<PAGE>   1
                                                                  Exhibit: 10.5D
                                  OFFICE LEASE

                                       for

                               1609 FOURTH STREET

                              BERKELEY, CALIFORNIA

                                 by and between

                          CEDAR/FOURTH STREET PARTNERS

                                       and

                                 DAMERT COMPANY
<PAGE>   2
                             BASIC LEASE INFORMATION
                             WAREHOUSE/OFFICE LEASE
                                 DaMert Company

<TABLE>
<CAPTION>
<S>                                               <C>
Lease Date:                                       July 27, 1995

Landlord:                                         Cedar/Fourth Street Partners,
                                                  a California limited partnership

Landlord's Address:                               5800 Shellmound Street
                                                  Suite 210
                                                  Emeryville, California 94608

Tenant:                                           DaMert Company, a California subchapter
                                                  S corporation

Premises:                                         Suite 1
                                                  1609 Fourth Street
                                                  Berkeley, CA 94710

Rentable Area of the Premises:                    32,000 square feet measured in
                                                  accordance with the standard set
                                                  forth in Section 1.3

Permitted Uses:                                   Warehouse and distribution, office
                                                  and other related uses necessary to
                                                  conduct its business.

Term:                                             Six (6) years, plus one Six (6)
                                                  year option

Scheduled Term
Commencement Date:                                December 1, 1995 [See Section 3.1]

Monthly Base Rent:                                ($0.69/rentable square foot) $22,080.00
                                                  as more particularly set forth in Section
                                                  4.1,

Security Deposit:                                 $22,080.00
</TABLE>
<PAGE>   3
<TABLE>
<CAPTION>
<S>                                               <C>
Rent Escalations:                                 None during Initial Term

Option to Renew:                                  One (1) six (6) year option (See
                                                  Section 3.5)

Broker:                                           CB Commercial Real Estate and Grubb
                                                  and Ellis Commercial Real Estate Services
Broker's Fee or
Commission,
paid by:                                          Landlord
</TABLE>

         The foregoing Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any of the terms
above shall mean the respective information set forth above and shall be
construed to incorporate all of the terms provided under the particular
paragraph pertaining to such information. In the event of any conflict between
any Basic Lease Information and the Lease, the Lease shall control.
<PAGE>   4
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>                                                                             <C>
1.   PREMISES                                                                    1
        1.1      Premises                                                        1
        1.2      Exhibits                                                        2
        1.3      Rentable Area                                                   2
        1.4      Verification of Rentable Area                                   2
        1.5      Warehouse/Distribution Space and
                   Office Space                                                  3

2.   IMPROVEMENTS                                                                3
        2.1      Plans                                                           3
        2.2      Construction                                                    3

3.   TERM                                                                        4
        3.1      Commencement of Term                                            4
        3.2      Lease Commencement Memorandum                                   4
        3.3      Early Entry                                                     5
        3.4      Delivery of Possession                                          5
        3.5      Option to Extend                                                5
        3.6      Penalty for Late Delivery                                       6
4.   RENT                                                                        6
        4.1      Rent                                                            6
        4.2      Security Deposit                                                6
        4.3      Late Charge                                                     7
        4.4      Lease Year                                                      7
        4.5      Additional Rent                                                 7
        4.6      Adjustments                                                     7
        4.7      Option Period                                                   8

5.   INSURANCE AND INDEMNITY                                                     10
        5.1      Tenant's Liability Insurance                                    10
        5.2      Form of Policies                                                12
        5.3      Insurance of Personalty                                         13
        5.4      Landlord to Insure Building                                     13
        S.S      Waiver of Liability                                             14
        5.6      Indemnity                                                       14
        5.7      Landlord's Disclaimer                                           16
</TABLE>
<PAGE>   5
<TABLE>
<CAPTION>
<S>                                                                             <C>
6.   OPERATING EXPENSES                                                          17
        6.1      Operating Expenses                                              17
        6.2      Impositions                                                     24
        6.3      Utility Services                                                26

7.   MAINTENANCE, REPAIRS AND ALTERATIONS                                        27
        7.1      (a)Landlord's Responsibility                                    27
        7.2      Tenant's Responsibility                                         29
        7.3      Condition Upon Surrender                                        30
        7.4      Improvements by Tenant                                          30
        7.5      Sanitary Condition                                              31

8.   FIXTURES AND PERSONAL PROPERTY                                              31
        8.1      Fixtures and Personal Property                                  3l

9.   USE AND COMPLIANCE WITH LAWS                                                31

        9.1      General Use and Compliance with Laws                            31
        9.2      Signs                                                           32
        9.3      Parking and Parking Access                                      32
        9.4      Floor Load                                                      33
        9.5      Pickup and Deliveries                                           33
        9.6      Hazardous Materials                                             33

10.  DAMAGE AND DESTRUCTION                                                      35
        10.1     Reconstruction                                                  35
        10.2     Rent Abatement                                                  35
        10.3     Excessive Damage or Destruction                                 36
        10.4     Uninsured Casualty                                              36
        10.5     Waiver                                                          37

11.  EMINENT DOMAIN                                                              37
        11.1     Automatic Termination                                           37
        11.2     Rent Abatement                                                  37
        11.3     Condemnation Award                                              38
        11.4     Sale Under Threat of Condemnation                               38

12.  DEFAULTS; REMEDIES                                                          38
        12.1     Defaults                                                        38
        12.2     Remedies                                                        39
        12.3     Default by Landlord                                             41
</TABLE>
<PAGE>   6
<TABLE>
<CAPTION>
<S>                                                                              <C>
13.  ASSIGNMENT AND SUBLETTING                                                   42
        13.1     Assignment and subletting: Prohibition                          42
        13.2     Bonus Rental                                                    43
        13.3     Scope                                                           43
        13.4     Waiver                                                          43
        13.5     Release                                                         44

14.  0FFSET STATEMENT, ATTORNMENT AND SUBORDINATION                              44
        14.1     Offset Statement                                                44
        14.2     Attornment                                                      45
        14.3     Subordination & Non-Disturbance                                 45

15.  NOTICES                                                                     46
        15.1     Notices                                                         46

16.  SUCCESSORS BOUND                                                            47
        16.1     Successors Bound                                                47

17.  INTENTIONALLY OMITTED                                                       47

18.  MISCELLANEOUS                                                               47
        18.1     Waiver                                                          47
        18.2     Easements                                                       48
        18.3     Interest                                                        48
        18.4     No Light, Air or View Easement                                  48
        18.5     Partnership and Corporate Authority                             48
        18.6     Accord and Satisfaction                                         48
        18.7     Limitation of Landlord's Liability                              49
        18.8     Lease Guaranty                                                  49
        18.9     Time                                                            49
        18.10    Attorneys' Fees                                                 49
        18.11    Captions and Article Numbers                                    50
        18.12    Severability                                                    50
        18.13    Applicable Law                                                  50
        18.14    Submission of Lease                                             50
        18.15    Holding Over                                                    50
        18.16    Surrender                                                       50
        18.17    Rules and Regulations                                           51
        18.18    No Nuisance                                                     51
        18.19    Broker                                                          51
</TABLE>
<PAGE>   7
<TABLE>
<CAPTION>
<S>                                                                             <C>
        18.20    Landlord's Right to Perform                                     52
        18.21    Mortgage Protection                                             52
        18.22    Abatement of Rent                                               52
        18.23    Location of Outdoor Equipment                                   54
        18.24    Modification for Lender                                         54
        18.25    Recording                                                       55
        18.26    Entire Agreement                                                55
        18.27    Roof Penetration                                                55
        18.28    Landlord's Representations                                      55

19.  ADDITIONAL PROVISIONS                                                       55
        19.1     Arbitration                                                     55
        19.2     Premises Security                                               58
        19.3     When Payment Is Due                                             58
        19.4     Limited Guarantees                                              58
        19.5     Right of First Refusal                                          58
</TABLE>
<PAGE>   8
                             WAREHOUSE OFFICE LEASE

         THIS LEASE ("Lease"), dated as of this 27th day of July, 1995, by and
between Cedar/Fourth Street Partners, a California partnership ("Landlord") and
DaMert Company, Inc., a California subchapter S corporation ("Tenant") for space
in a portion that building commonly known as 1609 Fourth Street (the
"Building") located in the City of Berkeley, County of Alameda, State of
California, shall be upon the terms and conditions contained hereinafter. The
legal description of the land upon which the Building and parking facilities
located (the "Lot") is attached hereto as Exhibit A.

1.       PREMISES

         1.1 Premises. Landlord leases to Tenant, subject to the provisions of
this Lease, Thirty Two Thousand (32,000) rentable square feet ("RSF") of
warehouse, distribution and office space, consisting of the
Warehouse/Distribution and Office Space as described in Section 1.6 below, whose
address is 1609 Fourth Street, Suite 1 in the Building, the usable space of
which is shown on the Building Floor Plan, attached hereto as Exhibit "B"
("Premises") and made a part hereof. In addition the Premises shall include
exclusive use of three of the existing loading docks with mechanical load
levelers on the west side of the Building and exclusive use of the loading ramp
as shown on Exhibit B, provided, Landlord shall have the right to utilize the
ramp for handicapped aces in order to satisfy ADA requirements so long as
modification and use do not impede Tenant's ability to use the ramp for its
purposes. Landlord shall build out the Tenant Improvements, as defined in the
Work Letter Agreement, in the Premises according to the Preliminary Plan
attached hereto as Exhibit "C" and made a part hereof and pursuant to the Work
Letter Agreement attached hereto as Exhibit "D" and made a part hereof.
Landlord, at Landlord's expense, will build out the Landlord's Improvements, as
defined in the Work Letter Agreement, pursuant to Paragraph 8 of the Work Letter
Agreement. Tenant acknowledges that the only warranties and representations
Landlord has made in connection with the physical condition of the Premises or
Tenant's use of the same upon which Tenant has

                                       1
<PAGE>   9
relied directly or indirectly for any purpose are those expressly provided in
this Lease and the Exhibits referenced and incorporated into this Lease.

         1.2 Exhibits. The following Exhibits are attached to this Lease after
the signatures and by reference thereto are incorporated herein:

                    Exhibit "A" - Property Legal Description
                    Exhibit "B" - Building Floor Plan & Premises
                    Exhibit "C" - Preliminary Plans
                    Exhibit "D" - Work Letter Agreement
                    Exhibit "E" - Rules and Regulations

         1.3 Rentable Area. As used in this Lease, the usable area of space and
rentable area of space shall be determined by measuring to the exterior surface
of exterior walls, and to the middle of demising walls between the Premises and
other Tenants. No deductions shall be made for columns or electrical panels or
sprinkler risers. The total rentable area of floor space in the Premises shall
be Thirty Two Thousand (32,000) square feet upon completion of the Final Plans,
as described in the Work Letter Agreement, subject to adjustment as set forth
below.

         1.4 Verification of Rentable Area. After completion of construction of
the Premises and the Premises are Ready for Occupancy (as defined in the Work
Letter Agreement), Landlord's space planner shall certify by letter to Tenant
the actual usable and rentable square footage of the Premises. Tenant shall have
thirty (30) days from receipt of the space planner's certification letter to
review the square footage calculations and to remeasure the Premises and the
Building. If Tenant disagrees with her final square footage, Landlord's and
Tenant's space planner shall meet to resolve the difference. In the event that
subsequent remeasurement of the Premises or the Building by Tenant, within the
time period specified above, indicates that the square footage measurement
prepared by Landlord produces a square footage number in excess of or lower than
the square footage number which would have resulted had the method described
above been properly utilized, any payments due to Landlord from Tenant based
upon the amount of square feet contained in the Premises shall be
proportionally, retroactively and prospectively reduced or increased, as
appropriate, to reflect the actual number of square feet, as properly
remeasured. If Landlord

                                       2
<PAGE>   10
disagrees with Tenant's remeasurement and if a dispute occurs regarding the
final accuracy of such measurements, such dispute will be resolved pursuant to
binding arbitration pursuant to Section 19.4. The final rentable square footage
shall be included in the Lease Commencement Memorandum executed by the parties.

         1.5 Warehouse/Distribution Space and Office Space. The Premises will
be built out for occupancy and use as warehouse/distribution space and office
space. The warehouse/distribution space [the "Warehouse/Distribution Space"]
will consist of 23,360 RSF, and the office space will consist of 8,640 RSF [the
"Office Space], and, both as set forth on Exhibit E.

2.       IMPROVEMENTS

         2.1. Plans.

                           (a) Preliminary Plans. Landlord and Tenant have
         approved the preliminary plans and outline specifications ("Preliminary
         Plans") identified in Exhibit "C", for the construction of the Premises
         ("Tenant Improvements").

                           (b) Final Plans. Landlord shall have final plans and
         specifications ("Final Plans") prepared by Malinda Malin, Consolidated
         Interiors, which Final Plans shall be in conformity with the
         Preliminary Plans. "Plans" shall hereinafter mean Preliminary Plans and
         then, when prepared and approved by Landlord and Tenant, Final Plans.
         Preparation and approval of the Preliminary Plans and Final Plans and
         any changes requested by Tenant thereto shall be made only in
         accordance with the Work Letter attached hereto as Exhibit "D".

         2.2 Construction. Landlord shall construct the Premises in accordance
with the Final Plans. Landlord covenants that at the time the Premises are Ready
for Occupancy, the Premises shall be in full compliance with the American
Disabilities Act, and Landlord further covenants to remedy any deficiency which
exists on the date the Premises are ready for occupancy. Landlord shall
determine Tenant's share of the cost of constructing the Tenant Improvements, if
any, based on the parties' obligations as specified in the Work Letter. Landlord
shall make the Premises

                                       3
<PAGE>   11
Ready for Occupancy, as defined in the Work Letter, not later than December 1,
1995, ("Scheduled Term Commencement Date"); provided, however (but subject to
the provisions of Section 3.4) that the Scheduled Term Commencement Date shall
be extended for a period equal to the period of any delays encountered by
Landlord affecting said work of construction because of fire, earthquake,
inclement weather, acts of God, acts of the public enemy, riot, insurrection,
City of Berkeley delays in issuing permits or approvals, or performing
inspections, governmental regulation of the sales of materials or supplies or
the transportation thereof, strikes or boycotts, shortages of material or labor,
changes in the Plans pursuant to the Work Letter, or any causes beyond the
control of Landlord. Notwithstanding the foregoing, the Commencement Date and
Tenant's obligation to pay Monthly Rent shall be determined in accordance with
the provisions of Section 3.1.

3.       TERM

         3.1 Commencement of Term. The Term shall be for a period equal to six
(6) years, commencing upon the earliest of the following dates:

                           (a) The day following the date Landlord delivers to
         Tenant a factually correct written notice stating that the Premises are
         Ready for Occupancy (as defined in Exhibit "D").

                           (b) The day following the date Landlord delivers to
         Tenant a factually correct written notice stating the date the Premises
         would have been ready for Occupancy had there been no Tenant Delay (as
         defined in Exhibit "D"); and

                           (c) The date upon which Tenant actually commences to
         do business in the Premises with Landlord's written consent.

         3.2 Lease Commencement Memorandum. Upon determination of the
Commencement Date of the Lease Term, Landlord and Tenant shall execute a Lease
Commencement Memorandum which acknowledges said Lease Commencement Date, the
final square footage of the Premises measured in accordance with the method set
forth in Section 1.3, and the effective rental rate for the Premises.

                                       4
<PAGE>   12
         3.3 Early Entry. If Tenant is permitted to occupy the Premises prior to
the Commencement Date pursuant to Paragraph 16 of Exhibit "D", such early entry
shall be at Tenant's sole risk and subject to all the terms and provisions
hereof, except for the payment of Monthly Rent which shall commence as set forth
in Section 4.1 and the payment of Tenant's share of expenses and charges which
shall be determined pursuant to the provisions of Section 6.3. Landlord shall
use its good faith efforts to provide Tenant with an advance notice of the date
the Premises shall be Ready for Occupancy so that Tenant can schedule its
move-in into the Premises, which advance notice shall be provided by Landlord to
Tenant as soon as reasonably possible, but in any event within ten (10) business
days before the date the Premises shall be Ready for Occupancy.

         3.4 Delivery of Possession. Landlord shall make the Premises Ready for
Occupancy on or before December 1, 1995 (subject to the provisions of Section
2.2), and, except as set forth in Section 3.7, Landlord shall not be subject to
liability therefor if it cannot so deliver, nor shall such failure affect the
validity of this Lease or the obligations of Tenant. If the office and
warehouse portions of the Premises are not Ready for Occupancy by February 28,
1996, Tenant may, at Tenant's option with notice in writing to Landlord within
ten (10) days thereafter, cancel this Lease ("Cancellation Right"). If notice of
cancellation is not received by Landlord within such ten (10) day period,
Tenant's right to cancel this Lease shall terminate and be of no further force
and effect.

         3.5 Option to Extend. Provided that Landlord has not given notice of a
material default which remains uncured on the part of Tenant, either at the time
of exercise of the option to Extend or at the time the extended Term commences,
Tenant shall have the option to extend ("Option to Extend") the Initial Term of
this Lease for one (1) additional period of six (6) years ("Option Period") and
except as may be provided elsewhere herein, on the same terms, covenants and
conditions provided herein, except that upon such renewal the Monthly Rent due
shall be equal to the Fair Market Rental Rate (as hereinafter defined);
provided, however, the Option Period rent shall not be less than the Monthly
Rent during the Initial term. In addition, there shall be no broker's commission
payable by Landlord other than as agreed to by Landlord in writing, ie. no
commission shall be payable as a

                                       5
<PAGE>   13
result of Tenant's actions. Tenant shall exercise its option to extend for the
Option Period by giving Landlord written notice ("Option Notice") of its intent
to renew at least nine (9) months prior to the expiration of the Initial Term,
and the failure by Tenant to give Landlord such Option Notice shall render the
Option to Extend null and void.

         3.6 Penalty for Late Delivery. If Landlord has not delivered the
Premises Ready for Occupancy by 5PM (PST) December 20, 1995, Landlord shall be
liable for a penalty of Three Hundred Dollars ($300.00) per day for each day
beyond December 20th that the warehouse has not been delivered. Tenant shall be
compensated for the penalty in the form of free rent. Notwithstanding the above,
the penalty initiation date shall be extended one day for each day of Tenant
Delay as described in Section 13 of Exhibit D.

4.       RENT

          4.1 Rent. Subject to the adjustments, if any, set forth in the Work
Letter Agreement attached hereto as Exhibit "C", Tenant shall pay to Landlord as
rent for the Premises the Rent set forth herein.

<TABLE>
<CAPTION>
          Month of Term                                  Monthly Rent
          -------------                                  ------------
<S>                                                      <C>
          Months 1 - 72                                  $22,080 ($0.69 per RSF)
</TABLE>

         4.2 Security Deposit. On execution of this Lease, Tenant shall deposit
with Landlord $22,080.00 as a security deposit for the performance by Tenant of
the provisions of this Lease. If Tenant remains in default upon written notice
and failure to cure within five (5) business days, Landlord can use the security
deposit, or any portion of it, to cure the default or to compensate Landlord for
all damage sustained by Landlord resulting from Tenant's default. Tenant shall
immediately on demand pay to Landlord a sum equal to the portion of the security
deposit expended or applied by Landlord as provided in this Section so as to
maintain the security deposit in the sum initially deposited with Landlord. If
Tenant is not in default at the end of the fourth Lease Year, and if during the
first four years of the Initial Lease Term, Tenant has not been in material
default, and if Landlord has not given written notice more than three (3) times
that rent has not been paid when due during said period, then within Ten (10)
days of the end of the fourth Lease Year, Landlord shall refund Tenant's
security deposit. If the security deposit has not been returned earlier, and if
Tenant is

                                       6
<PAGE>   14
not in default at the expiration or termination of this Lease, Landlord shall
return the security deposit to Tenant. Landlord's obligations with respect to
the security deposit are those of a debtor and not a trustee. Landlord shall not
be required to hold the security deposit in a segregated fund. Landlord shall
not be required to pay Tenant interest on the security deposit.

         4.3 Late Charge. If Tenant is in default in the payment of rent or any
other amount due hereunder, upon written notice pursuant to this Lease, and if
not cured within Five (5) business days of notice, Landlord may impose a late
charge of five percent (5%) of the amount overdue. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of the late payment by Tenant. The amount of the late
charge shall be added to the delinquent rent. Any dishonored check shall be
treated as rent unpaid and shall be subject to late charges. A late charge shall
only be assessed after written notice has been received by Tenant detailing the
overdue rent, and the overdue rent has not been paid within five (5) days of
Tenant's receipt of such notice, which notice may be sent by facsimile
transmission with Tenant's receipt thereof to be confirmed by telephone.

    Initials:           /s/ TG                       /s/ FD
                        Landlord                   Tenant

         4.4 Lease Year. The term "Lease Year" as used in the Lease means as
follows:

                           (a) The first Lease Year shall be the first twelve
         months of the Lease Term.

                           (b) Each succeeding Lease Year shall be a full year
         commencing on the anniversary date of the first Lease Year.

         4.5 Additional Rent. All other amounts of money to be paid by Tenant to
Landlord shall be deemed additional rent.

         4.6 Adjustments. The Monthly Base Rent set forth herein has been agreed
upon by the parties and is based upon the square footage for the Premises as
estimated by Landlord. If, at any

                                       7
<PAGE>   15
time prior to the Commencement Date, the approximate square footage of the
Premises is adjusted pursuant to the provisions of Section 1.4, the Monthly Base
Rent shall be adjusted accordingly upward or downward.

         4.7 Option Period. Rent for the Option Period shall be set at the then
Fair Market Rental Rate for a similar industrial gross lease for
warehouse/distribution office space for use as warehouse/distribution and office
space. No later than fifteen (15) days of Tenant's exercising its option,
Landlord shall give Tenant written notice of the proposed Fair Market Rental
Rate broken down by the respective uses and the proposed rent for each. If
Tenant does not agree, it shall inform Landlord within seven (7) days of receipt
of Landlord's notice ("Tenant's Review Period"). If Landlord and Tenant fail to
reach agreement within fifteen (15) days following Tenant's Review Period
("Outside Agreement Date"), then the parties shall agree upon and jointly
select, within ten (10) days, a single arbitrator agreed upon by the parties.
Neither Landlord nor Tenant shall consult with such arbitrator as to his or her
opinion as to Fair Market Rental Rate prior to the appointment. The
determination of the arbitrator shall be limited to determination of the Fair
Market Rent taking into account the requirements of this Section 4.6., provided,
however, the Fair Market Rent determined by the arbitrator shall be either the
same as Landlord's or Tenant's final proposal, or between such final proposals
subject to the minimum Monthly Rent as defined in Section 3.5. Such arbitrator
may hold such meetings and require such input as the arbitrator, in his or her
sole discretion, determines is necessary. In addition, Landlord or Tenant may
submit to the arbitrator with a copy to the other party within five (5) business
days after the appointment of the arbitrator any market data and additional
information that such party deems relevant to the determination of Fair Market
Rental Rate ("FMRR Data") and the other party may submit a reply in writing
within ten (10) business days after receipt of such FMRR Data.

         The Arbitrator shall, within thirty (30) days of his or her
appointment, reach a decision as to whether the parties shall use Landlord's or
Tenant's submitted Fair Market Rental Rate, or a Fair Market Rate between such
proposals, and shall notify Landlord and Tenant of such determination.

                                       8
<PAGE>   16
         The decision of the Arbitrator shall be binding upon Landlord and
Tenant, except as provided below.

         If Landlord and Tenant fail to agree upon and appoint an arbitrator,
then the appointment of the Arbitrator shall be made by the American Arbitration
Association or a comparable organization agreed upon by the parties.

         The cost of arbitration shall be paid by Landlord and Tenant equally.
Notwithstanding the above, in no event shall the Option Period rent be less than
the minimum monthly rent set forth in Section 3.5. After receipt of the final
determination of the Fair Market Rental Rate by the arbitrator as set forth
above, Tenant shall have seven (7) days to reaffirm or rescind its exercise of
its Option to Extend. If written notice of the election by Tenant to rescind the
exercise of its option to Extend is not delivered to Landlord within the seven
(7) day period, the exercise of the option shall be deemed affirmed. If Tenant
shall elect to rescind the exercise of its Option to Extend as set forth above,
then the Term of this Lease shall expire as set forth in this Lease; provided,
however, that in the event Tenant shall elect to rescind as set forth herein,
Landlord shall have the right for five (5) days to accept Tenant's initial
proposed Fair Market Rental Rate, and, if Landlord accepts, the exercise of the
option shall be deemed affirmed and the Rent for the option Period shall be
Tenant's initial proposed Fair Market Rental Rate.

         For purposes of the Lease, the term "Fair Market Rental Rate" shall
mean the annual amount per rentable square foot that a comparable landlord of
comparable warehouse/distribution and office space in the Emeryville/Berkeley
area would accept in Comparable Transactions. In any determination of Comparable
Transactions, appropriate consideration shall be given to the annual rental
rates per rentable square foot, the standard of measurement by which the
rentable square footage is measured, the ratio of rentable square feet to usable
square feet, the type of escalation clause (e.g., whether increases in
additional rent are determined on a net or gross basis, and if gross, whether
such increases are determined according to a base year or a base dollar amount
expense stop), length of the lease term, size and location of premises being
leased, tenant improvement allowances, deferred or free rent periods and any
other then customary tenant

                                       9
<PAGE>   17
inducement provided with respect to comparable space and other generally
applicable conditions of tenancy for such Comparable Transactions.
Notwithstanding the preceding sentence, the Arbitrator shall not factor into
his determination of Comparable Transactions and his ultimate determination of
the Fair Market Rental Rate, more than Two Dollars ($2.00) in customary tenant
inducements, including, but not limited to, tenant improvements allowances,
deferred or free rent periods or any other customary tenant inducement. For
example, if the Arbitrator determines that customary tenant inducements in
Comparable Transactions equal $5.00, he shall only take into consideration
$2.00. In addition, the Arbitrator shall have the right to take into account
whether it is then customary to include rent "bumps" during comparable lease
terms. The Arbitrator shall take into account that the Premises were built out
as of the Commencement Date, do not consist of "shell" space and shall assume
that additional modifications do not have to be made, except as required by law
or as required by the Lease. Further, the Arbitrator shall not take into
account any alterations, additions or improvements to the Premises paid for by
Tenant.

         If the final determination of the Fair Market Rental Rate has not been
made prior to the date on which Tenant's obligation to pay rent for the Option
Period commences, then, from such date until the date the final determination is
made ("Interest Period"), Tenant shall pay estimated rent for the Premises at
the rate applicable to the Premises during the month immediately preceding such
rent commencement date. Once the final determination of the Fair Market Rental
Rate has been made, if the rent payable by Tenant for the Premises pursuant to
the Fair Market Rental Rate exceeds the rent paid by Tenant during the Interest
Period, Tenant shall pay the excess to Landlord concurrently with its next
installment of Monthly Rent, and if the rent paid by Tenant during the Interest
Period exceeds the rent payable by Tenant for the Premises pursuant to the Fair
Market Rental Rate, Landlord shall credit the excess against the rent or other
charges next coming due under the Lease.

5.       INSURANCE AND INDEMNITY

         5.1 Tenant's Liability Insurance. Tenant shall procure at its sole cost
and expense and keep in effect from the date of

                                       10
<PAGE>   18
this Lease and at all times until the end of the Term either Comprehensive
General Liability insurance or Commercial General Liability insurance applying
to the use and occupancy of the Premises or the Building, or any part of either,
or any areas adjacent thereto, and the business operated by Tenant, or any other
occupant, on the Premises. Such insurance shall include Broad Form Contractual
liability insurance coverage insuring all of Tenant's indemnity obligations
under this Lease. Such coverage shall have a minimum combined single limit of
liability of at least Two Million Dollars ($2,000,000) and a general aggregate
limit of Five Million Dollars ($5,000,000); provided, that Landlord, not more
than once every two (2) years during the Initial Term and Option Term, if
applicable, hereof and upon the advice of Landlord's insurance broker, and in
consultation with Tenant's insurance broker, may require Tenant to increase its
single limit liability and aggregate liability if within the reasonable
discretion of the broker, and comparable landlords and comparable tenants in
Alameda County are doing the same. All such policies shall be written to apply
to all bodily injury, property damage, personal injury and other covered loss,
however occasioned, occurring during the policy term, shall be endorsed to add
Landlord as an additional insured, to provide that such coverage shall be
primary and that any insurance maintained by Landlord shall be excess insurance
only. Such coverage shall also contain endorsements: (a) deleting any employee
exclusion on personal injury coverage; and (b) providing for coverage of
employer's vehicle non-ownership liability. All such insurance shall provide for
severability of interests; shall provide that an act or omission of one of the
named insureds shall not reduce or avoid coverage to the other named insureds.
Tenant shall also maintain Worker's Compensation insurance in accordance with
California law, and employers liability insurance with a limit no less than
$1,000,000 per employee and $1,000,000 per occurrence. Such coverage shall be
endorsed to waive the insurer's rights of subrogation against Landlord. All
coverages described in this Section shall be endorsed to provide Landlord with
thirty (30) days, notice of cancellation or change in terms. If at any time
during the Term the amount or coverage of insurance which Tenant is required to
carry under this Section is, in Landlord's reasonable judgment, materially less
than the amount or type of insurance coverage typically carried by comparable
tenants of comparable buildings located in Alameda County, California, which are
similar to and operated for similar purposes as the Premises,

                                       11
<PAGE>   19
Landlord shall have the right upon the advice of Landlord's broker, to require
Tenant, not more than once every two (2) years, to increase the amount or change
the types of insurance coverage required under this Section.

         5.2 Form of Policies. All insurance policies required to be carried
under this Lease shall (a) be written by companies rated A-VII or better in
"Best's Insurance Guide" and authorized to do business in California, and (b)
name any parties with an insurable interest designated by Landlord as additional
insureds. Tenant shall deliver to Landlord on or before the Commencement Date,
and thereafter at least thirty (30) days before the expiration dates of expiring
policies, certified copies of its insurance policies, or a certificate
evidencing the same issued by the insurer thereunder, and, in the event Tenant
shall fail to procure such insurance, or to deliver such policies or
certificates, Landlord may, at its option (upon Tenant's failure to procure such
insurance or to deliver such policies or certificates within fifteen (15) days
following receipt of notice thereof from Landlord) and in addition to Landlord's
other remedies in the Event of Default by Tenant hereunder, procure the same for
the account of Tenant, and the cost thereof shall be paid to Landlord as
Additional Charges. Any insurance provided for in Sections 5.1 and 5.3 may be
maintained by means of a policy or policies of blanket insurance, covering
additional items or locations or insureds, provided, however, that:

                           (a) Landlord and any other parties in interest from
         time to time designated by Landlord to Tenant shall be named as an
         additional insured thereunder as its interest may appear;

                           (b) the coverage afforded Landlord and any such other
         parties in interest will not be reduced or diminished by reason of the
         use of such blanket policy of insurance;

                           (c) any such policy or policies shall specify therein
         (or Tenant shall furnish Landlord with a written statement from the
         insurers under such policy specifying) the amount of the total
         insurance allocated to the Tenant's improvements and property; and

                           (d) the requirements set forth in this Article 5 are
         otherwise satisfied.

                                       12
<PAGE>   20
         5.3 Insurance of Personalty. Tenant shall at all times during the Term,
at its cost and expense, maintain in effect policies of insurance covering (a)
its trade fixtures, personal property and equipment located on the Premises, in
an amount not less than eighty percent (80%) of their actual cash value,
providing protection against any peril included within the classification "Fire
and Extended Coverage", together with insurance against sprinkler damage,
vandalism and malicious mischief, and (b) all plate glass in the exterior
walls of and inside the Premises. The proceeds of such insurance, so long as
this Lease remains in effect, shall be used to repair or replace the fixtures,
equipment and plate glass so insured.

         5.4 Landlord to Insure Building. During the Term, Landlord shall carry
the types of insurance, and with such policy limits, as protecting the Building
and Landlord as are normally and customarily carried by comparable landlords of
comparable buildings including the following: (a) Landlord shall maintain "All
Risk" property insurance (including inflation endorsement sprinkler leakage
endorsement, and, at Landlord's lender's option, earthquake and flood coverage
on the Building covering one hundred percent (100%) of the full replacement cost
valuation of the Building with a reasonable deductible included (provided,
however, that the amount of property insurance that Landlord shall carry with
regard to the shell of the Building shall be in accordance with at least the
requirements of Landlord's lender), the Tenant Improvements (to the extent of
Landlord's contribution to Tenant in connection therewith) and Landlord's
personal property, excluding coverage of all Tenant's trade fixtures, personal
property and equipment located on or in the Premises, (b) policy of commercial
general liability and property damage insurance, (c) loss of rent insurance and
(d) workers' compensation insurance if Landlord has employees. Landlord shall
provide Tenant with certificates of insurance within 10 days of purchase of the
Building. Such insurance shall also include insurance against loss of rents on
an "All Risk" basis in an amount equal to the Monthly Rent and additional rent
payable under the Lease, for a period of at least six (6) months commencing on
the date of loss. Such insurance shall name Landlord and its agents as
additional insureds and include a lender's loss payable endorsement (Form 438
BFU) in favor of Landlord's lender, if any. If the insurance premium increases

                                       13
<PAGE>   21
due to Tenant's use (other than uses PERMITTED BY this Lease) of the Premises,
Tenant shall pay the full amount of the increase.

         5.5 Waiver of Liability. Landlord and Tenant each hereby waives the
right of subrogation against the other and any and all rights of recovery
against the other or against any other tenant or occupant of the Building or
against the officers, partners in, employees, agents, representatives, customers
and business visitors of, such other party or of such other tenant or occupant
of the Building for loss of or damage to such waiving party or its property or
the property of others under its control, arising from any cause insured against
under any standard form of fire insurance policy with all permissible extension
endorsements covering additional perils or under any other policy of insurance
carried by such waiving party in lieu thereof.

         5.6 Indemnity. Except as hereinafter set forth, Tenant shall indemnify,
defend, protect and hold Landlord harmless from and against any and all claims,
loss, proceedings, damages, causes of action, liability, costs or expense
(including reasonable attorneys' fees) arising from or in connection with, or
caused by (a) any willful act, omission or negligence of Tenant or any subtenant
of Tenant, or their respective contractors, licensees, invitees, agents,
servants or employees, wheresoever the same may occur, or (b) any use of the
Premises, or any accident, injury, death or damage to any person or property
occurring in, on or about the Premises, or any part thereof, and any service
delivery facilities or any other portions of the Building used by Tenant, this
indemnity shall not apply to and specifically excluding such claims, loss,
proceedings, damages, causes of action, liability, costs or expense (including
attorneys' fees) arising from or in connection with, or caused by, the
negligence or willful misconduct of Landlord or its agents, contractors or
employees.

         Notwithstanding the foregoing to the contrary, Tenant shall not be
required to indemnify and hold Landlord harmless from any loss, cost, liability,
damage or expense, including, but not limited to, penalties, fines, attorneys'
fees or costs (collectively "Claims"), to any person, property or entity
resulting from the negligent acts or omissions or willful misconduct of Landlord
or its agents, contractors, servants, employees or licensees, in connection with
Landlord's activities in the Building (except for damage to the Tenant
Improvements and

                                       14
<PAGE>   22
Tenant's personal property, fixtures, furniture and equipment in the Premises,
to the extent Tenant is required to obtain the requisite insurance coverage
pursuant to the Lease) or the site, and Landlord hereby so indemnifies and holds
Tenant harmless from any such Claims, including but not limited to Claims
arising from any noncompliance of the Building and/or the site with any laws
relating to disabled access, or Claims arising from the presence in the
Premises, the Building and/or the site of hazardous substances, except to the
extent such hazardous substances were placed in or on the Premises, the Building
and/or the site by Tenant or Tenant's agents, contractors, servants, employees
or licensees or other tenants of the Building (the "Exception") (Landlord's and
Tenant's indemnity hereunder will survive the expiration of the Term of, or any
termination of the Lease) as long as all tenants of the Building shall be
treated equally with regard to the Exception. Provided, further, to the extent
any damage or repair obligation is covered by insurance obtained by Landlord as
part of Operating Expenses, but is not covered by insurance required to be
maintained and carried by Tenant pursuant to the provisions of this Article 5 or
actually carried by Tenant, then Tenant shall be relieved of its indemnity
obligation up to the amount of the insurance proceeds which Landlord is entitled
to receive. Tenant's agreement to indemnify and hold Landlord harmless pursuant
to this Section 5.6 and the exclusion from Tenant's indemnity and Landlord's
agreement to indemnify and hold Tenant harmless pursuant to this provision are
not intended to and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Landlord or Tenant, respectively,
pursuant to the Lease to the extent that such policies cover the results of such
acts, omissions or willful misconduct. If Landlord or Tenant has been or at any
time hereafter is granted the right to self insure or if either party breaches
this agreement by its failure to carry required insurance, such failure shall
automatically be deemed to be a covenant and agreement by Landlord or Tenant,
respectively, to self-insure to the full extent of such required coverage, with
full waiver of subrogation.

         Notwithstanding the foregoing to the contrary, because Landlord is
required to maintain insurance on the Building and because of the existence of
waivers of subrogation set forth in Lease Section 5.5, Landlord hereby
indemnifies and holds Tenant harmless from any loss, cost, liability, damage or
expense

                                       15
<PAGE>   23
(including, but not limited to penalties, fines and actual attorneys' fees and
costs) to any property outside of the Premises to the extent such loss, costs,
liability, damage or expenses are covered by such insurance, even if resulting
from the negligent acts, omissions, or willful misconduct of Tenant or those of
its agents, contractors, servants, employees or licensees. Similarly, since
Tenant must carry insurance pursuant to Lease Section 5.1 to cover its personal
property within the Premises, Tenant hereby indemnifies and holds Landlord
harmless from any loss, cost, liability, damage or expense (including, but not
limited to penalties, fines and actual attorneys' fees and costs) to any
property within the Premises, to the extent such loss, costs, liability, damage
or expenses are covered by such insurance, even if resulting from the negligent
acts, omissions or willful misconduct of Landlord or those of its agents,
contractors, servants, employees or licensees. In the event the Premises and/or
the Building are damaged or destroyed and such damage or destruction is covered
by insurance obtained by Landlord and not covered by insurance obtained by
Tenant, Landlord shall, subject to any limitations imposed by Landlord's lender,
use the proceeds of its insurance actually received by Landlord as compensation
specifically paid for these purposes to repair the damage or destruction to the
Premises and/or the Building, subject to any rights either Landlord or Tenant
may have to terminate the Lease in the event such damage or destruction occurs.

         5.7 Landlord's Disclaimer. Landlord shall not be liable for injury or
damage which may be sustained by the person, goods, wares, merchandise or
property of Tenant, its employees, invitees or customers or any other person in
or about the Premises or the Building caused by or resulting from fire, steam,
electricity, gas, water or rain, which may leak or flow from or into any part of
the Premises, or from the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures of the same, whether such damage or injury results from conditions
arising upon the Premises or upon other portions of the Building, or from other
sources, unless any such injury or damage is caused by the negligence or,
willful acts of Landlord or Landlord's agents, contractors, or employees.
Landlord shall not be liable for any damages arising from any act or neglect of
any other tenant of the Building.

                                       16
<PAGE>   24

6.   OPERATING EXPENSES-INDUSTRIAL GROSS LEASE

     6.1 Operating Expenses. Tenant understands and agrees that this is an
Industrial Gross Lease. Tenant's share ("Tenant's Share") is hereby mutually
agreed to be fifty three and 56/100 percent [53.56%, which percent shall
represent the ratio of the RSF of the then occupied or deemed occupied portion
of the Premises to the RSF of the Building and shall be confirmed by Landlord's
space planner pursuant to Section 1.4 after the Premises are Ready for
Occupancy. Tenant shall pay to Landlord, as Additional Rent, Tenant's Share of
any increase in Operating Expenses over Base Year Operating Expenses. The Base
Year shall be the first Lease Year and Landlord shall provide Tenant with a
statement of Base Year Operating Expense within five (5) months of the Base Year
end. Tenant's Share shall be confirmed in the Commencement Memorandum.

          (a) Definition. Subject to the exclusions and the amortization
     requirements set forth in (b) below, "Operating Expenses" shall include all
     expenses and costs of every kind and nature which Landlord shall pay or
     become obligated to pay because of or in connection with the ownership and
     operation of the Building and Lot on which it stands and supporting
     facilities, including, without limitation: (i) all Impositions; (ii)
     premiums for insurance maintained by Landlord pursuant to Article 5; (iii)
     wages, salaries and related expenses and benefits of all
     employees/personnel of level of building manager or below engaged in
     operation, maintenance and security; provided, however, that if any such
     employees of Landlord provide services for more than one building of
     Landlord, then a prorated portion of their wages, benefits and taxes shall
     be included in Operating Expenses based on the pro-rata portion of their
     working time devoted to the Building; (iv) all supplies, materials and
     equipment rental used in operation; (v) all maintenance and repair,
     janitorial, trash removal, security and service costs to the extent
     provided by Landlord; (vi) legal and accounting expenses; (vii) repairs,
     replacements and general maintenance (excluding those paid for by proceeds
     of insurance or other parties and alterations attributable solely to
     tenants of the Building


                                       17
<PAGE>   25
     other than Tenant); (viii) all maintenance and repair costs, including
     sidewalks, landscaping, service areas, mechanical rooms and parking areas,
     Building exterior, driveways; (ix) amortization of capital improvements
     (over the useful life of the improvements); and (x) all charges for heat,
     water, gas, electricity and other utilities used or consumed in the
     Building and not directly charged to tenants, and; (xi) the cost of
     maintaining and repairing parking areas, entranceways, sidewalks to
     Building, etc.

          (b) Exclusions from Operating Expenses. Notwithstanding the foregoing,
     Operating Expenses shall not include the following:

               (I) Any ground lease rental;

                    (ii) Costs of items considered capital repairs,
               replacements, improvements and equipment under generally
               accepted, accounting principles consistently applied ("Capital
               Items"), except for (1) the cost of those Capital Items, together
               with interest at the actual interest rate incurred by Lessor,
               acquired to reduce Operating Expenses amortized over the useful
               life of such Capital Items;

                    (iii) Rentals for items (except when needed in connection
               with normal repairs and maintenance of permanent systems) which
               if purchased, rather than rented, would constitute a capital
               improvement which is specifically excluded in Subsection (ii)
               above (excluding, however, equipment not affixed to the Building
               which is used in providing janitorial or similar services);

                    (iv) Costs incurred by Landlord for the repair of casualty
               damage to the Building;

                    (v) Costs, including permit, license and inspection costs,
               incurred with respect to the installation of tenant or other
               occupants' improvements in the Building or incurred in renovating
               or otherwise improving, decorating, painting or redecorating
               vacant space for tenants or other occupants of the Building;


                                       18
<PAGE>   26
                    (vi) Costs associated with the operation of the business of
               the partnership or entity which constitutes Landlord as the same
               are distinguished from the costs of operation of the Building,
               including partnership accounting and legal matters, costs of
               defending any lawsuits with any mortgagee (except as the actions
               of Tenant may be in issue), costs of selling, syndicating,
               financing, mortgaging or hypothecating any of Landlord's interest
               in the Building, costs of any disputes between Landlord and its
               employees (if any) not engaged in Building operation, disputes of
               Landlord with Building management, or outside fees paid in
               connection with disputes with other tenants; and

                    (vii) Marketing costs including, without limitation,
               leasing commissions, attorneys' fees in connection with the
               negotiation and preparation of deal memos, letters of intent,
               leases, subleases and/or assignments, space planning costs, and
               other costs and expenses incurred in connection with lease,
               sublease and/or assignment negotiations and transactions with
               present or prospective tenants or other occupants of the
               Building;

                    (viii) Expenses in connection with services or other
               benefits which are not offered to Tenant or for which Tenant is
               charged for directly but which are provided to another tenant or
               occupant of the Building;

                    (ix) Costs incurred by Landlord due to the violation by
               Landlord or any tenant of the terms and conditions of any lease
               of space in the Building;

                    (x) overhead and profit increment paid to Landlord or to
               subsidiaries or affiliates of Landlord for goods and/or services
               in or to the Building to the extent the same exceeds the costs of
               such goods and/or services rendered by unaffiliated third parties
               on a competitive basis;


                                       19
<PAGE>   27
                    (xi) Interest, principal, points and fees on debts or
               amortization on any mortgage or mortgages or any other debt
               instrument encumbering the Building or the site (except as
               permitted elsewhere in this Lease;

                    (xii) Landlord's general partnership overhead and general
               and administrative expenses;

                    (xiii) Costs (including in connection therewith all
               attorneys' fees and costs of settlement judgments and payments in
               lieu thereof) arising from claims, disputes or potential disputes
               in connection with potential or actual claims litigation or
               arbitrations pertaining to Landlord and/or the Building and/or
               the Lot;

                    (xiv) Costs for sculpture, paintings or other objects of
               art;

                    (xv) Advertising and promotional expenditures, and costs of
               signs in or on the Building identifying the owner of the Building
               or other tenants' signs;

                    (xvi) Electric power costs for which any tenant directly
               contracts with the local public service company;

                    (xvii) Costs arising from Landlord's charitable or political
               contributions;

                    (xviii) Costs incurred in connection with upgrading or
               otherwise making alterations, additions or improvements to the
               Building exterior or the Building foundation or structural
               elements to comply with disability, life, fire and safety or
               other codes, ordinances, statutes, or other laws in effect prior
               to the Commencement Date including, without limitation, the ADA,
               including penalties or damages incurred due to such
               non-compliance;

                    (xix) Tax penalties incurred as a result of Landlord's
               negligence, inability or


                                       20
<PAGE>   28
               unwillingness to make payments and/or to file any tax or
               information returns when due;

                    (xx) Costs for which Landlord has been compensated by a
               management fee;

                    (xxi) Costs arising from the negligence or fault of other
               tenants or Landlord or its agents, or any vendors, contractors,
               or providers of materials or services selected, hired or engaged
               by Landlord or its agents including, without limitation, the
               selection of building materials;

                    (xxii) Notwithstanding any contrary provision of the Lease,
               including, without limitation, any provision relating to capital
               expenditures, any and all costs arising from the presence of
               hazardous materials or substances (as defined by Applicable Laws
               in effect on the date of this Lease) in or about the Building or
               site including, without limitation, hazardous substances in the
               ground water or soil, not placed in the Premises, Building or Lot
               by Tenant, it's agents, employees, invitees, or customers;

                    (xxiii) Costs arising from earthquake insurance unless
               required by Landlord's lender;

                    (xxiv) Any other expenses which, in accordance with
               generally accepted accounting principles, consistently applied,
               would not normally be treated as Operating Expenses by landlords
               of Comparable Buildings.

                         (1) Landlord agrees that since one of the purposes of
                    passing thru Operating Expenses is to allow Landlord to
                    require Tenant to pay for the pro-rata cost attributable to
                    its Premises, Landlord agrees that (I)(Landlord will not
                    collect or be entitled to collect Operating Expenses from
                    all of its tenants in an amount which is in excess of one
                    hundred percent (100%) of the Operating Expenses actually
                    paid by Landlord in connection with the operation of the


                                       21
<PAGE>   29
                    Building, and (ii) Landlord shall make no profit from
                    Landlord's collections of Operating Expenses except in the
                    form of late charges or interest on amounts not paid when
                    due. All assessments and premiums which are not specifically
                    charged to Tenant because of what Tenant has done, which can
                    be paid by Landlord in installments, shall be paid by
                    Landlord in the maximum number of installments permitted by
                    law and not included as Operating Expenses except in the
                    year in which the assessment or premium installment is
                    actually paid; provided, however, that if the prevailing
                    practice in other comparable buildings in the vicinity of
                    the Building is to pay such assessments or premiums on an
                    earlier basis, and Landlord pays on such basis, such
                    assessments or premiums shall be included in Operating
                    Expenses as paid by Landlord; in no event, however, shall
                    Landlord include any accrued interest (resulting from such
                    assessments or premiums) in its computation of Operating
                    Expenses.

                         (2) Each time Landlord provides Tenant with an actual
                    and/or estimated statement of Operating Expenses, such
                    statement shall be itemized on a line item by line item
                    basis, showing the applicable expense for the applicable
                    year and the year prior to the applicable year.

          (c) Proration. Any Operating Expenses attributable to a period which
     falls only partially within the Term shall be prorated between Landlord and
     Tenant so that Tenant shall pay only that proportion thereof which the part
     of such period within the Term bears to the entire period;

          (d) Survival. Any such sum payable by Tenant which would not otherwise
     be due until after the date of the termination of this Lease, shall, if the
     exact amount is uncertain at the time that this Lease terminates, be paid
     by Tenant to Landlord upon such termination in an amount to be determined
     by Landlord with an adjustment to be made once the exact amount is known;


                                       22
<PAGE>   30
          (e) Estimated Payments. Prior to the commencement of each of
     Landlord's accounting years of the Term, Landlord may reasonably estimate
     the Additional Rent payable by Tenant for such years pursuant to this
     provision and, commencing on the Commencement Date, Tenant shall pay to
     Landlord on the first of each month in advance, one-twelfth (1/12) of
     Landlord's estimated amount. At the end of each year there shall be an
     adjustment made to account for any difference between the actual and the
     estimated Operating Expenses for the previous year. Landlord shall provide
     Tenant with a statement of actual Operating Expenses ninety (90) days after
     year-end. In the event of any dispute regarding the amount due as Tenant's
     Share of Operating Expenses, Tenant shall have the right, not more often
     than once per calendar year, to audit the Operating Expenses and to retain
     an independent company to audit and/or review Landlord's records to
     determine the proper amount of Tenant's Share of Operating Expenses. If
     such audit or review reveals that Landlord has overcharged Tenant, then
     within five (5) days after the results of such audit are made available to
     Landlord, Landlord shall reimburse Tenant the amount of such overcharge
     plus interest at the Interest Rate. If the audit reveals that Tenant was
     undercharged, then within five (5) days after the results of such audit are
     made available to Tenant, Tenant shall reimburse Landlord the amount of
     such undercharge plus interest thereon at the Interest Rate. If Landlord
     desires to contest such audit results, Landlord may do so by submitting the
     results of the audit to arbitration pursuant to Section 19.4 within five
     (5) days of receipt of the results of the audit, and the arbitration shall
     be final and binding upon Landlord and Tenant. Tenant agrees to pay the
     cost of such audit, provided that, if the audit reveals that Landlord's
     determination of Tenant's Share of Operating Expenses as set forth in any
     statement sent to Tenant was in error in Landlord's favor by more than five
     percent(5%) Landlord shall pay the cost of such audit. Landlord shall be
     required to maintain records of all operating Expenses and other Rent
     Adjustments for the entirety of the three-year period ("Review Period")
     following Landlord's delivery to Tenant of each actual statement setting
     forth Tenant's Share of Operating Expenses. The payment by Tenant


                                       23
<PAGE>   31
     of any amounts pursuant to Lease Article 6 shall not preclude Tenant from
     questioning the correctness of any actual statement provided by Landlord at
     any time during the Review Period, but the failure of Tenant to object
     thereto prior to the expiration of the Review Period shall be conclusively
     deemed Tenant's approval of the actual statement.

          In the event that any other tenant audits or reviews Operating
     Expenses and an adjustment is made, the results of such audit or review
     shall be sent to Tenant to allow Tenant to determine whether Tenant is to
     be permitted a corresponding adjustment.

          (f) Adjustment. Notwithstanding any provision herein to the contrary,
     in the event the Building is not fully occupied during any full calendar
     year of the Term, including the Base Year, an adjustment shall be made in
     computing Operating Expenses for such year so that the same shall be
     computed for such year as though the Building had been at least ninety-five
     percent (95%) occupied during such year. Operating Expenses shall not
     include any costs and expenses related to comparable equipment used solely
     for other tenants' premises.

          (g) Operating Expenses for Equipment Used Solely for Tenant. If any
     equipment is used solely for the Premises, e.g., HVAC units ("Equipment"),
     then any Operating Expenses due entirely to such Equipment, e.g.,
     maintenance costs, shall be apportioned entirely to Tenant in calculating
     Operating Expenses.

     6.2 Impositions. Subject to the exclusions and the amortization
requirements set forth in 6.1(b), real estate taxes and all other taxes relating
to the Premises and/or the Building or the Lot, including, but not limited to,
license fees, city business tax, rent tax or levy, all other taxes which may be
levied in lieu of real estate taxes, all assessments, assessment bonds, levies,
fees and other governmental charges (including, but not limited to, charges for
traffic facilities improvements, water service studies and improvements, and
fire service studies and improvements) or amounts necessary to be expended
because of governmental orders, whether general or special, ordinary or
extraordinary, unforeseen as well as foreseen, of any kind and


                                       24
<PAGE>   32
nature for public improvements, services, benefits, or any other purpose which
are assessed, levied, confirmed, imposed or become a lien upon the Premises or
Building or Lot or become payable during the Term to the extent that same are
attributable to any Lease Year or portion thereof shall collectively be referred
to as "Impositions."

          (a) Installment Election. In the case of any Impositions which may be
     evidenced by improvement or other bonds or which may be paid in annual or
     other periodic installments, Landlord shall elect to cause such bonds to be
     issued or cause such assessment to be paid in installments over the maximum
     period permitted by law and only such installments as are due annually
     shall be included in the Operating Expenses.

          (b) Limitation. Nothing contained in this Lease shall require Tenant
     to pay any franchise, estate, inheritance or succession transfer tax of
     Landlord, or any income, profits or revenue tax or charge, upon the net
     income of Landlord from all sources; provided, however, that if at any time
     during the Term under the laws of the United States Government or the State
     of California, or any political subdivision thereof, a tax or excise on
     rent, or any other tax however described, is levied or assessed by any such
     political body against Landlord on account of Rent, or a portion thereof,
     the same shall be included as Impositions.

          (c) Sale or Transfer of the Property. Notwithstanding any other
     provision of Article 6, during the first three (3) years of the Initial
     Term (but not including the final three years or the Option Period), Tenant
     shall not be responsible for paying any increase of or reassessment in real
     estate taxes solely attributable to (i) an increase in the assessed value
     of the Building and Land (the "Property") based upon Change of Ownership as
     defined in Revenue and Taxation Code Section 61 or from major alterations,
     improvements, modifications or renovations to the Building or Land, or (ii)
     any action, including without limitation, judicial action or action by
     initiative, which serves to repeal, modify and/or limit the application of
     Article XIIIA of the California Constitution (otherwise known as
     Proposition 13);


                                       25
<PAGE>   33
     provided, however, this exclusion shall not apply to any lender which
     forecloses on the Property or takes a deed-in-lieu of foreclosure or any
     transferee of such a lender (or any subsequent transfer thereafter).

          (d) Personal Property Taxes. Tenant shall pay or cause to be paid,
     prior to delinquency, any and all taxes and assessments levied upon all
     trade fixtures, inventories and other personal property placed in and upon
     the Premises by Tenant.

          (e) Reassessment for Tenant Improvements. Any increase in real
     property taxes as the result of reassessment of the Property based upon the
     construction by Tenant of any improvements made after the Tenant
     Improvements or Landlord's Improvements shall be charged to Tenant.

     6.3 Utility Services.

          (a) Tenant to Pay. Except for those utility charges attributable to
     the Building exterior and parking and drive areas (which are Operating
     Expenses), e.g., exterior lights connected to the Building electric meter
     and in light of the fact that the Premises are separately metered for
     utilities, Tenant shall pay directly to the provider all charges for gas,
     sewer, electricity, telephone, heating, trash removal and other utility
     services (except water) used by Tenant in the Premises during the Term. If
     any such charges are not paid when due, Landlord, upon ten (10) days, prior
     notice to Tenant and failure by Tenant within such ten (10) day period to
     pay such charges, may pay the same, and any amount so paid by Landlord
     shall thereupon become due to Landlord from Tenant as Additional Rent.

          (b) Landlord's Election to Furnish. If Landlord shall elect to furnish
     any utility service to the Premises, Tenant shall pay the cost of any such
     utilities based upon the actual usage of the utilities) by Tenant without a
     profit to or overhead charge by Landlord ("Actual Cost"). In order to
     determine the actual usage, Landlord shall submeter the particular utility,
     e.g. gas. If any rationing of utilities occurs (e.g. water), allocation
     shall be made


                                       26
<PAGE>   34
     based upon the pro rata square footage which Tenant occupies in the
     Building, or such other basis as may be required by the provider of the
     services.

          (c) Interruption of Services. Except as set forth in Section 18.22,
     Landlord shall not be liable in damages or otherwise for any failure or
     interruption of any utility service being furnished the Premises, provided
     Landlord acted diligently and in good faith to provide such services and
     diligently and promptly acts to remedy any interruption in the supplying of
     the same, and no such failure or interruption shall entitle Tenant to
     terminate this Lease.

7.   MAINTENANCE, REPAIRS AND ALTERATIONS

     7.1 (a) Landlord's Responsibility. Subject to the provisions of Section
7.2, Landlord shall, during the Term, keep in good order, condition and repair
(comparable with other similar buildings in the vicinity of the Building) the
landscaping, parking lot and driveway area, all structural components of the
Building, including the floor slab and plumbing in the slab, mechanical ducts,
the electrical system up to, but not including, the panel connecting to Tenant's
transformer, the sprinkler system, the plumbing system, pipes, lines and drains
up to the exterior wall(s) of the Premises, which are not the responsibility of
Tenant or other tenants; the foundations, exterior walls (excluding the interior
surface of exterior walls and excluding all windows, doors and plate glass),
skylights, downspouts, gutters and roof, except for any damage thereto caused by
negligent act or omission of Tenant or its agents, contractors, employees or
invitees, and except for reasonable wear and tear. All of the costs incurred by
Landlord in performing its responsibilities under this Section shall be included
in Operating Costs except those costs which are expended for maintenance or
repair of items which are exclusively for Tenant's or a tenant's use, which
costs shall be billed to the tenant which is using the equipment or system.


                                       27
<PAGE>   35
          (b) Tenant's Right to Make Repairs. If Tenant provides written notice
     (or oral notice, which oral notice may be by facsimile transmission with
     receipt thereof to be confirmed by telephone, in the event of an emergency
     such as damage or destruction to or of a structural component, or any
     electrical, plumbing, mechanical or telecommunications system of or in the
     Building or the Premises and said item shall be Landlord's responsibility
     to so repair (including but not limited to damage to the roof, or exterior
     window or door)) to Landlord of an event or circumstance which requires the
     action of Landlord with respect to repair and/or maintenance (excluding
     therefrom any repair obligation of the utility company), and Landlord fails
     to provide such action within a reasonable period of time, given the
     circumstances, after the receipt of such notice, but in any event not later
     than twenty-one (21) days after receipt of such notice, then Tenant may
     proceed to take the required action upon delivery of an additional ten (10)
     business days' notice to Landlord specifying that Tenant is taking such
     required action (provided, however, that no such second notice shall be
     required in the event of an emergency, and if such action was required
     under the terms of the Lease to be taken by Landlord and was not taken by
     Landlord within such ten (10) day period, then Tenant shall be entitled to
     prompt reimbursement by Landlord of Tenant's reasonable costs and expenses
     in taking such action plus interest thereon at the Interest Rate (as
     hereinafter defined in Section 18.3). In the event Tenant takes such
     action, and such work will affect the Building Systems (including, without
     limitation, any intra building network cable) or the structural integrity
     of the Building or the roof of the Building, Tenant shall use only those
     contractors used by Landlord in the Building for work on such systems
     unless such contractors are unwilling or unable to perform, or timely
     perform, such work, in which event Tenant may utilize the services of any
     other qualified contractor licensed for the trade involved which normally
     and regularly performs similar work in Class A Buildings. Further, if
     Landlord does not deliver a detailed written objection to Tenant within
     thirty (30) days after receipt of an invoice by Tenant of its costs of
     taking action which Tenant claims should have been taken by Landlord, and
     if such invoice from Tenant sets forth a reasonably particularized
     breakdown of its costs and expenses in


                                       28
<PAGE>   36
     connection with taking such action on behalf of Landlord, then Tenant shall
     be entitled to deduct from rent payable by Tenant under the Lease, the
     amount set forth in such invoice. If, however, Landlord delivers to Tenant
     within thirty (30) days after receipt of Tenant's invoice, a written
     objection to the payment of such invoice, setting forth with reasonable
     particularity Landlord's reasons for its claim that such action did not
     have to be taken by Landlord pursuant to the terms of the Lease or that the
     charges are excessive (in which case Landlord shall pay the amount it
     contends would not have been excessive) or that the action was unwarranted,
     then Tenant shall not be entitled to such deduction from rent, but as
     Tenant's sole remedy, Tenant may proceed to claim a default by Landlord or,
     if elected by either Landlord or Tenant, the matter shall proceed to
     resolution by the selection of an arbitrator to resolve the dispute, which
     arbitrator shall be selected and qualified pursuant to the procedures set
     forth in Section 19.4 and whose costs shall be paid for by the losing
     party, unless it is not clear that there is a "losing party," in which
     event the costs of arbitration shall be shared equally.

     7.2 Tenant's Responsibility. Tenant shall, during the Term, keep in good
order, condition and repair the non-structural portion of the Premises and every
part thereof, including, without limitation, all plumbing pipes and fixtures in
the Premises, HVAC equipment whether located inside or outside the Premises,
electrical and lighting facilities and equipment within the Premises, fixtures,
interior walls and interior surface of exterior walls, ceilings, floors and
floor coverings, windows, doors, plate glass, entrances and vestibules located
within the Premises and all telecommunication and networking equipment. Tenant
shall paint the interior office and demising walls as often as may be required
to keep the Premises neat and attractive. Tenant shall provide all janitorial
services necessary to keep the Premises in a clean, good and sanitary condition.

     If Tenant fails to perform its obligations under this Paragraph 7.2,
notwithstanding any other provisions hereof, Landlord may, at its option, after
ten (10) days' written notice to Tenant and failure by Tenant to so perform in
such ten (10)


                                       29
<PAGE>   37
day period, enter upon the Premises and put the same in first-class condition
and repair and the cost incurred by Landlord in connection therewith shall be
reimbursed by Tenant as additional rent with interest thereon at the Interest
Rate from the date such cost shall be incurred by Landlord until the date Tenant
shall reimburse Landlord for such cost.

     7.3 Condition Upon Surrender. On the last day of the Term, or on any sooner
termination, unless agreed otherwise in writing by Landlord, Tenant shall remove
its personal property and trade fixtures (those paid for by Tenant) from the
Premises, surrender the Premises to Landlord in the same condition as on the
Commencement Date, ordinary wear and tear and damage by fire, the elements or
any other cause beyond the control of Tenant excepted.

     7.4 Improvements by Tenant. Tenant shall not, without prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed and
which consent shall be provided by Landlord pursuant to the receipt by Landlord
of a five (5) business days' notice from Tenant, make any alterations,
improvements, remodeling or additions to the Premises or to fixtures installed
therein in accordance with approved fixture plans, or mark, paint, drill or in
any way deface any portion of the Premises. Tenant may, however, make
nonstructural alterations to the Premises without Landlord's prior written
consent and without notice to Landlord. Landlord shall have the right at all
reasonable times to post and keep posted on the Premises such notices of
non-responsibility as Landlord may deem necessary for the protection of Landlord
from mechanic's liens and materialmen's liens. All alterations and improvements
shall be installed at Tenant's sole expense, in compliance with all applicable
laws, permit requirements and any covenants, conditions or restrictions of
record, by a licensed contractor, shall be done in a good and workmanlike manner
conforming in quality and design with the Premises existing as of the
Commencement Date, and shall not interfere with access to other tenants in the
Building. All alterations and improvements made by Tenant (excluding Tenant's
trade fixtures and personal property paid for by Tenant) shall be and become the
property of Landlord upon installation and shall not be deemed Tenant's
personal property. Notwithstanding any other provisions of this Lease, Tenant
shall be solely responsible for the maintenance and


                                       30
<PAGE>   38
repair of any alterations and improvements made by it to the Premises.

     7.5 Sanitary Condition. Tenant shall keep the Premises at all times in a
neat, clean and sanitary condition, shall neither commit nor permit any waste or
nuisance thereon, and shall keep the walks and parking areas free from Tenant's
waste or debris.

8.   FIXTURES AND PERSONAL PROPERTY

     8.1 Fixtures and Personal Property. Tenant, at Tenant's expense, may
install any trade fixtures, equipment and furniture in the Premises; provided,
that such items are installed and are removable without damage to the structure
of the Building. Landlord reserves the right to reasonably approve or disapprove
of window coverings or treatments visible from outside the Premises on wholly
aesthetic grounds based on a uniform program which Landlord shall have
instituted for the Building. Such improvements must be submitted for Landlord's
written approval prior to installation, or Landlord may remove or replace such
items at Tenant's sole expense. Said trade fixtures, equipment and furniture
shall remain Tenant's property and shall be removed by Tenant upon expiration of
the Term, or earlier termination of this Lease or at any time during the Term
hereof. Tenant shall repair, at Tenant's sole expense, all damage to exterior
walls, roof or slab caused by the installation or removal of trade fixtures,
equipment, furniture or temporary improvements. If Tenant fails to remove the
foregoing items on termination of this Lease, Landlord may keep and use them or
remove any or all of them at Tenant's cost and cause them to be stored or sold
in accordance with applicable law.

9.   USE AND COMPLIANCE WITH LAWS

     9.1 General Use and Compliance with Laws. Tenant shall only use the
Premises for the Permitted Uses specified in the Basic Lease Information and for
no other use without the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed; provided, however, Landlord shall have
the right within its sole discretion to refuse to allow a use if it includes the
use of Hazardous Materials.


                                       31
<PAGE>   39
Tenant shall, at Tenant's sole cost and expense, comply with all of the
requirements of municipal, county, state, federal and other applicable
governmental authorities, now in force, or which may hereafter be in force,
pertaining to Tenant's use of the Premises, Building, parking and drive areas
and secure any necessary permits. Tenant, in Tenant's use and occupancy of the
Premises, shall not subject the Premises to any use which would tend to damage
any portion thereof or which shall in any way increase the existing rate of any
insurance on the Building (unless Tenant shall elect to pay such increase in
premiums) or any portion thereof or cause any cancellation of any insurance
policy covering the Building or portion thereof. Notwithstanding the above, if a
change in any law, ordinance or regulation requires that the Lot, Building or
Premises be modified in order for Tenant to continue to occupy the Premises for
the Permitted Uses, then in such case Tenant shall be responsible for the cost
of such modification.

     9.2 Signs. Tenant shall not install any sign on the exterior of the
Building without Landlord's prior written approval, which approval shall not be
unreasonably withheld or delayed. Any exterior sign shall conform to and be
approved in accordance with the City of Berkeley's Sign Ordinance. Prior to
submission to the City for approval, Tenant shall submit its written Plans to
Landlord for approval. Any sign placed by Tenant on the Premises or Building
shall be installed at Tenant's sole cost and expense, and shall contain only
Tenant's name, or the name of any affiliate of Tenant actually occupying the
Premises and the company logo, and no advertising matter. Tenant shall remove
any such sign upon termination of this Lease and shall return the portion of the
Premises affected by the placement or removal of the sign(s) to their condition
prior to the placement or erection of said sign(s).

     9.3 Parking and Parking Access. Any governmental charges or surcharges or
other monetary obligations imposed relative to parking rights with respect to
the Premises, Building and parking area shall be considered as Impositions and
shall be payable by Tenant under the provisions of Article 6 hereinabove.
Landlord shall not charge for parking. Tenant shall have the right, in common
with other tenants and occupants of the Building, and their customers, invitees
and guests, to park in the Building's parking facilities ("Parking Facilities")
without charge subject to the reasonable and non-discriminatory terms and
conditions, as


                                       32
<PAGE>   40
may from time-to-time be established by Landlord. Tenant agrees not to
overburden the parking facilities and agrees to cooperate with Landlord and
other tenants in the use of the parking facilities. Landlord reserves the right
in its reasonable and non-discriminatory discretion to determine whether the
parking facilities are becoming crowded and to allocate and assign parking
spaces among tenants, subtenants, customers and invitees. Landlord shall not
discriminate against Tenant in the exercise of any of its rights under this
Article. Landlord shall make available to the tenants of the Building at a
minimum that number necessary to satisfy the City of Berkeley parking
requirements for parking as of the date this Lease is executed seven (7) days
per week, every day of the year in the Parking Facilities. Should Landlord
provide reserved, segregated, preferred, priority, or block parking to other
tenants, the same shall be made available to Tenant on a pro-rata basis.

     9.4 Floor Load. Tenant shall not place a load upon any portion of the
floor of the Premises in excess of 300 psi.

     9.5 Truck Pickup and Deliveries. All truck deliveries to and from the
Premises, except for mail and small packages, shall be made from the loading
docks which access the Premises and so as to cause the minimum amount of
interference with the business of other tenants. Trucks shall not park or load
or unload in the Parking Facilities, nor shall they block the drive areas and
ingress and egress for vehicles. Landlord reserves the right to post signs
regulating truck access to and from the Building and Lot so long as such
regulation does not discriminate against Tenant.

     9.6 Hazardous Materials. Except for ordinary and general office supplies
typically used in the ordinary course of business within offices (some or all of
which may constitute Hazardous Materials pursuant to the terms of this Section
9.6) and which supplies shall be used by Tenant for their prescribed uses in
accordance with the highest standard as may be customary for office use, Tenant
shall not cause or permit the escape, disposal or release of any biologically or
chemically active or other substances or materials which are classified or
deemed hazardous by any agency or are defined as hazardous under any local,
state, or federal environmental statue or regulation, or as defined in CERCLA
(42 U.S.C. subsections 9601(23) and (24))("Hazardous


                                       33
<PAGE>   41
Materials"). Tenant shall not allow the storage or use of such Hazardous
Materials in any manner not sanctioned by law or by the highest standards
prevailing in the industry for the storage and use of such Hazardous Materials,
nor allow to be brought into the Building or onto the Property any such
Hazardous Materials, except to use in the ordinary course of Tenant's business,
and then, except for ordinary office supplies, only after written notice is
given to Landlord of the identity of such Hazardous Materials. In addition,
Tenant shall execute certificates, representations and the like from
time-to-time at Landlord's lender's request or at a prospective buyer's request
concerning Tenant's best knowledge and belief regarding the presence of
Hazardous Materials on the Premises. In all events, Tenant shall indemnify
Landlord in the manner elsewhere provided in this Lease from any release of
Hazardous Materials in the Premises or on the Property not caused by Landlord or
persons acting under Landlord (including, but not limited to, all costs of
dealing with all governmental agencies with jurisdiction, testing, reporting,
monitoring, remediation, clean-up or disposal for such Hazardous Materials)
occurring while Tenant is in possession, or elsewhere if caused by Tenant or
persons acting under Tenant. The within covenants shall survive the expiration
or earlier termination of the Lease Term.

     Landlord shall indemnify Tenant in the manner elsewhere provided in this
Lease from any liability which Tenant may have as the result of any release of
Hazardous Materials in the Building or on the Property (including, but not
limited to, all costs of, dealing with all government agencies with
jurisdiction, testing, reporting, monitoring, remediation, clean-up or disposal
for such Hazardous Materials) caused by Landlord or persons acting under
Landlord, but excluding any tenant or person acting under a tenant. Landlord
hereby represents and warrants that as of the date hereof, to the best of
Landlord's knowledge i.e. that of the partners constituting Landlord, there are
no Hazardous Materials on or about the Premises, the Building or the Lot which
are above the levels permitted by the California Environmental Protection Agency
and other agencies with jurisdiction, and applicable Laws. If Tenant knows or
has reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises or the Building, other than as
previously consented to by Landlord, Tenant shall immediately give Landlord
written notice thereof, together with a copy of any statement, report, notice,
registration, application, permit,


                                       34
<PAGE>   42
license, claim, action or proceeding given to, or received from, any
governmental authority or private party concerning the presence, spill release,
discharge of, or exposure to, such Hazardous Substance including but not limited
to all such documents or statements as may be involved in any Reportable Use
involving the Premises.

10.  DAMAGE AND DESTRUCTION

     10.1 Reconstruction. If the Premises are damaged or destroyed during the
Term, Landlord shall, provided that repairs thereto can be made within one
hundred eighty (180) days after the date of such damage or destruction and to
the extent that insurance proceeds are available therefor and are not applied by
any lender against payment of an existing loan on the Building or Lot, except as
hereinafter provided, diligently repair or rebuild them to the same or higher
standard in which they existed immediately prior to such damage or destruction.
Notwithstanding the foregoing, as provided in Section 10.4 below, Landlord shall
bear a portion of the amount by which insurance proceeds shall not be available
to repair such damage or destruction to a maximum amount of $50,000.

     10.2 Rent Abatement. Monthly Rent and any Additional Rent due and payable
hereunder shall be abated proportionately, during any period in which, by reason
of any such damage or destruction, Tenant reasonably determines that there is
substantial interference with the operation of Tenant's business in the
Premises, having regard to the extent to which Tenant may be required to
discontinue its business in the Premises. Such abatement shall continue for the
period commencing with such damage or destruction and ending with a substantial
completion by Landlord of the work of repair or reconstruction which Landlord is
obligated to do in accordance with the provisions herein. If it be determined by
Tenant in its reasonable determination that continuation of business is not
practical pending reconstruction, Rent due and payable hereunder shall abate to
the extent of proceeds from rental loss insurance until reconstruction is
substantially completed or until business is totally or partially resumed,
whichever is the earlier; provided, however, this limitation on rental abatement
to the extent of rental loss insurance shall only be effective if Landlord
carries such


                                       35
<PAGE>   43
insurance and it is in effect at the time of the damage or destruction.

     10.3 Excessive Damage or Destruction. If the Premises is damaged or
destroyed to the extent that Landlord, based upon its contractor's advice,
determines that it cannot, with reasonable diligence, be fully repaired or
restored by Landlord within one hundred eighty (180) days after the date of the
damage or destruction, Landlord or Tenant may elect to terminate this Lease.
Notwithstanding the fact that the Premises have been damaged or destroyed,
Landlord, based upon the advice of its contractor, shall determine whether the
Building can be fully repaired or restored within the one hundred eighty (180)
day period, and Landlord's determination shall be binding upon Tenant. Landlord
shall notify Tenant of its determination, in writing, within forty-five (45)
days after the date of the damage or destruction. If Landlord determines that
the Building can be fully repaired or restored within the one hundred eighty
(180) day period, or if it is determined that such repair or restoration cannot
be made within said period but Landlord does not elect to terminate within
forty-five (45) days from the date of said determination, Tenant may terminate
this Lease by giving Landlord notice within the earlier of fifteen (15) days
after the forty-five (45) day period or after receiving notice from Landlord
that it cannot repair within the requisite period and elects not to terminate.
In the event neither Landlord nor Tenant shall elect to terminate this Lease as
set forth above, this Lease shall remain in full force and effect and Landlord
shall diligently repair and restore the damage as soon as reasonably possible
and the Monthly Rent and Additional Rent shall abate as set forth above.

     10.4 Uninsured Casualty. Notwithstanding anything contained herein to the
contrary, in the event of damage to or destruction of all or any portion of the
Building in excess of Fifty Thousand Dollars ($50,000) which is not fully
covered by the available insurance proceeds received by Landlord under the
insurance policies required to be carried by Landlord under Article 5
hereinabove, Landlord may terminate this Lease by written notice to Tenant,
given within thirty (30) days after the date of notice to Landlord that said
damage or destruction is not so covered. If Landlord does not elect to terminate
this Lease, the Lease shall remain in full force and effect and the Building
shall be repaired and rebuilt in accordance with the provisions


                                       36
<PAGE>   44
for repair set forth in this Article 10. Notwithstanding the above, Tenant shall
have the option for fifteen (15) days after receipt of Landlord's termination
notice to contribute the additional sums over Fifty Thousand dollars ($50,000)
which is not fully covered by the available insurance proceeds received by
Landlord under the insurance policies required to be carried by Landlord under
Article 5 hereinabove necessary to repair and rebuild the Building in which case
Landlord shall proceed to restore the Building as required herein. Said
contribution by Tenant shall not be deemed a loan or entitle Tenant to any
interest in the Building. Notwithstanding anything to the contrary contained in
this Article 10, if the Premises are damaged or destroyed, and (I) Landlord
shall not elect to terminate this Lease by reason thereof, (ii) under the
provisions of this Article 10, Landlord shall not be obligated to repair such
damage or destruction (whether by reason of any application of insurance
proceeds by any lender or otherwise) and (iii) Landlord shall not in fact
repair such damage or destruction, then Tenant shall have the right to
terminate this Lease by written notice to Landlord.

     10.5 Waiver. With respect to any destruction which Landlord is obligated to
repair or may elect to repair under the terms of this Article 10, Tenant hereby
waives all rights to terminate this Lease pursuant to rights otherwise presently
or hereafter accorded by law to tenants, including, but not limited to, Civil
Code Sections 1932(2) and 1933(4), except as expressly otherwise provided
herein.

11.  EMINENT DOMAIN

     11.1 Automatic Termination. If the entire Premises or the Building, or so
much of either as to make the Premises not reasonably adequate for the conduct
of Tenant's business (including the accommodation of all of Tenant's employees
and equipment comfortably therein) notwithstanding restoration by Landlord as
hereinafter provided, shall be taken under the power of eminent domain, this
Lease shall automatically terminate as of the date on which the condemning
authority takes possession.

     11.2 Rent Abatement. In the event of any taking of the Premises under the
power of eminent domain which does not so


                                       37
<PAGE>   45
result in a termination of this Lease, the Monthly Rent payable hereunder shall
be equitably reduced, effective as of the date on which the condemning authority
takes possession, in an amount based upon Tenant's ability to use and enjoy the
remaining portion of the Premises for its intended purposes under this Lease,
which shall include all of Tenant's precondemnation uses, using Tenant's
proportion of floor area as indication of Tenant's ability to use and enjoy the
remaining Premises. Landlord shall promptly, at its expense, restore the portion
of the Premises not so taken to as near its former condition as is reasonably
possible, and this Lease shall continue in full force and effect. In the event
that the remaining portion of the Premises is not fully restored to the former
condition of the Premises, Tenant will have the right to terminate this Lease as
of the date on which the condemning authority takes possession of the condemned
portion of the Premises upon thirty (30) days' prior written notice to Landlord.

     11.3 Condemnation Award. Any award for taking of all or any part of the
Premises or the Building under the power of eminent domain shall be the property
of Landlord, whether such award shall be made as compensation for the diminution
in value of the leasehold or for taking of the fee. Nothing contained herein,
however, shall be deemed to preclude Tenant from obtaining any award to Tenant
for loss of or damage to Tenant's business, "goodwill" or trade fixtures and in
connection with Tenant's relocation, displacement, inability to relocate or the
removal of personal property. Landlord will cooperate with Tenant if Tenant
seeks to recover such amounts, in the same action or a separate action.

     11.4 Sale Under Threat of Condemnation. A sale by Landlord to any authority
having the power of eminent domain, either under threat of condemnation or while
condemnation proceedings are pending, shall be deemed a taking under the power
of eminent domain for all purposes under this Article.

12.  DEFAULTS; REMEDIES

     12.1 Defaults. The occurrence of any one or more of the following events
shall constitute a default hereunder by Tenant ("Event of Default"):


                                       38
<PAGE>   46
          (a) The failure by Tenant to timely make any payment of Rent,
     Additional Rent or other payment required to be made by Tenant hereunder,
     such failure continuing for a period of five (5) business days after
     written notice of such failure.

          (b) The failure by Tenant to observe or perform any of the express or
     implied covenants or provisions of this Lease to be observed or performed
     by Tenant, other than as specified in (a) above, where such failure shall
     continue for a period of thirty (30) days after written notice from
     Landlord; provided, however, that if the nature of Tenant's default is such
     that more than thirty (30) days are reasonably required for its cure, then
     Tenant shall not be deemed to be in default if Tenant shall commence such
     cure within such thirty (30) day period and thereafter diligently prosecute
     such cure to completion.

          Any such notice under these sub-paragraphs (a) and (b) shall not be in
     lieu of, but in addition to, any notice required under California Code of
     Civil Procedure Section 1161.

     12.2 Remedies. Upon an Event of Default, Landlord shall have the following
remedies, in addition to all other rights and remedies provided by law or
otherwise provided in this Lease, to which Landlord may resort cumulatively or
in the alternative:

          12.2.1 Landlord may continue this Lease in full force and effect, and
     this Lease shall continue in full force and effect as long as Landlord does
     not terminate this Lease, and Landlord shall have the right to collect rent
     when due.

          12.2.2 Landlord, if an Event of Default shall have occurred, may
     terminate Tenant's right to possession of the Premises at any time by
     giving written notice to that effect and, at Tenant's expense, relet the
     Premises or any part thereof, including, without limitation, broker's
     commissions, expenses of cleaning and redecorating the Premises required by
     the reletting and like costs. Reletting may be for a period shorter or
     longer than the


                                       39
<PAGE>   47
     remaining Term of this Lease. Acts of maintenance, efforts to relet the
     Premises or the appointment of a receiver on Landlord's initiative to
     protect Landlord's interest under this Lease shall not constitute a
     termination of Tenant's right to possession. On termination, Landlord has
     the right to remove all Tenant's personal property, signs and trade
     fixtures and store same at Tenant's cost and to recover from Tenant as
     damages:

               (a) The worth at the time of award of unpaid rent and other sums
          due and payable which had been earned at the time of termination; plus

               (b) The worth at the time of award of the amount by which the
          unpaid rent and other sums due and payable which would have been
          payable after termination until the time of award exceeds the amount
          of such rent loss that Tenant proves could have been reasonably
          avoided; plus

               (c) The worth at the time of award of the amount by which the
          unpaid rent and other sums due and payable for the balance of the Term
          after the time of award exceeds the amount of such rent loss that
          Tenant proves could be reasonably avoided; plus

               (d) Any other amount necessary which is to compensate Landlord
          for all the detriment proximately caused by Tenant's failure to
          perform Tenant's obligations under this Lease, or which, in the
          ordinary course of things, would be likely to result therefrom,
          including, without limitation, any costs or expenses incurred by
          Landlord: (I) in retaking possession of the Premises; (ii) in
          maintaining, repairing, preserving, restoring, replacing, cleaning,
          altering or rehabilitating the Premises or any portion thereof,
          including such acts for reletting to a new tenant or tenants; (iii)
          for leasing commissions; or (iv) for any other costs necessary or
          appropriate to relet the Premises; plus

               (e) At Landlord's election, such other amounts in addition to or
          in lieu of the foregoing as


                                       40
<PAGE>   48
          may be permitted from time-to-time by the laws of the State of
          California.

               The "worth at the time of award" of the amounts referred to in
          Sections 12.2.2(a) and 12.2.2(b) is computed by allowing interest at
          the Interest Rate on the unpaid rent and other sums due and payable
          from the termination date through the date of award. The "worth at the
          time of award" of the amount referred to in Section 14.2.2(c) is
          computed by discounting such amount at the discount rate of the
          Federal Reserve Bank of San Francisco at the time of award plus one
          percent (1%).

          12.2.3 Landlord may, with the appropriate order from a Court of
     competent jurisdiction, with or without terminating this Lease, re-enter
     the Premises and remove all persons and property from the Premises; such
     property may be removed and stored in a public warehouse or elsewhere at
     the cost of and for the account of Tenant. No re-entry or taking possession
     of the Premises by Landlord pursuant to this Paragraph shall be construed
     as an election to terminate this Lease unless a written notice of such
     intention is given to Tenant.

          12.2.4 No delay or omission of Landlord to exercise any right or
     remedy shall be construed as a waiver of any such right or remedy or of any
     default by Tenant hereunder.

          12.2.5 Notwithstanding any other provision of subsection 12.2,
     Landlord shall not have the right to exercise its rights under the Unlawful
     Detainer provisions of the Civil Code of Procedure Section 1161 et seq for
     the nonpayment of amounts which do not constitute monthly rent, eg.
     Operating Expense reimbursements, unless the non monthly rent monetary
     payments claimed by Landlord are included in an Unlawful Detainer action
     for nonpayment of monthly rent.

     12.3 Default by Landlord. Except in emergencies, Landlord shall not be
deemed to be in default in the performance of any obligation required to be
performed by it hereunder unless and until it has failed to perform such
obligation promptly and within thirty (30) days after written notice by Tenant
to


                                       41
<PAGE>   49
Landlord specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
than thirty (30) days are required for its performance then Landlord shall not
be deemed to be in default if it shall commence such performance within such
thirty (30) day period and thereafter diligently prosecute the same to
completion.

13.  ASSIGNMENT AND SUBLETTING

     13.1 Assignment and Subletting: Prohibition. Tenant shall not assign,
mortgage, pledge or otherwise transfer this Lease, in whole or in part, nor
sublet all or any part of the Premises, without the prior written consent of
Landlord in each instance, which shall not be unreasonably withheld or delayed.
Tenant shall submit each proposed assignment or sublease agreement to Landlord
for Landlord's approval. No assignment or subletting by Tenant shall relieve
Tenant of any obligation under this Lease, including Tenant's obligation to
pay Rent and Additional Rent hereunder. Any purported assignment or subletting
contrary to the provisions hereof without consent shall be void. The consent by
Landlord to any assignment or subletting shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting. Provided,
it shall be reasonable for Landlord to refuse to consent to a proposed
assignment or subletting if the proposed use is not a use generally comparable
to the use of comparable space in the Building, or if the proposed assignee or
sublessee shall require the use of parking in excess of the number of parking
spaces normally used by Tenant, or if the proposed assignee will use any
Hazardous Materials in or about the Premises except those used in normal office
use. Notwithstanding the above, upon prior written notice to Landlord (but
without receipt of Landlord's consent), Tenant may assign or sublet or permit
occupancy of the Premises to or by any person or entity controlling, controlled
by, or under common control (directly or indirectly) with Tenant or anyone who
buys Tenant's business at the Premises and continues to operate the business of
Tenant or to any entity which acquires all or part of Tenant, or which is
acquired in whole or in part by Tenant so long as such transaction was not
entered into as a subterfuge to avoid the obligations and restrictions of the
Lease.


                                       42
<PAGE>   50
     13.2 Bonus Rental. If for any assignment or sublease, Tenant receives rent
or other consideration, either initially or over the term of the assignment or
sublease, in excess of the Rent called for hereunder, or in case of the sublease
of a portion of the Premises (not including space sharing as permitted above),
in excess of such Rent fairly allocable to such portion, after appropriate
adjustments to assure that all other payments required to be made by Tenant
hereunder are appropriately taken into account ("Profits"), Tenant shall pay to
Landlord, as Additional Rent hereunder, forty percent (40%) of the Profits
received by Tenant promptly after its receipt.

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

     13.4 Waiver. Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any assignee
or sublessee, or failure by Landlord to take action against any assignee or
sublessee, Tenant waives notice of any default of any assignee or sublessee and
agrees that Landlord may, at its option, proceed against Tenant without having
taken action against or joined such assignee or sublessee, except that Tenant
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.


                                       43
<PAGE>   51
     13.5 Release. Whenever Landlord conveys its interest in the Building,
Landlord shall be automatically released from the further performance of
covenants on the part of Landlord herein contained; and from any and all further
liability, obligations, costs and expenses, demands, causes of action, claims or
judgments arising from or growing out of, or connected with this Lease after the
effective date of said release. The effective date of said release shall be the
date the assignee executes an assumption of such an assignment whereby the
assignee expressly agrees to assume, as of the date of the assignment, all of
Landlord's future obligations, duties, responsibilities and liabilities with
respect to this Lease. If requested, Tenant shall execute a form of release and
such other documentation as may be required to further effect the provisions of
this Article 13.

14.  OFFSET STATEMENT, ATTORNMENT AND SUBORDINATION

     14.1 Offset Statement. Within twenty (20) days after receipt of request
therefor by Landlord, or if on any sale, assignment or hypothecation by Landlord
of Landlord's interest in the Building, or any part thereof, an offset statement
shall be required from Tenant, Tenant shall deliver, in recordable form, a
certificate (Estoppel Certificate) to any proposed mortgagee or purchaser, and
to Landlord, certifying (if such be the case) that this Lease is in full force
and effect; the date of Tenant's most recent payment of Rent, the amount of any
security deposit or prepaid rent paid by Tenant, and that Tenant, to the best of
Tenant's knowledge, has no defenses or offsets outstanding, or stating those
claimed by Tenant, that Landlord to the best of Tenant's knowledge (if such be
the case) is not in default under any provision of the Lease and any other
information reasonably requested. Upon Tenant's failure to deliver said
statement in time, Landlord and Landlord's lender or any prospective buyer of
the Building may deem the following as true and rely on such and it shall be
conclusive upon Tenant that: (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord's performance and Tenant has no right of offset,
counterclaim or deduction against Rent hereunder, and (c) no more than one
period's Base Rent has been paid in advance.


                                       44
<PAGE>   52
     Landlord hereby agrees to provide to Tenant an Estoppel Certificate signed
by Landlord, containing the same types of information, and within the same
periods of time, as are set forth above, except such changes as are reasonably
necessary to reflect that the Estoppel Certificate is being granted and signed
by Landlord to Tenant or Tenant's lender, assignee or sublessee, rather than
from Tenant to Landlord or to a lender or purchaser.

     14.2 Attornment. Tenant shall, in the event any proceedings are brought for
the foreclosure of, or in the event of exercise of the power of sale under any
mortgage or deed of trust made by the Landlord, its successors or assigns,
encumbering the Premises, or any part thereof, or in the event of termination of
a ground lease, if any, and if so requested, attorn to the purchaser upon such
foreclosure or sale or upon any grant of a deed in lieu of foreclosure and
recognize such purchaser as the Landlord under this Lease.

     14.3 Subordination & Non-Disturbance. The rights of Tenant hereunder are
and shall be, at the election of the mortgagee, subject and subordinate to the
lien of such mortgage, or the lien resulting from any other method of financing
or refinancing, now or hereafter in force against the Building, and to all
advances made or hereafter to be made upon the security thereof; provided,
however, that notwithstanding such subordination, so long as Tenant is not in
default under any of the terms, covenants and conditions of this Lease with any
applicable cure period having expired, neither this Lease nor any of the rights
of Tenant hereunder upon Tenant's covenanting that Tenant is not in default
hereunder with any applicable cure period having expired, shall be terminated or
subject to termination by any trustee's sale, any action to enforce the
security, or by any proceeding or action in foreclosure. If requested, Tenant
agrees to execute whatever documentation may be reasonably required to further
effect the provisions of this Article.

     Landlord agrees to provide Tenant with commercially reasonable
non-disturbance agreement(s) in favor of Tenant from any Superior Mortgagee(s)
of Landlord who later come into existence at any time prior to the expiration of
the Term of the Lease in consideration of, and as a condition precedent to,
Tenant's agreement to be bound by Lease Section 14.3.


                                       45
<PAGE>   53
      14.4 Financial Statements. If Landlord desires to finance, refinance or
sell the Premises or the Building, or any part thereof, Tenant and all
Guarantors shall deliver to any potential lender or purchaser designated by
Landlord such financial statements of Tenant and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to,
Tenant's financial statements for the past 3 years. All such financial
statements shall be received by Landlord and such Lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

15. NOTICES

      15.1 Notices. All notices required to be given hereunder shall be in
writing (except for notice required under the Unlawful Detainer Statutes, which
shall be given according to law) and mailed postage prepaid by certified or
registered mail, or air courier, return receipt requested, by personal delivery,
or by facsimile transmission followed by confirmation of receipt by telephone
with the hard copy immediately forwarded by first class mail to the appropriate
address indicated below or at such other place or places as either Landlord or
Tenant may, from time to time, respectively, designate in a written notice given
to the other. Notices shall be deemed sufficiently served on the date of
facsimile transmission, or four (4) days after the date of mailing thereof, or
upon personal delivery, or one day after deposit with an overnight/next day
courier.

       To Landlord:             Thomas J. Gram
                                Fourth Street Partners
                                5800 Shellmound St., Suite 210
                                Emeryville, CA 94608
                                FAX:    (510) 652-1967

       To Tenant:               DaMert Company, Inc.
                                1609 Fourth Street
                                Berkeley, CA.
                                Att: Fred DaMert
                                FAX: (510)

      In the event Landlord shall so designate by written notice to Tenant the
name and address of any beneficiary of a deed of trust or mortgagee covering the
Premises, Tenant shall also send

                                       46
<PAGE>   54
to such beneficiary a copy of any notice claiming non-performance or default
sent by Tenant to Landlord.

16. SUCCESSORS BOUND

      16.1 Successors Bound. This Lease and each of its covenants and conditions
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, successors and legal representatives and their
respective assigns, subject to the provisions hereof. Whenever in this Lease a
reference is made to the Landlord, such reference shall be deemed to refer to
the person in whom the interest of the Landlord shall be vested, and Landlord
shall have no obligation hereunder as to any claim arising after the transfer of
its interest in the Premises if such vested person or entity shall have assumed
the obligations of Landlord hereunder as of such date. Any successor or assignee
of the Tenant who accepts an assignment or the benefit of this Lease and enters
into possession or enjoyment hereunder shall thereby assume and agree to perform
and be bound by the covenants and conditions thereof. Nothing herein contained
shall be deemed in any manner to give a right of assignment to Tenant without
the written consent of Landlord, except as set forth in Article 13.

17. INTENTIONALLY OMITTED.

18. MISCELLANEOUS

      18.1 Waiver. No waiver of any default or breach of any covenant by either
party hereunder shall be implied from any omission by either party to take
action on account of such default if such default persists or is repeated, and
no express waiver shall affect any default other than the default specified in
the waiver, and then said waiver shall be operative only for the time and to the
extent therein stated. Waivers of any covenant, term or condition contained
herein by either party shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by
either party to or of any act by either party requiring further consent or
approval shall not be deemed to waive or render unnecessary their consent or
approval to or of any subsequent similar acts.


                                       47
<PAGE>   55
      18.2 Easements. Landlord reserves the right to (a) alter the boundaries of
the Lot and (b) grant easements on the Lot and dedicate for public use portions
thereof without Tenant's consent; provided, however, that no such grant or
dedication shall materially interfere with Tenant's use of and access to the
Premises or with Tenant's ingress to and egress from the Building.

      18.3 Interest. Any amount due from Tenant to Landlord, or from Landlord to
Tenant, hereunder which is not paid when due shall bear interest at the then-
prime/reference rate of Bank of America NT & SA, plus four (4) percentage
points, or the maximum rate allowed by law, if applicable, whichever is less,
from ten (10) days after notice of amount due is given, but the payment of such
interest shall not excuse or cure any default by Tenant under this Lease.

      18.4 No Light. Air or View Easement. Any diminution or shutting off of
light, air or view by any structure which may be erected on lands adjacent to or
in the vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.

      18.5 Partnership and Corporate Authority.

            (a) The persons executing the Lease on behalf of Tenant covenant and
warrant that they are officers of Tenant and have been duly authorized and
directed to execute this Lease on Tenant's behalf; further, Tenant shall deliver
to Landlord a duly adopted resolution of the Board of Directors of Tenant, and
certified by the Secretary of the corporation, authorizing the corporation to
enter into this Lease and authorizing and directing the President to execute the
Lease on behalf of the corporation.

            (b) The person executing the Lease behalf of Landlord covenants
and warrants that he is the General Partner of Landlord and is authorized to
execute this Lease on Landlord's behalf.

      18.6 Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent herein stipulated shall be deemed to be other
than on account of the


                                       48
<PAGE>   56
Rent, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or pursue any other remedy provided in
this Lease.

      18.7 Limitation of Landlord's Liability. The obligations of Landlord under
this Lease shall constitute personal obligations of the individual general
partners of Landlord only up to a combined total of $100,000 during the Initial
Term and Option Period, and beyond that amount Tenant shall look solely to the
real estate that is the subject of this Lease and to no other assets of
Landlord, its partners or their personal assets for satisfaction of any
liability in respect of this Lease.

      18.8 Lease Guaranty. Concurrently with execution of this Lease, Fred
DaMert ("Guarantor") will execute a Lease Guaranty. Under this Lease and the
Lease Guaranty, the Guarantor shall be personally liable, jointly and severally,
for all of Tenant's obligations arising during the Lease Term, provided,
however, the Lease Guaranty shall not apply to the Option Period. If during the
Initial Term, Tenant is sold or Guarantor sells its entire interest in Tenant,
and another individual with comparable net worth and liquidity executes a Lease
Guaranty in the same form, then Guarantor shall be released from all liability
under the Lease Guaranty. Further, if at the end of the fourth Lease Year of the
Lease, Tenant is not in material default under the Lease, and if the financial
condition of Tenant is as strong or stronger than that of the company at the end
of fiscal year 1995, then Guarantor shall be released from this Guaranty.

      18.9 Time. Time is of the essence of every provision hereof.

      18.10 Attorneys' Fees. In any action or proceeding, in connection with or
arising out of this Lease, which the Landlord or the Tenant may be required to
prosecute to enforce its respective rights hereunder, the unsuccessful party
therein agrees to pay all costs incurred by the prevailing party therein,
including reasonable attorneys' fees, to be fixed by the court, and said costs
and attorneys' fees shall be made a part of the judgment in said action.


                                       49
<PAGE>   57
      18.11 Captions and Article Numbers. The captions, article numbers and
table of contents appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent or such sections or articles of this Lease nor in any way affect this
Lease.

      18.12 Severability. If any term, covenant, condition or provision of this
Lease, or the application thereof to any person or circumstance, shall to any
extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Lease, or the application thereof to any person or circumstance, shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.

      18.13 Applicable Law. This Lease, and rights and obligations of the
parties hereto, shall be construed and enforced in accordance with the laws of
the State of California.

      18.14 Submission of Lease. The submission of this document for examination
and negotiation does not constitute an offer to lease, or a reservation of, or
option for leasing the Premises. This document shall become effective and
binding only upon execution and delivery hereof by Landlord. No act or omission
of any employee or agent of Landlord or of Landlord's broker shall alter,
change, or modify any of the provisions hereof.

      18.15 Holding Over. Should Tenant, or any of its successors in interest,
hold over the Premises, or any part thereof, after the expiration of the Term of
this Lease, unless otherwise agreed to in writing, such holding over shall
constitute and be construed as tenancy from month-to-month only, at a monthly
rent equal to one hundred fifty percent (150%) of the Monthly Rent owed during
the final year of the Term of this Lease as the same may be extended from time
to time. This inclusion of the preceding sentence shall not be construed as
Landlord's permission for Tenant to hold over.

      18.16 Surrender. Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises to Landlord in good order, condition and
repair, except for reasonable wear and tear or as otherwise provided in Articles
7, 10 and 11. Tenant shall not commit or allow any waste or damage


                                       50
<PAGE>   58
to be committed on any portion of the exterior walls, roof or slab. All,
property that Tenant is required to surrender shall become Landlord's property
upon the termination of this Lease. Landlord may cause any of said personal
property that is not removed from the Premises within thirty (30) days after the
date of any termination of this Lease to be removed from the Premises and stored
at Tenant's expense, or, at Landlord's election said personal property
thereafter shall belong to Landlord without the payment of any consideration,
subject to the rights of any person holding a perfected security interest
therein.

      18.17 Rules and Regulations. At all times during the Term, Tenant shall
comply with rules and regulations ("Rules and Regulations") for the Building and
the Lot, as set forth in Exhibit "D" (and such amendments as Landlord may
reasonably adopt), attached hereto and by this reference made a part hereof.
Tenant hereby acknowledges that Tenant shall not use in excess of Tenant's pro
rata share of the Building's total parking spaces as more particularly set forth
in Section 9.3. Landlord agrees that the Rules and Regulations of the Building,
attached to the Lease as Exhibit "D", shall not be changed or revised or
enforced in any unreasonable way by Landlord, nor enforced or changed by
Landlord in such a way as to interfere with the Permitted Uses. In the event any
other tenant or occupant of the Building fails to comply with the Rules and
Regulations, and such non-compliance unreasonably interferes with Tenant's use
of the Premises, Landlord shall use reasonable efforts to make such other
tenants and/or occupants comply with the Rules and Regulations.

      18.18 No Nuisance. Tenant shall conduct its business and control its
agents, employees, invitees and visitors in such a manner as not to create any
nuisance, or interfere with, annoy or disturb any other tenant or Landlord in
its operation of the Building.

      18.19 Broker. Tenant warrants that it has had no dealings with any real
estate broker or agent other than Grubb and Ellis Commercial Real Estate
Services ("Broker") in connection with the negotiation of this Lease, and that
it knows of no other real estate broker or agent who is entitled to any
commission or finder's fee as a result of representing Tenant in connection with
this Lease. Tenant agrees to indemnify Landlord and hold Landlord harmless from
and against any and all claims, demands,


                                       51
<PAGE>   59
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation, reasonable attorneys' fees and costs) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of Tenant's
dealings with any real estate broker or agent other than Broker. Landlord shall
indemnify Tenant for and hold Tenant harmless from and against any and all
claims of any person (including Landlord's broker) other than Tenant's broker
making a claim based on its representation and/or alleged representation of
Landlord in connection with this Lease and all liabilities arising out of or in
connection with such claim. Landlord shall be responsible for payment of a
commission as set forth in its agreement with CB Commercial Real Estate.

      18 .20 Landlord's Right to Perform. Upon Tenant's failure to perform any
obligation of Tenant hereunder, including without limitation, payment of
Tenant's insurance premiums, charges of contractors who have supplied materials
or labor to the Premises, etc., Landlord shall have the right to perform such
obligations of Tenant with prior notification to Tenant on behalf of Tenant and
failure by Tenant to perform within thirty (30) days following receipt of notice
thereof. Tenant shall reimburse Landlord the actual cost of Landlord's
performing such obligation on Tenant's behalf, including reimbursement of any
amounts that may be expended by Landlord, plus interest thereon at the Interest
Rate.

      18.21 Mortgage Protection. No act or failure to act on the part of
Landlord which would entitle Tenant under the terms of this Lease, or by law, to
be relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release of such obligations or a termination of this Lease unless
(a) Tenant has given notice by registered or certified mail to any beneficiary
of a deed of trust or mortgagee covering the Premises whose address shall have
been furnished to Tenant, and (b) Tenant offers such beneficiary or mortgagee a
reasonable opportunity to cure the default, including time to obtain possession
of the Premises by power of sale or of judicial foreclosure, if such should
prove necessary to effect a cure. The foregoing shall not apply to the
termination of the Lease pursuant to Section 3.4.

      18.22 Abatement of Rent. In the event that Tenant is prevented from using,
and does not use, the Premises or any


                                       52
<PAGE>   60
portion thereof, for fifteen(15) consecutive business days or thirty (30) days
in any twelve (12) month period (the "Eligibility Period") as a result of any
damage or destruction to the Premises or any repair, maintenance or alteration
performed by Landlord after the Commencement Date and required by the Lease,
which interferes with Tenant's use of the Premises, or the failure of any
utility for any cause except that of Tenant or anyone acting under Tenant, or
because of an eminent domain proceeding or because of the presence of hazardous
substances in, on or around the Building, the Premises or the site which could,
in Tenant's business judgment and taking into account the standards, guidance
and recommendations included in the definition of Applicable Laws (as set forth
in Section 19.2) with respect to hazardous substances, pose a health risk to
occupants of the Premises, then Tenant's rent shall be abated or reduced, as the
case may be, after expiration of the Eligibility Period for such time that
Tenant continues to be so prevented from using, and does not use, the Premises
or a portion thereof, in the proportion that the rentable area of the portion of
the Premises that Tenant is prevented from using, and does not use, bears to the
total rentable area of the Premises. However, in the event that Tenant is
prevented from conducting, and does not conduct, its business in any portion of
the Premises for a period of time in excess of the Eligibility Period, and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the rent for the entire Premises shall be
abated; provided, however, if Tenant reoccupies and conducts its business from
any portion of the Premises during such period, the rent allocable to such
reoccupied portion, based on the proportion that the rentable area of such
reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date such business operations
commence. If Tenant's right to abatement occurs during the Rent Abatement
Period, such Rent Abatement Period shall be extended for the number of days that
the abatement period overlapped the Rent Abatement Period ("Overlap Period").
Landlord shall have the right to extend the expiration date for a period of time
equal to the Overlap Period if Landlord sends a notice to Tenant of such
election within ten (10) days following the end of the


                                       53
<PAGE>   61
extended Rent Abatement Period. If Tenant's right to abatement occurs because of
an eminent domain taking and/or because of damage or destruction to the Premises
or Tenant's property, Tenant's abatement period shall continue until Tenant has
been given sufficient time, and sufficient access to the Premises, to rebuild
the portion of the Premises it is required to rebuild, to install its property,
furniture, fixtures, and equipment and to move in over one (1) weekend. To the
extent Tenant is entitled to abatement because of an event covered by Lease
Sections 10 [Damage & Destruction] or 11 [Eminent Domain], then the Eligibility
Period shall not be applicable.

      Subject to the provisions above, Landlord shall not be in default
hereunder or be liable for any damages directly or indirectly resulting from,
nor shall the Rent herein reserved be abated by reason of any failure to furnish
or delay in furnishing any services required to be provided by Landlord when
such failure or delay is caused by accident or any condition beyond the
reasonable control of Landlord or by the making of necessary repairs or
improvements to the Premises or to the Building, or the limitation, curtailment,
rationing or restriction on use of water or electricity, gas or any other form
of energy or any other service or utility whatsoever serving the Premises or the
Building.

      18.23 Location of Outdoor Equipment. Tenant shall not locate any equipment
on the roof unless equipment space inside the Premises or on the south side of
the building is unavailable. Further, Tenant shall not locate any equipment at
any other location outside the Premises without Landlord's written consent.
Tenant shall cover any of its roof equipment if required by the City of
Berkeley.

      18.24 Modification for Lender. If, in connection with obtaining
construction, interim or permanent financing for the Building, the lender shall
request reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or adversely affect the leasehold interest hereby created or Tenant's
rights hereunder.


                                       54
<PAGE>   62
      18.25 Recording. Neither Landlord nor Tenant shall record this Lease nor
a short form memorandum thereof without the consent of the other.

      18.26 Entire Agreement. This Lease and the Exhibits hereto set forth all
covenants, promises, agreements, conditions and understandings between Landlord
and Tenant concerning the Premises, Building and Lot, and there are no
covenants, promises, agreements, conditions or understandings, either oral or
written, between Landlord and Tenant other than as are herein set forth. Except
as herein otherwise provided, no subsequent alteration, amendment, change or
addition to this Lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by Landlord and Tenant.

      18.27 Roof Penetration. All roof penetrations necessary for any additional
improvements which Tenant wishes to make in addition to the Tenant Improvements
to be installed by Landlord shall be made, at Tenant's option, by Landlord's
contractor or a contractor approved in writing by Landlord. All such costs
incurred by Landlord shall be charged to Tenant, and Tenant shall reimburse
Landlord within thirty (30) days of receipt of Landlord's invoice.

      18.28 Landlord's Representations. Landlord represents to Tenant that: (a)
the Building and Lot are zoned for Tenant's use as described in the Basic Lease
Information; and (b) to the best of Landlord's knowledge, there is no asbestos
or other Hazardous Materials in the Building, and if any is found during
construction, it shall be removed by Landlord at Landlord's expense.

19. ADDITIONAL PROVISIONS

      19.1 Arbitration. With the exception of the arbitration provisions which
shall specifically apply to Section 4.6 (Fair Market Rental Rate) and the
provisions of the Unlawful Detainer provisions under applicable California Civil
Code which shall apply in the event of the non-payment by Tenant of Monthly
Base Rent and additional rent pursuant to the terms of this Lease, the
provisions of this Section 19.4 contain the sole and exclusive method, means and
procedure to resolve any and all disputes or


                                       55
<PAGE>   63
disagreements arising out of or in connection with this Lease, including whether
any particular matter constitutes, or with the passage of time would constitute,
an event of default ("Event of Default"): The parties hereby irrevocably waive
any and all rights to the contrary and shall at all times conduct themselves in
strict, full, complete and timely accordance with the provisions of this
Section. Any and all attempts to circumvent the provisions of this Section shall
be absolutely null and void and of no force or effect whatsoever. As to any
matter submitted to arbitration to determine whether it would, with the passage
of time, constitute an Event of Default, such passage of time shall not commence
to run until any such affirmative determination, so long as it is simultaneously
determined that the challenge of such matter as a potential Event of Default was
made in good faith, except with respect to the payment of money. With respect to
the payment of money, such passage of time shall not commence to run only if the
party which is obligated to make the payment does in fact make the payment to
the other party. Such payment can be made "under protest," which shall occur
when such payment is accompanied by a good-faith notice stating why the party
has elected to make a payment under protest. Such protest will be deemed waived
unless the subject matter identified in the protest is submitted to arbitration
as set forth in the following:

                  (a) Arbitration Panel. Within ten (10) days after delivery of
      written notice ("Notice of Dispute") of the existence and nature of any
      dispute given by any party to the other party, and unless otherwise
      provided herein in any specific instance, the parties shall apply to the
      American Arbitration Association for resolution of the dispute by a three
      member panel,

                  (b) Duty. Consistent with the provisions of this Section, the
      members of the Arbitration Panel shall utilize their utmost skill and
      shall apply themselves diligently so as to hear and decide, by majority
      vote, the outcome and resolution of any dispute or disagreement submitted
      to the Arbitration Panel as promptly as possible, but in any event on or
      before the expiration of thirty (30) days after the appointment of the
      members of the Arbitration Panel. None of the members of the Arbitration
      Panel shall have any liability whatsoever for any acts or omissions
      performed or omitted in good faith pursuant to the provisions of this
      Section.


                                       56
<PAGE>   64
                  (c) Authority. The Arbitration Panel shall (i) enforce and
      interpret the rights and obligations set forth in the Lease to the extent
      not prohibited by law, (ii) fix and establish any and all rules as it
      shall consider appropriate in its sole and absolute discretion to govern
      the proceedings before it, including any and all rules of discovery,
      procedure and/or evidence, and (iii) make and issue any and all orders,
      final or otherwise, and any and all awards, as a court of competent
      jurisdiction sitting at law or in equity could make and issue, and as it
      shall consider appropriate in its sole and absolute discretion, including
      the awarding of monetary damages (but shall not award consequential
      damages to either party and shall not award punitive damages except in
      situations involving knowing fraud or egregious conduct condoned by, or
      performed by, the person who, in essence, occupies the position which is
      the equivalent of the chief executive officer of the party against whom
      damages are to be awarded), the awarding of reasonable attorneys' fees and
      costs to the prevailing party as determined by the Arbitration Panel in
      its sole and absolute discretion, and the issuance of injunctive relief.
      If the party against whom the award is issued complies with the award,
      within the time period established by the Arbitration Panel, then no Event
      of Default will be deemed to have occurred, unless the Event of Default
      pertained to the non-payment of money by Tenant or Landlord, and Tenant or
      Landlord failed to make such payment under protest.

                  (d) Appeal. The decision of the Arbitration Panel shall be
      final and binding, may be confirmed and entered by any court of competent
      jurisdiction at the request of any party and may not be appealed to any
      court of competent jurisdiction or otherwise except upon a claim of fraud
      on the part of the Arbitration Panel, or on the basis of a mistake as to
      the applicable law. The Arbitration Panel shall retain jurisdiction over
      any dispute until its award has been implemented, and judgment on any such
      award may be entered in any court having appropriate jurisdiction.

                  (e) Compensation. Each member of the Arbitration Panel shall
      be compensated for any and all services rendered


                                       57
<PAGE>   65
      under this Section according to the schedule set by the American
      Arbitration Association. Such compensation and reimbursement shall be
      borne by the nonprevailing party as determined by the Arbitration Panel in
      its sole and absolute discretion.

      It is the understanding of the parties hereto that in the event a dispute
or disagreement between Landlord and Tenant shall involve the type and amount
(as may be amended by applicable laws) that could come under the jurisdiction of
the local small claims court, the parties shall submit such dispute or
disagreement to such small claims court for resolution. The decision of the
small claims court shall be final and binding on the parties hereto.

      19.2 Premises Security. Subject to Landlord's reasonable approval,
Tenant shall be entitled, at its sole cost, to install its own security systems
for the Premises, which shall be located within the Premises and which shall not
interfere with the Building Systems. Landlord shall not be required to provide
security or security services for the Premises or the Building.

      19.3 When Payment Is Due. Whenever a payment is required to be made by one
party to the other under the Lease, but a specific date for payment or a
specific number of days within which payment is to be made is not set forth in
the Lease, or the words "immediately," "promptly" and/or "on demand," or their
equivalent, are used to specify when such payment is due, then such payment
shall be due thirty (30) days after the party which is entitled to such payment
sends written notice to the other party demanding such payment.

      19.4 Lease Guaranty. The obligations of Tenant under this Lease have been
guaranteed pursuant to a Lease Guaranty executed by Fred DaMert on the same date
as this Lease.

      19.5 Right of First Refusal. Tenant shall have the first right ("First
Right of Refusal") to rent any portion(s) of the Building which become available
after the initial tenancy(ies) for the remainder of the Building terminate,
subject to options and renewals. Tenant's First Right of Refusal shall be
triggered by receipt of written notice from Landlord that the space is available
or will be available, in which case the rent and term will be those for which
Landlord is currently offering the space.


                                       58
<PAGE>   66
Tenant shall have 10 business days to exercise its First Right. If Tenant does
not exercise its First Right, it shall be triggered again by Landlord's
execution of a non binding letter of intent with a prospective tenant. Tenant
shall have 10 business to exercise its first right by accepting the terms set
forth in the non binding letter of intent. If Tenant does not exercise its First
Right of Refusal, Landlord shall have the right to enter into any lease
arrangement it elects, whether in conformity with the non binding letter of
intent or on more favorable terms to the tenant. If Tenant exercises its right
to match another offer, and that offer includes a tenant improvement allowance
which is unnecessary for Tenant's needs, the parties shall work out an
alternative arrangement whereby Tenant will receive free rent to make up for the
free allowance and Landlord will receive the effective rent for which it
bargained.


                                       59
<PAGE>   67
       IN WITNESS WHEREOF, the Parties have executed this Lease as of the date
first above written.



"Landlord"                                "Tenant"

CEDAR/FOURTH STREET PARTNERS,            DAMERT COMPANY,
  a California Partnership                 a California subchapter S
                                             corporation
By: /s/ Thomas Gram                      By: Fred DaMert
    --------------------------               -------------------------------
                                                its President
      Thomas J. Gram
Its:  General Partner


     -------------------------

      Edmund B. Taylor, Jr.
Its:  General Partner'


                                       60
<PAGE>   68
                                       61
<PAGE>   69
                                   EXHIBIT "A"
                           PROPERTY LEGAL DESCRIPTION
                                (To Be Attached)


                                       62
<PAGE>   70
                                  DESCRIPTION

Page 1                                                     Order No. 105689 MEW

CITY OF BERKELEY

PARCEL ONE:

THE NORTHWESTERN 100 FEET OF BLOCK "G", ACCORDING TO MAP OF TRACT "B" OF THE
BERKELEY L. T. & I. ASSOCIATION, FILED FEBRUARY 4, 1876, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID ALAMEDA COUNTY, AND OF RECORD IN MAP BOOK 19, PAGE 79.

PARCEL TWO:

BEGINNING AT A POINT ON THE EASTERLY LINE OF 4TH STREET, DISTANT THEREON 100
FEET SOUTHERLY FROM THE SOUTHERLY LINE OF CEDAR, FORMERLY HOLYOKE STREET;
RUNNING THENCE SOUTHERLY ALONG SAID EASTERLY LINE OF 4TH STREET, 51.25 FEET;
THENCE AT RIGHT ANGLES EASTERLY, 125 FEET; THENCE AT RIGHT ANGLES NORTHERLY,
51.25 FEET; THENCE AT RIGHT ANGLES WESTERLY, 125 FEET TO THE POINT OF BEGINNING.

BEING A PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON THE "MAP OF TRACT B OF
THE BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1878, IN BOOK 19 OF MAPS,
PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.

PARCEL THREE:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON 201
FEET, 3 INCHES NORTHERLY FROM THE INTERSECTION THEREOF, WITH THE NORTHERN LINE
OF VIRGINIA STREET, FORMERLY FOLSOM STREET, AS SAID STREETS ARE SHOWN ON THE
MAP HEREIN REFERRED TO; RUNNING THENCE NORTHERLY ALONG SAID LINE OF 5TH STREET,
75 FEET; THENCE AT RIGHT ANGLES WESTERLY, 150 FEET; THENCE AT RIGHT ANGLES
SOUTHERLY, 75 FEET; AND THENCE AT RIGHT ANGLES EASTERLY, 150 FEET TO THE POINT
OF BEGINNING.

BEING A PORTION OF BLOCK "G", ACCORDING TO THE "MAP OF TRACT 'B' OF THE
BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS,
PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.

PARCEL FOUR:

BEGINNING AT A POINT ON THE EASTERN LINE OF 4TH STREET, DISTANT THEREON
SOUTHERLY, 251 FEET, 3 INCHES, FROM THE POINT OF INTERSECTION THEREOF, WITH THE
SOUTHERN LINE OF CEDAR STREET, FORMERLY HOLYOKE STREET, AS SAID STREETS ARE
SHOWN ON THE MAP HEREIN REFERRED TO; RUNNING THENCE SOUTHERLY ALONG SAID LINE
OF 4TH STREET, 100 FEET, MORE OR LESS, TO A POINT ON SAID LINE OF 4TH STREET,
DISTANT THEREON NORTHERLY 251 FEET, 3 INCHES, FROM THE POINT OF INTERSECTION
THEREOF, WITH THE NORTHERN LINE OF VIRGINIA STREET, FORMERLY FOLSOM STREET, AS
SAID STREETS ARE SHOWN ON SAID MAP; THENCE EASTERLY, PARALLEL WITH SAID LINE OF
VIRGINIA STREET, 100 FEET; THENCE NORTHERLY, PARALLEL WITH SAID LINE OF 4TH
STREET, 100 FEET, MORE OR LESS, TO A POINT THAT WOULD BE INTERSECTED BY A LINE
DRAWN EASTERLY FROM THE POINT OF BEGINNING AND AT RIGHT ANGLES TO SAID LINE OF
4TH STREET; AND THENCE WESTERLY ALONG THE LINE SO DRAWN, 100 FEET TO THE POINT
OF BEGINNING.

BEING A PORTION OF BLOCK "G", ACCORDING TO THE "MAP OF BLOCK 'B' OF THE
BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS,
PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.
<PAGE>   71
                                  DESCRIPTION

Page 2                                                     Order No. 105689 MEW

PARCEL FIVE:

PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON THE "MAP OF TRACT 'B' OF THE
BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS,
PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY, DESCRIBED AS
FOLLOWS:

BEGINNING AT A POINT ON THE EASTERN LINE OF 4TH STREET, DISTANT THEREON
SOUTHERLY 151.25 FEET FROM THE INTERSECTION THEREOF, WITH THE SOUTHERN LINE OF
CEDAR, FORMERLY HOLYOKE STREET, AS SAID STREETS ARE SHOWN ON THE MAP HEREIN
REFERRED TO; RUNNING THENCE SOUTHERLY ALONG SAID LINE OF 4TH STREET, 100 FEET;
THENCE AT RIGHT ANGLES EASTERLY, 100 FEET; THENCE AT RIGHT ANGLES NORTHERLY,
100 FEET; THENCE AT RIGHT ANGLES WESTERLY, 100 FEET TO THE POINT OF BEGINNING.

PARCEL SIX:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON 276
FEET, 3 INCHES NORTHERLY FROM THE INTERSECTION THEREOF WITH THE NORTHERLY LINE
OF VIRGINIA STREET, FORMERLY FOLSOM STREET, AS SAID STREETS ARE SHOWN ON THE
MAP HEREIN REFERRED TO; RUNNING THENCE NORTHERLY ALONG SAID LINE OF 5TH STREET,
75 FEET; THENCE AT RIGHT ANGLES WESTERLY, 150 FEET; THENCE AT RIGHT ANGLES
SOUTHERLY, 75 FEET; THENCE AT RIGHT ANGLES EASTERLY, 150 FEET TO THE POINT OF
BEGINNING.

BEING A PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON THE "MAP OF TRACT 'B'
OF THE BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF
MAPS, PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.

PARCEL SEVEN:

PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON MAP OF "TRACT B OF THE BERKELEY
L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS, PAGE 79, IN
THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON
SOUTHERLY 151.25 FEET FROM THE INTERSECTION THEREOF WITH THE SOUTHERN LINE OF
CEDAR, FORMERLY HOLYOKE STREET, AS SAID STREETS ARE SHOWN ON THE ABOVE MAP;
RUNNING THENCE SOUTHERLY ALONG SAID LINE OF 5TH STREET, 101.41 FEET; THENCE AT
RIGHT ANGLES WESTERLY, 150 FEET TO A LINE DRAWN PARALLEL WITH THE EASTERN LINE
OF 4TH STREET, AS SHOWN ON SAID MAP, AND DISTANT AT RIGHT ANGLES 100 FEET
EASTERLY THEREFROM; THENCE AT RIGHT ANGLES ALONG THE LINE SO DRAWN NORTHERLY,
101.41 FEET; THENCE AT RIGHT ANGLES EASTERLY, 150 FEET TO THE POINT OF
BEGINNING.

PARCEL EIGHT:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON 151
FEET, 3 INCHES NORTHERLY FROM THE POINT OF INTERSECTION THEREOF, WITH THE
NORTHERN LINE OF VIRGINIA STREET, FORMERLY FOLSOM STREET; AND RUNNING THENCE
NORTHERLY ALONG SAID LINE OF 5TH STREET, 50 FEET; THENCE AT RIGHT ANGLES
WESTERLY, 150 FEET; THENCE AT RIGHT ANGLES SOUTHERLY, 50 FEET; AND THENCE AT
RIGHT ANGLES EASTERLY, 150 FEET TO THE POINT OF BEGINNING.

BEING A PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON THE "MAP OF TRACT B OF
THE BERKELEY L. T. I. ASSOCIATION," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS,

<PAGE>   72
                                  DESCRIPTION
Page 3                                                   Order No. 105689   MEW

AT PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.

PARCEL NINE:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON, 100
FEET SOUTHERLY FROM THE SOUTHERN LINE OF CEDAR STREET (FORMERLY HOLYOKE STREET);
RUNNING THENCE SOUTHERLY ALONG SAID LINE OF 5TH STREET, 27 FEET; THENCE AT A
RIGHT ANGLE WESTERLY, 125 FEET; THENCE AT A RIGHT ANGLE NORTHERLY, 27 FEET; AND
THENCE AT A RIGHT ANGLE EASTERLY, 125 FEET TO THE POINT OF BEGINNING.

BEING A PORTION OF BLOCK "G", AS SAID BLOCK IS SHOWN ON THE "MAP OF TRACT 'B' OF
THE BERKELEY L.T.I. ASSOCIATION, ETC.,", FILED FEBRUARY 4, 1876, IN BOOK 19 OF
MAPS, PAGE 79, IN THE OFFICE OF THE COUNTY RECORDER OF ALAMEDA COUNTY.

PARCEL TEN:

THAT PORTION OF BLOCK G, OF "MAP OF TRACT B OF THE BERKELEY L.T.I. ASSOCIATION,"
FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS, AT PAGE 79, RECORDS OF SAID COUNTY,
DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE WESTERLY LINE OF 5TH STREET, DISTANT THEREON 127
FEET SOUTHERLY FROM THE SOUTHERLY LINE OF CEDAR, FORMERLY HOLYOKE STREET; THENCE
SOUTHERLY ALONG SAID LINE OF 5TH, STREET 24-1/4 FEET; THENCE AT RIGHT ANGLES
WESTERLY, 125 FEET; THENCE AT RIGHT ANGLES NORTHERLY, 24-1/4 FEET; THENCE AT
RIGHT ANGLES EASTERLY, 125 FEET TO THE POINT OF BEGINNING.

PARCEL ELEVEN:

THAT PORTION OF BLOCK G OF "MAP OF TRACT B OF THE BERKELEY L.T.I. ASSOCIATION,
ETC.," FILED FEBRUARY 4, 1876, IN BOOK 19 OF MAPS, AT PAGE 79, RECORDS OF SAID
COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE WESTERN LINE OF 5TH STREET, DISTANT THEREON 101 FEET
NORTHERLY FROM THE NORTHERN LINE OF VIRGINIA, FORMERLY FOLSOM STREET, AS SHOWN
ON SAID MAP; THENCE NORTHERLY ALONG SAID WESTERN LINE OF 5TH STREET, 50 FEET, 3
INCHES; THENCE WESTERLY, PARALLEL WITH SAID LINE OF VIRGINIA STREET, 125 FEET TO
A LINE DRAWN PARALLEL WITH THE EASTERN LINE OF 4TH STREET, AS SHOWN ON SAID MAP,
AND DISTANT 125 FEET EASTERLY THEREFROM, MEASURED ALONG SAID NORTHERN LINE OF
VIRGINIA STREET; THENCE SOUTHERLY, PARALLEL WITH SAID LINE OF 4TH STREET, 50
FEET, 3 INCHES; THENCE EASTERLY, PARALLEL WITH SAID LINE OF VIRGINIA STREET, 125
FEET TO THE POINT OF BEGINNING.

ASSESSOR'S PARCEL NO. 057-2116-020-03


<PAGE>   73
                             Map of Tract B of the
                       Berkeley Land and Town Improvement
                                  Association


                                     [MAP]



                "Important: This plat is not a survey. It is
                merely furnished as a convenience to locate the
                land in relation to adjoining streets and other
                lands and NOT to guarantee any dimensions,
                distances, bearings, or acreage."
<PAGE>   74
                                  EXHIBIT "B"

                        BUILDING FLOOR PLAN AND PREMISES

                                [To Be Attached]




                                       63

<PAGE>   75
                                  EXHIBIT "C"

                               PRELIMINARY PLANS

                                [To Be Attached]




                                       64

<PAGE>   76
                                   EXHIBIT B


                                  [FLOORPLAN]