anthony R. Gette       43   President, Chief Operating Officer,
                            Secretary and Director

Malcolm Boddy          57   President, Mentor Manufacturing
                            Operations Division

Trevor Pritchard       45   President, Mentor Medical Inc.

Gary E. Mistlin        47   Senior Vice President,
                            Finance/Treasurer and Chief
                            Financial Officer

Bobby K. Purkait       49   Senior Vice President, Research &
                            Development

Ramona E. Schwab       38   Senior Vice President, Human
                            Resources

          Mr. Conway is a founder of the Company and has served
as its Chief Executive Officer and Chairman of the Board of
Directors since the Company's inception in 1969.

          Mr. Gette joined the Company in December 1980 and has
served in various financial and general management capacities
since that time. He became Vice President, Finance in 1983,
Executive Vice President in 1986 and President and Chief
Operating Officer in 1987.  He became Secretary in 1986.

          Mr. Boddy joined the Company in July 1997 as Senior
Vice President of Manufacturing Operations.  He was promoted to
President, Mentor Manufacturing Operations Division in February
1998.  From 1994 to 1997 he was Vice President, Operations of the
Renal Products Division of National Medical Care, a subsidiary of
W.R. Grace & Co.

          Mr. Pritchard joined the Company in November 1998 as
President of Mentor Medical, Inc.  From 1995 to 1998 he was
Executive Vice President of International Sales and Marketing for
Sherwood-Davis & Geck, a subsidiary of American Home Products
Corporation.  From 1994 to 1995 he was Vice President -
International for Davis & Geck.

          Mr. Mistlin joined the Company in November 1987, as
Director of Finance/Treasurer, and was promoted to Vice President
of Finance/Treasurer in April 1989 and Senior Vice President in
April 1998.

          Mr. Purkait joined the Company in February 1986 and has
served in various research & development capacities.  He was
promoted to Vice President of Research & Development in 1988, and
Senior Vice President in April 1998.

          Ms. Schwab joined the Company in March 1996.  From 1992
to 1996 she was Director, Human Resources of Sorin Biomedical
Inc., a privately held cardiovascular medical device company.


                             PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.

(a)       The Common Stock of the Company is traded on the NASDAQ
National Market under the symbol MNTR.  There are approximately
14 market makers for the Company's stock.  The following table
shows the range of high and low closing sale prices reported on
the NASDAQ National Market.  Quotations represent prices between
dealers, and do not reflect retail mark-ups, mark-downs or
commissions.

Year Ended March 31, 1999               High      Low
Quarter ended June 30, 1998             29 13/32  23 3/4
Quarter ended September 30, 1998        24 1/8    11 1/16
Quarter ended December 31, 1998         23 7/16   10 1/8
Quarter ended March 31, 1999            21 3/4    14 1/4

Year Ended March 31, 1998               High      Low
Quarter ended June 30, 1997             29 5/8    19 1/4
Quarter ended September 30, 1997        33 3/4    29
Quarter ended December 31, 1997         40 1/8    30 1/2
Quarter ended March 31, 1998            36 5/8    24 1/8

(b)       As of June 28, 1999 there were 1,500 holders of
record of the Company's Common Stock.

(c)       In fiscal 1999 and fiscal 1998, the Company declared
and paid a quarterly dividend of $0.025 per share of Common
Stock.

ITEM 6.   SELECTED FINANCIAL DATA.

          The following table summarizes certain selected
financial data of the Company and should be read in conjunction
with the related Consolidated Financial Statements of the Company
and accompanying Notes to Consolidated Financial Statements.

                                      Year Ended March 31,
(in thousands, except
per share data)
                          1999     1998      1997       1996     1995
Statement of Income
Data
Net sales               $202,783  $180,267  $166,794  $143,344   $116,602
Gross profit             126,609   121,145   116,162   100,558     79,105
Operating income          30,141    36,786    39,649    37,166     26,648
Income before income
  taxes - continuing
  operations              30,888    38,404    39,832   36,179      23,828
Income taxes -
  continuing operations   10,447    13,575    14,497    12,924      8,825
Income from continuing
  operations              20,441    24,829    25,335    23,255     15,003
Discontinued operations
  net of tax              (6,479)     (932)    2,535       564        770
Net income              $ 13,962  $ 23,897  $ 27,870  $ 23,819   $ 15,773

Basic earnings per
share:
  continuing operations $   0.83  $   1.00  $   1.02  $   0.96   $   0.69
Diluted earnings per
share:
  continuing operations $   0.80  $   0.94  $   0.96  $   0.89   $   0.64
Basic earnings per
  share                 $   0.57  $   0.96  $   1.12  $   0.99   $   0.73
Diluted earnings per
  share                 $   0.55  $   0.91  $   1.06  $   0.91   $   0.67
Dividends per common
  share                 $   0.10  $   0.10  $   0.10  $   0.10   $  0.075
Average outstanding
  shares:
    Basic                 24,550    24,894    24,863    24,163     21,640
    Diluted               25,394    26,330    26,349    26,412     25,306

Balance Sheet Data:
Working capital         $106,751  $113,657  $102,500  $ 85,255   $ 66,920
Total assets             196,011   199,911   164,474   146,072    125,162
Long-term debt, less
  current portion                                  8        58     24,655
Shareholders' equity    $158,618  $164,685  $138,349  $116,495   $ 71,114

SALES BY PRINCIPAL PRODUCT LINE
                                    Year Ended March 31,
                           1999           1998            1997
                                   (Dollars in thousands)
                        Amount    %     Amount    %     Amount    %
Plastic % General
  Surgery Products     $122,066   60%  $112,449   62%  $106,970   64%
Surgical Urology
  Products               37,307   18%    28,413   16%    25,500   15%
Disposable Urology
  Products               43,410   22%    39,405   22%    34,324   21%
                       $202,783  100%  $180,267  100%  $166,794  100%


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.

In May 1999, the Company announced that its Board of Directors had
decided to divest the ophthalmology business, which accounted for approximately
16% of sales in fiscal 1999.  The Company subsequently announced that it
has entered into an agreement to sell the assets of the intraocular lens
business.  The remaining parts of the ophthalmic business are currently
being actively marketed.  As a result of this decision, the Company now
accounts for the ophthalmic business as a "Discontinued Operation" under
Generally Accepted Accounting Principles (GAAP).  Accordingly, all sales
and expenses and other financial information of the ophthalmic business are
reported, on a net basis, as a single line on the financials.  Numbers in this
Form 10-K have been restated to exclude the results of the ophthalmic
business as appropriate.

The following table sets forth various items from the
Consolidated Statements of Income as a percentage of net sales
for the periods indicated:

                                        Year Ended March 31,
                                        1999     1998    1997
Net sales                             100.0%    100.0%   100.0%
Costs and expenses
  Cost of sales                        37.6%     32.8%    30.4%
  Selling, general and administrative  40.3%     38.4%    37.6%
  Research and development              7.2%      8.4%     8.2%

Operating income from continuing       14.9%     20.4%    23.8
operations
  Interest expense                     (0.1%)     0.0%    (0.3%)
  Interest income                       0.4%      0.7%     0.5%
  Other (expense) income                0.0%      0.2%    (0.1%)

Income from continuing operations
before income taxes                    15.2%     21.3%    23.9%
  Income taxes                          5.1%      7.5%     8.7%
Income from continuing operations      10.1%     13.8%    15.2%
  Income (loss) from discontinued
    operations (net of tax)            (3.2%)    (0.5%)    1.5%

Net income                              6.9%     13.3%    16.7%

RESULTS OF OPERATIONS

Sales
Sales for fiscal 1999 increased to $203 million from $180 million
in 1998, an increase of 12%.  Disposable urology products
increased 10% from the prior year.  Growth continues to be strong
in intermittent self-catheters.  Approximately half of the
increase in disposable urology product sales resulted from the
mid year acquisition of Sierra Laboratories, a privately held
manufacturer of specialty urological disposables.  Sales of
surgical urology products were up 31%.  Adding to urology product
sales were two new products: IoGold brachytherapy seeds for the
treatment of prostate cancer, which was introduced in January
1998, and the Suspend sling for treating female urinary
incontinence, introduced in May 1998.  These products accounted
for an additional $14 million of sales for the year.  Sales of
penile implants declined 21% from fiscal 1998, due to competition
from a new impotence drug, Viagra, which was introduced by Pfizer
during the Company's first quarter of fiscal 1999.  The Viagra
introduction and concurrent advertising campaign generated an
unprecedented amount of interest in impotence causes and
treatments.  The Company continues to believe that this interest
in treating impotence bodes well for the long-term prospects of
penile implant sales, as Viagra will not work on all patients.
Sales of penile implants in the second half of fiscal 1999
increased 17% over the first half of the year.  While the Company
hopes this upward trend will continue, we may continue to see
weakness in sales in the near term.  Plastic & general surgery
product sales increased 9% compared to fiscal 1998.  General
surgery products, which include the Company's Contour Genesis
soft tissue aspiration system and a line of related disposable
products, were up $3 million in fiscal 1999.  The remaining sales
growth in fiscal 1999 came from higher sales of plastic surgery
products, which had been adversely affected by a fire at the Texas
manufacturing facility during fiscal 1998.

Sales for fiscal 1998 increased from $167 million in 1997 to $180
million, an increase of 8%.  Sales of surgical urology products
increased 11%, primarily due to unit growth in penile implant
sales. Included in surgical urology product sales was
approximately $700 thousand in brachytherapy seeds, which was
introduced in January 1998.  Disposable urology sales grew 15%,
primarily from increased sales of intermittent self-catheters.
Plastic and General surgery products sales grew 5%.  Almost the
entire growth came from the Contour Genesis, which was introduced
during the second quarter of fiscal 1998.  Sales of plastic
surgery products were relatively unchanged from the prior year.
These sales were affected by a fire at the Company's Texas
facility, which occurred in August 1997.  The fire caused the
shutdown of certain production departments in September and
October 1997.  See "Cost of Sales".  As a result, the Company was
temporarily unable to meet all of its demand for certain mammary
implants, especially silicone-gel-filled products.  Production
was back to normal levels by the end of fiscal 1998, although
significant backorders still existed as of that date.

The Company's export sales to unaffiliated customers accounted
for 9% of net sales in all three fiscal years ended March 31,
1999, 1998 and 1997, respectively.  In addition, 14%, 14% and 12%
of sales in each year were from the Company's direct
international sales offices.

Over the three fiscal years ended March 31, 1999, sales increases
have been primarily the result of increased unit sales.  General
selling price increases have not been significant in recent
years.

Cost Of Sales
Cost of sales was 37.6% of net sales for fiscal 1999, compared to
32.8% for the prior year.  Approximately 1.1% of the change
related to the effect in the sales mix of increased sales of non-
company manufactured products, such as the IoGold brachytherapy
seed and the Suspend sling.  Pursuant to the Company's agreements
with its manufacturing partners, the Company generates
approximately a 50% gross margin on these types of products.

The remaining increase in fiscal 1999 was primarily related to
costs incurred in re-validating its manufacturing processes at
its Texas facility.  In 1996, the Food and Drug Administration
("FDA") issued the Texas facility a warning letter, citing
several inadequacies in the Company's adherence to FDA Good
Manufacturing Practices.  The FDA was specifically concerned with
the method by which the Company had performed its initial
validation of the manufacturing processes in the Texas facility.
The Company agreed to re-validate the facility, as well as
correct the other items in the warning letter.  The Company has
committed a variety of resources to the re-validation and GMP
compliance effort, including the hiring of additional staff, use
of outside consultants and extensive testing, both destructive
and otherwise, of work in process and finished goods.  In May
1998, the Company entered into a voluntary consent decree with
the FDA, which, among other things, required the Company to
complete the re-validations in the timeframe set forth in the
decree.

The consent decree required the Company to hire outside expert
consultants to assist in strengthening the Company's compliance
program and related processes.  In July 1998 the consultant
conducted a comprehensive GMP audit of the Texas facility and
submitted a detailed written report to Mentor management and the
FDA on its findings.  In that report, the consultant stated that,
except for the outstanding re-validations, there were no
significant areas of GMP non-compliance.

The Company and FDA agreed to time frames under which the Company
was to complete its re-validations of its manufacturing
processes; specifically by November 2, 1998 for saline-filled
devices and by December 31, 1998 for gel-filled devices.  The
Company completed its validations of both devices in those
timeframes.  The outside expert consultant reviewed the
validations and reported to management and to the FDA that all
validation projects had been completed in accordance with
established milestones and within the timeframes established by
the consent decree.

Additionally, under the terms of the consent decree, an expert
consultant is required to conduct an inspection and to issue a
report annually.  The first annual inspection and report has been
completed and filed with the FDA.  The consultant conducted a
comprehensive inspection according to the QSR/GMP medical device
regulations.  In his report, the consultant stated, "Mentor is in
substantial compliance with the current Good Manufacturing
Practices."

Should the Company fail to comply with the conditions of the
consent decree under its terms, the FDA is allowed to order the
Company to stop manufacturing or distributing breast implants,
order a recall or take other corrective actions.  The Company may
also be subject to penalties of $10,000 per day until the task is
completed.

In fiscal 1999, the Company settled for $6.0 million an insurance
claim related to the fire at its Texas facility in August 1997.
The Company recorded the $2.8 million of this amount that had not
been recorded in the previous year as a reduction to cost of
sales during fiscal 1999.

Cost of sales was 32.8% of net sales for fiscal 1998, compared to
30.4% for the prior year.  The increase was primarily related to
the fire at the Company's Texas manufacturing facility.  Several
production areas were affected by the fire and many of the
production departments were shut down for the month of September
1997, and, depending on the department, in October and November.
The higher level of cost of sales for the year was caused by
unabsorbed overhead due to a lack of production, combined with
inefficiencies upon production startup.

The Company filed an insurance claim as of March 31, 1998 for
property damage repair, loss of inventory destroyed by the fire
and business interruption.  Based on an initial progress payment
of $1 million and representations from the insurance carrier, the
Company recorded $1.6 million in insurance proceeds in fiscal
1998 to cover property damage losses.  An additional $1.6 million
in insurance proceeds to offset business interruption losses was
recorded as a reduction to cost of sales in the fourth quarter of
fiscal 1998.

In addition, during fiscal 1998, the Company began to spend a
significant amount of funds related to the re-validation efforts
described above.

Selling, General and Administrative
Selling, general and administrative expenses increased to 40.3%
of net sales in fiscal 1999, compared to 38.4% in the previous
year.  The Company added two specialized sales forces during the
year to better promote its line of soft tissue aspiration
products and to support the launch of its brachytherapy seed
products.

Selling, general and administrative expenses increased to 38.4%
of net sales in fiscal 1998, compared to 37.6% the prior year.
The increase relates primarily to the Company's efforts in
launching its new product, the Contour Genesis.

Research and Development
Research and development expenses were 7.2% of net sales in
fiscal 1999, a decrease from 8.4% the prior year.  The Company
continues to spend substantial funds on its premarket approval
applications ("PMAAs") for its silicone gel-filled breast
implants, saline-filled breast implants and penile implants.  The
Company is committed to a variety of clinical and laboratory
studies in connection with these products.  The Company expects
to complete the work on its saline-filled breast implant and
penile implant PMAAs and submit the data to the FDA in fiscal
2000.

The Company has an investment in Intracel, its marketing partner
for a potential bladder cancer treatment.  The Intracel agreement
requires the Company to pay $1 million a year for three years to
defray the costs of the clinical trials for the product,
beginning in January 1998.  Results for fiscal 1999 included $1.0
million of this amount, compared to $250 thousand in fiscal 1998.
In addition, the Company is obligated to pay an additional $3
million upon the completion of certain milestones by Intracel.
The first $1 million milestone payment was expensed in fiscal
1999.  The Company expects the second milestone payment of $1
million to be made in fiscal 2001.

Research and development expenses were 8.4% of sales in fiscal
1998, compared to 8.2% in fiscal 1997.  The increase was
primarily related to development of the Contour Genesis, which
was introduced in fiscal 1998.

Interest and Other Income and Expense
Interest expense was $272 thousand in fiscal 1999, an increase
from $27 thousand in fiscal 1998.  During the year, the Company
borrowed under its line of credit to help fund a stock repurchase
program.  There were no borrowings in fiscal 1998.

Interest income decreased to $926 thousand in 1999 from $1.3
million in fiscal year 1998, resulting from lower cash balances.
Other income and expense primarily includes gains or losses on
disposals of assets, and foreign currency gains or losses related
to the Company's foreign operations.

Interest expense was $27 thousand in fiscal 1998, a decrease from
$559 thousand in fiscal 1997.  During fiscal 1997, the Company
paid the remaining portion of its monetary obligations under the
terms of its fiscal 1994 agreement settling breast implant claims
against the Company.  This had accounted for $383 thousand of
interest expense in 1997.

Interest income increased to $1.3 million in 1998 from $806
thousand in fiscal 1997, resulting from higher cash balances.

Income Taxes
The effective rate of corporate income taxes was 34% for fiscal
1999, 35% in 1998 and 36% in 1997.

Restructuring Charge and Discontinued Operations
In December 1998, the Company announced a restructuring plan as
part of a strategic initiative to improve the profitability and
competitiveness of the ophthalmic segment of its business by
reducing manufacturing costs and concentrating on those products
and markets capable of sustained, long-term profitable growth.
During the implementation of this plan, the Board of Directors
authorized management to evaluate potential buyers for the
product lines of the ophthalmic business segment.  Subsequent to
March 31, 1999, the Company announced the pending sale of the
intraocular lens product line, a substantial portion of the
ophthalmic products business.  Consistent with this pending sale,
the net assets and operations of the ophthalmic segment of the
business, comprised of the intraocular lens products and
ophthalmic equipment, have been classified as "discontinued
operations".  The sale of both product lines is expected to be
completed in calendar year 1999.

A charge related to the planned restructuring of $7.0 million is
included in the results of discontinued operations in 1999.  The
plan included $1.9 million for employee termination benefits
related to a workforce reduction of 150 positions, anticipated
plant closing costs of $800 thousand, a write-down of $3.3
million for production assets, and a write-down of $1.0 million
of intangibles related to products to be discontinued.
Concurrent with the restructuring, the Company recorded a $7.0
million special charge for inventory primarily related to the
discontinuance of certain ophthalmic products.  As a result,
total charges of $14.0 million were included in the results of
discontinued operations in fiscal 1999.  At March 31, 1999, the
remaining liability for termination and plant closing costs
recorded as part of the restructuring plan was $2.2 million,
which is expected to be paid during calendar 1999.

Net Income
Net income for fiscal 1999 was $14.0 million, compared to $23.9
million the previous year.  Higher sales were offset by the
restructuring charge and the re-validation costs at the Texas
facility.

Inflation
The Company does not believe inflation has had a material impact
on the Company's operations over the three-year period ended
March 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

During the three years ended March 31, 1999, liquidity needs have
been satisfied principally by cash flow from operations and
borrowings under the Company's line of credit.

At March 31, 1999, working capital was $106.8 million compared to
$113.7 million the previous year.  The Company generated $19.1
million of cash from continuing operations during fiscal 1999,
compared to $31.7 million the previous year.  Lower income from
continuing operations, an increase in accounts receivable, and a
decline in taxes payable accounted for the majority of the
change.

During fiscal 1999 the Company spent $10.9 million on capital
expenditures.  The funds were used for capacity expansion at the
manufacturing facility in Minneapolis, additional manufacturing
equipment in Texas as a result of the re-validations, and
equipment and data processing hardware and software.  The Company
anticipates investing approximately $12 million in facilities and
capital equipment in fiscal 2000.

At the beginning of fiscal 1999, the Company had available to it
$15 million under a secured line of credit.  This was increased
to $25 million during the second quarter.  Borrowings accrue
interest at the prevailing prime rate or at a premium to LIBOR,
at the Company's discretion. The line of credit includes certain
covenants that, among others, limit the dividends the Company may
pay and require the maintenance of certain levels of tangible net
worth and debt service ratios.  An annual commitment fee of .125%
is paid on the unused portion of the credit line.  During fiscal
1999, the Company borrowed $6.9 million under the agreement. At
March 31, 1999, the balance outstanding was $4.0 million.  This
amount was paid off during the first quarter of fiscal 2000.

The Company's Board of Directors has authorized an ongoing stock
repurchase program.  The objectives of the program, among other
items, are to offset the issuance of stock options, provide
liquidity to the market and to reduce the overall number of
shares outstanding.  Repurchases are subject to market conditions
and cash availability.  In July 1998, the Board increased the
repurchase authorization by 1 million shares, to a total of 1.8
million, and instructed the Company to increase its share
repurchases.  As a result, during fiscal 1999, the Company
repurchased 1.1 million shares for consideration of $20.5
million.

The Company's principal source of liquidity at March 31, 1999
consisted of $21.6 million in cash and short term marketable
securities plus $21.0 million available under the existing line
of credit. The Company believes that funds generated from
operations, its cash and marketable securities and funds
available under its line of credit will be adequate to meet its
working capital and capital expenditure requirements through
fiscal 2000.

IMPACT OF YEAR 2000

General Description of the Year 2000 Issue and the Nature and
Effects of the Year 2000 on Information Technology (IT) and Non-
IT Systems
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the
applicable year.  Any of the Company's computer programs,
hardware or embedded chips that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000.  This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

Based on recent assessments, the Company determined that it will
be required to modify or replace portions of its distribution,
finance and manufacturing software and certain hardware so that
those systems will properly utilize dates beyond December 31,
1999.  The Company presently believes that with modifications or
replacements of certain existing software and hardware, the Year
2000 Issue can be mitigated.  However, if such modifications and
replacements are not made, or are not completed in a timely
manner, the Year 2000 Issue could have a material impact on the
operations of the Company.

The Company's plan to resolve the Year 2000 Issue involves the
following key phases: inventory, assessment and remediation.  The
Company has categorized its systems into several areas: core
systems (i.e. distribution, finance and manufacturing systems),
ancillary support systems to those core systems, embedded
systems, products, and third party vendors.

Inventory and Assessment
The Company has completed its inventory and assessment of both
its domestic and international core systems, indicating most of
the core systems would be adversely affected. For the ancillary
support systems and embedded systems, the Company has completed
its inventory and assessment. This identified two items that need
to be updated.  The Company has completed its inventory and
assessment of its product lines and has determined that most of
the products it has sold and will continue to sell do not require
remediation to be Year 2000 compliant.  Accordingly, the Company
does not believe that the Year 2000 presents a material exposure
as it relates to the Company's products.

Status of Progress in Becoming Year 2000 Compliant
For its domestic core system exposures related to its
distribution, finance and manufacturing software, the Company has
completed all required remediation. For other domestic core
systems, such as desktop computers, networks and off-the shelf
application software, the Company is 90% complete on the
remediation phase and expects to complete upgrades and/or
replacement no later than October 31, 1999.

The remediation of the identified ancillary and embedded systems
is expected to be complete no later than October 31, 1999.

Nature and Level of Importance of Third Parties and their
Exposure to the Year 2000
Other than payroll and its banking relationships, the Company has
no other significant direct interfaces with third party vendors.
The Company is in the process of working with key third party
vendors to ensure that the Company's systems that interface
directly with third party vendors are Year 2000 compliant by
December 31, 1999.  The Company understands that key vendors are
in the process of making their systems Year 2000 compliant.  Each
vendor queried by the Company believed that its system would be
Year 2000 compliant by the end of 1999.

The Company is beginning to query its significant suppliers and
subcontractors that do not share information systems with the
Company (external agents).  To date, the Company is not aware of
any external agent with a Year 2000 issue that would materially
impact the Company's results of operations, liquidity, or capital
resources.  The Company has no means of ensuring that external
agents will be Year 2000 ready.  The inability of external agents
to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company.  The effect of non-
compliance by external agents is not determinable at this time.

Costs
The total cost to the Company of the Year 2000 project is
estimated at $3.1 million and is being funded through operating
cash flows.  To date, the Company has incurred costs of
approximately $2.1 million. This amount includes upgrading its
desktop systems and office software to the latest release, which
the Company would do in the normal course of business. The
majority of these costs relate to new hardware and software and
are being capitalized.

Risks
Management of the company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner.  The
Company has not yet completed all necessary phases of the Year
2000 program.  In the event that the Company does not complete
any additional phases, the Company would be constrained in taking
customer orders, and might be unable to manufacture and ship
certain products, or invoice customers.  In addition, disruptions
in the economy generally resulting from Year 2000 issues could
also materially adversely affect the Company.

Contingency Plans
The Company currently has no contingency plans in place in the
event it does not complete all phases of the Year 2000 program.
The Company plans to evaluate the status of completion in June
1999 and determine whether such a plan is necessary.

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Except for the historical information contained herein, the
matters discussed in this Management's Discussion are forward-
looking statements, the accuracy of which is necessarily subject
to risks and uncertainties.  Actual results may differ
significantly from the discussion of such matters in the forward-
looking statements.

Due to the nature of the Company's products and business, the
Company has been and will be involved in various legal actions
arising in the course of business, some of which involve product
liability and intellectual property claims.  With respect to
product liability issues, the litigation and regulatory risks
will continue to exist even with respect to those products that
have received or in the future may receive regulatory approval
for commercial sale.  It is possible that adverse results arising
from product liability or intellectual property actions, as well
as adverse results arising from regulatory or administrative
proceedings could negatively affect the Company's future results
of operations.

The Company has been and may be in the future the subject of
negative publicity, which can arise from various sources, ranging
from the news media to legislative and regulatory investigations.
There can be no assurance that such negative publicity will not
result in a material adverse effect on the Company's future
financial position, its results of operations or the market price
of its stock.  In addition, significant negative publicity could
result in an increase in product liability claims.

The Company's products, development activities and manufacturing
processes are subject to extensive and rigorous regulation by the
FDA and by comparable agencies in foreign countries.  In the
United States, the FDA regulates the introduction, manufacturing,
labeling and record-keeping procedures for medical devices.  The
process of obtaining marketing clearance from the FDA for new
products and existing products can be time-consuming and
expensive, and there is no assurance that such clearances will be
granted or that FDA review will not involve delays that would
adversely affect the Company's ability to commercialize
additional products or additional applications for existing
products.  In addition, certain of the Company's products that
are in the research and development stage may be subject to a
lengthy and expensive pre-market approval ("PMA") process with
the FDA.  Product approvals by the FDA can also be withdrawn due
to failure to comply with regulatory standards or the occurrence
of unforeseen problems following initial approval.  The FDA could
also limit or prevent the manufacture or distribution of the
Company's products and has the power to require the recall of
such products.  FDA regulations depend heavily on administrative
interpretation, and there can be no assurance that future
interpretations made by the FDA or other regulatory bodies will
not adversely affect the Company.  The FDA, various state
agencies and foreign regulatory agencies inspect the Company and
its facilities from time to time to determine whether the Company
is in compliance with various regulations relating to
manufacturing practices, validation, testing, quality control and
product labeling.  A determination that the Company is in
violation of such regulations could lead to imposition of
penalties, product recalls, consent decrees or product seizures.

Each of the Company's major business segments operates its
manufacturing, warehousing and research and development
activities in a single facility.  While the Company has some
limited protection in the form of basic insurance coverage, the
Company's operating results and financial condition would be
materially adversely affected in the event of a fire or similar
catastrophe.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK

          The following discussion about the Company's market
risk disclosures involves forward-looking statements.  Actual
results could differ materially from those projected in the
forward-looking statements.  The Company is exposed to market
risk related to changes in interest rates and foreign exchange
rates.  The Company does not use derivative financial
instruments.

          The Company maintains a portfolio of highly liquid cash
equivalents, with maturities of three months or less as of the
date of purchase.  The Company also has current marketable
securities consisting primarily of municipal bonds that are of
limited credit risk and have contractual maturities of less than
two years.  Given the short-term nature of these investments, the
Company is not subject to significant interest rate risk.

          A portion of the Company's operations consists of sales
activities in foreign markets.  The Company manufactures its
products primarily in the United States and sells them outside
the U.S. through a combination of international distributors and
eight wholly owned sales offices.  Sales to third party
distributors and to the wholly owned sales offices are in U.S.
dollars.  The sales offices invoice their customers in their
local currency.

          As a result, the Company's financial results could be
significantly affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in those
foreign markets.  The principal exposure on sales to third party
distributors stems from the potential for weak economic
conditions in the foreign market, thus weakening the foreign
currency, decreasing the customer's buying power and potentially
decreasing the Company's sales.  The Company's exposure on sales
to its subsidiaries consists of 1) the exposure related to the
weakening of local currency when payment of the trade payable is
made, thus translating into more local currency needed to pay off
the U.S. denominated payable than when it was recorded, lowering
the subsidiaries' earnings and 2) upon translation of the
subsidiaries monthly financial statements, that a weakening local
currency would cause lower market sales to be recorded in U.S.
dollars that what have occurred had the currency been stable as
compared to the U.S. dollar.  However, in the latter instance,
operating expenses would also be translated at lower amounts and
accordingly, the effect on net income would be mitigated. The
Company does not currently hedge any of these exposures.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          The response to this item is submitted pursuant to Item
14 of this Annual Report on Form 10-K and incorporated herein by
reference.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE.

          None.


                            PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          Information concerning the directors of the Company is
contained in portions of the Proxy Statement for Annual Meeting
of Shareholders to be filed with the Securities and Exchange
Commission within 120 days of the close of the fiscal year ended
March 31, 1999 and incorporated herein by reference.  For
information concerning executive officers, see Item 4A of this
Annual Report on Form 10-K.


ITEM 11.  EXECUTIVE COMPENSATION.

          The information required in this item is incorporated
herein by reference to portions of the Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and
Exchange Commission within 120 days of the close of the fiscal
year ended March 31, 1999.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

          The information required in this item is incorporated
herein by reference to portions of the Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and
Exchange Commission within 120 days of the close of the fiscal
year ended March 31, 1999.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          The information required in this item is incorporated
herein by reference to portions of the Proxy Statement for Annual
Meeting of Shareholders to be filed with the Securities and
Exchange Commission within 120 days of the close of the fiscal
year ended March 31, 1999.


                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K.

(a)(1)    Consolidated Financial Statements

          Report of Independent Auditors

          Consolidated Statements of Financial Position
          as of March 31, 1999 and 1998

          Consolidated Statements of Income for the
          Years Ended March 31, 1999, 1998, and 1997

          Consolidated Statements of Changes in Shareholders'
          Equity for the Years Ended March 31, 1999, 1998, and
          1997

          Consolidated Statements of Cash Flows for the
          Years Ended March 31, 1999, 1998 and 1997

          Notes to Consolidated Financial Statements

(a)(2)    Consolidated Financial Statement Schedules

             Schedule II - Valuation and Qualifying Accounts and
          Reserves

               All other schedules are omitted because they are
          not required, inapplicable, or the information is
          otherwise shown in the consolidated financial
          statements or notes thereto.

(a)(3)    List of exhibits:

          3(a)
          Composite Restated Articles of Incorporation of the
          Company. (1)

     3(b) Composite Restated Bylaws of the Company. (2)

               10(a)     Mentor Corporation Restated 1987 Non-
               Statutory Stock Option Plan and Agreement -
               Registration Statement No. 33-25865. (8)(11)

               10(b)     Mentor Corporation 1991 Stock Option
               Plan - Registration Statement No. 33-48815.
               (9)(11)

               10(c)     Stock Option Agreement, dated September
               21, 1988, between Mentor Corporation and Anthony
               R. Gette. (2)(11)

               10(d)     Lease Agreement, dated November 9, 1989,
               between Mentor Corporation and Skyway Business
               Center Joint Venture. (3)

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K (continued)

               10(e)     First Amendment to Lease Agreement,
               dated December 1, 1993, between Mentor Corporation
               and Skyway Business Center Joint Venture. (6)

               10(f)     Credit Agreement, dated May 22, 1995,
               between Mentor Corporation and Sanwa Bank
               California. (7)

               10(g)     $15,000,000 Revolving Note, dated May
               22, 1995, between Mentor Corporation and Sanwa
               Bank California. (7)

               10(h)     Security Agreement, dated May 22, 1995,
               between Mentor Corporation and Sanwa Bank
               California. (7)

               10(i)     Guarantor Security Agreement, dated May
               22, 1995, between Mentor Corporation and its
               subsidiaries and Sanwa Bank California. (7)

               10(j)     Guaranty Agreement, dated May 22, 1995,
               between Mentor Corporation and Sanwa Bank
               California. (7)

               10(k)     Contribution Agreement, dated May 22,
               1995, between Mentor Corporation and Sanwa Bank
               California. (7)

               10(l)     Inter-Company Note, dated May 22, 1995,
               between Mentor Corporation and Sanwa Bank
               California. (7)

               10(m)     Lease Agreement, dated July 23, 1990,
               between Mentor Corporation and SB Corporate
               Center, Ltd., covering 201 Mentor Drive. (4)

               10(n)     Lease Agreement, dated August 19, 1998,
               between Mentor Corporation and SB Corporate
               Center, LLC, covering 301 Mentor Drive.

               10(o)     Employment Agreement, dated October 30,
               1997, between Mentor Corporation and Malcolm
               Boddy. (10) (11)

               10(p)     Employment Agreement, dated December 1,
               1998, between Mentor Corporation and Trevor M.
               Pritchard. (11)

     21   Subsidiaries of the Company

     23   Consent of Independent Auditors

     27   Financial Data Schedule

     (b)  Reports on Form 8-K:

          None

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K (continued)

(1)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1988, File No. 0-
     7955.

(2)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1989, File No. 0-
     7955.

(3)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1990, File No. 0-
     7955.

(4)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1991, File No. 0-
     7955.

(5)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1993, File No. 0-
     7955.

(6)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1994, File No. 0-
     7955.

(7)  Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1995, File No. 0-
     7955.

(8)  Incorporated by reference to the post effective amendment
     No. 1 to Registration Statement on Form S-8, Registration
     No. 33-25865.

(9)  Incorporated by reference to Registration Statement on Form
     S-8, Registration No. 33-48815.

(10) Incorporated by reference to Exhibits to Annual Report on
     Form 10-K for the year ended March 31, 1998, File No. 0-
     7955.

(11) Management contract or compensatory plan or arrangement.

                 REPORT OF INDEPENDENT AUDITORS


Board of Directors and Shareholders
Mentor Corporation

We have audited the accompanying consolidated statements of
financial position of Mentor Corporation as of March 31, 1999 and
1998, and the related consolidated statements of income, changes
in shareholders' equity, and cash flows for each of the three
years in the period ended March 31, 1999.  Our audits also
included the financial statement schedule listed in the Index at
Item 14(a).  These financial statements and schedule are the
responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Mentor Corporation at March 31, 1999 and
1998, and the consolidated statements of income and cash flows
for each of the three years in the period ended March 31, 1999,
in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.

                                                ERNST & YOUNG LLP


Los Angeles, California
May 11, 1999

MENTOR CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(dollars in thousands)                      March 31,
Assets                                   1999       1998
Current assets:
  Cash and equivalents                $  19,533  $  16,626
  Marketable securities                   2,088     11,603
  Accounts receivable, net of
    allowance for doubtful accounts
    of $2,072 in 1999 and $1,606 in
    1998                                 37,431     31,668
  Inventories                            30,552     27,557
  Deferred income taxes                   7,919      6,619
  Net assets of discontinued
    operations                           36,818     43,446
  Prepaid expenses and other              7,640      6,996
Total current assets                    141,981    144,515

Property and equipment, net              34,995     31,775
Intangibles, net                          2,342      2,938
Goodwill, net                             7,966      5,591
Long-term marketable securities and
  Investments                             8,356     14,806
Other assets                                371        286
                                      $ 196,011  $ 199,911
Liabilities and shareholders' equity
Current liabilities:
  Accounts payable and accrued
    liabilities                       $  26,848  $  24,982
  Income taxes payable                    3,770      5,192
  Dividends payable                         612        634
  Short-term bank borrowings              4,000         50
Total current liabilities                35,230     30,858

Long-term deferred income taxes           2,163      4,368

Shareholders' equity:
  Common Stock, $.10 par value:
    Authorized - 50,000,000 shares;
    Issued and outstanding --
    24,548,537 shares in 1999;            2,455      2,502
    25,020,690 shares in 1998
  Capital in excess of par value         21,502     35,189
  Cumulative translation adjustment      (1,141)    (1,404)
  Unrealized gain on investments            880      5,000
  Retained earnings                     134,922    123,398
                                        158,618    164,685
                                      $ 196,011  $ 199,911

See notes to consolidated financial statements.
MENTOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME


                                          Year Ended March 31,
(in thousands, except per share data)   1999      1998      1997

Net sales                             $202,783  $180,267  $166,794
Costs and expenses:
  Cost of sales                         76,174    59,122    50,632
  Selling, general and administrative   81,648    69,180    62,651
  Research and development              14,820    15,179    13,861
                                       172,642   143,481   127,144

Operating income from continuing
  operations                            30,141    36,786    39,650
  Interest expense                        (272)      (27)     (559)
  Interest income                          926     1,338       806
  Other (expense) income                    93       307       (65)

Income from continuing operations       30,888    38,404    39,832
  before income taxes

Income taxes                            10,447    13,575    14,497
Income from continuing operations       20,441    24,829    25,335
Income (loss) from discontinued
  operations, net of tax                (6,479)     (932)    2,535
Net income                            $ 13,962  $ 23,897  $ 27,870

Basic earnings (loss) per share:
   Continuing operations              $   0.83  $   1.00  $   1.02
   Discontinued operations            $  (0.26) $  (0.04) $   0.10
     Basic earnings per share         $   0.57  $   0.96  $   1.12

Diluted earnings (loss) per share:
   Continuing operations              $   0.80  $   0.94  $   0.96
   Discontinued operations            $  (0.25) $  (0.03) $   0.10
     Diluted earnings per share       $   0.55  $   0.91  $   1.06

See notes to consolidated financial statements.

MENTOR CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY


                                     Capital Accumu-
                            Common     in     lated
                   Common    Stock   Excess   Other
                   Shares    $.10    of Par  Compre-
(in thousands)    Outstand-   Par     Value  hensive Retained
                     ing     Value            Income Earnings    Total
Balance April 1,
1996               24,861   $2,486  $37,840   $  (445) $ 76,614  $116,495

Comprehensive
  income:
Net income                                               27,870    27,870
Foreign currency
  translation
  adjustment                                     (248)               (248)
Comprehensive
  income                                                           27,622
Exercise of stock
  options             241       24    1,610                         1,634
Income tax
  benefit arising
  from the
  exercise of
  stock options                       2,034                         2,034
Repurchase of
  common shares      (295)     (29)  (6,919)                       (6,948)
Dividends
  declared ($.10
  per share)                                             (2,488)   (2,488)
Balance March 31,
  1997             24,807    2,481   34,565      (693)  101,996    138,349

Comprehensive
income:
Net income                                               23,897     23,897
Foreign currency
  translation
  adjustment                                     (711)                (711)
Unrealized gain
   investments                                  5,000                5,000
Comprehensive
income                                                              28,186
Exercise of stock
  options             383       38    2,985                          3,023
Income tax
  benefit arising
  from the
  exercise of
  stock options                       1,703                          1,703
Repurchase of
common shares        (169)     (17)  (4,064)                        (4,081)
Dividends
  declared ($.10
  per share)                                             (2,495)    (2,495)
Balance March 31,
  1998             25,021    2,502   35,189     3,596   123,398    164,685

Comprehensive
  income:
Net income                                               13,962     13,962
Foreign currency
  translation
  adjustment                                      263                  263
Unrealized (loss)
  on investments                               (4,120)              (4,120)
Comprehensive
  income                                                            10,105
Exercise of stock
  options             660       66    4,614                          4,680
Income tax
  benefit arising
  from the
  exercise of
  stock options                       2,038                          2,038
Repurchase of
  common shares    (1,132)    (113) (20,339)                       (20,452)
Dividends
  declared  ($.10
  per share)                                             (2,438)    (2,438)
Balance March 31,
  1999             24,549   $ 2,455 $21,502   $  (261) $134,922  $ 158,618

See notes to consolidated financial statements.
MENTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS


                                            Year Ended March 31,
(in thousands)                            1999      1998      1997
Cash From Operating Activities:
Income from continuing operations      $ 20,441    $ 24,829  $ 25,335
Adjustments to derive cash flows from
 continuing operating activities
   Depreciation                           7,537       6,187     5,209
   Amortization                           1,072       1,124       861
   Deferred income taxes                 (1,165)        216     3,213
   Loss on sale of assets                   107         261        43
   Litigation settlement obligation                            (4,950)

   Changes in operating assets and
     liabilities:
     Accounts receivable                 (5,764)     (1,066)   (3,223)
     Inventories and other current
       assets                            (3,642)     (4,861)   (3,016)
     Accounts payable and accrued
       liabilities                        1,918       2,088     1,083
     Income taxes payable                (1,422)      2,952     1,237
Net cash provided by continuing
  operating activities                   19,082      31,730    25,792
Net cash provided by (used in)
  discontinued operating activities       1,720      (4,832)    1,452
Net cash provided by operating
  activities                             20,802      26,898    27,244

Cash From Investing Activities:
Purchases of property and equipment     (10,850)    (11,081)   (7,600)
Purchases of intangibles and goodwill    (2,866)       (612)   (2,504)
Purchases of marketable securities                   (9,073)  (10,349)
Sales of marketable securities            9,519       9,213     9,400
Investment in manufacturing partners                 (7,006)
Other net                                    67         143       (56)
Net cash used by continuing investing
  activities                             (4,130)    (18,416)  (11,109)
Net cash used by discontinued
  investing activities                   (1,521)     (6,025)     (756)
Net cash used by investing activities    (5,651)    (24,441)  (11,865)

Cash From Financing Activities:
Repurchase of common stock              (20,452)     (4,081)   (6,948)
Proceeds from exercise of stock           6,718       4,726     3,668
  options
Dividends paid                           (2,460)     (2,489)   (2,488)
Borrowings under line of credit
  agreement                               6,900
Repayments under line of credit
  agreement                              (2,900)
Reduction in long-term debt                 (50)         (8)     (415)
  Net cash used for financing
    activities                          (12,244)     (1,852)   (6,183)

Increase in cash and equivalents          2,907          605    9,196
Cash and equivalents at beginning of
  year                                   16,626       16,021    6,825
Cash and equivalents at end of year    $ 19,533    $  16,626 $ 16,021

See notes to consolidated financial statements.
MENTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999

Note A  Summary Of Significant Accounting Policies

Business Activity

Mentor Corporation was incorporated in April 1969.  The Company
develops, manufactures and markets a broad range of products for
medical specialties of plastic and general surgery and urology.
The Company's products are sold to hospitals, physicians and
through various health care dealers, wholesalers, and retail
outlets.  The net assets and results of operation of the
ophthalmic segment of the business are considered discontinued
operations and not included in the continuing operations.

Principles of Consolidation

The consolidated financial statements include the accounts of the
Company and all of its subsidiaries in which a controlling
interest is maintained.  For those subsidiaries where the Company
owns less than 100%, the outside shareholders' interests are
treated as minority interests.  All intercompany accounts and
transactions have been eliminated.  Certain amounts in previously
issued financial statements have been reclassified to conform to
the 1999 presentation.  Financial information presented in the
Notes to Consolidated Financial Statements excludes discontinued
operations, except where noted.

Cash and Equivalents

The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.

Marketable Securities and Long-term investments

The Company considers its marketable securities available-for-
sale as defined in Statement Financial Accounting Standards No.
115. Realized gains and losses and declines in value considered
to be other than temporary are included in income. The cost of
securities sold is based on the specific identification method.
For short term marketable securities there were no material
realized or unrealized gains or losses nor any material
differences between estimated fair values, based on quoted market
prices, and the costs of securities in the investment portfolio
as of March 31, 1999.  The Company's current marketable
securities consist primarily of municipal bonds that are of
limited credit risk and have contractual maturities of less than
two years.

The Company's long-term marketable securities and investments
include a $6 million equity interest, at cost, as quoted market
prices are not available, in Intracel Corporation, the Company's
business partner for a new bladder cancer test and potential
bladder cancer treatment.  Also included is an equity interest
($1.0 million cost) in North American Scientific Inc., the
Company's manufacturing partner under an exclusive agreement for
the distribution of brachytherapy seeds for the treatment of
prostate cancer.  The Company's investment is recorded at its
fair market value, based upon quoted stock market prices, of
$2,350,000 and $8,800,000 at March 31, 1999 and 1998,
respectively.  The unrealized gain of $880,000 and $5,00,000, net
of taxes of $470,000 and $2,800,000, at March 31, 1999 and 1998,
respectively, is reported as a separate component of
shareholders' equity.

Concentrations and Credit Risk

The Company obtains certain raw materials and components for a
number of its products from single suppliers.  In most cases the
Company's sources of supply could be replaced if necessary
without undue disruption, but it is possible that the process of
qualifying new materials and/or vendors for certain raw materials
and components could cause a material interruption in
manufacturing or sales.  No material interruptions occurred
during the last fiscal year.

The Company grants credit terms in the normal course of business
to its customers, primarily hospitals, doctors and distributors.
As part of its ongoing control procedures, the Company monitors
the credit worthiness of its customers.  Bad debts have been
minimal.  The Company does not normally require collateral or
other security to support credit sales.  No customer accounted
for more than 10% of the Company's revenues or accounts
receivable balance for all periods presented.

Revenue Recognition

Sales and related cost of sales are recognized primarily upon the
shipment of products.  The Company allows credit for products
returned within its policy terms.  Such returns are estimated and
an allowance provided at the time of sale.  The Company provides
a warranty on certain of its implants and capital equipment
products against defects in workmanship and material.  Estimated
warranty costs are provided at the time of sale and periodically
adjusted to reflect actual experience.

Inventories

Inventories are stated at the lower of cost or market, cost
determined by the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment is stated at cost.  Depreciation is based
on the useful lives of the properties and computed using the
straight-line method.  Buildings are depreciated over 30 years,
furniture and equipment over 3 to 10 years and leasehold
improvements over the shorter of their estimated remaining lives
or lease term.  Significant improvements and betterments are
capitalized while maintenance and repairs are charged to
operations as incurred.

Intangible Assets and Goodwill

Intangible assets consist of values assigned to patents,
licenses, and trademarks.  These are stated at cost less
accumulated amortization and are amortized over their economic
life ranging from 3 to 20 years using the straight-line method.
Accumulated amortization of intangibles was $3,745,000 at March
31, 1999 and $3,409,000 at March 31, 1998.  The excess purchase
cost over fair value of net tangible assets acquired, goodwill,
is amortized on a straight-line basis over 15-40 years.
Accumulated amortization of goodwill was $2,008,000 at March 31,
1999 and $1,611,000 at March 31, 1998.  The Company assesses on
an ongoing basis the recoverability of goodwill and intangibles
based on estimates of future undiscounted cash flows for the
applicable business compared to net book value.  If the future
undiscounted cash flow estimates were less than net book value,
net book value would then be reduced to fair value based on an
estimate of discounted cash flow.

Income Taxes

The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred income taxes are provided on the temporary
differences between income for financial statement and tax
purposes.

Stock Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") encourages but does
not require companies to record compensation expense for stock
options at fair value.  The Company has chosen to continue to
account for stock options using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees," ("APB Opinion 25")
and related interpretations.  Accordingly, the Company has
provided pro forma disclosures of the earnings per share as
determined under the provision of SFAS 123.

Foreign Sales

Export sales to independent distributors, principally to Canada
and Western Europe, were $17,600,000, $16,173,000 and $14,996,000
in 1999, 1998 and 1997, respectively.  In addition, $27,450,000,
$25,731,000 and $19,809,000 in sales respectively, were from the
Company's direct international sales offices primarily in Canada
and Western Europe.

Foreign Currency Translation

The financial statements of the Company's non-U.S. subsidiaries
are translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency
Translation."  Net assets of certain non-U.S. subsidiaries whose
"functional" currencies are other than the U.S. Dollar are
translated at current rates of exchange.  Income and expense
items are translated at the average exchange rate for the year.
The resulting translation adjustments are recorded directly into
a separate component of shareholders' equity.  Transaction
exchange gains and losses were immaterial in 1999, 1998 and 1997.
Net assets and the results of operations of the Company's foreign
entities were not significant on a consolidated basis.

New Accounting Requirements Adopted

During fiscal 1999, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards
under which companies report information about operating segments
in financial statements.

During fiscal 1999, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130").  SFAS 130 requires unrealized gains or losses on
the Company's available-for-sale securities and foreign currency
translation adjustments to be included in other comprehensive
income.  Prior year financial statements have been reclassified
to conform to the requirements of SFAS 130.  Comprehensive income
for the years ended March 31, 1999, 1998 and 1997 is presented in
the Consolidated Statements of Changes in Shareholders' Equity.

Estimates and Assumptions

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, and disclosure of contingent assets
and liabilities, at March 31, 1999, and the reported amounts of
revenues and expenses during the year then ended.  Actual results
could differ from those estimates.

Reclassifications

Certain reclassifications of previously reported amounts have
been made to conform to current year's presentation.
Specifically the amounts related to the Ophthalmic product lines
previously reported as continuing operation have been
reclassified as discontinued operations, except where noted.

Note B  Inventories

Inventories at March 31 consisted of:

(in thousands)         1999       1998
  Raw materials     $   7,640  $   9,231
  Work in process       6,563      4,999
  Finished goods       16,349     13,327
                    $  30,552  $  27,557

Note C    Property and Equipment

Property and equipment at March 31 consisted of:

(in thousands)                             1999       1998

Land                                    $     286  $     231
Buildings                                   9,489      4,662
Leasehold improvements                     12,508     11,086
Furniture, fixtures and equipment          42,213     34,620
Construction in progress                    3,053      7,005
                                           67,549     57,604
Less accumulated depreciation and         (32,554)   (25,829)
  amortization
                                        $  34,995  $  31,775

Note D    Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at March 31 consisted
of:

(in thousands)                             1999      1998

Trade accounts payables                 $   5,726  $   4,883
Accrued compensation                        7,049      7,085
Sales returns                               5,126      5,503
Self insured retention                      3,700      3,580
Accrued royalties                           1,076      1,163
Other                                       4,171      2,768
                                        $  26,848  $  24,982

Note E    Short-Term Bank Borrowings

At March 31, 1999, the Company had a secured line of credit for
borrowings up to $25 million.  Borrowings accrue interest at the
prevailing prime rate or at a mark-up over LIBOR at the Company's
discretion.  The Credit Agreement includes certain covenants,
which, among others, limit the dividends the Company may pay and
require maintenance of certain levels of tangible net worth and
debt service ratios.  A commitment fee of .125% is paid on the
unused portion of the credit line.  During fiscal 1999, the
Company borrowed $6.9 million under the line of credit.  At March
31, 1999, $4.0 million was outstanding, at 6.9% interest.

Note F    Stock Options

The Company has granted options to key employees and non-employee
directors under a qualified 1991 Plan and a non-qualified 1987
Plan.  Options granted under both plans are exercisable in four
equal cumulative installments beginning one year from the date of
grant, and expire in ten years.  Options are granted at the fair
market value on the date of grant.  Activity in the stock option
plans during fiscal 1999, 1998 and 1997 was as follows:

                              At March 31,
                                 1999,
                                Options
                              Outstanding
                                                 Weighted
                                                  Average
                                 Number of       Price per
                                  Shares           Share
Balance April 1, 1996           2,549,230      $     7.62

Granted                           402,800           23.18
Exercised                        (244,350)           7.06
Canceled or terminated            (41,400)          11.86
Balance March 31, 1997          2,666,280      $     9.91

Granted                           592,550           22.79
Exercised                        (383,441)           7.50
Canceled or terminated            (56,496)          17.91
Balance March 31, 1998          2,818,893      $    12.76

Granted                           361,300           21.31
Exercised                        (633,682)           7.02
Canceled or terminated           (166,725)          21.52
Balance March 31, 1999          2,379,786      $    15.04

At March 31, 1999 and 1998, there were 2,018,375 shares and
2,302,950 shares available for grant under the 1991 Plan.  There
are no additional shares available for grant under the 1987 Plan.

During fiscal 1989, the Company granted an officer a non-
qualified stock option to purchase 100,000 shares of Common
Stock, at $5.375 per share.  During fiscal 1996, the officer
exercised 73,334 shares of this option.  The remaining 26,666
shares were exercised in fiscal 1999.

Stock option grants are set at the closing price of the Company's
Common Stock on the date of grant and the related number of
shares granted are fixed at that point in time.  Therefore under
the principles of APB Opinion 25, the Company does not recognize
compensation expense associated with the grant of stock options.
SFAS 123 requires the use of an option valuation model to provide
supplemental information regarding options granted after fiscal
1995.  Pro forma information regarding net income and earnings
per share shown below was determined as if the Company had
accounted for its employee stock options under the Fair Value
method of that statement.

The weighted average fair values of stock option granted were
estimated at the date of grant using the Black-Scholes option
valuation model and the following actuarial assumptions:

                             1999      1998      1997
Weighted average fair
   value of stock
   options granted         $ 11.99   $ 13.18   $ 12.59
Risk-free interest rate        5.6%      6.6%      6.7%
Expected life (in years)       7.2       6.8       6.5
Expected volatility           .528      .531      .482
Expected dividend yield        0.5%      0.4%      0.4%

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options.  The Company's
employee stock options have characteristics significantly
different from those of traded options such as vesting
restrictions and extremely limited transferability.  In addition,
the assumptions used in option valuation models (see above) are
highly subjective, particularly the expected stock price
volatility of the underlying stock.  Because changes in these
subjective input assumptions can materially effect the fair value
estimate, in management's opinion, the existing models do not
provide a reliable single measure of the fair value of its
employee stock options.

For purposes of pro forma disclosure, the estimated fair value of
the options is amortized over the option's vesting period.  The
pro forma effect on net income for the years ended March 31,
1999, 1998 and 1997 is not representative of the pro forma effect
on net income in future years because it does not take into
consideration pro forma compensation expense related to grants
prior to 1996.  Pro forma information in future years will
reflect the amortization of a larger number of stock options
granted in several succeeding years.  The Company's pro forma
information is as follows (in thousands, except per share
information):

                                  Year Ended March 31,
                                1999      1998      1997
Net income: as reported       $13,962   $23,897   $27,870
Net income:  Pro forma        $11,266   $21,599   $26,700

Basic earnings per share:
  as reported                 $   .57   $   .96   $  1.12
Basic earnings per share:
  Pro forma                   $   .46   $   .87   $  1.07

Diluted earnings per share:
  as reported                 $   .55   $   .91   $  1.06
Diluted earnings per share:
  Pro forma                   $   .44   $   .83   $  1.03

Information regarding stock options outstanding as of March 31,
1999 is as follows:
                      Options Outstanding       Options Exercisable
                           Weighted-
                            Average   Weighted-           Weighted-
                           Remaining   Average   Number    Average
                 Number of Contract-  Exercise     of      Exercise
  Price Range     Shares    ual Life    Price    Shares     Price
Under $7.00        866,986 3.3 years  $  6.57    866,986  $   6.57
$7.00 to $22.00  1,085,300 7.6 years  $ 17.83    396,575  $  14.45
Over $22.00        427,500 7.6 years  $ 25.14    160,600  $  24.05

At March 31, 1999, 1998 and 1997 stock options to purchase
1,424,000, 1,698,000 and 1,673,000 shares, respectively, were
exercisable at weighted-average prices of $10.73, $7.96, and
$6.81, respectively.

Note G  Income Taxes

Income tax expense from continuing operations consists of
the following:
                              Year Ended March 31,
(in thousands)            1999        1998        1997
Current:
  Federal              $   9,736   $  10,307   $   9,098
  Foreign                  1,052       1,949       1,002
  State                      834       1,103       1,184
                          11,622      13,359      11,284
Deferred:
  Federal                 (1,150)        206       2,817
  State                      (25)         10         396
                          (1,175)        216       3,213
                       $  10,447   $  13,575    $ 14,497

The reconciliation of the federal statutory rate to the Company's
effective rate for continuing operations is as follows:

                                            Year Ended March 31,
                                          1999      1998      1997
Federal statutory rate                     35.0%      35.0%      35.0%
Increase (decrease) resulting from:
  State tax, net of federal tax
    benefit                                 2.7        2.3        2.3
  Non-taxable interest and dividends        (.4)      (0.7)      (0.3)
  Research and development credit          (2.0)      (2.0)      (1.1)
  Foreign Sales Corporation                (1.2)      (1.1)      (1.2)
  Foreign operations                       (1.0)       1.0        1.2
  Non-deductible goodwill                    .2        0.2        0.2
  Other                                      .5        0.6        0.3
                                           33.8%      35.3%      36.4%

Significant components of the Company's deferred tax liabilities
and assets at March 31 are as follows:

                                         Year Ended March
                                               31,
  (in thousands)                          1999      1998
Deferred tax liabilities:
  Tax over book depreciation           $  1,693    $ 1,568
  Unrealized gain on investment             470      2,800
                                          2,163      4,368
Deferred tax assets:
  Book liabilities not deductible for
    tax                                   5,774      4,607
  Inventory                                 862        907
  Profit in inventory of foreign
   subsidiaries                           1,283      1,105
                                          7,919      6,619
                                       $  5,756   $  2,251

Note H    Supplemental Information

Supplemental schedule of cash flow information:

                                            Year Ended March 31,
(in thousands)                            1999      1998      1997
   Interest paid                       $     226   $    54   $  1,549
   Income taxes paid                   $   6,727   $ 9,190   $ 10,013

Note I    Earnings per Share

A reconciliation of weighted average shares outstanding, used to
calculate Basic earnings per share, to weighted average shares
outstanding assuming dilution, used to calculate Diluted earnings
per share, follows:

                                       1999     1998    1997
Average outstanding shares: basic      24,550   24,894  24,863
Shares issueable through options          844    1,436   1,486
Average outstanding shares: diluted    25,394   26,330  26,349

Shares issueable through options are determined using the
treasury stock method.

Options to purchase 1,114,100, 23,500, and 21,500 shares with
exercise prices greater than the average market prices of common
stock were outstanding during the years ended March 31, 1999,
1998, and 1997, respectively.  These options were excluded from
the respective computations of diluted earnings per share because
their effect would be anti-dilutive.

Note J    Commitments

The Company leases certain facilities under operating leases with
unexpired terms ranging from one to twelve years.  Most leases
contain renewal options.  Rental expense for these leases was
$3.4 million, $2.8 million and $2.7 million for fiscal 1999, 1998
and 1997, respectively.

Future minimum lease payments under lease arrangements at March
31, 1999 are as follows:
          (in thousands)

                    2000  3,763
                    2001  3,216
                    2002  2,919
                    2003  2,809
                    2004  2,871
              Thereafter 35,142
               Total    $50,720

During fiscal 1998, the Company entered into an alliance with
Intracel Corporation, in which the Company will be the exclusive
distributor of a bladder cancer test manufactured by Intracel.
In addition, the Company has the right to distribute a potential
bladder cancer treatment product currently under development by
Intracel.  The agreement with Intracel requires the Company to
pay $1 million per year, beginning in January 1998, for three
years, to defray the costs of the clinical trials for the cancer
treatment product.  The Company must also pay an additional $3
million upon the completion of certain milestones related to the
clinical trials.  During fiscal year 1999, $1 million was paid
towards the cost of the clinical trials and an additional $1
million was paid on the achievement of the first milestone.  The
total $2 million paid was charged to research and development
expense in 1999.  Total remaining commitments to Intracel at
March 31, 1999 total $3.75 million.

Note K    Related Party Transactions

In 1991, the Company entered into an exclusive license agreement
with Rochester Medical Corporation (Rochester) to market and
distribute certain external catheter products developed by
Rochester.  The Company purchased $1,900,000, $2,400,000 and
$1,958,000 of product from Rochester in 1999, 1998 and 1997,
respectively.  Several officers/founders of Rochester, a public
company, are siblings of the Chairman of Mentor Corporation.  The
Chairman derived no financial or other benefit from transactions
between the Company and Rochester.

Note L    Litigation

Claims related to product liability are a regular and ongoing
aspect of the medical device industry.  At any one time, the
Company is subject to claims against it and is involved in
litigation.  These actions can be brought by an individual, or by
a group of patients purported to be a class action.  The Company
has carried product liability insurance on all its products,
including breast implants, subsequent to May 1991 and prior to
September 1985.  From June 1992 on, such insurance has excluded
silicone gel-filled breast implants.  This insurance is subject
to certain self-insured retention and other limits of the policy.
From September 1985 through April 1991, the Company was self
insured for the majority of its surgical implant products, but
had product liability insurance on the rest of its products,
subject to certain limits, exclusions and deductibles that the
Company believes to be appropriate.  The Company has recorded a
self-insured retention liability, ($3,700,000 and $3,580,000 at
March 31, 1999 and 1998, respectively) in an amount it believes
to be reasonably sufficient to cover the cost of anticipated
product liability claims.

In addition, in the ordinary course of its business, the Company
experiences various types of claims that sometimes result in
litigation or other legal proceedings.  The Company does not
anticipate that any of these proceedings will have any material
adverse effect on the Company.

Note M    Restructuring Charge and Discontinued Operations

In December 1998, Mentor announced a restructuring plan as part
of a strategic initiative to improve the profitability and
competitiveness of its ophthalmic business by reducing
manufacturing costs and concentrating on those products and
markets capable of sustained, long-term profitable growth.

The restructuring plan resulted in a third quarter charge to the
operating results of the ophthalmic business segment of $14
million.  The $14 million charge consisted of approximately $1.9
million for employee termination benefits related to the
workforce reduction of 150 positions, $800,000 for plant closing
costs, $3.3 million for the impairment write down of production
assets to their estimated fair value, approximately $1 million
for the write down of intangible assets related to discontinued
products, and $7 million for the write down of inventory to its
estimated net realizable value.

During the implementation of this plan, the Board of Directors
authorized management to evaluate potential buyers for the
product lines of the ophthalmic business segment.  In March 1999,
the Company adopted a plan to dispose of its ophthalmic business
segment.  Consistent with the plan to dispose of its ophthalmic
business segment, the net assets and operations of the ophthalmic
segment of the business, comprised of the intraocular lens
products and ophthalmic equipment product lines have been
classified as discontinued operations.  Subsequent to March 31,
1999, the Company announced the pending sale of the intraocular
lens product line, a substantial portion of the ophthalmic
products business.  The sale of both product lines is expected to
be completed in calendar year 1999.

Summaries   of   the  results  of  operations  for   discontinued
operations for the years ended March 31, 1999, 1998 and 1997  are
as follows:

                                Year Ended March 31,
                            1999 (1)     1998      1997
Revenues                   $ 37,893   $ 35,029   $ 36,574
Income (loss) before
  income taxes              (10,436)    (2,075)     2,613
Income tax expense
  (benefit)                  (3,957)    (1,143)        78
Net income (loss) from
  discontinued operations   ($6,479)     ($932)  $  2,535

(1)  Includes  charges  totaling  $14  million  related  to   the
     restructuring plan discussed above.

The assets and liabilities of discontinued operations have been
classified in the balance sheet as net assets of discontinued
operations and consist of the following:

                                       March 31,
(in thousands)                      1999       1998
Accounts receivable, net         $  7,981   $  8,541
Inventory                          17,687     17,075
Property, plant and equipment,
  net                               3,985      7,648
Intangibles and goodwill, net       9,017     11,644
Other                               4,525      4,181
  Total assets                     43,195     49,089
Current liabilities                 6,377      5,643
Net assets of discontinued
  operations                     $ 36,818   $ 43,446

Included  in current liabilities of the discontinued  segment  at
March  31,  1999,  is  the remaining $2.2 million  liability  for
termination  and  plant closing costs recorded  as  part  of  the
restructuring plan.  These amounts are expected to be paid during
calendar 1999.

Note N    Business Segment Information

In 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and related information," which revises reporting and disclosure
requirements for operating segments.  The following information
with respect to the Company's continuing operations is provided
in accordance with the requirements of this Statement.

The Company's operations are principally managed on a functional
basis and reported on a product or geographic basis.  As a result
there are four reportable segments:  Plastic and General Surgery,
Surgical Urology, Disposable Urology products and International.
The accounting policies of the reportable segments are the same
as those described in the summary of significant accounting
policies except that certain expenses such as interest and
certain corporate expenses are not allocated to the segments.
Due to the reorganization in early 1998, information related to
segments for fiscal 1997 was impracticable to provide.

The Plastic and General Surgery products segment consists
primarily of breast implants, tissue expanders and the Company's
Contour Genesis Ultrasonic equipment product line along with
equipment and disposables for traditional liposuction.  The
Surgical urology segment includes impotence implants, surgical
incontinence products and radioactive seeds for the treatment of
prostate cancer.  The Disposable urology segment includes
catheters and other products for the management of urinary
incontinence. The International segment includes the operations
of the Company's wholly owned international sales offices, which
cover most of the Company's implantable product lines, and a
small European manufacturing and distribution facility.  Segment
revenues include domestic sales, sales to independent foreign
distributors and sales to the Company's direct international
sales and offices.

Selected financial information for the Company's reportable
segments for the years ended March 31, 1999 and 1998 follows:

                                   Year Ended March 31,
(in thousands)                      1999         1998
Revenues
Plastic & General Surgery          $107,247     $ 98,794
Surgical Urology                     36,084       27,131
Disposable Urology                   41,446       37,201
International                        36,683       32,837
  Total reportable segments         221,460      195,963
Elimination of inter-segment
  revenues                          (18,677)     (15,696)
  Total consolidated revenues      $202,783     $180,267

                                   Year Ended March 31,
                                    1999         1998
Operating profit
Plastic & General Surgery          $ 21,326     $ 25,513
Surgical Urology                      4,410        2,164
Disposable Urology                    7,001        9,276
International                         4,707        4,822
  Total reportable segments        $ 37,444     $ 41,775

                                        March 31,
                                    1999         1998
Identifiable assets
Plastic & General Surgery          $ 48,818     $ 53,799
Surgical Urology                     23,175       21,055
Disposable Urology                   28,354       23,000
International                        20,957       17,371
  Total reportable segments        $121,304     $115,225

                                   Year Ended March 31,
                                    1999         1998
Depreciation and amortization
Plastic & General Surgery          $  3,418     $ 2,950
Surgical Urology                      1,652       1,347
Disposable Urology                    1,562       1,142
International                           502         313
  Total reportable segments           7,134       5,752
Corporate and other                   1,475       1,559
                                   $  8,609     $ 7,311

                                   Year Ended March 31,
                                    1999         1998
Capital expenditures
Plastic & General Surgery          $  3,499     $ 2,716
Surgical Urology                      2,173       2,011
Disposable Urology                    4,819       4,003
International                           356          91
  Total reportable segments          10,847       8,821
Corporate and other                   2,869       2,872
                                   $ 13,716     $11,693


The following tables reconcile segment information to the amounts
shown on the consolidated financial statements.


                                   Year Ended March 31,
(in thousands)                      1999         1998
Operating profit from
  continuing operations
Reportable segments                $ 37,444     $ 41,775
Corporate operating loss             (7,303)      (4,989)
Interest expense                       (272)         (27)
Interest income                         926        1,338
Other income                             93          307
Income from continuing
  operations before taxes          $ 30,888     $ 38,404

                                        March 31,
                                    1999         1998
Identifiable Assets
Reportable segments                $121,304     $115,225
Corporate and other                  37,889       41,240
Net assets of discontinued
  operations                         36,818       43,446
Consolidated assets                $196,011     $199,911


Selected financial information for the Company's operations by
geographic area is as follows:

                                   Year Ended March 31,
(in thousands)                      1999         1998
Geographic area revenue
United States                      $157,733    $138,363
Foreign                              45,050      41,904
Consolidated total                 $202,783    $180,267


                                        March 31,
                                    1999         1998
Geographic area long-lived
assets
United States                    $   43,748   $  38,669
Foreign                               1,555       1,635
Consolidated total               $   45,303   $  40,304

Note O    Quarterly Financial Data  (Unaudited)

The following is a summary of unaudited quarterly results of
operations.  Previously reported results have been restated to
reflect the ophthalmic business as a discontinued operation.  See
Note M.

(in thousands, except per
share data)                                    Quarter
Year Ended March 31, 1999        First     Second    Third     Fourth
Net sales                      $48,084    $ 47,713   $ 51,655   $ 55,331
Gross profit                    32,893      30,717     30,644     32,355
Income from continuing
  operations                     7,313       4,880      3,454      4,794
Income from discontinued
  operations                       526         692     (8,652)       955
Net income                     $ 7,839    $  5,572   $ (5,198)  $  5,749
Basic earnings (loss) per
share:
  Continuing operations        $   .29    $    .20   $    .14   $    .20
  Discontinued operations      $   .02    $    .03   $   (.35)  $    .04
Basic earnings (loss) per
  share                        $   .31    $    .23   $   (.21)  $    .24
Diluted earnings (loss) per
share:
  Continuing operations        $   .28    $    .19   $    .14   $    .19
  Discontinued operations      $   .02    $    .03   $   (.35)  $    .04
Diluted earnings (loss) per
  share                        $   .30    $    .22   $   (.21)  $    .23

Year Ended March 31, 1998        First     Second    Third     Fourth
Net sales                      $ 46,561   $ 40,790   $ 45,459   $ 47,457
Gross profit                     32,841     25,086     30,813     32,405
Net income from continuing
  operations                      7,973      3,862      6,017      6,976
Net income from discontinued
  operations                       (170)      (715)      (181)       135
Net income                     $  7,803   $  3,147   $  5,836   $  7,111
Basic earnings (loss) per
share:
  Continuing operations        $    .32   $    .16   $    .24   $    .28
  Discontinued operations          (.01)      (.03)      (.01)       .01
Basic earnings per share       $    .31   $    .13   $    .23   $    .29
Diluted earnings (loss) per
share:
  Continuing operations        $    .31   $    .15   $    .23   $    .27
  Discontinued operations          (.01)      (.03)      (.01)         -
Diluted earnings per share     $    .30   $    .12   $    .22   $    .27


               MENTOR CORPORATION AND SUBSIDIARIES

                           SCHEDULE II
         VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                         (In thousands)

         COL. A            COL. B       COL. C      COL. D  COL. E

                                       Additions

                           Balance
                             at    Charged                  Balance
                           Beginn- to CostsCharged          at End
                           ing of    and   to Other Deduc-    of
       Description         Period  ExpensesAccounts  tions  Period

Year Ended March 31, 1999
Deducted from asset
  accounts:
  Allowance for
    doubtful accounts     $  1,606  $   960  $        $   494 $ 2,072

Liability Reserves:
  Self insured retention  $  3,580  $ 2,866  $        $ 2,746 $ 3,700
  Accrued sales returns
    and allowances           5,503                        377   5,126
                          $  9,083  $ 2,866  $        $ 3,123 $ 8,826
Year Ended March 31, 1998
Deducted from asset
  accounts:
    Allowance for
      doubtful accounts   $  1,497  $   933  $        $   824 $ 1,606

Liability Reserves:
  Self insured retention  $  3,400  $ 2,385  $        $ 2,205 $ 3,580
  Accrued sales returns
    and allowances           5,398      105                     5,503
                          $  8,798  $ 2,490  $        $ 2,205 $ 9,083
Year Ended March 31, 1997
Deducted from asset
  accounts:
    Allowance for
      doubtful accounts   $  1,490  $ 1,028  $        $ 1,021 $ 1,497

Liability Reserves:
  Self insured retention  $  2,800  $ 2,624  $        $ 2,024 $ 3,400
  Accrued sales returns
    and allowances           6,405                      1,007   5,398
                          $  9,205  $ 2,624  $        $ 3,031 $ 8,798

                           EXHIBIT 21

                             LIST OF
               SUBSIDIARIES OF MENTOR CORPORATION

1.    Mentor Texas Inc. (Formerly Mentor H/S, Inc).

2.    Mentor Minnesota Inc. (Formerly Mentor Urology, Inc.)

3.    Mentor Ophthalmics, Inc. (Formerly Mentor O&O, Inc.)

4.    Mentor Caribe, Inc.

5.    Mentor ORC, Inc. (Dissolved 4/1/96)

6.    Mentor Polymer Technologies Company

7.    Teknar Corporation (Dissolved 4/1/96)

8.    Mentor International Sales Corporation

9.    Mentor International Holdings Alpha, Inc.

10.   Mentor International Holdings Beta, Inc.

11.   Mentor International Holdings Camda, Inc.

12.   Mentor International Holdings Delta, inc.

13.   Mentor Medical Systems,(Aust) Pty. Ltd.

14.   Mentor Medical Systems, Ltd.(UK)

15.   Mentor Medical Systems, B.V.

16.   Mentor Deutschland GmbH

17.   Mentor Medical Systems, France, S.A.

18.   Mentor Medical Systems,(Canada), Inc.

19.   MDI Company LTD

20.   Mentor Medical Systems, Iberica, S.L.

21.   Havas Medical,B.V.

22.   Mentor Medical Inc.

23.   Mentor Benelux B.V.

24.   Mentor Japan K.K.

25.   Mentor Medical Systems, C.V.


EXHIBIT 23

                 CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the (1)
Registration Statement Number 33-25865 on Form S-8 dated December
22, 1988, (2) Registration Statement Number 33-48815 on Form S-8
dated June 24, 1992 of our report dated May 11, 1999 with respect
to the consolidated financial statements and schedule of Mentor
Corporation included in the Annual Report on Form 10-K for the
year ended March 31, 1999.


                                                ERNST & YOUNG LLP

Los Angeles, California
June 28, 1999


Signatures

       Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Mentor Corporation has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                         MENTOR CORPORATION



                         /s/CHRISTOPHER J. CONWAY
                         Christopher J. Conway, Chairman


DATE:  June 28, 1999

       Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following
persons on behalf of the registrant, and in the capacities and on
the dates indicated:


/s/CHRISTOPHER J. CONWAY      Chairman, Chief          June 28, 1998
Christopher J. Conway         Executive Officer
                              and Director (Principal
                              Executive Officer)

/s/ANTHONY R. GETTE           President and Secretary  June 28, 1998
Anthony R. Gette              and Director

/s/GARY E. MISTLIN            Senior Vice President    June 28, 1998
Gary E. Mistlin               Chief Financial Officer
                              and Treasurer
                              (Principal Financial and
                              Accounting Officer)

/s/WALTER W. FASTER           Director                 June 28, 1998
Walter W. Faster

/s/EUGENE G. GLOVER           Director                 June 28, 1998
Eugene G. Glover

/s/MICHAEL NAKONECHNY         Director                 June 28, 1998
Michael Nakonechny

/s/DR. RICHARD W. YOUNG       Director                 June 28, 1998
Dr. Richard W. Young



Exhibit 10(n)

                         NET, NET, NET

                         BUILDING LEASE

                 Santa Barbara Corporate Center

                       Mentor Corporation
                       TABLE OF CONTENTS


1.   LEASE OF PREMISES

2.   TERM
     2.1    Commencement of Term
     2.2    Delay in Commencement

3.   RENT
     3.1    Base Rent
     3.2    Additional Rent
     3.3    Offset Rights
     3.4    Definitions
     3.5    Rent Adjustment for Consumer Price Index
     3.6    Calculation and Payment
     3.7    End of Term

4.   SECURITY DEPOSIT

5.   USE
     5.1    Use
     5.2    Compliance With Law
     5.3    Insurance Cancellation
     5.4    Hazardous Substances
     5.5    Solid Waste Management Program
     5.6    Environmental Laws
                 A. Compliance with Environmental Laws
                 B.  Hazardous Materials Handling
                 C.  Notices
                 D.  Indemnification of Lessor

6.   MAINTENANCE. REPAIRS AND ALTERATIONS
     6.1    Lessor's Obligations
     6.2    Lessee's Obligations
     6.3    Alterations and Additions
     6.4    Surrender
     6.5    Lessor's Rights

7.   INSURANCE
     7.1    Lessee's Liability Insurance
     7.2    Lessee's Worker's Compensation Insurance
     7.3    Lessee's Fire and Extended Coverage Insurance
     7.4    Policy Requirements
     7.5    Lessor's Rights
     7.6    Lessor's Insurance
     7.7    Indemnification
     7.8    Exemption of Lessor from Liability

8.   DAMAGE OR DESTRUCTION
     8.1    Partial Damage
     8.2    Damage Near End of Term
     8.3    Abatement of Rent, Lessee's Remedies
     8.4    Insurance Proceeds Upon Termination
     8.5    Restoration

9.   PERSONAL PROPERTY TAXES

10.  UTILITIES

11.  ASSIGNMENT AND SUBLETTING
     11.1   Restrictions on Assignment
     11.2   Consents to Transfer of Lease
     11.3   Organizational Changes
     11.4   Continuing Liability of Lessee
     11.5   Options in Favor of Lessor
     11.6   Assumption by Assignee
     11.7   Lessor's Participation in Rental Overages.
     11.8   Reimbursement of Costs and Fees

12.  DEFAULTS: REMEDIES
     12.1   Default by Lessee
     12.2   Remedies for Default of Lessee
     12.3   Default by Lessor.
     12.4   Late Charges.

13.  CONDEMNATION OR RESTRICTION ON USE
     13.1   Eminent Domain
     13.2   Abatement of Rent

     13.3   Temporary Taking.
     13.4   Voluntary Sale as Taking

14.  BROKERS

15.  LESSOR'S LIABILITY

16.  PARKING

17.  GENERAL PROVISIONS
     17.1   Estoppel Certificate
     17.2   Severability
     17.3   Time of Essence
     17.4   Captions
     17.5   Notices
     17.6   Waivers
     17.7   Holding Over
     17.8   Cumulative Remedies
     17.9   Inurement
     17.10  Choice of Law
     17.11  Subordination
     17.12  Attorneys' Fees
     17.13  Lessor's Access
     17.14  Corporate Authority
     17.15  Surrender or Cancellation
     17.16  Entire Agreement
     17.17  Signs
     17.18  Interest on Past Due Obligations
     17.19  Gender; Number
     17.20  Recording of Lease
     17.21  Waiver of Subrogation
     17.22  Confidentiality of Lease
     17.23  Quiet Enjoyment.
     17.24  Window Coverage
     17.25  Materials Storage Restrictions
     17.26  No Agency
     17.27  Force Majeure
     17.28  Building Name
     17.29  Assignment by Lessor
     17.30  Facsimile Signatures


                         Net, Net, Net
                         BUILDING LEASE

     THIS LEASE dated August 19, 1998, for reference purposes
only is made between SANTA BARBARA CORPORATE CENTER, LLC, a
California limited liability company, as Lessor, and MENTOR
CORPORATION, a Minnesota corporation, as Lessee.

                     BASIC LEASE PROVISIONS

10   Premises:           New free-standing building as depicted on
                         Exhibit A.

     Project Name:       Santa Barbara Corporate Center

     Premises Address:   301 Mentor Drive
                         Santa Barbara, CA 93111

     Use of Premises:    Office, research and development
                         and warehouse

20   Leased Area:        As depicted on Exhibit A

     Rentable Square Feet:    See Addendum.  Unless otherwise
                              expressly stated herein, all per square
                              foot rent described herein is based on
                              rentable square feet.  In no event will
                              the total rentable square feet of the
                              Premises upon which Lessee is obligated
                              to pay rent exceed 60,000 square feet
                              or, if the Additional Space is built,
                              68,000 square feet.

     Useable Square Feet:     See Addendum.  Unless otherwise
                              expressly described herein, all tenant
                              improvement allowance amounts described
                              herein are based on useable square feet.

30   Lessee's Percentages:

     Building:                100%.

     Common Area:             100%.

40   Base Rent:               See Addendum.  The base rent ("Base Rent") shall
                              initially be $1.45 per square foot per
                              month for office and research and
                              development ("Office/R&D") space
                              (estimated initially to be approximately
                              38,543 sq.ft.), $.65 per square foot per
                              month for warehouse space (estimated
                              initially to be 9,660 sq.ft.), and $.45
                              per square foot per month for shell area
                              (estimated initially to be 11,797 square
                              feet).  The shell area will be gradually
                              converted to executive offices.  Upon
                              such conversion, the Base Rent for such
                              space shall be increased as provided in
                              Sections 3.1 and 3.5.

                              Unless otherwise expressly stated
                              herein, all per square foot rental
                              amounts are stated on a per month basis.

     Rental Deposit:          See Addendum.

50   Initial Monthly Rental   See Addendum.
     Installments:

60   Term:                    Fifteen (15) years.

70   Commencement
     Date:                    Substantial completion of
                              the Phase I Tenant Improvements as
                              provided in Section 2.1.  To be
                              specified in Addendum.  Target
                              Commencement date is January 31, 1999.

     Term Commencement
     Date:                    First day of the month
                              succeeding substantial completion of
                              Tenant Improvements.  To be specified in
                              Addendum.

     Termination Date:        Fifteen (15) years after Term Commencement Date.

80   Security Deposit:        See Section 4.

90   Broker(s):               None.

100  Parking Spaces Provided: Not less than two hundred ten (210) spaces.
                              Thirty (30) spaces shall be reserved for
                              Lessee, the balance shall be in common
                              with other tenants.

1.   LEASE OF PREMISES

     11. Generally.  Concurrently with the execution of this  Lease,
Lessor   and   Lessee  have  entered  into  a   Development   and
Construction  Agreement (the "Development Agreement").   Pursuant
to  the  Development Agreement, Lessor proposes to construct  the
Building, which will be a two-story building for office, research
and development and warehouse use.  The Building shall consist of
a  building  shell area of approximately 76,136  rentable  square
feet  comprised  of two floors of approximately  38,068  rentable
square  feet  each.   The  building shell includes  approximately
16,136 square feet of space (the "Cutout Space") for which Lessor
has not received entitlements or building permits.  Approximately
8,000 of the Cutout Space is referred to herein as the Additional
Space,  as  defined in Section 1.2.  The balance  of  the  Cutout
Space  is  referred  to herein as the Future Building  Space,  as
defined in Section 1.3.   Accordingly, although the building size
will  be  approximately 76,136 square feet, the  rentable  square
feet  of the Building will only be approximately initially 60,000
rentable  square feet (68,000 including the Additional Space)  in
light of the exclusion of the Cutout Space.

     12. Additional Space.

         1.2.1 During and following the completion of the Building, Lessor
will  make  commercially reasonable efforts to obtain  sufficient
square footage allocations from the County of Santa Barbara under
the  Goleta Growth Management Ordinance (the "GGMO") to construct
an  additional  8,000 rentable square feet of second  floor  area
within the Cutout Space of the Building  (the "Additional Space")
in  accordance with Lessor's approved development plan  with  the
County of Santa Barbara (97-DP-024).

         1.2.2 If Lessor receives GGMO allocations for the Additional
Space,  Lessor  shall  have the right to enter  the  Premises  to
construct  and build out the Additional Space, and  Lessee  shall
lease  the  entire Additional Space.  Upon substantial completion
of the Landlord's Work in the Additional Space, the parties shall
measure  the  entire  Premises (including the  Additional  Space)
using the American National Standard ANSI Z65.1-1996 as published
by  the  Building  Owners and Managers Association  International
(the  "BOMA Standard").  Lessee's obligation to pay rent  on  the
Additional  Space shall commence upon substantial  completion  of
the  Landlord's Work for the Additional Space, and the Additional
Space  shall  be incorporated into the Premises for all  purposes
hereunder.   If  Lessor does not obtain GGMO  allocations  within
seven  years from the date hereof, Lessor shall have  no  further
obligation  to pursue the GGMO allocations.  If Lessor  does  not
obtain  the GGMO allocations, Lessor shall have no obligation  to
construct the Additional Space.

     13. Future Building Area.

         1.3.1 Lessee acknowledges that (a) the Building has not received
entitlements  or building permits for approximately 8,136  square
feet of rentable space in the Cutout Space on the second floor of
the  Building (the "Future Building Area"), and (b) Lessor  shall
have  no  obligation  whatsoever to seek any entitlements  or  to
construct any improvements within the Future Building Area unless
and until Lessor, in its sole discretion, determines to do so.

          1.3.2 If Lessor elects, in its sole discretion, to seek all
entitlements  (including  a  GGMO  allocation)  for  the   Future
Building  Area,  Lessor  nevertheless  shall  not  seek  building
permits  to construct any improvements within the Future Building
Area without Lessee's prior written approval until the sooner  of
(a)  the  expiration of this Lease, or (b) such  time  as  Lessee
reasonably  determines  that  the  warehouse  and  racking  space
currently  extending  vertically from the  ground  floor  of  the
Building  into the Future Building Area is no longer  needed  for
Lessee's business operations.

          1.3.3  If (a) Lessor determines, in Lessor's sole discretion, to
seek  entitlements for the Future Building Area, and  (b)  Lessee
has  made  the determination described in clause (b)  of  Section
1.3.2, then Lessor shall notify Lessee in writing, not less  than
30  days prior to submittal of a development application  to  the
County of Santa Barbara, that Lessor intends to seek entitlements
for  the  Future Building Area.  Prior to Lessor's obtaining  the
entitlements  for  the Future Building Area, Lessor  shall  offer
Lessee  a  right of first offer for such space based on the  then
current  terms  and conditions of this Lease and the  Development
Agreement.   Lessee  shall have 90 days from  such  offer  within
which to accept such offer. If Lessee does not accept such offer,
then  Lessor may lease the Future Building Space to a third party
lessee  at terms and conditions acceptable to Lessor, in Lessor's
sole discretion, provided that Lessor has notified Lessee of  the
name,  address and business of such third party lessee and Lessee
approves  the  third  party  lessee,  such  approval  not  to  be
unreasonably withheld provided that the third party  lessee  does
not materially compete with Lessee's business.

     14.  Lease of Rentable Space.  Lessee agrees to  lease  all
rentable  space in the Building  which the parties estimate  will
initially  be  approximately 60,000  rentable  square  feet  (the
"Premises").   After  construction of the Additional  Space,  the
Building rentable area shall be approximately 68,000 square feet.
The  Premises do not include the Cutout Area.  The Building  will
be  one  of  several free-standing buildings owned by Lessor  and
operated  as  the Santa Barbara Corporate Center (the "Project").
Upon  completion  of  the demising walls  in  the  Building,  the
parties  shall  measure the Premises using the BOMA  Standard  to
determine the precise square footage within the Premises.  Within
ten  (10)  days  following the completion of  such  measurements,
Lessor  and  Lessee  shall  complete  and  initial  the  Addendum
attached  hereto stating the total number of square feet  in  the
Premises,  the  initial  Monthly  Rental  Installments,  and  the
Initial Annual Rent.  Notwithstanding the foregoing, in no  event
shall  the total rentable square feet of the Premises upon  which
Lessee is obligated to pay rent exceed 60,000 square feet, or  if
the Additional Space is built, 68,000 square feet.

     15. Lease of Premises.  Lessor hereby leases to Lessee  and
Lessee  leases from Lessor for the term, at the rental, and  upon
all  of  the  conditions set forth in this  Lease,  the  Premises
identified in Item 1 of the Basic Lease Provisions, together with
the  non-exclusive use, in common, with Lessor and other  tenants
of  the Project and their respective invitees, of common areas in
or about the Project and the parking areas adjoining the Project.
The  approximate anticipated configuration of the Project and the
location of the Building, and associated common and parking areas
is  indicated on Exhibit "B".  The size, location and function of
the   buildings   and  related  structures  depicted   here   are
approximate.  The configuration of the development,  the  design,
size,  function and location of all other improvements,  and  the
identity and location of other tenants to the extent depicted are
subject to change without notice for any reason deemed sufficient
by  Lessor.  Lessor reserves the right to alter the configuration
of  the Project to construct additional improvements thereon,  to
withdraw  areas  therefrom  from  time  to  time  and  alter  the
configuration  of  the  associated  common  and  parking   areas,
provided  that   (i)  the number of parking spaces  intended  for
Lessee's use shall not thereby be materially diminished and  (ii)
areas material to Lessee's enjoyment of the Premises shall not be
withdrawn from the Property without the prior written consent  of
Lessee,  which shall not be unreasonably withheld.  Lessee  shall
be allocated the number of parking spaces set forth in item 10 of
the  Basic  Lease Provisions and Lessee acknowledges that  Lessor
shall have no responsibility to supervise or police the usage  of
the  parking lot by the tenants of the Project.  Nothing in  this
Lease  shall  cause  Lessor in any way  to  be  construed  as  an
employer,  employee, fiduciary, a partner, a  joint  venturer  or
otherwise  associated in any way with Lessee in the operation  of
the  Premises,  or  to  subject Lessor to any  obligation,  loss,
charge  or  expense in connection with or arising  from  Lessee's
operation or use of the Premises.

     16. Triple Net Lease.  The parties intend this Lease to be a
net,  net,  net  Lease with the Lessee paying  its  proportionate
share, as specified herein, of real property taxes, insurance and
certain operating costs for the Premises, the common areas of the
Project  and  the  land  on  which it  is  situated.   Except  as
expressly  provided herein, Lessee shall have no right to  reduce
or offset the rent payable hereunder for any reason.

2.   TERM

     21. Commencement of Term.  The term of the Lease shall be as
shown in Item 6 of the Basic Lease Provisions, commencing on  the
Term Commencement Date, which Lessor and Lessee expect to be  the
Target  Commencement Date as shown in Item 7 of the  Basic  Lease
Provisions  but which may be such other date as herein  provided,
and ending fifteen (15) years thereafter unless sooner terminated
pursuant to any provision hereof.

          2.1.1 The Commencement Date of this Lease shall be upon
substantial  completion  of the Phase I  Tenant  Improvements  as
defined  and  described  in the Development  Agreement,  and  the
obligation of Lessee to pay rent shall begin on such  date.   Not
more  than ten (10) days following substantial completion of  the
Tenant Improvements, Lessor and Lessee shall complete and initial
the  Addendum  attached hereto specifying the  Term  Commencement
Date.

          2.1.2 If delivery of possession occurs prior to the Target
Commencement Date, the term of this Lease shall commence on  such
date  of  delivery of possession, but the Termination Date  shall
not be advanced.

     22. Delay in Commencement.

          2.2.1 If for any reason Lessor cannot deliver possession of the
Premises  to  Lessee  on or before the Target Commencement  Date,
Lessor shall not be subject to any liability therefor, nor  shall
such failure affect the validity of this Lease or the obligations
of Lessee hereunder. Subject to the provisions of the Development
Agreement,  Lessee shall not be obligated to pay rent  until  the
Tenant Improvements are substantially complete.

          2.2.2 If Lessor shall not have completed such construction within
twelve (12) months from the date of execution of this Lease  (the
"Outside  Completion  Date),  Lessee  shall  have  the  right  to
terminate  this Lease by giving not less than thirty  (30)  days'
prior  written notice of default to Lessor, and this Lease  shall
terminate  as of the date set forth in said notice of termination
if  Lessor is unable to cure said default within thirty (30) days
after  receipt  of  said notice.  Lessor shall  use  commercially
reasonable  efforts  to  complete  the  Building  as  quickly  as
possible.  The Outside Completion Date shall be extended  in  the
event of a Tenant Delay (as defined in the Development Agreement)
or  as  a  result of conditions beyond the control of  Lessor  as
provided in the Development Agreement.

3.  RENT

    31. Base Rent.

        3.1.1 Lessee shall pay to Lessor as rent for the Premises Base
Rent  in  the amounts specified below and in Item 4 of the  Basic
Lease  Provisions  in equal monthly installments  in  the  amount
specified  in Item 5 of the Basic Lease provisions in advance  on
the first day of each month.

          Office/R&D Base Rent     -    $1.45 per sq.ft.
          Warehouse Base Rent      -    $.65 per sq.ft.
          Shell Base Rent          -    $.45 per sq.ft.

          The  Office/R&D Base Rent, the Warehouse Base Rent  and
the  Shell  Base Rent are collectively referred to as  the  "Base
Rent."

        3.1.2 The Base Rent payable during the first two (2) years of the
term  is based upon the following approximate allocation of space
within the Premises:

               Office/R&D:                        38,543 sq.ft.
               Warehouse:                         9,660 sq.ft.
               Shell:                             11,797 sq.ft.

               Notwithstanding    the    foregoing,    as    more
specifically provided in the Development Agreement, Lessee  shall
have  the  right  in  connection  with  and  as  a  part  of  the
construction of the Tenant Improvements for Phase I to (i) use  a
portion  of the Tenant Improvement Allowance (as defined  in  the
Development Agreement) to wallpaper, paint, finish and/or  carpet
all  or  a  portion of the Shell space that will be converted  to
Office/R&D  space  in the subsequent Phases for  the  purpose  of
assuring that colors and finishes of such finished materials  are
not  discontinued prior to the time that the shell space is fully
and  finally converted to office/R&D space as provided  hereunder
or  in the Development Agreement and/or (ii) use a portion of the
Tenant  Improvement Allowance to build approximately 4,491 square
feet of mezzanine space in the warehouse area.  In the event that
Lessee does use a portion of the Tenant Improvement Allowance for
(i)  and/or (ii) above, the Base Rent then payable for such space
shall be increased by $.01167 per square foot per month for every
$1.00  of  Tenant Improvement Allowance used for such  work  (the
"Amortization Rent") and the sum shall become the new  Base  Rent
for such space and be adjusted thereafter pursuant to Section 3.5
hereof.

               For  example, if Lessee used $20 per sq.ft. of the
Tenant  Improvement Allowance to carpet and paint the portion  of
the  Shell  space that will be converted to Office/R&D  space  as
provided in clause (i) above, the Base Rent for such shell  space
for  the  initial  two (2) years of the term shall  be  $.45  per
sq.ft.  (the  Shell  Base  Rent)  plus  $.2334  per  sq.ft.  (the
"Amortization Rent").  If, as provided below, the portion of  the
Shell   space  to  be  converted  to  Office/R&D  space  is   not
substantially  complete prior to the commencement  of  the  third
year  of the term, the Base Rent for the Initial Converted  Space
(defined below) shall be $1.10 per sq.ft., adjusted for increases
theretofore made in the Base Rent pursuant to Section 3.5  hereof
from  the  Term  Commencement Date, to which will  be  added  the
Amortization Rent as described above.  Similarly, if a portion of
the  Tenant Improvement Allowance is used for construction of the
mezzanine in the warehouse area, the Warehouse Base Rent for such
Warehouse space shall be increased as described herein.

               In  the case of the mezzanine, the only Base  Rent
payable by Lessee shall be the Amortization Rent attributable  to
the  amount  of  the Tenant Improvement Allowance  used  for  the
mezzanine.   In  other words, if Lessee uses $20  of  the  Tenant
Improvement Allowance to build the mezzanine, the Base  Rent  for
the  mezzanine shall be $.2334 per sq.ft. per month.  Except  for
the  payment of the Amortization Rent thereon, the mezzanine area
shall  not  be  included for purposes of calculating  useable  or
rentable square feet in the Building.

          3.1.3 Lessee agrees that during the initial two (2) years of the
term,  4,725  sq.ft. of the shell space in the Building  will  be
converted to Office/R&D space (the "Initial Converted Space")  so
that  the  approximate allocation of space  within  the  Premises
shall be as follows:

               Office/R&D:                        43,268 sq.ft.
               Warehouse:                         9,660 sq.ft.
               Shell:                             7,072 sq.ft.

               The  conversion of the Shell space  to  Office/R&D
shall be completed as described in the Development Agreement.  In
the  event  that  Tenant Improvements for the  Initial  Converted
Space have been substantially completed prior to the commencement
of  the  third  year  of  the term, commencing  upon  substantial
completion  of  the Tenant Improvements, the Base  Rent  for  the
Initial Converted Space shall be increased to the Office/R&D Base
Rent  then  payable,  and shall be subject to annual  adjustments
thereafter  as  provided herein.  In the event  that  the  Tenant
Improvements  for  the  Initial Converted  Space  have  not  been
substantially  completed by such date,  the  Base  Rent  for  the
converted space shall be $1.10 per sq.ft. (adjusted for increases
theretofore  made in the Base Rent pursuant to this  Section  3.1
and Section 3.5 hereof from the Term Commencement Date) until the
first  to occur of (i) the first day of the fifth lease  year  or
(ii) such time as the Tenant Improvements have been substantially
completed, at which time the Base Rent for the Initial  Converted
Space  shall be adjusted to be equal to the Office/R&D Base  Rent
then payable.

          3.1.4 Lessee agrees that prior to the end of the fourth year of
the  lease term, the remaining 7,072 sq.ft. of Shell space  shall
be  converted  to  Office/R&D  space (the  "Additional  Converted
Space")  so that the approximate allocation of space will  be  as
follows:

               Office/R&D:                        50,340 sq.ft.
               Warehouse:                         9,660 sq.ft.

               The  conversion of the shell space  to  Office/R&D
space   shall  be  completed  as  described  in  the  Development
Agreement.   Whether  or  not  the Tenant  Improvements  for  the
Additional  Converted  Space  have been  substantially  completed
prior to the commencement of the fifth year of the term, the Base
Rent for the Additional Converted Space shall be increased to the
Office/R&D Base Rent then payable and shall be subject to  annual
adjustments thereafter as provided herein.

          3.1.5 Notwithstanding anything herein to the contrary, in the
event that Lessee elects to build out the Initial Converted Space
and/or the Additional Converted Space through the utilization  of
the full Tenant Improvement Allowance for such areas prior to the
planned  conversion  of  such spaces to Office/R&D  as  described
above, upon the Substantial Completion of the Tenant Improvements
for  the  Initial  Converted  Space and/or  Additional  Converted
Space,  the  Base  Rent  therefor  shall  be  increased  to   the
Office/R&D  Base Rent then payable, and shall be subject  to  any
adjustments thereafter as provided herein.

          3.1.6 In the event that Lessor constructs the Additional Space, as
described  in  Section 1 hereof, the Additional  Space  shall  be
constructed  as  Shell Space and the Base Rent  payable  for  the
Additional  Space shall be the Base Rent then payable  for  Shell
Space  hereunder;  provided, however, that the  Additional  Space
shall  be converted to Office/R&D space at the same time  and  on
the  same  terms as the Additional Converted Space and  the  Base
Rent  for  the  Additional  Space  shall  be  increased  to   the
Office/R&D  Base Rent then payable.  If the Additional  Space  is
substantially completed at any time after the commencement of the
5th  year  of  the  term, the Base Rent for the Additional  Space
shall be the Office/R&D Base Rent then payable, regardless of the
time   that  the  Additional  Space  is  actually  converted   to
Office/R&D   space  or  the  date  when  the  Tenant  Improvement
Allowance for the Additional Space is actually used.

          The  parties intend that the Additional Space  will  be
constructed  at the earliest possible date, provided that  Lessor
is  successful in obtaining sufficient square footage allocations
under  the GGMO.  If and when the Additional Space is constructed
and  added  to  the  Premises,  the  Premises  shall  consist  of
approximately  67,991  rentable  square  feet.   The  approximate
allocation of the space within the Premises with the addition  of
the Additional Space shall be as follows:

                            Phase I

          Office/R&D                    37,854 sq.ft.
          Warehouse                     9,488 sq. ft.
          Shell                         20,658 sq.ft.

                            Phase II

          Office/R&D                    43,268 sq.ft.
          Warehouse                      9,488 sq.ft.
          Shell                         15,244 sq.ft.

                           Phase III

          Office/R&D                    58,512 sq.ft.
          Warehouse                      9,488 sq.ft.

     Following  the  construction of  the  Additional  Space  the
Premises  shall  be  re-measured  as  provided  in  Section  1.4;
provided,  however,  that the rentable  square  feet  upon  which
Lessee  is  obligated to pay rent shall not exceed 68,000  square
feet.  If the Additional Space is constructed, the conversions of
space to the allocations described above shall occur at the  same
intervals  as is described in Section 3.1.  For example,  if  the
Additional Space is built during the first two years of the  term
of  the  Lease,  the  conversion of space  from  Shell  Space  to
Office/R&D  shall  be such that it will cause the  allocation  of
space  between the Premises for Phase II to be as  set  forth  in
this Section 3.1.6.

     32.  Additional Rent.

          3.2.1 Lessee shall reimburse Lessor, as additional rent, in the
manner  and  at  the  times provided, for Lessee's  proportionate
share  of  all  Building  Operating  Expenses  and  Common   Area
Operating  Expenses (as hereinafter defined) incurred  by  Lessor
(the  "Additional Rent"). Lessee's proportionate  share  of  such
Building  Operating  Expenses and Common Area Operating  Expenses
shall  be based upon Lessee's Building Percentage in the case  of
Building  Operating  Expenses  and  upon  Lessee's  Common   Area
Percentage in the case of Common Area Operating Expenses, all  as
defined herein.

          3.2.2 Amounts included as Additional Rent for repair, maintenance
or  other building services obtained from an affiliate of  Lessor
shall  not exceed the amounts that would be paid if such services
had  been  obtained at competitive rates from independent  third-
party   contractors  providing  the  same  services  to   similar
buildings in the area in which the Project is located.

          3.2.3 The level of repair, maintenance and upkeep of the Building,
Common  Areas  and landscaping shall conform to,  but  shall  not
exceed, the standard customarily utilized for professional office
and  research/development buildings in the  Santa  Barbara  area,
with  the  University Business Center constituting an example  of
such standards.

          3.2.4 Salaries and payroll expenses shall be limited to (a) those
persons  who are employed on a substantially full-time  basis  on
site  and  (b) Lessee's pro rata share of the salary and  payroll
expense  of common employees who are engaged by Lessor to provide
services both to the Project and to other properties owned and/or
managed  by  Lessor,  based  on the percentage  that  the  square
footage of the space occupied by Lessee bears to the total square
footage  of  all  space  receiving the services  of  such  common
employees.

          3.2.5 Except as set forth below, no amounts shall be included in
Additional  Rent for (a) amortization or depreciation of  capital
assets  that  constitute real property or that do not  constitute
removable  trade fixtures or (b) the costs of correcting  defects
in workmanship or materials covered by contractor's warranties or
that  are  caused by the failure of Lessor or its  contractor  to
construct  the Building and Common Area in a good and workmanlike
manner  in  accordance  with  the plans  and  specifications  and
applicable building codes.

     33. Offset Rights.  All Base Rent and Additional Rent due under
this  Lease  shall  be  payable without deduction,  abatement  or
offset  except  as  may be otherwise expressly provided  in  this
Lease.

     34. Definitions.    For purpose of this Article 3:

          3.4.1 Lessee's Building Percentage is a percentage (not in excess
of  100%) calculated by dividing the Leased Area of the Premises,
as shown in Item 2 of the Basic Lease Provisions, by the rentable
area of the Building, and is stipulated to be as shown in Item  3
of the Basic Lease Provisions.

          3.4.2. Building Operating Expenses shall mean the sum of all
expenses  incurred  by Lessor in connection with  the  operation,
repair and maintenance of the Building, including but not limited
to  the  following: (a) the costs of supplying  heating  and  air
conditioning to the Common Areas; (b) all Real Property Taxes (as
hereinafter defined) imposed upon or with respect to the Building
and  related  improvements (exclusive of the land underlying  all
such  improvements); (c) fifty percent (50%) of the  premium  for
earthquake  insurance and the entire premium  for  all  fire  and
extended  coverage, loss of rents, vandalism, malicious  mischief
and  other insurance covering the Building (including a pro  rata
share  of  the  premium for Lessor's excess  liability  insurance
coverage)  maintained  by Lessor under  the  provisions  of  this
Lease,  to the extent the costs thereof are permitted by  Section
7.6,  below,  and  any  losses  suffered  which  fall  below  the
deductible  limits of such insurance; (d) direct  costs  incurred
for  security and fire protection and the costs of materials  and
supplies;  (e) salaries and payroll expenses for any persons  who
are  employed on a substantially full-time basis on-site  in  the
management,  operation, repair and maintenance of  the  Building;
(f) subject to the provisions of Section 3.2, above, the costs of
(1)  repair  and maintenance of the Building and (2)  repainting,
wallcovering or recarpeting Common Areas of the Building; (g)  an
allowance for overhead and administrative expense (including  the
costs of any off-site management supplied or procured by Lessor),
of thirteen percent (13%) of all expenses hereunder excluding the
premium  for earthquake insurance payable by Lessee; and (h)  the
amortization of the costs of capital investments for improvements
which  are designed to reduce operating costs, improve operations
or  comply  with  governmental conservation or  safety  programs,
together  with  interest at ten percent (10%) per  annum  on  the
unamortized  amount,  amortized over such  reasonable  period  as
Lessor  shall  determine,  but  such  amortized  costs  shall  be
included  only  to the extent of any demonstrable  reductions  or
savings  in  occupancy  costs  or  operating  expenses  that  are
achieved  by  Lessee  as  the  result  of  such  improvements  or
programs.

          3.4.3 Building Operating Expenses attributable to the utilities
and   services  furnished  pursuant  to  Article  10   shall   be
apportioned  among  the  tenants of the Building  receiving  such
services (excluding those tenants furnishing or paying for  their
own  utilities  and janitorial services) based on the  respective
leased  areas  occupied by such tenants. Lessor has  provided  to
Lessee  actual  Building Operating Expenses  for  5425  Hollister
Avenue,  the  current offices of Lessee, but without warranty  or
representation to Lessee that Building Operating Expenses for the
Premises will be limited to such amounts.

          3.4.4 Lessee's Common Area Percentage is a percentage figure cal
culated by the project architect by dividing the Premises by  the
average leasable area in all improvements, including the Building
and other buildings, shown on Exhibit "B" during such year and is
initially stipulated to be as shown in Item 3 of the Basic  Lease
Provisions.  Should the Building and/or landscape area  become  a
separate  legal lot, or should additional improvements or  common
area be added to or deleted from Exhibit "B", Lessor may, at  its
option,  calculate Lessee's Common Area Percentage  by  comparing
the common area attributable to the Premises with the common area
on such legal lot or otherwise within Exhibit "B" as so revised.

          3.4.5 Common Area Operating Expenses shall mean the sum of all
expenses incurred by Lessor in connection with the operation  and
maintenance of driveways, landscaping, walkways, plazas,  parking
facilities,  and perimeter property, including, but  not  limited
to:  (a) all real property taxes (as hereinafter defined) imposed
upon  or  with respect to the land described in Exhibit "B";  (b)
all  public  liability insurance maintained by Lessor  under  the
provisions  of  this Lease, to the extent the costs  thereof  are
permitted  by  Section 7.6, below, and any losses suffered  which
fall  below  the deductible limits of such insurance; (c)  direct
costs incurred for security and fire protection and the costs  of
materials and supplies; (d) salaries and payroll expenses for any
persons who are employed on a substantially full-time or contract
basis   on-site   in  the  management,  operation,   repair   and
maintenance   of   the  common  areas,  gardening,   landscaping,
repaving,  repainting  and  trash removal;  (e)  depreciation  of
equipment used in such maintenance; (f) the amortization  of  the
costs  of capital investments for improvements which are designed
to  reduce  operating costs, improve operations  or  comply  with
governmental  conservation  or  safety  programs,  together  with
interest  at  ten  percent  (10%)  on  the  unamortized   amount,
amortized  over such reasonable period as Lessor shall determine,
but such amortized costs shall be included only to the extent  of
any  demonstrable  reductions or savings in  occupancy  costs  or
operating  expenses that are achieved by Lessee as the result  of
such  improvements  or programs; (g) any governmental  surcharge,
fee  or assessment imposed with respect to the parking facilities
within  the Project, to the extent paid by Lessor and not  passed
on  to  the  users of said parking facilities; and (h) an  amount
equal  to  thirteen percent (13%) of all such expenses  to  cover
Lessor's administrative and overhead expenses.

          3.4.6 Subject to the exception set forth in subparagraph A, below,
Real  Property  Taxes shall mean all real and  personal  property
taxes   and  assessments  incurred  during  any  calendar   year,
including,   but  not  limited  to:  special  and   extraordinary
assessments,  water and sewer rates and charges, occupancy  taxes
or  similar  taxes  imposed on or with respect  to  the  real  or
personal  property whether or not imposed on or measured  by  the
rent  payable  by  Lessee,  and  other  governmental  levies  and
charges,   general  and  special,  ordinary  and   extraordinary,
unforeseen as well as foreseen, of any kind and nature whatsoever
relating  to  the real or personal property, including  increases
due  to  a change in ownership, and any gross rental, license  or
business  tax  measured  by or levied on rent  payable  or  space
occupied. If, by law, any property taxes are payable, or  may  at
the  option of the taxpayer be paid, in installments (whether  or
not  interest shall accrue on the unpaid balance of such property
taxes), Lessor may, at Lessor's option, pay the same and, in such
event,  any  accrued  interest on  the  unpaid  balance  of  such
property  taxes  shall  be deemed to be Real  Property  Taxes  as
defined  herein.  Real  Property Taxes  shall  also  include  all
expenses reasonably incurred by Lessor in seeking a reduction  by
the  taxing authorities of Real Property Taxes applicable to  the
Project.  If at any time during the term of this Lease under  the
laws  of  the  United States or the State of  California  or  any
political subdivision of either, a tax or excise on rents,  space
or  other aspects of real property, is levied or assessed against
Lessor,  the same shall be deemed to be Real Property  Taxes.  If
any  such  property  taxes upon the income  of  Lessor  shall  be
imposed  on  a  graduated  scale, based upon  Lessor's  aggregate
rental  income,  Real  Property Taxes  shall  include  only  such
portion  of such property taxes as would be payable if  the  rent
payable  with respect to the Building and Common Areas  were  the
only rental income of Lessor subject thereto.

               1. Real Property Taxes shall not include (1) any capital levy,
franchise, estate, inheritance, succession, gift or transfer  tax
of  Lessor  or  (2)  any income, profits or excess  profits  tax,
assessment, charge or levy upon the income of Lessor.

               2. Lessee at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the premises or  to
contest any Real Property Taxes that are paid by Lessee, provided
that Lessee first obtains Lessor's written consent to the seeking
of  such  reduction,  which  consent shall  not  be  unreasonably
withheld.  If  Lessee  seeks a reduction  or  contests  the  Real
Property  Taxes,  the failure on Lessee's part to  pay  the  Real
Property  Taxes shall not constitute a default as long as  Lessee
complies with the provisions of this Section.

               3. Lessor shall not be required to join in any proceeding or
contest  brought  by  Lessee unless the  provisions  of  any  law
require  that the proceeding or contest be brought by or  in  the
name  of Lessor or any owner of the Premises. In that case Lessor
shall  join  in  the proceeding or contest or  permit  it  to  be
brought  in  Lessor's name as long as Lessor is not  required  to
bear  any  cost. Lessee, on final determination of the proceeding
or  contest,  shall immediately pay or discharge any decision  or
judgment  rendered,  together with all costs, charges,  interest,
and penalties incidental to the decision or judgment.

               4. If Lessee does not pay the Real Property Taxes when due and
Lessee  seeks  a reduction or contests them as provided  in  this
Section,  before the commencement of the proceeding  or  contest,
Lessee  shall  furnish  to  Lessor a surety  bond  issued  by  an
insurance  company  qualified to do business in  California.  The
amount  of  the bond shall equal one hundred twenty-five  percent
(125%)  of  the total amount of Real Property Taxes  in  dispute,
including any penalties for late payment thereof. The bond  shall
hold Lessor and the Premises harmless from any damage arising out
of  the proceeding or contest and shall insure the payment of any
judgment that may be rendered.

               5. Should Real Property Taxes applicable to the property be
reduced, Real Property Taxes assessed to Lessee pursuant to  this
Lease shall reflect such reduction.

     35. Rent Adjustment for Consumer Price Index.  The Base Rent
shall be adjusted effective as of the first day of the thirteenth
(13th)  full  calendar  month  of the  lease  term,  and  on  the
corresponding day of each year thereafter during the  lease  term
(the  "Amendment  Date") in accordance with  the  procedures  set
forth in Section 3.6.2, below.

     36. Calculation and Payment.

         3.6.1 Base Rent and Additional Rent shall be payable to Lessor in
lawful  money of the United States at Lessor's address herein  or
to  such  other  persons  or  at  such  other  places  as  Lessor
designates in writing. Base Rent and Additional Rent payable  for
any period for less than one month shall be prorated based upon a
thirty (30) day month.

         3.6.2 The Base Rent shall be adjusted on each Amendment Date by an
amount equal to the percentage of increase in the Consumer  Price
Index  for  Urban Wage Earners and Clerical Workers,  All  Items,
L.A.-Anaheim-Riverside  Area (1982-84= 100  Base)  (the  "Index")
during  the  preceding year. Such amount shall be  determined  by
comparing  the  Index  figure for the  second  month  immediately
preceding  the  Amendment  Date  to  the  Index  figure  for  the
corresponding month of the prior year, but in no event shall  the
annual  rental increase be less than three percent (3%)  or  more
than seven percent (7%) in any year.

               1. If the applicable Index figure is not available on the
Amendment Date, the parties shall make an interim increase in the
annual  rent  on  the basis of the most recently available  Index
figure.  A  final amendment shall thereafter be made, retroactive
to  the  Amendment Date, once the applicable Index figure becomes
available,  and  Lessee shall pay any additional rent  owing  for
prior  periods by reason of such final amendment not  later  than
the first day of the next following month.

               2. If on any Amendment Date the Consumer Price Index is no
longer  published  in  the same format as set  forth  above,  the
parties  shall  substitute any official index  published  by  the
Bureau   of   Labor  Statistics  or  any  successor  or   similar
Governmental agency as may then be in existence and shall be most
nearly  equivalent  thereto. If the parties shall  be  unable  to
agree  upon a successor index, the parties shall refer the choice
to  nonbinding  arbitration  by an  experienced  commercial  real
estate broker or attorney mutually agreeable to the parties.   No
discovery shall be allowed.

          3.6.3 Prior to the commencement of the lease term and in each
December  thereafter, Lessor shall give Lessee a written estimate
of  Lessee's share of Building and Common Area Operating Expenses
for  the  ensuing year or portion thereof. Lessee shall pay  such
estimated  amount  to  Lessor in equal monthly  installments,  in
advance.  Within ninety (90) days after the end of each  calendar
year,  Lessor  shall  furnish to Lessee a  statement  showing  in
reasonable  detail the actual Building and Common Area  Operating
Expenses  incurred by Lessor during such period, and the  parties
shall  within  thirty  (30) days make any  payment  or  allowance
necessary to adjust Lessee's estimated payment to Lessee's actual
proportionate share as shown by such annual statement. Any amount
due Lessee shall be credited against installments next coming due
under this Section.

          3.6.4 Lessor shall keep at its principal place of business books
and  records  in sufficient detail to permit the verification  of
all  costs and expenses charged to Lessee as Building and  Common
Area  Operating Expenses during the term of this lease. All  such
books  and records shall be available for inspection and  copying
by  Lessee  or  its  duly authorized representative  at  Lessor's
principal  place of business at reasonable times  during  regular
business hours upon reasonable prior notice to Lessor.

     37. End of Term.  Upon the expiration or earlier termination of
this  Lease,  Lessee  shall pay Lessor, as Additional  Rent,  the
aggregate rental increase which would have been payable by Lessee
pursuant  to  this  Article  3, except  for  such  expiration  or
termination, for the portion of the year in which termination  or
expiration  occurs through the termination date.  The  amount  of
such  payment  shall be calculated by Lessor based upon  Sections
3.2,  3.3, and 3.5 (using the expiration or termination  date  as
the amendment date for Section 3.5) and the best information then
available  to  Lessor,  and  shall  give  effect  to  all   prior
amendments  and  payments on account by Lessee pursuant  to  this
Article 3.

4.  SECURITY DEPOSIT

       Lessee  has  deposited with Lessor the sum of One  Hundred
Twenty-seven  Thousand Dollars ($127,000)  as  security  for  the
faithful performance by Lessee of all covenants and conditions of
this Lease. Lessor shall deposit Lessee's security deposit into a
money  market or similar high yield account and shall  cause  the
interest  accruing  thereon  to be remitted  to  Lessee  no  less
frequently  than annually. If Lessee shall breach or  default  in
the  performance of any covenants or conditions  of  this  Lease,
including the payment of Base Rent or Additional Rent, Lessor may
use,  apply  or  retain the whole or any part  of  such  security
deposit  for the payment of any rent in default or for any  other
sum  which Lessor may spend or be required to spend by reason  of
Lessee's default. If Lessor so uses or applies all or any portion
of said deposit, Lessee shall, within ten (10) days after written
demand therefor, deposit cash with Lessor in an amount sufficient
to restore said deposit to the full amount hereinabove stated and
Lessee's  failure  to do so shall be a material  breach  of  this
Lease. Should Lessee comply with all covenants and conditions  of
this Lease, the security deposit or any balance thereof shall  be
returned  to  Lessee  (or at the option of Lessor,  to  the  last
assignee of Lessee's interest in this Lease) at the expiration of
the term. Should Lessor sell its interest in the Premises, Lessor
shall  transfer to the purchaser thereof the then  unexpended  or
unappropriated deposit and thereupon Lessor shall  be  discharged
from  any further liability for such funds.  Notwithstanding  the
foregoing, Lessee agrees that Lessor shall have the right to  use
said  deposit to pay the impact fees demanded by the Goleta Water
District ("GWD") in order to obtain GWD's plan check approval and
"Can  and  Serve" letter; upon Lessor's receipt of debt financing
from  Lessor's lender, Lessor shall restore the security  deposit
to the sum of $127,000.

5. USE

     51. Use.   The Premises shall be used and occupied for lawful
warehouse, office and research and development purposes permitted
under  applicable ordinances and other Governmental requirements,
the covenants, conditions and restrictions affecting the Project,
as  the same may be amended from time to time, and the Rules  and
Regulations as Lessor may from time to time reasonably adopt  for
the  safety, care and cleanliness of the Building and the Project
or  the  preservation  of good order. The Rules  and  Regulations
presently  in effect are attached hereto as Exhibit  "C".  Lessor
shall endeavor to enforce such Rules and Regulations in a uniform
and  consistent  manner as to all tenants and  occupants  of  the
Building, but Lessor shall not be responsible to Lessee  for  the
nonperformance   of  any  of  such  Rules  and  Regulations,   or
noncompliance  with said covenants, conditions and  restrictions,
by  any  other  tenant  of the Building for reasons  beyond  the,
reasonable ability of Lessor to control.

     52. Compliance With Law.  Lessee shall at Lessee's expense,
comply  promptly with all applicable statutes, ordinances, rules,
regulations, orders and requirements in effect regulating the use
by Lessee of the Premises. Lessee shall not use or permit the use
of the Premises in any manner that will tend to create waste or a
nuisance  or  which shall tend to disturb other  tenants  of  the
Building.

     53. Insurance Cancellation.  If Lessee's use of the Premises
causes  an  increase  in  the rates of fire  or  other  insurance
maintained  on  the Project, Lessee shall pay as additional  rent
the  amount  of  such increase. Lessee shall be in default  under
this  Lease should Lessee cause the cancellation of fire or other
insurance upon the Building or Property or should Lessee fail  to
pay any increased insurance rate attributable to Lessee's use  of
the  Premises.  In determining whether increased premiums  are  a
result of Lessee's use or occupancy of the Premises, Property  or
Building,  a  schedule issued by Lessor's insurer  computing  the
insurance  rate  on the Premises, Property or  Building,  or  the
leasehold  improvements showing the various  components  of  such
rate,  shall  be  conclusive evidence of the  several  items  and
charges  which  make up such rate. Lessee shall  promptly  comply
with all reasonable requirements of the insurance authority or of
any insurer now or hereafter in effect relating to the Premises.

     54. Hazardous Substances.  Any corrosive, flammable, hazardous,
or other special wastes or materials shall be handled or disposed
of  as  directed  by applicable State, Federal, County  and  City
regulations.  Lessee  shall handle,  store  or  dispose  of  such
materials in a careful and prudent manner. At the termination  of
the lease, or any option period thereof, Lessee shall fully clean
the  premises in such a manner that no residue of such  materials
or  wastes  shall remain on the premises in concentrations  which
exceed  those  permitted under applicable rules  and  regulations
then  in effect. Lessee shall notify the appropriate governmental
authority  of  the  presence and amount of any such  material  or
wastes,  and  shall comply with all conditions  imposed  by  such
authority.  Lessee  shall  contact the  appropriate  governmental
authority  prior to occupancy to determine the existence  of  any
records  for  the  Building and/or Premises. Specifically  thirty
(30)  days prior to occupancy, Lessee shall submit to Lessor  and
the appropriate governmental authority for approval any Hazardous
Materials Management Plan (HMMP) and a Hazardous Materials  Floor
Plan  (HMF) required by such governmental authority. These  plans
shall be attached in full to this lease.

          5.4.1 The HMMP shall include the following:

                1. The Company name, address, and contact person.

                2. General facility description with map showing location of
all buildings and structures.

                3. Facility hazardous material storage map showing the location
of  each  proposed hazardous material storage area and access  to
such  facilities.  The  map  shall be  updated  annually  by  the
occupant and submitted by January 1 each year.

                4. A floor plan showing the location of each hazardous material
storage  area, storage area access, and the location of emergency
equipment.

          5.4.2. The HMFP shall include the following:

                1. Hazardous Materials Handling Report describing the safe
handling of hazardous materials to prevent accidents.

                2. Separation of Hazardous Material Report outlining the
methods  to  be  utilized to insure separation and protection  of
hazardous  materials  from such factors that  could  cause  fire,
explosion, spills, etc.

                3. Inspection and Record Keeping Plan indicating the procedures
for  inspecting  each storage facility. An authorized  record  of
inspection shall be maintained by the Lessee.

                4. Employee Training Program to insure that employees know how
to safely handle hazardous materials.

                5. Hazardous Materials Contingency Plan that clearly describes
appropriate  response  procedures and  measures  in  case  of  an
accident.

                6. A floor plan identifying the location and quantity of each
hazardous  material,  including the chemical  name  and  quantity
limit for each class.

          5.4.3 Lessee shall reduce the hazardous waste stream from the
Building to the maximum extent feasible.  Thirty (30) days  prior
to  occupancy, Lessee shall submit to Lessor  and the appropriate
governmental authority for approval a plan outlining measures for
the  reduction  of the hazardous waste stream from the  Building.
The  plan shall contain the monitoring component.  Components  of
the plan shall be implemented as indicated in the plan.

          5.4.4 Lessee shall pay inspection fees, based on the hourly
inspection  rate, for an environmental audit to be  conducted  by
the   appropriate  governmental  authority  or  Lessor   at   the
termination  of  the  lease  and prior  to  reoccupation  of  the
Building  and/or premises if hazardous materials were in  use  on
the leased Building and/or premises. The appropriate governmental
authority shall perform or Lessee shall arrange for such an audit
in  a  timely manner to prevent economic hardship to  Lessor  and
shall  certify  that the premises are available for reoccupation,
or  shall  specify cleanup measures that will render the premises
safe  for  reoccupation.  Lessee shall  be  responsible  for  any
cleanup that may be required as a result of the audit.

          5.4.5 Should Lessee fail to comply with any duty set forth in this
Section 5.4, Lessor may, in addition to all other remedies now or
hereafter provided by this Lease or by law, perform such duty  or
make  good  such  default,  and any amounts  which  Lessor  shall
advance  pursuant thereto shall be repaid by Lessee to Lessor  on
demand.  Lessee shall indemnify, defend, and hold Lessor harmless
from all costs, attorney fees, expenses, claims and liability for
damage  to  property and injury to persons  as  a  result  of  or
arising  out  of  Lessee's use, generation, storage,  release  or
disposal of any hazardous or toxic substance, material, or  waste
on the Project site.

     55. Solid Waste Management Program.   Thirty (30) days prior to
occupancy  Lessee shall submit to Lessor and to  the  appropriate
governmental  authority  for approval a  Solid  Waste  Management
Program.   The  program  shall  identify  the  amount  of   waste
generation projected from the Building. The program shall include
one  or  more  of the following measures, but is not  limited  to
those  measures:  (i) provision of bins for storage of recyclable
materials within the Building, (ii) participation in the curbside
recycling program which serves the Goleta area, (iii) development
of  a  Source  Reduction Plan ("SRP") describing the  recommended
program  and the estimated reduction of the solid waste  disposed
of  in  the  Building, and (iv) implementation of  a  program  to
purchase  materials that have recycled content for the operations
of  Lessee (e.g. office supplies).  To insure compliance,  Lessee
shall  develop  an  integrated solid  waste  management  program,
including  recommended  source reduction,  recycling,  composting
programs, and/or a combination of such programs subject to review
and approval by the appropriate governmental authority.

     56. Environmental Laws.

         1. Compliance with Environmental Laws.  Lessee, in its conduct
of business on or in any activity, work, thing done, permitted or
suffered  by  Lessee,  its  agents,  contractors,  employees   or
invitees  on the Premises, shall at all times and in all respects
comply  with  all federal, state and county laws, ordinances  and
regulations   (the  "Hazardous  Materials  Laws")   relating   to
industrial   hygiene,  environmental  protection  or   the   use,
analysis,   generation,   manufacture,   storage,   disposal   or
transportation  of  any  oil,  flammable  explosives,   asbestos,
radioactive  materials  or  waste,  or  other  hazardous,  toxic,
contaminated  or  polluting  materials,  substances,  or  wastes,
including,   without  limitation,  any  "hazardous   substances,"
"hazardous  wastes," "hazardous materials," or "toxic substances"
under any such laws, ordinances or regulations (collectively, the
"Hazardous  Materials").   Such laws, ordinances  or  regulations
shall   include,  but  not  be  limited  to,  the   Comprehensive
Environmental Response, Compensation and Liability Act  of  1980,
as  amended,  42  U.S.C.  Section 9601,  et  seq;  the  Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901  et seq; the Clean Water Act, 33 U.S.C. Section 466, et seq;
the  Safe Drinking Water Act, 14 U.S.C. Section 1401, et seq; the
Superfund  Amendment and Reauthorization Act of 1986; Public  Law
99-499,  100  Stat. 1613; the Toxic Substances  Control  Act,  15
U.S.C. Section 2601, et seq, as amended; those substances defined
as  "hazardous  waste", "extremely hazardous waste",  "restricted
hazardous waste" or "hazardous substance" in the Hazardous  Waste
Control  Act,  Section 25100 et seq of the  California  Health  &
Safety   Code;  and  those  materials  and  substances  similarly
described  in the Federal Insecticide, Fungicide and  Rodenticide
Act, 7 U.S.C. Section 136, et seq., as amended; the Atomic Energy
Act  of  1954,  42 U.S.C. Section 2011, et seq., as amended;  the
Porter Cologne Water Quality Control Act, Section 1300 et seq. of
the  California Health & Safety Code; and any regulations adopted
and publications promulgated pursuant to said Laws.

          2. Hazardous Materials Handling.  The Lessee 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 for Lessee's  use
of  the  Premises,  including, without limitation,  discharge  of
(appropriately treated) materials or wastes into or  through  any
sanitary  sewer serving the Premises.  Except as discharged  into
the  sanitary sewer in strict accordance and conformity with  all
applicable Hazardous Materials Laws, Lessee 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.
Lessee  shall in all respects handle, treat, deal with and manage
any  and  all  Hazardous Materials in, on,  under  or  about  the
Premises  in  total  conformity  with  all  applicable  Hazardous
Materials   Laws   and   prudent  industry  practices   regarding
management  of  such  Hazardous Materials.   Upon  expiration  or
earlier termination of the term of the Lease, Lessee shall  cause
all  Hazardous  Materials to be removed  from  the  Premises  and
transported  for  use,  storage or  disposal  in  accordance  and
compliance with all applicable Hazardous Materials Laws.   Lessee
shall not take any remedial action in response to the presence of
any Hazardous Materials in or about the Premises or the Building,
nor enter into any settlement agreement, consent, decree or other
compromise  in  respect to any claims relating to  any  Hazardous
Materials in any way connected with the Premises or the Building,
without first notifying Lessor of Lessee's intention to do so and
affording  Lessor  ample  opportunity  to  appear,  intervene  or
otherwise appropriately assert and protect Lessor's interest with
respect thereto.

          3.   Notices.   Lessee shall immediately notify Lessor in writing
of   any   of  the  following  activities  relating  to  Lessee's
operations  on  the  Premises:  (i)  any  enforcement,  clean-up,
removal  or  other governmental or regulatory action  instituted,
completed or threatened pursuant to any Hazardous Materials Laws;
(ii)  any claim made or threatened by any person against  Lessee,
the  Premises  or the Building relating to damage,  contribution,
cost  recovery  compensation, loss or injury  resulting  from  or
claimed  to result from any Hazardous Materials in, on or removed
from the Premises or the Building; and (iii) any reports made  to
any environmental agency arising out of or in connection with any
Hazardous  Materials  in  or removed from  the  Premises  or  the
Building, including any complaints, notices, warnings or asserted
violations in connection therewith.  Lessee shall also supply  to
Lessor as promptly as possible, and in any event within five  (5)
business days after Lessee first receives or sends the same, with
copies  of all claims, reports, complaints, notices, warnings  or
asserted  violations  relating in any way to  the  Premises,  the
Building or Lessee's use thereof.  Lessee shall promptly  deliver
to  Lessor  copies  of hazardous waste manifests  reflecting  the
legal and proper disposal of all Hazardous Materials removed from
the Premises.

         4. Indemnification of Lessor.  Lessee shall indemnify, defend,
protect,   and  hold  Lessor,  and  each  of  Lessor's  partners,
employees,  agents, attorneys, successors and assigns,  free  and
harmless  from  and  against  any and  all  claims,  liabilities,
penalties,  forfeitures, losses or expenses (including reasonable
attorneys' fees) for 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 (A) the presence in, on,  under
or  about the Premises or the Building, or discharge in  or  from
the  Premises  or  the  Building of any  Hazardous  Materials  or
Lessee's   use,  analysis,  storage,  transportation,   disposal,
release, threatened release, discharge or generation of Hazardous
Materials  to, in, on, under, about or from the Premises  or  the
Building,  but  only to the extent such Hazardous  Materials  are
present   as  a  result  of  actions  of  Lessee,  its  officers,
employees,  invitees, assignees, contractors, or agents,  or  (B)
Lessee's  failure  to  comply with any Hazardous  Materials  Law.
Lessee's obligations hereunder shall include, without limitation,
and  whether  foreseeable  or unforeseeable,  all  costs  of  any
required  or  necessary  repair, clean-up  or  detoxification  or
decontamination  of  the  Premises  or  the  Building,  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 the term of the  Lease.
For  purposes of the release and indemnity provisions hereof, any
acts or omissions of Lessee, or by officers, invitees, employees,
agents,  assignees, contractors or subcontractors  of  Lessee  or
others acting for or on behalf of Lessee (to the extent any  such
individual  is  acting within the scope of his relationship  with
Lessee),  whether  or not such acts or omissions  are  negligent,
intentional,  willful or unlawful, shall be strictly attributable
to Lessee.

6.  MAINTENANCE. REPAIRS AND ALTERATIONS

    61. Lessor's Obligations.  Lessor shall cause to be maintained,
in  good  order, condition and repair (a) the roof  and  exterior
walls,  (b)  common windows and doors of the Building  (excluding
the  interior  surface  thereof), (c) heating,  venting  and  air
conditioning  systems,  (d)  all  encased  plumbing  and  wiring,
whether  within  or  outside the Leased Premises  (but  excluding
plumbing  blockages  attributable to any misuse  of  plumbing  by
tenant  or  its agents or employees), (e) any public  and  common
areas   in  the  Building,  (f)  all  parking  areas,  driveways,
sidewalks, private roads or streets and landscaping and  (g)  all
other  areas located within the Project other than areas occupied
by other buildings (such non-building areas being herein referred
to as "Common Areas").

   62. Lessee's Obligations.  Lessee shall during the term of this
Lease  keep in good order, condition and repair, the interior  of
the  Premises (except as set forth above) and every part thereof,
including, but not limited to, all interior windows and doors  in
and  to  the  Premises  and all exposed plumbing  and  electrical
fixtures.  Lessor shall incur no expense nor have any  obligation
of  any kind whatsoever in connection with the maintenance of the
interior  of  the Premises and, except as expressly  provided  in
Section  12.3, below, Lessee waives the benefits of  any  statute
now  or  hereafter in effect which would otherwise afford  Lessee
the  right  to  make repairs at Lessor's expense or to  terminate
this  Lease  because of any failure to keep the interior  of  the
Premises in good order, condition and repair. Notwithstanding the
foregoing,  Lessor  shall be liable for  maintenance  or  repairs
which  are caused by Lessor's active negligence (whether  act  or
omission) or willful misconduct, or due to defects in workmanship
or  material covered by Contractor's warranty or that are  caused
by  the  failure  of Lessor or its contractors to  construct  the
Premises to the agreed specifications.

     63. Alterations and Additions.

         6.3.1 Lessee shall not, without Lessor's prior written consent,
which  shall  not be unreasonably withheld, make any alterations,
improvements, additions or utility installations in, on or  about
the  Premises  unless  such  work is  nonstructural  and  can  be
completed  at  a  cost that does not exceed  one-half  (1/2)  the
monthly  Base  Rent  in  effect  at  the  time  of  the  proposed
alteration  or  addition. As used in this Section 6.3,  the  term
"utility installations" shall include bus ducting, power  panels,
fluorescent  fixtures, space heaters, conduits  and  wiring.  All
utility  installations  made  by  Lessee  shall  conform  to  all
applicable codes and governmental regulations. As a condition  to
giving any required consent, Lessor may require that Lessee agree
to  remove  any  such  alterations,  improvements,  additions  or
utility installations at the expiration or sooner termination  of
the  term,  and to restore the Premises to their prior condition.
Lessee shall keep the Premises free of all lien claims and  shall
defend,  indemnify  and hold harmless Lessor against  all  claims
arising  from  mechanics' and materialmen's liens, including  all
costs, attorneys' fees, expenses and liabilities incurred  in  or
about any such claim or any action or proceeding brought thereon.

          6.3.2 All alterations, improvements and additions to the Premises
for which the approval of Lessor is required under Section 6.3.1,
or  which  involve  changes to the plumbing, electrical  or  HVAC
systems,  shall  be  performed  by Lessor's  contractor  for  the
Project  or  other licensed contractor approved by Lessor,  which
shall  not be unreasonably withheld. Lessee shall pay, when  due,
all  claims for labor or materials furnished to or for Lessee  at
or for use in the Premises, which claims are or may be secured by
any  mechanics' or materialmen's lien against the Premises or any
interest therein, and Lessor shall have the right to post notices
of nonresponsibility in or on the Premises as provided by law.

          6.3.3 Lessee shall provide Lessor with notice of any changes or
alterations made to the Premises, whether or not such changes  or
alterations  require the prior approval of Lessor, shall  furnish
Lessor  with a copy of the plans, sketches or drawings,  if  any,
made for the purpose of designing or constructing such changes or
additions, and shall provide Lessor with "as-built" drawings  for
any such alterations requiring the prior approval of Lessor.


     64. Surrender.  On the last day of the term hereof, or on any
sooner termination, Lessee shall surrender to lessor the Premises
and,  subject  to  the provisions of Section  6.3.1  hereof,  all
additions,  and  improvements thereto, in the same  condition  as
when received or made, ordinary wear and tear excepted; provided,
however,  that  Lessee's machinery, equipment and trade  fixtures
(including  utility installations) which may be  removed  without
irreparable or material damage to the Premises, shall remain  the
property of Lessee and be removed by Lessee. Lessee shall  repair
any  damage to the Premises occasioned by the removal of Lessee's
furnishings,  machinery,  equipment  and  trade  fixtures,  which
repair shall include the patching and filling of holes and repair
of structural damage.

     65. Lessor's Rights.  If Lessee fails to perform  Lessee's
obligations under this Article 6, Lessor may, at its option  (but
shall  not  be required to), and with a 5-day written  notice  to
Lessee,  perform  such obligations on behalf of Lessee,  and  the
cost   thereof,  together  with  interest  thereon  at  the  rate
specified  in Section 17.18 hereof, shall immediately become  due
and payable as additional rent to Lessor.

7.  INSURANCE

     Lessee,  at its sole cost and expense, shall, commencing  on
the  date Lessee is given access to the premises for any purpose,
and  during the entire term hereof, procure, pay for and keep  in
full force and effect:

     71.  Lessee's  Liability Insurance.  Comprehensive  general
liability  insurance  with  respect  to  the  Premises  and   the
operations  of  or  on  behalf of Lessee  in,  on  or  about  the
Premises,   but   not  limited  to:  personal   injury,   blanket
contractual,  owner's  protective,  broad  form  property  damage
liability coverage, host liquor liability and owned and non-owned
automobile  liability in an amount not less than  $1,000,000  per
occurrence,  $2,000,000 general aggregate, per  policy  year.  In
addition, Lessee shall maintain for the Lease Term, such policies
of  product  liability  insurance as are  readily  available  for
Lessee's  product lines at competitive, cost-effective rates  and
shall  self-insure  for  those  product  lines  for  which   such
insurance  is  not  available or not  available  at  commercially
reasonable rates. Each policy of insurance maintained  by  Lessee
shall contain (i) severability of interest, (ii) cross liability,
and   (iii)  an  endorsement  stating  in  substance  that  "Such
insurance as is afforded by this policy for the benefit of Lessor
shall be primary as respects any liability or claims arising  out
of  the  occupancy of the Premises by Lessee, or out of  Lessee's
operations, and any insurance carried by Lessor shall  be  excess
and non-contributory."

     72.  Lessee's  Worker's Compensation  Insurance.   Worker's
Compensation coverage as required by law, together with  Employer
Liability coverage.

     73. Lessee's Fire and Extended Coverage Insurance.  Insurance
against  fire,  vandalism,  malicious  mischief  and  such  other
additional  perils as now are or hereafter may be included  in  a
standard  "All  Risks"  coverage, insuring all  improvements  and
betterments  made  to  the  Premises,  Lessee's  trade  fixtures,
furnishings,  equipment, stock, loss of income or extra  expense,
and  other items of personal property in an amount not less  than
100%  of replacement value. Such insurance shall contain  (i)  no
coinsurance  or  contribution clauses, (ii)  a  Replacement  Cost
Endorsement, and (iii) deductible amounts acceptable to Lessor.

    74. Policy Requirements.

        7.4.1 All policies of insurance required to be carried by Lessee
pursuant  to  these requirements shall be written by  responsible
insurance  companies authorized to do business in  the  State  of
California.  Any such insurance required by Lessee hereunder  may
be  furnished by Lessee under any blanket policy carried by it or
under  a separate policy therefor. A true and exact copy of  each
paid up policy evidencing such insurance or a certificate of  the
insurer,  certifying that such policy has been issued,  providing
the  coverage  required and containing the  provisions  specified
herein, shall be delivered to Lessor prior to the date Lessee  is
given the right to possession of the Premises, and upon renewals,
not  less than thirty (30) days prior to the expiration  of  such
coverage. Lessor may, at any time, and from time to time, inspect
and/or copy any and all insurance policies required hereunder. In
no  event  shall the then limits of any policy be  considered  as
limiting the liability of Lessee under this Lease.

        7.4.2 Each policy evidencing insurance required to be carried by
Lessee pursuant to these requirements shall contain, in form  and
substance satisfactory to Lessor: (i) a provision in all  general
liability  policies  including Lessor and any  other  parties  in
interest  designated by Lessor as an additional insured;  (ii)  a
waiver  by Lessee's insurers of any right to subrogation  against
Lessor, its agents, employees and representatives which arises or
might  arise  by reason of any payment under such  policy  or  by
reason of any act or omission of Lessor, its agents, employees or
representatives; and (iii) a provision that the insurer will  not
cancel  or materially change the coverage provided by such policy
without  first  giving  Lessor thirty  (30)  days  prior  written
notice, if the same is reasonably available.

        7.4.3 The amounts of insurance and extent of coverage set forth in
this  Article 7 can be subject to periodic review and  amendment,
based either on the mutual agreement of Lessor and Lessee or,  if
Lessor and Lessee are unable to agree, on the determination of an
insurance broker mutually agreeable to the parties.

     75.  Lessor's Rights.  If Lessee fails to procure, maintain
and/or  pay  for at the times and for the durations specified  in
this  Lease, the insurance required hereunder, or fails to  carry
insurance  required by any governmental requirement,  Lessor  may
(but  without  obligation to do so), and  with  twenty-four  (24)
hours  advance  notice  to Lessee, perform  such  obligations  on
behalf  or  Lessee, and the cost thereof, together with  interest
thereon  at  the rate specified in Section 12.2.1  hereof,  shall
immediately become due and payable as additional rent to Lessor.

     76.  Lessor's Insurance.  Lessor shall be entitled to maintain
during  the  term  of this Lease such insurance against  physical
damage  to  the  Building in an amount not less than  one-hundred
percent (100%) of replacement value of the Premises, and a policy
of  comprehensive  excess  liability insurance  with  a  combined
single  limit  in  such  amount  as Lessor  reasonably  considers
appropriate and Fire and Extended Coverage Insurance. Lessor may,
but shall not be obliged to, take out and carry any other form or
forms  of  Insurance  as  it  or the  mortgagees  of  Lessor  may
reasonably  determine advisable, except that  Lessor  and  Lessee
agree that (a) Lessor shall not be obligated to obtain earthquake
insurance  for the Premises and (b) Lessee shall not be  required
to  reimburse  Lessor  for  premiums for  other  insurance  which
exceeds in nature, scope or amount of coverage insurance that  is
consistent with normal commercial practices. Notwithstanding  any
contributions  by Lessee to the cost of insurance premiums,  with
respect  to  the Building or any alterations of the Premises,  as
may  be provided herein, Lessee acknowledges that it has no right
to  receive any proceeds from any such insurance policies carried
by Lessor.

     77. Indemnification.  To the fullest extent permitted by law,
Lessee shall defend, indemnify and hold harmless Lessor from  and
against  any  and  all claims arising from Lessee's  use  of  the
Premises  of  the conduct of its business or from  any  activity,
work, or thing done, permitted of suffered by Lessee, its agents,
contractors,  employees or invitees in or about the  Premises  or
elsewhere,  and shall further indemnify and hold harmless  Lessor
from  and  against any and all claims arising from any breach  or
default in the performance of any obligation on Lessee's part  to
be  performed hereunder, or arising from any act, neglect,  fault
or  omission of Lessee, or of its agents, employees, or invitees,
and  from  and  against all costs, attorney's fees, expenses  and
liabilities  incurred in or about such claim  or  any  action  or
proceeding  brought thereon. In case any action or proceeding  be
brought against Lessor by reason of any such claim, Lessee,  upon
notice from Lessor, shall defend the same at Lessee's expense  by
counsel approved in writing by Lessor. Lessee, as a material part
of the consideration to Lessor hereunder, hereby assumes all risk
of  damage to property or injury to persons in, upon or about the
Premises from any cause whatsoever except that which is caused by
the  failure of Lessor to observe any of the terms and conditions
of  this  Lease or, except as expressly waived by Lessee in  this
Lease,  a duty imposed on Lessor by law, and Lessee hereby waives
all  its  claims in respect thereof against Lessor,  but  nothing
herein  shall  be construed to release Lessor from liability  for
damages  caused by its fault or neglect and Lessee shall  not  be
obligated to defend, indemnify and hold harmless Lessor from  and
against any claims attributable to Lessor's negligence or willful
misconduct.

     78. Exemption of Lessor from Liability.  Lessor shall not be
liable  for  injury to Lessee's business or any  loss  of  income
therefrom  or  for  damage to the property  of  Lessee,  Lessee's
employees, invitees, customers, or any other person in  or  about
the Premises, nor shall Lessor by liable for injury to the person
of  Lessee,  Lessee's  employees, agents or contractors,  whether
such  damage  or  injury  is  caused by  or  results  from  fire,
explosion, falling plaster, electricity, gas, water or  rain,  or
from  the  breakage,  leakage, obstruction or  other  defects  of
pipes,  sprinklers, wires, appliances, plumbing, air conditioning
or  lighting  fixtures,  or from any other  cause,  whether  such
damage  or  injury  results  from  conditions  arising  upon  the
Premises  or upon other portions of the Building, or  from  other
sources  or places, and regardless or whether the cause  of  such
damage  or  injury  or  the  means  of  repairing  the  same   in
inaccessible.   Lessor  shall  not  be  liable  for   incorporeal
hereditament including interference or obstruction of light,  air
or  view. Lessor shall not be liable for any damages arising from
any  act  or neglect of any other tenant of the Building  or  the
other  portions  of  the  Project or for nonperformance  by  such
tenant of the Rules and Regulations affecting the Building  which
is   beyond   the  reasonable  ability  of  Lessor  to   control.
Notwithstanding the foregoing Lessor shall be liable  for  damage
or  injury caused by Lessor's active negligence (whether  act  or
omission) or willful misconduct.

8.  DAMAGE OR DESTRUCTION

    81. Partial Damage. If the Premises, or so much of the Building
as  to cause the Premises to be uninhabitable, are damaged by any
casualty required to be insured against by Lessor, and the damage
(exclusive of any property or improvements installed by Lessee in
the  Premises)  can be repaired within nine (9) months  from  the
receipt  by Lessor of proceeds from insurance policies applicable
to  said  casualty,  utilizing only such  proceeds,  without  the
payment of overtime, Lessor shall at Lessor's expense repair such
damage  (exclusive  of  any property of  Lessee  or  improvements
installed  by Lessee in the Premises) as soon as practicable  and
this   Lease   shall   continue  in  full   force   and   effect.
Notwithstanding the foregoing, Lessor shall not  be  required  to
undertake such repair if (a) the remaining term of the  Lease  is
less than three (3) years or (b) Lessor, for the remainder of the
Lease   Term,   either  (i)  provides  Lessee   with   comparable
alternative  space  at  a  cost that does  not  exceed  the  cost
previously paid by Lessee under the Lease or (ii) makes provision
sufficient  to  assure  the  reimbursement  to  Lessee   of   the
additional rent which Lessee will incur above its cost under  the
Lease  for  comparable alternative space.  Lessor  shall  not  be
required  to  undertake repairs resulting from any  casualty  for
which  Lessor is not obligated to maintain insurance, as provided
in  the Lease, or which cannot be repaired within nine (9) months
from the receipt of the insurance proceeds. In such event, either
party shall be entitled to terminate this Lease by giving written
notice of termination to the other party.

    82. Damage Near End of Term.  If the Premises, or so much of the
Building  as  to  cause  the Premises to  be  uninhabitable,  are
damaged during the last nine (9) months of the term of this Lease
or any renewal thereof, Lessor may, at Lessor's option, terminate
this  Lease as of the date of occurrence of such damage by giving
written  notice to Lessee of Lessor's election to  do  so  within
thirty  (30)  days after the date of occurrence of  such  damage;
provided,  however,  that if the term  of  this  Lease  has  been
extended  for any reason whatsoever, Lessor's right to  terminate
this  Lease shall only apply during the last nine (9)  months  of
the then current term of this Lease.

    83. Abatement of Rent, Lessee's Remedies.

         8.3.1 If Lessor is obligated or elects to repair the Premises as
provided above, the Base Rent payable for the period during which
such  repair  continues shall be abated,  in  proportion  to  the
degree  to which Lessee's use of the Premises is impaired. Except
for  such  abatement, if any, Lessee shall have no claim  against
Lessor  for  any  damage suffered by reason of any  such  damage,
destruction, repair or restoration.

         8.3.2 If Lessor is obligated or elects to repair the Premises
provided  above, but does not commence such repair within  ninety
(90)  days  after  such obligation shall accrue,  subject  to  an
extension or up to another sixty (60) days for delays beyond  the
reasonable  control  of Lessor, Lessee may, at  Lessee's  option,
terminate this Lease by giving Lessor written notice of  Lessee's
election to do so at any time prior to the commencement  of  such
repair  or restoration, in which event this Lease shall terminate
as of the date of such destruction.

     84. Insurance Proceeds Upon Termination.  If this Lease  is
terminated pursuant to any right given Lessee or Lessor to do  so
under  this  Article  8,  all insurance  proceeds  payable  under
Section 7.6 with respect to the damage giving rise to such  right
of termination shall be paid to Lessor and any encumbrance of the
Premises, as their interest may appear.

     85. Restoration.  Lessor's obligation to restore shall  not
include  the  restoration or replacement of Lessee's furnishings,
machinery,  equipment, trade fixtures or other personal  property
or  any  improvements  or  alterations  made  by  Lessee  to  the
Premises.

9.   PERSONAL PROPERTY TAXES

     Lessee  shall  pay  prior to delinquency all  Real  Property
Taxes   and  other  taxes  assessed  against,  levied   upon   or
attributable  to  its  furnishings, machinery,  equipment,  trade
fixtures or other personal property contained in the Premises  or
elsewhere, and, if required, all improvements to the Premises  in
excess  of  Lessor's "building standard" improvements,  provided,
however,  that nothing contained herein shall, require Lessor  to
insure  the accuracy of any segregation of the same for  purposes
of  Section  3.4.2 hereof. When practicable, Lessee  shall  cause
said  furnishings, machinery, equipment, trade fixtures  and  all
other personal property to be assessed and billed separately from
the real property of Lessor.

10.   UTILITIES

     Lessee  shall  pay for all water, gas, heat,  light,  power,
janitorial services and other utilities and services supplied  to
the  Premises,  together  with any taxes  thereon.  If  any  such
services are not separately metered or charged to Lessee,  Lessee
shall  pay  a pro rata proportion, as part of operating expenses,
based on leasable area, of all charges jointly metered or charged
with  other  premises. Lessor shall not be liable in  damages  or
otherwise  unless due to Lessor's active negligence (whether  act
or  omission)  for  any failure or interruption  of  any  utility
services  being furnished to the building and no such failure  or
interruption shall entitle Lessee to terminate this lease. In  no
event shall Lessor be liable for any such failure or interruption
caused by the exercise of governmental authority, strikes, riots,
acts  of  God, war, adverse weather conditions, fire,  flood,  or
casualties or acts of third parties beyond Lessor's control.  The
operation  and  control of utilities, air  conditioning  and  any
other  energy system is subject to compliance with any government
authority  governing  the regulation and use  of  energy  systems
within  the  commercial office or industrial building  structure.
Lessee  shall  not  subject  any of the  mechanical,  electrical,
plumbing,  sewer or other utility or service systems or equipment
to  exercise  or  use  which causes damage  to  said  systems  or
equipment.  Any  such  damages  to  equipment  caused  by  Lessee
overloading such equipment shall be rectified by Lessee, or  may,
at Lessor's option, be rectified by Lessor, at Lessee's sole cost
and expense.

11.  ASSIGNMENT AND SUBLETTING

     111. Restrictions on Assignment.  Lessee shall not voluntarily or
by  operation  of  law  sublet,  assign,  transfer,  mortgage  or
otherwise  encumber, or grant concessions, licenses or franchises
with  respect  to  all or any part of Lessee's interest  in  this
Lease  or  the  Premises  without the prior  written  consent  of
Lessor, which shall not be unreasonably withheld. Notwithstanding
the  foregoing, Lessee, without Lessor's consent, may  assign  or
sublet its interest in this Lease or the Premises to an affiliate
or  subsidiary  of Lessee, subject to the provisions  of  Section
11.3 hereof.

     112. Consents to Transfer of Lease.   If Lessee desires at
any  time to assign this Lease or to sublet the Premises  or  any
portion thereof in a transaction that is not exempt under Section
11.1, above, it shall first notify Lessor of its desire to do  so
and  shall  submit  in  writing to Lessor (i)  the  name  of  the
proposed  sublessee or assignee; (ii) the nature of the  proposed
sublessee   or  assignee;  (iii)  the  nature  of  the   proposed
sublessee's  or  assignee's business to  be  carried  on  in  the
Premises; (iv) the terms and provisions of the proposed  sublease
or  assignment;  (v)  such  reasonable financial  information  as
Lessor may request concerning the proposed sublessee or assignee,
including, but not limited to a balance sheet as of a date within
ninety  (90) days of the request for Lessor's consent, statements
of  income  or profit and loss for the two-year period  preceding
the  request  for  Lessor's consent and a  written  statement  in
reasonable details as to the business experience of the  proposed
sublessee  or  assignee during the five (5) years  preceding  the
request  for Lessor's consent; and (vi) the name and  address  of
sublessee's  or  assignee's present or previous landlord.  Lessor
may,  as  a condition to granting such consent, require that  the
obligations of any assignee which is a subsidiary or affiliate of
another  corporation be guaranteed by the parent  or  controlling
corporation.  Any  sublease, license,  concession,  franchise  or
other  permission to use the Premises shall be expressly  subject
and  subordinate to all applicable terms and conditions  of  this
Lease. Any purported or attempted assignment, transfer, mortgage,
encumbrance, subletting, license, concession, franchise or  other
permission to use the Premises contrary to the provisions of this
Section  shall  be  void  and, at the  option  of  Lessor,  shall
terminate this Lease.

     113. Organizational Changes.  If Lessee is a corporation, any
transfer   of   its   stock,  or  any  dissolution,   merger   or
consolidation, which results in a change in the control of Lessee
from  the person or persons owning a majority of its voting stock
immediately prior thereto, or the sale of other transfer  of  all
or substantially all of the assets of Lessee, shall constitute an
assignment of Lessee's interest in this Lease within the  meaning
of this Article 11 and the provisions requiring consent contained
herein.  Lessor may require as a condition to giving such consent
that  the  new controlling person(s) execute a guaranty  of  this
Lease.  If  Lessee  is a corporation which,  under  then  current
guidelines   published   by   the  California   Commissioner   of
Corporation,  is  not  deemed to be  a  public  corporation,  the
transfer,  assignment or hypothecation of any  interest  in  such
corporation  in  the aggregate in excess of  25%  (other  than  a
transfer  occurring by operation of law upon  the  death  of  the
holder of such interest) shall be deemed an assignment within the
provisions of this Article.

     114. Continuing Liability of Lessee.  No subletting, assignment,
license,  concession, franchise or other permission  to  use  the
Premises shall relieve Lessee of its obligations to pay the  rent
or  to  perform all of the other obligations to be  performed  by
Lessee hereunder. The acceptance of rent by Lessor from any other
person  shall  not  be deemed to be a waiver  by  Lessor  of  any
provisions of this Lease.

     115. Options in Favor of Lessor.  At any time within ten (10)
days  after  Lessor's  receipt of the  information  specified  in
Section 11.2 above, Lessor may by written notice to Lessee  elect
(a)  to  sublease the Premises or the portion thereof so proposed
to  be  subleased by Lessee, or to take an assignment of Lessee's
leasehold estate hereunder, upon the same terms as those  offered
to the proposed sublessee or assignee, as the case may be; or (b)
to  terminate this Lease as to the portion (including all) of the
Premises  so  proposed  to  be  subleased  or  assigned,  with  a
proportionate  abatement in the rent payable  hereunder;  or  (c)
disapprove such assignment or subletting. If Lessor does not  act
within  the  ten  (10) days, such failure  to  act  is  deemed  a
disapproval   of  such  request  for  assignment  or  subletting.
Notwithstanding  the foregoing, the provisions  of  this  Section
11.5  shall not apply to any assignment of the Lease to an entity
surviving  any corporate reorganization of Lessee, provided  that
said entity has a net worth, as demonstrated by the provisions of
such  reasonable financial information as is set forth in Section
11.2(v)  hereof,  of not less than twenty (20) times  the  annual
rent in effect on the date of assignment.

     116. Assumption by Assignee.  Each assignee or transferee, other
than  Lessor, shall assume all obligations of Lessee  under  this
Lease  and shall be and remain liable jointly and severally  with
Lessee for the payment of the Base Rent and Additional Rent,  and
for  the  due performance of all the terms, covenants, conditions
and  agreements  to  be performed by Lessee hereunder;  provided,
however, that a transferee other than an assignee shall be liable
to Lessor for rent only in the amount set forth in the assignment
or transfer. No assignment shall be binding on Lessor unless such
assignee or Lessee shall deliver to Lessor a counterpart of  such
assignment and an instrument in recordable form which contains  a
covenant of assumption by such assignee satisfactory in substance
and  form  to  Lessor, consistent with the requirements  of  this
Section  11.6,  but the failure or refusal of  such  assignee  to
execute  such  instrument  of assumption  shall  not  release  or
discharge such assignee from its liability as set forth above.

     117. Lessor's Participation in Rental Overages.  Consent  by
Lessor to any subletting or assignment shall be conditioned  upon
payment  by  Lessee  to Lessor of one-half (1/2)  of  any  Rental
Overages (as hereafter defined) received, directly or indirectly,
by  Lessee on account of such assignment or subletting.  Lessor's
share  of any such Rental Overages shall be paid to Lessor within
ten  (10)  days  after the receipt by Lessee of the consideration
upon  which such Rental Overages are based. Failure to pay Lessor
its  share  of any Rental Overages, or any portion or installment
thereof,  shall be deemed to default under this lease,  entitling
Lessor  to  exercise  all  remedies available  to  it  under  law
including, but not limited to, those specified in Article  12  of
this  lease. "Rental Overages" shall mean (a) in the  case  of  a
subletting,  any  net rental income (after deducting  all  broker
fees  and all other costs and expenses paid or incurred by Lessee
in  securing the sublease) paid or given, directly or indirectly,
by  the sublessee to Lessee pursuant to the sublease for the  use
of  the Premises, or any portion thereof, over and above the rent
and  any  additional rent, however denominated,  in  this  Lease,
payable  by  Lessee  to Lessor for the use of  the  Premises  (or
portion thereof), prorating as appropriate the amount payable  by
Lessee  to  Lessor  under this Lease if  less  than  all  of  the
Premises  is  sublet, and (b) in the case of an assignment  or  a
sublease, any net payment (after deducting (i) all, brokers  fees
and  (ii) all other costs and expenses, but not to exceed the sum
of  $10,000.00,  paid  or  incurred by  Lessee  in  securing  the
sublease) paid or given, directly or indirectly, by the sublessee
or  assignee to Lessee solely in exchange for entering  into  the
sublease  or  assignment, but shall not include (a) reimbursement
for  any security deposit, (b) reimbursement of any improvements,
fixtures or furnishings installed in the Premises by Lessee,  (c)
any amounts paid for the business or assets of Lessee, other than
the leasehold estate, or (d) any payment for personal property of
Lessee, including payments made for goodwill, going concern value
or   similar  intangible  personal  property.  As  used   herein,
consideration shall include consideration in any form,  including
but not limited to, money, property, discounts, services, credits
or  any other item or thing of value. Irrespective of the form of
such  consideration, Lessor shall be entitled to be paid in  cash
in  an amount equivalent to the aggregate of the cash portion  of
the  Rental Overages and the value of any non-cash portion of the
Rental  Overages. If any Rental Overages are to be paid or  given
in  installments, Lessee shall pay each such installment  at  the
time the same is received by Lessee.

      118. Reimbursement of Costs and Fees.  Lessee shall reimburse
Lessor for Lessor's reasonable costs and attorneys' fees,  in  an
amount  not to exceed Two Thousand Dollars ($2,000.00),  incurred
in  conjunction  with  the processing and  documentation  of  any
assignment,   subletting,  transfer,  change  of   ownership   or
hypothecation of this Lease or Lessee's interest in the Premises.

12.  DEFAULTS: REMEDIES

     121. Default by Lessee.  The occurrence of any one or more of the
following  events  shall constitute a default of  this  Lease  by
Lessee:

          12.1.1 The vacating or abandonment of the Premises by Lessee
combined with the failure to pay rent;

          12.1.2 The failure of Lessee to make any payment of rent or any
other  payment  required to be made by Lessee hereunder,  as  and
when  due, where such failure shall continue for a period of  ten
(10)  days  after written notice thereof from Lessor  to  Lessee;
provided, however, that any such notice shall be in lieu of,  and
not in addition to, any notice required under California Code  of
Civil Procedure Section 1161;

          12.1.3 The failure by Lessee to observe or perform any of the
covenants,  conditions  or  provisions  of  this  Lease  (or  the
covenants, conditions and restrictions governing the Project)  to
be  observed  or  performed by Lessee, other  than  described  in
Section  12.1.2 hereof, where such failure shall continue  for  a
period  of  thirty  (30) days after written notice  thereof  from
Lessor to Lessee, or for such lesser period as may be reasonable,
taking  in  to account the matter complained of and the potential
risk  of  damage  or loss caused thereby (hereinafter  the  "cure
period");  provided, however, than any such notice  shall  be  in
lieu  of,  and  not  in  addition to, any notice  required  under
California  Code  of  Civil  Procedure  Section  1161;   provided
further, that if the nature of Lessee's default is such that more
than the default period is reasonably required for its cure, then
Lessee  shall not be deemed to be in default if Lessee  commences
such  cure  within  the  cure  period and  thereafter  diligently
prosecutes such cure to completion; or

          12.1.4 The making by Lessee of any general assignment or general
arrangement  for  the  benefit of creditors;  the  filing  by  or
against  Lessee of a petition to have Lessee adjudged a  bankrupt
or  a  petition for reorganization or arrangement under  any  law
relating  to  bankruptcy (unless, in the case of a  petition  for
reorganization  or  arrangement  tinder  any  law   relating   to
bankruptcy (unless, in the case of a petition for against Lessee,
the same is dismissed within sixty (60) days); the appointment of
a  trustee or receiver to take possession of substantially all of
the  Lessee's  assets  located at the Premises,  or  of  Lessee's
interest  in  this  Lease, where possession is  not  restored  to
Lessee  within thirty (30) days; or the attachment, execution  or
other  judicial  seizure of substantially all of Lessee's  assets
located  at  the Premises or of Lessee's interest in this  Lease,
where such seizure is not discharged within thirty (30) days.

     122.0 Remedies for Default of Lessee.  In the event of any such
default,  Lessor  may  at any time thereafter,  upon  notice  and
demand  and without limiting Lessor in the exercise of any  other
right  or remedy which Lessor may have by reason of such  default
or breach:

          12.2.1 Terminate Lessee's right to possession of the Premises by
any  lawful  means, in which case this Lease shall terminate  and
Lessee shall immediately surrender possession of the Premises  to
Lessor.  In  such event Lessor shall be entitled to recover  from
Lessee:

               1. The worth at the time of award of the unpaid rent which has
been earned at the time of termination;

               2. The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination  until
the  time  of award exceeds the amount of such rental  loss  that
Lessee proves could have been reasonably avoided;

               3. The worth at the time of award of the amount by which the
unpaid  rent for the balance of the term after the time of  award
exceeds  the amount of such rental loss that Lessee proves  could
be reasonably avoided; and

               4. Any other amount necessary to compensate Lessor for all the
detriment  proximately caused by Lessee's failure to perform  its
obligations under this Lease or which in the ordinary  course  of
things  would be likely to result therefrom, including,  but  not
limited  to;  the cost of recovering possession of the  Premises,
expenses   of   releasing  including  necessary  renovation   and
alteration  of the Premises, reasonable attorneys' fees  and  any
other  reasonable cost. The "worth of the time of award"  of  the
amounts  referred to in subparagraphs (A) and (B) above shall  be
computed by allowing interest at five (5) percentage points above
the discount rate of the Federal Reserve Bank of San Francisco at
the  time  of  the award. The worth at the time of award  of  the
amount referred to in subparagraph (C) above shall be computed by
discounting  such amount at one (1) percentage point  above  such
discount rate.

          12.2.2 Suspend or discontinue the services specified in Article 10
above, or any thereof, during the continuance of any such default
and any such suspension or discontinuance shall not be deemed  or
construed to be an eviction or ejection of Lessee.

          12.2.3 Require Lessee to make payment of all rental obligations in
cash or by certified cashiers check

          12.2.4 Pursue any other remedy now or hereafter available to Lessor
under  the laws or judicial decisions of the State of California,
including,  but no limited to, the remedy provided in  California
Civil Code Section 1951.4 to continue this Lease in effect.

     123. Default by Lessor.

          12.3.1 Lessor shall not be in material default of any of the obliga
tions  of Lessor under this Lease unless Lessor fails to  perform
such  obligations  within thirty (30) days after  written  notice
thereof  from Lessee to Lessor, or such lesser period as  may  be
reasonable, taking into account the matter complained of and  the
potential risk of damage or loss caused thereby (hereinafter, the
"cure  period") . If the nature of Lessor's default is such  that
it  cannot  be  promptly cured, Lessor shall not be  in  material
default  if Lessor promptly commences such cure within such  cure
period   and  thereafter  diligently  prosecutes  the   same   to
completion. In the event of any such material default by  Lessor,
Lessee may pursue any remedy now or hereafter available to Lessee
under  the laws or judicial decisions of the State of California,
except  that  Lessee shall not have the right to  terminate  this
Lease  except as expressly provided herein. Lessee waives  except
as  herein provided, any Lessor obligations for tenantability  of
the Building or Premises.

          12.3.2 Lessee shall have the right to deduct from the rent the
expenses  of any commercially reasonable repairs to the  Premises
done  by  Lessee  on Lessor's behalf, or commercially  reasonable
expenditures made by Lessee to cure material defaults by  Lessor,
only under the following circumstances:

               1. Lessor shall have committed a material default in the
performance of its obligations under this Lease; and

               2. Lessee provides Lessor not less than three (3) working days'
prior   written  notice  of  Lessee's  intention  to   make   any
expenditure  that  Lessee proposes to make  for  the  purpose  of
curing  such default, unless the expenditure is for an  emergency
health  and  safety matter and it is not possible to  give  prior
notice; and

               3. Lessee must have been denied reimbursement by its insurance
carrier; and

               4. Lessor fails to reimburse Lessee within ten (10) days after
Lessee  makes written demand on Lessor for reimbursement of  such
expenditure, confirming the satisfaction of Items A-C above.

     124. Late Charges.   Lessee acknowledges that the late payment by
Lessee to Lessor of rent and other sums due hereunder will  cause
Lessor  to incur costs not contemplated by this Lease, the  exact
amount  of which will be extremely difficult to ascertain.   Such
costs  include, but are not limited to, processing and accounting
charges  and late charges which may be imposed on Lessor  by  the
terms  of  any  mortgage  or trust deed  covering  the  Premises.
Accordingly, if any installment of rent or any other sum due from
Lessee  shall  not  be  received by Lessor or  Lessor's  designee
within  ten (10) days after the same is due, Lessee shall pay  to
Lessor  a late charge equal to five percent (5%) of such  overdue
amount,  except  that no late charge shall be  assessed  for  the
first delinquency in any calendar year that exceeds ten (10) days
until   the   delinquency  exceeds  fifteen  (15)  days.   Lessee
acknowledges  that  such  late  charged  represents  a  fair  and
reasonable estimate of the cost Lessor will incur by reason of  a
late  payment by Lessee. Acceptance of such late charge by Lessor
shall  in  no event constitute a waiver of Lessee's default  with
respect  to  such  overdue  amounts,  nor  prevent  Lessor   from
exercising   any  of  the  other  rights  and  remedies   granted
hereunder.

13.  CONDEMNATION OR RESTRICTION ON USE

     131.  Eminent Domain.  If the whole of the Premises or so much
thereof  as  to  render the balance unusable by Lessee  shall  be
taken   under   power  of  eminent  domain,  this   Lease   shall
automatically  terminate as of the date of such condemnation,  or
as  of  the date possession is taken by the condemning authority,
whichever  is  earlier.   The balance of the  Premises  shall  be
deemed  to  be unusable if the taking constitutes an interference
with Lessee's business such that Lessee's ability to conduct  its
business  operations on the Premises in the same manner  as  they
were conducted prior to the taking is substantially impaired.  In
any  taking or condemnation, Lessee shall be entitled to  receive
the  value, if any, of its leasehold interest; and any award made
to  Lessee  for its relocation expenses, the taking  of  personal
property and fixtures belonging to Lessee, the interruption of or
damage to Lessee's business and/or for Lessee's unamortized  cost
of   leasehold  improvements.  The  unamortized  portion  of  the
Lessee's  expenditures  for  improving  the  Premises  shall   be
determined  by  multiplying such expenditures by a fraction,  the
numerator  of which shall be the number of years of the  term  of
this  Lease  which  shall not have expired at the  time  of  such
appropriation  or taking, and the denominator of which  shall  be
the  number  of years of the term of this Lease which  shall  not
have  expired  at  the time of improving the  Premises.  Lessee's
right  to  receive compensation or damages for its  fixtures  and
personal property shall not be affected in any manner thereby.

     132. Abatement of Rent.  In the event of a partial taking which
does  not result in a termination of this Lease, Base Rent  shall
be  abated  in  proportion to that part of the Premises  so  made
unusable by Lessee.

     133. Temporary Taking.  No temporary taking of the Premises
and/or  of  Lessee's  rights therein or under  this  Lease  shall
terminate this Lease or give Lessee any right to any abatement of
Base  Rent  hereunder; and any award made to Lessee by reason  of
any  such  temporary taking shall belong entirely to  Lessee  and
Lessor shall not be entitled to share therein. A temporary taking
shall  be  defined  as a taking which does not  extend  beyond  a
period of one (1) year in length.

     134. Voluntary Sale as Taking.   A voluntary sale by Lessor to
any  public  body  or agency having the power or eminent  domain,
either   under  threat  of  condemnation  or  while  condemnation
proceedings are pending, shall be deemed to be a taking under the
power of eminent domain for the purpose of this Article 13.

14.  BROKERS

     141.  Lessor  acknowledges its obligation to  pay  a  single
commission  to  the broker(s) specified in Item 9  of  the  Basic
Lease Provisions, if any.

     142. Lessor represents and warrants that it has not engaged any
other   brokers  or  finders,  in  connection  with  the  origin,
negotiation, execution or performance of this Lease and agrees to
indemnify,  defend and hold harmless Lessee from any  claims  for
compensation  asserted  by  any person  claiming  an  entitlement
thereto on account of services rendered for or at the request  of
Lessor.

     143. Lessee represents and warrants that it has not engaged any
other   brokers  or  finders,  in  connection  with  the  origin,
negotiation, execution or performance of this Lease and agrees to
indemnify,  defend and hold harmless Lessor from any  claims  for
compensation  asserted  by  any person  claiming  an  entitlement
thereto on account of services rendered for or at the request  of
Lessee.

15.  LESSOR'S LIABILITY

     The  term "Lessor" as used herein shall mean only the  owner
or  owners at the time in question of the fee title or a Lessee's
interest in a ground lease of the Building. In the event  of  any
transfer of such title or interest, Lessor herein named  (and  in
case  of  any  subsequent transfers, the then grantor)  shall  be
relieved  from  and  after the date of  such  transfers,  of  all
liability  for  Lessor's obligations thereafter to be  performed;
provided, however, that any funds in the hands of Lessor  or  the
then grantor at the time of such transfer in which Lessee has  an
interest shall be delivered to the grantee, and provided that the
grantee assumes in writing Lessor's obligations pursuant to  this
Lease. The obligations contained in this Lease to be performed by
Lessor  shall,  subject  as aforesaid,  be  binding  on  Lessor's
successors  and assigns only during their respective  periods  of
ownership.

     Lessee agrees that, in the event of any default or breach by
Lessor  with  respect to any of the terms  of  the  Lease  to  be
observed and performed by Lessor, (1) Lessee shall look solely to
the  then-current  Lessor's interest  in  the  Building  for  the
satisfaction  of  Lessee's  remedies  for  the  collection  of  a
judgment  (or  other judicial process) requiring the  payment  of
money  by Lessor; (2) no other property or assets of Lessor,  its
partners,    shareholders,   officers,   directors,    employees,
investment advisors, or any successor in interest of any of  them
(collectively,  the "Lessor Parties") shall be subject  to  levy,
execution or other enforcement procedure for the satisfaction  of
Lessee's remedies; (3) no personal liability shall at any time be
asserted  or enforceable against the Lessor Parties; and  (4)  no
judgment will be taken against Lessor Parties except as to  their
interest  in the Building.  The provisions of this section  shall
apply  only to Lessor and the parties herein described, and shall
not be for the benefit of any insurer nor any other third party.

16.  PARKING

     During  the term of this Lease, Lessee shall have the  right
in  common  with other tenants of the Building (if any)  and  any
adjacent buildings, to use the parking area available to  tenants
of  the Building. Lessee's use of such parking facilities or that
of its invitees shall be limited to two hundred ten (210) spaces,
and  shall  be subject to such rules and regulations  as  may  be
established from time to time by Lessor for the effective use  of
such  parking facilities. Such rules and regulations may include,
but  shall  not be limited to: designation of specific areas  for
use  by invitees of Lessee and Lessor; hours during which parking
shall  be  available  for  use;  parking  attendants;  a  parking
validation or other control system to prevent parking abuse;  and
such  other  matters affecting the parking operation to  the  end
that said facilities shall be utilized to maximum efficiency  and
in  the  best  interest  of Lessor, Lessee and  their  respective
invitees.  Lessor may temporarily close any part  of  the  Common
Area for such periods of time as may be necessary to prevent  the
public  from obtaining prescriptive rights or to make  repair  or
alterations. Lessee's right to use any area for parking  purposes
shall  be  subject to restrictions or other limitations resulting
from  any  laws,  statutes, ordinances  and  governmental  rules,
regulations  or requirements now in force or which may  hereafter
he  in  force,  and no such event shall in any  way  affect  this
Lease,   abate  rent,  relieve  Lessee  of  any  liabilities   or
obligations under this Lease or give rise to any claim whatsoever
against  Lessor; specifically Lessee's right to use any area  for
parking  purposes  shall be subject to any  preferential  parking
program  for  participants in any ridesharing program established
by  the  Lessor. If Lessor reasonably determines that  Lessee  is
regularly  using  in  excess  of the  number  of  parking  spaces
specified  in Item 10 of the Basic Lease Provisions, Lessor  may,
in  addition to any other remedy, impose a reasonable charge  for
such    excess   usage,   payable   by   Lessee   upon    demand.
Notwithstanding the above, Lessee shall be entitled to a total of
thirty  (30)  parking  spaces  to be  separately  identified  (at
Lessee's  sole cost and expense) as being reserved  for  Lessee's
exclusive use in a location acceptable to Lessor).

17.  GENERAL PROVISIONS

     171. Estoppel Certificate.

           17.1.1   Either party shall at any time and from time to time upon
not  less than ten (10) days prior written notice from the  other
party  execute, acknowledge and deliver to Lessor a statement  in
writing (i) certifying that this Lease is unmodified and in  full
force  and  effect (or, if modified, stating the nature  of  such
modification  and certifying that this Lease, as so modified,  is
in  full  force and effect) and the date to which  the  rent  and
other charges are paid in advance, if any, and (ii) acknowledging
that  there are not, to such party's knowledge, uncured  defaults
on  the  part of the other party, or specifying such defaults  if
any  are  claimed. Any such statement may be conclusively  relied
upon  by  any  prospective  purchaser  or  encumbrancer  of   the
Premises.

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

           17.1.3   If Lessor desires to finance or refinance the Premises, or
any  part  thereof, lessee shall deliver to any lender designated
by  Lessor such public financial statements of Lessee as  may  be
reasonably required by such lender.

     172. 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.

     173. Time of Essence.  Time is of the essence in the performance
of  all  terms and conditions of this Lease in which time  is  an
element.

     174. Captions.   Article and Section captions have been inserted
solely  as  a matter of convenience and such captions in  no  way
define  or  limit  the scope or intent of any provision  of  this
Lease.

     175. Notices.   All notices and demands of any kind which any
party  may be required or desires to serve upon the other parties
under  the terms of this Agreement shall be in writing, and shall
be  served  upon  the  other parties at the addresses  set  forth
beside  their names.  These addresses may be changed by a written
notice given in accordance with this Section 17.5.

     Notices  may be sent only by the following means:   personal
delivery;  United  States mail, registered or  certified,  return
receipt requested; telephonic facsimile process; or United States
Postal  Service  Express Mail, private courier, or  private  mail
service.

     Notices  shall  be  effective  only  as  follow:    (i)   if
personally delivered, upon actual delivery during normal  working
hours of the party to whom notice is given, (ii) if delivered  by
United  States mail, certified or registered mail (return receipt
requested),  then  upon actual delivery as  is  shown  by  return
receipt, (iii) if delivered by telephonic facsimile process  then
upon actual receipt by the party to whom notice is given, with  a
confirmation copy sent by United States mail (iv) if delivered by
United States Postal Service Express Mail, by private courier, or
by  private mail service, then upon actual receipt during  normal
business  hours of the party to whom notice is given.  No  notice
shall be effective except as delivered in a manner prescribed  in
this Section 17.5.

     176. Waivers.  No waiver of any provisions hereof shall be deemed
a waiver of any other provision hereof. Consent to or approval of
any  act  by  one of the parties hereto shall not  be  deemed  to
render  unnecessary the obtaining of such party's consent  to  or
approval  of any subsequent act. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee
of  any provision hereof, other than the failure of Lessee to pay
the particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such rent.

     177. Holding Over.  If Lessee holds over after the expiration or
earlier  termination  of  the  term hereof  without  the  express
written  consent  of  Lessor, Lessee shall  become  a  tenant  at
sufferance only at a rate one hundred twenty-five percent  (125%)
of  the  Base Rent for the space in effect upon the date of  such
expiration  or  earlier  termination  (subject  to  amendment  as
provided in Article 3 hereof and prorated on a daily basis),  and
otherwise  upon  the  terms,  covenants  and  conditions   herein
specified,  so  far as applicable. Acceptance by Lessor  of  Base
Rent  after  such  expiration or earlier  termination  shall  not
constitute  a  consent to a holdover hereunder  or  result  in  a
renewal. The foregoing provisions of this Section are in addition
to  and  do  not affect Lessor's right of re-entry or  any  other
rights of lessor hereunder or as otherwise provided by law.

     178. Cumulative Remedies.  No remedy or election hereunder shall
be  deemed  exclusive but shall, wherever possible, be cumulative
with all other remedies at law or in equity.

     179. Inurement.  Subject to any provisions hereof restricting
assignment  or subletting by Lessee and subject to the provisions
of  Article 15 hereof, the terms and conditions contained in this
Lease  shall  bind  the parties, their personal  representatives,
successors and assigns.

     1710. Choice of Law. This lease shall be governed by the laws of
the State of California.

     1711. Subordination.  This Lease shall, at Lessor's option, be
either superior or subordinate to mortgages or deeds of trust  on
the Premises, whether now existing or hereinafter created. Lessee
shall, upon written demand by Lessor, execute such instruments as
may  be required from time to time to subordinate the rights  and
interest  of Lessee under this Lease to the lien of any  mortgage
or  deed  of  trust  on  the Building. Notwithstanding  any  such
subordination,  so  long as Lessee is not in  default  hereunder,
this Lease shall not be terminated or Lessee's quiet enjoyment of
the  Premises  disturbed in the event such mortgage  or  deed  of
trust  is  foreclosed. In the event of such  foreclosure,  Lessee
shall thereupon become a Lessee of, and attorn to, the successor-
in-interest  to  Lessor on the same terms and conditions  as  are
contained in this Lease.

     1712. Attorneys' Fees.   If either party hereto brings an action
to  enforce the terms hereof or declare the rights of the parties
hereunder, the prevailing party in any such action, on  trial  or
appeal,  shall  be entitled to recover from the other  party  the
reasonable costs and attorneys' fees incurred in connection  with
such  action.  For purposes of this provision, in any  action  or
proceeding  instituted  by  a party based  upon  any  default  or
alleged  default by the other party hereunder, a party  shall  be
deemed  the prevailing party if (i) judgment is entered in  favor
of  such party or (ii) prior to trial or judgment the other party
shall  pay all or any portion of the rent and charges claimed  by
such  party,  eliminate the condition(s) , cease  the  act(s)  or
otherwise  cure  the  omission(s)  claimed  by  such   party   to
constitute  a default by the other party hereunder. Any  expenses
incurred  in  collecting sums due, whether action is  brought  or
not,  and any attorneys' fees incurred in collecting payment will
be charged to the losing party.

     1713. Lessor's Access.   Lessor and Lessor's agents shall have the
right  to enter the Premises at reasonable times for the  purpose
of   inspecting  the  same,  showing  the  same  to   prospective
purchasers,  lessees,  or lenders, and making  such  alterations,
repairs,  improvements or additions to the  Premises  or  to  the
Building as Lessor may deem necessary or desirable. Lessor may at
any  time place on or about the Building any ordinary "For  Sale"
signs  and  Lessor  may at any time during the last  one  hundred
eighty  (180)  days  of the term hereof place  on  or  about  the
Building  any ordinary "For Sale", "For Lease" or similar  signs,
all without rebate of rent or liability to Lessee.

     1714. Corporate Authority.  If Lessee is a corporation, Lessee
shall,   at   Lessor's  request,  require  that  each  individual
executing this Lease on behalf of said corporation represent  and
warrant  that  he is duly authorized to execute and deliver  this
Lease  on  behalf of said corporation in accordance with  a  duly
adopted  resolution of the Board of Directors of said corporation
or  in accordance with the By-Laws of said corporation, and  that
this  Lease  is binding upon said corporation in accordance  with
its  terms. Lessee shall also, at Lessor's request, within thirty
(30)  days  after execution of this Lease, deliver  to  Lessor  a
certified copy of a resolution of the Board of Directors of  said
corporation authorizing or ratifying the execution of this Lease.

     1715. Surrender or Cancellation.  The voluntary or other surrender
of  this Lease by Lessee, or a mutual cancellation thereof, shall
not  work  a  merger,  and shall terminate all  or  any  existing
subleases,  unless  Lessor  elects to  treat  such  surrender  or
cancellation  as an assignment to Lessor of any or  all  of  such
subleases.

     1716. Entire Agreement.

           17.16.1 This Lease, the Exhibits hereto which by this reference are
incorporated herein as though set forth in full herein,  and  the
Development Agreement covers in full each and every agreement  of
every  kind  or  nature  whatsoever between  the  parties  hereto
concerning  the  Premises and the Building, and  all  preliminary
negotiations  and  agreements of whatsoever kind  or  nature  are
merged  herein.  Lessor has made no representations  or  promises
whatsoever with respect to the Premises or the Building,  or  the
design  configuration  of  the Project,  except  those  contained
herein, and no other person, firm or corporation has at any  time
had  any  authority  from Lessor to make any  representations  or
promises  on  behalf  of Lessor. If any such  representations  or
promises have been made by others, Lessee hereby waives all right
to  rely thereon.  Lessee has made no representations or promises
whatsoever concerning its use or enjoyment of the Premises or the
Building except those contained herein, and no other person, firm
or  corporation  has at any time had any authority  to  make  any
representations  or promises on behalf of Lessee.   If  any  such
representations  or  promises have been made  by  others,  Lessor
hereby waives all right to rely thereon.  No verbal agreement  or
implied covenant shall be held to vary the provisions hereof, any
statute, law or custom to the contrary notwithstanding.

           17.16.2 Except as otherwise provided herein, nothing expressed or
implied  herein is intended or shall be construed to confer  upon
or  grant any person any rights or remedies under or by reason of
any term or condition contained in this Lease.

     1717. Signs.  No sign, placard, picture, advertisement, name or
notice  shall be inscribed, displayed, printed or affixed  to  or
near  any  part of the outside or inside of the Building  without
the  written consent of Lessor first had and obtained and without
full  compliance with all governmental requirements. Lessor shall
have  the  right  to  remove  any  non-complying  sign,  placard,
picture, advertisement, name or notice without notice to  and  at
the  expense of Lessee. All approved signs shall be installed  at
Lessee's sole cost and expense. Lessee further agrees to maintain
any  such approved signs, as may be approved by Lessor,  in  good
condition  and  repair at all times. Lessee shall not  place  any
sign  on  a  vehicle or movable or non-movable object  in  or  on
street adjacent to the Project. Lessor further agrees that:

           17.17.1 Signs approved by Lessor for future tenants of the project
shall  not  be  superior in size, placement or quality  to  those
signs approved by Lessor for Lessee.

           17.17.2 Lessee shall have exclusive signage rights on the facade of
the Building, except that Lessor may install a smaller additional
sign of a lesser nature on the lower portion of the facade of the
Building provided that (a) such smaller additional sign satisfies
all  applicable codes and ordinances and (b) does not  jeopardize
the right of Lessee to have its name prominently displayed on the
facade of the Building.

           17.17.3 The name "Mentor Corporation" shall be displayed alone in
the upper-most position on all monument signs for the Building in
lettering  no  smaller than that employed to identify  any  other
tenants of the Building.  Lessee shall pay its pro rata share  of
the  cost of any monument sign based upon its share of the  total
sign area.

     1718.  Interest on Past Due Obligations.  Any amount due from
Lessee to Lessor hereunder which is not paid when due shall  bear
interest at five (5) percentage points above the discount rate of
the  Federal  Reserve Bank of San Francisco at the  time  of  the
award  or  the  maximum  allowable under the  law,  whichever  is
greater,  from the date due until paid, but the payment  of  such
interest shall not excuse or cure any default by Lessee. Interest
will  accrue  from  and after the date on  which  a  late  charge
payment  first  becomes payable or, if there is  no  late  charge
payment, from and after ten (10) working days from and after  the
date on which the payment first becomes due.

     1719.  Gender;  Number.  Whenever the context of  this  Lease
requires,  the masculine gender includes the feminine or  neuter,
and the singular number includes the plural.

     1720. Recording of Lease.  Lessee shall not record this Lease
without the express written consent of Lessor. If such permission
is  granted,  at  the  expiration or sooner termination  of  this
Lease,  Lessee shall execute, acknowledge and deliver to  Lessor,
within  ten (10) days after written demand from Lessor, any  quit
claim deed or other document reasonably required by any reputable
title company to remove the cloud of this Lease from the title of
the real property subject to the Lease.

     1721.  Waiver of Subrogation.  Lessee and Lessor each  hereby
release  and  waive  any and all rights of recovery  against  the
other,  or  against  the  officers,  employees,  and  agents  and
representatives of the other, for loss of or any damage  to  such
waiving party or its property or the property of others under its
control to the extent that such loss or damage is insured against
under any valid and collectible insurance policy in force at  the
time  of  such loss or damages. Lessee shall, upon obtaining  the
policies  of  insurance required hereunder, give  notice  to  the
insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.

     1722. Confidentiality of Lease.  Lessee acknowledges and agrees
that  the  terms  of this Lease are confidential  and  constitute
proprietary information of Lessor. Disclosure of the terms hereof
could  adversely affect the ability of Lessor to negotiate  other
leases  with respect to the Building and impair Lessor's relation
ship  with other tenants of the Building. Lessee agrees that  it,
its partners, officers, directors, employees and attorneys, shall
not  disclose the terms and conditions of this Lease to any other
person  known by Lessee to be a tenant or prospective  tenant  of
the  Building  or Premises without the prior written  consent  of
Lessor.  It  is understood and agreed that damages  would  be  an
inadequate remedy for the breach of this provision by Lessee, and
Lessor  shall  have  the right to specific  performance  of  this
provision  and  to  injunctive relief to prevent  its  breach  or
continued breach.

           Lessor  agrees  to  keep the terms and  provisions  of
this  Lease  confidential except as may be required in connection
with   the  development,  construction,  improvement,  financing,
refinancing, sale or exchange of the Building and the Project.

     1723. Quiet Enjoyment.  Provided Lessee has performed all of the
terms,  covenants,  agreements  and  conditions  of  this  Lease,
including  the payment of rent and all other sums due  hereunder,
Lessee  shall  peaceably and quietly hold and enjoy the  Premises
for the term hereof, but subject to the provisions and conditions
of this Lease against Lessor and all persons claiming by, through
or  under  Lessor.  Lessee's right to use the  Premises  and  the
Common  Area  as herein provided shall be subject to restrictions
or  other  limitations or prohibitions resulting from  any  laws,
statutes,  ordinances  and  governmental  rules,  regulations  or
requirements now in force or which may hereafter be in force  and
no  such  event shall in any way affect this Lease,  abate  rent,
relieve Lessee of any liabilities or obligations under this Lease
or give rise to any claim whatsoever against Lessor.

     1724. Window Coverage.   Lessor shall select a standard miniblind
type and color for all windows to be covered by Lessee. No window
covering,  including  but not limited to coatings  or  draperies,
shall be used by Lessee without Lessor's written approval.

     1725. Materials Storage Restrictions.   Lessee agrees to conduct
its  business so as not to violate or exceed the design standards
of   the   fire  protection  system  or  any  insurance  policies
maintained by Lessor pursuant to Article 7.

     1726. No Agency.   Neither party is the agent or partner of the
other,  and  the  legal relationship between the  parties  hereto
shall  be  governed solely by the terms of this lease  when  duly
executed  by  both  parties  with  respect  to  the  transactions
contemplated hereby.

     1727. Force Majeure.  Notwithstanding any of the items set forth
above,  Lessor  shall  bear no liability, of  whatever  kind,  to
Lessee  if, despite Lessor's exercise of due diligence,  Lessor's
carrying out of its obligations as defined herein is prevented or
delayed  by  legal  action  nor by the exercise  of  governmental
authority, whether Federal, State, County, or other or  by  force
majeure,  strikes,  riots,  acts of  God,  war,  adverse  weather
conditions,  fire,  unavoidable  casualties,  or  acts  of  third
parties beyond Lessor's control.

     1728. Building Name.   Lessor agrees that the Project within which
the  Premises  are  located  will be  named  the  "Santa  Barbara
Corporate Center" and will not be "Hollister Corporate Center" or
any other name containing the word "Hollister."

     1729. Assignment by Lessor.   Lessor shall be entitled to assign
this  Lease  (or an interest therein) to any person who  acquires
title  to (or an undivided interest in) the fee ownership of  the
Property  provided  that  such assignee  assumes  and  agrees  in
writing  to  be bound by the obligations of the Lessor  named  in
this  Lease from and after the effective date of such assignment.
Lessor  and  its assignee shall give written notice of  any  such
assignment, together with a copy of the assignment and assumption
agreement, to Lessee promptly after the assignment has occurred.

     1730. Facsimile Signatures.  The parties (a) have each agreed to
permit  the  use,  from  time to time and where  appropriate,  of
telecopied signatures to expedite the transaction contemplated by
this  Lease;  (b)  each intend to be bound by his,  her,  or  its
respective  telecopied signature; (c) are  each  aware  that  the
others  will  rely  on  the telecopied signature;  and  (d)  each
acknowledge  such  reliance  and  waive  any  defenses   to   the
enforcement   of   the   documents  effecting   the   transaction
contemplated by this Lease based on a telecopied signature.

EXHIBITS

                    A    -    Building

                    B    -    Project

                    C    -    Rules and Regulations

Submission of this instrument for examination or signature by the
Lessee does not constitute a reservation of or option for space
and it is not effective as a lease or otherwise until execution
by both the Lessee and the Lessor.

     IN WITNESS WHEREOF, the parties hereto have executed this
Lease, consisting of the foregoing Basic Lease Provisions,
Articles 1 through 17 which follow, and any attached Exhibits or
Addendums, as of the date first above written.


                         LESSOR:

Date: August 19, 1998    SANTA BARBARA CORPORATE CENTER, LLC,
                         a California limited liability company


                         By:  /s/JEFFREY C. BERMANT
                              Jeffrey C. Bermant, Manager

                         Address:

                         5383 Hollister Avenue, Suite 150
                         Santa Barbara, California 93111


                         LESSEE:

Date: August 19, 1998    MENTOR CORPORATION, a Minnesota
                         corporation


                         By: /s/GARY E. MISTLIN
                             Senior Vice President
                             Chief Financial Officer & Treasurer

                         Address:

                         5425 Hollister Avenue
                         Santa Barbara, California 93111

Exhibit 10(p)

                      EMPLOYMENT AGREEMENT

     This Employment Agreement, dated December 1, 1998, is
between MENTOR Corporation ("COMPANY"), with its executive
offices at 5425 Hollister Avenue, Santa Barbara, California 93111
and TREVOR M. PRITCHARD ("EMPLOYEE") of 17014 Kimwood Court,
Chesterfield, Missouri, 63005.

RECITALS

     COMPANY is in the business of manufacturing and selling
medical devices and related products. EMPLOYEE has experience in
this business and possesses valuable skills and experience, which
will be used in advancing COMPANY's interests. EMPLOYEE is
willing to be engaged by COMPANY and COMPANY is willing to engage
EMPLOYEE in an executive capacity responsible for the global
sales, marketing and distribution operations of COMPANY, upon the
terms and conditions set forth in this Agreement.

     AGREEMENT

EMPLOYEE and COMPANY, intending to be legally bound, agree as
follows:

1.   SERVICES

     1.1  General Services.

          1.1.1  Company shall employ EMPLOYEE as President,
          Mentor Medical, Inc. ("MMI"), a wholly-owned subsidiary
          of COMPANY.  EMPLOYEE shall perform the duties
          customarily performed by one holding such position in a
          similar business as that engaged in by COMPANY.  To the
          extent that they do not reduce the scope of the
          responsibilities described above, EMPLOYEE's duties may
          change from time to time on reasonable notice, based on
          the needs of COMPANY and EMPLOYEE's skills as
          determined by COMPANY.  These duties shall hereinafter
          be referred to as "Services."  EMPLOYEE  shall report
          directly to the President and Chief Operating Officer
          of Mentor Corporation.

          1.1.2  As President of MMI, EMPLOYEE shall also be an
          officer of COMPANY and shall serve in such capacity
          without further compensation.  In the event that
          EMPLOYEE shall from time to time serve COMPANY or MMI
          as a director or shall serve in any other office during
          the term of this Agreement, EMPLOYEE shall serve in
          such capacities without further compensation.  If
          EMPLOYEE is, for any reason, removed as an officer or
          director of either COMPANY or MMI by the Board of
          Directors of COMPANY or MMI, such removal shall be
          without prejudice to EMPLOYEE's contractual rights
          under this Agreement.

          1.1.3.  EMPLOYEE shall devote his entire working time,
          attention, and energies to the business of COMPANY, and
          shall not, during the term of this Agreement, be
          engaged in any other business activity whether or not
          such business activity is pursued for gain, profit or
          other pecuniary advantage, without the prior written
          consent of the Board of Directors of COMPANY.  This
          shall not be construed as preventing EMPLOYEE from
          investing his assets in a form or manner that does not
          require any services on the part of EMPLOYEE in the
          operation or affairs of the entities in which such
          investments are made, or from engaging in such civic,
          charitable, religious, or political activities that do
          not interfere with the performance of EMPLOYEE's duties
          hereunder.

     1.2  Location.  EMPLOYEE shall be based in and shall render
     services for COMPANY primarily in Santa Barbara, California,
     but EMPLOYEE shall undertake such travel as is necessary or
     advisable for the effective performance of the duties of the
     position.

     1.3  Best Abilities.  EMPLOYEE shall serve COMPANY
     faithfully and to the best of EMPLOYEE's ability.  EMPLOYEE
     shall use EMPLOYEE's best abilities to perform the Services.
     Employee shall act at all times according to what EMPLOYEE
     reasonably believes is in the best interests of COMPANY.

     1.4  Corporate Authority.  Employee, as an executive
     officer, shall comply with all laws and regulations
     applicable to EMPLOYEE as a result of this Agreement
     including, but not limited to, the Securities Act of 1933
     and Securities Act of 1934.  Prior to the execution of this
     Agreement, EMPLOYEE has received and reviewed COMPANY's
     Policies and Procedures and COMPANY's Employee Handbook.
     EMPLOYEE shall comply with COMPANY's Policies and
     Procedures, and practices now in effect or as later amended
     or adopted by COMPANY, as required of similarly-situated
     executives of COMPANY.

2.   TERM

     This Agreement shall commence upon the execution of this
Agreement and shall continue until terminated as provided in
Section 4 of this Agreement.

3.   COMPENSATION AND BENEFITS

     3.1  Compensation.  EMPLOYEE's total compensation consists
     of base salary, bonus potential, stock options, and medical
     and other benefits generally provided to employees of
     COMPANY.  Any compensation paid to EMPLOYEE shall be
     pursuant to COMPANY's policies and practices for exempt
     employees and shall be subject to all applicable laws and
     requirements regarding the withholding of federal, state
     and/or local taxes.  Compensation provided in this Agreement
     is full payment for Services and EMPLOYEE shall receive no
     additional compensation for extraordinary services unless
     otherwise authorized.  EMPLOYEE's entire compensation
     package will be reviewed annually by the Compensation
     Committee of the Board of Directors, a practice which is
     consistent with COMPANY's Executive Compensation Program.

          3.1.1  Base Compensation.  COMPANY agrees to pay
          EMPLOYEE an annualized base salary of Two Hundred Forty
          Thousand Dollars ($240,000.00), less applicable
          withholdings, payable in equal installments no less
          frequently than semi-monthly.

          3.1.2  Cash Incentive Bonus.  EMPLOYEE shall be
          eligible for a cash incentive bonus, subject to
          applicable withholdings and subject to approval by
          COMPANY's Compensation Committee and Board of
          Directors.  Any cash incentive bonus shall accrue and
          become payable to EMPLOYEE only if EMPLOYEE is employed
          with COMPANY on the last day of the fiscal year for
          which the cash incentive bonus is calculated.   For the
          fiscal year ending March 31, 1999, EMPLOYEE will
          receive a pro-rated share (approximately 33-1/3 %) of a
          cash incentive bonus of fifty percent (50%) of base
          salary calculated on a fiscal year basis, or Forty
          Thousand Dollars ($40,000).

          3.1.3  Stock Options.  EMPLOYEE shall be granted an
          option for Forty-Five Thousand (45,000) shares of
          COMPANY's common stock subject to a four (4) year
          vesting schedule one (1) year after grant at the rate
          of twenty-five percent (25%) per year.  Options are
          exercisable for a period of ten (10) years after
          vesting and shall be exercised in accordance with the
          Mentor Corporation 1991 Stock Option Plan ("Plan"), as
          amended from time to time.  EMPLOYEE shall execute the
          Option Agreement and otherwise comply with the terms of
          the Plan with regard to the options being granted by
          this Agreement.  This provision is subject to
          applicable state and federal securities laws.  Based
          upon satisfactory performance, under the Plan, COMPANY
          expects that EMPLOYEE will qualify for additional
          grants of options to acquire common stock of COMPANY in
          the April-May 1999 time frame, subject to determination
          by the Board of Directors, of an amount which is
          consistent with COMPANY's Executive Compensation
          Program.  Subsequent grants, if any, shall also be
          subject to performance considerations as well as the
          determination of the Board of Directors.

     3.2   Relocation Expenses.  COMPANY shall reimburse EMPLOYEE
     for relocation expenses, whether or not deductible pursuant
     to federal, state and local tax laws.  Relocation expenses
     shall be limited to reasonable expenses for real estate
     commissions incurred upon the sale of EMPLOYEE's primary
     residence, house-hunting trips, physical moving expenses
     (once upon movement into temporary housing, if necessary,
     and once upon movement into permanent housing), closing
     costs and fees not to exceed two (2.0) mortgage points,
     temporary living expenses of up to Thirty-Five Hundred
     Dollars ($3,500.00) per month in the Santa Barbara area,
     including commuting trips until Employee and his family
     complete a physical relocation to a permanent residence in
     the Santa Barbara, California area, and other reasonable out-
     of-pocket expenses (other than home decorating expenses,
     differences in mortgage rates, costs of comparable housing,
     etc.).  COMPANY will reimburse EMPLOYEE for federal and
     state income taxes EMPLOYEE would not otherwise have
     incurred attributable to the receipt of Relocation Expenses
     as provided in this Section (generally referred to as
     reimbursement on a "gross-up" basis).  All reimbursements of
     relocation expenses as provided hereunder shall be subject
     to EMPLOYEE providing appropriate documentation of such
     expenses.

     3.3   Business Expenses.  COMPANY shall reimburse EMPLOYEE
     for business expenses reasonably incurred in performing
     Services according to COMPANY's Expense Reimbursement
     Policy.

     3.4   Additional Benefits.  COMPANY shall provide EMPLOYEE
     those additional benefits normally granted by COMPANY to its
     employees subject to eligibility requirements applicable to
     each benefit.  COMPANY has no obligation to provide any
     other benefits unless provided for in this Agreement.
     Currently COMPANY provides major medical and dental benefits
     and eligibility to participate in COMPANY's 401(k) plan.

     3.5   Vacation.  Employee shall accrue vacation equal to
     fifteen (15) days per year during the first five (5) years
     of service, at the rate of 1.25 days per month.  Thereafter,
     vacation will accrue at twenty (20) days per year, at the
     rate of approximately 1.67 days per month.  The time or
     times for such vacation shall be selected by Employee and
     approved by the Chairman of the Board of Directors of
     COMPANY.

     3.6   Automobile Expense.  COMPANY will permit EMPLOYEE to
     select a business automobile (four-door sedan) for lease by
     COMPANY for which COMPANY will make lease payments of up to
     Seven Hundred Fifty Dollars ($750.00) per month.  COMPANY
     shall pay applicable taxes on the automobile and shall
     obtain motor vehicle insurance in an amount it deems
     reasonable in its sole discretion.  EMPLOYEE may obtain
     additional liability insurance at his own expense if he so
     chooses.


4.  TERMINATION

     4.1   Circumstances Of Termination.  This Agreement and the
     employment relationship between COMPANY and EMPLOYEE may be
     terminated as follows:

          4.1.1  Death.  This Agreement shall terminate upon
          EMPLOYEE's death, effective as of the date of
          EMPLOYEE's death.

          4.1.2  Disability.  COMPANY may, at its option, either
          suspend compensation payments or terminate this
          Agreement due to EMPLOYEE's Disability if EMPLOYEE is
          incapable, even with reasonable accommodation by
          COMPANY, of performing the Services because of
          accident, injury, or physical or mental illness for
          forty-five (45) consecutive days, or is unable or shall
          have failed to perform the Services for a total period
          of sixty (60) days within a twelve (12) month period,
          regardless of whether such days are consecutive.  If
          COMPANY suspends compensation payments because of
          EMPLOYEE's Disability, COMPANY shall resume
          compensation payments when EMPLOYEE resumes performance
          of the Services.  If COMPANY elects to terminate this
          Agreement due to EMPLOYEE's Disability, it must first
          give EMPLOYEE three (3) days advance written notice.

          4.1.3  Discontinuance Of Business.  If COMPANY
          discontinues operating its business, this Agreement
          shall terminate as of the last day of the month on
          which COMPANY ceases its entire operations with the
          same effect as if that last date were originally
          established as termination date of this Agreement.

          4.1.4  For Cause.  COMPANY may terminate this Agreement
          without advance notice for Cause.  For the purpose of
          this Agreement, "Cause" shall mean any failure to
          comply in any material respect with this Agreement or
          any Agreement incorporated herein; personal or
          professional misconduct by EMPLOYEE (including, but not
          limited to, criminal activity or gross or willful
          neglect of duty); breach of EMPLOYEE's fiduciary duty
          to MMI and/or COMPANY; conduct which threatens public
          health or safety, or threatens to do immediate or
          substantial harm to MMI's and/or COMPANY's business or
          reputation; or any other misconduct, deficiency,
          failure of performance, breach or default, reasonably
          capable of being remedied or corrected by EMPLOYEE.  To
          the extent that a breach pursuant to this Section 4.1.4
          is curable by EMPLOYEE without harm to MMI and/or
          COMPANY and/or either of their reputations, COMPANY
          shall, instead of immediately terminating EMPLOYEE
          pursuant to this Agreement, provide EMPLOYEE with
          notice of such breach, specifying the actions required
          to cure such breach, and EMPLOYEE shall have ten (10)
          days to cure such breach by performing the actions so
          specified.  If EMPLOYEE fails to cure such breach
          within the ten (10) day period, COMPANY may terminate
          this Agreement without further notice.  COMPANY's
          exercise of its right to terminate under this section
          shall be without prejudice to any other remedy to which
          COMPANY may be entitled at law, in equity, or under
          this Agreement.

          4.1.5.  For Convenience Of Party.  This Agreement and
          employment relationship is terminable by either party,
          for convenience, with or without cause, at any time
          upon thirty (30) days' advance written notice to the
          other party.  If COMPANY terminates this Agreement for
          convenience prior to December 1, 1999, COMPANY shall
          pay EMPLOYEE the base compensation to which he would
          have been entitled if he had remained employed until
          December 1, 1999, less applicable withholdings.

     4.2  EMPLOYEE's Rights Upon Termination

          4.2.1 Death or Disability.   Upon termination of this
          Agreement because of death or Disability of EMPLOYEE
          pursuant to Sections 4.1.1 or 4.1.2 above, COMPANY
          shall have no further obligation to EMPLOYEE under the
          Agreement except to distribute to EMPLOYEE's estate or
          designated beneficiary any unpaid compensation and
          reimbursable expenses, less applicable withholdings,
          owed to EMPLOYEE prior to the date of EMPLOYEE's death
          or termination due to Disability.

          4.2.2  Discontinuance Of Business.  Upon termination of
          this Agreement because of discontinuation of COMPANY's
          business pursuant to Section 4.1.3, COMPANY shall have
          no further obligation to EMPLOYEE under the Agreement
          except to distribute to EMPLOYEE any unpaid
          compensation and reimbursable expenses, less applicable
          withholdings, owed to EMPLOYEE prior to the date of
          termination of this Agreement.
          4.2.3  Termination With Cause.  Upon termination of
          EMPLOYEE's employment for Cause pursuant to Section
          4.1.4, COMPANY  shall have no further obligation to
          EMPLOYEE under this Agreement except to distribute to
          EMPLOYEE:

               i.  Any compensation and reimbursable expenses
               owed to EMPLOYEE by COMPANY through the
               termination date, less applicable withholdings;
               and

               ii.  Severance compensation as provided for in
               COMPANY's Severance Policy, if any, less
               applicable withholdings.

          4.2.4  Termination Without Cause.  Upon termination of
          EMPLOYEE's employment by COMPANY without cause pursuant
          to Section 4.1.5, COMPANY shall have no further
          obligation to EMPLOYEE under this Agreement except to
          distribute to EMPLOYEE:

               i.  Any compensation and reimbursable expenses
               owed by COMPANY to EMPLOYEE through the
               termination date, less applicable withholdings;

               ii.  A pro-rated share of the cash incentive bonus
               that would be due to EMPLOYEE if EMPLOYEE had
               remained employed with COMPANY through the last
               day of the fiscal year for which the cash
               incentive bonus is calculated, less applicable
               withholdings; and

               iii.  Severance compensation totaling twelve (12)
               months base pay, determined at EMPLOYEE's then-
               current rate of base pay.  In consideration for
               this severance compensation, EMPLOYEE, on behalf
               of himself, his agents, heirs, executors,
               administrators, and assigns, expressly releases
               and forever discharges COMPANY and its successors
               and assigns, and all of its respective agents,
               directors, officers, partners, employees,
               representatives, insurers, attorneys, parent
               companies, subsidiaries, affiliates, and joint
               venturers, and each of them, from any and all
               claims based upon acts or events that occurred on
               or before the date on which EMPLOYEE accepts the
               severance compensation, including any claim
               arising under any state or federal statute or
               common law, including, but not limited to, Title
               VII of the Civil Rights Act of 1964, 42 U.S.C. ''
               2000e, et seq., the Americans with Disabilities
               Act, 42 U.S.C. '' 12101, et seq., the Age
               Discrimination in Employment Act, 29 U.S.C. ''
                623, et seq., the Worker Adjustment and
               Retraining Notification Act, 29 U.S.C. '' 2101, et
               seq., and the California Fair Employment and
               Housing Act, Cal. Gov't Code '' 12940, et seq.
               EMPLOYEE acknowledges that he is familiar with
               section 1542 of the California Civil Code, which
               reads as follows:

               A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
               WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
               TO EXIST IN HIS FAVOR AT THE TIME OF
               EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
               MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
               WITH THE DEBTOR.

               EMPLOYEE expressly acknowledges and agrees that he
               is releasing all known and unknown claims, and
               that he is waiving all rights he has or may have
               under Civil Code Section 1542 or under any other
               statute or common law principle of similar effect.
               EMPLOYEE acknowledges that the benefits he is
               receiving in exchange for this Release are more
               than the benefits to which he otherwise would have
               been entitled, and that such benefits constitute
               valid and adequate consideration for this Release.
               EMPLOYEE further acknowledges that he has read
               this Release, understands all of its terms, and
               has consulted with counsel of his choosing before
               signing this Agreement.

               Severance compensation pursuant to this paragraph
               shall be in lieu of any other severance benefit to
               which EMPLOYEE would otherwise be entitled under
               COMPANY's policies in effect on the date of
               execution of this Agreement.  Severance
               compensation shall be paid upon termination of
               EMPLOYEE's employment and in one lump sum payment
               at the date of termination, less applicable
               withholdings.

     4.3  Resignation From Board.  Upon termination of this
     Agreement, EMPLOYEE shall immediately submit his written
     resignation from any Board positions to which he has been
     appointed or elected.
5.   REPRESENTATIONS AND WARRANTIES

     5.1  Representations of EMPLOYEE.  EMPLOYEE represents and
     warrants that EMPLOYEE has all right, power, authority and
     capacity, and is free to enter into this Agreement; that by
     doing so, EMPLOYEE will not violate or interfere with the
     rights of any other person or entity; and that EMPLOYEE is
     not subject to any contract, understanding or obligation
     that will or might prevent, interfere with or impair the
     performance of this Agreement by EMPLOYEE.  EMPLOYEE shall
     indemnify and hold COMPANY harmless with respect to any
     losses, liabilities, demands, claims, fees, expenses,
     damages and costs (including attorneys' fees and court
     costs) resulting from or arising out of any claim or action
     based upon EMPLOYEE's entering into this Agreement.

     5.2  Representations of COMPANY.  COMPANY represents and
     warrants that it has all right, power and authority, without
     the consent of any other person, to execute and deliver, and
     perform its obligations under, this Agreement.  All
     corporate and other actions required to be taken by COMPANY
     to authorize the execution, delivery and performance of this
     Agreement and the consummation of all transactions
     contemplated hereby have been duly and properly taken.  This
     Agreement is the lawful, valid and legally binding
     obligation of COMPANY enforceable in accordance with its
     terms.

     5.3  Materiality of Representations.  The representations,
     warranties and covenants set forth in this Agreement shall
     be deemed to be material and to have been relied upon by the
     parties hereto.


6.   COVENANTS

     6.1  Nondisclosure and Invention Assignment.  EMPLOYEE
     acknowledges that, as a result of performing the Services,
     EMPLOYEE shall have access to confidential and sensitive
     information concerning COMPANY's business including, but not
     limited to, their business operations, sales and marketing
     data, and manufacturing processes.  EMPLOYEE also
     acknowledges that in the course of performing the Services,
     EMPLOYEE may develop new product ideas or inventions as a
     result of COMPANY's information.  Accordingly, to preserve
     COMPANY's confidential information and to assure it the full
     benefit of that information, EMPLOYEE shall, as a condition
     of employment with COMPANY, execute COMPANY's standard form
     of Employee Confidentiality Agreement attached hereto as
     Exhibit A, and execute updated versions of the Employee
     Confidentiality Agreement as it may be modified from time to
     time by COMPANY and as may be required of similarly-situated
     executives of COMPANY.  The Employee Confidentiality
     Agreement is incorporated herein by this reference.
     EMPLOYEE's obligations under the Employee Confidentiality
     Agreement continue beyond the termination of this Agreement.

     6.2  Covenant Not to Compete.  In addition to the provisions
     of the Employee Confidentiality Agreement, EMPLOYEE shall
     abide by the following covenant not to compete if COMPANY,
     at its option upon the termination of this Agreement
     (regardless of the reason for the termination), exercises
     this Covenant Not to Compete.  COMPANY shall notify EMPLOYEE
     within ten (10) days of termination of this Agreement of its
     intention to exercise this option and make an additional
     payment to EMPLOYEE  of six (6) months' base pay determined
     at EMPLOYEE's last rate of pay with COMPANY.  EMPLOYEE
     agrees that for a period of one (1) year following the
     termination of this Agreement, he shall not directly or
     indirectly for EMPLOYEE, or as a member of a partnership, or
     as an officer, director, stockholder, employee, or
     representative of any other entity or individual, engage,
     directly or indirectly, in any business activity which is
     the same or similar to work engaged in by EMPLOYEE on behalf
     of COMPANY within the same geographic territory as
     EMPLOYEE's work for COMPANY and which is directly
     competitive with the business conducted or to EMPLOYEE's
     knowledge, contemplated by COMPANY at the time of
     termination of this Agreement, as defined in the Employee
     Confidentiality Agreement incorporated into this Agreement
     by reference.  EMPLOYEE may accept employment with an entity
     competing with COMPANY only if the business of that entity
     is diversified and EMPLOYEE is employed solely with respect
     to a separately-managed and separately-operated part of that
     entity's business that does not compete with COMPANY.  Prior
     to accepting such employment, EMPLOYEE and the prospective
     employer entity shall provide COMPANY with written
     assurances reasonably satisfactory to COMPANY that EMPLOYEE
     will not render services directly or indirectly to any part
     of that entity's business that competes with the business of
     COMPANY.

     6.3  Covenant to Deliver Records.  All memoranda, notes,
     records and other documents made or compiled by EMPLOYEE, or
     made available to EMPLOYEE during the term of this Agreement
     concerning the business of COMPANY, shall be and remain
     COMPANY's property and shall be delivered to COMPANY upon
     the termination of this Agreement or at any other time on
     request.

     6.4  Covenant Not To Recruit.  EMPLOYEE shall not, during
     the term of this Agreement and for a period of one (1) year
     following termination of this Agreement, directly or
     indirectly, either on EMPLOYEE's own behalf, or on behalf of
     any other individual or entity, solicit, interfere with,
     induce (or attempt to induce) or endeavor to entice away any
     employee associated with COMPANY to become affiliated with
     him or any other individual or entity.


7.   CERTAIN RIGHTS OF COMPANY

     7.1  Announcement.  COMPANY shall have the right to make
     public announcements concerning the execution of this
     Agreement and certain terms thereof.

     7.2  Use of Name, Likeness and Biography.  COMPANY shall
     have the right (but not the obligation) to use, publish and
     broadcast, and to authorize others to do so, the name,
     approved likeness and approved biographical material of
     EMPLOYEE to advertise, publicize and promote the business of
     COMPANY and its affiliates, but not for the purposes of
     direct endorsement without EMPLOYEE's consent.  An "approved
     likeness" and "approved biographical material" shall be,
     respectively, any photograph or other depiction of EMPLOYEE,
     or any biographical information or life story concerning the
     professional career of EMPLOYEE.

     7.3  Right to Insure.  COMPANY shall have the right to
     secure in its own name, or otherwise, and at its own
     expense, life, health, accident or other insurance covering
     EMPLOYEE, and EMPLOYEE shall have no right, title or
     interest in and to such insurance.  EMPLOYEE shall assist
     COMPANY in procuring such insurance by submitting to
     examinations and by signing such applications and other
     instruments as may be required by the insurance carriers to
     which application is made for any such insurance.


8.   ASSIGNMENT

     Neither party may assign or otherwise dispose of its rights
or obligations under this Agreement without the prior written
consent of the other party except as provided in this Section.
COMPANY may assign and transfer this Agreement, or its interest
in this Agreement, to any affiliate of COMPANY or to any entity
that is a party to a merger, reorganization, or consolidation
with COMPANY, or to a subsidiary of COMPANY, or to any entity
that acquires substantially all of the assets of COMPANY or of
any division with respect to which EMPLOYEE is providing services
(providing such assignee assumes COMPANY's obligations under this
Agreement).  EMPLOYEE shall, if requested by COMPANY, perform
EMPLOYEE's duties and Services, as specified in this Agreement,
for the benefit of any subsidiary or other affiliate of COMPANY.
Upon assignment, acquisition, merger, consolidation or
reorganization, the term ACOMPANY@ as used herein shall be deemed
to refer to such assignee or successor entity.  EMPLOYEE shall
not have the right to assign EMPLOYEE's interest in this
Agreement, any rights under this Agreement, or any duties imposed
under this Agreement, nor shall EMPLOYEE or his spouse, heirs,
beneficiaries, executors or administrators have the right to
pledge, hypothecate or otherwise encumber EMPLOYEE's right to
receive compensation hereunder without the express written
consent of COMPANY.


9.   RESOLUTION OF DISPUTES

     In the event of any dispute arising out of or in connection
with this Agreement or in any way relating to the employment of
EMPLOYEE which leads to the filing of a lawsuit, the parties
agree that venue and jurisdiction shall be in Santa Barbara
County, California.  The prevailing party in any such litigation
shall be entitled to an award of costs and reasonable attorneys'
fees to be paid by the losing party.


10.  GENERAL PROVISIONS

     10.1  Notices.  Notice under this Agreement shall be
     sufficient only if personally delivered by a major
     commercial paid delivery courier service or mailed by
     certified or registered mail (return receipt requested and
     postage pre-paid) to the other party at its address set
     forth in the signature block below or to such other address
     as may be designated by either party in writing.  If not
     received sooner, notices by mail shall be deemed received
     five (5) days after deposit in the United States mail.

     10.2  Agreement Controls.  Unless otherwise provided for in
     this Agreement, the COMPANY's policies, procedures and
     practices shall govern the relationship between EMPLOYEE and
     COMPANY.  If, however, any of COMPANY's policies, procedures
     and/or practices conflict with this Agreement (together with
     any amendments hereto), this Agreement (and any amendments
     hereto) shall control.

     10.3  Amendment and Waiver.  Any provision of this Agreement
     may be amended or modified and the observance of any
     provision may be waived (either retroactively or
     prospectively) only by written consent of the parties.
     Either party's failure to enforce any provision of this
     Agreement shall not be construed as a waiver of that party's
     right to enforce such provision.

     10.4  Governing Law.  This Agreement and the performance
     hereunder shall be interpreted under the substantive laws of
     the State of California.

     10.5  Force Majeure.  Either party shall be temporarily
     excused from performing under this Agreement if any force
     majeure or other occurrence beyond the reasonable control of
     either party makes such performance impossible, except a
     Disability as defined in this Agreement, provided that the
     party subject to the force majeure provides notice of such
     force majeure at the first reasonable opportunity.  Under
     such circumstances, performance under this Agreement which
     related to the delay shall be suspended for the duration of
     the delay provided the delayed party shall resume
     performance of its obligations with due diligence once the
     delaying event subsides.  In case of any such suspension,
     the parties shall use their best efforts to overcome the
     cause and effect of such suspension.

     10.6  Remedies.  EMPLOYEE acknowledges that because of the
     nature of COMPANY's business, and the fact that the services
     to be performed by EMPLOYEE pursuant to this Agreement are
     of a special, unique, unusual, extraordinary, and
     intellectual character which give them a peculiar value, a
     breach of this Agreement shall cause substantial injury to
     COMPANY for which money damages cannot reasonably be
     ascertained and for which money damages would be inadequate.
     EMPLOYEE therefore agrees that COMPANY shall have the right
     to obtain injunctive relief, including the right to have the
     provisions of this Agreement specifically enforced by any
     court having equity jurisdiction, in addition to any other
     remedies that COMPANY may have.

     10.7  Severability.  If any term, provision, covenant,
     paragraph, or condition of this Agreement is held to be
     invalid, illegal, or unenforceable by any court of competent
     jurisdiction, that provision shall be limited or eliminated
     to the minimum extent necessary so this Agreement shall
     otherwise remain enforceable in full force and effect.

     10.8  Construction.  Headings and captions are only for
     convenience and shall not affect the construction or
     interpretation of this Agreement.  Whenever the context
     requires, words, used in the singular shall be construed to
     include the plural and vice versa, and pronouns of any
     gender shall be deemed to include the masculine, feminine,
     or neuter gender.

     10.9  Counterpart Copies.  This Agreement may be signed in
     counterpart copies, each of which shall represent an
     original document, and all of which shall constitute a
     single document.

     10.10 No Adverse Construction.  The rule that a contract is
     to be construed against the party drafting the contract is
     hereby waived, and shall have no applicability in construing
     this Agreement or the terms hereof.

     10.11 Entire Agreement.  With respect to its subject matter,
     namely, the employment by COMPANY of EMPLOYEE, this
     Agreement (including the documents expressly incorporated
     therein, such as the Employee Confidentiality Agreement),
     contains the entire understanding between the parties, and
     supersedes any prior agreements, understandings, and
     communications between the parties, whether oral, written,
     implied or otherwise, including, but not limited to, the
     offer of employment letter dated November 19, 1998.

     10.12 Assistance of Counsel.  EMPLOYEE expressly
     acknowledges that he was represented by counsel of his own
     choosing in connection with the negotiation and drafting of
     the terms of this Agreement.


The parties execute this Agreement as of the date stated above:


TREVOR M. PRITCHARD           MENTOR CORPORATION


/s/TREVOR M. PRITCHARD             /s/ANTHONY R. GETTE
Trevor M. Pritchard           Anthony R. Gette
                              President and Chief Operating
Officer

NOTICE ADDRESS:                    NOTICE ADDRESS:
17014 Kimwood Court           5425 Hollister Avenue
Chesterfield, Missouri 63005       Santa Barbara, California
     93111