Document:

<PAGE>
                                                                   EXHIBIT 10.02
                                    NET LEASE

                             BASIC LEASE INFORMATION

DATE:             November 14, 2000

LANDLORD:         Hollis Street Investors, L.L.C., a Delaware limited liability
                  company

TENANT:           Knowledge Kids Enterprises, a Delaware corporation, doing
                  business as "LeapFrog"

PREMISES:         A portion of the Building located at 6401 Hollis Street,
                  Emeryville, California, as shown on EXHIBIT A attached hereto.
                  Landlord and Tenant stipulate that for all purposes of this
                  Lease the Premises contains 40,060 rentable square feet.

PROPERTY:         Hollis Business Center, Emeryville, California

USE:              General office and administrative purposes, including customer
                  training and support incidental thereto.

TERM:             Approximately five (5) years

ESTIMATED COMMENCEMENT DATES:         February 1, 2001

INITIAL BASE RENT:                    $100,150.00 ($2.50 per month per rentable
                                      sq. ft.)

TENANT'S PERCENTAGE SHARE:            29.34%

SECURITY DEPOSIT:                     $1,200,000.00 Letter of Credit (subject to
                                      adjustment as provided in Section 17)

BROKERS:                              Colliers International (representing
                                      Tenant)

ADDRESS FOR NOTICES:       Landlord:  Hollis Street Investors, L.L.C.
                                      c/o Riggs & Company / MEPT
                                      808 17th Street, N.W.
                                      Washington, D.C. 200006
                                      Attention: Patrick O. Mayberry

                     With a copy to:  Hollis Street Investors, L.L.C.
                                      c/o Simeon Commercial Properties
                                      655 Montgomery Street; Suite 1190
                                      San Francisco, CA 94111
                                      Attn: Director of Property Management

                             Tenant:  Knowledge Kids Enterprises
                                      1400 65th Street Emeryville, CA 94608
                                      Attn: Chief Financial Officer

            After Commencement Date:  To Tenant at the Premises,
                                      Attn: Chief Financial Officer

LANDLORD'S INITIALS: [INIT]                            TENANT'S INITIALS: [INIT]

                                       1.
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LANDLORD'S CONTRIBUTION TO TENANT IMPROVEMENTS:     $1,022,000.00

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]

LANDLORD'S INITIALS: [INIT]                            TENANT'S INITIALS: [INIT]

                                       2.
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                                TABLE OF CONTENTS

                                                                            PAGE

1.   PREMISES..................................................................1

2.   TERM......................................................................1

3.   RENT......................................................................3

4.   BASE RENT.................................................................4

5.   OPERATING EXPENSES........................................................4

6.   PRORATION OF RENT.........................................................9

7.   TENANT IMPROVEMENTS.......................................................9

8.   USE OF THE PREMISES.......................................................9

9.   ALTERATIONS..............................................................11

10.  REPAIRS..................................................................13

11.  DAMAGE OR DESTRUCTION....................................................14

12.  EMINENT DOMAIN...........................................................15

13.  INDEMNITY AND INSURANCE..................................................15

14.  ASSIGNMENT OR SUBLET.....................................................18

15.  DEFAULT..................................................................21

16.  LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS...........................23

17.  LETTER OF CREDIT.........................................................23

18.  SURRENDER OF PREMISES....................................................25

19.  HOLDING OVER.............................................................26

20.  ACCESS TO PREMISES.......................................................26

21.  SIGNS....................................................................26

22.  SUBORDINATION............................................................27

23.  TRANSFER OF THE PROPERTY.................................................28

24.  ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS..............................28

25.  MORTGAGEE PROTECTION.....................................................29

26.  ATTORNEYS' FEES..........................................................29

27.  BROKERS..................................................................29

28.  PARKING..................................................................29

29.  UTILITIES AND SERVICES...................................................30

30.  FITNESS FACILITY.........................................................31

31.  ACCEPTANCE...............................................................31

                                       i.
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                                TABLE OF CONTENTS

                                   (CONTINUED)

                                                                            PAGE

32.  USE OF BUILDING NAME.....................................................32

33.  RECORDING................................................................32

34.  QUITCLAIM................................................................32

35.  NOTICES..................................................................32

36.  LANDLORD'S EXCULPATION...................................................32

37.  ADDITIONAL STRUCTURES....................................................33

38.  CONSENTS AID APPROVALS...................................................33

39.  RENEWAL OPTION...........................................................33

40.  ROOFTOP SPACE............................................................34

41.  GENERAL..................................................................35

Exhibit "A"   -   Premises Designation
Exhibit "B"   -   Property Site Plan
Exhibit "C"   -   Commencement Date Memorandum
Exhibit "D"   -   Rules and Regulations
Exhibit "E"   -   Form of Tenant Estoppel Certificate
Exhibit "F"   -   Utilities and Services
Exhibit "G"   -   Appraisal Procedure

                                      ii.
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                                    NET LEASE

         THIS LEASE, which is effective as of the date set forth in the Basic
Lease Information, is entered by Landlord and Tenant, as set forth in the Basic
Lease Information. Terms which are capitalized in this Lease shall have the
meanings set forth in the Basic Lease Information or as otherwise defined in
this Lease.

1. PREMISES.

         Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises described in the Basic Lease Information (as shown on EXHIBIT A),
together with the right in common to use the Common Areas. The Common Areas
shall mean the areas and facilities within the land shown on Exhibit A-1 (the
"Land") and within the Building identified in the Basic Lease Information (the
"Building") and within all other buildings and improvements now or hereafter
located on the Land, provided and designated by Landlord for the general use,
convenience or benefit of Tenant and other tenants and occupants of the Property
restrooms; janitorial, telephone and electrical closets; sidewalks; driveways,
public lobbies, entrances and stairs; and unreserved parking areas). Landlord
reserves the right to make changes to the Common Areas, provided that such
changes do not permanently materially adversely affect Tenant's reasonable
access to the Premises or reduce the parking spaces available to Tenant to less
than that required by applicable Legal Requirements (as defined in Section 8.c.
below). The Building and such other buildings and improvements now or hereafter
located on the Land are collectively referred to in this Lease as the
"Buildings". The Land, the Buildings and the Common Areas are collectively
referred to in this Lease as the "Property" or the "Real Property". Reference
herein to the "Building" or the "Buildings" includes all leasable space and
Common Areas located therein.

2. TERM.

         a. LEASE TERM. The term of this Lease (the "Term") shall commence on
the Commencement Date (as defined in Subsection 2.b.) and, unless terminated on
an earlier date in accordance with the terms of this Lease or renewed pursuant
to Section 39 below, shall end on the date (the "Expiration Date") that is the
last day of the calendar month in which occurs the day preceding the fifth (5th)
annual anniversary of the Commencement Date.

         b. COMMENCEMENT DATE. The "Commencement Date" of this Lease shall be
the earliest to occur of the following: (i) the date that the Tenant
Improvements (as such terms are defined in EXHIBIT B attached hereto) have been
Substantially Completed and Landlord provides written notice thereof to Tenant;
(ii) the date Tenant occupies the Premises for the conduct of business; (iii)
the date the Commencement Date would have occurred but for Tenant Delay; or (iv)
February 1, 2001.

         "Substantial Completion of the Tenant Improvements" shall be deemed to
have occurred when the Tenant Improvements have been completed in accordance
with the Final Plans (as defined in EXHIBIT B), subject only to the completion
or correction of Punch List Items, Landlord's Work has been completed to the
extent required so that the Premises may be lawfully occupied by Tenant for
general office and administrative purposes, and the Premises may

                                       1.
<PAGE>
otherwise be lawfully occupied by Tenant for general office and administrative
purposes. Tenant shall be responsible, at its sole cost and expense, for
obtaining any permits required by reason of Tenant's particular use of the
Premises (including, without limitation, permits for any Hazardous Materials
used in connection therewith) (collectively, the "Special Use Permits"), and in
no event shall Substantial Completion of the Tenant Improvements require that
the Special Use Permits have been obtained. "Punch List Items" shall mean
incomplete or defective work or materials in the Tenant Improvements which do
not materially impair Tenant's use of the Premises for the conduct of Tenant's
business therein and which can be completed or corrected without material
interference with Tenant's use and enjoyment of the Premises. Within fifteen
(15) days after Substantial Completion of the Tenant Improvements, but prior to
Tenant moving any of its furniture, fixtures or equipment into the Premises,
upon either party's request Landlord and Tenant shall together conduct an
inspection of the Premises and prepare a list of the Punch List Items any items
of the Tenant Improvements that are not in conformity with the Tenant
Improvements as required by the terms of this Lease. Landlord shall use its good
faith efforts to correct all such items within a reasonable period of time
following preparation of such list. In addition, within thirty (30) days
following preparation of such list, upon either party's request Landlord and
Tenant shall conduct a second inspection of the Premises and prepare a second
list with respect to any items that were not adequately completed from the first
list and any items that were not reasonably discoverable during the first
inspection. Landlord shall use its good faith efforts to correct any items
listed on the second list within a reasonable period of time following
preparation of such list. Punch List Items shall be corrected by Landlord in an
orderly fashion, and without material interference to Tenant's use and enjoyment
of the Premises. "Tenant Delay" means any delay in completion of the Tenant
Improvements caused or requested by Tenant, including any such delay caused by
(I) any Changes (as defined in Exhibit B attached hereto) to the Tenant
Improvements requested by Tenant (including any proposed Changes that are not
ultimately approved or made), (II) Tenant's interference with the construction
of the Tenant Improvements (including any early entry into the Premises, whether
or not approved by Landlord), (III) Tenant's failure to promptly respond to
inquiries regarding the construction of the Tenant Improvements or to promptly
make any selection of materials, finishes or colors, (IV) Tenant's failure to
approve or reasonably disapprove any plans or specifications or costs or budgets
or other items within the time period set forth on Exhibit B for the same, (V)
Tenant's failure to furnish any information to Landlord within the time period
set forth on Exhibit B for the same, (VI) Tenant's request that the Tenant
Improvements include special materials, finishes or installations or other
so-called "long lead" items, or (VII) the Special Use Permits, or any
requirement that the same be obtained.

         Landlord shall endeavor in good faith to notify Tenant in writing of
any Tenant Delay (identifying the nature of the Tenant Delay) as soon as
reasonably practicable after Landlord becomes actually aware of such Tenant
Delay, together with Landlord's then good faith estimate of the probable
duration of such Tenant Delay.

         C. PREMISES NOT DELIVERED. If, for any reason, Landlord is unable to
deliver possession of the Premises to Tenant on the Commencement Date, such
failure shall not affect the validity of this Lease nor shall such failure
subject Landlord to any liability, and the term of this Lease, and the
commencement of Tenant's obligation to pay Rent, shall nevertheless commence on
the Commencement Date, as determined pursuant to Section 2.b. above.
Notwithstanding the foregoing, in the event that Landlord does not deliver the
Premises to

                                       2.
<PAGE>
Tenant, with the Tenant. Improvements Substantially Completed therein, on or
prior to June l, 2001, as such date shall be extended for delays caused by
Tenant Delay or Force Majeure (such date, as so extended, the "Trigger Date"),
then Tenant shall have the right to terminate this Lease by notice to Landlord
given, if at all, within ten (10) days after the Trigger Date. For purposes of
this Lease, "Force Majeure" shall mean strikes, lock-outs, labor disputes,
shortages of material or labor, fire, earthquake, flood or other casualty, acts
of God or any other cause (other than financial inability) beyond the reasonable
control of Landlord. If Tenant exercises such termination option, this Lease
shall terminate effective as of the tenth (10th) day following delivery of
Tenant's notice of termination, unless Landlord shall deliver the Premises to
Tenant, with the Tenant Improvements Substantially Completed therein, prior to
such effective termination date. If this Lease is so terminated, Landlord shall
return any payments of Rent previously made by Tenant, the Letter of Credit and
any Letter of Credit Pry needs (as such terms are defined in Section 17), and
any sums paid by Tenant to Landlord as Tenant's contribution to the cost of the
Tenant Improvements, and the parties thereupon shall be released of further
liability under this Lease.

         d. COMMENCEMENT DATE MEMORANDUM. When the Commencement Date is
determined, the parties shall execute a Commencement Date Memorandum, in the
form attached hereto as EXHIBIT C, setting forth the Commencement Date and the
Expiration Date.

         e. EARLY ENTRY. Tenant shall be permitted to enter the Premises fifteen
(15) days prior to the Commencement Date for the purpose of installing its
telecommunications and data equipment, so long as Landlord shall reasonably
determine that the same will not delay or interfere with Landlord's construction
of the Tenant Improvements, or increase the cost of the Tenant Improvements.
Such early entry shall not in and of itself cause the Commencement Date to occur
or give rise to Tenant's obligation to pay Base Rent or Operating Expenses, but
prior to any such entry Tenant shall submit evidence to Landlord that the
insurance required to be maintained by Tenant pursuant to Sections 13.c. and
13.h. is in effect. Tenant shall be fully responsible for any equipment or
personal property it installs during such early entry period, and Landlord shall
have no liability for any loss or damage thereto from any cause whatsoever.
Tenant's indemnification obligations under clauses (a) and (b) of Section 13.a.
shall fully apply during any such early entry period.

3. RENT.

         As used in this Lease, the term "Rent" shall include: (i) the Base
Rent; (ii) Operating Expenses payable by Tenant pursuant to Section 5 below; and
(iii) all other amounts which Tenant is obligated to pay under the terms of this
Lease, including, without limitation, the parking charges payable by Tenant
pursuant to Section 28 below. All amounts of money payable by Tenant to Landlord
shall be paid without prior notice or demand, deduction or offset. If any
installment of Base Rent is not paid by Tenant by the fifth (5th) day of the
month, or if any payment of Operating Expenses or any other amount payable by
Tenant is not paid within five (5) days of the due date thereof, Tenant shall
pay to Landlord a late payment charge equal to five percent (5%) of the amount
of the delinquent amount, in addition to the amount of Rent then owing,
regardless of whether a notice of default or notice of termination has been
given by Landlord. In addition to the five percent (5%) late charge, any Base
Rent, Operating Expenses or other amounts owing hereunder which are not paid
within five (5) days after the date they are

                                       3.
<PAGE>
due shall thereafter bear interest at the rate ("Interest Rate") which is the
lesser of eighteen percent (18%) per annum or the maximum rate permitted by
applicable law. Notwithstanding the foregoing, Landlord shall give Tenant notice
of non-payment and five (5) days from receipt of such notice to cure such
non-payment once in each calendar year before assessing such late fees and/or
interest in such calendar year.

4. BASE RENT.

         a. INITIAL BASE RENT. Commencing on the Commencement Date, and
thereafter on the first day of each calendar month of the Term, Tenant shall pay
monthly base rent ("Base Rent") for the Premises to Landlord (or other entity
designated by Landlord), in advance, at Landlord's address for notices (as set
forth in the Basic Lease Information) or at such other address as Landlord may
designate. The initial Base Rent shall be the amount set forth in the Basic
Lease Information. Base Rent payable hereunder for the first full calendar month
after Tenant's obligation to pay Base Rent commences shall be paid upon Tenant's
execution of this Lease.

         b. BASE RENT ADJUSTMENT. Effective as of each annual anniversary of the
Commencement Date, the Base Rent payable by Tenant for the Premises shall
increase to one-hundred four percent (104%) of the Base Rent then in effect for
the Premises (without taking into account any temporary rental abatements then
in effect).

5. OPERATING EXPENSES.

         a. OPERATING EXPENSES. Tenant shall pay Tenant's Percentage Share of
Operating Expenses incurred by Landlord during each calendar year falling in
whole or in part during the Term. Tenant's Percentage Share has been calculated
as the ratio that the stipulated rentable area of the Premises bears to the
stipulated rentable area of the Building. If during the Term there is a physical
change in the rentable area of the Premises or the Building (as distinguished
from a change in the method of measuring any such rentable area), there shall be
a corresponding adjustment in Tenant's Percentage Share.

         b. OPERATING EXPENSES. The term "Operating Expenses" shall include all
reasonable expenses and costs of every kind and nature, except as provided in
the next paragraph, which Landlord shall pay or become obligated to pay because
of or in connection with the ownership, management, administration, maintenance,
repair and operation of the Premises, the Buildings, the Common Areas and the
balance of the Property, to the extent allocable, as reasonably determined by
Landlord, to the Building in which the Premises is located. Operating Expenses
shall include, without limitation, the following: (i) all impositions relating
to the Real Property, including Real Property Taxes (as defined in Section
5.d.); (ii) premiums for insurance relating to the Real Property, including as
set forth in Sections 13.b., 13.d. and 13.i., and insurance deductibles paid by
Landlord; (iii) wages, salaries, bonuses and expenses and benefits (including
hospitalization, medical, surgical, retirement plan, pension plan, union dues,
life insurance, including group life insurance, welfare and other fringe
benefits, and vacation, holidays and other paid absence benefits, and costs of
uniforms) of all on-site and off-site employees of Landlord or its agents, at
the rank of property manager or below, engaged in operation, management,
administration, maintenance, repair and security of the Real Property,

                                       4.
<PAGE>
including, without limitation, administrative, management and accounting
personnel and the individual(s) responsible for management of the Property, and
payroll, social security, workers' compensation, unemployment and similar taxes
with respect to such employees of Landlord or its agents, and the cost of
providing disability or other benefits imposed by law or otherwise, with respect
to such employees; (iv) costs of all supplies, materials and equipment rentals
used in operations with respect to the Real Property; (v) all maintenance,
janitorial (including refuse and rubbish removal and pest extermination),
security and service costs, including costs of maintaining and repairing a card
access security system and of providing cards with respect thereto; (vi) a
management fee not to exceed 5% of all gross revenues from the Real Property,
including revenues attributable to Tenant's and other tenants' payments of
Operating Expenses; (vii) legal and accounting expenses, including the cost of
audits by certified public accountants: (viii) all repair, painting and
maintenance costs relating to the Real Property and its Common Areas, including
sidewalks, landscaping, service areas, mechanical rooms, parking areas, Building
exterior and driveways; (ix) all charges for heat, water, gas, steam, fuel,
electricity and other utilities used or consumed in the Buildings and Common
Areas, provided, however, that so long as Tenant pays for electricity and gas
furnished to the Premises and to the HVAC systems serving the Premises on a
direct metered basis, charges for electricity and gas furnished to leasable
space or to the HVAC equipment serving leasable space shall be excluded from
Operating Expenses; (x) costs of repairs, replacements, and general maintenance
to and of the Building Systems and the Base Building Components (as such teens
are defined in Sections 9.a. and 10.a.; respectively, below), including, without
limitation, costs of regularly scheduled preventive maintenance/service
contracts with respect to the same; (xi) the costs of capital improvements,
capital replacements, capital repairs, capital equipment, and capital tools and
devices installed or paid for by Landlord and intended to reduce other Operating
Expenses or required to comply with Legal Requirements with which the Real
Property was not required to comply as of the Commencement Date or intended for
the protection of the health and safety of the occupants of the Property; (xii)
in the event that Landlord shall elect to operate a fitness facility on the
Property, the costs of purchasing and/or renting fitness equipment and other
equipment and personal property used in connection with such facility, and all
costs of maintaining and operating such facility, including costs described in
the other clauses of this Section 5.b.; (xiii) the cost of furniture, draperies,
carpeting, and other items of personal property (excluding paintings, sculptures
and other works of art) provided by Landlord for use in the Common Areas, the
fitness facility or the Building office (to the extent that such Building office
is dedicated to the operation and management of the Property); and (xiv)
Building office rent or rental value, for no more than 1,500 rentable square
feet. With respect to any costs included in Operating Expenses under clause (x)
which are capital expenditures, as determined by Landlord in accordance with
generally accepted accounting principles consistently applied, and with respect
to the costs of items included in Operating Expenses under clause (xi), such
costs shall be amortized over a period determined by Landlord, together with
interest on the unamortized balance at a rate per annum equal to three (3)
percentage points over the Treasury Rate charged at the time such item is
constructed or acquired, or at such higher rate as may have been paid by
Landlord on funds borrowed for the purpose of acquiring or constructing such
item, but in either case not more than the maximum rate permitted by law at the
time such item is acquired or constructed. As used herein, "Treasury Rate" means
the six-month United States treasury bill rate in effect from time to time by
the San Francisco Main Office of Bank of America, NA (or

                                       5.
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any successor bank thereto), or if there is no such rate, the rate quoted by
such bank in pricing ninety day commercial loans to substantial commercial
borrowers.

         Operating Expenses shall not include the following: (i) depreciation on
the Buildings or equipment or systems therein; (ii) debt service or the costs of
financing or selling the Property; (iii) rental under any ground or underlying
lease; (iv) attorneys' fees and expenses incurred in connection with lease
negotiations or disputes with past, current or prospective Building tenants; (v)
the cost of decorating, improving for tenant occupancy, painting or redecorating
portions of the Buildings to be demised to tenants; (vi) advertising,
promotional or marketing expenses; (vii) costs reimbursed by insurance proceeds,
warranty proceeds, or condemnation awards, or costs for which Landlord is
otherwise reimbursed (other than by tenants pursuant to a provisions similar to
this Section 5); (viii) real estate broker's or other leasing commissions; (ix)
penalties and interest incurred due to Landlord's failure to timely pay any Real
Property Taxes or other Operating Expenses or charges due in connection with the
Real Property, unless caused in whole or part by Tenant's failure to timely pay
any amount due from it under this Lease; (x) costs incurred due to a violation
by Landlord, as determined by written admission, stipulation, final judgment or
arbitration award, of any of the terms and conditions of this Lease or any other
lease relating to a Building, except to the extent such costs reflect costs that
would have been incurred by Landlord absent such violation; (xi) costs, fines
and penalties incurred due to a violation by Landlord or the Real Property of
any Legal Requirements, except to the extent due to a violation by Tenant of the
terms of this Lease, and except further to the extent such costs reflect costs
that would have been incurred by Landlord absent such violation; (xii) the cost
of services made available at no special cost to any tenant of a Building but
only made available to Tenant at special cost; (xiii) the cost of special
services made available to Tenant for which Tenant pays Landlord pursuant to
another provision of this Lease; (xiv) overhead and profit increments paid to
Landlord or to subsidiaries or affiliates of Landlord for services (other than
management) to the Property to the extent that the costs of the services
materially exceed the amounts normally payable for similar services to unrelated
third parties under similar circumstances (taking into account the market
factors in effect on the date any relevant contracts were" negotiated) in
comparable business parks in the county in which the Property is located; (xv)
Landlord's general corporate office overhead and administrative expenses, except
for management fees and as otherwise provided in the preceding paragraph; (xvi)
charitable and political contributions; (xvii) the purchase price of sculptures,
paintings or other objects of art'(which shall not be deemed to include
landscaping or features related thereto) placed in the Common Areas; and (xvii)
the cost of any large-scale abatement, remediation or removal activities with
respect to Hazardous Materials (as defined in Section 8.d.), provided, however,
Operating Expenses may include the costs attributable to those actions taken by
Landlord to comply with any Hazardous Materials Laws (as defined in Section
8.d.) or other Legal Requirements in connection with the ordinary operation and
maintenance of the Building or the Property.

         The parties agree that statements in this Lease to the effect that
Landlord is to perform certain of its obligations hereunder at its own or sole
cost and/or expense shall not be interpreted as excluding any cost from
Operating Expenses if such cost is an Operating Expense pursuant to the terns u
this Section 5.b.

         c. MONTHLY ADJUSTMENT. Promptly following the commencement of the Term
and prior to the commencement of each subsequent calendar year (or as soon
thereafter as

                                       6.
<PAGE>
practicable), Landlord shall in good faith estimate the Operating Expenses
payable by Tenant for such calendar year pursuant to this Section. Tenant shall
pay to Landlord, on the first day of each month, in advance, one-twelfth (1/12)
of Landlord's estimated amount. If at any time during the course of the year
Landlord determines that the Operating Expenses payable by Tenant will vary from
the then estimated amount, by notice to Tenant Landlord may revise the amount
payable by Tenant during the balance of the calendar year such that the total
estimated additional amount due from Tenant for such calendar year is paid by
Tenant during the balance of the calendar year in equal monthly amounts. Within
ninety (90) days (or as soon thereafter as practicable) after the close of each
calendar year, Landlord shall provide Tenant with a statement to account for any
difference between the actual and the estimated Operating Expenses for the
previous year. Landlord's annual statement shall be final and binding upon
Landlord and Tenant unless, within ninety (90) days after delivery thereof to
Tenant, Landlord shall revise or Tenant shall contest any item therein by
written notice to the other, specifying each item revised or contested and the
reason therefor. Notwithstanding the foregoing, the Real Property Taxes included
in any such annual statement may be modified by any subsequent adjustment or
retroactive application of Real Property Taxes affecting the calculation of
Operating Expenses. If Tenant has overpaid the amount of Operating Expenses
owing pursuant to this Section, Landlord shall credit the overpayment against
Tenant's next payments due under this Section 5 and under Section 4 above, and
if no further payments are due from Tenant Landlord shall refund the overpayment
to Tenant within thirty (30) days after delivery of such statement. If Tenant
has underpaid the amount of Operating Expenses owing pursuant to this Section,
Tenant shall pay the amount of the underpayment to Landlord within thirty (30)
days after Tenant's receipt of Landlord's statement. If the rentable area of the
Building is not fully occupied during any calendar year, Operating Expenses for
such calendar year which vary based on the level of occupancy shall be adjusted
to equal Landlord's reasonable estimate of the Operating Expenses which would
have been incurred during such calendar year if the total rentable area of the
Building were occupied.

         d. DEFINITION OF REAL PROPERTY TAXES. The term "Real Property Taxes"
shall mean any ordinary or extraordinary form of assessment or special
assessment, license fee, rent tax, levy, penalty (if a result of Tenant's
delinquency), or tax (other than net income, estate, succession, inheritance,
transfer or franchise taxes), imposed by any authority having the direct or
indirect power to tax, or by any city, county, state or federal government for
any maintenance or improvement or other district or division thereof. The term
shall include all transit charges, housing fund assessments, real estate taxes
and all other taxes relating to the Premises, Building and/or Property, all
other taxes which may be levied in lieu of real estate taxes, all assessments,
assessment bonds, levies, fees, and other governmental charges (including, but
not limited to, charges for traffic facilities, improvements, child care, water
services studies and improvements, and fire services studies and improvements)
for amounts necessary to be expended because of governmental orders, whether
general or special, ordinary or extraordinary, unforeseen as well as foreseen,
of any kind and nature for public improvement, services, benefits or any other
purposes which are assessed, levied, confirmed, imposed or become a lien upon
the Premises, Building or Property or become payable during the Term. With
respect to any assessments which may be paid in installments, the Real Property
Taxes for any given year of the Term shall be calculated on the assumption that
Landlord elected the installment method of payment.

                                       7.
<PAGE>
         e. ACKNOWLEDGEMENT OF PARTIES. It is acknowledged by Landlord and
Tenant that Proposition 13 was adopted by the voters of the State of California
in the June, 1978 election, and that assessments, taxes, fees, levies and
charges may be imposed by governmental agencies for such purposes as fire
protection, street, sidewalk, road, utility construction and maintenance, refuse
removal and for other governmental services which formerly may have been
provided without charge to property owners or occupants. It is the intention of
the parties that all new and increased assessments, taxes, fees, levies and
charges due to Proposition 13 or any other cause are to be included within the
definition of Real Property Taxes for purposes of this Lease.

         f. TAXES ON TENANT IMPROVEMENTS AND PERSONAL PROPERTY. Notwithstanding
any other provision hereof, Tenant shall pay the full amount of any increase in
Real Property Taxes during the Term resulting from any and all Alterations (as
defined in Section 9.a. below) of any kind whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. Tenant shall pay,
prior to delinquency, all taxes assessed or levied against Tenant's personal
property, equipment, furniture or fixtures (collectively, "Personal Property")
in, on or about the Premises. When possible, Tenant shall cause its Personal
Property to be assessed and billed separately from the real or personal property
of Landlord. Tenant recognizes that pursuant to Section 107.6 of the California
Revenue and Taxation Code Tenant's possessory interest under this Lease may be
subject to property taxation based on the full cash value, as defined in
Sections 110 and 110.1 of the California Revenue and Taxation Code.

         g. FISCAL YEAR. Landlord shall have the right to account and bill for
Operating Expenses on the basis of a fiscal year, rather than a calendar year as
set forth above, and to revise such fiscal year from time to time, provided that
Landlord follows generally accepted accounting principles consistently applied
in connection therewith.

         h. NET LEASE. This shall be a Net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses except as expressly herein
provided. The provisions for Tenant's payment of Tenant's Percentage Share of
Operating Expenses are intended to pass on to Tenant and reimburse Landlord for
Tenant's Percentage Share of all costs and expenses associated with the Real
Property, except as expressly provided in this Lease.

         i. TENANT'S AUDIT RIGHT. Tenant shall have the right to cause a
reputable nationally recognized accounting firm to audit Landlord's books and
records pertaining to Operating Expenses for the immediately prior calendar
year, provided that Tenant notifies Landlord in writing of Tenant's intention to
exercise such audit right within ninety (90) days after receipt of the relevant
annual statement described in Section 5.c., actually begins such audit within
thirty (30) days after such notice from Tenant (but in no event earlier than ten
(10) Business Days (as defined below) after such notice) and diligently pursues
such audit to completion. Landlord agrees to make available to Tenant's
auditors, at the Building or at Landlord's office in the State of California,
the books and records relevant to the audit for review and copying, but such
books and records may not be removed from Landlord's location. Tenant shall
promptly deliver to Landlord a copy of the report or other documentation
prepared by Tenant's auditors upon completion of the audit. Tenant shall bear
all costs of such audit, except that, if the audit (as conducted and certified
by Tenant's nationally recognized accounting fin-n) shows an aggregate
overstatement of Operating Expenses of more than five percent (5%), and
Landlord's auditors concur in such findings (or, in the absence of such
concurrence, such overstatement is ultimately

                                       8.
<PAGE>
confirmed by dispute resolution), then Landlord shall bear Tenant's costs of the
audit, such payment to be made by Landlord within thirty (30) days of Landlord's
receipt of the invoice (with reasonably satisfactory supporting documentation)
for such costs. If the agreed or confirmed audit shows an underpayment of
Operating Expenses by Tenant, Tenant shall pay to Landlord, within thirty (30)
days after the audit is agreed to or confirmed, the amount owed to Landlord,
and, if the agreed or confirmed audit shows an overpayment of Operating Expenses
by Tenant, Landlord shall reimburse Tenant for such overpayment within thirty
(30) days after the audit is agreed to or confirmed. As used in this Lease, a
"Business Day" is Monday through Friday, excluding state or federal holidays.

6. PRORATION OF RENT. If the Commencement Date is not the first day of a
calendar month, or if the end of the Term is not the last day of a calendar
month, Base Rent payable by Tenant pursuant to Section 4, and Operating Expenses
payable by Tenant pursuant to Section 5, shall be prorated on a daily basis
(based upon a thirty (30) day month) for such fractional month. If any date on
which Base Rent is to be adjusted hereunder is not the first day of a calendar
month, Base Rent payable by Tenant pursuant to Section 4 for such calendar month
shall be prorated on a daily basis (based on the number of days in such month)
to take into account the differing Base Rent rates. The termination of this
Lease shall not affect the obligations of Landlord and Tenant pursuant to
Section 5.c. which are to be performed after the termination.

7. TENANT IMPROVEMENTS. Landlord agrees to complete Landlord's Work and to
construct within the Premises certain improvements to the Premises ("Tenant
Improvements") pursuant to the terms of Exhibit B. Subject to completion of
Landlord's Work and the Tenant Improvements, the Premises shall be delivered to
Tenant in its then "as-is" condition, and Landlord shall not have any obligation
to make or pay for any alterations, additions, improvements or repairs to
prepare the Premises for Tenant's occupancy.

8. USE OF THE PREMISES.

         a. USE. The Premises shall be used solely for the use set forth in the
Basic Lease Information and for no other use or purpose, Tenant shall not do or
suffer or permit anything to be done in or about the Premises or the Real
Property which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them, or use or suffer
or permit the Premises to be used for any immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain, suffer or permit any nuisance in, on
or about the Premises or the Real Property. Without limiting the foregoing,
Tenant shall not permit any odors, smoke, dust, gas, substances, noise or
vibration to emanate from the Premises, and no loudspeakers or other similar
device which can be heard outside the Premises shall, without the prior written
approval of Landlord, be used in or about the Premises. Tenant shall not commit
or suffer to be committed any waste in, to or about the Premises. Tenant agrees
not to employ any person, entity or contractor for any work in the Premises
(including moving Tenant's equipment and furnishings in, out or around the
Premises) whose presence may give rise to a labor or other disturbance in the
Building and, if necessary to prevent such a disturbance in a particular
situation, Landlord may require Tenant to employ union labor for the work.

         b. RULES AND REGULATIONS: CC&R's. Tenant shall comply with the Rules
and Regulations attached hereto as Exhibit D as the same may be modified from
time to time by

                                       9.
<PAGE>
Landlord upon prior notice to Tenant (the "Rules"). In addition, Tenant shall
comply with any covenants, conditions and restrictions ("CC&R's") applicable to
the Real Property, and all rules, regulations and restrictions imposed by any
association formed pursuant to the CC&R's, in each case to the extent Landlord
has delivered a copy thereof to Tenant and the same are not in conflict with the
provisions of this Lease. Landlord shall not be responsible to Tenant for the
nonperformance or noncompliance by any other tenant or occupant of the Building
or Property of or with any of the Rules, but Landlord shall not enforce the
Rules in a discriminatory manner. In the event of any conflict or inconsistency
between the Rules and the balance of this Lease, the balance of this Lease shall
control.

         c. COMPLIANCE. Tenant shall not permit the Premises to be used in
violation of or in conflict with, and at its sole cost and expense shall
promptly comply with, all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which hereinafter may be in force,
with the requirements of any board of fire underwriters or other similar board
now or hereafter constituted, with any direction or occupancy certificate issued
pursuant to any law by any public officer or officers, as well as the provisions
of all recorded documents affecting the Premises (all of the foregoing,
collectively, "Legal Requirements"), insofar as any thereof relate to or affect
the condition, use or occupancy of the Premises, and Tenant shall perform all
work to the Premises and other portions of the Real Property required to effect
such compliance (or, at Landlord's election, Landlord may perform such work at
Tenant's expense). Notwithstanding the foregoing, in discharging its duty to
comply with Legal Requirements Tenant shall not be obligated to make structural
changes to the Premises or the Building, or to alter or supplement any Base
Building Components or any Building Systems which do not exclusively serve the
Premises, unless the need for compliance arises by reason of or is caused or
triggered by (i) Tenant's particular use or particular manner of use of the
Premises (as distinguished from Tenant's use of the Premises for general office
purposes in a normal and customary manner), or (ii) Tenant's Alterations, or
(iii) Tenant's particular employees or employment practices. The judgement of
any court of competent jurisdiction or the admission of Tenant in any actions
against Tenant, whether Landlord be a party thereto or not, that Tenant has so
violated any such law, statute, ordinance, rule, regulation or requirement,
shall be conclusive of such violation as between Landlord or Tenant.

         d. HAZARDOUS MATERIALS. Tenant shall not cause or permit the storage,
use, generation, release, handling or disposal (collectively, "Handling") of any
Hazardous Materials (as defined below), in, on, or about the Premises or the
Real Property by Tenant or any agents, employees, contractors, licensees,
subtenants, customers, guests or invitees of Tenant (collectively with Tenant,
"Tenant Parties"), except that Tenant shall be permitted to use in the Premises
in a normal and customary manner normal quantities of office supplies or
products (such as copier fluids or cleaning supplies) customarily used in the
conduct of general business office activities ("Common Office Chemicals"),
provided that the Handling of such Common Office Chemicals shall comply at all
times with all Legal Requirements, including Hazardous Materials Laws (as
defined below). Upon Landlord's request from time to time, Tenant shall provide
to Landlord a complete written inventory of all Hazardous Materials which Tenant
anticipates using or storing on, or discharging from , the Premises along with
copies of all reports, permits and business plans filed with any federal, state,
local or other governmental agency. Tenant shall update the inventory as
frequently as required to reflect any material changes to the items required to
be disclosed therein. Tenant shall be solely responsible for and

                                       10.
<PAGE>
shall indemnify, defend and hold Landlord and all other Indemnitees (as defined
in Section 13.a. below), harmless from and against all Claims (as defined in
Section 13.a. below), arising out of or in connection with, or otherwise
relating to (i) any Handling of Hazardous Materials by any Tenant Party or
Tenant's breach of its obligations hereunder, or (ii) any removal, cleanup, or
restoration work and materials necessary to return the Real Property or any
other property of whatever nature located on the Real Property to their
condition existing prior to the Handling of Hazardous Materials in, on or about
the Premises by any Tenant Party. Tenant shall promptly provide Landlord with
copies of all notices received by it, including, without limitation, any notice
of violations, notice of responsibility or demand for action from any federal,
state or local authority or official in connection with the presence of
Hazardous Materials in or about the Premises or any other portion of the
Property. In the event of any release of Hazardous Materials upon the Premises
or any other portion of the Property, or upon adjacent lands, if caused by
Tenant or any other Tenant Party, Tenant shall promptly remedy the problem in
accordance with all applicable Legal Requirements. For purposes of this Lease,
"Hazardous Materials" means any explosive, radioactive materials, hazardous
wastes, or hazardous substances, including without limitation asbestos
containing materials, PCB's, CFC's, or substances defined as "hazardous
substances" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657; the Hazardous
Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812; the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987; or any other
Legal Requirement regulating, relating to, or imposing liability or standards of
conduct concerning any such materials or substances now or at any time hereafter
in effect (collectively, "Hazardous Materials Laws"). Tenant's obligations under
this Section 8.d. shall survive the expiration or other termination of this
Lease.

         e. DEED RESTRICTION. The Land described herein contains hazardous
materials in soils and in the ground water under the property, and is subject to
a deed restriction dated as of October 6, 1999, and recorded on December 21,
1999, in the Official Records of Alameda County, California, as Document No.
1999450464, which Covenant and Restriction imposes certain covenants, conditions
and restrictions on the usage of the property described herein. This statement
is not a declaration that a hazard exists. Landlord has provided a copy of said
deed restriction to Tenant.

9. ALTERATIONS.

         a. ALTERATIONS. Tenant shall not make any alteration, addition or
improvement in, to or upon the Premises ("Alteration") without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld with respect to proposed Alterations which (i) are not structural in
nature, (ii) do not affect the Base Building Components, (iii) are, in
Landlord's opinion, compatible with the Building and the balance of the Real
Property and the Building's mechanical, plumbing, gas, electrical,
heating/ventilation/air conditioning, communication, security and fire and other
life safety systems (collectively, the "Building Systems"), (iv) in Landlord's
opinion will not interfere with the use and occupancy of any other portion of
the Building or the Real Property by any other tenant or permitted occupant
thereof, and (v) do not cause or trigger, under applicable Legal Requirements, a
requirement for "Beam Alterations". As used in this Lease, "Beam Alterations"
mean any wrapping or other alterations to the beams in the Premises or in other
portions of the Building which negatively impact the

                                      11.
<PAGE>
aesthetics of the Premises or the Building, as determined by Landlord in good
faith. Tenant shall give Landlord not less than twenty-one (21) days' prior
written notice of any Alteration Tenant desires to make. Any Alterations as to
which Landlord shall consent shall be made only by contractors approved in
advance, in writing by Landlord, which approval shall not be unreasonably
withheld; provided, however, that Landlord may, in its sole discretion, specify
the engineers and contractors to perform any work relating to or affecting the
Building Systems or the Base Building Components. Tenant shall comply with all
Legal Requirements applicable to each Alteration and shall deliver to Landlord a
complete set of "as built" plans and specifications for each Alteration. Any
work to the balance of the Building or Real Property related to or affected or
triggered by Tenant's Alterations shall be performed by Tenant at Tenant's
expense (or, at Landlord's election, Landlord may perform such work at Tenant's
expense). Tenant shall be solely responsible for maintenance and repair of all
Alterations made by Tenant. Tenant shall pay Landlord on demand (whether prior
to or during the course of construction) an amount (the "Alteration Fee") equal
to five percent (5%) of the total cost of each Alteration (and for purposes of
calculating the Alteration Fee, such cost shall include architectural and
engineering fees, but shall not include permit fees) as compensation to Landlord
for miscellaneous costs incurred by Landlord in connection with the Alteration.
In addition, Tenant shall reimburse Landlord for all third party fees paid by
Landlord in connection with reviewing the proposed Alterations (whether or not
the proposed Alterations are ultimately approved by Landlord or made by Tenant),
including, without limitation, Landlord's architectural and engineering fees.
All Alterations shall be performed diligently and in a first-class workmanlike
manner and in accordance with plans and specifications approved by Landlord, and
shall comply with Landlord's construction procedures and requirements for the
Building (including Landlord's requirements relating to insurance and contractor
qualifications and scheduling of the work).

         Notwithstanding the foregoing, Tenant shall have the right, without
Landlord's consent, to make any Alteration to the Premises that (a) is
decorative in nature (such as paint, carpet or other wall or floor finishes,
movable partitions or other such work), (b) does not affect the Base Building
Components or the Building Systems, (c) is not structural in nature and does not
require a building permit or other governmental permit, uses only first-class
materials and is performed in a workman-like manner and in accordance with all
applicable Legal Requirements, and (d) when aggregated with all other Cosmetic
Alterations performed on or about the same time or otherwise related thereto,
does not cost in excess of Ten Thousand Dollars ($10,000.00). Any Alteration
permitted without Landlord's consent pursuant to this paragraph is referred to
in this Lease as a "Cosmetic Alteration".

         b. LIENS. If, because of any act or omission of Tenant or anyone
claiming by, through, or under Tenant, any mechanic's lien or other lien is
filed against the Premises or any other portion of the Real Property or against
other property of Landlord (whether or not the lien is valid or enforceable),
Tenant shall, at its own expense, cause it to be discharged of record within a
reasonable time, not to exceed ten (10) days, after the date of the filing. In
addition, Tenant shall defend and indemnify Landlord and hold it harmless from
any and all Claims resulting from the lien. Without limitation of Landlord's
other remedies, Landlord shall have the rights under Section 16 below if any
such lien is not timely discharged by Tenant.

         c. OWNERSHIP OF ALTERATIONS. All Alterations shall immediately become
Landlord's property. Except as provided in Section 9.d., Landlord may require
Tenant, at Tenant's sole

                                      12.
<PAGE>
expense and by the end of the Term, to remove any Alterations and to restore the
Premises to its condition prior to the Alteration.

         d. REQUEST REGARDING REMOVAL OBLIGATION. At the time that Tenant
requests Landlord's consent to any Alteration, Tenant may request that Landlord
notify Tenant if Landlord will require Tenant, at Tenant's sole expense, to
remove any or all of the Alteration by the end of the Term, and to restore the
Premises to its condition prior to the Alteration. Unless Landlord shall have
expressly agreed in writing not to require such removal and restoration,
Landlord's election right under Section 9.c. shall continue through the end of
the Term as to such Alterations. In no event shall Tenant be required to remove
any of the Tenant Improvements constructed pursuant to EXHIBIT B hereto, unless
Landlord shall have notified Tenant in writing of such removal obligation on or
prior to Landlord's approval of the Final Plans (as defined in EXHIBIT B).

10. REPAIRS.

         a. LANDLORD'S REPAIRS. Landlord shall maintain the roof, foundations,
floor slabs and exterior walls of the Building (collectively, the "Base Building
Components") in good condition and repair, reasonable wear and tear excepted.
The term walls as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. The term roof as used herein
shall include skylights, smoke hatches and roof vents. Landlord shall also
maintain in good condition and repair, reasonable wear and tear excepted, the
Common Areas, including, but not limited to, the landscaped areas, parking areas
and driveways, and Building Systems (other than those which are Tenant's
responsibility under Section 10.b.). Tenant shall reimburse Landlord for
Landlord's costs of complying with its obligations under this Section 10 in
accordance with Section .5 above, provided, however, that, subject to Section
13.g. below, any damage caused by or repairs necessitated by any act of Tenant
or any other Tenant Party may be repaired by Landlord at Landlord's option and
at Tenant's expense. Tenant shall give Landlord prompt written notice of any
repairs required of Landlord pursuant to this Section 10, after which notice
Landlord shall have reasonable opportunity to perform the same.

         b. TENANT'S REPAIRS. Tenant shall, at Tenant's expense, subject to
damage by fire or other casualty or a taking (which shall be governed by
Sections 11 and 12, respectively, below), maintain all parts of the Premises in
a good, clean and secure condition, promptly making all necessary repairs and
replacements including, but not limited to, all windows, glass or plate glass,
doors and any special store fronts or office entries, walls and wall finishes,
floor coverings. Tenant, at Tenant's expense, shall also maintain and repair all
supplemental or special HVAC systems or other Building Systems located within
and exclusively serving the Premises, such as dedicated computer or conference
room HVAC facilities, computer room fire suppression systems, security systems
other than the Building's standard card access system and any electrical system
components other than Building standard wiring and other equipment.
Notwithstanding the foregoing, subject to Section 13.g. below, Tenant shall not
be responsible for repairs to the extent such repairs are Landlord's
responsibility pursuant to Section 10.a. or are necessitated by the gross
negligence or willful misconduct of Landlord or Landlord's agents, employees or
contractors. Tenant shall not damage any demising wall or disturb the integrity
and support provided by any demising wall and shall, at its sole expense,
immediately repair any damage to any demising wall caused by Tenant or its
employees, agents or invitees or any other

                                      13.
<PAGE>
Tenant Party. Tenant hereby waives all right to make repairs at the expense of
Landlord or in lieu thereof to vacate the Premises and its other similar rights
as provided in California Civil Code Sections 1932(1), 1941 and 1942 or any
other Legal Requirement (whether now or hereafter in effect).

11. DAMAGE OR DESTRUCTION.

         a. LANDLORD'S OBLIGATION TO REBUILD. If the Premises are damaged or
destroyed, Landlord shall promptly and diligently repair the Premises unless
Landlord has the option to terminate this Lease as provided herein, and Landlord
elects to terminate.

         b. RIGHT TO TERMINATE. Landlord shall have the option to terminate this
Lease if the Premises or the Building is destroyed or damaged by fire or other
casualty, regardless of whether the casualty is insured against under this
Lease, if Landlord reasonably estimates that the repair of the Premises or the
Building cannot be completed within one hundred eighty (180) days after the
casualty. Landlord shall also have the right to terminate this Lease if the
repair is not fully covered by insurance maintained (or required to be
maintained) by the Landlord pursuant to this Lease other than by reason of the
deductible amounts under Landlord's insurance policies. Tenant shall have the
option to terminate this Lease if the Premises is damaged or destroyed by fire
or other casualty, and Landlord reasonably estimates that the repair of the
Premises cannot be completed within one hundred eighty (180) days after the
casualty. Landlord shall notify Tenant of Landlord's reasonable repair period
estimate within (60) days after the casualty. If a party desires to exercise the
right to terminate this Lease as a result of a casualty, the party shall
exercise the right by giving the other party written notice of its election to
terminate within thirty (30) days after delivery of Landlord's repair period
estimate, in which event this Lease shall terminate fifteen (15) days after the
date of the terminating party's notice. If neither Landlord nor Tenant exercises
the right to terminate this Lease, this Lease shall continue in full force and
effect and Landlord shall promptly commence the process of obtaining necessary
permits and approvals, and shall commence repair of the Premises or the Building
as soon as practicable and thereafter prosecute the repair diligently to
completion.

         c. LIMITED OBLIGATION TO REPAIR. Landlord's obligation, should Landlord
elect or be obligated to repair or rebuild, shall be limited to the Building
shell and any tenant improvements in the Premises which are constructed by
Landlord pursuant to Exhibit B (excluding such of the Tenant Improvements which
are unusual or extraordinary for use of the Premises as permitted hereunder, as
reasonably determined by Landlord and noticed to Tenant at the time Landlord
approves the Final Plans pursuant to Exhibit B (the "Above Standard Tenant
Improvements"). Tenant, at its option and expense, shall replace or fully repair
all trade fixtures, equipment, Above Standard Tenant Improvements, Alterations
and other improvements installed by Tenant and existing at the time of the
damage or destruction.

         d. ABATEMENT OF RENT. In the event of any damage or destruction to the
Premises which does not result in termination of this Lease, the Base Rent shall
be temporarily abated proportionately to the degree the Premises are
untenantable as a result of the damage or destruction, commencing from the date
of the damage or destruction and continuing during the period required by
Landlord to substantially complete its repair and restoration of the Premises;
provided, however, that nothing herein shall preclude Landlord from being
entitled to collect the

                                      14.
<PAGE>
full amount of any rent loss insurance proceeds. Tenant shall not be entitled to
any compensation or damages from Landlord for loss of the use of the Premises,
damage to Tenant's Personal Property or any inconvenience occasioned by any
damage, repair or restoration. Tenant hereby waives the provisions of Section
1932, Subdivision 2, and Section 1933, Subdivision 4, and Sections 1941 and 1942
of the California Civil Code, and the provisions of any similar Legal
Requirement (whether now or hereafter in effect).

         e. INSURANCE PROCEEDS. If this Lease is terminated, Landlord may keep
all the insurance proceeds resulting from the damage payable pursuant to
insurance coverage maintained by Landlord, and Tenant shall have no claims
thereto.

12. EMINENT DOMAIN. If all or any material part of the Premises or balance of
the Real Property is taken for public or quasi-public use by a governmental
authority under the power of eminent domain or is conveyed to a governmental
authority in lieu of such taking (a "taking"), Landlord may terminate this Lease
by written notice to Tenant within thirty (30) days after the taking. If all or
any material part of the Premises is taken, and if the taking causes the
remaining part of the Premises to be untenantable or inadequate for use by
Tenant for the purpose for which they were leased, then Tenant, at its option
and by giving notice within fifteen (15) days after the taking, may terminate
this Lease as of the date Tenant is required to surrender possession of the
Premises. If part of the Premises is taken but the remaining part is tenantable
and adequate for Tenant's use, then this Lease shall be terminated as to the
part taken as of the date Tenant is required to surrender possession, and,
unless Landlord shall have terminated this Lease pursuant to the foregoing
provisions, Landlord shall make such repairs, alterations and improvements as
may be necessary to render the part not taken tenantable, and the Base Rent
shall be reduced in proportion to the part of the Premises taken. All
compensation awarded for the taking shall be the property of Landlord without
any deduction therefrom for any estate of Tenant, and Tenant hereby assigns to
Landlord all its right, title and interest in and to the award. Tenant shall
have the right, however, to recover from the governmental authority, but not
from Landlord, such compensation as may be awarded to Tenant on account of the
interruption of Tenant's business, moving and relocation expenses, the
unamortized cost of Tenant's Alterations (which shall in no event be deemed to
include the Tenant Improvements) (such amortization to be on a straight line
basis, without interest, from the date such Alterations are installed through
the Expiration Date), and removal of Tenant's Personal Property, provided that
any such award to Tenant will not reduce the award which would otherwise be made
to Landlord.

13. INDEMNITY AND INSURANCE.

         a. INDEMNITY. Tenant shall hold Landlord and its constituent
shareholders, partners, members or other owners, and all of their agents,
contractors, servants, officers, directors, employees and licensees
(collectively with Landlord, the "Indemnitees") harmless from and indemnify the
Indemnitees against any and all claims, liabilities, damages, costs and
expenses, including reasonable attorneys' fees and costs incurred in defending
against the same (collectively, "Claims"), to the extent arising from (a) the
acts or omissions of Tenant or any other Tenant Party in, on or about the Real
Property, or (b) any construction or other work undertaken by or on behalf of
Tenant in, on or about the Premises, whether prior to or during the Term, or (c)
any accident, injury or damage, howsoever and by whomsoever caused, to any
person or property, occurring in, on or about the Premises; except to the extent
such Claims are

                                      15.
<PAGE>
caused directly by the negligence or willful misconduct of Landlord or its
authorized representatives. In case any action or proceeding be brought against
any of the Indemnitees by reason of any such Claim, Tenant, upon notice from
Landlord, covenants to resist and defend at Tenant's sole expense such action or
proceeding by counsel reasonably satisfactory to Landlord. The provisions of
this Section 13.a. shall survive the expiration or earlier termination of this
Lease with respect to any injury, illness; death or damage occurring prior to
such expiration or termination.

         b. FIRE AND EXTENDED COVERAGE. Landlord shall procure and maintain in
full force and effect with respect to the Building (including any tenant
improvements in the Premises constructed by Landlord pursuant to Exhibit B,
excluding, at Landlord's option, the Above Standard Tenant Improvements), policy
or policies of all risk insurance (including sprinkler, vandalism and malicious
mischief coverage, and any other endorsements desired by the Landlord or
required by the holder of any fee or leasehold mortgage on the Real Property,
but excluding, at Landlord's option, the insurance described in Section 13.i.
below) in such amount as Landlord shall determine, but in an amount at least
equal to eighty percent (80%) (or such greater percentage as shall be required
to preclude Landlord from being deemed a coinsurer) ) of the full replacement
cost (including debris removal, and demolition, but excluding the land and the
footings, foundations and installations below the basement level) thereof. Such
insurance, and all other insurance maintained by Landlord under this Lease,
shall be for the sole benefit of Landlord, and the proceeds therefrom shall be
under Landlord's sole control.

         c. PUBLIC LIABILITY. Tenant, at its own cost and expense, shall keep
and maintain in full force and effect during the Term the following insurance
coverages, written by an insurance company licensed by and admitted to issue
insurance in the State of California, with a general policyholders' rating of
"A" or better and a financial size ranking of "Class X" or higher, in the most
recent edition of Best's Insurance Guide, in the form customary to the locality,
(i) commercial general liability insurance, including contractual liability
coverage, insuring Tenant's activities with respect to the Premises and/or
the-Raiding against loss, damage or liability for personal injury or death of
any person or loss or damage to property occurring in, upon or about the
Premises, with a minimum coverage of One Million Dollars ($1,000,000) per
occurrence/Two Million Dollars ($2,000,000) general aggregate, plus a Five
Million Dollar (55,000,000) per occurrence/general aggregate umbrella, (ii) fire
damage legal liability insurance and personal/advertising injury insurance
(which shall not be subject to the contractual, liability exclusion), each in
the minimum amount of One Million Dollars ($1,000,000), (iii) medical payments
insurance in the minimum amount of Five Thousand Dollars ($5,000), (iv) worker's
compensation insurance in statutory amounts, and (v) if Tenant operates owned,
leased or non-owned vehicles on the Property, comprehensive automobile liability
insurance with a minimum coverage of $1,000,000 per occurrence/ Two Million
Dollars ($2,000,000) general aggregate; provided, however, that if, at any time
during the Term, Tenant shall have in full force and effect a blanket policy of
public liability insurance with the same coverage for the Premises as described
above, as well as coverage of other premises and properties of Tenant, or in
which Tenant has some interest, the blanket insurance shall satisfy the
requirement hereof and be endorsed to separately apply to the Premises.

                                      16.
<PAGE>
         d. RENTAL ABATEMENT INSURANCE. Landlord may keep and maintain in full
force and effect during the Term rental abatement insurance against abatement or
loss of rents with respect to the Real Property in such amount as reasonably
determined by Landlord.

         e. INSURANCE CERTIFICATES. Tenant shall furnish to Landlord, on or
before the Commencement Date and thereafter within thirty (30) days prior to the
expiration of each policy, an original certificate of insurance issued by the
insurance carrier of each policy of insurance carried by Tenant pursuant to this
Section 13. The certificates shall expressly provide that the policies shall not
be cancelable or subject to reduction of coverage or otherwise be subject to
modification except after thirty (30) days' prior written notice to the parties
named as insureds. Landlord, its successors and assigns, and any nominee of
Landlord holding any direct or indirect ownership or security interest in the
Premises, including, without limitation, any ground lessor or the holder of any
fee or leasehold mortgage, shall be named as an additional insured under each
policy of insurance maintained by Tenant pursuant to this Lease. The policies
and certificates shall further provide that the coverage shall be primary, and
that any coverage carried by Landlord shall be secondary and noncontributory
with respect to Tenant's policy.

         f. TENANT'S FAILURE. If Tenant fails to maintain any insurance required
by this Lease, Tenant shall be liable for any loss or cost resulting from the
failure. This Section shall not be deemed to be a waiver of any of Landlord's
rights and remedies under any other provision of this Lease.

         g. WAIVER OF SUBROGATION. Any policy or policies of fire, extended
coverage, all risk or similar casualty or property insurance which either party
obtains in connection with the Building, the Premises, or Tenant's Personal
Property shall include a clause or endorsement denying the insurer any rights of
subrogation against the other party (and the other parties named as additional
insureds pursuant to Section 13.e. above) to the extent rights have been waived
by the insured prior to the occurrence of injury or loss. Landlord and Tenant
each waives any rights of recovery against the other (and the other parties
named as additional insureds pursuant to Section 13.e. above) for injury or loss
due to hazards insurable by policies of fire, extended coverage, all risk or
similar casualty or property insurance, regardless of-whether such insurance
policies or coverage shall actually have been obtained by the party granting
such waiver, and regardless of the cause of such fire or casualty, including the
negligence of the party benefiting from such waiver. Because this Section 13.g.
will preclude the assignment of any claim mentioned in it by way of subrogation
or otherwise to an insurance company or any other person, each party to this
Lease agrees immediately to give to each of its insurance companies written
notice of the terms of the mutual waivers contained in this Section 13.g. and to
have the insurance policies properly endorsed, if necessary, to prevent the
invalidation of the insurance coverages by reason of the mutual waivers
contained in this Section 13.g.

         h. TENANT'S PROPERTY AND FIXTURES. Tenant shall assume the risk of
damage to any of Tenant's furniture, equipment, machinery, goods, supplies or
fixtures or other Personal Property, and to any Alterations which Tenant may
make to the Premises, and shall insure the same throughout the Term, for their
full replacement cost, under insurance policies reasonably satisfactory to
Landlord (certificates of which shall be delivered to Landlord as set forth
above in Section 13.e). Tenant hereby releases Landlord from any obligation to
insure the foregoing items and from any liability for loss of or damage to such
items, regardless of cause.

                                      17.
<PAGE>
         i. EARTHQUAKE AND FLOOD INSURANCE. In addition to any other insurance
policies carried by Landlord in connection with the Building, Landlord may elect
to procure and maintain in full force and effect during the Term with respect to
the Building a policy of earthquake/volcanic action and flood and/or surface
water insurance, including rental value insurance against abatement or loss of
rent in the case of damage or loss covered under the earthquake/volcanic and
flood and/or surface water insurance, in an amount up to one hundred percent
(100%) of the full replacement cost (including debris removal and demolition) of
the Building.

14. ASSIGNMENT OR SUBLET.

         a. Tenant shall not assign this Lease or sublet the Premises or any
portion thereof without the prior written consent of Landlord in each instance,
which consent shall not, subject to Landlord's rights under clause (i) below, be
unreasonably withheld. If Tenant desires to assign this Lease or to sublet the
Premises, or any part thereof, Tenant shall give to Landlord written notice of
its intent at least thirty (30) days in advance of the date on which Tenant
desires to assign or sublet the Premises, which notice shall designate the terms
of the proposed assignment or sublet, the identity of the proposed assignee or
sublessee, and shall be accompanied by financial statements of such proposed
assignee or sublessee and such other information regarding such party and its
business and reputation as shall be required by Landlord to evaluate the
proposed assignment or sublet. Landlord shall have thirty (30) days after
receipt of Tenant's written notice and the above specified information within
which to notify Tenant in writing that Landlord elects to (i) terminate this
Lease, in the case of a proposed assignment, or to terminate this Lease as to
that portion of the Premises to be sublet, in the case of a proposed sublet the
term of which extends into the last three (3) years of the then Term of this
Lease, (ii) consent to the proposed assignment or sublet as described in
Tenant's notice, or (iii) refuse to consent to Tenant's proposed assignment or
sublet, stating the reasonable reasons for such refusal. If Landlord fails to
notify Tenant in writing of its election within the thirty (30) day period,
Landlord shall be deemed to have made the election in clause (iii) above. No
consent by Landlord to any assignment or sublet shall be deemed to be a consent
to a use not permitted under this Lease, to any act in violation of this Lease
or to any subsequent assignment or sublet. No assignment or sublet by Tenant
shall relieve Tenant of any liability theretofore or thereafter arising under
this Lease. Any attempted assignment or sublet by Tenant in violation of the
terms and covenants of this Section shall be void. The parties hereto agree and
acknowledge that, among other circumstances for which Landlord may reasonably
withhold its consent to an assignment or sublease, it shall be reasonable for
Landlord to withhold its consent where the assignment or subletting would cause
or trigger, under applicable Legal Requirements, a requirement for Beam
Alterations.

         b. PROCESSING EXPENSES. Tenant shall pay to Landlord, as Landlord's
cost of processing each proposed assignment or subletting (whether or not the
same is ultimately approved by Landlord or consummated by Tenant), an amount
equal to the sum of (i) Landlord's reasonable attorneys' and other professional
fees, plus (ii) the sum of $1000.00 for the cost of Landlord's administrative,
accounting and clerical time (collectively, "Processing Costs"). Notwithstanding
anything to the contrary herein, Landlord shall not be required to process any
request for Landlord's consent to an assignment or subletting until Tenant has
paid to Landlord the amount of Landlord's estimate of the Processing Costs. When
the actual amount of the

                                      18.
<PAGE>
Processing Costs is determined, it shall be reconciled with Landlord's estimate,
and any payments or refunds required as a result thereof shall promptly
thereafter be made by the parties.

         c. CONSIDERATION TO LANDLORD. In the event of any' assignment or
sublease, other than an assignment or sublease pursuant to Section 13.g.,
Landlord shall be entitled to receive as additional rent hereunder, seventy-five
percent (75%) of any consideration (including, without limitation, payment for
leasehold improvements) paid by the assignee or subtenant for the assignment or
sublease and, in the case of a sublease, the excess of the amount of rent paid
for the sublet space by the subtenant over the amount of Monthly Base Rent under
Section 4 above, Operating Expenses under Section 5 above and the Improvement
Advance under Paragraph l.f.iv. of EXHIBIT B attached hereto (if applicable)
attributable to the sublet space for the corresponding month. Upon Landlord's
request, Tenant shall direct any subtenant or assignee to pay the directly to
Landlord the amounts due to it pursuant to this Section 14.c. on account of such
sublease or assignment. If there is more than one sublease under this Lease, the
amounts (if any) to be paid by Tenant to Landlord pursuant to this Section 14.c.
shall be separately calculated for each sublease and amounts due Landlord with
regard to any one sublease may not be offset against rental and other
consideration pertaining to or due under any other sublease.

         d. DOCUMENTATION. No permitted assignment or subletting by Tenant shall
be effective until there has been delivered to Landlord a fully executed
counterpart of the assignment or sublease which expressly provides that (i) in
the case of a sublease, the subtenant may not assign its sublease or further
sublet the sublet space without Landlord's prior written consent, (ii) in the
case of an assignment, the assignee assumes all of Tenant's obligations under
this Lease arising on or after the date of the assignment, and (iii) in the case
of a sublease, the subtenant agrees to be and remain jointly and severally
liable with Tenant to Landlord for the payment of Rent pertaining to the sublet
space in the amount set forth in the sublease, and for the performance of all of
the terms and provisions of this Lease pertaining to the sublet space. In
addition to the foregoing, no assignment or sublease by Tenant shall be
effective until there has been delivered to Landlord a fully executed
counterpart of Landlord's consent to assignment or sublease form, as applicable.
The failure or refusal of a subtenant or assignee to execute any such instrument
shall not release or discharge the subtenant or assignee from its liability as
set forth above. Notwithstanding the foregoing, no subtenant or assignee shall
be permitted to occupy the Premises unless and until such subtenant or assignee
provides Landlord with certificates evidencing that such subtenant or assignee
is carrying all insurance coverage required of it under this Lease.

         e. NO MERGER. Without limiting any of the provisions of this Section
14, the voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation by Landlord and Tenant, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies or,
at the option of Landlord, operate as an assignment to Landlord of any or all
such subleases or subtenancies. If Landlord does elect that such surrender or
cancellation operate as an assignment of such subleases or subtenancies,
Landlord shall in no way be liable for any previous act or omission by Tenant
under the subleases or for the return of any deposit(s) under the subleases that
have not been actually delivered to Landlord, nor shall Landlord be bound by any
sublease modification(s) executed without Landlord's consent or for any advance
rental payment by the subtenant in excess of one month's rent.

                                      19.
<PAGE>
         f. INDIRECT ASSIGNMENTS. For purposes of this Section 14, the following
events shall be deemed an assignment or sublease, as appropriate: (i) the
issuance of equity interests (whether stock, partnership interests or otherwise)
in Tenant or any subtenant or assignee, or any entity controlling any of them,
to any person or group of related persons, in a single transaction or a series
of related or unrelated transactions, such that, following such issuance, such
person or group shall have Control (as defined below) of Tenant or any subtenant
or assignee; (ii) a transfer of Control of Tenant or any subtenant or assignee,
or any entity controlling any of them, in a single transaction or a series of
related or unrelated transactions (including, without limitation, by
consolidation, merger, acquisition or reorganization), except- that the issuance
of new, or the transfer of outstanding, capital stock or other listed equity
interests through the "over-the-counter" market or any recognized national or
international securities exchange (including as part of an initial public
offering of capital stock or other equity interests), shall not be included in
determining whether Control has been transferred; (iii) a reduction of Tenant's
assets to the point that this Lease and/or other leases are substantially
Tenant's only asset(s); or (iv) a change or conversion in the form of entity of
Tenant, any subtenant or assignee, or any entity controlling any of them, which
has the effect of limiting the liability of any of the partners, members or
other owners of such entity. "Control" shall mean direct or indirect ownership
of 50% or more of all of the voting stock of a corporation or 50% or more of the
voting legal or equitable interest in any other business entity, or the power to
direct the management and operations of any entity (by equity ownership,
contract or otherwise). The following transfers shall also be excluded in
determining whether Control has been transferred: (A) transfers in connection
with the death, disability or legal incapacity of an individual shareholder; (B)
transfers made from one spouse to another in connection with a dissolution of
marriage; and (C) transfers made to members of an individual shareholder's
family or to trusts established for the benefit of such family members.

         g. AFFILIATES: SUCCESSORS. Notwithstanding anything to the contrary in
Section 14.a or Section 14.c., but subject to the other provisions of this
Section 14, Tenant may assign this Lease or sublet the Premises or any portion
thereof, without Landlord's consent, to any partnership, corporation or other
entity which controls, is controlled by, or is under common control with Tenant
(control being defined for such purposes as ownership of 50% or more of all of
the voting stock of a corporation or 50% or more of the voting legal or
equitable interest in any other business entity, and the power to direct the
management and operations of, the relevant entity) (an "Affiliate") or to any
partnership, corporation or other entity resulting from a merger or
consolidation with Tenant or which acquires all or substantially all of Tenant's
assets (through a transfer of assets or equity interests in Tenant) as a going
concern and such assets include substantial assets other than this Lease (a
"Successor"), provided that (i) Landlord receives at least ten (10) days' prior
written notice of the assignment or subletting, in which Tenant shall expressly
confirm that Tenant remains primarily liable (together with the assignee in the
event of an assignment) for all of the obligations of the Tenant under this
Lease, except that if such prior notice shall be prohibited under applicable
Legal Requirements, then such notice shall be given as promptly as is
permissible under applicable Legal Requirements, (ii) in the case of an
assignment to a Successor, the Successor's net worth is not less than Tenant's
net worth immediately prior to such assignment (or series of transactions of
which such assignment is a part), (iii) in the case of a subletting or
assignment to an Affiliate, the Affiliate remains an Affiliate for the duration
of the subletting or the balance of the terns in the event of an assignment,
(iv) Landlord receives a fully executed copy of the assignment or sublease

                                      20.
<PAGE>
agreement between Tenant and the Affiliate or Successor at least ten (10) days
prior to the effective date of such assignment or sublease, in which the
Affiliate or Successor, as the case may be, assumes (in the event of an
assignment) all of Tenant's obligations under this Lease, and agrees (in the
event of a sublease) that such subtenant will, at Landlord's election, attorn
directly to Landlord in the event that this Lease is terminated for any reason,
except that if such prior delivery of the assignment or sublease shall be
prohibited under applicable Legal Requirements, then such delivery shall be made
as promptly as is permissible under applicable Legal Requirements, (v) the use
of the Premises will not change from the use of the Premises prior to such
assignment (or series of transactions of which such assignment is a part) or
subletting, and (vi) in the case of an assignment, the essential purpose of such
assignment is to transfer an active, ongoing business with substantial assets in
addition to this Lease, and in the case of an assignment or sublease the
transaction is for legitimate business purposes unrelated to this lease and the
transaction is not a subterfuge by Tenant to avoid it obligations under this
Lease or the restrictions on assignment and subletting contained herein.

15. DEFAULT.

         a. TENANT'S DEFAULT. A material breach of this Lease by Tenant shall
exist if any of the following events (severally, "Event of Default";
collectively, "Events of Default") shall occur: (i) if Tenant shall have failed
to pay Base Rent, Tenant's Percentage Share of increased Operating Expenses, or
any other sum required to be paid hereunder when due, including any interest due
under Section 3, and such failure shall continue for three (3) days after
written notice thereof from Landlord, except that Landlord shall only be
required to give two (2) such notices in any calendar year, and thereafter any
such failure by Tenant shall constitute an Event of Default without the
requirement of notice from Landlord; (ii) if Tenant shall have failed to perform
any term, covenant or condition of this Lease except those requiring the payment
of money, and Tenant shall have failed to cure the breach within fifteen (15)
days after written notice from Landlord if the breach could reasonably be cured
within fifteen (15) day period; provided, however, if the failure could not
reasonably be cured within the fifteen (15) day period, then Tenant shall not be
in default unless it has failed to promptly commence and thereafter continue to
make diligent and reasonable efforts to cure the failure as soon as practicable
as reasonably determined by Landlord; (iii) if Tenant shall have assigned its
assets for the benefit of its creditors; (iv) if the sequestration of,
attachment of, or execution on, any material part of the property of Tenant or
on any property essential to the conduct of Tenant's business shall have
occurred, and Tenant shall have failed to obtain a return or release of the
property within thirty (30) days thereafter, or prior to sale pursuant to any
sequestration, attachment or levy, whichever is earlier; (v) if Tenant shall
have abandoned the Premises; (vi) if a court shall have made or entered any
decree or order adjudging Tenant to be insolvent, or approving as properly filed
a petition seeking reorganization of Tenant, or directing the winding up or
liquidation of Tenant, and the decree or order shall have continued for a period
of thirty (30) days; (vii) if Tenant shall make or suffer any transfer which
constitutes a fraudulent or otherwise avoidable transfer under any provision of
the federal Bankruptcy Laws or any applicable state law; or (viii) if Tenant
shall have failed to comply with the provisions of Sections 22 or 24 of this
Lease within the time periods stated therein. An Event of Default shall
constitute a default under this Lease.

         b. REMEDIES UPON TENANT'S DEFAULT. Upon an Event of Default, Landlord
shall have the following remedies, in addition to all other rights and remedies
provided by law, equity,

                                      21.
<PAGE>
statute or otherwise provided in this Lease, to which Landlord may resort
cumulatively or in the alternative:

         (i) Landlord has the remedy described in California Civil Code Section
1951.4 (a landlord may continue the lease in effect after the tenant's breach
and abandonment and recover rent as it becomes due, if the tenant has the right
to sublet and assign subject only to reasonable limitations), and may continue
this Lease in full force and effect, and this Lease shall continue in full force
and effect as long as Landlord does not terminate Tenant's right to possession,
and Landlord shall have the right to collect Rent when due. During the period
Tenant is in default, Landlord may enter the Premises and relet it, or any part
of it, to third parties for Tenant's account, provided that any Rent in excess
of the Rent due hereunder shall be payable to Landlord. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises
including, without limitation, brokers' commissions, expenses of cleaning and
redecorating the Premises required by the reletting and like costs. Reletting
may be for a period shorter or longer than the remaining Term of this Lease.
Tenant shall pay to Landlord the Rent and other sums due under this Lease on the
dates the Rent is due, less the Rent and other sums Landlord receives from any
reletting. No act by Landlord allowed by this Subsection (i) shall terminate
this Lease unless Landlord notifies Tenant in writing that Landlord elects to
terminate this Lease.

         (ii) Landlord may terminate Tenant's right to possession of the
Premises at any time by giving written notice to that effect. No act by Landlord
other than giving written notice to Tenant of such termination shall terminate
this Lease. Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord shall have the right to remove all
personal property of Tenant and store it at Tenant's cost and to recover from
Tenant as damages: (a) the worth at the time of award of unpaid Rent and other
sums due and payable which had been earned at the time of termination; plus (b)
the worth at the time of award of the amount by which the unpaid Rent and other
sums due and payable which would have been payable after termination until the
time of award exceeds the amount of the Rent loss that Tenant proves could have
been reasonably avoided; plus (c) the worth at the time of award of the amount
by which the unpaid Rent and other sums due and payable for the balance of the
Term after the time of award exceeds the amount of the Rent loss that Tenant
proves could be reasonably avoided; plus (d) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's failure
to perform Tenant's obligations under this Lease, or which, in the ordinary
course of things, would be likely to result therefrom, including, without
limitation, any costs or expenses incurred by Landlord: (1) in retaking
possession of the Premises, including reasonable attorneys' fees and costs
therefor; (2) maintaining or preserving the Premises for reletting to a new
tenant, including repairs or alterations to the Premises for the reletting; (3)
leasing commissions; (4) any other costs necessary or appropriate to relet the
Premises; and (5) 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 California
Civil Code Section 1951.2 or any other laws of the State of California.

         The "worth at the time of award" of the amounts referred to in
Subsections (ii)(a) and (ii)(b) is computed by allowing interest at the lesser
of eighteen percent (18%) per annum or the maximum rate permitted by law, on the
unpaid Rent and other sums due and payable from the

                                      22.
<PAGE>
date due through the date of award. The "worth at the time of award" of the
amount referred to in Subsection (ii)(c) is computed by discounting the amount
at the discount rate of the Federal Reserve Bank of San Francisco at the time of
award, plus one percent (1%). Tenant waives redemption or relief from forfeiture
under California Code of Civil Procedure Sections 1174 and 1179, or under any
other present or future law, if Tenant is evicted or Landlord takes possession
of the Premises by reason of any default of Tenant hereunder.

         c. LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default in
the performance of any obligation required to be performed by Landlord hereunder
unless and until Landlord has failed to perform the obligation within thirty
(30) days after receipt of written notice by Tenant to Landlord specifying the
obligation Landlord has failed to perform; provided, however, that if the nature
of Landlord's obligation is such that more than thirty (30) days are required
for its performance, then Landlord shall not be deemed to be in default if
Landlord shall commence the performance of such obligation within the thirty
(30) day period and thereafter shall diligently prosecute the same to
completion.

16. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.

         If Tenant shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease, Landlord may,
but shall not be obligated to, make the payment or perform any other act to the
extent Landlord may deem desirable and, in connection therewith, pay expenses
and employ counsel. Any payment or performance by Landlord shall not waive or
release Tenant from any obligations of Tenant under this Lease. All sums so paid
by Landlord, and all penalties, interest and costs in connection therewith,
shall be due and payable by Tenant on the next day after any payment by
Landlord, together with interest thereon at the Interest Rate, from that date to
the date of payment thereof by Tenant to Landlord, plus collection costs and
attorneys' fees. Landlord shall have the same rights and remedies for the
nonpayment thereof as in the case of default in the payment of Base Rent.

17. LETTER OF CREDIT.

         a. LETTER OF CREDIT. Within ten (10) days after the date of this Lease,
Tenant shall deliver to Landlord the Letter of Credit described below as
security for Tenant's performance of all of Tenant's covenants and obligations
under this Lease; provided, however, that neither the Letter of Credit nor any
proceeds therefrom (the "Letter of Credit Proceeds") shall be deemed an advance
rent deposit or an advance payment of any other kind, or a measure or limitation
of Landlord's damages or constitute a bar or defense to any of the Landlord's
other remedies under this Lease or at law upon Tenant's default. The Letter of
Credit shall be maintained in effect from the date of this Lease through thirty
(30) days after the expiration or earlier termination of the Term, and on or
prior to the expiration of such thirty (30) day period, Landlord shall return to
Tenant the Letter of Credit (unless presented for payment as provided herein)
and any Letter of Credit Proceeds then held by Landlord (other than those held
for application by Landlord as provided below, including application to cure any
failure by Tenant to restore the Premises as required by this Lease upon the
surrender thereof); provided, however, that in no event shall any such return be
construed as an admission by Landlord that Tenant has performed all of its
obligations hereunder. Landlord shall not be required to segregate the Letter of
Credit Proceeds from its other funds and no interest shall accrue or be payable
to Tenant with respect thereto.

                                      23.
<PAGE>
Landlord may (but shall not be required to) draw upon the Letter of Credit and
use the Letter of Credit proceeds or any portion thereof to cure any Event of
Default by Tenant under this Lease or to compensate Landlord for any damage
Landlord incurs as a result of Tenant's failure to perform any of its
obligations hereunder, it being understood that any use of the Letter of Credit
Proceeds shall not constitute a bar or defense to any of Landlord's other
remedies under this Lease. In such event and upon written notice from Landlord
to Tenant specifying the amount of the Letter of Credit Proceeds so utilized by
Landlord and the particular purpose for which such amount was applied, Tenant
shall immediately deliver to Landlord an amendment to the Letter of Credit or a
replacement thereof in an amount equal to one hundred percent (100%) of the
amount specified below for the applicable period. Tenant's failure to deliver
such amendment or replacement to Landlord within five (5) days of Landlord's
notice shall constitute an Event of Default hereunder. No lessor under any
ground or underlying lease or holder of or beneficiary under a mortgage or deed
of trust, nor any purchaser at any judicial or private foreclosure sale of the
Property or any portion thereof, shall be responsible to Tenant for such Letter
of Credit or any Letter of Credit Proceeds unless such lessor, holder or
purchaser shall have actually received the same.

         b. As used herein, Letter of Credit shall mean an unconditional,
irrevocable letter f credit (hereinafter referred to as the "Letter of Credit")
issued at Tenant's sole expense by the San Francisco office of a national bank
satisfactory to Landlord (the "Bank"), naming Landlord as beneficiary, and in
the form and substance satisfactory to Landlord, in the amount of One Million
Two Hundred Thousand Dollars ($1,200,000.00) during the period from the delivery
date thereof through the fourth annual anniversary of the Commencement Date, and
reducing in amount on the fourth annual anniversary of the Commencement Date and
each annual anniversary of the Commencement Date thereafter by an amount equal
to twenty-five percent (25%) of the original amount of the Letter of Credit;
provided, however, that if on the date the Letter of credit amount would
otherwise reduce, an Event of Default, or default that with notice or the
passage of time or both could mature into an Event of Default, shall have
occurred and be continuing, the Letter of Credit amount shall not reduce on such
date and shall not thereafter reduce until such Event of Default or default
shall have been cured. The Letter of Credit shall be for a one-year or, at
Tenant's election, longer, term and shall provide: (i) that Landlord may make
mark partial and multiple draws thereunder, up to the face amount thereof, (ii)
that Landlord may draw upon the Letter of Credit up to the full amount thereof,
as determined by Landlord, and the Bank will pay to Landlord the amount of such
draw upon receipt by the Bank of a sight draft signed by Landlord and
accompanied by a written certification from Landlord to the Bank stating either:
(a) that an Event of Default has occurred and is continuing under this Lease, or
(b) that an uncured failure by the Tenant to perform one or more of its
obligations has occurred under this Lease and there exist circumstances under
which Landlord is enjoined or otherwise prevented by operation of law from
giving to Tenant a written notice which would be necessary for such failure of
performance to constitute an Event of Default under this Lease, or (c) that
Landlord has not received notice from the Bank that the Letter of Credit will be
renewed by the Bank for at least one (1) year beyond the then relevant
expiration date and Tenant has not furnished Landlord with a replacement Letter
of Credit as hereinafter provided, or (d) that Bank no longer meets the
requirements set forth above and Tenant has not furnished Landlord with a
replacement Letter of Credit as required hereunder from a Bank meeting such
requirements; and (iii) that, in the event of Landlord's assignment or other
transfer of its interest in this Lease, the Letter of Credit shall be freely
transferable by Landlord, without charge and without recourse, to

                                      24.
<PAGE>
the assignee or transferee of such interest and the Bank shall confirm the same
to Landlord and such assignee or transferee. The Letter of Credit shall further
provide that a draw thereon pursuant to clause (ii)(c) above may only be made
during the forty-five (45) day period preceding the then applicable expiration
date of the Letter of Credit. In the event that the Bank shall fail to notify
Landlord that the Letter of Credit will be renewed for at least one (1) year
beyond the then applicable expiration date, and Tenant shall not have delivered
to Landlord, at least forty-five (45) days prior to the relevant annual
expiration date, a replacement Letter of Credit in the amount required hereunder
and otherwise meeting the requirements set forth above, then Landlord shall be
entitled to draw on the Letter of Credit as provided above, and shall hold and
apply the proceeds of such draw as Letter of Credit Proceeds pursuant to
Paragraph 17.b. above.

         Notwithstanding the foregoing, in the event that Landlord shall be
required to make the Improvement Advance described in EXHIBIT B attached hereto,
then the original amount of the Letter of Credit shall be increased by the
amount of the Improvement Advance within ten (10) days after determination of
the amount of the Improvement Advance.

         In the event that Tenant shall not deliver the Letter of Credit to
Landlord in the form and amount required hereby on or prior to the date required
hereby, then in lieu thereof Tenant shall deliver to Landlord cash in the amount
of the so required Letter of Credit, and Tenant's failure to deliver either cash
or the Letter of Credit shall be deemed an Event of Default hereunder. In
addition to Landlord's other rights and remedies by reason of such Event of
Default, each day which passes after the applicable due date for the Letter of
Credit until and including the day on which Tenant shall deliver such cash or
Letter of Credit to Landlord shall be chargeable to Tenant as a day of Tenant
Delay pursuant to Section 2 above of this Lease.

18. SURRENDER OF PREMISES.

         By taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises and the Property in good, clean and completed condition
and repair, subject to all applicable laws, codes and ordinances, but the
foregoing shall not release Landlord from liability for completion of Punch List
Items or Landlord's repair obligations under this Lease. On the Expiration Date
or earlier termination of this Lease, Tenant shall surrender the Premises to
Landlord in its condition as of the Commencement Date, normal wear and tear and
damage by fire or other casualty or eminent domain excepted. Tenant shall remove
from the Premises all of Tenant's Personal Property and any Alterations required
to be removed pursuant to Section 9 of this Lease. Tenant shall repair any
damage or perform any restoration work required by the removal. If Tenant fails
to timely remove any Personal Property or Alterations as aforesaid, Landlord may
remove the property and store and/or dispose of the same at Tenant's expense,
including interest at the Interest Rate. If the Premises are not so surrendered
at the termination of this Lease, Tenant shall indemnify Landlord against all
Claims resulting from delay by Tenant in so surrendering the Premises,
including, without limitation, any claims made by any succeeding tenant, losses
to Landlord due to lost opportunities to lease to succeeding tenants, and
attorneys' fees and costs. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Premises and shall meet with Landlord for
a joint inspection of the Premises at the time of vacating. In the event of
Tenant's failure to give such notice or participate in such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall
conclusively be

                                      25.
<PAGE>
deemed correct for purposes of determining Tenant's responsibility for removal
of Alterations and repairs and restoration of the Premises.

19. HOLDING OVER.

         If Tenant remains in possession of all or any part of the Premises
after the expiration of the Term or the earlier termination of this Lease
without Landlord's prior written consent, the tenancy shall be a tenancy at
sufferance only and shall not constitute a renewal or extension for any further
term, regardless of whether Landlord shall accept Rent for any such period. In
such event, Base Rent shall be increased in an amount equal to the greater of
(i) two hundred percent (200%) of the Base Rent during the last month of the
Term (including any extensions); and (ii) two hundred percent (200%) of the fair
market value of the Premises. and any other sums due under this Lease shall be
payable in the amount, and at the times, specified in this Lease. The tenancy
shall be subject to every other term, condition, covenant and agreement
contained in this Lease, except that any renewal or extension option in favor of
Tenant shall not be applicable. No such increase shall impair Landlord's other
rights and remedies against Tenant by reason of such holding over by Tenant, and
Tenant shall vacate the Premises immediately upon Landlord's request.

20. ACCESS TO PREMISES.

         Tenant shall permit Landlord and its agents to enter the Premises at
all reasonable times upon reasonable notice, except in the case of an emergency
(in which event entry may be made when necessary and without notice), to inspect
the Premises, to post Notices of Nonresponsibility and similar notices, to show
the Premises to interested parties such as prospective mortgagees, purchasers
and (during the last one year of the Term) tenants, to provide any services
required of Landlord hereunder, to make necessary alterations, additions,
improvements or repairs either to the Premises, the Building, or other premises
within the Building, and to discharge Tenant's obligations hereunder when Tenant
has failed to do so within a reasonable time after written notice from Landlord.
No such entry shall constitute a constructive eviction or give rise to an
abatement of Rent hereunder, constitute a constructive eviction, or otherwise
diminish Tenant's obligations under this Lease. In exercising its rights under
this Section 20, Landlord shall at all times endeavor to minimize interference
with Tenant's operations, to the extent practicable. During the last year of the
Term, Landlord shall have the right to erect on the exterior of the Premises
and/or on the exterior or in the Common Areas of the Building and the Property
suitable signs indicating that the Premises are available for lease.

21. SIGNS.

         a. GENERAL. The size, design, color, location and other physical
aspects of any sign in or on the Premises shall be subject to the CC&R's,
Rules., Landlord's approval prior to installation, and to all Legal
Requirements. The costs of any permitted sign, and the costs of its
installation, maintenance and removal, shall be at Tenant's sole expense and
shall be paid within ten (10) days of Tenant's receipt of a bill from Landlord
for the costs. In no event shall Tenant be permitted to place any sign, logo or
other identification on the exterior of the Building, in the Building's Common
_Areas (other than on a Building directory maintained to identify the

                                      26.
<PAGE>
Building's tenants), or upon the Property, or which is inside the Premises but
visible from outside of the Premises (other than upon the door(s) to the
Premises).

         b. EXTERIOR BUILDING, SIEGE. Notwithstanding Section 21.a., so long as
the Tenant under this Lease (i) is the Tenant originally named under this Lease
in the Basic Lease Information, (ii) is in occupancy pursuant to this Lease of
the entire Premises originally demised under this Lease, and (iii) is not in
default of any of its obligations hereunder beyond the expiration of any
applicable grace and cure period, Tenant shall be permitted to maintain
identification signage at the top of one exterior side of the Building in a
location reasonably approved by Landlord. The installation, maintenance and
removal of Tenant's signage pursuant to this Section 21.b. shall be performed by
Tenant at Tenant's expense, but in coordination with Landlord and its reasonable
installation procedures and requirements, or at Landlord's option, by Landlord
at Tenant's expense. Such signage of Tenant shall be subject to Landlord's prior
approval and all Legal Requirements, and shall be limited to Tenant's name
and/or logo. If Tenant shall fail to meet the signage conditions specified
herein, Landlord may immediately remove Tenant's signage at Tenant's expense,
and Tenant's signage rights pursuant to this Section 21.b. shall thereafter
forever cease and terminate; provided, however, that if applicable Legal
Requirements do not require removal of such signage prior to the expiration of
the thirty (30) day period hereinafter provided, Landlord shall not remove such
signage unless it shall have given Tenant thirty (30) days' prior notice of the
signage conditions Tenant has failed to meet, and such failure continues after
the expiration of such thirty (30) day period. Upon the expiration or earlier
termination of this Lease, Tenant shall, at Tenant's expense, or at Landlord's
option Landlord shall, at Tenant's expense, remove Tenant's signage and repair
any damage to the Building caused by such removal. Tenant's signage rights with
respect to the exterior of the Building as provided above are non-exclusive, and
Landlord reserves the right to grant other signage rights with respect to the
exterior of the Building.

22. SUBORDINATION.

         a. SUBORDINATE NATURE. Except as provided in Subsection b., this Lease
is subject and subordinate to all ground and underlying leases, mortgages and
deeds of trust which now or may hereafter affect the Real Property or any
portion thereof, to the CC&R's, and to all renewals, modifications,
consolidations, replacements and extensions of the foregoing, without the
necessity of any further documentation evidencing such subordination.
Notwithstanding such self-operative subordination, within ten (10) days after
Landlord's written request therefor, Tenant shall execute any and all documents
required by Landlord, the lessor under any ground or underlying lease ("Ground
Lessor"), or the holder or holders of any mortgage or deed of trust ("Holder"),
evidencing this Lease to be subordinate to the lien of any such lease, mortgage
or deed of trust, as the case may be. Tenant hereby irrevocably appoints
Landlord as Tenant's attorney-in-fact to execute and deliver any such instrument
in the name of Tenant if Tenant fails to do so within such time. If the interest
of Landlord in the Real Property or the Building is transferred to any Ground
Lessor or Holder pursuant to or in lieu of proceedings for enforcement of any
such lease, mortgage, or deed of trust, Tenant shall immediately and
automatically attorn to the Ground Lessor or Holder, and this Lease shall
continue in full force and effect as a direct lease between the Ground Lessor or
Holder and Tenant on the terms and conditions set forth herein.

                                      27.
<PAGE>
         b. POSSIBLE PRIORITY OF LEASE. If a Ground Lessor or a Holder advises
Landlord that it desires or requires this Lease to be prior and superior to a
lease, mortgage or deed of trust, Landlord may notify Tenant. Within seven (7)
days of Landlord's notice, Tenant shall execute, have acknowledged and deliver
to Landlord any and all documents or instruments, in the reasonable form
presented to Tenant, which Landlord, Ground Lessor or Holder deems necessary or
desirable to make this Lease prior and superior to the lease, mortgage or deed
of trust.

         c. LEASE MODIFICATION. If, in connection with obtaining financing for
the Real Property or any portion thereof, any Holder or Ground Lessor shall
request reasonable modification to this Lease as a condition to such ground
lease or financing, Tenant shall execute and deliver to Landlord, within ten
(10) days of Landlord's request, any such modification agreement so requested,
provided such modifications do not materially adversely affect Tenant's rights
or materially increase Tenant's obligations hereunder.

         d. NONDISTURBANCE AGREEMENT. Landlord represents that there are no
mortgages or deeds of trust or ground or underlying leases in place as of the
date of this Lease with respect to the Real Property. As a condition to
subordination of this Lease to any mortgage, deed of trust or ground or
underlying lease arising after the date of this Lease, Landlord shall deliver to
Tenant in recordable form, and Tenant agrees to execute and shall have the right
to record with the county recorder of the county in which the Property is
located, a subordination, non-disturbance and attornment agreement from the
applicable Ground Lessor or Holder in the form reasonably required by such
party. If the applicable Ground Lessor or Holder shall impose any fees or
charges in connection with such subordination, non-disturbance and attornment
agreement, Tenant shall either pay the same in advance upon notice thereof from
Landlord, or the delivery of such agreement shall no longer be a condition of
the subordination of this Lease and Landlord shall be relieved of any obligation
to provide such agreement to Tenant.

23. TRANSFER OF THE PROPERTY.

         Upon transfer of the Real Property and assignment of this Lease,
Landlord shall be entirely freed and relieved of all liability under any and all
of its covenants and obligations contained in or derived from this Lease
occurring after the consummation of the transfer and assignment and, subject to
Section 25 below and Section 22 above and the terms of any subordination,
non-disturbance and attornment agreement executed pursuant thereto, the
transferee shall be deemed to have assumed such covenants and obligations, and
if Landlord shall transfer the Letter of Credit and the Letter of Credit
Proceeds, if any, to the transferee of Landlord's interest in the Real Property,
Landlord shall be released from all liability for the same. Tenant shall attorn
to any entity purchasing or otherwise acquiring the Premises at any sale or
other proceeding.

24. ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS.

         Within ten (10) days following written request by Landlord from time to
time throughout the Term, Tenant shall execute and deliver to Landlord an
estoppel certificate in the form attached hereto as EXHIBIT F, duly completed by
Tenant. At the request of Landlord from time to time during the Term, Tenant
shall provide to Landlord its current financial statements or other information
setting forth Tenant's financial condition and net worth. Landlord shall use

                                      28.
<PAGE>
such documentation solely for purposes of this Lease and in connection with the
ownership, financing, management and disposition of the Real Property.

25. MORTGAGEE PROTECTION.

         In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to each Ground Lessor and Holder whose
identity and address have been disclosed to Tenant, and shall offer the Ground
Lessor or Holder a reasonable opportunity after such notice (but in no event
less than thirty (30) days) to cure the default, including time to obtain
possession of the Property or the Premises by lease termination, power of sale
or a judicial foreclosure (as applicable), if such should prove necessary to
effect a cure. In no event shall any Ground Lessor or Holder in any way or to
any extent be: (a) liable for any act or omission of any prior Landlord in
contravention of any provision of this Lease; or (b) subject to any offsets,
claims or defenses which Tenant might have against any prior Landlord; or (c)
bound by any Rent which Tenant might have paid for more than thirty (30) days in
advance to any prior Landlord; or (d) bound by any agreement or modification of
this Lease made without such Ground Lessor's or Holder's written consent. Tenant
agrees that if any Ground Lessor or Holder acquires possession of the Premises
or title to the Real Property as a result of termination of its ground lease or
foreclosure of such Holder's deed of trust or other security instrument, as
applicable, the acceptance of a lease surrender or deed in lieu of such
foreclosure, or otherwise, the provisions of Section 36 below shall be
applicable to liability of such Ground Lessor or Holder as successor Landlord
under this Lease.

26. ATTORNEYS' FEES.

         If either party shall bring any action or legal proceeding for damages
for an alleged breach of any provision of this Lease, to recover rent or other
sums due, to terminate the tenancy of the Premises or to enforce, protect or
establish any term, condition or covenant of this Lease or right of either
party, the prevailing party shall be entitled to recover, as a part of the
action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys' fees and court costs as may be fixed by the court or jury.
The prevailing party shall be the party which secures a final judgment in its
favor, provided that if the party bringing any action shall dismiss the same
without the consent of the other party, the other party shall be deemed the
prevailing party.

27. BROKERS.

         Tenant warrants and represents that it has had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease,
except for any brokers(s) specified in the Basic Lease Information, and that it
knows of no other real estate broker or agent who is or might be entitled to a
fee, commission or other compensation in connection with this Lease. Tenant
shall indemnify and hold harmless Landlord from and against any and all
liabilities or expenses (including reasonable attorneys' fees and costs) arising
out of claims made by any other broker or individual for a fee, commission or
other compensation resulting from this Lease.

28. PARKING.

         Tenant shall have the right to use unreserved self-park spaces in the
Building's parking common parking facilities, twenty-four hours a day,- seven
days a week (subject to Landlord's

                                      29.
<PAGE>
repair and maintenance obligations under this Lease and to Force Majeure), upon
such terms and conditions as may from time to time be reasonably established by
Landlord, at the ratio of 2.75 parking spaces per 1,000 rentable square feet of
the Premises (as rounded down to the nearest whole space). Such ratio yields a
total of one hundred ten (110) spaces at the inception of this Lease. The charge
for each such space shall initially be Sixty Dollars ($60.00) per month and
shall be considered additional Rent for all purposes of this Lease. Such charge
shall be increased as of the first annual anniversary of the Commencement Date
and each annual anniversary thereafter of the Commencement Date to the then
prevailing market rate for the Building's parking facilities, but in no event
shall such rate be less than Sixty Dollars ($60.00) per month. Tenant shall not
use in excess of the number of spaces for which it is paying the foregoing
parking charge, and Tenant agrees to cooperate with Landlord and other tenants
in the use of the parking facilities. Landlord reserves the right, in its
absolute discretion, to determine whether the parking facilities are becoming
crowded and to allocate and assign parking spaces among Tenant and the other
tenants. Landlord shall not be liable to Tenant, nor shall this Lease be
affected, if any parking is impaired by moratorium, initiative, referendum, law,
ordinance, regulation or order passed, issued or made by any governmental or
quasi-governmental body or by fire or other casualty. Upon Landlord's request,
Tenant shall provide Landlord with written notice of the names of each party to
whom Tenant from time to time distributes Tenant's parking rights hereunder (all
of whom must be employees, partners, members, and/or shareholders, as
applicable, of Tenant or any permitted subtenant hereunder), and upon Landlord's
request Tenant shall cause each such party to execute Landlord's standard
contract and waiver form for use of the parking facilities. If the parking
charge is not paid when due, and such failure continues for five (5) days after
notice thereof to Tenant, then Landlord may terminate Tenant's rights under this
Section 28 as to the number of spaces as to which the parking charge has not
been paid in full. The parking rights set forth in this Section 28 are personal
to the then Tenant under this Lease and any permitted subtenants hereunder and
shall not inure to the benefit of any other party. Further, if at any time
during the tern hereof, Tenant releases to Landlord any parking space provided
for in this Section 28, then Tenant's right under this Section 28 to use such
released parking space shall forever terminate.

29. UTILITIES AND SERVICES.

         Landlord agrees to furnish, or cause to be furnished, to the Premises
the utilities and services described in EXHIBIT F attached hereto, subject to
the conditions and in accordance with the standards set forth therein and in
this Section 29. Except as provided EXHIBIT F and in this Section 29, Tenant
shall arrange for all utilities and services which it shall require in
connection with its use or occupancy of the Premises and shall pay for the same,
together with any taxes, penalties, surcharges or the like pertaining thereto.
Without limitation, but subject to Landlord's performance of Landlord's Work,
Tenant shall have sole responsibility for arranging for the provision of
electricity and gas to the Premises from the applicable utility company, and
Landlord shall have no responsibility to provide the same. As part of the Tenant
Improvements, separate meters shall be installed in the Premises, or elsewhere
in the Building as Landlord shall elect, to measure the electricity and gas,
respectively, consumed in the Premises and by the HVAC equipment serving the
Premises, and Tenant shall pay the costs of such electricity and gas directly to
the utility providers. If at any time during the Term such direct arrangements
shall not be permitted by Legal Requirements or if. Landlord shall otherwise
require, Tenant, at its expense (or, at Landlord election, Landlord, at Tenant's
expense) shall install a submeter to

                                      30.
<PAGE>
measure such electrical consumption and Tenant shall pay the costs of such
electrical consumption to Landlord. In any case, the costs of such meter or
submeter, special conduits, wiring and panels needed in connection therewith and
the installation, maintenance and repair thereof shall be paid for by Tenant
(except to the extent Landlord's Contribution pursuant to EXHIBIT B is utilized
for the same). In the case of all water and other utilities or services which
are not separately metered to Tenant, Tenant shall pay a reasonable proportion,
as reasonably determined by Landlord, of all charges of providing the same to
the Premises and other premises. Landlord may estimate all charges payable by
Tenant to Landlord pursuant to this Section 29 and require Tenant to pay the
same in monthly installments based on such estimates in the same manner as
provided pursuant to Section 5.c. with respect to Operating Expenses. Such
charges and payments shall also be subject to annual reconciliation in the same
manner as provided pursuant to Section 5.c. with respect to Operating Expenses.
Landlord shall not be liable for any damages directly or indirectly resulting
from, nor shall the Base Rent, Operating Expenses or any other monies owed by
Tenant to Landlord under this Lease be abated or reduced by reason of, nor shall
any constructive eviction of Tenant shall result from, (a) the installation, use
or interruption of use of any equipment used in connection with the furnishing
of any of the foregoing utilities and services, (b) failure to furnish or delay
in furnishing any such utilities or services for any reason whatsoever, or (c)
the limitation, curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or the Real Property. In the event of any
failure, stoppage or interruption in any utilities or services which Landlord is
obligated to provide pursuant to EXHIBIT F, Landlord shall use its diligent
efforts to cause the provision of such utilities or services to be resumed.
Landlord shall be entitled to cooperate voluntarily and in a reasonable manner
with the efforts of national, state or local government agencies or utility
suppliers in reducing energy or other resource consumption. Landlord's
obligation to make utilities and services available hereunder shall be subject
to the limitations of any such voluntary, reasonable program.

30. FITNESS FACILITY. At Landlord's sole election, Landlord may operate a
fitness facility on the Property and the costs associated with the same shall be
included in Operating Expenses pursuant to Section 5. The provisions of Section
13.a. shall fully apply in connection with use of such facility by Tenant or any
other Tenant Party. Without limitation of the preceding sentence, Tenant shall
hold Landlord and the other Indemnitees harmless from and indemnify the
Indemnitees against any and all Claims to the extent arising from (a) the acts
or omissions of Tenant or any other Tenant Party in, on or about the fitness
facility, or (b) any accident, injury or damage, howsoever and by whomsoever
caused, to any Tenant Party, occurring in, on or about the fitness facility.
Landlord may prescribe rules and regulations for the use of such facility, and
Tenant's use thereof shall be conditioned upon Tenant's observance of such rules
and regulations. Landlord may at any time close or permanently discontinue
operation of any such facility, without any liability to Tenant or any
obligation to open or make available to Tenant a replacement facility.

31. ACCEPTANCE.

         Delivery of this Lease, duly executed by Tenant, constitutes Tenant's
offer to lease the Premises as set forth herein, and under no circumstances
shall such delivery be deemed to create an option or reservation to lease the
Premises for the benefit of Tenant. This Lease shall become

                                      31.
<PAGE>
effective and binding only upon execution hereof by Landlord and delivery of a
signed copy to Tenant. If Landlord does not accept the Tenant's offer, any sums
delivered by Tenant with its offer shall be returned to Tenant.

32. USE OF BUILDING NAME.

         Tenant shall not employ the name of the Building in the name or title
of its business or occupation, or for any other purpose, except to identify the
address of the Building, without Landlord's prior written consent, which consent
Landlord may withhold in its sole discretion. Landlord reserves the right to
change the name of the Building without Tenant's consent and without any
liability to Tenant.

33. RECORDING.

         Neither Landlord nor Tenant shall record this Lease, nor a short form
memorandum of this Lease, without the prior written consent of the other.

34. QUITCLAIM.

         Upon any termination or expiration of this Lease pursuant to its terms,
Tenant, at Landlord's request, shall execute, have acknowledged and deliver to
Landlord a quitclaim deed of all Tenant's interest in the Premises, Building and
Property created by this Lease.

35. NOTICES.

         Any notice, demand or request required or desired to be given under
this Lease shall be in writing sent to the address of the party specified in
this Lease, and shall be given by hand delivery, electronic mail (e.g.,
telecopy), overnight courier service (e.g., Federal Express), or the United
States mail, registered or certified, the postage prepaid. All notices shall be
deemed to have been given when received at the address of the party to which it
has been sent (or when such receipt is refused). As of the date of execution of
this Lease, the addresses of Landlord and Tenant are as specified in the Basic
Lease Information. Either party may change its address by giving notice of the
change in accordance with this Section.

36. LANDLORD'S EXCULPATION.

         The term "Landlord," as used in this Lease, shall mean only the owner
or owners of the Real Property at the time in question. Notwithstanding any
other provision of this Lease, the liability of Landlord for its obligations
under this Lease is limited solely to Landlord's interest in the Real Property
as the same may from time to time be encumbered, and no personal liability shall
at any time be asserted or enforceable against any other assets of Landlord or
against the constituent shareholders, partners or other owners of Landlord, or
the directors, officers, employees and agents of Landlord or such constituent
shareholder, partner or other owner, on account of any of Landlord's obligations
or actions under this Lease. Notwithstanding any other provision of this Lease,
Landlord shall not be liable for any consequential damages or interruption or
loss of business, income or profits, nor shall Landlord be liable for loss of or
damage to artwork, currency, jewelry, bullion, unique or valuable documents,
securities or other valuables, or for other property not in the nature of
ordinary fixtures, furnishings and equipment.

                                      32.
<PAGE>
Wherever in this Lease Tenant (a) releases Landlord from any claim or liability,
(b) waives or limits any right of Tenant to assert any claim against Landlord or
to seek recourse against any property of Landlord or (c) agrees to indemnify
Landlord against any matters, the relevant release, waiver, limitation or
indemnity shall run in favor of and apply to Landlord, the constituent
shareholders, partners or other owners of Landlord, and the directors, officers,
employees and agents of Landlord and each such constituent shareholder, partner
or other owner. In no event shall any shareholder, partner, member, officer,
director or other constituent of Landlord or its direct or indirect constituents
ever be personally liable for Landlord's obligations or liability under this
Lease.

37. ADDITIONAL STRUCTURES.

         Any diminution or interference with light, air or view by any structure
which may be erected on land adjacent to the Building shall in no way alter this
Lease or impose any liability on Landlord.

38. CONSENTS AID APPROVALS.

         Wherever the consent, approval, judgment or determination of Landlord
is required or permitted under this Lease, except is expressly provided herein
Landlord may exercise its sole discretion in granting or withholding such
consent or approval or in making such judgment or determination. Whenever Tenant
requests Landlord to take any action or give any consent or approval, Tenant
shall reimburse Landlord for all of Landlord's costs incurred in reviewing the
proposed action or consent (whether or not Landlord consents to any such
proposed action), including, without limitation, reasonable attorneys' or
consultants' fees and expenses, within ten (10) days after Landlord's delivery
to Tenant of a statement of such costs. If it is determined that Landlord failed
to give its consent or approval where it was required to do so under this Lease,
Tenant's sole remedy will be an order of specific performance or mandatory
injunction of the Landlord's agreement to give its consent or approval unless it
is judicially determined that Landlord's failure was in bad faith. The review
and/or approval by Landlord of any item shall not impose upon Landlord any
liability for accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use. Any such review or approval is
for the sole purpose of protecting Landlord's interest in the Real Property, and
neither Tenant nor any Tenant Party nor any person or entity claiming by,
through or under Tenant, nor any other third party shall have any rights
hereunder by virtue of such review and/or approval by Landlord.

39. RENEWAL OPTION.

         a. Tenant shall have the option to renew this Lease for one (1)
additional term of five (5) years, commencing upon expiration of the initial
Term. Such renewal option must be exercised, if at all, by written notice given
than nine (9) months prior to expiration of the initial Term. Notwithstanding
the foregoing, this renewal option shall be null and void and Tenant shall have
no right to renew this Lease if (i) as of the date immediately preceding the
commencement of the renewal period the original Tenant named under this Lease in
the Basic Lease Information or any Affiliate thereof or Successor thereto is not
in occupancy of the entire Premises then demised hereunder or such Tenant or any
Affiliate thereof or Successor thereto does not intend to continue to occupy the
entire Premises then demised hereunder (but intends to

                                      33.
<PAGE>
assign this Lease or sublet the Premises in whole or in part), or (ii) on the
date Tenant exercises such renewal option or on the date immediately preceding
the commencement date of the renewal period an Event of Default shall have
occurred and be continuing under this Lease.

         If Tenant exercises such renewal option, then during the renewal term
all of the terms and conditions set forth in this Lease as applicable to the
Premises during the initial Term shall apply during the renewal term, except
that (i) Tenant shall have no further right to renew this Lease, (ii) Tenant
shall take the Premises in their then "as-is" state and condition and Landlord
shall have no obligation to make or pay for any improvements to the Premises,
and (iii) during the renewal period the Base Rent payable by Tenant shall be the
then fair market rent for the. Premises based upon the terms of this Lease, as
renewed. For purposes of this Section 39, the term "fair market rent" shall mean
the rental rate for comparable space under primary lease (and not sublease) to
new tenants, taking into consideration all relevant factors, including such
amenities as existing improvements, view, floor on which the Premises are
situated and the like, situated in comparable buildings in comparable business
centers in the county in which the Property is located, taking into
consideration the then-prevailing ordinary rental market practices with respect
to tenant concessions (if any) (e.g. not offering extraordinary rental,
promotional deals and other concessions to tenants which deviate from what is
the then-prevailing ordinary practice in an effort to alleviate cash flow
problems, difficulties in meeting loan obligations or other financial distress,
or in response to a greater than average vacancy rate). Fair market rent shall
include the periodic rental increases, if any, that would be included for space
leased for the renewal period. The fair market rent shall be mutually agreed
upon by Landlord and Tenant in writing within the thirty (30) calendar day
period commencing three (3) months prior to commencement of the renewal period.
If Landlord and Tenant do not agree upon the fair market rent within said thirty
(30) day period, then the fair market rent shall be established by appraisal in
accordance with the procedures set forth in EXHIBIT G attached hereto.

         b. Notwithstanding anything in the foregoing or in EXHIBIT G to the
contrary, in no event shall the Base Rent during the renewal period be less than
the Base Rent payable by Tenant for the month immediately preceding the
commencement of the renewal period (without regard to any temporary abatement of
rental then in effect pursuant to the provisions of this Lease).

40. ROOFTOP SPACE. Landlord recognizes that Tenant may, at some time during the
term of this Lease, desire to install, at Tenant's sole cost and expense,
antennae and/or communication dishes on the roof of the Building. Upon Tenant's
request, Landlord will endeavor in good faith to provide suitable space to
Tenant for such purposes, provided that such space is available to Landlord, and
provided further that Landlord and Tenant agree, after good faith negotiations,
as to the terms, covenants and conditions applicable to Tenant's lease of any
such space, provided, however, that there shall be no fee or charge payable by
Tenant to Landlord for use of any such space. In the event any such space is
leased by Tenant, the terms, covenants and conditions applicable thereto shall
be set forth in an amendment to this Lease approved and executed by Landlord and
Tenant.

                                      34.
<PAGE>
41. GENERAL.

         a. CAPTIONS. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.

         b. TIME. Time is of the essence for the performance of each term,
condition and covenant of this Lease.

         c. SEVERABILITY. If any provision of this Lease is held to be invalid,
illegal or unenforceable, the invalidity, illegality, or unenforceability shall
not affect any other provision of this Lease, but this Lease shall be construed
as if the invalid, illegal or unenforceable provision had not been contained
herein.

         d. CHOICE OF LAW; CONSTRUCTION. This Lease shall be construed and
enforced in accordance with the laws of the State of California. The language in
all parts of this Lease shall in all cases be construed as a whole according to
its fair meaning and not strictly for or against either Landlord or Tenant.

         e. GENDER: SINGULAR, PLURAL. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, and the singular includes the plural.

         f. BINDING EFFECT. The covenants and agreements contained in this Lease
shall be binding on the parties hereto and, subject to Section 14 above, on
their respective successors and assigns.

         g. WAIVER. `The waiver by either party of any breach of any term,
condition or covenant of this Lease shall not be deemed to be a waiver of the
provision or any subsequent breach of the same or any other term, condition or
covenant of this Lease. The subsequent acceptance of Rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach at the time of
acceptance of the payment. No covenant, term or condition of this Lease shall be
deemed to have been waived by either party unless the waiver is in writing
signed by such party.

         h. ENTIRE AGREEMENT. This Lease is the entire agreement between the
parties, and supersedes all prior agreements, including letters of intent,
between them, and there are no agreements or representations between the parties
except as expressly set forth herein. Except as otherwise provided herein, no
subsequent change or addition to this Lease shall be binding unless in writing
and signed by the parties hereto.

         i. WAIVER OF JURY. Landlord and Tenant each hereby waives any right it
may have to a jury trial in the event of litigation between Tenant and Landlord
pertaining to this Lease. Landlord and Tenant agree that this paragraph
constitutes a written consent to waiver of trial by jury within the meaning of
California Code of Civil Procedure Section 631(a)(2), and Landlord and Tenant
each does hereby authorize and empower the other party to file this paragraph
and or this Lease, as required, with the clerk or judge of any court of
competent jurisdiction as a written consent to waiver of jury trial.

                                       35.
<PAGE>
         j. COUNTERPARTS. This Lease may be executed in counterparts, each of
which shall be an original and all of which together shall constitute but one
instrument.

         k. EXHIBITS. The Basic Lease Information and all exhibits attached
hereto are hereby incorporated herein and made an integral part hereof.

         l. ADDENDUM. The Addendum, if any, attached hereto is hereby
incorporated herein and made an integral part hereof.

         IN WITNESS WHEREOF, the parties have executed this Lease on the dates
set forth below, effective as of the date first above written.

LANDLORD:                                      TENANT:

HOLLIS STREET INVESTORS, L.L.C.,               KNOWLEDGE KIDS ENTERPRISES,
a Delaware limited liability                   a Delaware corporation
company                                        (dba "LeapFrog")

By: Riggs & Company, a division of Riggs       By: /s/ Richard Finkbeiner
    Bank N.A., as trustee of the Multi-
    Employer Property Trust                    Its: Chief Executive Officer

    By:  /s/ Mary Anne Martins                 By:
         ---------------------                    ----------------------------

    Its: Managing Director                     Its:
         -----------------                         ---------------------------

                                      36.
<PAGE>
                                    EXHIBIT A

                                   [Premises]
<PAGE>
                                   EXHIBIT A-1

                              [Property Site Plan]
<PAGE>
                                    EXHIBIT B

                               TENANT IMPROVEMENTS

1. Tenant Improvements.

         a. Plans. Improvements shall be constructed in the Premises in
accordance with this Paragraph l. Within ten (10) Business Days of the date of
this Lease, Tenant shall furnish to Landlord sufficient information so as to
enable Landlord to prepare preliminary layout plans and finish specifications
for the Premises (the "Space Plans"). On the basis of such information, Landlord
shall furnish to Tenant for Tenant's written approval (which shall not be
unreasonably withheld) the Space Plans prepared by Landlord's architect. Tenant
shall respond to the Space Plans within three (3) Business Days of its receipt
thereof. Landlord shall respond promptly to any reasonable objections of Tenant
to the Space Plans and shall resubmit to Tenant for Tenant's approval (which
shall not be unreasonably withheld) appropriately revised Space Plans prepared
by Landlord's architect. Tenant shall respond to the revised Space Plans within
two (2) Business Days of its receipt thereof. This procedure shall be repeated
until the Space Plans are approved by Tenant. If Tenant fails to respond to the
Space Plans or the revised Space Plans within the periods described above,
Tenant shall be deemed to have approved the Space Plans or revised Space Plans,
as applicable. The Space Plans, as finally approved in writing by Landlord and
Tenant, shall be referred to herein as the "Final Space Plans." After completion
of the Final Space Plans, Landlord shall furnish to Tenant for Tenant's written
approval (which shall not be unreasonably withheld) working plans and
specifications (the "Working Drawings") for the Premises prepared by Landlord's
architect. Tenant shall respond to the Working Drawings within three (3)
Business Days of its receipt thereof. Landlord shall respond promptly to any
reasonable objections of Tenant to the Working Drawings and shall resubmit to
Tenant for Tenant's approval (which shall not be unreasonably withheld)
appropriately revised Working Drawings prepared by Landlord's architect. Tenant
shall respond to the revised Working Drawings within two (2) Business Days of
its receipt thereof. This procedure shall be repeated until the Working Drawings
are approved by Tenant. If Tenant fails to respond to the Working Drawings or
the revised Working Drawings within the periods described above, Tenant shall be
deemed to have approved the Working Drawings or revised Working Drawings, as
applicable. The Working Drawings, as approved in writing by Landlord and Tenant,
as revised in accordance with the following provisions of this Paragraph l, are
hereinafter called the "Final Plans", and the improvements to be performed in
accordance with the Final Plans are hereinafter called the "Tenant
Improvements". Restroom facilities shall be constructed in the Premises as part
of the Tenant Improvements. Any delay in Substantial Completion of the Tenant
Improvements or increased cost of the Tenant Improvements caused directly or
indirectly by any revision to the Space Plans or the Working Drawings requested
by Tenant or to otherwise make the same acceptable to Tenant after the initial
submission thereof to Tenant by Landlord, shall constitute a Tenant Delay under
Section 2 of the Lease; provided, however, that as to the Space Plans only,
Tenant shall be entitled to request revisions to the initial submission thereof
to Tenant, without the same giving rise to Tenant Delay. Tenant acknowledges
that the Tenant Improvements must include restrooms in the Premises.

                                       1.
<PAGE>
         b. Construction. Upon approval of the Final Plans, Landlord shall
submit the same for pricing to a contractor selected by Landlord ("Landlord's
Contractor"). Landlord shall cause Landlord's Contractor to receive bids from
not less than three (3) qualified subcontractors for each major trade working on
the Tenant Improvements. At Tenant's election, Tenant may suggest subcontractors
to be included on Landlord's Contractor's bid invitation list and, subject to
Landlord's prior approval (which shall not be unreasonably withheld), such
subcontractors shall be so included. After Landlord's Contractor has received
all responses to its bid requests, Landlord's Contractor will analyze the same
and provide Tenant with a copy of Landlord's Contractor's bid analysis,
recommended winning bidders and estimated budget for the Tenant Improvements,
based upon the selected subcontractors' bids and including Landlord's
Construction Operations Fee (as defined in Paragraph L.f.iii.B. below). Upon
Tenant's request, such bid analysis shall include a schedule of values and a
copy of any or all of the bids received by Landlord. Tenant shall have five (5)
Business Days after the receipt of Landlord's Contractor's bid analysis to
approve or reasonably disapprove Landlord's Contractor's selection of bids and
Landlord's Contractor's estimated budget. During such five (5) Business Day
period Tenant shall have the right to participate with Landlord in negotiations
with the bidders. In the event Tenant shall disapprove of any bid selected by
Landlord's Contractor, Tenant shall notify Landlord in writing of Tenant's
objection to such bid, with the reasons for such disapproval. In no event shall
Tenant be required to approve a bid solely by reason of the fact that it is the
lowest bid. Further, if Tenant disapproves of the budget within such five (5)
Business Day period and the budget will not be revised to Tenant's satisfaction
by virtue of selection of alternative bids as reasonably requested by Tenant and
reasonably approved by Landlord, the Final Plans shall promptly be modified by
Landlord's architect in a manner intended to satisfactorily reduce the amount of
the estimated budget to the amount requested by Tenant, to the extent reasonably
possible. Landlord shall resubmit to Tenant for Tenant's approval (which shall
not be unreasonably withheld) the so modified Final Plans prepared by Landlord's
architect. Tenant shall respond to the revised Final Plans within two (2)
Business Days of its receipt thereof. This procedure shall be repeated until the
revised Final Plans are approved by Tenant. After Tenant's disapproval of any
bid (without substitution of another received bid previously received and
approved by Landlord and Tenant) or the revision of the Final Plans, Landlord
shall cause Landlord's Contractor to promptly issue new bid requests and upon
receipt of new bids to prepare and submit to Tenant a revised estimated budget.
Tenant shall respond to the revised estimated budget in the manner described
above. Any delay in commencement of the Tenant Improvements or Substantial
Completion of the Tenant Improvements or increased cost of the Tenant
Improvements caused directly or indirectly by any such new bid requests or
revision to the Final Plans or the budget shall constitute Tenant Delay. If
Tenant fails to raise any objections to the analysis and/or budget within the
five (5) Business Day period described above, Tenant shall be deemed to have
approved Landlord's Contractor's recommended bid acceptance and proposed budget.
Upon Tenant's approval or deemed approval of the bids and budget Landlord shall
cause Landlord's Contractor to commence and diligently pursue to completion
construction of the Tenant Improvements in accordance with the Final Plans and
all applicable Legal Requirements; provided, however, that Landlord shall have
no obligation to pursue a construction schedule which would cause Substantial
Completion to occur prior to February 1, 2001). The budget so approved or deemed
approved by Tenant in accordance with the foregoing shall constitute a fixed
budget for the Tenant Improvements (subject to use of any contingencies and
reconciliation of any allowances with actual amounts, all as set forth in such
approved

                                       2.
<PAGE>
budget), and Tenant shall have no liability for any costs in excess of the
Excess Cost (as defined below) as calculated from such budget, other than by
reason of Tenant Delays and Changes as more particularly set forth below.

         c. Changes. In the event that Tenant shall request any change in or to
the Final Plans (a "Change"), Landlord's architect shall prepare for Landlord's
and Tenant's review and written approval a change order with respect to such
Change (the "Change Order"), together with, if appropriate, revised Working
Drawings incorporating the requested Change and clearly identifying the same as
such on the revised Working Drawings. Landlord shall not unreasonably withhold
or delay its approval of the Change Order or revised Working Drawings, provided,
however, that Landlord shall have at least three (3) Business Days after receipt
thereof to review any proposed Change. In the event that Landlord shall approve
any proposed Change, together with such approval, if practicable, and if not
practicable as soon thereafter as is practicable, Landlord shall give Tenant
Landlord's estimated increase or decrease in the cost of the Tenant Improvements
which would result from incorporating such Change and Landlord's estimate of the
delay; if any, in the commencement or completion of the Tenant Improvements
which would result from incorporating such Change. Landlord will use reasonable
care in preparing the estimates, but they shall be good faith estimates only and
will not limit Tenant's obligation to pay for the actual increase in the cost of
the Tenant Improvements or Tenant's responsibility for the actual construction
delay resulting from the Change. Notwithstanding the foregoing, upon Tenant's
request the cost of such Change shall be established and fixed by firm bid, with
the parties hereby acknowledging that any delay in commencement of the Tenant
Improvements or Substantial Completion of the Tenant Improvements or increased
cost of the Tenant Improvements caused directly or indirectly by any such bid
procedure shall constitute a Tenant Delay. Within two (2) Business Days after
receipt of such cost and delay estimates (or bids, as applicable), Tenant shall
notify Landlord in writing whether Tenant approves the Change. If Tenant fails
to approve the change within such two (2) Business Day period, construction of
the Tenant Improvements shall proceed as provided in accordance with the Final
Plans as they existed prior to the requested Change. If, following Tenant's
review of the estimated costs and delays (or bids, as applicable), Tenant
desires Landlord to incorporate the Change into the Tenant Improvements, then
Tenant and Landlord shall execute a change order for such Change on Landlord's
standard form therefor, and the term "Final Plans" shall thereafter be deemed to
refer to the Working Drawings as so revised and approved, and the budget for the
Tenant Improvements shall thereafter be deemed to refer to the budget, as
revised to take into account such estimated (or bid, as applicable) costs, and
the Excess Cost payable by Tenant shall be re-calculated on the basis of the
budget as so revised.

         d. Landlord's Work. In addition to construction of the Tenant
Improvements, Landlord shall construct the Building as a watertight shell, with
all utilities brought to the Building, and perform the other work to the
Building set forth on Schedule I attached hereto (collectively, "Landlord's
Work"). Landlord's Work shall be performed at Landlord's sole cost and expense
(except for any costs resulting from Tenant Delays, including any Changes) by
such general contractor as Landlord shall determine.

         e. Intentionally Deleted.

                                       3.
<PAGE>
         f. Cost of Improvements. The cost of the construction and installation
of the Tenant Improvements shall be borne as follows:

                           i. Intentionally Deleted.

                           ii. Landlord's architectural, engineering and other
                  consultant fees in connection with the design and construction
                  of the Tenant Improvements, including the costs of producing
                  the Space Plans, Final Space Plans, Working Drawings and Final
                  Plans, shall- be paid by Tenant upon Landlord's demand,
                  subject to Tenant's right to use a portion of Landlord's
                  Contribution towards the amount of such costs as provided
                  below.

                           iii. Landlord shall contribute toward the cost of the
                  construction and installation of the Tenant Improvements an
                  amount not to exceed $1,022,000.00 ("Landlord's
                  Contribution"). The following provisions shall govern the
                  payment of Landlord's Contribution:

                                    A. Excess Cost: Share of Costs. If the total
                  cost of construction of the Tenant Improvements (including,
                  without limitation, the Construction Operations Fee described
                  below, and all architectural, engineering and permits fees and
                  taxes), as set forth on the approved budget, exceeds the funds
                  available therefor from Landlord's Contribution and the
                  Improvement Advance (if applicable), then Tenant shall pay all
                  such excess (the "Excess Cost"). Based on such total cost (the
                  "Total Costs") of the construction of the Tenant Improvements,
                  the prorata share of the Total Costs payable by Landlord and
                  Tenant shall be determined and an appropriate percentage share
                  established for each (a "Share of Costs"). Tenant and Landlord
                  shall fund the cost of such work as the same is performed, in
                  accordance with their respective Share of Costs for such work.
                  At such time as Landlord's Contribution and the Improvement
                  Advance (if applicable) have been entirely disbursed, Tenant
                  shall pay the remaining Excess Cost, if any, which payments
                  shall be made in installments as construction progresses in
                  the same manner as Tenant's payments of Tenant's Share of
                  Costs were paid.

                                    B. Construction Operations Fee. Landlord
                  shall retain from the amount of Landlord's Contribution, in
                  the manner described below, an aggregate sum equal to five
                  percent (5%) of the total cost of the construction and
                  installation of the Tenant Improvements (which cost of the
                  construction and installation, for purposes of this paragraph
                  B, shall include architectural and engineering fees but shall
                  not include permit fees) (the "Construction Operations Fee")
                  as compensation to Landlord for review of plans,
                  specifications and budgets, coordinating the schedule for
                  construction of the Tenant Improvements, and for other
                  miscellaneous costs incurred by Landlord as a result of the
                  construction work. Tenant acknowledges that Landlord will not
                  undertake project management services by reason of Tenant's
                  payment of the Construction Operations Fee or otherwise, and
                  that it shall be Tenant's responsibility to retain, at
                  Tenant's sole cost and expense, such third party project
                  management services

                                       4.
<PAGE>
                  as shall be required in connection with the Tenant
                  Improvements. At the time Landlord makes any disbursement of
                  Landlord's Contribution, Landlord shall retain from Landlord's
                  Contribution, as a partial payment of the Construction
                  Operations Fee, a proportionate amount of the Construction
                  Operations Fee based upon Landlord's reasonable estimate of
                  the amount required to be withheld from such disbursement in
                  order to ensure that the entire Construction Operations Fee is
                  retained over the course of construction on a prorata basis.
                  At such time as Landlord's Contribution has been entirely
                  disbursed, if the entire Construction Operations Fee has not
                  yet been paid to Landlord, Tenant shall pay to Landlord a
                  prorata portion of each payment made by Tenant on account of
                  the Tenant Improvements in order to ensure that the balance of
                  the Construction Operations Fee is paid to Landlord over the
                  course of construction on a prorata basis.

                                    C. Certain Limitations. In no event may any
                  portion of Landlord's Contribution be applied towards the
                  costs of Tenant's architectural or engineering fees (if any),
                  trade fixtures, personal property, equipment or furniture,
                  telephone, data or other cabling, or towards rent due under
                  this Lease. Notwithstanding anything to the contrary in this
                  Exhibit B of the Lease, Landlord's Contribution shall be
                  available for disbursement pursuant to the terms hereof only
                  for the first twelve (12) months after the date of this Lease.
                  Accordingly, if any portion of Landlord's Contribution is not
                  utilized prior to the expiration of such twelve (12) month
                  period, the unused portion shall be forfeited by Tenant.

                                    D. Entire Premises to be Improved. Tenant
                  acknowledges that Landlord's Contribution is to be applied to
                  the Tenant Improvements covering the entire Premises. If
                  Tenant does not improve the entire Premises, then, without
                  limitation of any other rights or remedies of Landlord
                  hereunder, Landlord's Contribution shall be adjusted on a
                  prorata per rentable square foot basis to reflect the number
                  of rentable square feet actually being improved.

                           iv. Improvement Advance. Notwithstanding the
                  foregoing provisions, if the cost of the Tenant Improvements
                  shall exceed Landlord's Contribution, upon Tenant's request
                  Landlord shall advance to Tenant the Excess Cost, up to a
                  total advance of $400,600.00 (which is $10.00 per rentable
                  square foot of the Premises). The amount of the total Excess
                  Cost advanced by Landlord (the "Improvement Advance") shall be
                  repaid by Tenant, together with interest on amounts thereof
                  from time to time unpaid at the rate of eleven percent (11%)
                  per annum, in equal monthly installments of principal and
                  interest, as additional rent hereunder, payable with the
                  monthly Basic Rent. Such installments shall be in such amount
                  as will fully amortize the amount of the Improvement Advance,
                  together with such interest, over the initial Term. Upon the
                  determination of the amount of the Improvement Advance,
                  Landlord and Tenant shall promptly execute a written
                  memorandum of the amount of such installments. Notwithstanding
                  anything in the foregoing to the contrary, in the event this
                  Lease is terminated prior to the originally scheduled
                  Expiration Date by reason of an Event of Default, the
                  then-outstanding balance of Improvement Advance, together

                                       5.
<PAGE>
                  with accrued and unpaid interest thereon, but without any
                  prepayment penalty, shall become immediately due and payable
                  in full by Tenant.

                                       6.
<PAGE>
                                    EXHIBIT C

                          COMMENCEMENT DATE MEMORANDUM

LANDLORD:                HOLLIS STREET INVESTORS, LLC
                         A DELAWARE LIMITED LIABILITY
                         COMPANY

TENANT:                  LEAPFROG ENTERPRISES, INC.,
                         A DELAWARE CORPORATION, DBA
                         LEAPFROG

LEASE:                   NOVEMBER 14, 2001

PREMISES:                A PORTION OF THE BUILDING LOCATED AT 6401 HOLLIS
                         STREET, EMERYVILLE, CALIFORNIA
                         LANDLORD STIPULATES THAT FOR THE PURPOSES OF THIS LEASE
                         THE PREMISES CONTAINS 40,060 SQUARE FEET.

Pursuant to Section 2.d. of the above referenced Lease, the Commencement Date is
hereby established as February 1, 2001 and the Expiration date January 31, 2006.

LANDLORD:                HOLLIS STREET INVESTORS, LLC
                         A DELAWARE LIMITED LIABILITY
                         COMPANY

                         By: /s/ Mary Anne Martins
                             ---------------------
                         Its: Managing Director
                              --------------------

TENANT:                  LEAPFROG ENTERPRISES, INC.
                         A DELAWARE CORPORATION, DBA LEAPFROG

                         By: /s/ Rich Finkbeiner
                             -------------------
                         Its: CFO
                              ---
<PAGE>
                                    EXHIBIT D

                              RULES AND REGULATIONS

1. No sign, placard, picture, advertisement, name or notice shall be installed
or displayed on any part of the outside or inside of the Building without the
prior written consent of Landlord. Landlord shall have the right to remove, at
Tenant's expense and without notice, any sign installed or displayed in
violation of this rule. All approved signs or lettering on doors, windows and
walls shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person chosen by Landlord, using materials of Landlord's choice and in a
style and format approved by Landlord.

2. The directory of the Building will be provided exclusively for the display of
the name and location of tenants and permitted subtenants, and Landlord reserves
the right to exclude any other names therefrom. Tenant shall pay Landlord's
standard charge for Tenant's listing thereon and for any changes by Tenant.

3. Except as consented to in writing by Landlord or in accordance with Building
standard improvements, no draperies, curtains, blinds, shades, screens or other
devices shall be hung at or used in connection with any window or exterior door
or doors of the Premises. No awning shall be permitted on any part of the
Premises. Tenant shall not place anything against or near glass partitions or
doors or windows which may appear unsightly from outside the Premises.

4. Tenant shall not obstruct any sidewalks, halls, lobbies, passages, exits,
entrances, elevators or stairways of the Building. No tenant and no employee or
invitee of any tenant shall go upon the roof of the Building or make any roof or
terrace penetrations. Tenant shall not allow anything to be placed on the
outside terraces or balconies without the prior written consent of Landlord.

5. No Tenant shall invite to the Premises, or permit the visit of, persons in
such numbers or under such conditions as to interfere with the use and enjoyment
of the Common Areas of the Building by other tenants.

6. All cleaning and janitorial services for the Building shall be provided
exclusively through Landlord, and, except with the written consent of Landlord,
no person or persons other than those approved by Landlord shall be employed by
Tenant or permitted to enter the Building for the purpose of cleaning. Tenant
shall not cause any unnecessary labor by carelessness or indifference to the
good order and cleanliness of the Premises. Landlord shall not in any way be
responsible to any Tenant for any loss of property on the Premises, however
occurring, or for any damage to any Tenant's property by the janitor or any
other employee or person.

7. Landlord will furnish Tenant, free of charge, four (4) keys to Tenant's suite
entrance. Landlord may make a reasonable charge for any additional keys and for
having any locks changed. Tenant shall not make or have made additional keys
without Landlord's prior written consent, and Tenant shall not alter any lock or
install a new additional lock or bolt on any door of its Premises without
Landlord's prior written consent. Tenant shall deliver to Landlord, upon the

                                       1.
<PAGE>
termination of its tenancy, the keys to all locks for doors on the Premises. If
Tenant loses any keys furnished by Landlord, Tenant shall pay Landlord the cost
of rekeying the Premises.

         Landlord will furnish Tenant, free of charge, four (4) building access
cards. A reasonable charge will be assessed for any additional cards and lost or
stolen cards. Tenant shall deliver to Landlord, upon the termination of its
tenancy, all access cards.

8. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions for
their installation.

9. The elevator shall be available for use by all tenants in the Building,
subject to reasonable scheduling as Landlord in its discretion shall deem
appropriate. No equipment, materials, furniture, packages, supplies, merchandise
or other property will be received in the Building or carried in the elevator
except between the hours, in the manner and in the elevators as may be
designated by Landlord.

10. Tenant shall not place a load upon any floor of the Premises which exceeds
the maximum load per square foot which the floor was designed to carry and which
is allowed by law. Tenant's business machines and mechanical equipment which
cause noise or vibration which may be transmitted to the structure of the
Building or to any space therein, and which is objectionable to Landlord or to
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.

11. Tenant shall not use or keep in the Premises any toxic or hazardous
materials or any kerosene, gasoline or inflammable or combustible fluid or
material other than those limited quantities necessary for the operation or
maintenance of office equipment. Tenant shall not use or permit to be used in
the Premises any foul or noxious gas or substance, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable to
Landlord or other occupants of the Building by reason of noise, odors or
vibrations. No animal, except seeing eye dogs when in the company of their
masters, may be brought into or kept in the Building.

12. Tenant shall not use any method of heating or air-conditioning other than
that supplied by Landlord, if any, unless Tenant receives the prior written
consent of Landlord.

13. Tenant shall cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice. Tenant shall refrain from attempting to adjust controls other than room
thermostats installed for Tenant's use.

14. All entrance doors to the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress to and from the Premises.

15. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.

                                       2.
<PAGE>
16. Landlord reserves the right to exclude any person from the Building between
the hours of 6:00 p.m. and 7:00 a.m. the following day, or any other hours as
may be established from time to time by Landlord, and on Saturdays, Sundays and
legal holidays, unless that person is known to the person or employee in charge
of the Building and has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of those persons. Landlord shall not be liable for damages
for any error in admitting or excluding any person from the Building. Landlord
reserves the right to prevent access to the Building by closing the doors or by
other appropriate action in case of invasion, mob, riot, public excitement or
other commotion.

17. Tenant shall close and lock the doors of its Premises, shut off all water
faucets or other water apparatus and turn off all lights and other equipment
which is not required to be continuously run. Tenant shall be responsible for
any damage or injuries sustained by other tenants or occupants of the Building
or Landlord for noncompliance with this Rule.

18. The toilet rooms, toilets, 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 placed therein. The expense of
any breakage, stoppage or damage resulting from any violation of this rule shall
be borne by the tenant who, or whose employees or invitees, shall have caused
it.

19. Tenant shall not install any radio or television antenna, loudspeaker or
other device on the roof or exterior walls of the Building. Tenant shall not
interfere with radio or television broadcasting or reception from or in the
Building or elsewhere.

20. Tenant shall not cut or bore holes for wires in the partitions, woodwork or
plaster of the Premises. Tenant shall not affix any floor covering to the floor
of the Premises in any manner except as approved by Landlord. Landlord shall
approve in writing the method of attachment of any objects affixed to walls,
ceilings or doors in the Premises. Tenant shall repair, or be responsible for
the cost of repair of any damage resulting from noncompliance with this Rule.

21. Tenant shall not install, maintain or operate upon the Premises any vending
machine (other than vending machines for use by Tenant's employees) without the
prior written consent of Landlord.

22. Canvassing, soliciting and distributing handbills or any other written
material and peddling in the Building are prohibited, and each tenant shall
cooperate to prevent these activities.

23. Landlord reserves the right to exclude or expel from the Building any person
who, in Landlord's judgment, is intoxicated or under the influence of liquor or
drugs, or who is in violation of any of the Rules and Regulations of the
Building.

24. Tenant shall store all its trash and garbage within its Premises. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal
within the Building. All garbage and refuse disposal shall be made in accordance
with directions issued from time to time by Landlord.

                                       3.
<PAGE>
25. Use by Tenant of Underwriters' Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages and microwaving food shall be
permitted, provided that the equipment and use is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.

26. Tenant shall not use the name of the Building in connection with or in
promoting or advertising the business of Tenant, except as Tenant's address,
without the written consent of Landlord.

27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
Tenant shall be responsible for any increased insurance premiums attributable to
Tenant's use of the Premises, Building or Property.

28. Tenant assumes any and all responsibility for protecting its Premises from
theft and robbery, which responsibility includes keeping doors locked and other
means of entry to the Premises closed.

29. Tenant shall not use the Premises, or suffer or permit anything to be done
on, in or about the Premises, which may result in an increase to Landlord in the
cost of insurance maintained by Landlord on the Building and Common Areas.

30. Tenant's requests for assistance will be attended to only upon appropriate
application to the office of the Building by an authorized individual. Employees
of Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.

31. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building or other reserved
parking spaces. Tenant shall not leave vehicles in the Building parking areas
overnight, nor park any vehicles in the Building parking areas other than
automobiles, motorcycles, motor driven or non-motor driven bicycles or
four-wheeled trucks. Tenant, its agents, employees and invitees shall not park
any one (1) vehicle in more than one (1) parking space.

32. The scheduling and manner of all Tenant move-ins and move-outs shall be
subject to the reasonable discretion and approval of Landlord, and move-ins and
move-outs shall take place only after 6:00 p.m. on weekdays, on weekends, or at
other times as Landlord may designate. Landlord shall have the right to approve
or disapprove the movers or moving company employed by Tenant, and Tenant shall
cause the movers to use only the entry doors and elevators designated by
Landlord. If Tenant's movers damage the elevator or any other part of the
Property, Tenant shall pay to Landlord the amount required to repair the damage.

33. No cooking shall be permitted on the Premises, except with a microwave oven,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging or for any improper, objectionable or immoral purpose.

                                       4.
<PAGE>
34. Tenant shall not use in any space or in the public halls of the Building,
any hand trucks except those equipped with rubber tires and side guards or such
other material-handling equipment as Landlord may approve. Tenant shall not
bring any vehicles of any kind into the building, except for non-motorized
bicycles which may be brought into the Premises.

35. Landlord shall have the right to control and operate the public portions of
the Building, and the public facilities, heating and air conditioning, as well
as facilities furnished for the common use of the tenants, in such manner as it
deems best for the benefit of the tenants generally.

36. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no waiver by Landlord shall be
construed as a waiver of the Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing the Rules and
Regulations against any or all of the tenants of the Building.

37. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Building.

38. Landlord reserves the right to make other reasonable Rules and Regulations
as, in its judgment, may from time to time be needed for safety and security,
for care and cleanliness of the Building and for the preservation of good order
therein. Tenant agrees to abide by all Rules and Regulations hereinabove stated
and any additional rules and regulations which are adopted.

39. Tenant shall be responsible for the observance of all of the foregoing rules
by Tenant's employees, agents, clients, customers, invitees and guests.

                                       5.
<PAGE>
                                    EXHIBIT E

                      [Form of Tenant Estoppel Certificate]
<PAGE>
                                    EXHIBIT F

                             UTILITIES AND SERVICES

     The standards set forth below for Utilities and Services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto, which do not materially affect Tenant's nights. Landlord shall
give notice to Tenant, in accordance with provisions of this Lease, of material
modification and additions.

     1. PROVISION BY LANDLORD.  Landlord shall:

         a. ACCESS, ELEVATOR. Provide access to the Premises and one unattended
automatic elevator at all times.

         b. VENTILATION. Ventilate the Premises and furnish air-conditioning or
heating from 8:00 a.m. to 6:00 p.m., Monday through Friday, except state or
federal holidays ("Business Hours") (and at other times for the additional
charges described in Paragraph 2) to the extent required for the comfortable
occupancy of the Premises as reasonably determined by Landlord, subject to
governmental regulation. The air-conditioning system achieves maximum cooling
when the window coverings and sliding glass doors, if any, are closed. Landlord
shall not be responsible for room temperatures if Tenant does not keep all
sliding glass doors in the Premises, if any, closed whenever the system is in
operation or if Tenant permits occupancy of the Premises in densities greater
than one person per two hundred square feet of usable space. Tenant shall
cooperate to the best of its ability at all times with Landlord and shall abide
by all reasonable regulations and requirements which Landlord may prescribe for
the proper functioning and protection of the air-conditioning system. Tenant
shall not connect any apparatus, device, conduit or pipe to the Building's
chilled and hot water air-conditioning supply lines. Tenant and Tenant's
servants, employees, agents, visitors, licensees or contractors shall not enter
at any time the mechanical installations or facilities of the Building, or
adjust, tamper with, touch or otherwise in any manner affect the installations
or facilities, other than those controls located in the Premises and installed
so as to permit adjustment by Tenant. If any installation of partitions,
equipment or fixtures by Tenant necessitates the re-balancing of the climate
control equipment in the Premises, the re-balancing shall be performed by
Landlord at Tenant's expense. The ventilation and air-conditioning supplied by
Landlord will not be suitable to meet the cooling requirements of dedicated
computer rooms, conference areas or other special facilities, and Tenant shall
be responsible, at its sole cost and expense, for installing and maintaining
such supplemental systems as shall be necessary to meet the requirements of such
facilities. Landlord's obligations pursuant to this Paragraph 1.b. are subject
in all respects to Tenant's obligation to supply and pay for such electricity
and gas as shall be required to power the systems which furnish the foregoing
services.

         c. ELECTRICITY; BULBS. Except as provided as part of Landlord's Work
pursuant to Schedule I of Exhibit B, Landlord shall have no obligation to
furnish electricity or gas to the Building or the Premises. As more particularly
set forth in Section 29 of the Lease, Tenant shall make arrangements with the
public utility company and directly pay for all electricity and gas it requires
in connection with its use and occupancy of the Premises. At all times Tenant's
use of

                                       1.
<PAGE>
electric current shall not exceed the capacity of the electrical panels serving
the Premises or the risers or wiring installation with respect thereto, nor
shall Tenant's use of electric current ever exceed Tenant's Percentage Share of
the electrical power available to leasable space in the Building. Landlord shall
obtain and replace as necessary all building standard electric light bulbs,
ballasts and tubes for lighting within the Premises.

         d. WATER. Make water available for approved water fountain and lavatory
facilities only.

         e. JANITORIAL SERVICE. Provide building standard janitorial service to
the Premises, provided the Premises are used exclusively as offices, and are
kept reasonably in order by Tenant. Tenant shall pay to Landlord any cost
incurred by Landlord for janitorial services in excess of those generally
provided for other tenants in the Building. Tenant shall pay Landlord for the
cost of removal of any of Tenant's refuse and rubbish which is in excess of
normal and customary general office refuse and rubbish. Notwithstanding the
foregoing, at Tenant's election by written notice to Landlord, Tenant may elect
to provide janitorial service to the Premises, rather than have Landlord provide
the same. Tenant's election notice shall state the effective date it desires to
assume such janitorial obligations, which date shall be no earlier than sixty
(60) days after the date of Tenant's election notice; provided, however, that if
Landlord's applicable janitorial contract does not permit Landlord to
discontinue janitorial service to the Premises without penalty until a date
later than the date specified in Tenant's election notice, then Landlord shall
advise Tenant of such later date, and the effective date of Tenant's assumption
of such obligations shall thereupon be such later date as so specified by
Landlord. Effective as of such date that Tenant shall assume janitorial
responsibility for the Premises, Operating Expenses shall exclude Landlord's
cost of supplying janitorial services to leasable space in the Property.

         2. ADDITIONAL CHARGES. Landlord may impose a reasonable charge for any
utilities and services, including heating, ventilation and air-conditioning,
water and janitorial service, required to be provided by Landlord by reason of
any use of the Premises at any time other than during Business Hour or any use
of such utilities and services beyond what Landlord agrees to furnish as
described above. Such charges may include, without limitation, a reasonable
charge for excessive wear and tear upon the HVAC systems by reason of Tenant's
use thereof during other than normal Business Hours. Notwithstanding the
foregoing, so long as Tenant shall pay for electricity and furnished to the
Premises and the HVAC systems serving the Premises on a direct metered basis,
the additional charges imposed by Landlord pursuant to this paragraph shall not
include components attributable to such electrical and gas consumption.

         3. RULES AND REGULATIONS. Tenant agrees to cooperate at all times with
Landlord and to abide by all reasonable regulations and requirements which
Landlord may prescribe for the use of the utilities and services. Any failure to
pay any excess costs as described above with the next installment of Rent due
after receipt of a statement for such services shall constitute a breach of the
obligation to pay Rent under this Lease and shall entitle Landlord to the rights
granted in this Lease for a breach.

         4. STOPPING OF SERVICE. Landlord reserves the right to stop access to
the Premises, and services of the elevator, plumbing, heating, ventilation,
air-conditioning and electric systems and other Building systems when necessary
by reason of accident or emergency, or for repairs,

                                       2.
<PAGE>
maintenance, alterations or improvements, in the judgment of Landlord desirable
or necessary to be made or performed, until the repairs, alterations or
improvements have been completed. As more particularly set forth in Section 29
of the Lease, Landlord shall have no responsibility or liability for any such
interruption in access services or utilities, or for failure to supply any such
access, services or utilities, or for its failure to furnish or perform any
other act or thing for the benefit of Tenant as otherwise required pursuant to
this Lease. In the event of any failure, stoppage or interruption in any access,
utilities or services which Landlord is obligated to provide pursuant to this
Lease, Landlord shall use its diligent efforts to cause the provision of such
access, utilities or services to be resumed.

         5. NOTICE. To the extent practical, Landlord shall attempt to give
Tenant notice of proposed shutdowns of services.

                                       3.
<PAGE>
                                    EXHIBIT G

                               APPRAISAL PROCEDURE

         After the expiration of the thirty (30)-day period set forth in Section
39 for the mutual agreement of Landlord and Tenant as to the fair market rent,
each party hereto, at its cost, may engage a real estate appraiser to act on its
behalf in determining the fair market rent. The appraisers each shall have at
least five (5) years' experience in brokering or valuing leases in first class
business centers in Alameda County, California and shall submit to Landlord and
Tenant in advance for Landlord's and Tenant's reasonable approval the appraisal
methods to be used. If a party appoints such an appraiser and the other party
fails to appoint such an appraiser within fifteen (15) days after notice from
the first party that the first party has appointed such an appraiser, the single
appraiser appointed shall be the sole appraiser and shall set the fair market
rent. If the two appraisers are appointed by the parties as stated in this
paragraph, such appraisers shall meet promptly and attempt to set the fair
market rent. If such appraisers are unable to agree within thirty (30) days
after appointment of the second appraiser, the appraisers shall elect a third
appraiser meeting the qualifications stated in this paragraph within ten (10)
days after the last date the two appraisers are given to set the fair market
rent. Each of the parties hereto shall bear one-half (1/2) the cost of
appointing the third appraiser and of the third appraiser's fee. The third
appraiser shall be a person who has not previously acted in any capacity for
either party. The third appraiser shall conduct his own investigation of the
fair market rent, and shall be instructed not to advise either party of his
determination of the fair market rent except as follows: When the third
appraiser has made his determination, he shall so advise Landlord and Tenant and
shall establish a date, at least five (5) days after the giving of notice by the
third appraiser to Landlord and Tenant, on which he shall disclose his
determination of the fair market rent. Such meeting shall take place in the
third appraiser's office unless otherwise agreed by the parties. After having
initialed a paper on which his determination of fair market rent is set forth,
the third appraiser shall place his determination of the fair market rent in a
sealed envelope. Landlord's appraiser and Tenant's appraiser shall each set
forth their determination of fair market rent on a paper, initial the same and
place them in sealed envelopes. Each of the three envelopes shall be marked with
the name of the party whose determination is inside the envelope. In the
presence of the third appraiser, the determination of the fair market rent by
Landlord's appraiser and Tenant's appraiser shall be opened and examined. If the
higher of the two determinations is 105% or less of the amount set forth in the
lower determination, the average of the two determinations shall be the fair
market rent, the envelope containing the determination of the fair market rent
by the third appraiser shall be destroyed and the third appraiser shall be
instructed not to disclose his determination. If either party's envelope is
blank, or does not set forth a determination of fair market rent, the
determination of the other party shall prevail and be treated as the fair market
rent. If the higher of the two determinations is more than 105% of the amount of
the lower determination, the envelope containing the third appraiser's
determination shall be opened. The fair market rent shall be the rent proposed
by either Landlord's appraiser or Tenant's appraiser which is closest to the
determination of fair market rent by the third appraiser.
<PAGE>
                            FIRST AMENDMENT TO LEASE

         THIS FIRST AMENDMENT TO LEASE (this "Amendment"), is made as of the day
of April, 20, y and between Hollis Street Investors, L.L.C., a Delaware limited
liability company ("Landlord"), and LEAPFROG ENTERPRISES, Inc., a Delaware
corporation ("Tenant").

         WHEREAS, Landlord and Tenant entered into that certain lease dated
November 14, 2000 (the "Lease"), with respect to certain premises located in the
Hollis Business Center in Emeryville, California (the "Business Center"); and

         WHEREAS, the parties desire to amend the Lease to correct Tenant's
name, as originally set forth therein, and to reflect Tenant's new name as of
the date hereof. Unless otherwise defined herein, capitalized terms are used
herein as defined in the Lease.

         NOW, THEREFORE, the parties hereto do hereby agree as follows:

         1. TENANT'S PRIOR NAME. The parties agree that Tenant's name, as
originally set forth in the Lease as "Knowledge Kids Enterprises", was in error,
as it omitted the word "Inc." therefrom, and that Tenant's name should have been
originally set forth in the Lease as "Knowledge Kids Enterprises, Inc."

         2. TENANT'S NEW NAME. The parties acknowledge that subsequent to
execution of the Lease Tenant changed its name from "Knowledge Kids Enterprises,
Inc." to "LeapFrog Enterprises, Inc." pursuant to a Certificate of Amendment of
Amended and Restated Certificate of Incorporation of Knowledge Kids Enterprises,
Inc., filed with the Secretary of State of the State of Delaware on February 1,
2001. Accordingly, all references in the Lease to "Knowledge Kids Enterprises"
shall be deemed references to "LeapFrog Enterprises, Inc."

         3. RATIFICATION. Except as amended hereby, the Lease remains unmodified
and in full force and effect.

         4. BROKERS. Each party hereto represents and warrants to the other
party hereto that it has not retained or otherwise employed any broker or finder
who can properly claim a commission, fee or other compensation by reason of this
Amendment. Each party hereto shall indemnify, protect and hold harmless the
other party hereto from and against any and all loss, cost, damage, liability
and expense (including attorneys' fees and costs) arising out of any breach or
alleged breach of its foregoing representation and warranty.

         5. ENTIRE UNDERSTANDING. This Amendment represents the entire
understanding between of the parties concerning the subject matter hereof, and
there are no understandings or agreements between them relating to the Lease or
the Premises not set forth in writing and signed by the parties hereto. No party
hereto has relied upon any representation, warranty or understanding not set
forth herein, either oral or written, as an inducement to enter into this
Amendment.
<PAGE>
         6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.

LANDLORD:                                       TENANT:
HOLLIS STREET INVESTORS, L.L.C.,                LEAPFROG ENTERPRISES, Inc.
a Delaware limited liability company            a Delaware corporation

By:  Riggs & Company, a division of             By:  /s/ Paul Rioux
     Riggs Bank N.A., as trustee of                  --------------
     the Multi-Employer Property Trust          Its: Vice Chairman
                                                     -------------

     By:  /s/ Mary Anne Martins                  By:
          ---------------------                      --------------------------
     Its: Managing Director                     Its:
          ---------------------                      --------------------------

                                       2.
<PAGE>
                            SECOND AMENDMENT TO LEASE

         THIS SECOND AMENDMENT TO LEASE ("Agreement") dated this 22nd day of
February, 2002, is made and entered into by and between HOLLIS STREET INVESTORS,
L.L.C., a Delaware limited liability company ("Landlord") and LEAPFROG
ENTERPRISES, INC., a Delaware corporation ("Tenant").

                                   BACKGROUND

         A. Landlord and Tenant entered into that certain Lease Agreement dated
November 14, 2000 (the "Lease"), for approximately 40,060 rentable square feet
of space (the "Premises") located at 6401 Hollis Street, Suite 150, Emeryville,
California, as more fully described in the Lease; and

         B. The Lease has been amended by a First Amendment to Lease dated April
30, 2001.

         C. The current term of the Lease expires on February 1, 2006;

         D. Tenant desires to expand the Premises by an additional 30,770
rentable square feet on the terms and conditions set forth in this Agreement and
to make certain other amendments to the Lease.

         E. Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Lease.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereby mutually agree as follows:

         1. PREMISES: Effective as of the date of Substantial Completion (as
defined in Paragraph 6 below) of the proposed Expansion Improvements (as defined
below), estimated to be on or about April 1, 2002 (the "Expansion Effective
Date"), the Premises shall be expanded to include 30,770 rentable square feet
located in the northeast corner of the first floor of the Building as depicted
on Schedule A attached hereto and designated as Suite 175 (the "Expansion
Space"). From and after the Expansion Effective Date, the term "Premises" shall
include the initial Premises and the Expansion Space except as otherwise
specified in this Agreement.

         2. TERM: The Termination Date of the Lease shall be co-terminous with
respect both the initial Premises and the Expansion Space. The Termination Date
is February 1, 2006.

         3. RENT: As of the Expansion Effective Date, Section 4 of the Lease is
amended to reflect that the Base Rent for the Premises (including the initial
Premises and the Expansion

                                       3.
<PAGE>
Space) shall be as set forth below, payable in equal monthly installments, in
advance, on the first business day of each and every month of the Term. Rent
adjustments shall occur on the anniversary dates of the Lease.

<TABLE>
<CAPTION>
--------------------------------------------------------------
                Months                        Base Rent/Month
--------------------------------------------------------------
<S>                                           <C>
Commencement - January 31, 2003                  $137,356.00
--------------------------------------------------------------
February 1, 2003 - January 31, 2004              $162,522.00
--------------------------------------------------------------
February 1, 2004 - January 31, 2005              $172,855.00
--------------------------------------------------------------
February 1, 2005 - January 31, 2006              $180,361.00
--------------------------------------------------------------
</TABLE>

The above-referenced rent figures reflect the four percent (4%) annual increase
to Base Rent accorded under Section 4b of the Lease and include the costs of all
parking spaces. The Base Rent shall remain payable in equal monthly
installments, in advance, on the first business day of each and every month of
the Term. The Base Rent adjustments reflected above shall occur on the
anniversary of the Commencement Date of the Lease.

         4. TENANT'S PRORATA SHARE: As of the Expansion Effective Date, Tenant's
Prorata Share shall be revised to be Fifty-One and Sixty-Two Hundredths Percent
(51.62%).

         5. PARKING: Landlord shall provide Tenant with 2.75 parking spaces per
1,000 rentable square feet of leased space in the Expansion Space, resulting in
a total of 84 spaces allocated to the Expansion Space and as of the Expansion
Effective Date, a total of 194 spaces allocated to the Premises. Section 28 of
the Lease is hereby amended as follows:

                  (a) The third and fourth sentences of Section 28 are deleted
in their entirety.

                  (b) The penultimate sentence of Section 28 is hereby amended
to extend the parking rights to permitted assignees.

         6. IMPROVEMENT ALLOWANCE

                  (a) Landlord shall complete those improvements to the
Expansion Space ("Expansion Improvements") that are shown on those certain
plans, Project No. 0202 - Revision #2 dated 02/08/02 (Original Set dated
01/31/01), prepared by Kava Massih Architects and reviewed and approved by
Tenant. Unless noted on the plans, Landlord shall complete the Expansion
Improvements (the "Work"), at its sole cost and expense, in accordance with the
terms of this Agreement. Exhibit B of the Lease shall not apply to the Expansion
Improvements. All materials used in completion of the Work shall be approved
first by Tenant's Agent (as defined below). Tenant shall select the flooring,
paint and plastic laminate cabinet finishes from building standard finishes to
be provided by Landlord. Landlord shall complete the Expansion Improvements in a
first-class and workmanlike manner. All Expansion Improvements shall immediately
become the property of Landlord upon completion unless otherwise agreed to in
writing. Tenant shall not be obligated to remove the Expansion Improvements at
the end of the Term. Landlord warrants that all of the Expansion Improvements
shall be constructed in a good and workmanlike manner and free from defects for
twelve (12) months following the date of

                                       4.
<PAGE>
Substantial Completion. Landlord shall assign to Tenant any and all warranties
and guarantees of third parties held by Landlord, with respect to the Expansion
Improvements that Tenant is responsible to maintain pursuant to the terms hereof
and that extend beyond the 12-month period, for enforcement directly by Tenant.
If a warranty or guaranty is not assignable, then Landlord shall enforce it for
the benefit of Tenant, as directed by Tenant.

                  (b) Landlord, at its sole cost and expense, shall comply with
and shall be solely responsible for compliance with all laws in connection with
the Work, including without limitation, the completion of the Work, the filing
of any construction or engineering documents and obtaining any required
approvals or permits from any applicable governmental authority, including
without limitation a temporary (if necessary) and permanent certificate of
occupancy for the Premises (or its equivalent).

                  (c) Tenant shall designate a representative ("Tenant's Agent")
as having sole authority to speak for and bind Tenant during construction of the
Expansion Improvements. Landlord shall not be authorized to proceed with any
Tenant Improvement without authority by Tenant's Agent, and such authorization
by Tenant's Agent shall be deemed authorization by Tenant. Landlord shall not be
authorized to accept changes or additions from any other employees of Tenant
except Tenant's Agent.

                  (d) Landlord shall use commercially reasonable efforts to
Substantially Complete (as defined below) the Expansion Improvements by March
30, 2002 and to minimize any interference to Tenant and its business. The design
and construction of the Premises shall be Substantially Completed in accordance
with the dates agreed to by the parties and may include after-hours work.
Landlord shall notify Tenant when the Expansion Improvements are Substantially
Complete. Upon receipt of such notice, Landlord and Tenant's Agent shall prepare
and execute a punchlist. The punchlist shall list incomplete, minor and
insubstantial details of construction, necessary mechanical adjustments, and
needed finishing touches. Landlord shall complete the punchlist items within
thirty (30) calendar days thereafter. During the first twelve (12) months after
the date of Substantial Completion of the Expansion Improvements, Landlord shall
promptly correct any defect, patent or latent in the Expansion Improvements at
Landlord's sole cost and expense, as they become known to Landlord or within
thirty (30) days after Tenant notifies Landlord of such defect.

                  (e) "Substantially Complete" or "Substantial Completion"
means:

                           (i) The Expansion Improvements have been completed so
that Tenant can use the Premises for their intended purposes without material
interference to Tenant conducting its ordinary business activities;

                           (ii) The only incomplete items are minor or
insubstantial details of construction, mechanical adjustments or finishing
touches, like touch-up plastering or painting as identified on a punchlist
prepared by Tenant in accordance with subsection (d) above;

                                       5.
<PAGE>
                           (iii) Landlord has secured a permanent certificate of
occupancy or the equivalent, as required by the appropriate Governmental
Authority having jurisdiction over the Building, permitting the Premises to be
occupied by Tenant in accordance with the Laws;

                           (iv) Tenant has ready access to and egress from the
Expansion Space, free of construction equipment and materials; and

                           (v) The Expansion Space is broom clean.

                  (f) The final, stand alone, paragraph of Section 5b of the
Lease regarding the pass-through of certain costs as Operating Expenses shall
not apply to Landlord's obligation under this Paragraph 6.

         7. EARLY ACCESS: Notwithstanding anything contained in the Lease to the
contrary, Landlord shall allow Tenant access to the Premises approximately two
(2) weeks prior to the Expansion Effective Date for the purpose of installation
of wiring, furniture, tenant fixtures, and general setup. Such access shall be
governed by the terms and conditions of the Lease; however, in no event shall
any Base Rent or Additional Rent be payable during such early access period.
Landlord shall cooperate fully with Tenant in its efforts to fixturize the
Premises. Any work or installation performed by Tenant shall be completed in
compliance with the provisions of this Lease, shall be subject to coordination
by Landlord's contractor, and must be performed using workers compatible with
Landlord's contractors and subcontractors in order to avoid labor disputes and
delays in completion.

         8. ASSIGNMENT AND SUBLETTING: Paragraph 14 of the Lease is amended to
provide that Landlord shall have no recapture rights with respect to any
assigned or sublet space. Notwithstanding the provisions of paragraph 14(c) of
the Lease, "Assignment or Sublet", in the event of any assignment or sublease of
the Expansion Space, other than an assignment or sublease pursuant to Section
14.g., Landlord shall be entitled to receive, as additional rent hereunder,
sixty percent (60%) of the consideration actually received by the Tenant from
the assignee or subtenant for the assignment or sublease and, in the case of a
sublease, sixty percent (60%) of the excess of the amount of monthly base rent
paid for the sublet space by the subtenant over the amount of monthly Base Rent
under Section 4 of this Lease, excluding in each instance: Tenant's reasonable
out-of-pocket expenses (including attorneys' fees and advertising costs), tenant
improvement costs or other costs of readying the space for occupancy, brokerage
commissions paid by Tenant, any consideration paid to the assignee or subtenant
to induce assignee or subtenant to consummate the transaction and the
unamortized portion of Tenant's costs to improve the Premises above any tenant
improvement allowance paid by Landlord.

         9. OPTION TO EXTEND: As of the Expansion Effective Date the provisions
of Section 39 of the Lease, Renewal Option shall apply to the initial Premises
and the Expansion Space.

                                       6.
<PAGE>
         10. RIGHT OF FIRST OFFER:

                  (a) Tenant shall have a right of first offer on all remaining
space in the Building for up to two (2) years after the date of this Agreement.
Prior to the leasing any additional space to any prospective third parties,
Landlord shall notify Tenant in writing ("Landlord's Notice") of the general
terms and conditions, including without limitation, the size and location of the
available space (the "Available Space"), the rent, tenant allowance and parking
ratio, under which Landlord would be willing to rent such space. Tenant shall
have an option, exercisable by notice to Landlord within five (5) calendar days
after receipt of Landlord's Notice, to lease all or a portion of the Available
Space in accordance with the provisions contained in Landlord's Notice .
Promptly after Tenant exercises this option, the parties shall enter into an
amendment to the Lease that incorporates the Available Space as part of the
Premises, or, at Landlord's option, a separate lease on the Available Space.

                  (b) If Tenant elects not to lease all of the Available Space
specified in Landlord's notice, the right of first offer shall terminate as to
such Available Space and Landlord shall be free to lease the Available Space to
any third party, provided, however, the terms and conditions of any lease with
the third party are substantially in accordance with the terms offered to Tenant
and that the rent is within ninety percent (90%) of the rent proposed to Tenant.
If the rent offered to a third party is less than ninety percent (90%) of the
rent offered to Tenant, Tenant shall have a right of first refusal to lease the
Available Space at the price and terms offered to the third party.

         11. TENANT'S ACCESS. Tenant shall have access to the Building, the
Premises, the Common Areas and the parking facilities twenty-four (24) hours per
day, seven (7) days per week, fifty-two (52) weeks per year.

         12. AUTHORITY: Tenant represents and warrants that all necessary
corporate actions have been duly taken to permit Tenant to enter into this
Agreement and that the person signing this Agreement on behalf of Tenant has
been duly authorized and instructed to execute this Agreement. Landlord
represents and warrants that all necessary company actions have been duly taken
to permit Landlord to enter into this Agreement and that the person signing this
Agreement on behalf of Landlord has been duly authorized and instructed to sign
this Agreement.

         13. BROKERS: Each of Landlord and Tenant warrants and represents that
it has dealt with no real estate broker in connection with this Agreement other
than Colliers International and BT Commercial (collectively, "Broker"), and that
no other broker is entitled to any commission on account of this Agreement. The
party who breaches this warranty shall defend, hold harmless and indemnify the
other from any loss, cost, damage or expense, including reasonable attorneys'
fees, arising from the breach; Landlord's indemnity of Tenant shall include
claims by the Broker. Landlord is solely responsible for paying the commission
of the Broker in accordance with a separate agreement.

                                       7.
<PAGE>
         14. LETTER OF CREDIT. The first sentence of Section 17b of the Lease is
hereby deleted in its entirety and replaced with the following language:

                  As used herein, Letter of Credit shall mean an unconditional,
         irrevocable letter of credit (hereinafter referred to as the "Letter of
         Credit") issued at Tenant's sole expense by the San Francisco office of
         a major national bank satisfactory to Landlord (the "Bank"), naming
         Landlord as beneficiary, and in form and substance satisfactory to
         Landlord, in the amount of One Million Two Hundred Thousand Dollars
         ($1,200,000.00) ("Letter of Credit Amount"). On or after the Expansion
         Effective Date, provided that Tenant remains in occupancy of 100% of
         the Premises, the Letter of Credit Amount shall be reduced upon the
         occurrence of the following event(s) in the amount(s) indicated below:

                  (a) a $300,000.00 reduction upon the delivery by Tenant to
         Landlord of Tenant's [INIT] unaudited financial statements showing
         pre-tax annual income of at least $10,000,000.00 and stockholders
         equity, as of the end of Tenant's 2001 fiscal year, of $90,000,000.00
         or more;

                  (b) an additional $300,000.00 reduction when all of the
         following have occurred: (i) Tenant completes an initial public offer
         of its stock, (ii) Tenant eliminates all secured debt (other than
         nominal debt), and (iii) Tenant verifies, via one or more filings with
         the Securities and Exchange Commission ("SEC"), that Tenant has
         stockholders equity of $175,000,000.00 or more;

                  (c) an additional reduction of $300,000.00 as of the date on
         which Tenant verifies, via one or more SEC filings, that Tenant has
         pre-tax annual income of at least $20,000,000.00 and stockholders
         equity of $225,000,000.00 or more; and

                  (d) the Letter of Credit requirement will be eliminated in its
         entirety as of the date Tenant verifies, via one or more SEC filings,
         that Tenant has pre-tax annual income of at least $25,000,000.00 and
         stockholders equity of $275,000,000.00 or more.

                  Notwithstanding the foregoing, if on the date the Letter of
         Credit Amount would otherwise reduce, an Event of Default shall have
         occurred and be continuing, the Letter of Credit Amount shall not
         reduce on such date and shall not thereafter reduce until such Event of
         Default shall have been cured. Upon the occurrence of the foregoing
         events, Landlord shall make the original or then current Letter of
         Credit available for exchange with a replacement letter of credit
         obtained by Tenant in the applicable reduced Letter of Credit Amount.

         15. HOLDING OVER. The second sentence of Section 19 of the Lease is
revised by deleting the words "two hundred percent (200%)" in lines 5 and 6 and
replacing them with "one hundred fifty percent (150%)".

                                       8.
<PAGE>
         16. SUBORDINATION. Section 22d of the Lease shall be amended as
follows. The following phrase shall be inserted as an introductory clause to the
second sentence of Section 22d: "Notwithstanding the self-operative language of
Section 22a above."

         17. FULL FORCE AND EFFECT: Except as expressly modified above, all
terms and conditions of the Lease remain in full force and effect and are hereby
ratified and confirmed. Landlord and Tenant hereby acknowledge and agree that,
except as provided in this Agreement, the Lease has not been modified, amended,
canceled, terminated, released, superseded or otherwise rendered of no force or
effect.

LANDLORD:                                     TENANT:

Hollis Street Investors, L.L.C.,              Leapfrog Enterprises, Inc., a
a Delaware limited liability company          Delaware corporation

By: Riggs & Company, a division of
    Riggs Bank N.A., as Trustee of
    the Multi-Employer Property               By: /s/ James P. Curley
    Trust, its Manager                            -------------------
                                              Name:   James P. Curley
                                                    -----------------
                                              Its: Chief Executive Officer
                                                   ----------------------

    By: /s/ Mary Anne Martins
        ---------------------
    Name:  Mary Anne Martins
          -------------------
    Its:  Managing  Director
          ------------------

                                       9.
<PAGE>
                                   SCHEDULE A

                                  [Floor Plan]

                                      10.<PAGE>
                                                                   EXHIBIT 10.03
                            STANDARD LEASE AGREEMENT

                               NNN - MULTI-TENANT

     For and in consideration of the rental and of the covenants and agreements
hereinafter set forth to be kept and performed by the Tenant, Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the Premises described
below in Section 1.2 for the term, at the rental and subject to and upon all of
the terms, covenants and agreements hereinafter set forth.

1.   BASIC LEASE PROVISIONS.

     1.1 PARTIES: This Lease, dated for reference purposes only January 15,
2002, is made by and between Knowles Los Gatos, LLC, a California limited
liability company (hereinafter "Landlord") and LeapFrog Enterprises, Inc., a
Delaware corporation (hereinafter "Tenant").

     1.2 PREMISES: Those premises commonly known as 130 Knowles, Suites D & E,
Los Gatos, California, deemed to be approximately 14,470 square feet, more or
less, as defined in Paragraph 2 and as shown in Exhibit "A" attached hereto and
made a part hereof (hereinafter the "Premises").

     1.3 BUILDING: Commonly described as being deemed to be that certain 33,720
square foot building located at 130 Knowles Drive, Suites A through E, in the
City of Los Gatos, County of Santa Clara, State of California, as more
particularly shown in Exhibit "A" attached hereto and made a part hereof. Tenant
acknowledges that the sole purpose of any floor plan provided herein is to
identify the location of the Premises in the Building. Landlord makes no
representation or warranty in the attached floor plan as to the usable or
rentable square footage of the Premises.

     1.4 USE: General office, research and development, distribution and
warehouse of educational toys and related legal uses subject to Paragraph 7.

     1.5 TERM: Five (5) years, commencing on February 1, 2002, or upon
Landlord's delivery of Suite E to Tenant, pursuant to Paragraph 1.14 below
(hereinafter "Commencement Date") and ending January 31, 2007, subject to the
provisions of Paragraph 1.14 below.

     1.6 BASE RENT: Thirty-Six Thousand One Hundred Seventy-five and no/100ths
Dollars ($36,175.00) per month, payable on the first (1st) day of each month
subject to Paragraph 4 below.

     1.7 BASE RENT INCREASE: The monthly Base Rent payable under Paragraph 1.6
above shall be adjusted during the Term as follows:

<TABLE>
<CAPTION>
<S>                                                            <C>
February 1, 2003 through and including January 31, 2004:       Thirty-seven Thousand Nine Hundred Eighty-three and
                                                               75/100ths Dollars ($37,983.75)

February 1, 2004 through and including January 31, 2005:       Thirty-nine Thousand Eight Hundred Eighty-two and
                                                               94/100ths Dollars ($39.882.94)

February 1, 2005 through and including January 31, 2006:       Forty-one Thousand Eight Hundred Seventy-seven and
                                                               08/100ths Dollars ($41,877.08)

February 1, 2006 through and including January 31, 2007:       Forty-three Thousand Nine Hundred Seventy and
                                                               94/100ths Dollars ($43,970.94)
</TABLE>

                                       1.
<PAGE>
     1.8 RENT PAID UPON EXECUTION: Upon execution of this Lease, Tenant shall
pay the sum of Thirty-six Thousand One Hundred Seventy-five and no/100ths
Dollars ($36,175.00) for the first month's rent.

     1.9 SECURITY DEPOSIT: Tenant's existing deposit currently on account with
Landlord in the total sum of Forty-nine Thousand One Hundred Eighty-four and
62/100ths Dollars ($49,184.62) shall be transferred to this Lease as a security
deposit, as defined in Paragraph 5 below.

     1.10 TENANT'S SHARE OF OPERATING EXPENSES: Forty-two and ninety-one
hundredths percent (42.91%) of the Building and nine and twenty-six hundredths
percent (9.26%) of the Project, as defined in Paragraphs 2.1 and 4.2 below.

     1.11 PROPERTY TAXES: Pursuant to Paragraph 4.5, "Operating Expenses" and
Paragraph 6.1, "payment of Real Property Taxes as Additional Rent", Tenant shall
be responsible to pay Tenant's Share, as defined below, of all real property
taxes levied against the Premises during the term of this Lease.

     1.12 PROPERTY INSURANCE: Pursuant to Paragraph 4.5, "Operating Expenses"
and Paragraph 13.2, "Property Insurance", Tenant, as Additional Rent", Tenant
shall be responsible to pay Tenant's Share, as defined below, of all property
insurance, as further defined in Paragraph 13.2 below.

     1.13 PARKING: Tenant shall have the non-exclusive use of forty-five (45)
parking spaces.

     1.14 WORK OF IMPROVEMENT. Tenant shall accept the Premises in an "as is"
condition, except that Landlord shall construct the Improvements as outlined in
Exhibit "B" attached hereto and made a part hereof. Landlord shall bear the sole
cost of the Improvements, except that Tenant shall be responsible for the costs
associated with construction of the new lunch room and installation and
exhausting of Tenant's spray booth, including a portion of supervision and
overhead associated with these costs. Landlord and Tenant both acknowledge and
agree that the construction of the Improvements, as outlined in Exhibit "B"
attached hereto, shall be completed in two (2) phases. Phase 1 shall include: a)
demolition of all interior walls required by the Approved Plan, b)
reconstruction of offices and hallway between Suites D and E per the Approved
Plan, and, c) carpet and paint, per the Approved Plan. Phase 2 shall include: i)
construction of all work necessary for the lunch room; and, ii) installation and
exhausting of Tenant's spray booth equipment. Tenant herein acknowledges that
the Commencement Date referred herein shall occur after completion of all work
required in Phase 1 of the Improvements.

     1.15 MUTUAL TERMINATION OF EXISTING LEASE. Upon execution of this Lease,
Landlord and Tenant mutually agree to terminate that certain lease by and
between Landlord and Tenant dated October 18, 2000, including all addendums
thereto, for 130-C & D Knowles Drive, Los Gatos, California. Said mutual
termination of the above-referenced lease shall be effective upon the
Commencement Date of this Lease, as defined in Paragraph 1.5 above. The security
deposit in the amount of $49,184.62, currently on account with Landlord, shall
be applied to the Security Deposit required under Paragraph 1.9 of this Lease.
Prior to the Commencement Date as defined in Paragraph 1.5 above, Tenant shall
return 130 Knowles, Suite C, Los Gatos, California, to Landlord pursuant to
Paragraph 9.2(e) of that certain lease dated October 18, 2000, referred to
above.

2.   PREMISES, PARKING, COMMON AREAS, WORK OF IMPROVEMENT:

     2.1 PREMISES. The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in Paragraph 1.3. "Building" shall
include adjacent parking structures used in connection therewith. The Premises,
the Building, the Common Areas (as defined below) and the land upon which the
same are located, along with all other buildings and improvements thereon or
thereunder, are herein collectively referred to as the "Project".

     2.2 VEHICLE PARKING. Tenant shall be entitled to the non-exclusive use of
unreserved and unassigned parking spaces the number of which is specified in
Paragraph 1.13 above, on those portions of the Common Area designated by
Landlord for parking. Tenant shall not use more parking spaces than the number
specified. Said parking spaces shall be used only for parking by vehicles no
larger than full size passenger automobiles or pick-up

                                       2.
<PAGE>
trucks, herein called "Permitted Size Vehicles". Vehicles other than Permitted
Size Vehicles are herein referred to as "Oversized Vehicles". Tenant shall not
at any time park or permit the parking of Tenant's vehicles or trucks, or the
vehicles or trucks of Tenant, its employees, invitees, suppliers or others, in
any portion of the Common Area not designated by Landlord for such use by
Tenant. Tenant shall not abandon any inoperative vehicles or equipment on any
portion of the Common Area, nor shall Tenant, its employees, invitees, suppliers
or others park or store any vehicle (Permitted Size or otherwise) on any portion
of the Common Area, including designated parking areas, unattended for any
period longer than twenty-four (24) hours. If Tenant commits, permits or allows
any of the prohibited activities described in the Lease or the rules then in
effect, then Landlord shall have the right, without notice, in addition to such
other rights and remedies that it may have, to remove or tow away the vehicle
involved and charge the cost to Tenant, which cost shall be immediately paid by
Tenant to Landlord upon demand from Landlord.

     2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project that are provided and designated by Landlord from time to time
for the general non-exclusive use of Landlord, Tenant, and the other tenant and
other authorized users of the Project and their respective employees, suppliers,
shippers, customers and invitees, including, but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalk,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.

     2.4 COMMON AREAS - TENANT'S RIGHTS. Landlord hereby grants to Tenant, for
the benefit of Tenant and its employees, suppliers, shippers, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Landlord
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Project. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in the Common Areas or to
construct or install any improvements in the Common Areas. Any such storage
shall be permitted only by the prior written consent of Landlord or Landlord's
designated agent, which consent may be revoked at any time. In the event that
any unauthorized storage shall occur, the Landlord shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Tenant, which cost shall be
immediately payable by Tenant to Landlord upon demand by Landlord.

     2.5 COMMON AREAS - RULES AND REGULATIONS/CC&R's. Landlord or such other
person(s) as Landlord may appoint, shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
establish, modify, amend and enforce reasonable rules and regulations with
respect thereto. Tenant agrees to abide by and conform to all such rules and
regulations, as well as any private conditions, covenants, and restrictions of
public record now or hereafter affecting the Premises and any amendment thereof,
and to cause its employees, suppliers, shippers, customers and invitees to abide
and conform. Landlord shall not be responsible to Tenant for the non-compliance
with said rules and regulations by other tenants or authorized users of the
Project. Any failure by Tenant or its agents, employees or representatives to
observe and comply with the rules and regulations established by Landlord with
respect to the Common Areas shall be a default by Tenant hereunder. A copy of
the current Rules and Regulations for the Project are attached hereto as Exhibit
"B".

     2.6 COMMON AREAS - CHANGES. Landlord shall have the right at Landlord's
sole discretion, from time to time:

          (a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas and walkways;

          (b) To close temporarily any of the Common Areas for maintenance
purposes, so long as reasonable access to the Premises remains available;

          (c) To designate other land outside the boundaries of the Project to
be a part of the Common Areas;

                                       3.
<PAGE>
          (d) To add additional buildings and improvements to the Common Areas;

          (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof;

          (f) To close, at reasonable times, all or any portion of the parking
areas for any reasonable purpose, including without limitation, the prevention
of a dedication thereof, or the accrual of the rights of any person or public
therein; and

          (g) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and the Project as Landlord may, in the
exercise of sound business judgment, deem to be appropriate.

     Notwithstanding the foregoing, Landlord shall at all times provide the
parking spaces required by applicable law and except as provided immediately
below, in no event shall the number of parking spaces that Tenant is entitled to
under Paragraph 2.2 be reduced. The preceding sentence to the contrary
notwithstanding, in the event by reason of any rule, regulation, order, law,
statute or ordinance of any governmental or quasi-governmental authority
relating to or affecting parking on the Project, or any other cause beyond
Landlord's reasonable control, Landlord is required to have the right to
proportionately reduce the number of Tenant's parking spaces and the
non-exclusive parking spaces of the tenants of the Building.

3.   TERM.

     3.1 TERM. The term (the "Lease Term") and Commencement Date of this Lease
shall be as specified in Paragraph 1.5 of the Basic Lease Provisions, unless
terminated earlier pursuant to this Lease.

     3.2 DELAY IN COMMENCEMENT. Tenant agrees that in the event of the inability
of Landlord for any reason to deliver possession of the Premises to Tenant on
said Commencement Date set forth in Paragraph 1.5 of the Basic Lease Provisions,
Landlord shall not be liable for any damage thereby nor shall such inability
affect the validity of this Lease or the obligations of Tenant hereunder, but in
such case Tenant shall not be obligated to pay rent or other monetary sums until
possession of the Premises is tendered to Tenant; provided that if the delay in
delivery of possession exceeds thirty (30) days, then the expiration date of the
term of the Lease shall be extended by the period of time computed from the
scheduled commencement date to the date possession is tendered. If Tenant
occupies the Premises prior to said Commencement Date, such occupancy shall be
subject to all provisions hereof, such occupancy shall not advance the
termination date, and Tenant shall pay rent for such period at the initial
monthly rates as set forth below.

     3.3 COMMENCEMENT AFTER CONSTRUCTION. If Landlord is obligated under
Paragraph 1.14 of the Basic Lease Provisions and Exhibit "B" to perform
construction or remodeling work, then possession shall not be deemed tendered
and the term of this Lease shall not commence until the first to occur of the
following:

          (a) The date on which Phase 1 of the Improvements, as defined in
Paragraph 1.14 above, to be constructed by Landlord have been substantially
completed except for punch list items which do not prevent Tenant from using the
Premises for its intended use, such work as Landlord is required to perform but
which is delayed because of fault or neglect of Tenant, acts of Tenant or
Tenant's agents (including, without limitation, delays caused by work done on
the Premises by Tenant or Tenant's agents or by acts of Tenant's contractors or
subcontractors) or delays caused by change orders requested by Tenant or
required because of errors or omissions in plans submitted by Tenant; and such
work as Landlord is required to perform but cannot complete until Tenant
performs necessary portions of construction work it has elected or is required
to do; or

          (b) After a Certificate of Occupancy on the work of improvement for
Phase 1, or its equivalent, is granted by the proper governmental agency or, if
no Certificate of Occupancy, or its equivalent, is issued by any local agency,
then after notification by Landlord's architect or contractor that Landlord's
construction work has been completed; or

                                       4.
<PAGE>
          (c) Upon the occupancy of the Suite E of the Premises by any of
Tenant's operating personnel.

     3.4 If the term commences on a date other than as set forth in Paragraph
1.5 of the Basic Lease Provisions above, then Landlord and Tenant shall execute
a written acknowledgment stating the date of commencement.

4.   RENT.

     4.1 BASE MONTHLY RENT. Tenant shall pay to Landlord as base monthly rent
for the Premises in advance on the first day of each calendar month of the term
of this Lease without deduction, offset, prior notice or demand, in lawful money
of the United States, the sum as defined in Paragraphs 1.6 and 1.7 of the Basic
Lease Provisions (the "Base Rent"). If the Commencement Date is not the first
day of a month, or if the Lease expiration or termination date is not the last
day of a month, a prorated monthly installment shall be paid at the then current
rate for the fractional month during which the Lease commences and/or
terminates.

     Concurrently with Tenant's execution of this Lease; Tenant shall pay to
Landlord in the form of a check the sum as defined in Paragraph 1.8 of the Basic
Lease Provisions as Base Rent for the period defined in Paragraph 1.8 of the
Basic Lease Provisions.

     4.2 ADDITIONAL RENT. Commencing on the date set forth in Section 1.5 of the
Basic Lease Provisions above, and continuing throughout the Lease Term, Tenant
shall pay, as additional rent, Tenant's Share (as defined in Section 4.5(a)) of
(i) Operating Expenses as required by Section 4.5, 8.1 and 9.2 and as defined in
Paragraph 4.5 below; (ii) Real Property Taxes as required by Section 6.1; and,
(iii) the cost of any insurance premiums, pursuant to Section 13.2. All
Operating Expenses, real property taxes, insurance costs, late charges, costs,
expenses and other sums which Tenant is required to pay under this Lease,
together with all interest and penalties that may accrue thereon in the event of
Tenant's failure to pay such amounts, and all reasonable damages, costs and
attorneys' fees and expenses which Landlord may incur by reason of any default
of Tenant, or failure on Tenant's part to comply with the terms of this Lease,
shall be deemed to be additional rent ("Additional Rent") and shall be paid in
addition to the Base Rent, and, in the event of non-payment by Tenant, Landlord
shall have all the rights and remedies with respect thereto as Landlord has for
the non-payment of the Base Rent.

     4.3 LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant to
Landlord of Base Monthly Rent, Additional Rent and other sums 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, accounting charges and late payment fees which may
be imposed on Landlord by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of Base Monthly Rent, Additional Rent
or any other sum due from Tenant shall not be received by Landlord or Landlord's
designee within four (4) days after such amount shall be due, Tenant shall pay
to Landlord as Additional Rent a late charge equal to ten percent (10%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Landlord will incur by reason of late
payments by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. In no event shall this provision for a late charge be deemed to grant
to Tenant a grace period or extension of time within which to pay any
installment of Base Monthly Rent or Additional Rent or prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's failure to
make such payment when due. In the event any payment of Base Monthly Rent or
Additional Rent is not received by Landlord by the thirtieth (30th) day after
the due date for such payment or installment, such payment or installment shall
bear interest at the Permitted Rate, as defined in Paragraph 20.17 below,
commencing on the thirty-first (31st) day after the due date for such payment or
installment and continuing until the same is paid.

     4.4 RETURNED CHECK FEE. A twenty-five dollar ($25.00) charge will be paid
by Tenant as Additional Rent to Landlord for each check returned unpaid by the
bank and Tenant shall replace the payment with a Cashier's Check or Certified
Check. If Tenant has two (2) or more checks returned for insufficient funds at
any time during its tenancy, Landlord, at its option, may request all payments,
current and future, be made by Cashier's Check or Certified Check.

                                       5.
<PAGE>
     4.5 OPERATING EXPENSES. Tenant shall pay to Landlord during the term
hereof, in addition to the Base Rent, Tenant's Share, as hereinafter defined, of
all Operating Expenses, as hereinafter defined, during each calendar year of the
term of this Lease, in accordance with the following provisions:

          (a) "Tenant's Share" is defined, for purposes of this Lease, as the
respective percentages set forth in Paragraph 1.10 of the Basic Lease
Provisions, which percentages have been determined by dividing the approximate
square footage of the Premises by the total approximate square footage of both
the space contained within the Building and all buildings located in the
Project. Tenant's Share used in calculating Tenant's Share of any Operating
Expense shall be determined by the specific charge and its relationship to the
Building versus the Project, which determination shall be made by Landlord in
its reasonable discretion. It is understood and agreed that the square footage
figures set forth in the Basic Lease Provisions are approximate, which Landlord
and Tenant agree are reasonable and shall not be subject to revision except in
connection with an actual change in the size of the Premises, or a change in the
space available for lease in the Project.

          (b) "Operating Expenses" as defined, for purposes of this Lease, shall
include all costs and expenses incurred by Landlord in connection with the
ownership and operating of the Project, including but not limited to the
following:

               (i) The operating, repair, maintenance, and replacement in neat,
clean, good order and condition of the following:

                    (aa) the Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers. irrigation systems, Common Area
lighting facilities, electric rooms, elevators, fences and gates,

                    (bb) Common Area signage (i.e., address, directional.
Project identity and tenant directories),

                    (cc) fire detection systems, including sprinkler systems;
and,

                    (dd) security services, if provided.

               (ii) The cost of water, gas, electricity and other utilities to
serve the Common Areas or which are not separately metered to the Premises;

               (iii) trash disposal services;

               (iv) reserves set aside for maintenance repair and/or replacement
of the Common Areas;

               (v) Real Property Taxes as provided in Paragraph 6.1;

               (vi) property insurance premiums as provided in Paragraph 13.2;

               (vii) the cost of liability insurance carried by Landlord with
respect to the Common Areas;

               (viii) any deductible portion of an insured loss concerning the
Project or any portion thereto;

               (ix) the cost of any capital improvements made to the Building or
Project by Landlord that have the effect of reducing Operating Expenses or
avoiding increases in Operating Expenses or, subject to the terms of Paragraph
9.3 (b) below, the cost of any capital improvements that are required under any
governmental law or regulation that was not applicable to the Building at the
time it was constructed, which cost shall be amortized over such reasonable
period of time as Landlord shall determine with interest on the unamortized

                                       6.
<PAGE>
balance at the rate of ten percent (10%) per annum or such higher rate as may
have been paid by Landlord on funds borrowed for the purpose of constructing
such capital improvements;

               (x) fees for licenses and permits required for the operation of
the Building, Common Areas and Project;

               (xi) the reasonable cost of contesting the validity or
applicability of any governmental enactment's or assessments, including without
limitation property tax assessments, which may affect Operating Expenses;

               (xii) the repair, maintenance or patching, but not replacement,
of the roof membrane of the Building; and,

               (xiii) any other services to be provided by Landlord that are
stated elsewhere in this Lease to be an operating expense.

          (c) The inclusion of the improvements, facilities and services set
forth in Paragraph 4.5(b) shall not be deemed to impose an obligation by
Landlord to either have said improvements or facilities or to provide those
services. Without limiting the generality of the foregoing, nothing contained in
Paragraph 4.5(b) or elsewhere in this Lease shall create or imply an obligation
or duty on the part of Landlord to provide any security services or protection
for the Premises, the Building, Common Area and/or the Project.

          (d) Tenant's share of Operating Expenses shall be payable by Tenant
within ten (10) days after a reasonably detailed statement of actual expenses is
presented to Tenant by Landlord. At Landlord's option, however, an amount may be
estimated by Landlord from time to time of Tenant's share of annual Operating
Expenses and the same shall be payable monthly or quarterly, as Landlord shall
designate, during the Lease Term herein, on the same day as the Base Rent is due
hereunder. In the event that Tenant pays Landlord's estimate of Tenant's Share
of Operating Expenses as aforesaid, Landlord shall provide Tenant with a
reasonably detailed statement reconciling Tenant's Share of the actual Operating
Expenses. Said detailed statement shall be provided on an annual basis, or
within thirty (30) days of the expiration of this Lease or Tenant's vacation of
the Premises. If Tenant's payments under this Paragraph 4.5(d) during the
preceding year exceed Tenant's Share as indicated on said statement, Tenant
shall be entitled to credit the amount of such overpayment against Tenant's
Share of Operating Expenses next falling due. If Tenant's payments under this
Paragraph during said preceding year were less than Tenant's Share, as indicated
on said statement, Tenant shall pay to Landlord the amount of the deficiency
within ten (10) days after delivery by Landlord to Tenant of said statement.

5.   SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum, as defined in Paragraph 1.9 of the
Basic Lease Provisions outlined above, in the form of a Cashier's Check or
Certified Check payable to Landlord. Said sum shall be held by Landlord as a
security deposit for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof, including any extension or renewal of the term. If
Tenant defaults with respect to any provisions of this Lease, including but not
limited to the provisions relating to the payment of rent, Additional Rent and
any of the monetary sums due herewith, Landlord may use, apply or retain all or
any part of this security deposit for the payment of Base Rent, Additional Rent
or any other amount which Landlord may spend or become obligated to spend by
reason of Tenant's default or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's default, including, but
not limited to, any damages or deficiency in the re-letting of the demised
Premises or other reentry by Landlord. If any portion of said deposit is so used
or applied, Tenant shall, within ten (10) days after written demand therefore,
deposit cash with Landlord in an amount sufficient to restore the security
deposit to its original amount; Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep this security
deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully comply with all
the terms, covenants and conditions of this Lease, any part of the security
deposit not used or retained by Landlord pursuant to the terms outlined above
shall be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of the Lease Term and after
delivery of exclusive possession of the demised Premises to Landlord. If at any
time the Base Rent is increased, the security deposit shall be increased to an
amount equal to the Base Rent. In the event of termination of Landlord's
interest in the Lease, Landlord shall transfer said deposit to Landlord's

                                       7.
<PAGE>
successor in interest whereupon Landlord shall be automatically released of all
liability for return of such deposit or the accounting therefore.

     Tenant hereby agrees not to look to the mortgages, as mortgagee, mortgagee
in possession, or successor in title to the property, for accountability for any
security deposit required by the Landlord hereunder, unless said sums have
actually been received by said mortgagee as security for the Tenant's
performance of this Lease.

     Tenant covenants that it shall not assign or encumber the security deposit
given to Landlord pursuant to this Lease. Neither Landlord, its successors or
assigns shall be bound by any such assignment or encumbrance or any attempted
assignment or encumbrance.

6.   TAXATION.

     6.1 PAYMENT OF REAL PROPERTY TAXES AS ADDITIONAL RENT. Tenant shall pay, as
Additional Rent, Tenant's Share (as defined in Paragraph 4.5(a)) of all real
property taxes levied against the Premises during the term of this Lease. Such
payment shall be made by Tenant to Landlord within ten (l0) days after receipt
of Landlord's written statement setting forth the amount of such increase and
the reasonable computation thereof. Tenant's liability for Real Property Tax
Increases shall be prorated to reflect the commencement and termination dates of
this Lease.

     6.2 DEFINITION OF "REAL PROPERTY TAX". For the purpose of this Lease, "Real
Property Taxes" means and includes all taxes, assessments (including, but not
limited to, assessments for public improvements or benefits), taxes based on
vehicles utilizing parking areas, taxes based or measured by the rent paid,
payable or received under this Lease, taxes on the value, use, or occupancy of
the Premises, the Buildings and/or the Parcel, Environmental Surcharges, and all
other governmental impositions, fees and charges of every kind and nature
whatsoever, whether or not customary or within the contemplation of the parties
hereto and regardless of whether the same shall be extraordinary or ordinary,
general or special, unforeseen or foreseen, similar or dissimilar to any of the
foregoing which, at any time during the Lease Term, shall be applicable to the
Premises, the Building and/or the Project, or assessed, levied or imposed upon
the Premises, the Building and/or the Project, or become due and payable and a
lien or charge upon the Premises, the Building and/or the Project, or any part
thereof, under or by virtue of any present or future laws, statutes, ordinances,
regulations or other requirements of any governmental authority whatsoever. The
term "Environmental Surcharges" shall mean and include any and all expenses,
taxes, charges or penalties imposed by the Federal Department of Energy, the
Federal Environmental Protection Agency, the Federal Clean Air Act, or any
regulations promulgated thereunder or any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes, assessments, or other types of surcharges as a means of controlling or
abating environmental pollution or the use of energy. The term "Property Taxes"
shall not include any federal, state or local net income, estate, or inheritance
tax imposed on Landlord.

     6.3 PERSONAL PROPERTY TAXES.

          (a) Tenant shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Premises or elsewhere. When possible, Tenant
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of
Landlord.

          (b) If any of Tenant's personal property shall be assessed with
Landlord's real property, Tenant shall pay to Landlord the taxes attributable to
Tenant within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Tenant's property.

     6.4 OTHER TAXES. Tenant shall, as Additional Rent, pay or reimburse
Landlord for any tax based upon, allocable to, or measured by the area of the
Premises; or by the rent paid, payable or received under this Lease, any tax
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of the Premises or any portion
thereof, any privilege tax, excise tax, business and occupation tax, gross
receipts tax, sales and/or use tax, water tax, sewer tax, employee tax,
occupational license tax imposed upon

                                       8.
<PAGE>
Landlord or Tenant with respect to the Premises, any tax upon this transaction
or any document to which Tenant is a party creating or transferring an interest
or an estate in the Premises.

7.   USE.

     7.1 USE. The Premises shall be used and occupied by Tenant only for the
purpose as set forth in Paragraph 1.4 of the Basic Lease Provisions above and
for no other purpose whatsoever.

     7.2 SUITABILITY. If the Premises are completed as of the date of execution
hereof, then Tenant, by execution of this Lease, shall be deemed to have
accepted the Premises in the condition existing as of the date of execution and
in any event this Lease shall be subject to all applicable zoning ordinances and
to any municipal, county and state laws and regulations governing and regulating
the use of the Premises, and further to have accepted tenant improvements to be
constructed by Landlord, if any, as being completed in accordance with the plans
and specifications for such improvements. Tenant acknowledges that neither
Landlord nor Landlord's agent has made any representation, warranty, estimation
or promise of any kind as to the suitability of the Premises for the conduct of
Tenant's business, the condition of the Building or Premises or the use or
occupancy which may be made thereof. Tenant hereby warrants to Landlord that
Tenant (i) has made its own investigation and examination of all the relevant
data relating to or affecting the Premises, (it) is relying solely on its own
judgment in entering into this Lease; and, (iii) is satisfied that the Premises
are suitable for Tenant's intended use and that the Building and Premises meet
all governmental requirements for such intended use.

     7.3 USES PROHIBITED.

          (a) Tenant shall not do or permit anything to be done in or about the
Premises which will increase the existing rate of insurance upon the Premises
(unless Tenant shall pay any increased premium as a result of such use or acts)
or cause the cancellation of any insurance policy covering said Premises or any
building of which the Premises may be a part, nor shall Tenant sell or permit to
be kept, used or sold in or about said Premises any articles which may be
prohibited by a standard form policy of fire insurance.

          (b) Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of any building of which the Premises may be a part or
injure or annoy them or use or allow the Premises to be used for any unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises and Tenant shall keep the Premises in a clean,
attractive condition, free of any objectionable noises, odors, dust or debris.

          (c) Tenant shall not use the Premises or permit anything to be in or
about the Premises which will in any way conflict with or violate any law,
statute, zoning restriction, ordinance, governmental rule, regulation,
requirements now in force or which may hereafter be enacted or promulgated.
Tenant shall, at its sole cost and expense, promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force and with requirements of any board of
fire underwriters or other similar body now or hereafter constituted relating to
or affecting the condition, use or occupancy of the Premises. Tenant shall also
comply, at its sole cost, with the provisions of all recorded documents
affecting the Premises insofar as the same relate to or affect the condition,
use or occupancy of the Premises. Tenant shall obtain, prior to taking
possession of the Premises, any permits, licenses or other authorizations
required for the lawful operation of its business at the Premises. The judgment
of any court of competent jurisdiction or the admission of Tenant in any action
against Tenant, whether Landlord be a party thereto or not, that Tenant has
violated any law, statute, ordinance or governmental rule, regulation, recorded
document, or requirement, shall be conclusive of that fact as between Landlord
and Tenant. Tenant shall indemnify and hold Landlord harmless from and against
any and all loss, expense, cost, damage, attorney's fees, penalties or liability
arising out of the failure of Tenant or Tenant's agents or employees to comply
with any applicable law, statute, ordinance, rule, regulation, order,
requirement or recorded document

          (d) Tenant shall not store, park or operate any vehicles inside the
Building, other than those operated by electricity.

                                       9.
<PAGE>
8.   UTILITIES AND WASTE DISPOSAL.

     8.1 UTILITIES. Tenant shall pay as Additional Rent prior to delinquency for
all water, gas, heat, light, power, telephone, sewage, air conditioning and
ventilating, scavenger, trash disposal, janitorial, landscaping and all other
materials and utilities supplied to the Premises and all taxes and surcharges
thereon. If any such services are not separately metered to Tenant, Tenant shall
pay a reasonable proportion of all charges which are jointly metered or
maintained by Landlord as an Operating Expense, the determination to be made by
Landlord, and payment shall be made by Tenant within ten (10) days of receipt of
a statement for such charges. The lack or shortage of any utilities or services
described above due to any cause whatsoever shall not affect any obligation of
Tenant hereunder, and Tenant shall faithfully keep and observe all the terms,
conditions and covenants of this Lease and pay all rentals due hereunder, all
without diminution, credit or deduction.

     8.2 WASTE DISPOSAL. Tenant shall store its waste either inside the Premises
or in its own dumpsters located within outside trash enclosures. Tenant shall
not store, place or maintain any garbage, trash, rubbish, other refuse or
Tenant's personal property in any area of the Common Areas or exterior of the
Premises at any time. Tenant, at its sole expense, shall be responsible to
maintain and keep the designated trash enclosures and Common Areas free of
garbage, trash, rubbish, other refuse or Tenant's personal property.

9.   MAINTENANCE AND REPAIRS, ALTERATIONS AND ADDITIONS.

     9.1 LANDLORD'S OBLIGATIONS. Subject to the provisions of Section 14 and
except for damage caused by a negligent or intentional act or omission of Tenant
and Tenant's agents, employees or invitees, Landlord, at Landlord's expense,
shall keep in good order, condition and repair the foundations, exterior walls
and the exterior roof of the Premises. Landlord shall not, however, be obligated
to paint such exterior, nor shall Landlord be required to maintain the interior
surface of exterior walls, ceiling or doors, nor shall Landlord be required to
maintain, repair or replace windows, doors, skylights or plate glass. Landlord
shall have no obligation to make repairs under this Paragraph 9.1 until a
reasonable time after receipt of written notice of the need for such repairs.
Landlord shall maintain, repair or patch the roof membrane (as an Operating
Expense), and Tenant shall pay Tenant's Share of the cost thereof, pursuant to
Paragraph 4.5 above. Tenant expressly waives the benefits of any statute
(including, without limitation, the provisions of subsection 1 of Section 1932,
Section 1941 and Section 1942 of the California Civil Code and any similar law,
statute or ordinance now or hereafter in effect) which would otherwise afford
Tenant the right to make repairs at Landlord's expense (or to deduct the cost of
such repairs from rent due hereunder) or to terminate this Lease because of
Landlord's failure to keep the Premises in good order, condition and repair.

     9.2 TENANT'S OBLIGATIONS.

          (a) Subject to the provisions of Sections 9.1 and 14, Tenant, at
Tenant's expense, shall maintain in good order, condition and repair the
Premises and every part thereof, regardless of whether the damaged portion of
the Premises or the means of repairing the same are accessible to Tenant,
including, but not limited to floors, ceilings, windows, doors, skylights,
interior walls, and the interior surfaces of the exterior walls, plumbing,
heating, air conditioning and ventilating equipment, telecommunications
equipment and intrabuilding network cabling, electrical and lighting facilities
and equipment including circuit breakers and exterior lighting attached to the
Premises. In addition, Tenant shall, at Tenant's expense, maintain in good
order, condition and repair any sidewalks, landscaping (including but not
limited to irrigation systems and backflow prevention devices), driveways,
parking lots, fences and signs located in the areas which are adjacent to and
included with the Premises, unless such items are to be maintained by Landlord
as an Operating Expense, pursuant to Paragraphs 4.5, 8.1 and 9.1 above. Where
there is any rooftop mounted heating and/or air conditioning equipment, said
maintenance shall include, without limitation, a periodic agreement with a
reputable and licensed heating and air conditioning service company. If Tenant's
use of the Premises is limited to normal business hours (8:00 am to 6:00 p.m.),
such agreement shall provide for service at least as often as every ninety (90)
days. If Tenant's use extends beyond normal business hours, this service shall
be as often as may be required by Landlord. If Tenant does not provide Landlord
with a copy of said maintenance contract within sixty (60) days from
Commencement Date set forth in Paragraph 1.5 of the Basic Lease Provisions and
Section 3.1 above, Landlord may elect, at its option, to keep and maintain the
heating and air conditioning systems of the Premises and in such event, Tenant
shall pay to Landlord upon demand the full cost of such maintenance and repairs
to such systems.

                                      10.
<PAGE>
          (b) All glass in or around the building, both interior and exterior,
is at the sole risk of Tenant, and any broken glass shall promptly be replaced
by Tenant at Tenant's expense with glass of the same kind, size and quality
according to the current local code.

          (c) In the event the Premises is damaged due to an attempted burglary
or forcible entry into Premises, Tenant shall be responsible for any ensuing
damage to the Premises or that larger building of which Premises is part
thereof.

          (d) In the event Tenant fails to perform Tenant's obligations under
this Section 9, Landlord shall give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant, within ten (10) days
after notice from Landlord, fails to commence to do the work and diligently
prosecute it to completion, then Landlord shall have the right (but not the
obligation) to do such acts and expend such funds at the expense of Tenant as
are reasonably required to perform such work. Any amount so expended by Landlord
shall be paid by Tenant promptly after demand with interest at the Permitted
Rate from the date of such work until paid. Landlord shall have no liability to
Tenant for any damage, inconvenience or interference with the use of the
Premises by Tenant as a result of performing any such work.

          (e) Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Premises in the same condition as received, broom clean,
ordinary wear and tear and damage by fire, earthquake, act of God or the
elements alone excepted. On the last day of the Lease Term or upon the sooner
termination of the Lease, Tenant shall, to the reasonable satisfaction of
Landlord surrender the Premises in good condition (and free of all Hazardous
Materials used, generated or stored by Tenant and its agents. employees and
contractors) with all originally painted interior walls washed, or re-painted if
marked or damaged and other interior walls and doors cleaned and repaired or
replaced, all carpets cleaned and in good condition, the HVAC equipment
inspected, serviced and repaired by a reputable and licensed service firm and
all floors cleaned and waxed. Tenant further agrees to remove all Tenant's
personal property and trade fixtures from the Premises and repair any damage to
the Premises caused by or in connection with the removal of any articles of
personal property, business or trade fixtures, machinery, equipment or
furniture, including without limitation thereto, repairing the floor and
patching and painting the walls where required by Landlord to Landlord's
reasonable satisfaction. Tenant agrees that all Tenant's personal property and
trade fixtures not removed shall be deemed to be abandoned by Tenant and may be
removed by Landlord at Tenant's expense. Tenant shall continue to pay rent at
the rate paid by Tenant prior to the termination of the Lease until such time
that the Premises are returned in a condition as required above; however, said
payment of rent does not constitute an extension or renewal of lease nor does it
constitute a month-to-month tenancy, it shall constitute immediate compensation
for Tenant's detention of the Premises and does not preclude Landlord from
obtaining additional monetary damages for Tenant's delay in surrendering the
Premises, as set forth below. Tenant shall indemnify the Landlord against any
loss or liability resulting from delay by Tenant in so surrendering the
Premises, including without limitation, any claims made by any succeeding tenant
founded on such delay.

     9.3 ALTERATIONS.

          (a) Tenant shall not construct any improvements or additions or
otherwise alter, change or improve the Premises without Landlord's prior written
approval, and not until Landlord shall have first approved the plans and
specifications therefor, which approvals shall not be unreasonably withheld.
Landlord's approval of the plans, specifications and working drawings for
Tenant's alterations shall create no responsibility or liability on the part of
Landlord for their completeness, design sufficiency, or compliance with all
laws, rules and regulations of governmental agencies or authorities. All such
approved alterations or improvements shall be installed by Tenant at Tenant's
expense using a licensed contractor first approved by Landlord in compliance
with the approved plans and specifications therefor and in strict accordance
with all laws. All such construction shall be done in a good and workmanlike
manner using new materials of good quality. As a condition to consenting to any
leasehold improvement or alteration or change requested by Tenant, the cost of
which may exceed Twenty-five Thousand Dollars ($25,000), Landlord shall have the
right to require Tenant to post a completion bond in an amount and in a form
satisfactory to Landlord. In no event shall Tenant make any structural changes
to the Premises or make any changes to the Premises which would weaken or impair
the structural integrity of the Building or the roof membrane integrity of the
Building. Tenant shall not commence construction of any alterations, additions,
or improvements until (i) all required governmental approvals and permits shall
have been obtained, (ii) all requirements regarding insurance imposed by this
Lease have been satisfied, and (iii) Tenant shall have given Landlord at least
five (5) days

                                      11.
<PAGE>
prior written notice of its intention to commence such construction. All
alterations, additions and improvements constructed by Tenant shall remain the
property of Tenant during the Lease Term but shall not be damaged, altered, or
removed from the Premises. At the expiration or sooner termination of the Lease
Term, all alterations, additions, or improvements shall be surrendered to
Landlord as a part of the realty and shall then become Landlord's property, and
Landlord shall have no obligation to reimburse Tenant for all or any portion of
the value or cost thereof, however, Landlord may, at its option, require Tenant
to remove any alterations, additions, or improvements in which case Tenant shall
so remove such alterations, additions or improvements prior to the expiration or
sooner termination of the Lease Term.

          (b) Alterations Required by Law. If during the term of this Lease, any
alteration, addition or change of any sort, whether structural or otherwise to
all or any portion of the Premises is required by law (including, but not
limited to, alterations required by the Americans with Disabilities Act of 1990
or any amendments thereto or any regulations prorogated thereunder (collectively
the "ADA") because of (i) Tenant's use or occupancy of the Premises or change of
use or occupancy of the Premises, (ii) Tenant's application for any permit or
governmental approval, (iii) Tenant's construction or installation of any
leasehold improvements or trade fixtures, (iv) any violation by Tenant of any
Law (including any requirement of the ADA), (v) any special use of the Premises
or any part thereof by Tenant or any subtenant or assignee of Tenant (including,
but not limited to any use for a facility which constitutes, or if open to the
public would generally constitute a "place of public accommodation" under the
ADA requirements), or (vi) any special needs of the employees of Tenant or any
assignee or subtenant of Tenant, then Tenant shall promptly make the same at its
sole cost and expense. Within ten (10) days after receipt, Tenant shall notify
Landlord in writing and provide Landlord with copies of (i) any notices alleging
any violation of any Law relating to the Premises or Tenant's occupancy or use
of the Premises, including any notices alleging violation of the relating ADA to
any portion of the Project or the Premises; (ii) any claims made or threatened
in writing regarding non-compliance with the ADA or any Law relating to the
Project or the Premises, or (iii) any governmental or regulatory actions or
investigations instituted or threatened regarding non-compliance with the ADA or
any Law relating to any portion of the Project or the Premises.

10.  ENTRY BY LANDLORD.

     Landlord and Landlord's agents shall have the right at reasonable times to
enter the Premises to inspect the same or to maintain or repair, make
alterations or additions to the Premises or any portion thereof or to show the
Premises to prospective purchasers, tenants or lenders. Landlord may, at any
time, place on or about the Premises any ordinary "for sale" signs; Landlord may
at any time during the last one hundred eighty (180) days of the term of the
Lease place on or about the Premises any ordinary "for lease" signs. Tenant
hereby waives claim for abatement of rent or for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby

11.  LIENS.

     Tenant shall keep the Premises and any building of which the Premises are a
part free from any liens arising out of work performed, materials furnished or
obligations incurred by Tenant and shall indemnify, hold harmless and defend
Landlord from any liens and encumbrances arising out of any work performed or
materials furnished to or at the direction of Tenant. In the event that Tenant
shall not, within twenty (20) days following the imposition of any such liens,
cause such lien to be released of record by payment or posting of a proper bond.
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but not the obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All such sums paid by Landlord and all expenses incurred by it in
connection therewith including attorneys' fees and costs shall be payable to
Landlord by Tenant on demand with interest at the Permitted Rate (as defined in
Paragraph 20.17 below). Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord and the Premises, and
any other party having an interest therein, from mechanics' and material
person's liens and Tenant shall give to Landlord at least ten (10) business days
prior written notice of the expected date of commencement of any work relating
to alterations, improvements or additions to the Premises.

                                      12.
<PAGE>
12.  INDEMNITY.

     12.1 INDEMNITY. Tenant agrees to indemnify, protect and defend Landlord and
Landlord's agents and lenders against and hold Landlord and Landlord's agents
and lenders harmless from any and all claims, causes of action, judgments,
obligations or liabilities and all reasonable expenses incurred in investigating
or resisting the same (including reasonable attorneys' fees), on account of, or
arising out of (i) the operation, condition, maintenance, use or occupancy of
the Premises, (ii) any bodily injury, death or property damage occurring in or
about the Premises, (iii) any act, omission or neglect of Tenant or its agents,
or (iv) any breach or default in the performance in a timely manner of any
obligation on Tenant's part to be performed under this Lease. In the event any
action or proceeding is brought against Landlord by reason of any such claim,
Tenant upon notice from Landlord shall defend same at Tenant's expense by
counsel satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises arising from any cause and
Tenant hereby waives all claims in respect thereof against Landlord. The
provisions of this Paragraph 12.1 shall survive termination of the Lease with
respect to any damage, injury or death occurring or accruing prior to such
termination.

     12.2 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be liable for
injury and Tenant waives all claims against Landlord to Tenant's business or
loss of income therefrom or for damage which may be sustained by the person,
goods, wares, merchandise or property of Tenant, its employees, invitees,
customers, agents or contractors or any other person in or about the Premises,
caused by or resulting from fire, steam, electricity, gas, water or rain, which
may leak or flow from or into any part of the Premises, or from the breakage,
leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures of the same, whether
the said damage or injury results from conditions arising upon the Premises or
upon other portions of the building of which the Premises are a part, or from
other sources or places and regardless of whether the cause of such damage or
injury or the means of repairing the same is inaccessible to Tenant. Landlord
shall not be liable for any damages arising from any act or neglect of any other
tenant, if any, of the Building in which the Premises are located, or of the
Project.

13.  INSURANCE

     13.1 TENANT'S INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in force during this Lease the following insurance issued by an
insurance company acceptable to Landlord and licensed to do business in the
State of California.

          (a) Commercial General Liability (CGL) Insurance written on an
occurrence basis, covering the Premises and all operations of Tenant in or about
the Premises for bodily injury, property damage and personal injury liability.

               (i) Tenant's CGL coverage shall be written with limits of not
less than:

                    (aa) Two Million Dollars ($2,000,000) each occurrence
(combined single limit for bodily injury and property damage);

                    (bb) One Million Dollars ($1,000,000) for personal injury
liability;

                    (cc) One Million Dollars ($1,000,000) aggregate for products
- completed operations; and

                    (dd) Two Million Dollars ($2,000,000) general aggregate. The
general aggregate limit shall apply separately to liability arising in
connection with Tenant's use and occupancy of the Premises.

               (ii) Said policy shall provide contractual liability coverage
insuring Tenant's indemnification obligations under this Lease.

                                      13.
<PAGE>
               (iii) Said policy shall name Tenant's employees, Landlord, its
agent's employees and any party holding an interest to which this Lease may be
subordinated as Additional Insureds, and shall provide for the severability of
interests of insureds and shall provide that such parties may, although
additional insured, recover for any loss suffered by Tenant's neglect.

               (iv) Said policy shall provide that its coverage shall be
"primary" and non-contributing with any insurance maintained by Landlord and any
party holding an interest to which this Lease may be subordinated.

          (b) Fire Legal Liability Insurance covering direct physical damage and
loss of use of the Building for which Tenant is legally obligated in an amount
of the full replacement value of the Building.

          (c) Workers' Compensation and Employers' Liability Insurance. Workers'
Compensation Insurance shall be provided as required by any applicable law or
regulation. Employers' Liability Insurance shall be provided in amounts not less
than One Million Dollars ($1,000,000) each accident for bodily injury by
accident and One Million Dollars ($1,000,000) each employee for bodily injury by
disease.

          (d) Property Insurance on Tenant Improvements and Betterments on an
"all risk" basis, excluding earthquake peril, for one hundred percent (100%) of
replacement value.

          (e) Commercial Auto Liability Insurance with a combined limit of not
less than One Million Dollars ($1,000,000) for bodily injury and property damage
for each accident. Such insurance shall cover liability arising out of any auto
(including owned, hired and non-owned autos).

          (f) General Insurance Requirements. All coverages described in this
paragraph B shall provide, or shall be endorsed to provide:

               (i) that said insurance shall not be canceled nor be materially
reduced unless thirty (30) days prior written notice shall have been given to
Landlord; and

               (ii) a waiver of all rights of subrogation by the insurance
carrier against Landlord, its agents, employees and any party holding an
interest to which this Lease may be subordinated.

               (iii) Said policies or certificate(s) of insurance, along with
any required endorsements, evidencing the foregoing coverage requirements shall
be delivered to Landlord by Tenant upon commencement of the term of this Lease
and upon renewal of said insurance.

          (g) If Landlord's lender, insurance advisor or counsel reasonably
determines at any time that the amount of such coverage is not adequate, Tenant
shall increase such coverage to such amount as Landlord's lender, insurance
advisor or counsel reasonably deems adequate. The limits of such insurance shall
not limit the liability of Tenant.

     13.2 PROPERTY INSURANCE. Landlord shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Premises, the Building and all other buildings located in the Project, in
the amount of full replacement cost thereof, including protection against those
perils included within the classification of "all risk" insurance plus a policy
of rental income insurance in the amount of 100% of 12 months rent (including,
without limitation, sums payable as Additional Rent) plus, at Landlord's option,
flood insurance and earthquake insurance and any other coverages which may be
required from time to time by Landlord's lender. Tenant shall have no interest
in nor any right to the proceeds of any insurance procured by Landlord on the
Premises, the Building or the Project. Landlord shall not be required to cause
such insurance to cover any of Tenant's personal property, inventory, trade
fixtures or any modifications, alterations or improvements made or constructed
by Tenant to or within the Premises. During the term of this Lease, Tenant shall
pay to Landlord, as Additional Rent, Tenant's Share (as defined in Paragraph
4.5(a) above) of the amount of any premium for the insurance maintained by
Landlord under this Paragraph 13.2, including, without limitation, any insurance
premium due to lender's requirements or increase in insured value. Tenant shall
pay such insurance premiums to Landlord

                                      14.
<PAGE>
within ten (10) days after receipt by Tenant of a copy of the premium statement
or other reasonably satisfactory evidence of the amount due, which shall include
the method of calculation of Tenant's share thereof if the insurance covers
other improvements than the Premises. If the term of this Lease does not expire
concurrently with the expiration of the period covered by the insurance,
Tenant's liability for such insurance premium shall be prorated on an annual
basis.

     13.3 MUTUAL WAIVER OF SUBROGATION. Tenant and Landlord hereby mutually
waive their respective rights of recovery against each other of any loss of or
damage to the property of either party, to the extent such loss or damage is
covered by any insurance policy required to be maintained by this Lease or
otherwise in force at the time of such loss or damage. Each party shall obtain
any special endorsements, if required by the insurer, whereby the insurer waives
its right of subrogation against the other party hereto. The provisions of this
Subparagraph 13.3 shall not apply in those instances in which the waiver of
subrogation would cause either party's insurance coverage to be voided or
otherwise made uncollectible; or, if any such insurance policy cannot be
obtained with such a waiver of subrogation, then the party obtaining such
insurance shall notify the other party of that fact and thereon shall be
relieved of the obligation to obtain such a waiver of subrogation rights from
the insurer with respect to the particular insurance involved.

14.  DAMAGE OR DESTRUCTION.

     14.1 PARTIAL DAMAGE - INSURED. Subject to the provisions of Paragraphs 12
and 13 above, and if at any time during the term of this Lease there is partial
damage to the Premises that is not caused by the fault, omission, or negligence
of Tenant, its agents, employees, contractors, or invitees, which is covered
under an insurance policy required to be maintained pursuant to Section 13.2,
then Landlord shall repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If there is a monetary deductible
applicable to the aforementioned insurance policy coverage which is required to
be paid prior to coverage of such casualty or damage, it shall be the sole
responsibility for Tenant to reimburse Landlord for said monetary deductible.
Tenant shall reimburse Landlord within ten (10) days of receipt by Tenant of a
copy of the monetary deductible statement. In the event of damage to the
Premises or the Building by fire or other causes resulting from fault, omission
or negligence of Tenant, its agents, employees, contractors, or invitees, such
damage shall be promptly reported to Landlord and shall be repaired by and at
expense of Tenant under direction and supervision of Landlord and there shall be
no abatement of rent during the period of repair. Tenant shall indemnify and
hold harmless Landlord from and against any damages, injuries, losses, claims,
liabilities or causes of action arising out of or relating to the repair or
restoration of the Premises or Building.

     14.2 PARTIAL DAMAGE - UNINSURED. In the event the improvements on the
Premises are damaged, except by a negligent or willful act or omission of Tenant
or from an attempted burglary or forcible entry pursuant to Section 9.2 (c), by
any casualty not covered under an insurance policy required to be maintained
pursuant to Section 13.2, then Landlord may, at Landlord's option, either (a)
repair such damage as soon as reasonably possible at Landlord's expense, in
which event this Lease shall continue in full force and effect or (b) give
written notice to Tenant within thirty (30) days after the date of occurrence of
such damage of Landlord's intention to cancel and terminate this Lease as of the
date of the occurrence of the damage. In the event Landlord elects to terminate
this Lease pursuant to this Section 142, Tenant shall have the right within ten
(10) days of receipt of the required notice to notify Landlord, in which event
this Lease shall continue in full force and effect, and Tenant shall proceed to
make such repairs as soon as reasonably possible (or Landlord may elect, in its
sole discretion, to require Tenant to pay to Landlord within ten (10) days
following written request therefor, or furnish evidence reasonably satisfactory
to Landlord of Tenant's ability to fund that portion of the cost of such repair
or restoration which is not covered by insurance proceeds, in which event
Landlord shall proceed to make such repairs). If Tenant does not give such
notice within the ten (10) day period, this Lease shall be canceled and
terminated as of the date of the occurrence of such damage. All insurance
proceeds available from the fire and property damage insurance carried by
Landlord pursuant to Section 13.2 shall be paid to and become the property of
Landlord. If this Lease is not so terminated, then upon receipt of the insurance
proceeds (if the loss is covered by insurance) and the issuance of all necessary
governmental permits, Landlord shall commence and diligently prosecute to
completion the restoration of the leased Premises, to the extent then allowed by
law, to substantially the same condition in which the leased Premises was
immediately prior to such damage. Landlord's obligation to restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the Commencement Date. Landlord's obligation to

                                      15.
<PAGE>
repair or restore the Premises shall not include restoration of Tenant's trade
fixtures, equipment, merchandise, or any improvements alterations or additions
made by Tenant to the Premises.

     14.3 TOTAL DESTRUCTION. If the Premises are totally destroyed during the
term of this Lease from any cause whether or not covered by the insurance
required under Section 13.2 (including any destruction required by any
authorized public authority), this Lease, at Landlord's option, may
automatically terminate as of the date of such total destruction. If Lease is
not terminated pursuant to this Section, Landlord shall immediately begin the
process of reconstructing the Premises and all rent for the Premises shall be
abated during the period of reconstruction.

     14.4 DAMAGE NEAR END OF THE TERM. If the Premises are partially destroyed
or damaged during the last six (6) months of the term of this Lease, Landlord
may at Landlord's option cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of occurrence of such
damage.

     14.5 LANDLORD'S OBLIGATIONS. The Landlord shall not be required to repair
any injury or damage by fire or other cause, or to make any restoration or
replacement of any paneling, decorations, office fixtures, partitions, railings,
ceilings, floor covering, equipment, machinery or fixtures or any other
improvements or property installed in the Premises by Tenant or at the direct or
indirect expense of Tenant. Tenant shall be required to restore or replace same
in the event of damage.

     14.6 ABATEMENT OF RENT; TENANT'S REMEDIES.

          (a) If the Premises are partially destroyed or damaged and Landlord or
Tenant repairs them pursuant to this Lease, the rent payable hereunder for the
period during which such damage and repair continues shall be abated in
proportion to the extent to which Tenant's use of the Premises is impaired;
provided, however there shall be no abatement of rent if the damage or
destruction was caused by the fault, omission, negligence or willful misconduct
of Tenant or any of its agents, employees or representatives. Except for
abatement of rent, if any, Tenant shall have no claim against Landlord for any
damage suffered by reason of any such damage, destruction or restoration.

          (b) If Landlord shall be obligated to repair or restore the Premises
under this Section 14 and shall not commence such repair or restoration within
ninety (90) days after such obligation shall accrue, Tenant, at Tenant's option,
may cancel and terminate this Lease by written notice to Landlord at any time
prior to the commencement of such repair or restoration. In such event, the
Lease shall terminate as of the date of such notice.

     14.7 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease pursuant
to Section 14, an equitable adjustment shall be made concerning advance rent and
any advance payments made by Tenant to Landlord. Landlord shall, in addition,
return to Tenant so much of Tenant's security deposit as has not therefore been
applied by Landlord.

15.  CONDEMNATION.

     15.1 DEFINITION OF TERMS. For the purposes of this Lease, the term (l)
"Taking" means a taking of the Premises or damage to the Premises related to the
exercise of the power to eminent domain and includes a voluntary conveyance in
lieu of court proceedings, to any agency, authority, public utility, person or
corporate entity empowered to condemn property; (2) "Total Taking" means the
taking of the entire Premises or so much of the Premises as to prevent or
substantially impair the use thereof by Tenant for the uses herein specified;
(3) "Partial Taking" means the taking of only a portion of the Premises which
does not constitute a Total Taking, (4) "Date of Taking" means the date upon
which the title to the Premises, or a portion thereof, passes to and vests in
the condemnor or the effective date of any order for possession if issued prior
to the date title vests in the condemnor, and (5) "Award" means the amount of
any award made, consideration paid, or damages ordered as a result of a Taking.

     15.2 RIGHTS. The parties agree that in the event of a Taking all rights
between them or in and to an Award shall be as set forth herein and Tenant shall
have no right to any Award except as set forth herein.

                                      16.
<PAGE>
     15.3 TOTAL TAKING. In the event of a Total Taking during the term hereof,
(1) the rights of Tenant under the Lease and the leasehold estate of Tenant in
and to the Premises shall cease and be terminated as of the Date of Taking; (2)
Landlord shall refund to Tenant any prepaid rent; (3) Tenant shall pay to
Landlord any rent or charges due Landlord under the Lease, each prorated as of
the Date of Taking; (4) To the extent the Award is not payable to the
beneficiary of any mortgage affecting the Premises, Tenant shall receive from
the Award those portions of the Award attributable to trade fixtures of Tenant,
and (5) the remainder of the Award shall be paid to and be the property of
Landlord.

     15.4 PARTIAL TAKING. In the event of a Partial Taking during the term
hereof, (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (2) from and after the Date of Taking the monthly
installment of rent shall be an amount equal to the product obtained by
multiplying the monthly installment of rent immediately prior to the Taking by
the quotient obtained by dividing the number of square feet of floor area
contained in the Premises after the Taking by the number of square feet of floor
area contained in the Premises prior to the Taking; (3) To the extent the Award
is not payable to the beneficiary of any mortgage affecting the Premises, Tenant
shall receive from the Award the portions of the Award attributable to trade
fixtures of Tenant, and (4) the remainder of the Award shall be paid to and be
the property of Landlord. Each party waives the provisions of California Code of
Civil Procedure Section 1265.130 allowing either party to petition the Superior
Court to terminate this Lease in the event of a Partial Taking.

16.  ASSIGNMENT & SUBLETTING.

     16.1 LANDLORD'S CONSENT REQUIRED. Tenant's interest in this Lease is not
assignable, by operation of law or otherwise, nor shall Tenant have the right to
sublet the Premises, transfer any interest of Tenant therein or permit any use
of the Premises by another party, without the prior written consent of Landlord
to each such assignment, subletting, transfer or use, which consent Landlord
agrees not to withhold unreasonably subject to the provisions of Subparagraph
16.3 below. A consent to one assignment, subletting, occupancy or use by another
party shall not be deemed to be a consent to any subsequent assignment,
subletting, occupancy or use by another party. Any assignment or subletting
without such consent shall be void and shall, at the option of Landlord,
terminate this Lease.

     Landlord's waiver or consent to any assignment or subletting hereunder
shall not relieve Tenant from any obligation under this Lease unless the consent
shall so provide

     16.2 TRANSFEREE INFORMATION REQUIRED. If Tenant desires to assign its
interest in this Lease or sublet the Premises, or transfer any interest of
Tenant therein, or permit the use of the Premises by another party (hereinafter
collectively referred to as a "Transfer"), Tenant shall give Landlord at least
fifteen (15) business days prior written notice of the proposed Transfer and of
the name and legal composition of the proposed transferee, a financial statement
of the proposed transferee, the nature of the (including a list of the type and
quantities of all Hazardous Materials to be used by the transferee on the
Premises), the payment to be made or other consideration to be given to Tenant
on account of the Transfer, and such other pertinent information as may be
requested by Landlord, all in sufficient detail to enable Landlord to evaluate
the proposed Transfer and the prospective transferee.

     16.3 LANDLORD'S RIGHTS. It is the intent of the parties hereto that this
Lease shall confer upon Tenant only the right to use and occupy the Premises,
and to exercise such other rights as are conferred upon Tenant by this Lease.
The parties agree that this Lease is not intended to have a bonus value nor to
serve as a vehicle whereby Tenant may profit by a future Transfer of this Lease
or the right to use or occupy the Premises as a result of any favorable terms
contained herein, or future changes in the market for leased space. It is the
intent of the parties that any such bonus value that may attach to this Lease
shall be and remain the exclusive property of Landlord, except as provided in
Paragraph 16.3(6) below. In the event Tenant seeks to Transfer its interest in
this Lease or the Premises, Landlord shall have the following options, which may
be exercised at its sole choice without limiting Landlord in the exercise of any
other right or remedy which Landlord may have by reason of such proposed
Transfer.

          (a) In the event of a Transfer constituting either an assignment of
the entire Lease or a sublease of substantially all of the Premises for the
balance of the Lease Term, Landlord may elect to terminate this Lease effective
as of the proposed effective date of the proposed Transfer and release Tenant
from any further

                                      17.
<PAGE>
liability hereunder accruing after such termination date by giving Tenant
written notice of such termination within fifteen (15) days after receipt by
Landlord of Tenant's notice of intent to Transfer as provided above. If Landlord
makes such election to terminate this Lease, Tenant shall surrender the
Premises, in accordance with Paragraph 9.2(e), on or before the effective
termination date, or

          (b) Landlord may consent to the proposed Transfer on the condition
that Tenant agrees to pay to Landlord, as additional rent, seventy-five percent
(75%) of any and all rents or other consideration (including key money) received
by Tenant from the transferee by reason of such Transfer in excess of the rent
payable by Tenant to Landlord under this Lease (less any brokerage commissions,
attorneys' fees and advertising expenses incurred by Tenant in connection with
the Transfer). Tenant expressly agrees that the foregoing is a reasonable
condition for obtaining Landlord consent to any Transfer; or

          (c) Landlord may reasonably withhold its consent to the proposed
transfer.

     16.4 ATTORNEYS' FEES. In the event Landlord shall consent to a sublease or
assignment under this Section 16, Tenant shall pay Landlord's reasonable
attorneys' fees not to exceed $500.00 incurred in connection with giving such
consent.

     16.5 TRANSFER TO AN AFFILIATE. Tenant may, upon written notice to Landlord,
but without Landlord's consent and without the obligations of the forgoing
Paragraph 16.1, 16.2 and 16.3 above, transfer its interests under this Lease to
any affiliate of Tenant. For the purposes of this Lease, an "Affiliate" shall
mean any entity which is controlling, controlled by, or under common control of
Tenant and which directly or indirectly owns 50% or more of the voting power in
such other entity. "Control" as used herein shall mean the ability to manage the
operations of such entity by ownership of stock, contract or otherwise. In the
event of any transfer to an Affiliate of Tenant as provided above, Tenant shall
not be released or relieved of any obligations hereunder.

17.  SUBORDINATION. The following provisions shall govern the relationship of
this Lease to any underlying lease, mortgage or deed of trust which now or
hereafter affects the Premises or Landlord's interest or estate therein and any
renewal, modification, consolidation, replacement, or extension thereof (a
"Security Instrument").

     17.1 PRIORITY. This Lease is subject and subordinate to all Security
Instruments existing as of the Commencement Date. However, if any lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.

     17.2 SUBSEQUENT SECURITY INSTRUMENTS. At Landlord's election, this Lease
shall become subject and subordinate to any Security Instrument created after
the Commencement Date. Notwithstanding such subordination, Tenant's right to
quiet possession of the Premises shall not be disturbed so long as Tenant is not
in default and performs all of its obligations under this Lease, unless this
Lease is otherwise terminated pursuant to its terms.

     17.3 DOCUMENTS. Tenant shall execute any reasonable document or instrument
required by Landlord or any lender to make this Lease either prior or
subordinate to a Security Instrument, which may include such other matters as
the lender customarily requires in connection with such agreements, including
provisions that the lender, if it succeeds to the interest of Landlord under
this Lease, shall not be (i) liable for any act or omission of any prior
landlord (including Landlord), (ii) subject to any offsets or difference which
Tenant may have against any prior landlord (including Landlord), (iii) bound by
any rent or additional rent paid more than one (1) month in advance of the date
due under this Lease, (iv) liable for any defaults on the part of Landlord
occurring prior to the time that lender takes possession of the Premises in
connection with enforcement of its Security Instrument, (v) liable for the
return of any security deposit unless such deposit has been delivered to lender,
and (vi) bound by any agreement or modification of the Lease made without the
prior written consent of the lender.

     17.4 TENANT'S ATTORNMENT. Tenant shall attorn (1) to any purchase of the
Premises at any foreclosure sale or private sale conducted pursuant to any
Security Instrument encumbering the Premises; (2) to any grantee or transferee
designated in any deed given in lieu of foreclosure, or (3) to the lessor under
any underlying ground lease should such ground lease be terminated.

                                      18.
<PAGE>
18.  DEFAULT; REMEDIES.

     18.1 DEFAULT. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:

          (a) Default in payment when due of any installment of rent or other
payment required to be made by Tenant hereunder, where such default shall not
have been cured within three (3) days after written notice of such default is
given to Tenant;

          (b) The abandonment or vacation of the Premises by Tenant;

          (c) A failure by Tenant to observe and perform any other provision of
the Lease to be observed or performed by Tenant, where such failure shall have
continued for twenty (20) days after written notice thereof by Landlord to
Tenant; provided, however, that if the nature of such default is such that the
same cannot reasonably be cured within such twenty (20) day period, Tenant shall
not be deemed to be in default if Tenant shall within such period commence such
cure and thereafter diligently prosecute the same to completion;

          (d) Tenant or any guarantor of Tenant's obligations hereunder shall
commence any case, proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization, or
relief of debtors, or seek appointment of a receiver, trustee, custodian, or
other similar official for it or for all or any substantial part of its
property;

          (e) Tenant or any such guarantor shall take any corporate action to
authorize any of the actions set forth in Clause (d) above, or,

          (f) Any case, proceeding or other action against Tenant or any
guarantor of Tenant's obligations hereunder shall be commenced seeking to have
an order for relief entered against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property, and
such case, proceeding or other action (i) results in the entry of an order for
relief against it which is not fully stayed within seven (7) business days after
the entry thereof or (ii) is not dismissed within forty-five (45) days of filing
such case, action or proceeding.

          (g) Levy of a writ of attachment or execution of Tenant's interest
under this Lease where such writ continues for a period of ten (10) days;

          (h) An assignment, sublease or other transfer of this Lease or
Tenant's interest in the Premises or portion thereof contrary to the provisions
of Section 16, or

          (i) Execution of an assignment for the benefit of creditors of
substantially all assets of Tenant available by law for the satisfaction of
judgment creditor.

     18.2 NOTICES. When this Lease requires service of a notice that notice
shall replace rather than supplement any equivalent or similar statutory notice,
including any notices required under Code of Civil Procedure Section 1161, or
any similar successor statute.

     18.3 REMEDIES. In the event of any such material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice and demand
and without limiting Landlord in the exercise of any right or remedy at law or
in equity which Landlord may have by reason of such default or breach.

          (a) Maintain this Lease in full force and effect and recover the rent
and other monetary charges as they become due, without terminating Tenant's
right to possession, irrespective or whether Tenant shall have abandoned the
Premises. In the event Landlord elects to not terminate the Lease, Landlord
shall have the right

                                      19.
<PAGE>
to attempt to re-let the Premises at such rent and upon such conditions and for
such a term, and to do all acts necessary to maintain or preserve the Premises
as Landlord deems reasonable and necessary without being deemed to have elected
to terminate the Lease including removal of all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. In the event any such
re-letting occurs, this Lease shall terminate automatically upon the new tenant
taking possession of the Premises. Notwithstanding that Landlord fails to elect
to terminate the Lease initially, Landlord at any time during the Term of this
Lease may elect to terminate this Lease by virtue of such previous default of
Tenant.

          (b) Terminate this Lease by giving Tenant written notice of
termination or other lawful means. On the giving of the notice all of Tenant's
rights in the Premises and the Building and Project shall terminate. Upon the
giving of the notice of termination, Tenant shall surrender and vacate the
Premises in the condition required by Paragraph 9.2(e), and Landlord may
re-enter and take possession of the Premises and all the remaining improvement
or property and eject Tenant or any of Tenant's subtenants, assignees or the
person or persons claiming any right under or through Tenant or eject some and
not others or eject none. This Lease may also be terminated by a judgment
specifically providing for termination. Any termination under this paragraph
shall not release Tenant from the payment of any sum then due Landlord or from
any claim for damages or rent previously accrued or then accruing against
Tenant. In no event shall any one or more of the following actions by Landlord
constitute a termination of this Lease:

               (i) maintenance and preservation of the Premises;

               (ii) efforts to relet the Premises;

               (iii) appointment of a receiver in order to protect Landlord's
interest hereunder;

               (iv) consent to any subletting of the Premises or assignment of
this Lease by Tenant, whether pursuant to provisions hereof concerning
subletting and assignment or otherwise; or

               (v) any other action by Landlord or Landlord's agents intended to
mitigate the adverse effects from any breach of this Lease by Tenant.

          (c) In the event this Lease terminated pursuant to Subparagraph
18.3(b) above, or otherwise, Landlord shall be entitled to damages in the
following sums:

               (i) the worth at the time of award of the unpaid rent which has
been earned at the time of 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 term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and

               (iv) any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under the Lease, or which in ordinary course of things would be likely to result
therefrom including, without limitation, the following: (A) expenses for
cleaning, repairing or restoring the Premises; (B) expenses for altering,
remodeling or otherwise improving the Premises for the purpose of reletting,
including installation of leasehold improvements (whether such installation be
funded by a reduction of rent, direct payment or allowance to the succeeding
lessee, or otherwise), (C) real estate broker's fees, advertising costs and
other expenses of reletting the Premises; (D) costs of carrying the Premises
such as taxes and insurance premiums thereon, utilities and security
precautions, (E) expenses in retaking possession of the Premises;

                                      20.
<PAGE>
(F) attorneys' fees and court costs; and (G) any unamortized real estate
brokerage commission paid in connection with this Lease.

               (v) The "worth at the time of award" of the amounts referred to
in Subparagraphs (i) and (ii) of this paragraph 18.3(c) is computed by allowing
interest at the Permitted Rate. The "worth at the time of award" of the amounts
referred to in Subparagraph (iii) of this Paragraph 18.3(c) is computed by
discounting such amount at the discount rate of the Federal Reserve Board of San
Francisco at the time of award plus one percent (1%). The term "rent" as used in
this Paragraph 18 shall include all sums required to be paid by Tenant to
Landlord pursuant to the terms of this Lease, including, without limitation,
Base Rent, Additional Rent and Operating Expenses.

     18.4 DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord hereunder within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any first mortgage or deed of trust covering
the Premises whose name and address shall have theretofore been furnished to
Tenant in writing, specifying wherein Landlord has failed to perform such
obligation, provided, however, that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty-day
period and thereafter diligently prosecutes the same to completion. Any money
judgment obtained by Tenant based upon Landlord's breach of this Lease shall be
satisfied only out of the proceeds of the sale or disposition of Landlord's
interest in the Premises (whether by Landlord or by execution of judgment).

19.  HAZARDOUS MATERIALS.

     19.1 DEFINITIONS. As used herein, the term "Hazardous Material" shall mean
any substance: (i) the presence of which requires investigation or remediation
under any federal, state or local statute, regulation, ordinance, order, action,
policy or waste," "hazardous substance", pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C Section 9601 et seq.) and/or the
Resource Conservation and Recover Act (42 U.S.C. Section 6901 et seq.); (iii)
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; (iv) the presence of which on the Premises causes or
threatens to cause a nuisance upon the Premises or to the adjacent properties or
poses or threatens to pose a hazard to the health or safety of persons on or
about the Premises, (v) the presence of which on adjacent properties could
constitute a trespass by Landlord or Tenant: (vi) without limitation which
contains gasoline, diesel fuel or other petroleum hydrocarbons, (vii) without
limitation which contains polychlorinated biphenyl's (PCBs), asbestos or urea
formaldehyde foam insulation, or (viii) without limitation radon gas.

     19.2 PERMITTED USE. Subject to the compliance by Tenant with the provisions
of Paragraphs 19.3, 19.4, 19.5, 19.6, 19.7, 19.8 and 19.9 below, Tenant shall be
permitted to use and store on the Premises those Hazardous Materials listed in
Paragraph 19.11 attached hereto, in the quantities set forth in Paragraph 19.11.

     19.3 HAZARDOUS MATERIALS MANAGEMENT PLAN.

          (a) Prior to Tenant using, handling, transporting or storing any
Hazardous Material at or about the Premises (including, without limitation,
those listed in Paragraph 19.11), Tenant shall submit to Landlord a Hazardous
Materials Management Plan ("HMMP") for Landlord's review and approval, which
approval shall not be unreasonably withheld. The HMMP shall describe: (aa) the
quantities of each material to be used, (bb) the purpose for which each material
is to be used, (cc) the method of storage of each material, (dd) the method of
transporting each material to and from the Premises and within the Premises (ee)
the methods Tenant will employ to monitor the use of the material and to detect
any leaks or potential hazards, and (ff) any other information any department of
any governmental entity (city, state or federal) requires prior to the issuance
of any required permit for the Premises or during Tenant's occupancy of the
Premises. Landlord may, but shall have no obligation to review and approve the
foregoing information and HMMP, and such review and approval or failure to
review and approve shall not act as an estoppel or otherwise waive Landlord's
rights under this Lease or relieve Tenant of its

                                      21.

<PAGE>
obligations under this Lease. If Landlord determines in good faith by inspection
of the Premises or review of the HMMP that the methods in use or described by
Tenant are not adequate in Landlord's good faith judgment to prevent or
eliminate the existence of environmental hazards, then Tenant shall not use,
handle, transport, or store such Hazardous Materials at or about the Premises
unless and until such methods are approved by Landlord in good faith and added
to an approved HMMP. Once approved by Landlord, Tenant shall strictly comply
with the HMMP and shall not change its use, operations or procedures with
respect to Hazardous Materials without submitting an amended HMMP for Landlord's
review and approval as provided above.

                  (b) Tenant shall pay to Landlord when Tenant submits an HMMP
(or amended HMMP) the amount reasonably determined by Landlord to cover all
Landlord's costs and expenses reasonably incurred in connection with Landlord's
review of the HMMP which costs and expenses shall include, among other things,
all reasonable out-of-pocket fees of attorneys, architects, or other consultants
incurred by Landlord in connection with Landlord's review of the HMMP. Landlord
shall have no obligation to consider a request for consent to a proposed HMMP
unless and until Tenant has paid all such costs and expenses to Landlord
irrespective of whether Landlord consents to such proposed HMMP. Tenant shall
pay to Landlord on demand the excess, if any, of such costs and expenses
actually incurred by Landlord over the amount of such costs and expenses
actually paid by Tenant, and Landlord shall promptly refund to Tenant the
excess, if any, of such costs and expenses actually paid by Tenant over the
amount of such costs and expenses actually incurred by Landlord.

         19.4 USE RESTRICTION. Except as specifically allowed in Paragraph 19.2
above, Tenant shall not cause or permit any Hazardous Material to be used,
stored, generated, discharged, transported to or from, or disposed of in or
about the Premises, or any other land or improvements in the vicinity of the
Premises. Without limiting the generality of the foregoing, Tenant, at its sole
cost, shall comply with all Laws relating to the storage, use, generation,
transport, discharge and disposal by Tenant or its Agents of any Hazardous
Material. If the presence of any Hazardous Agents results in contamination of
the Premises or any soil, air, ground or surface waters under, through, over,
on, in or about the Premises, Tenant, at its expense, shall promptly take all
actions necessary to return the Premises and/or the surrounding real property to
the condition existing prior to the appearance of such Hazardous Material. In
the event there is a release, discharge or disposal of or contamination of the
Premises by a Hazardous Material which is of the type that has been stored,
handled, transported or otherwise used or permitted by Tenant or its Agents on
or about the Premises, Tenant shall have the burden of proving that such
release, discharge, disposal of contamination is not the result of the acts or
omissions of Tenant or its Agents.

         19.5 TENANT INDEMNITY. Tenant shall defend, protect, hold harmless and
indemnify Landlord and its agents and lenders with respect to all actions,
claims, losses (including, diminution in value of the Premises), fines,
penalties, fees (including, but not limited to, attorneys' and consultants'
fees) costs, damages, liabilities, remediation costs, investigation costs,
response costs and other expenses arising out of resulting from, or caused by
any Hazardous Material used, generated, discharged, transported to or from,
stored, or disposed of by Tenant or its agents in, on, under, over through or
about the Premises and/or the surrounding real property. Tenant shall not suffer
any lien to be recorded against the Premises as a consequence of the disposal of
any Hazardous Material on the Premises by Tenant or its agents, including any so
called state, federal or local "super fund" lien related to the "clean up" of
any Hazardous Material in, over, on, under, through or about the Premises.

         19.6 COMPLIANCE. Tenant shall immediately notify Landlord of any
inquiry, test, investigation, enforcement proceeding by or against Tenant or the
Premises concerning any Hazardous Material. Any remediation plan prepared by or
on behalf of Tenant must be submitted to Landlord prior to conducting any work
pursuant to such plan and prior to submittal to any applicable government
authority and shall be subject to Landlord's consent. Tenant acknowledges that
Landlord, as the owner of the Property, at its election, shall have the sole
right to negotiate, defend, approve and appeal any action taken or order issued
with regard to any Hazardous Material by any applicable governmental authority.

         19.7 ASSIGNMENT AND SUBLETTING. It shall not be unreasonable for
Landlord to withhold its consent to any proposed assignment or subletting if (i)
the proposed assignee's or subtenant's anticipated use of the Premises involves
the storage, generation, discharge, transport, use or disposal of any Hazardous
Material, (ii) if the proposed assignee or subtenant has been required by any
prior landlord, lender or governmental authority to "clean up" or remediate any
Hazardous Material, (iii) if the proposed assignee or subtenant is subject to
investigation or

                                      22.
<PAGE>
enforcement order or proceeding by any governmental authority in connection with
the use, generation, discharge, transport, disposal of storage of any Hazardous
Material.

         19.8 SURRENDER. Upon the expiration or earlier termination of the
Lease, Tenant, at its sole cost, shall remove all Hazardous Materials from the
Premises that Tenant or its Agents introduced to the Premises. If Tenant fails
to so surrender the Premises, Tenant shall indemnify, protect, defend and hold
Landlord harmless from and against all damages resulting from Tenant's failure
to surrender the Premises as required by this Paragraph, including without
limitation, any actions, claims, losses, liabilities, fees, (including but not
limited to attorneys' and consultants' fees), fines costs, penalties, or damages
in connection with the condition of the Premises including, without limitation,
damages occasioned by the inability to relet the Premises or a reduction m the
fair market and/or rental value of the Premises by reason of the existence of
any Hazardous Material in, on, over, under, through or around the Premises.

         19.9 RIGHT TO APPOINT CONSULTANT. Landlord shall have the right to
appoint a consultant to conduct an investigation to determine whether any
Hazardous Material is being used, generated, discharged, transported to or from,
stored or disposed of in, on, over, through, or about the Premises, in an
appropriate and lawful manner and in compliance with the requirements of this
Lease. If Tenant has violated any Law or covenant in this Lease regarding the
use, storage or disposal of Hazardous Materials on or about the Premises, Tenant
shall reimburse Landlord for the cost of such investigation. Tenant, at its
expense, shall comply with all reasonable recommendations of the consultant
required to conform Tenant's use, storage or disposal of Hazardous Materials to
the requirements of applicable Law or to fulfill the obligations of Tenant
hereunder.

         Tenant shall defend, protect, hold harmless and indemnify Landlord and
its agents and employees with respect to all actions, claims, losses, fines,
penalties, fees, costs, damages and liabilities (including but not limited to
attorneys' and consultants' fees) arising out of or in connection with any
Hazardous Material used, generated, discharged, transported to or from, stored,
or disposed of in, on, under, through or about the Premises and/or the
surrounding real and personal property. Tenant shall not suffer any lien to be
recorded against the Premises as a consequence of a Hazardous Material,
including any so called state, federal or local "super fund" lien related to the
"clean up" of a Hazardous Material in, over, on, under, through, or about the
Premises.

         19.10 HOLDING OVER. If any action of any kind is required or requested
to be taken by any governmental authority to clean-up, remove, remediate or
monitor any Hazardous Materials (the presence of which is the result of the acts
or omissions of Tenant or its Agents) and such action is not completed prior to
the expiration or earlier termination of the Lease, Tenant shall be deemed to
have impermissibly held over until such time as such required action is
completed, and Landlord shall be entitled to all damages directly or indirectly
incurred in connection with such holding over, including, without limitation,
damages occasioned by the inability to re-let the Premises or a reduction of the
fair market and/or rental value of the Premises.

         19.11 MATERIALS. Tenant shall provide the list of its Hazardous
Chemicals to be legally used during its tenancy in the following section
provided below in this Paragraph 19.11, or attach a separate list and so
indicate below or indicate "NONE" and initial below to indicate if no Hazardous
Materials will be used:

<TABLE>
<CAPTION>
MATERIALS:                         QUANTITIES:              LOCATION AND METHOD OF STORAGE:
<S>                                <C>                     <C>
Acetone                            < 1 Gallon              Flammable Liquids Storage Cabinet

Alcohol                            < 1 Gallon                 "        "        "       "

Methyl Ethyl Ketone                < 1 Gallon                 "        "        "       "

Lacquer & Paint                    < 1 Gallon                 "        "        "       "

Epoxy                              < I Gallon -               "        "        "       "

Cleaning Solvent                   < 1 Gallon                 "        "        "       "
</TABLE>

         19.12 PROVISIONS SURVIVE TERMINATION. The provisions of this Paragraph
19.0 shall survive the expiration or termination of this Lease.

         19.13 CONTROLLING PROVISIONS. The provisions of this Paragraph 19.0 are
intended to govern the rights and liabilities of the Landlord and Tenant
hereunder respecting Hazardous Materials to the exclusion of any other

                                      23.
<PAGE>
provisions in this Lease that might otherwise be deemed applicable. The
provisions of this Paragraph 19.0 shall be controlling with respect to any
provisions in this Lease that are inconsistent with this Paragraph 19.0.

20. MISCELLANEOUS.

         20.1 ESTOPPEL CERTIFICATE.

                  (a) Tenant shall at any time, upon not less than ten (10) days
prior written notice from Landlord, execute, acknowledge and deliver to Landlord
a statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed;
(iii) evidence the status of this Lease as may be required by a lender making a
loan to Landlord to be secured by a deed of trust covering the Premises,
Building or Project or a purchaser of the same from Landlord, (iv) certify that
all improvements to be constructed on or in the Premises by Landlord have been
substantially completed except for punch list items which do not prevent Tenant
from using the Premises for its intended use, and (v) certify such other matters
relating to the Lease and/or the Premises as may be requested by a lender making
a loan to Landlord or a purchaser of the Premises, Building or Project from
Landlord. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.

                  (b) Tenant's failure to deliver such statement within such
time shall be conclusive upon Tenant (i) that this Lease is in full force and
effect without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not more
than one month's rent has been paid in advance; and, (iv) the improvements to be
constructed on the Premises by Landlord have been substantially completed except
for punch list items which do not prevent Tenant from using the Premises for its
intended use.

                  (c) If Landlord desires to finance, refinance or sell said
Premises, or any part hereof, Tenant hereby agrees to deliver to Landlord, its
agent or any prospective purchaser or lender designated by Landlord such
financial statements of Tenant as may be reasonably required by such lender or
prospective purchaser. Such statements shall include the past three years
financial statements of Tenant. All such financial statements shall be received
by Landlord in confidence and shall be used only for the purposes herein set
forth.

         20.2 TRANSFER OF LANDLORD'S INTEREST. In the event of a sale or
conveyance by Landlord of Landlord's interest in the Premises other than a
transfer for security purposes only, Landlord shall be relieved from and after
the date specified in such notice of transfer of all obligations and liabilities
accruing thereafter on the part of the Landlord, provided that any funds in the
hands of Landlord at the time of transfer in which Tenant has an interest, shall
be delivered to the successor of Landlord. This Lease shall not be affected by
any such sale and Tenant agrees to attorn to the purchaser or assignee provided
all Landlord's obligations hereunder are assumed in writing by the transferee.

         20.3 CAPTIONS; ATTACHMENTS; DEFINED TERMS.

                  (a) The captions of the paragraphs of this Lease are for
convenience only and shall not be deemed to be relevant in resolving any
question of interpretation or construction of any section of this Lease.

                  (b) Exhibits attached hereto, and addendums and schedules
initialed by the parties, are deemed by attachment to constitute part of this
Lease and are incorporated herein.

                  (c) The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. Words used in neuter gender include
the masculine and feminine and words in the masculine or feminine gender include
the neuter. If there be more than one Landlord or Tenant, the obligations
hereunder imposed upon Landlord or Tenant shall be joint and several. If the
Tenants are husband and wife, the obligations shall extend individually to their
sole and separate property as well as to their community property. The term
"Landlord" shall

                                      24.
<PAGE>
mean only the owner or owners at the time in question of the fee title or a
tenant's interest in a ground lease of the Premises. The obligations contained
in this Lease to be performed by Landlord shall be binding on Landlord's
successors and assigns only during their respective periods of ownership.

                  (d) LAW. As used in this Lease, the term "Law" or "Laws" shall
mean any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any government
agency or authority having jurisdiction over the parties to this Lease or the
Premises or both, in effect at the Commencement Date of this Lease or any time
during the Lease Term, including, without limitation, any regulation, order, or
policy of any quasi-official entity or body (e.g., board of fire examiners,
public utility or special district).

                  (e) AGENT. As used in this Lease, the term "Agent" shall mean,
with respect to either Landlord or Tenant, its respective agents, employees,
contractors (and their subcontractors), and invitees (and in the case of Tenant,
its subtenants).

                  (f) LENDER. As used in this Lease, the term "Lender" shall
mean any beneficiary, mortgagee, secured party or other holder of any deed of
trust, mortgage or other written security device or agreement affecting
Landlord's interest in the Premises.

         20.4 ENTIRE AGREEMENT. This instrument along with any exhibits and
attachments hereto constitutes the entire agreement between Landlord and Tenant
relative to the Premises and this Agreement and the exhibits and attachments may
be altered, amended or revoked only by an instrument in writing signed by both
Landlord and Tenant. Landlord and Tenant agree hereby that all prior or
contemporaneous oral agreements between and among themselves and their agents or
representatives relative to the leasing of the Premises are merged in or revoked
by this Agreement.

         20.5 SEVERABILITY. If any term or provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.

         20.6 COSTS OF SUIT.

                  (a) If Tenant or Landlord shall bring any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorneys' fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment.

         The attorney's fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse attorneys' fees
reasonably incurred in good faith.

         20.7 LANDLORD AS PARTY DEFENDANT. Should Landlord, without fault on
Landlord's part, be made a party to any litigation instituted by Tenant or by
any third party against Tenant, or by or against any person holding under or
using the Premises by license of Tenant, or for the foreclosure of any lien for
labor or material furnished to or for Tenant or any such other person or
otherwise arising out of or resulting from any act or transaction of Tenant or
of any such other person, Tenant covenants to save and hold Landlord harmless
from any judgment rendered against Landlord or the Premises or any part thereof,
and all costs and expenses, including reasonable attorneys fees, incurred by
Landlord in or in connection with such litigation. Such indemnity obligation
shall survive termination of this Lease.

         20.8 WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive their
respective right to trial by jury of any cause of action, claim, counterclaim,
cross-complaint in any action, proceeding and/or hearing brought by either
Landlord against Tenant or Tenant against Landlord on any matter whatsoever
arising out of, or in any way connected with, this Lease, the relationship of
Landlord and Tenant, Tenant's use or occupancy of the Premises, or

                                      25.
<PAGE>
any claim or injury or damage, or the enforcement of any-remedy under any law,
statute or regulation, emergency or otherwise, now or hereafter in effect.

         20.9 TIME; JOINT AND SEVERAL LIABILITY. Time is of the essence of this
Lease and each and every provision hereof, except as to the conditions relating
to the delivery of possession of the Premises to Tenant. All the terms,
covenants and conditions contained in this Lease to be performed by either
party, if such party shall consist of more than one person or organization,
shall be deemed to be joint and several, and all rights and remedies of the
parties shall be cumulative and non-exclusive of any other remedy at law or in
equity.

         20.10 BINDING EFFECT: CHOICE OF LAW. Each provision of this Lease to be
performed by Tenant shall be construed as both a covenant and condition. Subject
to any provisions hereof restricting assignment or subletting any Tenant and
subject to Section 18.2, all of the provisions hereof shall bind and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.

         20.11 WAIVER. No covenant term or condition or the breach thereof shall
be deemed waived, except by written consent of the party against whom the waiver
is claimed, and any waiver or the breach of any covenant, term or condition
shall not be deemed to be a waiver of any preceding or succeeding breach of the
same of any other covenant, term or condition. Acceptance by Landlord of the
performance by Tenant after the time the same shall have become due shall not
constitute a waiver by Landlord of the breach or default of any covenant, term
or condition unless otherwise expressly agreed to by Landlord in writing.

         Landlord's failure to enforce against Tenant or any other tenant of the
Building or the Project any of the rules or regulations made by Landlord shall
not be deemed a waiver of such rules or regulations. No act or thing done by
Landlord, its agents or employees during this Lease Term shall be deemed an
acceptance of a surrender of the Premises and no agreement to accept a surrender
of the Premises shall be valid unless it is in writing and is signed by
Landlord. The delivery of keys to any of Landlord's agents or employees shall
not serve to terminate this Lease or surrender the Premises. No payment by
Tenant, or receipt and acceptance by Landlord, of a lesser amount than the rent
due shall be deemed to be other than on account of the earliest stipulated rent
or additional rent, nor shall any endorsement or statement on any check or any
letter accompanying a payment as rent be deemed an accord and satisfaction. The
receipt and acceptance by Landlord of any delinquent rent shall not constitute a
waiver of any other default; it shall only be a waiver of timely payment for the
particular rent payment involved. Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy available to Landlord.

         20.12 SURRENDER OF PREMISES. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of the Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
or any or all such subleases or subtenancies.

         20.13 HOLDING OVER.

                  (a) SURRENDER OF POSSESSION. Tenant shall surrender possession
of the Premises immediately upon the expiration or earlier termination of the
Lease. If Tenant shall continue to occupy or possess the Premises after such
expiration or termination without the consent of Landlord, then Tenant shall be
a tenant at will. If Landlord has consented to such holdover in writing, Tenant
shall be a tenant from month-to-month. All the terms, provisions and conditions
of the Lease shall apply to the month-to-month tenancy except those terms,
provisions and conditions pertaining to the Lease Term, and except that the
rental shall be immediately adjusted upward upon the expiration or earlier
termination of the Lease to equal the greater of (i) one hundred fifty percent
(150%) of the then prevailing monthly rental rate for similar commercial space,
as determined by Landlord; or (ii) one hundred fifty percent (150%) of the
Rental for the Premises in effect under this Lease on the day immediately prior
to the date of the expiration or earlier termination of the Lease.

         The month-to-month tenancy may be terminated by Landlord or Tenant upon
thirty (30) days prior notice to the non-terminating party. In the event that
Tenant fails to surrender the Premises upon such expiration or earlier
termination, then Tenant shall indemnify and hold Landlord harmless against all
losses or liability resulting from or

                                      26.
<PAGE>
arising out of Tenant's failure to surrender the Premises. This includes, but is
not limited to any amounts required to be paid or damages incurred due to the
loss of any tenant or prospective tenant who was to have occupied the Premises
after said termination or expiration and any related attorneys' fees and
brokerage commissions.

         20.14 PAYMENT OF MONEY AFTER TERMINATION. No payment of money by Tenant
to Landlord after the termination of the Lease by Landlord or after the giving
of any notice of termination to Tenant by Landlord, which Landlord is entitled
to give Tenant under the Lease, shall reinstate, continue or extend the Term of
the Lease or shall affect any such notice given to Tenant prior to the payment
of such money. It is agreed that after the service of such notice or the
commencement of any suit by Landlord to obtain possession of the Premises,
Landlord may receive and collect when due any and all payments owed by Tenant
under the Lease and otherwise exercise its rights and remedies. The making of
any such payments by Tenant shall not waive such notice or in any manner affect
any pending suit or judgment obtained.

         20.15 SIGNS AND AUCTIONS.

                  (a) Tenant shall not place any sign upon the Premises or
conduct any auction thereon without Landlord's prior written consent. All such
signs placed on the Premises by Tenant and consented to by Landlord shall comply
with all recorded documents affecting the Premises and applicable statutes,
ordinances, rules and regulations of governmental agencies having jurisdiction
thereof. At Landlord's option, Tenant shall, at the expiration or earlier
termination of the Lease, remove any sign which it has placed on the Premises
and shall at its sole cost, repair any damage caused by the installation or
removal of such sign.

                  (b) Obtaining permits for Tenant signs as may be required by
any governmental agency shall be the responsibility of Tenant.

         20.16 REASONABLE CONSENT. Except as limited elsewhere in this Lease,
wherever in this Lease Landlord or Tenant is required to give consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld. In the event of failure to give any such consent,
the other party shall be entitled to specific performance at law and shall have
such other remedies to it under this Lease, but in no event shall Landlord or
Tenant be responsible in monetary damages for failure to give consent unless
said failure is withheld maliciously or in bad faith.

         20.17 INTEREST ON PAST DUE OBLIGATIONS. Any installment of Base Rent or
Additional Rent due from Tenant, or any other sum due under this Lease from
Tenant, which is not received by Landlord when due, shall bear interest from
said due date until paid, at an annual rate equal to the lower of (the
"Permitted Rate"): (a) twelve percent (12%); or (b) five percent (5%) plus the
rate established by the Federal Reserve Bank of San Francisco, as of the
twenty-fifth (25th) day of the month immediately preceding the due date, on
advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act,
as now in effect or hereafter from time to time amended. Payment of such
interest shall not excuse or cure any default by Tenant. In addition, Tenant
shall pay all costs and attorneys' fees incurred by Landlord in collection of
such amounts.

         20.18 RECORDING. Tenant shall not record this Lease without Landlord's
prior written consent (which may be given or withheld in Landlord's sole and
absolute discretion), and such recordation shall, at the option of Landlord,
constitute a non-curable default of Tenant hereunder.

         20.19 NOTICES. All notices or demands of any kind required or desired
to be given by Landlord or Tenant hereunder shall be in writing and shall be
deemed delivered on the date received if personally delivered to Landlord or
Tenant, as the case may be, or if mailed, then forty-eight (48) hours after
depositing the notice or demand in the United States mail, certified or
registered, postage prepaid, addressed to the Landlord or Tenant respectively at
the addresses set forth after their signatures at the end of this Lease.

         20.20 CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance

                                      27.
<PAGE>
with its terms. If Tenant is a corporation Tenant shall, within thirty (30) days
after execution of this Lease, deliver to Landlord a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.

         20.21 LIMITATION ON LANDLORD'S LIABILITY. Tenant, for itself and its
successors and assigns (to the extent this Lease is assignable), hereby agrees
that in the event of any actual or alleged, breach or default by Landlord under
this Lease that:

                  (a) Tenant's sole and exclusive remedy and recourse against
Landlord shall be as against Landlord's interest in the Project;

                  (b) No partner of Landlord shall be sued or named as a party
in a suit or action (except as may be necessary to secure jurisdiction of the
partnership);

                  (c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);

                  (d) No partner of Landlord shall be required to answer or
otherwise plead to any service of process;

                  (e) No judgment will be taken against any partner of Landlord;

                  (f) Any judgment taken against any partner of Landlord may be
vacated and set aside at anytime nunc pro tunc;

                  (g) No writ of execution will ever be levied against the
assets of any partner of Landlord; and,

                  (h) The covenants and agreements of Tenant set forth in this
Paragraph 20.21 shall be enforceable by Landlord and any partner of Landlord.

         20.22 CONSTRUCTION OF LEASE PROVISIONS. Although printed provisions of
this Lease were prepared by Landlord, the doctrine or rule that ambiguities in
an agreement or document are to be construed against the drafting party, shall
not be utilized in interpreting this Lease and this Lease shall instead be
construed or interpreted in accordance with the general tenor of the language to
reach a fair and equitable result.

         20.23 CONFIDENTIALITY. Tenant hereby agrees not to disclose the terms
of this lease (specifically including, without limitation, the rent or rental
rate to be paid by Tenant hereunder and/or any tenant improvement allowance to
be furnished by Landlord to Tenant) to any existing or prospective tenant of the
Building or other third party; provided, however, Tenant may disclose the terms
of this Lease to its accountant, bookkeeper or tax advisor or any employee of
Tenant who has a need to know such information for a legitimate business
purpose, or if Tenant is otherwise required to disclose such confidential
information as permitted hereunder of the requirements of this Paragraph and
shall require each such person to comply with such confidentiality requirements.
In the event Tenant or any person to whom it discloses such confidential
information fails in any respect to comply with its obligations under this
Paragraph, Tenant shall be liable to Landlord for breach of this Paragraph 20.23
and Landlord may bring an action against Tenant for damages as a result of such
breach. In addition, nothing stated herein shall preclude or prohibit Landlord
from seeking an injunction to prevent disclosure of such confidential
information or an order compelling specific protection of such confidential
information. The provisions of this Paragraph 20.23 shall survive the
termination of this Lease.

LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND BY EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED THE TERMS OF THIS LEASE ARE

                                      28.
<PAGE>
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND
TENANT.

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO LEGAL
COUNSEL FOR APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY LANDLORD OR
BY SOUTH BAY DEVELOPMENT COMPANY, ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT OR THE CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

         IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
date and year first above written.

<TABLE>
<CAPTION>
LANDLORD:                                           TENANT:
<S>                                                 <C>
KNOWLES LOS GATOS LLC, a California Limited         LEAPFROG ENTERPRISES, INC., a Delaware
liability company                                   corporation

By: /s/ J.D. Mair                                   By: /s/ David J. Conroy
   --------------                                      --------------------

Printed: J.D. Mair                                  Printed: David J. Conroy
         ---------                                          ----------------

Its: Member                                         Its: Vice President of Software
    -------                                              --------------------------

Dated: 1/24/01                                      Dated: 1/18/01
       -------                                            --------

                                                    By:
                                                       ------------------------------------

                                                    Printed:
                                                            -------------------------------

                                                    Its:
                                                        -----------------------------------

                                                    Dated:
                                                          ---------------------------------

                                                    NOTE:  If Tenant is a corporation, the signatures of two
                                                    corporate officers is required, one signature must be
                                                    one of the following: chairman of the board, president
                                                    or any vice-president and the second signature must be
                                                    one of the following: secretary, assistant secretary,
                                                    chief financial officer or any assistant treasurer
</TABLE>

                                      29.
<PAGE>
                                   EXHIBIT "A"

                            [Floor Plan of Property]

                                       1.
<PAGE>
                                   EXHIBIT "B"

                              IMPROVEMENT AGREEMENT

         This Improvement Agreement ("Agreement") is made part of that Lease
dated January 15, 2001, by and between ("Landlord"), and LeapFrog Enterprises,
Inc. ("Tenant"). Landlord and Tenant agree that the following terms are hereby
added to the Lease:

         1. DEFINITIONS. Unless otherwise defined in this Agreement, capitalized
terms used herein shall have the same meaning and definition as set forth for
such terms in the Lease. The terms listed below, when used in this Agreement,
shall mean the following:

                  (a) APPROVED INTERIOR PLANS. The term "Approved Interior
Plans" shall have the meaning set forth in Paragraph 2(a) of this Agreement.

                  (b) IMPROVEMENTS. The term "Improvements" shall mean all
improvements to be constructed by Landlord within the Premises pursuant to the
Approved Interior Plans.

                  (c) IMPROVEMENT COSTS. The term "Improvement Costs" shall mean
and include all of the following:

                           (i) All "hard" construction costs for the
construction of the Improvements according to the Approved Interior Plans and
all approved changes thereto, including, but not limited to:

                                    (A) All labor and supervision costs;

                                    (B) Costs of all materials and supplies;

                                    (C) Contract price for all construction work
undertaken by general contractors and sub-contractors (including, without
limitation, the applicable general contractor's fee for overhead and profit);

                                    (D) Fees, taxes or other charges levied by
governmental or quasi-governmental agencies (including public utilities) in
connection with the issuance of all authorizations, approvals, licenses, and
permits necessary to undertake construction of the Improvements; including the
cost of installation;

                                    (E) The cost of all equipment and fixtures
provided for in the Approved Interior Plans,

                                    (F) The cost of all concrete, welding,
survey and other testing expenses;

                                    (G) The cost of premiums for surety bonds,
if any, including but not limited to payment and performance bonds and
mechanics' lien bonds;

                                    (H) The cost of installing a meter or meters
in the Premises to measure the utility services supplied to and consumed in the
Premises; and

                                    (I) The cost of installing standard utility
services (i.e., standard HVAC controls and distribution facilities; standard
electrical panels, distribution facilities, wiring, fixtures, switches and
receptacles) and special utility services (i.e., services other than those
specified above).

                                       1.
<PAGE>
                           (ii) All "soft" construction costs directly or
indirectly related to the construction of the Improvements including, but not
limited to, the following:

                                    (A) Engineering, initial space planning and
architectural fees for preparation of all plans, specifications and working
drawings and processing of applications for all governmental authorizations,
approvals, licenses and permits;

                                    (B) Fees of engineers, space. planners,
architects, attorneys and others providing professional or extra services in
connection with the construction of the Improvements or the supervision of the
construction; and

                                    (C) Inspection fees, recording costs and
filing fees.

         2. CONSTRUCTION OF IMPROVEMENTS. Landlord agrees to construct the
Improvements in the Premises in conformance with applicable construction codes
and with the Approved Interior Plans approved by both Landlord and Tenant and
developed pursuant to this Paragraph 2.

                  (a) APPROVAL OF PLANS. On or before the date five (5) business
days following execution of the Lease, Landlord shall deliver plans and
specifications to Tenant for its approval, which shall not be unreasonably
withheld. Tenant shall reasonably approve or disapprove such plans and
specifications within five (5) calendar days following delivery of the same to
Tenant. If Tenant reasonably disapproves such plans, then the parties shall
expeditiously confer and negotiate in good faith to reach agreement on the plans
and specifications for the Improvements. As soon as the final plans and
specifications are approved by Tenant, four (4) copies of such plans and
specifications shall be initialed and dated by Landlord and Tenant, and Landlord
shall submit such plans and specifications and working drawings to all
appropriate governmental agencies for approval. Immediately after all such
governmental approvals have been obtained, the final plans and specifications so
approved (including any governmentally required changes), and all change orders
specifically permitted by this Agreement, are referred to herein as the
"Approved Interior Plans" and shall become part of this Lease as though set
forth in full.

                  (b) CONSTRUCTION CONTRACTS. Landlord shall contract for the
construction of the Improvements in the following manner:

                           (i) It is presently contemplated that the
Improvements will be constructed by South Bay Construction Company, as general
contractor. Tenant acknowledges that one or more of the members of Landlord has
an ownership or other beneficial interest in South Bay Construction Company, but
Tenant nevertheless consents to Landlord's hiring of such company for purposes
of constructing the Improvements. Notwithstanding the above, Landlord shall have
no obligation to hire South Bay Construction Company, or any other specific
general contractor, for the purpose of constructing the Improvements, and
Landlord may select for such purposes any licensed general contractor it may
deem qualified to perform such work. The general contractor so selected by
Landlord (which likely is to be South Bay Construction Company) is referred to
herein as the "Prime Contractor."

                           (ii) Prior to commencement of construction of the
Improvements, Landlord shall cause the Prime Contractor to obtain at least two
competitive bids for each portion of the work to be performed by subcontractors
in the major trades. Tenant shall have the right to review all such competitive
bids, and the final bid accepted must be reasonably agreed upon by Landlord and
Tenant prior to the start of construction of the Improvements.

                  (c) CHANGES TO APPROVED INTERIOR PLANS. Once the Approved
Interior Plans have been finally approved by Landlord and Tenant and the general
construction contract signed with the Prime Contractor, Tenant shall have no
right to order extra work or change orders with respect to the construction of
the Improvements without the prior written consent of the Landlord, which
consent shall not be unreasonably withheld or delayed. All extra work or change
orders requested by Tenant shall be made in writing, shall specify the amount of
delay or the time saved resulting therefrom, shall specify any added or reduced
cost resulting therefrom, and shall become effective and a part of the Approved
Interior Plans once approved in writing by both parties.

                                       2.
<PAGE>
                  (d) COMMENCEMENT AND COMPLETION OF THE IMPROVEMENTS. As soon
as (i) the Approved Interior Plans have been developed as provided above, (ii)
all necessary governmental approvals have been obtained, and (iii) Landlord has
entered into a general construction contract with Prime Contractor for
construction of the Improvements, Landlord shall cause construction of the
Improvements to be commenced and diligently prosecuted to completion. Landlord
makes no representation or warranty as to when the Improvements will be
completed.

                  (e) PAYMENT OF IMPROVEMENT COSTS. Landlord shall pay all
Improvement Costs with the exception of I) any costs associated with
construction of the lunch room and installation and exhausting of Tenant's Spray
Booth; and ii) any change orders requested by Tenant that result in an increase
in construction costs. If Tenant incurs Improvement Costs as outlined herein,
then Tenant shall pay the entire amount of such costs, with one-half (1/2) of
such excess payable to Landlord in cash prior to commencement of construction of
the Improvements and the balance payable on the Commencement Date. The
obligation of Landlord to contribute monies up to pay for the Improvements shall
pertain only to Improvement Costs incurred by Landlord in connection with the
design and construction of the Improvements shown on the Approved Interior
Plans.

         3. DELAYS IN COMPLETION. The obligation of Tenant to pay Base Rent and
Tenant's Share of Operating Expense increases (and other additional rent) shall
commence on the Commencement Date of the Lease (as provided in the Lease) unless
otherwise provided in this Section 3. The parties hereto acknowledge that the
date on which Tenant's obligation to pay the Base Rent would otherwise commence
may be delayed because of (i) Tenant's failure to prepare and submit information
to Landlord so Landlord may prepare plans and specifications for the
Improvements and/or Tenant's failure to promptly review and approve the plans or
specifications for the Improvements, (ii) the entry by Tenant into the Premises,
or portion thereof, which interferes with or delays the completion of Landlord's
work, (iii) change orders requested by Tenant and approved by Landlord, and /or
(iv) any other act or omission of Tenant. It is the intent of the parties hereto
that the Tenant's obligation to pay the Base Rent and Tenant's Share of
Operating Expense Increases (and all additional rent) not be delayed by any of
such causes or by any other act of Tenant, and in the event it is so delayed,
then Tenant's obligation to pay Base Rent and Tenant's Share of Operating
Expense Increases (and all additional rent) shall commence as of the date it
would otherwise have commenced absent said delay caused by Tenant.

         4. REPRESENTATIONS AND WARRANTIES.

                  (a) LANDLORD. Landlord's Prime Contractor shall warrant the
Improvements constructed in the premises, but not any equipment included in the
Improvements, against defects in material and workmanship for a period of twelve
(12) months from the date of signed acceptance of the Improvement by Tenant.
Said warranty extends only to Tenant and shall be effective only as to defects
of which Landlord and the Prime Contractor are notified in writing by Tenant
within the warranty period. The Prime Contractor's sole obligation shall be
either to repair or replace, as the Prime Contractor and project architect
determine appropriate, any defect which is warranted hereunder. Any repair or
replacement is warranted against defects in material and workmanship for a
period ending on the date said warranty expires with regard to the original
construction to which the repair or replacement was made. Tenant agrees that
Landlord, Prime Contractor and the project architect shall not be liable for
consequential damages arising as a result of a defect warranted hereunder.
Tenant covenants that it will not pursue any remedy against Landlord, Prime
Contractor or the project architect as a result of such consequential damages if
any. Landlord shall inform Tenant of all written equipment warranties existing
in favor of Landlord which affect any equipment included in the Improvements.
Landlord shall cooperate with Tenant in enforcing such warranties and in
bringing any suit that may be necessary to enforce liability with regard to any
defective operation of equipment so long as Tenant pays all costs incurred by
Landlord in so acting. The warranties to be given as set forth in this paragraph
are all of the warranties of Landlord, Prime Contractor and the project
architect with respect to the subject matter hereof. LANDLORD, PRIME CONTRACTOR
AND THE PROJECT ARCHITECT MAKE NO OTHER EXPRESS OR IMPLIED WARRANTY WITH RESPECT
TO THE CONSTRUCTION OR OPERATION OF THE IMPROVEMENTS INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF FITNESS FOR PURPOSE OR MERCHANTABILITY.

                  (b) TENANT. Tenant represents to Landlord that Tenant shall
inspect or, if Tenant lacks sufficient expertise to so inspect, shall employ
experts of Tenant's choosing, to inspect the plans and specifications for the
Improvements and that upon written approval of such plans and specifications by
Tenant, Tenant shall be deemed fully satisfied that the Improvements constructed
in substantial accordance with such plans and

                                       3.
<PAGE>
specifications are sufficient to meet Tenant's purpose. Tenant covenants that
Tenant will not pursue any action against Landlord, Prime Contractor or the
project architect if the Improvements made in accordance with such plans and
specifications fail to meet Tenant's purpose. Landlord makes no warranty,
express or implied, of fitness for purpose or merchantability, of any equipment
or fixtures included in the Premises. Tenant acknowledges that Tenant shall rely
upon the manufacturer of such equipment or fixtures for any warranty with
respect thereto.

         5. HEADINGS. The paragraph headings used in this Agreement are for
convenience of reference only. They shall not be construed to limit or extend
the meaning of any part of this Agreement, and shall not be deemed relevant in
resolving any questions of interpretation or construction of any paragraph of
this Agreement.

<TABLE>
<S>                                   <C>
                                      LANDLORD:

                                      KNOWLES LOS GATOS LLC, a California Limited
                                      liability company

                                      By: /s/ J.D. Mair

                                      Its: Member

Dated: January 21, 2002
                                      TENANT:

                                      LEAPFROG ENTERPRISES, INC., a Delaware corporation

                                      By: /s/ David J. Conroy

Dated:                                Its: Vice President of Software
      -------------------------           ---------------------------

Dated:                                By:
      -------------------------          --------------------------------------

                                      Its:
                                          -------------------------------------
</TABLE>

                                       4.
<PAGE>
                                   EXHIBIT "C"

                   EL GATO BUSINESS PARK RULES AND REGULATIONS

         By and between Knowles, Los Gatos, LLC, a California limited liability
company ("Landlord") and Knowledge Kids Enterprises, Inc, a Delaware corporation
"Tenant") as exhibit to that certain Lease dated January 15, 2002.

         1. Tenant, its employees or invitees, shall not suffer or permit the
obstruction of any Common Areas, including driveways, walkways, and entrances.

         2. Tenant, its employees or invitees, shall not suffer or permit
loitering of any kind in the Common Areas, including driveways, walkways and
entrances.

         3. Tenant, its employees or invitees, shall not litter the Common areas
with trash or any type of debris, including, but not limited to cigarette butts.

         4. Tenant, its employees or invitees, shall not verbally, or otherwise,
harass other tenants, their employees or invitees.

         5. Tenant, its employees or invitees, shall not deface building walls,
fences, parking lots or any other part of the Premises or Common Areas.

         6. Tenant, its employees or invitees, shall not go on the roof of the
Building for any reason without the permission of Landlord.

         7. The Premises shall not be used for lodging of any kind.

         8. Tenant, its employees or invitees, shall not make or permit any
noise or odors that annoy or interfere with other Tenants or persons having
business within the Project.

         9. Tenant, its employees or invitees, shall not keep animals or birds
within the Common Areas. Any animals visiting the Leased premises must remain
properly leashed.

         10. Tenant, its employees or invitees, shall not store any rubbish
containers in the Common Areas other than the designated enclosures. Containers
that do not fit inside the enclosures are prohibited.

         11. Tenant, its employees or invitees, shall not store any pallets,
boxes or other debris any place in the Common Areas at any time. Landlord shall
have the right to remove and dispose of anything left in the Common Areas at the
expense of Tenant without prior notice.

         12. Landlord shall have the right to make further such reasonable rules
and regulations, and to alter the same, as in its judgment may from time to time
be needful for the safety, care, cleanliness and appearance of the Leased
Premises, the Project and the preservation of good order therein. Landlord also
has the right to suspend or cancel any or all of these rules and regulations
herein set out.

                                                                 INITIALS [INIT]

                                       1.

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