SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549

                              FORM 10-KSB


  X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934
              For the fiscal year ended December 31, 1996
                                  OR
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934
   For the transition period from                 to

                 Commission File Number: 1-11873

                            K2 DESIGN, INC.
      (Exact name of registrant as specified in its charter)

					           DELAWARE                                     13-3886065
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)              Identification Number)

55 BROAD STREET, 7TH FLOOR, NEW YORK, NY                       10004
     (Address of principal                                  (Zip Code)
      executive offices)

ISSUER'S TELEPHONE NUMBER: (212) 547-5234


Securities registered pursuant to Section 12 (b) of the Act:
NONE

Securities registered pursuant to Section 12 (g) of the Act:


                           COMMON STOCK
                         (Title of Class)
             REDEEMABLE COMMON STOCK PURCHASE WARRANTS
                         (Title of Class)


<PAGE>

     Check whether the issuer (1) filed all reports required to be filed by
Section  13  or  15(d)  of  the  Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter  period  that  the  registrant was
required  to  file  such reports), and (2) has been subject to such  filing
requirements for the past 90 days.  Yes   X     No

     Check if there is  no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained is this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated  by  reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.   Yes        No   X

     State issuer's revenues for its most recent fiscal year: $4,077,792.

     As of January 31, 1997, there were outstanding  3,645,421 shares of Common
Stock  (the  "Common  Stock")  and 1,000,000 Redeemable Common  Stock  Purchase
Warrants (the "Warrants").  Based  on  the  prices  of the Common Stock on that
date,  the  approximate aggregate market value of Common  Stock  held  by  non-
affiliates was $11,512,861.


                 DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  the  Registrant's  1997  Definitive  Proxy  Statement, which
statement  will  be filed not later than 120 days after the end of  the  fiscal
year covered by this Report, are incorporated by reference in Part III hereof.

     Certain  exhibits  are  incorporated  by  reference  to  the  Registrant's
Registration Statement  on  Form  SB-2 and the amendments thereto, as listed in
response to Item 13(a)(2).



Transitional Small Business Disclosure  Format (check one):  Yes ______  No   X



         [The remainder of this page is intentionally blank.]


<PAGE>
THE  BUSINESS SECTION AND OTHER PARTS OF THIS  REPORT  CONTAIN  FORWARD-LOOKING
STATEMENTS  THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY  FROM  THE  RESULTS  DISCUSSED  IN THE FORWARD-LOOKING
STATEMENTS.  FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE,  BUT  ARE  NOT
LIMITED  TO,  THOSE  DISCUSSED IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION
AND  ANALYSIS OF FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATION  --  FACTORS
AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK" COMMENCING ON PAGE 17.


                                   PART I

ITEM 1.  BUSINESS

GENERAL

     The  Company's  primary  business  is  providing interactive marketing and
communications  services  to commercial organizations.   Commencing  after  the
Company's initial public offering  ("IPO")  on July 26, 1996, the Company began
to  develop  its  vision  to become a full-service  interactive  marketing  and
communications firm, largely in response to and in anticipation of demands from
its customers for services  complementary to the Company's core Web site design
services.  Complementary services  the  Company  now  provides  include,  among
others,  development  of CD-ROM discs, media placement on Web sites, consulting
services regarding Web  site  usage  and  user characteristics, development and
maintenance  of  Company-owned  Web site advertising  networks,  live  Internet
broadcasts  and  the  development of  brand  strategies  and  print  collateral
systems.   In  1996 and 1995,  approximately  65%  and  80%  of  the  Company's
revenues, respectively,  were  derived from development of World Wide Web sites
("Web sites").  Since its inception,  the  Company,  alone and with others, has
designed and created more than 50 Web sites, including for the customers of MCI
Telecommunications  Corporation  ("MCI"),  a subsidiary of  MCI  Communications
Corporation, and for Toys `R' Us Corporation,  America  Online Incorporated and
International  Business  Machines, Inc., among others. Accordingly,  management
believes that the Company  is  a  recognized  provider  of Web site development
services.

     The  Company  believes that its core Web site expertise  positions  it  to
effectively transition  into  a  full service integrated, interactive marketing
and  communication  services firm because  Web  sites  are  increasingly  being
utilized as a new medium  for advertisement, promotion and technical support of
an organization's products  and  services.{*}  Web sites can provide commercial
organizations benefits in addition  to  those  available  through  conventional
media,  including  the  ability  to  engage  and  entertain  consumers, provide
in-depth  information, reduce selling and operating costs, expand  distribution
channels,  promote   major   sporting  and  entertainment  events  and  monitor
popularity  of  content  and make  timely  changes  in  response  to  real-time
feedback.  Web sites also  offer  businesses  the  ability  to  obtain  certain
information about visitors to their sites.

     The  Company  was  founded  in  1993  and initially operated a traditional
graphic  design business.  In August 1994 the  Company  shifted  its  principal
business to  Web  site  design  and  creation  but  did  not  begin to generate
significant revenues therefrom until 1995.  The Company's principal offices are
located  at  The New York Information Technology Center, 55 Broad  Street,  New
York, New York 10004 and its telephone number is (212) 547-5234.  The Company's
Web site is located at http://www.k2design.com.

K2 SERVICES

     The  Company   provides  its  customers  with  an  integrated  variety  of
interactive media services  as described by the Company's marketing slogan, "We
Build, We Market, We Measure  Success."    K2's  core creative development team
provides a combination of marketing, communications,  advertising,  production,
programming   and   design  services.   K2  strives  to  provide  comprehensive
integrated interactive marketing services by combining the aesthetic nuances of
its  design  staff, the  technological  command  of  its  software  development
personnel and the media experience of its on-line marketing teams.

     To be effective,  it  is  essential that an interactive project, whether a
Web site or a CD-ROM, be more than  merely attractive and that both the product
and the information therein be easily accessible and intuitively organized.  As
a provider of these services, the Company  must  combine creative and technical
expertise to meet its customers' needs.  The Company's  services add value to a
customer's    project   at  every  stage,  from  concept  development   through
completion.  The Company's  assignments  vary  significantly  in their size and
complexity and the scope of services rendered by the Company in connection with
projects has ranged from limited consulting services to complete  creative  and
technical  design  and  construction  of  multi-level  Web sites, including the
capture of live video feeds and audio feeds from remote  locations.   Should  a
customer  so  desire,  the  Company also offers numerous integrated services in
addition  to  those  discussed  above,  including  traditional  graphic  design
services,  strategic  marketing services,  traditional  media  placement,  logo
design for the Web site  or  a  particular  product,  brochures,  point-of-sale
displays  and  other  collateral  marketing  materials  and print advertisement
design and layout.

     The Company recently began to offer media placement  services  intended to
increase  traffic  on  Web  sites.   These  services  principally  comprise the
identification,  negotiation  for  and purchase of, hypertext links from  other
heavily trafficked Web sites.  Due to  the  limited  information and experience
regarding  Web  advertising and a general unfamiliarity  with  the  concept  of
interactive advertising,  advertisers  require  assistance  with the design and
placement  of  advertisements  on the Internet.  The Company believes  that  if
businesses increasingly embrace  the  Web  as  an  advertising  vehicle,  their
participation will stimulate the creation and expansion of the information  and
resources,  available  on  the  Web  which in turn, is expected to stimulate an
increase in the utilization of the Web  by businesses.{*}  The Company believes
that advertisers will seek to advertise on  Web  sites that offer a high volume
of  traffic  and feature flexible advertisement programs  capable  of  reaching
targeted audiences.{*}  However, the Internet as an advertising medium is still
evolving and, consequently, advertisers seek demonstration of its effectiveness
to justify its use.

     Today, the Company provides four different interactive services:  Creative
development,  media   buying  for  Web  sites,  media  selling  from  Web  site
advertising  networks  maintained  by  the  Company,  and  consulting  services
regarding Web site usage and user characteristics.

   CREATIVE DEVELOPMENT

   Comprised  of  personnel   experienced   in   advertising,  programming  and
   entertainment,  the  Company's  core  creative  development   team  provides
   integrated  new media services and solutions.  When first working  with  new
   customers, the  Company  will  follow  a three-step creative and development
   process: strategic concept development,  production and testing.  During the
   conceptual phase the Company will conduct  a  needs assessment briefing with
   the customer in order to determine the customer's  objectives and functional
   specifications  of  the  product,  media plan and other  requirements.   The
   creative approach is then developed  incorporating  the  marketing strategy,
   design, copy and programming.  During the implementation phase,  all artwork
   and  copy  are  developed  and  digitized.   The  content  is  then produced
   utilizing  various  development  tools  and programming languages.   Product
   testing on all anticipated computer configurations  takes  place  at various
   stages  of  the  implementation  process.   Testing  may  continue after the
   product,  or  project, launch through the Company's reporting  and  tracking
   consulting team.  This will be used to determine the project's effectiveness
   and whether further development is needed.

   MEDIA BUYING FOR WEB SITES

   K2 NetMedia<trademark>  offers  customers  full  service traditional and new
   media  planning  services  aimed at maximizing the effectiveness  of  a  Web
   presence.  This team plans and  executes  advertising  campaigns, as well as
   promotions,  advertisements  and marketing initiatives.  NetMedia<trademark>
   integrates the core development  team's  production, award winning creative,
   and strategic marketing experience to provide  customers  with a diversified
   communications  plan.   The  team's  staff  is  experienced  in  all  media:
   television, radio, cable, print, outdoor and direct.  However, to  date, the
   NetMedia<trademark> team has principally engaged in media purchasing  on the
   Web    and    in   print.    The   URL   for   K2   NetMedia<trademark>   is
   http://www.k2design.com/net.html.

   MEDIA SELLING FROM WEB SITE ADVERTISING NETWORKS

   To maximize advertisers'  return  on  investment  and  expand  distribution,
   CLIQNOW!<trademark>  develops  branded content networks that bundle together
   several theme-related Web sites.  By bundling theme-related sites, these
   networks  deliver increased ad-views to advertisers as compared to the
   individual sites on a stand-alone basis.   To  date, three networks have been
   developed: CLIQGolf!<trademark>, CLIQFinancial!<trademark> and
   CLIQCollege!<trademark> although only CLIQGolf!<trademark> has been launched.
   The Company maintains a distinctive product identity and a separate  physical
   location for the CLIQ networks in order to preserve the independence of this
   media  selling  business from the media buying business conducted by K2
   NetMedia<trademark>.   The  URLs  for CLIQNow!<trademark> and CLIQGolf! are
   http://www.cliqnow.com  and  http://www.cliqgolf.com.

   CONSULTING

   VisiTrac<trademark> TSP (Tracking  Solutions Provider) provides a customized
   solution for measuring return on investment  of a Web site and assessing the
   characteristics of visitors to that site.  These  services  are  intended to
   fill  the  gap  between various "off the shelf" Web based reporting packages
   and the particular  needs  of  specific  businesses,  particularly since the
   Company  believes  that  there  are  no  universally  useful  and   reliable
   techniques used to measure a Web site's productivity and value.  While there
   are   many  measurement  packages  available  on  the  market,  the  Company
   recognizes the need to provide each customer with a unique Web site Activity
   Tracking and Statistics (WATS) solution to suit its specific business model.
   Accordingly,  Company  personnel continually monitor product development and
   innovations  to  provide  objective   market   expertise   in  tracking  and
   measurement.  Company consultants assist customers in choosing  the  optimal
   package  for  their  needs.   VisiTrac<trademark>  TSP services also include
   publication of the VT Quarterly, a quarterly training  and industry analysis
   publication.  The URL for VisiTrac<trademark> is http://www.visitrac.com.

K2 STRENGTHS

CREATIVE EXPERTISE

   The Company believes that, in addition to the creative elements  required in
traditional   graphic  design,  superior  interactive  advertising  assignments
require  that the  end  product  be  easy-to-use  with   intuitive  interfaces,
seamlessly  integrated  technologies and an engaging look and feel.  Management
believes that the Company's  creative  developers  are fully capable across the
spectrum of expertise required to meet customers' creative  needs.  In order to
maintain high levels of creativity and quality, the Company intends  to recruit
the  best talent available.{*}  However, competition for creative personnel  is
especially  intense and there can be no assurance that the Company will attract
or retain adequate creative talent to accomplish these goals.

TECHNOLOGICAL EXPERTISE

   The Company  believes  the  creative  application of leading technologies is
also  crucial to the success of its business.   The  Company's  nine  technical
programming  personnel are skilled in various computer operating systems, tools
and languages,  including  C/C++,  Macromedia  products,  Basic, FORTRAN, UNIX,
Perl, Java, VRML, Real Audio and Video, Windows NT, Netscape  server  platforms
and  SUN  and  UNIX  operating  systems,  among  others.  These programmers are
responsible for providing complex computer programming  for special features on
CD-ROM   products  and  Web  sites  as  well  as  periodically  assessing   new
technologies  in order to identify and deploy, directly and through independent
contractors,  those  that  are  most  promising  for  enhancing  the  Company's
business.

FOCUS ON CUSTOMERS' BUSINESS OBJECTIVES

   The Company  has  made  understanding  customers'  business  challenges  the
primary focus which guides its customer services.  The Company often works with
customers'  management  to  determine  how best to integrate Web sites into the
customers' business goals.


K2 STRATEGY

CAPITALIZE ON ACCOMPLISHMENTS AND MARKET OPPORTUNITIES

   The Company believes that the proliferation of the Internet will continue to
provide substantial opportunities to the  Company  and  that  its  successfully
completed  projects  will  continue  to enhance its marketing efforts.{*}   The
Company's management does not, however,  believe  that  the  Company's  primary
business  will  always  be  limited  to  the Internet.{*}  The Company produces
digital content which may be carried over  a  variety  of emerging technologies
such   as  Vertical  Blanking  Interval,  digital  satellite  and   interactive
television.{*}   Although  there is no assurance that any of these technologies
will achieve acceptance in the  marketplace,  the Company believes its services
could be utilized over these channels as well.

LEVERAGE DEVELOPMENT EFFORTS

   In the course of developing customized Web sites  for certain customers, the
Company may gain technical know-how that can be applied in other efforts.  This
knowledge  is  preserved by the Company in order to facilitate  access  by  the
entire production staff, potentially reducing future development costs.{*}

DEPLOY LEADING TECHNOLOGIES

   The Company's objective is to apply both proven and emerging technologies as
they become available  in  order  to maximize the effectiveness of its Web site
services.   The  Company  has   formed  non-exclusive  relationships  with  key
technology providers in an effort to gain access to, and influence the features
of, their technologies in development.

CHANNEL MARKETING

   The Company will continue to focus  on  developing  strategic  relationships
with  Channel Sources (defined below) that seek to augment their businesses  by
making  available  the  Company's services to their own customer base.  See "--
Marketing; Channel Sources."

MARKETING

GENERAL

   The Company markets its  services  directly  and  seeks  to  form  strategic
marketing  relationships  with  third parties.  The Company's marketing efforts
have expanded as the scope of its  services  has increased.  As of December 31,
1996, the Company has eight employees dedicated  to sales and marketing and two
of the Company's executive officers spend a portion of their time marketing the
Company's services.  The Company also seeks to attract  new  customers  through
other  methods,  including  referrals  from existing customers, and the Company
advertises  its  services  in certain trade  and  business  publications.   The
Company also seeks to cross-sell  its various services, which are complementary
to  each  others,  to its customers and  prospective  customers  through  sales
presentations  that  encourage  customers  to  utilize  all  of  the  Company's
services.

CHANNEL SOURCES

   The Company's marketing  efforts  to  date  have  substantially  focused  on
developing  strategic  relationships  with other companies, such as advertising
agencies  and  Internet service providers  ("Channel  Sources")  that  seek  to
augment their businesses  by  making  available  Web  site  design and creation
services  provided  by  the  Company  and  other  third  parties.  The  Company
therefore  targets  advertising  agencies  that do not offer Web  site  related
services, providers of other Internet services  (e.g., access, connectivity and
Web site hosting) and other businesses whose customers  are  likely  to require
the services that the Company provides.

RELATIONSHIP WITH MCI

   To   date,   the   Company's  only  significant  continuing  Channel  Source
relationship has been and continues to be with MCI.  In 1996 and 1995, sales to
MCI  and to referrals from  MCI,  were  approximately  $355,000  and  $180,000,
respectively,  and  accounted  for  approximately  nine  percent and 15% of the
Company's revenues, making MCI the Company's fifth and second largest source of
revenues in the respective years.

   The Company's ongoing referral relationship with MCI relates  to an Internet
initiative of MCI commenced in February 1996 pursuant to which MCI salespersons
offer  comprehensive  Web  site  services  to  their  customers  and  potential
customers.   In  connection  with this initiative, MCI co-markets the Company's
services  and  after pre-screening  an  interested  customer,  introduces  that
customer to the  Company.   Executives  of  the  Company  have  participated in
presentations  made  to  MCI  salespersons  in  the northeastern United  States
regarding the mechanics of the program and the Company's  role  in  the program
and the Company has been advised that it is considered by MCI to be a  "best of
breed" vendor.  In December 1996, the Company signed an agreement with MCI that
names  the  Company  a  Creative Vendor eligible to participate in MCI's select
vendor program.  That agreement may be terminated by MCI at any time.

EXPAND SCOPE OF SERVICES AND GEOGRAPHIC SALES OFFICES

   The Company seeks to expand  both  the breadth and depth of its creative and
technical  service abilities.  The Company  seeks  to  achieve these objectives
both by continuing to expand the scope of the services that it currently offers
and adding new sales offices.  To date, all services have  been  rendered  from
the  New  York  office  regardless  of  the  customer's  location.  The Company
recently  opened  a  sales  office  in  Baltimore,  Maryland  to  service   the
Washington,  D.C. area.  The Company may also acquire products, technologies or
businesses that  may  expand  the  scope of services offered by the Company and
geographic  locations  of the Company.   Recently,  the  Company  modified  its
earlier intentions and determined  not  to  open  an additional sales office in
Germany, but is still evaluating whether to maintain  a relationship with other
businesses in Germany that have referred business to the Company in the past.

CUSTOMERS

   The  Company's  four largest sources of revenues during  1996  were  America
Online            Incorporated            (http://www.aol.com/about/devstudio/,
http://www.primehost.com/),  Toys  `R' Us Corporation (http://www.toysrus.com),
Chase   Manhattan   Bank   and   International    Business    Machines    Corp.
(http://www.chess.ibm.part.org,        http://www.informarket.ibm.com       and
http://www.distributor.ihost.com), which  accounted for approximately 20%, 15%,
14% and 12%, respectively, of the Company's  revenues  during  that  year.  The
Company has continued to provide services to these customers in the first
quarter of 1997.{*}  Referrals  from  MCI also accounted for approximately nine
percent of  the Company's services in 1996.   In  1995,  the  Company's  three
largest sources of  revenues  were J. Walter Thompson (relating to one project
for the benefit of Bell Atlantic)  MCI  and  Prudential Securities, which
accounted for approximately 18%, 15% and 12%, respectively,  of the Company's
revenues during that year.

   As of December 31, 1996, the Company has completed  more  than  50  Web site
design and creation projects, each generating gross revenue ranging from $1,500
to  more  than  $700,000, in addition to consulting engagements and interactive
projects other than  on  the World Wide Web.  One additional customer with whom
the Company established a  relationship since then, among others, is Wavephore,
Inc.  for  which  the  Company is  providing  extensive  and  varied  services.
These services have included traditional and interactive strategic  product
branding  and  advertising services and Web site development for the launch of
its consumer product technology known as WaveTop, as well as the design of
Wavephore's annual report.

   Because the Company's projects are generally completed in a relatively short
period of time, the Company has not experienced significant backlog.

TRADEMARKS

   The Company applied  to  the  U.S.  Patent  and Trademark Office for several
trademarks, which are all in examination but have  not  yet  been published for
opposition.   There  can be no assurance that any of these trademarks  will  be
granted.  Trademarks for  which  the Company has applied include K2<trademark>,
K2     Design<trademark> and Visitrac<trademark>.

GOVERNMENT REGULATION

   The Company is not currently subject  to direct regulation by any government
agency, other than regulations applicable  to  businesses  generally, and there
are currently few laws or regulations directly applicable to  Web  site service
companies  and  marketing  and  communications  firms.   However,  due  to  the
increasing  media  attention  focused  on  the  Internet, it is possible that a
number of laws and regulations may be adopted with  respect  to  the  Internet,
covering  issues  such as user privacy, pricing and characteristics and quality
of products and services.   The  adoption  of  any such laws or regulations may
decrease the growth of the Internet, which could  in  turn  decrease the demand
for  the  Company's  services and products and increase the Company's  cost  of
doing business or cause the Company to modify its operations, or otherwise have
an adverse effect on the  Company's  business,  operating  results or financial
condition.   Moreover,  the  applicability  to  the  Internet of existing  laws
governing  issues  such as property ownership, libel and  personal  privacy  is
uncertain.   The Company  cannot  predict  the  impact,  if  any,  that  future
regulation or  regulatory  changes  may have on its business.  In addition, Web
site developers such as the Company face potential liability for the actions of
customers and others using their services, including liability for infringement
of intellectual property rights, rights  of  publicity,  defamation,  libel and
criminal  activity  under the laws of the U.S. and foreign jurisdictions.   Any
imposition of liability could have a material adverse effect on the Company.

   The Communications  Decency  Act  of  1996  (the  "1996  Act"), which became
effective on February 8, 1996, imposes criminal liability on persons sending or
displaying in a manner available to minors indecent material  on an interactive
computer  service  such  as  the Internet.  The 1996 Act also imposes  criminal
liability on an entity knowingly  permitting facilities under its control to be
used for those activities.  Two separate three-judge panels comprised of judges
from  the  Second and Third Circuit Courts  of  Appeal  recently  preliminarily
enjoined the  enforcement  of  portions  of  the 1996 Act pending review by the
United States Supreme Court.  If upheld, the interpretation  and enforcement of
these  provisions  are  uncertain  and  the penalties imposed by the  1996  Act
include  fines  and imprisonment.  This legislation  may  decrease  demand  for
Internet access,  chill  the  development  of  Internet  content, or have other
adverse  effects  on  Web  site  service  providers  such as the  Company.   In
addition, in light of the uncertainty of the interpretation  and application of
this law, there can be no assurance that the Company would not  have  to modify
its operations to comply with the statute.  The impact of the 1996 Act  on  the
Company and its business cannot be predicted.

COMPETITION

   The  markets  for  the  Company's  services  are  highly competitive and are
characterized  by  pressures  to  incorporate new capabilities  and  accelerate
completion schedules.  The Company  expects  competition  for  its  services to
intensify  in  the future, partly because there are no substantial barriers  to
entry into the Company's business.  The Company faces competition from a number
of sources, including  potential  customers  that perform interactive marketing
and communications services and Web site development  services in-house.  These
sources  also  include  other Web site service boutique firms,  communications,
telephone and telecommunications  companies,  computer  hardware  and  software
companies  such  as  Microsoft  Corporation  and  Adobe  Systems  Incorporated,
established  online  services  companies,  advertising agencies, direct  access
Internet and Internet-services and access providers  as well as specialized and
integrated  marketing  communication firms such as CKS Group,  Inc.  and  Eagle
River Interactive, Inc.,  all  of  which  are  entering the Web site design and
creation market in varying degrees and are competing with the Company.  Many of
the  Company's  competitors  or  potential competitors  have  longer  operating
histories, longer customer relationships  and  significantly greater financial,
management, technological, development, sales, marketing  and  other  resources
than  the  Company.  The Company's ability to retain relationships with Channel
Sources and its existing customers and generate new customers and relationships
with Channel  Sources  depends  to  a  significant degree on the quality of its
services and its reputation, as compared  with the quality of services provided
by  and  the  reputations  of,  the Company's competitors.   The  Company  also
competes on the basis of creative  reputation,  price,  reliability of services
and responsiveness.  There can be no assurance that the Company will be able to
compete and its inability to do so would have a material  adverse impact on the
Company's business, financial condition and operating results.

EMPLOYEES

   As  of  December  31, 1996, the Company has 52 employees, of  which  48  are
full-time employees and  the remaining four are part-time employees.  Full-time
employees include nine salespeople,  13  account  managers  and producers, five
media sales and 15 creative and production personnel, in addition  to executive
management and support staff.

ITEM 2.  PROPERTIES

   The Company's chief executive offices occupy approximately 5,800 square feet
of  an office building known as The New York Information Technology Center,  55
Broad  Street,  New  York,  New  York at an annual rent ranging from $86,955 to
$98,549, payable in equal monthly  installments,  plus  the Company's allocable
share of certain real property taxes and building operating  expenses in excess
of fixed levels as provided in the lease.  The lease has a five-year  term  and
expires April 30, 2001.

   The Company maintains additional office space in New York City consisting of
1,976  square  feet  of  office space located at 50 Broad Street, New York, New
York at an annual rent ranging  from  $34,580  to  $38,532,  payable  in  equal
monthly  installments,  plus  the  Company's  allocable  share  of certain real
property  taxes  and building operating expenses in excess of fixed  levels  as
provided in the lease.   The  lease  has a term of five years, three months and
expires January 31, 2002.  The Company  is  also  negotiating  a  lease  for an
additional  approximately 13,000 square feet of office space near its principal
offices in New  York  City.   As  presently contemplated, the Company estimates
annual rent for this additional space in the range of $200,000 to $250,000.{*}
There can be no assurances that this lease will be executed on these terms, if
at all.

   The  Company also maintains additional  sales  office  space  in  Baltimore,
Maryland consisting of 1,897 square feet, at an annual rent of $30,127, payable
in equal  monthly  installments,  plus the Company's allocable share of certain
real property taxes and building operating  expenses  in excess of fixed levels
as  provided  in the lease.  The lease has a term of three  years  and  expires
November 30, 1999,  excluding  the Company's option to extend for an additional
three years.

ITEM 3.  LEGAL PROCEEDINGS

   The Company is not a party to  any  material pending legal proceedings as of
the date hereof.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   The  Company did not submit any matters  to  a  vote  of  its  stockholders,
through the  solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1996.

**FOOTNOTES**

      {*}This statement  is  a  forward-looking  statement  reflecting  current
expectations.   There  can  be  no  assurance  that the Company's actual future
performance  will  meet  the  Company's  current expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results and Market Price of Stock" commencing  on  page 17, for a discussion of
factors that could affect future performance.

      {*}This  statement  is  a  forward-looking statement  reflecting  current
expectations.   There can be no assurance  that  the  Company's  actual  future
performance will  meet  the  Company's  current  expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results  and  Market Price of Stock" commencing on page 17, for a discussion of
factors that could affect future performance.

      {*}This statement  is  a  forward-looking  statement  reflecting  current
expectations.   There  can  be  no  assurance  that the Company's actual future
performance  will  meet  the  Company's  current expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results and Market Price of Stock" commencing  on  page 17, for a discussion of
factors that could affect future performance.

      {*}This  statement  is  a  forward-looking statement  reflecting  current
expectations.   There can be no assurance  that  the  Company's  actual  future
performance will  meet  the  Company's  current  expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results  and  Market Price of Stock" commencing on page 17, for a discussion of
factors that could affect future performance.

      {*}This statement  is  a  forward-looking  statement  reflecting  current
expectations.   There  can  be  no  assurance  that the Company's actual future
performance  will  meet  the  Company's  current expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results and Market Price of Stock" commencing  on  page 17, for a discussion of
factors that could affect future performance.

      {*}This  statement  is  a  forward-looking statement  reflecting  current
expectations.   There can be no assurance  that  the  Company's  actual  future
performance will  meet  the  Company's  current  expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results  and  Market Price of Stock" commencing on page 17, for a discussion of
factors that could affect future performance.


<PAGE>
                                   PART II

ITEM 5.    MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
           MATTERS

   The  Company's  Common  Stock  is  traded  on the NASDAQ SmallCap<trademark>
Market ("NASDAQ") under the symbol "KTWO".

   The following table sets forth, for the periods indicated, the range of high
and low bid prices of the Common Stock as reported  by  NASDAQ  from  July  26,
1996,  the effective date of the Company's registration statement in connection
with its  initial public offering, through December 31, 1996.  These quotations
reflect inter-dealer  prices,  without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                    High                               Low
<S>                                        <C>                                 <C>

July 1996 (commencing July 26, 1996)                7 1/2                              5 61/64
August 1996                                         7 3/4                               6 1/4
September 1996                                      7 3/4                               6 1/2
Fiscal Quarter Ended
     December 31, 1996                              6 1/2                               5 3/4
</TABLE>

   The approximate number of recordholders  of the Common Stock at December 31,
1996 was 53, not including beneficial owners  whose  shares  are held by banks,
brokers and other nominees.

   The Company has not paid any dividends.  The Company does not  expect to pay
cash  dividends  on its Common Stock in the foreseeable future as any  earnings
are expected to be  retained  to finance the Company's operations.  Declaration
of dividends in the future will  remain  within the discretion of the Company's
Board of Directors.

RECENT SALES OF UNREGISTERED SECURITIES

   The Company was formed in January 1996  by the then-existing stockholders of
K-2 Design, Inc., a New York corporation (the  "Predecessor").   In  connection
with  the  formation  of  the Company, such stockholders each exchanged all  of
their shares of the Predecessor's  common  stock,  which constituted all of the
outstanding  capital  stock  of  the  Predecessor, for 473,870  shares  of  the
Registrant's Common Stock, or 1,895,480  such  shares  in  the aggregate.  This
exchange  was  not  a  sale  as  defined  by Section 2(3) of the Act  and  was,
accordingly, exempt from the registration requirements of the Securities Act of
1933 (the "Act").

   In March 1996, the Company consummated a  private placement in which it sold
200,000 shares of Common Stock for an aggregate  of  $250,000 ($1.25 per share)
and in May 1996, the Company consummated a second private placement in which it
sold an additional 400,002 shares of Common Stock for  an aggregate of $700,000
($1.75 per share).  Only accredited investors purchased  Common  Stock in these
private  placements.   With  respect  to the private placements, Donald  &  Co.
Securities Inc. acted as Placement Agent  and  received  $47,000 in commissions
and $9,500 in non-accountable expenses.  Since these offerings  were  made to a
limited  number  of  offerees  all  of  whom  are  accredited  and otherwise in
compliance with Rule 506 promulgated under Regulation D of the Act,  they  were
exempt from registration by reason of Section 4(2) of the Act.


<PAGE>
ITEM 6.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION AND
           RESULTS OF OPERATION

   The following presentation of management's discussion  and  analysis  of the
Company's  financial  condition  and  results  of  operations should be read in
conjunction   with  the  Company's  Consolidated  Financial   Statements,   the
accompanying notes  thereto and other financial information appearing elsewhere
in this Report.  This  section  and other parts of this Report contain forward-
looking statements that involve risks  and uncertainties.  The Company's actual
results may differ significantly from the  results  discussed  in  the forward-
looking  statements.   Factors that might cause such a difference include,  but
are not limited to, those  discussed  in  the  section  entitled  "Management's
Discussion  and  Analysis  of  Financial Condition and Results of Operation  --
Factors Affecting Operating Results  and  Market  Price of Stock" commencing on
page 17.

OVERVIEW

   The  Company  was  founded  in 1993 as a general partnership  and  initially
operated a traditional graphic design  business.   The  Company  was  hired  to
design  a  graphical user interface in March 1994 for Sierra Magazine Online, a
proprietary  online  service,  and in August 1994 for NetMarket Inc., the first
company to perform a secure online  transaction  on the Internet, at which time
the Company shifted its principal business to Web  site  design  and  creation.
After  the  Company's  initial  public  offering  ("IPO") on July 26, 1996, the
Company  began  to  develop  its  vision  to become a full-service  interactive
marketing and communications firm, largely  in anticipation of demands from its
customers for additional complementary services.   Complementary  services  the
Company  now provides include, among others, development of CD-ROM discs, media
placement  on  Web sites, consulting services regarding Web site usage and user
characteristics,  and  development  and  maintenance  of Company-owned Web site
advertising  networks, live Internet broadcasts and the  development  of  brand
strategies and print collateral systems.

   As a result  of  the  expansion  of  the  Company's services beyond Web site
design  and  creation, the Company incurred significant  expenses  in  1996  in
anticipation of  future  revenues.   Since  the Company has engaged in Web site
design and creation only for approximately two  years,  and  has been providing
various  other  services  for  less  than one year, the Company has  a  limited
operating history upon which an evaluation of the Company and its prospects can
be based.  Management therefore believes  that  period-to-period comparisons of
the Company's results of operations are not indicative of future results.

   In January 1995, the Company was reorganized as  a New York corporation that
elected to be treated as an S corporation for tax purposes.   In  January 1996,
the  Company  was  reorganized  as a Delaware holding company and the New  York
corporation became a wholly-owned  operating subsidiary thereof and thus ceased
to be an S corporation for tax purposes.  For financial reporting purposes, the
Company's  Consolidated  Financial  Statements  include  the  Company  and  its
wholly-owned subsidiary.

RESULTS OF OPERATIONS

GENERAL

   Project-based work for which the Company has been engaged has generally been
completed within 16 weeks, although certain  past,  current and future projects
have  taken  and  are  expected  to  take  longer  to complete.   Revenues  are
recognized on a percentage of completion basis.  Provisions  for  any estimated
losses on uncompleted projects are made in the period in which such  losses are
determinable.   A  portion of the Company's revenues have been generated  on  a
fixed fee for service  basis.   The  Company  also provides ongoing services to
certain customers, including one customer for which  the  Company is agency-of-
record.

   The Company has increased and is currently increasing its  expense levels to
accommodate  its  past  growth  and anticipated growth in its business.   These
expenses are related to, among other  things,  a  substantial  increase  in the
number  of employees, the relocation of the Company's principal office and  the
opening of  two  additional offices, and investing in equipment.  The Company's
failure to expand  its  business  in  an efficient manner could have a material
adverse  effect  on the Company's business,  operating  results  and  financial
condition.  In addition,  there can be no assurance that the Company's revenues
will continue to grow at a  rate  that  will  support  its  increasing  expense
levels.

   The  changes  in  the  various  line-items  discussed  below result from the
increase in the Company's expenses since it consummated a series  of securities
offerings  in  1996  and  began  to  apply  the proceeds to expand services  in
anticipation of future revenues.

<TABLE>
<CAPTION>
                                                   Percentage of Revenues
                                                   Year Ended December 31,
<S>                                          <C>                          <C>
                                             1996                         1995
Revenues                                              100.0%                 100.0%
Operating Expenses
   Direct Salaries and Costs                           79.7                   80.0
   Selling, General and Administrative                 42.2                   16.8
Expenses
   Depreciation                                          2.2                   2.1
     Total Operating Expenses                          124.1                  98.9
Operating Income (Loss)                               (24.1)                   1.1
Other Income (Expense)                                  2.1                    0.0
Income (Loss) before taxes
   Income taxes                                          --                     .1
   Net Income (Loss)                                  (22.0%)                  1.0%
</TABLE>
REVENUES

   Revenues for the years ended December 31,  1996 and 1995 were $4,077,792 and
$1,196,208, respectively, or an increase of 341%  in  1996 as compared to 1995.
in fiscal 1996, approximately 63% of revenues were generated from Web site
design and creation services, 14% from media placement on Web sites, 13% from
traditional   graphic  design  services  and  10% from  one   CD-ROM  project.
In  fiscal  1995,  approximately  80%  of revenues  were  generated  from  Web
site design and creation services and the remainder was attributable to
traditional  graphic  design services.  Since the transition  of  the  Company
from a Web site design firm  into  an  integrated, interactive marketing and
communications firm is ongoing, the Company is unable to predict the relative
percentage of its revenues that will be generated from each of its various
services.

   Any significant shortfall  of  demand for the Company's services in relation
to the Company's expectations would  have  an  adverse  impact on the Company's
business, operating results and financial condition.

DIRECT SALARIES AND COSTS

   Direct salaries and costs include all direct labor costs  and  other  direct
costs   related  to  project  performance,  such  as  independent  contractors,
freelance  labor,  supplies, and printing and equipment costs.  As a percentage
of revenues, direct  salaries  and costs remained relatively constant in fiscal
1996 as compared to fiscal 1995.   The  Company's direct salaries and costs for
fiscal 1996 were $3,249,717 and for fiscal 1995 were $957,027.  In 1996, direct
salaries and costs consisted primarily of  approximately  $1,200,000  in direct
salaries  and  approximately  $1,200,000  paid  to  freelance artists and other
independent  contractors  (half  of which was incurred in  the  fourth  quarter
principally in respect of two projects)  and  the  remainder consisted of media
placement costs and supplies and printing.  In 1995,  direct salaries and costs
consisted  primarily  of approximately $405,000 paid to freelance  artists  and
other independent contractors (approximately half of which was paid to a vendor
of complex computer programming  services  required for special features on Web
sites), and secondarily of approximately $300,000 paid as direct salaries.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

   Selling, general and administrative expenses  for  fiscal  1996 increased to
$1,720,503 (42.2% of revenues) from $200,931 in 1995 (16.8% of  revenues),  and
in  each  period  consisted  of  salaries,  professional fees, occupancy costs,
marketing and advertising and travel and office  expenses  and  supplies, among
other things.  The increase in absolute dollars reflects the application of the
proceeds  from  the  Company's  private placements and initial public  offering
during 1996, consistent with the Company's expansion strategy.  The increase as
a percentage of revenues reflects  the  incurrence  of  expenses in 1996 as the
Company expanded the scope of its services in anticipation  of future revenues.
In  1995,  prior to raising money from external sources, selling,  general  and
administrative expenses were limited by the Company's lack of funds.

   In addition,  the  Company  may  open additional sales offices, although the
Company  has  determined  not  to  open one  in  Germany  for  the  foreseeable
future.{*}  As a result of any such  expansion,  the Company's selling, general
and administrative expenses, particularly occupancy  costs  and office expenses
and supplies, would likely increase.

DEPRECIATION

   Depreciation expense was $92,167 and $24,485 in the years ended December 31,
1996  and  1995,  respectively,  and  related to depreciation of equipment  and
leasehold improvements.  The expense in  1996  was  principally  the  result of
depreciation   of   the  Company's  equipment  and  leasehold  improvements  in
connection with the acquisition of computer equipment and the relocation of its
offices.

INTEREST INCOME, NET

   The net proceeds from  the  Company's  securities  offerings earned interest
income net of interest and other expense of $89,178 for the year ended December
31, 1996.  The Company incurred interest expense of $869  for  the  year  ended
December 31, 1995.

INCOME TAXES

   The  Company  operated  as  a partnership during the year ended December 31,
1994.  As a result, the partners were individually liable for federal and state
income taxes on the Company's taxable  income.   Effective  January  1995,  the
Company  elected  to  be  treated  as  an  S Corporation for federal income tax
purposes.  As a result, the shareholders were  individually  liable for federal
income tax on the Company's taxable income.  In January 1996, the Company began
to  be  treated as a C corporation for federal and state income  tax  purposes.
The Company is also liable for New York state and city income taxes.
SELECTED QUARTERLY OPERATING RESULTS (UNAUDITED)

   The following  table  presents unaudited quarterly financial information for
the period from January 1, 1995 to December 31, 1996.  The information has been
derived from the Company's  unaudited  Consolidated  Financial Statements.  The
unaudited quarterly financial information has been prepared  on  the same basis
as the audited Consolidated Financial Statements and includes all  adjustments,
consisting  only  of  normal  recurring adjustments, that the Company considers
necessary for a fair presentation  of such information when read in conjunction
with  the  Company's  audited  Consolidated   Financial   Statements   and  the
accompanying  notes  thereto appearing elsewhere in this Report.  These results
are not indicative of results for any future period.

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
<S>                     <C>          <C>        <C>            <C>            <C>         <C>          <C>            <C>
                          MARCH 31,   JUNE 30,   SEPTEMBER 30,  DECEMBER 31,   MARCH 31,    JUNE 30,    SEPTEMBER 30, DECEMBER 31,
                             1995       1995          1995           1995        1996         1996          1996           1996
                                                            (UNAUDITED)
Revenues                   $ 33,639    $383,423     $301,481       $477,665    $ 512,434      $498,050       $825,348    $2,241,960
Operating Expenses:
Direct salaries and          68,152     274,309      268,074        346,492      499,109       607,066        785,245     1,358,297
costs
Selling, general and
administrative expenses      12,449      72,294       53,090         63,098      125,958       262,823        234,303     1,097,419
Depreciation                  4,779      10,147        4,779          4,780        9,113        14,221         23,626        45,207
Total operating              85,380     356,750      325,943        414,370      634,180       884,110      1,043,174     2,500,923
expenses
Operating income (loss)    $(51,741)   $ 26,673     $(24,462)      $ 63,295    $(121,746)   $(386,060)     $(217,826)    $(258,963)
</TABLE>
_________________


   Quarterly revenues  and operating results have fluctuated and will fluctuate
as a result of a variety  of  factors.   These  factors,  some  of  which  have
affected  the  Company  and  some  of  which  are beyond the Company's control,
include the timing of the completion, material  reduction  or  cancellation  of
major  projects,  the  loss  of  a  major  customer  or  the  termination  of a
relationship  with  a  Channel  Source,  timing of the receipt of new business,
timing of the hiring or loss of personnel,  changes  in  the pricing strategies
and  business  focus  of the Company or its competitors, capital  expenditures,
operating expenses and  other  costs  relating  to the expansion of operations,
general  economic  conditions  and acceptance and use  of  the  Internet.   The
Company's quarterly operating margins  may also fluctuate from period to period
depending on the relative mix of lower cost  full  time employees versus higher
cost independent contractors.  At the present time,  the Company has determined
to increase expense levels, which to a large extent are fixed, based in part on
expectations  as  to  future  revenues  and  will  base future  expense  levels
similarly.  As a result, operating expenses as a percentage  of  revenues  have
increased  in  the  fourth  quarter  of  1996  as  compared  to the prior three
quarters.  Revenues and operating results are difficult to forecast  because of
these fluctuations and because the Company lacks historical financial  data for
a  significant number of periods.  The Company may be unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall.

   Any  significant  shortfall of demand for the Company's services in relation
to the Company's expectations  would  have  an  adverse impact on the Company's
business, operating results and financial condition.

   The  trading  prices  of the Common Stock and its  Redeemable  Common  Stock
Purchase  Warrants  are  subject   to  fluctuation  in  response  to  quarterly
variations in operating results, announcements  of technological innovations or
new products or services by the Company or its competitors,  as  well  as other
events  or  factors.   In  addition,  the  stock  market  has from time to time
experienced price and volume fluctuations which have particularly  affected the
market price of technology-oriented and media companies, which often  have been
unrelated to the operating performance of these companies.  These broad  market
fluctuations may adversely affect the market price of the Common Stock and  the
Redeemable Common Stock Purchase Warrants.

LIQUIDITY AND CAPITAL RESOURCES

   The  Company  is  dependent  on  its  cash of approximately $3.9 million (at
December 31, 1996), together with cash generated  by  operations,  if  any, for
working capital in order to be competitive, to meet the increasing demands  for
service,  quality and pricing and for any expansion of its business.  While the
Company believes  that  its  cash  position  together  with cash expected to be
generated  by operations will be sufficient to finance its  operations  for  at
least  one year,  the  Company  may  nevertheless  require  future  substantial
alternative  financing in order to satisfy its working capital needs, which may
be unavailable  or  prohibitively  expensive  since  the  Company's only assets
available   to   secure   additional   financing  are  accounts  receivable.{*}
Accordingly,  the  Company may not have the  funds  to  relieve  any  liquidity
problems in the next  year  and  thereafter, or to finance any expansion of its
business.  See "-- Factors Affecting  Operating  Results  and  Market  Price of
Stock -- Cash Flow Deficit; Need for Additional Financing."

   Net  cash used in the Company's operating activities of $(1,925,081) in  the
year ended December 31, 1996 and related primarily to a substantial increase in
accounts  receivable,  which  was  partially  offset by an increase in accounts
payable, and to the loss incurred during the year.

   In 1996, the Company spent approximately $500,000  on  capital expenditures,
consisting of furniture, fixtures and leasehold improvements  acquired and made
in connection with the Company's recent relocation of its principal offices and
the opening of two sales offices.  Additional capital expenditures  may be made
in connection with the opening of additional sales offices.

   In  1996,  the  Company's  primary  source of liquidity was from two private
placements  and  its  initial  public  offering,  which  yielded  approximately
$6,300,000 of net proceeds.  In addition  the  Company financed the purchase of
certain equipment through capital leases.  The principal balance of such leases
was  $130,000  at  December  31, 1996 and is payable  in  varying  installments
through the year 2000.

FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

CASH FLOW DEFICIT; NEED FOR ADDITIONAL FINANCING

   The Company's current primary  focus  is  on increasing the volume of all of
its services.  As a result, the Company has hired  and  will  continue  to hire
additional  personnel  and  has incurred and will continue to incur substantial
expenses related to administration, production, technical resources, marketing,
customer  support  and infrastructure  in  order  to  enhance  and  expand  its
operations.  The Company had an operating cash flow deficit of $(2,404) in 1995
and of $(1,925,081)  in  1996.   The Company may require substantial additional
financing  in  order  to  satisfy its  working  capital  needs,  which  may  be
unavailable  or  prohibitively   expensive  since  the  Company's  only  assets
available to secure additional financing  are accounts receivable.  Should such
financing be unavailable or prohibitively expensive  when  the Company requires
it, the Company would not be able to finance any expansion of  its business and
may  not  be able to satisfy its working capital needs, either of  which  would
have a material  adverse effect on the Company's business, operating result and
financial condition.

RECENT OPERATING LOSSES; LIMITED OPERATING HISTORY; EARLY STAGE OF DEVELOPMENT

   The Company's revenues  for  the years ended December 31, 1995 and 1996 were
$1,196,208 and $4,077,792, respectively, with net income of $11,896 in 1995 and
a net loss of $(895,417) in 1996.   There  can be no assurance that the Company
will  be  profitable  in the future or that revenue  growth,  if  any,  can  be
sustained.

   The prospects of the  Company  must  be  considered  in  light of the risks,
expenses and difficulties frequently encountered by companies  in  their  early
stage  of  development,  particularly  companies  in  new  and rapidly evolving
markets  and especially those in Internet and other computer  related  markets.
There can  be  no  assurance  that the Company will be successful in addressing
these risks.

ABILITY TO MANAGE GROWTH

   Since the beginning of 1996, there has been substantial growth in the number
of the Company's employees and  increased  (i) responsibility for both existing
and new management personnel, (ii) strain on the Company's existing management,
administrative,  operational,  financial  and  technical  resources  and  (iii)
demands on its management information systems and  controls.   There  can be no
assurance  that  the  Company  will  effectively develop and implement systems,
procedures or controls adequate to support  the  Company's  operations  or that
management  will  be  able  to  achieve  the rapid execution necessary to fully
exploit the opportunity for the Company's services.  To manage its business and
any growth, the Company must continue to implement  and improve its operational
and financial systems and continue to expand, train and  manage  its employees.
In particular, management believes that in addition to Nelson Hunter,  who  was
recently  hired  as  Chief  Financial  Officer,  the  Company will need to hire
additional qualified administrative and management personnel  in the accounting
and  finance areas to establish and manage financial control systems.   If  the
Company  is  unable to manage its business effectively, the Company's business,
operating  results   and  financial  condition  will  be  materially  adversely
affected.

EVOLVING MARKETING STRATEGY

   The Company's marketing efforts have expanded as the range of services which
the  Company  offers  has  increased.   In  addition  to  developing  strategic
relationships with other  companies,  such as advertising agencies and Internet
service providers ("Channel Sources") that  seek to augment their businesses by
directly or indirectly offering to their customers  Web  site services provided
by the Company and other third parties, the Company also directly  markets  its
core  creative  services  as  well  as the services of VisiTrac<trademark>, Net
Media<trademark> and Cliqnow<trademark>!

   To try to avoid any conflict with  a  Channel  Source,  the Company does not
intend to offer services to customers referred by a particular  Channel  Source
that  could  be  provided to those customers by that Channel Source.  Since the
Company does not expect to offer its full range of services to these customers,
projects for them  may be less profitable than full-service production projects
for other customers.   Should a Channel Source favor other providers of similar
services, fail to effectively  market the Company's services as a result of the
Channel  Source's  competitive  position  or  otherwise,  or  not  utilize  the
Company's services to the extent  anticipated  by  the Company, the Company may
also  be  adversely  affected.   The  inability to recruit,  manage  or  retain
additional Channel Sources, or their inability to market the Company's services
effectively or provide timely and cost-effective  customer support and service,
could materially adversely affect the Company's business, operating results and
financial condition.

RELATIONSHIP WITH MCI AS ONLY SIGNIFICANT CHANNEL SOURCE

   To   date,  the  Company's  only  significant  continuing   Channel   Source
relationship  has  been and continues to be with MCI.  The Company continues to
derive revenues from  an Internet initiative of MCI commenced in February 1996,
pursuant to which MCI salespersons  offer  comprehensive  Web  site services to
their customers and potential customers in the northeastern United  States.  In
connection  with  Webworks,  MCI  co-markets  the  Company's services and after
pre-screening an interested customer, introduces that  customer to the Company.
However, MCI has no obligation to refer projects to the Company, is expected to
refer Webworks projects to others, and utilizes the services  of certain of the
Company's competitors, including CKS Group, Inc., for other Web  site projects.
The  Company is also aware that AT&T, UUNET, and Microsoft Technologies,  Inc.,
among  others,  have introduced programs directly competing with MCI's Internet
initiative.   See   "--One-Time   Customers;  Concentrative  of  Revenues"  and
"Business--Marketing--Relationship with MCI."

ONE-TIME CUSTOMERS; CONCENTRATION OF REVENUES

   Since most of the Company's direct  customers  (and certain Channel Sources)
have retained the Company on a single project basis,  customers  from  whom the
Company generated substantial revenue in one period have not been a substantial
source  of  revenue  in  a  subsequent  period.   During 1995, single customers
accounted for approximately 18% (J. Walter Thompson,  relating  to  one project
for  the  benefit  of Bell Atlantic), 15% (MCI and referrals from MCI) and  12%
(Prudential  Securities)  of  the  Company's  revenues.   During  1996,  single
customers accounted  for  20% (America Online Incorporated), 15% (Toys `R' Us),
14% (Chase Manhattan Bank) and 12% (International Business Machines Corp.).  In
addition, approximately nine  percent  of  the  Company's  1996  revenues  were
derived  from  referrals  from  MCI.   Due  to  the Company's limited operating
history and the emerging nature of the Internet,  the  Company generally cannot
be sure whether its relationships with customers will continue  to  be on a one
project per customer basis, although the Company continued to provide services
in the first quarter of 1997 to the  1996 customers named above.  To the extent
the Company does not generate repeat  or  ongoing business from its customers,
it will incur the higher sales and marketing expenses associated with attracting
new customers as compared to those in attracting additional business from
existing customers.

UNCERTAIN ADOPTION OF INTERNET  AS  A  MEDIUM  OF  COMMERCE AND COMMUNICATIONS;
DEPENDENCE ON INTERNET

   Demand and market acceptance for recently introduced  services  and products
like  those  offered by the Company are subject to a high level of uncertainty.
The  use  of  the   Internet   in  marketing  and  advertising  and  otherwise,
particularly by those individuals and enterprises that have historically relied
upon traditional means of marketing  and  advertising,  generally  requires the
acceptance  of  a  new  way  of conducting business and exchanging information.
Enterprises that have already  invested substantial resources in other means of
conducting business and exchanging information may be particularly reluctant or
slow  to  adopt a new strategy that  may  make  their  existing  resources  and
infrastructure  less useful.  There can be no assurance that the market for the
Company's services  will  develop  and  if  it  fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if the Company's
services  do not achieve market acceptance, the Company's  business,  operating
results and financial condition will be materially adversely affected.

   The Company's  ability  to  derive  revenues  will also depend upon a robust
industry  and  the infrastructure for providing Internet  access  and  carrying
Internet traffic.   The  Internet  may  not  prove  to  be  a viable commercial
marketplace  because of inadequate development of the necessary  infrastructure
or timely development  of  complementary  products,  such as high speed modems.
Moreover, other critical issues concerning the commercial  use  of the Internet
(including security, reliability, cost, ease of use and access, and  quality of
service) remain unresolved and may impact the growth of Internet use.   Because
global  commerce  and  online exchange of information on the Internet and other
similar open wide area networks  are  new  and  evolving,  it  is  difficult to
predict with any assurance whether the Internet will prove to be and  remain  a
viable  commercial marketplace.  If the infrastructure necessary to support the
Internet's  commercial  viability is not developed, or if the Internet does not
become a viable marketplace,  the  Company's  business,  operating  results and
financial condition would be materially and adversely affected.

RISK OF CHANGING TECHNOLOGY

   The  services  the Company offers and the services and products the  Company
expects to offer in  the   future, are impacted by rapidly changing technology,
evolving industry standards,  emerging  competition  and  frequent new service,
software and other product introductions.  There can be no  assurance  that the
Company  can  successfully identify new business opportunities and develop  and
bring new services or products to market in a timely and cost-effective manner,
or that services,  products or technologies developed by others will not render
the Company's services  or  products  noncompetitive or obsolete.  In addition,
there can be no assurance that services, products or enhancements introduced by
the Company will achieve or sustain market acceptance or be able to effectively
address compatibility, inoperability or  other  issues  raised by technological
changes  or  new  industry standards.  The Company's pursuit  of  technological
advances may also require the Company to seek assistance from third parties.

INTELLECTUAL PROPERTY RIGHTS; RISK OF INFRINGEMENT; POSSIBLE LITIGATION

   The Company believes  that  its  success  in  its  core business of Web site
design and creation is not dependent upon patents, copyrights or trademarks and
the  Company  does  not  currently have any registered patents,  copyrights  or
trademarks,  although applications  for  various  trademarks  have  been  made.
Consequently, the Company relies principally on a combination of common-law and
statutory law to protect its proprietary information and know-how.  The Company
also utilizes  technology  owned  by  third parties.  There can be no assurance
that licenses for any technology developed  by  third  parties  that  might  be
required  for the Company's services would be available on reasonable terms, if
at all.  See "Business -- Trademarks."

   Although  the  Company  does  not  believe  that  its  services infringe the
proprietary rights of any third parties, there can be no assurance  that  third
parties  will not assert claims based on these services against the Company  in
the future  or  that any of those claims would not be successful.  In addition,
many of the Company's  competitors  rely upon trade secret law.  Litigation may
be  necessary  in the future to enforce  the  Company's  intellectual  property
rights and to protect  its  proprietary  information, to determine the validity
and scope of the proprietary rights of others,  or  to defend against claims of
infringement  or  invalidity.   Litigation  of  this  nature,  whether  or  not
successful,  could  result  in substantial costs and diversions  of  resources,
either of which could have a material adverse effect on the Company's business,
financial condition and operating  results.  Furthermore, parties making claims
against the Company could secure a judgment  awarding  substantial  damages, as
well as injunctive or other equitable relief which could directly or indirectly
prohibit the Company from providing certain services and products.  A  judgment
of  this nature could have a material adverse effect on the Company's business,
financial condition and results of operations.

CONFLICTS OF INTEREST; RESTRICTIONS

    The  Company  has  been  precluded  and may be precluded in the future from
pursuing  opportunities  that  require  it  to   provide   services  to  direct
competitors of existing customers or Channel Sources.  In addition, the Company
risks alienating or straining relationships with customers and  Channel Sources
each  time the Company agrees to provide services to even indirect  competitors
of existing  customers or Channel Sources. Conflicts of interest may jeopardize
the stability of revenues generated from existing customers and Channel Sources
and preclude access  to  business  prospects,  either  of  which  could  have a
material  adverse  effect  on  the  Company's business, financial condition and
operating results.

**FOOTNOTES**

      {*}This  statement  is  a forward-looking  statement  reflecting  current
expectations.  There can be no  assurance  that  the  Company's  actual  future
performance  will  meet  the  Company's  current  expectations.   Investors are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results  and Market Price of Stock" commencing on page 17, for a discussion  of
factors that could affect future performance.

     {*}This  statement  is  a  forward-looking  statement  reflecting  current
expectations.   There  can  be  no  assurance  that the Company's actual future
performance  will  meet  the  Company's  current expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results and Market Price of Stock" commencing  on  page 17, for a discussion of
factors that could affect future performance.

      {*}This  statement  is  a  forward-looking statement  reflecting  current
expectations.   There can be no assurance  that  the  Company's  actual  future
performance will  meet  the  Company's  current  expectations.   Investors  are
strongly encouraged to review the section entitled "Factors Affecting Operating
Results  and  Market Price of Stock" commencing on page 17, for a discussion of
factors that could affect future performance.


<PAGE>
ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   See Item 13(a)(1) in Part IV.


<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

   Not Applicable


<PAGE>
                                  PART III

ITEM 9.    DIRECTORS  AND  EXECUTIVE  OFFICERS,  PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

   The information required for this item is incorporated  by  reference to the
Company's 1997 Definitive Proxy Statement which the Company will  file with the
Securities  and  Exchange  Commission's  no  later than 120 days subsequent  to
December 31, 1996.


<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

   The information required for this item is incorporated  by  reference to the
Company's 1997 Definitive Proxy Statement which the Company will  file with the
Securities  and  Exchange  Commission's  no  later than 120 days subsequent  to
December 31, 1996.


<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required for this item is incorporated  by  reference to the
Company's 1997 Definitive Proxy Statement which the Company will  file with the
Securities  and  Exchange  Commission's  no  later than 120 days subsequent  to
December 31, 1996.


<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required for this item is incorporated  by  reference to the
Company's 1997 Definitive Proxy Statement which the Company will  file with the
Securities  and  Exchange  Commission's  no  later than 120 days subsequent  to
December 31, 1996.



<PAGE>
                                   PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

                                                                        PAGE
(a)  Documents filed as part of this report.

   1.FINANCIAL STATEMENTS

   Report of Independent Public Accountants                              F-1

   Consolidated Balance Sheet - December 31, 1996                        F-2

   Consolidated Statements of Operations - For  the  years
   ended  December 31, 1996 and 1995                                     F-3

   Consolidated Statements of Changes in Stockholders' Equity -
   (Deficit) For the years ended December 31, 1996 and 1995              F-4

   Consolidated  Statements  of  Cash  Flows - For the years
   ended December 31, 1996 and 1995                                      F-5

   Notes to Consolidated Financial Statements                            F-6

   2. EXHIBITS

   3.1          Certificate of Incorporation of the Registrant*

   3.1(a)       Form of Amendment to Certificate of Incorporation*

   3.2          By-laws of the Registrant*

   4.1          Form of Common Stock Certificate*

   4.2          Form of Warrant Certificate*

   4.4          Form of Warrant Agreement  by  and  between  Continental  Stock
                Transfer & Trust Company and the Registrant*

   4.5          Form of Voting Agreement among Messrs. Centner, de Ganon, Cleek
                and Szollose*

   10.1         1996 Stock Option Plan and Rules Relating thereto*

   10.2         1997 Stock Option Plan**

   10.3         Consulting Agreement with Harvey Berlent*

   10.4         Employment Agreement with David J. Centner*

   10.5         Employment Agreement with Matthew G. de Ganon*

   10.6         Employment Agreement with Bradley K. Szollose*
   10.7         Employment Agreement with Douglas E. Cleek*

   10.8         Agreement of Lease - 55 Broad Street, New York, New York*

   10.9         Agreement of Lease - 50 Broad Street, New York, New York**

   10.10        Agreement of Lease - Baltimore, Maryland**

   21.1         Subsidiary List*

   24.1         Powers of Attorney to sign Registration Statement (set forth on
                signature page)**

   27.1         Financial Data Schedule**

-----------

  *  Incorporated by reference from the Registrant's Registration Statement  on
Form SB-2, No. 333-4319.
 **  Filed herewith.


(b)The  Company  did  not  file any Current Reports on Form 8-K during the last
   quarter of the period covered by this Report.


<PAGE>
                                 SIGNATURES

   In accordance with Section  13  or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its  behalf  by  the  undersigned, thereunto
duly authorized.

K2 DESIGN, INC.

By:  /S/ DAVID J. CENTNER              		Dated: March 27, 1997
     ------------------------------
        David J. Centner, Chairman



                              POWER OF ATTORNEY

   Each of the undersigned hereby appoints Matthew G. de Ganon,  as  his or her
attorneys-in-fact  to sign his or her name, in any and all capacities,  to  any
amendments to this Form  10-KSB  and  any  other  documents filed in connection
therewith to be filed with the Securities and Exchange Commission.

   In accordance with the Exchange Act, this report  has  been  signed below by
the following persons on behalf of the registrant and in the capacities  and on
the dates indicated.

     SIGNATURE                        TITLE                      DATE

   /S/ DAVID J. CENTNER          Chairman (principal executive	March 27, 1997
       David J. Centner          officer), and Director

   /S/ MATTHEW G. DE GANON       Director                   	March 27, 1997
       Matthew G. de Ganon

   /S/ DOUGLAS E. CLEEK          Director                   	March 27, 1997
       Douglas E. Cleek

   /S/ BRADLEY K. SZOLLOSE       Director                   	March 27, 1997
       Bradley K. Szollose

   /S/ JAMES A. FAVIA            Director                   	March 27, 1997
       James A. Favia

   /S/ STEVEN N. GOLDSTEIN       Director                   	March 27, 1997
       Steven N. Goldstein

   /S/ NELSON HUNTER             Chief Financial Officer    	March 27, 1997
       Nelson Hunter             (principal financial and
                                 accounting officer)


<PAGE>
                                K2 DESIGN, INC.
                                AND SUBSIDIARY

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                             PAGE


Financial Statements of K-2 Design, Inc. and Subsidiary

 Report of Independent Public Accountants.....................F-1

 Consolidated Balance Sheet - December 31, 1996...............F-2

 Consolidated Statements of Operations - For the years
    ended December 31, 1996 and 1995..........................F-3

 Consolidated Statements of Changes in Stockholders'
    Equity (Deficit) -For the years ended December 31,
    1996 and 1995.............................................F-4

 Consolidated Statements of Cash Flows - For the years
    ended December 31, 1996 and 1995..........................F-5

 Notes to Consolidated Financial Statements...................F-6






<PAGE>















                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To K2 Design, Inc.:


We have audited the accompanying consolidated balance sheet of K2 Design, Inc.
(a Delaware corporation) and its subsidiary (a New York corporation) as of
December 31, 1996, and the related consolidated statements of operations,
changes in stockholders' equity (deficit) and cash flows for the years ended
December 31, 1996 and 1995.  These financial statements are the responsibility
of the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of K2 Design, Inc. and its
subsidiary as of December 31, 1996, and the results of their operations and
their cash flows for the years ended December 31, 1996 and 1995, in conformity
with generally accepted accounting principles.



					  Arthur Andersen LLP



Roseland, New Jersey
February 27, 1997


<PAGE>



                      K2 DESIGN, INC. AND SUBSIDIARY


                          CONSOLIDATED BALANCE SHEET

                               DECEMBER 31, 1996


<TABLE>
<CAPTION>
                                                    ASSETS
CURRENT ASSETS:
<S>                                                                               <C>
  Cash                                                                            $3,867,430
  Accounts receivable (net of allowances for doubtful accounts of $25,000)        2,067,715
  Prepaids                                                                           52,369
  Costs in excess of billings                                                        81,044
  Other current assets                                                              178,068
           Total current assets                                                   $6,246,626
FIXED ASSETS, net (Note 3)                                                          607,431
OTHER ASSETS                                                                         40,622
           Total assets                                                           $6,894,679
                                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of capital lease obligations (Note 4)                           $  53,448
  Accounts payable                                                                  744,563
  Accrued professional fees                                                          35,000
  Accrued compensation                                                               91,521
  Accrued payroll taxes                                                              33,272
  Accrued sales taxes                                                                97,265
  Other accrued expenses                                                            174,784
  Billings in excess of costs (Note 2)                                              166,169
           Total current liabilities                                              1,396,022
LONG-TERM CAPITAL LEASE OBLIGATIONS (Note 4)                                         76,437
           Total liabilities                                                      1,472,459
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (Notes 2 and 7):
  Preferred stock, $.01 par value, 1,000,000 shares authorized;
    0 shares issued and outstanding                                                       -
  Common stock, $.01 par value, 9,000,000 shares authorized;
    3,645,421 shares issued and outstanding                                          36,454
  Additional paid-in capital                                                      6,281,183
  Accumulated deficit                                                              (895,417)
           Total stockholders' equity                                             5,422,220
           Total liabilities and stockholders' equity                            $6,894,679
</TABLE>

The accompanying notes are an integral part of this consolidated balance sheet.


<PAGE>



                        K2 DESIGN, INC. AND SUBSIDIARY


                     CONSOLIDATED STATEMENTS OF OPERATIONS

                FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995



<TABLE>
<CAPTION>
                                                                     1996                  1995
<S>                                                              <C>                    <C>
REVENUES                                                         $4,077,792             $1,196,208
DIRECT SALARIES AND COSTS                                         3,249,717                957,027
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                      1,720,503                200,931
DEPRECIATION                                                         92,167                 24,485
     Income (loss) from operations                                 (984,595)                13,765
INTEREST AND OTHER INCOME/(EXPENSE), net                             89,178                   (869)
     Income (loss) before provision for income taxes               (895,417)                12,896
PROVISION FOR INCOME TAXES                                           -                       1,000
     Net income (loss)                                            $(895,417)             $  11,896
Net loss per common share                                         $ (.32)                   -
PRO FORMA NET INCOME DATA (UNAUDITED)
  (Notes 2 and 6):
     Income before provision for income taxes, as reported                               $  12,896
     Pro forma income tax provision                                                         -
          Pro forma net income                                                           $  12,896
PRO FORMA NET INCOME PER COMMON SHARE                                                         $.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                        2,831,711              1,946,373
</TABLE>



 The accompanying notes are an integral part of these consolidated statements.


<PAGE>



                        K2 DESIGN, INC. AND SUBSIDIARY


     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995


<TABLE>
<CAPTION>
                                          Common Stock                          Additional
<S>                                   <C>            <C>           <C>            <C>             <C>              <C>
                                        Number of                     Partners'       Paid-in        Accumulated
                                         SHARES         AMOUNT         CAPITAL         CAPITAL         DEFICIT        TOTAL
BALANCE, December 31, 1994                -            $-            $(78,421)      $ -             $-              $(78,421)
  Termination of partnership and
capital contribution to S
Corporation                                 75               -         78,421        (78,421)               -              -
  Issuance of common stock                  25               -               -        10,000                -          10,000
  Capital contribution                       -               -               -        25,000                -          25,000
  Corporate recapitalization         1,895,380          18,955               -       (18,955)               -              -
(Note 7)
  Net income                                 -               -               -             -           11,896         11,896
BALANCE, December 31, 1995           1,895,480          18,955               -        (62,376)          11,896        (31,525)
  Termination of S Corporation               -               -               -         11,896          (11,896)             -
  Private placement of common
stock at $1.25 per share, net of
expenses                               200,000           2,000               -        153,230                -       155,230
  Private placement of common
stock at $1.75 per share, net of
expenses                               400,002           4,000               -        617,755                -       621,755
  Initial Public Offering of
   common stock at $6.00 per
   share, net of expenses            1,149,939          11,499               -      5,560,678                -     5,572,177
  Net loss                                   -               -               -              -         (895,417)      (895,417)
BALANCE, December 31, 1996           3,645,421         $36,454          $-         $6,281,183        $(895,417)    $5,422,220
</TABLE>


 The accompanying notes are an integral part of these consolidated statements.


<PAGE>



                        K2 DESIGN, INC. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                  1996                     1995
<S>                                                                    <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                                    $(895,417)                $   11,896
  Adjustments to reconcile net income to net cash provided by
     operating activities-
        Depreciation                                                       92,167                    24,485
        Changes in-
         Accounts receivable                                          (1,934,021)                 (114,711)
        Prepaid expenses                                                 (52,369)                  -
        Costs in excess of billings                                      (81,044)                  -
        Other current assets                                            (178,068)                  -
        Other assets                                                     (36,217)                   (2,530)
        Accounts payable                                                  649,623                    73,210
        Accrued professional fees                                          13,000                    19,500
        Accrued compensation                                               67,569                  (56,048)
        Accrued payroll taxes                                              29,545                     3,727
        Accrued sales taxes                                                97,265                  -
        Other accrued expenses                                            166,574                     8,210
        Billings in excess of costs                                       136,312                    29,857
            Net cash used in operating activities                      (1,925,081)                  (2,404)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of fixed assets                                              (502,152)                  (17,553)
            Net cash used in investing activities                       (502,152)                  (17,553)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of common stock                                              6,349,162                    10,000
  Capital contribution                                                          -                    25,000
  Principal payments on capital lease obligations                        (37,255)                  (35,613)
  Principal payments on note payable                                     (25,000)                  -
  Principal payments on line of credit                                   (10,000)                  -
  Proceeds from note payable                                             -                           25,000
  Proceeds from line of credit                                           -                           10,000
            Net cash provided by financing activities                   6,276,907                    34,387
            Net increase in cash                                        3,849,674                    14,430
CASH, beginning of year                                                    17,756                     3,326
CASH, end of year                                                      $3,867,430                $   17,756
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for-
    Interest                                                           $   16,260                $      869
    Income taxes                                                            1,000                     1,074
  Noncash investing activities-
    Equipment acquired under capital leases                               128,334                    54,136
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.


<PAGE>






                        K2 DESIGN, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          DECEMBER 31, 1996 AND 1995




1.ORGANIZATION AND BUSINESS

K2 Design, Inc. ("K2" or the "Company") commenced operations on March 1, 1993
as a partnership.  In January 1995 the Partnership contributed its capital into
a newly formed corporation and elected S Corporation status.

Effective January 1, 1996, the Company was reorganized as a Delaware holding C
corporation having a wholly owned operating subsidiary incorporated in New
York.  The reorganized corporation is authorized to issue 9,000,000 shares of
common stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share.  The 100 shares of common stock of the
predecessor corporation that were issued and outstanding at the date of
reorganization were exchanged for 1,895,480 shares of common stock in the
reorganized corporation.

K2 is a full service interactive communications, design and technology company,
engaged primarily in the business of designing and creating Web sites on the
Internet.  The Company also provides various other information delivery
services.  The Company's customers are primarily U.S.-based corporations
operating in a wide variety of industries.

PRIVATE PLACEMENTS

Effective February 29, 1996, the Company consummated a private placement
offering in which it sold 200,000 shares of its common stock at $1.25 per
share.  Effective May 9, 1996, the Company consummated a second private
placement offering in which it sold 400,002 additional shares of its common
stock at $1.75 per share.

 INITIAL PUBLIC OFFERING

Effective July 26, 1996, the Company consummated an initial public offering in
which 1,149,939 units of the Company's securities were sold to the public ( the
"Public Units") at $6.00 per unit, each consisting of one share of Common Stock
and two warrants to purchase one share of Common Stock at $7.50.  The net
proceeds from this offering of approximately $5,600,000 are being used for
used for working capital and general corporate purposes.


<PAGE>



2.SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES

Use of Estimates in the
PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

REVENUE RECOGNITION

Revenues are recognized on the percentage of completion method based upon the
ratio of costs incurred to total estimated costs incurred and anticipated
profits earned on projects in progress in excess of amounts billed.  Billings
in excess of costs represent amounts billed in excess of costs incurred and
estimated profit earned.  Such billings are generally at the beginning of
contract periods, and are in accordance with contract provisions.  Provisions
for any estimated losses on uncompleted contracts are made in the period in
which such losses are determinable.  A portion of the Company's revenues has
been generated on a fixed fee for service basis.

FIXED ASSETS

Fixed assets are carried at cost and depreciated using the straight-line method
over their estimated useful lives.  Leasehold improvements are amortized over
the shorter of their estimated useful lives or the term of the underlying
lease.

Estimated useful lives by class of assets are as follows:

Computers and equipment                      3 years
Furniture and fixtures                       5 years
Leasehold improvements                       Life of lease

Assets purchased with capital leases are depreciated over their estimated
useful lives.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's cash, accounts receivable, and accounts
payable approximate fair market value based upon the relatively short-term
nature of these financial instruments.


<PAGE>



CONCENTRATION OF CREDIT

Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of trade accounts receivable.  The Company
performs ongoing credit evaluations of its customers' financial condition and
generally requires no collateral from its customers.  The Company's sales to
its four largest customers constituted approximately 20%, 15%, 14% and 12% for
the year ended December 31, 1996.  The Company had accounts receivable from
these customers amounting to $1,538,798 at December 31, 1996.  The Company's
sales to its three largest customers for the year ended December 31, 1995
constituted approximately 18%, 15% and 12% of revenue.

INCOME TAXES

Effective January 1995, the Company elected to be treated as an S Corporation
for federal income tax purposes.  As a result, the shareholders were
individually liable for Federal income tax on the Company's taxable income. The
Company was subject to New York State and City income taxes.  Effective January
1996, the Company elected to be treated as a C Corporation.  As a result, the
Company is subject to Federal, New York State and City income taxes on the
Company's taxable income.

The Company provides federal, state and city income tax in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109).  Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years on which those temporary differences are
expected to be recovered or settled.  Deferred taxes were not significant for
the year ended December 31, 1996.

NET LOSS AND PRO FORMA NET LOSS PER SHARE OF COMMON STOCK

Net loss per share of common stock was computed by dividing net loss by the
weighted average number of common shares outstanding.  As required by the
Securities and Exchange Commission rules, all warrants, options and shares
issued within one year of the public offering  at less than the public
offering price are assumed to be outstanding for each period presented up to
the date of the initial public offering.

<PAGE>



STOCK-BASED COMPENSATION

During October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, Accounting for Stock Based
Compensation ("SFAS No. 123").   This statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
SFAS No. 123 encourages entities to adopt a fair value based method of
accounting for stock compensation plans.  However, SFAS. No. 123 also permits
entities to continue to measure compensation costs under pre-existing
accounting pronouncements with the requirement that pro forma disclosures of
net income and earnings per share be included in the notes to the financial
statements.  The Company has elected to adopt the disclosure requirements of
SFAS 123.

3.FIXED ASSETS

Fixed assets, at cost, including capital leases (Note 4), summarized by major
categories at December 31, 1996, consist of the following:

Computers and equipment                       $      513,728
Furniture and fixtures                               150,477
Leasehold improvements                               66,669
                                                     730,874
Less- Accumulated depreciation                       123,443
        Fixed assets, net                     $      607,431

4.  CAPITAL LEASE OBLIGATIONS

The Company is a lessee in noncancelable leasing agreements for certain
computers and equipment.  Included in fixed assets, net, is $129,771 of
computers and equipment held under capital leases.

Future minimum lease payments for fixed assets under capital lease at December
31, 1996, are as follows:


  1997                                       $ 65,790
  1998                                         59,525
  1999                                         31,261
  2000                                          2,111
     Total minimum lease payments             158,687
  Less- Imputed interest                      (28,802)
     Capital lease obligation              $  129,885


<PAGE>



5.COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases certain office space and automobiles for varying periods.
At December 31, 1996, approximate future minimum rental commitments under all
noncancelable operating leases are as follows:

Fiscal year:
  1997                                                           $ 173,723
  1998                                                             173,723
  1999                                                             164,418
  2000                                                             124,252
  2001                                                              57,990
  Thereafter                                                         2,456
  Total minimum lease payments                                   $  696,562

Rental expense for the Company's premises amounted to $78,687 in 1996 and
$29,150 in 1995.

EMPLOYMENT CONTRACTS

The Company has employment contracts with certain of its executives which
expire as of December 31, 1998.  Such agreements provide for minimum salary
levels and bonuses which are payable based on 1.88% of the Company's pre-tax
income.  The aggregate commitment for future salaries, excluding bonuses, at
December 31, 1996 was approximately $980,000.

6.INCOME TAXES

As described in Note 2, the Company previously elected "S" corporation status
under the provisions of the Internal Revenue Code.  In January, 1996 the
Company reorganized as a Delaware Holding C Corporation in contemplation of the
initial public offering.

At December 31, 1996, the Company had net operating loss carryforwards of
approximately $900,000 which expire in 2012.  The company has recorded a
deferred tax asset of approximately $350,000 related to the loss carryforward
and a corresponding valuation allowance due to the uncertainty of the
realization of the asset.

The provision for income taxes on historical and unaudited pro forma net income
for the years ended December 31, 1996 and 1995, respectively, differs from the
amount computed by applying the federal statutory rate due to the following:


<PAGE>




                                         1996           1995
Statutory federal income tax rate        (34)%           34%
State and local taxes, net                (6)             6
Operating loss carryforwards              -             (40)
Valuation Allowance                       40             -
                                           0%             0%

The unaudited pro forma information above reflects income tax expense as if the
Company had been subject to federal and state income taxes.  The Company would
not have had a federal and state income tax provision because of net operating
loss carryforwards for 1995.

7.STOCK OPTION PLAN

Effective January 16, 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"), pursuant to which designated employees, including officers and
directors of the Company and certain outside consultants, will be entitled to
receive nonqualified stock options and qualified stock incentive compensation.
An aggregate of 106,500 shares of common stock are available for grant under
the Plan and have been reserved for this purpose at December 31, 1996.

The Plan expires on January 1, 2006.  Under the terms of the Plan, the minimum
exercise price of options granted cannot be less than 100% of the fair market
value of the common stock of the Company on the option grant date.  Options
granted under the Plan expire ten years after the option grant date.  For
incentive stock options granted to such persons who would be deemed to have in
excess of a 10% ownership interest in the Company, the option price shall not
be less than 110% of such fair market value for all options granted, and the
options expire five years after the option grant date.  Options granted are
exercisable in five equal annual installments commencing on the option grant
date.


<PAGE>



A summary of the Plan at December 31, 1996 and the changes during the year then
ended is presented in the table and narrative below:

                                                                  Weighted
                                                                   Average
                                                SHARES         EXERCISE PRICE
Outstanding at beginning of year          -                    $ -
Granted                                   118,500                4.03
Exercised                                 -                      -
Forfeited                                 -                      -
Outstanding at end of year                118,500              $ 4.03
Exercisable at end of year                -                      -
Weighted average fair value of options
granted (see below)                       118,500              $ 1.18

The Company accounts for the Plan under APB No. 25, under which no compensation
cost is recognized for stock options granted with an exercise price at or above
the prevailing market price on the date of the grant.  Had compensation cost
for this plan been determined consistent with the fair value approach required
by SFAS No. 123, the Company's net loss and net loss per common share would
have been increased to the following pro forma amounts:

                                     1996
Net loss:
As reported                       $(895,417)
Pro forma                         $(919,926)
Net loss per common share:
As reported                       $(  0.32)
Pro forma                         $(  0.32)



The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with the following assumptions
used for the grants made in January 1996 and October 1996, respectively: risk-
free interest rates of 5.3% and 6.1%; no expected dividend yields for options
granted; expected lives of 5 years; expected stock price volatility of 75%.

The effects of applying SFAS No. 123 in this pro forma disclosure may not be
indicative of future amounts because anticipated stock option grants are
anticipated in future years.

Under SFAS No. 123, options granted to external consultants must be accounted
for at fair value on the date of grant utilizing the Black-Scholes option
pricing model.  The options granted to such individual during 1996 did not
have a material effect on the Company's December 31, 1996 financial statements.


<PAGE>



                               EXHIBIT INDEX

Exhibit
NUMBER     EXHIBIT NAME

10.2       1997 Stock Option Plan

10.9       Agreement of Lease - 50 Broad Street, New York, New York

10.10      Agreement of Lease - Baltimore, Maryland

24.1       Powers of Attorney to sign Registration Statement (set forth on
	   signature page)

27.1       Financial Data Schedule



<PAGE>



                                                                EXHIBIT 10.2

                               K2 DESIGN, INC.
                          1997 STOCK INCENTIVE PLAN


<PAGE>



                                  ARTICLE I

                          PURPOSE AND EFFECTIVENESS


1.1        Purpose.   The  purpose  of the K2 Design, Inc. 1997 Stock Incentive
Plan (the "Plan") is to promote the success  of K2 Design, Inc. (the "Company")
by providing a method whereby (i) eligible employees  of  the  Company  and its
Subsidiaries   and  (ii)  independent  contractors  and  consultants  providing
services  to  the  Company  or  its  Subsidiaries  may  be  awarded  additional
remuneration for services rendered and encouraged to invest in capital stock of
the Company, thereby  increasing  their  proprietary  interest in the Company's
businesses,  encouraging them to remain in the employ of  the  Company  or  its
Subsidiaries,  and  increasing their personal interest in the continued success
and progress of the Company  or its Subsidiaries.  The Plan is also intended to
aid (i) in attracting persons  of  exceptional  ability  to become officers and
employees  of  the  Company and its Subsidiaries and (ii) inducing  independent
contractors to agree to provide services to the Company.

1.2        Effective  Date.  The Plan shall be subject to, and become effective
upon, the approval by the  affirmative  vote  of  the  holders  of  at  least a
majority of the outstanding shares of capital stock of the Company.

                                 ARTICLE II

                                 DEFINITIONS

2.1        Certain  Defined Terms.  Capitalized terms not defined elsewhere  in
the Plan shall have the  following  meanings  (whether  used in the singular or
plural):

           "Affiliate"  of the Company means any corporation,  partnership,  or
           other business association that, directly or indirectly, through one
           or more intermediaries,  controls,  is  controlled  by,  or is under
           common control with the Company.

           "Agreement"  means  a  stock  option  agreement or restricted shares
           agreement, or an agreement evidencing more  than  one type of Award,
           specified in Section 10.5, as any such Agreement may be supplemented
           or amended from time to time.

           "Approved Transaction" means any transaction in which the Board (or,
           if  approval of the board is not required as a matter  of  law,  the
           stockholders  of the Company) shall approve (i) any consolidation or
           merger of the Company,  or binding share exchange, pursuant to which
           shares  of  Common Stock would  be  changed  or  converted  into  or
           exchanged for  cash,  securities  or  other property, other than any
           such  transaction in which the common stockholders  of  the  Company
           immediately  prior  to  such transaction have the same proportionate
           ownership of the common stock  of, and voting power with respect to,
           the surviving corporation immediately  after  such transaction, (ii)
           any  merger, consolidation or binding share exchange  to  which  the
           Company  is  a party as a result of which the persons who are common
           stockholders of the Company immediately prior thereto have less than
           a majority of  the  combined voting power of the outstanding capital
           stock of the Company  ordinarily (and apart from the rights accruing
           under  special circumstances)  having  the  right  to  vote  in  the
           election   of   directors   immediately   following   such   merger,
           consolidation  or binding share exchange, (iii) the adoption of  any
           plan or proposal  for the liquidation or dissolution of the Company,
           or  (iv)  any  sale, lease,  exchange  or  other  transfer  (in  one
           transaction  or  a  series  of  related  transactions)  of  all,  or
           substantially all, of the assets of the Company.

           "Award" means a grant  of  Options  or  Restricted Shares under this
           Plan.

           "Board" means the Board of Directors of the Company.

           "Code" means the Internal Revenue Code of 1986, as amended from time
           to time, or any successor statue or statues  thereto.   Reference to
           any specific Code section shall include any successor section.

           "Committee"  means the committee of the Board appointed pursuant  to
           Section 3.1 to administer the Plan.

           "Common Stock"  means the Common Stock, $.01 par value per share, of
           the Company.

           "Company" means K2 Design, Inc., a Delaware corporation.

           "Disability" means  the  inability  to  engage  in  any  substantial
           gainful activity by reason of any medically determinable physical or
           mental impairment which can be expected to result in death  or which
           has lasted or can be expected to last for a continuous period of not
           less than 12 months.

           "Dividend  Equivalents" means, with respect to Restricted Shares  to
           be issued at  the  end  of  the  Restriction  Period,  to the extent
           specified  by  the Committee only, an amount equal to all  dividends
           and other distributions  (or the economic, equivalent thereof) which
           are payable to stockholders  of record during the Restriction Period
           on a like number of shares of Common Stock.

           "Domestic  relations order" means  a  domestic  relations  order  as
           defined by the  Code  or  Title  I of the Employee Retirement Income
           Security Act, or the rules thereunder.

           " Effective Date" means the date on which the Plan becomes effective
           pursuant to Section 1.2.

           "Equity security" shall have the meaning  ascribed  to  such term in
           Section 3(a)(11) of the Exchange Act, and an equity security  of  an
           issuer  shall  have  the  meaning  ascribed  thereto  in  Rule 16a-1
           promulgated under the Exchange Act, or any successor Rule.

           "Exchange Act" means the Securities Exchange Act of 1934, as amended
           from  time  to  time,  or any successor statute or statutes thereto.
           Reference to any specific  Exchange  Act  section  shall include any
           successor section.

           "Fair Market Value" of a share of the Common Stock on  any day means
           the  last  sale  price  (or, if no last sale price is reported,  the
           average of the high bid and  low asked prices) for a share of Common
           Stock on such day (or, if such day is not a trading day, on the next
           preceding trading day) as reported  on NASDAQ or, if not reported on
           NASDAQ, as quoted by the National Quotation  Bureau Incorporated, or
           if  the  Common  Stock is listed on an exchange,  on  the  principal
           exchange on which  the  Common  Stock is listed.  If for any day the
           Fair Market Value of a share of Common Stock, is not determinable by
           any of the foregoing means, then  the Fair Market Value for such day
           shall be determined in good faith by  the  Committee on the basis of
           such  quotations  and other considerations as  the  Committee  deems
           appropriate.

           "Holder" means an employee  of  the  Company  or  a Subsidiary or an
           independent contractor or consultant who has received an Award under
           this Plan.

           "Incentive Stock Option" means a stock option granted  under Article
           VI  which  is  intended  to be an incentive stock option within  the
           meaning of Section 422 of the Code.

           "NASDAQ" means the Nasdaq Stock Market.

           "Nonqualified Stock Option"  means  a  stock  option  granted  under
           Article VI that is designated a nonqualified stock option.

           "Option"  means  any  Incentive  Stock  Option or Nonqualified Stock
           Option.

           "Plan" has the meaning ascribed thereto in Section 1.1.

           "Restricted Shares" means shares of Common  Stock  or  the  right to
           receive shares of Common Stock, as the case may be, awarded pursuant
           to Article VIII.

           "Restriction Period" means a period of time beginning on the date of
           each award of Restricted Shares and ending on the Vesting Date  with
           respect to such award.

           "Retained  Distribution" has the meaning ascribed thereto in Section
           8.3.

           "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or
           any successor  Rule,  References  to  paragraphs of Rule 16b-3 shall
           include the comparable provisions of any successor Rule.

           "Subsidiary" of the Company means any present  or  future subsidiary
           (as  defined  in Section 424(f) of the Code) of the Company  or  any
           business entity  in  which  the Company owns directly or indirectly,
           50% or more of the voting, capital  or profits interests.  An entity
           shall be deemed a subsidiary of the Company  for  purposes  of  this
           definition  only  for  such  periods  as  the requisite ownership or
           control relationship is maintained.

           "Vesting  Date"  with  respect  to  any  Restricted  Shares  awarded
           hereunder means the date on which such Restricted Shares cease to be
           subject to a risk of forfeiture, as designated  in  or determined in
           accordance  with  the  Agreement  with  respect  to  such  award  of
           Restricted  Shares  pursuant  to  Article  VIII.   If  more than one
           Vesting  Date  is  designated  for  an  award  of Restricted Shares,
           references in the Plan to a Vesting Date in respect  of  such  Award
           shall be deemed to refer to each party of such Award and the Vesting
           Date of such part.

                                 ARTICLE III

                               ADMINISTRATION

3.1        Committee.   The  Plan shall be administered by the Option Committee
of the Board unless a different  committee  is  appointed  by  the  Board.  The
Committee shall be comprised of not less than two persons.  The Committee shall
select one of its members as its chairman and shall hold its meetings  at  such
times  and  places as it shall deem advisable.  A majority of its members shall
constitute a  quorum and all determinations shall be made by a majority of such
quorum.  Any determination  reduced to writing and signed by all of the members
shall be fully as effective as  if  it  had  been  made by a majority vote at a
meeting duly called and held.

3.2        Powers.  The Committee shall have full power  and authority to grant
to  eligible  persons  Options  under Article VI of the Plan and/or  Restricted
Shares under Article VIII of the  Plan,  to  determine the terms and conditions
(which  need  not  be identical) of all Awards so  granted,  to  interpret  the
provisions of the Plan  and any Agreements relating to Awards granted under the
Plan, and to supervise the administration of the Plan.  The Committee in making
an Award may provide for the granting or issuance of additional, replacement or
alternative Awards upon the  occurrence  of  specified  events,  including  the
exercise of the original Award.  The Committee shall have sole authority in the
selection  of  persons  to whom Awards may be granted under the Plan and in the
determination of the timing, pricing and amount of any such Award, subject only
to the express provisions of the Plan.  In making determinations hereunder, the
Committee may take into account  the  nature  of  the  services rendered by the
respective  employees, independent contractors and consultants,  their  present
and potential  contributions to the success of the Company and its Subsidiaries
an such other factors as the Committee in its discretion deems relevant.

3.3        Interpretation.    The  Committee  is  authorized,  subject  to  the
provisions  of  the  Plan, to establish,  amend  and  rescind  such  rules  and
regulations as it deems necessary or advisable for the proper administration of
the Plan and to take such other action in connection with or in relation to the
Plan as it deems necessary or advisable.  Each action and determination made or
taken pursuant to the  Plan  by  the Committee, including any interpretation or
construction of the Plan, shall be  final  and  conclusive for all purposes and
upon all persons.  No member of the Committee shall be liable for any action or
determination made or take by him or the Committee  in  good faith with respect
to the Plan.

                                 ARTICLE IV

                         SHARES SUBJECT TO THE PLAN

4.1        Number of Shares.  Subject to the provisions of this Article IV, the
maximum number of shares of Common Stock with respect to  which  Awards  may be
granted  during the term of the Plan shall be 350,000 shares.  Shares of Common
Stock will  be  made  available  from the authorized but unissued shares of the
Company.  The shares of Common Stock subject to (i) any Award granted under the
Plan that shall expire, terminate  or be annulled for any reason without having
been exercised (or considered to have  been exercised as provided in Section 7)
and  (ii) any Award of Restricted Shares  that  shall  be  forfeited  prior  to
becoming  vested (provided that the Holder received no benefits of ownership of
such Restricted  Shares  other  than  voting  rights  and  the  accumulation of
Retained  Distributions  and  unpaid  Dividend  Equivalents  that  are likewise
forfeited), shall again be available for purposes of the Plan.

4.2        Adjustments.   If  the Company subdivides its outstanding shares  of
Common  Stock  into a greater number  of  shares  of  Common  Stock  (by  stock
dividend,  stock   split,   reclassification  or  otherwise)  or  combines  its
outstanding shares of Common  Stock  into  a similar number of shares of Common
Stock  (by  reverse stock split, reclassification  or  otherwise),  or  if  the
Committee determines  that  any  stock  dividend,  extraordinary cash dividend,
reclassification,   recapitalization,   reorganization,   split-up,   spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock, or other similar corporate event (including  mergers  or  consolidations
other  than  those  which constitute Approval Transactions) affects the  Common
Stock such that an adjustment  is required in order to preserve the benefits or
potential benefits intended to be  made  available  under  this  Plan, then the
Committee shall, in its sole discretion and in such manner as the Committee may
deem equitable and appropriate, make such adjustments to any or all  of (i) the
number  and  kind  of  shares  which  thereafter  may  be awarded, optioned, or
otherwise  made  subject  to the benefits contemplated by the  Plan;  (ii)  the
number and kind of shares subject to outstanding Awards, and (iii) the purchase
or exercise price with respect to any of the foregoing, provided, however, that
the number of shares subject  to any Award shall always be a whole number.  The
Committee may, if deemed appropriate,  provide for a cash payment to any Holder
of an Award in connection with any adjustment  made  pursuant  to  this Section
4.2.

                                  ARTICLE V

                                 ELIGIBILITY

5.1        General.   The persons who shall be eligible to participate  in  the
Plan and to receive Awards  under  the  Plan shall be such employees (including
officers  and directors) of the Company and  its  Subsidiaries  or  independent
contractors  or  consultants as the Committee shall select.  Awards may be made
to employees, independent  contractors  or  consultants  who  hold or have held
Awards under this Plan or any similar or other awards under any  other  plan of
the Company or any of its Affiliates.

                                 ARTICLE VI

                                STOCK OPTIONS

6.1        Grant  of  Options.   Subject  to  the  limitations of the Plan, the
Committee  shall  designate  from  time to time those eligible  persons  to  be
granted Options, the time when each  Option  shall  be granted to such eligible
persons, the number of shares subject to such Option, whether such Option is an
Incentive Stock Option or a Nonqualified Stock Option  and,  subject to Section
6.2, the purchase price of the shares of Common Stock subject  to  such Option.
Subject  to  the  other  provisions  of  the  Plan, the same person may receive
Incentive Stock Options and Nonqualified Stock  Options  at  the  same time and
pursuant  to  the  same  Agreement,  provided that Incentive Stock Options  and
Nonqualified Stock Options are clearly designated as such.

6.2        Option Price.  The price at  which  shares  may  be  purchased  upon
exercise  of  an  Option  shall be fixed by the Committee and may be more than,
less than or equal to the Fair  Market Value of the Common Stock as of the date
the Option is granted.

6.3        Term of Options.  Subject to the provisions of the Plan with respect
to death, retirement and termination  of  employment,  the  term of each Option
shall be for such period as the Committee shall determine as  set  forth in the
applicable Agreement.

6.4        Excise  of  Options.  An Option granted under the Plan shall  become
(and remain) exercisable  during  the term of the Option to the extent provided
in the applicable Agreement and this  Plan  and, unless the Agreement otherwise
provides, may be exercised to the extent exercisable,  in  whole or in part, at
any  time  and  from  time  to  time during such term; provided, however,  that
subsequent  to  the grant of an Option,  the  Committee,  at  any  time  before
complete termination  of  such Option, may accelerate the time or time at which
such Option may be exercised  in whole or in part (without reducing the term of
such Option).

6.5        Manner of Exercise.

           (a)             Form  of  Payment.   An Option shall be exercised by
           written notice to the Company upon such  terms and conditions as the
           Agreement may provide and in accordance with  such  other procedures
           for the exercise of Options as the Committee may establish from time
           to time.  The method or methods of payment of the purchase price for
           the  shares to be purchased upon exercise of an Option  and  of  any
           amounts  required  by  Section  10.10  shall  be  determined  by the
           Committee  and may consist of (i) cash, (ii) check, (iii) promissory
           note, (iv) whole shares of Common Stock or of Series B Stock already
           owned by the  Holder,  (v) the withholding of shares of Common Stock
           issuable  upon such exercise  of  the  Option,  (vi)  the  delivery,
           together with  a  properly  executed exercise notice, of irrevocable
           instructions to a broker to deliver  promptly  to  the  Company  the
           amount  of sale or loan proceeds required to pay the purchase price,
           (vii) any  combination  of the foregoing methods of payment, or such
           other consideration and method  of  payment  as may be permitted for
           the issuance of shares under the Delaware General  Corporation  Law.
           The  permitted  method  or methods of payment of the amounts payable
           upon exercise of an Option,  if  other  than  in  cash, shall be set
           forth  in  the  applicable  Agreement  and  may be subject  to  such
           conditions as the Committee deems appropriate.  Without limiting the
           generality of the foregoing, if a Holder is permitted  to  elect  to
           have  shares  of Common issuable upon exercise of an Option withheld
           to pay all or any  part  of  the  amounts payable in connection with
           such exercise, then the Committee shall  have the sole discretion to
           approve or disapprove such election, which  approval  or disapproval
           shall be given after such election is made.

           (b)             Value  of Shares.  Shares of Common Stock  delivered
           in payment of all or any  part  of the amounts payable in connection
           with the exercise of an Option, and  shares of Common Stock withheld
           for such payment, shall be valued for  such  purpose  at  their Fair
           Market   Value   as  of  the  exercise  date.   Notwithstanding  the
           foregoing, if a Holder  who  is  permitted  to do so pursuant to the
           applicable Agreement elects to have shares of  Common Stock issuable
           upon exercise of an Option withheld in payment of all or any part of
           the amounts payable in connection with the exercise  of  such Option
           and  if, in order to meet the exemptive requirements of Rule  16b-3,
           such  election   is  made  during  a  window  period  determined  in
           accordance with paragraph  (e)(3)  of  such  Rule  (or is made prior
           thereto  to  become effective during such window period),  then  for
           purposes of determining  the  Fair  Market  Value  of  the shares of
           Common  Stock  withheld, such Option (other than an Incentive  Stock
           Option) shall be  deemed  to  have  been exercised on the day during
           such window period on which the highest  reported last sale price of
           a share of Common Stock as reported on NASDAQ  occurred and the Fair
           Market  Value  of  such  shares shall be deemed to be  such  highest
           reported last sale price.

           (c)             Issuance of  Shares.   The  Company shall effect the
           transfer of the shares of Common Stock purchased under the Option as
           soon as practicable after the exercise thereof  and  payment in full
           of  the  purchase  price  therefor  and  of any amounts required  by
           Section 10.10, and within a reasonable time thereafter such transfer
           shall be evidenced on the books of the Company.   No Holder or other
           person  exercising  an  Option  shall  have any of the rights  of  a
           stockholder of the Company with respect  to  shares  of Common Stock
           subject to an Option granted under the Plan until due  exercise  and
           full  payment  has  been made.  No adjustment shall be made for cash
           dividends or other rights  for which the record date is prior to the
           date of such due exercise and full payment.

6.6        Nontransferability.  Unless  otherwise  determined  by the Committee
and  provided  in  the  applicable Agreement, Options shall not be transferable
other than by will or the  laws  of  descent  and distribution or pursuant to a
domestic  relations  order  and, except as otherwise  required  pursuant  to  a
domestic relations order, Options  may  be exercised during the lifetime of the
Holder  thereof  only  by such Holder (or his  or  her  court  appointed  legal
representative).

                                 ARTICLE VII

                            INTENTIONALLY OMITTED


                                ARTICLE VIII

                              RESTRICTED SHARES

8.1        Grant.  Subject  to the limitations of the Plan, the Committee shall
designate those eligible persons  to  be  granted  awards of Restricted Shares,
shall determine the time when each such Award shall  be granted, whether shares
of Common Stock covered by awards of Restricted Shares  will  be  issued at the
beginning or the end of the Restriction Period and whether Dividend Equivalents
will  be  paid during the Restriction Period in the event shares of the  Common
Stock are to  be  issued  at  the  end  of  the  Restriction  Period, and shall
designate (or set forth the basis for determining) the Vesting  Date or Vesting
Dates for each award of Restricted Shares and may prescribe other restrictions,
terms  and  conditions applicable to the vesting of such Restricted  Shares  in
addition to those  provided  in  the  Plan.   The Committee shall determine the
price, if any, to be paid by the Holder for the  Restricted  Shares;  provided,
however, that the issuance of Restricted Shares shall be made for at least  the
minimum  consideration  necessary to permit such Restricted Shares to be deemed
fully  paid  and nonassessable.   All  determinations  made  by  the  Committee
pursuant to this Section 8.1 shall be specified in the Agreement.

8.2        Issuance  of  Restricted  Shares  at  Beginning  of  the Restriction
Period.   If  shares  of  Common  Stock  are  issued  at  the beginning of  the
Restriction  Period,  the  stock certificate or certificates representing  such
Restricted Shares shall be registered  in  the  name of the Holder to whom such
Restricted  Shares  shall have been awarded.  During  the  Restriction  Period,
certificates representing the Restricted Shares and any securities constituting
Retained Distributions  shall  bear  a  restrictive  legend  to the effect that
ownership of the Restricted Shares (and such Retained Distributions),  and  the
enjoyment  of  all rights appurtenant thereto, are subject to the restrictions,
terms and conditions  provided  in the Plan and the applicable Agreement.  Such
certificates shall remain in the  custody  of  the Company and the Holder shall
deposit with the Company stock powers or other instruments  of assignment, each
endorsed  in blank, so as to permit retransfer to the Company  of  all  or  any
portion of  the  Restricted  Shares  and  any  securities constituting Retained
Distributions  that  shall  be  forfeited or otherwise  not  become  vested  in
accordance with the Plan and the applicable Agreement.

8.3        Restrictions.  Restricted  Shares  issued  at  the  beginning of the
Restriction  Period  shall constitute issued and outstanding shares  of  Common
Stock for all corporate  purposes.  The Holder will have the right to vote such
Restricted Shares, to receive  and  retain such dividends and distributions, as
the Committee may in its sole discretion designate, paid or distributed on such
Restricted Shares and to exercise all  other rights, powers and privileges of a
Holder of Common Stock with respect to such Restricted Shares; except, that (a)
the  Holder  will  not be entitled to delivery  of  the  stock  certificate  or
certificates representing  such  Restricted Shares until the Restriction Period
shall  have expired and unless all  other  vesting  requirements  with  respect
thereto  shall  have  been  fulfilled  or  waived;  (b) the Company will retain
custody  of the stock certificate or certificates representing  the  Restricted
Shares during the Restriction Period as provided in Section 8.2; (c) other than
such dividends  and  distributions  as the Committee may in its sole discretion
designate,  the Company will retain custody  of  all  distributions  ("Retained
Distributions")  made  or  declared  with respect to the Restricted Shares (and
such Retained Distributions will be subject to the same restrictions, terms and
vesting and other conditions as are applicable  to the Restricted Shares) until
such  time,  if  ever,  as the Restricted Shares with  respect  to  which  such
Retained Distributions shall have been made, paid or declared shall have become
vested,  and  such  Retained  Distributions  shall  not  bear  interest  or  be
segregated  in a separate  account;  (d)  the  Holder  may  not  sell,  assign,
transfer, pledge, exchange, encumber or dispose of the Restricted Shares or any
Retained Distributions  or  his  interest in any of them during the Restriction
Period; and (e) a breach of any restrictions,  terms  or conditions provided in
the Plan or established by the Committee with respect to  any Restricted Shares
or Retained Distributions will cause a forfeiture of such Restricted Shares and
any Retained Distributions with respect thereto.

8.4        Issuance  of  Stock  at  End of the Restriction Period.   Restricted
Shares issued at the end of the Restriction  Period shall not constitute issued
and outstanding shares of Common Stock and the Holder shall not have any of the
rights of a stockholder with respect to the shares  of  Common Stock covered by
such an award of Restricted Shares, in each case until such  shares  shall have
been transferred to the Holder at the end of the Restriction Period.  If and to
the  extent  that  shares  of  Common Stock are to be issued at the end of  the
Restriction  Period,  the  Holder  shall   be   entitled  to  receive  Dividend
Equivalents with respect to the shares of Common  Stock  covered thereby either
(i)  during  the  Restriction  Period  or  (ii)  in accordance with  the  rules
applicable  to  Retained Distributions, as the Committee  may  specify  in  the
Agreement.

8.5        Cash Awards.   In connection with any award of Restricted Shares, an
Agreement may provide for the  payment  of  a cash amount to the Holder of such
Restricted Shares at any time after such Restricted  Shares  shall  have become
vested.   Such  cash awards shall be payable in accordance with such additional
restrictions, terms  and  conditions as shall be prescribed by the Committee in
the Agreement and shall be in addition to any other salary, incentive, bonus or
other compensation payments  which  such  Holder shall be otherwise entitled or
eligible to receive from the Company.

8.6        Completion of Restriction Period.   On the Vesting Date with respect
to  each  award  of  Restricted  Shares,  and  the satisfaction  of  any  other
applicable restrictions, terms and conditions (a) all or the applicable portion
of such Restricted Shares shall become vested, (b)  any  Retained Distributions
and  any  unpaid  Dividend  Equivalents with respect to such Restricted  Shares
shall become vested to the extent  that  the  Restricted Shares related thereto
shall have become vested and (c) any cash award  to  be  received by the Holder
with respect to such Restricted Shares shall become payable,  all in accordance
with  the  terms  of  the  applicable  Agreement.  Any such Restricted  Shares,
Retained  Distributions  and any unpaid Dividend  Equivalents  that  shall  not
become vested shall be forfeited  to  the  Company  and  the  Holder  shall not
thereafter have any rights (including dividend and voting rights) with  respect
to  such  Restricted  Shares,  Retained  Distributions  and any unpaid Dividend
Equivalents  that  shall  have been so forfeited.  The Committee  may,  in  its
discretion,  provide that the  delivery  of  any  Restricted  Shares,  Retained
Distributions  and  unpaid  Dividend Equivalents that shall have become vested,
and  payment of any cash awards  that  shall  have  become  payable,  shall  be
deferred  until such date or dates as the recipient may elect.  Any election of
a recipient  pursuant  to the preceding sentence shall be filed in writing with
the Committee in accordance  with  such  rules  and  regulations, including any
deadline for the making of such an election, as the Committee may provide.

                                 ARTICLE IX

                            INTENTIONALLY OMITTED


                                  ARTICLE X

                             GENERAL PROVISIONS

10.1       Acceleration of Options and Restricted Shares.

           (a)             Death or Disability.  If a Holder's employment shall
           terminate  by  reason  of death or Disability,  notwithstanding  any
           contrary waiting period,  installment  period,  vesting  schedule or
           Restriction  Period  in  any  Agreement  or in the Plan, unless  the
           applicable Agreement provides otherwise:   (i)  in  the  case  of an
           Option,  each  outstanding  Option  granted  under  the  Plan  shall
           immediately  become  exercisable in full in respect of the aggregate
           number of shares covered thereby; and (ii) in the case of Restricted
           Shares, the Restriction  Period  applicable  to  each  such award of
           Restricted  Shares  shall  be  deemed  to have expired and all  such
           Restricted Shares, any related Retained Distributions and any unpaid
           Dividend  Equivalents  shall  become vested  and  any  cash  amounts
           payable pursuant to the applicable  Agreement  shall  be adjusted in
           such manner as may be provided in the Agreement.

           (b)             Approved Transactions.  In the event of any Approved
           Transaction,    notwithstanding   any   contrary   waiting   period,
           installment period,  vesting  schedule  or Restriction Period in any
           Agreement or in the Plan, unless the applicable  Agreement  provides
           otherwise:   (i)  in  the  case  of  an Option each such outstanding
           Option granted under the Plan shall become  exercisable  in  full in
           respect of the aggregate number of shares covered thereby; and  (ii)
           in  the case of Restricted Shares, the Restriction Period applicable
           to each  such  award  of  Restricted  Shares shall be deemed to have
           expired  and  all  such  Restricted  Shares,  any  related  Retained
           Distributions  and  any  unpaid Dividend  Equivalents  shall  become
           vested  and any cash amounts  payable  pursuant  to  the  applicable
           Agreement shall be adjusted in such manner as may be provided in the
           Agreement,  provided,  however,  that  any  Options  not theretofore
           exercised   shall   terminate  upon  consummation  of  the  Approved
           Transaction.   Notwithstanding   the   foregoing,  unless  otherwise
           provided  in the applicable Agreement, the  Committee  may,  in  its
           discretion,  determine  that any or all outstanding Awards of any or
           all types granted pursuant  to  the  Plan  will  not  vest or become
           exercisable on an accelerated basis in connection with  an  Approved
           Transaction  and/or  will  not  terminate if not exercised prior  to
           consummation  of  the Approved Transaction,  if  the  Board  or  the
           surviving or acquiring  corporation,  as the case may be, shall have
           taken, or made effective provision for the taking of, such action as
           in  the  opinion of the Committee is equitable  and  appropriate  to
           substitute a new Award for such Award or to assume such Award and in
           order to make  such  new  or  assumed  Award,  as  nearly  as may be
           practicable,  equivalent  to the old Award (before giving effect  to
           any acceleration of the vesting  or  exercisability thereof), taking
           into  account, to the extent applicable,  the  kind  and  amount  of
           securities,  cash or other assets into or for which the Common Stock
           may be changed,  converted  or  exchanged  in  connection  with  the
           Approved Transaction.

10.2       Termination of Employment.

           (a)             General.   If  a Holder's employment shall terminate
           prior to the complete exercise of  an  Option  (or  deemed  exercise
           thereof,  as  provided  in  Section  7.2)  or during the Restriction
           Period with respect to any Restricted Shares, then such Option shall
           thereafter be exercisable, and the Holder's  rights  to any unvested
           Restricted   Shares,   Retained   Distributions,   unpaid   Dividend
           Equivalents  and  cash  amounts shall thereafter vest solely to  the
           extent provided in the applicable Agreement; provided, however, that
           (i) no Option may be exercised  after  the scheduled expiration date
           thereof; (ii) if the Holder's employment  terminates  by  reason  of
           death  or  Disability,  the  Option  shall  remain exercisable for a
           period  of  at  least one year following such termination  (but  not
           later than the scheduled  expiration  of such Option); and (iii) any
           termination by the Company for cause will  be  treated in accordance
           with the provisions of Section 10.2(b).

           (b)             Termination  by Company for Cause.   If  a  Holder's
           employment with the Company or  a  Subsidiary shall be terminated by
           the Company or such Subsidiary during  the  Restriction  Period with
           respect  to any Restricted Shares, or prior to the exercise  of  any
           Option, for  cause (for these purposes, cause shall have the meaning
           ascribed thereto in any employment agreement to which such Holder is
           a party or, in the absence thereof, shall include but not be limited
           to,  insubordination,  dishonesty,  incompetence,  moral  turpitude,
           other  misconduct  of  any kind or the refusal to perform his duties
           and  responsibilities  for   any   reason   other  than  illness  or
           incapacity;  provided,  however,  that  if  such termination  occurs
           within  12  months  after an Approved Transaction,  termination  for
           cause   shall   mean   only   a   felony   conviction   for   fraud,
           misappropriation or embezzlement), then (i) all Options held by such
           Holder shall immediately  terminate and (ii) such Holder's rights to
           all restricted Shares, Retained  Distributions,  any unpaid Dividend
           Equivalents and any cash awards shall be forfeited immediately.

           (c)             Miscellaneous.  The Committee may  determine whether
           any given leave of absence constitutes a termination  of employment;
           provided,  however,  that  for purposes of the Plan (i) a  leave  of
           absence, duly authorized in  writing  by  the  Company  for military
           service  or  sickness,  or  for  any  other purpose approved by  the
           Company if the period of such leave does  not  exceed  90  days, and
           (ii)  a  leave  of absence in excess of 90 days, duly authorized  in
           writing  by  the  Company,   provided   the   employee's   right  to
           reemployment is guaranteed either by statute or contract, shall  not
           be  deemed  a termination of employment.  Awards made under the Plan
           shall not be  affected  by  any  change of employment so long as the
           Holder continues to be an employee of the Company or any Subsidiary.

10.3       Right of Company to Terminate Employment.   Nothing contained in the
Plan  or  in  any  Award,  and no action of the Company or the  Committee  with
respect thereto, shall confer or be construed to confer on any Holder any right
to  continue in the employ of  the  Company  or  any  of  its  Subsidiaries  or
interfere in any way with the right of the Company or a Subsidiary to terminate
the employment  of  the  Holder  at  any  time, with or without cause; subject,
however, to the provisions of any employment  agreement  between the Holder and
the Company or any Subsidiary.

10.4       Nonalienation of Benefits.  No right or benefit under the Plan shall
be  subject to alienation, sale, assignment, hypothecation,  pledge,  exchange,
transfer,  encumbrance  or  charge,  and any attempt to alienate, sell, assign,
hypothecate, pledge, exchange, transfer,  encumber  or charge the same shall be
void.   No  right or benefit hereunder shall in any manner  be  liable  for  or
subject to the debts, contracts, liabilities or torts of the person entitled to
such benefits.

10.5       Written  Agreement.  Each grant of an Option under the Plan shall be
evidenced by a stock option agreement which shall designate the Options granted
thereunder as Incentive  Stock  Options or Nonqualified Stock Options; and each
award of Restricted Shares shall be evidenced by a restricted shares agreement,
each in such form and containing  such  terms  and  provisions not inconsistent
with  the  provisions  of the Plan as the Committee from  time  to  time  shall
approve; provided, however,  that if more than one type of Award is made to the
same Holder, such Awards may be  evidenced  by  a  single  agreement  with such
Holder.   Each  grantee  of  an  Option  or Restricted Shares shall be notified
promptly of such grant and a written agreement  shall  be promptly executed and
delivered by the Company and the grantee, provided that,  in  the discretion of
the  Committee, such grant of Options or Restricted Shares shall  terminate  if
such written  agreement  is  not  signed  by such grantee (or his attorney) and
delivered to the Company within 60 days after  the  date the Committee approved
such grant.  Any such written agreement may contain (but  shall not be required
to contain) such provisions as the Committee deems appropriate  (i)  to  ensure
that  the penalty provisions of Section 4999 of the Code will not apply to  any
stock or  cash  received by the Holder from the Company or (ii) to provide cash
payments to the Holder  to  mitigate the impact of such penalty provisions upon
the Holder.  Any such agreement  may  be  supplemented  or amended from time to
time as approved by the Committee as contemplated by Section 10.8(b).

10.6       Designation of Beneficiaries.  Each person who  shall  be granted an
Award  under  the  Plan  may  designate a beneficiary or beneficiaries and  may
change such designation from time  to  time  by filing a written designation of
beneficiary or beneficiaries with the Committee  on  a form to be prescribed by
it, provided that no such designation shall be effective  unless so filed prior
to the death of such person.

10.7       Right of First Refusal.  The Agreements may contain  such provisions
as the Committee shall determine to the effect that if a Holder elects  to sell
all  or  any shares of Common Stock that such Holder acquired upon the exercise
of an Option  or  upon the vesting of Restricted Shares awarded under the Plan,
then such Holder shall not sell such shares unless such Holder shall have first
offered in writing to sell such shares to the Company at Fair Market Value on a
date specified in such  offer (which date shall be at least three business days
and not more than ten business  days following the date of such offer).  In any
such event, certificates representing shares issued upon exercise of Options or
and the vesting of Restricted Shares  shall  bear  a  restrictive legend to the
effect  that  transferability of such shares are subject  to  the  restrictions
contained in the  Plan  and  the applicable Agreement and the Company may cause
the transfer agent for the Common  Stock  to  place  a stop transfer order with
respect to such shares.

10.8       Termination and Amendment.

           (a)             General.   Unless  the Plan shall  theretofore  have
           been terminated as hereinafter provided, no Awards may be made under
           the Plan on or after the tenth anniversary  of  the  Effective Date.
           The  Board  or  the  Committee  may  at any time prior to the  tenth
           anniversary of the Effective Date terminate  the Plan, and may, from
           time to time, suspend or discontinue the Plan or modify or amend the
           Plan  in such respects as it shall deem advisable;  except  that  no
           such modification  or amendment shall be effective prior to approval
           by the Company's stockholders  to  the  extent such approval is then
           required  pursuant  to  Rule  16b-3  in  order   to   preserve   the
           applicability  of  any  exemption provided by such rule to any Award
           then outstanding (unless  the  holder  of such Award consents) or to
           the extent stockholder approval is otherwise  required by applicable
           legal requirements.

           (b)             Modification.   No  termination,   modification   or
           amendment of the Plan may, without the consent of the person to whom
           any  Award shall theretofore have been granted, adversely affect the
           rights  of such person with respect to such Award.  No modification,
           extension,  renewal  or  other change in any Award granted under the
           Plan shall be made after the grant of such Award, unless the same is
           consistent with the provisions of the Plan.  With the consent of the
           Holder  and  subject  to  the  terms  and  conditions  of  the  Plan
           (including Section 10.8(a)),  the  Committee  may  amend outstanding
           Agreements  with  any  Holder,  including,  without limitation,  any
           amendment which would (i) accelerate the time  or times at which the
           Award  may be exercised and/or (ii) extend the scheduled  expiration
           date  of   the  Award.   Without  limiting  the  generality  of  the
           foregoing, the  Committee  may, but solely with the Holder's consent
           unless otherwise provided in  the  Agreement,  agree  to  cancel any
           Award under the Plan and issue a new Award in substitution therefor,
           provided  that  the  Award  so substituted shall satisfy all of  the
           requirements of the Plan as of  the  date  such  new  Award is made.
           Nothing  contained  in  the  foregoing  provisions  of  this Section
           10.8(b)  shall be construed to prevent the Committee from  providing
           in any Agreement  that  the rights of the Holder with respect to the
           Award  evidenced  thereby  shall   be  subject  to  such  rules  and
           regulations as the Committee may, subject  to the express provisions
           of the Plan, adopt from time to time, or impair  the  enforceability
           of any such provision.

10.9       Government  and  Other  Regulations.  The obligation of the  Company
with respect to Awards shall be subject  to  all  applicable  laws,  rules  and
regulations and such approvals by any governmental agencies as may be required,
including,  without limitation, the effectiveness of any registration statement
required under the Securities Act of 1933, and the rules and regulations of any
securities exchange  or  association on which the Common Stock may be listed or
quoted.

10.10        Withholding.  The Company's obligation to deliver shares of Common
Stock or pay cash in respect  of  any  Award under the Plan shall be subject to
applicable  federal, state and local tax  withholding  requirements.   Federal,
state and local  withholding tax due at the time of an Award, upon the exercise
of any Option or upon  the  vesting  of,  or  expiration  of  restrictions with
respect  to, Restricted Shares, as appropriate, may, in the discretion  of  the
Committee,  be  paid  in  shares of Common Stock already owned by the Holder or
through the withholding of  shares otherwise issuable to such Holder, upon such
terms and conditions (including,  without limitation, the conditions referenced
in Section 6.5) as the Committee shall  determine.  If the Holder shall fail to
pay, or make arrangements satisfactory to the Committee for the payment, to the
Company of all such federal, state and local  taxes  required to be withheld by
the Company, then the Company shall, to the extent permitted  by  law, have the
right  to deduct from any payment of any kind otherwise due to such  Holder  an
amount equal  to  any  federal, state or local taxes of any kind required to be
withheld by the Company with respect to such Award.

10.11        Separability.   It  is  the  intent  of the Company that this Plan
comply with Rule 16b-3 with respect to persons subject  to  Section  16  of the
Exchange  Act  unless  otherwise provided herein or in an Award Agreement, that
any  ambiguities  or inconsistencies  in  the  construction  of  this  Plan  be
interpreted to give effect to such intention, and that if any provision of this
Plan is found not to  be in compliance with Rule 16b-3, such provision shall be
null and void to the extent  required  to  permit this Plan to comply with Rule
16b-3.
10.12        Non-Exclusivity of the Plan.  Neither  the adoption of the Plan by
the Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations  on  the  power  of the
Board  to  adopt  such  other  incentive arrangements as it may deem desirable,
including, without limitation, the  granting  of stock options and the awarding
of stock and cash otherwise then under the Plan,  and  such arrangements may be
either generally applicable or applicable only in specific cases.

10.13         Exclusion  from  Pension  and  Profit-Sharing  Computation.    By
acceptance  of an Award, unless otherwise provided in the applicable Agreement,
each Holder shall be deemed to have agreed that such Award is special incentive
compensation  that  will  not  be taken into account, in any manner, as salary,
compensation or bonus in determining  the  amount  of  any  payment  under  any
pension,  retirement  or other employee benefit plan,  program or policy of the
Company or any Subsidiary.   In addition, each beneficiary of a deceased Holder
shall be deemed to have agreed  that  such  Award will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the
Holder  which  is payable to such beneficiary under  any  life  insurance  plan
covering employees of the Company or any Subsidiary.

10.14        Unfunded  Plan.   Neither  the Company nor any Subsidiary shall be
required to segregate any cash or any shares  of  Common Stock which may at any
time be represented by Awards and the Plan shall constitute  an "unfunded" plan
of the Company.  Except as provided in Article VIII with respect  to  awards of
Restricted  Shares  and  except  as expressly set forth in writing, no employee
shall have voting or other rights  with  respect  to  shares  of Common A Stock
prior to the delivery of such shares.  Neither the Company nor  any  Subsidiary
shall, by any provisions of the Plan, be deemed to be a trustee of any Common A
Stock  or  any  other  property,  and  the  liabilities  of the Company and any
Subsidiary  to  any employee pursuant to the Plan shall be those  of  a  debtor
pursuant to such  contract  obligations  as  are  created by or pursuant to the
Plan, and the rights of any employee, former employee  or beneficiary under the
Plan  shall be limited to those of a general creditor of  the  Company  or  the
applicable  Subsidiary,  as the case may be.  In its sole discretion, the Board
may  authorize the creation  of  trusts  or  other  arrangements  to  meet  the
obligations  of  the  Company  under  the  Plan,  provided,  however,  that the
existence  of such trusts or other arrangements is consistent with the unfunded
status of the Plan.

10.15         Governing  Law.   The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.

10.16        Accounts.  The delivery  of  any  shares  of  Common Stock and the
payment of any amount in respect of an Award shall be for the  account  of  the
Company  or the applicable Subsidiary, as the case maybe, and any such delivery
or payment  shall  not  be  made  until  the  recipient shall have paid or made
satisfactory arrangements for the payment of any  applicable  withholding taxes
as provided in Section 10.10.

10.17        Legends.  In addition to any legend contemplated by  Section 10.7,
each  certificate evidencing Common Stock subject to an Award shall  bear  such
legends  as the Committee deems necessary or appropriate to reflect or refer to
any terms,  conditions  or restrictions of the Award applicable to such shares,
including, without limitation,  any  to  the effect that the shares represented
thereby may not be disposed of unless the  Company  has  received an opinion of
counsel, acceptable to the Company, that such disposition  will not violate any
federal or state securities laws.

10.18        Company's Rights.  The grant of Awards pursuant  to the Plan shall
not   affect   in   any  way  the  right  or  power  of  the  Company  to  make
reclassifications, reorganizations  or  other  changes  of or to its capital or
business  structure  or  to  merge, consolidate, liquidate, sell  or  otherwise
dispose of all or any part of its business or assets.


<PAGE>



                                                                EXHIBIT 10.9


                        STANDARD FORM OF OFFICE LEASE
                   The Real Estate Board of New York, Inc.


           AGREEMENT OF LEASE,  made  as  of  this  25th day of September 1996,
between  FIFTY  BROAD  STREET,  INC.  AND  FIFTY  NEW STREET,  INC.,  New  York
corporations having their principal place of business  c/o Cushman & Wakefield,
Inc.,  100  Wall  Street,  New  York,  N.Y.  10005,  party of the  first  part,
hereinafter referred to as OWNER, and K2 DESIGN, INC.,  a New York corporation,
party of the second part, hereinafter referred to as TENANT,

                                 WITNESSETH:

           Owner  hereby leases to Tenant and Tenant hereby  hires  from  Owner
Room  2001 in the building  known  as  50  Broad  Street,  in  the  Borough  of
Manhattan,  City  of New York, for the term of Five (5) years, three (3) months
(or until such term  shall  sooner cease and expire as hereinafter provided) to
commence on the First (1st) day  of  November  nineteen hundred and ninety-six,
and to end on the Thirty-first (31) day of January,  two-thousand and two, both
dates inclusive, at an annual rental rate of Thirty-four thousand, five hundred
and eighty 00/00 ($34,580.00) (11/1/96 to 11/30/98); then  Thirty-six thousand,
five hundred and fifty-six ($36,556.00) (12/1/98 to 12/31/99); and then Thirty-
eight   thousand,  five  hundred  and  thirty-two  ($38,532.00)  (1/1/2000   to
1/31/2002)  which  Tenant  agrees  to  pay in lawful money of the United States
which  shall be legal tender in payment of  all  debts  and  dues,  public  and
private,  at  the  time of payment, in equal monthly installments in advance on
the first day of each  month  during  said term, at the office of Owner or such
other  place  as  Owner  may  designate,  without  any  set  off  or  deduction
whatsoever, except that Tenant shall pay the first _____ monthly installment(s)
on the execution hereof (unless this lease be a renewal).

           In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to  the  terms  of  another lease with Owner or  with  Owner's  predecessor  in
interest, Owner may at  Owner's  option  and  without  notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.

           The  parties  hereto,  for  themselves,  their heirs,  distributees,
executors,  administrators,  legal  representatives,  successors  and  assigns,
hereby covenant as follows:

           RENT:           1.   Tenant  shall  pay the rent  as  above  and  as
hereinafter provided.

           OCCUPANCY:      2.  Tenant shall use and occupy demised premises for
executive offices for Tenant's use and for no other purpose.

           TENANT ALTERATIONS:3.  Tenant shall make  no  changes  in  or to the
demised premises of any nature without Owner's prior written consent and to the
provisions  of this article.  Tenant at Tenant's expense, may make alterations,
installations,  additions or improvements which are non-structural and which do
not affect utility  services  or  plumbing  and  electrical lines, in or to the
interior  of  the  demised  premises by using contractors  or  mechanics  first
approved by Owner.  Tenant shall,  before  making  any  alterations, additions,
installations  or improvements, at its expense, obtain all  permits,  approvals
and certificates  required by any governmental or quasi-governmental bodies and
(upon completion) certificates  of  final  approval  thereof  and shall deliver
promptly  duplicates of all such permits, approvals and certificates  to  Owner
and Tenant  agrees  to  carry  and  will  cause  Tenant's  contractors and sub-
contractors  to carry such workman's compensation, general liability,  personal
and property damage  insurance as Owner may require.  If any mechanic's lien is
filed against the demised  premises,  or the building of which the same forms a
part,  for  work claimed to have been done  for,  or  materials  furnished  to,
Tenant, whether  or  not  done  pursuant  to  this  article,  the same shall be
discharged  by  Tenant within thirty days thereafter, at Tenant's  expense,  by
filing the bond required  by  law.   All fixtures and all paneling, partitions,
railings and like installations, installed  in the premises at any time, either
by Tenant or by Owner in Tenant's behalf, shall,  upon installation, become the
property  of Owner and shall remain upon and be surrendered  with  the  demised
premises unless  Owner,  by notice to Tenant no later than twenty days prior to
the date fixed as the termination  of  this lease, elects to relinquish Owner's
right thereto and to have them removed by Tenant, in which event the same shall
be removed from the premises by Tenant prior to the expiration of the lease, at
Tenant's expense.  Nothing in this Article  shall  be  construed  to give Owner
title  to  or  to  prevent Tenant's removal of trade fixtures, moveable  office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations  as  may  be  required  by  Owner.  Tenant shall
immediately  and  at  its  expense,  repair  and  restore the premises  to  the
condition existing prior to installation and repair  any  damage to the demised
premises  or  the  building  due  to such removal.  All property  permitted  or
required to be removed by Tenant at  the  end  of  the  term  remaining  in the
premises  after  Tenant's  removal  shall  be  deemed abandoned and may, at the
election of Owner, either be retained as Owner's  property  or  may  be removed
from the premises by Owner, at Tenant's expense.

           MAINTENANCE AND REPAIRS:   4.  Tenant shall, throughout the  term of
this  lease,  take  good  care  of  the  demised  premises and the fixtures and
appurtenances therein.  Tenant shall be responsible for all damage or injury to
the  demised premises or any other part of the building  and  the  systems  and
equipment thereof, whether requiring structural or nonstructural repairs caused
by or  resulting  from  carelessness,  omission, neglect or improper conduct of
Tenant, Tenant's subtenants, agents, employees, invitees or licensees, or which
arise out of any work, labor service or  equipment  done  for  or  supplied  to
Tenant  or any subtenant or arising out of the installation use or operation of
the property  or equipment of Tenant or any subtenant. Tenant shall also repair
all damage to the  building  and  the  demised premises caused by the moving of
Tenant's fixtures, furniture and equipment.   Tenant  shall  promptly  make, at
Tenant's  expense,  all repairs in and to the demised premises for which Tenant
is responsible, using  only the contractor for the trade or trades in question,
selected from a list of  at least two contractors per trade submitted by Owner.
Any other repairs in or to  the  building or the facilities and systems thereof
for which Tenant is responsible shall  be  performed  by  Owner at the Tenant's
expense.   Owner shall maintain in good working order and repair  the  exterior
and the structural  portions of the building, including the structural portions
of its demised premises,  and  the public portions of the building interior and
the building plumbing, electrical,  heating  and  ventilating  systems  (to the
extent  such  systems  presently  exist)  serving the demised premises.  Tenant
agrees to give prompt notice of any defective  condition  in  the  premises for
which  Owner  may  be  responsible  hereunder.  There shall be no allowance  to
Tenant for diminution of rental value  and no liability on the part of Owner by
reason of inconvenience, annoyance or injury  to business arising from Owner or
others making repairs, alterations, additions or  improvements  in  or  to  any
portion  of  the  building  or  the demised premises or in and to the fixtures,
appurtenances or equipment thereof.   It  is  specifically  agreed  that Tenant
shall  not  be  entitled  to  any setoff or reduction of rent by reason of  any
failure of Owner to comply with  the  covenants of this or any other article of
this Lease.  Tenant agrees that Tenant's  sole  remedy  at law in such instance
will be by way of an action for damages for breach of contract.  The provisions
of this Article 4 shall not apply in the case of fire or  other  casualty which
are dealt with in Article 9 hereof.

           WINDOW  CLEANING:5.   Tenant  will  not  clean nor require,  permit,
suffer  or  allow any window in the demised premises to  be  cleaned  from  the
outside in violation  of  Section  202 of the Labor Law or any other applicable
law or of the Rules of the Board of  Standards  and  Appeals,  or  of any other
Board or body having or asserting jurisdiction.

           REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
6.  Prior  to  the  commencement  of  the  lease  term,  if  Tenant  is then in
possession,  and  at  all  times thereafter, Tenant, at Tenant's sole cost  and
expense, shall promptly comply  with  all  present  and future laws, orders and
regulations   of   all   state,  federal,  municipal  and  local   governments,
departments, commissions and  boards  and  any  direction of any public officer
pursuant to law, and all orders, rules and regulations of the New York Board of
Fire Underwriters, Insurance Services Office, or  any  similar body which shall
impose any violation, order or duty upon Owner or Tenant  with  respect  to the
demised  premises, whether or not arising out of Tenant's use or manner of  use
thereof, (including Tenant's permitted use) or, with respect to the building if
arising out  of  Tenant's  use or manner of use of the premises or the building
(including the use permitted  under  the  lease).  Nothing herein shall require
Tenant to make structural repairs or alterations  unless  Tenant  has,  by  its
manner  of use of the demised premises or method of operation therein, violated
any such  laws,  ordinances,  orders,  rules,  regulations or requirements with
respect  thereto.   Tenant may, after securing Owner  to  Owner's  satisfaction
against all damages,  interest,  penalties  and  expenses,  including,  but not
limited to, reasonable attorney's fees, by cash deposit or by surety bond in an
amount  and  in  a  company  satisfactory to Owner, contest and appeal any such
laws, ordinances, orders rules,  regulations  or  requirements provided same is
done with all reasonable promptness and provided such  appeal shall not subject
Owner to prosecution for a criminal offense or constitute  a  default under any
lease  or  mortgage  under which Owner may be obligated, or cause  the  demised
premises or any part thereof  to  be condemned or vacated.  Tenant shall not do
or permit any act or thing to be done  in  or  to the demised premises which is
contrary  to  law,  or  which will invalidate or be  in  conflict  with  public
liability, fire or other  policies  of  insurance at any time carried by or for
the benefit of Owner with respect to the  demised  premises  or the building of
which the demised premises form a part, or which shall or might  subject  Owner
to  any  liability  or  responsibility  to  any  person or for property damage.
Tenant  shall  not  keep  anything in the demised premises  except  as  now  or
hereafter  permitted  by the  Fire  Department,  Board  of  Underwriters,  Fire
Insurance Rating Organization  or other authority having jurisdiction, and then
only in such manner and such quantity  so  as not to increase the rate for fire
insurance applicable to the building, nor use  the  premises  in a manner which
will  increase  the  insurance  rate  for the building or any property  located
therein over that in effect prior to the  commencement  of  Tenant's occupancy.
Tenant shall pay all costs, expenses, fines, penalties, or damages,  which  may
be  imposed  upon  Owner  by  reason  of  Tenant's  failure  to comply with the
provisions of this article and if by reason of such failure the  fire insurance
rate shall, at the beginning of this lease or at any time thereafter, be higher
than  it  otherwise would be, then Tenant shall reimburse Owner, as  additional
rent hereunder, for that portion of all fire insurance premiums thereafter paid
by Owner which  shall  have  been charged because of such failure by Tenant, in
any action or proceeding wherein  Owner  and  Tenant are parties, a schedule or
"make-up" of rate for the building or demised premises  issued  by the New York
Fire  Insurance Exchange, or other body making fire insurance rates  applicable
to said  premises  shall be conclusive evidence of the facts therein stated and
the several items and  charges  in  the fire insurance rates then applicable to
said premises.  Tenant shall not place  a  load  upon  any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law.  Owner reserves the right  to  prescribe the
weight  and position of all safes, business machines and mechanical  equipment.
Such installations  shall  be  placed  and  maintained  by  Tenant, at Tenant's
expense,  in  settings sufficient, in Owner's judgment, to absorb  and  prevent
vibration, noise and annoyance.

           SUBORDINATION:  7.   This  lease  is  subject and subordinate to all
ground or underlying leases and to all mortgages which  may  now  or  hereafter
affect  such  leases or the real property of which demised premises are a  part
and to all renewals, modifications, consolidations, replacements and extensions
of any such underlying  leases  and  mortgages.   This  clause  shall  be self-
operative  and no further instrument of subordination shall be required by  any
ground or underlying  lessor  or  by  any mortgagee, affecting any lease or the
real property of which the demised premises  are  a  part.   In confirmation of
such  subordination, Tenant shall execute promptly any certificate  that  Owner
may request.

           PROPERTY-LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY:
8.  Owner  or  its  agents  shall  not  be liable for any damage to property of
Tenant or of others entrusted to employees  of the building, nor for loss of or
damage to any property of Tenant by theft or  otherwise,  nor for any injury or
damage  to  persons or property resulting from any cause of whatsoever  nature,
unless caused  by  or  due  to the negligence of Owner, its agents, servants or
employees.  Owner or its agents  will  not be liable for any such damage caused
by  other tenants or persons in, upon or  about  said  building  or  caused  by
operations  in construction of any private, public or quasi public work.  If at
any time any  windows  of the demised premises are temporarily closed, darkened
or bricked up (or permanently  closed,  darkened  or bricked up, if required by
law) for any reason whatsoever including, but not limited  to Owner's own acts.
Owner shall not be liable for any damage Tenant may sustain  thereby and Tenant
shall not be entitled to any compensation therefor nor abatement  or diminution
of  rent  nor shall the same release Tenant from its obligations hereunder  nor
constitute an eviction.  Tenant shall indemnify and save harmless Owner against
and from all  liabilities,  obligations,  damages, penalties, claims, costs and
expenses  for  which  Owner  shall not be reimbursed  by  insurance,  including
reasonable attorneys fees, paid  suffered or incurred as a result of any breach
by Tenant, Tenant's agents, contractors,  employees, invitees, or licensees, of
any covenant or condition of this lease, or  the  carelessness,  negligence  or
improper  conduct  of  the  Tenant,  Tenant's  agents,  contractors, employees,
invitees or licensees.  Tenant's liability under this lease extends to the acts
and omissions of any sub-tenant, and any agent, contractor,  employee,  invitee
or  licensee of any sub-tenant.  In case of any action or proceeding is brought
against  Owner  by  reason of any such claim.  Tenant, upon written notice from
Owner, will, at Tenant's expense, resist or defend such action or proceeding by
counsel approved by Owner  in  writing,  such  approval  not to be unreasonably
withheld.

           DESTRUCTION, FIRE AND OTHER CASUALTY:9.  (a) If the demised premises
or  any part thereof shall be damaged by fire or other casualty,  Tenant  shall
give  immediate  notice  thereof to Owner and this lease shall continue in full
force and effect except as  hereinafter  set forth. (b) If the demised premises
are partially damaged or rendered partially unusable by fire or other casualty,
the damages thereto shall be repaired by and  at  the  expense of Owner and the
rent, until such repair shall be substantially completed,  shall be apportioned
from the day following the casualty according to the part of the premises which
is usable. (c) If the demised premises are totally damaged or  rendered  wholly
unusable by fire or other casualty, then the rent shall be proportionately paid
up to the time of the casualty and thenceforth shall cease until the date  when
the  premises shall have been repaired and restored by Owner subject to Owner's
right  to  elect not to restore the same as herein provided. (d) If the demised
premises are  rendered  wholly unusable or (whether or not the demised premises
are damages in whole or in part) if the building shall be so damaged that Owner
shall decide to demolish  it  or  to  rebuild  it, then, in any of such events,
Owner  may elect to terminate this lease by written  notice  to  Tenant,  given
within 90  days  after  such  fire  or  casualty,  specifying  a  date  for the
expiration  of  the lease, which date shall not be more than 60 days after  the
giving of such notice,  and  upon the date specified in such notice the term of
this lease shall expire as fully  and  completely as if such date were the date
set forth above for the termination of this  lease  and  Tenant shall forthwith
quit,  surrender  and  vacate  the  premises  without  prejudice   however,  to
Landlord's  rights  and  remedies against Tenant under the lease provisions  in
effect prior to such termination  and  any  rent owing shall be paid up to such
date and any payments of rent made by Tenant  which  were  on  account  of  any
period subsequent to such date shall be returned to Tenant.  Unless Owner shall
serve  a  termination  notice  as  provided  for  herein.  Owner shall make the
repairs and restorations under the conditions of (b)  and  (c) hereof, with all
reasonable expedition subject to delays due to adjustment of  insurance claims,
labor troubles causes beyond Owner's control.  After any such casualty,  Tenant
shall  cooperate  with  Owner's  restoration  by  removing from the premises as
promptly  as  reasonably  possible, all of Tenant's salvageable  inventory  and
movable equipment, furniture,  and other property.  Tenant's liability for rent
shall resume five (5) days after  written  notice  from Owner that the premises
are  substantially  ready  for  Tenant's  occupancy.  (e)   Nothing   contained
hereinabove  shall relieve Tenant from liability that may exist as a result  of
damage from fire  or other casualty.  Notwithstanding the foregoing, each party
shall look first to  any insurance in its favor before making any claim against
the other party for recovery  for  loss  or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law.  Owner and  Tenant  each  hereby  releases  and
waives  all  right of recovery against the other or any one claiming through or
under each of  them  by way of subrogation or otherwise.  The foregoing release
and waiver shall be in force only if both releasors' insurance policies contain
a clause providing that  such  a  release  or  waiver  shall not invalidate the
insurance.  If, and to the extent, that such waiver can be obtained only by the
payment  of  additional premiums, then the party benefitting  from  the  waiver
shall pay such  premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation  under  the  provisions  hereof  with  respect  to waiver of
subrogation.   Tenant  acknowledges  that  Owner  will  not carry insurance  on
Tenant's   furniture   and/or   furnishings  or  any  fixtures  or   equipment,
improvements, or appurtenances removable  by  Tenant and agrees that Owner will
not be obligated to repair any damage thereto or replace the same.  (f)  Tenant
hereby waives the provisions of Section 227 of the Real Property Law and agrees
that the provisions of this article shall govern and control in lieu thereof.

           EMINENT DOMAIN: 10.   If  the  whole or  any  part  of  the  demised
premises shall be acquired or condemned by  Eminent  Domain  for  any public or
quasi  public  use  or purpose, then and in that event, the term of this  lease
shall cease and terminate from the date of title vesting in such proceeding and
Tenant shall have no  claim  for  the value of any unexpired term of said lease
and assigns to Owner.  Tenant's entire interest in any such award.

           ASSIGNMENT,  MORTGAGE, ETC.:11.   Tenant,  for  itself,  its  heirs,
distributees, executors,  administrators, legal representatives, successors and
assigns, expressly covenants  that  it  shall  not assign, mortgage or encumber
this agreement, nor underlet, or suffer or permit  the  demised premises or any
part thereof to be used by others, without the prior written  consent  of Owner
in each instance.  Transfer of the majority of the stock of a corporate  Tenant
shall  be  deemed  an assignment.  If this lease be assigned, or if the demised
premises or any part  thereof  be  underlet  or  occupied by anybody other than
Tenant, Owner may, after default by Tenant, collect  rent  from  the  assignee,
under-tenant or occupant, and apply the net amount collected to the rent herein
reserved,  but no such assignment, underletting, occupancy or collection  shall
be deemed a  waiver of this covenant, or the acceptance of the assignee, under-
tenant or occupant  as  tenant,  or  a  release  of  Tenant  from  the  further
performance by Tenant of covenants on the part of Tenant herein contained.  The
consent  by  Owner  to  an  assignment or underletting shall not in any wise be
construed or relieve Tenant from  obtaining  the  express consent in writing of
Owner to any further assignment or underletting.

           ELECTRIC CURRENT:12.  Rates and conditions in respect to submetering
or rent inclusion, as the case may be, to be added  in  RIDER  attached hereto.
Tenant covenants and agrees that at all times its use of electric current shall
not  exceed the capacity of existing feeders to the building or the  risers  or
wiring  installation  and Tenant may not use any electrical equipment which, in
Owner's opinion, reasonably  exercised,  will  overload  such  installation  or
interfere with the use thereof by other tenants of the building.  The change at
any  time  of  the  character  of  electric service shall in no wise make Owner
liable or responsible to Tenant, for any loss, damages or expenses which Tenant
may sustain.

           ACCESS TO PREMISES:13.  Owner or Owner's agents shall have the right
(but shall not be obligated) to enter  the demised premises in any emergency at
any time, and, at other reasonable times,  to examine the same and to make such
repairs,  replacements  and  improvements  as  Owner  may  deem  necessary  and
reasonably desirable to the demised premises or  to  any  other  portion of the
building or which Owner may elect to perform.  Tenant shall permit Owner to use
and maintain and replace pipes and conduits in and through the demised premises
and to erect new pipes and conduits therein provided they are concealed  within
the  walls,  floor, or ceiling.  Owner may, during the progress of any work  in
the demised premises,  take  all  necessary  materials  and equipment into said
premises  without  the same constituting an eviction nor shall  the  Tenant  or
entitled to any abatement  of  rent  while  such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise.  Throughout
the term hereof Owner shall have the right to  enter  the  demised  premises at
reasonable  hours for the purpose of showing same to prospective purchasers  or
mortgagees of  the building, and during the last six months of the term for the
purpose of showing  the  same to prospective tenants.  If Tenant is not present
to open and permit an entry  into  the  premises,  Owner  or Owner's agents may
enter  the same whenever such entry may be necessary or permissible  by  master
key or forcibly and provided reasonable care is exercised to safeguard Tenant's
property,  such entry shall not render Owner or its agents liable therefor, nor
in any event  shall the obligations of Tenant hereunder be affected.  If during
the last month  of  the term Tenant shall have removed all or substantially all
of Tenant's property  therefrom.   Owner may immediately enter, alter, renovate
or redecorate the demised premises without  limitation or abatement of rent, or
incurring liability to Tenant for any compensation  and  such act shall have no
effect on this lease or Tenant's obligations hereunder.

           VAULT,  VAULT  SPACE,  AREA:14.   No Vaults, vault  space  or  area,
whether  or  not  enclosed or covered, not within  the  property  line  of  the
building is leased hereunder, anything contained in or indicated on any sketch,
blue print or plan,  or  anything  contained  elsewhere  in  this  lease to the
contrary notwithstanding.  Owner makes no representation as to the location  of
the  property  line  of  the building.  All vaults and vault space and all such
areas not within the property  line  of  the  building,  which  Tenant  may  be
permitted to use and/or occupy, is to be used and/or occupied under a revocable
license,  and if any such license be revoked, or if the amount of such space or
area be diminished  or required by any federal, state or municipal authority or
public utility, Owner shall not be subject to any liability nor shall Tenant be
entitled to any compensation or diminution or abatement of rent, nor shall such
revocation,  diminution   or  requisition  be  deemed  constructive  or  actual
eviction.  Any tax, fee or  charge  of  municipal authorities for such vault or
area shall be paid by Tenant.

           OCCUPANCY:      15.  Tenant will  not  at any time use or occupy the
demised premises in violation of the certificate of  occupancy  issued  for the
building  of  which the demised premises are a part.  Tenant has inspected  the
premises and accepts  them  as  is,  subject  to the riders annexed hereto with
respect to Owner's work, if any.  In any event,  Owner  makes no representation
as  to  the  condition  of the premises and Tenant agrees to  accept  the  same
subject to violations, whether or not of record.

           BANKRUPTCY:     16.   (a)   Anything  elsewhere in this lease to the
contrary notwithstanding, this lease may be cancelled  by  Owner by the sending
of a written notice to Tenant within a reasonable time after  the  happening of
any  one or more of the following events:  (1)  the commencement of a  case  in
bankruptcy  or  under the laws of any state naming Tenant as the debtor; or (2)
the making by Tenant  of an assignment or any other arrangement for the benefit
of creditors under any  state  statute.  Neither Tenant nor any person claiming
through or under Tenant, or by reason  of  any statute or order of court, shall
thereafter  be  entitled  to  possession  of the  premises  demised  but  shall
forthwith quit and surrender the premises.   If this lease shall be assigned in
accordance  with  its  terms,  the  provisions  of this  Article  16  shall  be
applicable only to the party then owning Tenant's interest in this lease.

                           (b)  it is stipulated  and  agreed that in the event
of the termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an  amount  equal  to  the
difference between the rent reserved hereunder for the unexpired portion of the
term  demised  and the fair and reasonable rental value of the demised premises
for the same period.  In the computation of such damages the difference between
any installment  of  rent  becoming due hereunder after the date of termination
and the fair and reasonable rental value of the demised premises for the period
for which such installment was  payable  shall  be  discounted  to  the date of
termination  at  the rate of four percent (4%) per annum.  If such premises  or
any part thereof be relet by the Owner for the unexpired term of said lease, or
any part thereof,  before  presentation  or proof of such liquidated damages to
any  court,  commission or tribunal, the amount  of  rent  reserved  upon  such
reletting shall  be  deemed  to be the fair and reasonable rental value for the
part or the whole of the premises  so re-let during the term of the re-letting.
Nothing herein contained shall limit  or  prejudice  the  right of the Owner to
prove  for and obtain as liquidated damages by reason of such  termination,  an
amount equal  to the maximum allowed by any statute or rule of law in effect at
the time when,  and  governing the proceedings in which, such damages are to be
proved, whether or not  such  amount  be  greater,  equal  to, or less than the
amount of the difference referred to above.

           DEFAULT:        17.   (1)  If Tenant defaults in fulfilling  any  of
the covenants of this lease other than the covenants for the payment of rent or
additional rent; or if the demised  premises  become  vacant or deserted; or if
any execution or attachment shall be issued against Tenant;  or any of Tenant's
property whereupon the demised premises shall be taken or occupied  by  someone
other than Tenant or if this lease be rejected under <section> 235 of Title  11
of  the  U.S.  Code  (bankruptcy code); or if Tenant shall fail to move into or
take possession of the premises within fifteen (15) days after the commencement
of the term of this lease,  then, in any one or more of such events, upon Owner
serving a written five (5) days  notice  upon  Tenant  specifying the nature of
said  default and upon the expiration of said five (5) days,  if  Tenant  shall
have failed  to  comply  with or remedy such default, or if the said default or
omission complained of shall  be of a nature that the same cannot be completely
cured or remedied within said five (5) day period, and if Tenant shall not have
diligently commenced curing such  default  within such five (5) day period, and
shall not thereafter with reasonable diligence  and  in  good faith, proceed to
remedy  or cure such default, then Owner may serve a written  three  (3)  days'
notice of  cancellation  of  this lease upon Tenant, and upon the expiration of
said three (3) days this lease  and the term thereunder shall end and expire as
fully and completely as if the expiration of such three (3) day period were the
day herein definitely fixed for the  end  and  expiration of this lease and the
term thereof and Tenant shall then quit and surrender  the  demised premises to
Owner but Tenant shall remain liable as hereinafter provided.

                           (2)  If the notice provided for in  (1) hereof shall
have been given, and the term shall expire as aforesaid or if Tenant shall make
default  in  the payment of the rent reserved herein or any item of  additional
rent herein mentioned  or  any  part  of  either or in making any other payment
herein required, then and in any of such events  Owner  may without notice, re-
enter the demised premises either by force or otherwise,  and dispossess Tenant
by summary proceedings or otherwise, and the legal representative  of Tenant or
other  occupant  of  demised  premises  and  remove their effects and hold  the
premises  as  if this lease had not been made, and  Tenant  hereby  waives  the
service of notice of intention to re-enter or to institute legal proceedings to
that end.  If Tenant  shall  make  default hereunder prior to the date fixed as
the commencement of any renewal or extension  of  this lease.  Owner may cancel
and terminate such renewal or extension agreement by written notice.
           REMEDIES OF OWNER AND WAIVER OF REDEMPTION:18.   In case of any such
default,  re-entry,  expiration  and/or  dispossess  by summary proceedings  or
otherwise, (a) the rent shall become due thereupon and  be  paid up to the time
of  such  re-entry,  dispossess  and/or  expiration, (b) Owner may  re-let  the
premises  or  any  part  or parts thereof, either  in  the  name  of  Owner  or
otherwise, for a term or terms,  which  may  at  Owner's option be less than or
exceed the period which would otherwise have constituted  the  balance  of  the
term  of  this  lease and may grant concessions or free rent or charge a higher
rental than that  in this lease, and/or (c) Tenant or the legal representatives
of Tenant shall also  pay Owner as liquidated damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby  reserved  and/or  covenanted  to  be  paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised  premises  for  each  month  of  the period which would otherwise  have
constituted the balance of the term of this lease.  The failure of Owner to re-
let  the premises or any part or parts thereof  shall  not  release  or  affect
Tenant's  liability  for  damages.   In computing such liquidated damages there
shall be added to the said deficiency  such  expenses  as  Owner  may  incur in
connection with re-letting, such as legal expenses, attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the  same for re-letting.  Any such liquidated damages shall be paid in monthly
installments  by  Tenant  on  the rent day specified in this lease and any suit
brought  to collect the amount of  the  deficiency  for  any  month  shall  not
prejudice  in  any  way  the  rights of Owner to collect the deficiency for any
subsequent  month  by  a similar proceeding.  Owner,  in  putting  the  demised
premises in good order or  preparing  the  same  for  re-rental may, at Owner's
option, make such alterations, repairs, replacements, and/or decorations in the
demised  premises as Owner, in Owner's sole judgment, considers  advisable  and
necessary for the purpose of re-letting the demised premises, and the making of
such alterations,  repairs,  replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid.  Owner
shall in no event be liable in  any  way  whatsoever  for failure to re-let the
demised  premises, or in the event that the demised premises  are  re-let,  for
failure to  collect  the  rent  thereof  under such re-letting, and in no event
shall Tenant be entitled to receive any excess,  if  any,  of  such  net  rents
collected over the sums payable by Tenant to Owner hereunder.  In the event  of
a  breach  or threatened breach by Tenant of any of the covenants or provisions
hereof, Owner  shall  have  the right of injunction and the right to invoke any
remedy allowed at law or in equity  as  if  re-entry,  summary  proceedings and
other  remedies  were  not herein provided for.  Mention in this lease  of  any
particular remedy, shall not preclude Owner from any other remedy, in law or in
equity.  Tenant hereby expressly  waives  any  and  all  rights  of  redemption
granted  by  or  under any present or future laws in the event of Tenant  being
evicted or dispossessed  for any cause, or in the event of Tenant being evicted
or dispossessed for any cause, or in the event of Owner obtaining possession of
demised premises, by reason  of the violation by Tenant of any of the covenants
and conditions of this lease, or otherwise.

           FEES AND EXPENSES:19.   If Tenant shall default in the observance or
performance  of  any term or covenant  on  Tenant's  part  to  be  observed  or
performed under or  by  virtue of any of the terms or provisions in any article
of this lease, then, unless  otherwise provided elsewhere in this lease.  Owner
may  immediately or at any time  thereafter  and  without  notice  perform  the
obligation  of Tenant hereunder.  If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures  or  incurs  any  obligations  for the payment of money,
including  but not limited to attorney's fees, in instituting,  prosecuting  or
defending any  action or proceeding, then Tenant will, reimburse Owner for such
sums so paid or  obligations  incurred  with interest and costs.  The foregoing
expenses  incurred  by  reason  of  Tenant's default  shall  be  deemed  to  be
additional rent hereunder and shall be  paid by Tenant to Owner within five (5)
days of rendition of any bill or statement  to  Tenant  therefor.   If Tenant's
lease  term  shall  have expired at the time of making of such expenditures  or
incurring of such obligations,  such  sums  shall  be  recoverable  by Owner as
damages.

           BUILDING ALTERATIONS AND MANAGEMENT:20.  Owner shall have  the right
at  any  time  without  the same constituting an eviction and without incurring
liability to Tenant therefor  to  change  the  arrangement  and/or  location of
public  entrance,  passageways, doors, doorways, corridors, elevators,  stairs,
toilets or other public parts of the building and to change the name, number or
designation by which the building may be known.  There shall be no allowance to
Tenant for diminution  of rental value and no liability on the part of Owner by
reason of inconvenience,  annoyance or injury to business arising from Owner or
other Tenants making any repairs  in  the  building  or  any  such alterations,
additions  and  improvements.   Furthermore,  Tenant shall not have  any  claim
against Owner by reason of Owner's imposition of such controls of the manner of
access to the building by Tenant's social or business visitors as the Owner may
deem necessary for the security of the building and its occupants.

           NO REPRESENTATIONS BY OWNER:21.  Neither  Owner  nor  Owner's agents
have  made  any  representations  or  promises  with  respect  to  the physical
condition  of  the  building, the land upon which it is erected or the  demised
premises, the rents, leases, expenses or operation or any other matter or thing
affecting or related  to  the premises except as herein expressly set forth and
no rights, easements or licenses  are  acquired  by  Tenant  by  implication or
otherwise  except  as  expressly  set  forth  in the provisions of this  lease.
Tenant has inspected the building and the demised  premises  and  is thoroughly
acquainted  with  their  condition  and  agrees  to  take the same "as is"  and
acknowledges that the taking of possession of the demised  premises  by  Tenant
shall  be  conclusive evidence that the said premises and the building of which
the same form  a  part were in good and satisfactory condition at the time such
possession was so taken,  except  as to latent defects.  All understandings and
agreements heretofore made between  the  parties  hereto  are  merged  in  this
contract,  which  alone  fully  and  completely expresses the agreement between
Owner  and  Tenant  and  any  executory  agreement   hereafter  made  shall  be
ineffective  to change, modify, discharge or effect an  abandonment  of  it  in
whole or in part,  unless  such executory agreement is in writing and signed by
the party against whom enforcement  of  the  change, modification, discharge or
abandonment is sought.

           END OF TERM:    22.  Upon the expiration or other termination of the
term  of  this  lease, Tenant shall quit and surrender  to  Owner  the  demised
premises, broom clean,  in  good order and condition, ordinary wear and damages
which Tenant is not required  to  repair  as  provided  elsewhere in this lease
excepted,  and  Tenant shall remove all its property.  Tenant's  obligation  to
observe  or perform  this  covenant  shall  survive  the  expiration  or  other
termination  of  this  lease.  If the last day of the term of this Lease or any
renewal thereof, falls on  Sunday,  this  lease  shall  expire  at  noon on the
preceding  Saturday unless it be a legal holiday in which case it shall  expire
at noon on the preceding business day.

           QUIET  ENJOYMENT:23.   Owner  covenants  and agrees with Tenant that
upon  Tenant paying the rent and additional rent and observing  and  performing
all the  terms,  covenants  and conditions, on Tenant's part to be observed and
performed, Tenant may peaceably  and quietly enjoy the premises hereby demised,
subject, nevertheless, to the terms and conditions of this lease including, but
not limited to, Article 31 hereof  and  to the ground leases, underlying leases
and mortgages hereinbefore mentioned.

           FAILURE  TO  GIVE  POSSESSION:24.    If  Owner  is  unable  to  give
possession of the demised premises on the date of  the commencement of the term
hereof, because of the holding-over or retention of  possession  of any tenant,
undertenant or occupants or if the demised premises are located in  a  building
being constructed, because such building has not been sufficiently completed to
make the premises ready for occupancy or because of the fact that a certificate
of occupancy has not been procured or for any other reason.  Owner shall not be
subject  to  any liability for failure to give possession on said date and  the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed  in  any  wise  to extend the term of this lease, but the
rent payable hereunder shall be abated  (provided Tenant is not responsible for
Owner's inability to obtain possession) until  after  Owner  shall  have  given
Tenant  written  notice  that the premises are substantially ready for Tenant's
occupancy.  If permission  is  given  to Tenant to enter into the possession of
the demised premises or to occupy premises  other  than  the  demised  premises
prior  to  the  date  specified  as the commencement of the term of this lease.
Tenant covenants and agrees that such occupancy shall be deemed to be under all
the terms, covenants, conditions and provisions of this lease, except as to the
covenant  to  pay  rent.   The provisions  of  this  article  are  intended  to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.

           NO WAIVER:      25.   The  failure  of  Owner  to  seek  redress for
violation  of,  or  to  insist  upon the strict performance of any covenant  or
condition of this lease or of any  of  the  Rules  or Regulations, set forth or
hereafter adopted by Owner, shall not prevent a subsequent act which would have
originally constituted a violation from having all the  force  and effect of an
original violation.  The receipt by Owner of rent with knowledge  of the breach
of any covenant of this lease shall not be deemed a waiver of such  breach  and
no  provision of this lease shall be deemed to have been waived by owner unless
such  waiver be in writing signed by Owner.  No payment by Tenant or receipt by
Owner of  a  lesser  amount  than  the  monthly rent herein stipulated shall be
deemed to be other than on account of the  earliest  stipulated rent, nor shall
any endorsement or statement of any check or any letter  accompanying any check
or payment as rent be deemed an accord and satisfaction, and  Owner  may accept
such check or payment without prejudice to Owner's right to recover the balance
of  such  rent  or  pursue any other remedy in this lease provided.  No act  or
thing done by owner or  Owner's  agents during the term hereby demised shall be
deemed an acceptance of a surrender  of  said  premises,  and  no  agreement to
accept  such  surrender  shall be valid unless in writing signed by Owner.   No
employee of Owner or Owner's  agent  shall have any power to accept the keys of
said premises prior the termination of  the  lease  and the delivery of keys to
any such agent or employee shall not operate as a termination of the lease or a
surrender of the premises.

           WAIVE OF TRIAL BY JURY:26.  It is mutually  agreed  by  and  between
Owner  and  Tenant that the respective parties hereto shall and they hereby  do
waive trial by jury in any action, proceeding or counterclaim brought by either
of the parties hereto against the other (except for personal injury or property
damage) on any  matters  whatsoever arising out of or in any way connected with
this lease, the relationship  of Owner and Tenant, Tenant's use of or occupancy
of said premises, and any emergency  statutory  or  any other statutory remedy.
It  is further mutually agreed that in the event Owner  commences  any  summary
proceeding  for  possession  of  the  premises,  Tenant  will not interpose any
counterclaim of whatever nature or description in any such proceeding including
a counterclaim under Article 4.

           INABILITY TO PERFORM:27.  This Lease and the obligation of Tenant to
pay  rent  hereunder  and  perform  al  of  the other covenants and  agreements
hereunder  on part of Tenant to be performed shall  in  no  wise  be  affected,
impaired or  excused  because Owner is unable to fulfill any of its obligations
under this lease or to  supply or is delayed in supplying any service expressly
or impliedly to be supplied  or  is unable to make, or is delayed in making any
repair, additions, alterations or  decorations  or  is  unable  to supply or is
delayed in supplying any equipment or fixtures if Owner is prevented or delayed
from  so  doing  by reason of strike or labor troubles or any cause  whatsoever
including, but not  limited  to,  government  preemption  in  connection with a
National  Emergency  or  by  reason  of  any rule, order or regulation  of  any
department or subdivision thereof of any government  agency or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.

           BILLS AND NOTICES:28.  Except as otherwise in this lease provided, a
bill, statement, notice or communication which Owner may  desire or be required
to  give  to  Tenant,  shall  be deemed sufficiently given or rendered  if,  in
writing, delivered to Tenant personally or sent by registered or certified mail
addressed to Tenant at the building  of  which the demised premises form a part
or at the last known residence address or business address of Tenant or left at
any  of  the  aforesaid premises addressed to  Tenant,  and  the  time  of  the
rendition of such  bill  or  statement  and  of  the  giving  of such notice or
communication  shall  be  deemed  to be the time when the same is delivered  to
Tenant, mailed, or left at the premises  as  herein  provided.   Any  notice by
Tenant  to  Owner  must be served by registered or certified mail addressed  to
Owner at the address  first hereinabove given or at such other address as Owner
shall designate by written notice.

           SERVICES PROVIDED BY OWNERS:29.  As long as Tenant is not in default
under any of the covenants  of  this lease, Owner shall provide:  (a) necessary
elevator facilities on business days  from  8  a.m.  to 6 p.m. and on Saturdays
from 8 a.m. to 1 p.m. and have one elevator subject to call at all other times;
(b) heat to the demised premises when and as required  by law, on business days
from  8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1  p.m.;  (c) water  for
ordinary  lavatory purposes, but if Tenant uses or consumes water for any other
purposes or  in  unusual  quantities  (of  which  fact  Owner shall be the sole
judge), Owner may install a water meter at Tenant's expense  which Tenant shall
thereafter  maintain at Tenant's expense in good working order  and  repair  to
register such  water  consumption  and  Tenant  shall pay for water consumed as
shown  on  said  meter  as  additional  rent as and when  bills  are  rendered;
(d) cleaning  service for the demised premises  on  business  days  at  Owner's
expense provided  that the same are kept in order by Tenant.  If, however, said
premises are to be  kept  clean  by  Tenant,  it shall be done at Tenant's sole
expense,  in  a manner satisfactory to Owner and  no  one  other  than  persons
approved by Owner  shall be permitted to enter said premises or the building of
which they are a part  for  such  purpose.   Tenant shall pay Owner the cost of
removal of any of Tenant's refuse and rubbish  from  the  building;  (e) if the
demised   premises   are  serviced  by  Owner's  air  conditioning/cooling  and
ventilating system, air  conditioning/cooling  will be furnished to Tenant from
May  15th  through September 30th on business days  (Mondays  through  Fridays,
holidays excepted)  from  8:00  a.m.  to  6:00  p.m.,  and  ventilation will be
furnished  on  business  days  during  the  aforesaid  hours  except  when  air
conditioning/cooling is being furnished as aforesaid.  If Tenant  requires  air
conditioning/cooling  or  ventilation  for more extended hours or on Saturdays,
Sundays  or  on  holidays, as defined under  Owner's  contract  with  Operating
Engineers Local 94-94A, Owner will furnish the same at Tenant's expense.  RIDER
to be added in respect  to  rates  and  conditions for such additional service;
(f) Owner  reserves  the  right to stop services  of  the  heating,  elevators,
plumbing, air-conditioning,  power  systems  or  cleaning or other services, if
any,  when  necessary  by  reason  of  accident  or  for repairs,  alterations,
replacements or improvements necessary or desirable in  the  judgment  of Owner
for  as  long as may be reasonably required by reason thereof.  If the building
of which the  demised  premises  are a part supplies manually-operated elevator
service.  Owner at any time may substitute  automatic-control  elevator service
and upon ten days' written notice to Tenant, proceed with alterations necessary
therefor without in any wise affecting this lease or the obligation  of  Tenant
hereunder.   The  same  shall be done with a minimum of inconvenience to Tenant
and Owner shall pursue the alteration with due diligence.

           CAPTIONS:       30.   The  Captions are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this lease nor the intent of any provisions thereof.

           DEFINITIONS:    31.  The term  "office", or "offices", wherever used
in this lease, shall not be construed to mean  premises  used  as  a  store  or
stores,  for  the sale or display, at any time, of goods, wares or merchandise,
of any kind, or  as a restaurant, shop, booth, bootblack or other stand, barber
shop, or for other  similar  purposes  or  for manufacturing.  The term "Owner"
means a landlord or lessor, and as used in this  lease means only the owner, or
the mortgagee in possession, for the time being of  the  land  and building (or
the owner of a lease of the building or of the land and building)  of which the
demised premises form a part, so that in the event of any sale or sales of said
land  and  building  or of said lease, or in the event of any sale or sales  of
said land and building  or  of  said  lease, or in the event of a lease of said
building, or of the land and building,  the  said  Owner shall be and hereby is
entirely  freed  and  relieved  of  all  covenants  and  obligations  of  Owner
hereunder,  and  it  shall  be  deemed and construed without further  agreement
between the parties or their successors in interest, or between the parties and
the purchaser, at any such sale,  or the said lessee of the building, or of the
land and building, that the purchaser or the lessee of the building has assumed
and  agreed  to  carry out any and all  covenants  and  obligations  of  Owner,
hereunder.  The words  "re-enter"  and "re-entry" as used in this lease are not
restricted to their technical legal  meaning.  The term "business days" as used
in  this lease shall exclude Saturdays  (except  such  portion  thereof  as  is
covered  by specific hours in Article 29 hereof), Sundays and all days observed
by the State  or  Federal  Government as legal holidays and those designated as
holidays by the applicable building service union employees service contract or
by the applicable Operating Engineers contract with respect to HVAC service.

           ADJACENT EXCAVATION-SHORING:32.  If an excavation shall be made upon
land adjacent to the demised  premises,  or  shall  be  authorized  to be made,
Tenant  shall  afford  to  the  person  causing  or  authorized  to  cause such
excavation, license to enter upon the demised premises for the purpose of doing
such  work  as  said  person  shall deem necessary to preserve the wall or  the
building of which demised premises  form  a  part  from injury or damage and to
support  the  same  by  proper  foundations without any claim  for  damages  or
indemnity against Owner, or diminution or abatement of rent.

           RULES AND REGULATIONS:33.   Tenant and Tenant's servants, employees,
agents, visitors, and licensees shall observe  faithfully,  and comply strictly
with, the Rules and Regulations and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time  adopt.  Notice of
any additional rules or regulations shall be given in such manner  as Owner may
elect.   In case Tenant disputes the reasonableness of any additional  Rule  or
Regulation  hereafter  made  or adopted by owner or Owner's agents, the parties
hereto agree to submit the question  of  the  reasonableness  of  such  Rule or
Regulation  for  decision  to  the  New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto.  The right to dispute the reasonableness  of  any  additional  Rule  or
Regulation  upon  Tenant's part shall be deemed waived unless the same shall be
asserted by service  of  a  notice,  in writing upon Owner within ten (10) days
after the giving of notice thereof.  Nothing  in  this lease contained shall be
construed to impose upon Owner any duty or obligation  to enforce the Rules and
Regulations or terms, covenants or conditions in any other  lease,  as  against
any  other tenant and Owner shall not be liable to Tenant for violation of  the
same by  any  other  tenant,  its  servants,  employees,  agents,  visitors  or
licensees.

           SECURITY:       34.   Tenant  has  deposited  with  Owner the sum of
$2,881.67 as security for the faithful performance and observance  by Tenant of
the  terms, provisions and conditions of this lease; it is agreed that  in  the
event Tenant defaults in respect of any of the terms, provisions and conditions
of this  lease,  including,  but  not  limited  to,  the  payment  of  rent and
additional  rent,  Owner may use, apply or retain the whole or any part of  the
security so deposited  to  the  extent required for the payment of any rent and
additional rent or any other sum  as  to  which Tenant is in default or for any
sun which Owner may expend or may be required  to  expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this lease,
including but not limited to, any damages or deficiency  in  the  re-letting of
the  premises,  whether  such  damages  or  deficiency accrued before or  after
summary proceedings or other re-entry by Owner.  In the event that Tenant shall
fully and faithfully comply with all of the terms,  provisions,  covenants  and
conditions  of  this  lease, the security shall be returned to Tenant after the
date fixed as the end of  the Lease and after the delivery of entire possession
of the demised premises to  Owner.   In  the  event  of  a sale of the land and
building or leasing of the building, of which the demised premises form a part,
Owner shall have the right to transfer the security to the vendee or lessee and
Owner shall thereupon br released by Tenant from all liability  for  the return
of  such  security;  and Tenant agrees to look to the new Owner solely for  the
return of said security,  and  it  is  agreed  that the provisions hereof shall
apply to every transfer or assignment made of the  security  to  a  new  Owner.
Tenant  further  covenants  that  it  will not assign or encumber or attempt to
assign or encumber the monies deposited  herein  as  security  and that neither
Owner  nor  its  successors  or  assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.

           ESTOPPEL CERTIFICATE:35.   Tenant,  at  any  time,  and from time to
time, upon at least 10 days' prior notice by Owner, shall execute,  acknowledge
and deliver to owner, and/or to any other person, firm or corporation specified
by  Owner,  a  statement  certifying that this Lease is unmodified and in  full
force and effect (or, if there  have  been  modifications,  that the same is in
full force and effect as modified and stating the modifications),  stating  the
dates to which the rent and additional rent have been paid, and stating whether
or  not  there  exists  any  default  by  Owner  under  this Lease, and, if so,
specifying each such default.

           SUCCESSORS AND ASSIGNS:36.  The covenants, conditions and agreements
contained in this lease shall bind and inure to the benefit of Owner and Tenant
and   their   respective   heirs,   distributees,   executors,  administrators,
successors, and except as otherwise provided in this lease, their assigns.


Articles 37 through 43 inclusive are attached hereto and form a part hereof.


           IN WITNESS WHEREOF, Owner and Tenant have  respectively  signed  and
sealed this lease as of the day and year first above written.


Witness for Owner                     FIFTY BROAD STREET, INC. AND
                                                 FIFTY NEW STREET, INC.


_____________________________           /S/ NORMAN E. ALEXANDER
           Secretary                                            President

Witness for Tenant:                   K2 DESIGN, INC.


/S/ BRADLEY K. SZOLLOSE                 /S/ MATTHEW G. DE GANON
-----------------------------	      -----------------------------------
           Secretary                                   President


<PAGE>



                              ACKNOWLEDGEMENTS

CORPORATE OWNER
STATE OF NEW YORK          )
                           )    ss.:
COUNTY OF NEW YORK         )

           On  this 4th day of October, 1996, before me personally came Bradley

K. Szollose to me known, who being by me duly sworn, did depose and say that he

resides in Staten  Island,  NY that he is the Secretary/Treasurer of K2 Design,

Inc. the corporation described  in and which executed the foregoing instrument,

as OWNER:  that he knows the seal of said corporation; that the seal affixed to

said instrument is such corporate  seal; that it was so affixed by order of the

Board of Directors of said corporation,  and that he signed his name thereto by

like order.



                                             /S/ SETH BRESSMAN
					    -----------------------------------
                                            NOTARY PUBLIC, County of New York
                                            Registration No. 01BR4971373
                                            Notary Expiration Date: 9/4/98



<PAGE>



                              ACKNOWLEDGEMENTS

CORPORATE TENANT
STATE OF NEW YORK          )
                           )    ss.:
COUNTY OF NEW YORK         )

           On this 4th day of October, 1996,  before me personally came Matthew

de Ganon to me known, who being by me duly sworn,  did  depose  and say that he

resides  in  New  York  City  that  he is the President of K2 Design, Inc.  the

corporation  described  in  and which executed  the  foregoing  instrument,  as

TENANT:  that he knows the seal  of  said corporation; that the seal affixed to

said instrument is such corporate seal;  that it was so affixed by order of the

Board of Directors of said corporation, and  that he signed his name thereto by

like order.


                                                /S/ SETH BRESSMAN
					    ----------------------------------
                                            NOTARY PUBLIC, County of New York
                                            Registration No. 01BR4971373
                                            Notary Expiration Date: 9/4/98



<PAGE>



                                  GUARANTY


           FOR VALUE RECEIVED, and in consideration  for,  and as an inducement
to  owner  making the within lease with Tenant, the undersigned  guarantees  to
Owner, owner's  successors  and assigns, the full performance and observance of
all the covenants, conditions  and agreements, therein provided to be performed
and  observed by Tenant, including  the  "Rules  and  Regulations"  as  therein
provided, without requiring any notice of non-payment, non-performance, or non-
observance,  or  proof, or notice, or demand, whereby to charge the undersigned
therefor, all of which  the  undersigned  hereby expressly waives and expressly
agrees that the validity of this agreement and the obligations of the guarantor
hereunder shall in no wise be terminated, affected or impaired by reason of the
assertion by Owner against Tenant of any of  the rights or remedies reserved to
Owner pursuant to the provisions of the within  lease.  The undersigned further
covenants and agrees that this guaranty shall remain and continue in full force
and  effect  as to any renewal, modification or extension  of  this  lease  and
during any period  when  Tenant  is  occupying  the  premises  as  a "statutory
tenant."   As  a  further  inducement  to  owner  to  make  this  lease  and in
consideration thereof, Owner and the undersigned covenant and agree that in any
action  or  proceeding  brought  by either Owner or the undersigned against the
other on any matters whatsoever arising  out  of,  under,  or  by virtue of the
terms  of this lease or of this guarantee that Owner and the undersigned  shall
and do hereby waive trial by jury.


Dated:                         , 19__



Guarantor


Witness


Guarantor's Residence





Business Address


Firm Name


<PAGE>



STATE OF NEW YORK          )
                           )    ss.:
COUNTY OF                  )


           On this             day of             , 19   , before me
personally came to me known and known to me to be the individual described
in, and who executed the foregoing Guaranty and acknowledged to me that he
executed the same.




                                                        Notary


<PAGE>



                           IMPORTANT - PLEASE READ


                    RULES AND REGULATIONS ATTACHED TO AND
                          MADE A PART OF THIS LEASE
                       IN ACCORDANCE WITH ARTICLE 33.

1.         The  sidewalks,  entrances,  driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise  and equipment in a prompt and
efficient manner using elevators and passageways designated  for  such delivery
by Owner.  There shall not be used in any space, or in the public hall  of  the
building,  either  by  any  Tenant  or  by jobbers or others in the delivery or
receipt of merchandise, any hand trucks,  except  those  equipped  with  rubber
tires and sideguards.  If said premises are situated on the ground floor of the
building,  Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in  front  of  said  premises  clean and free from ice, snow, dirt and
rubbish.

2.         The water and wash closets and  plumbing  fixtures shall not be used
for any purposes other than those for which they were  designed  or constructed
and  no sweepings, rubbish, rags, acids or other substances shall be  deposited
therein,  and  the  expense of any breakage, stoppage, or damage resulting from
the violation of this  rule  shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.

3.         No carpet, rug or other  article  shall be hung or shaken out of any
window of the building; and no Tenant shall sweep  or  throw permit to be swept
or thrown from the demised premises any dirt or other substances  into  any  of
the  corridors or halls, elevators, or out of the doors or windows or stairways
of the building and Tenant shall not use, keep or permit to be used or kept any
foul or  noxious  gas or substance in the demised premises, or permit or suffer
the  demised premises  to  be  occupied  or  used  in  a  manner  offensive  or
objectionable  to  Owner or other occupants of the building by reason of noise,
odors, and/or vibrations,  or  interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building.  Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.

4.         No awnings or other projections  shall  be  attached  to the outside
walls of the building without the prior written consent of Owner.

5.         No   sign,  advertisement,  notice  or  other  lettering  shall   be
exhibited, inscribed,  painted  or  affixed  by  any  Tenant on any part of the
outside of the demised premises or the building or on the inside of the demised
premises if the same is visible from the outside of the  premises  without  the
prior  written  consent  of Owner, except that the name of Tenant may appear on
the entrance door of the premises.   In  the  event  of  the  violation  of the
foregoing  by any Tenant, Owner may remove same without any liability, and  may
charge the expense incurred by such removal to Tenant or Tenants violating this
rule.  Interior signs on doors and directory tablet shall be inscribed, painted
or affixed for each Tenant by Owner at the expense of such Tenant, and shall be
of a size, color and style acceptable to Owner.

6.         No  Tenant  shall  mark, paint, drill into, or in any way deface any
part of the demised premises or  the  building  of  which they form a part.  No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Owner, as Owner may direct.  No Tenant  shall  lay linoleum,
or other similar floor covering, so that the same shall come in direct  contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be  first affixed to the floor, by a paste or other material, soluble in water,
the  use   of  cement  or  other  similar  adhesive  material  being  expressly
prohibited.

7.         No additional locks or bolts of any kind shall be placed upon any of
the doors or  windows  by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof.   Each  Tenant  must,  upon  the termination of his
Tenancy, restore to Owner all keys of stores, offices and  toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in  the  event  of the
loss  of  any  keys,  so  furnished,  such  Tenant  shall pay to Owner the cost
thereof.

8.         Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed  from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner.  Owner  reserves  the  right to
inspect  all  freight  to be brought into the building and to exclude from  the
building all freight which  violates  any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.

9.         Canvassing, soliciting and peddling n the building is prohibited and
each Tenant shall cooperate to prevent the same.

10.        Owner reserves the right to  exclude  from  the building between the
hours of 6 P.M. an 8 A.M. and at all hours on Sundays, and  legal  holidays all
persons  who do not present a pass to the building signed by the Owner.   Owner
will furnish  passes  to  persons for whom any Tenant requests same in writing.
Each Tenant shall be responsible for all persons for whom he requests such pass
and shall be liable to Owner for all acts of such persons.

11.        Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building  for  offices,  and  upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.

12.        Tenant shall not bring or permit to be  brought or kept in or on the
demised  premises, any inflammable, combustible or explosive  fluid,  material,
chemical or  substance,  or  cause  or  permit  any  odors  of cooking or other
processes,  or  any  unusual  or  other objectionable odors to permeate  in  or
emanate from the demised premises.

13.        If the building contains  central  air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all rules
nd regulations issued by the Owner with respect  to  such  services.  If Tenant
requires  air conditioning or ventilation after the usual hours,  Tenant  shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.

14.        Tenant   shall   not   move   any   safe,   heavy  machinery,  heavy
equipment,bulky matter, or fixtures into or out of the building without Owner's
prior  written consent.  If such safe, machinery, equipment,  bulky  matter  or
fixtures  requires  special  handling,  all  work in connection therewith shall
comply with the Administrative Code of the City  of New York and all other laws
and regulations applicable thereto and shall be done during such hours as Owner
may designate.



<PAGE>




                           ADDRESS    50 Broad Street

                           PREMISES
                           =================================

                            FIFTY BROAD STREET, INC. AND
                                 FIFTY NEW STREET, INC.

                                            TO


                           ==================================
                                 STANDARD FORM OF

                                      OFFICE
                                      LEASE

                           The Real Estate Board of New York, Inc.
                           <copyright>Copyright in 1983. All rights Reserved
                                    Reproduction in while or in part prohibited.
                           ===================================
                           DATED: September 25,        1996

                           RENT PER YEAR    $34,580.00 (11/1/96-11/30/98)
                                            $34,556.00 (12/1/98-12/31/99)
                                            $38,532.00 (1/1/00-1/31/02)

                           RENT PER MONTH   $2,881.67 (11/1/96-11/30/98)
                                            $3,046.33 (12/1/98-12/31/99)
                                            $3,211.00 (1/1/00-1/31/02)

                           TERM Five (5) years, three (3) months
                           FROM November 1, 1996
                           TO January 31, 2002

Drawn...............................................
Checked by........................................

Entered by..........................................
Approved by.......................................



<PAGE>










                              [DIAGRAM OMITTED]


<PAGE>


     This RIDER is attached to and forms a part of a certain lease dated the
25th day of September, 1996, between FIFTY BROAD STREET, INC. AND FIFTY NEW
STREET, INC., as Landlord and K2 DESIGN, INC., as Tenant


     If there shall exist any duplication, conflict or inconsistency between
any term, covenant or condition in the printed form and in this Rider, the
term, covenant or condition of this Rider shall control.

     TENANT'S PROPORTIONATE SHARE:    37.  For the purpose of Articles 38 and
39 (a) demised premises shall be deemed to contain a floor area of 1,976 square
feet, (b) the Building shall be deemed to contain a total floor area of 172,424
square feet, and (c) Tenant's proportionate share shall be deemed to be
1.1460%.

     TAXES:     38.  A.  Taxes shall mean all real estate taxes, assessments,
sewer rentals, county taxes, or any other governmental charges whether Federal,
State, City, County or Municipal, whether general or special, ordinary or
extraordinary, foreseen or unforeseen which may now or hereafter be levied,
imposed or assessed against the land upon which the Building stands and upon
the Building, (hereinafter referred to as the "Real property").  In the event
of a future change in the method of taxation, any franchise, income, profit or
any other tax, assessment or other charge shall be levied, imposed or assessed
against the Real Property in substitution in whole or in part for or in lieu of
any tax, assessment or other charge which would otherwise constitute Taxes
under the foregoing provisions of this paragraph, then such franchise, income,
profit or any other tax, assessment or other charge shall be deemed to be Taxes
for the purposes hereof.

           B.   "Tax Year" shall be the period from July 1 to June 30.

           C.   "Base Year" shall be the Tax Year commencing July 1, 1996 and
expiring June 30, 1997.

           D.   Tenant hereby covenants and agrees that for each Tax Year or a
portion thereof occurring within the term of this lease, or any renewal or
extension hereof, or any period of retention of possession by Tenant as a hold-
over or otherwise, in which the total amount of Taxes shall exceed the Taxes
levied, imposed or assessed against the Real Property for the Base Year, Tenant
shall pay to Landlord, as additional rent, an amount equal to the product
obtained by multiplying the total of such excess by Tenant's proportionate
share (such amount hereinafter referred to as "Tenant's Tax Payment").

           E.   At or after the commencement of the Tax Year immediately
succeeding the Base Year and for each subsequent Tax Year occurring within the
term of this lease, or any renewal or extension hereof, or any period of
retention of possession by Tenant as a hold-over or otherwise, Landlord will
render to Tenant a statement, after receipt by Landlord of the necessary bills
or invoices from the governmental authorities charged with the duty of
collecting the Taxes, showing a comparison of the Taxes for the Base Year and
the Tax year which is the subject of such statement and setting forth the
amount, if any, of Tenant's Tax Payment (such statement hereinafter referred to
as the "Tax Statement").  Landlord shall use its best efforts to submit to
Tenant a Tax Statement within 120 days of the Commencement of the Tax Year
which is the subject of such Tax Statement.  However, nothing contained herein
shall be deemed or construed to release or relieve Tenant of its obligation to
pay its proportionate share of any increase in Taxes should Landlord fail to
submit a Tax Statement within 120 days period.

           F.   Tenant's Tax Payment as set forth on Landlord's Tax Statement
shall be payable in full within ten (10) days after receipt by Tenant of
Landlord's Tax Statement.

           G.   The amount of Taxes payable for the Base Year and subsequent
Tax Years occurring within the term of this lease, or any renewal or extension
hereof, or any period of retention of possession by Tenant as a hold-over or
otherwise, shall be the amount thereof as is finally determined by legal
proceedings or otherwise to be payable by Landlord.  (Notwithstanding the
foregoing Tenant shall be obligated to pay Landlord Tenant's Tax Payment as set
forth on the Tax Statement submitted to Tenant by Landlord and any adjustment
for a reduction in Taxes shall be made after rendition of the Adjusted Tax
Statement as provided below.)  If by virtue of any such adjustment in the Taxes
as finally determined to be payable by Landlord, Tenant's Tax Payment set forth
in any Tax Statement rendered by Landlord pursuant to paragraph E of this
Article 38 shall be less than (resulting in an underpayment) or be greater than
(resulting in an overpayment) that which would have been payable by Tenant had
the adjusted amount for the Base Year and/or subsequent Tax year been utilized
in the preparation of the Tax Statement and computation of Tenant's Tax
Payment, then after rendition by Landlord to Tenant of a statement setting
forth the amount of such underpayment or overpayment (such statement
hereinafter referred to as "Adjusted Tax Statement"):  (i) in the case of an
underpayment, Tenant shall, within five (5) days after rendition of such
Adjusted Tax Statement, pay to landlord an amount equal to such underpayment,
or (ii) in the case of an overpayment, Landlord shall, provided Tenant is not
then in default under any of the terms, covenants, or conditions of this lease,
credit an amount equal to such overpayment against the monthly installment of
the annual base rent next becoming due under this lease or, if the amount of
such credit shall exceed the monthly base rent payable by Tenant under this
lease, appropriate credit shall be made against subsequent monthly installments
of the annual base rent due from Tenant under this lease.  A proportionate
share of expenditures for attorney's fees and other expenses necessary to
obtain a reduction in the total amount of Taxes payable by Landlord may, at the
option of Landlord, be charged against the amount of any such reduction prior
to the rendition of any such Adjusted Tax Statement.  Nothing herein contained
shall obligate Landlord to make application for, or otherwise commence legal or
other proceedings, to obtain a reduction in the Taxes.  If Landlord shall
commence legal or other proceedings to obtain a reduction in the Taxes for the
base Year or any Tax Year, the Tenant shall continue to pay all Tenant's Tax
Payment as set forth on Landlord's Tax Statement and any adjustment will be
made after the final determination of the amount of Taxes.

           H.   Any payment under this Article 38 for any period occurring
within the term of this lease, or any renewal or extension hereof or any period
of retention of possession by Tenant as a hold-over or otherwise, for less than
a full Tax year, occurring at the commencement or expiration of the term of
this lease shall be apportioned so that Tenant shall pay only that portion
thereof which corresponds with the portion of said Tax Year occurring within
the term of this lease, or a renewal or extension hereof, or any period of
retention of possession by Tenant as a hold-over or otherwise.

           I.   Notwithstanding the foregoing provisions of this Article 38,
(i) in no event shall any adjustment in Tenant's Tax Payment result in a
decrease in the total amount of the annual base payable under this lease, nor
(ii) shall any such adjustment be chargeable against the additional rent
payable by Tenant under any other Article of this lease.

           J.   It is understood that the Tax Year (July 1 to June 30) is based
on the currently utilized fiscal year of the City of New York for the
computation of real estate taxes.  In the event the City of New York shall
substitute a different period for the computation of real estate taxes, the
Landlord at Landlord's option shall have the right to adopt such substituted
period for the purposes of this Article 38 and if Landlord so elects, Tenant
agrees that it will promptly execute an agreement deemed necessary and
appropriate by Landlord to modify this Article 38 to accurately reflect and
incorporate such change into the provisions of this Article 38.

           K.   Tenant's obligation to pay or receive a credit of any amount as
provided in this Article 38 shall survive the expiration or earlier termination
of this lease or any renewal or extension hereof or any period of retention of
possession by Tenant as a hold-over or otherwise.

     WAGES:     39.   A.  The term "Wage Rate" shall mean the hourly cost,
inclusive of the minimum hourly wage rate payable by Landlord for an hour's
work by a porter excluding fringe benefits.

           (1)  The minimum hourly wage rate shall be the rate for the
           employment of porters in class "A" office buildings, from time to
           time established by Agreement between the Realty Advisory Board on
           Labor Relations, Inc. and Local 32B-32J of the Building Services
           Employees International Union AFL-CIO or by the successor to either
           both of them; (this rate shall be used in computations under this
           Article whether or not porters' wages are actually paid by or for
           the Landlord or by independent contractors who furnish such services
           to the Building).

           (2)  If there is no such union agreement in effect at any time
           during or prior to the term of this Lease, then all computations and
           payments shall nevertheless, be made, but shall be on the basis of
           the regular hourly wage rate, actually being paid or accrued at such
           time by Landlord or by the contractor performing the cleaning
           services for Landlord for such porters, and appropriate retroactive
           adjustment shall thereafter be made if and when the minimum regular
           hourly wage rate pursuant to such agreement is finally determined.
           However, if any such union agreement shall require the regular
           employment of porters on days or during hours when overtime or other
           premium pay rates are in effect, then the "minimum hourly wage rate"
           as used above shall be deemed to mean the actual weekly wage rate,
           divided by the actual hours in a calendar week during which such
           porters re required to be employed (e.g. If, for example, as of
           October 1, 1980, an agreement between RAB and Local 32B shall
           require the regular employment of building porters for forty (40)
           hours during a calendar week at a regular hourly wage rate of $3.00
           for the first thirty (30) hours, and premium or overtime hourly wage
           rate of $4.50 for the remaining ten hours, then the regular straight
           time hourly wage rate under this Article, as of October 1, 1980,
           shall be deemed to be the total weekly wage rate of $135.00 divided
           by the total number of required hours of employment, forty (40) or
           $3.365 per hour).

           (3)  As used herein, the term "porters" shall mean that
           classification of employee engaged in the general maintenance and
           operation of office buildings most nearly comparable to that
           classification now applicable to porters in 1987 agreement with said
           Local 32B-32J (which classification is presently termed "others" in
           said agreement).

           B.   The "Basic Rate" shall be the Wage Rate as determined above
payable by Landlord as of December 31, 1997.

           C.   If in any calendar year occurring during the term of this lease
or any renewal, extension or period of retention by Tenant as a hold-over or
otherwise, the cost for an hour's work by a porter shall exceed the "Basic
Rate", Tenant shall pay to Landlord, as additional rent, an amount equal to the
product obtained by multiplying such increase by the square feet of floor area
demised hereby as set forth in Article 37 (such amount hereafter referred to as
"Tenant's Wage Payment").  At or after the beginning of the calendar year
subsequent to the calendar year utilized for the purposes of determining the
Basic Rate and each calendar year thereafter during the term of this lease,
Landlord shall furnish to Tenant a statement showing the comparison of the
Basic Rate and the cost for an hour's work by a porter for the calendar year
which is the subject of such statement and setting forth the amount, if any, of
Tenant's Wage Payment (such statement hereinafter referred to as the "Wage
Statement").

           D.   In order to provide for current payments on account of Tenant's
Wage Payment payable to landlord pursuant to paragraph (c) of this Article 39,
Tenant covenants and agrees that within ten (10) days after the rendition of
each such Wage Statement, Tenant shall pay to landlord an amount equal to one-
twelfth (1/12th) of Tenant's Wage Payment multiplied by the number of monthly
rent payment dates between the commencement of the calendar year to which such
Wage Statement relates and the month in which such Wage Statement is rendered
to Tenant and thereafter, and continuing monthly until the expiration of the
calendar year which is the subject of the Wage Statement, monthly amounts equal
to one-twelfth (1/12th) of Tenant's Wage Payment, aggregating an amount equal
to Tenant's Wage Payment as set forth in such Wage Statement.

           E.   Any payments due under this Article 39 for any period occurring
within the term of this lease, or any renewal or extension hereof, or any
period of retention of possession by Tenant as a hold-over or otherwise, for
less than a full calendar year occurring at the commencement or expiration of
the term of this lease shall be apportioned so that Tenant shall pay only that
portion thereof which corresponds with the portion of said calendar year within
the term of this lease, or a renewal or extension hereof, or any period of
retention of possession by Tenant as a hold-over or otherwise.

           F.   Nothing contained in this Article 39 shall be construed so as
to (i) permit any decrease in the cost for an hour's work by a porter,
(ii) result in a decrease in the total amount of the annual base rent payable
hereunder, (iii) permit Tenant to charge the amount of such decrease against
the additional rent payable hereunder, or (iv) permit Tenant to charge the
amount of such decrease against the additional rent payable by Tenant under any
other provision of this lease.

           G.   Any Wage Statements furnished to Tenant by landlord shall
constitute a final determination as between Landlord and Tenant as to the
hourly cost for an hour's work by a porter for the periods represented thereby.

     H.    Tenant's obligation to pay any amount pursuant to this Article 39
shall survive the expiration or earlier termination of this lease or any
renewal or extension hereof or any period of retention of possession by Tenant
as a hold-over or otherwise.

     ASSIGNMENT/SUBLETTING:40.  (a)  Supplementing Article 11 hereof, Tenant,
if it requests Landlord's consent to an assignment of the lease or a subletting
of all the demised premises, shall submit to Landlord the name of the proposed
assignee or subtenant and such information as to its financial responsibility
and standing as Landlord may reasonably require.  Upon the receipt of such
request and information from Tenant, Landlord shall have an option, to be
exercised in writing within 15 days after such receipt, to cancel and terminate
the lease as of the date set forth in Landlord's notice of exercise of such
option, which shall be not less than 60 nor more than 120 days following the
service of such notice.  Tenant shall have no right to any subletting for less
than the entire demised premises.

           (b)  In the event Landlord shall exercise such option, Tenant shall
surrender possession of the entire demised premises on the date set forth in
such notice in accordance with the provisions of this lease relating to
surrender of the demised premises at the expiration of the term.

           (c)  In the event that Landlord shall not exercise the option to
cancel the lease as above provided within 15 days after the receipt of Tenant's
written request, then Landlord's consent to such request shall not be
unreasonably withheld provided:

                (i)   the proposed subletting is for the purposes not
inconsistent with the manner of use permitted herein and is in keeping with the
then standards of the building and does not violate any negative covenants as
used in any other lease between the landlord and other tenants in the building;

                (ii)  the proposed subtenant is a reputable party of reasonable
financial worth considering the responsibility involved and the Tenant shall
provide Landlord with proof thereof satisfactory to Landlord;

                (iii) the proposed subtenant is not then an occupant of any
part of the building;

                (iv)  any proposed sublease shall contain a provision making
such sublease subject to the terms and conditions of this lease;

                (v)   such subletting shall not release Tenant from the due,
prompt, and punctual performance of all the terms, covenants and conditions
contained in this lease on its part to be performed or observed and from the
payment of the rents and additional rents due and to become due under this
lease;

                (vi)  Tenant submits a copy of the proposed sublease, executed
by the proposed subtenant, to Landlord for its review and approval prior to
execution by the Tenant.

           (d)  In no event shall any assignment or subletting to which
Landlord may have consented release or relieve Tenant from its obligations
fully to perform all of the terms, covenants and conditions of the lease on its
part to be performed.

           (e)  Tenant covenants and agrees that in any case where Tenant
claims Landlord is unreasonably withholding its consent, Tenant shall not make
any claim against Landlord for damages but shall be restricted to the remedy of
declaratory judgment in the Supreme Court of the State of New York.

     ELECTRICITY:41.  Landlord will redistribute or furnish to Tenant all
electric energy which Tenant shall require for the use of Tenant in the demised
premises on a so-called "rent inclusion" basis, and there shall be no charge to
the Tenant therefore by way of measuring the same on any meter or otherwise,
the total charge for electric current being included in the fixed annual rental
set forth in this lease.  Landlord shall not in any way be liable or
responsible to Tenant for any loss or damage or expense which Tenant may
sustain or incur if either the quantity or character of electric service is
changed.

     Landlord reserves the right to discontinue the redistribution or
furnishing of electric energy to Tenant if required to do so by the Public
Service Commission or any legal authority, at any time upon thirty (30) days'
written notice to Tenant, and from and after the effective date of such
termination, Landlord shall no longer be obliged to furnish Tenant with
electric energy.  If Landlord exercises such right of termination, this lease
shall remain unaffected thereby and shall continue in full force and effect;
and thereafter Tenant shall arrange to obtain electric service direct from the
public utility company servicing the building.  Commencing with the date when
Tenant receives such direct service and as long as Tenant shall continue so to
receive such service, the fixed annual rental rate payable under this lease
shall be reduced to $29,640.00 (11/1/96 to 11/30/98); and $31,616.00 (12/1/98
to 12/31/99); and $33,592.00 (1/1/200 to 1/31/02) per term, per annum.

     Tenant shall make no alteration or additions to the electrical equipment
and/or appliances without the prior written consent of Landlord in each
instance.  Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the building or
the risers or wiring installations.  Landlord, or Landlord's designated
independent electric consultant, is given the right to make surveys of Tenant's
premises from time to time to ascertain the electrical equipment and
appliances, fixtures and equipment utilizing electric power therein.

     At the option of Landlord, Tenant agrees to purchase from landlord all
lamps or bulbs used in the demised premises and to pay for the cost of
installation thereof.

     The rental hereunder shall be subject to future adjustments,
proportionately, in the event of (i) any increase or decrease, after the date
hereof, in the cost of Landlord of furnishing such electric current, including
without limitation, any sales, excise or similar taxes thereof, or any fuel
adjustment; (ii) any change in the Tenant's present electrical wiring or
increase in its equipment, facilities and/or fixtures; or (iii) in consumption
of electricity by Tenants because of the extension of or increase in Tenant's
office hours over those building standard office hours set forth herein for
heating and elevator services.  Should the parties not agree on the amount of
any such adjustment, the determination thereof by an independent electrical
consultant, selected by Landlord and Tenant, shall be binding and conclusive on
both parties.

     LANDLORD'S WORK: 42.  Landlord shall perform the following work in a
building standard manner in accordance with Exhibit A attached.

           1)   It is understood and agreed that Landlord, at its sole cost and
           expense, will erect one hundred (100) linear feet of building
           standard dry wall partition.

           2)   It is understood and agreed that Landlord will supply and
           install six (6) building standard doors, frames and hardware.

           3)   It is understood and agreed that Landlord will supply and
           install two (2) 100 volt, 15 amp dedicated electric circuits.

           4)   It is understood and agreed that Landlord will supply and
           install twelve (12), 110 volt building standard electric outlets.

           5)   it is understood and agreed that Landlord will relocate one (1)
           2' x 2' air-conditioning diffuser.

           6)   It is understood and agreed that Landlord will relocate two (2)
           light fixtures.

           7)   It is understood and agreed that Landlord will paint the
           demised premises in a building standard manner.

           8)   It is understood and agreed that Landlord will supply and
           install building standard venetian blinds.

           9)   It is understood and agreed that Landlord, at its sole cost and
           expense, will supply and install building standard carpeting.

     FREE RENT: 43.  It is understood and agreed that the Tenant shall receive
free rent for the period of 11/1/96 to 11/30/96 (1 month's free rent); and for
the period of 11/1/97 to 11/30/97 (1 month's free rent); and for the period
11/1/98 to 11/30/98 (1 month's free rent).

<PAGE>
                                                          EXHIBIT 10.10

     THIS LEASE, made this 6th day of November, 1996, by and

between SCARLETT HARBOR ASSOCIATES LIMITED PARTNERSHIP, hereinafter called

"Landlord," and K2 DESIGN, INC.,  hereinafter called "Tenant."

           WITNESSETH, that in consideration of the rental hereinafter agreed

upon and the performance of all the conditions and covenants hereinafter set

forth on the part of the Tenant to be performed, the Landlord does hereby lease

unto the said Tenant, and the latter does lease from the former the following

premises (hereinafter sometimes called the "Premises"):

BEING all those premises outlined in red on the Lease Plan attached hereto as
Exhibit A, said premises being located within the building (hereinafter
sometimes called the "Building") known as "Scarlett Place," situate on a parcel
of land (hereinafter sometimes called the "Property") bounded by East Pratt
Street to the North, Columbus Plaza to the South, the Jones Falls to the West,
and the extension of I-83 to the East in the City of Baltimore, Maryland; 200
S. President Street, 9th Floor, Baltimore, MD  21202; 1,897 rentable square
feet;

for the term of three (3) years, beginning on December 1, 1996 and ending

November 30, 1999. Landlord agrees that it will, at its sole cost and expense,

as soon as reasonably possible after the execution of this Lease, commence and

pursue to completion the Landlord's Work set forth in Section 44 of this Lease.

The Premises shall be deemed to be substantially completed on the date when

Landlord or its architect notifies Tenant in writing that the Premises are

substantially complete, with the exception of minor items which do not

interfere with Tenant's installations and work in order to outfit the Premises

for Tenant's use.  Tenant shall have the option to extend the initial term of

this Lease for one (1) consecutive additional term of three (3) years each,

provided Tenant gives Landlord written notice of such election at least one

hundred twenty (120) days prior to the expiration of the then current term of

this Lease. Each extension term shall be upon the same terms, covenants and

conditions as the initial term hereof, except that the minimum rental shall be

as set forth in paragraph 1 (d).

           This Lease is made subject to the following additional terms,

covenants and conditions:

     1.    RENTAL.

                (a)  Tenant  covenants  and  agrees  to pay Landlord as minimum

rental,  without notice or demand, the annual rental of  Thirty  Thousand,  One

Hundred Twenty-seven  Dollars and Ten Cents ($30,127.10), payable in advance on

the first day of each month  during  the  term  of this Lease, in equal monthly

installments  of Two Thousand, Five Hundred Ten Dollars  and  Fifty-nine  Cents

($2,510.59) each, without setoff or deduction.  If the term of this Lease shall

commence on a date  other  than  the  first  day of a month, the rental for the

period from the date of commencement of the term  to the first day of the first

full calendar month of the term shall be prorated and  shall  be payable on the

first day of the term; if the term of this Lease shall end on a date other than

the last day of a month, the rent for the period from the first day of the last

month  of  the  term to the date the term ends shall be prorated and  shall  be

payable on the first day of the last month of the term.

           (b)  All  rentals  shall  be paid to Landlord C/O MERRITT, 2066 LORD

BALTIMORE DRIVE, BALTIMORE, MD  21244,  or  at  such  other  place  or  to such

appointee  of  the Landlord as the Landlord may from time to time designate  in

writing.

           (c)  Tenant  covenants  and agrees to pay the rental herein reserved

and each installment thereof promptly  when  and  as  due,  without  setoff  or

deduction whatsoever.

           (d)  The annual minimum rental for the extension term or terms shall

be as follows:

                First Extension Term        $33,140.00

     2.    USE.

Tenant  covenants  and  agrees  to  use  and occupy the Premises solely for the

following purposes:        GENERAL OFFICES.

Tenant  agrees  to  comply  with  all applicable  zoning  and  other  laws  and

regulations, and to provide and install  at  its  own  expense  any  additional

equipment  or alterations required to comply with all such laws and regulations

as required  from time to time.  Tenant further agrees not to make, or cause or

permit to be made, any use of the Premises which shall constitute a nuisance or

shall interfere  with  the  rights  of other tenants in the Building to quietly

enjoy, use and occupy the Premises leased  by  them and the common areas of the

Building.  Tenant will not permit, allow or cause any public or private auction

sales  or  sheriffs'  or  constables'  sales to be conducted  on  or  from  the

Premises.

     3.    SERVICE AND UTILITIES.

           (a)  Provided that Tenant is  not  in  default  hereunder,  Landlord

agrees  to  furnish  to  the  Premises,  electricity  for normal desktop office

equipment and normal copying equipment, and lighting, heating,  ventilation and

air   conditioning  ("HVAC")  as  required  in  Landlord's  judgment  for   the

comfortable  use and occupancy of the Premises.  Subject to the limitations set

forth below, such  utilities  shall be made available without additional charge

between the hours of 8:00 a.m.  to  6:00  p.m., Monday through Friday, and 8:00

a.m. to 12:00 noon on Saturday, except for  legal  holidays.  If Tenant desires

electricity or HVAC at any other time, Landlord shall  provide  and  shall bill

Tenant  for  the  same at Landlord's standard charges therefore, a schedule  of

which Landlord has  delivered  to  Tenant  prior  to Tenant's execution of this

Lease,  (as such schedule may be reasonably adjusted  by  Landlord from time to

time) and Tenant shall pay Landlord's charges therefor at the  same time and in

the  same  manner  as is provided for the payment of minimum rental  hereunder.

Landlord shall also maintain and keep lighted the common stairs, common entries

and restrooms in the  Building.   Unless  caused  by  the negligence or willful

misconduct  of Landlord, its employees, agents or contractors,  Landlord  shall

not be in default hereunder or be liable for any damages directly or indirectly

resulting from, nor shall the rent be abated by reason of (i) the installation,

use or interruption  of  use of any equipment in connection with the furnishing

of any of the services to  be furnished by Landlord as set forth in this Lease;

(ii) failure to furnish or delay  in  furnishing  any  such services where such

failure or delay is caused by accident or any condition  or  event  beyond  the

reasonable  control  of  Landlord,  or  by  the  making of necessary repairs or

improvements  to  the  Premises  of  the  Building;  or (iii)  the  limitation,

curtailment or rationing of, or restrictions on, use of water, electricity, gas

or any other form of energy serving the Premises or Building.  Unless caused by

the  negligence  or willful misconduct of Landlord, its  employees,  agents  or

contractors, Landlord shall not be liable under any circumstances for a loss of

or injury to property or business, however, occurring, through or in connection

with or incidental  to  failure to furnish any such services.  Tenant shall not

use heat-generating machines  or  equipment  in  the  Premises which affect the

temperature otherwise maintained by the HVAC system without  the  prior written

consent of Landlord, and if such equipment is used, Landlord reserves the right

to  install supplementary air conditioning units in the Premises and  the  cost

thereof, including the cost of installation, operation and maintenance thereof,

shall be paid by Tenant to Landlord upon demand by Landlord.

           (b)  Tenant  shall not, without the written consent of Landlord, use

any  apparatus  or  device in  the  Premises,  including,  without  limitation,

electronic data processing  machines,  punch card machines or machines using in

excess of 120 volts, which consumes more  electricity than is usually furnished

or  supplied for the use of Premises as general  office  space,  as  reasonably

determined  by  Landlord.  Tenant shall not connect any apparatus with electric

current except through  existing  electrical  outlets  in the Premises.  Tenant

shall not consume water or electric current in excess of that usually furnished

or  supplied  for  the use of Premises as general office space  (as  reasonably

determined  by  Landlord)  without  first  procuring  the  written  consent  of

Landlord, which Landlord  may refuse, and in the event of consent, Landlord may

have installed a water meter  or  electrical  current  meter in the Premises to

measure the amount of water or electric current consumed.  The cost of any such

meter  and of its installation, maintenance and repair shall  be  paid  for  by

Tenant and  Tenant  agrees to pay to Landlord promptly upon demand for all such

water and electric current  consumed  as  shown  by  said  meters, at the rates

charged for such services by the local public utility.  If a  separate meter is

not  installed,  the excess cost for such water and electric current  shall  be

reestablished by Landlord from time to time as its standard charges thereof.

           (c)  Nothing  contained  in  this  Section shall restrict Landlord's

right to require at any time separate metering  of  utilities  furnished to the

Premises.   In  the  event utilities are separately metered, Tenant  shall  pay

promptly upon demand for all utilities consumed at utility rates charged by the

local public utility.   Tenant  shall  be  responsible  for the maintenance and

repair of any such meters at its sole cost.

           (d)  Landlord shall furnish elevator service,  lighting  replacement

for  building  standard lights, restroom supplies, exterior window washing  and

janitorial services in a manner that such services are customarily furnished to

comparable office buildings in the area.

     4.    COMPLIANCE WITH LAWS.

Tenant covenants  and  agrees that it will, at its own expense, observe, comply

with and execute all laws,  orders, rules, requirements, and regulations of any

and all governmental departments,  bodies,  bureaus, agencies and officers, and

all rules, directions, requirements, and recommendations  of the local board of

fire   underwriters   and  the  fire  insurance  rating  organizations   having

jurisdiction over the Premises,  or  other  bodies or agencies now or hereafter

exercising similar functions over the Premises  in  any  way  pertaining to the

Premises or Tenant's use and occupancy thereof.  In the event Tenant shall fail

or   neglect  to  comply  with  any  of  the  aforesaid  laws,  orders,  rules,

requirements, or recommendations, after the expiration of any applicable notice

and cure  periods,  Landlord  or its agents may enter the Premises and take all

such actions and do all such work  in or to the Premises as may be necessary in

order  to  cause compliance with such  laws,  orders,  rules,  requirements  or

recommendations, and Tenant covenants and agrees to reimburse Landlord promptly

upon demand for the expense actually incurred by Landlord in taking such action

and performing such work.

     5.    ASSIGNMENT AND SUBLETTING.

           (a)  Tenant  covenants and agrees not to assign this Lease, in whole

or part, nor sublet the Premises, or any part or portion thereof, nor grant any

license or concession for  all  or  any part thereof, without the prior written

consent of the Landlord in each instance  first  had and obtained, such consent

not to be unreasonably withheld, conditioned or delayed.  If such assignment or

subletting  is  permitted,  Tenant  shall not be relieved  from  any  liability

whatsoever under this Lease.  In the event that the amount of the rent or other

consideration to be paid to the Tenant  by any assignee or sublessee is greater

than the rent required to be paid by the  Tenant  to  the  Landlord pursuant to

this  Lease,  Tenant shall pay to Landlord any such excess as  is  received  by

Tenant from such  assignee  or  sublessee.   Any  consent  by  Landlord  to  an

assignment  or  subletting  of  this Lease shall not constitute a waiver of the

necessity of such consent as to any  subsequent  assignment  or subletting.  An

assignment for the benefit of Tenant's creditors or otherwise  by  operation of

law  shall not be effective to transfer or assign Tenant's interest under  this

Lease  unless  Landlord  shall  have  first  consented thereto in writing, such

consent not to be unreasonably withheld, conditioned or delayed.

           (b)  Notwithstanding the foregoing  provisions  of this Section 5 to

the contrary, Tenant shall have the right to sublease all or  a  portion of the

Premises  or  assign  the  Lease  throughout the Lease term, without Landlord's

consent, to an "Affiliate" (hereinafter  defined)  or to a successor by merger,

consolidation or purchase.  An "Affiliate" is a person  or  entity who or which

"Controls"  (hereinafter  defined)  Tenant,  is "Controlled" by Tenant,  or  is

Controlled  by  the  same  persons or entities who  or  which  Control  Tenant.

"Control" means the unrestricted  ownership  of,  and  power to vote, more than

forty-nine and nine-tenths percent (49.9%) of the outstanding capital.

     6.    OPERATING COSTS.

           (a)  "Operating Costs" are the reasonable, customary  and  necessary

costs  directly  related to the operation (not ownership), maintenance, repair,

redecoration, refurbishment  and insurance of the Building and all common areas

and facilities within the Property  (including,  but not limited to, elevators,

stairwells, loading areas, parking areas, pavements  and walkways, landscaping,

gardening, storm drainage, and other utility systems);  the  cost  of utilities

for such common areas and facilities; fire protection and security services, if

any;  traffic  control  equipment;  repairs to the common areas and facilities;

parking lot striping; lighting for the  common  areas  and facilities; sanitary

control; removal of snow, trash, rubbish, garbage and other refuse; the cost of

personnel to implement such services; all insurance of whatsoever  nature kept,

or caused to be kept, by Landlord out of or in connection with the ownership of

the  Building  and  common  areas,  including,  but  not  limited to, insurance

insuring  the  same  against loss or damage by, or abatement of  rental  income

resulting from, fire and other such hazards, casualties, and contingencies, and

liability and indemnity  insurance;  plus  Landlord's actual administrative and

overhead costs in connection therewith.  Operating  Costs shall not include the

cost of any capital improvements to the Building as determined  under generally

accepted accounting principles;  work which Landlord performs specifically  for

or  at  the  expense  of any tenant of the Building; *  "Operating Costs" shall

also include all taxes  (as  hereinafter defined) assessed against the Property

and Building, whether as a result  of an increase in the tax rate, or the levy,

assessment or imposition of any tax  on  real  estate  as  such not now levied,

assessed  or imposed.  The foregoing shall apply to increases  in  real  estate

taxes assessed  against  the land or Building generally, and not resulting from

improvements placed thereon  by  Tenant.  In the event of any increases in real

estate taxes resulting from improvements,  alterations  or  additions  made  by

Tenant,  Tenant  shall pay the entire amount of said increase.  "Taxes" as used

herein shall include,  but  not by way of limitation, all paving taxes, special

paving taxes, Metropolitan District  Charges, and any and all other benefits or

assessments which may be levied on the  Property or the Building, but shall not

include any income tax on the income or rent payable hereunder.

           (b)  "Base Year" is the 1997 Calendar Year.

           (c)  If, during any annual period  of  the term, Operating Costs per

rentable square foot in the Building exceed the Operating  Costs established in

the Base Year, Tenant shall pay Landlord, as additional rent,  an  amount equal

to  the  product  obtained  by  multiplying the number of rentable square  feet

comprising the Premises by such excess  Operating  Costs  per  rentable  square

foot.

           (d)  SEE  INSERT B ATTACHED.  Within sixty (60) days  following  the

end of each annual period  of  the  term,  Landlord  shall  submit  to Tenant a

statement  showing  the  actual  amounts  incurred by Landlord as set forth  in

paragraph (c), the amount theretofore paid  by  Tenant,  and  the amount of the

resulting balance due thereon, or overpayment thereof, as the case  may be.  In

the

* SEE INSERT A ATTACHED

event  any  balance may be due by Tenant, Tenant shall pay said balance  within

thirty (30) days  from Tenant's receipt of such statement.  In the event Tenant

has made any overpayment,  such  overpayment  shall  be  credited  by  Landlord

against  the next installment or installments of rent which are due and payable

hereunder,  or if the term of this Lease has expired, such overpayment shall be

refunded by Landlord  to  Tenant,  without interest, within five (5) days after

the date of such statement.  SEE INSERT C ATTACHED.

     7.    INCREASE IN LANDLORD'S INSURANCE RATES.

Tenant will not do, or suffer to be done, anything in or about the Premises, or

keep  or suffer to be kept, anything  in  or  about  the  Premises  which  will

contravene  or  affect  any  policy  of insurance against loss by fire or other

hazards, including, but not limited to, public liability, now existing or which

the Landlord may hereafter place thereon,  or  which  will prevent the Landlord

from procuring such policies in companies acceptable to  Landlord  at  standard

rates. Landlord hereby certifies to Tenant that as of the date hereof, Tenant's

use of the Premises (as specified in Section 2 hereof) and the Landlord's  Work

(as  described  in Section 44 hereof) do not contravene or affect any policy of

insurance maintained  by  Landlord, and that no installations or alterations to

the Premises are required to be made by Tenant in connection therewith.

     8.    INSURANCE - INDEMNITY.

           (a)  Tenant covenants  and  agrees  that  from and after the date of

delivery  of  the  Premises  from  Landlord to Tenant, Tenant  will  carry  and

maintain, at its sole cost and expense  and in the amounts specified and in the

form hereinafter provided, the following types of insurance:

                (i)   PUBLIC LIABILITY AND  PROPERTY  DAMAGE.   General  Public

Liability Insurance covering  the  Premises  and  Tenant's  use thereof against

claims for personal injury or death and property damage occurring  upon,  in or

about  the  Premises,  such  insurance to afford protection to the limit of not

less than $2,000,000 arising out  of  any  one occurrence, and against property

damage to afford protection to the limit of  not  less than $2,000,000; or such

insurance may be for a combined single limit of $2,000,000 per occurrence.  The

insurance  coverage  required under this Section 8(a)(i)  shall,  in  addition,

extend  to  any  liability  of  Tenant  arising  out  of  Tenant's  indemnities

hereinafter  provided,   as   well   as   Independent  Contractors'  Liability,

Products/Completed  Operations  Liability,  Personal   Injury   Liability   and

Contractual Liability.

                (ii)  TENANT IMPROVEMENTS AND PROPERTY.  Insurance covering all

leasehold  improvements  and  other  improvements  installed by Tenant upon the

Premises,  and  any alterations, improvements, additions  or  changes  made  by

Tenant thereto in  an  amount not less than one hundred percent (100%) of their

full replacement cost from  time  to  time  during  the  Lease  term, providing

protection  against perils included within the standard Maryland form  of  fire

and  extended  coverage  insurance  policy,  together  with  insurance  against

sprinkler  leakage or other sprinkler damage, vandalism and malicious mischief.

Any policy proceeds  from such insurance, so long as this Lease shall remain in

effect, shall be held  in  trust  by  Tenant's  insurance company first for the

repair, reconstruction, restoration or replacement  of  the property damaged or

destroyed.

                (iii)  PLATE GLASS.  Plate glass insurance  covering  all plate

glass  in  the Premises.  Tenant shall be and remain liable for the repair  and

restoration of all such plate glass.

           Tenant  further  covenants  and agrees to carry and maintain, at all

times  during the term of this Lease, the  aforegoing  types  of  insurance  in

amounts  at  least  equal  to  the  minimum amounts of such insurance coverages

commonly required of Tenants in comparable office buildings in the area.

           (b)  All policies of insurance  to  be  provided  by Tenant shall be

issued  in  form  acceptable  to  Landlord by insurance companies with  general

policyholder's rating of not less than A and a financial rating of AAA as rated

in the most current available "Best's"  Insurance  Reports, and qualified to do

business in Maryland.  Each such policy shall be issued  in the name of Tenant.

Said policies shall be for the mutual and joint benefit and  protection of each

of  said  parties  and  executed copies of each such policy of insurance  or  a

certificate thereof shall  be  delivered to Landlord within ten (10) days after

delivery  of possession of the Premises  to  Tenant  and  thereafter  at  least

fifteen (15) days prior to the expiration of each such policy.  As often as any

such policy  shall expire or terminate, renewal or additional policies shall be

procured and maintained  by Tenant in like manner and to like extent.  All such

policies of insurance shall  contain  a provision that the company writing said

policy will give to Landlord at least thirty  (30)  days'  notice in writing in

advance of any cancellations, or lapse, or the effective date  of any reduction

in  the  amounts  of  insurance.   In  the event Tenant shall fail to  promptly

furnish any insurance herein required, Landlord  may  effect  the  same  for  a

period  not exceeding one (1) year and Tenant shall promptly reimburse Landlord

upon demand,  as  additional  rent,  the premium so paid by Landlord.  If, upon

Tenant's failure, rather than purchase  separate  insurance  coverage, Landlord

chooses to include Tenant's coverage under Landlord's insurance  policies, then

Tenant shall promptly reimburse Landlord upon demand, as additional  rent,  the

actual  increase  in  Landlord's  premium resulting therefrom.  All such public

liability, property damage and other  casualty  policies  shall  be  written as

primary  policies  which do not contribute to and are not in excess of coverage

which Landlord may carry.   All  such  public  liability  and  property  damage

policies shall contain a provision that Landlord shall nevertheless be entitled

to  recover  under  said  policies for any loss occasioned to it, its servants,

agents and employees by reason  of  negligence  of  Tenant  or  any other named

assured.  Any insurance provided for may be affected by a policy or policies of

blanket  insurance,  covering additional items or locations; provided,  however

that (i) Landlord shall  be  named  as  an additional insured thereunder as its

interests may appear; (ii) the coverage afforded  Landlord  will not be reduced

or diminished by reason of the use of such blanket policy of  insurance;  (iii)

any  such  policy  or  policies  (except  any covering the risks referred to in

paragraph  (a)(i)  above),  and  (iv) the requirements  set  forth  herein  are

otherwise satisfied.  Neither party  shall  be  liable  to  the other or to any

insurer  (by  way  of  subrogation or otherwise) for any loss or  damage,  even

though such loss or damage  may  have been occasioned by the negligence of such

party,  if  such  loss  was  covered  by  an  insurance  policy  containing  an

endorsement  to the effect that any such  release  by  the  insured  shall  not

adversely affect  the  insured's  right  to recover for such loss, and that the

insurer  waives  its  right  of subrogation.   Any  insurance  policies  herein

required to be procured by Landlord  or  Tenant shall contain an express waiver

of any right of subrogation by the insurance  company  against  the other party

hereto,  and all other tenants or occupants of space in the Building.

           (c)  Tenant  shall,  and  does  hereby, indemnify and hold  harmless

Landlord, from and against any and all liabilities,  fines, claims, damages and

actions,  costs  and  expenses  of  any  kind  or nature (including  reasonable

attorneys'  fees)  and of anyone whatsoever (i) relating  to  or  arising  from

Tenant's use and occupancy  of  the Premises; (ii) due to or arising out of any

mechanic's lien filed against the  Premises, the Building, or any part thereof,

for labor performed or for materials  furnished  or  claimed to be furnished to

Tenant,  or  (iii)  due  to  or  arising  out  of  any  breach,   violation  or

nonperformance (beyond any applicable notice and cure periods) of any covenant,

condition  or  agreement in this Lease set forth and contained on the  part  of

Tenant to be fulfilled,  kept,  observed  or  performed,  unless such damage or

injury shall be occasioned by the gross negligence or willful  act  or omission

of the Landlord its employees, agents or contractors, in which event,  Landlord

shall  indemnify  and hold harmless Tenant to the extent of such negligence  or

willful act or omission.   Notwithstanding  the  foregoing, Tenant shall at all

times remain liable for, and indemnify and hold harmless  Landlord as aforesaid

against,  any  damage  or  injury arising from perils against which  Tenant  is

required by this Lease to insure,  regardless of the negligence or willful acts

or omissions of others.  Landlord shall,  and  does  hereby, indemnify and hold

Tenant  harmless  from  and  against  any and all liabilities,  fines,  claims,

damages, and actions, costs and expenses  of  any  kind  or  nature  (including

reasonable attorney's fees) and of anyone whatsoever (I) relating to or arising

from  the  common  areas  of  the Building and the Property, or (ii) due to  or

arising  out  of  any breach, violation  or  nonperformance  of  any  covenant,

condition or agreement  in  this  Lease  set  forth as contained on the part of

Landlord to be fulfilled, kept, observed or performed,  unless  such  damage or

injury  shall  be occasioned by the gross negligence or willful act or omission

of Tenant, its employees,  agents  or contractors, in which event, Tenant shall

indemnify and hold harmless Landlord  to  the  extent  of  such  negligence  or

willful act or omission.

     9.    ALTERATIONS.

Tenant  shall  not  make  any alterations to the Premises, or any part thereof,

without prior written consent  of  Landlord  in  each  instance  first  had and

obtained, such consent not to be unreasonably withheld, conditioned or delayed.

If Tenant shall desire to make such alterations, plans for the same shall first

be submitted to and approved by Landlord, and all work and installations  shall

be  performed  by  Tenant at its own expense in accordance with approved plans.

Tenant agrees that all  such  work  shall  be  done  in  a good and workmanlike

manner, that the structural integrity of the Building shall  not  be  impaired,

and  that  no  liens  shall  attach  to the Premises by reason thereof.  Tenant

agrees  to  obtain,  at  Tenant's  expense,   all  permits  required  for  such

alterations. Whenever Landlord consents to any  alteration, Landlord shall then

make an election (which election shall be irrevocable)  and  advise  Tenant  in

writing,  whether  that  alteration  must be removed from the Premises upon the

expiration or earlier termination of this Lease.

     10.   OWNERSHIP OF ALTERATIONS.

Unless Landlord, pursuant to the last sentence of Section 9 above,  shall elect

that all or part of any alteration made  by  Tenant  to the Premises (including

any alteration consented to by Landlord pursuant to paragraph  9  hereof) shall

remain on the Premises after the termination of this Lease, the Premises  shall

be restored to their original condition by Tenant before the expiration of this

Lease  at  Tenant's  sole  expense.   Upon  such election by Landlord, any such

alterations, improvements, betterments or mechanical  equipment,  including but

not limited to, heating and air conditioning systems, shall become the property

of  Landlord as soon as they are affixed to the Premises, and all right,  title

and interest thereof of Tenant shall immediately cease, unless otherwise agreed

to in  writing  by  Landlord.   Tenant  shall promptly pay any franchise, minor

privilege or other tax or assessment resulting  directly or indirectly from any

alterations  or  improvements  made by Tenant to the  Premises.   Tenant  shall

repair promptly, at its own expense,  any  damage  to  the Premises or Building

caused by bringing into the Premises any property for Tenant's  use,  or by the

installation  of removal of such property, regardless of fault or by whom  such

damage shall be caused.

      11.  REPAIRS AND MAINTENANCE.

           (a)  Except  as  expressly provided in Section 44, Landlord shall be

under no liability, nor have  any obligation to do any work or make any repairs

in or to the Premises necessary  to  outfit the Premises for Tenant's occupancy

or for the operation of Tenant's business  therein,  and  any work which may be

necessary to outfit the Premises for Tenant's occupancy or for the operation of

Tenant's  business therein is the sole responsibility of Tenant  and  shall  be

performed by  Tenant  at its own cost and expense.  Tenant acknowledges that it

has fully inspected the  Premises  prior  to  the  execution of this Lease, and

Tenant   further  acknowledges  that  Landlord  has  made  no   warranties   or

representations  with  respect  to  the  condition  or  state of repairs of the

Premises except as otherwise set forth in Section 44 hereof.

           (b)  Tenant,  at  Tenant's sole expense, shall except  for  services

furnished by Landlord pursuant  to  Section  3 hereof, maintain the Premises in

good  order,  condition, and repair, including the  interior  surfaces  of  the

ceilings, walls  and floors, all doors, all interior windows, building standard

furnishings and special  items  and equipment installed by or at the expense of

Tenant.

           (c)  Landlord shall maintain  the  structure,  roof, exterior of the

Building  and the Building systems (electrical, plumbing, lighting,  HVAC,  and

mechanical systems) in good order, condition and repair.

           (d)  If  Tenant  fails  to  maintain  the  Premises  in  good order,

condition and repair, Landlord shall give Tenant notice to do such acts  as are

reasonably  required  to so maintain the Premises.  If Tenant fails to promptly

commence such work and  diligently  prosecute it to completion and such failure

continues beyond the expiration of any applicable notice and cure periods, then

Landlord shall have the right to do such  acts  and  expend  such  funds at the

expense  of Tenant as are reasonably required to perform such work. Any  amount

so expended  by  Landlord  shall  be paid by Tenant promptly after demand, with

interest from the date of such work,  at a rate equal to four percentage points

(4%) above the prime commercial rate of  interest  then  being charged by First

National Bank of Maryland.  Landlord shall have no liability  to Tenant for any

damage, inconvenience, or interference with the use of the Premises  by  Tenant

as a result of performing any such work.

           (e)  Tenant  shall  not  place a load upon any floor of the Premises

which exceeds the load per square foot  which such floor was designed to carry,

as determined by Landlord's structural engineer.   Landlord  reserves the right

to consult with its structural engineer if necessary, in Landlord's opinion, to

resolve any questions concerning this matter, in which event the  determination

of  the  engineer  shall  be  conclusive and the cost of any such determination

shall be paid for by Tenant upon  demand.   Tenant  shall  not install business

machines  or  mechanical  equipment which cause noise or vibration  to  such  a

degree as to be objectionable to Landlord or other Building tenants.

           (f)  Except as otherwise  expressly provided in this Lease, Landlord

shall have no liability to Tenant nor  shall  Tenant's  obligations  under this

Lease  be  reduced  or  abated  in  any  manner  whatsoever  by  reason  of any

inconvenience,  annoyance,  interruption  or  injury  to  business arising from

Landlord's  making  any  repairs  or  changes  which  Landlord is  required  or

permitted by this Lease or by any other tenant's lease  or  required  by law to

make  in  or  to  any portion of the Building or the Premises.  Landlord shall,

nevertheless, use reasonable efforts to minimize any interference with Tenant's

business in the Premises.

           (g)  Tenant  shall  give  Landlord prompt notice of any damage to or

defective condition in any part or appurtenance  of  the Building's mechanical,

electrical,  plumbing, HVAC or other systems serving, located  in,  or  passing

through  the Premises  and  Landlord  shall  promptly  repair  such  damage  or

defective  condition.   However,  Tenant  shall  not be deemed liable if Tenant

fails to notify Landlord of any such conditions and  Tenant's failure to notify

Landlord shall not obviate Landlord's maintenance responsibilities  under  this

Lease.

           (h)  Subject  to  Section  10 hereof, upon the expiration or earlier

termination of this Lease, Tenant shall  return  the Premises to Landlord clean

and  in the same condition as on the date Tenant took  possession,  except  for

normal  wear  and  tear.   Any damage to the Premises, including any structural

damage, resulting from Tenant's  use  or from the removal of Tenant's fixtures,

furnishings and equipment shall be repaired  by  Tenant  at  Tenant's  expense.

Landlord  shall bill Tenant, as promptly as is practicable, for the actual  and

reasonable  costs of any cleanup and/or repairs to the Premises necessitated by

Tenant's use  and  occupancy  thereof  (normal wear and tear excepted) and such

costs   shall  constitute  additional  rental   due   and   payable   hereunder

notwithstanding any expiration or termination of this Lease.

     12.   DEFAULT.

           (a)  Any  of  the  following  events  shall  constitute a default by

Tenant:

                (i)   If the rent (basic or additional) shall be in arrears, in

whole or in part; or

                (ii)  If Tenant shall have failed to perform or comply with any

other term, condition, or covenant of this Lease on its part to be performed or

complied with, for a period of thirty (30) days after written  notice  of  such

failure  from Landlord plus such additional time as may reasonably be necessary

to consummate  the subject performance provided that, and so long as, Tenant is

pursuing such consummation; or

                (iii)  If the Premises are vacant, unoccupied or deserted for a

period of fifteen  (15) consecutive days or more at any time during the term of

this  Lease and Tenant  is  not  otherwise  current  in  the  payment  of  rent

hereunder; or

                (iv)  If  there shall occur an Act of Bankruptcy, as defined in

Section 36 hereof; or

                (v)   If Tenant's  leasehold  interest under this Lease is sold

under execution, attachment or decree of court  to  satisfy any debt of Tenant,

or  if  any  lien  (including  a  mechanic's  lien) is filed  against  Tenant's

leasehold  interest  and is not discharged or bonded  within  sixty  (60)  days

thereafter.

           (b)  In the  event  of  default  as defined in paragraph (a) hereof,

Landlord, in addition to any and all legal and  equitable remedies it may have,

shall have the following remedies:

                (i)   To distrain for any rent or  additional  rent in default;

and

                (ii)  At  any time after default (beyond any applicable  notice

and cure periods), without  notice,  to declare this Lease terminated and enter

the Premises with or without legal process;  and  in  such event Landlord shall

have the benefit of all provisions of law now or hereafter  in force respecting

the speedy recovery of possession from Tenant's holding over  or proceedings in

forcible  entry  and  detainer,  and  Tenant waives any and all provisions  for

notice under such laws.

           Notwithstanding  such  reentry   and/or  termination,  Tenant  shall

immediately be liable to Landlord for the sum  of  the  following: (a) all rent

and additional rent then in arrears, without apportionment  to  the termination

date; (b) all other liabilities of Tenant and damages sustained by  Landlord as

a  result  of  Tenant's  default, including, but not limited to, the reasonable

costs of reletting the Premises  and  any  broker's  commissions  payable  as a

result  thereof; (c) all of Landlord's reasonable costs and expenses (including

reasonable  court  fees)  in  connection  with  such  default  and  recovery of

possession;  (d) the difference between the rent reserved under this Lease  for

the balance of  the  term  and  the  fair  rental value of the Premises for the

balance of the term to be discounted to present  value at 15%, to be determined

as  of the date of reentry; or at Landlord's option  in  lieu  thereof,  Tenant

shall  pay the amount of the rent and additional rent reserved under this Lease

at the times  herein stipulated for payment of rent and additional rent for the

balance of the  term,  less  any amount received by Landlord during such period

from others to whom the Premises may be rented on such terms and conditions and

at such rentals as Landlord, in its sole discretion, shall deem proper; and (e)

any other damages recoverable  by law.  In the event Landlord brings any action

against Tenant to enforce compliance  by  Tenant with any covenant or condition

of  this  Lease,  including the covenant to pay  rent,  and  it  is  judicially

determined that Tenant  has  defaulted in performing or complying with any such

covenant or condition, then and in such event, Tenant shall pay to Landlord all

costs and expenses incurred by Landlord in bringing and prosecuting such action

against Tenant, including Landlord's reasonable attorney's fees.

           (c)  In the event Tenant fails to pay Landlord any rental payment or

other charge due hereunder within five (5) days from the date on which any such

payment was due (subject to any  applicable  notice and cure periods), Landlord

may, at its option, charge Tenant a late charge  equal  to five percent (5%) of

the rental payment or other such charge, which late charge shall be collectible

as additional rent and shall be payable by Tenant to Landlord  within  five (5)

days  after  written  notice  from  Landlord  to Tenant assessing the same.  In

addition, any such rental payment or other charge  which is delinquent for five

(5) days or more (after the passage of any applicable notice and cure periods),

shall bear interest from the date on which same was  due  at  a  rate  equal to

twelve percent (12%).

     13.   DAMAGE OR DESTRUCTION.

           (a)  If, during the Lease term, the Premises are damaged by fire  or

other casualty, but not to the extent that Tenant is prevented from carrying on

business  in  the  Premises,  Landlord  shall  promptly cause such damage to be

repaired; if such damage renders twenty percent  (20%)  or more of the Premises

untenantable, the rent reserved hereunder shall be reduced during the period of

its untenantability proportionately to the amount by which the area so rendered

untenantable bears to the entire gross rentable area of the  Premises, and such

reduction shall be apportioned from the date of the casualty to  the  date when

the Premises are rendered fully tenantable.  Notwithstanding the foregoing,  in

the  event  such  fire  or  other  casualty damages or destroys any of Tenant's

leasehold improvements, alterations, betterments, fixtures or equipment, Tenant

shall cause the same to be repaired  or  restored  at  Tenant's  sole  cost and

expense  and  Landlord  shall  have  no liability for the restoration or repair

thereof.

           (b)   If,  during the Lease term,  the  Premises  or  a  substantial

portion of the Building are rendered wholly untenantable as the result of fire,

the elements, unavoidable  accident  or  other  casualty, then either party may

terminate this Lease upon written notice to the other  given within thirty (30)

days after such fire, accident or casualty.  If neither  party  terminates this

Lease,  Landlord  shall  repair  the  Premises  and  such restoration shall  be

completed  as promptly as reasonably possible and the rent  reserved  hereunder

shall abate until the Premises are again rendered tenantable.

     14.   POSSESSION.

In case this  Lease  provides  for a specifically designated commencement date,

and if possession of the Premises,  in  whole  or  in  part, cannot be given to

Tenant on or before such commencement date, Landlord agrees  to  abate the rent

proportionately  until  possession  is  given  to Tenant, and Tenant agrees  to

accept such pro rata abatement as liquidated damages  for the failure to obtain

possession  on  the  commencement date herein specified.   The  parties  hereto

covenant and agree that  if  the  term  of this Lease commences on a date other

than the date herein specified, they will,  upon the request of either of them,

execute an agreement in recordable form setting  forth the new commencement and

termination dates of the Lease term.  Under no circumstances  shall Landlord be

under any liability for failure to deliver possession of the Premises to Tenant

on the date herein specified.

     15.   EXTERIOR OF PREMISES - SIGNS.

           (a)  Tenant  covenants and agrees that it will not place  or  permit

any window display, sign,  billboard,  marquee, lights, awning, poles, placard,

advertising matter, or other thing of any kind, in or about the exterior of the

Premises or the Building (including without  limitation  any  displays on or in

any  motor  vehicles  used by Tenant, its employees, agents and servants),  nor

paint or make any change  in,  to or on the exterior of said Premises to change

the uniform architecture, paint  or appearance of the Building, without in each

such  instance  obtaining  the  prior  written  consent  of  Landlord  and,  if

applicable, of any owners' association  or  similar entity which may govern the

use of Scarlett Place.  In the event such consent  is  given,  Tenant agrees to

pay  any  minor  privilege  or  other  tax  arising  as  a  result of any  such

installation  immediately when due.  Tenant shall obtain, at Tenant's  expense,

all permits required  for such installation.  Tenant further agrees to maintain

any  sign, billboard, marquee,  awning,  decoration,  placard,  or  advertising

matter  or  other  thing  of  any  kind  as may be approved by Landlord in good

condition and repair at all times.

     (b)  Tenant further covenants and agrees  not to pile or place anything on

the sidewalk, parking lot or other exterior portion of the Premises or Building

in the front, rear or sides of the Building, not  block  any  sidewalk, parking

lot or other exterior portion of the Premises or Building, not do anything that

directly  or  indirectly  will interfere with any of the rights of  ingress  or

egress or of light from any  other  tenant,  not do anything which will, in any

way, change the uniform and general design of the Building or the Property.

     16.  RELOCATION.

           INTENTIONALLY DELETED.

     17.  FOR RENT/SALE SIGNS.

Landlord shall have the right to place a "For Rent" sign on any portion of said

Premises for six (6) months prior to termination  of  this Lease and to place a

"For  Sale" sign thereon at any time.  During such six-month  period,  Landlord

may show  the Premises and all parts thereof to prospective tenants between the

hours of 8:00  a.m. and 6:00 p.m. on any day except Sunday or any legal holiday

on which Tenant  shall not be open for business.  Landlord shall use reasonable

efforts to give Tenant at least 24 hours' prior notice (either by writing or by

telephone) of its entrance into the Premises for the foregoing purposes.

      18.  WATER AND OTHER DAMAGE.

Landlord shall not  be liable for, and Landlord is hereby released and relieved

from all claims and demands  of  any kind by reason of or resulting from damage

or injury to person or property of  Tenant  or  any  other  party,  directly or

indirectly  caused  by  (a)  dampness, water, rain or snow, in any part of  the

Premises or in any part of any  other property of Landlord or of others, and/or

(b) falling plaster, steam, gas,  electricity, or any leak or break in any part

of the Premises or from any pipes, appliances or plumbing or from sewers or the

street or subsurface or from any other  place or any part of any other property

of Landlord or of others or in the pipes  of the plumbing or heating facilities

thereof,  unless  such  condition  is  caused  by  the  negligence  or  willful

misconduct of Landlord, its employees, agents or contractors.

     19.  RIGHT OF ENTRY.

Landlord  and  its  agents,  servants,  employees,  including  any  builder  or

contractor  employed  by  Landlord  shall have the absolute  and  unconditional

right, license and permission, at any  and  all  reasonable times, to enter and

inspect  the  Premises  or  any part thereof.  Landlord  shall  use  reasonable

efforts  and  shall  cause  its  agents,   servants,   employees,  builders  or

contractors to use reasonable efforts to give Tenant at  least  24 hours' prior

notice (either in writing or by telephone) of its entrance into the Premises.

     20.  TERMINATION OF TERM.

It is agreed that the term of this Lease shall expire and terminate  at the end

of the original term hereof (or at the expiration of the last renewal  term, if

this  Lease  contains  a  renewal  option  and the same is properly exercised),

without the necessity of any notice by or to  any of the parties hereto, unless

otherwise  provided herein.  If Tenant shall occupy  the  Premises  after  such

expiration or termination, it is understood that Tenant shall hold the Premises

as a tenant  from month-to-month, subject to all the other terms and conditions

of this lease,  at  an  amount  equal  to  double  the  highest  monthly rental

installment  reserved  in this Lease.  Landlord shall, upon such expiration  or

termination of this Lease,  be entitled to the benefit of all public general or

local laws relating to the speedy recovery of possession of lands and tenements

held over by tenants that may be now in force or may hereafter be enacted.

     21.   CONDEMNATION.

           (a)  If, during the term of this Lease, all or a substantial part of

the Premises shall be taken by  police  power or under power of eminent domain,

this Lease shall terminate as of, and the  rent (basic and additional) shall be

apportioned to and abate from and after, the date of taking.  Tenant shall have

no  right t participate in any award or damages  for  such  taking  and  hereby

assigns  all  of  its  right,  title and interest therein to Landlord.  For the

purposes of this paragraph, "a substantial  part  of  the  Premises" shall mean

such  part  that  the  remainder  thereof is rendered inadequate  for  Tenant's

business and that such remainder cannot practicably be repaired and improved so

as to be rendered adequate to permit  Tenant  to  carry  on  its  business with

substantially the same efficiency as before the taking.

           (b)  If, during the Lease term, less than a substantial  part of the

Premises  (as  hereinabove defined) is taken by police power or under power  of

eminent domain,  this  Lease shall remain in full force and effect according to

its terms; and Tenant shall  have  no  right  to  participate  in  any award or

damages for such taking and tenant hereby assigns all of its right,  title  and

interest in and to the award to Landlord.  In such event Landlord shall, at its

expense,  promptly  make such repairs and improvements as shall be necessary to

make the remainder of  the  Premises  adequate to permit Tenant to carry on its

business  to substantially the same extent  and  with  substantially  the  same

efficiency  as  before  the taking; provided that in no event shall Landlord be

required to expend an amount  in  excess  of the award received by Landlord for

such taking.  If, as a result of such taking,  any  part  of  the  Premises  is

rendered  permanently  unusable, the basic annual rent reserved hereunder shall

be reduced in such amount as may be fair and reasonable, which amount shall not

exceed the proportion which  the  area  so  taken or made unusable bears to the

total area which was usable by Tenant prior to  the taking.  IF the taking does

not render any part of the Premises unusable, there  shall  be  no abatement of

rent.

           (c)   For  purposes  of  this  section,  "taking"  shall  include  a

negotiated  sale  or lease and transfer of possession to a condemning authority

under bona fide threat of condemnation for public use, and Landlord alone shall

have the right to negotiate  with  the  condemning  authority  and  conduct and

settle  all  litigation connected with the condemnation.  As hereinabove  used,

the words "award  or  damages"  shall, in the event of such sale or settlement,

include the purchase or settlement price.

           (d)  Nothing herein shall  be deemed to prevent Tenant from claiming

and receiving from the condemning authority,  if  legally payable, compensation

for the taking of Tenant's own tangible property and  such  amount  as  may  be

payable  by  statute  or ordinance toward Tenant's damages for Tenant's loss of

business,  removal and relocation  expenses  and  the  undepreciated  value  of

Tenant's leasehold improvements.

     22.   SUBORDINATION.

This Lease shall  be subject to and subordinate at all times to the lien of any

mortgages and/or deeds  of trust upon the Building now or hereafter to be made,

unless the mortgagee or holder  of  the  deed  of trust elects to have Tenant's

interest hereunder superior to the interest of the  mortgagee or holder of such

deed  of trust.  This subordination provision shall be  self-operative  and  no

further  instrument  of subordination shall be required.   The Tenant agrees to

execute any documents  necessary,  subsequent  to  the execution of this Lease,

which are required to effect such subordination.

     23.   LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.

If Tenant shall fail to perform any covenant or duty  required  of  it  by this

Lease  or by law, and such failure shall continue beyond the expiration of  any

applicable  notice and cure periods, Landlord shall have the right (but not the

obligation) to  perform  the  same,  and  if  reasonably necessary to enter the

Premises for such purposes without notice.  The actual cost thereof to Landlord

shall be deemed to be additional rent hereunder payable by Tenant, shall be due

and payable by Tenant upon demand, and Landlord  shall have the same rights and

remedies with respect to such additional rent as Landlord  has  with respect to

the rental reserved hereunder.

      24.  ATTORNMENT.

           (a)   If  Landlord  assigns this Lease or the rents hereunder  to  a

creditor as security for a debt,  Tenant shall, after notice of such assignment

and upon demand by Landlord or the  assignee,  pay all sums thereafter becoming

due to Landlord hereunder either to Landlord or  to  such assignee, as required

by  such  notice.   Tenant shall also, upon receipt of such  notice,  have  all

policies  of insurance  required  hereunder  endorsed  so  as  to  protect  the

assignee's  interest  as  it  may  appear  and  shall deliver such policies, or

certificates thereof, to the assignee.

           (b)  In the event the Premises are sold  at  any foreclosure sale or

sales,  by virtue of any judicial proceedings or otherwise,  this  Lease  shall

continue  in  full  force and effect and provided that the purchaser(s) at such

sale(s) agree in writing  with  Tenant  to recognize the validity of this Lease

and to not disturb Tenant's occupancy and possession of the Premises so long as

Tenant is not in default under this Lease beyond any applicable notice and cure

periods, Tenant shall attorn to and acknowledge  the  foreclosure  purchase  or

purchasers at such sale as the landlord hereunder.

     25.   NON-WAIVER OF FUTURE ENFORCEMENT.

The  receipt of rent by Landlord, with knowledge of any breach of this Lease by

Tenant or of any default on the part of Tenant in the observance of performance

of any  of  the  conditions  or  covenants of this Lease (beyond any applicable

notice and cure periods), shall not  be  deemed to be a waiver of any provision

of this Lease, including the provision breached.   No  failure  on  the part of

Landlord or of the Tenant to enforce any covenant or provision herein contained

nor any waiver of any right hereunder by Landlord or Tenant shall discharge  or

invalidate  such covenant or provision or shall affect the right of Landlord or

tenant to enforce the same in the event of any subsequent default.  The receipt

by Landlord of  any  rent  or  any  sum  of  money  or  any other consideration

hereunder  paid  by Tenant after the termination, in any manner,  of  the  term

herein demised, or  after  the  giving  by  Landlord of any notice hereunder to

effect  such termination, shall not reinstate,  continue  or  extend  the  term

herein demised,  or  destroy,  or in any manner impair the efficacy of any such

notice of termination as may have  been  given  hereunder by Landlord to Tenant

prior to the receipt of any such sum of money or other consideration, unless so

agreed to in writing and signed by Landlord.  Neither  acceptance  of  the keys

nor any other act or thing done by Landlord or any agent or employee during the

term  herein demised shall be deemed to be an acceptance of a surrender of  the

Premises,  excepting  only an agreement in writing signed by Landlord accepting

or agreeing to accept such surrender.

     26.   PERSONAL PROPERTY TAXES.

Tenant shall be responsible  for  and shall pay any taxes or assessments levied

or assessed during the term of this  Lease  against  any  leasehold interest of

Tenant or personal property or trade fixtures of Tenant of  any  kind, owned by

Tenant or placed in, upon or about the Premises by Tenant.

     27.   RECORDATION OF LEASE.

Tenant  agrees  that it will, upon Landlord's request, execute a memorandum  of

this Lease in a form suitable for recording under applicable Maryland law.  The

party recording such  Memorandum  of  Lease shall pay all costs of recordation,

including any transfer or recordation taxes thereon.

     28.   NOTICES.

Any notice required by this Lease shall  be  sent by certified mail to Landlord

at:  c/o Merritt, 2066 Lord Baltimore Drive, Baltimore,  Maryland  21244.   Any

notice required by this Lease shall be sent by certified mail to Tenant at:

           55 Broad Street, 7th Floor

           New York, New York  10004

(if  no  address is specified, such notices to Tenant shall be addressed to the

Premises).   Either party may, at any time, and from time to time, designate in

writing a substitute  address  for  that  set  forth  above, and thereafter all

notices  to  such  party  shall  be sent by certified mail to  such  substitute

address.

     29.   WAIVER OF JURY TRIAL.

THE LANDLORD AND THE TENANT WAIVE  ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION,

COUNTERCLAIM, OR PROCEEDING BASED UPON,  OR  RELATED  TO, THE SUBJECT MATTER OF

THIS  LEASE.  THIS WAIVER APPLIES TO ALL CLAIMS AGAINST  ALL  PARTIES  TO  SUCH

ACTIONS  AND  PROCEEDINGS, INCLUDING PARTIES WHO ARE NOT PARTIES TO THIS LEASE.

THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE TENANT AND

THE TENANT ACKNOWLEDGES  THAT  NEITHER  THE  LANDLORD, NOR ANY PERSON ACTING ON

BEHALF OF THE LANDLORD, HAS MADE ANY REPRESENTATIONS  OF  FACT  TO  INDUCE THIS

WAIVER  OF  TRIAL  BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.   THE

TENANT FURTHER ACKNOWLEDGES  THAT  IT  HAS  BEEN  REPRESENTED  (OR  HAS HAD THE

OPPORTUNITY  TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE  MAKING

OF THIS WAIVER  BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, IN

THAT IT HAS HAD THE  OPPORTUNITY  TO  DISCUSS  THIS  WAIVER  WITH COUNSEL.  THE

TENANT  FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE  MEANING  AND

RAMIFICATIONS  OF  THIS WAIVER PROVISION AND AS EVIDENCE OF THIS FACT SIGNS ITS

INITIALS.

                                         /S/ MATTHEW DE GANON

                                      (initials of tenant)

     30.   SEVERABILITY.

           (a)  It is agreed that, for the purpose of any suit brought or based

on this Lease, this Lease shall be construed to be a divisible contract, to the

end that successive  actions  may  be maintained thereon as successive periodic

sums shall mature or be due hereunder, and it is further agreed that failure to

include in any suit or action any sum  or sums then matured or due shall not be

a bar to the maintenance of any suit or  action for the recovery of said sum or

sums so omitted; and Tenant agrees that it  will  not,  in  any  suit  or suits

brought  or  arising under this Lease for a matured sum for which judgment  has

not previously  been  obtained  or  entered,  plead,  rely  on or interpose the

defenses of RES ADJUDICATA, former recovery, extinguishment,  merger,  election

of remedies or other similar defense as a default said suit or suits.

           (b)   If  any  term,  clause  or provision of this Lease is declared

invalid by a court of competent jurisdiction,  the  validity f the remainder of

this Lease shall not be affected thereby but shall remain  in  full  force  and

effect.

     31.   NON-WAIVER.

It  is  understood  and  agreed  that nothing herein shall be construed to be a

waiver of any of the terms, covenants  or  conditions  herein contained, unless

the  same  shall  be in writing, signed by the party to be  charged  with  such

waiver, and no waiver  of  the breach of any covenant herein shall be construed

as a waiver of such covenant  or  any subsequent breach thereof.  No mention in

this Lease of any specific right or  remedy  shall  preclude  either party from

exercising any other right or from having any other remedy or from  maintaining

any action to which it may be otherwise entitled either at law or in equity.

      32.  SUCCESSORS AND ASSIGNS.

           (a)   Except  as  herein provided, this Lease and the covenants  and

conditions herein contained shall  inure  to the benefit of and be binding upon

Landlord  its  successors  and  assigns; shall  be  binding  upon  Tenant,  its

successors and assigns (including  without limitation any trustee in bankruptcy

or debtor-in-possession, and any assignee  of the same); and shall inure to the

benefit of Tenant and only such assignees of  Tenant  to  whom an assignment by

Tenant has been consented to in writing by Landlord.  In the  event  more  than

one person, firm or corporation is named herein as Tenant, the liability of all

parties named herein as Tenant shall be joint and several.

           (b)    In   the  event  Landlord's  interest  under  this  Lease  is

transferred or assigned,  written  notice  thereof  is given to Tenant and such

transferee or assignee assumes in writing all of the  obligations  of  Landlord

under  this  Lease,  Landlord  (or  any  subsequent  assignee  or transferee of

Landlord's  interest  under  this  Lease  who  gives such notice to Tenant  and

assumes in writing Landlord's obligations under this Lease) shall automatically

be  relieved  and  released  from  and after the date  of  such  transferee  of

Landlord's interest under this Lease  who  gives  such  notice  to  Tenant  and

assumes in writing Landlord's obligations under this Lease, shall automatically

be relieved and released from and after the date of such transfer or conveyance

from  all  liability  hereunder.   Further,  the  liability  of  Landlord,  its

successors  and  assigns, under this Lease shall at all times be limited solely

to Landlord's interest in the land and improvements comprising the Building and

in the event the owner  of  Landlord's interest in this Lease is at any time an

individual, partnership, joint  venture  or  unincorporated association, Tenant

agrees that such individual or the members or  partners  of  such  partnership,

joint  venture  or  unincorporated  association  shall  not  be  personally  or

individually  liable  or  responsible  for the performance of any of Landlord's

obligations hereunder.

     33.   SECURITY DEPOSIT.

Landlord hereby acknowledges receipt from  Tenant  of  the sum of Two Thousand,

Two  Hundred  Sixty  Dollars  and  Fifty-nine  Cents  ($2,260.59),   which  sum

represents  a  security  deposit  for  the  faithful  performance  of  Tenant's

obligations  under  this  Lease.   Tenant  agrees  that Landlord shall have the

right, but not the obligation, in its sole discretion  and  without  notice  to

Tenant  to apply said security deposit or any portion thereof to cure or remedy

any default  by  Tenant  hereunder  (beyond  any  applicable  notice  and  cure

periods),  including  default  in payment of rent (beyond any applicable notice

and cure periods).  If Landlord  so applies the security deposit or any portion

thereof  Tenant shall, upon demand,  immediately  reimburse  Landlord  for  the

portion of  the security deposit so applied; and any failure of Tenant to do so

within ten (10) business or fifteen (15) calendar days after Landlord's written

demand therefor  shall  constitute an event of default hereunder.  Said sum, if

not sooner applied, shall  be  returned  to  Tenant,  without  interest, within

thirty  (30)  days after vacating of the Premises by Tenant and termination  of

this Lease (or  upon termination of the last renewal term of this Lease if this

Lease contains a  renewal  option  and  Tenant properly exercises said option),

provided:  (i) Tenant is not then in default  under  any  of  the provisions of

this Lease (beyond any applicable notice and cure periods); (ii)  there  is  no

damage to the Premises beyond ordinary wear and tear and the Premises have been

left  in a clean condition and in good order with all debris, rubbish and trash

placed  in  property  containers;  (iii)  all  keys  to  the Premises have been

returned to the Landlord; and (iv) Tenant's forwarding address  has  been  left

with  Landlord.   Tenant  further  agrees  that  Landlord  shall be entitled to

commingle said security deposit with its own funds, and that  no  mortgagee  or

holder  of a deed of trust on the Premises and no purchaser of said Premises at

any foreclosure  sale  shall have any liability to Tenant for Tenant's security

deposit.

       34. NOTICES TO MORTGAGEE.

Tenant agrees that a copy  of  any  notice  of  default from Tenant to Landlord

shall  also be sent to the holder of any mortgage  or  deed  of  trust  on  the

Premises,  provided  Tenant has been given written notice of the fact that such

mortgage or deed of trust  has been made; and Tenant shall allow said mortgagee

or holder of the deed of trust  a  reasonable  time,  not to exceed thirty (30)

days from the receipt of said notice, to cure, or cause  to  be cured, any such

default.  If such default cannot reasonably be cured within the  time specified

herein,  then  such  additional  time  as  may  be  necessary shall be allowed,

provided  the  curing  of  such  default  is commenced and  diligently  pursued

(including,  but not limited to, commencement  of  foreclosure  proceedings  if

necessary to effect  such  cure)  in  which  event  this  Lease  shall  not  be

terminated   while   such   remedies   are   being   thus  diligently  pursued.

Notwithstanding the foregoing to the contrary, in the  event  of  an emergency,

neither  Landlord  nor  its  mortgagee  shall be entitled to a notice and  cure

period, and Tenant shall have the right (but not the obligation) to rectify the

emergency situation, at Landlord's expense, and Landlord shall reimburse Tenant

for the actual cost thereof promptly upon demand.

      35.  ESTOPPEL CERTIFICATE.

Tenant shall, at any time and from time to  time  during the term of this Lease

or any renewal thereof, upon written request of Landlord, execute, acknowledge,

and deliver to Landlord (or its designee) a statement  in  writing,  certifying

that this Lease is unmodified and in full force and effect if such is  the fact

(or  if  there  have  been  any modifications thereof, that the same is in full

force as modified and stating  the  modifications)  and  the dates to which the

rents and other charges have been paid in advance, if any.   Any such statement

delivered  pursuant  to  this  paragraph may be relied upon by any  prospective

purchaser of the estate of Landlord  or by the mortgagee or any assignee of any

mortgagee or the trustee or beneficiary  of  any  deed  of trust constituting a

lien on the Premises or the Building.

     36.   BANKRUPTCY.

           (a)  An "Act of Bankruptcy" shall mean:

                (i) the application by Tenant or any guarantor of Tenant or its

or  their consent to the appointment of a receiver, trustee  or  liquidator  of

Tenant or any guarantor of Tenant or a substantial part of its or their assets;

                (ii)  the  filing  of  voluntary  petition in bankruptcy or the

admission in writing by Tenant or any guarantor of  Tenant  of its inability to

pay its debts as they become due;

                (iii)  the making by Tenant or any guarantor of  Tenant  of  an

assignment for the benefit of its creditors;

                (iv)  the   filing  of  a  petition  or  an  answer  seeking  a

reorganization or an arrangement  with  its  creditors  or  an  attempt to take

advantage of any insolvency law;

                (v) the filing of an answer admitting the material  allegations

of  a  petition  filed  against  Tenant  or  any  guarantor  of  Tenant  in any

bankruptcy, reorganization or insolvency proceeding;

                (vi)  the entering of an order, judgment or decree by any court

of competent jurisdiction  adjudicating  Tenant  or  any  guarantor of Tenant a

bankrupt or an insolvent, approving a petition seeking such  a  reorganization,

or appointing a receiver, trustee or liquidator of Tenant or any  guarantor  of

Tenant or of all or a substantial part of its or their assets; or

                (vii)  the  commencing  of any proceeding under any bankruptcy,

reorganization, arrangement, insolvency,  readjustment, receivership or similar

law,  and  the  continuation  of  such order, judgment,  decree  or  proceeding

unstayed for a period of sixty (60) days.

           (b)  Upon the occurrence of an Act of Bankruptcy, this Lease and all

rights of Tenant hereunder shall automatically  terminate  with  the same force

and effect as if the date of any such event were the date stated herein for the

expiration of the term, and Tenant shall vacate and surrender the Premises, but

shall remain liable as herein provided.  Landlord reserves any and all remedies

provided herein or at law or in equity.

           (c)   If this Lease is not terminated in accordance with  subsection

(b) above because  such termination is not permitted under the BANKRUPTCY CODE,

11 U.S.C.  101 ET SEQ.  (the  "Bankruptcy  Code"),  then  upon  the filing of a

petition by or against Tenant under the Bankruptcy Code, Tenant,  as debtor and

as debtor in possession, and any trustee who may be appointed, agree:

                (i) To perform each and every obligation of Tenant  under  this

Lease  until  such time as this Lease is either rejected or assumed by order of

the United States Bankruptcy Court;

                (ii)  To  pay monthly in advance on the first day of each month

as reasonable compensation  for  use  and  occupancy  of the Premises an amount

equal to all basic rent and all additional rent reserved hereunder;

                (iii) To reject or assume this Lease within  sixty (60) days of

the filing of such petition under Chapter 7 of the Bankruptcy  Code  or  within

thirty (30) days of the filing of a petition under any other Chapter;

                (iv)  To  give  Landlord  at  least  forty-five (45) days prior

written notice of any proceeding relating to any assumption of this Lease;

                (v) To give Landlord at least thirty (30)  days  prior  written

notice of any abandonment to be deemed conclusively a rejection of this Lease;

                (vi)  To be deemed conclusively to have rejected this Lease  in

the event of the failure to comply with any of the above; and

                (vii) To  be  deemed to have consented to the entry of an order

by an appropriate United States  Bankruptcy  Court  providing all of the above,

waiving notice and hearing of the entry of same.

           (d)  Notwithstanding anything in this Lease  to  the  contrary,  all

amounts payable by Tenant to or on behalf of Landlord hereunder, whether or not

expressly  denominated  as  rent,  shall  constitute "rent" for the purposes of

Section  502(b)(7)  of  the  Bankruptcy  Code, including,  without  limitation,

reasonable  attorney's  fees  incurred  by  Landlord   by  reason  of  Tenant's

bankruptcy.

           (e) In the event that this Lease is assigned to any person or entity

pursuant to the provisions of the Bankruptcy Code, any and  all monies or other

consideration  payable  or  otherwise to be delivered in connection  with  such

assignment shall be paid or delivered  to  Landlord,  shall  be  and remain the

exclusive property of Landlord, and shall not constitute property  of Tenant or

of the estate of Tenant within the meaning of the Bankruptcy Code.  Any and all

monies  or  other  consideration  constituting  Landlord's  property under  the

preceding sentence not directly paid or delivered to Landlord  shall be held in

trust for the benefit of Landlord by the recipient thereof and be promptly paid

to  or turned over to Landlord.  If Tenant assumes this Lease and  proposes  to

assign the same pursuant to the provisions of the Bankruptcy Code to any person

or entity who shall have made a bona fide offer to accept an assignment of this

Lease  on  terms  acceptable  to Tenant, the notice of such proposed assignment

setting forth (i) the name and  address  of  such person; (ii) all of the terms

and conditions of such offer; and (iii) adequate  assurance  to  be provided to

Landlord  to  assure  such  assignee's  future  performance  under  the  Lease,

including,  without  limitation, the assurance referred to in Section 365(b)(3)

of the Bankruptcy Code, or any such successor or substitute legislation or rule

thereto, shall be given  to  Landlord by Tenant, but in any event no later than

ten (10) days prior to the date  that  Tenant shall make application to a court

of  competent  jurisdiction for authority  and  approval  to  enter  into  such

assignment and assumption,  and  Landlord  shall thereupon have the prior right

and option, to be exercised by notice to Tenant  given at any time prior to the

effective date of such proposed assignment, to accept  an  assignment  of  this

Lease  upon  the  same  terms and conditions and for the same consideration, if

any, as the bona fide offer  made by such person, less any brokerage commission

which may be payable out of the consideration to be paid by such person for the

assignment of this Lease.  Any person or entity to which this Lease is assigned

pursuant to the provisions of  the  Bankruptcy  Code  shall  be  deemed without

further act or deed to have assumed all of the obligations arising  under  this

Lease  on and after the date of such assignment.  Any such assignee shall, upon

demand,   execute  and  deliver  to  Landlord  an  instrument  confirming  such

assumption.

           (f)  Nothing  contained  in  this  Section 36 shall be deemed in any

manner to limit Landlord's rights and remedies  under  the  Bankruptcy Code, as

presently existing or as may hereafter be amended.

           (g)   No  default  under this Lease by Tenant, either  prior  to  or

subsequent to any Act of Bankruptcy, shall be deemed to have been waived unless

expressly done so in writing by Landlord.

           (h)  Neither Tenant's interest in this Lease, nor any estate created

hereby in Tenant nor any interest  herein or therein, shall pass to any trustee

or receiver or assignee for the benefit  of creditors or otherwise by operation

of law except as may specifically be provided by the Bankruptcy Code.

       37. BROKER'S COMMISSION.

Tenant and Landlord warrant that they have  dealt  with no broker in connection

with this Lease, except Long & Foster, Michael Reitz and agree to indemnify and

save the other harmless from all claims, actions, damages,  costs  and expenses

and liability whatsoever, including reasonable attorney's fees, that  may arise

from any breach of this warranty.  Landlord shall be responsible for paying the

commission owed on this lease transaction to the broker specified above.

     38.   RULES AND REGULATIONS.

Tenant  shall  faithfully  observe  and  comply  with the rules and regulations

attached hereto as Exhibit B, and to the extent the  same  do  not unreasonably

interfere with the conduct of Tenant's use and occupancy of the  Premises, with

any amendments or modifications thereto that Landlord shall, from time to time,

promulgate  with respect to the Building.  Any such amendments or modifications

to the rules  and  regulations  shall be binding upon Tenant upon delivery of a

copy of them to Tenant.  Landlord  shall  not  be responsible to Tenant for the

nonperformance of any of said rules and regulations  by  any  other  tenants or

occupants;  however, Landlord shall uniformly and non-discriminativily  enforce

all rules and regulations against all tenants and occupants.

       39. CAPTIONS.

The captions of the various sections of this Lease are for convenience only and

are not a part  of  this Lease.  Such captions shall not be construed to define

or limit any of the provisions of this Lease.

     40.   FINAL AND ENTIRE AGREEMENT.

This Lease contains the  final and entire agreement between the parties hereto,

and neither they nor their  agents  shall  be bound by any terms, conditions or

representations not herein written.

       41. TENANT REPRESENTATIVE.

The  name,  address  and  telephone  number  of Tenant   representative  to  be

contacted in event of emergency are as follows:

                Eric Dorsch - Premises (410) 995-0716

     42.  PARKING.

Tenant shall have the use of spaces 116, and 118 within the garage for the term

of the lease.  The parking rate of $125.00 per  month, per space is included in

the annual rental for the office premises.

     43.  IMPROVEMENTS.

Landlord shall provide the following within two (2) weeks of lease execution:

           A.  Remove wall as shown on plan to create a conference room.

           B.  Install sink and cabinets as shown on attached plan.

           C.  Install double entry doors with full lights.

     44.  QUIET ENJOYMENT.

Landlord hereby represents and warrants to Tenant  that  Landlord is in the fee

simple  owner  of the Building and the Premises, free and clear  of  liens  and

encumbrances, except  those  matters listed on Exhibit "__" attached hereto and

made a part hereof.  Subject to  all  of the other provisions of this Lease and

provided that Tenant performs and observes  all  of  the  terms, conditions and

covenants on Tenant's part to be performed and observed in  accordance with the

terms of this Lease, Tenant shall quietly enjoy and occupy the Premises without

molestation or hindrance by Landlord or any party claiming through Landlord.




<PAGE>


          WITNESS the hands and  seals  of  the parties hereto as of the day

   and year first above written.


   WITNESS:         SCARLETT HARBOR ASSOCIATES LIMITED PARTNERSHIP

                      By:  MERRITT MANAGEMENT CORPORATION, AGENT


    /S/ROBB MERRITT         By: /S/LEROY M. MERRITT   (SEAL)

                                             Landlord


   WITNESS/ATTEST:          K2  DESIGN, INC.


    /S/DENISE HOLLEY        By: /S/MATTHEW DE GANON    (SEAL)
                                        Tenant


<PAGE>





                       TABLE OF CONTENTS BY AND BETWEEN

         SCARLETT HARBOR ASSOCIATES LIMITED PARTNERSHIP, LANDLORD AND

                            K2 DESIGN, INC., TENANT

1. RENTAL....................................................................2
2. USE.......................................................................3
3. SERVICE AND UTILITIES.....................................................4
4. COMPLIANCE WITH LAWS......................................................7
5. ASSIGNMENT AND SUBLETTING.................................................7
6. OPERATING COSTS...........................................................9
7. INCREASE IN LANDLORD'S INSURANCE RATES...................................11
8. INSURANCE - INDEMNITY....................................................12
9. ALTERATIONS..............................................................17
10. OWNERSHIP OF ALTERATIONS................................................17
11. REPAIRS AND MAINTENANCE.................................................18
12. DEFAULT.................................................................22
13. DAMAGE OR DESTRUCTION...................................................25
14. POSSESSION..............................................................26
15. EXTERIOR OF PREMISES - SIGNS............................................26
16.  RELOCATION.............................................................27
17.  FOR RENT/SALE SIGNS....................................................27
18.  WATER AND OTHER DAMAGE.................................................28
19.  RIGHT OF ENTRY.........................................................28
21. CONDEMNATION............................................................29
22. SUBORDINATION...........................................................31
23. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS..........................32
24. ATTORNMENT..............................................................32
25. NON-WAIVER OF FUTURE ENFORCEMENT........................................33
26. PERSONAL PROPERTY TAXES.................................................34
27. RECORDATION OF LEASE....................................................34
28. NOTICES.................................................................35
29. WAIVER OF JURY TRIAL....................................................35
30. SEVERABILITY............................................................36
31. NON-WAIVER..............................................................37
32. SUCCESSORS AND ASSIGNS..................................................37
33. SECURITY DEPOSIT........................................................38
34. NOTICES TO MORTGAGEE....................................................40
35. ESTOPPEL CERTIFICATE....................................................40
36. BANKRUPTCY..............................................................41
37. BROKER'S COMMISSION.....................................................46
38. RULES AND REGULATIONS...................................................46
39. CAPTIONS................................................................47
40. FINAL AND ENTIRE AGREEMENT..............................................47
41. TENANT REPRESENTATIVE...................................................47
42.  PARKING................................................................47
43.  IMPROVEMENTS...........................................................47
44.  QUIET ENJOYMENT........................................................48


<PAGE>



                                                                     EXHIBIT A





                                DIAGRAM OMITTED


<PAGE>



                                                        EXHIBIT B


               SCARLETT PLACE COMMERCIAL CONDOMINIUM

                    HOUSE RULES AND REGULATIONS

      1.    No premises shall be used for any purpose  other  than  general
office use and  no  tenant  shall obstruct or use for storage or permit its
agents, clerks or servants to  obstruct or use for storage, in any way, any
common area of the Building; or  use  the  same  in any other way than as a
means of passage to and from the tenant's office,  bring in, store, test or
use   any   steam   or  internal  combustion  engine,  boiler,   machinery,
refrigerating  or heating  device  or  air-conditioning  apparatus  in  the
Building, or carry  on  any mechanical business herein, or use or permit to
be brought into the Building  any  inflammable  oils  or  fluids,  such  as
gasoline, kerosene, naptha and benzine, or any explosives or other articles
or  any  materials  which could cause a fire or an explosion or produce any
fumes  or vapor or which  could  be  deemed  hazardous  to  life,  limb  or
property;  smoke  in the elevators; throw substances of any kind out of the
windows or doors, or  down the passages of the Building, or in the halls or
passageways; sit on or place anything upon the window sills.

     2.   Waterclosets  and urinals shall not be used for any purpose other
than those for which they  were  constructed;  and  no  sweepings, rubbish,
ashes, newspaper or any other substances of any kind shall  be  thrown into
them.

      3.    No  signs, advertising, objects, notices or lettering shall  be
exhibited, inscribed, painted or affixed on any part of the common areas of
the Building, or  on  any part of any premises that is visible from outside
such premises, without the prior written consent of the Landlord.  Landlord
shall have the right to  prohibit  any  advertising  by  a tenant which, in
Landlord's opinion, tends to impair the reputation of the  Building  or its
desirability  as  an  office  building,  and  upon  written notice from the
Landlord, such tenant shall refrain from or discontinue such advertising.

     4.   Landlord shall have the right to prescribe  the  times  of moving
freight in and out of the Building, and all such moving shall be done under
the supervision of the Landlord.
     5.   Landlord reserves the right to control ingress and egress  to and
from  the  Building and/or to close and keep locked all entrances and exist
doors of the  Building on Sundays and legal holidays, on other days between
the hours of 6:00  p.m.  and  8:00  a.m.,  and  during  such other times as
Landlord  deems  advisable  for  the  adequate  security  of the  Building.
Tenants and their agents and employees, and any other persons  entering  or
leaving  the  building  at  such times may be required to sign the Building
register, and the watchman or  agent  of  Landlord in charge shall have the
right  to  refuse  admittance  to  any person not  possession  satisfactory
identification and authorization.  Landlord  assumes no responsibility with
respect  to  and  shall not be liable for any damages  resulting  from  the
admission of any person, authorized or unauthorized, into the Building.

     6.   Tenants and  their agents and employees shall not make, or permit
to be made, any noise that  is annoying, unpleasant or distasteful, whether
by the use of any musical instrument,  radio,  television  set, other audio
device or otherwise or cause or permits any unusual or objectionable  odors
to be produced upon or emanate from a unit, or in any other way disturb  or
interfere with other tenants or their agents, employees or invitees.

      7.    Tenants  shall not install or use any machinery or equipment in
the unit which may cause  any annoying or disturbing noise or jar or tremor
to any of the floors or walls of the Building, or which by its weight might
damage the floor of the Building upon which it is placed.

     8.   The directory board  in  the  entrance  lobby  of the Building is
provided  exclusively  for  the  display  of the name and location  in  the
Building of each tenant and Landlord reserves  the  right  to  exclude  any
other  name  therefrom  and  to make a reasonable charge for each and every
name in addition to the name of  the  tenant  placed on the directory board
with the consent of the Landlord.

     9.    Each tenant shall provide Landlord with  keys to the premises to
permit entry to the premises in case of emergency or otherwise as permitted
by the Lease.

     10.   No bicycles, vehicles or animals of any kind  shall  be  brought
into or kept in or upon the unit or any part of the common elements of  the
Building.

      11.   Employees of Landlord shall not perform any work for tenants or
do anything  outside  of their regular duties, unless under special written
instructions from Landlord.

     12.   No premises  shall be used for lodging or sleeping purposes, nor
may any cooking be done in  any  premises  that  causes  a  noticeable odor
therefrom in the common areas, or any part thereof, of the Building.

      13.    Tenants  shall  not  conduct,  or  permit any other person  to
conduct, any auction in the premises or any part of the common areas of the
Building; manufacture or store goods, wares or merchandise in the premises,
without the prior written approval of Landlord, except the storage of usual
supplies and inventory to be used by the Tenant incidental  to the purposes
for  which  the tenant may use the premises; or permit the premises  to  be
used for gambling.   Tenants  shall not occupy or permit any portion of the
premises to be occupied as an office  for public stenography or typewriter,
or  for  the  possession,  storage, manufacture  or  sale  of  intoxicating
beverages, narcotics, tobacco in any form, or as a barber or as a barber or
manicure shop.

     14.   No curtains, blinds,  shades,  screens, awnings or other form of
inside or outside window covering, or window ventilators or similar devices
shall be attached to or hung in, or used in  connection with, any window or
door of the premises, without the prior written  consent  of  Landlord.  If
landlord  consents,  such  covering or devices must be of a quality,  type,
design, and color and attached in a manner approved by Landlord.

      15.    Canvassing,  soliciting  and  peddling  in  the  Building  are
prohibited, and all tenants  shall  cooperate  to prevent the same.  Tenant
shall  not  exhibit,  sell  or offer for sale in the  premises  or  in  the
Building, any article or thing except those articles and things essentially
connected with the stated use  of  the  premises, without the prior written
consent of Landlord.

     16.   There shall not be used in any  part  of the common areas of the
Building,  either by a tenant or by others in the delivery  or  receipt  of
merchandise,  any  hand  trucks except those equipped with rubber tires and
side guards, and no hand trucks will be allowed in passenger elevators.


<PAGE>



     17.   Tenant shall list  all  articles  to  be taken from the Building
(other than those taken out in the usual course of  business of the tenant)
on such tenant's letterhead.  Such list shall be presented  to the Landlord
for  approval  before  Building  employees may permit such articles  to  be
placed in an elevator or taken from the Building.

     18.   The violation of these Rules and Regulations shall constitute an
Event of default under the Lease.