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Sample Business Contracts

California-San Francisco-660 Third Street Lease - Gorr Partners LLC and Wired Ventures Inc.

Free Customizable Lease Forms

  • 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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                                OFFICE LEASE FORM
        of the Building Owners and Managers Association of San Francisco


                                     PARTIES

         THIS LEASE, made this 21st day of June, 1996, between GORR PARTNERS,
LLC, a California limited liability company, Landlord, and WIRED VENTURES, INC.,
a Delaware corporation, Tenant.

                                   WITNESSETH:

         1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord those certain premises (hereinafter called "premises") outlined in
red on Exhibit A attached hereto and by this reference made a part hereof, said
premises being situated on the second floor of that certain building
(hereinafter called "building") known as 660 Third Street, San Francisco,
California.

         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 and that this Lease is
made upon the condition of such performance.

         2. PURPOSE. The premises shall be used for general office purposes and
for no other use or purpose without the prior written consent of Landlord.

         3. TERM. The term of this Lease shall be for the period from the Lease
Commitment Date to the Lease Expiration Date ("Lease Term") unless earlier
terminated or extended according to the terms of this Lease. See Addendum.

         4. POSSESSION. If Landlord, for any reason whatsoever, cannot deliver
possession of the said premises to Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable except as set forth herein, nor
shall Landlord be liable to Tenant for any loss or damage resulting therefrom,
but in that event there shall be a proportionate reduction of rent covering the
period between the commencement of said term and the time when Landlord can
deliver possession. See Addendum. Should Landlord tender possession of the
premises to Tenant prior to the date specified for the commencement of the term,
and Tenant accepts such prior tender, such prior occupancy shall be subject to
all terms, covenants, and conditions of this Lease, including the payment of
rent. No delay in delivery of possession shall operate to extend the term
hereof. Within 10 days after written request from Landlord, Tenant shall execute
and return to Landlord an acknowledgment of the commencement date of the term of
this lease. See Addendum.





                                       1.

<PAGE>   2



         5.       RENT.

                  (a) On or before the first business day of each calendar month
during the term hereof Tenant shall pay to Landlord, as minimum monthly rent for
the premises, the sum specified 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.

         Said rent shall be paid by Tenant to Landlord, in advance, without
deduction or offset, in lawful money of the United States of America at 290 San
Bruno Avenue, San Francisco, CA 94103, San Francisco, California, or to such
other person or at such other place as Landlord may from time to time designate
in writing.

                  (b) All charges and other amounts of any kind payable by
Tenant to Landlord pursuant to this Lease 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 basic rent. Basic rent and additional rent
are collectively sometimes hereinafter referred to as rent.

                  (c) All rent payable by Tenant to Landlord hereunder, if not
received by Landlord within five (5) days of the date when due, shall bear
interest from the due date until paid at the publicly announced prime rate or
reference rate charged on such due date by the San Francisco Main Office of bank
of America, N.T. & S.A. (or any successor bank) for short term, unsecured loans
to its most creditworthy borrowers, plus four percent (4%) per annum, but in no
event shall such interest exceed the maximum rate permitted by law. Landlord's
acceptance of any interest payments shall not constitute a waiver of Tenant's
default with respect to the overdue amount or prevent Landlord from exercising
any of the rights and remedies available to Landlord under this Lease or by law.

         6.       RENTAL ADJUSTMENT.

                  (a) In addition to the monthly rent provided for in Paragraph
5 hereof, Tenant shall pay to Landlord the sums set forth in the following
subparagraphs. Tenant's percentage share as set forth below has been calculated
by dividing the number of square feet of rentable area in the Premises by the
number of square feet of rentable area in the building. In the event the
rentable area of the building is changed, the Tenant's percentage share shall be
appropriately adjusted. Rentable area shall be based upon the Building Owners
and Managers Association International (BOMAI) standard method of floor
measurement for office buildings. Tenant hereby approves and accepts Landlord's
calculation of Tenant's current percentage share as set forth below.

                  (b) TAX INCREASES AND ASSESSMENTS. Subject to the terms of the
Addendum, Tenant shall pay to Landlord an amount equal to Tenant's percentage
share as specified in the Basic Lease Information of any increase in real
property taxes and assessments or other fees or charges of whatsoever kind or
character imposed by a governmental agency which may be levied on the land and
building of which the premises are a part and personal property taxes levied on
personal property of Landlord used in the operation of said land and building
above the amount




                                       2.

<PAGE>   3



of such taxes levied and assessed for the fiscal tax year ending June 30, 1997,
either by way of increase in the rate or in the assessed valuation of said land
and building or by imposition of any such charges by ordinance or statute of any
authority having jurisdiction. For the purposes of the (a) real and personal
property taxes shall include, without limitation, taxes of every kind and nature
levied and assessed in lieu of or in substitution for existing or additional
real or personal property taxes on said land and building 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 per cent (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
after the lease Commencement Date. In the event said taxes or assessments are
charged to or paid or payable by Landlord, Tenant forthwith upon demand
therefore, shall reimburse Landlord for all amounts of such taxes or assessments
chargeable against Tenant pursuant to this subparagraph (b) and paid by
Landlord. See Addendum.

                  (c) OPERATING EXPENSE INCREASES. Tenant shall pay to Landlord,
at the times hereinafter set forth, an amount equal to Tenant's percentage share
as specified in the Basic Lease Information of any increase in direct expenses
paid or incurred by Landlord on account of the operation or maintenance of the
building above such direct expenses paid or incurred by Landlord during the Base
Year. "Base Year" as used in this subparagraph (b) shall mean the calendar year
1997. "Direct expenses" as used herein shall include all direct costs of
operation and maintenance as determined by standard accounting practices as set
forth in the Building Owners and Managers Association International (BOMAI)
chart of accounts from time to time (excluding, however, any and all taxes of
the nature set forth in subparagraph (b) above) and shall include the following
by way of illustration but not limitation: the cost of contesting by appropriate
proceeding the amount or the validity of any of the aforementioned taxes or
fees; water and sewer charges; insurance premises; license, permit and
inspection fees; charges of heat, power and steam; janitorial services; labor;
supplies; materials, equipment and tools; management expenses and the cost of
capital improvements made by Landlord to the Building that are intended to
reduce other Operating Expenses or that are required under any governmental law
or regulation that is not applicable to the Building as of the date of
Commencement of this Lease, such cost or allocable portion thereof to be
amortized over such useful life of the improvement together with interest on the
unamortized balance at the rate that was paid by landlord on funds borrowed for
the purpose of constructing or installing such capital improvements, or, if
landlord does not borrow such funds, would have been paid had the Landlord
borrowed funds for such purpose but in no event shall such interest rate exceed
the maximum rate permitted by law. "Direct expenses" as used herein shall not
include depreciation on the building, real estate broker's commissions, tenant
improvements, interest and capital items other than those referred to above. In
the event the Building is not fully occupied during any Expense Year or in the
event the entire Building is not provided with Building standard




                                       3.

<PAGE>   4



services during any Expense Year, an adjustment shall be made by Landlord in
computing Operating Expenses for such Expense Year so that Operating Expenses
shall be computed as though 95% of the entire Building had been occupied and 95%
of the entire Building had been provided with Building standard services during
such year (or such Operating Expenses shall be computed in accordance with
actual occupancy or actual provision of Building standard services if such
respective amounts shall exceed 95%); provided, however, that in no event shall
the aggregate amount of Operating Expenses collected by Landlord from all
Tenants in the Building exceed the actual Operating Expenses for said year. See
Addendum.

         7. SECURITY DEPOSIT. Simultaneously with the execution of this lease,
Tenant shall deposit with Landlord the sum of $42,510.00, of which sum
$18,155.31 shall be payment of the first month's rent and the balance thereof,
namely, $24,354.69, shall be held by Landlord as security for the faithful
performance by Tenant of all the terms, covenants and conditions of this lease.
Provided that at the end of the term Tenant shall have delivered up the Premises
to Landlord, broom clean, and in the same condition as at the commencement date,
reasonable wear excepted, said sum held as security shall be returned to Tenant.
No interest shall be payable thereon and Landlord shall not be required to keep
said sum in a separate account. If Tenant fails to pay any Rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Landlord may at its option apply or retain all or any portion of the
deposit for the payment of any Rent or other charge in default or the payment of
any other sum to which landlord may become obligated by Tenant's default, or to
compensate Landlord for any loss damage which Landlord may suffer thereby. If
Landlord so uses or applies all or any portion of the deposit, then within 10
days after demand therefor Tenant shall deposit cash with Landlord in an amount
sufficient to restore the deposit to the full amount thereof, and Tenant's
failure to do so shall be a material breach of this Lease. Landlord's
application or retention of the deposit shall not constitute a waiver of
Tenant's default to the extent that the deposit does not fully compensate
Landlord for all losses or damages incurred by Landlord in connection with such
default and shall not prejudice any other rights or remedies available to
Landlord under this Lease or by law. Within thirty (30) days after termination
of this Lease, Landlord shall return the unapplied portion of the security
deposit to the Tenant.

         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.

         8. 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 contents. Tenant shall not do or permit anything to be done in
or about the premises which will in any way unreasonably obstruct or interfere
with the rights of other tenants or occupants of the building or injury or annoy
them, or use or allow the premises to be used for any residential, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the premises.




                                       4.

<PAGE>   5



No 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, be used in or at the premises. Tenant shall not commit or suffer to be
committed any waste in or upon the premises.
See Addendum.

         9. COMPLIANCE WITH LAW. 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 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 relating to or
affecting the Tenant's 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
any action against Tenant, whether Landlord be 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.
Further, Tenant shall at all times and in all respects comply with all federal,
state and local laws, ordinances and regulations ("Hazardous Material Laws")
relating to hygiene, environmental protection, or the presence, use generation,
storage, transportation or disposal of any toxic or hazardous substances, as the
same may be amended from time to time, including without limitation, obtaining
any required permits or licenses, and Tenant shall handle, treat, manage and
dispose of any and all toxic or hazardous substances in strict conformity with
all manufacturers' instructions and prudent business practices. See Addendum.

         10. ALTERATIONS. After the Commencement Date, Tenant shall not make or
suffer to be made any alterations, additions or improvements to or of the
premises (see Addendum) or any part thereof without the written consent of
Landlord first had and obtained which shall not be unreasonably withheld or
delayed. Any alterations, additions, or improvements to or of said 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 which shall
not be unreasonably withheld or delayed, subject to Paragraph 9 of the Addendum.
Tenant's obligation to remove any alterations, additions, improvements, fixtures
and/or personal property and to repair any damage from such removal shall
survive the termination of this Lease.

         Construction of the alterations, additions, or improvements shall be
completed in accordance with drawings and specifications approved in advance in
writing by Landlord, shall be carried out in a good and workmanlike manner, and
shall comply with all applicable requirements of governmental authorities and
such additional conditions as Landlord may reasonably impose.





                                       5.

<PAGE>   6



         11. REPAIR. By entry hereunder upon the commencement of the term
hereof, Tenant accepts the premises as being in good, sanitary order, condition
and repair. Tenant, at Tenant's sole cost and expense, shall keep the premises
and every part thereof in good condition and repair, damage thereto by fire,
earthquake, act of God or the elements not caused by Tenant's negligent or
willful act excepted, Tenant hereby waiving 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 the same condition as
when received, ordinary wear and tear and damage by fire, earthquake, act of God
or the elements excepted, unless caused by Tenant's negligent or willful act. 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 or the building have been made by Landlord to Tenant
except as specifically set forth in Exhibit B attached hereto. There shall be no
abatement of Rent and no liability to Landlord by reason of any injury or to
interference with Tenant's business arising from the making of any repair or
performance of any maintenance obligations by the Landlord, except for any
damages caused by Landlord's negligence or intentional acts but in no event any
consequential damages.

         12. 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 personal property belonging
to Tenant and left on the premises shall be deemed to be abandoned, at the
option of Landlord.

         13. 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 lines.

         14. ASSIGNMENT AND SUBLETTING.

                  (a) Tenant shall not mortgage, pledge, hypothecate or encumber
this Lease or any interest therein. Tenant shall not assign this Lease or sublet
or suffer any other person (the agents and servants of Tenant excepted) to
occupy or use the Premises, or any part hereof, or sublet any right or privilege
appurtenant thereto without the prior written consent of Landlord first had and
obtained, which consent shall not be unreasonably withheld or delayed.
Landlord's consent to one assignment, subleasing or occupancy shall not be
deemed to be a consent to any subsequent assignment, subleasing or occupancy.
See Addendum.





                                       6.

<PAGE>   7



                  (b) Provided further and notwithstanding anything herein
before set forth: In the event that at any time or from time to time during the
term of this Lease, Tenant desires to sublet all or any part of the Premises,
Tenant shall notify the Landlord in writing (the "Sublet Notice") of the terms
of the proposed subletting, and the area so proposed to be sublet and shall give
Landlord the right to sublet from Tenant such space (the "Sublet Space") on the
same terms as those contained in the Sublet Notice. See Addendum.

         If Landlord fails to exercise its option and Tenant desires to complete
the proposed sublease, Tenant shall deliver an executed copy of such sublease to
Landlord in order to obtain its consent as required in paragraph 14(a) above.
See Addendum. If Landlord consents to a sublease, then such sublease shall be
subject to and made upon the following terms:

                           (i) any such sublease shall be subject to the terms
of this Lease and the term thereof may not extend beyond the expiration of the
term of this Lease;

                           (ii) no subtenant shall have a right to further
sublease its premises. If Landlord fails to exercise such option, and Tenant
fails to consummate a sublease with a third party within 60 days after the
expiration of Landlord's option period on the same terms and conditions
contained in the Sublet Notice, Tenant shall be required to deliver a new Sublet
Notice to Landlord and comply with the terms and conditions set forth above
before any further subletting shall be permitted.

                  (c) Regardless of Landlord's consent, no subletting nor
assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay rent and perform other obligations of Tenant under
this lease.

                  (d) In no event shall Tenant assign this Lease or sublet the
premises or any portion thereof to any then existing or prospective tenant (with
whom Landlord has negotiated in the last six months) of said building.

                  (e) Tenant shall pay Landlord's reasonable costs not to exceed
$1000 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.

                  (f) If Tenant is a corporation or a partnership, the transfer
(as a consequence of a single transaction or any number of separate
transactions) of thirty-five percent (35%) 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 hereunder for which such consent is required. See
Addendum.

         15. INDEMNIFICATION OF LANDLORD. Tenant agrees to indemnify and defend
Landlord against and save Landlord harmless from any and all loss, cost,
liability, damage and expense, including without limitation penalties, fines and
reasonable attorneys fees and costs, except as caused by the negligent or
intentional acts of Landlord, its employees or agents, incurred in connection
with or arising from (1) any default by Tenant in the observance or performance
of




                                       7.

<PAGE>   8



any of the terms, covenants or conditions of this Lease on Tenant's part to be
observed or performed, or (2) the use or 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 toxic or hazardous
substances, or (3) the condition of the Premises after the Commencement Date and
during the term of the Lease or any occurrence or happening on the Premises from
any cause whatsoever, or (4) 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's agents 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. In the event any action or
proceeding is brought against Landlord for any claim against which Tenant is
obligated to indemnify Landlord hereunder, Tenant upon notice from Landlord
shall defend such action or proceedings at Tenant's sole expense by counsel
approved by Landlord, which approval shall not be unreasonably withheld or
delayed. The provisions of this Section 15 shall survive the expiration or
earlier termination of this lease.

         16. INSURANCE. Tenant agrees to keep in force during the term hereof,
at Tenant's expense, public liability and property damage insurance with
combined single limits in the amount of not less than $2,000,000. Said policy
shall name Landlord as an additional insured, and shall insure Landlord's
contingent liability as respects acts, or omissions of Tenant, shall be issued
by an insurance company licensed to do business in the state where the premises
are located; and shall provide that said insurance shall not be cancelled or
amended unless thirty (30) days' prior written notice to Landlord is first
given. Said policy or a certificate thereof shall be delivered to landlord by
Tenant prior to the commencement of the term and each renewal of such insurance.
Tenant and Landlord hereby waives all rights of subrogation against each other
to which any insurance carrier may at any time become entitled under any policy
of insurance carried by such other party.

         17. UTILITIES. Subject to the provisions of the Addendum, Landlord
shall furnish to the premises, during reasonable hours of generally recognized
business days, to be determined by Landlord, and subject to the rules and
regulations of the building, water and electricity suitable for the use of the
premises for general office purposes, including without limitation, use of the
premises for on-line computer operations (provided, however, that Landlord shall
be under no obligation to provide electricity in an amount exceeding the
capacity of the electrical panels described in Paragraph 1(d) of the Work
Letter) and heat required in Landlord's judgement for the comfortable use and
occupation of the premises for such purposes, janitorial service, and elevator
service. 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




                                       8.

<PAGE>   9



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 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
cooling capacity or water usually furnished or supplied for use of the premises
for general office purposes or connect with or water pipes, any apparatus or
device for the purpose of using water. If Tenant shall require water 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, to the use thereof and
Landlord may cause a water meter to be installed in the premises so as to
measure the amount of excess 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 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 water so
consumed.

         18. 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 leased 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 after the Lease Commencement Date. In the
event said taxes are charged to or paid or payable by Landlord, Tenant,
forthwith upon demand therefore, shall reimburse Landlord for all of such taxes
paid by Landlord.

         19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply
with the rules and regulations printed on or annexed to this Lease 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,
provided that such rules and regulations do not unreasonably interfere with
Tenant's use of the premises as permitted herein. 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.

         20. 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 140% of the last month's rent payable in
advance, in lawful money, and shall continue to be such Tenant until thirty (30)
days after Tenant shall have given to Landlord or Landlord shall have given to
Tenant a written




                                       9.

<PAGE>   10



notice of intent to terminate such monthly tenancy. Unless Landlord shall
exercise the option hereby given him, Tenant shall be a Tenant at sufferance
only, whether or not Landlord shall accept any rent from Tenant while Tenant is
so holding over.

         21. 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
land or on or against the 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. 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, upon Tenant's
attornment 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, 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
therefore. See Addendum.

         22. ENTRY BY LANDLORD. Landlord reserves and shall upon twenty-four
hours prior notice, except for emergencies, 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 nonresponsibility, 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, always providing 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 unless caused by Landlord's negligence or intentional wrongful acts
excluding consequential damages. 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.

         23. INSOLVENCY OR BANKRUPTCY. Either (a) the appointment of a receiver
to take possession of all or substantially all of the assets of Tenant or (b)
any action taken or suffered by Tenant under any insolvency, bankruptcy or
reorganization act, other than an assignment




                                       10.

<PAGE>   11



pursuant to the terms of Paragraph 14 of the Addendum, shall constitute a breach
of this Lease by Tenant. Upon the happening of any such event this lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant. Except as set forth in Paragraph 14 of the Addendum, in no event shall
this Lease be assigned or assignable by reason of any voluntary or involuntary
bankruptcy proceeding nor shall any rights or privileges hereunder be an asset
of Tenant in any bankruptcy, insolvency or reorganization proceedings. See
Addendum.

         24. DEFAULT. See Addendum. In the event of any breach or default of
Lease by Tenant, then Landlord, besides any other rights and remedies of
Landlord at law or equity, shall have the right either to terminate Tenant's
right to possession of the premises and thereby terminate this Lease or have
this Lease continue in full force and effect with Tenant at all times having the
right to possession of the premises. Such property so removed may be stored in a
public warehouse or elsewhere at the cost and for the account of Tenant. Upon
such termination Landlord, in addition to any other rights and remedies
(including rights and remedies under Subparagraphs (1), (2) and (4) of
Subdivision (a) of Section 1951.2 of the California Civil Code of any amendment
thereto), shall be entitled to recover from Tenant the worth at the time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of such rental loss that the Tenant proves
could be reasonably avoided. The worth at the time of award of the amount
referred to in subparagraphs (1) and (2) of Subdivision (a) of Section 1951.2 of
the California Civil Code shall be computed by allowing interest at the maximum
rate allowed by law. The worth at the time of the award of the amount referred
to in subparagraph (3) of Subdivision (a) of Section 1951.2 of the California
Civil Code shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus 1%.

         Any proof by Tenant of the amount of rental loss that could be
reasonably avoided shall be made in the following manner: Landlord and Tenant
shall each select a licensed real estate broker in the business of renting
property of the same type and use of the premises and in the same geographic
vicinity and such two real estate brokers shall select a third licensed real
estate broker and the three licensed real estate brokers so selected shall
determine the amount of rental loss that could be reasonably avoided for the
balance of the term of this Lease after the time of award. The decision of the
majority of said licensed real estate brokers shall be final and binding upon
the parties hereto.

         Should Landlord, following any breach or default of this Lease by
Tenant, elect to keep this Lease in full force and effect, with Tenant retaining
the right to possession of the premises (notwithstanding the fact the Tenant may
have abandoned the leased premises), then Landlord, besides the rights and
remedies specified in Section 1951.4 of the California Civil Code "(lessor may
continue lease in effect after lessee's breach and abandonment and recover rent
as it becomes due, if lessee has right to sublet or assign, subject only to
reasonable limitations)" and all other rights and remedies Landlord may have at
law or equity, shall have the right to enforce all of Landlord's rights and
remedies under this Lease. Notwithstanding ant such election to have this Lease
remain in full force and effect, Landlord may at any time thereafter elect to
terminate Tenant's right to possession of said premises and thereby terminate
this Lease for any previous breach or default which remains uncured, or for any
subsequent breach or default.




                                       11.

<PAGE>   12




         25. DESTRUCTION OR DAMAGE.

                  (a) In the event the Premises or a portion of the Building is
damaged by fire or other insured casualty, Landlord shall diligently repair the
same to the extent possible with the insurance proceeds received by Landlord,
subject to the provisions of this Section hereinafter set forth, if such repairs
can in Landlord's reasonable opinion be completed within 120 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 except that if such damage is
not the result of the negligence or willful misconduct of Tenant or Tenant's
agents, contractors, employees, subtenants, licensees, invitees or visitors, an
abatement of basic rent shall be allowed Tenant for such part of the Premises as
shall be rendered unusable or inaccessible 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 fire or other casualty, in which event this Lease shall
terminate as of the termination date specified in Landlord's notice.

                  (b) See Addendum.

                  (c) 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 nor or hereafter in force.

                  (d) If the Premises are to be repaired under this Section,
Landlord shall repair at its cost any injury or damage to the building itself,
and the initial improvements made by landlord pursuant to Exhibit B, 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.

         26. EMINENT DOMAIN. If all or any part of the premises shall be taken
or appropriated by any public or quasipublic 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 of the building of which the premises
are a party 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 excluding any award compensating
Tenant for relocation costs of personal property or equipment of Tenant 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 or the condemnor 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, and rent thereafter to be paid shall be equitably reduced.




                                       12.

<PAGE>   13




         27. PLATS AND RIDERS. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this lease are a part hereof.

         28. SALE BY LANDLORD. See Addendum. In the event the original Landlord
hereunder, or any successor owner of the building, shall sell or convey the
Building, including an involuntary transfer and the owner shall assume
Landlord's obligations under the Lease, all liabilities and obligations on the
part of the original Landlord, or such successor owner, 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 28, this Lease shall
not be affected by any such sale or conveyance.

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

         30. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
kept and performed by Tenant under any of the terms of this Lease shall be
performed by Tenant and Tenant's sole cost and expense and without any abatement
of rent except as otherwise provided herein. 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) business 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 in this lease provided. All sums so paid by the Landlord and all
necessary incidental costs, together with interest thereon at the rate of ten
percent (10%) per annum 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.

         31. 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 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 being action against the other party, by reason or of alleging the




                                       13.

<PAGE>   14



failure of the other party to comply with any or all of its obligations
hereunder, whether for declaratory or other relief, 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. A
party shall be deemed to have prevailed in any such action (without limiting the
generality of the foregoing) if such action is dismissed upon the payment by the
other party of the sums allegedly due or the performance of obligations
allegedly not complied with, or if such party obtains substantially the relief
sought by it in the action, irrespective of whether such action is prosecuted to
judgment. In addition, if either party to this Lease becomes a party to or is
involved in any way in any action concerning this Lease or the Premises by
reason in whole or in part of any act, neglect, fault or omission of any duty by
the other party, its employees or contractors, the party subjected to said
involvement shall be entitled to reimbursement for any and all reasonable
attorneys' fees and costs.

         32. SURRENDER OF PREMISES. 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.

         33. 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.

         34. NOTICES. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing. All notices
and demands by Landlord to Tenant shall be delivered personally or sent by
United States certified or registered mail, postage prepaid, addressed to Tenant
at the premises, or at such other place as Tenant may from time to time by like
notice designate. All notices and demands by Tenant to Landlord shall be sent by
United States certified or registered mail, postage prepaid, addressed to
Landlord at 290 San Bruno Avenue, San Francisco, California 94103 or at such
other place as Landlord may from time to time by like notice designate.

         35. NOTICE OF SURRENDER. At least sixty (60) days before the last day
of the term hereof, Tenant shall give to Landlord a written notice of intention
to surrender the premises on that date, but nothing contained herein or any
failure to give such notice shall be construed as an extension of the term
hereof or as consent of Landlord to any holding over by tenant.

         36. DEFINED TERMS AND MARGINAL HEADINGS. The words "Landlord" and
"Tenant," as used herein shall include the feminine and neuter. If there be more
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.




                                       14.

<PAGE>   15




         37. 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.

         38. SUCCESSORS. Subject to the provisions of Paragraph 14 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.

         39. 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.

         40. LATE CHARGE. In the event Tenant shall fail to pay any rents or
sums due hereunder within five (5) days of the due date herein provided, then
and in that event the amount so due and unpaid shall bear a late charge equal to
five percent (5%) of the amount due together with interest accruing from the
date due at the rate set forth in Paragraph 5(c) above, which late charge and
interest shall be payable forthwith upon demand. (The foregoing shall be in
addition to any other right or remedy of Landlord.)

         41. NO DISCRIMINATION. Tenant agrees for Tenant and Tenant's heirs,
executors, 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, marital 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.





                                       15.

<PAGE>   16



         42. ADDITIONAL PROVISIONS. The exhibits and addenda listed below are
incorporated by reference in this lease.

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

LANDLORD:                                 TENANT:                              
                                                                               
GORR PARTNERS, a California limited       WIRED VENTURES, INC., a Delaware     
liability company                         corporation                          
                                                                               
                                                                               
By:      /s/ Bernard Osher                By:      /s/ Jeff Simon              
         -------------------------------           -----------------------------
Its:     Member                           Its:     Chief Financial Officer     
         -------------------------------           -----------------------------
                                                                               
Dated:   June 24, 1996                    Dated:   June 21, 1996               
         -------------------------------           -----------------------------
                                         



                                   SEE YOUR ATTORNEY

This Lease should be given to your attorney for review and approval before you
sign it. BOMA makes no representation or recommendation concerning the legal
effect, legal sufficiency, or tax consequences of this Lease. These are
questions for your attorney.



                                       16.

<PAGE>   17



                                  OFFICE LEASE

                             BASIC LEASE INFORMATION



         This Basic Lease Information shall be completed and signed when all
applicable information has been set forth below.

DATE OF LEASE:                      As of June 21, 1996

BUILDING:                           660 Third Street
                                    San Francisco, California

LANDLORD:                           GORR PARTNERS, LLC
                                    a California limited liability company

TENANT:                             WIRED VENTURES, INC.
                                    a Delaware corporation

RENTABLE AREA
OF PREMISES
(ESTIMATED):                        21,255 +/- square feet

RENTABLE AREA
OF BUILDING
(ESTIMATED):                        85,020 +/- square feet

TENANT'S PERCENTAGE
SHARE:                              25%

LEASE
COMMENCEMENT DATE:                  December 15, 1996 (estimated)

LEASE
EXPIRATION DATE:                    The Lease Expiration Date for this
                                    Lease shall be the same as the "Lease
                                    Expiration Date" defined in that certain
                                    lease dated November 15, 1995 between
                                    Landlord (as landlord) and Hot Wired
                                    Ventures, LLC (as tenant) for the third and
                                    fourth floors of the Building.

OPTIONS:                            One (1) five year option, as described in
                                    Paragraph 3 of the Addendum.





                                       i.

<PAGE>   18



<TABLE>
<CAPTION>
MINIMUM MONTHLY
RENT:                Lease Years                       Minimum Monthly Rent
                     -----------                       --------------------
<S>                     <C>                                <C>       
                        1-2                                $ 18,155.31
                        3                                  $ 21,166.44
                        4-5                                $ 23,291.94
                        6-10                               $ 24,354.69

SECURITY DEPOSIT:       $24,354.69 as provided in Paragraph 7 hereof.
</TABLE>





                                       ii.

<PAGE>   19



                                    EXHIBITS



                  Exhibit A                 Floor Plan of Premises
                  Exhibit B                 Work Letter
                  Exhibit C                 Memorandum of Lease Term Dates
                  Exhibit D                 Rules and Regulations




                                     ADDENDA



         Addendum 1                 Addendum to Lease



TENANT:                    WIRED VENTURES, INC.
                           a Delaware corporation



                           By:      /s/  Jeffrey Simon
                                   ---------------------------------------------
                                    Jeffrey Simon, Chief Financial Officer

                           Dated:           June 21, 1996


                           Address:         520 Third Street, Fourth Floor
                                            San Francisco, California  94107

                           Telephone:       (415) 222-6333
                           Facsimile:       (415) 222-6369







                                      iii.

<PAGE>   20


LANDLORD:                  GORR PARTNERS, LLC
                           a California limited liability company



                           By:       /s/  Bernard Osher
                                    -----------------------------------------
                           Name:     Bernard Osher
                                    -----------------------------------------
                           Its:      Member
                                    -----------------------------------------

                           Dated:           June 24, 1996


                           Address:         290 San Bruno Avenue
                                            San Francisco, CA 94103

                           Telephone: (415)   522-5700
                           Facsimile: (415)   522-5701






                                       iv.

<PAGE>   21
                            ADDENDUM TO OFFICE LEASE



                  This Addendum is attached to and made a part of the Office
Lease dated June 21, 1996 (the "Lease), by and between GORR PARTNERS, LLC, a
California limited liability company ("Landlord") and WIRED VENTURES, INC., a
Delaware corporation ("Tenant"), and the terms and conditions of this Addendum
are incorporated into the Lease.

                  1. DEFINITIONS. All defined terms used in this Addendum
whether capitalized or in lower case shall have the same meaning as defined in
the Lease.

                  2. LEASE COMMENCEMENT DATE.

                           (a) LEASE COMMENCEMENT DATE. The Lease Term shall
commence on the earliest of (i) the date Tenant opens for business in the
premises, or (ii) ten (10) days after substantial c0ompletion of the tenant
improvements as specified in Exhibit B attached hereto or (iii) December 15,
1996 provided Landlord has substantially completed the tenant improvements as
specified in Exhibit B (the "Lease Commencement Date"). The premises shall be
deemed substantially completed and possession delivered when Landlord has
substantially completed these improvements and has delivered written notice of
such substantial completion to Tenant. Tenant agrees to accept delivery of the
premises upon delivery of such notice from Landlord. No later than ten (10) days
after the delivery of possession of the premises to Tenant, a representative of
Landlord and Tenant shall walk through the premises and compile a "punch list"
of items for the premises that must be completed or repaired by Landlord in
order for Landlord to fulfill all of its construction obligations under the Work
Letter. The punch list items shall not expand Landlord's construction
obligations beyond those contained in the Work Letter. Once the punch list is
compiled, Landlord will work diligently to complete or repair such items within
fifteen (15) days unless longer is necessary to complete said items. Landlord
and Tenant agree to cooperate in good faith so that Landlord can complete its
punch list work and Tenant can complete its fixturization work in the premises
with minimum interference to the other. Tenant agrees that within ten (10) days
after the Lease Commencement Date has been determined, Tenant will execute and
deliver to Landlord a written addendum to this Lease in the form of Exhibit C
attached hereto stating the Lease Commencement Date, the Lease Expiration Date,
and accepting possession of the premises and acknowledging compliance by
Landlord with all of the obligations to construct and deliver possession of the
premises. Notwithstanding anything in this paragraph to the contrary, Tenant
shall have a period of ten (10) days upon substantial completion of the tenant
improvements but prior to the Lease Commencement Date ("Early Entry") during
which Tenant shall have access to the Premises on the terms and conditions set
forth in this Lease except for rent for purposes of installing and assembling
Tenant's fixtures, telecommunications and computers. Tenant shall have no
obligation to pay rent during this Early Entry period.

                                       1.
<PAGE>   22

                           (b) DELAY IN COMMENCEMENT. Except for delays caused
by reasons beyond Landlord's control including delays caused by Tenant, delays
caused by governmental authorities or other Force Majeure causes ("Excused
Delays"), if the Commencement Date has not occurred on or before February 15,
1997, Tenant shall have the right to terminate this Lease upon written notice to
Landlord and Landlord and Tenant shall have no further obligations hereunder.
Any delays caused by Tenant's failure to comply with the requirements of the
Work Letter shall not extend the Lease Commencement Date and, in such case,
Tenant's obligations to pay rent and other charges hereunder shall commence on
December 15, 1996.

                  3.       OPTION TO EXTEND LEASE TERM.

                           (a)      OPTION TO EXTEND.  Tenant shall have one (1)
one-time option ("Option to Extend") to extend the initial Lease Term ("Initial
Term") on the same terms and conditions as set forth in this Lease, except for
the minimum monthly rent ("Minimum Rent") and the Base Year, for a period of
five (5) years ("Extended Term"). Tenant may exercise the Option to Extend by
delivering written notice of exercise ("Option Notice") to Landlord at least
eight (8) months but not more than twelve (12) months before the expiration of
the Initial Term. In the event Tenant fails to exercise the Option to Extend in
strict accordance with the foregoing, the Option to Extend shall expire and be
of no further force or effect. If, on the date Tenant gives the Option Notice, a
default under the Lease has occurred and is continuing, then the Option Notice
shall be of no force and effect. If the time period during which Tenant may
exercise the Option to Extend has not expired, Tenant may cure the default and
re-submit the Option Notice (if such resubmission is timely made). Additionally,
(i) if a default has occurred and is continuing on the expiration of the Initial
Term or, (ii) there have occurred more than three (3) material defaults during
the twenty-four (24) months immediately preceding the expiration of the Initial
Term, then, notwithstanding a valid exercise by Tenant of the Option Notice,
Landlord may, in its sole discretion, elect to have this Lease expire at the end
of the Initial Term. The Minimum Rent for the Extended Term shall be determined
pursuant to paragraph (b) below. In no event, however, shall the Minimum Rent
for the Extended Term be less than the Minimum Rent payable in the last Lease
Year of the Initial Term. The Base Year for the Extended Term shall be 2007. For
purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve
month period during the term of this Lease ending on December 31, provided that
the first Lease Year shall commence upon the Lease Commencement Date and shall
end on the next succeeding December 31, and the last Lease Year shall end upon
the Lease Expiration Date, unless extended pursuant to the terms hereof.

                           (b) MINIMUM RENT FOR EXTENDED TERM. Minimum Rent for
the Extended Term shall be the Ninety Five Percent (95%) of the Fair Market
Rental of the premises as determined below.

                                    (i) DEFINITION. "Fair Market Rental" means
                           the fair market rental per month on similar terms and
                           conditions contained in this Lease for the

                                       2.
<PAGE>   23

                           specific space that constitutes the premises for the
                           five (5) year period constituting the Extended Term,
                           as determined herein. The Fair Market Rental shall
                           take into account only the following factors: (1)
                           such periodic increases as may be part of the fair
                           market rental for the Extended Term, (2) the length
                           of the Extended Term, and (3) the contract rental
                           rate then being charged by other landlords for
                           similar space in comparable buildings in the area in
                           which the premises are located.

                               (ii) DETERMINING FAIR MARKET RENTAL FOR RENEWAL
                           TERM--INITIAL 20-DAY PERIOD FOR NEGOTIATION. After
                           Tenant delivers the Option Notice to Landlord,
                           Landlord and Tenant will commence negotiation, on
                           that date that is six months prior to the expiration
                           of the Initial Term to determine the Fair Market
                           Rental. If Landlord and Tenant have not agreed on the
                           Fair Market Rental within twenty (20) days after such
                           date, then Tenant may elect to have the Fair Market
                           Rental determined by arbitration.

                              (iii) ARBITRATION. The arbitration shall be
                           conducted and determined in the City and County of
                           San Francisco in accordance with the then prevailing
                           rules of the American Arbitration Association or its
                           successor for arbitration of commercial disputes
                           except to the extent that the procedures mandated by
                           said rules shall be modified as follows:

                                            (A) Tenant shall make demand for
                                    arbitration in writing within ten (10) days
                                    of the expiration of the initial twenty (20)
                                    day period provided for the determination by
                                    Tenant and Landlord of the Fair Market
                                    Rental [described in subsection (b)(ii)
                                    above], specifying therein the name and
                                    address of the person to act as the
                                    arbitrator on its behalf. The arbitrator
                                    shall be qualified as a real estate
                                    appraiser familiar with the Fair Market
                                    Rental of first-class commercial office
                                    space in the downtown San Francisco area who
                                    would qualify as an expert witness over
                                    objection to give opinion testimony
                                    addressed to the issue in a court of
                                    competent jurisdiction. Failure on the part
                                    of Tenant to make a proper demand in a
                                    timely manner for such arbitration shall
                                    constitute a waiver of the right thereto and
                                    acceptance of Landlord's determination of
                                    Fair Market Rental. Within fifteen (15) days
                                    after the service of the demand for
                                    arbitration, Landlord shall give notice to
                                    Tenant, specifying the name and address of
                                    the person designated by Landlord to act as
                                    arbitrator on its behalf who shall be
                                    similarly qualified. If Landlord fails to
                                    notify Tenant of the

                                       3.
<PAGE>   24

                                    appointment of its arbitrator, within or by
                                    the time above specified, then the
                                    arbitrator appointed by Tenant shall be the
                                    arbitrator to determine the issue.

                                            (B) In the event that two
                                    arbitrators are chosen pursuant to paragraph
                                    b(iii)(A) above, the arbitrators so chosen
                                    shall, within fifteen (15) days after the
                                    second arbitrator is appointed determine the
                                    Fair Market Rental. If the two arbitrators
                                    shall be unable to agree upon a
                                    determination of Fair Market Rental within
                                    such 15-day period, they, themselves, shall
                                    appoint a third arbitrator, who shall be a
                                    competent and impartial person with
                                    qualifications similar to those required of
                                    the first two arbitrators pursuant to
                                    paragraph b(iii)(A). In the event they are
                                    unable to agree upon such appointment within
                                    seven (7) days after expiration of said
                                    15-day period, the third arbitrator shall be
                                    selected by the parties themselves, if they
                                    can agree thereon, within a further period
                                    of fifteen (15) days. If the parties do not
                                    so agree, then either party, on behalf of
                                    both, may request appointment of such a
                                    qualified person by the then Chief Judge of
                                    the United States District Court having
                                    jurisdiction over the City and County of San
                                    Francisco, acting in his private and not in
                                    his official capacity, and the other party
                                    shall not raise any question as to such
                                    Judge's full power and jurisdiction to
                                    entertain the application for and make the
                                    appointment. The three arbitrators shall
                                    decide the dispute if it has not previously
                                    been resolved by following the procedure set
                                    forth below.

                                             (C) Where an issue cannot be
                                    resolved by an agreement between the two
                                    arbitrators selected by Landlord and Tenant
                                    or settlement between the parties during the
                                    course of arbitrations, the issue shall be
                                    resolved by the three arbitrators within
                                    fifteen (15) days of the appointment of the
                                    third arbitrator in accordance with the
                                    following procedure. The arbitrator selected
                                    by each of the parties shall state in
                                    writing his determination of the Fair Market
                                    Rental supported by the reasons therefor
                                    with counterpart copies to each party. The
                                    arbitrators shall arrange for a simultaneous
                                    exchange of such proposed resolutions. The
                                    role of the third arbitrator shall be to
                                    select which of the two proposed resolutions
                                    most closely approximates his determination
                                    of Fair Market Rental. The third arbitrator
                                    shall have no right to

                                       4.
<PAGE>   25

                                    propose a middle ground or any modification
                                    of either of the two proposed resolutions.
                                    The resolution he chooses as most closely
                                    approximating his determination shall
                                    constitute the decision of the arbitrators
                                    and be final and binding upon the parties.

                                            (D) In the event of a failure,
                                    refusal or inability of any arbitrator to
                                    act, his successor shall be appointed by
                                    him, but in the case of the third
                                    arbitrator, his successor shall be appointed
                                    in the same manner as provided for
                                    appointment of the third arbitrator. The
                                    arbitrators shall decide the issue within
                                    fifteen (15) days after the appointment of
                                    the third arbitrator. The decision of the
                                    arbitrators shall be binding and conclusive
                                    upon the parties. Each party shall pay the
                                    fee and expenses of its respective
                                    arbitrator and both shall share the fee and
                                    expenses of the third arbitrator, if any,
                                    and the attorneys' fees and expenses of
                                    counsel for the respective parties and of
                                    witnesses shall be paid by the respective
                                    party engaging such counsel or calling such
                                    witnesses.

                                            (E) The arbitrators shall have the
                                    right to consult experts and competent
                                    authorities to obtain factual information or
                                    evidence pertaining to a determination of
                                    Fair Market Rental, but any such
                                    consultation shall be made in the presence
                                    of both parties with full right on their
                                    part to cross-examine. The arbitrators shall
                                    render their decision and award in writing
                                    with counterpart copies to each party. The
                                    arbitrators shall have no power to modify
                                    the provisions of this Lease.

                  4.       TAX INCREASES AND ASSESSMENTS.

                           (a) CHANGE IN OWNERSHIP DURING INITIAL TERM. Not-
withstanding anything contained in Paragraph 6(b) of the Lease, during the
Initial Term Tenant shall have no obligation to pay any increases in real
property taxes which are attributable to any transaction by Landlord which
results in a reassessment of the building other than transactions requested by
Tenant after the Lease Commencement Date.

                           (b) PAYMENTS. Tenant shall pay to Landlord monthly as
additional rent during each Lease Year a sum equal to one-twelfth (1/12th) of
Tenant's percentage share of the amount of any increase in real property taxes
and assessments as described in Paragraph 6 (b) of the Lease, payable on or
before the first day of each month during such Lease Year, in advance, in an
amount reasonably estimated by Landlord and billed by Landlord to Tenant, and
Landlord shall have the right initially to determine monthly estimates and to
revise such estimates from time to time. After

                                       5.
<PAGE>   26

Landlord has received the bills for the property taxes and assessments for any
year, Landlord shall furnish Tenant with a statement ("Landlord's Tax
Statement") setting forth the amount of the Tenant's percentage share of the
increase in taxes for such year, which may include any legal fees or expenses
incurred by Landlord in seeking the reduction of such taxes. Such statement
shall credit Tenant with its proportionate share of any refund of taxes received
by the Landlord in the Lease Year and not credited to Tenant and shall be
accompanied by a copy of the tax bill, the refund statement and the bill for
legal services, if any, received by Landlord. If the actual Tenant's Percentage
Share of increases in taxes, including any refund and legal fees, for such year
exceeds the estimated amounts paid by Tenant for such year, Tenant shall pay to
Landlord the difference between the amount paid by Tenant and the actual
increase in taxes payable by Tenant within thirty (30) days after Landlord's Tax
Statement has been given to Tenant, and if the total amount paid by Tenant for
such year exceeds the actual increase in taxes payable by Tenant for such year,
such excess shall be credited against installments of increase in taxes due from
Tenant to Landlord until Tenant has fully recouped such excess payment; or, if
such excess payment is made during the last Lease Year of the Lease Term, such
excess shall be refunded to Tenant, within thirty (30) days after Landlord's
delivery of tax statement to Tenant.

                  5.       OPERATING EXPENSE INCREASES.

                           (a)      DEFINITION OF "DIRECT EXPENSES".  Notwith-
standing anything contained in Paragraph 6(c) of the Lease, Direct expenses
shall also include: (1) salaries, wages and payroll burden, (2) premiums and
other charges incurred by Landlord with respect to fire, other casualty, rent
and liability insurance, and, after the Base Year, costs of repairing an insured
casualty to the extent of the deductible amount under the applicable insurance
policy; (3) telephone, postage, stationery supplies and other reasonable
expenses directly incurred in connection with the operation, maintenance or
repair of the building; (4) repairs to and physical maintenance of the building,
including building systems and appurtenances thereto and normal repair and
replacement of worn-out equipment, facilities and installations, but excluding
the replacement of major building systems (except as otherwise provided in
Paragraph 6(c) of the Lease; (5) rubbish removal, window cleaning, security,
plumbing, service contracts for elevator, electrical, telecommunications,
cabling, mechanical and other building equipment and systems or as may otherwise
be necessary or proper for the operation or maintenance of the building; (6)
supplies, tools and equipment used in connection with the operation, maintenance
or repair of the building; (7) accounting, legal and other professional fees and
expenses; and (8) painting the exterior or the common areas of the building and
maintaining the sidewalks and landscaping and public areas of the building.

                           (b) OPERATING COST EXCLUSIONS. Notwithstanding the
provisions of paragraph (a) above, the following shall not be included within
Operating Expenses:

                                       6.
<PAGE>   27

                                    (1) Leasing commissions, attorneys' fees,
                           costs, disbursements, and other expenses incurred in
                           connection with negotiations or disputes with
                           tenants, or in connection with leasing, renovating,
                           or improving space for tenants or other occupants or
                           prospective tenants or other occupants of the
                           building.

                                    (2) The cost of any service sold to any
                           tenant (including Tenant) or other occupant for which
                           Landlord is entitled to be reimbursed as an
                           additional charge or rental over and above the basic
                           rent and escalations payable under the lease with
                           that tenant.

                                    (3) any depreciation on the building or
                           property.

                                    (4) Except as otherwise permitted in the
                           Lease, costs of a capital nature, including but not
                           limited to capital improvements and alterations,
                           capital repairs, capital equipment, and capital tools
                           as determined in accordance with generally accepted
                           accounting principles.

                                    (5) Expenses in connection with services or
                           other benefits of a type that are not provided to
                           Tenant but which are provided another tenant or
                           occupant of the building or property.

                                    (6) Costs incurred due to Landlord's
                           violation of any terms or conditions of this Lease or
                           any other lease relating to the building or property.

                                    (7) Overhead profit increments paid to Land-
                           lord's subsidiaries or affiliates for management or
                           other services on or to the building or for supplies
                           or other materials to the extent that the cost of the
                           services, supplies, or materials exceeds the cost
                           that would have been paid had the services, supplies,
                           or materials been provided by unaffiliated parties on
                           a competitive basis.

                                    (8) All interest, loan fees, and other
                           carrying costs related to any mortgage or deed of
                           trust or related to any capital item, which is an
                           excluded operating cost under the Lease, and all
                           rental and other payable due under any ground or
                           underlying lease, or any lease for any equipment
                           ordinarily considered to be of a capital nature
                           (except janitorial equipment which is not affixed to
                           the building).

                                    (9) Any compensation paid to clerks, attend-
                           ants, or other persons in commercial concessions
                           operated by Landlord.

                                       7.
<PAGE>   28

                                    (10) Advertising and promotional
                           expenditures.

                                    (11) Costs of repairs and other work
                           occasioned by fire, windstorm, or other casualty of
                           an insurable nature to the extent Landlord receives
                           insurance proceeds to cover such costs.

                                    (12) Any costs, fines, or penalties incurred
                           due to violations by Landlord of any governmental
                           rule or authority, this Lease or any other lease in
                           the property, or due to Landlord's negligence or
                           willful misconduct.

                                    (13) Management costs to the extent they
                           exceed management costs charged for similar
                           facilities in the area and in any event, to the
                           extent they exceed six percent (6%) of all other
                           Operating Expenses.

                                    (14) Costs for sculpture, paintings, or
                           other objects of art (nor insurance thereon or
                           extra-ordinary security in connection therewith).

                                    (15) Wages, salaries, or other compensation
                           paid to any executive employees above the grade of
                           building manager.

                                    (16) The cost of correcting any building
                           code or other violations which were violations prior
                           to the Commencement Date.

                                    (17) the cost of containing, removing, or
                           otherwise remediating any contamination of the
                           property (including the underlying land and ground
                           water) by any Hazardous Substances, as defined in
                           Paragraph 8(b) of this Addendum, (including, without
                           limitation, asbestos and "PCB's") where such
                           contamination was not caused by Tenant or any
                           employee, agent or invitee of Tenant.

                                    (18) Any other expense that under generally
                           accepted accounting principles and practice
                           consistently applied would not be considered a normal
                           maintenance or operating expense.

                           (c)      PAYMENT OF INCREASES IN DIRECT EXPENSES.
Tenant shall pay to Landlord monthly as additional rent during each Lease Year a
sum equal to one-twelfth (1/12th) of Tenant's percentage share of increases in
Direct expenses for such Lease Year, payable on or before the first day of each
month of such Lease Year, in advance, in an amount reasonably estimated by
Landlord and billed by Landlord to Tenant, and Landlord shall have the right
initially to determine monthly estimates and to revise such estimates from time
to time. Within ninety (90) days after the end of each Lease Year, Landlord
shall furnish Tenant with a statement ("Landlord's Expense Statement"), setting
forth in reasonable detail the Direct expenses for such Lease Year, and

                                       8.
<PAGE>   29

Tenant's Percentage Share of increases in Direct expenses over the Base Year. If
the actual increase in Direct expenses for said Lease Year exceed the estimated
increase in Direct expenses paid by Tenant for such year, Tenant shall pay to
Landlord the difference between the amount paid by Tenant and the actual
increase in Direct expenses within thirty (30) days after Landlord's Expense
Statement has been given to Tenant, and if the total amount paid by Tenant for
any such year exceeds the actual increase in Direct expenses for such year, such
excess shall be credited against installments of the estimated increase in
Direct expenses due from Tenant to Landlord hereunder until Tenant has fully
recouped such excess payment; or, if such excess payment is made during the last
Lease Year of the Initial Term, such excess shall be refunded to Tenant within
thirty (30) days after Landlord's delivery of Operating Expense Statement to
Tenant. Tenant shall have no obligation to pay any amounts hereunder if
Landlord's Expense Statement is not delivered within three (3) years after the
end of such Lease Year. A Landlord's Expense Statement for any Lease Year shall
be conclusively deemed to be correct if not objected to by Tenant, Landlord or
Landlord's successor within three years following the expiration of such Lease
Year. Tenant hereby waives the benefit of any statute of limitations that would
extend Tenant's right to challenge the propriety of any Direct expenses
contained in any Landlord's Expense Statement beyond the three year period
agreed to in the preceding sentence.

                           (d) TENANT'S AUDIT RIGHTS. Within ninety (90) days
after receipt of Landlord's statement setting forth actual Operating Expenses
and Direct Expenses (the "Statement"), Tenant shall have the right to audit at
Landlord's local offices, at Tenant's expense, Landlord's accounts and records
relating to Operating Expenses and Direct Expenses. Such audit shall be
conducted by a certified public accountant approved by Landlord, which approval
shall not be unreasonably withheld. If such audit reveals that Landlord has
overcharged Tenant, the amount overcharged shall be paid to Tenant within thirty
(30) days after the audit is concluded. If the Statement exceeds the actual
Operating Expenses and Direct Expenses which should have been charged to Tenant
by more than seven percent (7%), the cost of the audit shall be paid by
Landlord.

                  6.       [PROVISION INTENTIONALLY OMITTED]

                  7. COMPLIANCE WITH COVENANTS. Landlord warrants to Tenant that
on the Lease Commencement Date, the premises and all improvements thereon (a)
shall be free from material structural defects and (b) shall comply with all
applicable covenants and restrictions of record, statutes, ordinances, codes,
rules, regulations, orders, and requirements, including, without limitation,
Title 24 of the California Administrative Code and the Americans with
Disabilities Act. In the event of a breach of any of the foregoing warranties,
Landlord shall rectify such breach at its sole cost and expense. Nothing
contained herein shall constitute a warranty by Landlord of the plans and
specifications for the premises as prepared by Tenant's architect pursuant to
the Work Letter.

                                       9.
<PAGE>   30

                  8.       COMPLIANCE WITH LAWS.

                           (a) TENANT'S USE OF HAZARDOUS SUBSTANCES. In addition
to the provisions of Paragraph 9 of the Lease, Tenant shall not use, store,
dispose, release, discharge, transport or generate (collectively "Use of
Hazardous Substances") any Hazardous Substances (as defined below), in, on, to,
under, from or about the premises or the building without Landlord's prior
written consent, which consent may be granted on conditions or withheld in
Landlord's sole and absolute discretion. Tenant warrants and agrees that if
Landlord grants its consent to Tenant's Use of Hazardous Substances, such Use of
Hazardous Substances shall be conducted in strict accordance with all
Environmental Laws (as defined below) and prudent business practices. Any
consent or approval by Landlord of Tenant's Use of Hazardous Substances shall
not constitute an assumption of risk respecting the same nor a warranty or
certification by Landlord that Tenant's proposed Use of Hazardous Substances is
safe or reasonable or in compliance with Environmental Laws. Tenant shall
maintain current all permits required for its operations, including, without
limitation, those for the Use of Hazardous Substances. Tenant shall keep and
maintain the premises in compliance with all, and shall not cause or permit the
premises and the activities conducted thereon by Tenant to be in violation of
any, Environmental Laws. Tenant shall not undertake any remedial action with
respect to any release of Hazardous Substances or to comply with any violation
of any Environmental Law without obtaining the prior written consent of Landlord
which shall not be unreasonably withheld or delayed unless any delay in
undertaking any such remedial action may expose Tenant to any liability. If
Tenant's use of Hazardous Substances results in an increase in the premiums of
any insurance that Landlord is required to maintain under this Lease, then
Tenant shall pay the amount of such increased premiums. Additionally, Landlord
may require that Tenant procure, at Tenant's sole cost and expense, additional
insurance that specifically covers loss or damage to persons or property that
may result from Tenant's use of such Hazardous Substances.

                           (b) DEFINITIONS. As used in this Lease, the term
"Hazardous Substances" shall mean any substances or materials which at such time
are classified or are considered to be hazardous or toxic under any
Environmental Law, including, without limitation, petroleum products, asbestos
and PCBs. As used in this Lease, the term "Environmental Laws" shall mean any
and all present and future federal, state and local laws (whether under common
law, statute, rule, regulation or otherwise), requirements under permits issued
with respect thereto, and other requirements of governmental authorities
relating to the environment or to any Hazardous Substance (including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as heretofore or hereafter amended from time to time.

                           (c) LANDLORD'S ENVIRONMENTAL INDEMNITY. Landlord
warrants to Tenant that on the commencement of the term hereof, the premises
comply with Environmental laws. In the event of a breach of the foregoing
warranty, Landlord shall take all reasonable steps to remedy such breach.
Landlord shall protect, indemnify, defend,

                                      10.
<PAGE>   31

and hold Tenant harmless from and against any and all liability, loss, suits,
claims, actions, costs, and expense (including, without limitation, attorneys'
fees) arising from (a) any breach of the foregoing warranty and (b) any
contamination of the premises by any Hazardous Substances where such
contamination was caused by Landlord. The provisions of this paragraph shall
survive the termination of this Lease.

                  9. ALTERATIONS AND RESTORATION OF PREMISES. Notwithstanding
anything contained in Paragraph 10 of the Lease, after the Commencement Date,
Tenant shall not be required to obtain Landlord's prior written consent for
alterations, additions or improvements to or of the premises if the anticipated
cost of any such alteration, addition or improvement is less than $7,000;
provided, however, that any alteration, addition or improvement, regardless of
its anticipated cost, that will affect the structural portions or the mechanical
or utility systems of the Building shall require Landlord's prior written
consent, which shall not be unreasonably withheld or delayed. Upon the
expiration or sooner termination of the Term, upon demand by Landlord, at
Tenant's sole cost and expense, Tenant shall with all due diligence:

                           (a) remove any initial Tenant Improvements that were
constructed by Landlord to provide private access from the premises to the third
floor of the Building to the extent that the cost of removing such items does
not exceed $50,000;

                           (b) remove any alterations, additions or improvements
made by Tenant and designated for removal by Landlord at the time Landlord
approves such alterations; and

                           (c) repair any damage to the premises caused by any
such removal pursuant to subparagraphs (a) and (b) above.

                  10.      ASSIGNMENT AND SUBLETTING.

                           (a) For purposes of Paragraph 14(a) of the Lease, it
shall not be unreasonable for Landlord to consider the following, among others:
(a) reputation and character of the proposed assignee or sublessee; (b) the
financial worth of the proposed assignee or sublessee; (c) the business
experience of the proposed assignee or sublessee; (d) the number of separate
uses of the premises and (e) other similar matters. In no event shall it be
considered unreasonable for Landlord to withhold its consent to a proposed
assignment or sublease if such proposed assignment or sublease would cause
Landlord to be in default of a lease with another tenant or occupant of the
building. If Landlord approves such assignment or subletting, Tenant shall
proceed with such assignment or subletting and such transfer shall be upon and
subject to the terms of this Lease and Tenant shall pay Landlord a sum equal to
fifty percent (50%) of any rent or other consideration paid to Tenant by any
assignee or sublessee which is in excess of the rent then being paid to Landlord
by Tenant pursuant to the terms of this Lease net of: (a) leasing commissions;
(b) tenant improvements payable by Tenant; and (c) other transaction costs not
to exceed $6,000 in the aggregate including but not limited to attorneys' fees
and the Landlord's approval fee.

                                      11.
<PAGE>   32

                           (b) If Tenant delivers a Sublet Notice to Landlord,
the Sublet Notice shall be accompanied by a proposed draft of the assignment or
sublease ("Draft"). Landlord shall have fifteen (15) business days after
delivery of such Draft to grant its consent or to notify Tenant, in writing, of
its intent to withhold consent. If Landlord does not withhold its consent,
Tenant shall thereafter deliver a copy of the executed sublease or assignment to
Landlord and Landlord shall have five (5) business days thereafter to grant its
consent or to notify Tenant in writing, of its intent to withhold consent;
provided, however, Landlord shall have no right to withhold its consent if the
executed sublease or assignment is substantially the same as the proposed Draft
previously approved by Landlord on the same economic terms and conditions as
approved by Landlord.

                           (c) Notwithstanding anything contained in Paragraph
14(f) of the Lease, Tenant may assign or sublease this Lease to an affiliate or
subsidiary without Landlord's consent. Tenant shall provide Landlord written
notice of such assignment or sublease on or before the effective date of such
assignment or sublease.

                  11.      UTILITIES AND SERVICES.

                           (a) GENERAL. So long as Tenant is not in material
default in the performance of its obligations under this Lease, Landlord shall:

                                    (1) Operate or cause the operation in season
                           of the heating, ventilating and air-conditioning
                           ("HVAC") system presently serving the premises, at
                           such temperatures and in such amounts as Landlord
                           determines are reasonably required for the
                           comfortable occupancy of the premises or as may be
                           permitted or controlled by applicable laws,
                           ordinances, rules and regulations. Any HVAC provided
                           by Landlord to Tenant shall be at Tenant's sole cost
                           and expense, which shall be an amount equal to
                           Landlord's cost of supplying HVAC to the HVAC zone of
                           which the premises are a part. Tenant shall also be
                           responsible for and shall pay Landlord any additional
                           costs (including, without limitation, the costs of
                           installation of additional HVAC equipment) incurred
                           because of the failure of the HVAC system to perform
                           its function due to arrangement of partitioning in
                           the premises after the initial tenant improvements or
                           changes or alterations thereto, from any use of heat-
                           generating machinery or equipment, from occupancy of
                           the premises exceeding one person per one hundred
                           twenty (120) square feet of rentable area, or for
                           failure of Tenant to keep all HVAC vents within the
                           premises free of obstruction.

                                    (2) Provide access to water in the
                           lavatories in the premises and make customary
                           arrangements with public utilities and/or public
                           agencies to furnish electric current to the premises
                           as

                                      12.
<PAGE>   33

                           specified in Paragraph (G) of the Work Letter. The
                           cost of all electricity serving the Premises shall be
                           paid for by Tenant directly to the utility company.
                           Landlord shall, at its sole cost and expense, install
                           a separate electrical meter in the premises.

                                    (3) Operate, maintain, clean, light, heat,
                           ventilate and air-condition the common areas of the
                           building and provide such security as may be
                           reasonably necessary during business hours only.
                           Landlord shall not be liable to Tenant for losses due
                           to theft or burglary, or for damages or injury done
                           by unauthorized persons in the building. Landlord
                           shall provide elevator service in the building on a
                           24 hours per day, seven days per week basis.

                                    (4) Provide janitorial service to the
                           building at a standard provided to other comparable
                           office buildings in San Francisco on each weekday,
                           exclusive of Saturday, Sunday and holidays, subject
                           to access being granted to the person or persons
                           employed or retained by Landlord to perform such work
                           at such time as prescribed by Landlord.

                                    (5) Notify Tenant in writing at least
                           forty-eight (48) hours before any intentional
                           shut-down of electrical power or HVAC serving the
                           premises, except in the case of an emergency.

                           Notwithstanding the terms of this Lease to the
contrary, if any building service is interrupted for a period of five (5)
consecutive business days due to the gross negligence or willful acts of
Landlord, its agents, servants, employees, contractors or subcontractors, or ten
(10) consecutive business days for any other reason and such failure adversely
effects Tenant's use of the premises for Tenant's normal business operations,
then there shall be an abatement of Base Rent from and after said fifth (5th) or
tenth (10th) day, until such services are restored. However, if such failure
lasts for one hundred twenty (120) consecutive days, Tenant shall have the
option, upon written notice to Landlord, to terminate this Lease. Landlord
agrees to use its best efforts to restore such services as soon as possible. If
Landlord has not diligently commenced efforts to restore such services within
three (3) days of such interruption, Tenant may make any necessary repairs and
may deduct the actual cost of such repairs from the next installment or
installments of rent due hereunder.

                           (b) SUPPLEMENTARY SERVICES. Tenant shall pay
Landlord, at the charges established by Landlord from time to time, for all
supplementary services requested by Tenant, which charges shall be payable by
Tenant upon demand by Landlord. Such supplementary services shall include,
without limitation, maintenance, repair, janitorial, cleaning and other services
provided

                                      13.
<PAGE>   34

during hours other than ordinary business hours and/or in amounts not considered
by Landlord as standard.

                           (c) INTERRUPTION OF ACCESS, USE OR SERVICES. Land-
lord shall not be liable for any failure to provide access to or use of the
premises, or to furnish any services or utilities when such failure is caused by
nature occurrences, riots, civil disturbances, insurrection, war, court order,
public enemy, accidents, breakage, repairs, strikes, lockouts, other labor
disputes, the making of repairs, alterations or improvements to the premises or
the building, the inability to obtain an adequate supply of fuel, gas, steam,
water, electricity, labor or other supplies or by any other condition beyond
Landlords' reasonable control, and Tenant shall not be entitled to any damages
resulting from such failure,nor shall such failure relieve Tenant of the
obligation to pay all sums due hereunder or constitute or be construed as a
constructive or other eviction of Tenant. If any governmental entity promulgates
or revises any statute, ordinance or building, fire or other code, or imposes
mandatory or voluntary controls or guidelines on Landlord or the building or any
part thereof, relating to the use or conservation of energy, water, gas, steam,
light or electricity or the provision of any other utility or service provided
with respect to this Lease, or if Landlord is required or elects to make
alterations to the building in order to comply with such mandatory or voluntary
controls or guidelines, or make such alterations to the building, neither such
compliance nor the making of such alterations shall in any event entitle Tenant
to any damages, relieve Tenant of the obligation to pay any of the sums due
hereunder, or constitute or be construed as a constructive or other eviction of
Tenant.

                  12. SUBORDINATION AGREEMENT. Landlord specifically agrees that
(i) Tenant may conclusively rely upon any written notice Tenant receives from
the beneficiary of any mortgage or deed of trust ("Lender"), encumbering the
building and/or the land upon which the building is situated, notwithstanding
any claim by Landlord contesting the validity of any term or condition of such
notice, including, but not limited to, any default claimed by Lender and (ii)
that Landlord shall not make any claim of any kind against Tenant or Tenant's
leasehold interest with respect to amounts paid to Lender by Tenant or any acts
performed by Tenant pursuant to such written notice. As a condition to Tenant's
execution of this Lease, Landlord hereby covenants and agrees to deliver to
Tenant, prior to the Lease Commencement Date, a Subordination, Non-Disturbance
and Attornment Agreement executed by Wells Fargo Bank, National Association, in
a form reasonably acceptable to Tenant (the "Non-Disturbance"). In the event
that Landlord does not deliver the Non-Disturbance to Tenant prior to the Lease
Commencement Date, this Lease shall terminate and be of no further force and
effect, Landlord shall immediately return to Tenant the Security Deposit and any
and all other funds theretofore delivered by Tenant to Landlord, and neither
Tenant nor Landlord shall have any further liability under this Lease.
Notwithstanding anything in this Lease to the contrary, as a condition to
Tenant's subordination to any future mortgages, deeds of trust, or ground or
underlying leases affecting the premises, Tenant shall receive a

                                      14.
<PAGE>   35

non-disturbance agreement in a form reasonably acceptable to Landlord and
Tenant.

                  13. TENANT'S DEFAULT. Tenant shall be deemed to be in default
under this Lease upon the occurrence of any of the following events ("Event of
Default"): (a) Tenant shall fail to pay any Rent within five (5) days after the
same becomes due and payable; (b) Tenant shall fail to pay any other sum when
and as the same becomes due and payable and such failure shall continue for more
than five (5) business days after written notice that such payment was not
received when due; (c) Tenant shall fail to observe, keep or perform any of the
other terms, covenants, agreements or conditions contained in this Lease or in
the rules and regulations described in Paragraph 6 above and on the part of
Tenant to be observed or performed and such default continues for a period of
thirty (30) days after written notice by Landlord and Tenant shall not within
said period commence with due diligence the curing of such default or, having so
commenced, shall thereafter fail or neglect with due diligence to complete the
curing of such default or shall not, in all events, complete the curing of such
default within ninety (90) days after the original default notice to Tenant; (d)
Tenant shall file a petition for bankruptcy or become insolvent or make a
transfer in fraud of creditors, or make an assignment for the benefit of
creditors, or commence or there is commenced against Tenant any proceedings of
any kind under any provision of the United States Bankruptcy Code or under any
other insolvency, bankruptcy or reorganization act and, in the event any such
proceedings are involuntary, Tenant is not discharged from the same within
ninety (90) days thereafter; (e) a receiver is appointed for a substantial part
of the assets of Tenant and is not dismissed or discharged within ninety (90)
days; (f) Tenant shall abandon the premises; or (g) this Lease or any estate of
Tenant hereunder shall be levied upon by any attachment or execution which is
not discharged or bonded against within thirty (30) days.

                  14. BANKRUPTCY OF TENANT. To the extent permitted under
then-applicable law, if a petition is filed by or against Tenant for relief
under Title 11 of the United States Code, as amended (the "Bankruptcy Code"),
and Tenant (including for purposes of this paragraph Tenant's successor in
bankruptcy, whether a trustee or Tenant as debtor in possession) assumes and
proposes to assign, or proposes to assume and assign, this Lease pursuant to the
provisions of the Bankruptcy Code to any person or entity who has made a bona
fide offer to accept any assignment of this Lease on the terms acceptable to
Tenant, then notice of the proposed assignment setting forth (a) the name and
address of the proposed assignee, (b) all of the terms and conditions of the
offer and proposed assignment, and (c) the adequate assurance to be furnished by
the proposed assignee of its future performance under the Lease, shall be given
to Landlord by Tenant no later than twenty (20) days after the Tenant has made
or received such offer, but in no event later than ten (10) days prior to the
date on which Tenant applies to a court of competent jurisdiction for authority
and approval to enter into the proposed assignment. Landlord shall have the
prior right and option, to be exercised by notice to Tenant given at any time
prior the date on which the court order authorizing such assignment becomes
final and non-appealable, to receive an

                                      15.
<PAGE>   36

assignment of this Lease upon the same terms and conditions, and for the same
consideration, if any, as the proposed assignee, less any brokerage commissions
which may otherwise be payable out of the consideration to be paid by the
proposed assignee for the assignment of this Lease. If this Lease is assigned
pursuant to the provisions of the Bankruptcy Code, Landlord: (i) may require
from the assignee a deposit or other security for the performance of its
obligations under the Lease in an amount substantially the same as would have
been required by Landlord upon the initial leasing to a tenant similar to the
assignee; and (ii) shall receive, as additional rent, the sums and economic
consideration described in Paragraph 7 of this Addendum. Any person or entity to
which this Lease is assigned pursuant to the provisions of the Bankruptcy Code
shall be deemed, without further act or documentation, to have assumed all of
the Tenant's obligations arising under this Lease on and after the date of such
assignment. No provision of this Lease shall be deemed a waiver of Landlord's
rights or remedies under the Bankruptcy Code to oppose any assumption and/or
assignment of this Lease, to require a timely performance of Tenant's
obligations under this Lease, or to regain possession of the premises if this
Lease has neither been assumed nor rejected within sixty (60) days after the
date of the order for relief or within such additional time as a court of
competent jurisdiction may have fixed. Notwithstanding anything in this Lease to
the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated as rent, shall constitute rent
for the purposes of Section 502(b)(6) of the Bankruptcy Code.

                  15. DAMAGE AND DESTRUCTION. This paragraph shall be in
replacement of Paragraph 25(b) of the Lease: "Landlord shall notify Tenant
within thirty (30) days of the date of a casualty, and such notice shall specify
Landlord's architect's or engineer's reasonable estimate as to the time required
to rebuild or restore the Premises. If such repairs cannot in Landlord's
reasonable opinion be completed within one hundred twenty (120) days after
issuance of a building permit therefor or if such damage is uninsured, either
Landlord or Tenant may elect to terminate this Lease by giving written notice
thereof within sixty (60) days after the date of such fire or casualty. If
either Landlord or Tenant elects to terminate this Lease, the Lease shall
terminate as of the termination date specified in either party's notice. If
neither party elects to terminate the Lease, Landlord shall commence restoration
of the premises.

                           If Landlord fails to restore the premises within a
period which is thirty (30) days longer than the period Landlord estimates as
the rebuilding period, Tenant may within ten (10) days thereafter terminate this
Lease by delivering written notice to Landlord of such termination, in which
event this Lease shall terminate as of the date of the giving of such notice.

                           If the damage or destruction to the Premises is of
such a nature that Tenant reasonably determines that such damage or destruction
will materially interfere with the conduct of Tenant's business, and Landlord is
obligated to restore the Premises under this section, and Landlord fails to
restore the

                                      16.
<PAGE>   37

Premises (including reasonable means of access thereto) within said one hundred
twenty (120) days, Tenant, at any time thereafter until such restoration is
completed, may terminate this Lease by delivering written notice to Landlord of
such termination, in which event this Lease shall terminate as of the date of
the giving of such notice.

                  16. LIMITATION OF RECOVERY AGAINST LANDLORD. Tenant
acknowledges and agrees that the liability of Landlord (which for purposes of
this Paragraph shall include all partners, both general and limited, of any
partnership and the officers, directors and shareholders of any corporation and
the members and managers of any limited liability company) under this Lease
shall be limited to its interest in the building, and any judgments rendered
against Landlord shall be satisfied solely out of the proceeds of sale of its
interest in the building. No officer, member, manager or partner of Landlord
shall be named as a party in any suit or action (except as may be necessary to
secure jurisdiction over Landlord) and no personal judgment shall lie against
Landlord. Tenant agrees that the foregoing covenants and limitations shall be
applicable to any obligation or liability of Landlord, whether expressly
contained in this Lease or imposed by statute or at common law. The foregoing
provisions are not intended to relieve Landlord from the performance of any of
Landlord's obligations under this Lease, but only to limit the personal
liability of Landlord in case of recovery of a judgment against Landlord.

                  17. AUTHORITY. Each of the persons executing this Lease on
behalf of the Tenant does hereby covenant and warrant that Tenant is duly
organized and validly existing, that Tenant has and is qualified to do business
in California, that Tenant has full right and authority to enter into this Lease
and to carry out the transactions contemplated herein, and that each person
signing on behalf of Tenant is authorized to do so.

                  18. BASIC LEASE INFORMATION. At such time as all the Lease
terms called for in the Basic Lease Information attached hereto have been
finally determined in accordance with the provisions of this Lease, the Basic
Lease Information shall be completed and signed by the parties and shall
thereafter be a final and binding agreement of the parties as to the terms and
conditions set forth therein.

                  19. NO CONSTRUCTION AGAINST PREPARER. This Lease has been
prepared by Landlord and its professional advisors and reviewed by Tenant and
its professional advisors. Landlord, Tenant, and their separate advisors believe
that this Lease is the product of all of their efforts, that it expresses their
agreement, and that it should not be interpreted in favor of either Landlord or
Tenant or against either Landlord or Tenant merely because of their efforts in
preparing it.

                  20. FORCE MAJEURE. In addition to specific provisions of this
Lease, the time within which a party is to perform an obligation under this
Lease shall be extended on a day for day basis to the extent such performance is
delayed as a result of labor or supply difficulties, inclement weather, acts of
God,

                                      17.
<PAGE>   38

government regulation, additions, modifications or withdrawals of, or delays in
obtaining, governmental consents or approvals, building moratoria or
restrictions, requirements to prepare further environmental impact documents or
to conduct further environmental impact studies, or any similar cause beyond the
reasonable control or without the fault of the party invoking such extension.
Nothing contained in the foregoing sentence, however, shall excuse Tenant from
its obligation to timely pay Rent or any other monetary amounts owing under this
Lease. Any party invoking an extension under this Paragraph shall immediately
notify the other party in writing of the occurrence and nature of the force
majeure event and the anticipated delay resulting therefrom.

                  21. SIGNAGE. Tenant may, at Tenant's sole cost and expense,
install on the exterior facade of the building as well as on the lobby directory
and at the entrance to the premises on both the second floor, and on a flag pole
on the roof such signs subject to Landlord's approval which shall not be
unreasonably withheld or delayed, and otherwise in accordance with the
ordinances of the City of San Francisco.

                  22. PARKING. During the initial term of the Lease, Tenant
shall have the right to lease up to thirteen (13) parking spaces in the parking
lot located at 676-680 3rd Street, San Francisco, California ("South Spaces") at
an initial monthly rental rate of $100 per space ("Parking Rate") on the terms
and conditions established by Landlord from time to time for the use of such
parking spaces ("Parking Terms"); provided, however, that Tenant's right to
lease the South Spaces is expressly contingent on and subject to the continued
existence of Landlord's right to the spaces as set forth in that lease dated
July 28, 1986 between Williamson Estate, Inc., as landlord, and Landlord, as
tenant. Landlord may, at is option, move Tenant's right to the South Spaces to
spaces located in the building's north parking lot provided Landlord can
guaranty Tenant access to such spaces during the initial term of this Lease.
After the first Lease Year, the Parking Rate for all spaces leased by Tenant
shall be subject to increase as a result of an increase in the Consumers Price
Index ("CPI"), effective on the first day of such Lease Year computed as
follows: the then monthly Parking Rate shall be multiplied by a fraction, the
numerator of which shall be equal to the index (defined below) available
immediately prior to the expiration of the prior Lease Year and the denominator
of which shall be equal to the Index available immediately prior to the
commencement of the Prior Lease Year. The basis for computing each CPI increase
shall be the CPI for All Urban Consumers, San Francisco-Oakland-San Jose area,
All Items (1982-84=100), as published by the United States Department of Labor,
Bureau of Labor Statistics ("Index"). If publication of the Index by any
governmental or private agency is discontinued or if it so modified that it does
not accurately reflect the changes in consumer prices from one Lease Year to
another then the Landlord and Tenant shall use such other index as is then
generally recognized and accepted for similar determination of changes in
consumer prices. If the Index is revised, it shall be converted in accordance
with the conversion factor published by the Bureau of Labor Statistics or any
other governmental agency then publishing same.

                                      18.
<PAGE>   39

                  23. BROKERAGE COMMISSION. The parties hereto acknowledge that
no broker or finder has represented either party with respect to this Lease. If
a broker or finder claims that it represented Landlord or Tenant in connection
with this Lease and that it is entitled to a commission or finder's fee, then
the party whom such broker or finder claims to represent (whether Landlord or
Tenant) shall indemnify, protect and defend the other from all loss, claim,
expense and liability arising out of such claim, including reasonable attorneys'
fees.

                  24. SECURITY. At the time of the execution of this Lease,
there is no provision for continuous manned security during either standard or
non-standard operating hours at the building.

                  25. EXPANSION SPACE - RIGHT OF FIRST REFUSAL. Subject to the
terms and conditions of this Paragraph, Tenant shall have the right of first
refusal throughout the Initial Term to lease all or a portion of the first floor
of the building (the "Expansion Space"), which right may be exercised only by
strict compliance with the terms of this Paragraph; provided, however, that such
right of first refusal, with respect to the space leased by Tower Records, is
subject to and expressly subordinate to the right of Tower Records, a tenant of
a portion of the first floor of the building, to extend the term of its lease
pursuant to the terms of that lease. During the Lease Term, Landlord shall not
enter into a binding lease with any third party tenant for all or any portion of
the Expansion Space without first offering such Expansion Space to Tenant as
follows:

                           (a) Landlord shall provide Tenant with its right of
first refusal hereunder by notifying Tenant in writing that it has received a
bona fide offer from a third party tenant to lease the Expansion Space, or any
portion thereof, and offering to lease such premises to Tenant (the "Offer") on
all the same terms and conditions as this Lease, except as follows: (i) the term
of any lease for the Expansion Space shall be co-terminus with this Lease,
including any renewal options; and (ii) Landlord shall have no obligation to
perform or pay for any Base Building Work (as defined in the Work Letter
attached hereto) except for demolition, HVAC, code required upgrades, and
electrical work required to enable Tenant to occupy the Expansion Space
("Expansion Base Building Work"), and Landlord's obligation to perform or pay
for such Expansion Base Building Work and for any Tenant Improvements (as
defined in the Work Letter) shall be reduced proportionately as follows:

                                    (1) the total cost to Landlord for Tenant
                           Improvements relating to the Expansion Space shall
                           not exceed the product of (x) $17.75 per rentable
                           square foot of the Expansion Space, multiplied by (y)
                           a fraction (the "Remaining Term Fraction"), the
                           numerator of which is the number of full calendar
                           months remaining in the Initial Term following
                           Tenant's scheduled occupancy date in the Expansion
                           Space, and the denominator of which is 120 months;
                           and

                                      19.
<PAGE>   40

                                    (2) the total cost to Landlord for the
                           Expansion Base Building Work relating to the
                           Expansion Space shall not exceed the product of (x)
                           the cost of all such work required for the Expansion
                           Space multiplied by (y) the Remaining Term Fraction;
                           provided, however, that no such limitation or
                           proration of Landlord's cost shall apply if either of
                           the following conditions is satisfied: (A) the
                           Remaining Term Fraction (expressed as a percentage)
                           is more than sixty percent (60%); or (B) concurrently
                           with accepting the Offer in accordance with
                           subparagraph (c) below Tenant also validly and
                           irrevocably exercises the Option to Extend pursuant
                           to Paragraph 3 of this Addendum (which concurrent
                           exercise of the Option to Extend shall be permitted
                           notwithstanding the 12-month time limitation
                           contained in the second sentence of said Paragraph
                           3).

                           (b) In addition, any new lease for the Expansion
Space, or any portion thereof, executed pursuant to this right of first refusal
(an "Expansion Lease") shall contain provisions that provide for the following:

                                    (i) Any default under this Lease shall
                           constitute a default under the Expansion Lease, and
                           it is agreed that any default under any Expansion
                           Lease shall constitute a default under this Lease.

                                    (ii) Neither the Option to Extend provided
                           under Section 3 above nor any renewal or extension
                           option contained in any Expansion Lease may be
                           exercised by Tenant singly, but both must be
                           exercised, if at all, concurrently with each other.
                           Any attempted or purported exercise in violation of
                           this provision shall be void and of no force or
                           effect for any purpose.

                           (c) The Expansion Lease shall take the form of an
amendment to this Lease in form mutually acceptable to Landlord and Tenant and
in compliance with this Paragraph to be executed within five (5) business days
after Tenant's acceptance of the Offer.

                           (d) If Tenant fails to deliver its written acceptance
of the Offer in the manner required above within such five (5) business day
period, or if an Expansion Lease for the Expansion Space consistent with the
Offer is not signed by Tenant within the time required by subparagraph (c)
above, then Landlord shall have the right to lease all or any portion of the
Expansion Space covered by the Offer to any other person on any terms or
conditions whatsoever, regardless whether such terms and conditions are more or
less favorable than those offered to Tenant.

                           (e) Tenant shall have no right to exercise any right
of first refusal hereunder if, at the time Landlord desires to enter into a
lease with another tenant for all or any portion

                                      20.
<PAGE>   41

the Expansion Space, an Event of Default has occurred and is continuing.

                  26. RIGHT OF FIRST REFUSAL TO PURCHASE BUILDING. Before
consummating a voluntary sale of the building at any time during the Initial
Term or the Extended Term of this Lease, and so long as no breach or default by
Tenant has occurred and is continuing under this Lease, Landlord will notify
Tenant of the purchase price and other terms (collectively "Sale Terms") upon
which it would be willing to sell the building to Tenant, which Sale Terms shall
include an allocation of closing costs in accordance with then prevailing custom
in the City and County of San Francisco. Tenant shall notify Landlord in writing
within five (5) business days after Landlord's notice whether Tenant is
interested in purchasing the building on the Sale Terms ("Tenant's Interest
Notice"). If, within twenty-five (25) business days after Tenant's Interest
Notice, Tenant unconditionally agrees in writing to purchase the building on the
Sale Terms, Tenant shall execute a formal agreement prepared by Landlord for the
purchase and sale of the building consistent with the Sale Terms within five (5)
days thereafter; provided, however, if the notice of Sale Terms was delivered by
Landlord in the form of a proposed contract of sale, then Tenant shall indicate
its acceptance of the Sale Terms by signing such proposed contract and the sale
shall close within fifteen (15) business days thereafter. If Tenant does not
deliver the Tenant's Interest Notice within the five (5) business day period, or
its written agreement to purchase the building on the Sale Terms offered in
Landlord's notice within such twenty-five day period, or if Landlord and Tenant
do not enter into a fully executed agreement for the purchase and sale of the
building within such five-day period (if applicable), Landlord shall thereafter
have the right to offer and sell the building to any third party on the Sale
Terms or any other terms and conditions, so long as the gross purchase price for
the building is at least ninety-five (95%) of the purchase price contained in
the Sale Terms and the terms of any seller financing, if any, are not
substantially less favorable to the purchaser than any such terms contained in
the Sale Terms offered to Tenant; provided, however, Landlord may elect to
transfer or sell the building to a nonprofit or charitable organization for a
lesser amount which amount is ninety-five percent (95%) of the purchase price
contained in the Sales Terms adjusted to reflect the economic value of the
transaction to Landlord including the tax consequences of such transaction. The
right of first refusal shall lapse upon such sale to a third party.
Notwithstanding the foregoing, Tenant's right of first refusal to purchase the
building under this Paragraph shall not apply to any involuntary sale or
disposition of the building, such as by foreclosure, deed-in-lieu of
foreclosure, condemnation or sale under threat of condemnation or any change in
the percentage ownership among the parties constituting Landlord or any change
in the legal entity constituting Landlord.

                  27. LANDLORD'S WARRANTY. Landlord hereby warrants it is the
fee owner of the premises, that it has authority to enter into this Lease, and
that it shall take all actions necessary, at its expense, to defend Tenant's
quiet enjoyment of the premises.

                                      21.
<PAGE>   42

                  28. LANDLORD'S INDEMNITY. Landlord hereby indemnifies Tenant
and its agents, employees and successors and assignees against the following
unless caused by the negligence or intentional actions of Tenant, its employees,
shareholders, partners, agents, contractors or invitees: (i) any damages and
claims arising from Landlord's or Landlord's agents' breach of this Lease; (ii)
the negligence or willful misconduct of Landlord or its agents in the building
or the premises; and (iii) any causes of action solely related to the building
arising prior to the Commencement Date. The foregoing indemnity shall exclude
consequential damages unless any damages are caused by the gross negligence or
intentional misconduct of Landlord.







                                      22.