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Sample Business Contracts

California-San Francisco-300 California Street Lease - 300 California Associates LLC and T E Network Inc.

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  • Commercial Lease. Start a state-specific lease for the rental of commercial property. Specify the term and rent due, as well as whether the landlord or tenant is responsible for property taxes, insurance, and maintenance and repairs.
  • Commercial Sublease. When a tenant vacates commercial property before the lease term has expired, it may be able to rent the premises to a third party. The tenant would be the sublessor and the third party would be the sublessee. Besides preparing a sublease, both parties will want to review the provisions for assignment or subletting in the original lease agreement between the landlord and the sublessor.
  • Sublease Agreement. Tenants of residential property should prepare a sublease agreement if they are seeking to sublease a room or the entire apartment or house to a third party. All parties should review the original lease agreement to see if there are any restrictions on subletting or assigning the premises.
  • Triple Net Lease. Triple net leases are a type of commercial leases where the tenant has to pay for property taxes, insurance, utilities, and maintenance, in addition to the monthly rent.
  • Office Space Lease. When renting an office space, tenants should understand the amount of the rent and duration of the lease. Other important terms include whether the space can be subleased, which parties are responsible for maintenance, and whether any furniture and furnishings will be provided.

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COPY

Pogo.com Inc.                 LEASE: SAN FRANCISCO                      19615

<PAGE>

                             300 CALIFORNIA STREET


                                  OFFICE LEASE

                    300 CALIFORNIA ASSOCIATES, LLC, Landlord

                                      and

               T E Network, Inc., a Delaware Corporation, Tenant



                           Dated: September 17, 1999

<PAGE>

                             300 CALIFORNIA STREET

                            BASIC LEASE INFORMATION



Lease Paragraph

Introductory
Paragraph:          Date:      September 17, 1999
                    Landlord:  300 CALIFORNIA ASSOCIATES, LLC
                    Tenant:    T E Network, Inc., a Delaware Corporation

Paragraph 1:        Initial  Premises:  Suite 700 and Suite 800,  which includes
                    the entire seventh and eighth  floors,  deemed to consist of
                    30,762  rentable  square  feet,  and  Suite  500,  deemed to
                    consist of 8,000 rentable square feet.

                    Expansion  Premises:  Suite 501,  deemed to consist of 7,316
                    rentable square feet.

Building:           300  CALIFORNIA  STREET,  San Francisco,  California,  94104
                    deemed to consist of 122,612 rentable square feet

Paragraph 3:        Projected Commencement Date: November 1,1999

                    Expansion Commencement Date: June 1, 2000

                    Initial Term: Seven (7) years

Paragraph 5:        Base Rent: As set forth in Schedule 4

Paragraph 6:
and Paragraph 7:    Initial  Tenant's  Share:  31.61%
                    Expanded  Tenant's  Share (Month 7) 37.58%

                    Real Estate Taxes Base Year: 2000

                    Operating Expenses Base Year: 2000

Paragraph 8:        Security Deposit: $158,278.16 and Letter of Credit

Paragraph 40:       Tenant's Address for Notices:

                    T E Network, Inc., a Delaware Corporation
                    300 CALIFORNIA STREET
                    Suite 800
                    San Francisco, CA 94104

                    with a copy to:

                    Dennis Debroeck
                    Fenwick & West
                    2 Palo Alto Square
                    Palo Alto, CA 94306

                    Landlord's Address for Notices:

                    300 CALIFORNIA ASSOCIATES, LLC
                    1000 Sansome Street, Suite 380
                    San Francisco, CA 94111
                    Attn: Michael Halper

Paragraph 46:       Tenant's Broker: Ernst & Young

Schedule 1:         Option to Renew

                                       2
<PAGE>

Schedule 2:         Option to Expand

Schedule 3:         First Right of Refusal

Schedule 4:         Rental Adjustment Schedule

The provisions of the Lease  identified above in the margin are those provisions
where  references  to  particular  Basic  Lease  Information  appear.  Each such
reference shall incorporate the applicable Basic Lease Information.



Landlord:       300 CALIFORNIA ASSOCIATES, LLC


By:       /s/ Michael Halper
          ---------------------------------

Name:     Michael Halper
          ---------------------------------

Title:    Manager
          ---------------------------------


Tenant:   T E Network, Inc., a Delaware Corporation

By:       /s/ Erick Hachenburg
          ---------------------------------

Name:     Erick Hachenburg
          ---------------------------------

Title:    President/CEO
          ---------------------------------

                                       3
<PAGE>

                             300 CALIFORNIA STREET
                                  OFFICE LEASE

This  Lease,  made  this  17th day of  September  1999,  is by and  between  300
CALIFORNIA ASSOCIATES, LLC ("Landlord"), a California limited liability company,
and T E Network, Inc., a Delaware Corporation ("Tenant").

WITNESSETH:

1.       Premises.

         Landlord  hereby leases to Tenant and Tenant hereby hires from Landlord
certain  premises  consisting  of  a  portion  of  that  certain  building  (the
"Building")  described  in the Basic  Lease  Information.  The  Building is (the
"Building") owned by Landlord and located on certain land in the City and County
of San  Francisco,  which  land is more  particularly  described  in  Exhibit  A
attached hereto. The premises leased to Tenant hereunder (the "Premises") are or
shall be commonly identified by the Suite Number, if any, appearing in the Basic
Lease  Information  and are  generally  depicted in the  preliminary  floor plan
attached  hereto as  Exhibit B and  Exhibit  B-1.

         It is  expressly  agreed  and  understood  by Tenant  that the  Initial
Premises  shall  include  the entire  eighth,  seventh and more than half of the
fifth floors of the  Building.  On June 1, 2000,  the Premises will also include
the balance of the fifth floor of the Building (the  "Expansion  Premises").  as
depicted in Exhibit B-1 attached  hereto.  All terms and conditions of the Lease
shall apply to the Expansion Premises.

         Said  letting and hiring is upon and  subject to the terms,  covenants,
and conditions  herein set forth and Tenant  covenants as a material part of the
consideration  for this Lease to keep and  perform  each and all of said  terms,
covenants and conditions by it to be kept and performed.

         See also Schedule 2 and Schedule 3 attached hereto.

2.       Purpose.

         The  Premises  shall be used for  general  office  purposes  (including
sales,  training,  administrative,  customer services and operations center) and
for no other use or purpose without the prior written consent of Landlord, which
consent may be granted or denied in Landlord's sole discretion.

3.       Term.

         The  term  of  this  Lease  shall  commence  on  November  1,1999  (the
"Projected  Commencement  Date"),  or  upon  substantial  completion  of  Tenant
Improvements, whichever comes first, but in no event later than January 1, 2000.
Landlord shall deliver possession of the Premises in accordance with the Exhibit
C attached  hereto.  The term  shall  continue  as set forth in the Basic  Lease
Information  unless  sooner  terminated  pursuant  to the terms  hereof.  If the
Commencement  Date is other than the first day of a calendar month,  the initial
term shall also include the remainder of the partial calendar month in which the
Commencement Date occurs.

         See also Schedule 1 and Schedule 3.

4.       Possession.

         Landlord  shall  use   commercially   reasonable   efforts  to  deliver
possession  of the  Premises  to  Tenant  in  accordance  with the  Work  Letter
Agreement  attached  hereto as Exhibit C upon the mutual  execution of the Lease
(the "Delivery Date") . If Landlord,  for any reason whatsoever,  cannot deliver
possession of the Premises to Tenant on the Delivery  Date, this Lease shall not
be void or  voidable,  nor shall  Landlord  be liable to Tenant  for any loss or
damage resulting therefrom; provided, however, that if Landlord does not deliver
the  Premises  to  Tenant on or before  that  date  which is 120 days  after the
Delivery  Date,  as such date may be  extended  on  account  of  Tenant  Delays,
casualty, inclement weather, labor disputes. shortage of materials, or any other
matters beyond the reasonable  control of Landlord,  Tenant shall have the right
to  terminate  this  Lease by  notifying  Landlord  thereof  at any time  before
Landlord delivers possession of the Premises to Tenant in the condition required
hereby.

         Within 10 days  after  written  request  from  Landlord,  Tenant  shall
execute and return to Landlord an  acknowledgment  of the Commencement  Date and
such other information as Landlord shall reasonably request.

         Tenant confirms and agrees that it is leasing the Premises in their "as
is" state and condition that it has, and will have, reviewed and fully satisfied
itself as to the  adequacy  of the

                                       4
<PAGE>

Premises,  and that Landlord shall have no obligation  whatsoever to make or pay
for any  improvements  or  renovation  in the  Premises  to prepare the same for
Tenant's  occupancy,  except as expressly  provided  elsewhere in this Lease. By
taking possession of the Premises, Tenant agrees that the Premises are then in a
good and tenantable condition,  and otherwise in the condition in which Landlord
was required to deliver them to Tenant.

         Notwithstanding  the foregoing,  Tenant may enter the Premises,  at all
times, at its own risk,  subsequent to the mutual execution and delivery of this
Lease,  for the  purpose  of  constructing  tenant  improvements,  or to install
fixtures,  supplies,  inventory and other  property in the Premises prior to the
Commencement  Date.  Pre-term  possession will be subject to the availability of
the Premises.  During the course of any such pre-term possession,  all terms and
conditions of this Lease, except rent and commencement, shall apply.

5.       Rent.

         (a) Base Rent. On or before the first day of each calendar month during
the term hereof  Tenant shall pay to Landlord,  as minimum  monthly rent for the
Premises,  the Base Rent set forth in the Basic Lease  Information.  The minimum
monthly rent for any partial  month shall be prorated at the rate of 1/30 of the
minimum monthly rent per day.  Simultaneously  with the execution of this Lease,
Tenant shall pay to Landlord the Base Rent for the first full calendar month for
which Base Rent is payable.

         (b) General  Provisions.  Rent shall be paid by Tenant to Landlord,  in
advance,  without  deduction or offset,  in lawful money of the United States of
America to 300 CALIFORNIA  ASSOCIATES,  LLC, 1000 Sansome Street, San Francisco,
CA 94111 or to such other  person or at such other  place as  Landlord  may from
time to time designate by prior written  notice.  Payments made by check must be
drawn either on a California financial institution or on a financial institution
that is a member of the federal reserve system.

         All charges and other amounts of any kind payable by Tenant to Landlord
pursuant  to this Lease  other than Base Rent shall be deemed  additional  rent.
Landlord  shall have the same  remedies for default in the payment of additional
rent as for default in the payment of Base Rent.  Base Rent and additional  rent
are collectively sometimes hereinafter referred to as rent.

         No  security  or  guaranty  which  may now or  hereafter  be  furnished
Landlord  for the payment of the rent  herein  reserved  or for  performance  by
Tenant of the other  covenants or conditions of this Lease shall in any way be a
bar or defense to any action in unlawful  detainer,  or for the  recovery of the
Premises,  or to any action which Landlord may at any time commence for a breach
of any of the covenants or conditions of this Lease.

6.       Taxes.

         Tenant shall pay to Landlord an amount  equal to Tenant's  Share of any
increase in Taxes above the amount of Taxes  levied and  assessed for the fiscal
tax year  specified  in the  Basic  Lease  Information.  The total  amounts  due
hereunder  shall be paid to Landlord  on or before the date full  payment of the
applicable Taxes are due or, if payable in installments, the date payment of the
first  installment  of such  Taxes  are  due.  Notwithstanding  anything  in the
foregoing to the contrary,  at Landlord's  sole  election,  at any time or times
Landlord  may  reasonably  estimate  in advance the amount of Taxes for any next
ensuing 12-month period and, upon Landlord's written notice, Tenant shall pay to
Landlord on the first day of each calendar month of such 12-month  period,  with
Base Rent as  provided  for in  Paragraph  5  hereof,  one-twelfth  (1/12th)  of
Tenant's  Share of such  estimated  Taxes.  If during any such  12-month  period
Landlord  shall  reasonably  revise its estimate of Tenant's share of said taxes
for such 12- month period,  Landlord  shall,  with 30 days prior written notice,
advise  Tenant  and  commencing  on the date the next Base Rent  payment is due,
Tenant shall pay all additional  Taxes on such revised  estimate for the portion
of the 12-month  period already elapsed and shall commence paying the additional
Taxes based on such revised estimate for the remainder of such 12- month period.
Upon  conclusion of such  12-month  period,  Landlord  shall deliver to Tenant a
statement  of  Tenant's  Share of the  actual  Taxes for such  period and if the
amounts  theretofore  paid by Tenant on account  of  Landlord's  estimate  shall
exceed the amount of Tenant's Share of such actual Taxes,  Landlord shall pay to
Tenant the amount of such  excess  within 15 days after date of delivery of such
statement to Tenant, and if the amounts theretofore paid by Tenant on account of
Landlord's  estimate  shall be less than the  amount of  Tenant's  Share of such
actual Taxes,  Tenant shall pay to Landlord the amount of such deficiency within
15 days after date of delivery of such  statement  to Tenant.  Landlord,  at its
election,  may estimate Taxes on a  calendar-year  basis,  in which event Tenant
shall  pay one-  twelfth  (1/12th)  of such  estimated  Taxes as  herein  before
provided and, if this Lease shall  commence on a day other than the first day of
a calendar  year and/or shall end on a day other than the last day of a calendar
year,

                                       5
<PAGE>

Tenant's  Share of such Taxes,  as  applicable  to such first and last  calendar
years of the term hereof, shall be computed on a pro rata basis.

         For the purposes of this  Paragraph 6, "Taxes"  shall mean all real and
personal taxes, assessments, and reassessments,  special or otherwise,  foreseen
or  unforeseen,  levied  or  assessed  upon  the  Building,  including,  without
limitation, any increases in taxes resulting from any change in ownership of the
Building or any portion thereof, and any taxes levied and assessed in lieu of or
in substitution  for existing or additional  real or personal  property taxes as
well as any form of assessment,  license, fee, levy, penalty, or tax (other than
inheritance  or estate  taxes),  imposed by any  authority  having the direct or
indirect power to tax, including any city, county, state, or federal government,
or any school, agricultural,  lighting, drainage, or other improvement district,
as against any legal or equitable interest of Landlord in the Premises or in the
real property of which the Premises are a part, or as against  Landlord's  right
to rent or other income therefrom,  or as against Landlord's business of leasing
the Premises.  In addition,  Tenant shall pay one hundred  percent (100%) of any
increase  in taxes or  assessments  of  whatsoever  kind and nature  (including,
without  limitation,  all personal  property  taxes) caused by  improvements  or
installations made by Tenant to the Premises at any time during the term hereof.

         For purposes of this Paragraph 6, "Tenant's Share" shall be in the same
proportion  that the rentable  square footage of the Premises bears from time to
time to the aggregate rentable square footage of the Building.  At the inception
of this Lease  Tenant's  Share for  purposes  of this  Paragraph 6 shall be that
percentage specified as Tenant's Share in the Basic Lease Information (which may
be adjusted  from time to time by Landlord,  upon written  notice to Tenant,  in
event of  changes  in the  aggregate  rentable  building  square  footage in the
Building).

7.       Operating Expenses.

         (a) Payment of Operating Expenses. Tenant shall pay to Landlord, at the
times  hereinafter  set forth, an amount equal to Tenant's Share of any increase
in  Operating  Expenses for the Building  above the  Operating  Expenses for the
Building for the Base Year specified in the Basic Lease Information.  Statements
of the amount of Operating  Expenses  for the  preceding  calendar  year and the
amount of such  increase  payable  by Tenant  shall be  determined  by  Landlord
utilizing  Generally Accepted  Accounting  Principles  consistently  applied and
shall be payable by Tenant on demand by Landlord, as defined below.

         Notwithstanding the foregoing, at Landlord's sole election, at any time
or times  Landlord  may  reasonably  estimate  in advance  Landlord's  Operating
Expenses  for any next  ensuing 12- month period and,  upon  Landlord's  written
notice,  Tenant shall pay to Landlord on the first day of each calendar month of
such  12-month  period,  with Base Rent as provided  for in  Paragraph 5 hereof,
one-twelfth (1/12th) of Tenant's Share of such estimated Operating Expenses.  If
during any such 12-month  period  Landlord shall revise its estimate of Tenant's
Share of said expenses for such 12-month  period,  Landlord  shall,  with thirty
(30) days prior written  notice,  advise  Tenant and  commencing on the date the
next  Base Rent  payment  is due,  Tenant  shall  pay all  additional  Operating
Expenses on such revised estimate for the portion of the 12-month period already
elapsed and shall  commence  paying the additional  Operating  Expenses based on
such revised estimate for the remainder of such 12-month period. Upon conclusion
of such 12-month period,  Landlord shall deliver to Tenant an itemized statement
in reasonable  detail of Tenant's Share of Landlords actual  Operating  Expenses
for such period and,  if the  amounts  theretofore  paid by Tenant on account of
Landlord's  estimate  shall  exceed the amount of Tenant's  Share of such actual
costs,  Landlord  shall pay to Tenant the amount of such  excess  within 15 days
after  date of  delivery  of such  statement  to  Tenant,  and,  if the  amounts
theretofore paid by Tenant on account of Landlord's  estimate shall be less than
the amount of Tenant's Share of such actual costs,  Tenant shall pay to Landlord
the amount of such  deficiency  within 15 days after  date of  delivery  of such
statement to Tenant.  Landlord, at its election, may estimate Operating Expenses
on a  calendar-year  basis, in which event if this Lease shall commence on a day
other than the first day of a calendar year and/or shall end on a day other than
the last day of a calendar  year,  Tenant's Share of such  estimated  costs,  as
applicable  to such first and last calendar  years of the term hereof,  shall be
computed on a pro rata basis.

         For purposes of this Paragraph 7, "Tenant's Share" shall be in the same
proportion  that the rentable  square footage of the Premises bears from time to
time to the aggregate rentable square footage of the Building.  At the inception
of this Lease  Tenant's  Share for  purposes  of this  Paragraph 7 shall be that
percentage specified as Tenant's Share in the Basic Lease Information (which may
be adjusted  from time to time by Landlord,  upon written  notice to Tenant,  in
event of  changes  in the  aggregate  rentable  building  square  footage in the
Building).

                                       6
<PAGE>


         (b) Operating  Costs Defined.  As used in this Paragraph 7,  "Operating
Expenses"  shall  mean  any  and all  sums  expended  by  Landlord  directly  or
indirectly  for the  maintenance,  management,  and  operation of the  Building,
including,  without limiting the foregoing:  wages, salaries, employee benefits,
and payroll burden of personnel engaged in management, operation and maintenance
of the  Building;  Building  management  office rent or rental  value;  costs of
power, heat, light,  steam, air conditioning,  gas, water,  garbage,  sewage and
waste disposal and other  utilities;  costs of equipment,  tools,  materials and
supplies; all insurance premiums and deductibles; license, permit and inspection
fees;  amounts  paid  under  maintenance  contracts  and for  general  services;
depreciation  on,  or  rental  of,  personal  property;  reasonable  replacement
reserves; the costs of resurfacing, repainting, cleaning, sweeping and repairing
the parking lot areas; costs of repairing or replacement of debris  receptacles;
landscaping  costs  including  maintenance,  watering  and  the  replacement  or
addition of plants; cost of directional signs, other markers, and car stops; all
costs of keeping the exterior walls, foundations,  down spouts, roofs, plumbing,
sewage  systems,  electrical,  and heating and air  conditioning  systems in the
Building  in good order,  condition  and  repair;  any and all parking  charges,
surcharges  or any other  costs  levied  by any  governmental  authority  on the
Building, or the rents generated therefrom, or the utilities consumed therein or
similar matters;  reasonable management fees; and the cost (hereinafter "capital
cost") of any capital  improvements  made to the  Building by Landlord  that (i)
reduce  Operating  Expenses or that reduce or conserve  the amount of  utilities
consumed,  (ii)  are  required  under  any  Legal  Requirements  that  were  not
applicable to the Building at the time this Lease was entered into, or (iii) are
required  to keep the  Building  and the common  areas  therein,  in good order,
condition,  and repair, each of the foregoing capital costs to be amortized over
such reasonable period as Landlord shall determine together with interest on the
unamortized  balance at the rate of ten  percent  (10%) per year or such  higher
rate as may have been paid by  Landlord  on funds  borrowed  for the  purpose of
constructing such capital  improvements.  Tenant expressly  acknowledges that if
Landlord, from time to time, elects to provide security services, Landlord shall
not be deemed to have  warranted  the  efficiency  of such  security  personnel,
service,  procedures or equipment and Landlord shall not be liable in any manner
for  the  failure  of any  such  security  personnel,  services,  procedures  or
equipment  to prevent or control,  or  apprehend  anyone  suspected  of personal
injury or property damage in, on, or around the Property.

         Operating Expenses shall not include (i) capital  improvements  (except
as  otherwise  provided  above);  (ii) costs of  special  services  rendered  to
individual  tenants (including Tenant) for which a special charge is made; (iii)
interest and principal payments on loans or indebtedness secured by the Building
and any rent paid on any ground or underlying  lease; (iv) costs of improvements
for Tenant or other  tenants of the  Building;  (v) costs of  services  or other
benefits of a type which are not  available to Tenant but which are available to
other tenants or occupants,  and costs for which Landlord is reimbursed by other
tenants  of the  Building  other than  through  payment  of  tenants'  shares of
increases in Operating Costs and Taxes; (vi) advertising,  leasing  commissions,
attorneys' fees and other expenses  incurred in connection with leasing space in
the Building or enforcing such leases; (vii) depreciation or amortization, other
than as  specifically  enumerated in the  definition  of Operating  Costs above;
(viii) costs for which Landlord  actually  receives  reimbursement  from parties
other than current or former tenants of the Building; (ix) costs relating to the
abatement  of  Hazardous  Materials,  except  such costs as are  incurred in the
ordinary  course of  maintaining  and repairing  the Building,  or (x) insurance
deductibles  to the extent  they  exceed  the higher of (1)  $50,000 or (2) such
amounts  as  are  commercially  reasonable  with  respect  to  office  buildings
equivalent to the Building  located in the financial  district of San Francisco.
In  addition,  if the Base Year  Operating  Expenses do not  include  earthquake
insurance and Landlord  subsequently  elects,  at its sole discretion,  to carry
earthquake  insurance,  the cost that  Landlord  would have incurred in the Base
Year had it carried  earthquake  insurance during the Base Year shall be imputed
into the Base Year Operating Expenses.  Likewise, if Landlord carries earthquake
insurance in the Base Year but elects, in its sole discretion, not to carry such
insurance in a subseouent  year,  the cost of such  earthquake  insurance in the
Base Year  shall be  deducted  from the Base  Year  Operating  Expenses  for the
purposes of determining  Tenant's Share of Operating Expenses in such subsequent
year. For any period during which 100% of the rentable square footage comprising
the  Building  is not  leased,  Operating  Expenses  shall be  adjusted to equal
Landlord's reasonable estimate of what Operating Expenses would be had the total
rentable area of the Building been occupied during such period.



         (c) Additional Services. If in Landlord's determination Tenant's demand
for or use of the common area  facilities  and  services  for the Building is or
becomes excessive or sufficiently  frequent as to warrant the same, Landlord may
separately charge Tenant for Landlord's additional  maintenance or service costs
related  thereto,  with an 18% maximum  administrative

                                       7
<PAGE>

charge from Landlord,  which additional  charges shall be due and payable within
thirty (30) days after demand therefor.

         (d) Audit  Right.  Tenant,  at its  expense,  shall have the right upon
fifteen (15) days prior written notice to Landlord  ("Tenant's Audit Notice") to
be given only within two (2) months after Tenant  receives the annual  statement
of additional  rent under Paragraph 7(a) to audit  Landlord's  books and records
relating to such statement for such immediately preceding calendar year, subject
to the following  terms and  conditions:  (a) No audit shall be conducted at any
time that Tenant is in default of any of the terms of this Lease;  (b) any audit
shall be conducted only by independent  certified public accountants  practicing
for an accounting firm of national or regional prominence, employed by Tenant on
an hourly or fixed fee basis, and not on a contingency fee basis; and (c) Tenant
shall not audit  Landlord's  books  and  records  more than one (1) time for any
calendar year.  Tenant  acknowledges  that Tenant's right to inspect  Landlord's
books and records with respect to Operating  Expenses for the preceding calendar
year is for the exclusive  purpose of determining  whether Landlord has complied
with the  terms  of the  Lease  with  respect  to  Tenant's  Share of  Operating
Expenses.  Tenant  shall have thirty (30) days after  Tenant's  Audit  Notice to
complete Tenant's inspection of Landlord's books and records concerning Tenant's
Share  of  Operating  Expenses  at  Landlord's  accounting  office.  During  its
inspection  Tenant  agrees to  request,  in  writing,  all  pertinent  documents
relating to the inspection.  If in Landlord's possession,  Landlord will provide
such  documents to Tenant  within ten (10) days from  Landlord's  receipt of the
request and Tenant  shall not remove such  records  from  Landlord's  accounting
office, but Tenant shall have the right to make copies of the relevant documents
at Tenant's  expense.  Tenant shall deliver to Landlord a copy of the results of
such audit within fifteen (15) days after its receipt by Tenant.  The nature and
content  of any  audit  are  strictly  confidential.  Tenant,  on  behalf of its
accountant,  employees  and agents shall not disclose the  information  obtained
from the audit to any other person or entity, including, without limitation, any
other tenant in the  Building,  or any agent,  employee,  officer,  shareholder,
partner,  accountant or attorney of such tenant in the  Building,  except as may
reasonably  be required in any dispute  between  Landlord  and Tenant  where the
results of such audit are at issue. A breach of this  confidentiality  agreement
shall constitute an Event of Default under this Lease. No assignee shall conduct
an audit for any period  during which such assignee was not in possession of the
Premises. If Tenant's audit shows that Operating Expenses are overstated by more
than five percent (5%), then Landlord agrees to pay the reasonable costs of such
audit, not to exceed Five Thousand and 00/100 Dollars ($5,000.00) per audit.

8.       Security Deposit/Letter of Credit.

         (a) On execution of this Lease,  Tenant shall deposit with Landlord the
amount specified in the Basic Lease Information as the Security Deposit,  if any
(the  "Security   Deposit"),   as  security  for  the  performance  of  Tenant's
obligations under this Lease. Landlord may (but shall have no obligation to) use
the  Security  Deposit or any  portion  thereof to cure any breach or default by
Tenant  under this  Lease,  to fulfill any of  Tenant's  obligations  under this
Lease,  or to compensate  Landlord for any damage Landlord incurs as a result of
Tenant's  failure to perform  any of  Tenant's  obligations  hereunder.  In such
event,  Tenant shall pay to Landlord on demand an amount sufficient to replenish
the Security Deposit.  If at the expiration or termination of this Lease, Tenant
is not in default,  has otherwise  fully  performed all of Tenant's  obligations
under this Lease, and there are no outstanding  claims,  liabilities,  losses or
damages for which Tenant is  responsible  under  Paragraph  17,  Landlord  shall
return to Tenant  the  Security  Deposit  or the  balance  thereof  then held by
Landlord and not applied as provided above.  Landlord may commingle the Security
Deposit with Landlord's general and other funds.  Landlord shall not be required
to pay interest on the Security Deposit to Tenant.

         (b) Tenant shall  deliver to Landlord,  upon  execution and delivery of
this Lease a clean,  unconditional,  irrevocable,  transferable letter of credit
(the "Letter of Credit"), naming Landlord as beneficiary, in the form of Exhibit
E to the Lease, and issued by a financial institution  ("Issuer"),  satisfactory
to Landlord.  The amount  available to be drawn under the Letter of Credit shall
be One Million  Five  Hundred and Ninety One  Thousand  Seven  Hundred and Sixty
Eight Dollars and No Cents ($1,591,768). So long as there is no uncured Event of
Default then  existing  under the Lease,  the amount  remaining  available to be
drawn  under the Letter of Credit  shall  remain the same over the term,  so the
amount available to be drawn under the Letter of Credit shall be as follows:

                                                              Minimum Amount
Months (counting from the Commencement Date through           Available Under
applicable monthly anniversary of Commencement Date)        the Letter of Credit
----------------------------------------------------        --------------------
                        01 - 12                             $1,591,768
                        13 - 24                             $1,591,768
                        25 - 36                             $1,341,768
                        37 - 48                             $1,091,768

                                       8
<PAGE>

                        49 - 60                             $841,768
                        61 - 72                             $591,768
                        73 - 84                             $341,768

The  foregoing  reductions  in the face amount of the Letter of Credit  shall be
accomplished  through the  delivery  of  substitute  Letters of Credit.  Without
limiting the generality of the foregoing,  no Letter of Credit shall provide for
any  reduction in its face value other than those  resulting  from draws on such
Letter of Credit.

         (c) Landlord shall be entitled to draw any portion or all of the amount
under the Letter of Credit if either (i) an Event of  Default  occurs  under the
Lease,  or (ii)  Tenant does not  deliver to  Landlord a  replacement  letter of
credit from Issuer or another financial institution  satisfactory to Landlord in
the  amount  and form of the  initial  Letter of Credit no later  than one month
before the expiration  date of the then existing  Letter of Credit,  or (iii) if
upon a proposed  sale or lease of the  Building,  Tenant does not deliver to any
new landlord a replacement  Letter of Credit  pursuant to the  provisions of (e)
below.  The Letter of Credit  shall  provide  for  partial  draws by Landlord in
accordance with this paragraph. Any such draws when made shall be deemed applied
to the amounts owing under this Lease (in such order as Landlord may elect).  In
the event of any draw under the Letter of Credit,  Tenant  shall within five (5)
days after demand therefor from Landlord,  cause the amount remaining  available
to be drawn under the Letter of Credit to be increased by an amount equal to the
amount drawn.

         (d)Tenant shall not assign or encumber or attempt to assign or encumber
the Letter of Credit and neither Landlord nor its successors or assigns shall be
bound  by  any  such  assignment  or  encumbrance  or  attempted  assignment  or
encumbrance.

         (e) In the event of a sale or other  transfer of the  Building,  Tenant
will, if requested by Landlord in writing,  at its sole cost and expense  within
ten (10) Business Days after  receiving such request,  cause the issuing bank of
the  Letter of Credit to  consent  to the  assignment  or to issue a  substitute
letter of credit on  identical  terms to the  Letter of  Credit,  other than the
stated  beneficiary,  from  the  same  issuing  bank or,  if the  transferee  so
requests,  from another bank  acceptable to such  transferee  in its  reasonable
discretion,  naming such transferee as the beneficiary thereof, upon delivery by
Landlord of the then outstanding Letter of Credit.

         (f) If Tenant is unable to  procure a Letter of Credit at or before its
execution of this Lease,  Tenant may deliver to Landlord,  in lieu of the Letter
of Credit but in addition to the  Security  Deposit,  an amount in cash equal to
One Million  Five  Hundred  Ninety One  Thousand  Seven  Hundred and Sixty Eight
Dollars ($1,591,768),  which amount shall be placed in a U.S.  Government-backed
securities money market account, reasonably selected by Landlord. Such sum shall
constitute,  together with the amount  referenced in Paragraph 8(a),  above, the
"Security Deposit" and shall be held and used by Landlord in accordance with the
provisions  of  Paragraph  8(a).  At such time as Tenant  delivers to Landlord a
Letter of  Credit  that  meets  all of the  requirements  of this  Paragraph  8,
Landlord  shall  promptly  return the  additional  deposit of One  Million  Five
Hundred Ninety One Thousand Seven Hundred and Sixty Eight Dollars  ($1,591,768),
with the interest that has accrued thereon, if any.

9.       Uses Prohibited.

         Tenant  shall  not do or  permit  anything  to be done in or about  the
Premises nor bring or keep  anything  therein which will in any way increase the
rate of or affect any fire or other  insurance  upon the  Building or any of its
contents or cause a cancellation of any insurance  policy covering said Building
or its contents.  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 the Building or injure or annoy them,  or use or
allow the  Premises to be used for any  residential,  unlawful or  objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises.  No  odor-causing  devices,  space heaters,  loudspeakers or other
similar device,  system or apparatus  which can be heard or experienced  outside
the Premises shall, without the prior written approval of Landlord,  which shall
not be unreasonably  withheld,  be used in or at the Premises.  Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.

10.      Compliance with Laws.

         Tenant  shall  not use or  permit  anything  to be done in or about the
Premises  which will in any way  conflict  with any law,  statute,  ordinance or
governmental rule, regulation or requirement now in force or which may hereafter
be enacted or promulgated.  Tenant, at its sole cost and expense, shall promptly
comply with all laws, statutes, ordinances and governmental

                                       9
<PAGE>

rules,  regulations  or  requirements  now in force or which may hereafter be in
force  and with the  requirements  of any  board of fire  underwriters  or other
similar body now or hereafter constituted (collectively,  "Laws") relating to or
affecting the condition, use of occupancy of the Premises,  excluding structural
changes  not  related to or  affected  by  Tenant's  improvements  or acts.  The
judgment of any court of competent jurisdiction or the admission of Tenant in an
action against Tenant,  whether  Landlord is a party thereto or not, that Tenant
has violated any law,  statute,  ordinance or governmental  rule,  regulation or
requirement shall be conclusive of that fact as between Landlord and Tenant.

11.      No Use of Hazardous Materials Permitted.

         Tenant will not use, generate,  manufacture,  produce,  store, release,
discharge,  or dispose of, on,  under or about the  Premises or the  Building or
transport to or from the Premises or the Building any  Hazardous  Materials  (as
defined  below) or allow its  employees,  agents,  contractors,  invitees or any
other person or entity to do so, except that Tenant shall be permitted to use in
the Premises  reasonable and customary  quantities of ordinary office  products,
janitorial  materials and cleaning supplies such as inks,  household  cleansers,
and the like.  Tenant shall keep and maintain the Premises in  compliance  with,
and shall not cause or permit the Premises or the Building to be in violation of
any Environmental Laws (as defined below).

         Tenant shall protect, defend, indemnify and hold harmless Landlord, the
holder(s) of any mortgage or deed of trust  encumbering the Building,  and their
respective partners, agents, employees,  officers,  directors, and shareholders,
from and against any and all liabilities,  losses,  damages, costs, and expenses
(including  attorneys' and  consultants'  fees and costs) directly or indirectly
arising  out  of  the  presence,  due  to  Tenant  (or  its  employees,  agents,
contractors,  invitees,  or any person permitted or suffered by Tenant to use or
occupy  the  Premises),  of any  Hazardous  Materials  in,  under or  about  the
Premises,  the  Building  or  the  Building,  whether  resulting  from  Tenant's
activities prior to or after the Commencement Date. This indemnity shall survive
the expiration or  termination  of this Lease.  Landlord shall have the right to
join and  participate in, as a party if it so elects,  any legal  proceedings or
actions  affecting  the  Premises,  the  Building or the  Building  initiated in
connection  with any  Environmental  Law  violated  by Tenant and shall have its
attorneys' and consultants' fees in connection therewith paid by Tenant.

         As used herein,  the term "Hazardous  Materials" means any hazardous or
toxic  substance,  material or waste which is or becomes  regulated by any local
governmental authority, the State of California or the United States Government,
or is or becomes classified as hazardous or toxic under federal, state, or local
laws  or  regulations.   "Hazardous  Materials"  shall  also  include,   without
limitation, petroleum, asbestos, polychlorinated biphenyls, flammable explosives
and radioactive materials.

         "Environmental  Laws"  shall  mean any  federal,  state  or local  law,
statute,  ordinance,  or  regulation  now or  hereafter  pertaining  to  health,
industrial  hygiene,  or the  environmental  conditions  on,  under or about the
Premises,  or the Building,  including,  without  limitation,  the Comprehensive
Environmental  Response,  Compensation,  and Liability Act of 1980 ("CERCLA") as
amended,  42 U.S.C.  Section  9601 et seq.,  And the Resource  Conservation  and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sections 6901 et seq.

12.      Alterations.

         (a) General Provisions.  Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without  the prior  written  consent  of  Landlord  which  consent  shall not be
unreasonably   withheld,   provided  that  if  the  alterations,   additions  or
improvements  affect the  Building  systems or  structure  such  consent  may be
withheld  in  Landlord's  sole  discretion.   Any  alterations,   additions,  or
improvements to Premises,  including without limitation any partitions,  movable
or otherwise,  and all carpeting,  shall at once become a part of the realty and
belong to Landlord. Movable furniture, equipment and trade fixtures shall remain
the property of Tenant.  If Landlord  consents to the making of any alterations,
additions or improvements  to the Premises by Tenant,  the same shall be made by
Tenant at Tenant's sole cost and expense and any  contractor or person  selected
by Tenant to make the same must first be  approved  of in  writing by  Landlord.
Upon the expiration or sooner  termination of the term,  Tenant,  upon demand by
Landlord,  at  Tenant's  sole  cost  and  expense,  forthwith  and  with all due
diligence shall remove any alterations, additions or improvements made by Tenant
designated  by  Landlord  to be removed  at the time of  approval,  and  Tenant,
forthwith and with all due diligence, at its sole cost and expense, shall repair
any damage to the Premises caused by such removal. Tenant's obligation to remove
any

                                       10
<PAGE>

alterations,  additions, improvements,  fixtures and/or personal property and to
repair any damage from such removal shall survive the termination of this Lease.

         Except for  Tenant's  Initial  Tenant  Improvements,  Tenant  shall pay
Landlord  on demand an amount  equal to eight (8%)  percent of the total cost of
any  alteration,  addition or improvement as compensation to Landlord for review
of the plans and  specifications  for the  alteration,  addition or improvement,
monitoring of construction,  additional  cleaning expenses,  additional security
services,  and for other reasonable  miscellaneous costs incurred by Landlord as
result of the work.

         Construction of the alterations,  additions,  or improvements  shall be
completed in accordance with drawings and specifications  reasonably approved in
advance in writing by Landlord,  shall be carried out in a good and  workmanlike
manner,  and shall comply with all  applicable  laws,  statutes,  ordinances and
governmental rules, regulations and requirements.

         (b) Prohibition on Alterations.  Tenant  acknowledges that if more than
two  floors of the  Premises  are  substantially  renovated  prior to the second
anniversary  of  the  Commencement  Date,  significant  seismic  and  structural
upgrades to the Building will be required.  Therefore,  and  notwithstanding the
foregoing or anything to the contrary in this Lease or the schedules or exhibits
to this Lease,  prior to the second anniversary of the Commencement Date, Tenant
may make  alterations,  additions  or  improvements,  including  initial  tenant
improvements,  to two full floors of the Premises only, one of which must be the
seventh (7th) floor of the Building. Tenant shall notify Landlord in writing, as
to which other full floor (the "Other Improved Floor") Tenant will improve prior
to the second  anniversary of the Commencement Date. Tenant shall keep all other
areas of the Premises (the "Non-Improved  Floor") in its "as-is" condition as of
the date of this  Lease,  and shall  not  permit  any  alteration,  addition  or
improvement work or preparation for such work,  including  obtaining permits for
such work, in or with respect to such areas prior to the second  anniversary  of
the  Commencement  Date;  provided,  however,  that Tenant  shall be entitled to
repaint  and  recarpet  such  areas  prior  to  the  second  anniversary  of the
Commencement Date, subject to Landlord's prior written consent,  which shall not
be  unreasonably  withheld.  In addition,  Tenant shall be entitled to make such
other alterations,  additions or improvements to the Non-Improved Floor prior to
the second  anniversary of the  Commencement  Date for which Tenant has received
Landlord's  prior written  consent,  which consent may be withheld in Landlord's
sole and absolute  discretion.  Landlord shall use reasonable efforts to present
to the building department for approval the proposed alternations,  additions or
improvements  for the  Non-Improved  Floor.  In the event  Tenant  breaches  its
obligations  under  this  paragraph  or  proceeds  with any  alteration  without
Landlord's  prior written  consent,  without limiting the generality of Tenant's
obligations and Landlord's  rights as set forth elsewhere in this Lease,  Tenant
shall indemnify Landlord from and against all losses, costs, claims, damages and
expenses,  including without limitation the cost of any required upgrades to the
Building, resulting from such breach.

13.      Repair.

         (a) Tenant's  Obligation.  Tenant,  at Tenant's  sole cost and expense,
shall keep the  Premises and every part  thereof in good  condition  and repair,
ordinary  wear and  tear  and  damage  caused  by act of God or  other  casualty
excepted.  Tenant hereby waives all rights to make repairs at the expense of the
Landlord as provided by law,  statute or  ordinance  now or hereafter in effect.
Upon the  expiration  or sooner  termination  of the term  hereof,  Tenant shall
surrender the Premises to Landlord in good condition, ordinary wear and tear and
damage by act of God or other casualty excepted.  It is specifically  understood
and agreed that  Landlord has no  obligation  and has made no promises to alter,
remodel, improve, repair, decorate or paint the Premises or any part thereof and
that no representations  respecting the condition of the Premises,  the Building
or the Building have been made by Landlord to Tenant except as specifically  set
forth in this Lease.

         Tenant shall pay upon demand the entire cost of repairing any damage to
any  portion  of the  Premises,  the  Building  or the  Building  caused  by the
negligence  or  willful   misconduct   of  Tenant  or  its  agents,   employees,
contractors,  or  invitees,  or by Tenant's  failure to comply with the terms of
this Lease.

         (b)  Landlord's  Obligation.  Landlord  shall  maintain  or cause to be
maintained  in  reasonably  good order,  condition  and repair,  the  structural
portions of the roof,  foundations,  floors and exterior  walls of the Building,
the Building systems,  and the public and common areas of the Building,  such as
elevators, stairs, corridors and restrooms; provided, however, that Tenant shall
pay the  cost of  repairs  for any  damage  occasioned  by  Tenant's  use of the
Premises or the Building or any act or omission of Tenant or Tenant's employees,
contractors,  agents,  or  invitees,  to the  extent  (if  any) not  covered  by
Landlord's property insurance.  Landlord shall be under no

                                       11
<PAGE>

obligation to inspect the Premises.  Tenant shall promptly  report in writing to
Landlord any defective  condition  known to Tenant which Landlord is required to
repair.

14.      Abandonment.

         Tenant  shall not  abandon  the  Premises  at any time  during the term
hereof,  and  if  Tenant  shall  abandon,   or  surrender  the  Premises  or  be
dispossessed  by process of law, or otherwise,  any tangible  personal  property
belonging to Tenant and left on the Premises shall be deemed to be abandoned, at
the option of Landlord.

15.      Liens.

         Tenant shall keep the Premises and the Building and the land upon which
the Building is situated free from any liens arising out of any work  performed,
materials furnished or obligations incurred by Tenant. Tenant shall in the event
of the filing of any such lien,  post any bond  required to release the Premises
therefrom.  Should  Tenant fail to remove any such lien within five (5) business
days after notice to do so from Landlord, Landlord may, in addition to any other
remedies,  record a bond pursuant to California  Civil Code Section 3143 and all
amounts  incurred  by  Landlord in so doing  shall  become  immediately  due and
payable by Tenant to Landlord as additional rent.  Landlord shall have the right
to post and keep posted on the  Premises any notices that may be provided by law
or which  Landlord may deem to be proper for the  protection  of  Landlord,  the
Premises and the Building from such liens.

16.      Assignment and Subletting.

         (a) Landlord's  Consent.  Landlord's and Tenant's agreement with regard
to Tenant's right to transfer  all or part of its interest in the Premises is as
expressly set forth in this Paragraph 16. Except upon  Landlord's  prior written
consent,  which consent shall not (subject to Landlord's  rights under Paragraph
16 (b), below) be unreasonably  withheld,  delayed or conditioned,  neither this
Lease  nor all or any  part of the  leasehold  interest  created  hereby  shall,
directly or  indirectly,  voluntarily or  involuntarily,  by operation of law or
otherwise, be assigned,  mortgaged, pledged, encumbered or otherwise transferred
by  Tenant  or  Tenant's  legal   representatives   or  successors  in  interest
(collectively  an  "assignment")  and neither the  Premises nor any part thereof
shall be sublet or be used or  occupied  for any  purpose  by anyone  other than
Tenant (collectively, a "sublease").  Tenant agrees that any instrument by which
Tenant  assigns or sublets all or any portion of the  Premises  shall  expressly
provide  that the  subtenant  or assignee  may not further  assign or sublet the
assigned or sublet space without  Landlord's  prior written consent and that the
assignee or subtenant  will comply with all of the  provisions of this Lease and
that Landlord may enforce the Lease provisions directly against such assignee or
subtenant. Any assignment or subletting without Landlord's prior written consent
shall, at Landlord's  option,  be void and shall  constitute an Event of Default
entitling  Landlord to terminate  this Lease and to exercise all other  remedies
provided in Paragraph 27 of this Lease.

         In the event of an assignment or subletting, other than to an Affiliate
(as  defined  below) any renewal  options,  expansion  options,  rights of first
refusal,  rights of first negotiation or any other rights or options  pertaining
to additional  space in the Building  contained in this Lease,  shall not run to
the subtenant or assignee,  it being agreed by the parties  hereto that any such
rights and options are personal to the original  Tenant named herein and may not
be transferred.

         In no event shall  Tenant  assign this Lease or sublet the  Premises or
any  portion  thereof  to any  then,  existing  or  prospective  Tenant  of said
Building.

         Tenant shall pay  Landlord's  reasonable  costs  incurred in connection
with Tenant's  request to assign this Lease or sublet the  Premises,  regardless
whether or not the Landlord consents to the proposed transfer.

         If  Tenant  is a  corporation  or a  partnership,  the  transfer  (as a
consequence of a single  transaction or any number of separate  transactions) of
fifty percent (50%) or more of the beneficial  ownership  interest of the voting
stock  of  Tenant  issued  and  outstanding  as of  the  date  hereof  or of the
partnership  interests  in  Tenant,  as the case  may be,  shall  constitute  an
assignment  for  which  Landlord's  consent  is  required  as  provided  in this
Paragraph  16;  provided,   however,   that  if  Tenant  is  a  publicly  traded
corporation,  transfers of Tenant's stock through a nationally  recognized stock
exchange,  including an initial  public  offering of Tenant's  stock,  shall not
constitute an assignment requiring  Landlord's consent. In addition,  Tenant may
assign or sublet this Lease,  without Landlord's  consent, to any corporation or
other entity which  controls,  is controlled by, or is under common control with
Tenant,  or to  any  corporation  or  other  entity  resulting  from  a  merger,
reorganization  or consolidation  with Tenant,  or to any person or entity which
acquires a controlling  interest in Tenant's stock or  substantially  all of the
assets of Tenant as a going concern  (collectively,  an  "Affiliate"),  provided
that, as to an assignment to an Affiliate,

                                       12
<PAGE>

the Affiliate  assumes in writing all of Tenant's  remaining  obligations  under
this  Lease and that  Tenant  gives  Landlord  such  reasonable  information  as
Landlord shall reasonably request regarding the Affiliate.

         (b)  Procedure.  If Tenant desires to assign this Lease or any interest
therein or sublet all or part of the Premises  (each  hereinafter a "transfer"),
Tenant shall give Landlord written notice thereof designating the space proposed
to be transferred  and the terms  proposed.  Landlord shall have the prior right
and option (to be exercised by written notice to Tenant given within thirty (30)
business days after receipt of Tenant's notice) to do any of the following:

         (1) Landlord may terminate this Lease,  or in the case of a sublease of
less  than all of the  Premises,  terminate  this  Lease as to that  part of the
Premises proposed to be so sublet, either (i) on the condition that the proposed
transferee  immediately  enter into a direct lease of the Premises with Landlord
(or, in the case of a partial sublease, a lease of the portion proposed to be so
sublet) on the same terms and conditions  contained in Tenant's notice,  or (ii)
so that Landlord is thereafter  free to lease the Premises (or, in the case of a
partial  sublease,  the portion proposed to be so sublet) to whomever it pleases
on whatever terms are acceptable to Landlord. In the event Landlord elects to so
terminate this Lease, then if such termination is conditioned upon the execution
of a lease between Landlord and the proposed  transferee,  Tenant's  obligations
under this Lease shall not be terminated  until such  transferee  executes a new
lease with Landlord,  enters into  possession and commences the payment of rent.
If Landlord  elects simply to terminate this Lease (or, in the case of a partial
sublease,  to terminate this Lease as to the portion to be so sublet), the Lease
shall so terminate in its entirety (or as to the space to be so sublet)  fifteen
(15) days after Landlord has notified  Tenant in writing of such election.  Upon
such termination,  Tenant shall be released from any further obligation accruing
under this Lease after the date of such  termination  if it is terminated in its
entirety,  or shall be released from any further  obligation  accruing under the
Lease after the date of such  termination  with respect to the space proposed to
be sublet in the case of a proposed partial  sublease.  In the case of a partial
termination  of the  Lease,  the Base  Rent  and  Tenant's  Share  of Taxes  and
Operating Costs shall be reduced to an amount which bears the same  relationship
to the original amount thereof as the rentable area of that part of the Premises
which  remains  subject to the Lease bears to the original  rentable area of the
Premises.  Landlord and Tenant  shall  execute a  cancellation  and release with
respect to the Lease to effect such termination.

         (2) In the event of a proposed subletting, Landlord may elect to sublet
such space  from  Tenant at the  rental  and other  terms set forth in  Tenant's
notice to Landlord setting forth the proposed terms of such subletting, in which
event,  Landlord  shall  have the  further  right to sublet to on such terms and
conditions as it may desire.

         (3) Landlord may elect to permit Tenant to assign the Lease or sublease
such part of the  Premises,  in which event Tenant may do so, but without  being
released of its liability for the performance of all its  obligations  under the
Lease.

         (c) Documentation. Without limiting any other conditions stated in this
Paragraph 16, no permitted  subletting by Tenant shall be effective  until there
has been  delivered  to  Landlord a  counterpart  of the  sublease  in which the
subtenant  agrees to be and remain jointly and severally  liable with Tenant for
the payment of rent  pertaining to the sublet space and for the  performance  of
all of the terms and  provisions  of this  Lease;  provided,  however,  that the
subtenant  shall be liable to Landlord  for rent only in the amount set forth in
the sublease. Without limiting any other conditions stated in this Paragraph 16,
no  permitted  assignment  shall be  effective  unless and until  there has been
delivered  to Landlord a  counterpart  of the  assignment  in which the assignee
assumes all of  Tenant's  obligations  under this Lease  arising on or after the
date of the  assignment.  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.

         (d) No Release Of Tenant. No assignment, sublease or any other transfer
of any kind, whether or not requiring  Landlord's consent,  shall relieve Tenant
of any obligation to be performed by Tenant under this Lease,  whether occurring
before or after such  assignment,  sublease or other  transfer.  Each transferee
shall be jointly and  severally  liable with Tenant (and Tenant shall be jointly
and severally  liable with each  transferee) for the payment of rent (or, in the
case of a sublease,  rent in the amount set forth in the  sublease)  and for the
performance  of all other terms and  provisions  of this  Lease.  The consent by
Landlord to any  sublease  or  assignment  shall not relieve  Tenant or any such
transferee  from the  obligation  to obtain  Landlord's  express  prior  written
consent to any  subsequent  assignment or sublease by Tenant or any  transferee.
The acceptance of rent by Landlord from any other person (whether or not

                                       13
<PAGE>

such person is an occupant of the  Premises)  shall not be deemed to be a waiver
by Landlord of any provision of this Lease or to be a consent to any  assignment
or sublease.

17.      Indemnification.

         (a) By Tenant.  Tenant agrees to indemnify and defend  against and hold
harmless  Landlord and the holders of any mortgage or deed of trust  encumbering
the Building, and each of their constituent shareholders,  partners,  members or
other  owners,  and  all of  their  respective  agents,  contractors,  servants,
officers, directors, managers, employees and licensees (hereinafter collectively
called the  "Indemnitees")  from any and all loss, cost,  liability,  damage and
expense,  including without limitation penalties, fines and reasonable attorneys
fees and costs,  incurred  arising from any case  whatsoever in, on or about the
Premises,  including  without limiting the generality of the foregoing:  (i) any
default  by  Tenant  in the  observance  or  performance  of  any of the  terms,
covenants  or  conditions  of this  Lease on  Tenant's  part to be  observed  or
performed, or (ii) the use of occupancy or manner of the use or occupancy of the
Premises  by Tenant or any other  person  or entity  claiming  through  or under
Tenant,  including without limitation,  the presence, use, generation,  storage,
transportation or disposal of any Hazardous Materials, or (iii) the condition of
the Premises or any  occurrence  or  happening  on the  Premises  from any cause
whatsoever,  or (iv) any acts,  omissions or negligence of Tenant or of Tenant's
agents, contractors,  employees, subtenants,  licensees, invitees or visitors or
any such person or entity, in, on or about the Premises or the Building,  either
prior to the  commencement  of,  during,  or after the  expiration  of the term,
including without limitation any acts,  omissions or negligence in the making or
performing of any  alterations.  Tenant further agrees to indemnify,  defend and
save harmless  Landlord and each  Indemnitee  from and against any and all loss,
cost, liability, damage and expense, incurred in connection with or arising from
any claims by any  persons by reason of injury to persons or damage to  property
occasioned by any use, occupancy condition, occurrence, happening, act, omission
or  negligence  referred  to in the  preceding  sentence,  except  for injury to
persons or damage to  property to the extent a court of  competent  jurisdiction
determines  such  injury  or damage  was  caused by the  willful  misconduct  or
negligent  acts or omissions of Landlord or its authorized  representatives.  In
the event any action or proceeding is brought against Landlord or any lndemnitee
for any claim against which Tenant is obligated to indemnify  hereunder,  Tenant
upon notice from  Landlord  shall defend such action or  proceeding  at Tenant's
sole  expense by counsel  approved  by  Landlord,  which  approval  shall not be
unreasonably  withheld.  The  provisions of this  Paragraph 17 shall survive the
expiration or earlier termination of this lease.

         (b) By  Landlord.  Landlord  agrees  to  indemnify,  defend,  and  hold
harmless Tenant, Tenant's officers, directors shareholders,  partners, trustees,
members  and agents  (collectively  "Tenant's  Parties")  from and  against  all
claims, losses, and liabilities in connection with death or injury to any person
or  physical  damage to property  to the extent the same are  determined  by the
final judgment of a court of competent  jurisdiction  to have been caused by the
willful   misconduct   or   negligent   acts  of  Landlord  or  its   authorized
representatives  in the  Building,  except to the  extent  such  claim,  loss or
liability  results from (a) the negligence,  omissions or acts of Tenant, or (b)
any default by Tenant of the Lease.  Notwithstanding  the foregoing,  Landlord's
indemnity  obligations  are  limited to the extent of the  coverage  is provided
under any insurance actually maintained by Landlord.

18.      Insurance.

         (a) Insurance Requirements. Tenant shall, at Tenant's expense, maintain
during the term of this Lease (and, if Tenant shall occupy or conduct activities
in or about the  Premises  prior to or after the term  hereof,  then also during
such pre-term or post-term period):  (i) Broad Form Commercial General Liability
insurance or Broad Form  Comprehensive  General Liability  insurance,  in either
case including  contractual  liability coverage,  with a minimum combined single
limit of liability of at least  $2,000,000  for injuries to, or illness or death
of,  persons  and  damage to  property  occurring  in or about the  Premises  or
otherwise  resulting  from Tenant's  operations  in the Building,  (ii) property
insurance  protecting Tenant against loss or damage by fire and such other risks
as are insurable  under then available  standard  forms of "all risk"  insurance
policies (excluding  earthquake and flood but including water damage),  covering
Tenant's  property in or about the Premises and also  covering any fixtures that
may belong to Tenant, Tenant's property, but excluding the improvements existing
in the Premises as of the date of Tenant's  initial  occupancy of the  Premises,
for the full replacement value thereof without  deduction for depreciation;  and
(iii) workers'  compensation  insurance in statutory limits. The above described
liability insurance shall protect Tenant, as named insured, and Landlord and its
agent and any other  parties  designated by Landlord,  as  additional  insureds,
shall insure Landlord's,  its agent and such other parties' contingent liability
with regard to acts or omissions of Tenant; and shall  specifically  include all
liability  assumed  by Tenant  under this Lease  (provided,  however,  that such
contractual  liability  coverage  shall not  limit or be  deemed  to

                                       14
<PAGE>

satisfy Tenant's indemnity obligations under this Lease).  Landlord reserves the
right to increase the foregoing  amount of liability  coverage from time to time
as Landlord reasonably determines is required to adequately protect Landlord and
the other parties designated by Landlord from the matters insured thereby.

         (b) Policy  Form.  Each  insurance  policy  required  pursuant  to this
Paragraph 18 shall be issued by an insurance  company licensed to do business in
the State of California, shall be rated A+ or better in "Best's Insurance Guide"
and approved by Landlord in Landlord's  reasonable  discretion.  Each  insurance
policy, other than Tenant's workers' compensation  insurance,  shall (i) provide
that it may not be  materially  changed,  canceled  or allowed  to lapse  unless
thirty  (30) days'  prior  written  notice to  Landlord  and any other  insureds
designated  by  Landlord  is first  given,  (ii)  provide  for  severability  of
interests  and that no act or  omission  of  Tenant  shall  affect  or limit the
obligations  of the  insurer  with  respect to any other  insured,  (iii)  shall
provide that their respective  coverages shall be primary and that any insurance
maintained  by  Landlord  shall be excess  insurance  only,  (iv) in the case of
insurance  against  loss or damage to the  Premises  or the  Building,  shall be
endorsed  to  provide  that such loss shall be  adjusted  with and be payable to
Landlord,  and (v)  shall  have  deductible  amounts,  if any,  not in excess of
$1,000.  Each such insurance policy or a certificate  thereof shall be delivered
to  Landlord  by Tenant on or  before  the  effective  date of such  policy  and
thereafter  Tenant shall deliver to Landlord renewal policies or certificates at
least thirty (30) days prior to the expiration  dates of expiring  policies.  If
Tenant fails to procure such insurance or to deliver such Landlord shall furnish
to the Premises,  during  reasonable hours of generally  recognized  policies or
certificates,  Landlord  may,  at its  option,  procure  the same  for  Tenant's
account, and the cost thereof shall be paid to Landlord by Tenant upon demand.

         (c) Landlord's Insurance. During the Term, to the extent such coverages
are available at a  commercially  reasonable  cost,  Landlord  shall maintain in
effect insurance on the Building with responsible  insurers, on an "all risk" or
"special  form" basis,  insuring the Building in an amount equal to at least 90%
of the  replacement  cost thereof,  excluding  land,  foundations,  footings and
underground  installations.  Landlord  may, but shall not be obligated to, carry
insurance against additional perils and/or in greater amounts.

19.      Mutual Waiver of Subrogation Rights.

         Each party hereto  hereby  releases the other party and the  respective
partners,  shareholders,  agents, employees,  officers, directors and authorized
representatives  of such  released  party  (and,  in the case of  Tenant  as the
releasing  party,  the holders of any mortgage or deed of trust  encumbering the
Building),  from any  claims  such  releasing  party may have for  damage to the
Premises,  the  building or any of such  releasing  party's  fixtures,  personal
property,  improvements and alterations in or about the Premises or the building
or the Building  that is caused by or results from risks  insured  against under
any fire and  extended  coverage  insurance  policies  actually  carried by such
releasing party or deemed or required  hereunder to be carried by such releasing
party; provided, however, that such waiver shall be limited to the extent of the
net insurance proceeds payable by the relevant insurance company with respect to
such loss or damage.  For purposes of this  Paragraph 19, Tenant shall be deemed
to be  carrying  the fire and  extended  coverage  insurance  policies  required
pursuant to clause (ii) of Paragraph  18(a),  above and Landlord shall be deemed
to carry standard fire and extended  coverage  policies on the building in which
the  Premises  are  located.  Each party  hereto  shall cause each such fire and
extended coverage  insurance policy obtained by it to provide that the insurance
company  waives all rights of recovery by way of  subrogation  against the other
respective party and the other aforesaid released parties in connection with any
matter covered by such policy.

20.      Utilities.

         Landlord shall furnish to the Premises, during reasonable hours, Monday
through Friday except recognized public holidays,  to be determined by Landlord,
and subject to the rules and  regulations of the Building,  HVAC service for the
use of the Premises for general office purposes. Landlord shall also furnish the
Premises,  at all times,  subject to the rules and  regulations of the Building,
with water and  electricity  suitable  for the use of the  Premises  for general
office  purposes.  Landlord  shall not be liable  for,  and Tenant  shall not be
entitled to any abatement or reduction of rent by reason of  Landlord's  failure
to  furnish  any of the  foregoing  when  such  failure  or delay is  caused  by
accident,  breakage,  repairs,  strikes, lockouts or other labor disturbances or
labor  disputes of any  character,  or is caused  directly or  indirectly by the
limitation, curtailment, rationing or restrictions on use of water, electricity,
gas or any other form of energy serving the Premises or the Building,  or by any
other cause,  similar or dissimilar,  beyond the reasonable control of Landlord.
Landlord  shall not be liable  under any  circumstances  for loss of business or
injury to  property,  however  occurring,  through or in

                                       15
<PAGE>

connection with or incidental to failure to furnish any of the foregoing. Tenant
shall pay and provide for all services and utilities not furnished by Landlord.

         Tenant  will not,  without  the written  consent of  Landlord,  use any
apparatus or device in the Premises which will in any way increase the amount of
electricity,  cooling capacity or water usually furnished or supplied for use of
the  Premises for general  office  purposes or connect  with  electric  current,
except through existing electrical outlets in the Premises,  or water pipes, any
apparatus  or device for the  purpose  of using  electric  current or water.  If
Tenant shall  require  water or electric  current in excess of that  customarily
furnished or supplied to other Tenants of the Building for use of their Premises
for general office purposes, Tenant shall first procure the consent of Landlord,
which  Landlord  may  refuse  in its sole  discretion,  to the use  thereof  and
Landlord  may cause an electric  current or water meter to be  installed  in the
Premises  so as to  measure  the  amount of  excess  electric  current  or water
consumed  by  Tenant.  The  cost  of any  such  meter  and of the  installation,
maintenance  and repair thereof shall be paid by Tenant and Tenant agrees to pay
to Landlord  promptly upon demand therefor the cost of all such excess water and
electric  current  consumed,  as shown by said meters,  at the rates charged for
such  services  by the  local  public  utility  furnishing  the  same,  plus any
additional expense incurred in keeping account of the excess electric current or
water so consumed.

         Upon request by Tenant in accordance with the procedures established by
Landlord  from time to time for  furnishing  HVAC  service  at times  other than
Business  Hours,  Landlord shall furnish such service to Tenant and Tenant shall
pay for such services on an hourly basis at the then prevailing rate established
for the Building by Landlord.

21.      Personal Property and other Taxes.

         Tenant  shall  pay  before  delinquency,  any and all  taxes  levied or
assessed  and  which  become  payable   during  the term  hereof  upon  Tenant's
equipment,  furniture,  fixtures  and other  personal  property  located  in the
Premises, including carpeting installed by Tenant even though said carpeting has
become a part of the Premises; and any and all taxes or increases therein levied
or  assessed  on  Landlord  or Tenant by virtue  of  alterations,  additions  or
improvements to the Premises made by Tenant or Landlord at Tenant's request.  In
the event said taxes are  charged  to or paid or  payable by  Landlord,  Tenant,
forthwith upon demand therefor,  shall reimburse  Landlord for all of such taxes
paid by Landlord.

22.      Rules and Regulations.

         Tenant  shall  faithfully   observe  and  comply  with  the  rules  and
regulations  printed  on  or  annexed  to  this  Lease  as  Exhibit  D  and  all
modifications of and additions thereto applicable to all tenants of the Building
from time to time put into effect by Landlord of which Tenant shall have notice.
Landlord shall not be responsible to Tenant for the  nonperformance by any other
tenant or occupant of the Building of any of said rules and regulations.


23.      Holding Over.

         If  Tenant  holds  possession  of the  Premises  after the term of this
lease, Tenant shall, (at option of Landlord to be exercised by Landlord's giving
written notice to Tenant and not otherwise)  become a Tenant from month to month
upon the terms and  conditions  herein  specified,  so far as  applicable,  at a
monthly  rental of one and  one-half  (1.5) times the  monthly  rental in effect
during the last month of the Lease term.  Such  monthly rent shall be payable in
advance, in lawful money, and shall continue until thirty (30) days after Tenant
shall have given to Landlord  or  Landlord  shall have given to Tenant a written
notice of intent to  terminate  such  monthly  tenancy.  Unless  Landlord  shall
exercise the option  provided  herein,  Tenant  shall be a tenant at  sufferance
only,  whether or not Landlord shall accept any rent from Tenant while Tenant is
so holding over.

24.      Subordination.

         This Lease shall be subject and  subordinate at all times to all ground
or underlying leases which may now exist or hereafter be executed  affecting the
Building  and/or the land upon which the Building is situated and to the lien of
any  mortgages  or deeds of trust in any  amount or  amounts  whatsoever  now or
hereafter  placed on or  against  said  Building  and/or the land upon which the
Building is situated or on or against  Landlord's  interest or estate therein or
on or against any ground or  underlying  lease  without the  necessity of having
further  instruments  on the part of Tenant to  effectuate  such  subordination.
Notwithstanding  the  foregoing,  Tenant  covenants  and agrees to  execute  and
deliver, upon demand, such further instruments  evidencing such subordination of
this  Lease to such  ground  or  underlying  leases  and to the lien of any such
mortgages  or deeds  of trust as may be  required  by  Landlord.  Tenant  hereby
irrevocably  appoints  Landlord  the  attorney  in fact of Tenant to execute and
deliver any such  instrument  or  instruments  for or in the name of Tenant,  if
Tenant fails to execute such

                                       16
<PAGE>

documents within ten (10) days after request. In the event of termination of any
ground or underlying  lease,  or in the event of  foreclosure or exercise of any
power of sale under any  mortgage or deed of trust  superior to this Lease or to
which this Lease is subject or  subordinate,  Tenant shall upon demand attorn to
the lessor  under such ground or  underlying  lease or to the  purchaser  at any
foreclosure sale or sale pursuant to the exercise of any power of sale under any
mortgage or deed of trust,  in which event this Lease  shall not  terminate  and
Tenant  shall  automatically  be and become the Tenant of said lessor under such
ground or underlying  lease or to said  purchaser,  whichever  shall make demand
therefor.  Landlord agrees to use commercially  reasonable efforts to obtain, at
Tenant's sole cost and expense, a non-disturbance  agreement  from the holder of
any existing encumbrance on the Building in a form reasonably acceptable to such
holder of the encumbrance;  provided,  however,  that the  effectiveness of this
Lease shall not be affected by Landlord's failure to obtain such an agreement.

25.      Entry by Landlord.

         Landlord  reserves and shall at any and all  reasonable  times have the
right to enter the Premises to inspect the same, to supply  janitor  service and
any other service to be provided by Landlord to Tenant hereunder,  to submit the
Premises   to   prospective   purchasers   or  Tenants,   to  post   notices  of
non-responsibility, and to alter, improve or repair the Premises and any portion
of the  Building  without  abatement  of rent  and may for  that  purpose  erect
scaffolding  and other necessary  structures  where  reasonably  required by the
character  of the work to be  performed,  provided  the entrance to the Premises
shall not be blocked  thereby and further  providing that the business of Tenant
shall not be interfered  with  unreasonably.  Tenant hereby waives any claim for
damages  for any  injury  or  inconvenience  to or  interference  with  Tenant's
business,  any loss of occupancy of quiet  enjoyment of the Premises,  and other
loss  occasioned  by such entry.  For each of the aforesaid  purposes,  Landlord
shall at all times  have and retain a key with which to unlock all of the doors,
in,  upon and about the  Premises  excluding  Tenant's  vaults  and  safes,  and
Landlord  shall have the right to use any and all means which  Landlord may deem
proper  to open  said  doors in an  emergency  in order to  obtain  entry to the
Premises,  and any entry to the  Premises  obtained  by  Landlord by any of said
means, or otherwise, shall not under any circumstances be construed or deemed to
be a  forcible  or  unlawful  entry  into or a detainer  of the  Premises  or an
eviction of Tenant from the Premises or any portion thereof.

26.      Intentionally Deleted.

27.      Default.

         (a) Events of Default.  The  occurrence of any of the  following  shall
constitute an "Event of Default" by Tenant:

                  (i) Tenant  fails to make any payment of rent when due, or any
amount  required to replenish  the  security  deposit as provided in Paragraph 8
above,  if payment in full is not  received  by Landlord  within  three (3) days
after written notice that it is due.

                  (ii) Tenant abandons the Premises.

                  (iii)  Tenant  fails  timely  to  deliver  any   subordination
document,  estoppel  certificate  or financial  statement  requested by Landlord
within the applicable time period specified in Paragraphs 24 and 33.

                  (iv) Tenant  violates  the  restrictions  on  assignments  and
subleases set forth in Paragraph 16.

                  (v) Tenant ceases doing business as a going concern;  makes an
assignment for the benefit of creditors;  is  adjudicated an insolvent,  files a
petition (or files an answer  admitting the material  allegations of a petition)
seeking relief under any state or federal  bankruptcy or other  statute,  law or
regulation  affecting  creditors'  rights;  all or substantially all of Tenant's
assets are subject to judicial seizure or attachment and are not released within
30 days, or Tenant  consents to or acquiesces in the  appointment  of a trustee,
receiver  or  liquidator  for  Tenant  or for  all or any  substantial  part  of
Tenant's assets.

                  (vi)  Tenant   fails,   within  ninety  (90)  days  after  the
commencement of any proceedings against Tenant seeking relief under any state or
federal  bankruptcy or other  statute,  law or regulation  affecting  creditors'
rights, to have such proceedings dismissed,  or Tenant fails, within ninety (90)
days after an appointment,  without  Tenant's  consent or  acquiescence,  of any
trustee, receiver or liquidator for Tenant or for all or any substantial part of
Tenant's assets, to have such appointment vacated.

                                       17
<PAGE>

                  (vii) Tenant fails to perform or comply with any  provision of
this Lease other than those  described in (i) through  (vi) above,  and does not
fully cure such  failure  within  thirty (30) days after notice to Tenant or, if
such failure cannot be cured within such thirty  (30)-day  period,  Tenant fails
within  such thirty  (30)-day  period to  commence,  and  thereafter  diligently
proceed with,  all actions  necessary to cure such failure as soon as reasonably
possible but in all events  within  ninety (90) days of such  notice;  provided,
however, that if Landlord in Landlord's reasonable judgment determines that such
failure cannot or will not be cured by Tenant within such ninety (90) days, then
such failure shall  constitute an Event of Default  immediately upon such notice
to Tenant.

         (b)  Remedies.  Upon the  occurrence  of an Event of Default,  Landlord
shall have the  following  remedies,  which shall not be exclusive  but shall be
cumulative  and shall be in  addition  to any other  remedies  now or  hereafter
allowed by law:

                  (i) Landlord may terminate Tenant's right to possessinn of the
Premises at any time by written notice to Tenant. Tenant expressly  acknowledges
that in the  absence  of such  written  notice  from  Landlord,  no other act of
Landlord,  including re-entry into the Premises,  efforts to relet the Premises,
reletting of the Premises for  Tenant's  account,  storage of Tenant's  personal
property and trade  fixtures,  acceptance of keys to the Premises from Tenant or
exercise of any other  rights and remedies  under this  Paragraph  27(b),  shall
constitute an  acceptance of Tenant's  surrender of the Premises or constitute a
termination  of this Lease or of Tenant's  right to  possession of the Premises.
Upon  such  termination  in  writing  of  Tenant's  right to  possession  of the
Premises,  as herein provided,  this Lease shall terminate and Landlord shall be
entitled to recover  damages  from Tenant as provided in  California  Civil Code
Section  1951.2 and any other  applicable  existing or future Law  providing for
recovery of damages for such breach, including the worth at the time of award of
the amount by which the rent which would be payable by Tenant  hereunder for the
remainder  of the  Term  after  the  date of the  award  of  damages,  including
additional rent as reasonably estimated by Landlord,  exceeds the amount of such
rental loss as Tenant proves could have been reasonably  avoided,  discounted at
the discount  rate  published by the Federal  Reserve Bank of San  Francisco for
member banks at the time of the award plus one percent (1%).

                  (ii)  Landlord  shall have the remedy  described in California
Civil Code  Section 1951.4  (Landlord  may continue  this Lease in effect  after
Tenant's  breach and  abandonment  and recover rent as it becomes due, if Tenant
has the right to sublet or assign, subject only to reasonable limitations).

                  (iii)  Landlord  may cure the  Event of  Default  at  Tenant's
expense.  If Landlord  pays any sum or incurs any expense in curing the Event of
Default,  Tenant  shall  reimburse  Landlord  upon demand for the amount of such
payment or expense with  interest at the Interest  Rate from the date the sum is
paid or the expense is incurred until Landlord is reimbursed by Tenant.

                  (iv)  Landlord  may  remove  all  Tenant's  property  from the
Premises,  and such property may be stored by Landlord in a public  warehouse or
elsewhere at the sole cost and for the account of Tenant.  If Landlord  does not
elect to store any or all of Tenant's  property left in the  Premises,  Landlord
may consider such property to be abandoned by Tenant, and Landlord may thereupon
dispose of such  property in any manner  deemed  appropriate  by  Landlord.  Any
proceeds  realized  by Landlord on the  disposal of any such  property  shall be
applied first to offset all expenses of storage and sale, then credited  against
Tenant's  outstanding  obligations to Landlord under this Lease, and any balance
remaining after satisfaction of all obligations of Tenant under this Lease shall
be delivered to Tenant.

28.      Damage or Destruction.

         If all or a substantial part of the Premises are rendered  untenantable
or  inaccessible  by damage to all or any part of the Building,  Landlord  shall
diligently  repair the same to the extent  possible with the insurance  proceeds
received by Landlord, subject to the provisions of this Paragraph 28 hereinafter
set forth,  if such  repairs  can in  Landlord's  opinion be made within 90 days
after issuance of a building  permit  therefor under the laws and regulations of
federal,  state and local governmental  authorities having jurisdiction thereof.
In such event this Lease  shall  remain in full force and  effect.  Unless  such
damage was caused the  negligence  or willful  misconduct  of Tenant or Tenant's
agents, contractors,  employees,  subtenants,  licensees,  invitees or visitors,
Base Rent shall be abated to the extent the  Premises  is  rendered  unusable by
Tenant in the conduct of its business  during the time such part is so unusable.
Notwithstanding the foregoing,  if such damage shall occur during the final year
of the term of this  Lease,  Landlord  shall not be  obligated  to  repair  such
damage,  but may instead elect to terminate this Lease upon written notice given
to Tenant  within 30 days after the date of such

                                       18


<PAGE>

fire or other  casualty,  in which  event this Lease shall  terminate  as of the
termination date specified in Landlord's notice.

         If such  repairs  cannot in  Landlord's  opinion be made within 90 days
after  issuance of a building  permit  therefor or if such damage is  uninsured,
Landlord  may elect upon  notice to Tenant  given 60 days after the date of such
fire or other casualty to (i) repair or restore such damage, in which event this
Lease shall continue in full force and effect, but basic rent shall be partially
abated as herein above in this Section  provided or (ii) terminate this Lease in
which event this Lease shall terminate as of the  termination  date specified in
Landlord's notice.

         A total destruction of the Building  automatically shall terminate this
Lease.  Landlord and Tenant  acknowledge that this Lease  constitutes the entire
agreement of the parties  regarding events of damage or destruction,  and Tenant
waives the provisions of California  Civil Code Sections 1932(2) and 1933(4) and
any similar statute now or hereafter in force.

         If the Premises are to be repaired  under this  Paragraph 28,  Landlord
shall  repair at its cost any  injury or damage to the  Building  itself and the
initial  improvements  made to the Premises by Landlord  pursuant to this Lease.
Tenant shall pay the cost of repairing or replacing  all other  improvements  in
the Premises and  Tenant's  trade  fixtures,  furnishings,  equipment  and other
personal property.

29.      Eminent Domain.

         If all or any part of the Premises  shall be taken or  appropriated  by
any public or quasi-public   authority  under the power of eminent  domain,  and
such taking will substantially impair Tenant's use of the Premises for more than
90 days,  either party hereto shall have the right, at its option,  to terminate
this Lease.  If all or any part of the building of which the Premises are a part
shall be taken or appropriated by any public or quasi-public authority under any
power of eminent  domain,  Landlord may terminate this Lease.  In either of such
events,  Landlord  shall be entitled to and Tenant upon demand of Landlord shall
assign to Landlord any rights of Tenant to any and all income,  rent,  award, or
any interest  therein  whatsoever  which may be paid or made in connection  with
such  public or  quasi-public  use or  purpose,  and Tenant  shall have no claim
against Landlord for the value of any unexpired term of this Lease. If a part of
the Premises  shall be so taken or  appropriated  and neither party hereto shall
elect to terminate this Lease, the rent thereafter to be paid shall be equitably
reduced.

30.      Clauses, Plats and Riders.

         Clauses, plats and riders, if any, endorsed on or affixed to this Lease
are a part hereof.

31.      Sale by Landlord.

         In the event the Landlord  hereunder  shall sell or convey the building
in  which  the  Premises  are a part and the  transferee  assumes,  in  writing,
Landlord's  obligations under this Lease arising from and after the date of such
assignment,  all  liabilities  and obligations on the part of the Landlord under
this  Lease  accruing  thereafter  shall  terminate,   and  thereupon  all  such
liabilities and obligations  shall be binding upon the new owner.  Tenant agrees
to attorn to such new owner.  If any  security  be given by Tenant to secure the
faithful performance of all or any of the covenants of this Lease on the part of
Tenant,  Landlord shall transfer and/or deliver the security to the successor in
interest of Landlord and thereupon Landlord shall be discharged from any further
liability in reference  thereto.  Except as set forth in this Paragraph 31, this
Lease shall not be affected by any such sale or conveyance.

32.      Limitation of Liability.

         It is expressly understood and agreed by Tenant that none of Landlord's
covenants,   undertakings  or  agreements  are  made  or  intended  as  personal
covenants,  undertakings  or  agreements  by Landlord,  any  mortgagee  having a
security  interest in the Building or portion thereof,  Landlord's  partners (if
Landlord is a partnership),  Landlord's shareholders, officers and directors (if
Landlord  is a  corporation)  or  Landlord's  members,  managers,  officers  and
directors (if Landlord is a limited liability company). Any liability for damage
or  breach  or  nonperformance  by  Landlord  shall be  collectible  only out of
Landlord's interest in the Building and no personal liability is assumed by, nor
at any time may be asserted against,  Landlord, any mortgagee having an interest
in the  Building  or portion  thereof,  or  Landlord's  partners,  shareholders,
members,  managers,  officers,  or  directors,  as  applicable,  or any of their
respective officers,  agents,  employees,  legal representatives,  successors or
assigns,  all such  liability,  if any, being  expressly  waived and released by
Tenant.

33.      Estoppel Certificates.

         At any time and from  time to time,  upon not more  than ten (10)  days
prior  request by Landlord,  Tenant shall  execute,  acknowledge  and deliver to
Landlord a statement  certifying the

                                       19
<PAGE>

date of commencement of this Lease, stating that this Lease is unmodified and in
full force and effect (or if there have been  modifications,  that this Lease is
in  full  force  and  effect  as  modified  and  the  date  and  nature  of such
modifications)  and the dates to which the rent has been paid, and setting forth
such other  matters as may  reasonably  be requested  by Landlord.  Landlord and
Tenant intend that any such statement  delivered  pursuant to this paragraph may
be relied upon by any  mortgagee or the  beneficiary  of any deed of trust or by
any  purchaser  or  prospective   purchaser  of  the  Building.   Tenant  hereby
irrevocably  appoints  Landlord  as its agent and  attorney-in-fact  to execute,
acknowledge  and  deliver any such  certificate  in the name of and on behalf of
Tenant in the event that Tenant fails to so execute, acknowledge and deliver any
such certificate within 10 days after request thereof. In addition, from time to
time, but no more frequently than once per year, upon Landlord's request, Tenant
shall promptly furnish Landlord financial statements reflecting Tenant's current
financial  condition  and,  if  rendered in the  ordinary  course of  conducting
Tenant's  business,  a copy of Tenant's latest certified  financial  statements.
Landlord   shall  make   commercially   reasonable   efforts  to  maintain   the
confidentiality of such statements,  provided that Landlord shall be entitled to
make such statements  available to potential  lenders,  investors and purchasers
with respect to the Building.

34.      Right of Landlord to Perform.

         All  covenants  and  agreements to be kept or performed by Tenant under
any of the terms of this Lease shall be  performed  by Tenant at  Tenant's  sole
cost and expense and without any  abatement of rent. If Tenant shall fail to pay
any sum of money, other than rent,  required to be paid by it hereunder or shall
fail to perform any other act on its part to be  performed  hereunder,  and such
failure  shall  continue  for ten (10) days after  notice  thereof by  Landlord,
Landlord may, but shall not be obligated to, and without  waiving any default of
Tenant or releasing  Tenant from any obligations of Tenant  hereunder,  make any
such  payment  or  perform  any such  other act on  Tenant's  part to be made or
performed as provided herein. All sums so paid by the Landlord and all necessary
incidental costs,  together with interest thereon at the highest rate allowed by
law from the date of such  payment by the  Landlord,  shall be paid to  Landlord
forthwith on demand,  and Landlord shall have (in addition to any other right or
remedy of  Landlord)  the same rights and  remedies  in the event of  nonpayment
thereof by Tenant as in the case of default by Tenant in payment of rent.

35.      Landlord's Default and Tenant's Remedies.

         Landlord shall not be in default  unless  Landlord fails to perform any
of its obligations under this Lease and falls to cure such default within thirty
(30) days after written notice from Tenant specifying the nature of such default
where such default could reasonably be cured within said thirty (30) day period,
or fails to commence such cure within said thirty (30) day period and thereafter
continuously  with due diligence  prosecute  such cure to completion  where such
default could not reasonably be cured within said thirty (30) day period. Tenant
waives the provisions of Section 1932(1),  1941 and 1942 of the California Civil
Code and/or any similar or successor law regarding  Tenant's  right to terminate
this Lease or to make  repairs and deduct the  expenses of such repairs from the
rent due under the Lease. Tenant hereby waives any right of redemption or relief
from  forfeiture  under the laws of the State of California,  or under any other
present or future law, including the provisions of Sections 1174 and 1179 of the
California Code of Civil Procedure.

36.      Mortgagee Protections.

         If any  lender  requires,  as a  condition  to its  lending  funds  the
repayment  of which is to be secured by a mortgage or trust deed on the Building
or any portion thereof,  that certain modifications be made to this Lease, which
modifications will not require Tenant to pay any additional amounts or otherwise
change materially the rights or obligations of Tenant  hereunder,  Tenant shall,
upon  Landlord's  request,   execute  appropriate   instruments  effecting  such
modifications.

         In the event of any act or omission by Landlord which would give Tenant
the right to damages from Landlord or the right to terminate this Lease,  Tenant
will not sue for such damages or exercise any such right to terminate  until (i)
it shall have given written notice of the act or omission to Landlord and to the
holder(s) of any mortgage or deed of trust encumbering the Building, if the name
and  address of such  holder(s)  have been  furnished  to Tenant,  and (ii) such
holder(s)  shall have been given a  reasonable  opportunity  to cure  Landlord's
default,  including time to obtain possession of the Building or portion thereof
by power of sale or judicial foreclosure or other appropriate legal proceedings,
if such should prove necessary to effect a cure.

37.      Attorney Fees.

         If as a result of any  breach or  default  on the part of Tenant  under
this  Lease,  Landlord  uses the  services  of any  attorney  in order to secure
compliance  with this Lease,  Tenant shall

                                       20
<PAGE>

reimburse  Landlord  upon demand as additional  rent for any and all  attorneys'
fees and expenses incurred by Landlord,  whether or not formal legal proceedings
are  instituted.  Should  either party bring  action  against the other party to
enforce  the  provisions  of this Lease,  then the party which  prevails in such
action shall be entitled to its reasonable  attorneys' fees and expenses related
to such action in addition to all other recovery or relief.

38.      Surrender of Possession.

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

39.      Waiver.

         The waiver by Landlord or Tenant of performance  of any term,  covenant
or condition  herein  contained shall not be deemed to be a waiver of such term,
covenant or  condition or any  subsequent  breach of the same or any other term,
covenant or  condition  herein  contained.  The  subsequent  acceptance  of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term,  covenant  or  condition  of this  Lease,  other than the
failure  of  Tenant  to pay the  particular  rent  so  accepted,  regardless  of
Landlord's  knowledge of such preceding breach at the time of acceptance of such
rent.

40.      Notices.

         Any notices  required or permitted to be given hereunder shall be given
in writing and shall be delivered (a) in person,  (b) by certified mail, postage
prepaid,  return receipt requested,  (c) by a commercial  overnight courier that
guarantees next day delivery and provides a receipt,  or (d) by telefacsimile or
telecopy,  and such  notices  shall be  addressed  to  Tenant  or  Landlord,  as
applicable,  at the addresses  specified for each in the Basic Lease Information
or to such  other  address  as either  party may from  time to time  specify  in
writing to the other party.  Any notice shall be deemed  delivered when actually
delivered,  if such delivery is in person, three (3) business days after deposit
with the U.S.  Postal  Service,  if such delivery is by certified  mail, one (1)
business day after deposit with the overnight courier service,  if such delivery
is by an overnight courier service, and one (1) business day after transmission,
if such delivery is by  telefacsimile  or telecopy.  The  foregoing  shall in no
event prohibit notice from being given as provided by the federal or state Rules
of Civil Procedure, as the same may be amended from time to time.

41.      Defined Terms and Marginal Headings.

         The words  "Landlord"  and  "Tenant" as used herein  shall  include the
plural as well as the singular and words used in masculine  gender shall include
the feminine and neuter. If there is than one. Tenant, the obligations hereunder
imposed upon Tenant shall be joint and several. The marginal headings and titles
to the  paragraphs  of the Lease are not a part of this  Lease and shall have no
effect upon the construction or interpretation of any part hereof.

42.      Time and Applicable Law.

         Time  is of  the  essence  of  this  Lease  and  each  and  all  of its
provisions.  This Lease  shall in all  respects  be  governed by the laws of the
state in which the Premises are located.

43.      Successors.

         Subject to the  provisions  of Paragraph 16 hereof,  the  covenants and
conditions  herein  contained shall be binding upon and inure to the benefits of
the heirs,  successors,  executors,  administrators  and  assigns of the parties
hereto.

44.      Entire Agreement.

         This Lease constitutes the entire agreement between Landlord and Tenant
and no promises or representations,  express or implied, either written or oral,
not herein set forth  shall be binding  upon or inure to the benefit of Landlord
or Tenant.  This  Lease  shall not be  modified  by any oral  agreement,  either
express or implied,  and all modifications hereof shall be in writing and signed
by both Landlord and Tenant.

45.      Late Charge.

         In the  event  Tenant  shall  fail to pay any  rent or  other  sums due
hereunder on the due-date herein provided,  then and in that event the amount so
due and unpaid  shall bear  interest  from and after  due-date  until paid at an
annual  rate of  interest  ("lnterest  Rate")  equal to the  lesser of (i) three
percent (3%) over the prevailing "prime rate" announced from time to time by the
Bank of America NT&SA for purposes of pricing loans to major corporate borrowers
or (ii) the  highest  rate  allowed  by law for  commercial  obligations,  which
interest shall be payable  forthwith upon demand.  In addition to such interest,
with respect to any installment of monthly

                                       21
<PAGE>

rent not received by Landlord when due hereunder,  Landlord shall be entitled to
collect from Tenant a one-time late collection charge in an amount equal to five
percent (5%) of the  delinquent  amount to  compensate  Landlord for  Landlord's
administrative and other costs and efforts in connection therewith. Landlord and
Tenant  hereby  agree  that such five  percent  (5%) late  charge  represents  a
reasonable  approximation of Landlord's  losses and costs that would be incurred
in connection  with the late payment of such monthly rent.  (The foregoing shall
be in addition to any other right or remedy of  Landlord).  Landlord  shall give
Tenant written notice within thirty (30) days after assessing such late fee.

46.      Brokers.

         Landlord and Tenant each represent and warrant to the other that, other
than Tenant's broker  identified in the Basic Lease  Information  (collectively,
the "Brokers"),  no broker,  agent, or finder  negotiated or was instrumental in
negotiating  or  consummating  this  Lease on its behalf and that it knows of no
broker, agent, or finder, other than the Brokers, who are, or might be, entitled
to a commission or  compensation  in connection with this Lease. In the event of
any such  claims for  additional  brokers' or finders'  fees or  commissions  in
connection with the negotiation,  execution or consummation of this Lease,  then
Landlord shall indemnify,  save harmless and defend Tenant from and against such
claims, and any liability,  loss, damage, or expense (including  attorneys' fees
and  costs)  if they  shall  be  based  upon any  statement,  representation  or
agreement by  Landlord,  and Tenant shall  indemnify,  save  harmless and defend
Landlord  from and against such claims,  and any  liability,  loss,  damage,  or
expense  (including  attorneys'  fees and costs) if they shall be based upon any
statement,   representation  or  agreement  made  by  Tenant.  Tenant  shall  be
responsible  for all fees due the Brokers  arising  out of this Lease,  provided
that  Tenant  shall be  entitled  to apply a portion of the  Tenant  Improvement
Allowance,  as more particularly described in Exhibit C, against its obligations
to the Brokers.  Tenant shall indemnify,  save harmless and defend Landlord from
and  against  any  claims,  liability,   loss,  damage,  or  expense  (including
attorneys'  fees and costs)  incurred  by  Landlord  as a result of the  Brokers
involvement in the leasing of the Premises and the negotiation of this Lease.

47.      No Discrimination.

         Tenant agrees for Tenant and Tenant's heirs, executors, administrators,
successors  and assigns and all persons  claiming under or through  Tenant,  and
this Lease is made and accepted upon the following conditions:  that there shall
be no discrimination against or segregation of any person or group of persons on
account of race,  color,  creed,  sex,  religion,  martial  status,  ancestry or
national origin (whether in the use, occupancy, subleasing, transferring, tenure
or  enjoyment  of the  Premises  or  otherwise)  nor shall  Tenant or any person
claiming  through  or under  Tenant  establish  or permit any such  practice  or
practices of  discrimination  or segregation with reference to or arising out of
the use or occupancy of the Premises by Tenant or any person claiming through or
under Tenant.

48.      Owner's Right to Perform Building Renovations.

         (1) Tenant  understands  and agrees that Owner may, at any time or from
time to time during the term of the Lease,  perform substantial  renovation work
in and to the Building or the  mechanical  systems  serving the Building  (which
work may include,  but need not be limited to, the repair or  replacement of the
Building's  exterior  facade,  exterior  window  glass,  elevators,   electrical
systems, air conditioning and ventilating systems,  plumbing system,  structural
systems;  including seismic upgrades,  common hallways,  or lobby), any of which
work may require access to the same from within the Premises.

         (2) Tenant agrees that:

                  (a) Owner shall have access to the Premises at all  reasonable
                      times,  upon  reasonable   notice,   for  the  purpose  of
                      performing such work, and

                  (b) Owner shall incur no liability to Tenant, nor shall Tenant
                      be  entitled  to any  abatement  of rent on account of any
                      noise,   vibration,   or  other  disturbance  to  Tenant's
                      business  at the  Premises  (provided  that  Tenant is not
                      denied access to said  Premises)  which shall arise out of
                      said access by Owner or by the performance by Owner of the
                      aforesaid renovations at the Building,  provided that this
                      paragraph  shall not limit  Landlord's  obligations  under
                      Paragraph 17(b).

         (3) Owner shall use reasonable  efforts to avoid disruption of Tenant's
business  during any such  entry upon the  Premises  by Owner.  Such  reasonable
efforts  shall not  include any  obligation  to employ  labor at overtime  rates
unless Tenant  agrees to pay the amount by which such overtime  rates exceed the
standard non-overtime rates. Such payment obligation shall constitute additional
rent and shall be payable on demand.

                                       22
<PAGE>

         (4) It is  expressly  understood  and agreed by and  between  Owner and
Tenant  that  if  Tenant  shall  commence  any  action  or  proceeding   seeking
injunctive,  declaratory,  or  monetary  relief in  connection  with the  rights
reserved to Owner under this provision, or if Owner shall commence any action or
proceeding to obtain access to the Premises in accordance  with this  provision,
and if Owner shall  prevail in any such action,  then Tenant shall pay to Owner,
as additional  rent under this Lease,  a sum equal to all legal fees,  costs and
disbursements  incurred  by Owner in any way  related to or arising  out of such
action or proceeding.

49.      Signage.

         No sign, advertisement or notice shall be inscribed, painted or affixed
on any part of the inside or outside of the Building unless of such color,  size
and style and in such place upon or in the Building as shall be first designated
by Landlord,  but there shall be no  obligation or duty on Landlord to allow any
sign, advertisement or notice to be inscribed, painted or affixed on any part of
the inside or outside of the Building.  A directory in a conspicuous place, with
the names of  Tenant,  not to  exceed  one (1)  name(s),  shall be  provided  by
Landlord on a one time basis. Any necessary  revision to such directory shall be
made by Landlord,  at Tenant's  expense,  within a reasonable time after written
notice from Tenant of the change making the revision  necessary.  Landlord shall
have the right to remove all non-permitted signs without notice to Tenant and at
the expense of Tenant.

         Notwithstanding  the  foregoing,  once  tenant has  occupied  three (3)
floors of the  building,  Tenant may, at its own expense,  erect a sign with its
company name and logo on a wall in the lobby, separate from the directory,  at a
position and size to be mutually agreed upon by Landlord and Tenant.

50.      Telephone Service.

         Landlord  shall  have no  responsibility  for  providing  to Tenant any
telephone  equipment,  including  wiring,  within the Premises or for  providing
telephone  service or  connections  from the utility to the Premises,  except as
required by the express terms of this Lease.

         Tenant shall not alter,  modify, add to or disturb any telephone wiring
in the  Premises or  elsewhere  in the  Building  without the  Landlord's  prior
consent.  Tenant  shall be liable to  Landlord  for any damage to the  telephone
wiring in the Building due to the act, negligent or otherwise,  of Tenant or any
employee,  contractor  or other agent of Tenant.  Tenant shall have no access to
the  telephone  closets  within  the  Building,  except in the  manner and under
procedures established by Landlord. Tenant shall promptly notify Landlord of any
actual or suspected failure of telephone service to the Premises.

         All costs  incurred  by  Landlord  for the  installation,  maintenance,
repair and  replacement  of telephone  wiring  within the  Building  shall be an
Operating  Expense,  as otherwise  defined in Paragraph 7 of this Lease,  unless
Landlord is reimbursed for such costs by other tenants of the Building.

         Landlord  shall not be liable to Tenant  and  Tenant  waives all claims
against Landlord whatsoever,  whether for personal injury, property damage, loss
of use of the Premises,  or  otherwise,  due to the  interruption  or failure of
telephone  services to the Premises.  Tenant hereby holds Landlord  harmless and
agrees to indemnify,  protect and defend Landlord from and against any liability
for any damage,  loss or expense due to any failure or interruption of telephone
service to the Premises for any reason.  Tenant  agrees to obtain loss of rental
insurance  adequate  to cover any  damage,  loss or  expense  occasioned  by the
interruption of telephone service.

51.      Intentionally Deleted.

52.      Hazardous Substance Disclosure.

         California law requires  landlords to disclose to tenants the existence
of certain  hazardous  substances.  Accordingly,  the  existence of gasoline and
other  automotive  fluids,  maintenance  fluids,  copy  fluids and other  office
supplies and  equipment,  certain  construction  and finish  materials,  tobacco
smoke,  cosmetics and other personal items,  and asbestos  containing  materials
("ACM"),  must be disclosed.  Gasoline and other automotive  fluids are found in
the parking area of the Building.  Cleaning,  lubricating  and hydraulic  fluids
used in the operation and  maintenance  of the Building are found in the utility
areas of the Building not generally  accessible  to tenants or the public.  Many
Building  occupants use copy machines and printers  with  associated  fluids and
toners, and pens, markers,  inks and office equipment that may contain hazardous
substances.  Certain  adhesives,  paints and other  construction  materials  and
finishes  used in portions of the  Building  may contain  hazardous  substances.
Although

                                       23
<PAGE>

smoking is prohibited in the public areas of the Building, these areas may, from
time to time, be exposed to tobacco smoke.  Building occupants and other persons
entering  the  Building  from  time to time  may use or carry  prescription  and
nonprescription drugs, perfumes,  cosmetics and other toiletries,  and foods and
beverages,  some which may contain hazardous substances.  Certain floor tiles in
the Building may also contain ACM. Landlord has made no special investigation of
the Premises with respect to hazardous substances.

53.      Authority.

         If Tenant is a corporation,  partnership,  trust,  association or other
entity,  Tenant and each person  executing this Lease on behalf of Tenant hereby
covenants  and  warrants  that (a)  Tenant  is duly  incorporated  or  otherwise
established  or  formed  and  validly  existing  under  the laws of its state of
incorporation,  establishment  or formation,  (b) Tenant is duly qualified to do
business in the State of California, (c) Tenant has full corporate, partnership,
trust,  association or other  appropriate power and authority to enter into this
Lease and to perform all of Tenant's obligations hereunder,  and (d) each person
(and all persons if more than one signs)  signing this Lease on behalf of Tenant
is duly and validly authorized to do so.

54.      Execution of Lease.

         The  submission  of this Lease to Tenant or its broker or other  agent,
does not  constitute an offer to Tenant to lease the premises.  This Lease shall
have no force and effect  until (a) it is executed  and  delivered  by Tenant to
Landlord  and (b) it is fully  reviewed  and  executed  by  Landlord;  provided,
however,  that, upon execution of this Lease by Tenant and delivery to Landlord,
such execution and delivery by Tenant shall,  in  consideration  of the time and
expense  incurred  by  Landlord  in  reviewing  the Lease and  Tenant's  credit,
constitute  an offer by  Tenant  to  lease  the  Premises  upon  the  terms  and
conditions  set forth  herein  (which  offer to lease shall be  irrevocable  for
twenty (20) business days following the date of delivery).

55.      Parking.

         Landlord shall make available to Tenant the right to lease its pro-rata
share of parking spaces,  or one per every 3,000 rentable square feet leased, in
the building garage at the prevailing market rate for the building garage.

56.      Generator.

         Landlord  acknowledges  that  Tenant's  operations at the Building will
require a natural gas powered  back-up  generator.  As of the date of this Lease
the parties  have been unable to  determine  the  appropriate  location for such
generator.  Landlord and Tenant shall  negotiate and finalize an agreement  with
respect to the  installation of such generator in the form of Exhibit F attached
hereto on or before December 31, 1999.

57.      Quiet Possession.

         Subject to  Tenant's  full and timely  performance  of all of  Tenant's
obligations  under this Lease and subject to the terms of this Lease,  including
Paragraph  24 -  Subordination,  Tenant shall have the quiet  possession  of the
Premises  throughout  the term of this Lease as against  any persons or entities
lawfully  claiming by, through or under Landlord.

                                       24
<PAGE>

IN WITNESS  WHEREOF  Landlord and Tenant have  executed this Lease as of the day
and year first above written.


Landlord:       300 CALIFORNIA ASSOCIATES, LLC, a California
                limited liability company

By:             /s/ Michael Halper
                --------------------------------

Name:           Michael Halper
                --------------------------------

Title:          Manager
                --------------------------------


Tenant:         T E Network, lnc., a Delaware Corporation


By:             /s/ Erick Hachenburg
                --------------------------------

Name:           Erick Hachenburg
                --------------------------------


Title:          President/CEO
                --------------------------------

                                       25
<PAGE>

                                   EXHIBIT A
                               LEGAL DESCRIPTION


Commonly known as 300 CALIFORNIA STREET, San Francisco, California

The land referred to in this Lease is situated in the State of California,  City
and County of San Francisco, and is described as follows:

Beginning  at the point of  intersection  of the  northerly  line of  California
Street, with the westerly line of Battery Street; running thence northerly along
said westerly line of Battery  Street 124 feet to the southerly  line of Halleck
Street;  thence  westerly along said southerly line of Halleck Street 121 feet 9
inches;  thence at a right angle  southerly  124 feet to the  northerly  line of
California  Street;  thence  easterly  along said  northerly  line of California
Street 121 feet 9 inches to the point of commencement.

Being part of Block No. 37.

Assessor's Lot 2; Block 238




                                       26
<PAGE>

                                   EXHIBIT B
                            DESCRIPTiON OF PREMISES

                                  EIGHTH FLOOR










                             300 California Street
                                   8th Floor











                               [GRAPHIC OMITTED]










                                       27
<PAGE>

                                   EXHIBIT B
                            DESCRIPTION OF PREMISES


                                 SEVENTH FLOOR











                             300 California Street
                                   7th Floor












                               [GRAPHIC OMITTED]











                                       28
<PAGE>

                                   EXHIBIT B
                            DESCRIPTION OF PREMISES

                                  FIFTH FLOOR











                             300 California Street
                                   5th Floor









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                                  EXHIBIT B-I
                       DESCRIPTION OF EXPANSION PREMISES

                                  FIFTH FLOOR












                             300 California Street
                                   5th Floor














                               [GRAPHIC OMITTED]







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                                  EXHIBIT B-2
                            DESCRIPTION OF PREMISES

                                  SIXTH FLOOR










                             300 California Street
                                   6th Floor











                               [GRAPHIC OMITTED]










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                                   EXHIBIT C
                             WORK LETTER AGREEMENT


This Work Letter  Agreement  supplements  that certain lease (the "Lease") dated
and executed  concurrently  herewith by and between 300  California  Associates,
LLC, a California Limited Liability Company ("Landlord"),  and T E Network Inc.,
a Delaware Corporation  ("Tenant"),  with the terms defined in the Lease to have
the same definition where used herein.

This  Agreement  shall  set  forth the  terms  and  conditions  relating  to the
construction of the tenant  improvements  in the Premises,  which Landlord shall
deliver to Tenant in its as-is condition.

1.      TENANT iMPROVEMENTS

        (a)       Tenant  Improvement  Allowance.  Tenant shall be entitled to a
                  one-time tenant improvement allowance (the "Tenant Improvement
                  Allowance")  in the amount of  Thirty-Three and 80/100 Dollars
                  ($33.80) for each rentable square foot of the Initial Premises
                  to be applied toward payment of the tenant  improvement  costs
                  described below (the "Tenant Improvements");  provided that up
                  to Five and 80/100 Dollars ($5.80) per rentable square foot of
                  the Initial  Premises may be applied toward the payment of any
                  fee due Tenant's leasing advisor,  Ernst & Young, arising from
                  Ernst & Young's  representation  of Tenant in connection  with
                  the leasing of the  Premises  ("Broker's  Fees").  In no event
                  shall Landlord be obligated to make disbursements  pursuant to
                  this  Agreement  in a total  amount  which  exceeds the Tenant
                  Improvement Allowance.

                  In  addition,  Tenant  shall be entitled  to a one-time tenant
                  improvement  allowance  in the  amount  of  ($33.40)  for each
                  rentable  square foot of the Expansion  Premises to be applied
                  to the payment of the tenant improvement costs described below
                  (the "Tenant Improvements");  provided that up to Five Dollars
                  and 40/100  ($5.40) per square foot may be applied  toward the
                  payment  of any  fee due  Tenant's  leasing  advisor,  Ernst &
                  Young,  arising from Ernst & Young's  representation of Tenant
                  in  connection  with the  leasing  of the  Expansion  Premises
                  ("Broker's  Fees"). In no event shall Landlord be obligated to
                  make  disbursements  pursuant  to  this  Agreement  in a total
                  amount which exceeds the Tenant Improvement Allowance.

                  Notwithstanding  the  foregoing,   if  Tenant,   breaches  its
                  obligations under Paragraph 12(b) of the Lease with respect to
                  any  portion  of the  Premises,  without  limiting  Landlord's
                  remedies  as set forth  elsewhere  in this  Lease,  the Tenant
                  Improvement  Allowance  shall not apply to such portion of the
                  Premises.

        (b)       Construction  Costs.  All costs and expenses to construct  the
                  Tenant  Improvements  approved by Landlord,  including all fee
                  and expenses for:

        (i)       (a)   architectural/space    planning   services  utilized  by
Landlord in preparation of any space plans;

                  (b)  architects,  engineers and consultants in the preparation
and review of the Construction Plans;

                  (c) labor,  materials,  equipment and fixtures supplied by the
general contractor, its subcontractors and/or materialman;

                  (d) the furnishing and  installation of all HVAC,  electrical,
lighting,  window and floor  coverings,  fire and life safety  control  systems,
plumbing and painting throughout and within the Premises;

                  (e) all fees charged by the City and/or County where  building
is located required for tenant improvement work in the Premises;

                  (f) all costs and  expenses  incurred to comply with all laws,
rules,  regulations or ordinances of any governmental  authority for any work at
the Project in order to construct the Tenant Improvements.

                  The term Construction Costs shall not include any fees, costs,
expenses,  compensation or other consideration  payable to Tenant, or any of its
officers,  directors,  employees or  affiliates,  or the cost of any of Tenant's
furniture, artifacts, trade fixtures, telephone and computer systems and related
facilities, or equipment.


                                       32
<PAGE>

         (ii) Disbursement of Tenant Improvement  Allowance.  Upon completion of
construction  of the Tenant  Improvements  Landlord  shall  disburse  the Tenant
Improvement Allowance for Tenant Improvement Allowance Items, and, to the extent
permitted  under this Lease,  Broker's Fees,  within thirty (30) days of written
request for disbursement.

                  (1)  Disbursement.  Tenant shall provide to Landlord  prior to
disbursement  (i) a request  for  payment  detailing  the work  completed;  (ii)
invoices from all of "Tenant's Agents",  as that term is defined in Section 3 of
this  Agreement,  for labor  rendered and  materials  delivered to the Premises;
(iii) executed  mechanic's lien releases from all of Tenant's Agents which shall
comply with the appropriate provisions, as reasonably determined by Landlord, of
California Civil Code Section 3262(d); and (iv) all other information reasonably
requested by Landlord;  provided,  however,  that if the disbursement request is
solely for  Brokers Fees, Tenant shall provide to Landlord prior to disbursement
(i) a request for payment detailing the fees and the services for which the fees
were incurred,  (ii) invoices from the Brokers,  and (iii) all other information
reasonably requested by Landlord. Thereafter,  Landlord shall deliver a check to
Tenant for the Tenant Improvement  Allowance,  provided that Landlord  does  not
dispute  any request for  payment  based on  noncompliance  of any work with the
"Approved Working Drawings",  as that term is defined in Section 2 below, or due
to any  substandard  work, or for any other reason.  Landlord's  payment of such
amounts  shall not be  deemed  Landlord's  approval  or  acceptance  of the work
furnished of materials supplies as set forth in Tenant's payment request.

                  (2) Other Terms.  Landlord  shall  only be  obligated  to make
disbursements  from the Tenant  Improvement  Allowance  to the extent  costs are
incurred by Tenant for Tenant Improvement Allowance Items.

         (c) Landlord's  Work.  Landlord shall be responsible  for installing in
the Building (but not in the Premises),  at Landlord's sole cost and expense,  a
building flre pump, riser for the Building fire sprinkler system,  and the HVAC,
plumbing and electrical systems.  Notwithstanding the foregoing, Tenant shall be
responsible,  at its sole cost and expense,  for all  sprinkler  floor loops and
branch distribution and any installation of HVAC, plumbing or electrical systems
in or around the  Premises  to the extent  such  portions  of such  systems  are
intended for the primary benefit of the Premises.

         (d) Restrictions on Tenant  Improvements.  Notwithstanding  anything to
the contrary in this exhibit,  the  construction  of the Tenant  Improvements is
subject  to all of the terms and  provisions  of the Lease,  including,  without
limitation, Paragraph 12(b).

2.      CONSTRUCTION DRAWINGS

         (a) Selection of Drawings.  Tenant shall retain the architect  with the
prior  approval  of  Landlord  (the  "Architect")  to prepare  the  Construction
Drawings.  Tenant  shall  retain  the  engineering  consultants  with the  prior
approval  of Landlord  (the  "Engineers")  to prepare all plans and  engineering
working drawings relating to the structural,  mechanical,  electrical, plumbing,
HVAC, life safety, and sprinkler work in the Premises. The plans and drawings to
be prepared by Architect and the Engineers hereunder shall be known collectively
as the "Construction  Drawings".  All Construction  Drawings shall be subject to
Landlord's approval,  which approval shall not be unreasonably withheld.  Tenant
and Architect shall verify, in the field, the dimensions and conditions as shown
on the relevant  portions of the base building  plans,  and Tenant and Architect
shall  be  solely   responsible  for  the  same,  and  Landlord  shall  have  no
responsibility  in connection  therewith.  Landlord's review of the Construction
Drawings as set forth in this Section 2, shall be for its sole purpose and shall
not imply  Landlord's  review of the same,  or  obligate  Landlord to review the
same, for quality,  design, code compliance or other like matters,  Accordingly,
notwithstanding  that any Construction  Drawings are reviewed by Landlord or its
space planner,  architect,  engineers and consultants,  and  notwithstanding any
advice or  assistance which may be rendered to Tenant by Landlord or  Landlord's
architect,  engineers,  and  consultants,   Landlord  shall  have  no  liability
whatsoever  in  connection  therewith  and  shall  not be  responsible  for  any
omissions  or  errors  contained  in the  Construction  Drawings,  and  Tenant's
indemnity set forth in Section 18 of this Lease shall  specifically apply to the
Construction Drawings.

         (b) Final Space Plan. Tenant shall supply landlord with four (4) copies
signed by Tenant of its final space plan for the Premises.  The final space plan
(the "Final Space Plan") shall include a layout and  designation of all offices,
rooms and other partitioning,  their intended use, and equipment to be contained
therein.  Landlord  shall  advise  Tenant  within five (5)  business  days after
Landlord's  receipt  of the Final  Space  Plan for the  Premises  if the same is
approved, such approval not to be unreasonably withheld.


                                       33
<PAGE>

         (c)  Final  Working  Drawings.  After  the  Final  Space  Plan has been
approved by Landlord,  Tenant shall supply the Engineers with a complete listing
of standard and  nonstandard  equipment and  specifications  including,  without
limitation, B.T.U. calculations,  electrical requirements and special electrical
receptacle  requirements  for the  Premises,  to enable  the  Engineers  and the
Architect  to complete  the "Final  Working  Drawings"  (as that term is defined
below) in the manner as set forth  below.  Upon the  approval of the Final Space
Plan by Landlord and Tenant,  Tenant shall  promptly cause the Architect and the
Engineers  to  complete  the  architectural  and  engineering  drawings  for the
Premises,  and Architect shall compile a fully coordinated set of architectural,
structural,  mechanical,  electrical,  and plumbing  working  drawings in a form
which is complete to allow  subcontractors  to bid on the work and to obtain all
applicable permits (collectively, the "Final Working Drawings") and shall submit
the same to Landlord for Landlord's approval.  Tenant shall supply Landlord with
four (4) copies signed by Tenant of such Final Working Drawings.  Landlord shall
advise  Tenant  within five (5) business  days after  Landlord's  receipt of the
Final Working  Drawings for the Premises if the same is approved,  such approval
not to be unreasonably withheld.

         (d) Approved  Working  Drawings.  The Final Working  Drawings  shall be
approved by Landlord (the "Approved Working Drawings") prior to the commencement
of  construction  of the Premises by Tenant.  After  approval by Landlord of the
Final  Working  Drawings,   Tenant  hereby  agrees  that  neither  Landlord  nor
Landlord's consultants shall be responsible for obtaining any building permit or
certificate  of occupancy for the Premises and that  obtaining the same shall be
Tenant's responsibility;  provided,  however, that Landlord shall cooperate with
tenant in executing permit  applications  and performing other  ministerial acts
reasonably  necessary to enable Tenant to obtain any such permit or  certificate
of occupancy.  No changes,  modifications or alternation in the Approved Working
Drawings  may be made  without  the prior  written  consent of  Landlord,  which
consent may not be unreasonably withheld.

         (e) Changes.  No material changes,  modifications or alterations in the
Plans and Specifications or in the Tenant Improvements  ("Change") shall be made
by Tenant without the prior written consent of Landlord, which consent shall not
be unreasonably  withheld,  conditioned or delayed.  Any request by Tenant for a
Change shall be in writing and shall be accompanied by all information necessary
to clearly  identify  and explain the  proposed  Change.  Landlord  shall notify
Tenant in writing of Landlord's  approval of  disapproval  of such Change within
two (2) business days after Landlord's receipt of same. If Landlord  disapproves
a change,  Tenant shall make the changes necessary and shall resubmit the Change
to Landlord,  which Landlord shall approve or disapprove within two (2) business
days after  Landlord  receives  the  revised  Change.  This  procedure  shall be
repeated until the Change is finally  approved by Landlord and written  approval
has been  delivered to and  received by Tenant.  Tenant shall bear the sole cost
and expense of Landlord's review and approval of any Change.

3.      CONSTRUCTION OF THE TENANT IMPROVEMENTS

         (a) Tenant's Selection of Contractors.

                  (i) The Contractor.  A general contractor shall be retained by
Tenant  to  construct   the  Tenant   Improvements.   Such  general   contractor
("Contractor")  shall be subject to the  approval of  Landlord,  which  approval
shall not be unreasonably withheld.

                  (ii)   Tenant's   Agents.   All   subcontractors,    laborers,
materialmen,  and  suppliers  used by  Tenant  (such  subcontractors,  laborers,
materialmen,  and  suppliers,  and the  Contractor to be known  collectively  as
"Tenant's Agents".

         (b) Construction of Tenant Improvements by Tenant's Agents.

                  (i) Tenant's Agents.

                           (1)  Indemnity   Landlord's  General  Conditions  for
Tenant's  Agents and Tenant  Improvement  Work.  Tenant's and  Tenant's  Agent's
construction of the Tenant Improvements shall comply with the following: (i) the
Tenant  Improvements shall be constructed in strict accordance with the Approved
Working  Drawings;  (ii)  Tenant's  Agents  shall  submit  schedules of all work
relating to the Tenant's Improvements to Contractor and Contractor shall, within
five (5) business days of receipt thereof, inform Tenant's Agents of any changes
which are necessary thereto,  and Tenant's Agents shall adhere to such corrected
schedule;  and (iii)  Tenant  shall  abide by all rules  made by  Landlord  with
respect to the storage of materials,  coordination  of work with the contractors
of other tenants of the Building,  and any other matter in connection  with this
Agreement,  including,  without  limitation,  the  construction  of  the  Tenant
Improvements.

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<PAGE>

         (2) Indemnity. Tenant's indemnity of Landlord as set forth in Section 3
of this Work  Letter  Agreement  shall also  apply  with  respect to any and all
costs, losses, damages,  injuries, and liabilities related in any way to any act
or omission of Tenant or Tenant's Agents or any directly or indirectly  employed
by any of them, or in connection with Tenant's  nonpayment of any amount arising
out of the Tenant Improvements and/or Tenant's disapproval of all or any portion
of any request for payment. Such indemnity by Tenant, as set forth in Section 18
of this  Lease  shall also  apply  with  respect  to any and all costs,  losses,
damages,  injuries and liabilities related in any way to Landlord's  performance
of any ministerial  acts  reasonably  necessary (i) to permit Tenant to complete
the Tenant Improvements, and (ii) to enable Tenant to obtain any building permit
or certificate of occupancy for the Premises.

         (3)Requirements  of  Tenant's  Agents.  Each of Tenant's  Agents  shall
guarantee  to Tenant and for the  benefit of  Landlord  that the  portion of the
Tenant Improvements,  for which it is responsible shall be free from any defects
in workmanship and materials for a period of not less than one (1) year from the
date of completion thereof. Each of Tenant's Agents shall be responsible for the
replacement or repair,  without additional charge, of all work done or furnished
in accordance with its contract that shall become  defective within one (1) year
after  the  later to  occur of (i)  completion  of the  work  performed  by such
contractor or subcontractors  and (ii) the Commencement  Date. The correction of
such work shall include,  without additional charge, all additional expenses and
damages  incurred in connection  with such removal or  replacement of all or any
part of the Tenant  Improvements,  and/or the Building  and/or common areas that
may be damaged or disturbed  thereby.  All such  warranties  or guarantees as to
materials or workmanship of or with respect to the Tenant  Improvements shall be
contained  in the  Contract or  subcontract  and shall be written such that such
guarantees or warranties shall inure to the benefit of both Landlord and Tenant,
as their  respective  interests  may  appear,  and can be  directly  enforced by
either.  Tenant  covenants to give Landlord any  assignment or other  assurances
which may be necessary to effect such right of direct enforcement.

         (4) Insurance Requirements.

                  a) General  Coverages.  All of  Tenant's  Agents  shall  carry
worker's compensations  insurance covering all of the respective employees,  and
shall also carry public liability insurance, including property damage, all with
limits,  in form and with  companies  as are required to be carried by Tenant as
set forth in Section 19 of this Lease.

                  b) Special Coverages. Tenant shall carry "Building's All Risk"
insurance in an amount  approved by Landlord  covering the  construction  of the
Tenant Improvements,  and such other insurance as Landlord may require, it being
understood  and agreed that the Tenant  Improvements  shall be insured by Tenant
pursuant to Section 19 of this Lease immediately upon completion  thereof.  Such
insurance  shall  be  in  amounts  and  shall  include  such  extended  coverage
endorsements  as may be  reasonably  required  by  Landlord  including,  but not
limited to, the  requirement  that all of  Tenant's  Agents  shall carry  excess
liability  and Products and  Completed  Operation  Coverage  insurance,  each in
amounts  not less than  $500.00 per incident,  $2,000,000  in aggregate,  and in
form and with  companies as are required to be carried by Tenant as set forth in
Section 19 of this Lease.

                  c)  General  Terms.  Certificates  for all  insurance  carried
pursuant  to  this  Section  3  shall  be  delivered  to  Landlord   before  the
commencement  of  construction  of  the  Tenant   Improvements  and  before  the
Contractor's  equipment is moved onto the site.  All such  policies of insurance
must contain a provision that the company writing said policy with give Landlord
thirty  (30)  days  prior  written  notice of any  cancellation  or Lapse of the
effective date or any reduction in the amounts of such  insurance.  In the event
that the tenant  Improvements  are damaged by any cause during the course of the
construction thereof,  Tenant shall immediately repair the same at Tenant's sole
cost and expense.  Tenant's Agents shall maintain all of the foregoing insurance
coverage in force until the Tenant Improvements are fully completed and accepted
by Landlord,  except for any Products and Completed Operation Coverage insurance
required by Landlord,  which is to be  maintained  for ten (10) years  following
completion  of the work and  acceptance  by Landlord  and tenant.  All  policies
carried  under  this  Section  3 shall  insure  Landlord  and  Tenant,  as their
interests may appear, as well as Contractor and Tenant's Agents.  All insurance,
except  Worker's  Compensation,  maintained  by tenant's  Agents shall  preclude
subrogation  claims by the  insurer  against  anyone  insured  thereunder.  Such
insurance  shall  provide that it is primary  insurance as respects the Landlord
and  that  any  other   insurance   maintained   by   Landlord   is  excess  and
noncontributing with the insurance required hereunder.  The requirements for the
foregoing  insurance shall not derogate form the provisions for  indemnification
of Landlord by Tenant under  Section 3 of this  Agreement.  Landlord may, in its
discretion,  require  Tenant  to  obtain  a lien  and  completion  bond  or some
alternate form of

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<PAGE>

security  satisfactory  to Landlord in an amount  sufficient  to ensure the lien
free completion of the tenant Improvements and naming Landlord as a co-obligee.

         (iii) Governmental Compliance.  The Tenant Improvements shall comply in
all respects with the following:  (1) the building code and other state, federal
city or quasi-governmental laws, codes, ordinances and regulations,  as each may
apply  according to the rulings of the  controlling  public  official,  agent or
other person;  (2) applicable  standards of the American  Insurance  Association
(formerly,  the National Board of Fire Underwriters) and the National Electrical
Code; and (3) building material manufacturer's specifications.


         (iv)  Inspection by Landlord.  Landlord shall have the right to inspect
the Tenant Improvements at all times, provided; however, that Landlord's failure
to inspect the Tenant  Improvements shall in no event constitute a waiver of any
of Landlord's  rights  hereunder nor shall  Landlord's  inspection of the Tenant
Improvements   constitute  andlord's  approval  of  the  same.  Should  Landlord
disapprove any portion of the Tenant Improvements,  Landlord shall notify Tenant
in writing of such  disapproval  and shall  specify the items  disapproved.  Any
defects  or  deviations  in,  and/or  disapproval  by  Landlord  of  the  Tenant
Improvements  shall be rectified  by Tenant at no expense to Landlord;  provided
however, that in the event Landlord determines that a defect or deviation exists
or  disapproves  of any  matter in  connection  with any  portion  of the Tenant
Improvements  and such defect,  deviation or matter might  adversely  affect the
mechanical,  electrical,  plumbing, heating, ventilation and air-conditioning or
life-safety systems of the Building, the structure or exterior appearance of the
Building  or any other  tenant's  use of such other  tenant's  leased  premises,
Landlord may take such action as Landlord deems  necessary,  at Tenant's expense
and without  incurring  any  liability on  Landlord's  part, to correct any such
defect,  deviation  and/or matter,  including  without  limitation,  causing the
cessation of performance of the  construction of the Tenant  Improvements  until
such time as the defect,  deviation  and/or  matter is corrected  to  Landlord's
satisfaction.

         (c) Notice of Completion:  Copy of Record Set of Plans. Within ten (10)
days after the completion of  construction  of the tenant  Improvements,  Tenant
shall cause a Notice of  Completion to be recorded in the office of the Recorder
of the County of San Francisco in accordance with Section 3093 of the Civil Code
of the State of California or any  successor  statute,  and shall furnish a copy
thereof to landlord upon such  recordation.  If Tenant fails to do so,  Landlord
may  execute  and file the same on behalf of Tenant as  Tenant's  agent for such
purpose,  at Tenant's sole cost and expense.  At the conclusion of construction,
(i)  Tenant  shall  cause the  Architect  and the  Contractor  (A) to update the
Approved  Working  Drawings as  necessary  to reflect  all  changes  made to the
Approved Working  Drawings during the course of construction,  (B) to certify to
the best of their knowledge that the "record set" of mylar as-built drawings are
true  and  correct,   which   certification  shall  survive  the  expiration  or
termination of this Lease, and (C) to deliver to Landlord two (2) sets of copies
of such  record  set of  drawings  within  (90)  days  following  issuance  of a
certificate  of occupancy  for the  Premises  and (ii) Tenant  shall  deliver to
Landlord  a copy  of all  warranties,  guaranties,  and  operating  manuals  and
information  relating  to  the  improvements,  equipment,  and  systems  in  the
Premises.

4.      MISCELLANEOUS


         (a)  Time  is of  the  Essence  in  This  Agreement.  Unless  otherwise
indicated, all  references  herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval in timely disapproved by Landlord,
the  procedure  for  preparation  of the document and approval  thereof shall be
repeated until the document is approved by Landlord.

         (b)  Tenant's  Lease  Default.  Notwithstanding  any  provision  to the
contrary  contained in the Lease, if an Event of Default as described in Section
27 of the Lease or this  Agreement  has  occurred  at any time on or before  the
substantial  completion  of the  Premises,  then (i) in  additional to all other
rights and remedies granted to Landlord  pursuant to this Lease,  Landlord shall
have  the  right  to  withhold  payment  of  all or any  portion  of the  Tenant
Improvement  Allowance  and/or  Landlord  may  cause  Contractor  to  cease  the
construction of the Premises (in which case, Tenant shall be responsible for any
delay in the substantial completion of the Premises (in which case, Tenant shall
be  responsible  for any delay in the  substantial  completion  of the  Premises
caused by such work stoppage), and (ii) all other obligation s of Landlord under
the terms of this Agreement shall be forgiven until such time as such default is
cured  pursuant  to the  terms of this  Lease (in which  case,  Tenant  shall be
responsible for any delay in the  substantial  completion of the Premises caused
by such inaction by Landlord).

         (c) Tenant's Agents. All  subcontractors,  laborers,  materialmen,  and
suppliers  retained  directly by Tenant shall  conduct  their  activities in and
around the Premises, in a harmonious relationship with all other subcontractors,
laborers, materialmen and suppliers at the Premises,

                                       36
<PAGE>

Building,  and, if  necessary,  Tenant  shall employ union labor to achieve such
harmonious relations.

         (d) Hazardous Materials. The construction of the Tenant lmprovements or
Tenant's move into the Premises will not involve the use of or disturb hazardous
materials or substances existing in the Premises.

         (e) Liens. Tenant shall keep the Premises and the Building and the land
upon which the Building is situated  free from any liens as described in Section
15 of the Lease.

                                       37
<PAGE>

                                   EXHIBIT D
                     RULES AND REGULATIONS FOR THE BUILDING

1. Except as provided or  required  by  Landlord  in  accordance  with  building
standards,  no sign, placard,  picture,  advertisement,  name or notice shall be
inscribed, displayed, printed, painted or affixed by Tenant on or to any part of
the  Building or exterior  of the  Premises  leased to Tenants or to the door or
doors  thereof  without  the  written  consent of Landlord  first  obtained  and
Landlord  shall  have the  right to  remove  any such  sign,  placard,  picture,
advertisement, name or notice without notice to and at the expense of Tenant.

2. Except as provided or  required  by  Landlord  in  accordance  with  Building
standards,  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.

3. The bulletin  board or directory of the building  shall be used primarily for
display of the name and location of Tenants and  Landlord  reserves the right to
exclude any other names therefrom,  to limit the number of names associated with
Tenants to be placed thereon and to charge for names  associated with Tenants to
be placed thereon at rates applicable to all Tenants.

4. The sidewalks, halls, passages, exits, entrances,  elevators and stairways of
the Building  shall not be obstructed by Tenants or used by them for any purpose
other than for ingress to and egress from their respective Premises.  The halls,
passages,  exits,  entrances,  elevators,  stairways,  balconies and roof of the
Building  are not for the use of the  general  public and  Landlord in all cases
reserves the right to control the same and prevent access thereto by all persons
whose presence, in the judgment of the Landlord, is or may be prejudicial to the
safety,  character,  reputation  or  interests  of the Building and its Tenants;
provided  however,  that Landlord  shall not prevent such access to persons with
whom  Tenants deal in the  ordinary  course of business  unless such persons are
engaged in illegal activities.  No person shall go upon the roof of the Building
unless expressly so authorized by Landlord.

5. Tenants shall not alter any lock nor install any new or  additional  locks or
any bolts on any  interior or exterior  door of any  Premises  leased to Tenant,
except as reasonably required by Tenant and reasonably approved by Landlord, but
in no event  leaving  Landlord  without  keys or codes  required  for  emergency
access.

6. The doors,  windows,  light fixtures and any lights or skylights that reflect
or admit light into halls or other places of the  Building  shall not be covered
or  obstructed.  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 thrown or
placed therein.  The expense of any breakage,  stoppage or damage resulting from
the violation of this rule shall be borne by the Tenant who, or whose  employees
or invitees, cause such expense.

7. Tenants shall not mark, drive nails, screw or drill into the walls,  woodwork
or plaster or in any way deface the Building or any  Premises  leased to Tenant,
except to mount standard office artwork or shelving.

8.  Furniture,  freight or equipment of every kind shall be moved into or out of
the building only at such times and in such manner as Landlord shall  designate.
Landlord may prescribe and limit the weight,  size and position of all equipment
to be used by Tenants,  other than standard office desks,  chairs and tables and
portable office  machines.  Safes and other heavy equipment shall, if considered
necessary by Landlord,  stand on wood strips of such thickness as Landlord deems
necessary to distribute properly the weight thereof.  All damage to the building
or Premises  occupied by Tenants caused by moving or maintaining any property of
a Tenant shall be repaired at the expense of such Tenant.

9. No Tenant  shall  employ any  person,  other  than the  janitor  provided  by
Landlord,  for the  purposes of cleaning  the  Premises  occupied by such Tenant
unless otherwise agreed to by Landlord, trade fixtures excepted. Except with the
written consent of Landlord,  no person shall be permitted to enter the Building
for the purpose of cleaning the same.  Tenants  shall not cause any  unnecessary
labor by  carelessness  or  indifference  in the  preservation of good order and
cleanliness.  Landlord  shall  not be  responsible  to any  Tenant  for  loss of
property on the Premises,  however occurring,  or for any damage to the property
of any Tenant caused by the employees or independent  contractors of Landlord or
by any other  person.  Janitor  service  will not be  furnished  when  rooms are
occupied  during the regular  hours when  janitor  service is  provided.  Window
cleaning  shall be done only at the regular and  customary  times  determined by
Landlord for such  services.

                                       38
<PAGE>

10. No Tenant  shall  sweep or throw or permit to be swept or thrown any dirt or
other  substance  into any of the  corridors,  halls or  elevators or out of the
doors or stairways of the Building; use or keep or permit to be used or kept any
foul or noxious gas or substance; permit or suffer the Premises occupied by such
Tenant to be occupied or used in a manner offensive or objectionable to Landlord
or other Tenants by reason of noise,  odors or vibrations;  interfere in any way
with other Tenants or persons having business in the Building;  or bring or keep
or permit to be brought or kept in the Building any animal life form, other than
human, except seeing-eye dogs when in the company of their masters.

11.  No  cooking  shall be done or  permitted  by  Tenants  in their  respective
Premises,  nor shall  Premises  occupied  by Tenants be used for the  storage of
merchandise, washing clothes, lodging, or any improper, objectionable or immoral
purposes.

12. No Tenant shall use or keep in the  Premises or the  Building any  kerosene,
gasoline or  inflammable  or  combustible  fluid or material  other than limited
quantities  thereof  reasonably  necessary for the operation or  maintenance  of
customary office equipment,  or, without Landlord's prior written approval,  use
any method of heating or air-conditioning  other than that supplied by Landlord.
No Tenant shall use or keep or permit to be used or kept any foul or noxious gas
or substance in the Premises, or permit or suffer 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,  or interfere in any way
with other Tenants or those having business therein. Tenant must comply with any
government  imposed codes and  regulations  concerning the use or storage of any
substances on the Premises.

13. No boring or  cutting  for  telephone  or  electric  wires  shall be allowed
without the consent of Landlord and any such wires permitted shall be introduced
at the  place  and  in  the  manner  described  by  Landlord.  The  location  of
telephones,  speakers,  fire extinguisher and all other office equipment affixed
to Premises  occupied by Tenants  shall be subject to the  approval of Landlord.
Each Tenant shall pay all expenses  incurred in connection with the installation
of  its  equipment,   including  any  telephone  and  electricity   distribution
equipment.

14. Upon termination of occupancy of the Building,  each Tenant shall deliver to
Landlord all keys furnished by Landlord,  and any reproductions  thereof made by
or at the  direction  of such  Tenant,  and in the  event  of  loss of any  keys
furnished to Tenant shall pay Landlord therefor.

15. No Tenant shall affix any floor covering in any manner except as approved by
the Landlord.  The expense of repairing any damage caused by removal of any such
floor  covering  shall be borne by the Tenant by whom, or by whose  contractors,
employees or invitees, the damage shall have been caused.

16. No mail, furniture, packages, supplies, equipment, merchandise or deliveries
of any kind  will be  received  in the  building  or  carried  up or down in the
elevators except between such hours and in such elevators as shall be designated
by Landlord.

17. On Saturdays,  Sundays and legal holidays and between the hours of 6:00 p.m.
and 8:00 am.,  access to the Building may be refused  unless the person  seeking
access is known to the person  charged  with  responsibility  for the safety and
protection of the Building and has a pass or is properly  identified by Landlord
or Tenant.  In no case shall  Landlord  be liable for any loss or damage for any
error with respect to the  admission  to or  exclusion  from the Building of any
person. In case of invasion, mob, riot, public excitement or other commotion and
at such times as Landlord  deems  necessary for the safety and protection of the
Building,  its Tenants and all property located  therein,  Landlord may prohibit
and prevent  access to the Building by all persons by any means  Landlord  deems
appropriate.

18. Each Tenant shall see that the exterior doors of its Premises are closed and
securely  locked on Sundays and legal  holidays  and not later than 6:00 p.m. of
each other day each Tenant shall  exercise  extraordinary  care and caution that
all water  faucets or water  apparatus are entirely shut off each day before its
Premises are left  unoccupied and that all  electricity or gas shall likewise be
carefully  shut off so as to  prevent  waste or damage to  Landlord  or to other
Tenants of the Building.

19.  Landlord  may  exclude or expel from the  Building  any person  who, in the
judgment of Landlord,  is intoxicated or under the influence of liquor or drugs,
or who  shall in any  manner  do any act in  violation  of any of the  rules and
regulations of the Building.

                                       39
<PAGE>

20. The  requirements  of Tenants will be attended to only upon  application  to
Landlord at the office of the Building.  Employees of Landlord shall not perform
any work outside of their regular duties unless under special  instructions from
Landlord,  and no  employee  of  Landlord  shall be required to admit any person
(Tenant or otherwise) to any Premises in the Building.

21. No  vending  or food or  beverage  dispensing  machine  or  machines  of any
description  shall be installed,  maintained or operated upon any Premise in the
Building without the written permission of the Landlord.

22. Landlord,  without notice and without  liability to any Tenant,  at any time
may change the name or the street  address of the Building,  after prior written
notice to Tenant at least thirty (30) days in advance.

23.  The word  "Building"  as used in these  rules  and  regulations  means  the
Building  of which a part of the  Premises  are leased  pursuant to the Lease to
which these rules and regulations  are attached.  Each Tenant shall be liable to
Landlord and to each other Tenant of the Building for any loss,  cost,  expense,
damage or  liability,  including  attorneys'  fees,  caused or occasioned by the
failure of such first named  Tenant to comply  with these  rules,  but  Landlord
shall  have no  liability  for such  failure or for  failing or being  unable to
enforce  compliance  therewith  by any Tenant and such  failure by  Landlord  or
noncompliance  by any other Tenant shall not be a ground for  termination of the
Lease  to  which  these  rules  and  regulations  are  attached  by  the  Tenant
thereunder.

24. Intentionally Deleted.

25. Each Tenant shall  maintain  the portions of its Premises  which are visible
from the outside of the  Building or from  hallways or other public areas of the
Building, in a neat, clean and orderly condition.

26. No Tenant  shall  tamper with or attempt to adjust the  temperature  control
thermostats in its Premises.  Landlord shall adjust such thermostats as required
to maintain heat and air-conditioning at the Building standard temperature.

27. All requests for air-conditioning or heating during hours when such services
are not  normally  furnished  by Landlord  must be  submitted  in writing to the
Building  management  office by 2:00 p.m. on the preceding  Thursday for weekend
service. and by 9:00 am. on the preceding business day for holiday service.

28. No Tenant shall place any items  whatsoever  on the roof or balcony areas of
the Building without prior written consent of Landlord.

29.  No  curtains,   draperies,  blinds,  shutters,  shades,  screens  or  other
coverings,  hangings or decorations  shall be attached to, hung or placed in, or
used in connection with any window of the Building without prior written consent
of Landlord.  In any event,  with the prior  written  consent of Landlord,  such
items shall be installed on the office side of the  Landlord's  standard  window
covering and shall in no way be visible from the exterior of the Building.

30. No Tenant shall obtain or use in the Premises  ice,  drinking  water,  food,
beverage,  towel or other similar services,  except at such reasonable hours and
under reasonable regulations as may be fixed by the Landlord.

31. Except with the prior written consent of Landlord,  no Tenant shall sell, or
permit the sale at retail, of newspapers, magazines, periodicals, tickets or any
other goods or  merchandise  to the general  public in or on the  Premises,  nor
shall any Tenant  carry on, or permit or allow any  employee or other  person to
carry on, the business of stenography,  notary,  typewriting or similar business
in or from the  Premises  for the service or  accommodation  of occupants of any
other portion of the Building,  nor shall the Premises of any Tenant be used for
manufacturing  of  any  kind,  or any  business  or  activity  other  than  that
specifically provided for in such Tenant's Lease.

32. No Tenant shall  install any radio or  television  antenna,  loudspeaker  or
other device on the roof or exterior walls of the Building.

33.  There  shall  not be used  in any  space,  or in the  public  halls  of the
Building,  either by any Tenant or others, any hand trucks except those equipped
with rubber tires and side guards or such other material  handling  equipment as
Landlord  may  approve.  No other  vehicles  of any kind shall be brought by any
Tenant into the Building or kept in or about the Premises.

                                       40
<PAGE>

34. Each Tenant shall store all its trash and garbage  within its  Premises.  No
material  shall be placed in the trash boxes or  receptacles if such material is
of such  nature that it may not be disposed  of in the  ordinary  and  customary
manner  of  removing  and  disposing  of trash  and  garbage  in the City of San
Francisco  without  being in violation of any law or  ordinance  governing  such
disposal.  All garbage and refuse disposal shall be made only through  entryways
and  elevators  provided  for such  purpose and at such times as Landlord  shall
designate.

35. Canvassing, peddling, soliciting, and distribution of handbills or any other
written materials in or about the Building are prohibited, and each Tenant shall
cooperate to prevent same.

36. While in the Building,  Tenant's  contractors  shall be subject to and under
the  control  and  direction  of the  manager of the  Building  or the  Building
Engineer  (but  not as an agent or  employee  of  Landlord  or said  manager  or
engineer).

37.  Landlord may waive any one or more of these Rules and  Regulations for  the
benefit of any  particular  Tenant or  Tenants,  but no such  waiver by Landlord
shall be construed as a waiver of such Rules and Regulations  against any or all
of the Tenants of the Building.

38. 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.

39.  Landlord  reserves  the  right to make  such  other  reasonable  rules  and
regulations  as in its  judgment may from time to time be needed for the safety,
care and  cleanliness  of the  Building and for the  preservation  of good order
therein.

40.  Landlord  reserves the right to restrict the hours that Tenant may move its
equipment,  furniture or other personal property. As a general rule, Tenants may
only stage  move-in and move-out of its suite after  building  hours.

                                       41
<PAGE>

                                    EXHIBIT E
                         Approved Letter of Credit Form


                          [Letterhead of Issuing Bank]

  [must be a Bank whose location, credit and practices Landlord has approved]

RE: IRREVOCABLE COMMERCIAL LETTER OF CREDIT NO. ________

TO:     300 California Associates LLC ("Landlord")
        1000 Sansome Street, Suite 380
        San Francisco, CA 94104
        Attn:   Michael Halper

Gentlemen:

We hereby issue our Irrevocable  Commercial  Letter of Credit in your favor, for
the   account   of   _______________________   ("Tenant"),   in  the  amount  of
____________________________ Dollars ($_____________).  This amount is available
to you on  presentation of your sight draft drawn upon us referring to the above
letter of credit number,  date and amount being drawn hereunder,  accompanied by
the signed statement of you or your authorized  agent,  _________________,  that
the amount  drawn  hereunder  is being drawn  pursuant to the terms of the Lease
Agreement,  dated as of  ____________________  by and between Tenant, as tenant,
and    Landlord,    as    landlord,    for   certain    premises    located   at
________________________________, San Francisco, California (the "Lease").

Any   draft   presented   for   payment   must  be   presented   on  or   before
__________________ [term must be for at least one year], the date this Letter of
Credit expires. Partial drawings are permitted.

If you sell or otherwise transfer any interest in the "Premises,"  "Building" or
"Project" (as defined in the Lease), in the land upon which the same is located,
in the Lease, or in Landlord (including consolidations,  mergers or other entity
changes),  you shall have the right to  transfer  this  Letter of Credit to your
transferee(s), successors or assigns.

We hereby certify that this is an unconditional and irrevocable Letter of Credit
and agree that a draft drawn under and in compliance  with the terms hereof will
be honored upon presentation at our office at San Francisco, California.

Except to the extent  inconsistent  with the  express  provisions  hereof,  this
Letter of Credit is subject to and governed by Uniform  Customs and Practice for
Documentary   Credits  (1993   Revision)   International   Chamber  of  Commerce
publication number 500.

                         [Name of Bank]

                         ___________________________

                                       42
<PAGE>

                                    EXHIBIT F

                          Form of Generator Agreement

                          GENERATOR LICENSE AGREEMENT

         THIS GENERATOR LICENSE  AGREEMENT (this  "Agreement") is made as of the
______ day of __________,  1999, by and between 300 CALIFORNIA  ASSOCIATES,  LLC
("Landlord"),  a California limited liability company, and T E NETWORK,  INC., a
Delaware Corporation ("Tenant").

                                    RECITALS

         A.  Landlord and Tenant have entered  into that certain  Office  Lease,
dated as of  _______________,  1999 (the "Lease").  All  capitalized  terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Lease.

         B.  Under  the  terms of the  Lease,  Landlord  and  Tenant  agreed  to
negotiate  and  execute a license  agreement  with  respects  installation  of a
generator in or about the Building.

                                   AGREEMENT

         NOW,  THEREFORE,  in consideration of the foregoing  recitals and other
good and valuable  consideration,  the adequacy of which is hereby  acknowledge,
Landlord and Tenant agree as follows:

         1. Grant of License.  Landlord hereby grants to Tenant the nonexciusive
right to use  approximately  __________  square feet of space in the basement or
roof  areas of the  Building  at the  location  specified  in Exhibit F attached
hereto (the "Licensed  Area") for the purpose of installing,  operating,  using,
maintaining and repairing a natural gas powered backup electrical  generator for
the sole  purpose of powering  Tenant's  data  communications  equipment  in the
Premises on a short-term basis during power outages  affecting the building,  as
such equipment is described in Exhibit G attached hereto (the  "Equipment")  and
including  the right to use certain core areas of the Building as  designated by
Landlord and necessary to connect the  Equipment to the  Premises.  Landlord may
designate the location or locations of all the Equipment in its sole discretion.
Tenant shall be entitled to use the  Licensed  Area only during the term of this
Lease.  Landlord  retains the right to grant  similar or  additional  rights and
access to others.  The Licensed  Area shall be deemed a part of the Premises for
all purposes under the Lease, provided that the rent for the Licensed Area shall
be the amount set forth in Section 2, below, and Tenant shall not be entitled to
any tenant improvement allowance with respect to the Licensed Area.

         2. License  Fee.  Tenant shall pay to Landlord on the first day of each
calendar  month during the term of this Lease,  a license fee of  $_____________
per month (the  "License  Fee").  The License Fee shall be payable to  Landlord,
without  demand,  setoff or deduction at the address  specified and on the terms
stated in the Lease and shall be treated as rent under the Lease.

         3.  Use.  The  Licensed  Area  may be  used  by  Tenant  only  for  the
installation,  operation, use, maintenance,  repair,  replacement and removal of
the Equipment, all at Tenant's sole risk and expense and in full compliance with
all  applicable  Laws,  which  Equipment  shall be used only in the  conduct  of
Tenant's  business in the Premises.  Tenant's  right to use the Licensed Area is
personal  to Tenant and may not be  separately  assigned  or  sublet,  except in
connection  with an assignment  of the Lease or sublease of the entire  Premises
consented to by  Landlord.  Notwithstanding  any other  provision of this Lease,
Tenant  shall not  begin  using  the  Equipment  until  Landlord  is  completely
satisfied,  in its  sole  discretion,  that  Tenant's  use will  not  cause  any
interference  as  described  in  subsection  4,  below,  and if that  cannot  be
established  to Landlord s  satisfaction,  Tenant's  right to the Licensed  Area
shall terminate effective upon Landlord's written notice to Tenant.

         4. No  Interference.  Tenant's use of the Licensed  Area and  Equipment
shall not interfere in any manner with Landlord's or any tenant's, occupant's or
licensee's  use or  activities in the Building and shall not damage or interfere
with any  facilities or equipment of any type installed by Landlord or any other
person or entity,  including  without  limitation,  the Building systems and any
satellite dishes, antenna, computer or other devices or systems installed at the
Property.   Tenant  agrees,   warrants  and  represents  that  should  any  such
interference occur,

                                       43
<PAGE>

it shall take whatever  steps are required to correct such  interference  within
two (2) business days after  receiving  written  notice  thereof from  Landlord.
Tenant's failure to promptly correct any such interference, as set forth herein,
shall  constitute an Event of Default and shall entitle  Landlord to correct the
cause of the  interference,  including turning off the utilities to the Licensed
Area, and to charge Tenant with all costs so incurred.

         5. Condition and Installation.  Tenant agrees that the Licensed Area is
being  delivered  to it in its AS IS and WHERE IS  condition  and that  Landlord
shall have no obligation to modify or install any  improvements  in the Licensed
Area.  Prior to installing any of the Equipment or constructing any improvements
in  the  Licensed  Area,   Tenant  shall  provide   complete,   detailed  plans,
specifications  and construction  drawings  ("Plans") to Landlord for its review
and approval.  Landlord shall have the right to require reasonable modifications
and impose reasonable conditions on the Plans; provided,  however, that Landlord
shall have the absolute right, in its sole discretion, to require any changes or
impose any conditions on the Plans  (including  without  limitation the right to
require  which  contractors  must be used) to the  extent  the Plans  affect the
structural   integrity  of  the   Building   (including   requiring   use  of  a
nonpenetrating  roof mount) or any of the Building  systems,  or to minimize the
effect of the Equipment on the appearance of the Building (including  installing
screens and other esthetic  improvements).  Tenant shall be required, at its own
cost,  to construct  or install any  improvements  to the  Property  required by
applicable  Laws as a result  of the  Equipment  or  improvements  or the use or
operation  thereof.  The  installation of the Equipment and  construction of all
related or required improvements shall be completed by Tenant, at its sole cost,
and in full  compliance  with the Plans  approved by Landlord and any conditions
imposed by Landlord  thereon and the  requirements of Paragraph 12 (Alterations)
of the Lease.  Tenant shall pay all of Landlord's  costs  incurred in the review
and supervision of Tenant's efforts.  Tenant shall at all times, and at its sole
cost, maintain the Equipment and the Licensed Area in a good, orderly,  sanitary
and safe  condition  and repair and restore any loss or damage  Tenant or any of
Tenant's employees,  contractors,  agents or invitees cause to the Licensed Area
or roof of the Building. Tenant shall have access to the Licensed Area and other
portions of the Property at all  reasonable  times and as necessary for Tenant's
installation,  operation, use, maintenance,  repair,  replacement and removal of
the Equipment and other  improvements  installed by Tenant;  provided,  however,
that all of such access and activities shall be coordinated with Landlord, after
reasonable prior written notice,  and shall be performed in a manner to minimize
any  disturbance or interference of Landlord and all tenants and other occupants
of the Building,  and to the maximum extent possible,  shall be performed during
regular business hours for the Building.

         6. Ownership and Removal. Tenant shall at all times remain the owner of
all the Equipment,  which shall not be deemed  fixtures,  notwithstanding  their
method of  installation  or attachment to the Building,  and shall pay all taxes
with  respect to all the  Equipment  and  related  improvements  constructed  or
installed by Tenant. On or before the expiration or earlier  termination of this
Lease,  Tenant shall remove all of the Equipment and all improvements  installed
or  constructed  by Tenant  during the term of this  Lease,  shall  restore  the
Licensed  Area and  portions of the  Building  affected by the  Equipment to the
condition they were in upon execution of this Lease by both parties,  reasonable
wear and tear  excepted,  and shall  return  the  Licensed  Area in  broom-clean
condition; provided, however, that (i) Landlord shall have the option to require
Tenant to leave at the  Property  any or all of the  improvements  installed  or
constructed by Tenant, excluding the Equipment; and (ii) Landlord shall have the
right,  in its  sole  discretion,  to  approve  Tenant's  contractor  and all of
Tenant's plans for the removal of the Equipment and improvements and restoration
of  the  Building.   If  Tenant  does  not  remove  all  of  its  Equipment  and
improvements,  as required hereunder,  Landlord may, at its sole option,  either
retain  such  items  as  its  own,  without  any  further  actions,   notice  or
compensation  to Tenant,  or remove  and  dispose of such items in any manner it
chooses,  restore the Building as required  hereunder  and charge Tenant for all
costs incurred in that effort.

         7. Utilities.  Tenant shall have the right to draw natural gas from the
existing gas service available at the Building, if any; provided,  however, that
Landlord shall have the right to stop such service and  availability at any time
that Landlord  determines,  in its  reasonable  discretion,  that  providing gas
service to Tenant is no longer practicable, interferes with the provision of gas
service to any other tenants or occupants of the Property or otherwise overloads
or endangers the Building systems. Tenant shall pay for all costs of gas service
and  other  utilities  provided  to the  Licensed  Area,  which  cost  shall  be
determined  and  billed  by  Landlord  as  equitably  and  accurately  as may be
reasonably  practicable under the circumstances  (including  applicable Laws and
tariffs);  provided,  however, that Tenant shall have the right, at its expense,
to install and use check  meters and  similar  devices to measure its use of gas
and other  utilities for the Equipment.

                                       44
<PAGE>

         8.  Relocation  Landlord  shall have the right at any time,  upon sixty
(60) days' prior written notice to Tenant, to relocate all or any portion of the
Licensed Area  and the  Equipment,  at  Landlord's  sole  cost and at no cost or
expense to Tenant,  provide that the relocation does not interfere with Tenant's
operations or use of the  Equipment,  except for the period of time required for
such relocation.

         9.  Indemnification.  In  addition  to the  other  indemnifications  of
Landlord set forth in this Lease,  Tenant shall indemnify,  protect,  defend and
hold  harmless  Landlord  from any and all loss,  cost,  liability,  damage  and
expense,  including,   without  limitation,   penalties,  fines  and  reasonable
attorneys fees and costs, arising out of or resulting from, in whole or in part,
any loss,  injury or damage  occurring or caused to any person or property in or
about the Licensed Area; provided,  however, that the foregoing  indemnification
by Tenant  shall not apply to the extent any such  losses,  costs,  liabilities,
damages and expenses are proven by final judgment to have been caused by acts or
omissions of Landlord that constitute  gross  negligence or willful  misconduct.
This indemnification shall apply and be enforced to the fullest extent permitted
by Law and shall survive termination or expiration of this Lease. Landlord shall
not be liable to Tenant, and Tenant hereby waives all claims it may have against
Landlord,  for any loss,  injury or damage to any person or property in or about
the Licensed  Area,  including  interruption  of services and loss of use of the
Equipment,  from any cause,  without  limitation as to type or  description  and
specifically  including  acts  or  omissions  constituting  the  active  or sole
negligence  of Landlord,  but  excluding  from all of the  foregoing the acts or
omissions  of Landlord  that are proven by final  judgment to  constitute  gross
negligence or willful  misconduct.  Notwithstanding  any other provision of this
Lease,  in no event  shall  Landlord  be liable to Tenant  for any  punitive  or
consequential  damages  or damages  for loss of  business  by Tenant.  It is the
intent of the foregoing  provisions  that Tenant shall look to its own insurance
for payment or reimbursement for any such loss, damage, injury or liability.

         10.  Miscellaneous.  Except as expressly modified hereby, the terms and
conditions  of the Lease shall remain  unmodified  and in full force and effect.
This Agreement may be executed in  counterparts,  all of which evidence only one
agreement,  binding on all  parties,  even though they are not  signators to the
same  counterpart.  In the event any dispute  between the parties  hereto should
result in litigation or  arbitration,  the prevailing  party shall be reimbursed
for all reasonable costs in connection therewith, including, but not limited to,
reasonable  attorneys' fees. The Lease and this Agreement  constitute the entire
understanding  between the parties with respect to the  Premises,  including the
Licensed Area and the Equipment. All obligations that are not completed or fully
satisfied as of the  expiration  of this  Agreement,  shall  survive until fully
satisfied.  If  any  term,  covenant  or  condition  of  this  Agreement  or its
application  to any  person  or  circumstances  shall be held to be  invalid  or
unenforceable,  the remainder of this Agreement and the application of such term
or provision to other persons or circumstances  shall not be affected,  and each
term hereof shall be valid and  enforceable to the fullest  extent  permitted by
Law.  No  subsequent  amendment  will be  effective  unless it is in writing and
executed by the parties.  The terms of this Agreement are binding upon and shall
inure  to the  benefit  of  Landlord  and  Tenant  and  their  respective  legal
representatives,  successors and assigns. Each of the individuals executing this
Agreement on behalf of a party  individually  represents and warrants that he or
she has been  authorized  to do so and has the  power to bind the party for whom
they are signing.

IN WITNESS  WHEREOF  Landlord and Tenant have executed this  Agreement as of the
day and year first above written.

Landlord: 300 CALIFORNIA ASSOCIATES, LLC, a Delaware
          limited liability company

By:       _________________________________

Name:     _________________________________

Title:    _________________________________





Tenant:  T E Network, Inc., a California Corporation

By:      _________________________________

Name:    _________________________________

Title:   _________________________________



                                       45
<PAGE>

                                   EXHIBIT G
                            Description of Equipment










                                       46
<PAGE>



                                   SCHEDULE 1
                                Option to Renew


Tenant  shall have one (1)  option to extend the term of this Lease  ("Extension
Option") for an additional five (5) years  ("Extended  Term"),  upon the further
terms and provisions  provided below;  (i) Tenant shall not be in default at the
time it exercises  the Extension  Option;  (ii) the Lease shall be in full force
and effect at the time the  Extension  Option is  exercised  and at the time the
Extended Term is to commence;  (iii) Tenant shall have delivered  written notice
of its  exercise  of the  Extension  Option to  Landlord  not less than nine (9)
months  prior  to the  expiration  of the  term of the  Lease  as  specified  in
Paragraph 3.

Upon  Tenant's  exercise of the Extension  Option,  and subject to the foregoing
conditions,  the term of the Lease shall be extended for the Extended  Term upon
all the terms and conditions  hereof,  except that (i) the Base Rent shall be as
provided below, (ii) Tenant shall have no right to extend the term of this Lease
beyond the  expiration  of the  Extended  Term,  and (iii) Tenant shall take the
space in "as-is" condition with no tenant improvements.

Not more  than  six (6)  months  nor less  than  five  (5)  months  prior to the
commencement of the Extended Term, Landlord and Tenant shall meet and attempt in
good faith to determine and mutually  agree upon the Base Rent to be paid during
such  Extended  Term.  The Base Rent shall be based on the then fair market rent
for similar  office  projects in the San Francisco  market ("Fair Market Rent").
If, one hundred  twenty (120) days prior to the  commencement  of such  Extended
Term, the parties have not reached an agreement, the parties shall enter into an
Appraisal to determine the Base Rent.

The Base Rent shall be determined as provided below. Each party shall appoint an
Appraiser  (herein  defined)  and shall  give  notice to the other  party of the
identity  of  the  Appraiser  no  later  than  ninety  (90)  days  prior  to the
commencement of the Extended Term. For purposes hereof, "Appraiser" means a real
estate  broker or MAI  designated  appraiser,  in either case with not less than
five (5) years of full time commercial  appraisal or brokerage experience in San
Francisco County. If either party fails to timely appoint an Appraiser, the sole
Appraiser  appointed  shall determine the Fair Market Rent to be paid during the
Extended Term. If two appraisers are appointed,  they shall immediately meet and
attempt to agree upon the Fair Market  Rent.  If they are unable to do so within
fifteen (15) days of their first  meeting,  they shall  deliver  copies of their
appraisals to each other and thereafter  jointly appoint a third Appraiser.  The
third appraiser  shall,  within ten 10 days of his/her  appointment,  select the
appraisal  submitted by the other two  appraisers  which,  in the opinion of the
third  appraiser,  most  accurately  states  the Fair  Market  Rent.  If the two
Appraisers  are  unable to agree  upon such third  Appraiser,  either  party may
petition the Presiding  Judge of the Superior  Court of San Francisco  County to
appoint such third Appraiser.

After the Fair Market Rent has been  determined,  the rent for the Extended Term
shall be the greater of the following:

(a) the Fair Market Rent, or

(b) the Base Rent and the additional rent for the last year of the Initial Term.

The  determination  of Base Rent as provided  herein  shall be binding  upon the
parties hereto.  Promptly upon such determination,  the parties shall execute an
amendment  specifying the Base Rent payable during the Extended Term.

                                       47
<PAGE>

                                   SCHEDULE 2
                                Option to Expand

Tenant shall have a one-time  Option to Expand by leasing the entire sixth floor
of the  Building,  consisting  of  approximately  15,300  rentable  square  feet
(depicted in Exhibit B-2 attached  hereto) at the end of the  thirtieth  (30th)
month of the term of this Lease upon the following terms:

Tenant shall give written  notice to Landlord of Tenant's  intention to exercise
its option ("Notice of Intent") and lease the sixth floor.  The Notice of Intent
must be delivered to the Landlord no later than the end of the eightieth  (18th)
month of the Lease term.  The Notice of Intent must also be  accompanied  with a
check equal to the first month's rent for the space.

The Rental  Adjustment  Schedule in Schedule 4 of the Lease and attached  hereto
shall be substituted by the following schedule of rent:

                         Months 31-36   $230,168 per month
                         Months 37-48   $235,282 per month
                         Months 49-60   $240,397 per month
                         Months 61-72   $245,512 per month
                         Months 73-84   $250,627 per month

If Tenant  fails to  submit  the  Notice of Intent by the end of the  eighteenth
(18th) month of the Lease term, Landlord shall be free to lease such premises to
any party,  without  any  further  obligations  to Tenant  under this  Option to
Expand.

In  addition,  should  Tenant  exercise  this Option to Expand,  Landlord  shall
provide  Tenant with a tenant  improvement  allowance of not more than  Eighteen
Dollars ($18.00) per square foot,  subject to the terms and conditions set forth
in Exhibit C.

This  Option to Expand  shall  in any event  terminate  upon the  expiration  or
earlier termination of this Lease.

                                       48
<PAGE>

                                   SCHEDULE 3
                             First Right of Refusal


Provided  that Tenant has  effectively  exercised  its option to lease,  and has
occupied  under the terms of this Lease,  as  modified  by the  exercise of such
option,  the sixth (6th)  floor of the  Building,  Tenant  shall have a one-time
First Right of Refusal to lease one (1) additional  floor of the Building during
the term of this Lease upon the following terms:

(a)  In the event that  another  floor of the  Building  identified  by Landlord
     becomes  available,  prior to (i) listing  such  premises  for lease with a
     broker,  or (ii)  accepting a binding  offer to lease such  premises to any
     party other than the existing tenant, Landlord shall give written notice to
     Tenant of  Landlord's  intention  to offer  such  premises  for lease  (the
     "Notice of Intent").

(b)  The Notice of Intent will also outline the terms and conditions  reflecting
     the Fair Market Value for lease of such premises, but in no event shall the
     rent be less than the base rent for Tenant's  existing suite.  Tenant shall
     have five (5) days following the Notice of Intent within which to accept or
     reject the  Landlord's  offer to lease.  If Tenant  accepts the proposal or
     Landlord  and  Tenant can agree to basic  business  terms  within  five (5)
     business  days,  both parties  will use good faith  efforts to sign a Lease
     amendment for the  additional  space  incorporating  said terms.  If Tenant
     rejects the offer,  does not respond to the offer, or if the parties cannot
     agree to terms within five (5)  business  days,  Landlord  shall be free to
     lease such  premises to any party,  as long as the rent for the  subsequent
     lease is not  significantly  less than the rent offered to the Tenant under
     this First  Right of  Refusal.  If the rent for the  subsequent  lease to a
     third party is  significantly  less than that  offered to Tenant,  Landlord
     will  present  Tenant with said new terms.  Tenant will then have three (3)
     business  days  following  such notice to accept  those new terms and enter
     into a Lease amendment with the Landlord,

(c)  Should Tenant exercise its first Right of Refusal and lease said space, the
     Initial Term of the Lease shall be automatically extended another three (3)
     years for the entire  Premises.  Thus, if Tenant leases an additional floor
     under this First Right of Refusal,  the initial  Term of the Lease would be
     extended  and  thereby  the lease  term  would be ten (10)  years  from the
     Commencement Date.

(d)  Landlord shall identify said floor as soon as reasonably practical,  but in
     no event later than the 55th month of the initial term.

(e)  Landlord shall provide a tenant improvement  allowance for the floor of not
     more than Twenty ($20.00) Dollars per square foot, subject to the terms and
     conditions set forth in Exhibit C.

(f)  The Base  Rent for the  Initial  and  Expanded  Premises  for the three (3)
     additional years of the term set forth herein shall be increased One Dollar
     ($1.00) per rentable square foot per year.

(g)  The First Right of Refusal shall in any event terminate upon the expiration
     or earlier termination of this Lease.

(h)  No portion of the Building  shall be deemed  available  for the purposes of
     the First Right of Refusal if such portion of the Building is occupied by a
     tenant who is negotiating an extension or renewal of their lease.

(i)  If Tenant does not lease such space from  Landlord when it is first offered
     to Tenant by Landlord or when it is re-offered  to Tenant  because the rent
     first offered to Tenant has been significantly reduced, as described in the
     second to last  sentence of  paragraph  (b) above,  then the First Right of
     Refusal  shall  terminate  and shall be of no further  force or effect with
     respect to any other portions of the Building.


                                       49
<PAGE>

                                   SCHEDULE 4

                           Rental Adjustment Schedule

The  minimum base rent provided for in Paragraph 5 above shall be as follows:

If the eighth floor of the Building is the Other Improved  Floor,  as defined in
Paragraph 12(b) of the Lease, the following rent schedule will apply:

        Months 1-7      $132,230 per month
        Months 7-12     $152,350 per month
        Months 13-24    $154,913 per month
        Months 25-36    $172,793 per month
        Months 37-48    $176,632 per month
        Months 49-60    $180,472 per month
        Months 61-72    $184,312 per month
        Months 73-84    $188,152 per month



If the fifth floor of the  Building is the Other Improved  Floor,  as defined in
Paragraph 12(b) of the Lease, the following rent schedule will apply:

        Months 1-7      $126,016 per month
        Months 7-12     $152,232 per month
        Months 13-24    $154,784 per month
        Months 25-36    $172,793 per month
        Months 37-48    $176,632 per month
        Months 49-60    $180,472 per month
        Months 61-72    $184,312 per month
        Months 73-84    $188,152 per month


                                       50