Net, Net,Net

LEASE

THIS LEASE dated as of the 10th day of July 1990 forreference purposes only is made between Lessor andLessee named below, effective on the later of the dates set forth under theirrespective signatures.

BasicLease Provisions

1.             Premises:                               As depicted onExhibit A.

                ProjectName:                         SantaBarbara Corporate Center                Building Name:                      Santa Barbara CorporateCenter                Premises Address:               Hollister Avenue. Santa Barbara  CA 93117

2.             LeasedArea:                36,350 Square Feet

3.             Lessee'sPercentages:  Building: 49.71% Common Area 42.93%

4.             InitialAnnual               Rent: $597,594.00 ($16.44 per square foot)

5.             MonthlyRental           Installments: $49,.799.50 ($1.37Per Square Foot)

6.             Term:Ten (10) Years and No Months

7.             Target Commencement Date:             June 1. 1991 (subject to adjustment)

                 TerminationDate:                                     May31. 2001 (ten years after commencement)

8.              SecurityDeposit:                                      $49,799.50

9.              Broker(s):                                                   Coldwell Banker: Grubb & Ellis

10.             Parking Spaces: 145 (with 25 to be separatelyidentified)

11.           Address for Payments and Notices: (If different frombelow)

12.           Submission of this instrument for examination or signatureby Lessee does not constitute a reservation of or option for space and it isnot effective as a 

lease or otherwise until execution by both Lessee and Lessor.

                INWITNESS WHEREOF, the parties hereto have executed this Lease, consisting of theforegoing Basic Lease Provisions, Articles 1 through 17 which follow, as of thedate first above written. 

                                            LESSOR                                                                                                     LESSEE

SB CORPORATE CENTER, LTD.,                                                          MENTORCORPORATION, a Minnesotaa California limited partnership                                                                corporation

By:  /S/JEFFREYC. BERMANT                                                              By:  /S/ANTHONY R. GETTE

Date:  July 23,1990                                                                                    Date:  July 19, 1990

Address:                 300Esplanade Drive                                                Address:             600 Pine Avenue                                  Suite1860                                                                                               Goleta,CA 93117                                  Oxnard,CA 93030

TABLE OF CONTENTS

 

 

Section                                                                                                                                                                   Page

1.          LEASEOF PREMISES

1.1              LeasedPremises 

1.2              Notice of Available Additional Space

1.3              Leaseof Space to Competitors of Lessee

2.         TERM

2.1             Commencement of Term

2.2             Delay inCommencement

3.         RENT

3.1               Initial Annual Rent

3.2               Additional Rent

3.3               Offset Rights

3.4               Definitions

3.5               Rent Adjustment for ConsumerPrice Index

3.6               Calculation and Payment

3.7               End of Term

4.         SECURITY DEPOSIT

5.         USE

5.1               Use

5.2               Compliance WithLaw

5.3               Insurance Cancellation

5.4               Hazardous Substances

6.         MAINTENANCE, REPAIRS AND ALTERATIONS

6.1               Lessor'sObligations

6.2               Lessee's Obligations

6.3               Alterations and Additions

6.4               Surrender

6.5               Lessor'sRights

7.         ISURANCE

7.1               Lessee's Liability Insurance

7.2               Lessee's Worker's CompensationInsurance

7.3               Lessee's Fire and ExtendedCoverage Insurance

7.4               Policy Requirements

7.5               Lessor'sRights

7.6               Lessor'sInsurance

7.7               Indemnification

7.8               Exemption of Lessorfrom Liability

8.         DAMAGE OR DESTRUCTION

8.1               Partial Damage

8.2               Damage near end of Term

8.3               Abatement of Rent; Lessee'sRemedies

8.4               Insurance Proceeds Upon Termination

8.5               Restoration

9.         PERSONAL PROPERYTAXES

10.       UTILITIES

11.       ASSIGMENT AND SUBLETTING

11.1             Restrictionson Assignment

11.2             Consentsto Transfer of Lease

11.3             OrganizationalChanges

11.4             ContinuingLiability of Lease

11.5             Optionsin Favor of Lessor

11.6             Assumptionby Participation in Rental Overages

11.7             Lessor's Participation in Rental Overages

11.8Reimbursement of Costs and Fees

12.       DEFAULTS:REMEDIES

12.1             Defaultby lesse

12.2             Remediesfor Default of Lessee

12.3             Default by Lessor

12.4             LateCharges

 

13.       CONDEMNATION OR RESTRICTION ON USE

13.1             EminentDomain

13.2             Abatementof Rent

13.3             TemporaryTaking

13.4             VoluntarySale as Taking

14.        BROKERS

15.        LESSOR'S LIABILITY        

16.         PARKING

17.         GENERALPROVISIONS              

17.1             EstoppelCertificate17.2             Severability17.3             Timeof Essence              17.4             Captions17.5             Notices                     17.6             Waivers                     17.7             HoldingOver17.8             CumulativeRemedies          17.9             Inurement                  17.10           Choiceof Law                17.11           Subordination                17.12           Attorneys'Fees              17.13           Lessor's Access             17.14           CorporateAuthority          17.15           Surrenderor Cancellation17.16           EntireAgreement17.17           Signs                       17.18           Intereston Past Due Obligations17.19           Gender;Number17.20           Recordingof Lease17.21           Waiverof Subrogation        17.22           Confidentialityof Lease17.23           QuietEnjoyment              17.24           WindowCoverage              17.25           MaterialsStorage Restrictions17.26           NoAgency                    17.27           Forcemajeure               17.28           BuildingName                17.29           Assignmentby Lessor

1.  LEASE OPPREMISES

1.1  Leased Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of theconditions set forth in this Lease, the Premises identified in Item 1 of theBasic Lease Provisions, together with the nonexclusive use, in common with Lessor and other tenants of the Building(s) and theirrespective invitees, of common areas in or about the Building and the parkinggarage (if any) or parking areas adjoining the Building. The Premises,building, common areas and parking areas are referred to collectively herein as"the Project" or "the Property." The approximateanticipated configuration of the Project and the location of the Building(s),Premises and associated common and parking areas isindicated on Exhibit "A". The size, location and function of thebuildings and related structures depicted here are approximate. Theconfiguration of the development, the design, size, function and location ofall other improvements, and the identity and location of other tenants to theextent depicted are subject to change without notice for any reason deemedsufficient by the owner. Lessor reserves the right toalter the configuration of the Project, to construct additional improvementsthereon, to withdraw areas therefrom from time totime, and to alter the configuration of the associated common and parkingareas, provided that (a) the number of parking spaces intended for Lessee's useshall not thereby be materially diminished and (b) the design, size, functionand location of improvements (exceeding Common Area exterior to the Building)shall not be substantially altered, and (c) areas material to Lessee'senjoyment of the premises shall not be withdrawn from the property, in eachcase without the prior written consent of Lessee, which consent shall bereasonably exercised.

1.2  Notice of Available Additional Space, Lessee shall have a right of 30-day notice ofavailability with respect to the 12,000 square foot supplemental buildingproposed to be constructed by Lessor as part of theProject. Lessor shall not enter into a lease orrental agreement with respect to the supplemental building without first givingLessee not less than thirty (30) days written notice advising Lessee (i) that such building is available for lease and (ii) ofthe terms and conditions upon which Lessor proposesto lease the supplemental building.

1.3  Lease of Space to Competitors of Lessee. For as long as Lessee continues to occupy at leasttwenty-five percent (25%) of the net leasable area ofthe Building, Lessor shall not lease space in theBuilding to any person or entity whose business is competitive with that ofLessee.

1.3.1  There is attached to this Lease as Exhibit C a schedule setting forth (a)the names of Lessee's competitors and (b) a description of products that arecompetitive with those manufactured, sold and/or distributed by Lessee. Lesseeshall be entitled to update such schedule from time to time to reflect (a) theidentity of any successors-in-interest to existing competitors of Lessee and(b) the identity of new or additional firms or entities that develop or expandproduct lines to include products that are competitive with those products ofLessee that are shown on the attached list, but Lessee shall not be entitled toadd new products to the list.

1.3.2        Lessor shall not lease space in the Project to any personwho (a) is identified on the Schedule attached as Exhibit C or who isidentified by Lessee as being a successor-in-interest to such a party, or (b)whose product line includes one or more of the products shown on the scheduleattached Exhibit C, but no change made by Lessee to such schedule shall affectany lease entered into by Lessor prior to the timethat Lessee has furnished Lessor with written noticeof such change.

2.              TERM

2.1  Commencement of Term.The term of the Lease shall be as shown in Item 6 of the Basic LeaseProvisions, commencing on the Commencement Date, which Lessorand Lessee expect to be the Target Commencement Date as shown in Item 7 of theBasic Lease Provisions but which may be such other date as herein provided, andending on the last day of the month during which the tenth (10th) anniversaryof the Commencement Date shall occur, unless sooner terminated pursuant to anyprovision hereof.

2.1.1  TheCommencement Date of this Lease shall be the date on which Lessordelivers possession of the Premises to Lessee and upon compliance with the provisionsof Exhibit D of this Lease, and the obligation of Lessee to pay rent shallbegin on such date.

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

2.2          Delay in Commencement.

2.2.1  Iffor any reason Lessor cannot deliver possession ofthe premises to Lessee on or before the Target Commencement Date, Lessor shall not be subject to any liability therefor, except as provided in this section, nor shallsuch failure affect the validity of this Lease or the obligations of Lesseehereunder. Subject to the provisions of Exhibit D of this Lease, Lessee shallnot be obligated to pay rent until delivery of possession of the Premises hasoccurred. Lessor shall commence grading of theProperty or shall commence construction on the Building and/or Premises withinthirty (30) working days after obtaining a building or grading permit, as thecase may be, and shall diligently carry such construction to completion. Thecommencement or completion of such construction shall be excused during anyperiod of delay resulting from acts or conditions described in Exhibit D of theLease, including delays attributable to Lessee.

2.2.2  IfLessor shall not have completed such constructionwithin eleven (11) months from August 1, 1990 after commencement thereof,Lessee shall have the right to terminate this Lease by giving not less thanthirty (30) days' prior written notice of default to Lessor,and this Lease shall terminate as of the date set forth in said notice oftermination if Lessor is unable to cure said defaultwithin thirty (30) days after receipt of said notice. The June 1, 1991completion date shall be extended automatically to include delays resultingfrom acts or conditions beyond the ability of Lessorto control, but if Lessor is unable to deliverpossession of the Premises on or before January 1, 1992, regardless of thereason for the delay, then Lessee shall be entitled to terminate this Lease bygiving not less than thirty (30) days' prior written notice of termination to Lessor at any time thereafter unless Lessortenders possession of the Premises to Lessee prior to the expiration of suchthirty (30)-day period. Lessee shall use due diligence in cooperating with Lessor's construction activities.

3.  RENT

 

3.1  Initial Annual Rent.

3.1.1  Subject to the provisions of Section 3.1.3, below, Lessee shall pay to Lessor as rent for the Premises an Initial Annual Rent inthe amount specified in Item 4 of the Basic Lease Provisions in equal monthlyinstallments in the amount specified in Item 5 of the Basic Lease provisions inadvance on the first day of each month.

3.1.2  Asa rental deposit, Lessee shall deposit with Lessor anamount constituting the first and second month's rent, in the sum of$99,599.00. Of this sum, $49,799.50 shall be paid upon lease execution and$49,799.50 upon tender of possession of the Premises by Lessorto Lessee.

3.1.3  Forthe first ninety (90) days of the Lease Term, Lessee shall be obligated to payonly fifty percent (50%) of the monthly rental installment specified in Section5 of the Basic Lease Provisions. Commencing on the ninety first (91st) day ofthe Lease Term, Lessee shall pay one-hundred percent (100%) of the monthlyrental installment, regardless of whether Lessee has occupied the entirety of theLeased Premises.

3.2 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 ofall Building Operating Expenses and Common Area Operating Expenses (as hereinafterdefined) incurred by Lessor. Lessee's proportionateshare of such Building Operating Expenses and Common Area Operating Expensesshall be based upon Lessee's Building Percentage in the case of BuildingOperating Expenses and upon Lessee's Common Area Percentage in the case ofCommon Area Operating Expenses, all as defined herein.

3.2.2  Amounts included as Additional Rent for repair, maintenance or other buildingservices obtained from an affiliate of Lessor shallnot exceed the amounts that would be paid if such services had been obtained atcompetitive rates from independent third-party contractors providing the sameservices to similar buildings in the area in which the Project is located.

3.2.3  Thelevel of repair, maintenance and upkeep of the Building, Common Areas andlandscaping shall conform to, but shall not exceed, the standard customarilyutilized for professional office and research/development buildings in theSanta Barbara area, with the University Business Center constituting an exampleof such standards.

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

3.2.5 Except as set forth below, no amounts shall be included in AdditionalRent for (a) amortization or depreciation of capital assets that constitutereal property or that do not constitute removable trade fixtures or (b) thecosts of correcting defects in worlcmanship ormaterials covered by contractor's warranties or that are caused by the failureof Lessor or its contractor to construct the Buildingin a good and workmanlike manner in accordance with the plans and specificationsand applicable building codes.

3.3  Offset Rights. Allrent due under this Lease shall be payable without deduction, abatement oroffset except as may be otherwise expressly provided in this Lease.

3.4 Definitions. Forpurpose of this Article 3:

3.4.1  Lessee's Building Percentage is a percentage calculated by dividing the LeasedArea of the Premises, as shown in Item 2 of the Basic Lease Provisions, by the leasable area of the Building, and is stipulated to be asshown in Item 3 of the Basic Lease Provisions.

3.4.2 Building Operating Expense shall mean the sum of all expenses incurredby Lessor in connection with the operation, repairand 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 withrespect to the Building and related improvements (exclusive of the landunderlying all such improvements); (c) all fire and extended coverage, loss ofrents, vandalism, malicious mischief and other insurance covering the Building(including a pro rata share of the premium for Lessor'sexcess liability insurance coverage) maintained by Lessorunder the provisions of this Lease, to the extent the costs thereof arepermitted by Section 7.6, below, and any losses suffered which fall below thedeductible limits of such insurance; (d) direct costs incurred for security andfire protection and the costs of materials and supplies; (e) salaries and payrollexpenses for any persons who are employed on a substantially full-time basison-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) repairand maintenance of the Building and (2) repainting, wallcoveringor recarpeting Common Areas of the Building; (g) anallowance for overhead and administrative expense (including the costs of anyoff-site management supplied or procured by Lessor),of $12,000.00 per year, adjusted annually in accordance with the procedures setforth in Section 3.5, below, to reflect increases in the Consumer Price Index;(h) the amortization of the costs of capital investments for improvementswhich are designed to reduce operating costs, improve operations or complywith governmental conservation or safety programs, together with interest atten percent (10%) on the unamortized amount,amortized over such reasonable period as Lessorshall determine, but such amortized costs shall be included only to the extentof any demonstrable reductions or savings in occupancy costs or operatingexpenses that are achieved by Lessee as the result of such improvements orprograms.

3.4.3 Building Operating Expenses attributable to the utilities and servicesfurnished pursuant to Article 10 shall be apportioned among the tenants of theBuilding receiving such services (excluding those tenants furnishing or payingfor their own utilities and janitorial services) based on the respective leasedareas occupied by such tenants. Lessor has providedto Lessee examples of actual Building Operating Expenses for other buildingsowned or managed by Lessor, but without warranty orrepresentation to Lessee that Building Operating Expenses for the Premises willbe limited to such amounts.

** **

3.4.4  Lessee'sCommon Area Percentage is a percentage figure calculated by the projectarchitect by dividing the Leased Area of the Premises by the average leasable area in all improvements, including the Buildingand other buildings, shown on Exhibit "A" during such year and isinitially 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, orshould additional improvements or common area be added to or deleted fromExhibit "A", Lessor may. atits option, calculate Lessees Common Area Percentage by comparing the commonarea attributable to the Premises with the common area on such legal lot orotherwise within Exhibit "A" as so revised.

3.4.5  CommonArea Operating Expenses shall mean the sum of all expenses incurred by Lessor in connection with the operation and maintenance ofdriveways, landscaping, walkways, plazas, parking facilities, and perimeterproperty, including, but not limited to: (a) all real property taxes (ashereinafter defined) imposed upon or with respect to the land described atExhibit "A"; (b) all public liability insurance maintained by Lessor under the provisions of this Lease, to the extentthe costs thereof are permitted by Section 7.6, below, and any lasses sufferedwhich fall below the deductible limits of such insurance; (c) direct costsincurred for security and fire protection and the costs of materials andsupplies; (d) salaries and payroll expenses for any persons who are employed ona substantially full-time basis on-site in the management, operation, repairand maintenance of the common areas, gardening, landscaping, repaving,repainting and trash removal; (e) depreciation of equipment used in suchmaintenance; (f) the amortization of the costs of capital investments forimprovements which are designed to reduce operating costs, improve operationsor comply with governmental conservation or safety programs, together withinterest at ten percent (10%) on the unamortized amount,amortized over such reasonable period as Lessor shalldetermine, but such amortized costs shall be included only to the extent of anydemonstrable reductions or savings in occupancy costs or operating expensesthat are achieved by Lessee as the result of such improvements or programs: (g)any governmental surcharge, fee or assessment imposed with respect to theparking facilities within the Project, to the extent paid by Lessor and not passed on to the users of said parkingfacilities. General overhead and depreciation of improvements shall not beincluded in Common Area Operating Expenses except as specifically set forth inthe foregoing.

3.4.6  Subjectto the exception set forth in subparagraph A, below, Real Property Tax shallmean all real and personal property taxes and assessments incurred during anycalendar year, including, but not limited to: special and extraordinaryassessments, water and sewer rates and charges, occupancy taxes or similartaxes imposed on or with respect to the real or personal property whether ornot imposed on or measured by the rent payable by Lessee, and othergovernmental levies and charges, general and special, ordinary andextraordinary, unforeseen as well as foreseen, of any kind and naturewhatsoever relating to the real or personal property, and any gross rental,license or business tax measured by or levied on rent payable or spaceoccupied. If, by law, any property taxes are payable, or may at the option ofthe taxpayer be paid, in installments (whether or not interest shall accrue onthe unpaid balance of such property taxes), Lessormay, at Lessor's option, pay the same and, in suchevent, any accrued interest on the unpaid balance of such property taxes shallbe deemed to be Real Property Taxes as defined herein. Real Property Taxesshall also include all expenses reasonably incurred by Lessorin seeking a reduction by the taxing authorities of Real Property Taxesapplicable to the Project. If at any time during the term of this Lease underthe laws of the United States or the State of California or any politicalsubdivision of either, a tax or excise on rents, space or other aspects of realproperty, is levied or assessed against Lessor, thesame shall be deemed to be Real Property Taxes. If any such property taxes uponthe income of Lessor shall be imposed on a graduatedscale, based upon Lessor's aggregate rental income,Real Property Taxes shall include only such portion of such property taxes aswould be payable if the rent payable with respect to the Building and CommonAreas were the only rental income of Lessor subjectthereto.

A. 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 levyupon the income of Lessor, or (3) any increase intaxes or assessments attributable to a reassessment or tax increase resultingfrom a sale or other disposition of the Property constituting a change ofownership under the rules and regulations of the California State Board ofEqualization.

B. Lessee at its cast shall have the right, at any time, to seek areduction in the assessed valuation of the premises or to contest any Real PropertyTaxes 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 reductionor contests the Real Property Taxes, the failure on Lessee's part to pay theReal Property Taxes shall not constitute a default as long as Lessee complieswith the provisions of this paragraph.

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

D.  If Lessee does not pay the Real PropertyTaxes when due and Lessee seeks a reduction or contests them as provided inthis Section, before the commencement of the proceeding or contest, Lesseeshall furnish to Lessor a surety bond issued by aninsurance company qualified to do business in California. The amount of thebond shall equal one hundred twenty-five percent (125%) of the total amount ofReal Property Taxes in dispute, including any penalties for late paymentthereof. The bond shall hold Lessor and the Premisesharmless from any damage arising out of the proceeding or contest and shallinsure the Payment of any judgment that may be rendered.

E.  Should Real Property Taxes applicable to theproperty be reduced, Real Property Taxes assessed to Lessee Pursuant to thisLease shall reflect such reduction.

3.5  RentAdlustment for ConsumerPrice Index. The annual rent shall beadjusted effective as of the first day of the twenty-fifth (25th) full calendarmonth of the lease term, and on the corresponding day of each year thereafterduring the lease term (the "Adjustment Date") in accordance with theprocedures set forth in Section 3.6.2, below.

3.6  Calculation and Payment.

3.6.1  Annualrent shall be payable to Lessor in lawful money ofthe United States at Lessor's address herein or to suchother persons or at such other places as Lessordesignates in writing. Rent payable for any period for less than one monthshall be prorated based upon a thirty (30) day month.

3.6.2  Theannual rent shall be adjusted on each Adjustment Date by an amount equal to thepercentage of increase in the Consumer Price Index for Urban Wage Earners andClerical Workers, All Items, L.A. -Anaheim-Riverside Area (1982-1984 - 100Base) (the "Index") during the preceding year. Such amount shall bedetermined by comparing the Index figure for the second month immediatelypreceding the Adjustment Date to the Index figure for the corresponding monthof the prior year, but in no event shall the annual rental increase be lessthan three percent (3%) or more than seven percent (7%) in any year.

A.  If the applicable Index figure is notavailable on the Adjustment Date, the parties shall make an interim increase inthe annual rent on the basis of the most recently available Index figure. Afinal adjustment shall thereafter be made, retroactive to the Adjustment Date,once the applicable Index figure becomes available, and Lessee shall pay anyadditional rent owing for prior periods by reason of such final adjustment notlater than the first day of the next following month.

B.  If on any Adjustment Date the Consumer PriceIndex is no longer published in the same format as set forth above, the partiesshall substitute any official index published by the Bureau of LaborStatistics or any successor or similar Governmental agency as may then be inexistence and shall be most nearly equivalent thereto. If the parties shall beunable to agree upon a successor index the parties shall refer the choice toarbitration in accordance with the rules of the American Arbitration Association.

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

3.6.4  Lessor shall keep at its principal place of business booksand records in sufficient detail to permit the verification of all costs andexpense charged to Lessee as Building Operating Expenses during the term ofthis lease. All such books and records shall be available for inspection andcopying by Lessee or its duly authorized representative at Lessor'sprincipal place ofbusinessat reasonable times during regular business hours upon reasonable prior noticeto Lessor.

3.7  End of Term.Upon the expiration or earlier termination of this Lease Lessee shall pay Lessor, as additional rent, the aggregate rental increasewhich would have been payable by Lessee pursuant to this Article 3, except forsuch expiration or termination, for the portion of the year in whichtermination or expiration occurs through the termination date. The amount ofsuch payment shall be calculated by Lessor basedupon Sections 3.2, 3.3, and 3.5 (using the expiration or termination date asthe adjustment date for Section 3.5) and the best information then available toLessor, and shall give effect to all prioradjustments and payments on account by Lessee pursuant to this Article 3.

4.  SECURITY DEPOSIT

Ten(10) days prior to Lessee's occupancy of the Premises, Lessee shall depositwith Lessor the sum specified in Item 8 of the BasicLease Provisions as security for the faithful performance by Lessee of allcovenants and conditions of this Lease. Lessor shalldeposit Lessee's security deposit into a money market or similar high-yieldaccount and shall cause the interest accruing thereon to be remitted to Lesseeno less frequently than annually. If Lessee shall breach or default in theperformance of any covenants or conditions of this Lease, including the paymentof rent, Lessor may use, apply or retain the whole orany part of such security deposit for the payment of any rent in default or forany other sum which Lessor may spend or be required tospend by reason of Lessee's default. If Lessor souses or applies all or any portion of said deposit, Lessee shall, within ten(10) days after written demand therefor, deposit cashwith Lessor in an amount sufficient to restore saiddeposit to the full amount hereinabove stated and Lessee's failure to do soshall be a material breach of this Lease. Should Lessee comply with allcovenants and conditions of this Lease, the security deposit or any balancethereof 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 ofthe term. Should Lessor sell its interest in thePremises, Lessor may transfer to the purchaserthereof the then unexpended or unappropriated depositand thereupon Lessor shall be discharged from anyfurther liability for such funds.

5.  USE

5.1  Use. The Premises shall be used and occupied for lawfulgeneral office purposes permitted under applicable ordinances and otherGovernmental requirements, the covenants, conditions and restrictions affectingthe Project, as the same may be amended from time to time, and the Rules andRegulations as Lessor may from time to timereasonably adopt for the safety, care and cleanliness of the Building and theProject or the preservation of good order. The Rules and Regulations presentlyin effect are attached hereto as Exhibit "B". Lessorshall endeavor to enforce such Rules and Regulations in a uniform andconsistent manner as to all tenants and occupants of the Building, but Lessor shall not be responsible to Lessee for thenonperformance of any of such Rules and Regulations, or noncompliance with saidcovenants, conditions and restrictions, by any other tenant of the Building forreasons beyond the reasonable ability of Lessor to control.

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

5.3  Insurance Cancellation.If Lessee's use of the Premises causes an increase in the rates of fire or otherinsurance maintained on the Project, Lessee shall pay as additional rent theamount of such increase. Lessee shall be in default under this Lease shouldLessee cause the cancellation of fire or other insurance upon the Building orProperty or should Lessee fail to pay any increased insurance rate attributableto Lessee's use of the Premises. In determining whether increased premiums area result of Lessee's use or occupancy of the Premises, Property or Building, aschedule issued by Lessors insurer computing theinsurance rate on the Premises, Property or Building, or the LeaseholdImprovements showing the various components of such rate, shall be conclusiveevidence of the several items and charges which make up such rate. Lessee shallpromptly comply with all reasonable requirements of the insurance authority orof any insurer now or hereafter in effect relating to the Premises.

5.4  Hazardous Substances.Any corrosive, flammable, hazardous, or other special wastes or materials shallbe handled or disposed of as directed by applicable State, Federal, County andCity regulations. Lessee shall handle, store or dispose of such materials in acareful and prudent manner. At the termination of the lease, or any optionperiod thereof, Lessee shall fully clean the premises in such a manner that noresidue of such materials or wastes s1411 remain on the premises inconcentrations which exceed those permitted under applicable rules andregulations then in effect. Lessee shall notify the appropriate governmental authorityof the presence and amount of any such material or wastes, and shall complywith all conditions imposed by such authority. Lessee shall contact theappropriate governmental authority prior to occupancy to determine theexistence of any records for the Building and/or Premises. Specifically thirty(30) days prior to occupancy, Lessee shall submit to Lessorand the appropriate governmental authority for approval any HazardousMaterials Management Plan (HMMP) and a HazardousMaterials Floor Plan (HMF) required by suchgovernmental authority. These plans shall be attached in full to this lease.

5.4.1  TheHMMP shall include the following:

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

B.  General facility description with map showinglocation of all buildings and structures.

C.  Facility hazardous material storage mapshowing the location of each proposed hazardous material storage area andaccess to such facilities. The map shall be updated annually by the occupantand submitted by January 1 each year.

D.         A floor plan showing the location ofeach hazardous material storage area, storage area access, and the location ofemergency equipment.

5.4.2       The HMF shallinclude the following:

A.  HazardousMaterials Handling Report describing the safe handling of hazardous materialsto prevent accidents.

B.  Separation of Hazardous Material Reportoutlining the methods to be utilized to insure separation and protection ofhazardous materials from such factors that could cause fire, explosion, spills,etc.

C.  Inspection and Record Keeping Plan indicatingthe procedures for inspecting each storage facility. An authorized record ofinspection shall be maintained by the Lessee.

D.  EmployeeTraining Program to insure that employees know how to safely handle hazardousmaterials.

E.  Hazardous Materials Contingency Plan thatclearly describes appropriate response procedures and measures in case of anaccident.

F.  A floor plan identifying the location andquantity of each hazardous material, including the chemical name and quantitylimit for each class.

5.4.3  Lessee shall pay inspection fees, based on the hourlyinspection rate, for an environmental audit to be conducted by the appropriategovernmental authority or Lessor at the terminationof the lease and prior to reoccupation of the Building and/or premises ifhazardous materials were in use on the leased Building and/or premises. Theappropriate governmental authority shall perform or Lessee shall arrange forsuch an audit in a timely manner to prevent economic hardship to Lessor and shall certify that the premises are availablefor reoccupation, or shall specify cleanup measures that will render thepremises safe for reoccupation. Lessee shall be responsible for any cleanupthat may be required as a result of the audit.

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5.4.4  Should Lessee fail to comply with any duty set forth in this Section 5.4, Lessor may, in addition to all other remedies now orhereafter provided by this Lease or by law, perform such duty or make good suchdefault, and any amounts which Lessor shall advancepursuant thereto shall be repaid by Lessee to Lessoron demand. Lessee shall indemnify, defend, and bold Lessorharmless from all costs, attorney fees, expenses, claims and liability fordamage to property and injury to persons as a result of or arising out ofLessee's use, generation, storage, release or disposal of any hazardous ortoxic substance, material, or waste on the Project site.

6.  MAINTENANCE.REPAIRS AND **ALTERATIONS**

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6.1  Lessor'sOblinations. Lessor shall cause to bemaintained, in good order, condition and repair Ca) the roof and exteriorwalls, (b) common windows and doors of the Building (excluding the interiorsurface thereof), (c) heating, venting and air conditioning systems, (d) allencased plumbing and wiring, whether within or outside the Leased Premises (butexcluding plumbing blockages attributable to any misuse of plumbing by tenantor its agents or employees), (e) any public and common areas in the Building,(f) all parking areas, driveways, sidewalks, private roads or streets andlandscaping and (g) all other areas located within the Project other than areasoccupied by other buildings (such non-building areas being herein referred toas "Common Areas").

6.2  Lossee's Obli2atians. Lessee shallduring the term of this Lease keep in good order, condition and repair, theinterior 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 thePremises and all exposed plumbing and electrical fixtures. Lessorshall incur no expense nor have any obligation of any kind whatsoever inconnection with the maintenance of the interior of the Premises and, except asexpressly provided in Section 12.3, below, Lessee waives the benefits of anystatute now or hereafter in effect which would otherwise afford Lessee theright to make repairs at Lessor's expense or toterminate this Lease because of any failure to keep the interior of thePremises in good order, condition and repair. Notwithstanding the foregoing, Lessor shall be liable for maintenance or repairs which arecaused by Lessor's negligence or willful misconduct.

6.3  Alterations and Additions.

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

6.3.2  Allalterations, improvements and additions to the Premises for which the approvalof Lessor is required under Section 6.3.1, or whichinvolve changes to the plumbing, electrical or HVAC systems, shall be performedby Lessor's contractor for the Project or otherlicensed contractor approved by Lessor, which shallnot be unreasonably withheld. Lessee shall pay, when due, all claims for laboror materials furnished to or for Lessee at or for use in the Premises, whichclaims are or may be secured by any mechanics' or materialmen'slien against the Premises or any interest therein, and Lessorshall have the right to post notices of nonresponsibilityin or on the Premises as provided by law.

6.3.3  Lessee shall provide Lessor with notice of anychanges or alterations made to the Premises, whether or not such changes oralterations 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 constructingsuch changes or additions, and shall provide Lessorwith "as-built' drawings for any such alterations requiring the priorapproval of Lessor.

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6.4 Surrender. On thelast day of the term hereof, or on any sooner termination, Lessee shallsurrender to lessor the Premises and, subject to theprovisions of paragraph 6.3.1 hereof, all alterations, additions, and improvementsthereto, in the same condition as when received or made, ordinary wear and tearexcepted; provided, however, that Lessee's machinery, equipment and tradefixtures (including utility installations) which may be removed withoutirreparable or material damage to the Premises, shall remain the property ofLessee and be removed by Lessee. Lessee shall repair any damage to the Premisesoccasioned by the removal of Lessee's furnishings, machinery, equipment andtrade fixtures, which repair shall include the patching and filling of holesand repair of structural damage.

6.5 Lessor's Rights. IfLessee 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 behalfof Lessee, and the cost thereof, together with interest thereon at the ratespecified in Paragraph 12.2.1 hereof, shall immediately become due and payableas additional rent to Lessor.

7.  INSURANCE

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

7.1 Lessee'sLiability Insurance. Comprehensivegeneral liability insurance with respect to the Premises and the operations ofor on behalf of Lessee in, on or about the Premises, but not limited to:personal injury, blanket contractual, owner s protective, broad form propertydamage liability coverage, host liquor liability and owned and non-ownedautomobile liability in an amount not less than $1,000,000 per occurrence,$2,000,000.00 general aggregate, per policy year. In addition, Lessee shallmaintain for the Lease Term, such policies of product liability insurance asare readily available for Lessee's product lines at competitive, cost-effectiverates and shall self-insure for those product lines for which such insurance isnot available. Each policy of insurance maintained by Lessee shall contain (i) severability of interest, (ii)cross liability, and (iii) an endorsement stating in substance that "Suchinsurance as is afforded by this policy for the benefit of Lessorshall be primary as respects any liability or claims arising out of theoccupancy of the Premises by Lessee, or out of Lessee's operations, and anyinsurance carried by Lessor shall be excess andnon-contributory".

7.2 Lessee's Worker'sCompensation Insurance. Worker'sCompensation coverage as required by law, together with Employer Liabilitycoverage.

7.3 Lessee's Fire andExtended Coverafe Insurance. Insurance against fire vandalism, malicious mischiefand such other additional perils as now are or hereafter may be included in astandard "All Risks" coverage, insuring all improvements and bettermentsmade to the Premises, Lessee's trade fixtures, furnishings, equipment, stock,loss of income or extra expense, and other items of personal property in anamount not less than 100% of replacement value. Such insurance shall contain (i) no coinsurance or contribution clauses, (ii) aReplacement Cost Endorsement, and (iii) deductible amounts acceptable to Lessor.

7.4 PolicyRequirements.

7.4.1  Allpolicies of insurance required to be carried by Lessee pursuant to theserequirements shall be written by responsible insurance companies authorized todo business in the State of California. Any such insurance required by Lesseehereunder may be furnished by Lessee under any blanket policy carried by it orunder a separate policy therefor. A true and exactcopy of each paid up policy evidencing such insurance or a certificate of theinsurer, certifying that such policy has been issued, providing the coveragerequired and containing the provisions specified herein, shall be delivered toLessor prior to the date Lessee is given the right topossession of the Premises, and upon renewals, not less than thirty (30) daysprior to the expiration of such coverage. Lessor may,at any time, and from time to time, inspect and/or copy any and all insurancepolicies required hereunder. In no event shall the then limits of any policy beconsidered as limiting the liability of Lessee under this Lease.

7.4.2  Each policy evidencing insurance required tobe carried by Lessee pursuant to these requirements shall contain, in form andsubstance satisfactory to Lessor: (i) a provision including Lessorand any other parties in interest designated by Lessoras an additional insured; (ii) a waiver by Lessee's insurers of any right tosubrogation against Lessor, its agents, employees andrepresentatives which arises or might arise by reason of any payment under suchpolicy or by reason of any act or omission of Lessor,its agents, employees or representatives; and (iii) a provision that theinsurer will not cancel or materially change the coverage provided by suchpolicy without first giving Lessor thirty (30) daysprior written notice.

7.4.3  The amounts of insurance and extent ofcoverage set forth in this Article 7 can be subject to periodic review andadjustment, based either on the mutual agreement of Lessorand Lessee or, if Lessor and Lessee are unable toagree, on the determination of an insurance broker independent of either party.

7.5  Lessor'sRiahts. If Lessee fails to procure, maintain and/or pay forat the times and for the durations specified in this Lease, the insurancerequired hereunder, or fails to carry insurance required by any governmentalrequirement, Lessor may (but without obligation to doso), and with twenty-four (24) hours advance notice to Lessee, perform suchobligations on behalf or Lessee, and the cost thereof, together with interestthereon at the rate specified in Paragraph 12.2.1 hereof shall immediatelybecome due and payable as additional rent to Lessor.

7.6  Lessor's Insurance. Lessor shall be entitled to maintain during the term ofthis Lease such insurance against physical damage to the Building in an amountnot less than one-hundred percent (100%) of replacement value of the Premises,and a policy of comprehensive excess liability insurance in a combined singlelimit of not more than $8,000,000.00 per occurrence and $8,000,000 generalaggregate per policy year, and Fire and Extended Coverage Insurance. Lessor may, but shall not be obliged to, take out and carryany other form or forms of insurance as it or the mortgageesof Lessor may reasonably determine advisable, exceptthat Lessor and Lessee agree that (a) Lessor shall not be obligated to obtain earthquakeinsurance for the Premises and (b) Lessee shall not be required to reimburse Lessor for premiums for (i)earthquake insurance or (ii) for any other insurance which exceeds in nature,scope or amount of coverage insurance that is consistent with normal commercialpractices. Notwithstanding any contributions by Lessee to the cost of insurancepremiums, with respect to the Building or any alterations of the Premises, asmay be provided herein, Lessee acknowledges that it has no right to receive anyproceeds from any such insurance policies carried by Lessor.

7.7  Indemnification. To the fullest extent permitted by law, Lessee shalldefend, indemnify and hold harmless Lessor from andagainst any and all claims arising from Lessee's use of the Premises of theconduct of its business or from any activity, work, or thing done, permitted ofsuffered by Lessee, its agents, contractors, employees or invitees in or aboutthe Premises or elsewhere, and shall further indemnify and hold harmless Lessor from and against any and all claims arising from anybreach or default in the performance of any obligation on Lessee's part to beperformed hereunder, or arising from any act, neglect, fault or omission ofLessee, or of its agents, employees, or invitees, and from and against allcosts, attorney's fees, expenses and liabilities incurred in or about such claimor any action or proceeding brought thereon. In case any action or proceeding be brought against Lessor byreason 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 toproperty or injury to persons in, upon or about the Premises from any causewhatsoever except that which is caused by the failure of Lessorto observe any of the terms and conditions of this Lease or, except asexpressly waived by Lessee in this Lease, a duty imposed on Lessorby 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 orneglect and Lessee shall not be obligated to defend, indemnify and holdharmless Lessor from and against any claimsattributable to Lessor's negligence or willfulmisconduct.

7.8  Exemption of Lessor from Liability. Lessor shall not be liablefor injury to Lessee's business or any loss of income therefromor 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 iscaused by or results from fire, explosion, falling plaster, electricity, gas,water or rain, or from the breakage, leakage, obstruction or other defects ofpipes, sprinklers, wires, appliances, plumbing, air conditioning or lightingfixtures, or from any other cause, whether such damage or injury results fromconditions arising upon the Premises or upon other portions of the Building, orfrom other sources or places, and regardless or whether the cause of suchdamage or injury or the means of repairing the same in inaccessible. Lessor shall not be liable for incorporeal hereditament including interference or obstruction oflight, air or view. Lessor shall not be liable forany damages arising from any act or neglect of any other tenant of the Buildingor the other portions of the Project or for nonperformance by such tenant ofthe Rules and Regulations affecting the Building which is beyond the reasonableability of Lessor to control. Notwithstanding theforegoing Lessor shall be liable for damage or injurycaused by Lessor's negligence or willful misconduct.

8.DAMAGE OR DESTRUCTION

8.1  Partial Damage. Ifthe Premises, or so much of the Building as to cause the Premises to beuninhabitable, are damaged by any casualty required to be insured against by Lessor, and the damage (exclusive of any property orimprovements installed by Lessee in the Premises) can be repaired within nine(9) months from the receipt by Lessor of proceedsfrom insurance policies applicable to said casualty, utilizing only suchproceeds, without the payment of overtime, Lessorshall at Lessor's expense repair such damage(exclusive of any property of Lessee or improvements installed by Lessee inthe Premises) as soon as practicable and this Lease shall continue in fullforce and effect. Notwithstanding the foregoing, Lessorshall not be required to undertake such repair if (a) the remaining term of theLease is less than three (3) years or (b) Lessor, forthe remainder of the Lease Term either (i) providesLessee with comparable alternative space at a cost that does not exceed thecost previously paid by Lessee under the Lease or (ii) makes provisionsufficient to assure the reimbursement to Lessee of the additional rent whichLessee will incur above its cost under the Lease for comparable alternativespace. Lessor shall not be required to undertakerepairs resulting from any casualty for which Lessoris not obligated to maintain insurance, as provided in the Lease, or whichcannot be repaired within nine (9) months from the receipt of the insuranceproceeds. In such event, either party shall be entitled to terminate this Leaseby giving written notice of termination to the other party.

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

8.3  Abatement of Rent: Lessee's Remedies.

8.3.1  IfLessor is obligated or elects to repair the Premisesas provided above, the rent payable for the period during which such repaircontinues shall be abated, in proportion to the degree to which Lessee's use ofthe Premises is impaired. Except for such abatement, if any, Lessee shall haveno claim against Lessor for any damage suffered byreason of any such damage, destruction, repair or restoration.

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

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

8.5  Restoration. Lessor's obligation torestore shall not include the restoration or replacement of Lessee'sfurnishings, machinery, equipment, trade fixtures or other personal property orany improvements or alterations made by Lessee to the Premises.

9.  PERSONAL PROPERTY TAXES

Lessee shall pay prior to delinquency all RealProperty Taxes and other taxes assessed against, levied upon or attributable toits furnishings, machinery, equipment, trade fixtures or other personalproperty contained in the Premises or elsewhere, and, if required, allimprovements to the Premises in excess of Lessor's "buildingstandard" improvements, provided, however1 that nothingcontained herein shall require Lessor to insure theaccuracy of any segregation of the same *for*purposes of Section 3.4.2hereof. When practicable, Lessee shall cause said furnishings, machinery,equipment, trade fixtures and all other personal property to be assessed andbilled 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 serviQes supplied to the Premises, together with any taxesthereon. 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 onleasable area, of all charges jointly metered orcharged with other premises. Lessor shall not beliable in damages or otherwise unless due to Lessor'snegligence for any failure or interruption of any utility services beingfurnished to the building and no such failure or interruption shall entitleLessee to terminate this lease. In no event shall Lessorbe liable for any such failure or interruption caused by the exercise ofgovernmental authority, strikes, riots, acts of God, war, adverse weatherconditions, 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 anygovernment authority governing the regulation and use of energy systems withinthe commercial office or industrial building structure. Lessee shall notsubject any of the mechanical, electrical, plumbing, sewer or other utility orservice systems or equipment to exercise or use which causes damage to saidsystems or equipment. Any such damages to equipment caused by Lesseeoverloading 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

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

11.2  Consents to Transfer of Lease. If Lessee desires at any time to assign this Leaseor to sublet the Premises or any portion thereof in a transaction that is notexempt under Section 11.1, above, it shall first notify Lessorof its desire to do so and shall submit in writing to Lessor(i) the name of the proposed sublesseeor assignee; (ii) the nature of the proposed sublesseeor assignee; (iii) the nature of the proposed sublessee'sor assignee's business to be carried on in the Premises~ (iv) the terms andprovisions of the proposed sublease or assignment; (v) such reasonablefinancial information as Lessor may requestconcerning 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, statementsof income or profit and loss for the two-year period preceding the request for Lessor's consent and a written statement in reasonabledetails as to the business experience of the proposed sublesseeor 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 affiliateof another corporation be guaranteed by the parent or controlling corporation.Any sublease, license, concession, franchise or other permission to use thePremises shall be expressly subject and subordinate to all applicable termsand conditions of this Lease. Any purported or attempted assignment, transfer,mortgage, encumbrance, subletting, license, concession, franchise or otherpermission to use the Premises contrary to the provisions of this paragraphshall be void and, at the option of Lessor, shallterminate this Lease.

11.3  Organizational Changes. IfLessee is a corporation, any transfer of its stock, or any dissolution, mergeror consolidation, which results in a change in1the control of Lesseefrom the person or persons owning a majority of its voting stock immediatelyprior thereto, or the sale of other transfer of all or substantially all of theassets of Lessee, shall constitute an assignment of Lessee's interest in thisLease within the meaning of this Article 11 and the provisions requiringconsent contained herein. Lessor may require as acondition to giving such consent that the new controlling person(s) execute aguaranty of this Lease. If Lessee is a corporation which, under then currentguidelines published by the California Commissioner of Corporation, is notdeemed to be a public corporation, the transfer assignment or hypothecatian of any interest in such corporation in theaggregate in excess of 25% (other than a transfer occurring by operation of lawupon the death of the bolder of such interest) shall be deemed an assignmentwithin the provisions of this Article.

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

11.5  Options in Favor of *Lessor**.*At anytime within ten (10) days after Lessor's receipt ofthe information specified in Section 11.2 above, Lessormay be written notice to Lessee elect (a) to sublease the Premises or theportion thereof so proposed to be subleased by Lessee, or to take an assignmentof Lessee's leasehold estate hereunder, upon the same terms as those offered tothe proposed sublessee or assignee, as the case maybe; or (b) to terminate this Lease as to the portion (including all) of thePremises so proposed to be subleased or assigned, with a proportionateabatement in the rent payable hereunder; or (c) disapprove such assignment orsubletting. If Lessor does not act within the ten(10) days, such failure to act is deemed a disapproval of such request forassignment or subletting. Notwithstanding the foregoing, the provisions of thisSection 11.4 shall not apply to any assignment of the Lease to an entitysurviving any corporate reorganization of Lessee, provided that said entity hasa net worth, as demonstrated by the provisions of such reasonable financialinformation as is set forth in Section l1.2(iv)hereof, of not less than twenty (20) times the annual rent in effect on thedate of assignment.

11.6  Assumption by Assignee.Each assignee or transferee, other than Lessor, shallassume, all obligations of Lessee under this Lease and shall be and remainliable Jointly and severally with Lessee for the payment of the rent, and forthe due performance of all the terms, covenants, conditions and agreements tobe performed by Lessee hereunder; provided, however, that a transferee otherthan an assignee shall be liable to Lessor for rentonly in the amount set forth in the assignment or transfer. No assignment shallbe binding on Lessor unless such assignee or Lesseeshall deliver to Lessor a counterpart of suchassignment and an instrument in recordable form whichcontains a covenant of assumption by such assignee satisfactory in substanceand form to Lessor, consistent with the requirementsof this Section 11.5, but the failure or refusal of such assignee to executesuch instrument of assumption shall not release or discharge such assignee fromits liability as set forth above.

11.7  Lessor's Participation in Rental OveraRes. Consent by Lessor to anysubletting or assignment shall be conditioned upon payment by Lessee to Lessor of one-half (1/2) of any Rental Overages (as hereafterdefined) received, directly or indirectly, by Lessee on account of suchassignment or subletting. Lessor's share of any suchRental Overages shall be paid to Lessor within ten(10) days after the receipt by Lessee of the consideration upon which suchRental Overages are based. Failure to pay Lessor itsshare of any Rental Overages, or any portion or installment thereof, shall bedeemed to default under this lease, entitling Lessorto exercise all remedies available to it under law including, but not limitedto, those specified in Article 12 of this lease. "Rental Overages' shallmean (a) in the case of a subletting, any net rental income (after deductingall broker fees and all other costs and expenses paid or incurred by Lessee insecuring the sublease) paid or given, directly or indirectly, by the sublessee to Lessee pursuant to the sublease for the use ofthe Premises, or any portion thereof, over and above the rent and anyadditional 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 Lessorunder this Lease if less than all of the Premises is sublet, and (b) in thecase 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 securingthe sublease) paid or given, directly or indirectly, by the sublesseeor assignee to Lessee solely in exchange for entering into the sublease orassignment, but shall not include (a) reimbursement for any security deposit,(b) reimbursement of any improvements, fixtures or furnishings installed in thePremises 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 ofLessee, including payments made for goodwill, going concern value or similarintangible personal property. As used herein, consideration shall includeconsideration in any form, including but not limited to, money, property,discounts, services, credits or any other item or thing of value. Irrespectiveof the form of such consideration, Lessor shall beentitled to be paid in cash in an amount equivalent to the aggregate of thecash portion of the Rental Overages and the value of any non-cash portion ofthe Rental Overages. If any Rental Overages are to be paid or given ininstallments, Lessee shall pay each such installment at the time the same isreceived by Lessee.

11.8  Reimbursement of Costa and Fees. Lessee shall reimburse Lessor for Lessor's reasonable costs and attorneys' fees, in an amountnot to exceed Two Thousand Dollars ($2,000.00), incurred in conjunction withthe processing and documentation of any assignment, subletting, transfer,change of ownership or hypothecation of this Lease or Lessee's interest in thePremises.

12.  DEFAULTS:  REMEDIES

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

12.1.1  Thevacating or abandonment of the Premises by Lessee combined with the failure topay rent;

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

1161;

12.1.3 The failureby Lessee to observe or perform any of the covenants, conditions or provisionsof this Lease (or the covenants, conditions and restrictions governing theProject) to be observed or performed by Lessee, other than described inParagraph 12.1.2 hereof, where such failure shall continue for a period ofthirty (30) days after written notice thereof from Lessorto Lessee, or for such lesser period as may be reasonable, taking in to accountthe matter complained of and the potential risk of damage or loss causedthereby (hereinafter the "cure period"); provided, however, than anysuch notice shall be in lieu of, and not in addition to, any notice requiredunder California Code of Civil Procedure Section 1161; provided further, thatif the nature of Lessee's default is such that more than the default period isreasonably required for its cure, then Lessee shall not be deemed to be indefault if Lessee commences such cure within the cure period and thereafter diligentlyprosecutes such cure to completion; or

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

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

12.2.1  Terminate Lessee's right to possession of the Premises by anylawful means, in which case this Lease shall terminate and Lessee shallimmediately surrender possession of the Premises to Lessor.In such event Lessor shall be entitled to recoverfrom Lessee:

A.  The worth atthe time of award of the unpaid rent which has been earned at the time oftermination;

B.  The worth atthe time of award of the amount by which the unpaid rent which would have beenearned after termination until the time of award exceeds the amount of suchrental loss that Lessee proves could have been reasonably avoided;

C.  The worth atthe time of award of the amount by which the unpaid rent for the balance of theterm after the time of award exceeds the amount of such rental loss that Lesseeproves could be reasonably avoided; and

D.  Any otheramount necessary to compensate Lessor for all thedetriment proximately caused by Lessee's failure to perform its obligationsunder this Lease or which in the ordinary course of things would be likely toresult therefrom, including, but not limited to; thecast of recovering possession of the Premises, expenses of releasing includingnecessary renovation and alteration of the Premises, reasonable attorneys' feesand any other reasonable cost. The "worth of the time of award" ofthe amounts referred to in subparagraphs (A) and (B) above shall be computed byallowing interest at five (5) percentage points above the discount rate of theFederal Reserve Bank of San Francisco at the time of the award. The worth at thetime of award of the amount referred to in subparagraph (C) above shall becomputed by discounting such amount at one (1) percentage point above suchdiscount rate.

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

12.2.3  Require Lessee to make payment of all rental obligations in cash or bycertified cashiers check.

12.2.4  Pursue any other remedy now or hereafter available to Lessorunder the laws or judicial decisions of the State of California, including, butno limited to, the remedy provided in California Civil Code Section 1951.4 tocontinue this Lease in effect.

12.3  Default by Lessor.

12.3.1  Lessor shall not be in material default of any of the obligationsof Lessor under this Lease unless Lessorfails to perform such obligations within thirty (30) days after written noticethereof from Lessee to Lessor, or such lesser periodas may be reasonable, taking in to account the matter complained of and thepotential risk of damage or loss caused thereby (hereinafter, the "cureperiod"). If the nature of Lessar's default issuch that it cannot be promptly cured, Lessor shallnot be in material default if Lessor promptlycommences such cure within such cure period and thereafter diligentlyprosecutes the same to completion. In the event of any such material default byLessor, Lessee may pursue any remedy now or hereafteravailable to Lessee under the laws of judicial decisions of the State ofCalifornia, except that Lessee shall not have the right to terminate this Leaseexcept as expressly provided herein. Lessee waives except as herein provided,any Lessor obligations for tenantabilityof the Building or Premises.

12.3.2  Lessee shall have the right to deduct from the rent the expenses of anyrepairs to the Premises done by Lessee on Lessor'sbehalf, or expenditures made by Lessee to cure material defaults by Lessor, only under the following circumstances:

A.  Lessor shall have committed a material default in theperformance of its obligations under this Lease

B.  Lesseeprovides Lessor not less than three (3) working days'prior written notice of Lessee's intention to make any expenditure that Lesseeproposes to make for the purpose of curing such default.

C.  Lessor fails to reimburse Lessee within ten (10) days afterLessee makes written demand on Lessor forreimbursement of such expenditure.

If Lessor fails to reimburse an expenditure by Lessee withinten (10) days after receipt of Lessee's written demand, then upon request byeither party the dispute shall be submitted to arbitration, the results ofwhich shall be binding on the parties. Arbitration shall be conducted by asingle arbitrator, who will be an attorney who has practiced law in the City ofSanta Barbara for not less than ten (10) years and who has not previouslyprovided legal services for either party. The arbitrator shall be designated bythe mutual agreement of the Lessor and Lessee or, ifthey are unable to agree, by the President of the Santa Barbara County BarAssociation upon the request of either party for such designation. Arbitrationshall be conducted pursuant to the rules of the American ArbitrationAssociation.

12.4  Late Charges.Lessee acknowledges that the late payment by Lessee to Lessorof rent and other sums due hereunder will cause Lessorto incur costs not contemplated by this Lease, the exact amount of which will beextremely 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 coveringthe Premises. Accordingly, if any installment of rent or any other sum due fromLessee shall not be received by Lessor or Lessor's designee within ten (10) days after the same isdue, Lessee shall pay to Lessor a late charge equalto five percent (5%) of such overdue amount, except that no late charge shallbe assessed for the first delinquency in any calendar year that exceeds ten(10) days until the delinquency exceeds fifteen (15) days. Lessee acknowledgesthat 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 noevent constitute a waiver of Lessee's default with respect to such overdueamounts, nor prevent Lessor from exercising any ofthe other rights and remedies granted hereunder.

13.  CONDEMNATION ORRESTRICTION ON USE

13.1  Eminent Domain. Ifthe whole of the Premises or so much thereof as to render the balance unusableby Lessee shall be taken under power of eminent domain this Lease shallautomatically terminate as of the date of such condemnation, or as of the datepossession is taken by the condemning authority, whichever is earlier. Thebalance of the Premises shall be deemed to be unusable if the takingconstitutes an interference with Lessee's business such that Lessee's abilityto conduct its business operations on the Premises in the same manner as theywere conducted prior to the taking is substantially impaired. In any taking orcondemnation, Lessee shall be entitled to receive the value, if any, of itsleasehold interest; and any award made to Lessee for its relocation expenses,the taking of personal property and fixtures belonging to Lessee, theinterruption 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 forimproving the Premises shall be determined by multiplying such expenditures bya fraction, the numerator of which shall be the number of years of the term ofthis Lease which shall not have expired at the time of such appropriation ortaking, and the denominator of which shall be the number of years of the termof this Lease which shall not have expired at the time of improving thePremises. Lessee's right to receive compensation or damages for its fixturesand personal property shall not be affected in any manner thereby.

13.2  Abatement of Rent. Inthe event of a partial taking which does not result in a termination of thisLease, rent shall be abated in proportion to that part of the Premises so madeunusable by Lessee.

13.3  Temnorary Taking. Notemporary taking of the Premises and/or of Lessee's rights therein or underthis Lease shall terminate this Lease or give Lessee any right to any abatementof rent hereunder; and any award made to Lessee by reason of any such temporarytaking shall belong entirely to Lessee and Lessorshall not be entitled to share therein. A temporary taking shall be defined asa taking which does not extend beyond a period of one (1) year in length.

13.4  Voluntary Sale as Takinu. A voluntary sale by Lessorto any public body or agency having the power or eminent domain, either underthreat of condemnation or while condemnation proceedings are pending, shall bedeemed to be a taking under the power of eminent domain for the purpose of thisArticle 13.

14.  BROKERS

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

14.2  Lessor represents and warrants that it has not engaged anyother brokers or finders, in connection with the origin, negotiation, executionor performance of this Lease and agrees to indemnify, defend and hold harmlessLessee from any claims for compensation asserted by any person claiming anentitlement thereto on account of services rendered for or at the request of Lessor.

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

15.  LESSOR'SLIABILITY

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

15.2  Theoriginal Lessor hereunder is California limitedpartnership that expects to convey title to or to become a tenancy-in-common.Such limited partnership and the tenancy-in-common are referred to collectivelyherein as the "initial Lessor." Inconsideration of the benefits accruing hereunder, Lessee, its successors andassigns, agree that, in the event of any actual or alleged failure, breach ordefault hereunder by the initial Lessor:

15.2.1  The sole and exclusive remedy of Lessee shall be againstthe real property of which the leased premises are a part.

15.2.2  No judgment will be taken against any individual partneror tenant-in-common who is a member of the initial Lessor,except to the extent of such individual's interest in the real property ofwhich the leased premises are a part.

15.2.3  Any judgment, inclusive of costs andattorneys fees, taken against any such partner or tenant-in-common whichpurports to extend beyond the interest of such partner or tenant-in-common inthe real property of which the leased premises are a part may be vacated andset aside at any time nunc pro tuno.

15.2.4  No judgment lien and no writ of execution will ever belevied and no abstract of judgment shall be recorded against the assets of anysuch partner or tenant-in-common, as the case may be, other than the interestof such partner or tenant-in-common in the real property of which the leasedpremises are a part.

15.2.5  These covenants and agreements are enforceable by anypartner or tenant-in-common who is one of the initial lessorsunder this Lease.

16.  PARKING

Duringthe term of this Lease, Lessee shall have the right in common with othertenants of the Building (if any) and any adjacent buildings, to use the parkingarea available to tenants of the Building. Lessee's use of such parkingfacilities or that of its invitees shall be limited to one hundred forty-five(145) spaces, and shall be subject to such rules and regulations as may beestablished from time to time by Lessor for theeffective use of such parking facilities. Such rules and regulations mayinclude, but shall not be limited to: designation of specific areas for use byinvitees of Lessee and Lessor; hours during whichparking shall be available for use; parking attendants; a parking validation orother control system to prevent parking abuse; and such other matters affectingthe parking operation to the end that said facilities shall be utilized tomaximum efficiency and in the best interest of Lessor,Lessee and their respective invitees. Lessor maytemporarily close any part of the Common Area for such periods of time as maybe necessary to prevent the public from obtaining prescriptive rights or tomake repair or alterations. Lessee's right to use any area for parking purposesshall be subject to restrictions or other limitations resulting from any laws,statutes, ordinances and governmental rules, regulations or requirements now inforce or which may hereafter be in force, and no such event shall in any wayaffect this Lease, abate rent, relieve Lessee of any liabilities or obligationsunder this Lease or give rise to any claim whatsoever against Lessor; specifically Lessee's right to use any area forparking purposes shall be subject to any preferential parking program forparticipants in any ridesharing program established by the Lessor.If Lessor reasonably determines that Lessee isregularly using in excess of the number of parking spaces specified in Item 10of the Basic Lease Provisions, Lessor may, inaddition to any other remedy, impose a reasonable charge for such excess usage,payable by Lessee upon demand. Notwithstanding the above, Lessee shall beentitled to a total of twenty-five (25) parking spaces to be separatelyidentified (at Lessee's sole cost and expense) as being reserved for Lessee'sexclusive use, ten (10) of which parking spaces shall be located proximate tothe entrance to the Premises; Lessor shall have noduty or obligation to monitor the use of such spaces.

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17.  GENERAL PROVISIONS

17.1  Estoggel Certificate.

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

17.1.2  Lessee's failure to deliver such statementwithin such time shall be conclusive upon Lessee that (i)this Lease is in full force and effect without modification except as may berepresented by Lessor, (ii) there are no uncureddefaults in Lessor's performance and (iii) not marethan one month's rent has been paid in advance.

17.1.3  IfLessor 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 bereasonably required by such lender.

17.2  Severability. The invalidity of any provision of this Lease as determined by acourt of competent jurisdiction, shall in no way affect the validity of anyother provision hereof.

17.3  Time of Essence.Time is of the essence in the performance of all terms and conditions of thisLease in which time is an element.

17.4  Captions. Article and paragraph captions have been insertedsolely as a matter of convenience and such captions in no way define or limitthe scope or intent of any provision of this Lease.

17.5  Notices. Any notice required or permitted to be givenhereunder shall be in writing and may be served personally or by regular mail,addressed to Lessor and Lessee respectively at theaddresses set forth before their signatures in Item 11 of the Basic Leaseprovisions, or to such other or additional persons or at such other addressesas may from time to time be designated in writing by Lessoror Lessee by notice pursuant hereto.

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

17.7  Holding Over. IfLessee holds over after the expiration or earlier termination of the termhereof without the express written consent of Lessor,Lessee shall become a tenant at sufferance only at a rate one hundredtwenty-five percent (125%) of the rent for the space in effect upon the date ofsuch expiration or earlier termination (subject to adjustment as provided inArticle 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 rent after such expiration or earlier terminationshall not constitute a consent to a holdover hereunderor result in a renewal. The foregoing provisions of this Paragraph are inaddition to and do not affect Lessor's right ofre-entry or any other rights of lessor hereunder oras otherwise provided by law.

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

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

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17.10  Choice of Lay.This lease shall be governed by the laws of the State of California.

17.11  Subordination. This Lease shall, at Lessar'soption, be either superior or subordinate to mortgages or deeds of trust on thePremises, whether now existing or hereinafter created. Lessee shall, uponwritten demand by Lessor, execute such instruments asmay be required from time to time to subordinate the rights and interest ofLessee under this Lease to the lien of any mortgage or deed of trust on theBuilding. Notwithstanding any such subordination, so long as Lessee is not indefault hereunder, this Lease shall not be terminated or Lessee's quietenjoyment of the Premises disturbed in the event such mortgage or deed of trustis foreclosed. In the event of such foreclosure, Lessee shall thereupon becomea Lessee of, and attorn to, the successor-in-interestto Lessor on the same terms and conditions as arecontained in this Lease.

17.12  Attorneys' Fees. Ifeither party hereto brings an action to enforce the terms hereof or declare therights of the parties hereunder, the prevailing party in any such action, ontrial or appeal, shall be entitled to recover from the other party thereasonable costs and attorneys' fees incurred in connection with such action.For purposes of this provision, in any action or proceeding instituted by Lessor based upon any default or alleged default by Lesseehereunder, Lessor shall be deemed the prevailingparty if (i) judgment is entered in favor of Lessor or (ii) prior to trial or judgment Lessee shall payall or any portion of the rent and charges claimed by Lessor,eliminate the condition(s), cease the act(s) or otherwise cure the omission(s)claimed by Lessor to constitute a default by Lesseehereunder. Any expenses incurred in collecting sums due, whether action isbrought or not, and any attorneys' fees incurred in collecting payment will becharged to Lessee.

17.13  Lessor's Access. Lessor and Lessor's agents shallhave the right to enter the Premises at reasonable times for the purpose ofinspecting the same, showing the same to prospective purchasers, lessees, orlenders, and making such alterations, repairs, improvements or additions to thePremises or to the Building as Lessor may deemnecessary or desirable. Lessor may at any time placeon 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 withoutrebate of rent or liability to Lessee.

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

17.15  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 terminateall or any existing subleases, unless Lessor electsto treat such surrender or cancellation as an assignment to Lessorof any or all of such subleases.

17,16  Entire A9reement.

17.16.1  This Lease, the Exhibits hereto which by thisreference are incorporated herein as though set forth in full herein, covers infull each and every agreement of every kind or nature whatsoever between theparties hereto concerning the Premises and the Building, and all preliminarynegotiations and agreements of whatsoever kind or nature are merged herein. Lessor has made no representations or promises whatsoeverwith respect to the Premises or the Building, or the design configuration ofthe Project, except those contained herein, and no other person, form orcorporation has at any time had any authority from Lessorto make any representations or promises on behalf of Lessor.If any such representations or promises have been made by others, Lessee herebywaives all right to rely thereon. No verbal agreement or implied covenant shallbe held to vary the provisions hereof, any statute, law or custom to thecontrary notwithstanding.

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

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17.17  Signs. No sign, placard, picture, advertisement, name ornotice shall be inscribed, displayed, printed or affixed to or near any part ofthe outside or inside of the Building without the written consent of Lessor first had and obtained and without full compliancewith all governmental requirements and with the Project Signage Plan. Lessor shall have the right to remove any such sign,placard, picture, advertisement, name or notice without notice to and at theexpense of Lessee. All approved signs shall be installed at Lessee's sole costand expense. Lessee further agrees to maintain any such approved signs, as maybe approved by Lessor, in good condition and repairat all times. Lessee shall not place any sign on a vehicle or movable ornon-movable object in or on street adjacent to the Project. Lessorfurther agrees that:

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

17.17.2  Lessee shall have exclusive signage rights on the facade of the Buildingfacing Hollister Avenue, except that Lessor mayinstall a smaller additional sign of a lesser nature on the lower portion ofthe facade of the building facing Hollister Avenue provided that (a) suchsmaller additional sign satisfies all applicable codes and ordinances and (b)does not jeopardize the right of Lessee to have its name prominently displayedon the facade of the building facing Hollister Avenue.

17.17.3  Thename "Mentor Corporation" shall be displayed alone in the upper-mostposition on all monument signs for the Building in lettering no smaller thanthat employed to identify any other tenants of the Building.

17.18  Interest on Past Due Obli2ations. Any amount due from Lessee to Lessorhereunder which is not paid when due shall bear interest at five (5) percentagepoints above the discount rate of the Federal Reserve Bank of San Francisco atthe time of the award or the maximum allowable under the law, whichever isgreater, from the date due until paid, but the payment of such interest shallnot excuse or cure any default by Lessee. Interest will accrue from and afterthe date on which a late charge payment first becomes payable or, if there isno late charge payment, from and after ten (10) working days from and after thedate on which the payment first becomes due.

17.19  Gender; Number. Wheneverthe context of this Lease requires, the masculine gender includes the feminineor neuter, and the singular number includes the plural.

17.20  Recording of Lease.Lessee shall not record this Lease without the express written consent of Lessor. If such permission is granted, at the expirationor sooner termination of this Lease, Lessee shall execute, acknowledge anddeliver to Lessor, within ten (10) days after writtendemand from Lessor, any quit-claim deed or otherdocument reasonably required by any reputable title company to remove the cloudof this Lease from the title of the real property subject to the Lease.

17.21  Waiver of Subrogation.Lessee and Lessor each hereby release and waive anyand all rights of recovery against the other, or against the officers,employees, and agents and representatives of the other, for loss of or anydamage to such waiving party or its property or the property of others underits control to the extent that such loss or damage is insured against under anyvalid and collectible insurance policy in force at the time of such loss ordamages. Lessee shall, upon obtaining the policies of insurance requiredhereunder, give notice to the insurance carrier or carriers that the foregoingmutual waiver of subrogation is contained in this Lease.

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

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17.23  Quiet Enjoyment.Provided Lessee has performed all of the terms, covenants, agreements andconditions of this Lease, including the payment of rent and all other sums duehereunder1 Lessee shall peaceably and quietly hold and enjoy thePremises for the term hereof, but subject to the provisions and conditions ofthis Lease against Lessor and all persons claimingby, through or under Lessor. Lessee's right to usethe Premises and the Common Area as herein provided shall be subject torestrictions or other limitations or prohibitions resulting from any laws,statutes, ordinances and governmental rules, regulations or requirements now inforce or which may hereafter be in force and no such event shall in any wayaffect this Lease, abate rent, relieve Lessee **of**any liabilities orobligations **under this Lease or give rise**to any claim whatsoeveragainst Lessor.

17.24  Window Coverage. Lessor shall select a standard miniblindtype 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 Lessor without Lessor's writtenapproval.

17.25  Materials Storage Restrictions. Lessee agrees to conduct its business so as not toviolate or exceed the design standards of the fire protection system or anyinsurance policies maintained by Lessor pursuant toArticle 7.

17.26  NoAgencv. Neither party is the agent orpartner of the other, and the legal relationship between the parties heretoshall be governed solely by the terms of this lease when duly executed by bothparties with respect to the transactions contemplated hereby.

17.27  ForceMajeure. Notwithstanding any of the items set forth above, Lessor shall bear no liability, of whatever kind, to Lesseeif, despite Lessor's exercise of due diligence, Lessor's carrying out of its obligations as defined hereinis prevented or delayed by legal action nor by the exercise of governmentalauthority, whether Federal, State, County, or other or by force majeure, strikes, riots, acts of God, war, adverse weatherconditions, fire, unavoidable casualties, or acts of third parties beyond Lessor's control.

17.28  Building Name. Lessor agrees that the Building within which the Premisesare located will not be "Hollister Corporate Center" or any othername containing the word "Hollister."

17.29  Assignment by Lessor. Lessor shall be entitledto assign this Lease (or an interest therein) to any person who acquires titleto (or an undivided interest in) the fee ownership of the Property providedthat such assignee assumes and agrees in writing to be bound by the obligationsof the Lessor named in this Lease from and after theeffective date of such assignment. Lessor and itsassignee shall give written notice of any such assignment, together with a copyof the assignment and assumption agreement, to Lessee promptly after theassignment has occurred.

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EXHIBITB

RULESAND REGULATIONS

THESE RULES AND REGULATIONS constitutean integral part of the Lease to which they are attached. Any conflict betweenthese rules and regulations and the provisions of such Lease shall be resolvedin favor of the provisions of the Lease.

1.  No sign, placard, picture, advertisement,name or notice shall be inscribed, displayed or printed or affixed on or to anypart of the outside of the Building without the written consent of Lessor first had and obtained and Lessorshall have the right to remove any such sign, placard, picture, advertisement,name or notice to and at the expense of Lessee.

1.1  Allapproved signs or lettering on doors shall be printed, painted, affixed orinscribed at the expense of Lessee by a person approved of by the Lessor.

1.2  Lessee shall not place anything or allow anything to be placed near the glassof any window, door, partition or wall which may appear unsightly from outsidethe Premises.

2.  Thedirectory or name identification of the Building, if any, will be providedexclusively for the display of thenames and location of Lessee andother Lessees in the Building,and Lessor reserves the right to exclude any othernames therefrom.

3.  Allsidewalks, halls, passages, exits, entrances of the Building, if any, shall notbe obstructed by any Lessee or used by him for any purpose other than foringress to and egress from his respective Premises. The halls, passages, exits,entrances elevators, stairways, balconies and roof are not for the use of thegeneral public and the Lessor shall in all casesretain the right to control and prevent access thereto by all persons whosepresence in the judgment of the Lessor shall beprejudicial to the safety, character, reputation and interests of the Buildingand its Lessees, provided that nothing herein contained shall be construed toprevent such access to persons with whom the Lessee normally deals in theordinary course of Lessee's business unless such persons are engaged in illegalactivities. No Lessee and no employee or invitee of any Lessee shall go uponthe roof of the Building without the prior consent of Lessor.For purposes of Lessee's obligations, if any, of repair and maintenance of theheating, ventilating and air conditioning systems of the Premises, Lessee shalluse a maintenance firm selected or designated by Lessorunless Lessee demonstrates by written evidence reasonably satisfactory to Lessor that the rates quoted by such firm for such work arenot competitive with rates quoted by one or more other firms which Lesseeproposes to use.

4.  Lessee mayinstall new or additional locks or any bolts on any door of the premises;however, Lessee shall provide Lessor with access tothe premises in the event of an emergency access requirement upon one hournotice.

5.  Lessee shallnot overload the floor of the Premises or mark, drive nails, screw or drillinto the partitions, woodwork or plaster or in any way deface the Premises orany part thereof.

6.  Lessee shallnot use, keep or permit to be used or kept any foul or noxious gas or substancein the Premises, or permit or suffer the Premises to be occupied or used in amanner offensive or objectionable to the Lessor orother occupants of the Building by reason of noise, odors and/or vibrations, orinterfere in any way with other Lessees or those having business therein, norshall any animals or birds be brought in or kept in or about the Premises ofthe Building.

7.  Any cookingshall be limited to the use of microwave ovens and coffee makers of the typecustomarily used in professional office buildings for the preparation of fooditems, tea, hot chocolate and similar items by Lessee for its employees and businessvisitors. Nor shall the Premises be used for washing clothes, for lodging, orfor any improper, objectionable or immoral purposes.

8.  Other thanstored in a proper manner allowed for by governmental ordinances and in amanner consistent with Article 5.4 of this Lease, Lessee shall not use or keepin the Premises or the Building any kerosene, gasoline or inflammable orcombustible fluid or material, or use any method of heating or air conditioningother than that supplied by Lessor, excepting the useof individual, UL-approved electric space heaters. Any permitted corrosive,flammable or other special wastes shall be handled for disposal as directed by Lessor.

9.  Each Lessee, upon the termination of histenancy, shall deliver to the Lessor the keys ofoffices, rooms and toilet rooms, if any, which shall have been furnished theLessee or which the Lessee shall have had made, and in the event of loss of anykeys so furnished, shall pay the Lessortherefor.

10.  No Lessee shall lay linoleum, tile, carpet orother similar floor covering so that the same shall be affixed to the floor ofthe Premises in any manner except as approved by the Lessor.The expense of repairing any damage resulting from a violation of this rule orremoval of any floor covering shall be borne by the Lessee by whom, or by whosecontractors, employees or invitees, the damage shall have been caused.

11.  Lesseeshall see that the doors of the Premises are closed and securely locked beforeleaving the Building and must observe strict care and caution that all waterfaucets or water apparatus are entirely shut off before Lessee or Lessee'semployees leave the Building, and that all electricity shall likewise bycarefully shut off, so as to prevent waste or damage, and for any default orcarelessness Lessee shall make good all injuries sustained by other tenants oroccupants of the Building or Lessor.

12.  Lessor reserves the right to exclude or expel from theBuilding any person who, in the judgment of Lessor,is intoxicated or under the influence of liquor or drugs, or who shall in anymanner do any act in violation of any of the Rules and Regulations of theBuilding.

13.  Requirementsof Lessee as to any matters within Lessor'sobligations pursuant to its Lease will be attended to only upon application atthe Lessee's address for notices. Employees of Lessorshall not perform any work or do anything outside of their regular dutiesunless under special instructions from the Lessor,and no employee will admit any person (Lessee or otherwise) to any officewithout specific instructions from the Lessor.

14.  Lessor shall have the right, exercisable without notice andwithout liability to Lessee, to change the name and Street address of theBuilding of which the Premises are a part.

15.  Lesseeshall not disturb, solicit or canvass any occupant of the Building and shallcooperate to prevent same.

16.  Without the written consent of Lessor, Lessee shall not use the name of the Building andshall cooperate to prevent same.

17.  Lessee'suse of the common areas shall be limited to access and parking purposes andunder no circumstances shall Lessee be permitted to store any goods orequipment, conduct any operations, or construct or place any improvements,barriers or obstructions in the common areas, or otherwise adversely affect theappearance thereof.

18.  Canvassing,soliciting and peddling in the Building are prohibited and Lessee shallcooperate to prevent the same.

19.  Lessee shall not install any radio ortelevision antenna, loudspeaker or other device on the roof or exterior wallsof its premises.

20.  Lessor reserves the right to make such other and furthernondiscriminatory Rules and Regulations as in its reasonable judgment may benecessary for the safety, care and cleanliness of the Premises and the Buildingand for the preservation of good order therein. Lessee agrees to abide by allsuch Rules and Regulations which are adopted.

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EXHIBITC

LIST 0FCOMPETITORS AND PRODUCT LINE DESCRIPTION

LIST OF COMPETITORS

1.  Pudenz SchulteMedical

2.  Helix Medical

3.  InHealthTechnologies

4. Circon Carp.

5. Unimed Corp.

6. Inamed Corp. and Subsidiaries, and othercorporations of which Donald Mcohan is a principal.

This list shall be deemed to includeany company which acquires a substantial portion of or merges with any of thecompanies identified above.

LISTOF PRODUCTS

1.  Plastic andreconstructive surgical implants.

2.  Dermal gelfillers.

3.  Urological implants, including penile implants.

4.  Endourologicalstents and drains.

5.  External andintermittent catheters for urinary incontinence.

6.  Siliconedispersion or material for use in above products.

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EXHIBIT_D

 

PREPARATION OP LEASED PREMISES

THISEXHIBIT constitutes an integral part of the lease between BERMANTDEVELOPMENT COMPANY, a sole proprietorship (the "Lessor"),and the Lessee identified below for space in the office building beingconstructed by Lessor at Hollister Avenue in Goleta,California, commonly known as the Santa BarbaraCorporate Center.

Name ofLessee:  Mentorcorporation

Lessee'sTradename: N/A/

1.  DESCRIPTION OF LESSOR'SWORK

1.1          General Provisions. Lessor agrees to construct and complete at its own cost andexpense the finished building shell in which the leased premises shall belocated in accordance with the plans and specifications thereforreferred to in Section 1.1.1, below, prepared by Lessor'sarchitect and approved by applicable regulatory agencies.

1.1.1    Lessor has previously furnished to Lessee and Lessee hasapproved (a) external elevations, (b) site drawings, (c) structural drawingsand (d) core designs for the building shell to be constructed by Lessor. Lessor shall not make anychanges to the plans and specifications for the building shell that materiallyaffect (1) the design and use of Lessee's space, (2) Lessee's occupancy costsand/or (3) the costs of Lessee's Tenant Improvements without the prior writtenconsent of Lessee.

1.1.2        Lessor shall consult with Lessee with respect to the finishof common areas and restrooms on the floor to be occupied by Lessee to assureconsistency and compatibility with Lessee's Tenant Improvements, and Lesseeshall be entitled to upgrade such areas at Lessee's expense provided that Lessor approves such changes, which change shall not beunreasonably withheld if the proposed upgrades are consistent with Lessor's building plan.

1.1.3  Thebuilding shell shall include all of the improvements described in this Section1 or otherwise called for by the plans and specifications approved by Lessee,but no other improvements unless expressly noted to the contrary in a writtenagreement signed by Lessor and Lessee.

1.1.4  Lessee shall have the right to inspect the project at any time during thedevelopment and construction process. Lessee shall provide proof of adequateinsurance coverage and indemnify Lessor against anyclaims resulting from such inspection activities.

1.2 Building Shell. The building shell shall be constructed inaccordance with the following criteria:

1.2.1  Foundation. 6" concrete slab on gradewith #3 reinforcing at 24" on center.

1.2.2  Frame. Shall be of steel and concreteconstruction designed in accordance with governing building codes.

1.2.3  Shear Walls.Shall be concrete

1.2.4  Exterior Walls. (non-shear) Shall be of lath and plaster over metal stud, andglass.

1.2.5  Floor Construction.Ground floor to be concrete slab on grade. Secondfloor to be a steel beam grid/wood truss joist system with 3/4" plywoodand 3/4" "Gypcrete 2000" fill, 24'column spacing.

1.2.6  Roof. Shall be a panelized wood roof system with glulam beams and

5/8"plywood, insulated, with 4-ply built-up roofing and an air conditioning screen.

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1.2.7  Fire Sprinkler System. Shall be provided for all common areas and withsprinkler heads installed above Lessee's future ceiling. Future droppingof heads below Lessee's finished ceiling shall be Lessee's responsibility.

1.2.8  Site Work. Shall be in substantial conformity with the presentCounty-approved permit set of drawings, with the exception that (a) parking lotscreen walls in front of the building will be replaced with landscape moundingand screening approved by the County, (b) loading and lunch areas in the rearof the building will be eliminated and redesigned, respectively, and (c) Lessor may elect not to construct the road shown on ExhibitA as adjoining the western portion of the property.

1.2.9  Landscaping. To be consistent withCounty-approved plans, but upgraded to the extent permitted by the County,including the use of 48" trees in lieu of 24" trees and the use ofsome 60" box trees if possible.

1.3  Interior

1.3.1  Core Area. Shall be provided with standard multi-tenant completely finishedlobbies, corridors, elevator, monumental main stairway, and men's and women'srestrooms on both floors.

1.3.2  Main lobby.Floors to be finished with marble, granite or pavertile border with upgraded carper field with pad. Wallcovering throughout. Ceiling to be drywall and/or 12"x12"concealed spline acoustic tile. Monumental mainstairway to be as wide as the core design permits, but not less than 6' wide,finished carpet over pad, with oak handrails and trim. Lightingto be incandescent down-lighting and/or special lens fluorescent fixtures.

1.3.3  Corridors. Floors to be carpet over pad withcarpet base, Wall covering throughout.Ceilings to befinished with 2'x2' acoustical tiles.Lighting to beprovided by special lens fluorescent fixtures.

1.3.4  Restrooms. Men's restrooms to be furnished with 3 water closetsand 2 urinals, 3 sinks/basins and 1 shower stall. Women's restrooms to befurnished with 5 water closets, 3 sinks/basins and 1 shower stall. All plumbingfixtures to be equipped with water conservation devices. All floors to beceramic tile, and walls to be wainscot height ceramic tile. Ceilingto be drywall, with lighting provided by special lens fluorescent fixtures.

1.3.5  Fire Exits. Stairs & Corridors. In addition to the monument stairway, Lessor shall furnish one fire corridor, stairway and exit.Additional fire exits, stairs and/or corridors necessitated by Lessee's TenantImprovements to be installed and paid for by Lessee.

1.4 Utilities

1.4.1  HVAC. Lessor to supply HVAC with vibration isolators, noise dampeners andseismic restraints, where appropriate, to all common areas. Lessee tosupply HVAC to leased premises by individual package units to be supplied byLessee and to be located throughout the roof behind an AC screen enclosure, atlocations and with cut-outs to be established by the mutual agreement of Lessor and Lessee prior to the construction of the roof ofthe building.

1.4.2  Water. Sever & Gas. Service as required for building shell, stubbed to Lessee's space,with common meters. Hookups and interior distribution shall be Lessee'sresponsibility.

1.4.3  Electric Service. Lessor to install sufficient electrical service to provide200 amp service to Lessee's space, and shall provide electrical service tocommon areas with separate meter. Individual meters, panels, and distributionto tenant space shall be Lessee's responsibility.

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2.  TENANT IMPROVEMENTS

2.1  Designs and Scecificationa. As soon as practicable after the execution of thisLease, and in no event more than four (4) months after the date on which Lessor acquires title to the Property comprising theproject site:

2.1.1  DesignConceyts. Lessee will cause its architect or its interiordesigner to prepare preliminary designs for Lessee's Tenant Improvements andwill submit such designs to Lessor for its approval,which shall not be unreasonably withheld. The preliminary design shall allowfor HVAC duct shaft penetration at locations necessary to **serve**futurefirst floor tenants.

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2.1.2  Improvement Plans. OnceLessee's preliminary design concepts have been approved by Lessor,Lessee shall cause its architect to prepare and submit to Lessor(a) plans and drawings conforming to and implementing the design conceptspreviously agreed to by the parties, (b) a schedule of finishes, (c) a scheduleof fixtures and equipment for the Improvements and (d) an estimated budget of thecosts of completing the proposed Tenant Improvements (the "ImprovementFlans").

**A. **The Improvement Plans shall provide for the completionand delivery of finished space, including the installation of carpets, levolors, wall coverings, telephone, lighting and utilityinstallations and the like.

B.  Lessorshall promptly review the proposed Improvement Plans and shall advise Lessee inwriting of any requested changes or additions to or deletions from the proposedImprovement Plans and the reason for the proposed change.

2.2  Ancrovals: Chanues. The failure **of**Lessor to givewritten notice of its objections to any designs, drawings or Improvement Planssubmitted by Lessee within fifteen (15) days after receipt thereof, settingforth (a) the matters objected to, (b) the basis therefor,and (c) any proposed alternatives, shall constitute approval in the form inwhich submitted.

2.2.1  After the Improvement Plans have been approved by both Lessor and Lessee, a copy of them shall be initialed anddated by both parties and shall be incorporated into this Exhibit by reference.

2.2.2  Neither party shall make any changes to the approvedImprovement Plans without the prior consent of other. Any changes,modifications or alterations proposed by Lessor orLessee after Lessor's approval of the ImprovementPlans shall be submitted to the other party for review and approval in themanner provided by this Section 2.2.

2.2.3  The Target Commencement Date may be extended to reflectthe effects of any changes that cause a delay in the construction of Lessee'sTenant Improvements, or any other delays caused by Lessee or Lessee's agents,on the ability of Lessee to occupy the Premises, but there shall be noabatement of Lessee's rent as a result of any such delay. Failure by Lessee toaccomplish, complete and approve plans and specifications for Lessee'simprovements in a timely fashion shall be a material breach of this Lease and,at Lessor's option, this Lease may be cancelled orthe monthly rent shall begin on the date indicated in Item 7 of the Basic LeaseProvisions. Under no circumstances shall Lessor becharged with any delay whatsoever as a result of nonstandard improvement work.

2.3  Building Standards for Tenant Improvements. Lessees Tenant Improvements shall conform to atleast the following minimum building standards established by

Lessor:

2.3.1          Doors. Solid core, 8'-O" high, plain sliced red oak, with buildingstandard stain finish.

2.3.2        7a~u. WesternIntegrated black anodized aluminum.

2.3.3        Hardware.Schlage "Olympiad", lever-style, polishedchrome finish.

                              2.3.4                       9g~pfl.Cut Pile:     Hollytex"Eastgate:, 32 oz.                                                                        LoopPile:     Hollytex"Ridgecrest", 26 oz.

2.3.5          lain.Burke 4" rubber base, commercial grade, color asselected.

2.3.6        Vinyl Tile. Armstrong "Standard Excelon",12"x12, 1/8" ga.

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2.3.7        Window Covering. Del-Mar "Novel", 1"mini-blinds.

2.3.8        Ceiling. Celotex "Baroque", 9'-O" finishheight, 2'x2' tegular lay-in panels, with white grid.

2.3.9        Li~htin~Fixtures. Prudential #2323, 2'x4', 3-lap fluorescent fixture,with K-12 prismatic lens.

2.3.10      Walls. Light textured finish, flat paint finish with stockcolors.

2.3.11      HVAC.Vibration isolators, sounddampeners and seismic restraints, as appropriate, on all mechanical equipmentto be situated on the roof of the building.

2.4                     Costs of Tenant Imorovements. Once the Improvement Plans have beenapproved by Lessor and Lessee, Lessorshall obtain a not-to-exceed bid from its general contractor for the costs ofinstalling and completing the Tenant Improvements. Such bid shall be subjectto review and approval by Lessee, which approval shall not be unreasonablywithheld. Lessor agrees that, if Lessee obtains anot-to-exceed bid from a reputable general contractor within ten (10) workingdays after Lessee's receipt of the bid by Lessor'scontractor that is more than five percent (5%) less than the bid of Lessor's contractor, then Lessorshall either (a) employ the alternate contractor proposed by Lessee for theinstallation of Lessee's Tenant Improvements or (b) agree to pay (in additionto the improvement allowance provided by Section 2.3.1, below) so much of thecosts and expense of such improvements as exceeds the bid of the contractorproposed by Lessee.

2.4.1        IinnrovementsAllowance. Lessor shall provide an allowance of

$25.00 per square foot, exclusive of the finished corearea, for a total allowance of $832,125, toward the cost of Lessee's TenantImprovements (the "Tenant Improvement Allowance'). Payment of the Tenant Improvement Allowance shall bemade by Lessor to its contractors and subcontractorsin accordance with Lessor's established paymentpractices under its construction contract with its general contractor. So muchof the Tenant Improvements as are funded with Lessor'sTenant Improvement Allowance shall at once become a part of the leased premisesand shall constitute property owned by the Lessor.

2.4.2          Tenant Imvrovement Cost. "TI Cost" means the sum ofall contract costs for completion of Lessee's Tenant Improvements, includingthe cost of design services payable to any architect, engineer and any otherconsultant reasonably necessary to complete such Improvements.

2.4.3          Additional TICosts. The cost of all Tenant Improvements in excess of the allowanceprovided for hereunder ("Additional TI Costs") shall be borne byLessee and, subject to the provisions of Section 2.4.4, below, shall bedeposited by Lessee with Lessor, or secured by anirrevocable and unconditional letter of credit in favor of Lessoror its lender, prior to the start of construction of the Tenant Improvements.The failure of Lessee to make such deposit shall be a material breach of thisLease and, at Lessor's option, this Lease may becancelled. Lessee shall be deemed the owner during the term of this Lease ofany improvements, the construction of which is funded by Lessee as providedherein, but the ownership of such Improvements shall revert to Lessor upon the expiration of this Lease. Should the costof the Tenant Improvements be less than the allowance provided for herein, anysavings shall inure to the benefit of Lessor.

2.5                     Construction ofImprovements. Subject to the provisions of Section 2.4, above, all ofLessee's improvement work shall be accomplished by parties acceptable both to Lessor and to Lessee, and then only upon such conditions asLessor may impose. Lessorshall perform all work depicted on the Improvement Plans for the TenantImprovements; all work not so depicted shall be performed by Lessee.

2.5.1          Changes Durinu Construction. Lessee shall pay the cost of anywork covered by change orders that Lessee requests after execution of theconstruction contract. All such changes shall require the prior approval of Lessor, which shall not be unreasonably withheld, and shallbe effected only by written change order setting forththe nature of the change and the estimated cost thereof and the amount of anyadditional time, if any, required therefor. Lesseeshall deposit the estimated costs of any such change with Lessorat the time such change is made and Lessor shall notbe required to proceed prior to the receipt of such deposit.

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3.                                                                                                                                                   LESSOR'S WARRANTIES

3.1         BuhldinQ & Tenant Improvements. Lessor warrants that (a) Lessor'swork hereunder shall be of good quality and shall performed in a good andworkmanlike manner, consistent with and comparable to standards of practice forsimilar professional office and light industrial buildings in Santa Barbara;(b) the Building and any Tenant Improvements installed by Lessorin the Premises (i) will be constructed in accordancewith the final plans and specifications therefor, and(ii) upon completion will comply with all applicable statutes, ordinances1rules, regulations, orders and requirements of Governmental authoritiesin effect as of the commencement of the lease term; and (c) the Building andany Tenant Improvements constructed for Lessee by Lessoror its contractor shall be free of defects in workmanship or materials for aperiod of one Cl) year from the Commencement Date ofthe lease.

3.2         SubcontractorWarranties. Lessor shall obtain such contractor'swarranties against defects in materials and workmanship with respect to thestructural components of the Building and the Tenant Improvements, includingthe roof and exterior walls, and all system components included therein, as arecustomarily available, but in no event for a period of less than one (1) yearfrom the date on which a notice of completion is recorded by Lessor or its general contractor.

4.              ANTICIPATEDCOMPLETION DATE

The estimated completion date for the Building and theTenant Improvements to be installed by Lessor forLessee is the 1st day of June, 1991.

5.              POSSESSIONOF PREMISES

5.1         Notice of Anticinated Completion. Lessorshall give Lessee at least ten (10) days' prior notice of the expected date forsubstantial completion of the building shell and the installation of Lessee'sTenant Improvements. After Lessor notifies Lessee ofthe anticipated date of substantial completion, Lessee shall have the right toenter the premises to commence equipping and fixturingthe premises provided that Lessee exercises reasonable care so as not to impairor interfere with any ongoing construction activities of Lessor'scontractor. Upon Lessee's entry as provided in this Section all the provisionsof the Lease shall be in full force and effect except those provisions relatingto the payment of rent, Operating Costs and other amounts becoming due on andafter the Commencement Date. Lessee shall indemnify and hold Lessor free and harmless from any liability, damage, costor expense resulting from injuries to person or property attributable to the fixturing activities of Lessee as provided herein.

5.2         Commencement Date.Tender of possession of the Premises by Lessor toLessee may not take place prior to the time the Building and the Premises havebeen completed, and the term of the Lease shall not commence until the date onwhich both of the following conditions have occurred: (a) the Lessor's architect has issued a certificate of substantialcompletion for the Building and of Lessee's Tenant Improvements; and (b) theCounty of Santa Barbara has approved and signed the final inspection card forthe Premises.

5.2.1  Lessee shall take possession of no less than fifty percent (50%) of thePremises no later than June 1, 1991, or the date on which the conditionsspecified in Section 5.2, above, have both occurred, whichever occurs later.Lessee shall take possession of the remaining percentage of the Premises nolater than ninety (90) days thereafter. The date on which Tenant is required bythis Section 5.2.1 to first take possession of a portion of the Premises shallconstitute the Commencement Date of this Lease.

5.2.2  Except as provided in Section 2.3.3, above,Lessee shall not be liable for the payment of rent or for Operating Expensesunder the Lease for any period prior to the Commencement Date, notwithstandingthat Lessee has previously entered the Premises pursuant to Section 5.1, above,in order to commence its furnishing and fixturingactivities.

6.  INSPECTION& ACCEPTANCE OP PREMISES

6.1 Deficiency List. Within fifteen (15) working days after Lessor has taken possession of any portion of the Premisesas provided in Section 5.2.1, above), Lessee shall deliver to Lessor a deficiency list of items that Lessee believes thatLessor should complete or correct in order for theBuilding Shell and any Tenant Improvements installed by Lessorto comply with the Improvement Plans and the provisions of thisLease. Lessor shall promptly proceed to complete or correct suchitems, except those that it contends are not justified or not part of Lessor's work. If Lessee does not deliver a deficiency listto Lessor within such fifteen (15) working dayperiod, Lessee shall be deemed to have accepted the Building Shell and suchTenant Improvements and approved the construction thereof by Lessor. Should Lessee and Lessorbe unable to agree with respect to any matter included in Lessee's deficiencylist, then upon the request of either party for arbitration such dispute shallbe determined by a neutral arbitrator (who shall be an architect) in accordancewith the commercial arbitration rules of the American Arbitration Association. Punchlist items of a minor nature shall not delay deliveryof possession of the Premises from Lessor to Lesseeor excuse the obligation of the Lessee to commence the payment of rent.

6.2  Defects in Construction. Lessee's taking possession of the Improvements shall not constitute awaiver of any warranty or of any defect in workmanship or materials. Lesseeshall have a period of one (1) year after the Commencement Date within which tonotify Lessor of any such defect or deficiency.

6.3  Lessor'sCorrective Work.Lessor shall promptly repair or restore at its owncost and expense defects or deficiencies in the Improvements (other than thosecaused by Lessee or its agents or employees) of which notice is given by Lesseewithin one (1) year after the Commencement Date and, in addition, shall repairor cause to be repaired any defects covered by contractor's or subcontractor'swarranties during the applicable warranty period.

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