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                                                                  EXHIBIT 10.2

DATED:  29th September, 1999




                                THE POST OFFICE

                                      AND

                               eTOYS UK LIMITED






                    =======================================

                                  UNDERLEASE
                                      of
                             Unit A Stirling Court
                        South Marston Industrial Estate
                      Stirling Road South Marston Swindon

                    =======================================





                                                           Post Office
                                                           Legal Services
                                                           Impact House
                                                           2 Edridge Road
                                                           Croydon CR9 1PJ

                                                           Ref: C/11314/KJE/aly
                                                           4 August, 1999


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                                                                        [SEAL]

THIS UNDERLEASE is made the 29th day of September, One thousand nine hundred
and ninety nine

B E T W E E N

(1)  THE POST OFFICE whose principal office is at 148 Old Street, London
     [ILLEGIBLE] EC1V 9HQ (hereinafter called "the Landlord") and

(2)  eTOYS UK LIMITED whose registered office is situate at St. Victoria
     Embankment London EC4Y 0DX (Registered in England Number [ILLEGIBLE])
     (hereinafter called "the Tenant")

N O W   T H I S   D E E D   W I T N E S S E T H  as follows

1  DEFINITIONS AND INTERPRETATION

         In this Deed:

         1.1  "The Term" means the period commencing on the Third day of
              August 1999 and expiring on the 27th day of September 2008

         1.2  "the Rent" means the additional rents secondly and thirdly
              reserved by Clause 2 hereof Together With:

                   1.2.1  For the period commencing on the Rent Commencement
                          Date and ending on the 28th day of September 2003
                          a rent of One Hundred and Twelve Thousand pounds
                          (L112,000) per annum

                   1.2.2  Thereafter the yearly rent shall be the greater of
                          the sum referred to in Clause 1.2.1 and such amount
                          as may be agreed between the Landlord and the
                          Superior Landlord as being the revised rent with
                          effect from 29th September 2003 for the Premises
                          under the terms of the Superior Lease

          1.3  "the Rent Commencement Date" shall be the Fourth day of
               August, 1999

          1.4  "the Premises" means the land and buildings at Unit A Stirling
               Court South Marston Industrial Estate Stirling Road South
               Marston Swindon as the same is more particularly described in
               Part I of the First

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               Schedule to the Superior Lease and shown edged red on the plan
               numbered 2 attached thereto

          1.5  "the permitted use of the premises" means use for storage and
               distribution in accordance with Class B8 of the Schedule to
               the Town & Country Planning (Use Classes) Order 1987 together
               with ancillary offices Provided that references to the Order
               herein shall not include or be deemed to include references to
               any amendment re-enactment or replacement of the Order and
               accordingly Clause 1.12.1 hereof shall not apply to these
               references to the Order

          1.6  "The Superior Lease" means the Lease dated 19th December 1988
               as varied by the Deeds referred to in the Third Schedule of
               this Underlease and all documents supplemental thereto

          1.7  "Superior Landlord" means Clerical Medical Investment Group
               Limited or such other persons for the time being entitled to
               the reversion immediately expectant upon the determination of
               the term granted by the Superior Lease

          1.8  "the Landlord" includes where the context so admits the person
               or persons for the time being entitled to the reversion
               immediately expectant on the determination of the Term

          1.9  "The Tenant" includes the Tenant and the successors in title
               and assigns of the Tenant

          1.10 "the Quarter Days" means the 25th day of March the 24th day of
               June the 29th day of September and the 25th day of December
               in each year

          1.11 "Qualifying Assignee" means an assignee being:

                   1.11.1  a statutory or public body or statutory undertaker
                           a public or local authority a government
                           department or ministry or a nationalised industry
                           or

                   1.11.2  a limited company incorporated in England and
                           Wales with annual profits before tax in the three
                           complete trading years immediately preceding the
                           date of application for licence to

                                       2

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                            assign which in each year exceed an amount
                            representing the Rent payable under this
                            Underlease at the date of the application
                            multiplied by three as evidenced by a set of
                            properly audited accounts the latest set of which
                            has been published not earlier than eleven months
                            before the date of the application or

                    1.11.3  an organisation which is able to provide a surety
                            as a party to any proposed alienation of these
                            presents who fulfills one or more of the foregoing
                            criteria

          1.12  And in this Underlease unless there be something in the
                context inconsistent therewith:

                    1.12.1  Reference (whether general or specific) in this
                            Underlease to any Act of Parliament or Bye-Law
                            shall include every Act of Parliament or Bye-Law
                            for the time being in force amending and
                            modifying or replacing the same and all Orders
                            Directions and Regulations already made or issues
                            or hereafter to be made or issued thereunder

                    1.12.2  Words importing the masculine gender shall
                            include the feminine gender and the neuter and
                            vice versa and words importing the singular
                            number only shall include the plural number and
                            vice versa and words importing persons and all
                            references to persons shall include companies
                            corporations and firms and vice versa

                    1.12.3  If at any time two or more persons are included
                            in the expression "the Tenant" then covenants
                            entered into or implied herein by or on the part
                            of the Tenant shall be deemed to be and shall be
                            construed as covenants entered into by and
                            binding on such persons jointly and severally

2         DEMISE

          In consideration of the Rent and covenants hereinafter reserved and
          contained on the part of the Tenant to be paid performed and
          observed the Landlord


                                       3

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          HEREBY DEMISES unto the Tenant ALL THAT the Premises TOGETHER with
          the benefit of but subject to (as the case may be) the covenants
          (except the covenant as to payment of the rents reserved by the
          Superior Lease) exceptions reservations and provisos contained in
          the Superior Lease TO HOLD the same unto the Tenant for the Term
          YIELDING AND PAYING therefor clear of all deductions whatsoever
          yearly and proportionately for any part of a year [FIRST] from the
          Rent Commencement Date and thereafter until the end of the Term the
          yearly rents specified in subclauses 1.2.1 and 1.2.2 (inclusive)
          of Clause 1 hereof without any deduction by equal quarterly
          payments in advance on the Quarter Days the first payment for the
          period from the Rent Commencement Date to the next following
          Quarter Day to be paid on the Rent Commencement Date SECONDLY by
          way of additional rent and on demand the insurance costs and
          service charges which the Landlord shall from time to time be
          required to pay pursuant to the provisions of Clause 2(b) pages 8
          and 9 of the Superior Lease and THIRDLY by way of additional rent
          interest on a daily basis on all rents or any other sums due under
          this Underlease which the Tenant shall fail to pay within seven
          days of the due date such interest to be calculated at the
          Prescribed Rate as defined by the Superior Lease from the date on
          which the same were due until the date of payment without deduction
          set off or counter-claim (except such as the Tenant may be required
          by law to deduct notwithstanding any stipulation to the contrary)
          and by means of a bankers standing order if so required by the
          Landlord

3         TENANT'S COVENANTS

          The Tenant to the intent that the obligations hereby created shall
          continue throughout the Term hereby convenants with the Landlord as
          follows:

          3.1  At all times during the Term to pay the Rent at the times and
               in the manner hereinbefore reserved

          3.2  To observe and perform in favour of the Landlord the covenants
               on the part of the tenant (except the covenant as to payment
               of the rents

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               reserved by Clause 1 of the Third Schedule to the Superior
               Lease) and the conditions and provisos contained in the
               Superior Lease and in the documents referred to by the Third
               Schedule of this Underlease in all respects as if the same
               were set out herein in extenso with such modifications only as
               may be contained in the Tenant's additional covenants set out
               in the First Schedule hereto

          3.3  To observe and perform the said additional covenants on the
               Tenant's part contained in the First Schedule hereto

          3.4  To indemnify and keep indemnified the Landlord against any
               liability (save in respect of any default by the Landlord in
               observing its covenants hereinafter contained) whatsoever
               including costs and expenses in any way relating to the
               Tenant's use and occupation of the Premises or any breach of
               the Tenant's covenants herein contained

4         LANDLORD'S COVENANTS

          The Landlord hereby covenants with the Tenant throughout the Term:

          4.1  To perform and observe the covenant on its part contained in
               the Superior Lease to pay the rents reserved by Clause 2
               thereof and at all times to keep the Tenant indemnified
               against any liability including costs and expenses in any way
               relating to the same

          4.2  That the Tenant paying the Rent hereby reserved and performing
               and observing the covenants and stipulations herein contained
               on the part of the Tenant to be performed and observed shall
               peaceably hold and enjoy the Premises during the Term without
               interruption or disturbance by the Landlord or any person
               lawfully claiming under or in trust for the Landlord

          4.3  Upon receiving notice from and at the expense of the Tenant to
               take all reasonable steps to enforce the covenants on the part
               of the Superior Landlord contained in the Superior Lease

                                       5


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          4.4  To take all reasonable steps to obtain the consent of the
               Superior Landlord whenever the Tenant makes an application for
               any consent required hereunder where the consent of both the
               Landlord and the Superior Landlord is needed by virtue of this
               Underlease and the Superior Lease in those cases where the
               Landlord is willing to give its consent or where the Landlord's
               refusal to give such consent is held by the Court to be
               unreasonable

          4.5  To notify the Tenant of any such notice served by the Superior
               Landlord instituting a review of the rent in accordance with
               the provisions of the Superior Lease and to keep the Tenant
               informed at all times of the progress and outcome of all
               negotiations in connection with such review.

5         PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED:

          5.1  That the provisos for re-entry reduction of rent in the event
               of damage by fire and other provisos and conditions contained
               in the Superior Lease shall apply to this Underlease as if
               they had been written in full herein.

          5.2  Where the consent of the Landlord is required to any act
               matter or thing under the terms of this Underlease the consent
               of the Superior Landlord shall also be required whenever
               requisite under the covenants and conditions of the Superior
               Lease

          5.3  Whenever necessary or appropriate under the covenants and
               conditions of the Superior Lease or this Underlease where any
               matter is to be carried out to the satisfaction or approval of
               the Landlord it shall also be carried out to the satisfaction
               of the Superior Landlord

          5.4  Where any issue question or matter arising out of or under or
               relating to the Superior Lease which affects or relates to the
               provisions of this Underlease is to be determined as therein
               provided it shall also be so


                                       6

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               determined under this Underlease and the determination of any
               such issue question or matter pursuant to the provisions of
               the Superior Lease shall be binding on the Tenant as well as
               the Landlord for the purposes both of the Superior Lease and
               this Underlease

          5.5  All sums payable by the Tenant hereunder which may be subject
               to Value Added Tax shall be considered to be tax exclusive
               sums and the Value Added Tax at the appropriate rate for the
               time being shall be payable by the Tenant in addition thereto

          5.6  Notwithstanding the provisions of Clause 1.5 the Landlord does
               not thereby make or give to the Tenant any representation or
               warranty that the said use or any other use of the Premises or
               any part thereof is or will be or become or remain a permitted
               use within the provisions of current planning legislation and
               the Tenant shall not be entitled to any relief or compensation
               whatsoever in respect thereof

          5.7  A notice by one party ("the sender") to another ("the
               recipient") is duly served if in writing and either delivered
               to the recipient or sent by registered or recorded delivery
               post addressed to the recipient at his address as stated in
               this deed or as from time to time notified to the sender in
               writing provided that any notice to the Landlord while the
               reversionary interest is vested in the Post Office shall be
               addressed to Post Office Property Holdings at Impact House  2
               Edridge Road Croydon Surrey CR9 1PJ or as from time to time
               notified in writing to the Tenant

          5.8

               5.8.1  If either party shall have served on it a notice of
                      wants of repairs or schedule of dilapidation or a
                      notice under Section 146 or 147 of the Law Of Property
                      Act 1925 ("the Notice") it shall supply the other with
                      a copy of the Notice

               5.8.2  The parties will seek to agree what works detailed in
                      the Notice are to be carried out by the Tenant pursuant
                      to the covenants on


                                       7

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                      its part contained in this Lease and in the absence of
                      agreement either party shall be entitled to refer the
                      issue to an independent surveyor who shall act as an
                      expert for determination (the provisions of the Second
                      Schedule to the Superior Lease applying in respect of
                      the appointment duties and fees of the surveyor)

               5.8.3  The Tenant hereby covenants to carry out those works
                      which fall within its obligations under this Lease as
                      detailed in paragraph 4 of the First Schedule hereof
                      necessary to comply with the Notice without undue delay

               5.8.4  The Landlord hereby covenants to carry out those works
                      which do not fall within the Tenant's obligations under
                      this Lease necessary to comply with the Notice without
                      undue delay

6         MISCELLANEOUS PROVISIONS

          6.1  If the Tenant wishes to determine this Underlease on either
               the 1st day of February 2001 ("the First Break") or the 29th
               day of September 2004 ("the Second Break") and shall give to
               the Landlord not less than six months' prior notice in writing
               and in the case of the Second Break shall give to the Landlord
               not less than six months' prior notice in writing and provided
               that the Tenant shall up to the time of such determination pay
               the Rent AND REASONABLY PERFORM AND OBSERVE THE COVENANTS
               CONTAINED IN THIS UNDERLEASE then upon expiry of such notice
               the Term shall immediately cease and determine but without
               prejudice to the respective rights of either party in respect
               of any antecedent claim or breach of covenant

7         IT IS HEREBY CERTIFIED that there is no agreement for lease to
          which this Underlease gives effect


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I N  W I T N E S S whereof the Landlord has caused its Common Seal to be
hereunto affixed and the Tenant has duly executed this Deed which shall be
deemed to be delivered the day and year first before written


                                FIRST SCHEDULE

                        TENANT'S ADDITIONAL COVENANTS


1

          1.1  Not to assign underlet or part with or share possession or
               occupation of part only of the Premises and not to assign
               underlet or part with or share possession or occupation of the
               whole of the Premises except as may be permitted in accordance
               with the provisions of paragraphs 1.3 1.4 1.5 1.6 and 1.7 of
               this Schedule

          1.2  Not to:

               1.2.1  hold the whole or any part of the Premises on trust for
                      another

               1.2.2  charge or mortgage either the whole of any part or
                      parts of the Premises

          1.3  Not to assign the whole of the Premises without the prior
               written consent of the Landlord (such consent not to be
               unreasonably withheld or delayed) provided that the Landlord
               shall be entitled:

               1.3.1  to withhold its consent in any of the circumstances
                      specified for the purposes of Section 19(1A) of the
                      Landlord and Tenant Act 1927 and set out in paragraph
                      1.5

               1.3.2  to impose all or any of the conditions specified for
                      the purposes of Section 19(1A) of the Landlord and
                      Tenant Act of 1927 and set out in paragraph 1.6 as a
                      condition of its consent

          1.4  The proviso to paragraph 1.3 shall operate without prejudice to
               the right of the Landlord to withhold such consent on any other
               ground or grounds where such withholding of consent would be
               reasonable or to


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               impose any further condition or conditions upon the grant of
               consent where the imposition of such condition or conditions
               would be reasonable

          1.5  The circumstances referred to in paragraph 1.3.1 are as follows:

               1.5.1  if any sums due are from the Tenant under this Underlease
                      have not been paid at the date of the application for
                      licence to assign

               1.5.2  if the proposed assignee is not resident in a
                      jurisdiction where reciprocal enforcement of judgment
                      exists

               1.5.3  if in the Landlord's reasonable opinion there are at
                      the date of the application for the licence to assign
                      any material outstanding breaches of any tenant
                      covenant under this Lease or any personal covenants
                      undertaken by the Tenant

               1.5.4  If the proposed assignee is not a Qualifying Assignee

          1.6  The conditions referred to in paragraph 1.3.2 are as follows:

               1.6.1  the execution and delivery to the Landlord prior to the
                      proposed assignment of a deed of guarantee (being an
                      authorised guarantee agreement within Section 16 of the
                      Landlord and Tenant (Covenants) Act 1995) in the form
                      set out in the Second Schedule

               1.6.2 if the Landlord shall reasonably so require (or if the
                      proposed assignee is a group company of the Tenant
                      within the meaning of Section 42 of the Landlord and
                      Tenant Act 1954) in the absolute discretion of the
                      Landlord the execution and delivery by one or more
                      third party guarantors reasonably acceptable to the
                      Landlord of a deed of guarantee containing a covenant
                      with the Landlord as a primary obligation in such terms
                      as the Landlord may reasonably require prior to the
                      completion of the purposed assignment

               1.6.3  the written Licence to Assign contains a condition that
                      if at any time prior to the assignment the
                      circumstances (or any of them)


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                      specified in paragraph 1.5 arise the Landlord may
                      revoke the Licence by written notice to the Tenant

          1.7

               1.7.1  Not to underlet the whole of the Premises without the
                      prior written consent of the Landlord (such consent not
                      to be unreasonably withheld or delayed) nor without
                      procuring that:

                      1.7.1.1  prior to the grant of any underlease the
                               undertenant shall execute a deed containing
                               a direct covenant with the Landlord to perform
                               and observe the obligations of the undertenant
                               to be contained in the underlease and the
                               obligations of the Tenant under these presents
                               (other than the obligations to pay the rents
                               hereby reserved and except where inapplicable
                               to the premises underlet)

                      1.7.1.2  any undertenant shall (if the Landlord shall so
                               reasonably require) provide a surety or
                               sureties reasonably acceptable to the Landlord
                               to guarantee the due performance by the
                               undertenant of its obligations in the
                               underlease

                      1.7.1.3  each underlease shall be at a rent which shall:

                              1.7.1.3.1  be not less than the open market
                                         rental value (without taking or giving
                                         a fine or premium or other valuable
                                         consideration) reasonably obtainable
                                         for the premises underlet at the time
                                         such underlease is granted and not
                                         less than the Rent then payable

                              1.7.1.3.2  not to be commuted or be payable more
                                         than one quarter in advance

                      1.7.1.4  each underlease shall contain covenants by the
                               undertenant:


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                              1.7.1.4.1 not to assign any part of the premises
                                        underlet as distinct from the whole

                              1.7.1.4.2 not to sub-underlet or charge the whole
                                        or any part of the premises underlet nor
                                        (save by way of an assignment of the
                                        whole thereof) part with the possession
                                        or share the occupation of the whole or
                                        any part of the premises underlet

                              1.7.1.4.3 not to assign any part of the premises
                                        underlet with obtaining the prior
                                        written consent of the Landlord (such
                                        consent not to be unreasonably withheld
                                        or delayed)

                              1.7.1.4.4 otherwise corresponding with the
                                        obligations of the Tenant under this
                                        Underlease (except the obligation to
                                        pay the rents hereby reserved and
                                        except where inapplicable to the
                                        premises underlet)

                              1.7.1.4.5 an Order of the Court be obtained under
                                        the provisions of Section 38(4) of the
                                        1954 Act authorising the exclusion of
                                        Sections 24-28 of the Landlord and
                                        Tenant Act 1954 (as amended) in relation
                                        to such underlease and that a certified
                                        copy of such Order be supplied to the
                                        Landlord

                    1.7.2     Not without the prior written consent of the
                              Landlord such consent not to be unreasonably
                              withheld or delayed to vary or waive the terms nor
                              accept any surrender of any underlease and to take
                              all steps necessary to enforce such terms

                    PROVIDED ALWAYS that nothing herein contained shall preclude
                    the Tenant from sharing occupation in accordance with the
                    provisions of paragraph 28(g) of the Third Schedule to the
                    Superior Lease


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<PAGE>


2    The Tenant shall upon request from time to time provide within one month
     all information which the Landlord may request under Section 40(1)(a) and
     (b) of the Landlord and Tenant Act 1954

3    The Tenant shall within 28 days of any assignment or underletting of or
     of any other devolution of the Lease or of any interest deriving from
     the Lease give notice thereof to the Landlord's Solicitor and produce
     for registration the original or a certified copy of the document
     effecting or evidencing such devolution and pay such reasonable
     registration fee as the Landlord's Solicitor may require being not less
     than L20 (plus VAT) plus any registration fee payable to the
     Superior Landlord pursuant to clause 29 of the Superior Lease

 4   At all times during the Term to keep the Premises repaired and maintained
     in accordance with the provisions of the Superior Lease Provided That the
     Tenant shall not be obligated to keep or hand back the Premises in any
     better state of repair or decorative condition than that evidenced by the
     Schedule of Condition marked 'A' and signed on behalf of the parties hereto
     and for the avoidance of doubt the Tenant shall not be required to
     redecorate the exterior of the Premises in accordance with paragraph 6(a)
     of the Third Schedule to the Superior Lease in the year 2000

5    The obligations contained in clause 2 (2) and 12 respectively of the
     Licences for Alterations detailed in the Third Schedule shall not apply on
     the determination of the Term pursuant to clause 6.1 of this underlease


                                       13
<PAGE>

                                 SECOND SCHEDULE

THIS GUARANTEE AGREEMENT is made the                   day of
          199[ ]

BETWEEN

(1)  [                                ] (a company registered in England number
                ) whose registered office is at
                           ("the Landlord")

(2)  [                                ] (a company registered in England number
                         ) ("the Assignee")

W H E R E A S

(1)  LEASE

     By an Underlease ("the Lease") made the                     day of
               between [                               ] (1) and [
                   ] (2) [                                                ]
     ("the Original Tenant") the premises known as [
          ] ("the Premises") were demised from a term of
     [                                    ] years from the                  day
     of      ("the Term") subject to the payment of the rent[s] reserved by the
     observance and performance of the covenants on the Tenant's part and the
     conditions contained in the Lease




(2)  DEVOLUTION OF TITLE

     The reversion immediately expectant upon the determination of the Term
     [remains or is now] vested in the Landlord and the unexpired residue of
     the Term [remains or is now] vested in [the Original Tenant] or [       ]



                                       14

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(3)  AGREEMENT TO ENTER INTO GUARANTEE

     The Assignor has agreed with the Landlord to enter into this guarantee
     agreement as a condition of the Landlord's consent permitting the
     assignment of the Lease to [                    ] ("the Assignee")

NOW THIS DEED WITNESSES as follows:

1.   In this Deed:

     1.1  "the Landlord" includes the person in whom the reversion immediately
          expectant on the determination of the Term is for the time being
          vested

     1.2  "the Lease" includes all or any deeds and documents supplemental to
          the lease whether or not expressed to be so

     1.3  "the Term" includes any continuation or extension of the Term and any
          holding over whether by statute at common law or otherwise

     1.4  "Commencement Date" means the date [of this deed or upon which the
          residue of the Term became vested in the Assignee referred to in
          recital (3) above]

     1.5  if the Assignor is more than one person [its] obligations shall be the
          joint and several obligations of such persons

     1.6  words importing one gender import any other gender works importing the
          singular import the plural and vice versa

2    THE ASSIGNOR'S COVENANTS

     The Assignor covenants with the Landlord and without the need for any
     express assignment with all [its] succesors in title such covenant to take
     effect from the Commencement Date that:

                                       15
<PAGE>

     2.1  TO PAY AND PERFORM

          The Assignee will punctually pay the rents and observe and perform
          the covenants and other terms of the Lease and if at any time the
          Assignee shall make any default in payment of the rents or in
          observing or performing any of the covenants or other terms of the
          Lease the Assignor will pay the rents and observe or perform the
          covenants or terms in respect of which the Assignee shall be in
          default and make good to the Landlord on demand and indemnify the
          Landlord against all losses damages costs and expenses arising or
          incurred by the Landlord as a result of such non-payment
          non-performance or non-observance notwithstanding:

          2.1.1 any time or indulgence granted by the Landlord to the Assignee
                or any neglect or forbearance of the Landlord in enforcing the
                payment of the rents or the observance or performance of the
                covenants or other terms of the Lease or any refusal by the
                Landlord to accept rents tendered by or on behalf of the
                Assignee at a time when the Landlord was entitled (or would
                after the service of a notice under the Law of Property Act
                1925 Section 146 have been entitled) to re-enter the Property

          2.1.2 that the terms of the Lease may have been varied by agreement
                between the parties Provided that such variation is non
                prejudicial

          2.1.3 that the Assignee shall have surrendered part of the Property in
                which event the liability of the Assignor under the Lease shall
                continue in respect of the part of the Property not so
                surrendered after making any necessary apportionments under the
                Law of Property Act 1925 Section 140 and

          2.1.4 any other act or thing by which but for this provision the
                Assignor would have been released other than a variation of the
                terms of the Lease agreed between the parties that is
                prejudicial to the Assignor

                                       16

<PAGE>

     2.2  TO TAKE A LEASE FOLLOWING DISCLAIMER

          In the event of the Assignee

          2.2.1 being a company:

               2.2.1.1 going into liquidation and the liquidator disclaiming the
                       Lease or

               2.2.1.2 being dissolved and the Crown disclaiming the Lease or

               2.2.1.3 ceasing for any reason to be registered with the
                       Registrar of Companies or

          2.2.2 being an individual becoming bankrupt and the Trustee in
                bankruptcy disclaiming the Lease

          then if the Landlord so requires the Assignor will accept a new
          underlease of the Premises for a term equal in duration to the residue
          remaining unexpired of the Term at the time of the grant of a new
          underlease to contain like tenant's and landlord's covenants
          respectively and the like provisions and conditions in all respects as
          are contained in the Lease and the rights and liabilities shall take
          effect as from the date of such disclaimer forfeiture or cessation (as
          the case may be) provided always that the Landlord within the period
          of six months after such disclaimer or exercise of the right of
          re-entry shall serve upon the Assignor notice in writing so to do and
          subject to the consent of any superior landlord to the grant of the
          new underlease being obtained prior to the grant thereof.


3    THE ASSIGNOR'S FURTHER COVENANTS

     The Assignor further covenants with the Landlord to pay to the Landlord on
     demand and to indemnify the Landlord against all reasonable costs charges
     fees disbursements and expenses including those of professional advisers
     and agents and including in each case VAT incurred by the Landlord in
     connection with this guarantee agreement including without limitation those
     arising from


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<PAGE>

     the obtaining of the consent or approval of or information from any other
     person in connection with this guarantee agreement

4    CESSATION

     This guarantee agreement ceases to have effect when the Assignee is
     released from the tenant covenants of the Lease by virtue of Section 5 of
     the Landlord and Tenant (Covenants) Act 1995 or with the consent of the
     Landlord


I N  W I T N E S S whereof the parties hereto have executed this guarantee
agreement as a deed the day and year first before written





     EXECUTED as a Deed (but not           )
     delivered until the date hereof       )
     by affixing the Common Seal of        )
     Landlord in the presence of:          )


     EXECUTED as a Deed (but not           )
     delivered until the date hereof       )
     by affixing the Common Seal of        )
     [Assignor] in the presence of:        )


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<PAGE>

                                 THIRD SCHEDULE
                                 (ENCUMBRANCES)

19th December 1988   Service Charge           Vickers Properties Limited (1)
                     Lease (Phase I)          Superior Landlord (2)

6th July 1990        Licence for Alterations  Superior Landlord (1)
                                              Landlord (2)

January 1998         Licence for Alterations  Superior Landlord (1)
                                              Landlord (2)



THE COMMON SEAL of THE            )
POST OFFICE affixed hereto        )
is authenticated by:              )
Stephen Charles Hill              )

the signature of a person         )
authorised by the Post Office     )
to act for that purpose           )


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