Document:

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EXHIBIT 10.57

                               999 NORTH SEPULVEDA

                                  OFFICE LEASE

         This Office Lease (the "LEASE"), dated as of the date set forth in
Section 1 of the Summary of Basic Lease Information (the "SUMMARY"), below, is
made by and between KILROY REALTY, L.P., a Delaware limited partnership
("LANDLORD"), and ENCORE SOFTWARE, INC., a Minnesota corporation ("TENANT").

                       SUMMARY OF BASIC LEASE INFORMATION

<TABLE>
<CAPTION>
                      TERMS OF LEASE                                               DESCRIPTION
                      --------------                                               -----------
<S>                                                          <C>
1. Date:                                                     October 8, 2004.

2.       Building, Premises and Project

         2.1      Building                                   999 North Sepulveda Boulevard, El Segundo, California
                                                             (consisting of approximately 127,322 rentable square
                                                             feet of space).

         2.2      Premises:                                  13,216 rentable (12,294 usable) square feet of space
                                                             located in the Building, as further set forth below and
                                                             in EXHIBIT A to this Lease.

                                                             Suite No.: 700

                                                             Floors: Entire Seventh (7th).

         2.3      Project:                                   The Building is part of an office project  as further
                                                             set forth in Section 1.1.2 of this Lease.

3.       Lease Term (Article 2).

         3.1      Length of Term:                            Sixty-two (62) months.

         3.2      Lease Commencement Date:                   The later of (i) the date the Premises is "Ready for
                                                             Occupancy," as such term is defined in the Tenant Work
                                                             Letter and (ii) March 1, 2005.

         3.3      Lease Expiration Date:                     The last day of the sixty-second (62nd) month to occur
                                                             after the Lease Commencement Date.

4.       Base Rent (Article 3):
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<TABLE>
<CAPTION>
                                                                                                    Annual
                                                                       Monthly                    Rental Rate
Months during the Lease                 Annual                      Installment                 per Rentable
           Term                        Base Rent                    of Base Rent*                 Square Foot
           ----                        ---------                    -------------                 -----------
<S>                                   <C>                           <C>                          <C>
            1-2                           N/A                            N/A                        $ 0.00
           3-30                       $309,254.40                    $25,771.20                     $23.40
          31-62                       $325,113.60                    $27,092.80                     $24.60
</TABLE>

<TABLE>
<S>                                                          <C>
5.       Base Year                                           Calendar year 2005.
         (Article 4):

6.       Tenant's Share (Article 4):

         6.1      Tenant's Share of the Building:            10.3800%.
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

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<TABLE>
<S>                                                          <C>
7.       Permitted Use                                       General office use consistent with the character of a
         (Article 5):                                        first-class office building.

8.       Security Deposit                                    $27,092.80.
         (Article 21):

9.       Parking Passes                                      An obligatory three (3) parking permits and an optional
         (Article 28):                                       (1) parking permit (for a total of up to four (4))
                                                             parking permits) for every 1,000 rentable square feet of the
                                                             Premises, of which up to a total of five (5) permits may be
                                                             for the use of reserved parking spaces as reasonably
                                                             designated by Landlord and the remainder of which shall be
                                                             unreserved parking permits. The above unreserved parking
                                                             permits shall be provided free of charge (except as provided
                                                             in Article 28 of this Lease) during the first two (2) years of
                                                             the Lease Term and thereafter at Landlord's then prevailing
                                                             rates for such parking. Subject to availability, Tenant may
                                                             rent up to an additional five (5) permits for reserved parking
                                                             on a month-to-month basis at Landlord's then prevailing rates.

10.      Notice Address of Tenant                            16920 South Main Street
         (Section 29.18):                                    Gardena, California 90248
                                                             Attention: Mr. Steve Miller, CFO
                                                             (Prior to the Lease Commencement Date)

                                                             and

                                                             999 North Sepulveda Boulevard
                                                             Suite 700
                                                             El Segundo, California  90245
                                                             Attention: Mr. Steve Miller, CFO
                                                             (After the Lease Commencement Date)

                                                             with a copy to:

                                                             Advisors LLP
                                                             11911 San Vicente Boulevard
                                                             Suite 265
                                                             Los Angeles, California 90049
                                                             Attention: Robert J. Plotkowski, Esq.
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -2-
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<TABLE>
<S>                                                          <C>
11.      Notice Address of Landlord:                         Kilroy Realty, L.P.
                                                             12200 W. Olympic Boulevard, Suite 200
                                                             Los Angeles, California  90064
                                                             Attention:  Legal Department
                                                             Phone:  (310) 481-8400
                                                             Facsimile:  (310) 481-6530

                                                             and to:

                                                             Kilroy Realty, L.P.
                                                             12200 W. Olympic Boulevard, Suite 200
                                                             Los Angeles, California  90064
                                                             Attention: Asset Management
                                                             Phone: (310) 481-8400
                                                             Facsimile: (310) 481-6520

                                                             With a copy to:

                                                             Allen Matkins Leck Gamble & Mallory LLP
                                                             1901 Avenue of the Stars, Suite 1800
                                                             Los Angeles, California  90067
                                                             Attention: Delmar L. Nehrenberg, Esq.
                                                             Phone: (310) 788-2400
                                                             Facsimile: (310) 788-2410

 12.      Broker(s)                                          For Landlord:
         (Section 29.24):                                    Madison Partners/CB Richard Ellis

                                                             For Tenant:
                                                             Julien J. Studley, Inc.

13.      Tenant Improvement Allowance                        $45.00 per usable square foot of the Premises for a
         (Section 2 of EXHIBIT B):                           total of $553,230.00.

14.      Guarantor                                           Navarre Corporation, a Minnesota corporation
         (EXHIBIT G):
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -3-
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                                    ARTICLE 1

         PREMISES, BUILDING, PROJECT, AND COMMON AREAS; EARLY POSSESSION

      1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.

            1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the premises set forth in Section 2.2 of the Summary
(the "PREMISES"). The outline of the Premises is set forth in EXHIBIT A attached
hereto and has the number of rentable square feet as set forth in Section 2.2 of
the Summary. The outline of the Premises, the "Building" and the "Project," as
those terms are defined in Section 1.1.2 below. The parties hereto agree that
the lease of the Premises is upon and subject to the terms, covenants and
conditions herein set forth, and Landlord and Tenant each covenant, as a
material part of the consideration for this Lease, to keep and perform each and
all of such terms, covenants and conditions by them, respectively, to be kept
and performed under this Lease. The parties hereto hereby acknowledge that the
purpose of EXHIBIT A is to show the approximate location of the Premises in the
"Building," as that term is defined in Section 1.1.2. below, only, and such
Exhibit is not meant to constitute an agreement, representation or warranty as
to the construction of the Premises, the precise area thereof or the specific
location of the "Common Areas," as that term is defined in Section 1.1.3, below,
or the elements thereof or of the accessways to the Premises or the "Project" as
that term is defined in Section 1.1.2, below. Except as specifically set forth
in this Lease and in the Tenant Work Letter attached hereto as EXHIBIT B (the
"TENANT WORK LETTER"), Landlord shall not be obligated to provide or pay for any
improvement work or services related to the improvement of the Premises. Tenant
also acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant's business, except as specifically set forth in this Lease
and the Tenant Work Letter.

            1.1.2 THE BUILDING AND THE PROJECT. The Premises are a part of the
building set forth in Section 2.1 of the Summary (the "BUILDING"). The Building
is part of the "Project," defined below. The term "PROJECT," as used in this
Lease, shall mean (i) the Building and the "Common Areas," as that term is
defined in Section 1.1.3, below (ii) the land (which is improved with
landscaping, subterranean parking facilities and other improvements) upon which
the Building and the Common Areas are located, (iii) the parking structure
located at 955 North Sepulveda Boulevard (iv) the building located adjacent to
the Building at 909 North Sepulveda Boulevard, and (v) at Landlord's discretion,
any additional real property, areas, land, buildings or other improvements added
thereto adjacent to the Project.

            1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to use
in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its reasonable
discretion, including certain de minimus areas designated for the exclusive use
of certain tenants, or to be shared by Landlord and certain tenants, are
collectively referred to herein as the "COMMON AREAS"). The Common Areas shall
consist of the "Project Common Areas" and the "Building Common Areas." The term
"PROJECT COMMON AREAS," as used in this Lease, shall mean the portion of the
Project designated as such by Landlord. The term "BUILDING COMMON AREAS," as
used in this Lease, shall mean the portions of the Common Areas located within
the Building designated as such by Landlord. The manner in which the Common
Areas are maintained and operated shall be at the reasonable discretion of
Landlord and the use thereof shall be subject to such rules, regulations and
restrictions as Landlord may make from time to time provided the same are
enforced in a nondiscriminatory manner. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas. Except when and where Tenant's
right of access is specifically excluded or restricted as the result of (i) an
emergency, (ii) a requirement by Applicable Laws, or (iii) a specific provision
set forth in this Lease, Tenant shall have the right of access to the Premises,
the Building, and the Project parking facility twenty-four (24) hours per day,
seven (7) days per week during the Lease Term. Notwithstanding anything above to
the contrary, Landlord shall maintain and operate the Project in a manner
materially consistent with other first-class, mid-rise office buildings in El
Segundo, California, which are comparable in terms of size (from 100,000 to
500,000 square feet), date and extent of renovation, age, quality of

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -4-
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construction, appearance, and quality of common area improvements (the
"COMPARABLE BUILDINGS").

            1.1.4 LANDLORD MODIFICATION OF THE PROJECT. Notwithstanding anything
to the contrary set forth in Section 1.1.3 or Article 5, the Rules and
Regulations or elsewhere in the Lease, Landlord shall not modify the Common Area
or any other portion of the Project in such a manner which shall (i) materially
reduce the common facilities available to the Building, (ii) materially diminish
the amount of visitor parking available to the Building for any sustained
period, or (iii) unreasonably obstruct or interfere with the accessibility of
the Premises, the Building or the parking areas, the visibility of Tenant's
signage or Tenant's use and enjoyment of the Premises or the Building or the
parking areas ("TENANT'S LEASE RIGHTS").

      1.2 RENTABLE SQUARE FEET OF PREMISES, BUILDING, AND PROJECT. For purposes
of this Lease, the "rentable square feet" and "usable square feet" of the
Premises, Building and Project and all percentages based thereupon shall be
deemed as set forth in the Summary, above, and shall not be subject to
remeasurement or verification.

                                    ARTICLE 2

                         INITIAL LEASE TERM; OPTION TERM

      2.1 INITIAL LEASE TERM. The terms and provisions of this Lease shall be
effective as of the date of this Lease. The term of this Lease (the "LEASE
TERM") shall be as set forth in Section 3.1 of the Summary, shall commence on
the date set forth in Section 3.2 of the Summary (the "LEASE COMMENCEMENT
DATE"), and shall terminate on the date set forth in Section 3.3 of the Summary
(the "LEASE EXPIRATION DATE") unless this Lease is sooner terminated or extended
as herein provided. For purposes of this Lease, the term "LEASE YEAR" shall mean
each consecutive twelve (12) month period during the Lease Term; provided,
however, that the first Lease Year shall commence on the Lease Commencement Date
and end on the last day of the eleventh month thereafter and the second and each
succeeding Lease Year shall commence on the first day of the next calendar
month; and further provided that the last Lease Year shall end on the Lease
Expiration Date. Within six (6) months following the Lease Commencement Date,
Landlord shall deliver to Tenant a Notice of Lease Term Dates in the form as set
forth in EXHIBIT C, attached hereto (or a reasonably comparable form), as a
confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within twenty (20) business days of receipt
thereof, provided that if said notice is not factually correct, then Tenant
shall make such changes as are necessary to make the notice factually correct
and shall thereafter execute and return such notice to Landlord within such
twenty (20) business day period. Once the Notice of Lease Term Dates is executed
and delivered by Landlord and Tenant, the same shall be binding upon Landlord
and Tenant.

      2.2 OPTION TERM.

            2.2.1 OPTION RIGHT. Landlord hereby grants the Original Tenant, any
assignee of Tenant permitted under Article 14 of this Lease, and any "Affiliate"
(as that term is defined in Section 14.8 below) (collectively, the "RIGHT
HOLDERS"), one (1) option to extend the Lease Term for a period of five (5)
years (the "OPTION TERM" ), which option shall be exercisable only by written
notice delivered by Tenant to Landlord as provided below, provided that, as of
the date of delivery of such notice, Tenant is not in Default under this Lease
beyond any applicable notice and cure periods set forth herein. Upon the proper
exercise of such option to extend, and provided that, at Landlord's option, as
of the end of the initial Lease Term or the first Option Term, as the case may
be, Tenant is not in Default under this Lease beyond any applicable notice and
cure periods set forth herein, the Lease Term, as it applies to the Premises,
shall be extended for a period of five (5) years. The rights contained in this
Section 2.2 shall be personal to the Right Holders, and may only be exercised by
such Right Holders (and not any other assignee, sublessee or other transferee of
Tenant's interest in this Lease) if such entities collectively occupy the not
less than fifty percent (50%) of the Premises.

            2.2.2 OPTION RENT. The rent payable by Tenant during the Option Term
(the "OPTION RENT") shall be equal to the "FAIR MARKET RENT RATE," as that term
is defined in Section 2.2.2.1, below.

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -5-
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                  2.2.2.1 FAIR MARKET RENT RATE. The "FAIR MARKET RENT RATE"
shall be equal to the rent (including additional rent and considering any "base
year" or "expense stop" applicable thereto), including all escalations, at which
tenants, as of the commencement of the Option Term, are leasing non-sublease,
non-encumbered, non-equity, non-renewal, non-expansion space comparable in size,
location and quality to the Premises, for a similar lease term and for a similar
use, in an arms length transaction, which comparable space is located in the
Project and in the Comparable Buildings (the "COMPARABLE TRANSACTIONS"), taking
into consideration the following concessions: (a) rental abatement concessions,
if any, being granted such tenants in connection with such comparable space, (b)
tenant improvements or allowances provided or to be provided for such comparable
space, taking into account, and deducting the value of, the existing
improvements in the Premises, such value to be based upon the age, design,
quality of finishes, and layout of the improvements and the extent to which the
same could be utilized by a general office user and (c) all other monetary and
non-monetary concessions, if any, being granted such tenants in connection with
such comparable space; provided, however, that notwithstanding anything to the
contrary herein, no consideration shall be given to (x) the fact that Landlord
is or is not required to pay a real estate brokerage commission in connection
with the applicable term or the fact that the comparable transactions do or do
not involve the payment of real estate brokerage commissions, and (y) any period
of rental abatement, if any, granted to tenants in Comparable Transactions in
connection with the design, permitting and construction of tenant improvements
in such comparable space. The Fair Market Rent Rate shall additionally include a
determination, based on the concession package being offered by Landlord, as to
whether, and if so to what extent, Tenant must provide Landlord with financial
security, such as a letter of credit or guaranty, for Tenant's Rent obligations
during the Option Term. Such determination shall be made by reviewing the extent
of financial security then generally being imposed in Comparable Transactions
from tenants of comparable financial condition and credit history to the then
existing financial condition and credit history of Tenant (with appropriate
adjustments to account for differences in the then-existing financial condition
of Tenant and such other tenants).

            2.2.3 EXERCISE OF OPTION. The option contained in this Section 2.2
shall be exercised by Tenant, if at all, only in the following manner: (i)
Tenant shall deliver written notice to Landlord not more than fifteen (15)
months nor less than ten (10) months prior to the expiration of the initial
Lease Term, stating that Tenant is interested in exercising its option (the
"INTEREST NOTICE"); (ii) Landlord, after receipt of Tenant's notice, shall
deliver notice (the "OPTION RENT NOTICE") to Tenant not more than thirty (30)
days after receipt of Tenant's notice, setting forth the Option Rent; (iii) if
Tenant wishes to exercise such option, Tenant may, by written notice to
Landlord, on or before the date occurring thirty (30) days after Tenant's
receipt of the Option Rent Notice, request Landlord's determination of the Fair
Market Rent Rate (which shall not exceed the Option Rent set forth in the Option
Rent Notice) which Landlord would submit to arbitration, if arbitration were to
occur under Section 2.2.4, below, and within ten (10) business days of such
request, Landlord and Tenant shall each simultaneously deliver to the other
their determinations of the Fair Market Rent Rate (provided that the
determination of the Fair Market Rent Rate submitted by Landlord shall not
exceed the Option Rent set forth in the Option Rent Notice) that each would
submit to arbitration if arbitration were to occur under Section 2.2.4, below
(the "ARBITRATION FAIR MARKET RENTAL VALUES") (provided that if Tenant has
requested an exchange of Arbitration Fair Market Rental Values and Landlord
fails to provide Landlord's Arbitration Fair Market Rental Value, then the
Option Rent contained in the Option Rent Notice shall be deemed Landlord's
Arbitration Fair Market Rental Value, and, so long as Tenant has delivered to
Landlord its Arbitration Fair Market Rental Value, the Arbitration Fair Market
Rental Values shall be deemed determined and exchanged); and (iv) whether or not
Arbitration Fair Market Rental Values were determined and exchanged pursuant to
Section 2.2.3(iii), above, if Tenant wishes to exercise such option, Tenant
shall, on or before the date occurring thirty (30) days after Tenant's receipt
of the Option Rent Notice, exercise the option by delivering written notice
thereof to Landlord (the "OPTION EXERCISE NOTICE"), and upon, and concurrent
with, such exercise, Tenant shall, at its option, either (A) accept the Option
Rent contained in the Option Rent Notice, in which case the Option Rent shall be
the amount set forth in the Option Rent Notice, (B) accept Landlord's
Arbitration Fair Market Rental Value (to the extent the same has been previously
provided pursuant to the terms hereof), in which case the Option Rent shall be
Landlord's Arbitration Fair Market Rental Value, or (C) object to both the
Option Rent contained in the Option Rent Notice, and, if applicable, Landlord's
Arbitration Fair Market Rental Value, in which case the parties shall follow the
procedure, and the Option Rent shall be determined, as set forth in Section
2.2.4 below, but subject to the terms and conditions,

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -6-
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when appropriate, of Section 2.2.2 above. Notwithstanding the foregoing, in the
event that Tenant shall fail to deliver the Interest Notice, Tenant shall
nonetheless have the right to deliver the Option Exercise Notice within the time
period set forth above, in which case the parties shall follow the procedure,
and the Option Rent shall be determined, as set forth in Section 2.2.4, below.

            2.2.4 DETERMINATION OF FIRST OPTION RENT. In the event Tenant timely
and appropriately objects to the Option Rent, or Tenant delivers the Option
Exercise Notice without having delivered the Interest Notice, Landlord and
Tenant shall attempt to agree upon the same using their best good-faith efforts.
If Landlord and Tenant fail to reach agreement within ten (10) business days
following Tenant's objection to the Option Rent (the "OUTSIDE AGREEMENT DATE"),
then (i) if Arbitration Fair Market Rental Values have been determined and
exchanged pursuant to item (iii) of Section 2.2.3, above, each party's
Arbitration Fair Market Rental Values shall be submitted to arbitration without
modification in accordance with Sections 2.2.4.1 through 2.2.4.7 below or (ii)
if Arbitration Fair Market Rental Values have not been determined and exchanged
pursuant to item (iii) of Section 2.2.3, above, each party shall make a separate
determination of the Option Rent within ten (10) business days, and such
determination and the Option Rent shall be submitted to arbitration in
accordance with Sections 2.2.4.1 through 2.2.4.7 below.

                  2.2.4.1 Landlord and Tenant shall each appoint one (1)
arbitrator who shall by profession be a real estate broker or appraiser who
shall have been active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of commercial mid
or high-rise properties in the El Segundo, California area. The determination of
the arbitrators shall be limited solely to the issue area of whether Landlord's
or Tenant's submitted Option Rent is the closest to the actual Option Rent as
determined by the arbitrators, taking into account the requirements of Section
2.2.2 of this Lease. Each such arbitrator shall be appointed within fifteen (15)
days after the applicable Outside Agreement Date.

                  2.2.4.2 The two (2) arbitrators so appointed shall within ten
(10) days of the date of the appointment of the last appointed arbitrator agree
upon and appoint a third arbitrator who shall be qualified under the same
criteria set forth hereinabove for qualification of the initial two (2)
arbitrators.

                  2.2.4.3 The three (3) arbitrators shall within thirty (30)
days of the appointment of the third arbitrator reach a decision as to whether
the parties shall use Landlord's or Tenant's submitted Option Rent and shall
notify Landlord and Tenant thereof.

                  2.2.4.4 The decision of the majority of the three (3)
arbitrators shall be binding upon Landlord and Tenant.

                  2.2.4.5 If either Landlord or Tenant fails to appoint an
arbitrator within fifteen (15) days after the applicable Outside Agreement Date,
the arbitrator appointed by one of them shall reach a decision, notify Landlord
and Tenant thereof, and such arbitrator's decision shall be binding upon
Landlord and Tenant.

                  2.2.4.6 If the two (2) arbitrators fail to agree upon and
appoint a third arbitrator, or both parties fail to appoint an arbitrator, then
the appointment of the third arbitrator or any arbitrator shall be dismissed and
the matter to be decided shall be forthwith submitted to binding, final,
non-applicable arbitration before a J.A.M.S. arbitrator mutually agreed upon by
Landlord and Tenant. If Landlord and Tenant cannot agree on the arbitrator, the
parties will so inform J.A.M.S., who will then be authorized to select a
J.A.M.S. judge to arbitrate the matter. Each party shall have the right of
discovery pursuant to the California Code of Civil Procedure and evidentiary
hearings shall be governed by the California Evidence Code, but subject to the
instruction set forth in this Section 2.2.4.

                  2.2.4.7 The cost of arbitration shall be paid by Landlord and
Tenant equally.

      2.3 PRE-OCCUPANCY RIGHT. If the date on which the Premises are Ready for
Occupancy precedes the Lease Commencement Date, then Tenant shall have the right
to occupy the Premises commencing on the date the Landlord delivers the Premises
to Tenant Ready for

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -7-
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Occupancy through and including the day immediately preceding the Lease
Commencement Date (the "Pre-Occupancy Period") without payment of Base Rent for
such period, provided that all of the terms and conditions of the Lease shall
apply (other than Tenant's obligations to pay Base Rent), as though the Lease
Commencement Date had occurred upon such occupancy of the Premises by Tenant,
although Lease Commencement Date shall not actually occur until the occurrence
of the same pursuant to the terms of this Lease.

                                    ARTICLE 3

                                    BASE RENT

      Tenant shall pay, without prior notice or demand, to Landlord or
Landlord's agent at the management office of the Project, or, at Landlord's
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent ("BASE
RENT") as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary, in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction whatsoever (except as otherwise specifically set forth
in this Lease). The Base Rent for the third (3rd) month of the Lease Term shall
be paid at the time of Tenant's execution of this Lease. If any Rent payment
date (including the Lease Commencement Date) falls on a day of the month other
than the first day of such month or if any payment of Rent is for a period which
is shorter than one month, the Rent for any such fractional month shall accrue
on a daily basis during such fractional month and shall total an amount equal to
the product of (i) a fraction, the numerator of which is the number of days in
such fractional month and the denominator of which is the actual number of days
occurring in such calendar month, and (ii) the then-applicable Monthly
Installment of Base Rent. All other payments or adjustments required to be made
under the terms of this Lease that require proration on a time basis shall be
prorated on the same basis.

                                    ARTICLE 4

                                 ADDITIONAL RENT

      4.1 GENERAL TERMS. In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct
Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease,
respectively, which are in excess of the amount of Direct Expenses applicable to
the "Base Year," as that term is defined in Section 4.2.1, below; provided,
however, that in no event shall any decrease in Direct Expenses for any Expense
Year below Direct Expenses for the Base Year entitle Tenant to any decrease in
Base Rent or any credit against sums due under this Lease. Such payments by
Tenant, together with any and all other amounts payable by Tenant to Landlord
pursuant to the terms of this Lease, are hereinafter collectively referred to as
the "ADDITIONAL RENT", and the Base Rent and the Additional Rent are herein
collectively referred to as "RENT." All amounts due under this Article 4 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent. Without limitation on other obligations of Tenant and Landlord
which survive the expiration of the Lease Term, the obligations of Tenant to pay
the Additional Rent attributable to the period of time prior to the Lease
Expiration Date, as may be extended pursuant to the terms of Section 2.2 of this
Lease, or earlier termination of this Lease, and Landlord's obligation to refund
to Tenant any overpayments of such Additional Rent, shall survive the expiration
of the Lease Term. Notwithstanding the foregoing, other than Tax Expenses and
costs incurred for utilities (the "EXCLUDED EXPENSES"), Tenant shall not be
responsible for Tenant's Share of any Direct Expenses which are first billed to
Tenant more than two (2) calendar years after the end of the Expense Year to
which such Direct Expenses relate, provided that Tenant shall be responsible for
Excluded Expenses first billed to Tenant more than two (2) calendar years after
the end of the Expense Year to which such Excluded Expenses relate only to the
extent that Landlord becomes aware of such increased Excluded Expenses following
such two (2) year period due to governmental revision, supplementation or other
governmental action which results in the adjustment of the Excluded Expenses.

      4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:

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            4.2.1 "BASE YEAR" shall mean the period set forth in Section 5 of
the Summary.

            4.2.2 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."

            4.2.3 "EXPENSE YEAR" shall mean each full or partial calendar year
in which any portion of the Lease Term falls, through and including the calendar
year in which the Lease Term expires.

            4.2.4 "OPERATING EXPENSES" shall mean all expenses, costs and
amounts of every kind and nature which Landlord pays or accrues during any
Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement or operation of the Project, or any
portion thereof, subject to the terms and conditions of this Lease.

                  4.2.4.1 OPERATING EXPENSES: INCLUSIONS. Without limiting the
generality of the foregoing, Operating Expenses shall specifically include any
and all of the following: (i) the cost of supplying all utilities, the cost of
operating, repairing, and maintaining, the utility, mechanical, sanitary, storm
drainage, and elevator systems, and the cost of maintenance and service
contracts in connection therewith; (ii) the cost of licenses, certificates,
permits and inspections and the cost of contesting any governmental enactments
which may affect Operating Expenses, and the costs incurred in connection with
any governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection with
the Project; (iv) the cost of landscaping, relamping, with similar items and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof, or any area adjacent to the
Project in connection with which Landlord is required to perform such services;
(v) costs incurred in connection with the parking areas servicing the Project
(including costs of painting, restriping and resurfacing the parking areas
servicing the Project); (vi) reasonable fees and other costs, including
management fees, consulting fees, legal fees and accounting fees, of all
contractors and consultants in connection with the management, operation,
maintenance and repair of the Project; (vii) payments under any equipment rental
agreements and the fair rental value of any management office space; (viii)
reasonable wages, salaries and other compensation and benefits, including taxes
levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) reasonable costs under any instrument currently in
force pertaining to the sharing of costs by the Project; (x) operation, repair,
and maintenance of all systems and equipment and components thereof of the
Building; (xi) the reasonable cost of janitorial, alarm, security and other
services, reasonable replacement of wall and floor coverings, ceiling tiles and
fixtures in common areas with similar items, maintenance and replacement of
curbs and walkways, repair to roofs; (xii) amortization (including interest on
the unamortized cost) of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are reasonably intended to effect
economies in the operation or maintenance of the Project, or any portion
thereof, but only to the extent of reasonably intended cost savings, or (B) that
are required under any governmental law or regulation enacted after the Lease
Commencement Date; provided, however, that any capital expenditure shall be
amortized with interest over its useful life as reasonably determined; (xiv)
costs, fees, charges or assessments imposed by, or resulting from any mandate
currently in force imposed on Landlord by, any federal, state or local
government for fire and police protection, trash removal, community services, or
other services which do not constitute "Tax Expenses" as that term is defined in
Section 4.2.5, below; (xv) payments under any easement, license, operating
agreement, declaration, restrictive covenant, or instrument currently in force
pertaining to the sharing of costs by the Building. Any of the services which
may be included in the computation of the Operating Expenses of the Building may
be performed by divisions, subsidiaries or affiliates of Landlord, provided that
the contracts for the performance of such services shall be materially
consistent (in terms of price and quality of work) with similar contracts and
transactions with unaffiliated entities for the performance of such services in
comparable office buildings within the greater Los Angeles metropolitan area.

                  4.2.4.2 If Landlord does not carry earthquake insurance for
the Building during the Base Year but subsequently obtains earthquake insurance
for the Building during the Lease Term, then from and after the date upon which
Landlord obtains such earthquake insurance and continuing throughout the period
during which Landlord maintains such insurance,

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Operating Expenses for the Base Year shall be deemed to be increased by the
amount of the premium Landlord would have incurred had Landlord maintained such
insurance for the same period of time during the Base Year as such insurance is
maintained by Landlord during such subsequent Expense Year. If the Building (or,
with respect to Project-wide expenses, the Project) is not at least ninety-five
percent (95%) occupied during all or a portion of the Base Year or any Expense
Year, Landlord shall make an appropriate adjustment to the components of
Operating Expenses for such year to determine the amount of Operating Expenses
that would have been incurred had the Building (or, with respect to Project-wide
expenses, the Project) been ninety-five percent (95%) occupied; and the amount
so determined shall be deemed to have been the amount of Operating Expenses for
such year. In no event shall Landlord's grossed-up calculations for any
particular expense result in a determination of such particular expense which,
if applied to all tenants of the Building, would result in more than 100% of
such expense being reimbursable to Landlord by all tenants of the Building, and
if such calculations result in an excess, Tenant's Share of the amount in excess
of 100% shall be returned to Tenant. All exclusions to Operating Expenses, as
set forth above, shall be deducted prior to applying a gross-up methodology to
any item of Operating Expenses. Only those items, or components of items, which
are variable (i.e., costs which vary as a result of changes in occupancy of the
Building such as cleaning, repair, maintenance, HVAC operation, etc.), as
opposed to fixed costs (i.e., costs which do not vary as a result of changes in
occupancy of the Building such as annual contracted inspections of systems of
equipment, fixed security and insurance costs, etc.) shall be grossed-up. In the
gross-up treatment, reasonable projections shall be used and sound real estate
accounting principles, consistently applied, utilized.

                  4.2.4.3 OPERATING EXPENSES; EXCLUSIONS. Notwithstanding
anything to the contrary contained in this Lease, "Operating Expenses" shall not
include the following:

                        (i) Landlord's brokerage fees or commissions, finder's
fees, space planning costs, attorneys' fees and other costs incurred by Landlord
in leasing or attempting to lease space or operate concessions in the Project,
including design, construction and construction management costs relating to
tenant improvements of other tenants;

                        (ii) costs of design, entitlement, site preparation,
planning, marketing, construction, and/or acquisition of new buildings,
additional land or any expansion of or major physical change to the Building or
the Project;

                        (iii) except as set forth in Section 4.2.4 (xii) and
Section 4.2.4 (xiii), costs of items considered capital repairs, replacements,
improvements and equipment, or amortization or depreciation under generally
accepted accounting principles consistently applied or otherwise except for
minor capital improvements, tools or expenditures to the extent each such
improvement or acquisition costs less than Three Thousand Dollars ($3,000) and
the total cost of same are not in excess of Ten Thousand Dollars ($10,000) in
any twelve (12) month period;

                        (iv) except as set forth in Section 4.2.4 (xii) and
Section 4.2.4 (xiii) and except to the extent reasonably required in connection
with the operation, maintenance, or repair of the Project, costs for equipment
or machinery incurred by Landlord after the Lease Commencement Date (unless same
are reasonably anticipated to effectuate an annual reduction in Operating
Expenses greater than the annual expense thereof to be included in Operating
Expenses pursuant to the other terms and provisions hereof);

                        (v) except as set forth in Section 4.2.4 (xii) and
Section 4.2.4 (xiii), interest, principal, points and fees on debt or
amortization on any mortgage, deed of trust or other debt secured, or unsecured,
by the Project;

                        (vi) repairs or replacements to any utility systems
which are dedicated to the use of a single other tenant or concession operator;

                        (vii) amounts paid for goods or services to any persons
or entities related to Landlord in excess of the prevailing cost of such goods
or services from competitive unrelated sources;

                        (viii) any fee to or charge by Landlord (or any person
and/or entity related to Landlord) for management, supervision, employee costs,
profit and/or general

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overhead, and any bookkeeping and accounting costs or expenses, except to the
extent (i) incurred in connection with Landlord's in-house accountant, or (ii)
included in the management fee permitted hereunder;

                        (ix) any cost which is the responsibility of any utility
company, governmental agency, or other third party to the extent such cost is
reimbursed to Landlord from such company, agency or other third party, or to the
extent such cost is reimbursable but Landlord has failed to seek such
reimbursement with due diligence;

                        (x) reserves for future expenses beyond current year
anticipated expenses;

                        (xi) any costs or expenses for which Landlord is paid or
reimbursed by insurance or a past or present tenant of the Project to the extent
Landlord has failed to seek payment or reimbursement with due diligence;

                        (xii) all interest and penalties incurred as a result of
Landlord's failure to pay bills as the same become due;

                        (xiii) charitable or political contributions;

                        (xiv) accountants' fees, arbitration fees, and other
costs and expenses incurred in connection with any audits conducted by Landlord
or any past or present tenant or any existing or prospective leasing, lease
renewal, lease termination, lease modification or other negotiations or disputes
with employees or contractors, present or prospective tenants or other occupants
of the Project, or their assignees or sublessees, or lenders or ground lessors;

                        (xv) costs associated with the operation of the business
of the entity which constitutes Landlord as the same are distinguished from the
costs of operation of the Project, including accounting and legal matters, costs
of selling, syndicating, financing, mortgaging or hypothecating any of
Landlord's interest in the Project or the entity constituting Landlord, and
costs incurred by Landlord, in whole or in part, in connection with or as a
result of Landlord's ownership, operation or management of any properties other
than the Project;

                        (xvi) expenses in connection with services, repairs or
other benefits for which Tenant is charged directly but which are provided
without charge to another tenant or occupant of the Project, and costs for which
tenants contract directly with the applicable service provider;

                        (xvii) costs incurred to comply with laws relating to
the removal, remediation, containment or treatment of hazardous material (as
defined under applicable law) which was in existence in, on or under the
Building or on the Project prior to the Lease Commencement Date or is brought
onto the Project after the Lease Commencement Date by any party other than
Tenant;

                        (xviii) advertising and promotional expenditures, costs
of installing, lighting or maintaining signs in or on the Project identifying
the owner, manager, leasing agent or tenants of the Project;

                        (xix) any compensation paid or costs incurred in
connection with commercial concessions operated by Landlord or third party
operators;

                        (xx) rent for space occupied as a Project management
office to the extent such space is larger than 5,000 rentable square feet; to
the extent such management office is used for other purposes, including, without
limitation, leasing activities, the rent and other charges associated with such
office shall be prorated in an equitable manner;

                        (xxi) costs arising from the gross negligence or willful
misconduct of Landlord's agents or tenants of the Project, and costs incurred
due to the violation by Landlord of any law or the terms and conditions of any
lease of space in the Project;

                        (xxii) costs incurred for the repair of damage or
destruction or eminent domain/taking governed by the destruction and
condemnation provisions of the Lease, except as provided in item xxxv, below;

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                        (xxiii) cost of meals, beverages and bottled water;

                        (xxiv) automobile or travel expense for Landlord or its
agents;

                        (xxv) any bad debt loss, rent loss or reserves for bad
debts or rent loss;

                        (xxvi) costs for acquisition and refurbishment (as
opposed to ordinary repair) of sculpture, murals, paintings or other objects of
art;

                        (xxvii) except as specifically permitted in Sections
4.2.4 (ii), (iv), (ix) and (xv), fees and payments to obtain or arising under
any REA or any recorded easements, development agreements, participation
agreements, covenants, conditions or restricting conditional use permits,
traffic management programs, mitigation fees, conservation fees, housing
replacement or linkage fees, or similar fees;

                        (xxviii) rentals and other related expenses incurred in
leasing HVAC systems, elevators or other equipment ordinarily considered to be
Capital Items, except for (1) expenses in connection with making repairs on or
keeping Building Systems in operation while repairs are being made and (2) costs
of equipment not affixed to the Building which is used in providing janitorial
or similar services;

                        (xxix) the cost of any electric power provided to the
rentable area of the Building (i) in excess of the amount provided to Tenant
without charge to the extent that Landlord actually charges Tenant directly for
such overstandard use, and (ii) which any tenant directly contracts with the
local public service company or for which any tenant is separately or submetered
and pays Landlord directly;

                        (xxx) any management fees whether paid to Landlord or a
third party, in excess of those management fees which are normally and
customarily charged by landlords of comparable buildings, or otherwise in excess
of an amount (the "Maximum Amount") equal to the product of (A) five percent
(5%) and (B) the amount of gross revenues for the Building, from office tenants;

                        (xxxi) costs of any "tap fees" or any sewer or water
connection fees for the benefit of any particular tenant in the Building;

                        (xxxii) any entertainment, dining or travel expenses for
any purpose;

                        (xxxiii) any "finders fees", brokerage commissions, job
placement costs or job advertising cost;

                        (xxxiv) the cost of any training or incentive programs,
other than for tenant life safety information services;

                        (xxxv) Tax Expenses;

                        (xxxvi) costs incurred in removing and storing the
property of former tenants or occupants of the Building;

                        (xxxvii) the cost of any work or services performed for
any tenant (including Tenant) at such tenant's cost (unless such cost is an
allowable part of Operating Expenses);

                        (xxxviii) "takeover" expenses, including, but not
limited to, the expenses incurred by Landlord with respect to space located in
another building of any kind or nature in connection with the leasing of space
in the Project;

                        (xxxix) costs of renovating the Building or preparing
the Base Building for Tenant's occupancy;

                        (xl) cost of work or replacements covered by warranties;

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                        (xli) costs, expenses and charges incurred during the
Lease Term which are of the nature of a cost, expense or charge incurred during
the Base Year but not included therein as an Operating Expense (unless the cost,
expense or charge is imputed to have been included in Operating Expenses for the
Base Year so that the Operating Expenses for the Base Year are appropriately
adjusted);

                        (xlii) costs of installing, maintaining and operating
any specialty service operated by Landlord including without limitation, any
luncheon club or athletic facility, or the repair thereof;

                        (xliii) costs resulting from the failure of the Project,
as of the Lease Commencement Date, to comply with laws applicable to the Project
as of the Lease Commencement Date;

                        (xliv) costs to repair the tenant improvements within
space occupied by any other tenant of the Building to the extent Tenant is
charged directly for comparable repairs to the tenant improvements within the
Premises.

      The foregoing schedule of exclusions from Operating Expenses is intended
to function solely as an exclusionary listing and shall not be interpreted to
permit or authorize any cost or expense which would not otherwise be considered
to be an Operating Expense under the other terms and conditions of this Lease.
In no event shall Landlord bill tenants of the Project in the aggregate for more
than 100% of the cost actually incurred by Landlord for any item of Operating
Expense. Landlord shall not include in Operating Expenses for any Expense Year
after the Base Year any new category of Operating Expenses (for example, without
limitation, relating to (i) earthquake insurance, (ii) parking garage operation
expenses, or (iii) services provided by Landlord), unless such new category is
(a) required to comply with applicable governmental law or regulation, (b)
reasonably necessary to maintain the safe occupancy and use of the Premises,
Building and/or Project by Tenant and the other tenants of the Project, in which
event such new category shall be included in the Base Year, such Expense Year
and each Expense Year thereafter, or (c) reasonably approved by Tenant.
Operating Expenses shall be calculated in a manner consistent with sound real
estate management accounting principles, consistently applied.

            4.2.5 TAXES.

                  4.2.5.1 "TAX EXPENSES" shall mean all federal, state, county,
or local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Project, or
any portion thereof), which shall be paid or accrued during any Expense Year
(without regard to any different fiscal year used by such governmental or
municipal authority) because of or in connection with the ownership, leasing and
operation of the Project, or any portion thereof. Tax Expenses for the Base Year
shall be increased to equal the Tax Expenses, including ad valorem taxes and
gross receipts taxes, which would be payable if the Building (if the Building is
on a separate parcel, and if not, then the buildings that are on the applicable
tax parcel) were fully occupied by tenants paying rental comparable to Tenant's
rent, built out at a level comparable to Tenant's improvements, and the
Building(s) fully assessed as a result of the foregoing.

                  4.2.5.2 Tax Expenses shall include, without limitation: (i)
Any tax on the rent, right to rent or other income from the Project, or any
portion thereof, or as against the business of leasing the Project, or any
portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to,
or in substitution, partially or totally, of any assessment, tax, fee, levy or
charge previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the

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level and quality of governmental services and amenities as a result of
Proposition 13, Tax Expenses shall also include any governmental or private
assessments or the Project's contribution towards a governmental or private
cost-sharing agreement for the purpose of augmenting or improving the quality of
services and amenities normally provided by governmental agencies; (iii) Any
assessment, tax, fee, levy, or charge allocable to or measured by the area of
the Premises or the Rent payable hereunder, including, without limitation, any
business or gross income tax or excise tax with respect to the receipt of such
rent, or upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon
this transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises.

                  4.2.5.3 Any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses (excluding, however, those costs and expenses incurred by
Landlord in securing any Proposition 8 reduction as set forth in Section
4.2.5.4, below) shall be included in Tax Expenses in the Expense Year such
expenses are paid. Except as set forth in Section 4.2.5.4, below, refunds of Tax
Expenses shall be credited against Tax Expenses and refunded to Tenant
regardless of when received, based on the Expense Year to which the refund is
applicable, provided that in no event shall the amount to be refunded to Tenant
for any such Expense Year exceed the total amount paid by Tenant as Additional
Rent under this Article 4 for such Expense Year. If Tax Expenses for any period
during the Lease Term or any extension thereof are increased or decreased
(except as otherwise provided herein) after payment thereof for any reason,
including, without limitation, error or reassessment by applicable governmental
or municipal authorities, Tenant shall pay Landlord upon demand or be refunded
within thirty (30) days Tenant's Share of any such increased Tax Expenses
included by Landlord as Building Tax Expenses pursuant to the terms of this
Lease. Notwithstanding anything to the contrary contained in this Section 4.2.5
(except as set forth in Section 4.2.5.1, above), there shall be excluded from
Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state
income taxes, and other taxes to the extent applicable to Landlord's general or
net income (as opposed to rents, receipts or income attributable to operations
at the Project), (ii) any items already included as Operating Expenses, (iii)
any items paid by Tenant or other tenants under Section 4.5 of this Lease, and
(iv) Operating Expense exclusions (v), (x), (xi), (xii) and (xxvii).

                  4.2.5.4 Notwithstanding anything to the contrary set forth in
this Lease, the amount of Tax Expenses for the Base Year and any Expense Year
shall be calculated without taking into account any decreases in real estate
taxes obtained in connection with Proposition 8, and, therefore, the Tax
Expenses in the Base Year and/or an Expense Year may be greater than those
actually incurred by Landlord, but shall, nonetheless, be the Tax Expenses due
under this Lease; provided that (i) any costs and expenses incurred by Landlord
in securing any Proposition 8 reduction shall not be included in Direct Expenses
for purposes of this Lease, and (ii) tax refunds under Proposition 8 shall not
be deducted from Tax Expenses, but rather shall be the sole property of
Landlord. Landlord and Tenant acknowledge that this Section 4.2.5.4 is not
intended to in any way affect (A) the inclusion in Tax Expenses of the statutory
two percent (2.0%) annual increase in Tax Expenses (as such statutory increase
may be modified by subsequent legislation), or (B) the inclusion or exclusion of
Tax Expenses pursuant to the terms of Proposition 13, which shall be governed
pursuant to the terms of Sections 4.2.5.1 through 4.2.5.3, above.

            4.2.6 "TENANT'S SHARE" shall mean the percentage set forth in
Section 6 of the Summary.

      4.3 ALLOCATION OF DIRECT EXPENSES.

            4.3.1 METHOD OF ALLOCATION. The parties acknowledge that the
Building is a part of a multi-building project and that the costs and expenses
incurred in connection with the Project (i.e. the Direct Expenses) should be
shared between the tenants of the Building and the tenants of the other
buildings in the Project. Accordingly, as set forth in Section 4.2 above, Direct
Expenses (which consists of Operating Expenses and Tax Expenses) are determined
annually for the Project as a whole, and a portion of the Direct Expenses, which
portion shall be determined by Landlord on a reasonable and equitable basis,
shall be allocated to the tenants of the Building (as opposed to the tenants of
any other buildings in the Project) and such portion

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shall be the Direct Expenses for purposes of this Lease. Such portion of Direct
Expenses allocated to the tenants of the Building shall include all Direct
Expenses attributable solely to the Building and a reasonable and equitable
portion of the Direct Expenses attributable to the Project as a whole.

            4.3.2 COST POOLS. Landlord shall have the right, from time to time,
to equitably allocate some or all of the Direct Expenses for the Project among
different portions or occupants of the Project (the "COST POOLS"), in Landlord's
reasonable discretion; provided that any such Cost Pools shall be employed by
Landlord reasonably consistently in the Base Year and any applicable Expense
Year(s). Such Cost Pools may include, but shall not be limited to, the office
space tenants of a building of the Project or of the Project, and the retail
space tenants of a building of the Project or of the Project. The Direct
Expenses within each such Cost Pool shall be allocated and charged to the
tenants within such Cost Pool in a reasonable and equitable manner.

      4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. If for any Expense Year
ending or commencing within the Lease Term, Tenant's Share of Direct Expenses
for such Expense Year exceeds Tenant's Share of Direct Expenses applicable to
the Base Year, then Tenant shall pay to Landlord, in the manner set forth in
Section 4.4.1, below, and as Additional Rent, an amount equal to the excess (the
"EXCESS").

            4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
Landlord shall give to Tenant within 180 days following the end of each Expense
Year, a statement (the "STATEMENT") which shall state the Direct Expenses
incurred or accrued for such preceding Expense Year, and which shall indicate
the amount of the Excess. Each Statement shall be itemized with reasonable
detail as to general categories and shall specifically note the amount of each
such category. Upon receipt of the Statement for each Expense Year commencing or
ending during the Lease Term, if an Excess is present, Tenant shall pay, with
its next installment of Base Rent due or within thirty (30) days following
Tenant's receipt of the Statement, whichever is later, the full amount of the
Excess for such Expense Year, less the amounts, if any, paid during such Expense
Year as "Estimated Excess," as that term is defined in Section 4.4.2, below. If
the amount of the Excess is less than the amount paid by Tenant as Estimated
Excess during the applicable Expense Year, Tenant shall receive a credit for
such overpayment against the Rent next due under this Lease, provided that if
the Lease Term has expired, Landlord shall pay the amount of Tenant's
overpayment to Tenant. The failure of Landlord to timely furnish the Statement
for any Expense Year shall not prejudice Landlord or Tenant from enforcing its
rights under this ARTICLE 4. Even though the Lease Term has expired and Tenant
has vacated the Premises, when the final determination is made of Tenant's Share
of Direct Expenses for the Expense Year in which this Lease terminates, if an
Excess is present, Tenant, within thirty (30) days following demand by Landlord,
shall pay to Landlord such amount. The provisions of this Section 4.4.1 shall
survive the expiration or earlier termination of the Lease Term.

            4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition, Landlord
shall endeavor to give Tenant within 180 days following the commencement of each
Expense Year a yearly expense estimate statement (the "ESTIMATE STATEMENT")
which shall set forth Landlord's reasonable estimate (the "ESTIMATE") of what
the total amount of Direct Expenses for the then-current Expense Year shall be
and the estimated excess (the "ESTIMATED EXCESS") as calculated by comparing the
Direct Expenses for such Expense Year, which shall be based upon the Estimate,
to the amount of Direct Expenses for the Base Year. The failure of Landlord to
timely furnish the Estimate Statement for any Expense Year shall not preclude
Landlord from enforcing its rights to collect any Estimated Excess under this
ARTICLE 4, nor shall Landlord be prohibited from revising any Estimate Statement
or Estimated Excess theretofore delivered to the extent necessary. Thereafter,
Tenant shall pay, with its next installment of Base Rent due or within 30 days
following Tenant's receipt of the Estimate Statement, whichever is later, a
fraction of the Estimated Excess for the then-current Expense Year (reduced by
any amounts paid pursuant to the next to last sentence of this Section 4.4.2).
Such fraction shall have as its numerator the number of months which have
elapsed in such current Expense Year, including the month of such payment, and
twelve (12) as its denominator. Until a new Estimate Statement is furnished
(which Landlord shall have the right to deliver to Tenant at any time), Tenant
shall pay monthly, with the monthly Base Rent installments, an amount equal to
one-twelfth (1/12) of the total Estimated Excess set forth in the previous
Estimate Statement delivered by Landlord to Tenant.

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      4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.

            4.5.1 Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against Tenant's equipment, furniture, fixtures and
any other personal property located in or about the Premises. If any such taxes
on Tenant's equipment, furniture, fixtures and any other personal property are
levied against Landlord or Landlord's property or if the assessed value of
Landlord's property is increased by the inclusion therein of a value placed upon
such equipment, furniture, fixtures or any other personal property and if
Landlord pays the taxes based upon such increased assessment, which Landlord
shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.

            4.5.2 If the tenant improvements in the Premises, whether installed
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation in excess the highest value for tenant improvements
which Landlord includes in Tax Expenses without direct charge to the applicable
tenant of the Building, then the Tax Expenses levied against Landlord or the
property by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of Section 4.5.1, above..

      4.6 LANDLORD'S BOOKS AND RECORDS. In the event that Tenant disputes the
amount of Additional Rent set forth in any annual Statement delivered by
Landlord, then within two (2) years after receipt of such Statement by Tenant,
Tenant shall have the right to notify Landlord in writing that it intends to
cause an independent certified public accountant (which accountant must be
qualified and experienced, and must be employed by a firm which derives its
primary revenues from its accounting practice) (the "THIRD PARTY AUDITOR") to
inspect Landlord's accounting records at Landlord's office in the Building for
the Expense Year covered by such Statement during normal business hours
("TENANT'S REVIEW"), provided that as a condition precedent to any such
inspection, Tenant shall deliver to Landlord a copy of Tenant's written
agreement with such Third Party Auditor, which agreement shall include a
provision which states that such Third Party Auditor shall maintain in strict
confidence any and all information obtained in connection with Tenant's Review
and shall not disclose such information to any person or entity other than to
the management personnel of Tenant. Tenant shall provide Landlord with not less
than two (2) weeks' prior written notice of its desire to conduct Tenant's
review. In connection with the foregoing review, Landlord shall furnish Tenant
with such reasonable supporting documentation relating to the subject Statement
(and the Statement for the Base Year, provided that such supporting
documentation relating to the Statement for the Base Year shall be for
informational purposes only and not for the purpose of any audit of the Base
Year Statement if the time period for Tenant's audit of the Base Year Statement
shall have expired) as Tenant may reasonably request. In no event shall Tenant
have the right to conduct Tenant's Review if Tenant is then in default under the
Lease with respect to any of Tenant's monetary obligations (following the
expiration of all notice and cure periods set forth in Article 19), including,
without limitation, the payment by Tenant of all Additional Rent amounts
described in the Statement which is the subject of Tenant's Review, which
payment, at Tenant's election, may be made under dispute. In the event that
Tenant shall fail to provide Landlord with written notification within two (2)
years following receipt of a particular Statement of Tenant's desire to conduct
a Tenant's Review, Tenant shall have no further right to dispute the amounts of
Additional Rent set forth on such Statement. In the event that following
Tenant's Review Tenant continues to dispute the amounts of Additional Rent shown
on Landlord's Statement and Landlord and Tenant are unable to resolve such
dispute, then Landlord shall cause a final and determinative audit to be made by
an independent accountant mutually and reasonably agreed upon by Landlord and
Tenant, of the proper amount of the disputed items and/or categories of Direct
Expenses to be shown on such Statement (the "FINAL AUDIT"). The results of such
Final Audit shall be conclusive and binding upon both Landlord and Tenant unless
either party objects to the results of such Final Audit by written notice
delivered to the other party within ten (10) days following receipt by the
parties of the result of the Final Audit, which objection must be accompanied by
a request that the correctness of the Additional Rent determination for such
Expense Year in question be determined pursuant to binding arbitration as set
forth in Section 29.34 of this Lease. If the resolution of the parties' dispute
with regard to the Additional Rent shown on the Statement, whether pursuant to
Tenant's Review, the Final Audit or the Arbitration reveals an error in the
calculation of Tenant's Share of Building Direct Expenses to be paid for such
Expense Year, the parties' sole remedy shall be for the parties to make
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payments or reimbursements, as the case may be, to each other as are determined
to be owing. Any such payments shall be made within thirty (30) days following
the resolution of such dispute, along with interest at the "Interest Rate," as
that term is defined in Article 25, below, from the date such amounts were
originally due, until the date of such payment. At Tenant's election, Tenant may
treat any overpayments (plus the interest described above) resulting from the
foregoing resolution of such parties' dispute as a credit against Rent until
such amounts are otherwise paid by Landlord. Tenant shall be responsible for all
costs and expenses associated with Tenant's Review and any Final Audit, provided
that if the parties' final resolution of the dispute involves the overstatement
by Landlord of Direct Expenses for such Expense Year (or an understatement for
the Base Year) in excess of five and one-half percent (5-1/2%), then Landlord
shall be responsible for all reasonable, out-of-pocket costs and expenses
associated with Tenant's Review and any Final Audit. In the event that the
parties' dispute is resolved pursuant to Arbitration, Tenant shall be
responsible for all costs and expenses associated with such Arbitration,
provided that if the arbitrator's decision reveals that Landlord's determination
of Tenant's Share of Direct Expenses as submitted to arbitration was overstated
(or understated, with respect to the Base Year) by more than five and one-half
percent (5-1/2%), then Landlord shall be responsible for all reasonable,
out-of-pocket costs and expenses of such Arbitration. If another tenant of the
Building audits Direct Expenses for the Building and, as a result of that audit,
Landlord discovers a material error in Direct Expenses previously paid or to be
payable by Tenant, Landlord shall make an appropriate adjustment to Direct
Expenses to correct such error and shall provide Tenant with supporting
documentation of such error at the time of such correction.

                                    ARTICLE 5

                                 USE OF PREMISES

      5.1 PERMITTED USE. Tenant shall use the Premises solely for the Permitted
Use set forth in Section 7 of the Summary and only in accordance with the uses
permitted under applicable zoning and other municipal regulations, and Tenant
shall not use or permit the Premises or the Project to be used for any other
purpose or purposes whatsoever without the prior written consent of Landlord,
which may be withheld in Landlord's sole discretion.

      5.2 PROHIBITED USES. The uses prohibited under this Lease shall include,
without limitation, use of the Premises or a portion thereof for (i) offices of
any agency or bureau of the United States or any state or political subdivision
thereof; (ii) offices or agencies of any foreign governmental or political
subdivision thereof; (iii) offices of any health care professionals or service
organization; (iv) schools or other training facilities which are not ancillary
to corporate, executive or professional office use; (v) retail or restaurant
uses; or (vi) communications firms such as radio and/or television stations.
Tenant shall not allow occupancy density of use of the Premises which is greater
than seven (7) persons per 1,000 usable square feet of the Premises. Tenant
further covenants and agrees that Tenant shall not use, or suffer or permit any
person or persons to use, the Premises or any part thereof for any use or
purpose contrary to the provisions of the Rules and Regulations set forth in
EXHIBIT D, attached hereto, or in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or requirements
of the local municipal or county governing body or other lawful authorities
having jurisdiction over the Project including, without limitation, any such
laws, ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way damage the reputation of the Project or obstruct
or interfere with the rights of other tenants or occupants of the Building, or
injure or annoy them or use or allow the Premises to be used for any improper,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises. Landlord acknowledges and agrees that
Tenant's use of the Premises for first class general office use is not a
prohibited use under this Section. Landlord shall use reasonable efforts to
cause other tenants or occupants of the Project to comply with Rules and
Regulations and to avoid any unreasonable, material interference of Tenant's use
of the Premises as a result of the failure of such other tenants or occupants to
comply with the Rules and Regulations. Landlord shall have the right from time
to time upon written notice to Tenant to reasonably modify the Rules and
Regulations, attached to and made a part of this Lease as EXHIBIT D, provided
that the Rules and Regulations shall not be changed or revised or enforced in
any unreasonable way by Landlord, nor enforced or changed by Landlord in such a
way as to substantially interfere with "Tenant's Lease Rights," as that term is
defined in Section 1.1.4 of this Lease. In the event of any conflict between
this

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Lease and this Rules and Regulations, the Lease shall prevail and control and
the inconsistent provisions of the Rules and Regulations shall not be
inapplicable to Tenant.

      5.3 CC&RS. Tenant shall comply with all recorded covenants, conditions,
and restrictions currently affecting the Project. Additionally, Tenant
acknowledges that the Project may be subject to any future covenants,
conditions, and restrictions (the "CC&RS") which Landlord, in Landlord's
discretion, deems reasonably necessary or desirable, and Tenant agrees that, so
long as such CC&Rs do not materially diminish Tenant's rights under this Lease
and/or increase Tenant's obligations or costs under this Lease, this Lease shall
be subject and subordinate to such CC&Rs. Subject to the foregoing, Landlord
shall have the right to require Tenant to execute and acknowledge, within
fifteen (15) business days of a request by Landlord, a "Recognition of
Covenants, Conditions, and Restriction," in a form substantially similar to that
attached hereto as EXHIBIT F, agreeing to and acknowledging the CC&Rs.

                                   ARTICLE 6

                             SERVICES AND UTILITIES

      6.1 STANDARD TENANT SERVICES. Landlord shall provide the following
services on all days (unless otherwise stated below) during the Lease Term.

            6.1.1 Subject to limitations imposed by all governmental rules,
regulations and guidelines applicable thereto, Landlord shall provide heating
and air conditioning ("HVAC") when necessary for normal comfort for normal
office use in the Premises from 8:00 A.M. to 6:00 P.M. Monday through Friday,
and on Saturdays from 8:00 A.M. to 1:00 P.M. (collectively, the "BUILDING
HOURS"), except for the date of observation of New Year's Day, Presidents' Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and,
at Landlord's discretion, other nationally recognized holidays (collectively,
the "HOLIDAYS").

            6.1.2 Subject to the other terms of this Lease, Landlord shall
provide electrical wiring, facilities and capacity for connection to, and use by
Tenant of, Tenant's lighting fixtures and incidental use equipment, provided
that (i) the connected electrical load of the incidental use equipment does not
exceed (on an average watts per usable square foot of the Premises basis) two
and five-tenths (2.5) watts per usable square foot of the Premises during the
Building Hours on a monthly basis, and the electricity so furnished for
incidental use equipment will be at a nominal one hundred twenty (120) volts and
no electrical circuit for the supply of such incidental use equipment will
require a current capacity exceeding twenty (20) amperes (except as reasonably
approved in advance by Landlord), and (ii) the connected electrical load of
Tenant's lighting fixtures does not exceed (on an average watts per usable
square foot of the Premises basis) one and five-tenths (1.5) watts per usable
square foot of the Premises during the Building Hours on a monthly basis, and
the electricity so furnished for Tenant's lighting will be at a nominal two
hundred seventy-seven (277) volts, which electrical usage shall be subject to
applicable laws and regulations, including Title 24. Tenant will design Tenant's
electrical system serving any equipment producing nonlinear electrical loads to
accommodate such nonlinear electrical loads, including, but not limited to,
oversizing neutral conductors, derating transformers and/or providing power-line
filters. Engineering plans shall include a calculation of Tenant's fully
connected electrical design load with and without demand factors and shall
indicate the number of watts of unmetered and submetered loads. Tenant shall
bear the cost of replacement of lamps, starters and ballasts for non-Building
standard lighting fixtures within the Premises.

            6.1.3 Landlord shall provide city water from the regular Building
outlets for drinking, lavatory and toilet purposes in the Building Common Areas.

            6.1.4 Landlord shall provide janitorial services to the Premises
five (5) days per week, except the date of observation of the Holidays, in and
about the Premises in a manner materially consistent with the specifications
shown on EXHIBIT "J", and window washing services in a manner and with a
frequency consistent with those of the Comparable Buildings.

            6.1.5 Landlord shall provide nonexclusive, non-attended automatic
passenger elevator service during the Building Hours, and, subject to
emergencies shall have at least one (1) elevator available at all other times to
provide service to the Building.

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            6.1.6 Landlord shall provide nonexclusive, non-attended freight
elevator service subject to scheduling with Landlord and Landlord's reasonable
rules and regulations regarding use thereof.

      Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems.

      6.2 OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's prior
written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
Building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Landlord pursuant to the terms of Section
6.1 of this Lease except as permitted in this Lease. If Tenant uses water or
electricity, in excess of that supplied by Landlord pursuant to Section 6.1 of
this Lease, Tenant shall pay to Landlord, upon billing, the actual, reasonable
and documented cost paid to third parties at arms length, without profit or
overhead or penalty (the "ACTUAL COST"), in connection with such excess
consumption. Furthermore, if Tenant uses electricity in an aggregate amount in
excess of that supplied by Landlord pursuant to Section 6.1 of this Lease,
Landlord may, at its option, install devices to separately meter such excess
electrical use, and provided that such meters indicate excess usage by Tenant
when measured on a monthly basis, Tenant shall pay to Landlord, within thirty
(30) days following demand by Landlord, the Actual Cost of any such devices.
Tenant's use of electricity shall never exceed "Capacity," as that term is
defined, below. If Tenant desires to use heat, ventilation or air conditioning
during hours other than those for which Landlord is obligated to supply such
utilities pursuant to the terms of Section 6.1 of this Lease (the "AFTER HOURS
HVAC"), Landlord shall supply such utilities to Tenant at Sixty Dollars ($60)
per hour per zone during the first Lease Year and thereafter such cost shall be
subject to increase (but only to the extent that Landlord's Actual Cost for such
After Hours HVAC shall increase). For purposes of this Section 6.2, "CAPACITY"
shall mean 5.5 watts per usable square foot, provided that the foregoing
"Capacity" shall be (a) inclusive of the 1.5 watts per usable square foot
available for Tenant's fluorescent lighting, and (b) exclusive of the
electricity utilized by the Building HVAC system.

      6.3 INTERRUPTION OF USE. Except as provided in Section 19.6.2, below,
Tenant agrees that Landlord shall not be liable for damages, by abatement of
Rent or otherwise, for failure to furnish or delay in furnishing any service
(including telephone and telecommunication services), or for any diminution in
the quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole or in part, by breakage, repairs, replacements, or
improvements, by any strike, lockout or other labor trouble, by inability to
secure electricity, gas, water, or other fuel at the Building or Project after
reasonable effort to do so, by any riot or other dangerous condition, emergency,
accident or casualty whatsoever, by acts of war or terrorism or by act or
Default of Tenant; and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's use and possession
of the Premises or relieve Tenant from paying Rent (except as provided in
Section 19.6.2, below) or performing any of its obligations under this Lease.
Furthermore, Landlord shall not be liable under any circumstances for a loss of,
or injury to, property or for injury to, or interference with, Tenant's
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to a failure to furnish any of the
services or utilities as set forth in this Article 6. Landlord may comply with
voluntary controls or guidelines promulgated by any governmental entity relating
to the use or conservation of energy, water, gas, light or electricity or the
reduction of automobile or other emissions without creating any liability of
Landlord to Tenant under this Lease, provided that the Premises are not thereby
rendered untenantable and/or unfit for the Permitted Use.

      6.4 CERTAIN UTILITY AGREEMENTS. If Landlord enters into an agreement with
a "Utility Provider" (as that term is defined below) whereby such Utility
Provider shall provide to the Building all or a portion of a particular utility
service that is used in the operation of the Project, the Common Areas, or by
occupants of the Project (e.g., electricity, chilled or hot water for the HVAC
system, natural gas, water, etc.) and Landlord obtains from such Utility
Provider a "QUALIFIED DISCOUNT" (as that term is defined below), Tenant shall be
entitled to Tenant's Share of such Qualified Discount for any such utility
services that are allocable to the Building. For purposes of this Lease (i) a
"UTILITY PROVIDER" shall mean either a municipal or private utility or a third
party that supplies one or more utility services to the Building or Project, and
(ii) a "QUALIFIED DISCOUNT" shall mean a discount from the rate that Landlord
otherwise would have

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paid and would have been included as part of Operating Expenses, whether or not
such discount is in the form of a discounted rate or a lump sum payment to
Landlord that is separate from the rate.

      6.5 TENANT'S SECURITY SYSTEM. Tenant may, at its own expense, install its
own security system ("TENANT'S SECURITY SYSTEM") in the Premises as part of
Tenant's initial construction of the Tenant Improvements or afterward pursuant
to the terms of ARTICLE 8, below; provided, however, that Tenant shall
coordinate the installation and operation of Tenant's Security System with
Landlord to assure that Tenant's Security System does not interfere with any
Landlord's security system in place as of the Lease Commencement Date and the
Building systems and equipment and to the extent that Tenant's Security System
unreasonably interferes with any Landlord's security system or the Building
systems and equipment, Tenant shall not be entitled to install or operate it.
Tenant shall be solely responsible, at Tenant's sole cost and expense, for the
monitoring, operation and removal of Tenant's Security System.

      6.6 TENANT HVAC SYSTEM. Subject to the terms and conditions of Article 8
of this Lease, Tenant, at its sole expense, may install a supplemental HVAC
system in the Premises at any time during the Lease Term, for the purpose of
providing supplemental air-conditioning to the Premises (the "TENANT HVAC
SYSTEM"). All aspects of the Tenant HVAC System shall be subject to Landlord's
prior written approval, which approval shall not be unreasonably withheld,
conditioned or delayed, unless the Building Systems or Building Structure and/or
the exterior appearance of the Building will be affected, in which event
Landlord's approval may be withheld in Landlord's sole and absolute discretion.
In connection with the foregoing, Landlord may, at Tenant's sole cost and
expense without profit or markup by Landlord, separately meter the electricity
utilized by the Tenant HVAC System, and Tenant shall reimburse Landlord for the
cost as reasonably determined by Landlord of all electricity utilized by the
Tenant HVAC System. At the time of Landlord's approval of the Tenant HVAC
System, Landlord shall notify Tenant as to whether or not the Tenant HVAC System
must be removed by Tenant or surrendered with the Premises upon the expiration
or earlier termination of this Lease, provided that if Landlord fails to provide
such notice at the time its gives its consent to such Tenant HVAC System, then
Tenant shall not be required to remove such Tenant HVAC System and the same
shall be surrendered to Landlord along with the Premises upon the expiration or
earlier termination of this Lease. Tenant shall be solely responsible, at
Tenant's sole cost and expense, for the monitoring, operation, repair,
replacement, and removal (subject to the foregoing terms of this Section 6.6),
of the Tenant HVAC System, and in no event shall the Tenant HVAC System
interfere with Landlord's operation of the Building. Any reimbursements owing by
Tenant to Landlord pursuant to this Section 6.6 shall be payable by Tenant
within thirty (30) days of Tenant's receipt of an invoice therefor.

                                    ARTICLE 7

                                     REPAIRS

      7.1 DUTIES OF REPAIR. Landlord shall maintain, repair and replace (i) the
structural portions of the Building, including the foundation, floor/ceiling
slabs, roof, curtain wall, exterior glass and mullions, columns, beams, shafts
(including elevator shafts), exit stairs, Project parking facility, elevator
cabs, and Building mechanical, electrical and telephone closets and Base
Building (collectively, "BUILDING STRUCTURE"), and (ii) the mechanical,
electrical, life safety, plumbing, sprinkler systems and HVAC systems installed
or furnished by Landlord and not located within the Premises (the "BUILDING
SYSTEMS"), in good order and repair and in a first class condition. The Building
Structure and Building Systems shall be collectively referred to as the "BASE
BUILDING." In addition, Landlord shall, at all times during the Lease Term,
cause the Building Systems (including the Building HVAC units servicing the
floor of the Building on which the Premises is located) to operate in such a
manner which does not result in a level of noise and/or a level of vibration
which unreasonably interferes with Tenant's use of the Premises. Except as to
Landlord's obligations set forth above in this Section 7.1, Tenant shall, at
Tenant's own expense, keep the Premises, including all Alterations, "Tenant
Improvements," as that term is defined in the Tenant Work Letter, improvements,
fixtures and furnishings therein, in good order, repair and condition at all
times during the Lease Term. In addition, except as provided as part of
Landlord's repair obligations set forth above or elsewhere in this Lease, Tenant
shall, at Tenant's own expense, but under the supervision and subject to the
prior approval of Landlord, and within any reasonable period of time, promptly
and adequately complete all repairs which Tenant is obligated to complete;
provided however, that, at Landlord's option, if Tenant fails to

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make such repairs, Landlord may, but need not, on not less than ten (10)
business days prior notice to Tenant (except in case of an emergency) make such
repairs, and to the extent Tenant was obligated to undertake such repair at
Tenant's sole cost, Tenant shall pay Landlord the cost thereof, including a
reasonable percentage of the cost thereof sufficient to reimburse Landlord for
the Actual Cost arising from Landlord's involvement with such repairs and
replacements forthwith upon being billed for same. Notwithstanding the
foregoing, following reasonable prior notice from Tenant, Landlord shall repair
any items required to be repaired by Tenant pursuant to the terms of this
Section 7.1, provided that, in such event, Tenant shall pay to Landlord, within
thirty (30) days following demand by Landlord, the Actual Cost incurred by
Landlord in connection with such repairs. Landlord may, but shall not be
required to, enter the Premises at all reasonable times to make repairs,
alterations, improvements or additions to the Premises or to the Building or to
any equipment located in the Building as Landlord shall desire or deem necessary
or as Landlord may be required to do by governmental or quasi-governmental
authority or court order or decree. Tenant hereby waives and releases its right
to make repairs at Landlord's expense under Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute, or ordinance now or
hereafter in effect.

                                    ARTICLE 8

                            ADDITIONS AND ALTERATIONS

      8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant shall have the have the
right, without Landlord's consent, but upon at least ten(10) business days prior
Notice to Landlord, to do the following: (a) make strictly cosmetic,
non-structural additions and alterations ("COSMETIC ALTERATIONS") to the
Premises that do not (i) involve the expenditure of more than $30,000.00 in the
aggregate in any Lease Year; (ii) affect the exterior appearance of the Building
or (iii) affect the Building Systems or the Building Structure and (b) paint
and/or replace carpet and/or wall coverings within the Premises. Except in
connection with Cosmetic Alterations, Tenant may make improvements, alterations,
additions or changes to the Premises (collectively, the "ALTERATIONS") only upon
first procuring the prior written consent of Landlord to such Alterations, which
consent shall be requested by Tenant in accordance with the terms and conditions
of this Article 8, and which consent shall not be withheld, conditioned or
delayed by Landlord unless a Design Problem exists. A "DESIGN PROBLEM" is
defined as, and will be deemed to exist if and to the extent such Alterations
(I) affect the exterior appearance of the Building; (II) adversely affect the
Building Structure; (III) adversely affect the Building Systems; (IV)
unreasonably interfere with any other occupant's normal and customary operations
or (V) fail to comply with Applicable Laws or (VI) are visible from outside of
the Premises. Except as provided in Section 8.5, below, the construction of the
"Tenant Improvements," as that term is defined in Section 1 of the Tenant Work
Letter, shall be governed by the terms of the Tenant Work Letter and not the
terms of this Article 8.

      8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
consent to any and all Alterations or repairs of the Premises or about the
Premises, reasonable requirements, including, but not limited to, the
requirement that Tenant utilize for such purposes only contractors,
subcontractors, materials, mechanics and materialmen selected by Tenant from a
list provided and approved by Landlord, the requirement that upon Landlord's
request, Tenant shall, at Tenant's expense, remove such Alterations upon the
expiration or any early termination of the Lease Term (but only as provided in
Section 8.5 below). Landlord may further condition its approval of any proposed
Alteration requested by Tenant upon some or all of the following requirements:
(a) that such Alteration shall comply with Landlord's then existing building
standards for tenant improvement work (unless such Alteration is otherwise
consistent (including without limitation, with respect to materials utilized),
as reasonably determined by Landlord, with the Tenant Improvements ("CONSISTENT
ALTERATIONS"); (b) that Landlord shall supervise the performance of such
Alteration; (c) that subcontractor and/or consultants specified by Landlord
shall be utilized to insure the integrity of the Building mechanical and
electrical systems; and (d) that, as to any Alterations reasonably anticipated
to cost in excess of $50,000, Tenant provides Landlord, at Tenant's sole cost
and expense, a performance and/or payment bond or a lien and completion bond in
an amount equal to one and one-half (1-1/2) times the estimated cost of the
Alterations, to insure Landlord that said Alterations shall be completed
satisfactorily to Landlord (provided, however, no such performance and/or
payment bond shall be required in connection with the Tenant Improvements). If
Landlord shall give its consent, the consent shall be deemed conditioned upon
Tenant acquiring applicable permits to do the work from appropriate governmental
agencies, the furnishing of a copy of such permit to Landlord prior to the

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commencement of the work, and the compliance by Tenant with all conditions of
said permit in a prompt and expeditious manner. If any Alterations will involve
the use of or disturb hazardous materials or substances existing in the
Premises, Tenant shall comply with Landlord's rules and regulations concerning
such hazardous materials or substances. Tenant shall construct such Alterations
and perform such repairs in a good and workmanlike manner, in conformance with
any and all applicable federal, state, county or municipal laws, rules and
regulations and pursuant to a valid building permit, issued by the City of Los
Angeles, all in conformance with Landlord's construction rules and regulations.
In the event Tenant performs any Alterations in the Premises which are not
typical first class general office improvements and require or give rise to
governmentally required changes to the "Base Building," as that term is defined
below, then Landlord shall, at Tenant's expense, make such changes to the Base
Building. The "BASE BUILDING" shall include the structural portions of the
Building, and the public restrooms and the systems and equipment located in the
internal core of the Building on the floor or floors on which the Premises are
located as further set forth in Section 1 of the Tenant Work Letter. In
performing the work of any such Alterations, Tenant shall have the work
performed in such manner so as not to materially and adversely obstruct access
to the Project or any portion thereof, by any other tenant of the Project, and
so as not to materially and adversely obstruct the business of Landlord or other
tenants in the Project. Tenant shall not use (and upon Notice from Landlord
shall cease using) contractors, services, workmen, labor, materials or equipment
that, in Landlord's reasonable judgment, would disturb labor harmony with the
workforce or trades engaged in performing other work, labor or services in or
about the Building or the Common Areas. In addition to Tenant's obligations
under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees
to cause a Notice of Completion to be recorded in the office of the Recorder of
the County of Los Angeles in accordance with Section 3093 of the Civil Code of
the State of California or any successor statute, and Tenant shall deliver to
the management office for the Project a reproducible copy of the "as built"
drawings of the Alterations as well as all permits, approvals and other
documents issued by any governmental agency in connection with such Alterations.

      8.3 PAYMENT FOR IMPROVEMENTS. If payment is made directly to contractors,
Tenant shall comply with Landlord's reasonable requirements for final lien
releases and waivers in connection with Tenant's payment for work to
contractors. Whether or not Tenant orders any work directly from Landlord, there
shall be included within the cost of such work and Tenant shall pay to Landlord
a fee for Tenant's use of Landlord's personnel involved with the supervision,
coordination, inspection and the like pertaining to such Alterations. Said fee
shall be two percent (2%) of the cost of the Alterations if the Alterations are
performed by an outside general contractor (whether employed by Landlord or
Tenant) and twelve percent (12%) of the cost of the Alterations if Landlord (or
a subsidiary or an affiliate of Landlord) is acting as the general contractor,
and such fee shall be paid by Tenant within ten (10) days after rendition of an
invoice therefor.

      8.4 CONSTRUCTION INSURANCE. In addition to the requirements of Article 10
of this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant or Tenant's contractor shall provide
Landlord with evidence that Tenant carries "BUILDER'S ALL RISK" insurance in an
amount reasonably approved by Landlord covering the construction of such
Alterations, and such other insurance as Landlord may require, it being
understood and agreed that all of such Alterations shall be insured by Tenant
pursuant to Article 10 of this Lease immediately upon completion thereof.

      8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures,
equipment and/or appurtenances which may be installed or placed in or about the
Premises, from time to time, shall be at the sole cost of Tenant (except as
otherwise provided herein) and shall be and become the property of Landlord,
except that Tenant may remove any Alterations, improvements, fixtures and/or
equipment which Tenant can substantiate to Landlord have not been paid for with
any Tenant improvement allowance funds provided to Tenant by Landlord, provided
Tenant repairs any damage to the Premises, and Building caused by such removal
and returns the affected portion of the Premises to a Building standard tenant
improved condition as determined by Landlord. Landlord may, by written notice to
Tenant given at the time of Landlord's consent to or approval thereof, as
applicable, require Tenant, prior to the end of the Lease Term or upon any
earlier termination of this Lease, at Tenant's expense, to remove any
Alterations or improvements in the Premises which are not consistent with (i)
first-class general office space, and/or (ii) Landlord's Building standards for
tenant improvements, and to repair any damage to the Premises, and Building
caused by such removal and return the affected portion of the

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Premises to a Building standard tenant improved condition as reasonably
determined by Landlord. If Tenant fails to complete such removal and/or to
repair any damage caused by the removal of any Alterations or improvements in
the Premises required to be removed pursuant to the above, and return the
affected portion of the Premises to a building standard tenant improved
condition as determined by Landlord, then at Landlord's option, either (A)
Tenant shall be deemed to be holding over in the Premises and Rent shall
continue to accrue in accordance with the terms of Article 16, below, until such
work shall be completed, and/or (B) Landlord may do so and may charge the cost
thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds
Landlord harmless from any liability, cost, obligation, expense or claim of lien
in any manner relating to the installation, placement, removal or financing by
or on behalf of Tenant of any such Alterations, improvements, fixtures and/or
equipment in, on or about the Premises, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.

      8.6 RECOGNITION OF LANDLORD'S NOTICE OF NONRESPONSIBILITY. Before
commencing any such work or construction in or about the Premises (provided
Tenant has theretofore obtained any required Landlord's consent to the
particular Alteration, which shall exclude any Cosmetic Alterations), Tenant
shall notify Landlord at least ten (10) days in advance in writing of the
expected date of commencement thereof. Landlord shall have the right at any time
and from time to time to post and maintain on the Premises such notices as
Landlord deems necessary to protect the Premises and Landlord from the liens of
mechanics, laborers, materialmen, suppliers or vendors. In the event that any
liens are filed against the Premises by any mechanics, laborers, materialmen,
suppliers or vendors, Tenant shall execute and/or cause the necessary parties to
execute such lien releases as may be requested by Landlord to clear such liens
from the Premises. In addition, Tenant covenants and agrees that it shall cause
any and all contractors or other parties engaged by Tenant in connection with
the construction of any Alterations, improvements, maintenance, repairs or other
items to timely execute and deliver to Landlord a written acknowledgment in
Landlord's standard form waiving, to the fullest extent permitted by law, any
rights granted under any applicable owner's participation doctrine or related
doctrines, rules, laws, ordinances, etc. and to further acknowledge that
Landlord's Notice of Nonresponsibility (in Landlord's standard form) in
connection therewith has been verified, has been properly posted, is valid and
enforceable against such party. Tenant shall indemnify, defend and hold harmless
Landlord in connection with any failure of Tenant to comply, or failure to cause
any such contractors or other parties to comply, with the terms of this Section
8.6 of this Lease.

                                    ARTICLE 9

                             COVENANT AGAINST LIENS

      Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least ten (10) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
Applicable Laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Landlord shall have the right at all
reasonable times to post and keep posted on the Premises any notices which it
deems necessary for protection from such liens. Tenant shall remove any such
lien or encumbrance by bond or otherwise within twenty (20) days after Notice by
Landlord, and if Tenant shall fail to do so, Landlord may pay the amount
necessary to remove such lien or encumbrance, without being responsible for
investigating the validity thereof. The amount so paid shall be deemed
Additional Rent under this Lease payable upon demand, without limitation as to
other remedies available to Landlord under this Lease. Nothing contained in this
Lease shall authorize Tenant to do any act which shall subject Landlord's title
to the Building or Premises to any liens or encumbrances whether claimed by
operation of law or express or implied contract.

                                   ARTICLE 10

                                    INSURANCE

      10.1 INDEMNIFICATION AND WAIVER. Except to the extent arising from matters
set forth in items (i), (ii) and (iii), below, Tenant hereby assumes all risk of
damage to property or injury

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to persons in, upon or about the Premises from any cause whatsoever and agrees
that Landlord, its partners, members, subpartners, parents, subsidiaries,
affiliates and their respective officers, agents, servants, employees, and
independent contractors (collectively, "LANDLORD PARTIES") shall not be liable
for, and are hereby released from any responsibility for, any damage either to
person or property or resulting from the loss of use thereof, which damage is
sustained by Tenant or by other persons claiming through Tenant. Tenant shall
indemnify, defend, protect, and hold harmless the Landlord Parties from any and
all loss, cost, damage, expense and liability (including without limitation
court costs and reasonable attorneys' fees) ("CLAIMS AND EXPENSES") incurred in
connection with or arising from any cause in, on or about the Premises any acts,
omission, or negligence of Tenant or of any person claiming by, through or under
Tenant, or of the contractors, agents, servants, employees, of Tenant or any
such person, in on or about the Project or any breach of the terms of this
Lease, either prior to, during, or after the expiration of the Lease Term,
provided that the terms of the foregoing indemnity shall not apply to the
negligence or willful misconduct of Landlord Parties. Should Landlord be named
as a defendant in any suit brought against Tenant in connection with or arising
out of Tenant's occupancy of the Premises, Tenant shall pay to Landlord its
costs and expenses incurred in such suit, including without limitation, its
actual professional fees such as appraisers', accountants' and attorneys' fees.
Further, Tenant's agreement to indemnify Landlord pursuant to this Section 10.1
is not intended and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Tenant pursuant to the provisions of
this Lease, to the extent such policies cover the matters subject to Tenant's
indemnification obligations; nor shall they supersede any inconsistent agreement
of the parties set forth in any other provision of this Lease. The provisions of
this Section 10.1 shall survive the expiration or sooner termination of this
Lease with respect to any claims or liability arising in connection with any
event occurring prior to such expiration or termination. Subject to the
provisions of this Section 10.1, Landlord shall indemnify, defend, protect and
hold Tenant and its partners, officers, agents, servants and employees
(collectively, "TENANT PARTIES") harmless from and against any and all Claims
and Expenses incurred in connection with, or arising form (i) any cause in or
about the Project, the Land, the Building or the Common Areas (in each case
other than the Premises), to the extent the same would be covered under a
customary CGL Policy of insurance or is otherwise covered by Landlord's
insurance; (ii) any negligence or willful misconduct of Landlord or of any
Landlord Party or any Landlord contractor, whether in or about the Project, the
Land, the Building, the Common Areas or the Premises, or (iii) a breach of this
Lease by Landlord; provided, however, that the foregoing indemnity shall not
apply to the extent of the negligence or willful misconduct of Tenant or its
partners, members, subpartners, parents, subsidiaries, affiliates and their
respective officers, agents, servants, employees, and independent contractors.

      10.2 LANDLORD'S INSURANCE. Landlord shall insure the Building (including
the Building Structure and Building Systems) and the Project during the Lease
Term against loss or damage due to fire and other casualties covered within the
classification of fire and extended coverage, vandalism coverage and malicious
mischief, sprinkler leakage, water damage and special extended coverage. Such
coverage shall be in such amounts, from such companies, and on such other terms,
as Landlord may from time to time reasonably determine. Additionally, at the
sole option of Landlord, such insurance coverage may include the risks of
earthquakes and/or flood damage and additional hazards, a rental loss
endorsement and one or more loss payee endorsements in favor of the holders of
any mortgages or deeds of trust encumbering the interest of Landlord in the
Building or the ground or underlying lessors of the Building, or any portion
thereof. Notwithstanding the foregoing terms of this Section 10.2, the coverage
and amounts of insurance carried by Landlord in connection with the Building
shall at a minimum be comparable to the coverage and amounts of insurance which
are carried by reasonably prudent landlords of Comparable Buildings (but in no
event shall Landlord be required to carry earthquake insurance), and Worker's
Compensation and Employee's Liability coverage as required by Applicable Law.
The minimum limits of policies of insurance required of Landlord under the Lease
shall not limit the liability of Landlord under this Lease with respect to
claims covered by such insurance. Tenant shall, at Tenant's expense, comply with
all insurance company requirements pertaining to the use of the Premises. If
Tenant's conduct or use of the Premises for other than the Permitted Use causes
any increase in the premium for such insurance policies then Tenant shall
reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall
comply with all rules, orders, regulations or requirements of the American
Insurance Association (formerly the National Board of Fire Underwriters) and
with any similar body.

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      10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages in
the following amounts. Tenant may utilize blanket policies of insurance (and
combinations of primary and excess/umbrella policies).

            10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operations, and contractual
liabilities (covering the performance by Tenant of its indemnity agreements)
including a Broad Form endorsement covering the insuring provisions of this
Lease and the performance by Tenant of the indemnity agreements set forth in
Section 10.1 of this Lease, for limits of liability not less than:

            Bodily Injury and                $5,000,000 each occurrence
            Property Damage Liability        $5,000,000 annual aggregate

            Personal Injury Liability        $5,000,000 each occurrence
                                             $5,000,000 annual aggregate
                                             0% Insured's participation

            10.3.2 Physical Damage Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant
Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter,
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Building Structure and Building Systems) (the
"ORIGINAL IMPROVEMENTS"), and (iii) all other improvements, alterations and
additions to the Premises which do not constitute the Building Structure or
Building Systems. Such insurance shall be written on an "all risks" of physical
loss or damage basis, for the full replacement cost value (subject to reasonable
deductible amounts) new without deduction for depreciation of the covered items
and in amounts that meet any co-insurance clauses of the policies of insurance
and shall include coverage for damage or other loss caused by fire or other
peril including, but not limited to, vandalism and malicious mischief, theft,
water damage of any type, including sprinkler leakage, bursting or stoppage of
pipes, and explosion, and providing business interruption coverage for a period
of one year.

            10.3.3 Worker's Compensation and Employer's Liability or other
similar insurance pursuant to all applicable state and local statutes and
regulations.

      10.4 FORM OF POLICIES. The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, and any other
party the Landlord so specifies, as an additional insured, including Landlord's
managing agent, if any; (ii) specifically cover the liability assumed by Tenant
under this Lease, including, but not limited to, Tenant's obligations under
Section 10.1 of this Lease; (iii) be issued by an insurance company having a
rating of not less than A-X in Best's Insurance Guide or which is otherwise
acceptable to Landlord and licensed to do business in the State of California;
(iv) be primary insurance as to all claims thereunder and provide that any
insurance carried by Landlord is excess and is non-contributing with any
insurance requirement of Tenant; (v) be in form and content reasonably approved
by Landlord; and (vi) provide that said insurance shall not be canceled or
coverage changed unless thirty (30) days' prior written notice shall have been
given to Landlord and any mortgagee of Landlord. All commercial general
liability and property damage liability policies maintained by Tenant will
contain a provision that Landlord and any other additional insured, although
named as an insured, will nevertheless be entitled to recover under such
policies for any loss sustained by Landlord, Landlord's agents, and Landlord's
employees as a result of the acts or omissions of Tenant. Insurance required to
be maintained by Tenant by this Article 10 may be subject to commercially
reasonable deductibles (not to exceed $100,000.00). Tenant shall deliver said
policy or policies or certificates thereof to Landlord on or before the Lease
Commencement Date and at least thirty (30) days before the expiration dates
thereof. In the event Tenant shall fail to procure such insurance, or to deliver
such policies or certificate, Landlord may, at its option, procure such policies
for the account of Tenant, and the cost thereof shall be paid to Landlord within
five (5) days after delivery to Tenant of bills therefor. If either party fails
to carry the amounts and types of insurance required to be carried by it
pursuant to this Lease, such failure

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shall be deemed to be a covenant and agreement by such party to self-insure with
respect to the type and amount of insurance which such party so failed to carry,
with full waiver of subrogation with respect thereto.

      10.5 SUBROGATION. Landlord and Tenant intend that their respective
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective insurance
policies are now, or shall be, endorsed such that the waiver of subrogation
shall not affect the right of the insured to recover thereunder, so long as no
material additional premium is charged therefor. Tenant will cause all other
occupants of the Premises claiming by, under, or through Tenant to execute and
deliver to Landlord a waiver of claims similar to the waiver in this Section
10.5 and to obtain such waiver of subrogation rights endorsements.

      10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord. Notwithstanding any provisions of this
Lease to the contrary, the obligations of Tenant to provide increased or new
insurance hereunder shall be limited to the extent the same is (i) then
customarily required by landlords of Comparable Buildings in connection with
comparable tenants occupying comparable sized premises and (ii) reasonably
available for purchase by Tenant at a commercially reasonable cost.

                                   ARTICLE 11

                             DAMAGE AND DESTRUCTION

      11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly
notify Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the Base Building and such Common Areas. Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, Tenant shall repair any injury or
damage to the Tenant Improvements and the Original Improvements installed in the
Premises and shall return such Tenant Improvements and Original Improvements to
their original condition. Prior to the commencement of construction, Tenant
shall submit to Landlord, for Landlord's review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall
reasonably approve the contractors to perform such improvement work. If such
fire or other casualty shall have damaged the Premises , or Common Areas which
render the Premises unfit for occupancy for the purposes permitted under this
Lease, Landlord shall allow Tenant a proportionate abatement of Rent, during the
time and to the extent the Premises are unfit for occupancy for the purposes
permitted under this Lease, and not occupied for the conduct of business by
Tenant as a result thereof Tenant's right to rent abatement pursuant to the
preceding sentence shall continue until Tenant has been provided a reasonable
period to rebuild the portion of the Premises it is required to rebuild under
this Article 11 (subject to Force Majeure), to install Tenant's property,
furniture, fixtures, and equipment, and to move in over one (1) weekend.

      11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of Section
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of discovery of the damage, such notice to include a termination date

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giving Tenant one hundred twenty (120) days to vacate the Premises, but Landlord
may so elect only if the Building or Project shall be damaged by fire or other
casualty or cause, whether or not the Premises are affected, Landlord terminates
the leases of all tenants of the Building that are affected by the casualty in a
manner similar to Tenant, and one or more of the following conditions is
present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be
completed within three hundred sixty (360) days after the date of discovery of
the damage (when such repairs are made without the payment of overtime or other
premiums); (ii) except for an amount not to exceed the "Threshold Amount," as
that term is defined below, the damage is not fully covered by Landlord's
insurance policies; or (iii) the damage occurs during the last nine (9) months
of the Lease Term. Notwithstanding the foregoing, if Landlord does not elect to
terminate this Lease pursuant to Landlord's termination right as provided above,
and the repairs cannot, in the reasonable opinion of Landlord, be completed
within three hundred sixty and (360) days after being commenced, Tenant may
elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than one
hundred twenty (120) days after the date such notice is given by Tenant. For
purposes of this Section 11.2, the "Threshold Amount" shall equal $1,000,000.00;
provided, however, that such amount shall be reduced by an amount equal to
$16,129.03 on the first day of each month during the Lease Term.

      11.3 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

                                   ARTICLE 12

                                    NONWAIVER

      No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord or payment of Rent by Tenant shall not be deemed to be a
waiver of any preceding breach by Landlord or Tenant of any term, covenant or
condition of this Lease, other than the failure of Tenant to pay the particular
Rent so accepted, regardless of Landlord's or Tenant's knowledge of such
preceding breach at the time of acceptance or payment of such Rent. No
acceptance of a lesser amount than the Rent herein stipulated shall be deemed a
waiver of Landlord's right to receive the full amount due, nor shall any
endorsement or statement on any check or payment or any letter accompanying such
check or payment be deemed an accord and/or satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant or by Tenant
from Landlord after the termination of this Lease shall in any way alter the
length of the Lease Term or of Tenant's right of possession hereunder, or after
the giving of any Notice shall reinstate, continue or extend the Lease Term or
affect any Notice given Tenant prior to the receipt of such monies, it being
agreed that after the service of Notice or the commencement of a suit, or after
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of said Rent shall not waive or affect said
Notice, suit or judgment. Tenant's payment of any Rent hereunder shall not
constitute a waiver by Tenant of any breach or default by Landlord under this
Lease nor shall Landlord's payment of monies due Tenant hereunder constitute a
waiver by Landlord of any breach or Default by Tenant under this Lease.

                                   ARTICLE 13

                                  CONDEMNATION

      If the whole or any material part of the Premises, Building or Project
shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-

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public use or purpose, or if Landlord shall grant a deed or other instrument in
lieu of such taking by eminent domain or condemnation, provided that Landlord
terminates all of the leases of all tenants of the Building that are affected by
the taking (or a deed or other instrument in lieu thereof) in a manner
comparable to Tenant, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. If more than twenty-five percent (25%) of the rentable square feet of
the Premises is taken, or if access to the Premises is substantially impaired,
in each case for a period in excess of one hundred eighty (180) days, Tenant
shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. Tenant shall not
because of such taking assert any claim against Landlord or the authority for
any compensation because of such taking and Landlord shall be entitled to the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses, provided that in each event that such claim by Tenant
is payable to Tenant or is otherwise separately identifiable, and provided
further that if the recovery from the condemnor shall be paid into a common fund
or paid to Landlord only, so long as amounts are specifically designated as
payment for claims which are due Tenant pursuant to the terms of this ARTICLE
13. In addition, Tenant shall be entitled to 50% of the bonus value of this
Lease (which bonus value shall be equal to the difference between the Rent
payable under this Lease and the sum established by the condemning authority as
the award for compensation for the leasehold estate). All Rent shall be
apportioned as of the date of such termination. If any part of the Premises
shall be taken, and this Lease shall not be so terminated, the Rent shall be
proportionately abated. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of The California Code of Civil
Procedure. Notwithstanding anything to the contrary contained in this ARTICLE
13, in the event of a temporary taking of all or any portion of the Premises for
a period of one hundred and eighty (180) days or less, then this Lease shall not
terminate but the Base Rent and the Additional Rent shall be abated for the
period of such taking in proportion to the ratio that the amount of rentable and
useable square feet of the Premises taken bears to the total rentable square
feet of the Premises. Landlord shall be entitled to receive the entire award
made in connection with any such temporary taking.

                                   ARTICLE 14

                            ASSIGNMENT AND SUBLETTING

      14.1 TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder,
sublet the Premises or any part thereof, or enter into any license or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as
"Transfers" and any person to whom any Transfer is made or sought to be made is
hereinafter sometimes referred to as a "Transferee"). If Tenant desires
Landlord's consent to any Transfer, Tenant shall notify Landlord in writing,
which notice (the "Transfer Notice") shall include (i) the proposed effective
date of the Transfer, which shall not be less than thirty (30) days nor more
than two hundred seventy (270) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be transferred (the
"Subject Space"), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the "Transfer Premium", as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer(iv)
current financial statements of the proposed Transferee certified by an officer,
partner or owner thereof, business credit and personal references and history of
the proposed Transferee and any other information required by Landlord which
will enable Landlord to determine the financial responsibility, character, and
reputation of the proposed Transferee, nature of such Transferee's business and
proposed use of the Subject Space and (v) an executed estoppel certificate from
Tenant in the form attached hereto as Exhibit E. Any Transfer made without
Landlord's prior written consent shall, at Landlord's option, be null, void and
of no effect, and shall, at Landlord's option, constitute a default by Tenant
under this Lease. Whether or not Landlord consents to any proposed Transfer,
Tenant shall pay Landlord's reasonable

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review and processing fees, as well as any reasonable professional fees
(including, without limitation, attorneys', accountants', architects',
engineers' and consultants' fees) incurred by Landlord within thirty (30) days
after written request by Landlord, provided that (I) in no event shall such fees
and costs exceed $2,500.00 for a Transfer, and (II) no such fees and costs shall
be due in connection with an assignment or sublease which does not require the
consent of Landlord pursuant to the terms of this Article 14.

      14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Landlord shall grant or deny its consent
to a proposed Transfer within thirty (30) days following the date Landlord
receives the Transfer Notice. Any denial of Landlord's consent shall be
accompanied by a statement indicating the reasonable grounds upon which Landlord
denied such consent. In the event that Landlord shall fail to grant or deny its
consent within the foregoing thirty (30) day period, and shall fail to grant or
deny its consent within three (3) business days following receipt of notice
thereof from Tenant, Landlord's consent shall be deemed granted. Without
limitation as to other reasonable grounds for withholding consent, the parties
hereby agree that it shall be reasonable under this Lease and under any
applicable law for Landlord to withhold consent to any proposed Transfer where
one or more of the following apply:

            14.2.1 The Transferee is of a character or reputation or engaged in
a business which is not consistent with the quality of the Building or the
Project, as reflected by the then existing tenants of the Project;

            14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;

            14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;

            14.2.4 The Transfer occurs during the period from the Lease
Commencement Date until the earlier of (i) the first anniversary of the Lease
Commencement Date, or (ii) the date at least ninety percent (90%) of the
rentable square feet of the Building is leased, and the rent charged by Tenant
to such Transferee during the term of such Transfer (the "TRANSFEREE'S RENT"),
calculated using a present value analysis, is less than ninety percent (90%) of
the rent being quoted by Landlord at the time of such Transfer for comparable
space in the Building for a comparable term (the "QUOTED RENT"), calculated
using a present value analysis;

            14.2.5 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;

            14.2.6 The proposed Transfer would cause a violation of another
lease for space in the Project, or would give an occupant of the Project a right
to cancel its lease; or

            14.2.7 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, occupies space in the Project at the time of the
request for consent and Landlord has space in the Project which is reasonably
sufficient, and can provide tenant improvements which are reasonably adequate,
to satisfy the proposed Transferee's requirements, provided that the terms of
this Section 14.2.7 shall be inapplicable in connection with a proposed sublease
to be entered into by Tenant during the last twenty-four (24) months of the
Lease Term which is for a term (inclusive of renewals) of twenty-four (24)
months or less.

      If Landlord consents to any Transfer pursuant to the terms of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be more favorable to the Transferee in any

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material manner than the terms set forth in Tenant's original Transfer Notice,
Tenant shall again submit the Transfer to Landlord for its approval and other
action under this Article 14 (including Landlord's right of recapture, if any,
under Section 14.4 of this Lease).

      14.3 TRANSFER PREMIUM. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee; provided,
however, that Tenant shall not be required to pay to Landlord any Transfer
Premium until such time as Tenant has recovered from payments or other
consideration made by the Transferee in consideration of the Transfer all
applicable "Tenant's Subleasing Costs," as that term is defined in this Section
14.3. "TRANSFER PREMIUM" shall mean all rent, additional rent or other
consideration payable by such Transferee in connection with the Transfer in
excess of the Rent and Additional Rent payable (in lieu of or in addition to
rent) by Tenant under this Lease during the term of the Transfer on a per
rentable square foot basis if less than all of the Premises is transferred,
after deducting the reasonable expenses incurred by Tenant for (i) any changes,
alterations and improvements to the Premises in connection with the Transfer,
(ii) any free base rent reasonably provided to the Transferee, and (iii) any
brokerage commissions and/or marketing fees in connection with the Transfer (iv)
any key money, bonus money or other cash consideration paid by Tenant to
Transferee for furniture, fixtures, equipment and/or similar items; (v) any
attorney fees actually incurred by Tenant in connection with such Transfer; (vi)
the aggregate amount of Base Rent and Additional Rent paid by Tenant during the
period prior to the commencement of the term of the Transfer during which Tenant
does not occupy the Subject Space, commencing on and after the "Downtime Start
Date" (as defined below); (vii) any lease takeover incurred by Tenant in
connection with the Transfer; and (viii) out-of-pocket costs of advertising the
space subject to the Transfer (collectively, "SUBLEASING COSTS"). The "DOWNTIME
START DATE" shall mean the later of (A) the date which Tenant vacates and does
not reoccupy the Subject Space and delivers notice of the same to Landlord, and
(B) the date Tenant enters into a listing agreement for the Subject Space with a
reputable broker, and provides Landlord with notice thereof. "Transfer Premium"
shall also include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer, and
any payment in excess of fair market value for services rendered by Tenant to
Transferee or for assets, fixtures, inventory, equipment, or furniture
transferred by Tenant to Transferee in connection with such Transfer; provided,
however, under no circumstances shall Landlord be paid any Transfer Premium
until Tenant has recovered all applicable Tenant's Subleasing Costs for each
applicable Transferred Space, it being understood that if in any year the gross
revenues, less the deductions set forth and included in Tenant's Subleasing
Costs, are less than any and all costs actually paid in assigning or subletting
the affected space (collectively "TRANSACTION COSTS"), the amount of the excess
Transaction Costs shall be carried over to the next year and then deducted from
net revenues with the procedure repeated until a Transfer Premium is achieved.

      14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything to
the contrary contained in this Article 14, in the event Tenant contemplates a
Transfer (specifically excluding an assignment or sublease under Section 14.8 of
this Lease) which, when aggregated with all other Transfers, would constitute a
Transfer of more than fifty percent (50%) of the rentable area of the Premises,
Tenant shall give Landlord notice (the "INTENTION TO TRANSFER NOTICE") of such
contemplated Transfer (whether or not the contemplated Transferee or the terms
of such contemplated Transfer have been determined). The Intention to Transfer
Notice shall specify the portion of and amount of rentable square feet of the
Premises which Tenant intends to Transfer (the "CONTEMPLATED TRANSFER SPACE"),
the contemplated date of commencement of the Contemplated Transfer (the
"CONTEMPLATED EFFECTIVE DATE"), and the contemplated length of the term of such
contemplated Transfer, and shall specify that such Intention to Transfer Notice
is delivered to Landlord pursuant to this Section 14.4 in order to allow
Landlord to elect to recapture the Contemplated Transfer Space for the term set
forth in the Intention to Transfer Notice. Thereafter, Landlord shall have the
option, by giving written notice to Tenant (the "RECAPTURE NOTICE") within
thirty (30) days after receipt of any Intention to Transfer Notice, to recapture
the Contemplated Transfer Space; provided, however, within five (5) business
days of Tenant's receipt of the Recapture Notice, Tenant may, by written notice
to Landlord, withdraw its Intention to Transfer Notice (the "SUBLEASE WITHDRAWAL
NOTICE"), in which case the subject Intention to Transfer Notice and the subject
Recapture Notice shall be null and void and of no force or effect. Any such
recapture by Landlord shall cancel and terminate this Lease with respect to such
Contemplated Transfer Space as of the Contemplated Effective Date as set forth

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in the Intention to Transfer Notice. In the event of a recapture by Landlord, if
this Lease shall be canceled with respect to less than the entire Premises, the
Rent and Security Deposit reserved herein shall be prorated on the basis of the
number of rentable square feet retained by Tenant in proportion to the number of
rentable square feet contained in the Premises, and this Lease as so amended
shall continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same. If Landlord
recaptures the Premises or any portion thereof, Landlord shall pay Tenant the
unamortized amount (amortized on a straightline basis over the Lease Term) of
the cost of any permanently affixed improvements paid for by Tenant relating to
such portion of the Premises. Landlord shall be responsible for installing, at
its cost, any demising wall and other improvements necessary to separate the
recaptured space from the balance of the Premises and for HVAC balancing and
separation of electrical circuits. If Landlord declines, or fails to elect in a
timely manner to recapture such Contemplated Transfer Space under this Section
14.4, then, subject to the other terms of this Article 14, for a period of nine
(9) months (the "NINE MONTH PERIOD"). Landlord shall not have any right to
recapture the Contemplated Transfer Space with respect to any Transfer made
during the Nine Month Period, provided that any such Transfer is substantially
on the terms set forth in the Intention to Transfer Notice; provided however,
that any such Transfer shall be subject to the remaining terms of this Article
14. If such a Transfer is not so consummated within the Nine Month Period (or if
a Transfer is so consummated), then upon the expiration of the term of any
Transfer of such Contemplated Transfer Space consummated within such Nine Month
Period), Tenant shall again be required to submit to Landlord a new Intention to
Transfer Notice with respect to any Contemplated Transfer, as provided in this
Section 14.4.

      14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the terms
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish upon Landlord's request (but not more than once every
twelve (12) months of the Lease Term) a complete statement, certified by an
independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than five and one-half percent (5-1/2%),
Tenant shall pay Landlord's costs of such audit, otherwise the cost shall be
borne by Landlord.

      14.6 INTENTIONALLY OMITTED.

      14.7 OCCURRENCE OF DEFAULT. Any Transfer hereunder shall be subordinate
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:
(i) treat such Transfer as canceled and repossess the Subject Space by any
lawful means, or (ii) require that such Transferee attorn to and recognize
Landlord as its landlord under any such Transfer. If Tenant shall be in Default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such Default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
Default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment, the assignee shall assume in writing all obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any Transferee shall be deemed a waiver
of any provision of this Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord's enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord's right to
enforce any term of this Lease against Tenant or any other person. If Tenant's
obligations hereunder have been guaranteed, Landlord's consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.

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      14.8 NON-TRANSFERS. Notwithstanding anything to the contrary contained in
this Article 14, neither (i) an assignment of the Premises to a transferee which
is the resulting entity of a merger or consolidation of Tenant with another
entity, (ii) a sale by Tenant of all or substantially all of its assets to
another entity, (iii) transfers of shares of stock, partnership, interests, or
membership interests of Tenant or any affiliate of Tenant if Tenant or such
affiliate is a publicly-held company, nor (iv) an assignment or subletting of
all or a portion of the Premises to an affiliate of Tenant (an "AFFILIATE") (an
entity which is controlled by, controls, or is under common control with,
Tenant), shall be deemed a Transfer under this Article 14, provided that, with
respect to item (iv) above only, Tenant notifies Landlord of any such assignment
or sublease and promptly supplies Landlord with any documents or information
reasonably requested by Landlord regarding such assignment or sublease or such
affiliate, to the extent such documents and /or information is required to prove
that such assignment or sublease is not a subterfuge by Tenant to avoid its
obligations under this Lease. In no event shall any Transfer Premium be payable
to Landlord for any transfer described in items (i) through (iv) of this Section
14.8. "CONTROL," as used in this Section 14.8, shall mean the ownership,
directly or indirectly, of at least fifty-one percent (51%) of the voting
securities of, or possession of the right to vote, in the ordinary direction of
its affairs, of at least fifty-one percent (51%) of the voting interest in, any
person or entity.

                                   ARTICLE 15

                      SURRENDER OF PREMISES; OWNERSHIP AND
                            REMOVAL OF TRADE FIXTURES

      15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.

      15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15 and Sections 8.2 and 8.5, quit and
surrender possession of the Premises to Landlord in good order and condition of
this Lease, reasonable wear and tear, casualty, and repairs which are
specifically made the responsibility of Landlord hereunder excepted. Upon such
expiration or termination, subject to the terms of Sections 8.2 and 8.5 of this
Lease, and subject to the last sentence of this Section 15.2, Tenant shall,
without expense to Landlord, remove or cause to be removed from the Premises,
any Tenant Improvements or Alterations designated by Landlord in accordance with
the terms of this Lease, all debris and rubbish, and such items of furniture,
equipment, business and trade fixtures, free-standing cabinet work, movable
partitions, all signs and placards, and other articles of personal property
owned by Tenant or installed or placed by Tenant at its expense in the Premises,
and such similar articles, as Landlord may, in its reasonable discretion,
require to be removed, and Tenant shall repair at its own expense all damage to
the Premises and Building resulting from such removal. Landlord may elect to
retain or dispose of, in any manner, any Alterations or Tenant's personal
property that Tenant does not remove (and was not directed by Landlord to
remove) from the Premises on the expiration or termination of the Term. Title to
any such Alterations or Tenant's personal property that Landlord elects to
retain or dispose of on expiration of the Term shall vest in Landlord. Tenant
waives all claims against Landlord for any damage to Tenant resulting from
Landlord's retention or disposition of any such Alterations or Tenant's personal
property. Tenant shall be liable to Landlord for Landlord's reasonable and
actual costs for storing, removing and disposing of any Alterations or Tenant's
personal property and shall indemnify and hold Landlord harmless from the claim
of any third party to an interest in said personal property.

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                                   ARTICLE 16

                                  HOLDING OVER

      If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case, Rent
shall be payable at a monthly rate equal to one hundred twenty-five percent
(125%) of the Rent applicable during the last rental period of the Lease Term
under this Lease for the first sixty (60) days of such holding over and
thereafter equal to one hundred fifty percent (150%) of the Rent applicable
during the last rental period of the Lease Term under this Lease. Such
month-to-month tenancy shall be subject to every other applicable term, covenant
and agreement contained herein. For purposes of this Article 16, a holding over
shall include, without limitation, (i) Tenant's remaining in the Premises after
the expiration or earlier termination of the Lease Term, as required pursuant to
the terms of Section 8.5, above, to remove any Alterations or improvements
located within the Premises and replace the same as requested by Landlord with
Building standard improvements, or (ii) Tenant's failure to remove items and
restore the Premises as required in Article 15, above. Nothing contained in this
Article 16 shall be construed as consent by Landlord to any holding over by
Tenant, and Landlord expressly reserves the right to require Tenant to surrender
possession of the Premises to Landlord as provided in this Lease upon the
expiration or other termination of this Lease. The provisions of this Article 16
shall not be deemed to limit or constitute a waiver of any other rights or
remedies of Landlord provided herein or at law. If, after the termination or
expiration of this Lease, Tenant fails to surrender the Premises within five (5)
days following written notice from Landlord , in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys' fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
tenant founded upon such failure to surrender and any lost profits to Landlord
resulting therefrom.

                                   ARTICLE 17

                              ESTOPPEL CERTIFICATES

      Within ten (10) business days following a request in writing by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord an estoppel
certificate, which, as submitted by Landlord, shall be substantially in the form
of EXHIBIT E, attached hereto (or such other form as may be reasonably required
by any prospective mortgagee or purchaser of the Project, or any portion
thereof), indicating therein any exceptions thereto that may exist at that time,
and shall also contain any other information reasonably requested by Landlord or
Landlord's mortgagee or prospective mortgagee. Any such certificate may be
relied upon by any prospective mortgagee or purchaser of all or any portion of
the Project. Within ten (10) business days following request by Tenant, Landlord
shall deliver a commercially reasonable form of estoppel certificate as may be
reasonably requested by Tenant or a purchaser or lender of Tenant, indicating
therein any exceptions thereto that may exist at that time. At any time during
the Lease Term, if Tenant is not then a public company reporting under
applicable federal securities laws, Landlord may require Tenant to provide
Landlord with a current financial statement and financial statements of the two
(2) years prior to the current financial statement year. Failure of Tenant to
timely execute, acknowledge and deliver such estoppel certificate or other
instruments shall constitute an acceptance of the Premises and an acknowledgment
by Tenant that statements included in the estoppel certificate are true and
correct, without exception. Landlord shall, within ten (10) business days after
receipt of Tenant's written request therefor, execute and deliver to Tenant an
estoppel certificate certifying that this Lease is unmodified and in full force
and effect (or, if there have been modifications, that this Lease is in full
force and effect, as modified, and stating the date and nature of each
modification) and the date, if any, to which rental and other sums payable
hereunder have been paid.

                                   ARTICLE 18

                          SUBORDINATION AND ATTORNMENT

      18.1 SUBORDINATION. This Lease shall be subject and subordinate to all
present and future ground or underlying leases of the Building or Project and to
the lien of any mortgage,

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trust deed or other encumbrances now or hereafter in force against the Building
or Project or any part thereof, if any, and to all renewals, extensions,
modifications, consolidations and replacements thereof, and to all advances made
or hereafter to be made upon the security of such mortgages or trust deeds,
unless the holders of such mortgages, trust deeds or other encumbrances, or the
lessors under such ground lease or underlying leases, require in writing that
this Lease be superior thereto. Landlord hereby covenants to Tenant that the
Building, is not, as of the date hereof, encumbered by or subject to any
mortgage, trust deed or other debt related encumbrance. Landlord's delivery to
Tenant of commercially reasonable non-disturbance agreement(s) (the
"NONDISTURBANCE AGREEMENT") in favor of Tenant from any ground lessors, mortgage
holders or lien holders of Landlord who come into existence following the date
hereof but prior to the expiration of the Lease Term shall be in consideration
of, and a condition precedent to, Tenant's agreement to be bound by the terms of
this Article 18 with respect thereto. Tenant covenants and agrees in the event
any proceedings are brought for the foreclosure of any such mortgage or deed in
lieu thereof (or if any ground lease is terminated), to attorn, without any
deductions or set-offs whatsoever, to the lienholder or purchaser or any
successors thereto upon any such foreclosure sale or deed in lieu thereof (or to
the ground lessor), if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor as
the lessor under this Lease, provided such lienholder or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so
long as Tenant timely pays the rent and observes and performs the terms,
covenants and conditions of this Lease to be observed and performed by Tenant.
Landlord's interest herein may be assigned as security at any time to any
lienholder. Tenant shall, within ten (10) days of request by Landlord, execute
such further instruments or assurances as Landlord may reasonably deem necessary
to evidence or confirm the subordination or superiority of this Lease to any
such mortgages, trust deeds, ground leases or underlying leases.

                                   ARTICLE 19

                               DEFAULTS; REMEDIES

      19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute a "Default" or "default" of this Lease by Tenant:

            19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within ten (10) days after written notice; or

            19.1.2 Except where a specific time period is otherwise set forth
for Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a Default by Tenant under this Section
19.1.2, any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such Default is such that the
same cannot reasonably be cured within a thirty (30) day period, Tenant shall
not be deemed to be in Default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such Default, but
in no event exceeding a period of time in excess of ninety (90) days after
written notice thereof from Landlord to Tenant; or

            19.1.3 To the extent permitted by law, a general assignment by
Tenant or any guarantor of this Lease for the benefit of creditors, or the
taking of any corporate action in furtherance of bankruptcy or dissolution
whether or not there exists any proceeding under an insolvency or bankruptcy
law, or the filing by or against Tenant or any guarantor of any proceeding under
an insolvency or bankruptcy law, unless in the case of a proceeding filed
against Tenant or any guarantor the same is dismissed within ninety (90) days,
or the appointment of a trustee or receiver to take possession of all or
substantially all of the assets of Tenant or any guarantor, unless possession is
restored to Tenant or such guarantor within ninety (90) days, or any execution
or other judicially authorized seizure of all or substantially all of Tenant's
assets located upon the Premises or of Tenant's interest in this Lease, unless
such seizure is discharged within ninety (90) days; or

            19.1.4 Intentionally omitted; or

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            19.1.5 The failure by Tenant to observe or perform according to the
      provisions of Articles 5, 14, 17 or 18 of this Lease where such failure
      continues for more than ten (10) business days after notice from Landlord;
      or

            19.1.6 Intentionally omitted.

      If Tenant disputes that any amount is due and payable by Tenant pursuant
to the Lease, Tenant shall have the right, without waiving any of its rights at
law or in equity, to pay any such amount under protest and thereafter to seek
recovery of all or any part thereof by Landlord.

      All notices to be given pursuant to this Section 19 shall be in addition
to, and not in lieu of, the notice requirements of California Code of Civil
Procedure Section 1161.

      19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of Default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.

            19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:

                        (i) The worth at the time of any unpaid rent which has
been earned at the time of such termination; plus

                        (ii) The worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus

                        (iii) The worth at the time of award of the amount by
which the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus

                        (iv) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, specifically including but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the
Premises or any portion thereof for a new tenant, whether for the same or a
different use, and any special concessions made to obtain a new tenant; provided
that to the extent any new lease involves space other than the Premises or
extends beyond the then Lease Term, only those costs, expenses, commissions and
concessions attributable to the Premises or the remainder of the then Lease
Term, as determined on a straight line basis, shall be recoverable by Landlord;
and

                        (v) At Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
applicable law.

      The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

            19.2.2 Intentionally omitted.

            19.2.3 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and

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recover rent as it becomes due, if lessee has the right to sublet or assign,
subject only to reasonable limitations). Accordingly, if Landlord does not elect
to terminate this Lease on account of any Default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due.

            19.2.4 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 through 19.2.3, above,
or any law or other provision of this Lease), without prior demand or notice
except as required by applicable law, to seek any declaratory, injunctive or
other equitable relief, and specifically enforce this Lease, or restrain or
enjoin a violation or breach of any provision hereof.

      19.3 SUBLEASES OF TENANT. If Landlord elects to terminate this Lease on
account of any Default by Tenant, as set forth in this Article 19, Landlord
shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and
affecting the Premises.

      19.4 EFFORTS TO RELET. No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.

      19.5 LANDLORD DEFAULT.

            19.5.1 GENERAL. Notwithstanding anything to the contrary set forth
in this Lease, Landlord shall not to be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease unless
Landlord fails to perform such obligation within thirty (30) days after receipt
of notice from Tenant, specifying in detail Landlord's failure to perform;
provided, however, if the nature of Landlord's obligation is such that more than
thirty (30) days are required for its performance, then Landlord shall not be in
default under this Lease if it shall commence such performance within such
thirty (30) day period and thereafter diligently pursue the same to completion.
Upon such default by Landlord under this Lease, Tenant may, except as otherwise
specifically provided in this Lease to the contrary, exercise any of its rights
provided at law or in equity.

            19.5.2 ABATEMENT OF RENT. In the event that Tenant is prevented from
using, and does not use, the Premises or any portion thereof, as a result of (i)
any repair, maintenance or alteration performed by Landlord, or which Landlord
failed to perform, after the Lease Commencement Date and required by this Lease,
which substantially interferes with Tenant's use of the Premises, (ii) any
failure to provide services, utilities or access to the Premises, (iii) damage
and destruction of or eminent domain proceedings in connection with the
Premises, the Project or the parking facility servicing the Project, or (iv) the
presence of hazardous materials not brought on the Premises by Tenant, its
employees, agents, invitees or customers (any such set of circumstances as set
forth in items (i) through (iv), above, to be known as an "ABATEMENT EVENT"),
then Tenant shall give Landlord notice of such Abatement Event, and if such
Abatement Event continues for five (5) consecutive business days after
Landlord's receipt of any such notice (the "ELIGIBILITY PERIOD"), then the Base
Rent, Tenant's Share of Direct Expenses, and Tenant's obligation to pay for
parking shall be abated or reduced, as the case may be, from the commencement of
the Eligibility Period for such time that Tenant continues to be so prevented
from using, and does not use, the Premises or a portion thereof, in the
proportion that the rentable area of the portion of the Premises that Tenant is
prevented from using, and does not use, bears to the total rentable area of the
Premises; provided, however, in the event that Tenant is prevented from using,
and does not use, a portion of the Premises for a period of time from the
commencement of the Eligibility Period and the remaining portion of the Premises
is not sufficient to allow Tenant to effectively conduct its business therein,
and if Tenant does not conduct its business from such remaining portion, then
for such time after expiration of the Eligibility Period during which Tenant is
so prevented from effectively conducting its business therein, the Base Rent and
Tenant's Share of Building Direct Expenses and Tenant's obligation to

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pay for parking for the entire Premises shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises. If,
however, Tenant reoccupies any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises. Such right to abate Base Rent, Tenant's
Share of Direct Expenses, and Tenant's parking charges shall be Tenant's sole
and exclusive remedy at law or in equity to abate rent for an Abatement Event.
If Tenant's right to abatement occurs because of an eminent domain taking and/or
because of damage or destruction to the Premises, the Project's parking
facility, and/or the Project, Tenant's abatement period shall continue until
Tenant has been given sufficient time, and sufficient access to the Premises, to
rebuild such portion it is required to rebuild, to install its property,
furniture, fixtures, and equipment to the extent the same shall have been
removed as a result of such damage or destruction and to move in over a weekend.
Except as provided in this Section 19.5.2, nothing contained herein shall be
interpreted to mean that Tenant is excused from paying Rent due hereunder.

                                   ARTICLE 20

                           COVENANT OF QUIET ENJOYMENT

      Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by Landlord or any persons lawfully claiming by or through
Landlord. The foregoing covenant is in lieu of any other covenant express or
implied, except for those covenants expressly set forth in this Lease.

                                   ARTICLE 21

                                SECURITY DEPOSIT

      Concurrent with Tenant's execution of this Lease, Tenant shall deposit
with Landlord a security deposit (the "SECURITY DEPOSIT") in the amount set
forth in Section 8 of the Summary, as security for the faithful performance by
Tenant of all of its obligations under this Lease and any renewals or extensions
of this Lease. If Tenant defaults with respect to any provisions of this Lease,
including, but not limited to, the provisions relating to the payment of Rent,
the removal of property and the repair of resultant damage, Landlord may,
without notice to Tenant, but shall not be required to apply all or any part of
the Security Deposit for the payment of any Rent or any other sum in default and
Tenant shall, upon demand therefor, restore the Security Deposit to its original
amount within five (5) days after written notice from Landlord. Any unapplied
portion of the Security Deposit shall be returned to Tenant, or, at Landlord's
option, to the last assignee of Tenant's interest hereunder, within sixty (60)
days following the expiration of the Lease Term so long as Tenant is not in
default under this Lease. Tenant shall not be entitled to any interest on the
Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of the
California Civil Code, or any successor statute.

                                   ARTICLE 22

                              INTENTIONALLY DELETED

                                   ARTICLE 23

                                      SIGNS

      23.1 FULL FLOORS. Subject to Landlord's prior written approval, in its
reasonable discretion, and provided all signs are in keeping with the quality,
design and style of the Building and Project, Tenant, at its sole cost and
expense, may install identification signage anywhere in the Premises, including
the elevator lobby of the Premises, provided that such signs must not be visible
from the exterior of the Building.

      23.2 INTENTIONALLY DELETED.

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      23.3 PROHIBITED SIGNAGE AND OTHER ITEMS. Except as expressly set forth in
this Lease, any signs, notices, logos, pictures, names or advertisements which
are installed and that have not been separately approved by Landlord may be
removed (with prior written notice to Tenant) by Landlord at the sole expense of
Tenant. Tenant may not install any signs on the exterior or roof of the Project
or the Common Areas. Any signs, window coverings, or blinds (even if the same
are located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its reasonable discretion.

      23.4 BUILDING DIRECTORY. Tenant shall have the right, as part of the
initial Tenant Improvements, to cause Tenant's business unit name to be
displayed on the building directory in building standard font and size. Any
changes to the initial strip containing Tenant's name on the Building directory
shall be at Tenant's sole cost and expense.

      23.5 MONUMENT SIGNAGE. Tenant shall be entitled, as part of the initial
Tenant Improvements, to install non-exclusive identification signage (the
"MONUMENT SIGNAGE") on the multi-tenant Building monument sign (the "MONUMENT").
The position on the Monument that Tenant's Monument Signage shall occupy shall
be either the second (2nd) or third (3rd) position from the top position as
designated by Landlord. The Monument Signage shall be non-exclusive to Tenant
and Landlord shall have the right to grant other tenants of the Building the
right to install identification signage on the Monument. Upon the expiration or
earlier termination of this Lease, Tenant shall be responsible, at Tenant's sole
cost and expense, for the removal of the Monument Signage and the repair of any
damage resulting therefrom to the Monument to the satisfaction of Landlord,
including, without limitation, repairing and/or replacing the Monument and/or
repairing and/or replacing any landscaping surrounding the Monument which is
caused by such removal. All aspects of the Monument Signage, including, but not
limited to, quality, design, style, lighting and size, as applicable, shall be
(a) consistent with Landlord's Building standard signage program, (b) subject to
Landlord's prior written approval, in Landlord's reasonable discretion, and (c)
subject to and in compliance with all Applicable Laws. Further, Tenant shall be
responsible, at its sole cost and expense, for the maintenance, repair,
replacement and removal of the Monument Signage. Should the name of Tenant be
legally changed to another name (the "New Name"), Tenant shall be entitled to
modify, at Tenant's sole cost and expense, Tenant's name on the Monument Signage
to reflect Tenant's New Name, so long as Tenant's New Name is not an
"Objectionable Name." The term "Objectionable Name" shall mean any name which
relates to an entity which is of a character or reputation, or is associated
with a political orientation or faction, which is inconsistent with the quality
of the Project, or which would otherwise reasonably offend a prudent landlord of
the Comparable Buildings. The rights to the Monument Signage granted herein
shall be deemed personal to the Original Tenant (and not any assignee, sublessee
or transferee of Tenant's interest in this Lease) and shall terminate if at any
time the Tenant and the Right Holders cease to collectively occupy not less than
fifty percent (50%) of the Premises.

                                   ARTICLE 24

                               COMPLIANCE WITH LAW

      Tenant shall not do anything or suffer anything to be done in or about the
Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated ("APPLICABLE LAWS"). Subject to Landlord's
obligations as set forth in this ARTICLE 24, at its sole cost and expense,
Tenant shall promptly comply with all such governmental measures which relate to
(i) Tenant's use of the Premises, (ii) the Alterations Tenant Improvements (as
to the Alterations and Tenant Improvements only but not as to any other part of
the Building triggered thereby, except as set forth in item (iii), below), (iii)
the Base Building, Building Systems and Building Structure, but only to the
extent such obligations are triggered by Tenant Improvements or Alterations
which are not customary general office improvements or Tenant's non-general
office use; provided, however, that Tenant's obligation to comply with
Applicable Laws shall only apply to the extent Tenant's failure to comply
therewith would (a) prohibit Landlord or any tenant of the Building from
obtaining or maintaining a certificate of occupancy for all or any portion of
the Building, (b) unreasonably and materially affect the safety of any tenants,
occupants, invitees, employees or any other person at the Building, (c) impose
an unreasonable health hazard for any such persons, and/or (d) otherwise
materially adversely affect Landlord and/or the Building (items (a) through (d)
to be referred to herein as "TENANT'S COMPLIANCE

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CONDITIONS"). Should any standard or regulation now or hereafter be imposed on
Tenant by a state, federal or local governmental body charged with the
establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, or tenants, then Tenant agrees, at its sole
cost and expense, to comply promptly with such standards or regulations. Subject
to the foregoing terms of this ARTICLE 24, and the terms of this Lease, Landlord
shall, at its sole cost and expense, comply with laws relating to the Base
Building, Building Systems, Building Structure and the Common Areas; provided,
however, that Landlord's obligation to comply with such Applicable Laws shall
only apply to the extent that failure to comply with therewith would (I) impose
an unreasonable health hazard to the occupants of the Premises, (II) prohibit
Tenant from obtaining or maintaining a certificate of occupancy for the
Premises, (III) unreasonably and materially affect the safety of any tenants,
occupants, invitees, employees or any other person at the Building, or (IV)
otherwise materially adversely affect Tenant and/or the Premises (items (I)
through (IV) to be referred to herein is "LANDLORD'S COMPLIANCE CONDITIONS").
Notwithstanding anything to the contrary set forth in this ARTICLE 24, Tenant's
and Landlord's obligation under this ARTICLE 24 shall commence upon the Lease
Commencement Date.

                                   ARTICLE 25

                                  LATE CHARGES

      Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent
or Additional Rent due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing,
administration and accounting charges and late charges which may be imposed on
Landlord by the terms of any encumbrance covering the Premises. Accordingly, If
any installment of Rent or any other sum due from Tenant shall not be received
by Landlord or Landlord's designee within five (5) days after said amount is due
more than once in a Lease Year, then Tenant shall pay to Landlord a late charge
equal to three and one-half percent (3.5%) of the overdue amount. The late
charge shall be deemed Additional Rent and the right to require it shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner. In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid within ten (10) days after the date
they are due shall bear interest from the date when due until paid at a rate per
annum (the "INTEREST RATE") equal to the lesser of (i) the annual "BANK PRIME
LOAN" rate cited in the Federal Reserve Statistical Release Publication
G.13(415), published on the first Tuesday of each calendar month (or such other
comparable index as Landlord and Tenant shall reasonably agree upon if such rate
ceases to be published) plus two (2) percentage points, and (ii) the highest
rate permitted by applicable law.

                                   ARTICLE 26

              LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

      26.1 LANDLORD'S CURE. All covenants and agreements to be kept or performed
by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, then upon an additional ten (10) days' Notice
from Landlord, Landlord may, but shall not be obligated to, make any such
payment or perform any such act on Tenant's part without waiving its rights
based upon any Default of Tenant and without releasing Tenant from any
obligations hereunder.

      26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, within thirty (30) days
following demand by Landlord to Tenant sums equal to expenditures reasonably
made and obligations incurred by Landlord in connection with the remedying by
Landlord of Tenant's defaults pursuant to the provisions of Section 26.1.
Tenant's obligations under this Section 26.2 shall survive the expiration or
sooner termination of the Lease Term.

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                                   ARTICLE 27

                                ENTRY BY LANDLORD

      Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees
or tenants, or to current or prospective mortgagees, ground or underlying
lessors or insurers (but as to prospective tenants, only during the last twelve
(12) months of the Lease Term unless Tenant is in Default under this Lease);
(iii) post notices of nonresponsibility; or (iv) alter, improve or repair the
Premises or the Building, or for structural alterations, repairs or improvements
to the Building or the Building's systems and equipment; provided, however,
Landlord shall enter the Premises only after normal business hours to the extent
reasonably practicable in connection with the foregoing. Notwithstanding
anything to the contrary contained in this Article 27, Landlord may enter the
Premises at any time to (A) perform services required of Landlord, including
janitorial service; (B) take possession due to any breach of this Lease in the
manner provided herein; and (C) perform any covenants of Tenant which Tenant
fails to perform. Landlord may make any such entries without the abatement of
Rent and may take such reasonable steps as required to accomplish the stated
purposes. Any such entries shall be performed by Landlord as expeditiously as
reasonably possible and in a manner so as to minimize any interference with the
conduct of Tenant's business. For each of the above purposes, Landlord shall at
all times have a key with which to unlock all the doors in the Premises,
excluding Tenant's vaults, safes and special security areas designated in
advance by Tenant. In an emergency, Landlord shall have the right to use any
means that Landlord may deem proper to open the doors in and to the Premises.
Any entry into the Premises by Landlord in the manner hereinbefore described
shall not be deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an actual or constructive eviction of Tenant from any portion
of the Premises. No provision of this Lease shall be construed as obligating
Landlord to perform any repairs, alterations or decorations except as otherwise
expressly agreed to be performed by Landlord herein. No reentry into or taking
of possession of the Premises by Landlord pursuant to this Article 27 shall be
construed as an election to terminate this Lease unless a written notice of such
intention be given to Tenant or unless the termination thereof be decreed by a
court of competent jurisdiction. No notice from Landlord under this Lease or
under a forcible entry and detainer statute or similar law will constitute an
election by Landlord to terminate this Lease unless such notice specifically
says so. Landlord reserves the right following any such reentry or re-letting,
or both, to exercise its right to terminate this Lease by giving Tenant such
written notice, and, in that event the Lease will terminate as specified in such
notice. Tenant may designate certain areas of the Premises as "SECURED AREAS"
should Tenant require such areas for the purpose of securing certain valuable
property or confidential information. In connection with the foregoing, Landlord
shall not enter such Secured Areas except in the event of an emergency. Landlord
need not clean any area designated by Tenant as a Secured Area and shall only
maintain or repair such secured areas to the extent (i) such repair or
maintenance is required in order to maintain and repair the Building Structure
and/or the Building Systems; (ii) as required by Applicable Law, or (iii) in
response to specific requests by Tenant and in accordance with a schedule
reasonably designated by Tenant, subject to Landlord's reasonable approval.

                                   ARTICLE 28

                                 TENANT PARKING

      Tenant shall rent three (3) parking permits per one thousand rentable
square feet of the Premises and shall have the right to rent an additional one
(1) parking permit per one thousand rentable square feet of the Premises,
subject to the following terms hereof, commencing on the earlier of (i) the
Lease Commencement Date and (ii) the date the Premises are Ready for Occupancy,
on a monthly basis throughout the Lease Term, which parking permits shall
pertain to the Project parking facility. Subject to the above requirements and
limitations, Tenant shall notify Landlord on or before the date that Tenant
takes occupancy of the Premises of the initial number of parking passes that
Tenant desires to rent from Landlord and Tenant shall rent such passes from
Landlord in accordance with the terms of this Lease. Subsequent to Tenant's
initial allocation of parking permits pursuant to the above, Tenant may increase
(subject to the maximum allocation of additional unreserved parking permits as
provided in Section 9 of the Summary and above) or decrease the number of passes
rented (subject to the minimum allocation of parking permits as provided in
Section 9 of the Summary and above), as the case may be, by

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Tenant upon not less than thirty (30) days notice to Landlord. Notwithstanding
anything to the contrary contained herein, even though Tenant may not be
required to pay any fees or rent during a portion of the initial Lease Term in
connection with Tenant's parking permits, Tenant shall be responsible for the
full amount of any taxes imposed by any governmental authority in connection
with the renting of such parking permits by Tenant or the use of the parking
facility by Tenant throughout the Lease Term. At Landlord's option all or any
portion of any visitor parking which may be provided in the Project parking
facility, may be unreserved tandem parking spaces. Tenant's continued right to
use the parking permits is conditioned upon Tenant abiding by the "Parking Rules
and Regulations" attached hereto as EXHIBIT I, as the same may be reasonably
modified from time to time by Landlord, and all other rules and regulations
prescribed by Landlord for the orderly operation and use of the parking facility
where the parking permits are located, including any sticker or other
identification system established by Landlord, Tenant's cooperation in seeing
that Tenant's employees and visitors also comply with the foregoing, and Tenant
not being in Default under this Lease. Landlord specifically reserves the right
to change the size, configuration, design, layout and all other aspects of the
Project parking facility at any time and Tenant acknowledges and agrees that
Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, close-off or restrict
access to the Project parking facility for purposes of permitting or
facilitating any such construction, alteration or improvements, provided that
Landlord uses commercially reasonable efforts to ensure that at all times Tenant
shall have adequate parking for its employees and customers at the ratios stated
herein. Landlord may delegate its responsibilities hereunder to a parking
operator in which case such parking operator shall have all the rights of
control attributed hereby to the Landlord. Tenant hereby acknowledges that the
parking license privileges provided for herein are personal to Tenant and for
the exclusive use of Tenant, its officers and employees; and, notwithstanding
anything to the contrary contained in this Lease, Tenant shall not assign or
sublease any parking license privileges or permits provided to Tenant herein or
by a separate license or other agreement, and any attempted assignment of
parking privileges and/or parking permits by Tenant shall be null and void and
without effect, unless done pursuant to a Landlord approved Transfer under
Article 14, above. Tenant acknowledges that Landlord has no obligation to
provide visitor parking for Tenant's customers, invitees or licensees other than
parking spaces in those parking areas located in the Project which may from time
to time be designated for patrons of the Project; provided, however, if Landlord
opts to provide visitor parking for Tenant's customers, invitees or licensees,
Tenant may validate visitor parking by such method or methods as the Landlord
may establish, at the validation rate from time to time generally applicable to
visitor parking. Landlord assumes no responsibility whatsoever for loss or
damage due to fire, theft, vandalism, malicious mischief or otherwise to any
automobiles parked in the parking areas of the Project, or any personal property
therein, except to the extent that such loss or damage is due to the willful act
or negligence of Landlord, and Tenant agrees, upon request from Landlord from
time to time, to notify Tenant's officers, employees and agents then using any
of the parking privileges provided for in this Lease of such limitation of
liability. It is the intention of the parties hereto that a license only is
hereby granted to Tenant for the parking permit privileges provided herein and
no bailment is intended or shall be created hereby.

                                   ARTICLE 29

                            MISCELLANEOUS PROVISIONS

      29.1 TERMS; CAPTIONS. The words "Landlord" and "Tenant" as used herein
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.

      29.2 BINDING EFFECT. Subject to all other provisions of this Lease, each
of the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their successors or assigns, provided this
clause shall not permit any assignment by Tenant contrary to the provisions of
Article 14 of this Lease.

      29.3 NO AIR RIGHTS. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.

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      29.4 INTENTIONALLY OMITTED.

      29.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, so long as such transferee expressly agrees in writing to assume
Landlord's obligations hereunder, Landlord shall automatically be released from
all liability under this Lease and Tenant agrees to look solely to such
transferee for the performance of Landlord's obligations hereunder after the
date of transfer and such transferee shall be deemed to have fully assumed and
be liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit, and Tenant shall attorn to such
transferee. Tenant further acknowledges that Landlord may assign its interest in
this Lease to a mortgage lender as additional security and agrees that such an
assignment shall not release Landlord from its obligations hereunder and that
Tenant shall continue to look to Landlord for the performance of its obligations
hereunder.

      29.6 PROHIBITION AGAINST RECORDING. Except as provided in Section 29.4 of
this Lease, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant.

      29.7 LANDLORD'S TITLE. Landlord's title is and always shall be paramount
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord.

      29.8 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.

      29.9 APPLICATION OF PAYMENTS. Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.

      29.10 TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.

      29.11 PARTIAL INVALIDITY. If any term, provision or condition contained in
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.

      29.12 NO WARRANTY. In executing and delivering this Lease, Tenant has not
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto. Tenant agrees that, except as
expressly set forth in this Lease, neither Landlord nor any agent of Landlord
has made any representation or warranty as to the suitability of the Premises
for the conduct of Tenant's business, that any specific tenant or number of
tenants shall occupy any space in the Project, nor has Landlord agreed to
undertake any modification, alteration or improvement to the Premises except as
provided in this Lease. Tenant further agrees that, except as expressly set
forth in this Lease, neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the physical condition of the
Building, the Project, the land upon which the Building or the Project are
located, or the Premises, or the expenses of operation of the Premises, the
Building or the Project, or any other matter or thing affecting or related to
the Premises.

      29.13 LANDLORD EXCULPATION. The liability of Landlord or the Landlord
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the equity interest of Landlord in the Building and any sales, condemnation or

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insurance proceeds received by Landlord or the Landlord Parties in connection
with the Project, Building or Premises. Neither Landlord, nor any of the
Landlord Parties shall have any personal liability therefor, and Tenant hereby
expressly waives and releases such personal liability on behalf of itself and
all persons claiming by, through or under Tenant. The limitations of liability
contained in this Section 29.13 shall inure to the benefit of Landlord's and the
Landlord Parties' present and future partners, beneficiaries, officers,
directors, trustees, shareholders, agents and employees, and their respective
partners, heirs, successors and assigns. Under no circumstances shall any
present or future partner of Landlord (if Landlord is a partnership), or trustee
or beneficiary (if Landlord or any partner of Landlord is a trust), have any
liability for the performance of Landlord's obligations under this Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties shall be liable under any circumstances for injury or damage to, or
interference with, Tenant's business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring.

      29.14 ENTIRE AGREEMENT. It is understood and acknowledged that there are
no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties' entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.

      29.15 RIGHT TO LEASE. Landlord reserves the absolute right to effect such
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project, so long as those tenancies are consistent with a first-class office
building. Tenant does not rely on the fact, nor does Landlord represent, that
any specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.

      29.16 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease, except as to Tenant's obligations under Articles 5 and
24 of this Lease (collectively, a "FORCE MAJEURE"), notwithstanding anything to
the contrary contained in this Lease, shall excuse the performance of such party
for a period equal to any such prevention, delay or stoppage and, therefore, if
this Lease specifies a time period for performance of an obligation of either
party, that time period shall be extended by the period of any delay in such
party's performance caused by a Force Majeure.

      29.17 WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives, for Tenant and
for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.

      29.18 NOTICES. All notices, demands, statements, designations, approvals
or other communications (collectively, "NOTICES") given or required to be given
by either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested ("MAIL"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. If any Notice is sent
by telecopy, the transmitting party may as a courtesy send a duplicate copy of
the Notice to the other party by regular mail. In all events, however, any
Notice sent by telecopy transmission shall govern all matters dealing with
delivery of the Notice, including the date on which the Notice is deemed to have
been received by the other party. Any Notice shall be sent, transmitted, or
delivered, as the case may be, to Tenant at the appropriate address set forth in
Section 10 of the Summary, or to such other place as Tenant may from time to
time designate in a Notice to Landlord. Any Notice will be deemed given (i)
three (3) days after the date it is posted if sent by Mail, (ii) the date the
telecopy is transmitted, (iii) the date the overnight courier delivery is made,
or (iv) the date personal delivery is made or attempted to be made. If Notice is
tendered under the provisions of

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this Lease and is refused by the intended recipient of the Notice, the Notice
shall nonetheless be considered to have been given and shall be effective as of
the date provided in this Lease. If Tenant is notified of the identity and
address of Landlord's mortgagee or ground or underlying lessor, Tenant shall
give to such mortgagee or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease by registered or certified
mail, and such mortgagee or ground or underlying lessor shall be given a
reasonable opportunity to cure such default prior to Tenant's exercising any
remedy available to Tenant. As of the date of this Lease, any Notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
addresses stated in Section 11 of the Summary of Basic Lease Information.

      29.19 JOINT AND SEVERAL. If there is more than one Tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.

      29.20 AUTHORITY. Each of the persons executing this Lease on behalf of
Tenant warrants to Landlord that Tenant is a duly authorized and existing
corporation, that Tenant is qualified to do business in the state in which the
Premises are located, that Tenant has full right and authority to enter into
this Lease, and that each person signing this Lease on behalf of Tenant has full
authority to do so. Each person signing this Lease for Landlord represents and
warrants that he has full authority to sign for the partnership and that this
Lease binds the partnership.

      29.21 ATTORNEYS' FEES. In the event that either Landlord or Tenant brings
any action or proceeding against the other for possession of the Premises or for
the recovery of any sum due hereunder, or because of the breach of any covenant,
condition, or provision hereof, or for any other relief against the other,
declaratory or otherwise, including appeals therefrom, and whether being an
action based upon a tort, or contract or this Lease, then the prevailing party
to this Lease in any such proceeding shall be paid by the other party to this
Lease in any such proceeding reasonable attorneys' fees and all costs of such
action or proceeding which shall be enforceable, whether or not such action or
proceeding is prosecuted to final judgment, and including an allowance for
attorneys' fees for appeals and rehearings.

      29.22 GOVERNING LAW; WAIVER OF TRIAL BY JURY. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT
TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA,
(II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN
THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY.

      29.23 SUBMISSION OF LEASE. Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.

      29.24 BROKERS. Landlord and Tenant hereby warrant to each other that they
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the "BROKERS"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.

      29.25 INDEPENDENT COVENANTS. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or

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perform any acts hereunder at Landlord's expense or to any setoff of the Rent or
other amounts owing hereunder against Landlord.

      29.26 PROJECT OR BUILDING NAME AND SIGNAGE. Landlord shall have the right
at any time to change the name of the Project or Building and to install, affix
and maintain any and all signs on the exterior and on the interior of the
Project or Building as Landlord may, in Landlord's sole discretion, desire.
Tenant shall not use the name of the Project or Building or use pictures or
illustrations of the Project or Building in advertising or other publicity or
for any purpose other than as the address of the business to be conducted by
Tenant in the Premises, without the prior written consent of Landlord, which
shall not be unreasonably withheld.

      29.27 COUNTERPARTS. This Lease may be executed in counterparts with the
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.

      29.28 CONFIDENTIALITY. Tenant acknowledges that the content of this Lease
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants; provided, however, that Tenant may
disclose such information as may be required by law (including securities laws
disclosures) or as ordered by a court of competent jurisdiction.

      29.29 TRANSPORTATION MANAGEMENT. Tenant shall fully comply with all
present or future governmentally mandated programs intended to manage parking,
transportation or traffic in and around the Building, and in connection
therewith, Tenant shall take responsible action for the transportation planning
and management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other
transportation-related committees or entities.

      29.30 BUILDING RENOVATIONS. It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no representations
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant except as specifically set forth herein or in the Tenant Work
Letter. However, Tenant hereby acknowledges that Landlord is currently
renovating or may during the Lease Term renovate, improve, alter, or modify
(collectively, the "RENOVATIONS") the Project, the Building and/or the Premises
including without limitation the parking structure, common areas, systems and
equipment, roof, and structural portions of the same, which Renovations may
include, without limitation, (i) installing sprinklers in the Building common
areas and tenant spaces, (ii) modifying the common areas and tenant spaces to
comply with applicable laws and regulations, including regulations relating to
the physically disabled, seismic conditions, and building safety and security,
and (iii) installing new floor covering, lighting, and wall coverings in the
Building common areas, and in connection with any Renovations, Landlord may,
among other things, erect scaffolding or other necessary structures in the
Building, limit or eliminate access to portions of the Project, including
portions of the common areas, or perform work in the Building, which work may
create noise, dust or leave debris in the Building. Tenant hereby agrees that
such Renovations and Landlord's actions in connection with such Renovations
shall in no way constitute a constructive eviction of Tenant nor entitle Tenant
to any abatement of Rent (except as specifically provided herein).
Notwithstanding anything in this Section 29.30 to the contrary, Landlord shall
perform all Renovations in a commercially reasonable manner and such that the
same do not materially impair Tenant's access to the Premises and in a manner,
whenever reasonably possible, to minimize material, adverse or unreasonable
interference with Tenant's business operations and Permitted Use.

      29.31 NO VIOLATION. Landlord and Tenant hereby warrant and represent that
neither their execution of nor their performance under this Lease shall cause
such party to be in violation of any agreement, instrument, contract, law, rule
or regulation by which such party is bound, and Landlord and Tenant shall
protect, defend, indemnify and hold the other party harmless against any claims,
demands, losses, damages, liabilities, costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, arising from such party's
breach of this warranty and representation.

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      29.32 COMMUNICATIONS AND COMPUTER LINES. Tenant may install, maintain,
replace, remove or use any communications or computer wires and cables
(collectively, the "LINES") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord's prior written consent, which consent
shall not be withheld unreasonably, use an experienced and qualified contractor
approved in writing by Landlord, and comply with all of the other provisions of
Articles 7 and 8 of this Lease, (ii) reasonable space for additional Lines shall
be maintained for existing and future occupants of the Project, (iii) the Lines
therefor (including riser cables) shall be appropriately insulated to prevent
excessive electromagnetic fields or radiation, and shall be surrounded by a
protective conduit reasonably acceptable to Landlord, (iv) any new or existing
Lines servicing the Premises shall comply with all applicable governmental laws
and regulations, (v) as a condition to permitting the installation of new Lines,
Landlord may require that Tenant remove existing Lines located in or serving the
Premises and repair any damage in connection with such removal, and (vi) Tenant
shall pay all costs in connection therewith. Landlord reserves the right to
require that Tenant remove any Lines located in or serving the Premises prior to
the expiration or any earlier termination of the Lease Term or, at any time, any
Lines which are installed in violation of these provisions, or which are at any
time in violation of any laws or represent a dangerous or potentially dangerous
condition.

      29.33 DEVELOPMENT OF THE PROJECT.

            29.33.1 SUBDIVISION. Tenant acknowledges that the Project has been
subdivided. Landlord reserves the right to further subdivide all or a portion of
the buildings and Common Areas in the Project provided that Landlord shall not
materially impair Tenant's access to the Premises or unreasonably interfere with
Tenant's business operations and Permitted Use in connection therewith. Tenant
agrees to execute and deliver, within twenty (20) days after Landlord's written
demand, and in the form reasonably requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from a
subdivision and any all maps in connection therewith. Notwithstanding anything
to the contrary set forth in this Lease, the separate ownership of any buildings
and/or Common Areas of the Project by an entity other than Landlord shall not
affect the calculation of Direct Expenses or Tenant's payment of Tenant's Share
of Direct Expenses.

            29.33.2 THE OTHER IMPROVEMENTS. If portions of the Project or
property adjacent to the Project (collectively, the "OTHER IMPROVEMENTS") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements to
provide (i) for reciprocal rights of access and/or use of the Project and the
Other Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, (iii) for the allocation of a portion of the Direct Expenses to
the Other Improvements and the operating expenses and taxes for the Other
Improvements to the Project, and (iv) for the use or improvement of the Other
Improvements and/or the Project in connection with the improvement,
construction, and/or excavation of the Other Improvements and/or the Project.
Nothing contained herein shall be deemed or construed to limit or otherwise
affect Landlord's right to convey all or any portion of the Project or any other
of Landlord's rights described in this Lease.

            29.33.3 CONSTRUCTION OF PROJECT AND OTHER IMPROVEMENTS. Tenant
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Tenant
hereby waives any and all rent offsets (except as provided herein) or claims of
constructive eviction which may arise in connection with such construction.
Notwithstanding anything in this Section 29.33.3 to the contrary, (i) Landlord
shall perform such construction in a commercially reasonable manner and use
commercially reasonable efforts to minimize interference with Tenant's business
operations and Permitted Use and (ii) in no event shall such construction by
Landlord materially increase Tenant's obligations or decrease Tenant's rights
under the terms and conditions of this Lease

      29.34 ARBITRATION.

            29.34.1 GENERAL SUBMITTALS TO ARBITRATION. The submittal of all
matters to arbitration in accordance with the provisions of this Section 29.34
is the sole and exclusive method, means and procedure to resolve any and all
claims, disputes or disagreements arising

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under this Lease, including, but not limited to any matter relating to
Landlord's failure to approve an assignment, sublease or other transfer of
Tenant's interest in the Lease under Article 14 of this Lease, any other
defaults by Landlord, or any Tenant Default, except for (i) all claims by either
party which (A) seek anything other than enforcement of rights under this Lease,
or (B) are primarily founded upon matters of fraud, willful misconduct, bad
faith or any other allegations of tortious action, and seek the award of
punitive or exemplary damages, (ii) all claims by either party arising from the
determination of Fair Market Rental Rate which shall be decided as provided in
Section 2.2.4 of this Lease, and (iii) claims relating to Landlord's exercise of
any unlawful detainer rights pursuant to California law or rights or remedies
used by Landlord to gain possession of the Premises or terminate Tenant's right
of possession to the Premises, which disputes shall be resolved by suit filed in
the Superior Court of Los Angeles County, California, the decision of which
court shall be subject to appeal pursuant to Applicable Laws. The parties hereby
irrevocably waive any and all rights to the contrary and shall at all times
conduct themselves in strict, full, complete and timely accordance with the
provisions of this Section 29.34 and all attempts to circumvent the terms and
conditions of this Section 29.34 shall be absolutely null and void and of no
force or effect whatsoever. As to any matter submitted to arbitration (except
with respect to the payment of money) to determine whether a matter would, with
the passage of time, constitute a default, such passage of time shall not
commence to run until any such affirmative arbitrated determination, as long as
it is simultaneously determined in such arbitration that the challenge of such
matter as a potential Tenant Default or Landlord default was made in good faith.
As to any matter submitted to arbitration with respect to the payment of money,
to determine whether a matter would, with the passage of time, constitute a
default, such passage of time shall not commence to run in the event that the
party which is obligated to make the payment does in fact make the payment to
the other party. Such payment can be made "under protest," which shall occur
when such payment is accompanied by a good faith Notice stating the reasons that
the party has elected to make a payment under protest. Such protest will be
deemed waived unless the subject matter identified in the protest is submitted
to arbitration as set forth in this Section 29.34.

            29.34.2 JAMS. Any dispute to be arbitrated pursuant to the
provisions of this Section 29.34 shall be determined by binding arbitration
before a retired judge of the Superior Court of the State of California (the
"ARBITRATOR") under the auspices of Judicial Arbitration & Mediation Services,
Inc. ("JAMS"). Such arbitration shall be initiated by the parties, or either of
them, within ten (10) days after either party sends Notice (the "ARBITRATION
NOTICE") of a demand to arbitrate to the other party and to JAMS. The
Arbitration Notice shall contain a description of the subject matter of the
arbitration, the dispute with respect thereto, the amount involved, if any, and
the remedy or determination sought. The parties may agree on a retired judge
from the JAMS panel. If they are unable to promptly agree, JAMS will provide a
list of three available judges who, to the extent available, have had extensive
experience in handling real estate commercial lease transactions as
practitioners and each party may strike one. The remaining judge (or if there
are two, the one selected by JAMS) will serve as the Arbitrator. In the event
that JAMS shall no longer exist or if JAMS fails or refuses to accept submission
of such dispute, then the dispute shall be resolved by binding arbitration
before the American Arbitration Association ("AAA") under the AAA's commercial
arbitration rules then in effect.

            29.34.3 ARBITRATION PROCEDURE.

                  29.34.3.1 PRE-DECISION ACTIONS. The Arbitrator shall schedule
a pre-hearing conference to resolve procedural matters, arrange for the exchange
of information, obtain stipulations, and narrow the issues. The parties will
submit proposed discovery schedules to the Arbitrator at the pre-hearing
conference. The scope and duration of discovery will be within the sole
discretion of the Arbitrator. The Arbitrator shall have the discretion to order
a pre-hearing exchange of information by the parties, including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties and
third-party witnesses. This discretion shall be exercised in favor of discovery
reasonable under the circumstances.

                  29.34.3.2 THE DECISION. The arbitration shall be conducted in
Los Angeles, California. Any party may be represented by counsel or other
authorized representative. In rendering a decision(s), the Arbitrator shall
determine the rights and obligations of the parties according to the substantive
and procedural laws of the State of California and the provisions of this Lease.
The Arbitrator's decision shall be based on the evidence introduced at the
hearing, including all logical and reasonable inferences therefrom.

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The Arbitrator may make any determination, and/or grant any remedy or relief (an
"ARBITRATION AWARD") that is just and equitable. The decision must be based on,
and accompanied by, a written statement of decision explaining the factual and
legal basis for the decision as to each of the principal controverted issues.
The decision shall be conclusive and binding, and it may thereafter be confirmed
as a judgment by the Superior Court of the State of California, subject only to
challenge on the grounds set forth in the California Code of Civil Procedure
Section 1286.2. The validity and enforceability of the Arbitrator's decision is
to be determined exclusively by the California courts pursuant to the terms and
conditions of this Lease. The Arbitrator shall award costs, including without
limitation attorneys' fees, and expert and witness costs, to the prevailing
party as defined in California Code of Civil Procedure Section 1032 ("PREVAILING
PARTY"), if any, as determined by the Arbitrator in his discretion. The
Arbitrator's fees and costs shall be paid by the non-prevailing party as
determined by the Arbitrator in his discretion. A party shall be determined by
the Arbitrator to be the prevailing party if its proposal for the resolution of
dispute is the closer to that adopted by the Arbitrator.

      29.35 OFFICE AND COMMUNICATIONS SERVICES.

            29.35.1 THE PROVIDER. Landlord has advised Tenant that certain
office and communications services may be offered to tenants of the Building by
a concessionaire under contract to Landlord ("PROVIDER"). Tenant shall be
permitted to contract with Provider for the provision of any or all of such
services on such terms and conditions as Tenant and Provider may agree.

            29.35.2 OTHER TERMS. Tenant acknowledges and agrees that: (i)
Landlord has made no warranty or representation to Tenant with respect to the
availability of any such services, or the quality, reliability or suitability
thereof; (ii) the Provider is not acting as the agent or representative of
Landlord in the provision of such services, and Landlord shall have no liability
or responsibility for any failure or inadequacy of such services, or any
equipment or facilities used in the furnishing thereof, or any act or omission
of Provider, or its agents, employees, representatives, officers or contractors;
(iii) Landlord shall have no responsibility or liability for the installation,
alteration, repair, maintenance, furnishing, operation, adjustment or removal of
any such services, equipment or facilities; and (iv) any contract or other
agreement between Tenant and Provider shall be independent of this Lease, the
obligations of Tenant hereunder, and the rights of Landlord hereunder, and,
without limiting the foregoing, no default or failure of Provider with respect
to any such services, equipment or facilities, or under any contract or
agreement relating thereto, shall have any effect on this Lease or give to
Tenant any offset or defense to the full and timely performance of its
obligations hereunder, or entitle Tenant to any abatement of rent or additional
rent or any other payment required to be made by Tenant hereunder, or constitute
any actual or constructive eviction of Tenant, or otherwise give rise to any
other claim of any nature against Landlord.

      29.36 LANDLORD'S RESERVED RIGHTS. Landlord reserves to itself and shall at
any and all times have the right to perform the following, except to the extent
the same would be in contravention of other express terms and/or conditions of
this Lease:

            29.36.1 CHANGE OF NAME OR ADDRESS. Change the name or street address
of the Premises or the Building or any other portion of the Project.

            29.36.2 INSTALLATION OF SIGNS. Install and maintain signs on the
exterior and interior of the Building and any place within the Project, except
within the Premises.

            29.36.3 RE-WORK OF PREMISES IF TENANT VACATES. Decorate, remodel,
alter or otherwise repair the Premises for reoccupancy during the last six (6)
months of the Term hereof if, during or prior to such time, Tenant has abandoned
the Premises(as defined by Applicable Laws).

            29.36.4 WORK ON EXTERIOR AND SERVICE EQUIPMENT. Do or permit to be
done any work in or about the exterior of the Premises, Building or the Project,
including changing the size, shape, location, number and extent of any or all of
the improvements in the Project and the right to install, use, maintain and
replace equipment, machinery, pipes, conduits, and wiring below the floor or
above the ceiling of the Premises which serve other parts of the Building.

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

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            29.36.5 GRANT RIGHT TO CONDUCT BUSINESS. Grant to anyone the
exclusive right to conduct any business or render any service in the Building or
the Project, provided such exclusive right shall not operate to exclude Tenant
from the use of the Premises expressly permitted by this Lease.

      29.37 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD. If Tenant fails to
pay when due amounts payable under this Lease or to perform any of its other
obligations under this Lease within the time permitted for its performance, then
Landlord, after ten (10) days' prior written notice to Tenant (or, in case of
any emergency, upon such notice or without notice, as may be reasonable under
the circumstances) and without waiving any of Landlord's rights under this
Lease, may (but will not be required to) pay such amount or perform such
obligation. All amounts so paid by Landlord and all costs and expenses
reasonably incurred by Landlord in connection with the performance of any such
obligations will be payable by Tenant to Landlord on demand. In the proof of any
damages which Landlord may claim against Tenant arising out of Tenant's failure
to maintain insurance, Landlord will not be limited to the amount of the unpaid
insurance premium but rather Landlord will also be entitled to recover as
damages for such breach, the amount of any uninsured loss (to the extent of any
deficiency in the insurance required by the provisions of this Lease), damages,
costs and expenses of suit, including attorneys' fees, arising out of damage to,
or destruction of, the Premises occurring during any period for which Tenant has
failed to provide such insurance.

      29.38 INTENTIONALLY DELETED.

      29.39 WAIVER.

            29.39.1 DELAY BY LANDLORD NOT WAIVER. No delay or omission in the
exercise of any right or remedy of Landlord or Tenant on any Default by the
other party shall impair such right or remedy or be construed as a waiver.

            29.39.2 PARTIAL PAYMENT OR WRITING BY TENANT NOT WAIVER OR AN
ACCORD. The receipt and acceptance by Landlord of delinquent Rent shall not
constitute a waiver of any other Default, it shall constitute only waiver of
timely payment for the particular Rent payment involved. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated Rent or partial
Rent so received, nor shall any endorsement or statement on any check or any
letter or other writing accompanying any check or payment as Rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or to pursue
any other right or remedy provided herein or at law or in equity.

            29.39.3 NO SURRENDER UNLESS IN WRITING. No act or conduct of
Landlord, including, without limitation, the acceptance of keys to the Premises,
shall constitute an acceptance of the surrender of the Premises by Tenant before
the expiration of the Lease Term. Only a notice in writing from Landlord to
Tenant shall constitute acceptance of the surrender of the Premises and
accomplish a termination of the Lease.

            29.39.4 WAIVER MUST BE IN WRITING. Any waiver by Landlord or Tenant
of any default must be in writing. One or more waivers by Landlord or Tenant of
a breach by the other party of any covenant, term or condition of this Lease
shall not be construed as a waiver by such waiving party of a subsequent breach
by the other party of the same covenant, term or condition. The consent or
approval of Landlord to or of any act by Tenant of a nature requiring consent or
approval shall not be deemed to waive or render unnecessary consent to or
approval of any subsequent similar act.

      29.40 HAZARDOUS SUBSTANCES.

            29.40.1 DEFINITIONS. For purposes of this Lease, the following
definitions shall apply: "hazardous substance(s)" shall mean any solid, liquid
or gaseous substance or material that is described or characterized as a toxic
or hazardous substance, waste, material, pollutant, contaminant or infectious
waste, or any matter that in certain specified quantities would be injurious to
the public health or welfare, or words of similar import, in any of the
"Environmental Laws," as that term is defined below, or any other words which
are intended to define, list or classify substances by reason of deleterious
properties such as ignitability,

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                                                               [Encore Software]

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<PAGE>

corrosivity, reactivity, carcinogenicity, toxicity or reproductive toxicity and
includes, without limitation, asbestos, petroleum (including crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel, or any mixture thereof), petroleum products,
polychlorinated biphenyls, urea formaldehyde, radon gas, nuclear or radioactive
matter, medical waste, soot, vapors, fumes, acids, alkalis, chemicals, microbial
matters (such as molds, fungi or other bacterial matters), biological agents and
chemicals which may cause adverse health effects, including but not limited to,
cancers and /or toxicity. "Environmental Laws" shall mean any and all federal,
state, local or quasi-governmental laws (whether under common law, statute or
otherwise), ordinances, decrees, codes, rulings, awards, rules, regulations or
guidance or policy documents now or hereafter enacted or promulgated and as
amended from time to time, in any way relating to a) the protection of the
environment, the health and safety of persons (including employees), property or
the public welfare from actual or potential release, discharge, escape or
emission (whether past or present) of any hazardous materials or b) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any hazardous materials.

            29.40.2 COMPLIANCE WITH ENVIRONMENTAL LAWS. Landlord covenants that
during the Lease Term, Landlord shall comply with all Environmental Laws in
accordance with, and as required by, the terms covenants and conditions of
Article 24 of this Lease. Tenant represents and warrants that, except as herein
set forth, it will not use, store or dispose of any hazardous materials in or on
the Premises. However, notwithstanding the preceding sentence, Landlord agrees
that Tenant may use, store and properly dispose of commonly available household
cleaners and chemicals to maintain the Premises and Tenant's routine office
operations (such as printer toner and copier toner) (hereinafter the "Permitted
Chemicals"). Landlord and Tenant acknowledge that any or all of the Permitted
Chemicals described in this paragraph may constitute hazardous materials.
However, Tenant may use, store and dispose of same, provided that in doing so,
Tenant fully complies with all Environmental Laws.

            29.40.3 LANDLORD'S RIGHT OF ENVIRONMENTAL AUDIT. Landlord may, upon
reasonable notice to Tenant, be granted access to and enter the Premises no more
than once annually to perform or cause to have performed an environmental
inspection, site assessment or audit. Such environmental inspector or auditor
may be chosen by Landlord, in its sole discretion, and be performed at
Landlord's sole expense. To the extent that the report prepared upon such
inspection, assessment or audit, indicates the presence of hazardous materials
in violation of Environmental Laws, or provides reasonable and customary
recommendations or suggestions to prohibit the release, discharge, escape or
emission of any hazardous materials at, upon, under or within the Premises, or
to comply with any Environmental Laws, Tenant shall promptly, at Tenant's sole
expense, comply with such recommendations or suggestions. Notwithstanding the
above, if at any time, Landlord has actual notice or reasonable cause to believe
that Tenant has violated, or permitted any violations of any Environmental Law,
then Landlord will be entitled to perform its environmental inspection,
assessment or audit at any time, notwithstanding the above mentioned annual
limitation, and Tenant must reimburse Landlord for the cost or fees incurred for
such as Additional Rent.

            29.40.4 INDEMNIFICATION. Tenant agrees to indemnify, defend, protect
and hold harmless the Landlord Parties from and against any liability,
obligation, damage or costs, including without limitation, attorneys' fees and
costs, resulting directly or indirectly from any use, presence, removal or
disposal of any hazardous materials or breach of any provision of this section,
to the extent such liability, obligation, damage or costs was a result of
actions caused or permitted by Tenant or a Tenant Party. Landlord shall protect,
defend, indemnify and hold Tenant free and harmless from and against any
liability relating to Hazardous Materials brought onto the Project by Landlord
or the Landlord Parties or existing in the Premises prior to delivery thereof to
Tenant.

      29.41 "AND/OR". Whenever the words and symbols "and/or" are used in this
Lease, it is intended that this Lease be interpreted and the sentence, phrase or
other part be considered in both its conjunctive and disjunctive sense, and as
having been written twice, once with the word "and" inserted, and once with the
word "or" inserted, in the place of said words and symbol "and/or."

      29.42 INTENTIONALLY OMITTED.

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                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                      -50-
<PAGE>

      29.43 COMPLIANCE WITH "AMERICANS WITH DISABILITIES ACT." For purposes of
this Lease, disabled persons' access and related laws and regulations (including
the Americans with Disabilities Act, to the extent applicable), shall be deemed
an Applicable Law. Accordingly, Landlord's and Tenant's obligations with respect
to any such laws and regulations shall be governed by the terms of Article 24 of
this Lease.

      29.44 INTENTIONALLY OMITTED.

      29.45 "INCLUDING" DEFINED. The use of the word "including," or "include,"
when followed by any general statement, term or matter, shall not be construed
to limit such statement, term or matter to the specific items or matters set
forth immediately following such word or to similar items, statements, terms or
matters, whether or not non-limiting language (such as "without limitation," or
"but not limited to," or words of similar import) is used with reference
thereto, but rather will be deemed to refer to all other items, statements,
terms or matters that could reasonably fall within the broadest possible scope
of such general statement, term, item or matter.

      29.46 INTENTIONALLY OMITTED.

      29.47 INTENTIONALLY OMITTED.

      29.48 STORAGE SPACE. Tenant shall have the right to lease up to
approximately one thousand two hundred (1,200) square feet of storage space (the
"Storage Space") in the Project parking facility; provided, however, if, after
the first twelve (12) months of the Lease Term, Tenant has not commenced leasing
or ceases to lease the Storage Space, as applicable, any subsequent leasing of
the Storage Space by Tenant shall be subject to availability. The exact size of
the Storage Space and the location thereof shall be reasonably determined by
Landlord. Tenant shall pay rent equal to One Dollar ($1.00) per square foot of
the Storage Space per month along with Tenant's payments of Base Rent for the
Premises. In addition, Tenant shall pay for, or reimburse Landlord for, all any
Landlord-provided utilities used in connection with the Storage Space at the
Actual Cost thereof. Tenant shall comply with such rules and regulations as
promulgated by Landlord from time to time pertaining to the use of such Storage
Space and, in connection therewith, Tenant agrees that Tenant's obligations
under this Lease, including, but without limitation thereof, Article 10 will
specifically apply to the Storage Space as if the Storage Space were a part of
the Premises. Tenant agrees not to store any flammable, combustible or other
materials in the Storage Space that would increase the cost of Landlord's
insurance, and not to store any toxic, hazardous or odorous materials or waste
in the Storage Space. Tenant also agrees not to store excess or highly
concentrated weight in the Storage Space. Tenant agrees to use the Storage Space
solely for storage purposes of dry goods and not as office or other space.
Tenant agrees that Landlord and its agents may enter and inspect the Storage
Space and any goods stored therein during normal business hours, on not less
than one (1) business day's prior notice (except in an emergency in which case
no prior notice shall be required). Tenant shall deliver to Landlord a key for
any locks installed by Tenant for Landlord's emergency entry purposes.
Notwithstanding anything to the contrary contained in this Lease, Tenant accepts
the Storage Space in its presently existing "as is", "with all faults", "without
any warranties or representations" condition and Landlord shall not be obligated
perform any improvement or other work in connection with the Premises. No
obligations of Landlord under this Lease with respect to the Premises or Base
Building shall apply to the Storage Space. Tenant may make interior,
non-structural modifications to the Storage Space only in accordance with the
terms of Article 8 of the Lease. Landlord shall have the right, upon not less
than sixty (60) days prior written notice to Tenant, to substitute for the
Storage Space comparable storage area within the Project having reasonably
comparable access to and reasonably equivalent usable area as the Storage Space,
provided that Landlord shall pay all expenses reasonably incurred in moving
Tenant's property to such new location; and upon the expiration of such 60-day
written notice, the new storage space shall be deemed to be the Storage Space
covered by this terms of this Section 29.48. Tenant agrees to, at all times,
maintain the Storage Space in neat and orderly condition and repair. Tenant
acknowledges that Landlord shall have no obligation to provide any security,
services, maintenance, work or improvements whatsoever for the Storage Space.
Subject to the terms and conditions hereof, Tenant may terminate any such lease
of Storage Space upon thirty (30) days written notice to Landlord.

      29.49 TELECOMMUNICATION EQUIPMENT. At any time during the Lease Term,
subject to the terms of this Section 29.49, Tenant may install, at Tenant's sole
cost and expense, one (1) one

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                      -51-
<PAGE>

(1) meter satellite or microwave dish or other related communications equipment
(the "Telecommunications Equipment") upon the roof of the Building. The physical
appearance and the size of the Telecommunications Equipment shall be subject to
Landlord's reasonable approval, the location of any such installation of the
Telecommunications Equipment shall be designated by Landlord subject to Tenant's
reasonable approval and Landlord may require Tenant to install screening around
such Telecommunications Equipment, at Tenant's sole cost and expense, as
reasonably designated by Landlord. Tenant shall maintain such Telecommunications
Equipment, at Tenant's sole cost and expense. In the event Tenant elects to
exercise its right to install the Telecommunication Equipment, then Tenant shall
give Landlord prior written notice thereof and Landlord and Tenant shall execute
an amendment to this Lease covering the payment for installation costs, if any,
the Telecommunications Equipment, the installation and maintenance of such
Telecommunications Equipment, Tenant's indemnification of Landlord with respect
thereto, Tenant's obligation to remove such Telecommunications Equipment upon
the expiration or earlier termination of this Lease, and other related matters;
provided that other than the foregoing matters, in no event shall Tenant be
required to pay Landlord for the use of the roof of the Building in connection
with the Telecommunications Equipment. Tenant may only use the
Telecommunications Equipment for its own usage.

      29.50 GUARANTY. This Lease is subject to and conditioned upon Tenant
delivering to Landlord, concurrently with Tenant's execution and delivery of
this Lease, a guaranty in the form attached hereto, as EXHIBIT G, which guaranty
shall be executed by and binding upon Navarre Corporation, a Minnesota
corporation, as guarantor.

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

      29.52 GOOD FAITH. Wherever in the Lease Landlord or Tenant is granted the
right to grant or withhold consent or approval, exercise discretion or make a
determination, calculation or allocation, except as otherwise expressly set
forth in this Lease, Landlord or Tenant, as the case may be, shall act
reasonably and in good faith.

             [The remainder of the page is intentionally left blank.
                            Signatures on next page.]

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                      -52-
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      IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.

                                   "LANDLORD":

                                   KILROY REALTY, L.P.,
                                   a Delaware limited partnership

                                   By: KILROY REALTY CORPORATION,
                                       a Maryland corporation,
                                   Its: General Partner

                                        By: ____________________________________

                                            Name: ______________________________

                                            Its: _______________________________

                                            By: ________________________________

                                            Name: ______________________________

                                            Its: _______________________________

                                   "TENANT":

                                   ENCORE SOFTWARE, INC.,
                                   a Minnesota corporation

                                   By: _________________________________________

                                         Its: __________________________________

                                   By: _________________________________________

                                         Its: __________________________________

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                      -53-
<PAGE>

                                    EXHIBIT A

                               999 NORTH SEPULVEDA

                               OUTLINE OF PREMISES

                                  [FLOOR PLAN]

                                                       SUITE 700 ENCORE SOFTWARE
                                                       -------------------------
                                                       Useable:  12,294
                                                       Rentable: 13,216

                                                                       [COMPASS]

[KILROY LOGO]  999 N. SEPULVEDA                      SEVENTH FLOOR
               El Segundo, California                [LOGO] HUNTER | HUGHES
                                                                05, AUGUST, 2004

                                    EXHIBIT A                      KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

                                       -1-

<PAGE>

                                    EXHIBIT B

                               999 NORTH SEPULVEDA

                               TENANT WORK LETTER

      This Tenant Work Letter shall set forth the terms and conditions relating
to the construction of the tenant improvements in the Premises. This Tenant Work
Letter is essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises. All references in this Tenant Work Letter
to Articles or Sections of "this Lease" shall mean the relevant portion of
Articles 1 through 29 of the Office Lease to which this Tenant Work Letter is
attached as EXHIBIT B and of which this Tenant Work Letter forms a part, and all
references in this Tenant Work Letter to Sections of "this Tenant Work Letter"
shall mean the relevant portion of Sections 1 through 6 of this Tenant Work
Letter.

                                    SECTION 1

                         LANDLORD'S INITIAL CONSTRUCTION

      1.1 Delivery. In accordance with the terms and conditions of this Lease,
Landlord shall deliver the Premises and Base Building to Tenant and Tenant shall
accept the Premises and Base Building from Landlord in their presently existing,
"as-is" condition, except as otherwise provided in the Lease and in this Tenant
Work Letter. Promptly following the mutual execution of this Lease, Landlord
shall provide Tenant with a complete set of Base Building drawings (the "BASE
BUILDING DRAWINGS").

      1.2 Base Building Definition. The Base Building shall be substantially in
accordance with SCHEDULE 2 attached hereto.

                                    SECTION 2

                               TENANT IMPROVEMENTS

2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant
improvement allowance (the "TENANT IMPROVEMENT ALLOWANCE") in the amount of
$45.00 per usable square foot of the Premises for the costs relating to the
initial design and construction of Tenant's improvements which are permanently
affixed to the Premises (the "Tenant Improvements"). In no event shall Landlord
be obligated to make disbursements pursuant to this Tenant Work Letter in the
event that Tenant fails to immediate pay any portion of the "Over-Allowance
Amount," as defined in Section 4.2.1, nor shall Landlord be obligated to make
disbursements in a total amount which exceeds the Tenant Improvement Allowance.
All Tenant Improvements for which the Tenant Improvement Allowance has been made
available shall be deemed Landlord's property under the terms of the Lease.

      2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord (each of which disbursements shall be made pursuant to
Landlord's disbursement process) for costs related to the construction of the
Tenant Improvements and for the following items and costs (collectively, the
"TENANT IMPROVEMENT ALLOWANCE ITEMS"):

                  2.2.1.1 Payment of the fees of the "Architect" and the
"Engineers," as those terms are defined in Section 3.1 of this Tenant Work
Letter;

                  2.2.1.2 The cost of any changes in the Base Building required
in connection with the Tenant Improvements.

                  2.2.1.3 The cost of any changes to the Construction Drawings
or Tenant Improvements required by all applicable building codes (the "CODE");

                  2.2.1.4 Intentionally deleted;

                  2.2.1.5 Intentionally deleted;

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

                  2.2.1.6 Costs of cabling, conduit, wiring, and connections for
voice and data lines, costs of designing, fabricating and installing Tenant's
signs, costs of millwork, installation and finishing of built-in work stations,
costs of the Tenant Security System, including design and consulting fees and
connection costs or costs of modifying such systems to be compatible with the
Building Systems;

                  2.2.1.7 Costs for Tenant's furniture, fixtures and equipment
placed within the Premises (up to a maximum of $5.00 per usable square foot of
the Premises); and

                  2.2.1.8 A portion of the costs of the tenant demising walls
and public corridor walls and materials, if any, as designated by Landlord.

      2.3 Building Standards. Landlord has established specifications for
certain Building standard components to be used in the construction of the
Tenant Improvements in the Premises which are attached hereto as SCHEDULE 3. The
quality of Tenant Improvements shall be equal to or of greater quality than the
quality of such Building standards, provided that Landlord may, at Landlord's
option, require the Tenant Improvements to comply with certain Building
standards. Landlord may make changes to said specifications for Building
standards from time to time.

                                    SECTION 3

                              CONSTRUCTION DRAWINGS

      3.1 Selection of Architect/Construction Drawings. Tenant shall retain HLW
International (the "Architect") to prepare the "Construction Drawings," as that
term is defined in this Section 3.1. Tenant shall retain Levine Seegal
Associates (the "ENGINEERS") to prepare all plans and engineering working
drawings relating to the structural, mechanical, electrical, plumbing, HVAC,
lifesafety, and sprinkler work of the Tenant Improvements. The plans and
drawings to be prepared by Architect and the Engineers hereunder shall be known
collectively as the "CONSTRUCTION DRAWINGS." Notwithstanding anything to the
contrary in this Work Letter, the construction of the Tenant Improvements and/or
the work of certain subcontractors may be performed, as mutually and reasonably
agreed by Landlord and Tenant, on a "design/build" basis. All Construction
Drawings shall comply with the drawing format and specifications as determined
by Landlord, and shall be subject to Landlord's approval. Landlord shall grant
such approval unless Landlord determines that there is a Design Problem (as
defined in Article of the Lease) in connection therewith (provided, however,
such approval shall not affect Landlord's right to require removal and
restoration pursuant to Section 8.5 of the Lease). Tenant and Architect shall
verify, in the field, the dimensions and conditions as shown on the relevant
portions of the base Building plans, and Tenant and Architect shall be solely
responsible for the same, and Landlord shall have no responsibility in
connection therewith (except as provided in Section 6.8, below). Landlord's
review of the Construction Drawings as set forth in this Section 3, shall be for
its sole purpose and shall not imply Landlord's review of the same, or obligate
Landlord to review the same, for quality, design, Code compliance or other like
matters. Accordingly, notwithstanding that any Construction Drawings are
reviewed by Landlord or its space planner, architect, engineers and consultants,
and notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord's space planner, architect, engineers, and consultants,
Landlord shall have no liability whatsoever in connection therewith and shall
not be responsible for any omissions or errors contained in the Construction
Drawings, and Tenant's waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.

      3.2 Final Space Plan. On or before the date set forth in Schedule 1,
attached hereto, Tenant and the Architect shall prepare the final space plan for
Tenant Improvements in the Premises (collectively, the "FINAL SPACE PLAN"),
which Final Space Plan shall include a layout and designation of all offices,
rooms and other partitioning, their intended use, and equipment to be contained
therein, and shall deliver the Final Space Plan to Landlord for Landlord's
approval. Landlord shall advise Tenant within five (5) business days after
Landlord's receipt of the Final Space Plan for the Premises if the same is
unsatisfactory or incomplete in any respect. Landlord may only disapprove
aspects of the Final Space Plan which would constitute a Design Problem. If
Tenant is so advised, Tenant shall promptly cause the Final Space Plan to be
revised to correct any Design Problems.

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

      3.3 Final Working Drawings. On or before the date set forth in Schedule 1,
Tenant, the Architect and the Engineers shall complete the architectural and
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "FINAL WORKING
DRAWINGS") and shall submit the same to Landlord for Landlord's approval.
Landlord shall advise Tenant within five (5) business days after Landlord's
receipt of the Final Working Drawings for the Premises if the same is
unsatisfactory or incomplete in any respect. Landlord may only disapprove
aspects of the Final Working Drawings which would constitute a Design Problem.
If Tenant is so advised, Tenant shall promptly cause the Final Working Drawings
to be revised to correct any Design Problems.

      3.4 Permits. The Final Working Drawings shall be approved by Landlord (the
"APPROVED WORKING DRAWINGS") prior to the commencement of the construction of
the Tenant Improvements. Tenant shall immediately submit the Approved Working
Drawings to the appropriate municipal authorities for all applicable building
and other permits necessary to allow "Contractor," as that term is defined in
Section 4.1, below, to commence and fully complete the construction of the
Tenant Improvements (the "PERMITS"), and, in connection therewith, Tenant shall
coordinate with Landlord in order to allow Landlord, at its option, to take part
in all phases of the permitting process and shall supply Landlord, as soon as
possible, with all plan check numbers and dates of submittal and obtain the
Permits on or before the date set forth in Schedule 1. Notwithstanding anything
to the contrary set forth in this Section 3.4, Landlord shall be responsible for
obtaining a certificate of occupancy for the Premises and that the obtaining of
the same shall not be Tenant's responsibility; provided however that Tenant
shall, in any event, cooperate with Landlord in executing permit applications
and performing other ministerial acts reasonably necessary to enable Landlord to
obtain such certificate of occupancy. No changes, modifications or alterations
in the Approved Working Drawings may be made without the prior written consent
of Landlord, provided that Landlord may withhold its consent, in its sole
discretion, if such changes would cause a Design Problem.

      3.5 Time Deadlines. Tenant shall use its best, good faith, efforts and all
due diligence to cooperate with the Architect, the Engineers, and Landlord to
complete all phases of the Construction Drawings and the permitting process and
to receive the permits, and with Contractor for approval of the "Cost Proposal,"
as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as
possible after the execution of the Lease, and, in that regard, shall meet with
Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant's
progress in connection with the same. The applicable dates for approval of
items, plans and drawings as described in this Section 3, Section 4, below, and
in this Tenant Work Letter are set forth and further elaborated upon in Schedule
1 (the "TIME DEADLINES"), attached hereto. Tenant agrees to comply with the Time
Deadlines.

                                    SECTION 4

                     CONSTRUCTION OF THE TENANT IMPROVEMENTS

      4.1 Contractor. Landlord shall solicit bids for the construction of the
Tenant Improvements from Howard Building Corporation, Turelk, 2H Construction
and Pinnacle Construction. Of the foregoing general contractors, Landlord shall
engage the contractor ("CONTRACTOR") that timely provides the lowest bid (after
reasonable adjustment by Landlord for inconsistent qualifications, assumptions
and clarifications) which Contractor shall construct the Tenant Improvements.

      4.2 Cost Proposal. After the Approved Working Drawings are signed by
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant Improvement Allowance
Items to be incurred by Tenant in connection with the design and construction of
the Tenant Improvements (the "COST PROPOSAL"). Tenant shall approve and deliver
the Cost Proposal to Landlord within five (5) business days of the receipt of
the same, and upon receipt of the same by Landlord, Landlord shall be released
by Tenant to purchase the items set forth in the Cost Proposal and to commence
the construction relating to such items. The date by which Tenant must approve
and deliver the Cost Proposal to Landlord shall be known hereafter as the "COST
PROPOSAL DELIVERY DATE".

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -3-                     [Encore Software]

<PAGE>

      4.3 Construction of Tenant Improvements by Contractor under the
Supervision of Landlord.

            4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date,
Tenant shall deliver to Landlord cash in an amount (the "OVER-ALLOWANCE AMOUNT")
equal to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the Tenant Improvement Allowance. The Over-Allowance Amount shall be
disbursed by Landlord on a pro-rata basis along with the Tenant Improvement
Allowance, and such disbursement shall be pursuant to the same procedure as the
Tenant Improvement Allowance. In the event that, after the Cost Proposal
Delivery Date, any revisions, changes, or substitutions shall be made to the
Construction Drawings or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions or any other
additional costs shall be paid by Tenant to Landlord immediately upon Landlord's
request as an addition to the Over-Allowance Amount. In addition, if the Final
Working Drawings or any amendment thereof or supplement thereto shall require
alterations in the Base Building (as contrasted with the Tenant Improvements),
and if Landlord in its sole and exclusive discretion agrees to any such
alterations, and notifies Tenant of the need and cost for such alterations, then
Tenant shall pay the cost of such required changes in advance upon receipt of
notice thereof. If after all final costs in connection with the Tenant
Improvements have been paid there remain unused Over-Allowance Amount funds,
such unused funds shall be returned to Tenant within thirty (30) days.

            4.3.2 Landlord's Retention of Contractor. Landlord shall
independently retain Contractor, on behalf of Tenant, to construct the Tenant
Improvements in accordance with the Approved Working Drawings and the Cost
Proposal.

            4.3.3 Contractor's Warranties and Guaranties. Landlord shall require
the Contractor to provide at least a one-year warranty with respect to labor and
materials and Landlord shall enforce the same against the Contractor.

            4.3.4 Tenant's Covenants. Promptly after the Substantial Completion
of the Premises, Tenant shall have prepared and delivered to the Building a copy
of the "as built" plans and specifications (including all working drawings) for
the Tenant Improvements.

                                    SECTION 5

                     COMPLETION OF THE TENANT IMPROVEMENTS;
                             LEASE COMMENCEMENT DATE

      5.1 Ready for Occupancy. The Premises shall be deemed "READY FOR
OCCUPANCY" upon the Substantial Completion of the Tenant Improvements. For
purposes of this Lease, "SUBSTANTIAL COMPLETION" of the Tenant Improvements
shall occur upon the completion of construction of the Tenant Improvements in
the Premises pursuant to the Approved Working Drawings, with the exception of
any punch list items and any tenant fixtures, work-stations, built-in furniture,
or equipment to be installed by Tenant or under the supervision of Contractor
(provided that a certificate of occupancy, temporary certificate of occupancy or
either of their equivalents has been obtained for the Premises).

      5.2 Delay of the Substantial Completion of the Premises. Except as
provided in this Section 5.2, the Lease Commencement Date shall occur as set
forth in the Lease and Section 5.1, above. If there shall be an actual delay or
there are actual delays (each a "TENANT DELAY") in the Substantial Completion of
the Tenant Improvements or in the occurrence of any of the other conditions
precedent to the Lease Commencement Date, as result of:

            5.2.1 Tenant's failure to comply with the Time Deadlines;

            5.2.2 Tenant's failure to timely approve any matter requiring
Tenant's approval;

            5.2.3 A breach by Tenant of the terms of this Tenant Work Letter or
the Lease;

            5.2.4 Changes in any of the Construction Drawings after disapproval
of the same by Landlord or because the same do not comply with Code or other
applicable laws;

            5.2.5 Tenant's request for changes in the Approved Working Drawings;

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -4-                     [Encore Software]

<PAGE>

            5.2.6 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Tenant Improvements, as set
forth in the Lease, or which are different from, or not included in Landlord's
Building standards;

            5.2.7 Changes to the Base Building required by the Approved Working
Drawings;

            5.2.8 Tenant's use of specialized or unusual improvements and/or
delays in obtaining Permits due thereto;

            5.2.9 Any failure by Tenant to timely pay to Landlord any portion of
the Over-Allowance Amount; or

            5.2.10 Any other acts or omissions of Tenant, or its agents, or
employees;

(collectively, "TENANT DELAYS"); then, notwithstanding anything to the contrary
set forth in the Lease or this Tenant Work Letter and regardless of the actual
date of the Substantial Completion of the Tenant Improvements, the Lease
Commencement Date shall be deemed to be the date the Lease Commencement Date
would have occurred if no Tenant delay or delays, as set forth above, had
occurred. Notwithstanding the foregoing, until a cumulative total of five (5)
days of Tenant Delay have accrued or Tenant has received five (5) "Cure
Notices," as defined below, and except as to Tenant Delays under Sections 5.2.4,
5.2.5 and 5.2.9, no Tenant Delay shall be deemed to have occurred unless and
until Landlord has provided written notice (the "CURE NOTICE") to Tenant
specifying the action or inaction Landlord contends constitutes a Tenant Delay
with respect to the foregoing. If such action or inaction is not cured within
one (1) day after receipt of such Cure Notice and otherwise constitutes a
"Tenant Delay," then a Tenant Delay shall be deemed to have occurred commencing
as of the date such Tenant Delay commenced and continuing on a day-for-day basis
for the number of days and partial days that the construction of the Tenant
Improvements was in fact delayed as a result of such Tenant Delay.

                                    SECTION 6

                                  MISCELLANEOUS

      6.1 Tenant's Entry Into the Premises Prior to Substantial Completion.
Provided that Tenant and its agents do not interfere with construction of the
Tenant Improvements, Contractor shall allow Tenant access to the Premises prior
to the Substantial Completion of the Tenant Improvements for the purpose of
Tenant installing overstandard equipment or fixtures (including Tenant's data
and telephone equipment) in the Premises. Prior to Tenant's entry into the
Premises as permitted by the terms of this Section 6.1, Tenant shall submit a
schedule to Landlord and Contractor, for their approval, which schedule shall
detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord
harmless from and indemnify, protect and defend Landlord against any loss or
damage to the Building or Premises and against injury to any persons caused by
Tenant's actions pursuant to this Section 6.1.

      6.2 Freight Elevators. Landlord shall, consistent with its obligations to
other tenants of the Building, make the freight elevator reasonably available to
Tenant in connection with initial decorating, furnishing and moving into the
Premises.

      6.3 Tenant's Representative. Tenant has designated Bita Salamat as its
sole representative with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.

      6.4 Landlord's Representative. Landlord has designated Kathy Cumming as
"PROJECT MANAGER" who shall be responsible for the implementation of all Tenant
Improvements to be performed by Landlord in the Premises. With regard to all
matters involving such Tenant Improvements, Tenant shall communicate with the
Project Manager rather than with the Contractor. Landlord shall not be
responsible for any statement, representation or agreement made between Tenant
and the Contractor or any subcontractor. It is hereby expressly acknowledged by
Tenant that such Contractor is not Landlord's agent and has no authority

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -5-                     [Encore Software]

<PAGE>

whatsoever to enter into agreements on Landlord's behalf or otherwise bind
Landlord. The Project Manager will furnish Tenant with notices of substantial
completion, cost estimates for Above Standard Tenant Improvements, Landlord's
approvals or disapprovals of all documents to be prepared by Tenant pursuant to
this Tenant Work Letter and changes thereto.

      6.5 Intentionally Deleted.

      6.6 Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.

      6.7 Tenant's Lease Default. Notwithstanding any provision to the contrary
contained in the Lease or this Tenant Work Letter, if any default by Tenant
under the Lease or this Tenant Work Letter beyond any applicable notice and cure
period (including, without limitation, any failure by Tenant to fund any portion
of the Over-Allowance Amount) occurs at any time on or before the Substantial
Completion of the Tenant Improvements, then (i) in addition to all other rights
and remedies granted to Landlord pursuant to the Lease, Landlord shall have the
right to withhold payment of all or any portion of the Tenant Improvement
Allowance and/or Landlord may, without any liability whatsoever, cause the
cessation of construction of the Tenant Improvements (in which case, Tenant
shall be responsible for any delay in the Substantial Completion of the Tenant
Improvements and any costs occasioned thereby), and (ii) all other obligations
of Landlord under the terms of the Lease and this Tenant Work Letter shall be
forgiven until such time as such default is cured pursuant to the terms of this
Lease.

      6.8 Error in Base Building Plans. If Tenant reasonably incurs increased
design or construction expenses because of material errors in the Base Building
plans, then Landlord shall bear any increased costs in the design and
construction of the Tenant Improvements resulting therefrom separate and apart
from, and in addition to, the Tenant Improvement Allowance.

      6.9 No Miscellaneous Charges. Landlord shall provide to Tenant and
Tenant's Agents, without charge, but subject to availability, utilities, HVAC,
freight elevator service, parking and/or use of loading docks during the
Building Hours during the period of construction of the Tenant Improvements and
Tenant's move into the Premises.

                                                                   KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -6-                     [Encore Software]

<PAGE>

                             SCHEDULE 1 TO EXHIBIT B

                                 TIME DEADLINES

<TABLE>
<CAPTION>
                           Dates                                             Actions to be Performed
                           -----                                             -----------------------
<S>      <C>                                                 <C>

A.       Within five (5) days of Lease execution             Final Space Plan to be completed by Tenant and
                                                             delivered to Landlord.

B.       October 25, 2004                                    Tenant to deliver Final Working Drawings to Landlord.

C.       Five (5) business days after the receipt of the     Tenant to approve Cost Proposal and deliver
                                                             Cost Cost Proposal by Tenant Proposal to Landlord.
</TABLE>

                                  CHEDULE 1 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

                             SCHEDULE 2 TO EXHIBIT B

                          BASE BUILDING SPECIFICATIONS

The Base Building shall be delivered in substantial accordance with the
specifications set forth below.

The Building Systems shall be in working order.

Except as noted above or elsewhere in the Lease, the Base Building shall comply
with Applicable Laws existing as of the date of the Lease which pertain to shell
space in unoccupied construction, including but not limited to life-fire safety
codes, disabled access codes (including, without limitation, the ADA) and/or
earthquake safety codes to the extent required for Tenant to be able to obtain a
certificate of occupancy, temporary certificate of occupancy, or either of their
legal equivalent for the Premises for general office use upon completion of
construction of the Tenant Improvements (assuming the Tenant Improvements are
exclusively general office improvements). The Base Building shall include the
following items:

            -     Men and Women's toilet rooms constructed pursuant to Base
            Building plans and in compliance with code to the extent required
            above. All restrooms on the floors, which the Premises are located
            completed with the Building standard finishes.

            -     Electrical/telephone closet with the capacity for two (2 watts
            demand load per usable square foot (excluding lighting and typical
            office use air conditioning load) with all sub-panels and breakers;
            Panels must contain a clearly written panel schedule identifying all
            circuits.

            -     Lighting - maximum of 1 1/2 watts of connected load per
            usable square foot for all lighting.

            -     Power- capable of a maximum of 4 watts of connected load per
            usable square foot within the Premises for all outlets and non-
            lighting requirements. Landlord shall provide all step down
            transformers and one 42 circuit panel with breakers for distribution
            of such power requirement.

            -     Tenant, at its own cost and expense shall have the ability to
            install additional electrical power capacity (in excess of the total
            5 1/2 watts per usable square foot for outlets and lighting) of
            electrical power capacity (including panels and transformers), if
            needed and reasonably approved by Landlord.

            -     Landlord shall provide Tenant its proportionate share of the
            riser capacity from the ground floor main point of entry (MPOE) of
            the Building to the Premises for the purposes of installing data,
            telecom and phone cable as required to operate business;

            -     Mechanical equipment room with main supply of ducted
            mechanical system stubbed to the Premises. Extension of main duct to
            be installed as part of the Tenant Improvements.

            -     HVAC - Landlord shall maintain and operate the integrated
            heating ventilation and air conditioning system to provide (so long
            as Tenant's mechanical and electrical working drawings and
            specifications are designed and constructed for proper capacity and
            to coordinate with the Base Building HVAC system and assuming normal
            first class office configuration, occupancy density and equipment)
            cooling, ventilation and heating with the capacity to produce the
            following results effective during Building Hours: maintenance of
            inside space conditions of no greater than 73 degrees Fahrenheit
            during the cooling mode and no less than 70 degrees Fahrenheit
            during the heating mode.

            -     concrete floors as-is

            -     All Base Building HVAC duct work, sprinklers, pipes, conduits
            and other building systems designed and installed to maintain no
            less than 9' AFF, clear ceiling

                                  CHEDULE 2 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

            height. Landlord shall provide main HVAC loop on the floor of the
            Building on which the Premises is located (new or existing patched
            and sealed).

            -     Landlord shall provide existing sprinkler protection "as-is".

            -     Base Building Fire Protection and Fire/life safety alarm and
            communication system installed according to current Building codes.

            -     Fire life safety: Landlord shall provide a life safety
            infrastructure including panels and power sources. Landlord shall
            provide adequate capacity within the Base Building fire alarm system
            to provide for Tenant's, reasonable and customary fire life safety
            requirements on the leased floor.

            -     Adequate (for a normal office tenant) supply of cold water,
            waste and vents.;

            -     Elevator cabs with building standard finishes.

            -     All smoke control systems including the Premises, stairwells,
            corridors, etc shall be provided, commissioned and inspected by
            Landlord.

            -     Landlord shall demolish all non-structural interior
            improvements within the Premises identified by Tenant in advance as
            unusable, prior to turning the Premises over to tenant for
            construction of the Tenant Improvements.

                                  CHEDULE 2 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

                             SCHEDULE 3 T0 EXHIBIT B

                        BUILDING STANDARD SPECIFICATIONS

                             FOR TENANT IMPROVEMENTS

STANDARD PARTITIONS

DEMISING PARTITION

a.    3-5/8" x 25 gauge metal studs @ 24" on center.

b.    1 layer each side 5/8" thick type 'x' gypsum wallboard.

c.    From floor slab to underside of structure above.

d.    R11 batt sound insulation in partition cavity.

e.    Partition taped and sanded smooth to receive paint.

f.    Fire caulk @ partition and metal deck as required by City of El Segundo.
      (Fill deck flutes voids to achieve one (1) hour fire rating).

g.    Provide minimum opening above ceiling as required for return air, with
      sound boots.

INTERIOR PARTITION

a.    2-1/2" x 25 gauge metal studs @ 24" on center.

b.    1 layer each side 5/8" thick type 'x' gypsum wallboard.

c.    From floor slab to underside of ceiling grid, 9'-0". Floors 2-8 (11'-0"
      ground floor).

d.    Diagonal Bracing: 2-1/2" x 25 gauge metal studs at 45 degree diagonal to
      structure above staggered @ 4'-0" on center.

e.    Partition taped and sanded smooth to receive paint.

f.    Metal corner bead @ termination of partition and ceiling.

INTERIOR ONE-HOUR SEPARATION PARTITION

a.    Same as demising partition with fire dampers as required for penetrations
      and return air.

INTERIOR LOW PARTITION

a.    2-1/2" x 25 gauge metal studs @ 16" on center.

b.    1 layer each side and top 5/8" thick type 'x' gypsum wallboard.

c.    Heights vary to maximum of 68" above floor.

d.    Metal corner beads at all exposed corners.

e.    Partition taped and sanded smooth to receive paint.

f.    Pipe support @ free end within partition cavity.

COLUMN FURRING

a.    2-1/2" x 25 gauge metal studs @ 24" on center.

b.    1 layer one side 5/8" thick type 'x' gypsum wallboard.

c.    From floor slab to 6" above ceiling grid.

d.    Partition taped and sanded smooth to receive paint.

FURRING AT PERIMETER

a.    Below glazing sill and above glazing head, 1 layer 5/8" thick type 'x'
      gypsum wallboard.

b.    Taped and sanded smooth to receive paint.

c.    Drywall to finish flush with face of glass framing.

DOORS, FRAMES AND HARDWARE

SINGLE CORRIDOR DOOR AND HARDWARE

a.    Single leaf U.L. rated, 20-minute suite entry door label attached to hinge
      side of door, 1-3/4" x 3'-0" x 8'-10", solid core wood, 5 ply, quartered
      sliced maple veneer, clear finish, to match building standard premium
      grade. Book match face veneers of doors premium grade.

b.    Door shall be pre-finished and pre-mortised for hardware.

c.    Frame: 3'-0" x 8'-10" `Alpha Aluminum Products' flush trim clear
      anodized extruded aluminum, 20-minute fire rated.

d.    Hardware: Schlage "L" Series: L9453 x 03A, finish 626 hardware finish 626
      satin chrome. Corbin Russwin cylinders with an inter-changeable core and
      D1 keyway. Hinges: AB700, 4.5 x 4.5, `Hager', finish: stainless steel -
      satin. Closer: LCN 4041 series, parallel arm-heavy duty, finish: to match
      626. Stop: `Trimco' 1211 series, finish 626. Threshold: `Pemko' 270A
      series as needed, finish 626. Smoke Seals: `Pemco' HSS2000 series `Hot
      Smoke Seal'.

DOUBLE CORRIDOR DOOR AND HARDWARE

a.    Double leaf U.L. rated 20-minute suite entry doors with label attached to
      hinge side of doors, 1-3/4" x 6'-0" x 8'-10", solid core wood, 5 ply,
      quartered sliced maple veneer, clear finish, to match building standard
      premium grade. Book match face veneers of doors premium grade.

b.    Door shall be pre-finished and mortised for hardware.

c.    Frame: 6'-0" x 8'-10", `Alpha Aluminum Products' flush trim clear anodized
      extruded aluminum, 20-minute fire rated.

d.    Hardware: Schlage "L" Series: L9453 x 03A, finish 626 hardware finish 626
      satin chrome. Corbin Russwin cylinders with an inter-changeable core and
      D1 keyway. Hinges: AB700, 4.5 x 4.5, `Hager', finish: stainless steel -
      satin. Stop: `Trimco' 1211 series, finish 626. Threshold: `Pemko'

                                  CHEDULE 3 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

      270A series as needed, finish 626. Auto flush bolts: DCI No. 942, finish
      to match 626. Coordinator: DCI No. 600 series, finish to match 626.
      Closer: LCN 4041 series, parallel arm-heavy duty, Finish: to match 626.
      Astragal: `Pemco' 355CV. Smoke Seals: `Pemco' HSS2000 series `Hot Smoke
      Seal'.

SINGLE INTERIOR DOOR AND HARDWARE

a.    Single leaf, 1-3/4" x 3'-0" x 8'-10", solid core wood, 5 ply, plain sliced
      maple veneer, clear finish, to match building standard premium grade.

b.    Matching veneer at vertical edges.

c.    20-minute rated with label attached to hinge side of door.

d.    Door shall be pre-finished and mortised for hardware.

e.    Frame: 3'-0" x 8'-10", `Alpha Aluminum Products' flush trim clear anodized
      extruded aluminum, 20-minute fire rated.

f.    Hardware: Schlage "L" Series: L9010 x 03A, finish 626 satin chrome. Corbin
      Russwin cylinders with an inter-changeable core and D1 keyway. Hinges:
      AB700, 4.5 x 4.5, `Hager', finish: stainless steel - satin. Stop: `Trimco'
      1211 series, finish 626.

DOUBLE INTERIOR DOOR AND HARDWARE

a.    Double leaf, 1-3/4" x 6'-0" x 8'-10", solid core wood, 5 ply, plain sliced
      maple veneer, clear finish, to match building standard premium grade.

b.    Match face veneers of doors. Matching veneer at vertical edges.

c.    20-minute rated with label attached to hinge side of the door.

d.    Door shall be pre-finished and mortised for hardware.

e.    Frame: 6'-0" x 8'-10", `Alpha Aluminum Products' flush trim clear anodized
      extruded aluminum, 20-minute fire rated.

f.    Hardware: Schlage "L" Series: L9010 x 03A, finish 626 hardware finish 626
      satin chrome. Corbin Russwin cylinders with an inter-changeable core and
      D1 keyway. Hinges: AB700, 4.5 x 4.5, `Hager', finish: stainless steel -
      satin. Stop: `Trimco' 1211 series, finish 626. Auto flush bolts: DCI No.
      942, finish to match 626. Coordinator: DCI No. 600 series, finish to match
      626. Closer: LCN 4041 series, parallel arm-heavy duty, finish: to match
      626. Closer: LCN 4041 series, parallel arm-heavy duty, finish to match
      626. Astragal: `Pemco' 355CV.

SUITE DOOR SIGNAGE

a.    Insert - 9" x 9", chrome trim, matte clear Plexiglas with silkscreen copy.

b.    Applicable to all floors, exclusive of ground floor lobby areas.

ACOUSTICAL CEILING

a.    2' x 2' USG `Millenia Clima Plus' 2 x 2 x 5/8" tegular lay-in tile.

b.    2' x 2' "Donn Fineline" narrow suspension systems #DXFH29 heavy-duty,
      off-white, enamel finish.

ELECTRICAL

LIGHT FIXTURES

a.    'Metalux', Paralux III, 2P3G Series, 2' x 4' recessed static troffer

            -     18 cell parabolic lens

            -     3 T-8 Octron lamps per fixture with electronic ballasts

b.    Lamps: Phillips 32 Watt

            -     Color 741-4100K (cool white)

LIGHT CONTROL

a.    Novitas Sensors.

b.    Wall - #01-151.

c.    Ceiling: One Way 01-100.

d.    Ceiling: Two Way 01-110

ELECTRICAL WALL OUTLET

a.    Specification Grade, Leviton 15A, 125V, Decora/single switch.

b.    White.

c.    Mounted vertically.

d.    Outlet height at 15" above finish floor to centerline of outlet U.O.N.

TELEPHONE WALL OUTLET

a.    Single box in wall - mounted vertically.

b.    3/4" metal conduit stub to ceiling.

c.    Cover plate and wiring by Tenant's telephone vendor.

EXIT SIGN LIGHTS

a.    Lithonia LRP-1-GC-RA-LED recessed architectural edge lit exit sign or
      double face, two (2) circuit 277 volt. Housing trim with white finish.

AUTOMATIC FIRE SPRINKLERS

                                  CHEDULE 3 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

Reliable sprinkler model "G" pendant semi-recessed sprinkler with white
sprinkler and escutcheon with a Fahrenheit temperature rating of 165 degrees.

a.    Reliable sprinkler model "G4" concealed sprinkler head with white cover
      plate and a Fahrenheit temperature rating of 165 degrees (To be used in
      all public areas).

HEATING AND AIR CONDITIONING DISTRIBUTION

All Tenant Improvement HVAC construction work will be performed by the
Landlord's base building HVAC contractor or Landlord approved alternate vendor.

a.    Furnish and install DDC VAV zone (as manufactured by Krueger, series LMHS
      #66) for interior with 5-ft long lined sheet metal plenum.

b.    Furnish and install DDC fan-powered VAV zones (as manufactured by Krueger,
      series LMHS #66) with hot water heat for exterior with 5-ft long lined
      sheet metal plenum.

c.    Furnish and install high-pressure sheet metal ducts to zones.

d.    Furnish and install low-pressure sheet metal downstream and branch
      ductwork, max 7' of glass flex UL181.

e.    Furnish and install air distribution ceiling 2' x 2' perforated diffusers
      (as manufactured by Krueger model 6500F23) as required to meet tenant
      comfort needs.

f.    Zoning as required to meet tenant needs. Max size is one zone per 750 sq.
      ft.

g.    Independent air balance.

h.    Furnish and install DDC zone sensors and include all programming.

i.    Provide access doors.

j.    Provide fire or fire/smoke dampers as required by code.

FINISHES

PAINT

Three coats of eggshell interior latex washable paint by Frazee, Sinclair, or
approved equal.

FLOOR COVERING

a.    Carpet, "Patcraft" All that Jazz.

b.    Direct glue down installation for all carpet.

c.    VCT Armstrong Excelon Vinyl Tile or approved equal, colors to be selected
from a standard color chart.

RUBBER BASE

a.    Rubber Base Roppe 2-1/2".

PLASTIC LAMINATE

a.    Formica or WilsonArt.

WINDOW COVERINGS

a.    MechoShade - manually operated units. Fabric: 1319, Silver Birch, Fascia:
      Clear Anodized.

FIRE/LIFE SAFETY

FIRE ALARM SPEAKER/STROBE: Wheelock E90-2430CFW (Ceiling Mount) E90-2415WFW
(Wall Mount). Cover to be selected from manufacturer's standards. All
Life/Safety components shall be furnished and installed by the Building
Life/Safety contractor (Pyro-Comm Systems, Inc. did the common area
installation).

MANUAL PULL STATION: Notifier NBG-12 with FMM-101. All Life/Safety components
shall be furnished and installed by the Building Life/Safety contractor
(Pyro-Comm Systems, Inc. did the common area installation).

AREA SMOKE DETECTORS: Notifier FSP-751B710LP. All Life/Safety components shall
be furnished and installed by the Building Life/Safety contractor (Pyro-Comm
Systems, Inc. did the common area installation).

FIRE EXTINGUISHER: Loma Extinguisher Cabinet Semi-Recessed. 7322-BA-6. Paint
cabinet to match adjacent finish.

NOTES:

a.    Landlord can substitute like quality materials.

b.    Where more than one (1) type of material or structure is available, the
selection will be at Landlord's option, provided that such selection does not
increase the cost of such material or fixture.

                                  CHEDULE 3 TO                     KILROY REALTY
                                    EXHIBIT B              [999 North Sepulveda]
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                                    EXHIBIT C

                               999 NORTH SEPULVEDA

                           NOTICE OF LEASE TERM DATES

To:   _______________________
      _______________________
      _______________________
      _______________________

      Re:   Office Lease dated ____________, 200__ between ____________________,
            a _____________________ ("LANDLORD"), and _______________________, a
            _______________________ ("TENANT") concerning Suite ______ on
            floor(s) __________ of the office building located at
            ____________________________, El Segundo, California.

Gentlemen:

      In accordance with the Office Lease (the "LEASE"), we wish to advise you
and/or confirm as follows:

      1.    The Lease Term shall commence on or has commenced on ______________
            for a term of __________________ ending on __________________.

      2.    Rent commenced to accrue on __________________, in the amount of
            ________________.

      3.    If the Lease Commencement Date is other than the first day of the
            month, the first billing will contain a pro rata adjustment. Each
            billing thereafter, with the exception of the final billing, shall
            be for the full amount of the monthly installment as provided for in
            the Lease.

      4.    Your rent checks should be made payable to __________________ at
            ___________________.

      5.    The exact number of rentable/usable square feet within the Premises
            is ____________ square feet.

      6.    Tenant's Share as adjusted based upon the exact number of usable
            square feet within the Premises is ________%.

                                                                   KILROY REALTY
                                    EXHIBIT C              [999 North Sepulveda]
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                                       "Landlord":

                                       ________________________________________,
                                       a________________________________________

                                       By: _____________________________________
                                           Its:_________________________________

                                       By: _____________________________________
                                           Its:_________________________________

Agreed to and Accepted
as of ____________, 200__.

"Tenant":

_________________________
a________________________

By: _____________________________________
    Its:_________________________________

                                                                   KILROY REALTY
                                    EXHIBIT C              [999 North Sepulveda]
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                                    EXHIBIT D

                               999 NORTH SEPULVEDA

                              RULES AND REGULATIONS

      Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project; provided, however,
Landlord shall use commercially reasonable efforts to enforce all Rules and
Regulations with all tenants of the Project. In the event of any conflict
between the Rules and Regulations and the other provisions of this Lease, the
latter shall control. Landlord will provide written notice of any modifications
to the Rules and Regulations before any such modifications shall be deemed
effective.

      1. Tenant shall not alter any lock or install any new or additional locks
or bolts on any doors or windows of the Premises without obtaining Landlord's
prior written consent. Tenant shall bear the cost of any lock changes or repairs
required by Tenant. Two keys will be furnished by Landlord for the Premises.
Additional keys shall be obtained only from the manager of the Building or
Project (as designated by Landlord) at Landlord's actual cost therefore. Tenant
shall not duplicate or obtain keys from any other source. Upon the termination
of this Lease, Tenant shall restore to Landlord all keys of stores, offices, and
toilet rooms, either furnished to, or otherwise procured by, Tenant and in the
event of the loss of keys so furnished, Tenant shall pay to Landlord the cost of
replacing same.

      2. All doors opening to public corridors shall be kept closed at all times
except for normal ingress and egress to the Premises.

      3. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building during such hours as are customary for comparable
buildings in the El Segundo, California area. Tenant, its employees and agents
must be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. Landlord will furnish passes to persons for
whom Tenant requests same in writing. The Landlord and his agents shall in no
case be liable for damages for any error with regard to the admission to or
exclusion from the Building of any person. In case of invasion, mob, riot,
public excitement, or other commotion, Landlord reserves the right to prevent
access to the Building or the Project during the continuance thereof by any
means it deems appropriate for the safety and protection of life and property.

      4. No furniture, freight or equipment of any kind shall be brought into
the Building without prior notice to Landlord. All moving activity into or out
of the Building shall be scheduled with Landlord and done only at such time and
in such manner as Landlord reasonably designates. Landlord shall have the right
to prescribe the weight, size and position of all safes and other heavy property
brought into the Building and also the times and manner of moving the same in
and out of the Building. Safes and other heavy objects shall, if considered
necessary by Landlord, stand on supports of such thickness as is necessary to
properly distribute the weight. Landlord will not be responsible for loss of or
damage to any such safe or property in any case. Any damage to any part of the
Building, its contents, occupants or visitors by moving or maintaining any such
safe or other property shall be the sole responsibility and expense of Tenant.

      5. No furniture will be received in the Building or carried up or down in
the elevators, except between such hours, in such specific elevator and by such
personnel as shall be designated by Landlord.

      6. The requirements of Tenant will be attended to only upon notification
to management office for the Project or at such office location designated by
Landlord. Employees

                                                                   KILROY REALTY
                                    EXHIBIT D              [999 North Sepulveda]
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of Landlord shall not perform any work or do anything outside their regular
duties unless under special instructions from Landlord.

      7. Except as expressly set forth in the Lease, (a) no sign, advertisement,
notice or handbill shall be exhibited, distributed, painted or affixed by Tenant
on any part of the Premises or the Building without the prior written consent of
the Landlord; (b) Tenant shall not disturb, solicit, peddle, or canvass any
occupant of the Project and shall cooperate with Landlord and its agents of
Landlord to prevent same; (c) Landlord shall have the right to remove any sign,
placard, picture, advertisement, name, or notice placed or maintained by Tenant
in violation of these Rules and Regulations or of the Lease, without notice, at
Tenant's expense and Landlord shall not be liable in damages for such removal;
(d) standard interior signs, such as on doors, shall be affixed for Tenant by
Landlord at Tenant's expense, and all such signs shall be of a type, size and
kind approved by Landlord; and (e) if Landlord shall have given its consent with
respect to any sign at any time, whether before or after the execution of this
Lease, such consent shall in no way operate as a waiver or release of any of the
provisions hereof or of the Lease and shall be deemed to relate only to the
particular sign, placard, picture, advertisement, name or notice so consented to
by Landlord and shall not be construed as dispensing with the necessity of
obtaining the specific written consent of Landlord with respect to each and
every such sign, placard, picture, advertisement, name or notice other than the
particular sign, placard, picture, advertisement, name or notice, as the case
may be, so consented to by Landlord.

      8. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense of
any breakage, stoppage or damage resulting from the violation of this rule shall
be borne by the tenant who, or whose servants, employees, agents, visitors or
licensees shall have caused same.

      9. Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machine or machines other than fractional
horsepower office machines shall be installed, maintained or operated upon the
Premises without the written consent of Landlord.

      10. Tenant shall not use or keep in or on the Premises, the Building, or
the Project any kerosene, gasoline, explosive material, corrosive material,
material capable of emitting toxic fumes, or other inflammable or combustible
fluid chemical, substitute or material. Tenant shall provide material safety
data sheets for any Hazardous Material used or kept on the Premises.

      11. Tenant shall not without the prior written consent of Landlord use any
method of heating or air conditioning other than that supplied by Landlord.

      12. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Project by reason of noise, odors, or vibrations, or
interfere with other tenants or those having business therein, whether by the
use of any musical instrument, radio, phonograph, or in any other way. Tenant
shall not throw anything out of doors, windows or skylights or down passageways.

      13. Tenant shall not bring into or keep within the Project, the Building
or the Premises any animals (other than assistance animals, such as seeing eye
dogs), birds, aquariums, or, except in areas designated by Landlord, bicycles or
other vehicles.

      14. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances,
rules and regulations.

      15. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
provided for in the Summary. Tenant shall not occupy or permit any portion of
the Premises to be occupied as an office for a messenger-type operation or
dispatch office, public stenographer or typist, or for the manufacture or sale
of liquor, narcotics, or tobacco in any form, or as a medical office, or as

                                                                   KILROY REALTY
                                    EXHIBIT D              [999 North Sepulveda]
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a barber or manicure shop, or as an employment bureau without the express prior
written consent of Landlord. Except with the prior written consent of the
Landlord, no tenant of the Project shall sell or permit the sale (at retail or
wholesale) of newspapers, magazines, periodicals, theatre tickets, liquor,
narcotics or tobacco, in any form, or any other goods or merchandise to the
general public in or from their premises or from anywhere in the Project.

      16. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who has in any manner acted in violation of any of these
Rules and Regulations.

      17. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.

      18. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system. Tenant shall participate
in recycling programs undertaken by Landlord.

      19. Tenant shall store all its trash and garbage within the interior of
the Premises. No material shall be placed in the trash boxes or receptacles if
such material is of such nature that it may not be disposed of in the ordinary
and customary manner of removing and disposing of trash and garbage in El
Segundo, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Landlord
shall designate. If the Premises is or becomes infested with vermin as a result
of any cause other than Landlord's negligence or willful misconduct, then Tenant
shall forthwith, at Tenant's expense, cause the Premises to be exterminated from
time to time to the satisfaction of Landlord and shall employ such licensed
exterminators as shall be approved in writing in advance by Landlord. To the
extent such infestation is caused by Landlord's negligence or willful
misconduct, the cost of extermination shall be borne by Landlord.

      20. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
All tenants and their authorized representatives shall observe and participate
in scheduled fire prevention and other calamitous drills and observances,
whether required by Landlord (but not more than once per quarter) or any law or
public official or agency. Tenant agrees that it shall comply with all fire and
security regulations that may be issued from time to time by Landlord and Tenant
also shall provide Landlord with the name of a designated responsible employee
to represent Tenant in all matters pertaining to such fire or security
regulations.

      21. Any persons employed by Tenant to do janitorial work shall be subject
to the prior written approval of Landlord, and while in the Building and outside
of the Premises, shall be subject to and under the control and direction of the
Building manager (but not as an agent or servant of such manager or of
Landlord), and Tenant shall be responsible for all acts of such persons.

      22. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord, and no curtains,
blinds, shades or screens shall be attached to or hung in, or used in connection
with, any window or door of the Premises other than as reasonably approved by
Landlord. All electrical ceiling fixtures hung in the Premises or spaces along
the perimeter of the Building must be reasonably approved by Landlord. Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the prior written consent of Landlord. Tenant shall be
responsible for any damage to the window film on the exterior windows of the
Premises and shall promptly repair any such damage at Tenant's sole cost and
expense. Prior to leaving the Premises for the day, Tenant shall and extinguish
most lights.

      23. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.

                                                                   KILROY REALTY
                                    EXHIBIT D              [999 North Sepulveda]
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      24. Tenant must comply with applicable "NO-SMOKING" ordinances and all
related, similar or successor ordinances, rules, regulations or codes. If Tenant
is required under the ordinance to adopt a written smoking policy, a copy of
said policy shall be on file in the office of the Building. In addition, no
smoking of any substance shall be permitted within the Project except in
specifically designated outdoor areas. Within such designated outdoor areas, all
remnants of consumed cigarettes and related paraphernalia shall be deposited in
ash trays and/or waste receptacles. No cigarettes shall be extinguished and/or
left on the ground or any other surface of the Project. Cigarettes shall be
extinguished only in ashtrays.

      25. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.

      26. No auction, liquidation, fire sale, going-out-of-business or
bankruptcy sale shall be conducted in the Premises without the prior written
consent of Landlord.

      27. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.

      28. Tenant shall install and maintain, at Tenant's sole cost and expense
fire extinguishers in accordance with Applicable Laws.

      29. Landlord reserves the right at any time to, by written notice to
Tenant, change or rescind any one or more of these Rules and Regulations, or to
make such other and further reasonable Rules and Regulations as in Landlord's
judgment may from time to time be necessary for the management, safety, care and
cleanliness of the Premises, Building, the Common Areas and the Project, and for
the preservation of good order therein, as well as for the convenience of other
occupants and tenants therein. Tenant shall be deemed to have read these Rules
and Regulations and to have agreed to abide by them as a condition of its
occupancy of the Premises.

      30. Landlord reserves the right to prohibit "Personal Goods and Services
Vendors" (defined below) from access to the Building and the Project, except
upon such reasonable terms and conditions, including the payment of a reasonable
fee and provision for insurance coverage, as are related to the safety, care and
cleanliness of the Building and the Project, the preservation of good order
thereon, and the relief of any financial or other burden on the Landlord
occasioned by the presence of such vendors or the sale by them of personal goods
or services to a Tenant or a Tenant's employees. If necessary for the
accomplishment of these purposes, Landlord may exclude a particular vendor
entirely or limit the number of vendors who may be present at any one time or
during any week in the Building or the Project. As used herein, "PERSONAL GOODS
AND SERVICES VENDORS" means persons who may periodically enter the Building in
which the Premises are located for the purpose of selling goods or services to a
Tenant, other than goods or services which are used by the Tenant only for the
purpose of conducting its business on the Premises. Personal goods and services
include, but are not limited to, drinking water and other beverages, food,
barbering services, and shoeshining services.

      31. The sashes, sash doors, glass doors, windows, glass lights, and any
glass, plastic material, lights or skylights that reflect or admit light into
the halls or other places of a Building or the Premises shall not be covered or
obstructed in any way, partially or in full. No furniture, files or other solid
objects above thirty (30) inches in height shall be placed against or within two
(2) feet of any clear or transparent glass exterior window of the Building or
any interior window facing common areas, on the first or second floor.

      32. Tenant shall not use any curtains, blinds, shades, screens, window
ventilator or other form of window covering (collectively "WINDOW COVERING") in
connection with any

                                                                   KILROY REALTY
                                    EXHIBIT D              [999 North Sepulveda]
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<PAGE>

window or door of the Premises unless approved in writing by Landlord. Landlord
reserves the right, at Landlord's expense, to install in the Premises of any
tenant any Building standard window covering selected by Landlord, and any
subsequent changes of such Building standard window covering, so that the
premises shall have a uniformity in outside appearance. No awnings shall be
permitted on any part of the Premises.

      33. Tenant shall not do or permit anything to be done in the Premises, or
bring or keep anything therein, which shall in any way increase the rate of fire
insurance on the Premises, Building or the Project, or on the property kept
therein, or obstruct or interfere with the rights of other tenants, or in any
way injure or annoy them; or conflict with the regulations of the Fire
Department or fire laws, or with any insurance policy upon the Building or the
Project, or any part thereof, or with any rules and ordinances established by
the City of El Segundo, Board of Health, or other governmental authority or
agency.

      34. No hand trucks or vehicles, including bicycles, other than a
wheelchair for an individual, shall be used or carried in the elevators without
Landlord's prior approval. Any hand trucks permitted in the Building must be
equipped with soft rubber tires and rubber side guards.

      35. Landlord will direct electricians or other installers as to where and
how telephone and other communication and electrical facilities are to be
introduced. No boring or cutting of or for these facilities shall be allowed
without the prior written consent of Landlord.

      36. Landlord shall have the right to prohibit any advertising by any
Tenant which, in Landlord's opinion, tends to impair the reputation of the
Project or its desirability as a first-class office building project, and upon
written notice from Landlord, Tenant shall refrain from and discontinue such
advertising.

      37. The Building in which the Premises are located and the Project is and
it shall remain private property (except for any dedicated streets or
sidewalks). No part of the Project is maintained for nor is it open to the
general public. At any time and from time to time Landlord may establish
perimeter restraints around the entire Project or portions of the Project, or
around any one or more of the Buildings comprising the Project, and admit only
those persons who have identification as tenants or as authorized
representatives of tenants of the Building and/or the Project. All facilities
and common areas forming a part of a Building and the Project shall be under the
sole and absolute control of Landlord with the exclusive right to regulate and
control these areas and to exclude therefrom any one who is not a Tenant or an
employee or authorized representative of a Tenant.

      38. If any governmental license or permit shall be required for the proper
and lawful conduct of any business or other activity carried on by Tenant in the
Premises, and if the failure to secure such license or permit would in any
manner affect Landlord, Tenant shall duly procure and thereafter maintain such
license or permit.

      39. Landlord shall have no liability to any tenant by reason of the
non-compliance with or violation of these Rules and Regulations by any other
tenant.

      40. Subject to limitations imposed by all governmental rules, regulations
and guidelines applicable thereto, Landlord shall provide heating and air
conditioning "HVAC") when necessary for normal comfort for normal office use in
the Premises during the Building Hours, except for any Holidays.

      41. Any consent, approval, request, agreement or other communication to be
given or made under these Rules and Regulations shall be in writing. Any
violation of these Rules and Regulations which results in damage or injury to
persons or to property, or requires additional cleaning or other services to the
Premises, Building or Project shall be borne by and paid by the Tenant who, or
whose employees or agents, violated these Rules and Regulations.

      42. All Rules and Regulations contained in this EXHIBIT D shall be
enforced by Landlord in a nondiscriminatory manner. Notwithstanding the
foregoing, in no event shall Landlord's failure to enforce any rule or
regulation set forth in this EXHIBIT D constitute a waiver of Landlord's future
rights of enforcement with respect to the same as contained herein.

                                                                   KILROY REALTY
                                    EXHIBIT D              [999 North Sepulveda]
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                                    EXHIBIT E

                               999 NORTH SEPULVEDA

                      FORM OF TENANT'S ESTOPPEL CERTIFICATE

      The undersigned as Tenant under that certain Office Lease (the "LEASE")
made and entered into as of ___________, 200 by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises on -- the ______________
floor(s) of the office building located at ______________, El Segundo,
California ____________, certifies as follows:

      1. Attached hereto as EXHIBIT A is a true and correct copy of the Lease
and all amendments and modifications thereto. The documents contained in EXHIBIT
A represent the entire agreement between the parties as to the Premises.

      2. The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project.

      3. Base Rent became payable on ____________.

      4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in EXHIBIT A.

      5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:

      6. Tenant shall not modify the documents contained in EXHIBIT A without
notice to Landlord's mortgagee (but only if such mortgagee is identified to
Tenant in writing in advance).

      7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is
$_____________________.

      8. To Tenant's knowledge, Landlord is not in default thereunder. In
addition, the undersigned has not delivered any notice to Landlord regarding a
default by Landlord thereunder.

      9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.

      10. As of the date hereof, there are no existing defenses or offsets, or,
to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.

      11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.

      12. There are no actions pending against the undersigned under the
bankruptcy or similar laws of the United States or any state.

      13. Other than in compliance with all applicable laws and incidental to
the ordinary course of the use of the Premises, the undersigned has not used or
stored any hazardous substances in the Premises.

      14. To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been

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accepted by the undersigned and all reimbursements and allowances due to the
undersigned under the Lease in connection with any tenant improvement work have
been paid in full.

      The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.

      Executed at ______________ on the ____ day of ___________, 200__.

                                           "Tenant":

                                           ____________________________________,
                                           a____________________________________

                                           By: _________________________________
                                               Its: ____________________________

                                           By: _________________________________
                                               Its: ____________________________

                                                                   KILROY REALTY
                                    EXHIBIT E              [999 North Sepulveda]
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                                    EXHIBIT F

                               999 NORTH SEPULVEDA

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

ALLEN MATKINS LECK GAMBLE
         & MALLORY LLP
1901 Avenue of the Stars
18th Floor
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq. and Delmar L. Nehrenberg, Esq.

                            RECOGNITION OF COVENANTS,
                          CONDITIONS, AND RESTRICTIONS

      This Recognition of Covenants, Conditions, and Restrictions (this
"AGREEMENT") is entered into as of the __ day of ________, 200__, by and between
__________________ ("LANDLORD"), and ________________ ("TENANT"), with reference
to the following facts:

      A. Landlord and Tenant entered into that certain Office Lease Agreement
dated _____, 200__ (the "LEASE"). Pursuant to the Lease, Landlord leased to
Tenant and Tenant leased from Landlord space (the "PREMISES") located in an
office building on certain real property described in EXHIBIT A attached hereto
and incorporated herein by this reference (the "PROPERTY").

      B. The Premises are located in an office building located on real property
which is part of an area owned by Landlord containing approximately ___(__)
acres of real property located in the City of ____________, California (the
"PROJECT"), as more particularly described in EXHIBIT B attached hereto and
incorporated herein by this reference.

      C. Landlord, as declarant, has previously recorded, or proposes to record
concurrently with the recordation of this Agreement, a Declaration of Covenants,
Conditions, and Restrictions (the "DECLARATION"), dated ________________, 200__,
in connection with the Project.

      D. Tenant is agreeing to recognize and be bound by the terms of the
Declaration, and the parties hereto desire to set forth their agreements
concerning the same.

      NOW, THEREFORE, in consideration of (a) the foregoing recitals and the
mutual agreements hereinafter set forth, and (b) for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows,

      1. Tenant's Recognition of Declaration. Notwithstanding that the Lease has
been executed prior to the recordation of the Declaration, Tenant agrees to
recognize and by bound by all of the terms and conditions of the Declaration.

      2. Miscellaneous.

            2.1 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, estates, personal
representatives, successors, and assigns.

            2.2 This Agreement is made in, and shall be governed, enforced and
construed under the laws of, the State of California.

            2.3 This Agreement constitutes the entire understanding and
agreements of the parties with respect to the subject matter hereof, and shall
supersede and replace all prior understandings and agreements, whether verbal or
in writing. The parties confirm and

                                                                   KILROY REALTY
                                    EXHIBIT F              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

acknowledge that there are no other promises, covenants, understandings,
agreements, representations, or warranties with respect to the subject matter of
this Agreement except as expressly set forth herein.

            2.4 This Agreement is not to be modified, terminated, or amended in
any respect, except pursuant to any instrument in writing duly executed by both
of the parties hereto.

            2.5 In the event that either party hereto shall bring any legal
action or other proceeding with respect to the breach, interpretation, or
enforcement of this Agreement, or with respect to any dispute relating to any
transaction covered by this Agreement, the losing party in such action or
proceeding shall reimburse the prevailing party therein for all reasonable costs
of litigation, including reasonable attorneys' fees, in such amount as may be
determined by the court or other tribunal having jurisdiction, including matters
on appeal.

            2.6 All captions and heading herein are for convenience and ease of
reference only, and shall not be used or referred to in any way in connection
with the interpretation or enforcement of this Agreement.

            2.7 If any provision of this Agreement, as applied to any party or
to any circumstance, shall be adjudged by a court of competent jurisdictions to
be void or unenforceable for any reason, the same shall not affect any other
provision of this Agreement, the application of such provision under
circumstances different form those adjudged by the court, or the validity or
enforceability of this Agreement as a whole.

            2.8 Time is of the essence of this Agreement.

            2.9 The Parties agree to execute any further documents, and take any
further actions, as may be reasonable and appropriate in order to carry out the
purpose and intent of this Agreement.

            2.10 As used herein, the masculine, feminine or neuter gender, and
the singular and plural numbers, shall each be deemed to include the others
whenever and whatever the context so indicates.

              [Remainder of this page is intentionally left blank.]

                                                                   KILROY REALTY
                                    EXHIBIT F              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

                        SIGNATURE PAGE OF RECOGNITION OF

                     COVENANTS, CONDITIONS AND RESTRICTIONS

      IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.

                                      "Landlord":

                                      KILROY REALTY, L.P.,
                                      a Delaware limited partnership

                                      By: KILROY REALTY CORPORATION,
                                          a Maryland corporation,
                                      Its: General Partner

                                           By: _________________________________

                                               Name: ___________________________

                                               Its: ____________________________

                                           By: _________________________________

                                               Name: ___________________________

                                               Its: ____________________________

                                      "Tenant":

                                      __________________________________________
                                      a_________________________________________

                                      By: ______________________________________

                                          Its: _________________________________

                                      By: ______________________________________

                                          Its: _________________________________

                                                                   KILROY REALTY
                                    EXHIBIT F              [999 North Sepulveda]
                                       -3-                     [Encore Software]

<PAGE>

                                    EXHIBIT G

                               999 NORTH SEPULVEDA

      THIS GUARANTY OF LEASE (this "GUARANTY") is made as of October 8, 2004, by
Navarre Corporation, a Minnesota corporation (the "GUARANTOR"), whose address is
set forth in Paragraph 9 hereof, in favor of Kilroy Realty, L.P., a Delaware
limited partnership ("LANDLORD"), having an office at 12200 W. Olympic
Boulevard, Suite 200, Los Angeles, California 90064.

      WHEREAS, Landlord and Encore Software, Inc., a Minnesota corporation
("TENANT") desire to enter into that certain Office Lease dated October 8, 2004
(the "LEASE") concerning the premises on the seventh (7th) floor of the office
building located at 999 North Sepulveda Boulevard, in the City of El Segundo,
County of Los Angeles, State of California (the "BUILDING");

      WHEREAS, Guarantor has a financial interest in the Tenant; and

      WHEREAS, Landlord would not execute the Lease if Guarantor did not execute
and deliver to Landlord this Guaranty.

      NOW THEREFORE, for and in consideration of the execution of the foregoing
Lease by Landlord and as a material inducement to Landlord to execute said
Lease, Guarantor hereby jointly, severally, and absolutely, presently,
continually, unconditionally and irrevocably guarantees the prompt payment by
Tenant of all rentals and all other sums payable by Tenant under said Lease and
the faithful and prompt performance by Tenant of each and every one of the
terms, conditions and covenants of said Lease to be kept and performed by
Tenant, and further agree as follows:

            1. It is specifically agreed and understood that the terms,
covenants and conditions of the Lease may be altered, affected, modified,
amended, compromised, released or otherwise changed by agreement between
Landlord and Tenant, or by course of conduct and Guarantor does guaranty and
promise to perform all of the obligations of Tenant under the Lease as so
altered, affected, modified, amended, compromised, released or changed and the
Lease may be assigned by or with the consent of Landlord or any assignee of
Landlord without consent or notice to Guarantor and that this Guaranty shall
thereupon and thereafter guaranty the performance of said Lease as so changed,
modified, amended, compromised, released, altered or assigned. Notwithstanding
the foregoing, this Guaranty shall not apply to any modifications to the Lease
which increase, enlarge or expand Tenant's monetary obligations thereunder made
without Guarantor's consent.

            2. This Guaranty shall not be released, modified or affected by
failure or delay on the part of Landlord to enforce any of the rights or
remedies of Landlord under the Lease, whether pursuant to the terms thereof or
at law or in equity, or by any release of any person liable under the terms of
the Lease (including, without limitation, Tenant) or any other guarantor, from
any liability with respect to Guarantor's obligations hereunder.

            3. Guarantor's liability under this Guaranty shall continue until
all rents due under the Lease have been paid in full and until all other
obligations to Landlord have been satisfied. If all or any portion of Tenant's
obligations under the Lease is paid or performed by Tenant, the obligations of
Guarantor hereunder shall continue and remain in full force and effect in the
event that all or any part of such payment(s) or performance(s) is avoided or
recovered directly or indirectly from Landlord as a preference, fraudulent
transfer or otherwise. Notwithstanding anything in this Guaranty to the
contrary, Guarantor's liability hereunder for the payment and performance of
Tenant's obligations under the Lease shall be limited to a maximum aggregate
amount of $700,000.00 during the first two (2) years of the Lease Term and
$500,000.00 thereafter (exclusive of reasonable attorneys' fees and reasonable
out-of-pocket costs incurred by Landlord in enforcing this Guaranty) and shall
in no event require Guarantor to pay any amounts or to make any expenditures in
excess of such maximum aggregate amount except for reasonable attorneys' fees
and reasonable out-of-pocket enforcement costs.

            4. Guarantor warrants and represents to Landlord that Guarantor now
has and will continue to have full and complete access to any and all
information concerning the Lease,

                                                                   KILROY REALTY
                                    EXHIBIT G              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

the value of the assets owned or to be acquired by Tenant, Tenant's financial
status and its ability to pay and perform the obligations owed to Landlord under
the Lease. Guarantor further warrants and represents that Guarantor has reviewed
and approved copies of the Lease and is fully informed of the remedies Landlord
may pursue, with or without notice to Tenant, in the event of default under the
Lease. So long as any of Guarantor's obligations hereunder remains unsatisfied
or owing to Landlord, Guarantor shall keep fully informed as to all aspects of
Tenant's financial condition and the performance of said obligations.

            5. Guarantor hereby covenants and agrees with Landlord that if a
default shall at any time occur in the payment of any sums due under the Lease
by Tenant or in the performance of any other obligation of Tenant under the
Lease, and such default shall continue beyond any applicable grace and cure
periods, Guarantor shall and will forthwith upon demand pay such sums, and any
arrears thereof, to Landlord in legal currency of the United States of America
for payment of public and private debts, and take all other actions necessary to
cure such default and perform such obligations of Tenant.

            6. The liability of Guarantor under this Guaranty is a guaranty of
payment and performance and not of collectibility, and is not conditioned or
contingent upon the pursuit by Landlord of any remedies which it now has or may
hereafter have with respect thereto, at law, in equity or otherwise.

            7. Guarantor hereby waives and agrees not to assert or take
advantage of to the extent permitted by law: (i) all notices to Guarantor (or
any of them), to Tenant, or to any other person, including, but not limited to,
notices of the acceptance of this Guaranty or the creation, renewal, extension,
assignment, modification or accrual of any of the obligations owed to Landlord
under the Lease and, except to the extent set forth in Paragraph 9 hereof,
enforcement of any right or remedy with respect thereto, and notice of any other
matters relating thereto; (ii) notice of acceptance of this Guaranty; (iii) any
right to require Landlord to apply to any default any security deposit or other
security it may hold under the Lease; and (iv) any right or defense that may
arise by reason of the incapability, lack or authority, death or disability of
Tenant or any other person. Moreover, Guarantor agrees that Guarantor's
obligations shall not be affected by any circumstances which constitute a legal
or equitable discharge of a guarantor or surety.

            8. Guarantor agrees that Landlord may enforce this Guaranty without
the necessity of proceeding against Tenant or any other guarantor. Guarantor
hereby waives the right to require Landlord to proceed against Tenant, to
proceed against any other guarantor to exercise any right or remedy under the
Lease or to pursue any other remedy or to enforce any other right.

            9. (a) Guarantor agrees that nothing contained herein shall prevent
Landlord from suing on the Lease or from exercising any rights available to it
thereunder and that the exercise of any of the aforesaid rights shall not
constitute a legal or equitable discharge of Guarantor. Without limiting the
generality of the foregoing, Guarantor hereby expressly waives any and all
benefits under California Civil Code Sections 2810, 2819, 2845, 2849 and 2850.

            (b) Guarantor agrees that Guarantor shall have no right of
subrogation against Tenant or any right of contribution against any other
guarantor unless and until all amounts due under the Lease have been paid in
full and all other obligations under the Lease have been satisfied. Guarantor
further agrees that, to the extent the waiver of Guarantor's rights of
subrogation and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation Guarantor may have against Tenant shall be junior and subordinate to
any rights Landlord may have against Tenant, and any rights of contribution
Guarantor may have against any other guarantor shall be junior and subordinate
to any rights Landlord may have against such other guarantor.

            (c) To the extent any dispute exists at any time between or among
Guarantor and any other guarantors as to Guarantor's right to contribution or
otherwise, Guarantor agrees to indemnify, defend and hold Landlord harmless from
and against any loss, damage, claim, demand, cost or any other liability
(including, without limitation, reasonable attorneys' fees and costs) Landlord
may suffer as a result of such dispute.

                                                                   KILROY REALTY
                                    EXHIBIT G              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

            (d) The obligations of Guarantor under this Guaranty shall not be
altered, limited or affected by any case, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Tenant or any defense which Tenant may have by reason of order,
decree or decision of any court or administrative body resulting from any such
case. Guarantor acknowledges and agrees that any payment which accrues with
respect to Tenant's obligations under the Lease (including, without limitation,
the payment of rent) after the commencement of any such proceeding (or, if any
such payment ceases to accrue by operation of law by reason of the commencement
of such proceeding, such payment as would have accrued if said proceedings had
not been commenced) shall be included in Guarantor's obligations hereunder
because it is the intention of the parties that said obligations should be
determined without regard to any rule or law or order which may relieve Tenant
of any of its obligations under the Lease. Guarantor hereby permits any trustee
in bankruptcy, receiver, debtor-in-possession, assignee for the benefit of
creditors or similar person to pay Landlord, or allow the claim of Landlord in
respect of, any such payment accruing after the date on which such proceeding is
commenced. Guarantor hereby assigns to Landlord Guarantor's right to receive any
payments from any trustee in bankruptcy, receiver, debtor-in-possession,
assignee for the benefit of creditors or similar person by way of dividend,
adequate protection payment or otherwise, but only to the extent of Guarantor's
liability to Landlord hereunder.

            10. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Guaranty or pursuant to any applicable law
or requirement of public authority, shall be in writing (whether or not so
stated elsewhere in this Guaranty) and shall be deemed to have been properly
given, rendered or made only if hand-delivered or sent by first-class mail,
postage pre-paid, addressed to the other party at its respective address set
forth below, and shall be deemed to have been given, rendered or made on the day
it is hand-delivered or one day after it is mailed, unless it is mailed outside
of the county in which the Building is located, in which case it shall be deemed
to have been given, rendered or made on the third business day after the day it
is mailed. By giving notice as provided above, either party may designate a
different address for notices, statements, demands, consents, approvals or other
communications intended for it.

      To Landlord:      Kilroy Realty, L.P.
                        12200 W. Olympic Boulevard, Suite 200
                        Los Angeles, California  90064
                        Attention: Legal Department
                        Phone: (310) 481-8400
                        Facsimile: (310) 481-6530

                        and to:

                        Kilroy Realty, L.P.
                        12200 W. Olympic Boulevard, Suite 200
                        Los Angeles, California  90064
                        Attention: Asset Management
                        Phone: (310) 481-8400
                        Facsimile: (310) 481-6520

                        With a copy to:

                        Allen Matkins Leck Gamble & Mallory LLP
                        1901 Avenue of the Stars, Suite 1800
                        Los Angeles, California  90067
                        Attention: Delmar L. Nehrenberg, Esq.
                        Phone: (310) 788-2400
                        Facsimile: (310) 788-2410

      To Guarantor:     _______________________________
                        _______________________________
                        _______________________________
                        _______________________________

                                                                   KILROY REALTY
                                    EXHIBIT G              [999 North Sepulveda]
                                       -3-                     [Encore Software]

<PAGE>

      11. Guarantor represents and warrants to Landlord as follows:

            (a) No consent of any other person, including, without limitation,
any creditors of Guarantor, and no license, permit, approval or authorization
of, exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority is required by Guarantor in connection with
this Guaranty or the execution, delivery, performance, validity or
enforceability of this Guaranty and all obligations required hereunder. This
Guaranty has been duly executed and delivered by Guarantor, and constitutes the
legally valid and binding obligation of Guarantor enforceable against Guarantor
in accordance with its terms.

            (b) The execution, delivery and performance of this Guaranty will
not violate any provision of any existing law or regulation binding on
Guarantor, or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on Guarantor, or of any mortgage, indenture,
lease, contract or other agreement, instrument or undertaking to which Guarantor
is a party or by which Guarantor or any of Guarantor's assets may be bound, and
will not result in, or require, the creation or imposition of any lien on any of
Guarantor's property, assets or revenues pursuant to the provisions of any such
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.

      12. Intentionally Omitted.

      13. This Guaranty shall be binding upon Guarantor, Guarantor's heirs,
representatives, administrators, executors, successors and assigns and shall
inure to the benefit of and shall be enforceable by Landlord, its successors,
endorsees and assigns. Any married person executing this Guaranty agrees that
recourse may be had against community assets and against his separate property
for the satisfaction of all obligations herein guaranteed. As used herein, the
singular shall include the plural, and the masculine shall include the feminine
and neuter and vice versa, if the context so requires.

      14. The term "Landlord" whenever used herein refers to and means the
Landlord specifically named in the Lease and also any assignee of said Landlord,
whether by outright assignment or by assignment for security, and also any
successor to the interest of said Landlord or of any assignee in the Lease or
any part thereof, whether by assignment or otherwise. So long as the Landlord's
interest in or to demised premises (as that term is used in the Lease) or the
rents, issues and profits therefrom, or in, to or under the Lease, are subject
to any mortgage or deed of trust or assignment for security, no acquisition by
Guarantor of the Landlord's interest in demised premises or under the Lease
shall affect the continuing obligations of Guarantor under this Guaranty, which
obligations shall continue in full force and effect for the benefit of the
mortgagee, beneficiary, trustee or assignee under such mortgage, deed of trust
or assignment, of any purchaser at sale by judicial foreclosure or under private
power of sale, and of the successors and assigns of any such mortgagee,
beneficiary, trustee, assignee or purchaser.

      15. The term "Tenant" whenever used herein refers to and means the Tenant
in the Lease specifically named and also any assignee or sublessee of said Lease
and also any successor to the interests of said Tenant, assignee or sublessee of
such Lease or any part thereof, whether by assignment, sublease or otherwise.

      16. In the event of any dispute or litigation regarding the enforcement or
validity of this Guaranty, the party which does not prevail in any such dispute
or litigation shall be obligated to pay all charges, costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by the
party which prevails in such dispute or litigation, whether or not any action or
proceeding is commenced regarding such dispute and whether or not such
litigation is prosecuted to judgment.

      17. This Guaranty shall be governed by and construed in accordance with
the laws of the state in which the Building is located, and in a case involving
diversity of citizenship, shall be litigated in and subject to the jurisdiction
of the courts of the State in which the Building is located.

      18. Every provision of this Guaranty is intended to be severable. In the
event any term or provision hereof is declared to be illegal or invalid for any
reason whatsoever by a court of competent jurisdiction, such illegality or
invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable.

                                                                   KILROY REALTY
                                    EXHIBIT G              [999 North Sepulveda]
                                       -4-                     [Encore Software]

<PAGE>

      19. This Guaranty may be executed in any number of counterparts each of
which shall be deemed an original and all of which shall constitute one and the
same Guaranty with the same effect as if all parties had signed the same
signature page. Any signature page of this Guaranty may be detached from any
counterpart of this Guaranty and re-attached to any other counterpart of this
Guaranty identical in form hereto but having attached to it one or more
additional signature pages.

      20. No failure or delay on the part of Landlord to exercise any power,
right or privilege under this Guaranty shall impair any such power, right or
privilege, or be construed to be a waiver of any default or an acquiescence
therein, nor shall any single or partial exercise of such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

      21. This Guaranty shall constitute the entire agreement between Guarantor
and the Landlord with respect to the subject matter hereof. No provision of this
Guaranty or right of Landlord hereunder may be waived nor may Guarantor be
released from any obligation hereunder except by a writing duly executed by an
authorized officer, director or trustee of Landlord.

      22. The liability of Guarantor and all rights, powers and remedies of
Landlord hereunder and under any other agreement now or at any time hereafter in
force between Landlord and Guarantor relating to the Lease shall be cumulative
and not alternative and such rights, powers and remedies shall be in addition to
all rights, powers and remedies given to Landlord by law.

      IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and
year first above written.

                                    Navarre Corporation, a Minnesota corporation

                                    By: ________________________________________

                                        Its: ___________________________________

                                                                   KILROY REALTY
                                    EXHIBIT G              [999 North Sepulveda]
                                       -5-                     [Encore Software]

<PAGE>

                                    EXHIBIT H

                               999 NORTH SEPULVEDA

                              INTENTIONALLY DELETED

                                                                   KILROY REALTY
                                    EXHIBIT H              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

                                    EXHIBIT I

                               999 NORTH SEPULVEDA

                          PARKING RULES AND REGULATIONS

      1. No vehicle shall be permitted to park in any portion of the Project
unless the driver is a guest, invitee or customer of a tenant of the Project and
is issued a parking ticket or a currently validated parking decal (or such other
parking permit identification as may then be employed by Landlord) is affixed to
and/or displayed on the vehicle in the manner prescribed by Landlord, or unless
the vehicle's driver is in possession of a valid temporary parking permit.

      2. Parking decals and/or parking key cards (or other form of
identification then used by Landlord) shall be issued only to and can be held
only by tenants and employees of tenants of the Project who are not in default
of their respective leases. All items issued for such identification purposes
shall be returned to Landlord upon the expiration or any earlier termination of
the Lease. Landlord reserves the right to make a reasonable charge for the costs
of reserved parking signs.

      3. Landlord reserves the right to restrict access to the parking areas of
the Project, or to have removed from the parking areas, at the expense of the
defaulting tenant or the vehicle owner, any vehicle which, in the opinion of
Landlord: (a) presents a hazard to the health and welfare of the tenants or the
general public; (b) is not in operable condition; (c) contains explosive cargo
or any toxic materials other than gasoline or fuel in the original equipment
vehicle tanks; (d) leaks fluids of any kind, including water; (e) is without
proper licenses attached; (f) contains illegal goods or contraband; or (g) is
excessive in width, length or height or has attachments thereto making it
excessive in width, length or height.

      4. All persons shall observe all speed and traffic controls established by
Landlord, and shall park only in such areas or spaces as are authorized by
Landlord. In the event an area or areas are marked or identified for parking for
only a specific tenant ("SPECIAL IDENTIFIED PARKING AREA"), then no unauthorized
persons shall park in such Special Identified Parking Area.

      5. No tenant shall operate any motor vehicle of any kind in any parking
garage or other parking area faster than five (5) miles per hour.

      6. No tenant shall leave or permit its employees or agents to leave
vehicles in the parking areas overnight, nor park any vehicles in the parking
areas other than automobiles, motorcycles, motor-driven or non-motor driven
bicycles or four-wheeled light trucks without Landlord's prior consent.

      7. The vehicles of persons who violate the provisions of the Lease or the
Parking Rules and Regulations may be impounded and/or removed from the parking
facilities at the option of Landlord and at the expense of the particular tenant
involved or the owner of such vehicle.

      8. Landlord shall not be liable nor responsible for fire, theft, or any
damage to or loss of any vehicle or contents therein, from any cause or
circumstance whatsoever, nor for the failure of any vehicle owner or operator to
observe these Parking Rules and Regulations.

      9. Landlord reserves the right from time to time to amend, modify, expand
or change in any way these Parking Rules and Regulations and agrees to notify
Tenant in writing upon any parking or other rule changes.

      10. All Parking Rules and Regulations contained in this EXHIBIT I shall be
enforced by Landlord in a nondiscriminatory manner. Notwithstanding the
foregoing, in no event shall Landlord's failure to enforce any rule or
regulation set forth in this EXHIBIT I constitute a waiver of Landlord's future
rights of enforcement with respect to the same as contained herein.

                                                                   KILROY REALTY
                                    EXHIBIT I              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

                                    EXHIBIT J

                               999 NORTH SEPULVEDA

                           JANITORIAL SPECIFICATIONS

                            OFFICES AND COMMON AREAS
                                       AND

                      PARKING GARAGE ELEVATORS AND LOBBIES

1. OFFICES AND COMMON AREA (EXCEPT RESTROOMS)

      1.1 NIGHTLY - FIVE TIMES PER WEEK

            1.1.1 Empty trash receptacles

            1.1.2 Clean all waste receptacles and reline as necessary.

            1.1.3 Put trash in trash bins.

            1.1.4 Clean drinking fountains.

            1.1.5 Spot clean all mirrors and glass.

            1.1.6 Spot clean doors and frames.

            1.1.7 Spot clean light switches.

            1.1.8 Vacuum carpets and rugs as necessary.

            1.1.9 Spot mop resilient floors.

            1.1.10 Dust mop resilient floors.

            1.1.11 Spot clean interior partition glass.

            1.1.12 Turn off designated lights.

            1.1.13 Vacuum elevator floors, spot clean carpets as required.

            1.1.14 Wipe down exterior elevator painted doors.

            1.1.15 Wipe down stainless elevator interior and exterior.

            1.1.16 Wipe and wash down entranceways.

            1.1.17 Clean glass doors.

            1.1.18 Spot clean rugs and carpets as necessary.

            1.1.19 Maintain janitorial closets in a clean and neat condition.

            1.1.20 Lock all designated doors.

      1.2 WEEKLY

            1.2.1 Spot clean walls.

            1.2.2 Perform low dusting.

            1.2.3 Dust windowsills and ledges.

            1.2.4 Sweep stairways.

            1.2.5 Wipe down handrails in stairwells.

            1.2.6 Clean granite and pavers at exterior entrances, including
                  trash compactor area.

      1.3 MONTHLY

            1.3.1 Wash, wax, and buff resilient floors.

                                                                   KILROY REALTY
                                    EXHIBIT J              [999 North Sepulveda]
                                       -1-                     [Encore Software]

<PAGE>

            1.3.2 Perform high dusting.

            1.3.3 Clean vents.

2. RESTROOMS

      2.1 NIGHTLY - FIVE TIMES A WEEK

            2.1.1 Clean and disinfect all commodes, urinals, sinks and faucets,
                  removing all dirt and stains. Remove all calcium deposits.

            2.1.2 Refill all soap dispensers.

            2.1.3 Clean all chrome and metal fixtures.

            2.1.4 Clean all mirrors.

            2.1.5 Clean all trim ledges and doors.

            2.1.6 Wash walls around wash basins.

            2.1.7 Empty all waste containers.

            2.1.8 Reline all waste containers as necessary.

            2.1.9 Dispose of trash as per Owners direction.

            2.1.10 Wet mop all floors with an effective disinfectant and
                   deodorant.

            2.1.11 Spot clean all tile and partitions.

            2.1.12 Clean all vents.

            2.1.13 Wipe down light switches.

            2.1.14 Wipe down door hardware and kick plates.

            2.1.15 Wipe down access panels under sinks.

            2.1.16 Treat all floor drains to prevent sewer gasses as necessary.

            2.1.17 Stock restrooms with towels, tissue, and seat covers provided
                   by Owner.

      2.2 WEEKLY

            2.2.1 Perform low dusting.

      2.3 MONTHLY

            2.3.1 Machine scrub floors.

            2.3.2 Perform high dusting.

            2.3.3 Spot clean walls.

                                                                   KILROY REALTY
                                    EXHIBIT J              [999 North Sepulveda]
                                       -2-                     [Encore Software]

<PAGE>

                                  OFFICE LEASE

                                  KILROY REALTY

                               999 NORTH SEPULVEDA

                               KILROY REALTY, L.P.

                         a Delaware limited partnership,

                                  as Landlord,

                                       and

                              ENCORE SOFTWARE, INC.

                            a Minnesota corporation,

                                   as Tenant.

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                                               [Encore Software]

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
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                                                                                                            ----
<S>                                                                                                         <C>
ARTICLE 1   PREMISES, BUILDING, PROJECT, AND COMMON AREAS; EARLY POSSESSION..............................     4

ARTICLE 2   INITIAL LEASE TERM; OPTION TERM..............................................................     5

ARTICLE 3   BASE RENT....................................................................................     8

ARTICLE 4   ADDITIONAL RENT..............................................................................     8

ARTICLE 5   USE OF PREMISES..............................................................................    17

ARTICLE 6   SERVICES AND UTILITIES.......................................................................    18

ARTICLE 7   REPAIRS......................................................................................    20

ARTICLE 8   ADDITIONS AND ALTERATIONS....................................................................    21

ARTICLE 9   COVENANT AGAINST LIENS.......................................................................    23

ARTICLE 10  INSURANCE....................................................................................    23

ARTICLE 11  DAMAGE AND DESTRUCTION.......................................................................    26

ARTICLE 12  NONWAIVER....................................................................................    27

ARTICLE 13  CONDEMNATION.................................................................................    27

ARTICLE 14  ASSIGNMENT AND SUBLETTING....................................................................    28

ARTICLE 15  SURRENDER OF PREMISES; OWNERSHIP AND  REMOVAL OF TRADE FIXTURES..............................    32

ARTICLE 16  HOLDING OVER.................................................................................    33

ARTICLE 17  ESTOPPEL CERTIFICATES........................................................................    33

ARTICLE 18  SUBORDINATION AND ATTORNMENT.................................................................    33

ARTICLE 19  DEFAULTS; REMEDIES...........................................................................    34

ARTICLE 20  COVENANT OF QUIET ENJOYMENT..................................................................    37

ARTICLE 21  SECURITY DEPOSIT.............................................................................    37

ARTICLE 22  INTENTIONALLY DELETED........................................................................    37

ARTICLE 23  SIGNS........................................................................................    37

ARTICLE 24  COMPLIANCE WITH LAW..........................................................................    38

ARTICLE 25  LATE CHARGES.................................................................................    39

ARTICLE 26  LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.........................................    39

ARTICLE 27  ENTRY BY LANDLORD............................................................................    40

ARTICLE 28  TENANT PARKING...............................................................................    40

ARTICLE 29  MISCELLANEOUS PROVISIONS.....................................................................    41
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                       (i)                     [Encore Software]

<PAGE>

EXHIBITS:

EXHIBIT A             OUTLINE OF PREMISES

EXHIBIT B             TENANT WORK LETTER

EXHIBIT C             NOTICE OF LEASE TERM DATES

EXHIBIT D             RULES AND REGULATIONS

EXHIBIT E             FORM OF TENANT'S ESTOPPEL CERTIFICATE

EXHIBIT F             RECOGNITION OF COVENANTS, CONDITIONS, AND
                      RESTRICTIONS

EXHIBIT G             INTENTIONALLY DELETED

EXHIBIT H             FORM OF LETTER OF CREDIT

EXHIBIT I             PARKING RULES AND REGULATIONS

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                      (ii)                     [Encore Software]

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                         <C>
AAA.....................................................................................       47
Abatement Event.........................................................................       36
Actual Cost.............................................................................       19
Additional Rent.........................................................................        8
Affiliate...............................................................................       32
After Hours HVAC........................................................................       19
Alterations.............................................................................       21
Applicable Laws.........................................................................       38
Arbitration Award.......................................................................       48
Arbitration Fair Market Rental Values...................................................        6
Arbitration Notice......................................................................       47
Arbitrator..............................................................................       47
Bank Prime Loan.........................................................................       39
Base Building...........................................................................    20,22
Base Building Drawings..................................................................        1
Base Rent...............................................................................        8
Base Year...............................................................................        9
Brokers.................................................................................       44
Builder's All Risk......................................................................       22
Building................................................................................        4
Building Common Areas...................................................................        4
Building Hours..........................................................................       18
Building Structure......................................................................       20
Building Systems........................................................................       20
Capacity................................................................................       19
CC&Rs...................................................................................       18
Claims and Expenses.....................................................................       24
Common Areas............................................................................        4
Comparable Buildings....................................................................        5
Comparable Transactions.................................................................        6
Consistent Alterations..................................................................       21
Contemplated Effective Date.............................................................       30
Contemplated Transfer Space.............................................................       30
Control.................................................................................       32
Cosmetic Alterations....................................................................       21
Cost Pools..............................................................................       15
Design Problem..........................................................................       21
Direct Expenses.........................................................................        9
Downtime Start Date.....................................................................       30
Eligibility Period......................................................................       36
Environmental Laws......................................................................       50
Estimate................................................................................       15
Estimate Statement......................................................................       15
Estimated Excess........................................................................       15
Excess..................................................................................       15
Excluded Expenses.......................................................................        8
Expense Year............................................................................        9
Fair Market Rent Rate.................................................................        5,6
Final Audit.............................................................................       16
First Option Rent.......................................................................        5
Force Majeure...........................................................................       43
hazardous substance(s)..................................................................       49
Holidays................................................................................       18
HVAC....................................................................................       18
Intention to Transfer Notice............................................................       30
Interest Rate...........................................................................       39
JAMS....................................................................................       47
Landlord................................................................................        1
Landlord Parties........................................................................       24
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                       (i)                     [Encore Software]

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                         <C>
Landlord's Compliance Conditions........................................................       39
Lease...................................................................................        1
Lease Commencement Date.................................................................        5
Lease Expiration Date...................................................................        5
Lease Term..............................................................................        5
Lease Year..............................................................................        5
Lines...................................................................................       46
Mail....................................................................................       43
Maximum Amount..........................................................................       12
Monument................................................................................       38
New Name................................................................................       38
Nine Month Period.......................................................................       31
Nondisturbance Agreement................................................................       34
Notices.................................................................................       43
Objectionable Name......................................................................       38
Operating Expenses......................................................................        9
Option Rent Notice......................................................................        6
Option Term.............................................................................        5
Original Improvements...................................................................       25
Other Improvements......................................................................       46
Outside Agreement Date..................................................................        7
Premises................................................................................        4
Prevailing Party........................................................................       48
Project Common Areas....................................................................        4
Project,................................................................................        4
Proposition 13..........................................................................       13
Provider................................................................................       48
Qualified Discount......................................................................       19
Recapture Notice........................................................................       30
Renovations.............................................................................       45
Rent....................................................................................        8
Right Holders...........................................................................        5
Secured Areas...........................................................................       40
Security Deposit........................................................................       37
Statement...............................................................................       15
Storage Space...........................................................................       51
Subject Space...........................................................................       28
Sublease Withdrawal Notice..............................................................       30
Subleasing Costs........................................................................       30
Summary.................................................................................        1
Tax Expenses............................................................................       13
Telecommunications Equipment............................................................       52
Tenant..................................................................................        1
Tenant HVAC System......................................................................       20
Tenant Parties..........................................................................       24
Tenant Work Letter......................................................................        4
Tenant's Lease Rights...................................................................        5
Tenant's Compliance Conditions..........................................................       38
Tenant's Review.........................................................................       16
Tenant's Security System................................................................       20
Tenant's Share..........................................................................       14
Third Party Auditor.....................................................................       16
Threshold Amount........................................................................       27
Transaction Costs.......................................................................       30
Transfer Notice.........................................................................       28
Transfer Premium........................................................................       30
Transferee..............................................................................       28
Transfers...............................................................................       28
Utility Provider........................................................................       19
</TABLE>

                                                                   KILROY REALTY
                                                           [999 North Sepulveda]
                                      (ii)                     [Encore Software]<PAGE>

                                                                    EXHIBIT 10.1

                           INDUSTRIAL LEASE AGREEMENT

      THIS LEASE AGREEMENT (the "Lease") is made as of the "Effective Lease
Date" (as defined in Section 37 herein) by and between Industrial Developments
International, Inc., a Delaware corporation ("Landlord"), and Priority
fulfillment services, inc., a Delaware corporation ("Tenant") (the words
"Landlord" and "Tenant" to include their respective legal representatives,
successors and permitted assigns where the context requires or permits).

                              W I T N E S S E T H:

      1.    Basic Lease Provisions. The following constitute the basic
            provisions of this Lease:

            (a)   Demised Premises Address:        8474 Market Place
                                                   Suite 101
                                                   Southaven, Mississippi  38671

            (b)   Demised Premises Square Footage: approximately 434,900 sq. ft.

            (c)   Building Square Footage: approximately 602,500 sq. ft.

            (d)   Annual Base Rent:

                     Lease Years 1-4     $1,226,418.00 (plus the prorated amount
                                         for any Fractional Month per Section 3
                                         hereof, if applicable) (annualized,
                                         where applicable)

            (e)   Monthly Base Rent Installments:

                    Lease Years 1-4 $102,201.50 (plus the prorated amount for
                                                any Fractional Month per
                                                Section 3 hereof, if applicable)

            (f)   Lease Commencement Date: October 1, 2004

            (g)   Base Rent Commencement Date: October 1, 2004

            (h)   Expiration Date: December 31, 2007

            (i)   Primary Term: Thirty-nine (39) months plus, in the event the
                  Base Rent Commencement Date does not occur on the first (1st)
                  day of a calendar month, the period from and including the
                  Base Rent Commencement Date to and including the last day of
                  the calendar month in which the Base Rent Commencement Date
                  occurs (if applicable, the "Fractional Month")

            (j)   Tenant's Operating Expense Percentage: 72.18%

            (k)   Security Deposit: $102,201.50

            (l)   Permitted Use: Storage and distribution of durable and
                  non-durable consumer and business goods and products, and
                  office and administrative uses reasonably ancillary thereto
                  (collectively, the "Initial Use"), or, subject to the
                  limitations hereinafter specified, for any other lawful
                  distribution center and/or warehousing use; provided, however,
                  that Tenant shall obtain Landlord's prior written consent to a
                  use which is different from the Initial Use and which involves
                  the distribution, warehousing or other handling or use of
                  either (1) Hazardous Substances (as defined in Section 16) not
                  used by Tenant in its Initial Use and which would materially
                  increase the risk of Contamination (as defined in Section 16)
                  or materially adversely affect the value or marketability of
                  the Demised Premises if a Contamination involving such
                  Hazardous Substances were to occur, or (2) noxious substances
                  not used by Tenant in its Initial Use and which would likely
                  cause or create a nuisance or trespass for, or otherwise
                  disturb the quiet enjoyment of, any other tenant and occupant
                  of the Building (as hereinafter defined), and provided
                  further, however, that Tenant's use of the Demised Premises
                  (i) shall never include any use prohibited by any provision
                  contained in this Lease (including, without limitation,
                  Section 16 hereof), (ii) shall never extend to or allow the
                  use or storage of radioactive or biohazardous materials at the
                  Demised Premises, or any use

<PAGE>

                  wherein a Hazardous Substance (as defined in Section 16)
                  constitutes the principal or primary product of the business
                  to be conducted at the Demised Premises, (iii) shall never
                  include any heavy manufacturing, and (iv) must not result in a
                  material increase in the wear and tear on the Demised
                  Premises, as compared to the Initial Use.

            (m)   Address for notice:

                  Landlord:          Industrial Developments International, Inc.
                                     c/o IDI, Inc.
                                     3424 Peachtree Road, N.E., Suite 1500
                                     Atlanta, Georgia  30326
                                     Attn:  Manager - Lease Administration

                  Tenant:            Priority Fulfillment Services, Inc.
                                     500 North Central Expressway
                                     Plano, Texas  75074
                                     Attn:  Chief Financial Officer

            (n)   Address for rental payments:

                                     Industrial Developments International, Inc.
                                     c/o IDI Services Group, LLC
                                     P.O. Box 281464
                                     Atlanta, Georgia  30384-1464

            (o)   Broker(s):         Commercial Advisors

            (p)   Guarantor(s):      PFSWeb, Inc.
                                     500 North Central Expressway
                                     Plano, Texas 74074
                                     Attn: Chief Financial Officer

      2. Demised Premises. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord all upon the terms and conditions hereinafter set forth the
following premises, referred to as the "Demised Premises", as outlined on
Exhibit A attached hereto and incorporated herein: an agreed upon approximately
434,900 square feet of space, approximately 6,000 square feet of which is office
space, having an address as set forth in Section 1(a), located within Building E
(the "Building"), which contains a total of an agreed upon approximately 602,500
square feet and is located within Airways Distribution Center (the "Project"),
located in DeSoto County, Mississippi. The parties acknowledge that the number
of square feet recited above has been conclusively determined and is not subject
to contest by either party.

      3. Term. To have and to hold the Demised Premises for a preliminary term
(the "Preliminary Term") commencing on the Effective Lease Date and ending on
the day immediately preceding the Lease Commencement Date as set forth in
Section 1(f), and a primary term (the "Primary Term") commencing on the Lease
Commencement Date and terminating on the Expiration Date as set forth in Section
1(h), as the Lease Commencement Date and the Expiration Date may be revised
pursuant to Section 17 (the Preliminary Term, the Primary Term, and any and all
extensions thereof, herein referred to as the "Term"). The term "Lease Year", as
used in this Lease, shall mean the 12-month period commencing on the Base Rent
Commencement Date, and each 12-month period thereafter during the Term;
provided, however, that (i) if the Base Rent Commencement Date occurs after the
Lease Commencement Date, the first Lease Year will include the period between
the Lease Commencement Date and the Base Rent Commencement Date, and (ii) if the
Base Rent Commencement Date is a day other than the first day of a calendar
month, the first Lease Year shall include the resulting Fractional Month and
shall extend through the end of the twelfth (12th) full calendar month following
the Base Rent Commencement Date.

      4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(n), as base rent for the Demised Premises, commencing on the Base Rent
Commencement Date and continuing throughout the Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance, without demand and without abatement, reduction, set-off or deduction,
on the first day of each calendar month during the Term. If the Base Rent
Commencement Date shall fall on a day other than the first day of a calendar
month, the Base Rent shall be apportioned pro rata on a per diem basis for the
resulting Fractional Month (which pro rata payment shall be due and payable on
the Base Rent Commencement Date). No payment by Tenant or receipt by Landlord of
rent hereunder shall be deemed to be other than on account of the amount due,
and no endorsement or statement on any check or any letter accompanying any
check or payment of rent shall be deemed an accord and satisfaction, and
Landlord may accept such check as payment without prejudice to Landlord's right
to recover the balance of such installment or payment of rent or pursue any
other remedies available to Landlord.

                                      -2-
<PAGE>

          5. Security Deposit.

            (a) Upon Tenant's execution of this Lease, Tenant will pay to
Landlord the sum set forth in Section 1(k) (the "Cash Security Deposit") as
security for the full and faithful performance by Tenant of each and every term,
covenant and condition of this Lease. In the alternative, Tenant shall have the
right, within five (5) business days of Tenant's execution of this Lease, to
deliver to Landlord an Irrevocable Letter of Credit (the "Letter of Credit") in
the amount set forth in Section 1(k) (the "LC Security Deposit"; the Cash
Security Deposit or the LC Security Deposit, as applicable, being referred to
herein as the "Security Deposit"), in a form and from a financial institution
acceptable to Landlord, and shall cause the same to be maintained in full force
and effect throughout the Term, as may be extended, and during the thirty (30)
day period after the later of (a) the Expiration Date or (b) the date that
Tenant delivers possession of the Demised Premises to Landlord, as security for
the full and faithful performance by Tenant of each and every term, covenant and
condition of this Lease. In the event that, during the Term, Tenant fails to
deliver to Landlord a renewal of or replacement to the letter of credit by a
date no later than thirty (30) days prior to its expiration date, Landlord shall
have the right to demand and receive payment in full under the letter of credit
and to hold the cash proceeds as the Security Deposit under this Lease. The
acceptance by Landlord of the Security Deposit paid by Tenant shall not render
this Lease effective unless and until Landlord shall have executed and delivered
to Tenant a fully executed copy of this Lease. The Security Deposit, if in the
form of cash, may be commingled with Landlord's other funds or held by Landlord
in a separate interest bearing account, with interest paid to Landlord, as
Landlord may elect. In the event that Tenant is in default under this Lease,
Landlord may retain or draw on the security Deposit for the payment of any sum
due Landlord or which Landlord may expend or be required to expend by reason of
Tenant's default or failure to perform; provided, however, that any such
retention by Landlord shall not be or be deemed to be an election of remedies by
Landlord or viewed as liquidated damages, it being expressly understood and
agreed that Landlord shall have the right to pursue any and all other remedies
available to it under the terms of this Lease or otherwise. In the event all or
any portion of the Security Deposit is so retained by Landlord, Tenant shall,
within five (5) days of demand therefor from Landlord, replenish the Security
Deposit to the full amount set forth in Section 1(k) (and Tenant's failure to do
so shall constitute an immediate "Event of Default", as defined in Section 22
hereof, without any further notice or demand from Landlord). In the event that
Tenant shall comply with all of the terms, covenants and conditions of this
Lease, the security deposit shall be returned to Tenant within thirty (30) days
after the later of (a) the Expiration Date or (b) the date that Tenant delivers
possession of the Demised Premises to Landlord. In the event of a sale of the
Building, Landlord shall have the right to transfer the security deposit to the
purchaser, and upon acceptance by such purchaser, Landlord shall be released
from all liability for the return of the security deposit. Tenant shall not
assign or encumber the money deposited as security, and neither Landlord nor its
successors or assigns shall be bound by any such assignment or encumbrance.

            (b) Notwithstanding the foregoing, if at the end of the first (1st)
Lease Year, (i) Tenant has not previously committed an Event of Default (as
defined below) and (ii) as of the date on which such reduction is to occur, no
Event of Default exists and no facts exist which, with the passage of time or
giving of notice would constitute an Event of Default, the amount of the
Security Deposit shall be reduced by Fifty-One Thousand One Hundred and 75/100
Dollars ($51,100.75) (the "Reduction Amount") (such that, after such reduction,
the Security Deposit shall be in an amount equal to $51,100.75, which is the
equivalent of one half (1/2) installment of monthly Base Rent). In connection
with each such reduction, if applicable, Landlord will either (i) refund to
Tenant the Reduction Amount within thirty (30) days after the expiration of the
first (1st) Lease Year (if the Security Deposit is in the form of a cash
deposit), or (ii) within thirty (30) days of demand therefor from Tenant,
execute any reasonable documentation presented to Landlord by Tenant which is
necessary to cause a reduction in the Letter of Credit by the Reduction Amount
(if the Security Deposit is in the form of the Letter of Credit). If the
Security Deposit is initially in the form of a Letter of Credit, Tenant shall
nevertheless have the right at any time after the reduction in the Security
Deposit in accordance herewith to deliver to Landlord, in cash, the amount of
the then required Security Deposit (i.e., $51,100.75), which shall thereafter be
held by Landlord as a cash Security Deposit pursuant to the terms of subsection
(a) above, whereupon Landlord shall surrender the Letter of Credit to Tenant

      6. Operating Expenses and Additional Rent.

            (a) Tenant agrees to pay as Additional Rent (as defined in Section
6(b) below) its proportionate share of Operating Expenses (as hereinafter
defined). "Operating Expenses" shall be defined as, without duplication, all
reasonable expenses for operation, repair, replacement and maintenance as
necessary to keep the Building and the common areas, driveways, and parking
areas associated therewith (collectively, the "Building Common Area") fully
operational and in good order, condition and repair, including but not limited
to, utilities for the Building Common Area, expenses associated with the
driveways and parking areas (including sealing and restriping, and trash, snow
and ice removal), security systems, fire detection and prevention systems,
lighting facilities, landscaped areas, walkways, painting and caulking,
directional signage, curbs, drainage strips, sewer lines, all charges assessed
against or attributed to the Building pursuant to any applicable easements,
covenants, restrictions, agreements, declaration of protective covenants or
development standards, property management fees, all real property taxes and
special assessments imposed upon the Building, the Building Common Area and the
land on which the Building and the Building Common Area are constructed, all
costs of insurance paid by Landlord with respect to the Building and the
Building Common Area (including, without limitation, commercially reasonable
deductibles), and costs of improvements to the Building and the Building Common
Area

                                      -3-
<PAGE>

required by any law, ordinance or regulation enacted or promulgated after the
Lease Commencement Date and applicable to the Building and the Building Common
Area generally (and not because of the particular use of the Building or the
Building Common Area by a particular tenant), which cost shall be amortized on a
straight line basis over the useful life of such improvement, as reasonably
determined by Landlord. Operating Expenses shall not include expenses for the
costs of any maintenance and repair required to be performed by Landlord at its
own expense under Section (10)(b) or advertising, marketing or commission
expenses. Further, Operating Expenses shall not include the costs for capital
improvements unless such costs are incurred for the purpose of causing a
material decrease in the Operating Expenses of the Building or the Building
Common Area or are incurred with respect to improvements made to comply with
laws, ordinances or regulations as described above. Operating Expenses shall be
accounted for in accordance with generally accepted accounting principles
consistently applied ("GAAP"). The proportionate share of Operating Expenses to
be paid by Tenant shall be a percentage of the Operating Expenses based upon the
proportion that the square footage of the Demised Premises bears to the total
square footage of the Building (such figure referred to as "Tenant's Operating
Expense Percentage" and set forth in Section 1(j)); provided that, as to
management fees, Tenant shall pay Landlord the management fees directly
attributable to the Rent (as hereinafter defined) payable hereunder with respect
to the Demised Premises, and not Tenant's Operating Expense Percentage of the
management fees payable on the entire Building, and, for each Lease Year during
the Primary Term (and in no event during any extended term), such management
fees shall not exceed two percent (2%) of the total amount of Base Rent and
Operating Expenses payable hereunder during each such Lease Year during the
Primary Term. Notwithstanding the foregoing, Landlord shall, in Landlord's
reasonable discretion, have the right to adjust Tenant's proportionate share of
individual components of Operating Expenses if Tenant's Operating Expense
Percentage thereof would not equitably allocate to Tenant its share of such
component of Operating Expenses in light of Tenant's particular use, manner of
use and/or level of tenant improvements in the Demised Premises (and Landlord
shall use good faith, diligent efforts to include in every other lease in the
Building language substantially similar to the foregoing so as to entitle
Landlord to make similar adjustments with respect to such other tenants'
Operating Expenses as and where appropriate). Prior to or promptly after the
beginning of each calendar year during the Term, Landlord shall estimate the
total amount of Operating Expenses to be paid by Tenant during each such
calendar year and Tenant shall pay to Landlord one-twelfth (1/12) of such sum on
the first day of each calendar month during each such calendar year, or part
thereof, during the Term. Within a reasonable time after the end of each
calendar year, Landlord shall submit to Tenant a statement of the actual amount
of Operating Expenses for such calendar year, and the actual amount owed by
Tenant, and within thirty (30) days after receipt of such statement, Tenant
shall pay any deficiency between the actual amount owed and the estimates paid
during such calendar year, or in the event of overpayment, Landlord shall credit
the amount of such overpayment toward the next installment of Operating Expenses
owed by Tenant or remit such overpayment to Tenant if the Term has expired or
has been terminated and no Event of Default exists hereunder. The obligations in
the immediately preceding sentence shall survive the expiration or any earlier
termination of this Lease. If the Lease Commencement Date shall fall on other
than the first day of the calendar year, and/or if the Expiration Date shall
fall on other than the last day of the calendar year, Tenant's proportionate
share of the Operating Expenses for such calendar year shall be apportioned
prorata.

            (b) Any amounts required to be paid by Tenant hereunder (in addition
to Base Rent) and any charges or expenses incurred by Landlord on behalf of
Tenant under the terms of this Lease shall be considered "Additional Rent"
payable in the same manner and upon the same terms and conditions as the Base
Rent reserved hereunder except as set forth herein to the contrary (all such
Base Rent and Additional Rent sometimes being referred to collectively herein as
"Rent"). Any failure on the part of Tenant to pay such Additional Rent when and
as the same shall become due shall entitle Landlord to the remedies available to
it for non-payment of Base Rent. Tenant's obligations for payment of Additional
Rent shall begin to accrue on the Lease Commencement Date regardless of the Base
Rent Commencement Date.

            (c) If applicable in the jurisdiction where the Demised Premises are
located, Tenant shall pay and be liable for all rental, sales, use and inventory
taxes or other similar taxes, if any, on the amounts payable by Tenant hereunder
levied or imposed by any city, state, county or other governmental body having
authority, such payments to be in addition to all other payments required to be
paid Landlord by Tenant under the terms of this Lease. Such payment shall be
made by Tenant directly to such governmental body if billed to Tenant, or if
billed to Landlord, such payment shall be paid concurrently with the payment of
the Base Rent, Additional Rent, or such other charge upon which the tax is
based, all as set forth herein.

            (d) Landlord currently reasonably estimates that Tenant's
proportionate share of Operating Expenses for calendar year 2004 (not including
property taxes and property insurance) will be $.17 per square foot of the
Demised Premises.

      7. Use of Demised Premises.

            (a) The Demised Premises shall be used for the Permitted Use set
forth in Section 1(l) and for no other purpose without Landlord's prior written
consent, which consent shall not be unreasonably withheld.

            (b) Tenant will permit no liens to attach or exist against the
Demised Premises, and shall not commit any waste.

                                      -4-
<PAGE>

            (c) The Demised Premises shall not be used for any illegal purposes,
and Tenant shall not allow, suffer, or permit any vibration, noise, odor, light
or other effect to occur within or around the Demised Premises that could
constitute a nuisance or trespass for Landlord or any occupant of the Building
or an adjoining building, its customers, agents, or invitees. Upon notice by
Landlord to Tenant that any of the aforesaid prohibited uses are occurring,
Tenant agrees to promptly remove or control the same.

            (d) Tenant shall not in any way violate any law, ordinance or
restrictive covenant affecting the Demised Premises, and shall not in any manner
use the Demised Premises so as to cause cancellation of, prevent the use of, or
increase the rate of, the fire and extended coverage insurance policy required
hereunder. Landlord makes no (and does hereby expressly disclaim any) covenant,
representation or warranty as to the Permitted Use being allowed by or being in
compliance with any applicable laws, rules, ordinances or restrictive covenants
now or hereafter affecting the Demised Premises, and any zoning letters, copies
of zoning ordinances or other information from any governmental agency or other
third party provided to Tenant by Landlord or any of Landlord's agents or
employees shall be for informational purposes only, Tenant hereby expressly
acknowledging and agreeing that Tenant shall conduct and rely solely on its own
due diligence and investigation with respect to the compliance of the Permitted
Use with all such applicable laws, rules, ordinances and restrictive covenants
and not on any such information provided by Landlord or any of its agents or
employees.

            (e) In the event insurance premiums pertaining to the Demised
Premises, the Building, or the Building Common Area, whether paid by Landlord or
Tenant, are increased over the least hazardous rate available due to the nature
of the use of the Demised Premises by Tenant, Tenant shall pay such additional
amount as Additional Rent. Landlord shall promptly notify Tenant of any such
increase.

      8. Insurance.

            (a) Tenant covenants and agrees that from and after the Lease
Commencement Date or any earlier date upon which Tenant enters or occupies the
Demised Premises or any portion thereof, Tenant will carry and maintain, at its
sole cost and expense, the following types of insurance, in the amounts
specified and in the form hereinafter provided for:

                  (i) Liability insurance in the Commercial General Liability
form (including Broad Form Property Damage and Contractual Liabilities or
reasonable equivalent thereto) covering the Demised Premises and Tenant's use
thereof against claims for bodily injury or death, property damage and product
liability occurring upon, in or about the Demised Premises, such insurance to be
written on an occurrence basis (not a claims made basis), to be in combined
single limits amounts not less than $1,000,000.00 and to have general aggregate
limits of not less than $2,000,000.00 with "umbrella" coverage with limits of
not less than $5,000,000.00 for each policy year. The insurance coverage
required under this Section 8(a)(i) shall, in addition, extend to any liability
of Tenant arising out of the indemnities provided for in Section 11 and, if
necessary, the policy shall contain a contractual endorsement to that effect.

                  (ii) Insurance covering (A) all of the items included in the
leasehold improvements constructed in the Demised Premises by or at the expense
of Landlord (collectively, the "Improvements"; and, except to the extent
otherwise provided herein, the Improvements shall be deemed to include any
"Additional Improvements" constructed pursuant to Special Stipulation 1 on
Exhibit C hereto), including but not limited to demising walls and the heating,
ventilating and air conditioning system and (B) Tenant's trade fixtures,
merchandise and personal property from time to time in, on or upon the Demised
Premises, in an amount not less than one hundred percent (100%) of their full
replacement value from time to time during the Term, providing protection
against perils included within the standard form of "all-risk" fire and casualty
insurance policy, together with insurance against sprinkler damage, vandalism
and malicious mischief. Any policy proceeds from such insurance relating to the
Improvements shall be used solely for the repair, construction and restoration
or replacement of the Improvements damaged or destroyed unless this Lease shall
cease and terminate under the provisions of Section 20.

            (b) All policies of the insurance provided for in Section 8(a) shall
be issued in form reasonably acceptable to Landlord by insurance companies with
a rating of not less than "A," and financial size of not less than Class X, in
the most current available "Best's Insurance Reports", and licensed to do
business in the state in which the Building is located. Each and every such
policy:

                  (i) shall name Landlord, Lender (as defined in Section 24),
and any other party reasonably designated by Landlord, as an additional insured.
In addition, the coverage described in Section 8(a)(ii)(A) relating to the
Improvements shall also name Landlord as "loss payee";

                  (ii) shall be delivered to Landlord, in the form of an
insurance certificate acceptable to Landlord as evidence of such policy, prior
to the Lease Commencement Date and thereafter within thirty (30) days prior to
the expiration of each such policy, and, 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;

                                      -5-
<PAGE>

                  (iii) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least thirty (30) days notice in
writing in advance of any material change, cancellation, termination or lapse,
or the effective date of any reduction in the amounts of insurance; and

                  (iv) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may carry.

            (c) In the event that Tenant shall fail to carry and maintain the
insurance coverages set forth in this Section 8, Landlord may upon thirty (30)
days notice to Tenant (unless such coverages will lapse in which event no such
notice shall be necessary) procure such policies of insurance and Tenant shall
promptly reimburse Landlord therefor.

            (d) Landlord and Tenant hereby waive any rights each may have
against the other on account of any loss or damage occasioned to Landlord or
Tenant, as the case may be, their respective property, the Demised Premises, its
contents or to the other portions of the Building, arising from any risk covered
by "all-risk" fire and extended coverage insurance of the type and amount
required to be carried hereunder, provided that such waiver does not invalidate
such policies or prohibit recovery thereunder. The parties hereto shall cause
their respective insurance companies insuring the property of either Landlord or
Tenant against any such loss, to waive any right of subrogation that such
insurers may have against Landlord or Tenant, as the case may be.

      9. Utilities. During the Term, Tenant shall promptly pay as billed to
Tenant all rents and charges for water and sewer services and all costs and
charges for gas, steam, electricity, fuel, light, power, telephone, heat and any
other utility or service used or consumed in or servicing the Demised Premises
and all other costs and expenses involved in the care, management and use
thereof as charged by the applicable utility companies to Tenant. All such
utilities shall be separately metered and billed to Tenant, and Tenant shall
establish an account with the utility provider with respect to each such
separately metered utility. Tenant's obligation for payment of all utilities
shall commence on the earlier of the Lease Commencement Date or the date of
Tenant's actual occupancy of all or any portion of the Demised Premises,
including any period of occupancy prior to the Lease Commencement Date,
regardless of whether or not Tenant conducts business operations during such
period of occupancy. If Tenant fails to pay any utility bills or charges,
Landlord may, at its option and upon reasonable notice to Tenant, pay the same
and in such event, the amount of such payment, together with interest thereon at
the Interest Rate as defined in Section 32 from the date of such payment by
Landlord, will be added to Tenant's next payment due as Additional Rent.

      10. Maintenance and Repairs.

            (a) Tenant shall, at its own cost and expense, maintain in good
condition and repair and replace as necessary the interior of the Demised
Premises, including but not limited to the heating, air conditioning and
ventilation systems, glass, windows and doors, sprinkler, all plumbing and
sewage systems, fixtures, interior walls, floors (including floor slabs),
ceilings, storefronts, plate glass, skylights (excluding seals between skylights
and the roof, which shall be a Landlord obligation as hereinafter set forth),
all electrical facilities and equipment including, without limitation, lighting
fixtures, lamps, fans and any exhaust equipment and systems, electrical motors,
and all other appliances and equipment (including, without limitation, dock
levelers, dock shelters, dock seals and dock lighting) of every kind and nature
located in, upon or about the Demised Premises, except as to such maintenance,
repair and replacement as is the obligation of Landlord pursuant to Section
10(b). During the Term, Tenant shall maintain in full force and effect a service
contract for the maintenance of the heating, ventilation and air conditioning
systems with an entity reasonably acceptable to Landlord; provided, however,
that during the one year period following the Lease Commencement Date, such
service contract shall be maintained with the contractor that installed the
heating, ventilation and air conditioning systems and shall provide for at least
two preventive maintenance service calls during such one year period. Tenant
shall deliver to Landlord (i) a copy of said service contract prior to the Lease
Commencement Date, and (ii) thereafter, a copy of a renewal or substitute
service contract within thirty (30) days prior to the expiration of the existing
service contract. Tenant's obligation shall exclude any maintenance, repair and
replacement required because of the act or negligence of Landlord, its
employees, contractors or agents, which shall be the responsibility of Landlord.

            (b) Landlord shall, at its own cost and expense, maintain in good
condition and repair the foundation (beneath the floor slab), structural frame,
external walls (exclusive of painting and caulking, the cost of which will be
included in Operating Expenses in accordance with Section 6 hereof) and roof of
the Building(including the seals between the skylights and the roof). Landlord's
obligation shall exclude the cost of any maintenance or repair required because
of the act (exclusive of ordinary wear and tear resulting from the Permitted
Use) or negligence of Tenant or any of Tenant's subsidiaries or affiliates, or
any of Tenant's or such subsidiaries' or affiliates' agents, contractors,
employees, licensees or invitees (collectively, "Tenant's Affiliates"), the cost
of which shall be the responsibility of Tenant. Landlord shall never have any
obligation to repair, maintain or replace, pursuant to this subsection 10(b) or
any other provision of this Lease, any Tenant's Change (as defined in Section 18
hereof).

            (c) Unless the same is caused solely by the negligent action or
inaction of Landlord, its employees or agents, and is not covered by the
insurance required to be carried by Tenant pursuant to the terms of this Lease,
Landlord shall not be liable to Tenant or to any other person for any damage
occasioned

                                      -6-
<PAGE>

by failure in any utility system or by the bursting or leaking of any vessel or
pipe in or about the Demised Premises, or for any damage occasioned by water
coming into the Demised Premises or arising from the acts or neglects of
occupants of adjacent property or the public.

      11. Tenant's Personal Property; Indemnity. All of Tenant's personal
property in the Demised Premises shall be and remain at Tenant's sole risk.
Landlord, its agents, employees and contractors, shall not be liable for, and
Tenant hereby releases Landlord from, any and all liability for theft thereof or
any damage thereto occasioned by any act of God or by any acts, omissions or
negligence of any persons. Landlord, its agents, employees and contractors,
shall not be liable for any injury to the person or property of Tenant or other
persons in or about the Demised Premises, Tenant expressly agreeing to indemnify
and save Landlord, its agents, employees and contractors, harmless, in all such
cases, except, in the case of personal injury only, to the extent caused by the
negligence of Landlord, its agents, employees and contractors. Tenant further
agrees to indemnify and reimburse Landlord for any costs or expenses, including,
without limitation, reasonable attorneys' fees, that Landlord reasonably may
incur in investigating, handling or litigating any such claim against Landlord
by a third person, unless such claim arose from the negligence of Landlord, its
agents, employees or contractors. The provisions of this Section 11 shall
survive the expiration or earlier termination of this Lease with respect to any
damage, injury or death occurring before such expiration or termination.

      12. Tenant's Fixtures. Tenant shall have the right to install in the
Demised Premises trade fixtures required by Tenant or used by it in its
business, and if installed by Tenant, to remove any or all such trade fixtures
from time to time during and upon termination or expiration of this Lease,
provided no Event of Default, as defined in Section 22, then exists; provided,
however, that Tenant shall repair and restore any damage or injury to the
Demised Premises (to the condition in which the Demised Premises existed prior
to such installation) caused by the installation and/or removal of any such
trade fixtures. In all cases, however, any fixtures, equipment and personal
property contained in the Demised Premises owned by Philip Morris (as
hereinafter defined) may be removed at any time, and Landlord shall not prohibit
access to the Demised Premises for such purpose, provided that prior to any such
entry and removal Philip Morris shall have executed and delivered for the
benefit of Landlord an entry and indemnification agreement in form reasonably
acceptable to Landlord.

      13. Signs. No sign, advertisement or notice shall be inscribed, painted,
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, and which
conform to all applicable laws, ordinances, or covenants affecting the Demised
Premises. Notwithstanding the foregoing, Tenant shall have the right to affix
one (1) identification sign to the exterior of the Demised Premises and to
install one (1) monument identification sign in the Building Common Area,
provided Tenant and such signs otherwise comply with the terms and conditions of
this Section 13. Any and all signs installed or constructed by or on behalf of
Tenant pursuant hereto shall be installed, maintained and removed by Tenant at
Tenant's sole cost and expense.

      14. Reserved.

      15. Governmental Regulations. Tenant shall promptly comply throughout the
Term, at Tenant's sole cost and expense, with all present and future laws,
ordinances, orders, rules, regulations or requirements of all federal, state and
municipal governments and appropriate departments, commissions, boards and
officers thereof (collectively, "Governmental Requirements") relating to (a) all
or any part of the Demised Premises, and (b) the use or manner of use of the
Demised Premises and the Building Common Area; provided, however, that Landlord
shall be solely responsible for making all changes necessitated by violations of
applicable Governmental Requirements that are in effect as of the Lease
Commencement Date. Tenant shall also observe and comply with the requirements of
all policies of public liability, fire and other policies of insurance at any
time in force with respect to the Demised Premises. Without limiting the
foregoing, if as a result of one or more Governmental Requirements it is
necessary, from time to time during the Term, to perform an alteration or
modification of the Demised Premises, the Building, or the Building Common Area
(a "Code Modification") which is made necessary as a result of the specific use
being made by Tenant of the Demised Premises or a Tenant's Change, then such
Code Modification shall be the sole and exclusive responsibility of Tenant in
all respects; any such Code Modification shall be promptly performed by Tenant
at its expense in accordance with the applicable Governmental Requirement and
with Section 18 hereof. If as a result of one or more Governmental Requirements
it is necessary from time to time during the Term to perform a Code Modification
which (i) would be characterized as a capital expenditure under GAAP and (ii) is
not made necessary as a result of the specific use being made by Tenant of the
Demised Premises (as distinguished from an alteration or modification which
would be required to be made by the owner of any warehouse-office building
comparable to the Building irrespective of the use thereof by any particular
occupant) or a Tenant's Change, then (a) Landlord shall have the obligation to
perform the Code Modification at its expense, (b) the cost of such Code
Modification shall be amortized on a straight-line basis over the useful life of
the item in question, in accordance with GAAP, and (c) to the extent the Code
Modification relates to the Building or the Building Common Area (and not to any
portion of the Demised Premises), Tenant shall be obligated to pay (as
Additional Rent, payable in the same manner and upon the same terms and
conditions as the Base Rent reserved hereunder) for (i) Tenant's proportionate
share (based on Tenant's Operating Expense Percentage) of the portion of such
amortized costs attributable to the remainder of the Term, including any
extensions thereof, with respect to any Code Modification respecting the
Building or the Building Common Area, and (ii) to the extent the Code

                                      -7-
<PAGE>

Modification relates to the Demised Premises (and not any other portion of the
Building), the entire portion of such amortized costs attributable to the
remainder of the Term, including any extensions thereof, with respect to any
Code Modification respecting the Demised Premises. Tenant shall promptly send to
Landlord a copy of any written notice received by Tenant requiring a Code
Modification.

      16. Environmental Matters.

            (a) For purposes of this Lease:

                  (i) "Contamination" as used herein means the presence of or
release of Hazardous Substances (as hereinafter defined) into any environmental
media from, upon, within, below, into or on any portion of the Demised Premises,
the Building, the Building Common Area or the Project so as to require
remediation, cleanup or investigation under any applicable Environmental Law (as
hereinafter defined).

                  (ii) "Environmental Laws" as used herein means all federal,
state, and local laws, regulations, orders, permits, ordinances or other
requirements, which exist now or as may exist hereafter, concerning protection
of human health, safety and the environment, all as may be amended from time to
time including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq. ("CERCLA") and the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. ("RCRA").

                  (iii) "Hazardous Substances" as used herein means any
hazardous or toxic substance, material, chemical, pollutant, contaminant or
waste as those terms are defined by any applicable Environmental Laws and any
solid wastes, polychlorinated biphenyls, urea formaldehyde, asbestos,
radioactive materials, radon, explosives, petroleum products and oil.

            (b) Landlord represents that, except as revealed to Tenant in
writing by Landlord, to Landlord's actual knowledge, Landlord has not treated,
stored or disposed of any Hazardous Substances upon or within the Demised
Premises, nor, to Landlord's actual knowledge, has any predecessor owner of the
Demised Premises.

            (c) Tenant covenants that all its activities, and the activities of
Tenant's Affiliates (as defined in Section 10(b)), on the Demised Premises, the
Building, or the Project during the Term will be conducted in compliance with
Environmental Laws. Tenant warrants that it is currently in compliance with all
applicable Environmental Laws and that there are no pending or threatened
notices of deficiency, notices of violation, orders, or judicial or
administrative actions involving alleged violations by Tenant of any
Environmental Laws. Tenant, at Tenant's sole cost and expense, shall be
responsible for obtaining all permits or licenses or approvals under
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises and shall make all notifications and registrations required by
any applicable Environmental Laws. Tenant, at Tenant's sole cost and expense,
shall at all times comply with the terms and conditions of all such permits,
licenses, approvals, notifications and registrations and with any other
applicable Environmental Laws. Tenant warrants that it has obtained, or will
obtain prior to the date required by the applicable Governmental Requirements,
all such permits, licenses or approvals and made, or will make prior to the date
required by the applicable Governmental Requirements, all such notifications and
registrations required by any applicable Environmental Laws necessary for
Tenant's operation of its business on the Demised Premises.

            (d) Tenant shall not cause or permit any Hazardous Substances to be
brought upon, kept or used in or about the Demised Premises, the Building, or
the Project in violation of any Environmental Law without the prior written
consent of Landlord, which consent shall not be unreasonably withheld; provided,
however, that the consent of Landlord shall not be required for the use at the
Demised Premises of cleaning supplies, toner for photocopying machines and other
similar materials, in containers and quantities reasonably necessary for and
consistent with normal and ordinary use by Tenant in the routine operation or
maintenance of Tenant's office equipment or in the routine janitorial service,
cleaning and maintenance for the Demised Premises. For purposes of this Section
16, Landlord shall be deemed to have reasonably withheld consent if Landlord
determines that the presence of such Hazardous Substance within the Demised
Premises could result in a risk of harm to person or property or otherwise
negatively affect the value or marketability of the Building or the Project.

            (e) Tenant shall not cause or permit the release of any Hazardous
Substances by Tenant or Tenant's Affiliates into any environmental media such as
air, water or land, or into or on the Demised Premises, the Building or the
Project in any manner that violates any Environmental Laws. If such release
shall occur, Tenant shall (i) take all steps reasonably necessary to contain and
control such release and any associated Contamination, (ii) clean up or
otherwise remedy such release and any associated Contamination to the extent
required by, and take any and all other actions required under, applicable
Environmental Laws and (iii) notify and keep Landlord reasonably informed of
such release and response.

            (f) Regardless of any consents granted by Landlord pursuant to
Section 16(d) allowing Hazardous Substances upon the Demised Premises, Tenant
shall under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under

                                      -8-
<PAGE>

RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Project or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.

            (g) Tenant shall and hereby does indemnify Landlord and hold
Landlord harmless from and against any and all expense, loss, and liability
suffered by Landlord (except to the extent that such expenses, losses, and
liabilities arise out of Landlord's own negligence or willful act), by reason of
the storage, generation, release, handling, treatment, transportation, disposal,
or arrangement for transportation or disposal, of any Hazardous Substances
(whether accidental, intentional, or negligent) by Tenant or Tenant's Affiliates
or by reason of Tenant's breach of any of the provisions of this Section 16.
Such expenses, losses and liabilities shall include, without limitation, (i) any
and all reasonable expenses that Landlord may incur to comply with any
Environmental Laws; (ii) any and all reasonable costs that Landlord may incur in
studying or remedying any Contamination at or arising from the Demised Premises,
the Building, or the Project; (iii) any and all reasonable costs that Landlord
may incur in studying, removing, disposing or otherwise addressing any Hazardous
Substances; (iv) any and all fines, penalties or other sanctions assessed upon
Landlord; and (v) any and all reasonable legal and professional fees and costs
incurred by Landlord in connection with the foregoing. The indemnity contained
herein shall survive the expiration or earlier termination of this Lease.

      17. Construction of Demised Premises.

            (a) Within thirty (30) days after the Effective Lease Date, Landlord
shall prepare, at Landlord's sole cost and expense, and submit to Tenant a set
of plans and specifications and/or construction drawings (collectively, the
"Plans and Specifications") based on the preliminary plans and specifications
and/or preliminary floor plans set forth on Exhibit B attached hereto and
incorporated herein, covering all work to be performed by Landlord in
constructing the Improvements (as defined in Section 8(a)(ii)). Tenant shall
have ten (10) days after receipt of the plans and specifications in which to
review and to give to Landlord written notice of its approval of the plans and
specifications or its requested changes to the Plans and Specifications. Tenant
shall have no right to request any changes to the plans and specifications which
would materially alter either the Demised Premises or the exterior appearance or
basic nature of the Building, as the same are contemplated by the preliminary
Plans. If Tenant fails to approve or request changes to the Plans and
Specifications by ten (10) days after its receipt thereof, then Tenant shall be
deemed to have approved the Plans and Specifications and the same shall
thereupon be final. If Tenant requests any changes to the Plans and
Specifications, Landlord shall make those changes which are reasonably requested
by Tenant and shall within ten (10) days of its receipt of such request submit
the revised portion of the Plans and specifications to Tenant. Tenant may not
thereafter disapprove the revised portions of the Plans and specifications
unless Landlord has unreasonably failed to incorporate reasonable comments of
Tenant and, subject to the foregoing, the Plans and specifications, as modified
by said revisions, shall be deemed to be final upon the submission of said
revisions to Tenant. Landlord and Tenant shall at all times in their respective
preparation or review of the plans and specifications, and of any revisions
thereto, act reasonably and in good faith. Tenant acknowledges that the
Improvements are being constructed on a "fast track" basis and that Landlord
shall have the right and option to submit various parts of the proposed Plans
and Specifications from time to time during said thirty (30) day period and the
time period for approval of any part of the proposed plans and specifications
shall commence upon receipt of each submission. After Tenant has approved the
Plans and Specifications or the Plans and Specifications have otherwise been
finalized pursuant to the procedures set forth hereinabove, any subsequent
changes to the Plans and Specifications requested by Tenant (herein referred to
as a "Change Order") shall be at Tenant's sole cost and expense and subject to
Landlord's written approval, which approval shall not be unreasonably withheld,
conditioned or delayed. In the event Landlord approves any such requested Change
Order, Landlord shall give written notice thereof to Tenant, which notice will
specify the Change Order approved by Landlord as well as the estimated
incremental cost thereof. The cost to Tenant for Change Orders shall be
Landlord's incremental cost plus fifteen percent (15%) of such amount as
Landlord's overhead. Tenant acknowledges and agrees that Landlord shall be under
no obligation to proceed with any work related to the approved Change Order
unless and until Tenant delivers to Landlord an amount equal to the full
estimated incremental cost of such approved Change Order as set forth in
Landlord's notice. When the final incremental cost of any such Change Order has
been determined and incurred, Landlord and Tenant each agree to pay or refund
the amounts owed to the other with respect to such Change Order, based on the
estimated payment made to Landlord. If after the Plans and specifications have
been finalized pursuant to the procedures set forth hereinabove Tenant requests
a Change Order or any further changes to the Plans and specifications and, as a
result thereof, Substantial Completion (as hereinafter defined) of the
Improvements is delayed, then for purposes of establishing the Lease
Commencement Date and any other date tied to the date of Substantial Completion,
Substantial Completion shall be deemed to mean the date when Substantial
Completion would have been achieved but for such Tenant delay.

            (b) Landlord shall use reasonable speed and diligence to
Substantially Complete the Improvements, at Landlord's sole cost and expense,
and have the Demised Premises ready for occupancy on or before the anticipated
Lease Commencement Date of October 1, 2004 set forth in Section 1(f). If the
Demised Premises are not Substantially Complete on that date, such failure to
complete shall not in any way affect the obligations of Tenant hereunder except
that the Lease Commencement Date and the Base Rent Commencement Date shall be
postponed one day for each day Substantial Completion is delayed until the
Demised Premises are Substantially Complete, unless the delay is caused by (i)
Tenant's failure to approve or disapprove the Plans and Specifications as set
forth in Section 17(a), (ii) change orders requested by

                                      -9-
<PAGE>

Tenant after approval of the Plans and Specifications, (iii) this Lease not
being executed and delivered by Tenant on or before August 17, 2004, (iv) any
delay in construction of the Improvements as a result of the construction of any
Additional Improvements required pursuant to Special Stipulation 1 on Exhibit C
attached hereto, and/or (v) any other act or omission of Tenant or Tenant's
Affiliates (collectively, "Tenant Delays"). No liability whatsoever shall arise
or accrue against Landlord by reason of its failure to deliver or afford
possession of the Demised Premises, and Tenant hereby releases and discharges
Landlord from and of any claims for damage, loss, or injury of every kind
whatsoever as if this Lease were never executed. Notwithstanding the foregoing,
if Landlord fails to achieve Substantial Completion on or before the seventieth
(70th) day following the date on which the Plans and Specifications are
finalized pursuant to subsection 17(a) above, as such date may be extended by
Delay (as hereinafter defined) (the "Outside Improvements Date"), Tenant will
have the right, as its sole and exclusive remedy (subject to the additional
termination remedy set forth hereinbelow), to a credit against Base Rent equal
to $1,000.00 for each day Substantial Completion of the Improvements was delayed
beyond the Outside Improvements Date (excluding any days of Delay, as defined
below) until said credit is fully realized by Tenant. Notwithstanding the
foregoing, in the event that Landlord is unable to Substantially Complete the
Improvements on or before the one hundredth twentieth (120th) day after the
Outside Improvements Date, as extended by Delay, Tenant may, at its option and
as its sole and exclusive remedy, terminate this Lease by written notice to
Landlord given within thirty (30) days following the expiration of such one
hundred twenty (120)-day period (provided that Substantial Completion has not
occurred prior to Landlord's receipt of said termination notice), and thereafter
neither Landlord nor Tenant shall have any further obligation hereunder. For
purposes of this Lease, "Delay" shall mean (i) Tenant Delays, and (ii) such
additional time as is equal to the time lost by Landlord or Landlord's
contractors or suppliers in connection with the construction of the Improvements
due to strikes or other labor troubles (but in no event due to Landlord's
failure to pay such contractors or suppliers as and when due), governmental
restrictions and limitations, war or other national emergency, non-availability
of materials or supplies, delay in transportation, accidents, floods, fire,
damage or other casualties, weather or other conditions, and other matters not
within the reasonable control of Landlord.

            (c) Upon Substantial Completion of the Demised Premises, a
representative of Landlord and a representative of Tenant together shall inspect
the Demised Premises and generate a punchlist of defective or uncompleted items
relating to the completion of construction of the Improvements (the
"Punchlist"). Landlord shall, within a reasonable time after the Punchlist is
prepared and agreed upon by Landlord and Tenant, complete such incomplete work
and remedy such defective work as is set forth on the Punchlist. All
construction work performed by Landlord shall be deemed approved by Tenant in
all respects except for items of said work which are not completed or do not
conform to the Plans and Specifications and which are included on the Punchlist.

            (d) Reserved.

            (e) Landlord hereby warrants to Tenant, which warranty shall survive
for the one (1) year period following the Lease Commencement Date, that (i) the
materials and equipment furnished by Landlord's contractors in the completion of
the Improvements will be of good quality and new, and (ii) such materials and
equipment and the work of such contractors shall comply with all applicable
laws, rules, regulations, building codes and insurance requirements and shall be
completed in accordance with the Plans and Specifications in all material
respects in a good and workmanlike manner and free from defects not inherent in
the quality required or permitted hereunder. This warranty shall exclude damages
or defects caused by Tenant or Tenant's Affiliates, improper or insufficient
maintenance, improper operation, and normal wear and tear under normal usage.

            (f) For purposes of this Lease, the term "Substantial Completion"
(or any variation thereof) shall mean completion of construction of the
Improvements in accordance with the Plans and Specifications, subject only to
Punchlist items established pursuant to Section 17(c), as established by the
delivery by Landlord to Tenant of a certificate of occupancy or its equivalent
(or temporary certificate of occupancy or its equivalent) for the Demised
Premises issued by the appropriate governmental authority, if a certificate is
so required by a governmental authority, or if not so required or if unavailable
because of unfinished work to be performed by Tenant, then by the delivery by
Landlord to Tenant of a Certificate of Substantial Completion for the
Improvements on Standard AIA Form G-704 certified by Landlord's architect. In
the event Substantial Completion is delayed because of Tenant's failure to
approve or disapprove the Plans and Specifications as set forth in Section
17(a), by change orders requested by Tenant after approval of the Plans and
Specifications (including, without limitation, Tenant's request for additional
improvements in accordance with Special Stipulation 2 on Exhibit C hereto) or by
any other delay caused by Tenant or Tenant's Affiliates, then for the purpose of
establishing the Lease Commencement Date and any other date tied to the date of
Substantial Completion, Substantial Completion shall be deemed to mean the date
when Substantial Completion would have been achieved but for such delay.

      18. Tenant Alterations and Additions.

            (a) Tenant shall not make or permit to be made any alterations,
improvements, or additions to the Demised Premises (a "Tenant's Change"),
without first obtaining on each occasion Landlord's prior written consent (which
consent Landlord agrees not to unreasonably withhold) and Lender's prior written
consent (if such consent is required). As part of its approval process, Landlord
may require that Tenant submit plans and specifications to Landlord, for
Landlord's approval or disapproval, which approval shall

                                      -10-
<PAGE>

not be unreasonably withheld. All Tenant's Changes shall be performed in
accordance with all legal requirements applicable thereto and in a good and
workmanlike manner with first-class materials. Tenant shall maintain insurance
reasonably satisfactory to Landlord during the construction of all Tenant's
Changes. If Landlord at the time of giving its approval to any Tenant's Change
notifies Tenant in writing that approval is conditioned upon restoration, then
Tenant shall, at its sole cost and expense and at Landlord's option upon the
termination or expiration of this Lease, remove the same and restore the Demised
Premises to its condition prior to such Tenant's Change. Landlord may withhold
consent to any Tenant's Change which is structural in nature or impairs the
structural strength of the Building, in Landlord's sole discretion, or reduces
its value, in Landlord's reasonable discretion. Tenant shall pay the full cost
of any Tenant's Change. Except as otherwise provided herein and in Section 12,
or as otherwise agreed at the time of a Tenant's Change is approved, all
Tenant's Changes and all repairs and all other property attached to or installed
on the Demised Premises by or on behalf of Tenant (excluding racks, conveyers
and related equipment) shall immediately upon completion or installation thereof
be and become part of the Demised Premises and the property of Landlord without
payment therefor by Landlord and shall be surrendered to Landlord upon the
expiration or earlier termination of this Lease.

            (b) To the extent permitted by law, all of Tenant's contracts and
subcontracts for such Tenant's Changes shall provide that no lien shall attach
to or be claimed against the Demised Premises or any interest therein other than
Tenant's leasehold interest in the Demised Premises, and that all subcontracts
let thereunder shall contain the same provision. Whether or not Tenant furnishes
the foregoing, Tenant agrees to hold Landlord harmless from, and defend against
(with legal counsel acceptable to Landlord) all liens, claims and liabilities of
every kind, nature and description which may arise out of or in any way be
connected with such work. Tenant shall not permit the Demised Premises to become
subject to any mechanics', laborers' or materialmen's lien on account of labor,
material or services furnished to Tenant or claimed to have been furnished to
Tenant in connection with work of any character performed or claimed to have
been performed for the Demised Premises by, or at the direction or sufferance of
Tenant and if any such liens are filed against the Demised Premises, Tenant
shall promptly discharge the same; provided, however, that Tenant shall have the
right to contest, in good faith and with reasonable diligence, the validity of
any such lien or claimed lien if Tenant shall give to Landlord, within fifteen
days after demand, such security as may be reasonably satisfactory to Landlord
to assure payment thereof and to prevent any sale, foreclosure, or forfeiture of
Landlord's interest in the Demised Premises by reason of non-payment thereof;
provided further that on final determination of the lien or claim for lien,
Tenant shall immediately pay any judgment rendered, with all proper costs and
charges, and shall have the lien released and any judgment satisfied. If Tenant
fails to post such security or does not diligently contest such lien, Landlord
may, without investigation of the validity of the lien claim, discharge such
lien and Tenant shall reimburse Landlord upon demand for all costs and expenses
incurred in connection therewith, which expenses shall include any attorneys'
fees, paralegals' fees and any and all costs associated therewith, including
litigation through all trial and appellate levels and any costs in posting bond
to effect a discharge or release of the lien. Nothing contained in this Lease
shall be construed as a consent on the part of Landlord to subject the Demised
Premises to liability under any lien law now or hereafter existing of the state
in which the Demised Premises are located.

      19. Services by Landlord. Landlord shall be responsible for providing for
maintenance of the Building Common Area, and, except as required by Section
10(b) hereof or as otherwise specifically provided for herein, Landlord shall be
responsible for no other services whatsoever. Tenant, by payment of Tenant's
share of the Operating Expenses, shall pay Tenant's pro rata share of the
expenses incurred by Landlord hereunder.

      20. Fire and Other Casualty. In the event the Demised Premises are damaged
by fire or other casualty insured by Landlord, Landlord agrees to promptly
restore and repair the Demised Premises at Landlord's expense, including the
Improvements to be insured by Tenant, but only to the extent Landlord receives
insurance proceeds therefor, including the proceeds from the insurance required
to be carried by Tenant on the Improvements (Landlord being responsible for any
deductible under Landlord's insurance policies and the amount of any risk
retained by Landlord to the extent Landlord does not carry coverage at one
hundred percent (100%) of the replacement value of the Building, exclusive of
fixtures and property required to be insured by Tenant under this Lease).
Notwithstanding the foregoing, in the event that the Demised Premises are (i) in
the reasonable opinion of Landlord, so destroyed that they cannot be repaired or
rebuilt within one hundred eighty (180) days after the date of such damage; or
(ii) destroyed by a casualty which is not covered by Landlord's insurance, or if
such casualty is covered by Landlord's insurance but Lender or other party
entitled to insurance proceeds fails to make such proceeds available to Landlord
in an amount sufficient for restoration of the Demised Premises, then Landlord
shall give written notice to Tenant of such determination (the "Determination
Notice") within sixty (60) days of such casualty. Either Landlord or Tenant may
terminate and cancel this Lease effective as of the date of such casualty by
giving written notice to the other party within thirty (30) days after Tenant's
receipt of the Determination Notice. Upon the giving of such termination notice,
all obligations hereunder with respect to periods from and after the effective
date of termination shall thereupon cease and terminate. If no such termination
notice is given, Landlord shall, to the extent of the available insurance
proceeds, make such repair or restoration of the Demised Premises to the
approximate condition existing prior to such casualty, promptly and in such
manner as not to unreasonably interfere with Tenant's use and occupancy of the
Demised Premises (if Tenant is still occupying the Demised Premises). Base Rent
and Additional Rent and all other amounts payable by Tenant hereunder shall
equitably abate during the time that the Demised Premises or any part thereof
are unusable by reason of any such damage thereto.

                                      -11-
<PAGE>

      21. Condemnation.

            (a) If all of the Demised Premises is taken or condemned for a
public or quasi-public use, or if a material portion of the Demised Premises is
taken or condemned for a public or quasi-public use and the remaining portion
thereof is not usable by Tenant in the reasonable opinion of Landlord, this
Lease shall terminate as of the earlier of the date title to the condemned real
estate vests in the condemnor or the date on which Tenant is deprived of
possession of the Demised Premises. In such event, the Base Rent herein reserved
and all Additional Rent and other sums payable hereunder shall be apportioned
and paid in full by Tenant to Landlord to that date, all Base Rent, Additional
Rent and other sums payable hereunder prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant, and neither party shall thereafter
have any liability hereunder, except that any obligation or liability of either
party, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.

            (b) If only part of the Demised Premises is taken or condemned for a
public or quasi-public use and this Lease does not terminate pursuant to Section
21(a), Landlord shall, to the extent of the award it receives, restore the
Demised Premises to a condition and to a size as nearly comparable as reasonably
possible to the condition and size thereof immediately prior to the taking, and
there shall be an equitable adjustment to the Base Rent and Additional Rent
based on the actual loss of use of the Demised Premises suffered by Tenant from
the taking.

            (c) Landlord shall be entitled to receive the entire award in any
proceeding with respect to any taking provided for in this Section 21, without
deduction therefrom for any estate vested in Tenant by this Lease, and Tenant
shall receive no part of such award. Nothing herein contained shall be deemed to
prohibit Tenant from making a separate claim, against the condemnor, to the
extent permitted by law, for the value of Tenant's moveable trade fixtures,
machinery and moving expenses, provided that the making of such claim shall not
and does not adversely affect or diminish Landlord's award.

      22. Tenant's Default.

            (a) The occurrence of any one or more of the following events shall
constitute an "Event of Default" of Tenant under this Lease:

                  (i) if Tenant fails to pay Base Rent or any Additional Rent
hereunder as and when such rent becomes due and such failure shall continue for
more than ten (10) days after Landlord gives written notice to Tenant of such
failure; provided, however, that Landlord shall only be required to give such a
notice of default three (3) times in any twelve (12) month period during the
Term, it being understood and agreed that any failure to pay Base Rent or any
Additional Rent on time thereafter within such twelve (12) month period shall
constitute an immediate Event of Default hereunder;

                  (ii) reserved;

                  (iii) if the Demised Premises become deserted or abandoned for
more than twenty (20) consecutive days or if Tenant fails to take possession of
the Demised Premises on the Lease Commencement Date or within twenty (20) days
thereafter;

                  (iv) if Tenant permits to be done anything which creates a
lien upon the Demised Premises and fails to discharge or bond such lien, or post
security with Landlord acceptable to Landlord within thirty (30) days after
receipt by Tenant of written notice thereof;

                  (v) if Tenant fails to maintain in force all policies of
insurance required by this Lease and such failure shall continue for more than
ten (10) business days after Landlord gives Tenant written notice of such
failure;

                  (vi) if any petition is filed by or against Tenant or any
guarantor of this Lease under any present or future section or chapter of the
Bankruptcy Code, or under any similar law or statute of the United States or any
state thereof (which, in the case of an involuntary proceeding, is not
permanently discharged, dismissed, stayed, or vacated, as the case may be,
within ninety (90) days of commencement), or if any order for relief shall be
entered against Tenant or any guarantor of this Lease in any such proceedings;

                  (vii) if Tenant or any guarantor of this Lease becomes
insolvent or makes a transfer in fraud of creditors or makes an assignment for
the benefit of creditors;

                  (viii) if a receiver, custodian, or trustee is appointed for
the Demised Premises or for all or substantially all of the assets of Tenant or
of any guarantor of this Lease, which appointment is not vacated within ninety
(90) days following the date of such appointment; or

                  (ix) if Tenant fails to perform or observe any other term of
this Lease and such failure shall continue for more than thirty (30) days after
Landlord gives Tenant written notice of such failure, or, if such failure cannot
be corrected within such thirty (30) day period, if Tenant does not

                                      -12-
<PAGE>

commence to correct such default within said thirty (30) day period and
thereafter diligently prosecute the correction of same to completion within a
reasonable time.

            (b) Upon the occurrence of any one or more Events of Default,
Landlord may, at Landlord's option, without any demand or notice whatsoever
(except as expressly required in this Section 22):

                  (i) Terminate this Lease by giving Tenant notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination and all rights of Tenant under this
Lease and in and to the Demised Premises shall terminate. Tenant shall remain
liable for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Demised Premises to Landlord on the
date specified in such notice; or

                  (ii) Terminate this Lease as provided in Section 22(b)(i)
hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, which shall be calculated at the date of such termination, as
follows: (1) the value of the excess, if any, of (A) the Base Rent, Additional
Rent and all other sums which would have been payable hereunder by Tenant for
the period commencing with the day following the date of such termination and
ending with the Expiration Date had this Lease not been terminated (the
"Remaining Term"), over (B) the aggregate reasonable rental value of the Demised
Premises for the Remaining Term (which excess, if any shall be discounted to
present value at the "Treasury Yield" as defined below for the Remaining Term);
plus (2) the costs of recovering possession of the Demised Premises and all
other expenses incurred by Landlord due to Tenant's default, including, without
limitation, reasonable attorney's fees; plus (3) the unpaid Base Rent and
Additional Rent earned as of the date of termination plus any interest and late
fees due hereunder, plus other sums of money and damages owing on the date of
termination by Tenant to Landlord under this Lease or in connection with the
Demised Premises. The amount as calculated above shall be deemed immediately due
and payable. The payment of the amount calculated in subparagraph (ii)(1) shall
not be deemed a penalty but shall merely constitute payment of liquidated
damages, it being understood and acknowledged by Landlord and Tenant that actual
damages to Landlord are extremely difficult, if not impossible, to ascertain.
"Treasury Yield" shall mean the rate of return in percent per annum of Treasury
Constant Maturities for the length of time specified as published in document
H.15(519) (presently published by the Board of Governors of the U.S. Federal
Reserve System titled "Federal Reserve Statistical Release") for the calendar
week immediately preceding the calendar week in which the termination occurs. If
the rate of return of Treasury Constant Maturities for the calendar week in
question is not published on or before the business day preceding the date of
the Treasury Yield in question is to become effective, then the Treasury Yield
shall be based upon the rate of return of Treasury Constant Maturities for the
length of time specified for the most recent calendar week for which such
publication has occurred. If no rate of return for Treasury Constant Maturities
is published for the specific length of time specified, the Treasury Yield for
such length of time shall be the weighted average of the rates of return of
Treasury Constant Maturities most nearly corresponding to the length of the
applicable period specified. If the publishing of the rate of return of Treasury
Constant Maturities is ever discontinued, then the Treasury Yield shall be based
upon the index which is published by the Board of Governors of the U.S. Federal
Reserve System in replacement thereof or, if no such replacement index is
published, the index which, in Landlord's reasonable determination, most nearly
corresponds to the rate of return of Treasury Constant Maturities. In
determining the aggregate reasonable rental value pursuant to subparagraph
(ii)(1)(B) above, the parties hereby agree that, at the time Landlord seeks to
enforce this remedy, all relevant factors should be considered, including, but
not limited to, (a) the length of time remaining in the Remaining Term, (b) the
then current market conditions in the general area in which the Building is
located, (c) the likelihood of reletting the Demised Premises for a period of
time equal to the remainder of the Term, (d) the net effective rental rates then
being obtained by landlords for similar type space of similar size in similar
type buildings in the general area in which the Building is located, (e) the
vacancy levels in the general area in which the Building is located, (f) current
levels of new construction that will be completed during the Remaining Term and
how this construction will likely affect vacancy rates and rental rates and (g)
inflation; or

                  (iii) without terminating this Lease, declare immediately due
and payable the sum of the following: (1) the present value (calculated using
the "Treasury Yield") of all Base Rent and Additional Rent due and coming due
under this Lease for the entire remaining Term (as if by the terms of this Lease
they were payable in advance), plus (2) the cost of recovering and reletting the
Demised Premises and all other expenses incurred by Landlord in connection with
Tenant's default, plus (3) any unpaid Base Rent, Additional Rent and other
rentals, charges, assessments and other sums owing by Tenant to Landlord under
this Lease or in connection with the Demised Premises as of the date this
provision is invoked by Landlord, plus (4) interest on all such amounts from the
date due at the Interest Rate, and Landlord may immediately proceed to distrain,
collect, or bring action for such sum, or may file a proof of claim in any
bankruptcy or insolvency proceedings to enforce payment thereof; provided,
however, that such payment shall not be deemed a penalty or liquidated damages,
but shall merely constitute payment in advance of all Base Rent and Additional
Rent payable hereunder throughout the Term, and provided further, however, that
upon Landlord receiving such payment, Tenant shall be entitled to receive from
Landlord all rents received by Landlord from other assignees, tenants and
subtenants on account of said Demised Premises during the remainder of the Term
(provided that the monies to which Tenant shall so become entitled shall in no
event exceed the entire amount actually paid by Tenant to Landlord pursuant to
this subparagraph (iii)), less all costs, expenses and attorneys' fees of
Landlord incurred but not yet reimbursed by Tenant in connection with recovering
and reletting the Demised Premises; or

                                      -13-
<PAGE>

                  (iv) Without terminating this Lease, in its own name but as
agent for Tenant, enter into and upon and take possession of the Demised
Premises or any part thereof. Any property remaining in the Demised Premises may
be removed and stored in a warehouse or elsewhere at the cost of, and for the
account of, Tenant without Landlord being deemed guilty of trespass or becoming
liable for any loss or damage which may be occasioned thereby unless caused by
Landlord's negligence, provided, however, that to the extent any property
contained in the Demised Premises is owned by Philip Morris, Landlord shall give
Philip Morris five (5) days prior written notice of such removal, provided that
Philip Morris shall have executed and delivered for the benefit of Landlord an
entry and indemnification agreement in form reasonably acceptable to Landlord.
Thereafter, Landlord may, but shall not be obligated to, lease to a third party
the Demised Premises or any portion thereof as the agent of Tenant upon such
terms and conditions as Landlord may deem necessary or desirable in order to
relet the Demised Premises. The remainder of any rentals received by Landlord
from such reletting, after the payment of any indebtedness due hereunder from
Tenant to Landlord, and the payment of any costs and expenses of such reletting,
shall be held by Landlord to the extent of and for application in payment of
future rent owed by Tenant, if any, as the same may become due and payable
hereunder. If such rentals received from such reletting shall at any time or
from time to time be less than sufficient to pay to Landlord the entire sums
then due from Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Notwithstanding any such reletting without termination, Landlord may
at any time thereafter elect to terminate this Lease for any such previous
default provided same has not been cured; or

                  (v) Without terminating this Lease, and with or without notice
to Tenant, enter into and upon the Demised Premises and, without being liable
for prosecution or any claim for damages therefor, maintain the Demised Premises
and repair or replace any damage thereto or do anything or make any payment for
which Tenant is responsible hereunder. Tenant shall reimburse Landlord
immediately upon demand for any expenses which Landlord incurs in thus effecting
Tenant's compliance under this Lease and Landlord shall not be liable to Tenant
for any damages with respect thereto; or

                  (vi) Without liability to Tenant or any other party and
without constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any property, material, labor, utilities or
other service, wherever Landlord is obligated to furnish or render the same as
long as an Event of Default exists under this Lease; or

                  (vii) With or without terminating this Lease, allow the
Demised Premises to remain unoccupied and collect rent from Tenant as it comes
due; or

                  (viii) Pursue such other remedies as are available at law or
equity.

            (c) If this Lease shall terminate as a result of or while there
exists an Event of Default hereunder, any funds of Tenant held by Landlord may
be applied by Landlord to any damages payable by Tenant (whether provided for
herein or by law) as a result of such termination or default.

            (d) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a bar
to the maintenance of any subsequent actions or proceedings for the recovery of
such sum or sums so omitted.

            (e) No agreement to accept a surrender of the Demised Premises and
no act or omission by Landlord or Landlord's agents during the Term shall
constitute an acceptance or surrender of the Demised Premises unless made in
writing and signed by Landlord. No re-entry or taking possession of the Demised
Premises by Landlord shall constitute an election by Landlord to terminate this
Lease unless a written notice of such intention is given to Tenant. No provision
of this Lease shall be deemed to have been waived by either party unless such
waiver is in writing and signed by the party making such waiver. Landlord's
acceptance of Base Rent or Additional Rent in full or in part following an Event
of Default hereunder shall not be construed as a waiver of such Event of
Default. No custom or practice which may grow up between the parties in
connection with the terms of this Lease shall be construed to waive or lessen
either party's right to insist upon strict performance of the terms of this
Lease, without a written notice thereof to the other party.

            (f) If an Event of Default shall occur, Tenant shall pay to
Landlord, on demand, all reasonable expenses incurred by Landlord as a result
thereof, including reasonable attorneys' fees, court costs and expenses actually
incurred.

      23. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of Lender to enter upon the Demised
Premises at all reasonable times for the purposes of inspecting the Demised
Premises and Tenant's compliance with this Lease, and making any necessary
repairs thereto; provided that, except in the case of an emergency, Landlord
shall give Tenant reasonable prior notice of Landlord's intended entry upon the
Demised Premises. Nothing herein shall imply any duty upon the part of Landlord
to do any work required of Tenant hereunder, and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
it. Landlord shall not be liable for inconvenience, annoyance, disturbance or
other damage to Tenant by reason

                                      -14-
<PAGE>

of making such repairs or the performance of such work in the Demised Premises
or on account of bringing materials, supplies and equipment into or through the
Demised Premises during the course thereof, and the obligations of Tenant under
this Lease shall not thereby be affected; provided, however, that Landlord shall
use reasonable efforts not to disturb or otherwise interfere with Tenant's
operations in the Demised Premises in making such repairs or performing such
work. Landlord also shall have the right to enter the Demised Premises at all
reasonable times to exhibit the Demised Premises to any prospective purchaser,
mortgagee or, during the last six (6) months of the Term, tenant thereof.

      24. Lender's Rights.

            (a) For purposes of this Lease:

                  (i) "Lender" as used herein means the holder of a Mortgage;

                  (ii) "Mortgage" as used herein means any or all mortgages,
deeds to secure debt, deeds of trust or other instruments in the nature thereof
which may now or hereafter affect or encumber Landlord's title to the Demised
Premises, and any amendments, modifications, extensions or renewals thereof.

            (b) Subject to the receipt by Tenant of a non-disturbance agreement,
substantially in the form of Exhibit F attached hereto, this Lease and all
rights of Tenant hereunder are and shall be subject and subordinate to the lien
and security title of any Mortgage. Tenant recognizes and acknowledges the right
of Lender to foreclose or exercise the power of sale against the Demised
Premises under any Mortgage.

            (c) Tenant shall, in confirmation of the subordination set forth in
Section 24(b) and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be necessary,
upon demand, at any time or times, execute, acknowledge, and deliver to Landlord
or to Lender any and all reasonable instruments requested by either of them to
evidence such subordination which are consistent with the form of Exhibit F
attached hereto.

            (d) At any time during the Term, Lender may, by written notice to
Tenant, make this Lease superior to the lien of its Mortgage. If requested by
Lender, Tenant shall, upon demand, at any time or times, execute, acknowledge,
and deliver to Lender, any and all reasonable instruments that may be necessary
to make this Lease superior to the lien of any Mortgage.

            (e) If Lender (or Lender's nominee, or other purchaser at
foreclosure) shall hereafter succeed to the rights of Landlord under this Lease,
whether through possession or foreclosure action or delivery of a new lease,
Tenant shall, if requested by such successor, attorn to and recognize such
successor as Tenant's landlord under this Lease without change in the terms and
provisions of this Lease and shall promptly execute and deliver any reasonable
instrument that may be necessary to evidence such attornment, provided that such
successor shall not be bound by (i) any payment of Base Rent or Additional Rent
for more than one month in advance, except prepayments in the nature of security
for the performance by Tenant of its obligations under this Lease, and then only
if such prepayments have been deposited with and are under the control of such
successor, (ii) any provision of any amendment to the Lease to which Lender has
not consented, (iii) the defaults of any prior landlord under this Lease, or
(iv) any offset rights arising out of the defaults of any prior landlord under
this Lease. Upon such attornment, this Lease shall continue in full force and
effect as a direct lease between each successor landlord and Tenant, subject to
all of the terms, covenants and conditions of this Lease.

            (f) In the event there is a Mortgage at any time during the Term,
Landlord shall, at Tenant's request, use reasonable efforts to cause the Lender
to enter into a subordination, nondisturbance and attornment agreement with
Tenant reasonably satisfactory to Tenant and consistent with this Section 24.

      25. Estoppel Certificate and Financial Statement.

            (a) Landlord and Tenant agree, at any time, and from time to time,
within ten (10) business days after written request of the other, to execute,
acknowledge and deliver a statement in writing in recordable form to the
requesting party and/or its designee certifying that: (i) 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), (ii) the dates to which
Base Rent, Additional Rent and other charges have been paid, (iii) whether or
not, to the best of its knowledge, there exists any failure by the requesting
party to perform any term, covenant or condition contained in this Lease, and,
if so, specifying each such failure, (iv) (if such be the case) Tenant has
unconditionally accepted the Demised Premises and is conducting its business
therein, and (v) and as to such additional matters as may be requested, it being
intended that any such statement delivered pursuant hereto may be relied upon by
the requesting party and by any purchaser of title to the Demised Premises or by
any mortgagee or any assignee thereof or any party to any sale-leaseback of the
Demised Premises, or the landlord under a ground lease affecting the Demised
Premises.

            (b) If Landlord desires to finance, refinance, or sell the Building,
Tenant and all guarantors of Tenant's obligations hereunder, if any, shall
deliver to any potential lender or purchaser designated by Landlord such
financial statements of Tenant and such guarantors as may be reasonably

                                      -15-
<PAGE>

required by such lender or purchaser, including but not limited to Tenant's
financial statements for the past 3 years; provided, however, that if Priority
Fulfillment Services, Inc. is the Tenant at the time that Landlord desires to
finance, refinance, or sell the Building, then only the guarantors of such
Tenant's obligations hereunder shall be required to provide their financial
statements, in the manner described in this subsection (b), to any such lender
or purchaser. All such financial statements shall be received by Landlord and
such lender or purchaser in confidence and shall be used only for the purposes
herein set forth.

      26. Landlord Liability. NO OWNER OF THE DEMISED PREMISES, WHETHER OR NOT
NAMED HEREIN, SHALL HAVE LIABILITY HEREUNDER AFTER IT CEASES TO HOLD TITLE TO
THE DEMISED PREMISES. NEITHER LANDLORD NOR ANY OFFICER, DIRECTOR, SHAREHOLDER,
PARTNER OR PRINCIPAL OF LANDLORD, WHETHER DISCLOSED OR UNDISCLOSED, SHALL BE
UNDER ANY PERSONAL LIABILITY WITH RESPECT TO ANY OF THE PROVISIONS OF THIS
LEASE. IN THE EVENT LANDLORD IS IN BREACH OR DEFAULT WITH RESPECT TO LANDLORD'S
OBLIGATIONS OR OTHERWISE UNDER THIS LEASE, TENANT SHALL LOOK SOLELY TO THE
EQUITY OF LANDLORD IN THE BUILDING FOR THE SATISFACTION OF TENANT'S REMEDIES. IT
IS EXPRESSLY UNDERSTOOD AND AGREED THAT LANDLORD'S LIABILITY UNDER THE TERMS,
COVENANTS, CONDITIONS, WARRANTIES AND OBLIGATIONS OF THIS LEASE SHALL IN NO
EVENT EXCEED LANDLORD'S EQUITY INTEREST IN THE BUILDING.

      27. Notices. Any notice required or permitted to be given or served by
either party to this Lease shall be deemed given when made in writing, and
either (i) personally delivered, (ii) deposited with the United States Postal
Service, postage prepaid, by registered or certified mail, return receipt
requested, or (iii) delivered by a nationally recognized overnight delivery
service providing proof of delivery, properly addressed to the address set forth
in Section 1(m) (as the same may be changed by giving written notice of the
aforesaid in accordance with this Section 27). If any notice mailed is properly
addressed with appropriate postage but returned for any reason, such notice
shall be deemed to be effective notice and to be given on the date of mailing.
Any notice required or permitted to be given or served by Landlord or Tenant to
this Lease may be given by either an agent, law firm or attorney acting on
behalf of Landlord or Tenant.

      28. Brokers. Tenant represents and warrants to Landlord that, except for
those parties set forth in Section 1(o) (the "Brokers"), Tenant has not engaged
or had any conversations or negotiations with any broker, finder or other third
party concerning the leasing of the Demised Premises to Tenant who would be
entitled to any commission or fee based on the execution of this Lease. Tenant
hereby further represents and warrants to Landlord that Tenant is not receiving
and is not entitled to receive any rebate, payment or other remuneration, either
directly or indirectly, from the Brokers, and that it is not otherwise sharing
in or entitled to share in any commission or fee paid to the Brokers by Landlord
or any other party in connection with the execution of this Lease, either
directly or indirectly. Tenant hereby indemnifies Landlord against and from any
claims for any brokerage commissions (except those payable to the Brokers, all
of which are payable by Landlord pursuant to a separate agreement) and all
costs, expenses and liabilities in connection therewith, including, without
limitation, reasonable attorneys' fees and expenses, for any breach of the
foregoing. Landlord represents and warrants to Tenant that, except for those
parties set forth in Section 1(o) (the "Brokers"), Landlord has not engaged or
had any conversations or negotiations with any broker, finder or other third
party concerning the leasing of the Demised Premises to Tenant who would be
entitled to any commission or fee based on the execution of this Lease. Landlord
hereby further represents and warrants to Tenant that Landlord, apart from the
standard brokerage commission, is not receiving and is not entitled to receive
any rebate, payment or other remuneration, either directly or indirectly, from
the Brokers. Landlord hereby indemnifies Tenant against and from any claims for
any brokerage commissions (except those payable to the Brokers, all of which are
payable by Landlord pursuant to a separate agreement) and all costs, expenses
and liabilities in connection therewith, including, without limitation,
reasonable attorneys' fees and expenses, for any breach of the foregoing. The
foregoing indemnification shall survive the termination of this Lease for any
reason.

      29. Assignment and Subleasing.

            (a) Tenant may not assign, mortgage, pledge, encumber or otherwise
transfer this Lease, or any interest hereunder, or sublet the Demised Premises,
in whole or in part, without on each occasion first obtaining the prior express
written consent of Landlord, which consent Landlord shall not unreasonably
withhold, delay or condition. Any change in control of Tenant resulting from a
merger, consolidation, stock transfer or asset sale shall be considered an
assignment or transfer which requires Landlord's prior written consent. For
purposes of this Section 29, by way of example and not limitation, Landlord
shall be deemed to have reasonably withheld consent if Landlord determines (i)
that the prospective assignee or subtenant is not of a financial strength
similar to Tenant as of the Effective Lease Date, (ii) that the prospective
assignee or subtenant has a poor business reputation, (iii) that the proposed
use of the Demised Premises by such prospective assignee or subtenant
(including, without limitation, a use involving the use or handling of Hazardous
Substances) will negatively affect the value or marketability of the Building or
the Project or (iv) that the prospective assignee or subtenant is a current
tenant in the Project or is a bona-fide third-party prospective tenant.

            (b) Notwithstanding Section 29(a) above, provided that there then
exists no Event of Default under this Lease which remains uncured, Tenant shall
have the right, upon forty-five (45) days' prior written notice to Landlord but
without Landlord's prior consent, to assign this Lease to Philip Morris

                                      -16-
<PAGE>

USA, Inc. or to Altria Group, Inc. (either being referred to herein as a
"Pre-Approved Assignee"), provided that upon any such assignment the
Pre-Approved Assignee assumes all of the obligations and liabilities of Tenant
arising under this Lease and shall then have assets, capitalization, tangible
net worth and creditworthiness at least equal to the assets, capitalization,
tangible net worth and creditworthiness of the Guarantor as of the Effective
Lease Date as determined by GAAP. For the purpose hereof, "tangible net worth"
shall mean the excess of the value of tangible assets (i.e. assets excluding
those which are intangible such as goodwill, patents and trademarks) over
liabilities. Following an assignment to a Pre-Approved Assignee as described
hereinabove, such Pre-Approved Assignee may assign this Lease to: (a) an
affiliate of such Pre-Approved Assignee, or (b) as part of a merger or
consolidation or to an entity which acquires the business which is operated by
such Pre-Approved Assignee in the Demised Premises, without Landlord's consent,
but with notice to Landlord, provided such successor entity under (a) or (b)
above assumes the obligations of such Pre-Approved Assignee in writing, and
provided, further, that no such further assignment by such Pre-Approved Assignee
shall relieve such Pre-Approved Assignee from or reduce its obligations under
this Lease. Any sublease or assignment pursuant to and in compliance with this
subsection (b) shall be referred to herein as a "Pre-Approved Assignment". The
provisions of subsection 29(c) below shall not apply to any Pre-Approved
Assignment; provided, however, that the written notice given by Tenant to
Landlord pursuant to this subsection 29(b) must contain sufficient information
and documentation to enable Landlord to confirm that all of the requirements of
this subsection 29(b) have been satisfied.

            (c) If Tenant desires to assign this Lease or sublet the Demised
Premises or any part thereof, other than in connection with a Pre-Approved
Assignment, Tenant shall give Landlord written notice no later than forty-five
(45) days in advance of the proposed effective date of any proposed assignment
or sublease, specifying (i) the name and business of the proposed assignee or
sublessee, (ii) the amount and location of the space within the Demised Premises
proposed to be subleased, (iii) the proposed effective date and duration of the
assignment or subletting and (iv) the proposed rent or consideration to be paid
to Tenant by such assignee or sublessee. Tenant shall promptly supply Landlord
with financial statements and other information as Landlord may reasonably
request to evaluate the proposed assignment or sublease. Landlord shall have a
period of thirty (30) days following receipt of such notice and other
information requested by Landlord within which to notify Tenant in writing that
Landlord elects: (i) to terminate this Lease as to the space so affected as of
the proposed effective date set forth in Tenant's notice, in which event Tenant
shall be relieved of all further obligations hereunder as to such space, except
for obligations under Sections 11 and 28 and all other provisions of this Lease
which expressly survive the termination hereof; or (ii) to permit Tenant to
assign or sublet such space; provided, however, that, if the rent rate agreed
upon between Tenant and its proposed subtenant is greater than the rent rate
that Tenant must pay Landlord hereunder for that portion of the Demised
Premises, or if any consideration shall be promised to or received by Tenant in
consideration of such proposed assignment or sublease (in addition to rent),
then one half (1/2) of such excess rent and other consideration (after payment
of brokerage commissions, attorneys' fees and other disbursements reasonably
incurred by Tenant for such assignment and subletting if acceptable evidence of
such disbursements is delivered to Landlord) shall be considered Additional Rent
owed by Tenant to Landlord, and shall be paid by Tenant to Landlord, in the case
of excess rent, in the same manner that Tenant pays Base Rent and, in the case
of any other consideration, within ten (10) business days after receipt thereof
by Tenant; or (iii) to refuse, in Landlord's reasonable discretion (taking into
account all relevant factors including, without limitation, the factors set
forth in the Section 29(a) above), to consent to Tenant's assignment or
subleasing of such space and to continue this Lease in full force and effect as
to the entire Demised Premises. If Landlord should fail to notify Tenant in
writing of such election within the aforesaid thirty (30) day period, Landlord
shall be deemed to have elected option (iii) above. Tenant agrees to reimburse
Landlord for reasonable legal fees and any other reasonable costs incurred by
Landlord in connection with any requested assignment or subletting, and such
payments shall not be deducted from the Additional Rent owed to Landlord
pursuant to subsection (ii) above. Tenant shall deliver to Landlord copies of
all documents executed in connection with any permitted assignment or
subletting, which documents shall be in form and substance reasonably
satisfactory to Landlord and which shall require such assignee to assume
performance of all terms of this Lease on Tenant's part to be performed.

            (d) No acceptance by Landlord of any rent or any other sum of money
from any assignee, sublessee or other category of transferee shall be deemed to
constitute Landlord's consent to any assignment, sublease, or transfer.
Permitted subtenants or assignees shall become liable directly to Landlord for
all obligations of Tenant hereunder, without, however, relieving Tenant of any
of its liability hereunder. No such assignment, subletting, occupancy or
collection shall be deemed the acceptance of the assignee, tenant or occupant,
as Tenant, or a release of Tenant from the further performance by Tenant of
Tenant's obligations under this Lease. Any assignment or sublease consented to
by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's
consent to any subsequent assignment or sublease.

      30. Termination or Expiration.

      (a) No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof. Notwithstanding anything to the
contrary contained herein, if this Lease is rejected in any bankruptcy action or
proceeding filed by or against Tenant, and the effective date of rejection is on
or after the date upon

                                      -17-
<PAGE>

which that month's Rent is due and owing, then the Rent owing under this Lease
for the month during which the effective date of such rejection occurs shall be
due and payable in full and shall not be prorated.

            (b) At the expiration or earlier termination of the Term of this
Lease, Tenant shall surrender the Demised Premises and all improvements,
alterations and additions thereto, and keys therefor to Landlord, clean and
neat, and in the same condition as at the Lease Commencement Date, excepting
normal wear and tear, condemnation and casualty other than that required to be
insured against by Tenant hereunder.

            (c) If Tenant remains in possession of the Demised Premises after
expiration of the Term, with or without Landlord's acquiescence and without any
express agreement of the parties, Tenant shall be a tenant-at-sufferance at the
greater of (i) one hundred fifty percent (150%) of the then current fair market
base rental value of the Demised Premises or (ii) one hundred fifty percent
(150%) of the Base Rent in effect at the end of the Term. Tenant shall also
continue to pay all other Additional Rent due hereunder. Notwithstanding the
foregoing, there shall be no renewal of this Lease by operation of law or
otherwise, and, in addition to and without limiting such rights and remedies as
may be available to Landlord at law or in equity as a result of Tenant's holding
over beyond the Term, Landlord shall be entitled to exercise any and all rights
and remedies available to Landlord in respect of an Event of Default hereunder
(it being agreed that any such holdover shall be deemed an immediate Event of
Default hereunder). In addition to the foregoing, Tenant shall be liable for all
damages, direct and consequential, incurred by Landlord as a result of such
holdover. No receipt of money by Landlord from Tenant after the termination of
this Lease or Tenant's right of possession of the Demised Premises shall
reinstate, continue or extend the Term or Tenant's right of possession. The
provisions of this subsection 30(c) shall survive the expiration of the Term.

      31. Reserved.

      32. Late Payments. In the event any installment of rent, inclusive of Base
Rent, or Additional Rent or other sums due hereunder, if any, is not paid within
five (5) days after the due date therefor, Tenant shall pay an administrative
fee (the "Administrative Fee") equal to five percent (5%) of such past due
amount, plus interest on the amount past due at the lesser of (i) the maximum
interest rate allowed by law or (ii) a rate of fifteen percent (15%) per annum
(the "Interest Rate"), in order to defray the additional expenses incurred by
Landlord as a result of such late payment. The Administrative Fee is in addition
to, and not in lieu of, any of the Landlord's remedies hereunder.

      33. Rules and Regulations. Tenant agrees to abide by the rules and
regulations set forth on Exhibit D attached hereto, as well as other reasonable
rules and regulations reasonably promulgated by Landlord from time to time, so
long as such rules and regulations are uniformly enforced against all tenants of
Landlord in the Building and not intended to modify or amend the basic Lease
terms, or that would materially and adversely impact Tenant's cost or ability to
operate.

      34. Quiet Enjoyment. So long as Tenant pays its rent and performs its
obligations hereunder, Landlord agrees that Tenant shall have the right to
quietly use and enjoy the Demised Premises for the Term free from the
disturbance by Landlord or any party by, through or under Landlord.

      35. Miscellaneous.

            (a) The parties hereto hereby covenant and agree that Landlord shall
receive the Base Rent, Additional Rent and all other sums payable by Tenant
hereinabove provided as net income from the Demised Premises, without any
abatement (except as set forth in Section 20 and Section 21), reduction,
set-off, counterclaim, defense or deduction whatsoever.

            (b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.

            (c) All rights, powers, and privileges conferred hereunder upon the
parties hereto shall be cumulative, but not restrictive to those given by law.

            (d) Time is of the essence of this Lease.

            (e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder or to insist upon strict compliance by Landlord or
Tenant with its obligations hereunder, and no custom or practice of the parties
at variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.

            (f) This Lease contains the entire agreement of the parties hereto
as to the subject matter of this Lease and no prior representations,
inducements, letters of intent, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force and effect. Any
future

                                      -18-
<PAGE>

amendment to this Lease must be in writing and signed by the parties hereto. The
masculine (or neuter) pronoun, singular number shall include the masculine,
feminine and neuter gender and the singular and plural number.

            (g) This contract shall create the relationship of landlord and
tenant between Landlord and Tenant; no estate shall pass out of Landlord; Tenant
has a usufruct, not subject to levy and sale, and not assignable by Tenant
except as expressly set forth herein.

            (h) Under no circumstances shall Tenant have the right to record
this Lease or a memorandum thereof.

            (i) The captions of this Lease are for convenience only and are not
a part of this Lease, and do not in any way define, limit, describe or amplify
the terms or provisions of this Lease or the scope or intent thereof.

            (j) This Lease may be executed in multiple counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same agreement.

            (k) This Lease shall be interpreted under the laws of the State
where the Demised Premises are located.

            (l) The parties acknowledge that this Lease is the result of
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No inference shall be made
from any item which has been stricken from this Lease other than the deletion of
such item.

      36. Special Stipulations. The Special Stipulations, if any, attached
hereto as Exhibit C, are incorporated herein and made a part hereof, and to the
extent of any conflict between the foregoing provisions and the Special
Stipulations, the Special Stipulations shall govern and control.

      37. Effective Lease Date. For purposes of this Lease, the term "Effective
Lease Date" shall mean the later date upon which this Lease is signed by
Landlord and Tenant.

      38. Authority. If Tenant is not a natural person, Tenant shall cause its
corporate secretary or general partner, as applicable, to execute the
certificate attached hereto as Exhibit E. Tenant is authorized by all required
corporate or partnership action to enter into this Lease and the individual(s)
signing this Lease on behalf of Tenant are each authorized to bind Tenant to its
terms.

      39. No Offer Until Executed. The submission of this Lease by Landlord to
Tenant for examination or consideration does not constitute an offer by Landlord
to lease the Demised Premises and this Lease shall become effective, if at all,
only upon the execution and delivery thereof by Landlord and Tenant. Execution
and delivery of this Lease by Tenant to Landlord constitutes an offer to lease
the Demised Premises on the terms contained herein. The offer by Tenant will be
irrevocable until 6:00 p.m. Eastern time for fifteen (15) days after the date of
execution of this Lease by Tenant and delivery to Landlord. This Lease may be
executed and delivered by facsimile or electronic media and in multiple
counterparts.

      IN WITNESS WHEREOF, the parties hereto have hereunto set their hands under
seals, the day and year first above written.

                                     LANDLORD:

Date:__________________

                                     INDUSTRIAL DEVELOPMENTS INTERNATIONAL, a
                                     delaware corporation

                                     By:_____________________________________
                                          Name:______________________________
                                          Title:_____________________________

                                     Attest:_________________________________
                                            Name:____________________________
                                            Title:___________________________

                                                       [CORPORATE SEAL]

                                      -19-
<PAGE>

                                     TENANT:

Date:__________________              PRIORITY FULFILLMENT SERVICES, INC., a
                                     delaware corporation

                                     By:_____________________________________
                                          Name:______________________________
                                          Title:_____________________________

                                     Attest:_________________________________
                                            Name:____________________________
                                            Title:___________________________

                                                       [CORPORATE SEAL]

                                      -20-
<PAGE>

                                   ATTESTATION

Landlord - Corporation:

STATE OF_________________

COUNTY OF________________

      BEFORE ME, a Notary Public in and for said County, personally
appeared__________________________ and , known to me to be the person(s) who, as
___________________________________ and ____________________________________,
respectively, of Industrial Developments International, Inc., the corporation
which executed the foregoing instrument in its capacity as Landlord, signed the
same, and acknowledged to me that they did so sign said instrument in the name
and upon behalf of said corporation as officers of said corporation, that the
same is their free act and deed as such officers, respectively, and they were
duly authorized thereunto by its board of directors; and that the seal affixed
to said instrument is the corporate seal of said corporation.

      IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my
official seal, this__day of_____________________, 20____.

                                ________________________________________
                                Notary Public
                                My Commission Expires:

Tenant - Corporation:

STATE OF_________________

COUNTY OF________________

      BEFORE ME, a Notary Public in and for said County, personally
appeared__________________________ and , known to me to be the person(s) who, as
___________________________________ and ____________________________________,
respectively, of Priority Fulfillment Services, Inc., the corporation which
executed the foregoing instrument in its capacity as Tenant, signed the same,
and acknowledged to me that they did so sign said instrument in the name and
upon behalf of said corporation as officers of said corporation, that the same
is their free act and deed as such officers, respectively, and they were duly
authorized thereunto by its board of directors; and that the seal affixed to
said instrument is the corporate seal of said corporation.

      IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my
official seal, this_day of___________________, 20___.

                                ________________________________________
                                Notary Public

                                My Commission Expires:

                                      -21-
<PAGE>

LEASE INDEX

<TABLE>
<CAPTION>
Section            Subject
-------            -------
<S>               <C>
   1               Basic Lease Provisions

   2               Demised Premises

   3               Term

   4               Base Rent

   5               Security Deposit

   6               Operating Expenses and Additional Rent

   7               Use of Demised Premises

   8               Insurance

   9               Utilities

  10               Maintenance and Repairs

  11               Tenant's Personal Property; Indemnity

  12               Tenant's Fixtures

  13               Signs

  14               Reserved

  15               Governmental Regulations

  16               Environmental Matters

  17               Construction of Demised Premises

  18               Tenant Alterations and Additions

  19               Services by Landlord

  20               Fire and Other Casualty

  21               Condemnation

  22               Tenant's Default

  23               Landlord's Right of Entry

  24               Lender's Rights

  25               Estoppel Certificate and Financial Statement

  26               Landlord's Liability

  27               Notices

  28               Brokers

  29               Assignment and Subleasing

  30               Termination or Expiration

  31               Reserved 32    Late Payments

  33               Rules and Regulations

  34               Quiet Enjoyment

  35               Miscellaneous

  36               Special Stipulations

  37               Effective Lease Date

  38               Authority

  39               No Offer Until Executed
</TABLE>

Exhibit "A"  Demised Premises
Exhibit "A-1"  Parking
Exhibit "A-2"  Access
Exhibit "A-3"  Adjacent Space
Exhibit "B"  Preliminary Plans and Specifications/Work
Exhibit "C"  Special Stipulations
Exhibit "D"  Rules and Regulations
Exhibit "E"  Certificate of Authority
Exhibit "F"  SNDA
Exhibit "G" Guaranty

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