EXHIBIT 10.9 LEASE

Warehouse Lease Agreement

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NOVACEPT INC | McCANDLESS LIMITED | ENVISION SURGICAL SYSTEMS

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Title: EXHIBIT 10.9 LEASE
Governing Law: California Date: 1/12/2004

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EXHIBIT 10.9

McCANDLESS LIMITED

AND

ENVISION SURGICAL SYSTEMS

LEASE

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McCANDLESS LIMITED

1. DATE OF LEASE:

2. LANDLORD: McCandless Limited

3945 Freedom Circle, Suite 640

Santa Clara, California 95054

3. TENANT: ENVISION SURGICAL SYSTEMS

4. PREMISES: 1047 Ewell Court

Palo Alto, California

5. SQUARE FEET : 8,650 square feet

6. PERMITTED USE : General office, research & development,

and warehouse

7. TERM: 3 years

(a) SCHEDULED COMMENCEMENT DATE: August 26, 1993

(b) SCHEDULED EXPIRATION DATE: August 25, 1996

8. RENT:

(a) BASIC RENT: $7,352.50 per month (Lease months 1-12)

(b) ADJUSTMENTS TO BASIC RENT: $7,750.00 per month (Lease months 13-24)

$8,217.50 per month (Lease months 25-36)

COMMON AREA CHARGES: $951.50 per month

9. SECURITY DEPOSIT: $8,304.00

10. PARKING SPACES PROVIDED : Thirty-four (34)

11. OTHER IMPORTANT PROVISIONS: Reduced Rent

Option to Extend Term

First Right to Lease

THIS SUMMARY OF LEASE IS INTENDED TO SUMMARIZE CERTAIN KEY PROVISIONS IN THE

ATTACHED LEASE. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE

PROVISIONS OF THIS SUMMARY AND THE LEASE, THE PROVISIONS OF THE LEASE SHALL

GOVERN.

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TABLE OF CONTENTS

ITEM PAGE

---- ----

1. USE

2. TERM

3. POSSESSION

4. MONTHLY RENT

5. ADJUSTMENT OF BASIC RENT

6. RESTRICTION ON USE

7. COMPLIANCE WITH LAWS

8. ALTERATIONS

9. REPAIR AND MAINTENANCE

10. LIENS

11. INSURANCE

12. UTILITIES AND SERVICE

13. TAXES AND OTHER CHARGES

14. ENTRY BY LANDLORD

15. COMMON AREA; PARKING

16. COMMON AREA CHARGES

17. DAMAGE BY FIRE; CASUALTY

18. INDEMNIFICATION

19. ASSIGNMENT AND SUBLETTING

20. DEFAULT

21. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT

22. EMINENT DOMAIN

23. NOTICE AND COVENANT TO SURRENDER

24. TENANT'S QUITCLAIM

25. HOLDING OVER

26. SUBORDINATION

27. CERTIFICATE OF ESTOPPEL

28. SALE BY LANDLORD

29. ATTORNMENT TO LENDER OR THIRD PARTY

30. DEFAULT BY LANDLORD

31. CONSTRUCTION CHANGES

32. MEASUREMENT OF PREMISES

33. ATTORNEY FEES

34. SURRENDER

35. WAIVER

36. EASEMENTS; AIRSPACE RIGHTS

37. RULES AND REGULATIONS

38. NOTICES

39. NAME

40. GOVERNING LAW; SEVERABILITY

41. DEFINITIONS

42. TIME

43. INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGE

44. ENTIRE AGREEMENT

45. CORPORATE AUTHORITY

46. RECORDING

47. REAL ESTATE BROKERS

48. EXHIBITS AND ATTACHMENTS

49. ENVIRONMENTAL MATTERS

50. SIGNAGE

51. SUBMISSION OF LEASE

52. PREMISES TAKEN "AS IS"

53. ADDITIONAL RENT

54. CAPITAL EXPENDITURES

55. REDUCED RENT

56. OPTION TO EXTEND TERM

57. FIRST RIGHT TO LEASE

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LEASE

THIS LEASE is made this ________ day of ________________________, 1993,

by and between McCANDLESS LIMITED, a California limited partnership

("Landlord"), and ENVISION SURGICAL SYSTEMS, a California corporation

("Tenant").

W I T N E S S E T H :

Landlord leases to Tenant and Tenant leases from Landlord those certain

premises outlined in red on Exhibit A (the "Premises") commonly known as 1047

Elwell Court, Palo Alto, California, which Landlord and Tenant hereby agree

consists of approximately eight thousand six hundred fifty (8,650) square feet.

As used herein the term "Project" shall mean and include all of the land

described in Exhibit B and all the buildings, improvements, fixtures and

equipment now or hereafter situated on said land.

Tenant covenants, as a material part of the consideration of this

lease, to perform and observe each and all of the terms, covenants and

conditions set forth below, and this lease is made upon the condition of such

performance and observance.

1. USE

Subject to the restrictions contained in paragraph 6 hereof,

Tenant shall use the Premises for general office, research & development, light

manufacturing and warehouse purposes and shall not use or permit the Premises to

be used for any other purpose.

2. TERM

The term shall be for three (3) years (unless sooner

terminated as hereinafter provided) and shall commence on August 26, 1993 and

end on August 25, 1996.

3. POSSESSION

(a) If Landlord for any reason cannot deliver possession of

the Premises to Tenant by the date of commencement set forth in paragraph 2,

this lease shall not be void or voidable, Landlord shall not be liable to Tenant

for any loss or damage on account thereof and Tenant shall not be liable for

rent until Landlord delivers possession of the Premises to Tenant. If

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the term commences on a date other than the date specified in paragraph 2 above,

then the parties shall immediately execute an amendment to this lease stating

the actual date of commencement and the revised expiration date. The expiration

date of the term shall be extended by the same number of days that Tenant's

possession of the Premises was delayed from that set forth in paragraph 2.

(b) Tenant's inability or failure to take possession of the

Premises when delivery is tendered by Landlord shall not delay the commencement

of the term of this lease or Tenant's obligation to pay rent. Tenant

acknowledges that Landlord shall incur significant expenses upon the execution

of this lease, even if Tenant never takes possession of the Premises, including

without limitation brokerage commissions and fees, legal fees and other

professional fees, Tenant acknowledges that all of said expenses shall be

included in measuring Landlord's damages should Tenant breach the terms of this

lease.

4. MONTHLY RENT

(a) Basic Rent. Tenant shall pay to Landlord as basic rent for

the Premises, in advance and subject to adjustment as provided in paragraph 5,

the sum of Seven Thousand Three Hundred Fifty Two and 50/100 Dollars ($7,352.50)

on or before the first day of the first full calendar month of the term and on

or before the first day of each and every successive calendar month. Basic rent

for any partial month shall be payable in advance and shall be prorated at the

rate of 1/30th of the monthly basic rent per day.

(b) Common Area Charges. In addition to the above basic rent

and as additional rent, Tenant shall pay to Landlord, subject to adjustments and

reconciliation as provided in paragraph 16 of this lease, the sum of Nine

Hundred Fifty-One and 50/100 Dollars ($951.50) on or before the first day of the

first full calendar month of the term and on the first day of each and every

successive calendar month, said sum representing Tenant's estimated payment of

its percentage share of common area charges as provided for in paragraph 16 of

this lease. Payment of common area charges for any partial month shall be

payable in advance and shall be prorated at the rate of 1/30th of the monthly

payment of common area charges per day.

and common area charges shall be paid to Landlord, without deduction or offset,

in lawful money of the United States of America, at the office of Landlord at

3945 Freedom Circle, Suite 640, Santa Clara, California 95054, or to such other

person or place as Landlord may from time to time designate in writing.

(d) Third Month's Rent. Concurrently with Tenant's execution

of this lease, Tenant shall deposit with Landlord the

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sum of Eight Thousand Three Hundred Four Dollars ($8,304.00), to be applied

against the basic rent and common area charges for the third lease month of the

term.

(e) Security Deposit. Concurrently with Tenant's execution of

this lease, Tenant shall deposit with Landlord the sum of Eight Thousand Three

Hundred Four ($8,304.00) Dollars $8,304.00), which sum shall be held by Landlord

as a security deposit for the faithful performance by Tenant of all of the

terms, covenants and conditions of this lease to be kept and performed by

Tenant. If Tenant defaults with respect to any provision of this lease,

including but not limited to, the provisions relating to the payment of basic

rent and common area charges, Landlord may (but shall not be required to) use,

apply, or retain all or any part of this security deposit for the payment of any

amount which Landlord may spend by reason of Tenant's default or to compensate

Landlord for any other loss or damage which Landlord may suffer by reason of

default. If any portion of said deposit is so used, Tenant shall, within ten

(10) after written demand therefor, deposit cash with Landlord in the amount

sufficient to restore the security deposit to its original amount; Tenant's

failure to do so shall be a material breach of this lease. Landlord shall not be

required to keep this security deposit separate from its general funds and

Tenant shall not be entitled to interest on such deposit. If Tenant is not in

default at the expiration or termination of this lease, the security deposit or

any balance thereof shall be returned to Tenant after Tenant has vacated the

Premises. In the event of termination of Landlord's interest in this lease,

Landlord shall transfer said deposit to Landlord's successor in interest, and

Tenant agrees that Landlord shall thereupon be released from liability for the

return of such deposit or any accounting therefor.

5. ADJUSTMENT OF BASIC RENT

The basic rent provided for in paragraph 4(a) shall be

adjusted periodically and the monthly basic rent for each period shall be as set

forth below:

Lease Months 1 - 12 $7,352.50 per month

Lease Months 13 - 24 $7,750.00 per month

Lease Months 25 - 36 $8,217.50 per month

6. RESTRICTION ON USE

Tenant shall not do or permit to be done in or about the

Premises or the Project, nor bring or keep or permit to be brought or kept in or

about the Premises or Project, anything

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which is prohibited by or will in any way increase the existing rate of, or

otherwise affect, fire or any other insurance covering the Project or any part

thereof, or any of its contents, or will cause a cancellation of any insurance

covering the Project or any part thereof, or any of its contents. Tenant shall

not do or permit to be done anything in or about the Premises or the Project

which will constitute waste or which will in any way obstruct or interfere with

the rights of other tenants or occupants of the Project or injure or annoy them,

or use or allow the Premises to be used for any unlawful purpose, nor shall

Tenant cause, maintain or permit any nuisance in or about the Premises or the

Project. No loudspeaker or other device, system or apparatus which can be heard

outside the Premises shall be used in or at the Premises without the prior

written consent of Landlord. Tenant shall not use the Premises in any manner

that will cause or emit any objectionable odor, noise or light into the

adjoining premises or Common Area. Tenant shall not do anything on the Premises

that will cause damage to the Project and Tenant shall not overload the floor

capacity of the Premises or the Project. No machinery, apparatus or other

appliance shall be used or operated in or on the Premises that will in any

manner injure, vibrate or shake the Premises. Landlord shall be the sole judge,

of whether such odor, noise, light or vibration is such as to violate the

provisions of this paragraph. No waste materials or refuse shall be dumped upon

or permitted to remain upon any part of the Premises or the Project except in

trash containers placed inside exterior enclosures designated for that purpose

by Landlord, or where otherwise designated by Landlord; and no toxic or

Hazardous Materials (as defined in paragraph 49) shall be disposed of through

the plumbing or sewage system. No materials, supplies, equipment, finished

products or semifinished products, raw materials or articles of any nature shall

be stored or permitted to remain outside of the building proper. No retail sales

shall be made on the Premises. Tenant shall comply with any covenant, condition

or restriction ("C.C. & R.'s") affecting the Premises.

7. COMPLIANCE WITH LAWS

Tenant shall, in connection with its use and occupation of the

Premises, at its sole cost and expense, promptly observe and comply with (i) all

laws, statutes, ordinances and governmental rules, regulations and requirements

of federal, state, county, municipal and other governmental authorities, now or

hereafter in effect, which shall impose any duty upon Landlord or Tenant with

respect to the use, occupancy or alteration to the Premises, (ii) with the

requirements of any board of fire underwriters or other similar body now or

hereafter constituted and (iii) with any direction or occupancy certificate

issued pursuant to law by any public authority; provided, however, that no such

failure shall be deemed a breach of these provisions if Tenant, immediately upon

notification, commences to remedy or rectify said failure. The judgment of any

court of competent

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jurisdiction or the admission of Tenant in any action against Tenant (whether or

not Landlord is a party thereto) that Tenant has violated any such law, statute,

ordinance or governmental rule, regulation, requirement, direction or provision,

shall be conclusive of that fact as between Landlord and Tenant. This lease

shall remain in full force and effect notwithstanding any loss of use or other

effect on Tenant's enjoyment of the Premises by reason of any governmental laws,

statutes, ordinances, rules, regulations and requirements now or hereafter in

effect.

8. ALTERATIONS

Tenant shall not make or suffer to be made any alteration,

addition or improvement to or of the Premises or any part thereof (collectively

referred to herein as "alterations") without (i) the prior written consent of

Landlord, (ii) a valid building permit issued by the appropriate governmental

authority and (iii) otherwise complying with all applicable laws, regulations

and requirements of governmental agencies having jurisdiction and with the

rules, regulations and requirements of any board of fire underwriters or similar

body. Notwithstanding the foregoing, Tenant may make non-structural alterations

costing in the aggregate less than Five Thousand Dollars ($5,000) in any one

year of the term without the prior written consent of Landlord, provided that

Tenant promptly informs Landlord in writing of the nature of the alterations,

the cost thereof and the contractor engaged or proposed to be engaged to perform

such work, and provided further that all such work complies with clauses (ii)

and (iii) above. Landlord's consent to any requested alteration shall not create

on the part of Landlord or cause Landlord to incur any responsibility or

liability for such alteration's compliance with all laws, rules and regulations

of federal, state, county, municipal and other governmental authorities. Any

alteration made by Tenant (excluding moveable furniture and trade fixtures not

attached to the Premises) shall at once become a part of the Premises and belong

to Landlord. Without limiting the foregoing, all heating, lighting, electrical

(including all wiring, conduit, outlets, drops, buss ducts, main and subpanels),

air conditioning, partitioning, drapery and carpet installations made by Tenant,

regardless of how attached to the Premises, together with all other alterations

that have become an integral part of the Project in which the Premises are a

part, shall be and become part of the Premises and belong to Landlord upon

installation and shall not be deemed trade fixtures, and shall remain upon and

be surrendered with the Premises at the termination of the lease.

Regardless of whether Landlord's consent is required in

connection with the making of any alteration by Tenant, the same shall be made

by Tenant at its sole risk, cost and expense and only after Landlord's written

approval of any contractor or person selected by Tenant for that purpose, and

the same shall be made at such time and in such manner as Landlord may from time

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time designate. Tenant shall, if required by Landlord, secure at Tenant's cost a

completion and lien indemnity bond for such work. Upon Tenant's request,

Landlord shall advise Tenant in writing whether it reserves the right to require

Tenant to remove any Alterations from the Premises upon termination of the

Lease. Upon the expiration or sooner termination of the term, Landlord may, at

its sole option, require Tenant, at Tenant's sole cost and expense, to promptly

both remove any such alteration made by Tenant and designated by Landlord to be

removed and repair any damage to the Premises caused by such removal and shall

restore the Premises to the surrender condition as provided in paragraph 23

herein. Any moveable furniture and equipment or trade fixtures remaining on the

Premises at the expiration or other termination of the term shall become the

property of the Landlord unless promptly removed by Tenant.

If during the term any alteration, addition or change of the

Premises is required by law, regulation, ordinance or order of any public

authority, Tenant, at its sole cost and expense, shall promptly make the same.

If during the term any alterations, additions or changes to the Common Area or

to the Project in which the Premises is located is required by law, regulation,

ordinance or order of any public or quasi-public authority, and it is

impractical in Landlord's judgment for the affected tenants to individually make

such alterations, additions or changes, Landlord shall make such alterations,

additions or changes and the cost thereof shall be a common area charge and

Tenant shall pay its percentage share of such cost to Landlord as provided in

paragraph 16.

All trade fixtures, personal property and Alterations

installed in the Premises at Tenant's expense ("Tenant's Property") shall be

deemed Tenant's property and Tenant shall be entitled to all depreciation,

amortization and other tax benefits with respect thereto.

9. REPAIR AND MAINTENANCE

By entry hereunder, Tenant accepts the Premises as being in

good and sanitary order, condition and repair. Except as expressly provided

below, Tenant shall at its sole cost keep and maintain the entire Premises and

every part thereof including, without limitation, the windows, window frames,

plate glass, glazing, elevators within the Premises, truck doors, doors and all

door hardware, the interior walls and partitions, lighting and the electrical,

mechanical, and plumbing systems. Tenant shall also repair and maintain the

heating and air conditioning systems (unless Landlord has elected to keep and

maintain the heating and air conditioning systems as provided below) which shall

include, without limitation, a periodic maintenance agreement with a reputable

and licensed heating and air conditioning service company. If Tenant's use of

the heating and air conditioning systems is limited to normal business hours

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(8:00 a.m. to 6:00 p.m.), such agreement shall provide for service at least as

often as every 60 days; if Tenant's use of the heating or air conditioning

systems extends beyond such normal business hours this service shall be as often

as may be required by Landlord and in any event such service shall meet all

warranty enforcement requirements of such equipment and comply with all

manufacturer recommended maintenance. Landlord may elect, at its option, to keep

and maintain the heating and air conditioning systems of the Premises and in

such event, Tenant shall pay to Landlord upon demand the full cost of such

maintenance.

As of the commencement date of this lease the Premises, including the

roof, shall be in good condition and repair with all building systems (e.g.,

electrical, mechanical, plumbing and HVAC) operating and to Landlord's actual

knowledge the Premises were constructed in compliance with applicable law when

built. Subject to the provisions of paragraph 17, Landlord shall keep and

maintain the roof, structural elements, and exterior walls of the buildings

constituting the Project and Common Area in good order and repair. Tenant waives

all rights under and benefits of California Civil Code Sections 1932(1), 1941,

and 1942 and under any similar law, statute or ordinance now or hereafter in

effect. The cost of the repairs and maintenance which are the obligation of

Landlord hereunder, including without limitation, maintenance contracts and

supplies, materials, equipment and tools used in such repairs and maintenance

shall be a common area charge and Tenant shall pay its percentage share of such

costs to Landlord as provided in paragraph 16; provided, however, that if any

repairs or maintenance is required because of an act or omission of Tenant, or

its agents, employees or invitees, Tenant shall pay to Landlord upon demand the

full cost of such repairs or maintenance.

10. LIENS

Tenant shall keep the Premises and the Project free from any

liens arising out of any work performed, materials furnished or obligations

incurred by Tenant, its agents, employees or contractors. Upon Tenant's receipt

of a preliminary twenty (20) day notice filed by a claimant pursuant to

California Civil Code Section 3097, Tenant shall immediately provide Landlord

with a copy of such notice. Should any lien be recorded against the Project,

Tenant shall give immediate notice of such lien to Landlord. In the event that

Tenant shall not, within ten (10) days following the imposition of such lien,

cause the same to be released of record, Landlord shall have, in addition to all

other remedies provided herein and by law, the right, but no obligation, to

cause the same to be released by such means as it shall deem proper, including

payment of the claim giving rise to such lien. All sums paid by Landlord for

such purpose, and all expenses (including attorneys' fees) incurred by it in

connection therewith, shall be payable to Landlord by Tenant on demand with

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interest at the rate of twelve percent (12%) per annum or the maximum rate

permitted by law, whichever is less. Landlord shall have the right at all times

to post and keep posted on the Premises any notices permitted or required by

law, or which Landlord shall deem proper for the protection of Landlord, the

Premises and the Project and any other party having an interest therein, from

mechanics' and materialmen's liens and like liens. Tenant shall give Landlord at

least fifteen (15) days prior notice of the date of commencement of any

construction on the Premises in order to permit the posting of such notices. In

the event Tenant is required to post an improvement bond with a public agency in

connection with any work performed by Tenant on or to the Premises, Tenant shall

include Landlord as an additional obligee.

11. INSURANCE

Tenant, at its sole cost and expense, shall keep in force

during the term (i) commercial general liability and property damage insurance

with a combined single limit of at least $2,000,000 per occurrence insuring

against personal or bodily injury to or death of persons occurring in, on or

about the Premises or Project and any and all liability of the insureds with

respect to the Premises or arising out of Tenant's maintenance, use or occupancy

of the Premises and all areas appurtenant thereto, (ii) direct physical

loss-special insurance covering the leasehold improvements in the Premises and

all of Tenant's equipment, trade fixtures, appliances, furniture, furnishings,

and personal property from time to time located in, on or about the Premises,

with coverage in the amount of the full replacement cost thereof, and (iii)

Worker's Compensation Insurance as required by law, together with employer's

liability coverage with a limit of not less than $1,000,000 for bodily injury

for each accident and for bodily injury by disease for each employee. Tenant's

commercial general liability and property damage insurance and Tenant's Workers

Compensation Insurance shall be endorsed to provide that said insurance shall

not be cancelled or reduced except upon at least thirty (30) days prior written

notice to Landlord. Further, Tenant's commercial general liability and property

damage insurance shall be primary and shall be endorsed to provide that Landlord

and McCandless Management Corporation, and their respective partners, officers,

directors and employees and such other persons or entities as directed from time

to time by Landlord shall be named as additional insureds for all liability

using ISO Bureau Form CG20111185 (or a successor form) or such other endorsement

form reasonably acceptable to Landlord; shall contain a severability of interest

clause and a cross-liability endorsement; shall be endorsed to provide that the

limits and aggregates apply per location using ISO Bureau Form CG25041185 (or a

successor form) or such other endorsement form reasonably acceptable to

Landlord; and shall be issued by an insurance company admitted to transact

business in the State of California and rated A+VIII or better in

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Best's Insurance Reports (or successor report). The deductibles for all

insurance required to be maintained by Tenant hereunder shall be satisfactory to

Landlord. The commercial general liability insurance carried by Tenant shall

specifically insure the performance by Tenant of the indemnification provisions

set forth in paragraph 18 of this lease provided, however, nothing contained in

this paragraph 11 shall be construed to limit the liability of Tenant under the

indemnification provisions set forth in said paragraph 18. If Landlord or any of

the additional insureds named on any of Tenant's insurance, have other insurance

which is applicable to the covered loss on a contributing, excess or contingent

basis, the amount of the Tenant's insurance company's liability under the policy

of insurance maintained by Tenant shall not be reduced by the existence of such

other insurance. Any insurance carried by Landlord or any of the additional

insureds named on Tenant's insurance policies shall be excess and

non-contributing with the insurance so provided by Tenant.

Tenant shall, prior to the commencement of the term and at

least thirty (30) days prior to any renewal date of any insurance policy

required to be maintained by Tenant pursuant to this paragraph, provide Landlord

with a completed Certificate of Insurance, using a form acceptable in Landlord's

reasonable judgement, attaching thereto copies of all endorsements required to

be provided by Tenant under this lease. Tenant agrees to increase the coverage

or otherwise comply with changes in connection with said commercial general

liability, property damage, direct physical loss and Worker's Compensation

Insurance as Landlord or Landlord's lender may from time to time require.

Landlord shall obtain and keep in force a policy or policies

of insurance covering loss or damage to the Premises and Project, in the amount

of the full replacement value thereof, providing protection against those perils

included within the classification of "all risk" insurance, with increased cost

of reconstruction and contingent liability (including demolition), plus a policy

of rental income insurance in the amount of one hundred percent (100%) of twelve

(12) months' rent (including sums paid as additional rent) and such other

insurance as Landlord or Landlord's lender may from time to time require.

Landlord may, but shall not be obligated to, obtain flood and/or earthquake

insurance. Landlord shall have no liability to Tenant if Landlord elects not to

obtain flood and/or earthquake insurance. The cost of all such insurance

purchased by Landlord, plus any charges for deferred payment of premiums and the

amount of any deductible incurred upon any covered loss within the Project,

shall be common area charges and Tenant shall pay to Landlord its percentage

share of such costs as provided in paragraph 16 (provided that the amount of the

deductible under earthquake insurance shall not exceed ten percent (10%) of

replacement cost and shall be treated as a capital expenditure and the cost to

Tenant shall be limited as provided therein). If

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the cost of insurance is increased due to Tenant's use of the Premises, then

Tenant shall pay to Landlord upon demand the full cost of such increase.

Landlord and Tenant hereby mutually waive any and all rights

of recovery against one another for real or personal property loss or damage

occurring to the Premises or the Project, or any part thereof, or to any

personal property therein, from perils insured against under fire and extended

insurance and any other property insurance policies existing for the benefit of

the respective parties so long as such insurance permits waiver of liability and

contains a waiver of subrogation without additional premiums.

If Tenant does not take out and maintain insurance as required

pursuant to this paragraph 11, Landlord may, but shall not be obligated to, take

out the necessary insurance and pay the premium therefor, and Tenant shall repay

to Landlord promptly on demand, as additional rent, the amount so paid. In

addition, Landlord may recover from Tenant and Tenant agrees to pay, as

additional rent, any and all reasonable expenses (including attorney fees) and

damages which Landlord may sustain by reason of the failure of Tenant to obtain

and maintain such insurance, it being expressly declared that the expenses and

damages of Landlord shall not be limited to the amount of the premiums thereon.

12. UTILITIES AND SERVICE

Tenant shall pay for all water, gas, light, heat, power,

electricity, telephone, trash pickup, sewer charges and all other services

supplied to or consumed on the Premises. In the event that any service is not

separately metered or billed to the Premises, the cost of such utility service

or other service shall be a common area charge and Tenant shall pay its

percentage share of such cost to Landlord as provided in paragraph 16. In

addition, the cost of all utilities and services furnished by Landlord to the

Common Area shall be a common area charge and Tenant shall pay its percentage

share of such cost to Landlord as provided in paragraph 16.

If Tenant's use of any such utility or service is materially

in excess of the average furnished to the other tenants of the Project, and such

utility or service is not separately metered, then Tenant shall pay to Landlord

upon demand, as additional rent, the full cost of such excess use, or Landlord

may cause such utility or service to be separately metered, in which case Tenant

shall pay the full cost of such utility or service and reimburse Landlord upon

demand for the cost of installing the separate meter.

Landlord shall not be liable for, and Tenant shall not be

entitled to any abatement or reduction of rent by reason of,

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the failure of any person or entity to furnish any of the foregoing services

when such failure is caused by accident, breakage, repairs, strikes, lockouts or

other labor disturbances or labor disputes of any character, governmental

moratoriums, regulations or other governmental actions, or by any other cause,

similar or dissimilar, beyond the reasonable control of Landlord. In addition,

Tenant shall not be relieved from the performance of any covenant or agreement

in this lease because of any such failure, and no eviction of Tenant shall

result from such failure.

13. TAXES AND OTHER CHARGES

All real estate taxes and assessments and other taxes, fees

and charges of every kind or nature, foreseen or unforeseen, which are levied,

assessed or imposed upon Landlord and/or against the Premises, building, Common

Area or Project, or any part thereof by any federal, state, county, regional,

municipal or other governmental or quasi-public authority, together with any

increases therein for any reason, shall be a common area charge and Tenant shall

pay its percentage share of such costs to Landlord as provided in paragraph 16.

By way of illustration and not limitation, "other taxes, fees and charges" as

used herein include any and all taxes payable by Landlord (other than state and

federal personal or corporate income taxes measured by the net income of

Landlord from all sources, and premium taxes), whether or not now customary or

within the contemplation of the parties hereto, (i) upon, allocable to, or

measured by the rent payable hereunder, including, without limitation, any gross

income or excise tax levied by the local, state or federal government with

respect to the receipt of such rent, (ii) upon or with respect to the

possession, leasing, operation, management, maintenance, alteration, repair, use

or occupancy by Tenant of the Premises or any part thereof, (iii) upon or

measured by the value of Tenant's personal property or leasehold improvements

located in the Premises, (iv) upon this transaction or any document to which

Tenant is a party creating or transferring an interest or estate in the

Premises, (v) upon or with respect to vehicles, parking or the number of persons

employed in or about the Project, and (vi) any tax, license, franchise fee or

other imposition upon Landlord which is otherwise measured by or based in whole

or in part upon the Project or any portion thereof. If Landlord contests any

such tax, fee or charge, the cost and expense incurred by Landlord thereby

(including, but not limited to, costs of attorneys and experts) shall also be

common area charges and Tenant shall pay its percentage share of such costs to

Landlord as provided in paragraph 16. In the event the Premises and any

improvements installed therein by Tenant or Landlord are valued by the assessor

disproportionately higher than those of other tenants in the building or Project

or in the event alterations or improvements are made to the Premises, Tenant's

percentage share of such taxes, assessments, fees and/or charges shall be

readjusted upward accordingly and Tenant agrees

<PAGE>

to pay such readjusted share. Such determination shall be made by Landlord from

the respective valuations assigned in the assessor's work sheet or such other

information as may be reasonably available and Landlord's determination thereof

shall be conclusive.

Tenant agrees to pay, before delinquency, any and all taxes

levied or assessed during the term hereof upon Tenant's equipment, furniture,

fixtures and other personal property located in the Premises, including

carpeting and other property installed by Tenant notwithstanding that such

carpeting or other property has become a part of the Premises. If any of

Tenant's personal property shall be assessed with the Project, Tenant shall pay

to Landlord, as additional rent, the amount attributable to Tenant's personal

property within ten (10) days after receipt of a written statement from Landlord

setting forth the amount of such taxes, assessments and public charges

attributable to Tenant's personal property.

14. ENTRY BY LANDLORD

Landlord reserves, and shall at all reasonable times have, the

right to enter the Premises (i) to inspect the Premises, (ii) to supply services

to be provided by Landlord hereunder, (iii) to show the Premises to prospective

purchasers, lenders or tenants and to put 'for sale' or 'for lease' signs

thereon, (iv) to post notices required or allowed by this lease or by law, (v)

to alter, improve or repair the Premises and any portion of the Project, and

(vi) to erect scaffolding and other necessary structures in or through the

Premises or the Project where reasonably required by the character of the work

to be performed. Landlord shall not be liable in any manner for any

inconvenience, disturbance, loss of business, nuisance or other damage arising

from Landlord's entry and acts pursuant to this paragraph and Tenant shall not

be entitled to an abatement or reduction of rent if Landlord exercises any

rights reserved in this paragraph. For each of the foregoing purposes, Landlord

shall at all times have and retain a key with which to unlock all of the doors

in, on and about the Premises (excluding Tenant's vaults, safes and similar

areas designated in writing by Tenant in advance), and Landlord shall have the

right to use any and all means which Landlord may deem proper to open said doors

in an emergency in order to obtain entry to the Premises. Any entry by Landlord

to the Premises pursuant to this paragraph shall not under any circumstances be

construed or deemed to be a forcible or unlawful entry into or a detainer of the

Premises or an eviction, actual or constructive, of Tenant from the Premises or

any portion thereof.

Notwithstanding the foregoing, and except in the case of

emergency, Landlord shall give Tenant at least twenty-four (24) hours prior

notice of its intent to enter the Premises, and such entry shall be subject to

the reasonable security

<PAGE>

requirements of Tenant. In the course of such entry, Landlord shall not

unreasonably interfere with Tenant's use of the Premiss unless reasonably

required in order for Landlord to fulfill its obligations under the Lease.

15. COMMON AREA; PARKING

Subject to the terms and conditions of this lease and such

rules and regulations as Landlord may from time to time prescribe, Tenant and

Tenant's employees and invitees shall, in common with other occupants of the

Project, and their respective employees and invitees and others entitled to the

use thereof, have the nonexclusive right to use the access roads, parking areas

and facilities within the Project provided and designated by Landlord for the

general use and convenience of the occupants of the Project which areas and

facilities shall include, but not be limited to, sidewalks, parking, refuse,

landscape and plaza areas, roofs and building exteriors, which areas and

facilities are referred to herein as "Common Area". This right shall terminate

upon the termination of this lease.

Landlord reserves the right from time to time to make changes

in the shape, size, location, amount and extent of the Common Area. Landlord

shall also have the right at any time to change the name, number or designation

by which the Project is commonly known. Landlord further reserves the right to

promulgate such rules and regulations relating to the use of the Common Area,

and any part thereof, as Landlord may deem appropriate for the best interests of

the occupants of the Project. The rules and regulations shall be binding upon

Tenant upon delivery of a copy of them to Tenant and Tenant shall abide by them

and cooperate in their observance. Such rules and regulations may be amended by

Landlord from time to time, with or without advance notice.

Tenant shall have the nonexclusive use of thirty-four (34)

parking spaces in the Common Area as designated from time to time by Landlord.

Landlord reserves the right at its sole option to assign and label parking

spaces, but it is specifically agreed that Landlord is not responsible for

policing any such parking spaces. Tenant shall not at any time park or permit

the parking of Tenant's trucks or other vehicles, or the trucks or other

vehicles of others, adjacent to loading areas so as to interfere in any way with

the use of such areas; nor shall Tenant at any time park or permit the parking

of Tenant's vehicles or trucks, or the vehicles or trucks of Tenant's suppliers

or others, in any portion of the Common Area not designated by Landlord for such

use by Tenant. Tenant shall not park or permit any inoperative vehicle or

equipment to be parked on any portion of the Common Area.

Landlord shall operate, manage and maintain the Common Area.

The manner in which the Common Area shall be operated,

<PAGE>

managed and maintained and the expenditures for such operation, management and

maintenance shall be at the sole discretion of Landlord. The cost of such

maintenance, operation and management of the Common Area, including but not

limited to landscaping, repair of paving, parking lots and sidewalks, security

and exterminator services and salaries and employee benefits (including union

benefits) of on-site and accounting personnel engaged in such maintenance and

operations management, shall be a common area charge and Tenant shall pay to

Landlord its percentage share of such costs as provided in paragraph 16.

16. COMMON AREA CHARGES

Tenant shall pay to Landlord, as additional rent, an amount

equal to fifty-five and 52/100 percent (55.52%) of the total common area charges

as defined below. Tenant's percentage share of common area charges shall be paid

as follows:

Tenant's estimated monthly payment of common area charges

payable by Tenant during the calendar year in which the term commences is set

forth in paragraph 4(b) of this lease. Prior to the commencement of each

succeeding calendar year of the term (or as soon as practicable thereafter),

Landlord shall deliver to Tenant a written estimate of Tenant's monthly payment

of common area charges. Tenant shall pay, as additional rent, on the first day

of each month during the term in accordance with paragraph 4(b) of the lease,

its monthly share of common area charges as estimated by Landlord. Within one

hundred twenty (120) days of the end of each calendar year and of the

termination of this lease (or as soon as practicable thereafter), Landlord shall

deliver to Tenant a statement of actual common area charges incurred for the

preceding year. If such statement shows that Tenant has paid less than its

actual percentage then Tenant shall on demand pay to Landlord the amount of such

deficiency. If Tenant fails to pay such deficiency due within ten (10) days

after demand, Tenant shall pay an additional ten percent (10%) of the amount due

as a penalty. If such statement shows that Tenant has paid more than its actual

percentage share then Landlord shall, at its option, promptly refund such excess

to Tenant or credit the amount thereof to the rent next becoming due from

Tenant. Landlord reserves the right to revise any estimate of common area

charges if actual or projected common area charges show an increase or decrease

in excess of 10% from any earlier estimate for the same period. In such event,

Landlord shall deliver the revised estimate to Tenant, together with an

explanation of the reasons therefor, and Tenant shall revise its payments

accordingly. Landlord's and Tenant's obligation with respect to adjustments at

the end of the term or earlier expiration of this lease shall survive such

termination or expiration.

As used in this lease, "common area charges" shall include,

but not be limited to, (i) all items identified in

<PAGE>

paragraphs 8, 9, 11, 12, 13 and 15 as being common area charges; (ii)

amortization of such capital improvements having a useful life greater than one

year as Landlord may have installed for the purpose of reducing operating costs

and/or to comply with all laws, rules and regulations of federal, state, county,

municipal and other governmental authorities now or hereinafter in effect

(Tenant's share of any such capital improvement shall equal Tenant's

proportionate share of the fraction of the cost of such capital improvement

equal to the remaining term of the lease over the useful life of such capital

improvement); (iii) salaries and employee benefits (including union benefits) of

personnel engaged in the operation and maintenance of the Project (or the

building in which the Premises are located) and payroll taxes applicable

thereto; (iv) supplies, materials, equipment and tools used or required in

connection with the operation and maintenance of the Project; (v) licenses,

permits and inspection fees; (vi) a reasonable reserve for repairs and

replacement of equipment used in the maintenance and operation of the Project;

(vii) all other operating costs incurred by Landlord in maintaining and

operating the Project; and (viii) an amount equal to five percent (5%) of the

actual expenditures for the aggregate of all other common area charges as

compensation for Landlord's accounting and processing services.

Notwithstanding anything to the contrary in this paragraph 16,

common area charges shall not include the following: (i) any costs occasioned by

a breach of the obligations of Landlord, or the negligence of Landlord, its

agents, employees or contractors, (ii) costs related to any construction defects

existing as of the commencement date of this lease, (iii) any costs related to

remediation of Hazardous Materials in, on or about the Premises or the Project

(this shall not limit Tenant's obligations set forth in paragraph 49 of this

lease), and (iv) any costs for which Landlord has a right of reimbursement from

third parties.

17. DAMAGE BY FIRE; CASUALTY

In the event the Premises are damaged by any casualty which is

covered under an insurance policy required to be maintained by Landlord pursuant

to paragraph 11, Landlord shall be entitled to the use of all insurance proceeds

and shall repair such damage as soon as reasonably possible and this lease shall

continue in full force and effect.

In the event the Premises are damaged by any casualty not

covered under an insurance policy required to be maintained pursuant to

paragraph 11, Landlord may, at Landlord's option, either (i) repair such damage,

at Landlord's expense, as soon as reasonably possible, in which event this lease

shall continue in full force and effect, or (ii) give written notice to Tenant

within thirty (30) days after the date of the occurrence of such damages of

Landlord's intention to cancel and terminate this

<PAGE>

lease as of the date of the occurrence of the damages; provided, however, that

if such damage is caused by an act or omission of Tenant or its agent, servants

or employees, then Tenant shall repair such damage promptly at its sole cost and

expense. In the event Landlord elects to terminate this lease pursuant hereto,

Tenant shall have the right within ten (10) days after receipt of the required

notice to notify Landlord in writing of Tenant's intention to repair such damage

at Tenant's expense, without reimbursement from Landlord, in which event this

lease shall continue in full force and effect and Tenant shall proceed to make

such repairs as soon as reasonably possible. If Tenant does not give such notice

within the ten (10) day period, this lease shall be cancelled and terminated as

of the date of the occurrence of such damage. Under no circumstances shall

Landlord be required to repair any injury or damage to (by fire or other cause),

or to make any restoration or replacement of, any of Tenant's personal property,

trade fixtures or property leased from third parties, whether or not the same is

attached to the Premises.

If the Premises are totally destroyed during the term from any

cause (including any destruction required by any authorized public authority),

whether or not covered by the insurance required under paragraph 11, this lease

shall automatically terminate as of the date of such total destruction;

provided, however, that if the Premises can reasonably and lawfully be repaired

or restored within twelve (12) months of the date of destruction to

substantially the condition existing prior to such destruction and if the

proceeds of the insurance payable to the Landlord by reason of such destruction

are sufficient to pay the cost of such repair or restoration, then the insurance

proceeds shall be so applied, Landlord shall promptly repair and restore the

Premises and this lease shall continue, without interruption, in full force and

effect. If the Premises are totally destroyed during the last twelve (12) months

of the term, Landlord may at Landlord's option cancel and terminate this lease

as of the date of occurrence of such damage by giving written notice to Tenant

of Landlord's election to do so within thirty (30) days after the occurrence of

such damage.

If the Premises are partially or totally destroyed or damaged

and Landlord or Tenant repair them pursuant to this lease, the rent payable

hereunder for the period during which such damage and repair continues shall be

abated only in proportion to the square footage of the Premises rendered

untenantable to Tenant by such damage or destruction. Tenant shall have no claim

against Landlord for any damage, loss or expense suffered by reason of any such

damage, destruction, repair or restoration. The parties waive the provisions of

California Civil Code sections 1932(2) and 1933(4) (which provisions permit the

termination of a lease upon destruction of the leased premises), and hereby

agree that the provisions

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