EXHIBIT 10.12  LEASE AGREEMENT  THIS AGREEMENT is entered into on May 13th,1999, BETWEEN:  ZONA FRANCA
METROPOLITANA, S.A., a corporation organized and existing according to
the laws of the Republic of Costa Rica, domiciled in Barreal de Heredia, bearer
of the corporate identification number three - one, zero, one - zero, eight,
zero, six, five, three - zero, four, registered in the Public Registry,
Mercantile Section, volume four hundred fifty nine, page two hundred twenty
one, entry one hundred ninety eight, herein represented by its universal proxy JORGE MANUEL BRENES RAMIREZ, identification
number four-zero nine two-five five two, with power of attorney registered in
the Mercantile Section of the Public Registry at volume one thousand and
twelve, page one hundred and sixty nine, entry two hundred and sixty,
(hereinafter referred to, for the purposes of this Agreement, as the OWNER).  OF
THE FIRST PART  and McGhan
Medical, Corporation, a corporation organized and existing according
to the laws of United States of America, domiciled at Santa Barbara,
California, herein represented by its President/CEO, with full power of
attorney,C. SCOTT  ESCHBACH, of legal age, married, resident
of Nevada, bearer of the United States passport number one hundred and fifty million
two hundred and thirty thousand six hundred and seventy one, (hereinafter
referred to, for the purposes of this agreement, as the LESSEE).  CONFIDENTIAL [SEAL OF McGHAN MEDICAL CORPORATION PROPRIETARY INFORMATION]   
  ZURCHER, MONTOYA AND ZURCHER Attorneys  OF
THE SECOND PART  WHEREAS  First:OWNER was
awarded the development and construction of a Free Zone in Barreal de Heredia,
known as ZONA FRANCA METROPOLITANA, in accordance with Law No. 6695 of December
10, 1981 (Law of Processing Export Zones and Industrial Parks) as amended by
Law No. 6951 of February 14, 1984, Law No. 6999 of August 3, 1985 and its
regulations, Executive Decree No. 16168 H- amended by Law No. 6951 of February
14, 1984, Law No. 6999 of August 3, 1985 and its regulations, Executive Decree
No. 16168 HMEIC of April 5, 1985 and Executive Decree No. 18496 H-MEIC of
September 27, 1988. All the above is also in conformance with the Law No. 7210
(Law of Free Trade Zone Regimes) of November 22, 1990.  Second:OWNER has built
industrial units and office units in ZONA FRANCA METROPOLITANA, to be leased or
sold to companies establishing operation in such Free Zone.  Third:LESSEE
is a business entity dedicated to medical devices manufacturing.  Fourth:OWNER wishes to
lease an office area to LESSEE, and LESSEE wishes to lease such office area
from OWNER.  NOW, THEREFORE, THIS
AGREEMENT WITNESSES that in consideration of the premises and the covenants and
agreements contained herein, which each of the parties hereto acknowledges is
sufficient consideration, the parties hereto do  2 
   hereby agree to enter into a lease contract,
which shall be regulated by law number 7527 of August 17, 1995, and subject to
the following clauses:  DEFINITIONS - For the purpose of this
Agreement, the following definitions apply:  a)
  Lease:
  
  The
  present lease agreement.b)
  Leased Premises
  
  The premises described in
  Clause 2 of this Lease.c)
  Security Deposit:
  
  The deposit referred to in
  Clause 4.d)
  OWNER:
  
  Zona Franca Metropolitana,
  S.A.e)
  LESSEE:
  
  McGhan Medical,
  Corporationf)
  Dollars:
  
  Currency of legal tender
  of the United States of America.  CLAUSE 1.-Objective.  OWNER agrees to lease to LESSEE, and LESSEE
agrees to lease from OWNER, an office area in Barreal de Heredia, within Metro
Free Zone.  CLAUSE 2.-Description of the Leased
Premises.  The Leased Premises are described as follows:  a)The leased
premises are located within Metro Free Zone, in lot 1E.  b)The Leased
Premises will include an office and service area of four thousand two hundred
and nineteen square feet (4,219.00 Sq. Ft.), and a warehouse area of sixteen
thousand and thirty eight square feet (16,038.00 Sq. Ft.) for a total area of
twenty thousand two hundred and fifty seven square feet (20,257.00 Sq. Ft.).
The exact dimensions are shown in the copy of the blueprints delivered on this
date to LESSEE by OWNER, which both parties expressly declare to know and  3 
   accept.  c)The Leased
Premises include: In the office and services area: Mineral fiber dropped
ceiling, light fixtures, terrace tile floor, internal partitions, two (2)
bathrooms with fixtures and a central air conditioning system. In the warehouse
area: Loading dock with two (2) curtain type steel gates, reinforced industrial
floor, light fixtures, two bathroom areas with complete fixtures and internal
partitions for offices, parking area and a set of three (3) electricity
transformers.  d)Maintenance and
repair of the central air conditioning system and of the three (3) electricity
transformers corresponds to LESSEE.  e)All fire
protection equipment and systems required for LESSEEs production process,
according to the Costa Rican Construction Code, are the responsibility of
LESSEE.  f)OWNER will make
available the Leased Premises to LESSEE, for occupation by LESSEE, by June 1st., 1999.  CLAUSE 3. -Use of the Facilities. -  a)Uses. -  LESSEE is permitted to perform in the Leased
Premises Type 1 industrial processes, as defined in the Regulations of the
National Institute of Housing and Urbanization, and storage of raw material and
finished products. Lease is not permitted to dedicate the Leased Premises to
industrial processes that generate contamination incompatible with existing
sewer systems or that require special safety measures.  b)Sewers. -  The Leased Premises are connected to a sewer
system in use, which LESSEE declares to know. LESSEE shall not use the system
to dispose of any non-conforming materials or any other inconsistent use that
does not conform  4 
   with the systems
specification or limitations.  c)Insurance.
-  LESSEE is solely responsible for
obtaining and paying any insurance policy required for its manufacturing
operations and equipment. OWNER shall provide insurance coverage for the Leased
Premises only.  d)Internal
Regulation. -  LESSEE declares to know
and accept the terms and conditions contained in the Zona Franca Metropolitana
Internal Regulations, which shall be considered an integral part of this Lease;
therefore, LESSEE is required to comply with all dispositions contained
therein. If LESSEE does not comply with any of the said dispositions, such
actions will amount to a breach of this Lease.  e)Modification.
-  The specific use of the Leased
Premises shall not be modified without prior written consent from OWNER. In
such case, OWNER shall not unreasonably delay or withhold this consent. The use
and exploitation of the Leased Premises by LESSEE and compliance with its
provisions and regulations shall be the sole responsibility of LESSEE.  CLAUSE 4. -Lease Rates. -  a)The rental rate
for the Leased Premises is the sum of EIGHT THOUSAND Dollars (US$ 8,000.00) per
month starting June 1st.., 1999.  b)The rental rate
is subject to an annual increase equivalent to six percent (6.00 %) starting
June 1st., year 2001.  c)LESSEE agrees
to pay in dollars.  CLAUSE 5. -Form of Payment. -  a)The agreed
monthly rent shall be paid in advance during the first five (5) days of each
month. Therefore, any delay in such payment shall give OWNER the  5 
   right
to enact eviction proceedings and demand the return of the Leased Premises. In
addition, any delay in rent payment shall cause the collection of interests on
the unpaid rent at a rate of three percent (3%) per month; such interests to be
calculated from the date the monthly rent was due, until its effective payment;
all without prejudice of any other legal action provided by law.  b)All payments
must be made at the offices of the OWNER, or by means of a deposit in the bank
account of the OWNER, as indicated to LESSEE in due time.  CLAUSE 6. -Security Deposit.  a)The Security Deposit is equivalent to six (6)
months of rent, which is today equivalent to the sum of FORTY EIGHT THOUSAND
Dollars to be paid by LESSEE to OWNER upon the signature of this lease
agreement.  In the event this Lease is
renewed, the Security Deposit shall be immediately renewed, and adjusted so
that it is equivalent to six (6) months of rent at that date.  b)The Security Deposit shall be used as
indemnity by OWNER, in the following cases:  1)In case any
material damage is caused by LESSEE to the Leased premises.  2)To pay for any monthly
rent not paid by LESSEE.  OWNER reserves
the right of imputing the Security Deposit, but is not obligated to apply such
deposit to unpaid rents; therefore, the existence of the deposit will never
preclude the OWNER from undertaking eviction proceedings against the LESSEE due
to non-payment of rent owed.  3)To cover any
amount owed by LESSEE to OWNER derived from this contract.  6 
   c)In case OWNER uses the Security Deposit, or
any part thereof, to cover any of the cases above established, LESSEE has the
obligation to replenish said deposit within eight (8) natural days following
written notice given by OWNER, so that this Lease be will secured at all times
by the full amount of the Security Deposit agreed upon herein.  d)In the event that LESSEE does not replenish
the deposit within the term above established, OWNER is hereby expressly
authorized by LESSEE to take from the payment rendered by LESSEE for the next
months rent, the amount necessary to fully replenish the Security
Deposit.  If that is the case, LESSEE
shall remain liable for the full amount of that months rent that was applied
to replenishing the deposit.  OWNER has
the right to enact eviction proceedings against LESSEE and to demand the return
of the Leased Premises due to non payment of the monthly rent due.  e)If OWNER does
not use the deposit, or part thereof, to cover any of the cases above
established or others established in this agreement, OWNER has the obligation
to return the remaining balance to LESSEE within eight (8) natural days from
the expiration of the lease term established in Clause 7 herein, once proof of
payment of last months utilities has been given to OWNER.  CLAUSE 7. -Lease Term.-  The term of this Lease is five (5) years as
of June 1st., 1999.  The term
of the agreement shall be renewed for an additional (5) year term unless LESSEE
or OWNER notices in written to the other party its desire not to renew the term
of the Lease Agreement, at least ninety (90) days prior to the termination of
the original term.  The renewal of the
term will only proceed if LESSEE is in full compliance with  7 
   its obligations under this Lease and under
the Services Agreement signed among OWNER and LESSEE today.  The terms and conditions of the Lease
Agreement when renewed will be the same established for the Lease Agreement
during the original term except for the Lease Rate.  CLAUSE 8. -Modification and
Improvements.-  All modifications and/or improvements to be
executed to the Leased Premises must have prior written consent from the OWNER,
who shall not unreasonably delay or withhold such consent.  OWNER'S omission to answer in written, to
LESSEES written request to execute modifications and/or improvements, within a
term of forty eight (48) hours after receiving such written request, shall be
interpreted as an authorization to LESSEE to perform the requested
modifications and/or improvements to the Leased Premises.  OWNER is not obligated to pay any amount
therefrom either to LESSEE or to third parties.  At the termination of the Lease, LESSEE shall be allowed to
remove all modifications or improvements, as long as the building is returned
thereafter in the same condition as delivered to LESSEE; reasonable wear and
tear is accepted.  OWNER is fully
entitled to appoint supervisors to inspect the execution of such  improvements.  In any event, LESSEE is responsible for obtaining the necessary
permits to execute any authorized modifications or improvements (OWNER will
cooperate if so requested by LESSEE). 
For the purpose of this clause, major modifications and improvements are
those which require structural changes.  CLAUSE 9. -Maintenance and Repairs.-  a)LESSEE is
required to cover the repair of damages caused by abnormal use of the Leased
Premises and the repair of those damages incurred by the gross  8 
   negligence or intentional
misconduct of its officers, workers, or visitors, whether authorized or not.  b)OWNER shall be
liable for other damages caused to the Leased Premises.  CLAUSE 10. -Inspections .-  OWNER shall have the right to inspect once a
month, through its representatives, the Leased Premises upon reasonable notice
to LESSEE, during LESSEES working days and working hours.  In emergency cases, OWNER shall have the
right to inspect the Leased Premises at any time it considers necessary.  CLAUSE 11.
-Advanced Termination by
Mutual Agreement.-  Both parties may agree on terminating the
Lease at any time prior to the expiration of the lease term.  For this purpose, an addendum to the Lease
will be signed by both parties, containing the conditions of such advanced
termination.  CLAUSE 12.
-Advanced Termination by
LESSEE.-  a)Both parties
agree that in case LESSEE decides to advance terminate this Lease or if the
Lease is terminated due to reasons imputable to LESSEE or if LESSEE terminates
operations in the Leased Premises for any reason, in all of these cases, LESSEE
shall forfeit the Security Deposit.  b)If at the time
LESSEE leaves the Leased Premises, such premises show damages attributable to
LESSEE that may prevent its regular use, then LESSEE will be obligated to both,
cover the additional cost of the repairs necessary to return the Leased
Premises to their original condition and pay the monthly rent that corresponds
to the period of time required to carry out such repairs.  This period of time will be agreed upon by
both parties before commencing the repairs.  9 
   CLAUSE 13.
-Limitations of Rights.-  a)LESSEE shall
not be allowed to sell, sublease, assign, or by any means transfer its right to
the Lease without the prior written consent from OWNER, who shall not unreasonably
delay or withhold the consent. 
Therefore, any act directed to such purpose shall be considered void and
non enforceable against OWNER.  This
Lease shall not give any goodwill right to LESSEE based on the development of
the Leased Premises, since such right is expressly reserved for OWNER.  b)LESSEE shall
not be able to consider, as part of the goodwill of its establishment, any of
the rights derived from this Lease. 
Consequently, at the termination of this Lease, either by advanced
termination or by expiration of its term, LESSEE shall not have any action
against OWNER arising from such rights, or for the exploitation of commercial,
mercantile, or industrial rights.  CLAUSE 14. -Fiscal Value.-  For fiscal purpose, this Lease is valued at
an amount equal to the Security Deposit established in Clause 6 herein.  The applicable legal stamps are paid by the
OWNER and attached to his copy of the Lease.  CLAUSE 15.
-Totality of the Contract.-  This contract contains the totality of the
agreements between the parties, and includes all the discussions and previous
agreements between them.  Any
modification or extension of this Lease must be registered in writing and with
the approval of both parties.  10 
   CLAUSE 16.
-Notifications.-  Any notification or delivery of documents
required or authorized to be sent from one party to the other, must be
delivered in writing to the main offices of each party as follows:  To OWNER:
  
  At its offices in Barreal
  de Heredia.Copy to:
  
  Zurcher, Montoya &
  Zurcher Law Offices.  Attention: HarryZurcher Esq. San Jose,
  Costa Rica, Calle 1, Avenida 11,Numero 959To LESSEE:
  
  At its Offices within Zona
  Franca Metropolitana  CLAUSE 17.
-Rescission.-  The breach or non compliance by any of the
parties of one or several of the obligations contained in this Lease shall give
the other party the right to rescind or terminate it without liability.  CLAUSE 18.
-Recordation.-  Both parties are entitled to record this
agreement before a Public Notary and/or authenticate its date and signatures,
without notifying nor requiring the appearance of the other party.  The party requesting such recordation or
authentication shall cover the corresponding expenses and fees.  IN WITNESS WHEREOF, both parties sign this
document.  By:
  
  By: /s/ C. Scott EschbachTitle:
  
  Title: President & CEOZONA FRANCA METROPOLITANA,
  S.A.
  
  MCGHAN MEDICAL CORP.(OWNER) /s/ [ILLEGIBLE]
  
  (LESSEE)  11